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<SEC-DOCUMENT>0000928385-02-003263.txt : 20021009
<SEC-HEADER>0000928385-02-003263.hdr.sgml : 20021009
<ACCEPTANCE-DATETIME>20021008174957
ACCESSION NUMBER:		0000928385-02-003263
CONFORMED SUBMISSION TYPE:	N-2
PUBLIC DOCUMENT COUNT:		22
FILED AS OF DATE:		20021009

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ABERDEEN ASIA PACIFIC INCOME FUND INC
		CENTRAL INDEX KEY:			0000790500
		IRS NUMBER:				133334183
		STATE OF INCORPORATION:			MD
		FISCAL YEAR END:			1031

	FILING VALUES:
		FORM TYPE:		N-2
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-100430
		FILM NUMBER:		02784510

	BUSINESS ADDRESS:	
		STREET 1:		ONE SEAPORT PLAZA
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10292
		BUSINESS PHONE:		2122141250

	MAIL ADDRESS:	
		STREET 1:		ONE SEAPORT PLAZA
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10292

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	FIRST AUSTRALIA PRIME INCOME FUND INC
		DATE OF NAME CHANGE:	19920703

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	ABERDEN ASIA-PACIFIC INCOME FUND INC
		DATE OF NAME CHANGE:	20010531

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ABERDEEN ASIA PACIFIC INCOME FUND INC
		CENTRAL INDEX KEY:			0000790500
		IRS NUMBER:				133334183
		STATE OF INCORPORATION:			MD
		FISCAL YEAR END:			1031

	FILING VALUES:
		FORM TYPE:		N-2
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-04611
		FILM NUMBER:		02784511

	BUSINESS ADDRESS:	
		STREET 1:		ONE SEAPORT PLAZA
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10292
		BUSINESS PHONE:		2122141250

	MAIL ADDRESS:	
		STREET 1:		ONE SEAPORT PLAZA
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10292

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	FIRST AUSTRALIA PRIME INCOME FUND INC
		DATE OF NAME CHANGE:	19920703

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	ABERDEN ASIA-PACIFIC INCOME FUND INC
		DATE OF NAME CHANGE:	20010531
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-2
<SEQUENCE>1
<FILENAME>dn2.txt
<DESCRIPTION>FORM N-2
<TEXT>
<PAGE>

    As filed with the Securities and Exchange Commission on October 8, 2002.

                                   Investment Company Act File No. 811-04611
                                   Securities Act File No. 333-_____________
================================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM N-2

|X|  Registration Statement Under the Securities Act of 1933
         [_]  Pre-effective Amendment No. ____
         [_]  Post-effective Amendment No. ____

|X|  Registration Statement Under the Investment Company Act of 1940
         [X]  Amendment No. 34

                     ABERDEEN ASIA-PACIFIC INCOME FUND, INC.
               (Exact name of Registrant as Specified in Charter)

                                Gateway Center 3
                               100 Mulberry Street
                                Newark, NJ 07102
       Registrant's telephone number, including Area Code: (800) 451-6788

                                 Beverley Hendry
                               300 Las Olas Place
                               300 S.E. 2nd Street
                           Fort Lauderdale, FL 33301
                     (Name and Address of Agent for Service)

                                   Copies to:
          Thomas A. Hale, Esquire                      Sander M. Bieber, Esquire
 Skadden, Arps, Slate, Meagher & Flom LLP                       Dechert
           333 West Wacker Drive                         1775 Eye Street, N.W.
             Chicago, IL 60606                           Washington, D.C. 20006

Approximate date of proposed public offering: As soon as practicable after the
effective date of this Registration Statement

If any securities being registered on this form will be offered on a delayed or
continuous basis in reliance on Rule 415 under the Securities Act of 1933, other
than securities offered in connection with a dividend reinvestment plan, check
the following box ......[_]

It is proposed that this filing will become effective (check appropriate box)

[_] when declared effective pursuant to Section 8(c)

        CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
                                                     Proposed Maximum
  Title of Securities         Amount Being         Offering Price Per      Proposed Maximum           Amount of
    Being Registered           Registered                Unit/1/            Offering Price        Registration Fee
- ----------------------------------------------------------------------------------------------------------------------
<S>                           <C>                  <C>                     <C>                    <C>
 Common Stock                    100,000                $ 4.53                 $ 453,000               $ 41.67
 ($.01 par value)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Estimated pursuant to Rule 457(c) on the basis of market value per share on
October 3, 2002.

The Registrant hereby amends this Registration Statement under the Securities
Act of 1933 on such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in
accordance with the provisions of Section 8(a) of the Securities Act of 1933 or
until the Registration Statement shall become effective on such date as the
Commission, acting pursuant to Section 8(a), may determine.

<PAGE>

      SUBJECT TO COMPLETION -- PRELIMINARY PROSPECTUS DATED ________, 2002

The information contained in this Prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
             in any state where the offer or sale is not permitted.
PROSPECTUS
- --------------------------------------------------------------------------------
                     ABERDEEN ASIA-PACIFIC INCOME FUND, INC.

                      [# of shares] Shares of Common Stock
                  Issuable Upon Exercise of Transferable Rights
                  to Subscribe for Such Shares of Common Stock

                      American Stock Exchange Symbol: FAX
                       Pacific Stock Exchange Symbol: FAX
- --------------------------------------------------------------------------------
Aberdeen Asia-Pacific Income Fund, Inc. ("Fund") will issue to its common
stockholders ("Stockholders") of record as of the close of business on [Record
Date] ("Record Date"), transferable rights ("Rights") entitling the holders
thereof to subscribe for up to an aggregate of [# of shares] new shares
("Shares") of the Fund's common stock, par value $0.01 ("Common Stock"), at the
rate of one share of Common Stock for every __ Rights held ("Offer").
Stockholders of record on the Record Date ("Record Date Stockholders") will
receive one transferable Right for each share of Common Stock held as of the
Record Date. The number of Rights issued to a Record Date Stockholder will be
rounded up to the nearest number of Rights evenly divisible by __. In the case
of shares of Common Stock held of record by Cede & Co. ("Cede"), as nominee for
the Depository Trust Company ("DTC"), or any other depository or nominee, the
number of Rights issued to Cede or such other depository or nominee will be
adjusted to permit rounding up (to the nearest number of Rights evenly divisible
by __) of the Rights to be received by beneficial owners for whom it is the
holder of record only if Cede or such other depository or nominee provides to
the Fund on or before the close of business on ______, 2002 a written
representation of the number of Rights required for such rounding. Record Date
Stockholders who fully exercise their Rights may purchase the new Shares not
acquired by other Record Date Stockholders in this Offer, subject to certain
limitations and subject to allotment ("Over-Subscription Privilege"). Fractional
shares will not be issued upon the exercise of Rights. See "The Offer."

The Fund's Common Stock is listed on the American Stock Exchange ("AMEX") and
the Pacific Stock Exchange ("PSE") under the symbol "FAX." The Rights are
transferable and will be admitted for trading on the AMEX under the
symbol "FAX.R" during the course of the Offer. The subscription price per share
will be $____ ("Subscription Price"). THE OFFER WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON [EXPIRATION DATE], UNLESS EXTENDED ("EXPIRATION DATE"). For
additional information regarding the Offer, please call Georgeson Shareholder
Communications, Inc. ("Information Agent") at (866) 206-4933.

The Fund is a non-diversified, closed-end management investment company. The
Fund's investment objective is to seek current income. In June 2001, the Fund's
common and preferred stockholders approved a series of proposals allowing the
Fund to invest up to 80% of its assets in Asian debt securities. The Fund may
also achieve incidental capital appreciation. See "Investment Objective,"
"Investment Policies," and "Investment Restrictions." Investment in the Fund
involves certain risks and special considerations, including risks associated
with currency fluctuations and the Fund's leveraged capital structure. See "Risk
Factors and Special Considerations." The Fund's Investment Manager is Aberdeen
Asset Managers (C.I.) Limited ("Investment Manager"), an affiliate of Aberdeen
Asset Management Limited, the Fund's Investment Adviser ("Investment Adviser").
Prudential Investments LLC acts as the Fund's administrator ("Administrator").
The Administrator is an affiliate of Prudential Securities, Inc. The address of
the Fund is Gateway Center 3, 100 Mulberry Street, Newark, New Jersey 07102, and
its telephone number is (800) 451-6788.

The Fund announced the Offer after the close of trading on the AMEX on
__________, 2002. The net asset value ("NAV") per share of Common Stock at the
close of business on __________, 2002 [(the last trading date on which the Fund
publicly reported its NAV prior to the announcement)] and on __________ [(the
last trading date on which the Fund publicly reported its NAV prior to the date
of this Prospectus)] was $____ and $____, respectively, and the last reported
sales price per share of the Fund's Common Stock on the AMEX on those dates was
$____ and $____, respectively.

This Prospectus sets forth concisely the information about the Fund that a
Stockholder ought to know before investing. Additional information about the
Fund has been filed with the Securities and Exchange Commission ("SEC") and is
available upon written or oral request without charge. The SEC maintains a
website (http://www.sec.gov) that contains material incorporated by reference
and other information regarding the Fund.

    INVESTORS ARE ADVISED TO READ THIS PROSPECTUS AND TO RETAIN IT FOR FUTURE
                                   REFERENCE.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
                   NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION
                                      HAS APPROVED OR DISAPPROVED THESE SECURITIES
                               OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
                                ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
=======================================================================================================================
                                                                     Estimated                Estimated Proceeds to
                                     Subscription Price            Sales Load(1)            Fund or Other Persons (2)
- -----------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                           <C>                     <C>
 Per Share .....................            $____                      $____                           $____
- -----------------------------------------------------------------------------------------------------------------------
 Total Maximum .................         $__________                $__________                     $__________
=======================================================================================================================
</TABLE>

                                                Footnotes set forth on next page

                                 Dealer Managers

[Record Date + 2]

<PAGE>

(continued from previous page)

- ------------

(1)   In connection with the Offer, the Fund has agreed to pay[Dealer Managers]
      ("Dealer Managers") a fee for their financial advisory, marketing and
      soliciting services equal to an aggregate of 3.75% of the aggregate
      Subscription Price for the Shares issued pursuant to the Offer and to
      reimburse the Dealer Managers for out-of-pocket expenses up to $150,000.
      The Dealer Managers will reallow to certain broker-dealers in the selling
      group formed by the Dealer Managers selling fees of 2.50% of the
      Subscription Price for Shares issued pursuant to the Offer as a result of
      their selling efforts. In addition, the Dealer Managers will reallow to
      certain soliciting dealers that have solicited the exercise of Rights a
      solicitation fee of 0.50% of the Subscription Price for Shares issued
      pursuant to the Offer as a result of their soliciting efforts, subject to
      a maximum. See "Distribution Arrangements." These fees and expense
      reimbursement will be borne by the Fund and indirectly by all of the
      Fund's Stockholders, including those who do not exercise their Rights. The
      Fund and the Investment Manager have agreed to indemnify the Dealer
      Managers against certain liabilities including liabilities under the
      Securities Act of 1933, as amended, and the Investment Company Act of
      1940, as amended.

(2)   Before deduction of expenses incurred by the Fund, estimated to be
      $___________, including $150,000 to be paid to the Dealer Managers for
      reimbursement of their expenses.

     As a result of the terms of the Offer, assuming that Rights are exercised,
Stockholders who do not fully exercise their Rights will, upon the completion of
the Offer, own a smaller proportional interest in the Fund than they owned prior
to the Offer. In addition, because the Subscription Price may be less than the
NAV per share at the expiration of the Offer and because the Fund will incur
expenses in connection with the Offer, the Offer is likely to result in a
dilution of the NAV per share for all existing Stockholders. Such dilution may
disproportionately affect non-exercising Stockholders. If the Subscription Price
were to be substantially less than the NAV per share at the expiration of the
Offer, such dilution could be substantial. The Offer includes the
Over-Subscription Privilege that may also result in substantial dilution of NAV
per share. See "The Offer" and "Risk Factors and Special Considerations."

     In connection with this Offer, the Dealer Managers may effect transactions
which stabilize or maintain the market price of the Rights and the shares of
Common Stock of the Fund at levels above those which might otherwise prevail in
the open market. Such transactions may be effected on the AMEX, Nasdaq or
otherwise. Such stabilizing, if commenced, may be discontinued at any time.

     Prior to the expiration of the Offer, the Dealer Managers may offer shares
of Common Stock, including Shares acquired through purchasing and exercising the
Rights, at prices it sets. The Dealer Managers may realize profits or losses
independent of any fees described in this Prospectus.

     Unless otherwise specified, all references to currency in this Prospectus
may be abbreviated throughout this Prospectus as shown in the table below. On
[Record Date], the noon buying rates in New York City for cable transfers
payable in each currency per U.S. dollar, as certified for customs purposes by
the Federal Reserve Bank of New York, were as shown in the table below. See
"Risk Factors and Special Considerations - Currency Exchange Rate Fluctuations."

<TABLE>
<CAPTION>
     ------------------------------------------------------------------------------------------
            Currency                       Abbreviations                   Currency per US$
     ------------------------------------------------------------------------------------------
     <S>                       <C>                                         <C>
     United States Dollar      "U.S. dollar," "dollar," "US$" or "$"              N/A
     ------------------------------------------------------------------------------------------
     Australian Dollar                          "A$"                            A$_____
     ------------------------------------------------------------------------------------------
     New Zealand Dollar                        "NZ$"                           NZ$_____
     ------------------------------------------------------------------------------------------
     South Korean Won                       "W" or "KRW"                       KRW_____
     ------------------------------------------------------------------------------------------
     Thai Baht                              "B" or "THB"                       THB_____
     ------------------------------------------------------------------------------------------
     Philippines Peso                       "P" or "PHP"                       PHP_____
     ------------------------------------------------------------------------------------------
     Malaysian Ringgit                      "R" or "MYR"                       MYR_____
     ------------------------------------------------------------------------------------------
     Singapore Dollar                      "S$" or "SGD"                       SGD_____
     ------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                               PROSPECTUS SUMMARY

         The following summary is qualified in its entirety by reference to the
more detailed information appearing elsewhere or incorporated by reference in
this Prospectus. Unless otherwise indicated, the information in this Prospectus
assumes that the Rights issued are all exercised. Also, unless otherwise
indicated, references in the Prospectus to "Stockholders" refer only to holders
of the Fund's Common Stock.

                              THE OFFER AT A GLANCE

- --------------------------------------------------------------------------------
The Offer                            The Fund is issuing to Stockholders of
                                     record on [Record Date] ("Record Date
                                     Stockholders") one transferable Right for
                                     each share of Common Stock held. A Record
                                     Date Stockholder's right to acquire, during
                                     the Subscription Period at the Subscription
                                     Price, one Share for every __ Rights held
                                     is hereinafter referred to as the "Primary
                                     Subscription." The number of Rights to be
                                     issued to a Record Date Stockholder on the
                                     Record Date will be rounded up to the
                                     nearest number of Rights evenly divisible
                                     by __.

                                     The first regular monthly distribution to
                                     be paid on Shares acquired upon exercise of
                                     Rights will be the first monthly
                                     distribution the record date for which
                                     occurs after the issuance of the Shares.
                                     The Shares issued in the Offer will not be
                                     entitled to the distribution to be declared
                                     to Stockholders of record on [month day,
                                     year] which is payable in [month year].
                                     Whether a Stockholder is entitled to the
                                     distribution to be declared to Stockholders
                                     of record on [month day, year] which is
                                     payable in [month year] will depend on the
                                     date Shares are actually issued to the
                                     Stockholder.

- --------------------------------------------------------------------------------
Subscription Price                   The Subscription Price will be $____ per
                                     Share.
- --------------------------------------------------------------------------------
Over-Subscription Privilege          Record Date Stockholders who fully exercise
                                     all Rights issued to them (other than those
                                     Rights which cannot be exercised because
                                     they represent the right to acquire less
                                     than one Share) are entitled to subscribe
                                     for additional Shares which were not
                                     subscribed for by other Record Date
                                     Stockholders. If sufficient Shares are
                                     available, all Record Date Stockholders'
                                     Over-Subscription requests will be honored
                                     in full. If these requests for Shares
                                     exceed the Shares available, the available
                                     Shares will be allocated pro rata among
                                     Record Date Stockholders who over-subscribe
                                     based on the number of Rights originally
                                     issued to them by the Fund.
- --------------------------------------------------------------------------------
Purpose of the Offer                 In June 2001, holders of the Fund's Common
                                     Stock and preferred stock approved a series
                                     of proposals allowing the Fund, among other
                                     things, to:

                                     .  increase to a maximum of 80% the Fund's
                                        investments in Asian debt securities;

                                     .  reduce the minimum investment in
                                        Australian debt securities to 20%;

                                     .  increase to a maximum of 35% the Fund's
                                        investments in Asian debt securities
                                        rated, or considered by the Investment
                                        Manager to be, below investment grade at
                                        the time of investment;

                                     .  invest to a maximum of 10% in securities
                                        rated, or considered by the Investment
                                        Manager to be, below B-; and

                                     .  expand the categories of derivatives
                                        which may be utilized by the Fund.

                                     The net proceeds of this Offer will be used
                                     to further implement this investment
                                     flexibility and are intended to enable the
                                     Fund to increase the Fund's net investment
                                     income above the current level by taking
                                     increased advantage of the relatively high
- --------------------------------------------------------------------------------

                                       1

<PAGE>

- --------------------------------------------------------------------------------
                                     level of interest rates currently available
                                     in Asian markets compared with interest
                                     rates currently available in Australia. By
                                     using the proceeds of this Offer rather
                                     than reallocating assets currently in its
                                     portfolio, the Fund would not necessarily
                                     have to realize the substantial foreign
                                     exchange losses that might otherwise be
                                     realized if the portfolio were internally
                                     restructured. This will, however, expose
                                     the Fund to greater interest rate risk,
                                     credit risk, political and economic risk
                                     and liquidity risk, than the Fund has been
                                     exposed to in the past, particularly in
                                     light of the potential volatility in Asian
                                     currency and bond markets. To the extent
                                     that further Asian investments are made in
                                     local currency denominated debt securities,
                                     the Fund will also be exposed to greater
                                     foreign exchange risk. However, to the
                                     extent that further Asian investments are
                                     U.S. dollar-denominated, the foreign
                                     exchange risk to which the Fund's portfolio
                                     is exposed will be mitigated. Also, as a
                                     consequence of the Fund's increased
                                     investment in Asian debt securities, the
                                     overall credit quality of the securities in
                                     the Fund's portfolio may be reduced.

                                     The Investment Manager and Investment
                                     Adviser believe that an increase in the
                                     size of the Fund should result in an
                                     incidental modest reduction in the Fund's
                                     expense ratio, which would be of long-term
                                     benefit to Stockholders. There can be no
                                     assurance that the Offer will be successful
                                     or that by increasing the size of the Fund,
                                     the Fund's aggregate expenses and,
                                     correspondingly, its expense ratio, will be
                                     lowered.

- --------------------------------------------------------------------------------
Sale of Rights                       The rights are transferable until the
                                     expiration date of the offer. The rights
                                     will be listed for trading on the AMEX
                                     under the symbol "FAX.R" during the
                                     course of the offering. The Fund will use
                                     its best efforts to ensure that an adequate
                                     trading market for the rights will exist.
                                     No assurance can be given that a market for
                                     the rights will develop. Trading in the
                                     rights on the AMEX may be conducted until
                                     the close of trading on the AMEX on the
                                     last business day prior to the expiration
                                     date of the offer.
- --------------------------------------------------------------------------------
Use of Proceeds                      The Investment Manager and Investment
                                     Adviser anticipate that investment of the
                                     net proceeds of the Offer in Asian and New
                                     Zealand debt securities, in accordance with
                                     the Fund's investment objective and
                                     policies, will take approximately two to
                                     four months from their receipt by the Fund,
                                     depending on market conditions and the
                                     availability of appropriate securities. See
                                     "Use of Proceeds."
- --------------------------------------------------------------------------------
How to Obtain Subscription           .  Contact your bank, broker or nominee, or
Information

                                     .  Contact the Information  Agent toll-free
                                        at (866) 204-4933.
- --------------------------------------------------------------------------------
How to Subscribe                     .  Deliver a completed Subscription
                                        Certificate and payment to the
                                        Subscription Agent by the Expiration
                                        Date, or

                                     .  If your shares are held in a brokerage
                                        or bank account, have your broker or
                                        bank deliver a Notice of Guaranteed
                                        Delivery to the Subscription Agent by
                                        the Expiration Date.
- --------------------------------------------------------------------------------
Subscription Agent                   [name]
- --------------------------------------------------------------------------------

                                       2

<PAGE>

                           IMPORTANT DATES TO REMEMBER

<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>
Record Date........................................................................ [Record Date]

Subscription Period................................................................ [Start Subscription Period] -
                                                                                    [Expiration Date]

Expiration Date.................................................................... [Expiration Date]*

Deadline for Subscription Certificates and Payment for Shares+..................... [Payment Date]*

Deadline for Notice of Guaranteed Delivery+........................................ [Payment Date]*

Deadline for payment pursuant to Notice of Guaranteed Delivery..................... [Notice of Guar. Deliv. Date]*

Confirmation Mailed to Exercising Rights Holders................................... [Confirmation Date]*
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

* Unless the Offer is extended.

+ A person exercising rights must deliver either (i) a Subscription Certificate
and payment for Shares or (ii) a Notice of Guaranteed Delivery by [Payment
Date], unless the Offer is extended.

                              THE FUND AT A GLANCE

- --------------------------------------------------------------------------------
The Fund                             The Fund is a non-diversified, closed-end
                                     management investment company organized as
                                     a Maryland corporation. As of the Record
                                     Date, the Fund's NAV per share was $____.
- --------------------------------------------------------------------------------
AMEX and PSE Listed                  As of the Record  Date, the Fund had  _____
                                     shares of Common Stock, par value $0.01,
                                     outstanding. The Fund's Common Stock is
                                     traded on the AMEX and PSE under the symbol
                                     "FAX." As of the Record Date, the last
                                     reported sales price of a share of the Fund
                                     was $____. The Rights are transferable and,
                                     therefore, will be admitted for trading on
                                     the AMEX under the symbol "FAX.R" during
                                     the course of the Offer.
- --------------------------------------------------------------------------------
Stock Repurchase Program             The Fund's shares have traded in the market
                                     below, at and above NAV since the
                                     commencement of the Fund's operations.
                                     However, it is frequently the case that
                                     Fund shares trade at a discount to net
                                     asset value. In an effort to minimize the
                                     spread between market value and net asset
                                     value that may otherwise exist, on March 1,
                                     2001, the Board of Directors approved a
                                     stock repurchase program. The stock
                                     repurchase program allows the Fund to
                                     repurchase up to 10% of its outstanding
                                     Common Stock in the open market during any
                                     12-month period, if and when the discount
                                     to net asset value is at least 10%. When
                                     the Fund repurchases its shares for a price
                                     below their net asset value, the net asset
                                     value of the remaining outstanding shares
                                     will be enhanced. This may or may not
                                     affect the market price of the shares.
                                     Acquisitions of shares by the Fund may
                                     increase the expense ratio, increase
                                     interest expense and increase portfolio
                                     turnover. For a discussion of the Fund's
                                     historic discount/premium to net asset
                                     value, see "The Fund - Description of
                                     Common Stock." Through July 31, 2002, there
                                     have been 2,723,300 shares repurchased and
                                     cancelled under this program.
- --------------------------------------------------------------------------------
Preferred Stock                      As of the Record Date, the Fund had 24,000
                                     shares of Auction Market Preferred Stock,
                                     par value $0.01 ("Preferred Stock"),
                                     outstanding. The Preferred Stock has an
                                     aggregate liquidation value of $600
                                     million. See "The Fund - Description of
                                     Preferred Stock."

                                     Holders of Common Stock have generally
                                     benefited from the Fund's issuance of the
                                     Preferred Stock which commenced in 1989.
                                     Since the fiscal quarter beginning August
                                     1, 1997, there have been periods during
                                     which the shrinking yield differential
                                     between Australia and U.S. rates and a
                                     depreciating Australian dollar have
                                     resulted in the Preferred Stock having a
                                     negative impact on returns to holders of
                                     Common Stock. During the 12 months to July
                                     31, 2002, the key investment trend was an
                                     end to the unilateral strength of the U.S.
                                     dollar. The Australian dollar and most
                                     Asian currencies
- --------------------------------------------------------------------------------

                                       3

<PAGE>

<TABLE>
<S>                             <C>
- ------------------------------------------------------------------------------------------------------------------------------------
                                 strengthened against the U.S. dollar over the period, with the Australian dollar rising 7.5%.
                                 Further, with U.S. interest rates at historic lows, the differential between the cost of the
                                 Preferred Stock and the rates at which the Fund invests remains positive. Offsetting these impacts
                                 slightly have been capital losses as bond yields have risen in line with signs of global recovery.
                                 The proposed investment of a significant percentage of the Fund's total assets in higher yielding
                                 Asian debt securities, as recommended by the Fund's Investment Manager and Investment Adviser, and
                                 approved by Common and Preferred stockholders in June 2001, is expected to increase the Fund's net
                                 investment income above the current level. See "The Offer - Purpose of the Offer."
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Objective             To seek current  income. The Fund may also achieve incidental capital appreciation. For as long as
                                 the name of the Fund remains Aberdeen Asia-Pacific Income Fund, Inc., it shall be the policy of the
                                 Fund normally to invest at least 80% of its net assets plus the amount of any borrowings for
                                 investment purposes, in Asian debt securities, Australian debt securities and New Zealand debt
                                 securities. This 80% investment policy is a non-fundamental policy of the Fund and may be changed
                                 by the Board of Directors upon 60 days prior written notice to stockholders.
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Structure              To achieve its investment objective, the Fund may invest up to 80% of its total assets in "Asian
                                 debt securities," which include: (1) debt securities of Asian Country issuers, including securities
                                 issued by Asian Country governmental entities, as well as by banks, companies and other entities
                                 which are located in Asian Countries, whether or not denominated in an Asian Country currency; (2)
                                 debt securities of other issuers, denominated in, or linked to, the currency of an Asian Country,
                                 including securities issued by supranational issuers, such as The World Bank and derivative debt
                                 securities that replicate, or substitute for, the currency of an Asian Country; (3) debt securities
                                 issued by entities which, although not located in an Asian Country, derive at least 50% of their
                                 revenues from Asian Countries or have at least 50% of their assets located in Asian Countries; and
                                 (4) debt securities issued by a wholly-owned subsidiary of an entity located in an Asian Country,
                                 provided that the debt securities are guaranteed by the parent entity located in the Asian Country.
                                 With reference to items (3) and (4) above, Asian debt securities may be denominated in an Asian
                                 Country currency or in Australian, New Zealand or U.S. dollars. The maximum country exposure to any
                                 one Asian Country (other than Korea) is limited to 20% of the Fund's total assets and the maximum
                                 currency exposure to any one Asian Country currency (other than Korea) is limited to 10% of the
                                 Fund's total assets. The maximum country exposure for Korea is limited to 40% of the Fund's total
                                 assets, and the maximum currency exposure for Korea is limited to 25% of the Fund's total assets.

                                 "Asian Countries" (each, an "Asian Country") include China, Hong Kong, India, Indonesia, Japan,
                                 Malaysia, Pakistan, the Philippines, Singapore, South Korea, Taiwan, Thailand, and Vietnam, and
                                 such other countries on the Asian continent approved for investment by the Board of Directors upon
                                 the recommendation of the Investment Manager.

                                 At least 20% of the Fund's total assets will be invested in "Australian debt securities," which
                                 include: (1) debt securities of Australian issuers, including securities issued by Australian
                                 governmental entities, as well as by banks, companies and other entities which are located in
                                 Australia, whether or not denominated in the Australian dollar; (2) debt securities of other
                                 issuers, denominated in, or linked to, the Australian dollar, including securities issued by
                                 supranational issuers, such as The World Bank and derivative debt securities that replicate, or
                                 substitute for, the Australian dollar; (3) debt securities issued by entities which, although not
                                 located in Australia, derive at least 50% of their revenues from Australia or have at least 50% of
                                 their assets located in Australia; and (4) debt securities issued by a wholly-owned subsidiary of
                                 an entity located in Australia, provided that the debt securities are guaranteed by the parent
                                 entity located in Australia. With reference to items (3) and (4) above, Australian debt securities
                                 may be denominated in Australian, New Zealand or U.S. dollars.
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                                 The Fund may also invest in "New Zealand debt securities," which include: (1) debt securities of
                                 New Zealand issuers, including securities issued by New Zealand governmental entities, as well as
                                 by banks, companies and other entities which are located in New Zealand, whether or not denominated
                                 in the New Zealand dollar; (2) debt securities of other issuers, denominated in, or linked to, the
                                 New Zealand dollar, including securities issued by supranational issuers, such as The World Bank
                                 and derivative debt securities that replicate, or substitute for, the New Zealand dollar; (3) debt
                                 securities issued by entities which, although not located in New Zealand, derive at least 50% of
                                 their revenues from New Zealand or have at least 50% of their assets located in Zealand; and (4)
                                 debt securities issued by a wholly-owned subsidiary of an entity located in New Zealand, provided
                                 that the debt securities are guaranteed by the parent entity located in New Zealand. With reference
                                 to items (3) and (4) above, New Zealand debt securities may be denominated in Australian, New
                                 Zealand or U.S. dollars. The maximum country exposure for New Zealand is limited to 35% of the
                                 Fund's total assets, and the maximum currency exposure for New Zealand is limited to 35% of the
                                 Fund's total assets.

                                 During periods when, in the Investment Manager's judgment, economic conditions warrant a temporary
                                 defensive investment policy, the Fund may temporarily invest up to 100% of its assets in U.S. debt
                                 securities.

                                 The Fund may invest up to 10% of the Fund's total assets in secondary market bank loans, and up to
                                 an additional 10% of the Fund's total assets in convertible securities and other hybrid securities,
                                 and up to an additional 10% of the Fund's total assets in asset-backed securities.
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Investment Guidelines            In order to accommodate investment in Asian markets, the Fund may invest up to 35% of its total
                                 assets in Asian debt securities rated by Standard & Poor's ("S&P") or Moody's Investors Service,
                                 Inc. ("Moody's") (provided that, with the approval of the Fund's Board of Directors, the ratings of
                                 other recognized rating services may be used), or judged by the Investment Manager to be, below
                                 investment grade at the time of investment. The Fund may invest up to 35% of its total assets in
                                 Asian debt securities much of which may be deemed to be illiquid.

                                 The Fund may invest up to 10% of its total assets in securities rated by S&P or Moody's (provided
                                 that, with the approval of the Fund's Board of Directors, the ratings of other recognized ratings
                                 services may be used), or judged by the Investment Manager to be, below B- at the time of
                                 investment. As a consequence of the Fund's increased investment in Asian debt securities, the
                                 overall credit quality of the securities in the Fund's portfolio may be reduced.

                                 The Fund may invest up to 80% of its total assets in Asian debt securities for which there is no
                                 established relevant market.

                                 The Fund may use derivatives to manage currency, credit and interest rate risk and as a substitute
                                 for physical securities. The Investment Manager uses only exchange-traded (as opposed to
                                 over-the-counter) interest rate derivatives in the Australian component of the Fund.
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Distributions                    The Fund pays distributions monthly out of current income supplemented by realized capital gains
                                 and, to the extent necessary, return of paid-in capital. The current monthly cash distribution is
                                 U.S. 3.5 cents per share of Common Stock. For the current fiscal year, the distributions to date
                                 have exceeded net investment income and realized capital gains. However, under United States tax
                                 accounting rules, the amount of distributable income for each fiscal period depends on the actual
                                 exchange rates during the entire year between the U.S. dollar and the currencies in which Fund
                                 assets are denominated and on the aggregate gains and losses realized by the Fund during the entire
                                 year. Therefore, the exact amount of distributable income for each fiscal year can only be
                                 determined as of the end of the Fund's fiscal year, October 31st. These monthly distributions may
                                 be reinvested in additional full and fractional shares of
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                                 Common Stock through the Fund's Dividend Reinvestment and Cash Purchase Plan.

                                 The first regular monthly distribution to be paid on Shares acquired upon exercise of Rights will
                                 be the first monthly distribution the record date for which occurs after the issuance of the
                                 Shares. The Shares issued in the Offer will not be entitled to the distribution to be declared to
                                 Stockholders of record on [month day, year] which is payable in [month year]. Whether a Stockholder
                                 is entitled to the distribution to be declared to Stockholders of record on [month day, year] which
                                 is payable in [month year] will depend on the date Shares are actually issued to the Stockholder.
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Investment Manager and           Aberdeen Asset Managers (C.I.) Limited ("Investment Manager") acts as the Fund's investment manager
Investment Adviser               and Aberdeen Asset Management Limited ("Investment Adviser") acts  as the Fund's investment
                                 adviser. The Investment Manager and the Investment Adviser also serve in these capacities for
                                 Aberdeen Asia-Pacific Income Investment Company Limited, a closed-end management investment
                                 company, the shares of which are listed on the Toronto Stock Exchange ("TSX") under the symbol
                                 "FAP," investing in debt securities of issuers in Australia, New Zealand and other Asian countries;
                                 The First Asia Income Fund, a closed-end investment trust, the units of which are listed on the TSX
                                 under the symbol "FAI.UN," investing primarily in debt securities of issuers in Australia, New
                                 Zealand and Asian countries; Aberdeen Global Income Fund, Inc., a non-diversified, registered
                                 closed-end management investment company, the shares of which are listed on the New York Stock
                                 Exchange under the symbol "FCO," investing in global fixed income securities; and Aberdeen
                                 Australia Equity Fund, Inc., a non-diversified, registered closed-end management investment
                                 company, the shares of which are listed on the AMEX and the PSE under the symbol "IAF," investing
                                 primarily in Australian listed equity securities. In addition, the Investment Manager currently
                                 manages Aberdeen Scots Trust and Aberdeen G(7) Trust, each of which is a Canadian unit investment
                                 trust.

                                 Investment Experience. The Investment Manager and Investment Adviser, together with other
                                 affiliates of Aberdeen Asset Management PLC, (collectively, the "Aberdeen Group") form a globally
                                 diversified management firm. The Investment Manager and the Investment Adviser are parties to a
                                 memorandum of understanding ("MOU") with three affiliated Aberdeen organizations, Aberdeen Asset
                                 Management Asia Limited ("Aberdeen Singapore"), Aberdeen Asset Managers Limited ("Aberdeen UK") and
                                 [name of Aberdeen Thailand entity] ("Aberdeen Thailand"). Pursuant to the MOU, the Investment
                                 Manager and the Investment Adviser have retained the services of investment professionals from
                                 Aberdeen Singapore, Aberdeen UK and Aberdeen Thailand to provide portfolio management and/or
                                 trading services to the Fund, as well as other U.S. funds managed by the Investment Manager and the
                                 Investment Adviser.

                                 As of the date of this prospectus, the Aberdeen Group had approximately US $___ billion in assets
                                 under management. Aberdeen Singapore is one of the largest dedicated managers/advisers on Asian
                                 bonds globally, with approximately US $___ billion of such assets under management as of the date
                                 of this prospectus. In Australia, the Aberdeen Group manages several Australian institutional
                                 domestic bond mandates, in addition to advising the Fund and other listed closed-end funds.
- ------------------------------------------------------------------------------------------------------------------------------------
Compensation of the              The Fund pays the Investment Manager a fee at the annual rate of 0.65% of the Fund's average weekly
Investment Manager and           net assets applicable to the shares of Common Stock and the shares of Preferred Stock up to $200
Investment Adviser               million, 0.60% of the assets between $200 million and $500 million, 0.55% of the assets between
                                 $500 million and $900 million, 0.50% of the assets between $900 million and $1,750 million and
                                 0.45% of the assets in excess of $1,750 million, computed based upon net asset value applicable to
                                 shares of Common Stock and Preferred Stock at the end of each week and payable at the end of each
                                 calendar month. Under the Advisory Agreement, the Investment Manager pays the Investment Adviser an
                                 advisory fee at the annual rate of 0.25% of the Fund's average weekly net assets applicable to
                                 shares of Common Stock and Preferred Stock up to $1,200 million and 0.20% of the assets in excess
                                 of $1,200 million, computed based upon net asset value applicable to shares of Common Stock and
                                 Preferred Stock at the end of each week and payable at the end of each calendar month.

                                 The Fund's Investment Manager and Investment Adviser will benefit from the Offer because their fees
                                 are based on the average net asset value applicable to shares of Common Stock and Preferred Stock
                                 of the Fund.
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Administrator                    The Fund's Administrator is Prudential Investments LLC. The Administrator is an affiliate of
                                 Prudential Securities, Inc. The Fund pays the Administrator a fee computed at the annual rate of
                                 0.15% of the Fund's average weekly net assets applicable to the Common Stock and Preferred Stock up
                                 to $900 million, 0.10% of such assets between $900 million and $1,750 million and 0.07% of such
                                 assets in excess of $1,750 million, computed based upon the net asset value applicable to the
                                 Common Stock and Preferred Stock at the end of each week and payable at the end of each calendar
                                 month. The Fund's Administrator will benefit from the Offer because its fee is based on the average
                                 net assets applicable to Common and Preferred Stock of the Fund.
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                                       7

<PAGE>
               RISK FACTORS AND SPECIAL CONSIDERATIONS AT A GLANCE


     The following summarizes certain matters that should be considered, among
others, in connection with the Offer. For a more complete discussion of the risk
factors and special considerations involved in investing in the Fund's shares,
see "Risk Factors and Special Considerations."

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Dilution - Net Asset Value and     Assuming that Rights are exercised, Record Date Stockholders who do not fully exercise their
Non-Participation in the Offer     Rights should expect that they will, at the completion of the Offer, own a smaller proportional
                                   interest in the Fund than would otherwise be the case if they exercised their Rights. It is not
                                   possible to determine the extent of this dilution at this time because the Fund does not know
                                   what proportion of the Shares will be purchased as a result of the Offer.

                                   As of the date of this Prospectus, the Subscription Price per share for the Offer is less than
                                   the Fund's NAV per share. Assuming that all Rights are exercised and there is no change in the
                                   NAV per share, the aggregate net asset value of each Record Date Stockholder's shares of Common
                                   Stock should decrease as a result of the Offer. The Fund cannot state precisely the amount of any
                                   such decrease in NAV because it is not known at this time what the NAV per share will be on the
                                   Expiration Date or what proportion of the Shares will be purchased as part of the Offer.

                                   If you do not exercise the Rights issued to you, you may still transfer or sell these Rights as
                                   set forth in this Prospectus. The cash you receive from transferring your Rights should serve as
                                   partial compensation for any possible dilution of your interest in the Fund. There can be no
                                   assurance, however, that a market for the Rights will develop or that the Rights will have any
                                   value. See "Risk Factors and Special Considerations - Dilution - Net Asset Value and
                                   Non-Participation in the Offer."
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Current Distribution Rate          In February 1989, the Fund began to pay regular monthly distributions. These distributions have
                                   been paid from net investment income and supplemented by realized capital gains and return of
                                   paid-in capital. The amount of monthly distributions has been adjusted (principally downward)
                                   from time to time to reflect the current interest rate environment. For the current fiscal year,
                                   the distributions to date have exceeded the sum of net investment income and realized capital
                                   gains. To the extent total distributions for the year exceed the Fund's net investment income,
                                   the difference will be deemed for income tax purposes to have been distributed from realized
                                   capital gains or will be treated as return of capital, as applicable. Although the Fund
                                   anticipates that investment of the proceeds in higher yielding Asian debt securities will enable
                                   the Fund to increase the Fund's net investment income above the current level, Stockholders are
                                   cautioned that there can be no guarantee of future performance.

                                   The Fund's investment in Asian debt securities involves risks and uncertainties so that actual
                                   results may differ materially from those anticipated as a result of various factors. If the
                                   anticipated results are not achieved, the Fund may not be able to maintain the current level of
                                   monthly distributions. The Fund undertakes no obligation to update or revise the disclosure in
                                   this Prospectus with regard to the effect of increased investment in Asia on the Fund's monthly
                                   distributions, to reflect current events or circumstances after the date of this Prospectus or to
                                   reflect the occurrence of unanticipated events.

                                   The Board of Directors reviews the level of monthly distributions on a continuing basis at its
                                   quarterly Board meetings. The first regular monthly distribution to be paid on Shares acquired
                                   upon exercise of Rights will be the first monthly distribution the record date for which occurs
                                   after the issuance of the Shares. The Shares issued in the Offer will not be entitled to the
                                   distribution to be declared to Stockholders of record on [month day, year] which is payable in
                                   [month year].
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                                       8

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                                   Whether a Stockholder is entitled to the distribution to be declared to Stockholders of record on
                                   [month day, year] which is payable in [month year] will depend on the date Shares are actually
                                   issued to the Stockholder.
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Interest Rate Fluctuations         Fluctuations in interest rates in the relevant bond markets can affect the Fund's NAV and
                                   distribution rate. The Fund's NAV is adversely affected during periods of rising interest rates
                                   in those bond markets and is favorably affected during periods when interest rates fall. In
                                   addition, the Fund may recognize capital losses, impacting its ability to supplement
                                   distributable income, when bonds in the Fund's portfolio are sold or mature at a price which is
                                   less than the Fund's cost.

                                   Any overall downward trend in interest rates can also be expected ultimately to reduce available
                                   yields to Fund Stockholders, which could in turn result in a reduction in the amount of the
                                   Fund's monthly distributions. While interest rates in Australia and New Zealand were higher than
                                   interest rates in the U.S. at the inception of the Fund in 1986, yields on Australian and New
                                   Zealand debt securities have generally declined in recent years and are currently more comparable
                                   to yields available in the United States. Although relatively high levels of interest rates are
                                   currently available in Asian debt markets, there can be no assurance that these rates will
                                   continue to be obtainable.
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Currency Exchange Rate             To the extent that further Asian investments are made in local currency denominated debt
Fluctuations                       securities, the Fund will be exposed to greater foreign currency exchange risk. However, to the
                                   extent that further Asian investments are U.S. dollar-denominated, the foreign currency exchange
                                   risk to which the Fund's portfolio is exposed will be mitigated.

                                   Currency exchange rates can fluctuate significantly over short periods and can be subject to
                                   unpredictable changes based on a variety of factors including political developments and the
                                   imposition of currency controls by foreign governments. See "Risk Factors and Special
                                   Considerations - Currency Exchange Rate Fluctuations." A decline in the value of the currency in
                                   which a portfolio security is denominated against the U.S. dollar will generally result in a
                                   decline in the U.S. dollar value of the Fund's assets. If the decline occurs after the Fund has
                                   accrued income but before it has been received, the Fund could be required to liquidate portfolio
                                   securities to make distributions.

                                   Currency exchange rate fluctuations can decrease or eliminate income available for distribution
                                   or conversely increase income available for distribution. For example, if currency exchange
                                   losses exceed net investment income for a taxable year, the Fund would not be able to make
                                   ordinary income distributions. In that event, if distributions had been made before the losses
                                   had been realized, they would be recharacterized either as a return of capital, thus reducing
                                   each Stockholder's cost basis, or as a dividend from capital gains rather than ordinary income.

                                   Currency fluctuations against the U.S. dollar in many foreign countries in which the Fund invests
                                   have historically been profound and negative. Although exchange rates against the U.S. dollar
                                   have been favorable in recent months, there can be no assurance that favorable exchange rates
                                   will continue. Nor can there be any assurance that currency fluctuations against the U.S. dollar
                                   will not return to being profound and negative. Although the Fund may hedge against currency
                                   fluctuations with respect to foreign currencies, there can be no assurance that it can employ a
                                   hedging strategy successfully, nor can there be any assurance that the Fund will employ a
                                   currency hedge at any given time.

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                                       9

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Risks Involved in Asian            Proposals approved by Common and Preferred Stockholders in June 2001 permit the Fund to
Investment - Credit Risk           invest up to 80% of its assets in Asian debt securities, including, with respect to 35% of its
                                   total assets, Asian debt securities which, at the time of investment, are rated below investment
                                   grade or, if unrated, are in the opinion of the Investment Manager, of equivalent quality.
                                   However, the Fund may not invest more than 10% of its total assets in securities rated by S&P or
                                   Moody's, or judged by the Investment Manager to be, below B- at the time of investment. Among
                                   other things, investment in securities which are rated below investment grade requires skilled
                                   credit analysis and reduces the overall credit quality of the Fund's portfolio. As of July 31,
                                   2002, 12% of the debt securities held in the Fund's portfolio were rated below investment grade,
                                   of which only 0.1% were rated below B-. See "Risk Factors and Special Considerations - Risks
                                   Involved in Asian Investment - Credit Risk."
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Risks Involved in Asian            The Fund's investments could in the future be adversely affected by any increase in taxes or by
Investment - Political and         political, economic or diplomatic developments in Asian Countries. Moreover, accounting, auditing
Economic Risk                      and financial reporting standards and other regulatory practices and requirements vary from
                                   those applicable to entities subject to regulation in the United States. See "Risk Factors and
                                   Special Considerations - Risks Involved in Asian Investment - Political and Economic Risk."
- ------------------------------------------------------------------------------------------------------------------------------------
Risks Involved in Asian            In some Asian countries, there is no established secondary market for securities. Therefore,
Investment - Liquidity Risks       liquidity in these countries is generally low and transaction costs high. Reduced liquidity often
                                   creates higher volatility, as well as difficulties in obtaining accurate market quotations for
                                   financial reporting purposes and for calculating net asset values, and sometimes also an
                                   inability to buy and sell securities. See "Risk Factors and Special Considerations - Risks
                                   Involved in Asian Investment - Liquidity Risk."
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Use of Derivatives                 With respect to the Australian portion of the Fund's portfolio, the Fund may use derivatives to
                                   manage currency and interest rate risk, and to replicate or substitute for physical securities.
                                   In addition, with respect to the Asian portion of the Fund's portfolio, the Fund may also use
                                   derivatives to manage credit risk.

                                   The use of derivatives will expose the Fund to a variety of risks which include:

                                   .    an imperfect correlation between the price of derivatives and the movement of the securities
                                        prices, interest rates or currency exchange rates being hedged or replicated;

                                   .    the possible absence of a liquid secondary market for any particular derivative at any time;

                                   .    the potential loss if the  counterparty to the transaction  does not perform as promised;

                                   .    the possible need to defer closing out certain positions to avoid adverse tax consequences,
                                        as well as the possibility that derivative transactions may result in acceleration of gain,
                                        deferral of losses or a change in the character of gain realized;

                                   .    the risk that the financial intermediary "manufacturing" the over-the-counter derivative,
                                        being the most active market maker and offering the best price for repurchase, will not
                                        continue to create a credible market in the derivative;

                                   .    because certain derivatives are "manufactured" by financial institutions, the risk that the
                                        Fund may develop a substantial exposure to financial institution counterparties; and

                                   .    the risk that a full and complete appreciation of the complexity of derivatives and how
                                        future value is affected by various factors including
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                                       10

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- --------------------------------------------------------------------------------
                                        changing interest rates, exchange rates
                                        and credit quality is not attained.

                                     See "Risk Factors and Special
                                     Considerations - Use of Derivatives." In
                                     general, derivatives will not be used to
                                     leverage the Fund, although they may be
                                     used to hedge the interest risk associated
                                     with the Fund's outstanding leverage.

                                     The Fund may also use interest rate swaps
                                     to hedge the Fund's liability with respect
                                     to the Preferred Stock. At present, the
                                     Fund has been authorized by the Board of
                                     Directors to hedge up to one-third of the
                                     Fund's liability with respect to the
                                     Preferred Stock. This allows the Fund to
                                     lock in the relatively low current U.S.
                                     dollar interest rates, if available, with
                                     respect to up to one-third of the Fund's
                                     outstanding Preferred Stock. A significant
                                     type of risk associated with interest rate
                                     swaps is the risk that the counterparty may
                                     default or file for bankruptcy, in which
                                     case the Fund would bear the risk of loss
                                     of the amount expected to be received under
                                     the swap agreement. There can be no
                                     assurance that the Fund will have an
                                     interest rate swap in place at any given
                                     time, nor can there be any assurance that,
                                     if an interest rate swap is in place, it
                                     will be successful in hedging the Fund's
                                     interest rate risk with respect to the
                                     Preferred Stock. See "Portfolio Securities
                                     - Derivative Securities - Swaps," "Risk
                                     Factors and Special Considerations - Use of
                                     Derivatives" and "Risk Factors and Special
                                     Considerations - Preferred Stock - Leverage
                                     Risk."
- --------------------------------------------------------------------------------
Preferred Stock - Leverage Risk      Investors should note that leverage
                                     resulting from the issuance of Preferred
                                     Stock creates risks for holders of Common
                                     Stock, including higher volatility of both
                                     the NAV and market value of the Common
                                     Stock, and that fluctuations in the
                                     dividend rates on Preferred Stock will
                                     affect the yield to holders of Common
                                     Stock. If the Fund is able to realize a net
                                     return on its investment portfolio in
                                     excess of the then current dividend rate of
                                     the Preferred Stock, the effect of leverage
                                     permits holders of Common Stock to realize
                                     a higher current rate of return than if the
                                     Fund were not leveraged. On the other hand,
                                     if the current dividend rate on the
                                     Preferred Stock exceeds the net return on
                                     the Fund's investment portfolio, the Fund's
                                     leveraged capital structure results in a
                                     lower rate of return to holders of Common
                                     Stock than if the Fund were not leveraged.
                                     Similarly, because any decline in the NAV
                                     of the Fund's investments will be borne
                                     entirely by holders of Common Stock, the
                                     effect of leverage in a declining market
                                     results in a greater decrease in NAV to
                                     holders of Common Stock than if the Fund
                                     were not leveraged, which would likely be
                                     reflected in a greater decline in the
                                     market price for shares of Common Stock.
                                     Moreover, because dividends and other
                                     distributions on Preferred Stock are
                                     payable in U.S. dollars, a decline in value
                                     against the U.S. dollar of currencies in
                                     which portfolio securities are denominated
                                     also impacts negatively on the rate of
                                     return to holders of Common Stock. If the
                                     Fund's current investment income were not
                                     sufficient to meet dividend requirements on
                                     the Preferred Stock, it could be necessary
                                     for the Fund to liquidate certain of its
                                     investments, thereby reducing the NAV
                                     attributable to the Fund's Common Stock.
                                     See "Risk Factors and Special
                                     Considerations - Preferred Stock - Leverage
                                     Risk."

                                     In order to reduce the risk that the
                                     dividend requirements on the Preferred
                                     Stock will exceed the net return of the
                                     Fund's investment portfolio, the Fund may
                                     use interest rate swaps to hedge the Fund's
                                     liability with respect to the Preferred
                                     Stock. At present, the Fund has been
                                     authorized by the Board of Directors to
                                     hedge up to one-third of the Fund's
                                     liability with respect to the Preferred
                                     Stock. This allows the Fund to lock in the
                                     relatively low current U.S. dollar interest
                                     rates with respect to up to one-third of
                                     the Fund's outstanding Preferred Stock.
                                     There can be no assurance that the Fund
                                     will have an interest rate swap in place at
                                     any given time, nor can there be any
                                     assurance that, if an interest rate swap is
                                     in place, it will be successful in hedging
                                     the Fund's leverage risk with respect to
                                     the Preferred Stock. See "Portfolio
                                     Securities - Derivative Securities -
                                     Swaps," "Risk Factors and Special
                                     Considerations - Use of Derivatives" and
                                     "Risk
- --------------------------------------------------------------------------------

                                       11

<PAGE>

- --------------------------------------------------------------------------------
                                     Factors and Special Considerations -
                                     Preferred Stock - Leverage Risk."

                                     Holders of Common Stock have generally
                                     benefited from the Fund's issuance of the
                                     Preferred Stock which commenced in 1989.
                                     Since the fiscal quarter beginning August
                                     1, 1997, there have been periods during
                                     which the shrinking yield differential
                                     between Australia and U.S. rates and a
                                     depreciating Australian dollar have
                                     resulted in the Preferred Stock having a
                                     negative impact on returns to holders of
                                     Common Stock. During the 12 months to July
                                     31, 2002, the key investment trend was an
                                     end to the unilateral strength of the U.S.
                                     dollar. The Australian dollar and most
                                     Asian currencies strengthened against the
                                     U.S. dollar over the period, with the
                                     Australian dollar rising 7.5%. Further,
                                     with U.S. interest rates at historic lows,
                                     the differential between the cost of the
                                     Preferred Stock and the rates at which the
                                     Fund invests remains positive. Offsetting
                                     these impacts slightly have been capital
                                     losses as bond yields have risen in line
                                     with signs of global recovery.

                                     Because the Investment Manager's and the
                                     Investment Adviser's fees are based on the
                                     average net assets of the Fund, which
                                     include the Preferred Stock, the Investment
                                     Manager and Investment Adviser have
                                     benefited from the Fund's determination not
                                     to redeem the Preferred Stock.

                                     The proposed increased investment of a
                                     significant percentage of the Fund's total
                                     assets in higher yielding Asian debt
                                     securities, as recommended by the Fund's
                                     Investment Manager and Investment Adviser,
                                     and approved by Common and Preferred
                                     Stockholders in June 2001, is expected to
                                     increase the Fund's net investment income
                                     above the current level. See "The Offer -
                                     Purpose of the Offer." The implementation
                                     of this strategy is proposed to occur
                                     within approximately two to four months of
                                     the completion of the Offer by a
                                     combination of investing the net proceeds
                                     of the Offer together with the proceeds
                                     from the sale of existing Australian
                                     portfolio securities. Stockholders are
                                     cautioned that there can be no guarantee of
                                     future performance and the Fund's
                                     investment in Asian debt securities
                                     involves risks and uncertainties, so that
                                     actual results may differ materially from
                                     those anticipated as a result of various
                                     factors. The Fund undertakes no obligation
                                     to update or revise the disclosure in this
                                     Prospectus with regard to the effect of
                                     increased investment in Asia on the Fund's
                                     leverage to reflect current events or
                                     circumstances after the date of this
                                     Prospectus or to reflect the occurrence of
                                     unanticipated events.
- --------------------------------------------------------------------------------
Discount from Net Asset Value        The Fund's shares have traded in the market
                                     below, at and above NAV since the
                                     commencement of the Fund's operations. This
                                     characteristic of shares of closed-end
                                     investment companies is a risk separate and
                                     distinct from the risk that the Fund's NAV
                                     will decrease. In the 12-month period ended
                                     August 31, 2002, the Fund's shares have
                                     traded in the market at an average discount
                                     to NAV of 9.94%. As of August 31, 2002, the
                                     discount to NAV had narrowed to 6.37%. See
                                     "The Fund - Description of Common Stock."
- --------------------------------------------------------------------------------
Foreign Custody                      The Fund generally holds its foreign
                                     securities and cash in foreign banks and
                                     securities depositories. Some foreign banks
                                     and securities depositories may be recently
                                     organized or new to the foreign custody
                                     business. Regulatory oversight over their
                                     operations may be limited or non-existent.
                                     Also, the laws of certain countries may put
                                     limits on the Fund's ability to recover its
                                     assets if a foreign bank, depository or
                                     issuer of a security, or any of their
                                     agents, goes bankrupt. In addition, it is
                                     often more expensive for the Fund to buy,
                                     sell and hold securities in certain foreign
                                     markets than in the United States. The
                                     increased expense of investing in foreign
                                     markets reduces the amount the Fund can
                                     earn on its investments and typically
                                     results in a higher operating expense ratio
                                     for the Fund than for investment companies
                                     invested only in the United States.
- --------------------------------------------------------------------------------

                                       12

<PAGE>

- --------------------------------------------------------------------------------
Non-Diversified Status               The Fund is classified as a
                                     "non-diversified" management investment
                                     company under the 1940 Act, which means
                                     that the Fund is not limited by the 1940
                                     Act as to the proportion of its assets that
                                     may be invested in the securities of a
                                     single issuer. As a non-diversified
                                     investment company, the Fund may invest a
                                     greater proportion of its assets in the
                                     obligations of a smaller number of issuers
                                     and, as a result, will be subject to
                                     greater risk with respect to its portfolio
                                     securities. Although the Fund must
                                     diversify its holdings in order to be
                                     treated as a regulated investment company
                                     under the provisions of the Internal
                                     Revenue Code of 1986, as amended ("Code"),
                                     the Fund may be more susceptible to any
                                     single economic, political or regulatory
                                     occurrence than would be the case if it had
                                     elected to diversify its holdings
                                     sufficiently to be classified as a
                                     "diversified" management investment company
                                     under the 1940 Act. See "Investment
                                     Objective," "Investment Policies,"
                                     Investment Restrictions" and "Taxation -
                                     United States Taxes."
- --------------------------------------------------------------------------------
Tax Considerations                   Withholding and/or other taxes may apply in
                                     the countries in which the Fund invests,
                                     which will reduce the Fund's cash return in
                                     those countries. The Fund intends to elect,
                                     when eligible, to "pass-through" to the
                                     Fund's stockholders, as a deduction or
                                     credit, the amount of foreign income and
                                     similar taxes paid by the Fund. See
                                     "Taxation."
- --------------------------------------------------------------------------------
Anti-Takeover Provisions             The Fund has provisions in its Articles of
                                     Amendment and Restatement that could have
                                     the effect of limiting the ability of other
                                     entities or persons to acquire control of
                                     the Fund. The By-Laws provide for a
                                     staggered election of those Directors who
                                     are elected by the holders of Common Stock,
                                     with such Directors divided into three
                                     classes, each having a term of three years.
                                     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 Board of Directors. This
                                     system of electing Directors may be
                                     regarded as having an anti-takeover effect,
                                     and may have the effect of maintaining the
                                     continuity of management and thus may make
                                     it more difficult for the Fund's
                                     Stockholders to change the majority of
                                     Directors.

                                     Articles Supplementary approved by the
                                     Board of Directors subject the Fund to
                                     certain provisions of the Maryland General
                                     Corporation Law with respect to unsolicited
                                     takeovers. These provisions limit the
                                     ability of stockholders to remove
                                     directors, provide that the number of
                                     directors may be fixed only by the Board,
                                     provide that certain vacancies on the Board
                                     of Directors may be filled only by the vote
                                     of the remaining directors, and limit the
                                     ability of stockholders to call a special
                                     meeting of stockholders. See "Capital Stock
                                     - Certain Provisions of the Articles,
                                     By-Laws and Articles Supplementary."
- --------------------------------------------------------------------------------

                                       13

<PAGE>

                                  FUND EXPENSES

<TABLE>
<S>                                                                                            <C>
Shareholder Transaction Expenses
     Sales Load (as a percentage of the Subscription Price)/(1)/ ..........................    3.75%
     Dividend Reinvestment and Cash Purchase Plan Fees ....................................     None

Annual Expenses (as a percentage of net assets attributable to the Common Stock/(2)/
     Management Fee .......................................................................    0.__%
     Administrative Fee ...................................................................    0.__%
     Other Expenses/(3)/ ..................................................................    0.__%
                                                                                               -----
     Total Annual Expenses/(4)/ ...........................................................        %
                                                                                               =====
</TABLE>

____________________
(1)  The Fund has agreed to pay the Dealer Managers a fee for their financial
     advisory, marketing and soliciting services equal to an aggregate of 3.75%
     of the aggregate Subscription Price for the Shares issued pursuant to an
     aggregate of the Offer and to reimburse the Dealer Managers for their
     out-of-pocket expenses up to $150,000. In addition, the Fund has agreed to
     pay a fee to each of the Subscription Agent and the Information Agent
     estimated to be $[______] and $327,000, respectively, which includes
     reimbursement for their out-of-pocket expenses related to the Offer. Total
     offering expenses are estimated to be $__________, which assumes that the
     Offer is fully subscribed. These fees will be borne by the Fund and
     indirectly by all of the Fund's Stockholders, including those who do not
     exercise their Rights. See "Distribution Arrangements."

(2)  Fees payable under the Management Agreement and Administration Agreement
     are calculated on the basis of the Fund's average weekly net assets
     applicable to the Fund's Common and Preferred Stock. See "Management
     Agreement and Advisory Agreement" and "Administration Agreement." "Other
     Expenses" have been estimated for the current fiscal year.

(3)  Other Expenses include amounts paid to Aberdeen Asset Management Investor
     Relations, an affiliate of the Fund's Investment Manager and Investment
     Adviser, for investor relations services.

(4)  The indicated ____% expense ratio assumes that the Offer is fully
     subscribed, yielding estimated net proceeds of approximately $___________
     (assuming a Subscription Price of $____) and that, as a result, based on
     the Fund's net assets of $________ million attributable to holders of
     Common Stock on [Record Date]; the net assets attributable to Stockholders
     would be $_______ million. It also assumes that net assets attributable to
     Stockholders will not increase or decrease due to currency fluctuations.
     The indicated ratio reflects all expenses of the Offer.

         The above table is intended to assist the Fund's investors in
understanding the various costs and expenses associated with investing in the
Fund through the exercise of Rights.

Hypothetical Example

         An investor would directly or indirectly pay the following expenses on
a $1,000 investment in the Fund, assuming a 5% annual return:

            1 Year           3 Years              5 Years           10 Years
            ------           -------              -------           --------
              $__              $__                  $__8               $__

         This Hypothetical Example assumes that all dividends and other
distributions are reinvested at NAV and that the percentage amounts listed under
Annual Expenses above remain the same in the years shown. (See also Note (4)
above for assumptions made in calculating the expenses in this Hypothetical
Example.) The above tables and the assumption in the Hypothetical Example of a
5% annual return are required by regulation of the SEC applicable to all
investment companies; the assumed 5% annual return is not a prediction of, and
does not represent, the projected or actual performance of the Fund's shares.
This Hypothetical Example reflects all recurring and non-recurring fees,
including underwriting discounts and commissions. For more complete descriptions
of certain of the Fund's costs and expenses, see "Management of the Fund,"
"Management Agreement and Advisory Agreement" and "Administration Agreement."

         This Hypothetical Example should not be considered a representation of
past or future expenses, and the Fund's actual expenses may be greater or less
than those shown.

                                       14

<PAGE>

                              FINANCIAL HIGHLIGHTS

     The following information, insofar as it relates to each year of the
10-year period ended October 31, 2001, has been audited by
PricewaterhouseCoopers LLP, independent accountants for the Fund, whose reports
thereon were unqualified. This information should be read in conjunction with
the Financial Statements and Notes thereto and incorporated by reference in this
Prospectus.

<TABLE>
<CAPTION>
                                                 Six Months
                                                   Ended
                                                  April 30,                                          For the Year Ended October 31,
                                                    2002         2001            2000         1999         1998         1997
                                                 (unaudited)
<S>                                              <C>             <C>             <C>          <C>          <C>          <C>
Per Share Operating Performance:/(1)/
Net asset value per common share, beginning of
period.........................................  $     4.65      $     4.78      $     6.20   $     7.33   $     8.85   $     9.93
                                                 ----------      ----------      ----------   ----------   ----------   ----------
Net investment income..........................        0.20            0.53            0.60         0.67         0.82         0.87
Net realized and unrealized gain (loss) on
     investments and foreign currencies........        0.16           (0.01)          (1.28)       (0.35)       (1.45)       (0.96)
                                                 ----------      ----------      ----------   ----------   ----------   ----------
     Total from investment operations..........        0.36            0.52           (0.68)        0.32        (0.63)       (0.09)
                                                 ----------      ----------      ----------   ----------   ----------   ----------
Dividends from net investment income to
     preferred stockholders....................       (0.02)          (0.11)          (0.13)       (0.10)       (0.17)       (0.17)
Dividends from net investment income to common
     stockholders..............................       (0.22)          (0.22)          (0.39)       (0.63)       (0.51)       (0.82)
Tax return of capital distribution ............          --           (0.32)          (0.21)          --           --           --
Distributions from net capital and currency
     gains to preferred stockholders...........          --              --           (0.01)       (0.02)          --           --
Distributions from net capital and currency
     gains to common stockholders..............          --              --              --        (0.09)       (0.21)          --
                                                 ----------      ----------      ----------   ----------   ----------   ----------
     Total dividends and distributions.........       (0.24)          (0.65)          (0.74)       (0.84)       (0.89)       (0.99)
                                                 ----------      ----------      ----------   ----------   ----------   ----------
Capital reduction with respect to issuance of
     shares....................................          --              --              --        (0.61)          --           --
Increase resulting from Fund share
     repurchase ...............................          --/(2)/         --/(2)/         --           --           --           --
Net asset value per common
     share, end of period .....................  $     4.77      $     4.65      $     4.78   $     6.20   $     7.33   $     8.85
                                                 ==========      ==========      ==========   ==========   ==========   ==========
Market value per common share,
     end of period ............................  $     4.45      $     4.02      $     3.86   $     6.00   $    5.625   $    8.125
                                                 ==========      ==========      ==========   ==========   ==========   ==========
Number of shares of common stock outstanding
     (000 omitted).............................     264,699         266,782         267,377      267,377      194,744      194,744
Total Investment Return Based on:/(3)/
     Market value..............................       17.02%          18.74%         (26.73)%      20.96%      (23.19)%      (0.42)%
     Net asset value...........................        8.44%          10.91%         (12.19)%      (5.15)%      (8.10)%      (2.37)%
Ratios to Average Net Assets of Common
Stockholders/Supplementary Data:/(4)/
Expenses/(5)/..................................        1.53%           1.51%           1.36%        1.26%        1.47%        1.25%
Net investment income available to common
     stockholders..............................        7.85%           8.48%           8.22%        8.34%        8.51%        7.39%
Portfolio turnover rate........................          18%             47%             64%          89%          61%          85%
Net assets of common stockholders, end of
     Period (000 omitted.......................  $1,262,309      $1,241,841      $1,279,346   $1,657,365   $1,428,142   $1,723,025
Average net assets of common stockholders
     (000 omitted).............................  $1,237,975      $1,299,044      $1,530,638   $1,775,894   $1,485,690   $1,848,378
Senior securities (preferred stock)
     outstanding (000 omitted).................  $  600,000      $  600,000      $  600,000   $  600,000   $  600,000   $  600,000
Asset coverage of preferred stock
     at period-end ............................         312%            308%            316%         376%         338%         387%

<CAPTION>
                                                 1996        1995        1994         1993        1992
<S>                                              <C>         <C>         <C>          <C>         <C>
Per Share Operating Performance/(2)/
Net asset value per common share, beginning of
period.........................................  $     9.36  $     8.82  $    10.09   $     9.61  $  11.31
                                                 ----------  ----------  ----------   ----------  --------
Net investment income..........................        0.87        0.93        1.01         1.19      1.29
Net realized and unrealized gain (loss) on
     investments and foreign currencies........        1.13        1.16       (1.03)        0.58     (1.42)
                                                 ----------  ----------  ----------   ----------  --------
     Total from investment operations..........        2.00        2.09       (0.02)        1.77     (0.13)
                                                 ----------  ----------  ----------   ----------  --------
Dividends from net investment income to
     preferred stockholders....................       (0.14)      (0.17)      (0.12)       (0.11)    (0.14)
Dividends from net investment income to common
     stockholders..............................       (0.83)      (0.83)      (0.84)       (1.08)    (1.10)
Return of capital distribution tax ............         --          --          --           --        --
Distributions from net capital and currency
     gains to preferred stockholders...........       (0.02)      (0.01)      (0.01)       (0.01)    (0.01)
Distributions from net capital and currency
     gains to common stockholders..............       (0.03)      (0.15)      (0.17)       (0.08)    (0.29)
                                                 ----------  ----------  ----------   ----------  --------
     Total dividends and distributions.........       (1.02)      (1.16)      (1.14)       (1.28)    (1.54)
                                                 ----------  ----------  ----------   ----------  --------
Capital reduction with respect to issuance of
     shares....................................       (0.41)      (0.39)      (0.11)       (0.01)    (0.03)(6)
Increase resulting from Fund share
     repurchase ...............................          --          --          --           --        --
Net asset value per common share,
     end of period ............................  $     9.93  $     9.36  $     8.82   $    10.09  $   9.61
                                                 ==========  ==========  ==========   ==========  ========
Market value per common share,
     end of period ............................  $     8.94  $     9.31  $     9.56   $    10.25  $  10.00
                                                 ==========  ==========  ==========   ==========  ========
Number of shares of common stock outstanding
     (000 omitted).............................     194,560     155,079     123,476      104,036   101,804
Total investment return based on:/(3)/
     Market value..............................        5.59%       8.78%       3.32%       15.00%     4.11%
     Net asset value...........................       16.73%      18.54%      (3.19)%      17.80%    (3.22)%
Ratios to Average Net Assets of Common
Stockholders/Supplementary Data:/(4)/
Expenses/(5)/..................................        1.29%       1.47%       1.41%        1.44%     1.43%
Net investment income available to common
     stockholders..............................        7.71%       8.96%       9.48%       11.00%    10.89%
Portfolio turnover rate........................          63%         50%         34%          23%       17%
Net assets of common stockholders, end of
     period Period (000 omitted)...............  $1,931,894  $1,452,205  $1,088,631   $1,050,084  $977,933
Average net assets of common stockholders
     (000 omitted).............................  $1,627,916  $1,201,383  $1,174,394   $1,011,324  $938,072
Senior securities (preferred stock)
     outstanding (000 omitted).................  $  600,000  $  475,000  $  400,000   $  350,000  $300,000
Asset coverage of preferred stock
     at period-end ............................         422%        406%        372%         400%      426%
</TABLE>

                                       15

<PAGE>

- -------------------------

/(1)/     Calculated based upon average shares outstanding during the period.

/(2)/     Less than $0.005 per share.

/(3)/     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 the purposes of this calculation to be reinvested at
          prices obtained under the Fund's dividend reinvestment plan. Total
          investment return does not reflect brokerage commissions. Generally,
          total investment return based on net asset value will be higher than
          total investment return based on market value in years 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
          years. 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 years.

/(4)/     Ratios are calculated on the basis of income, expenses and preferred
          share dividends applicable to both the common and preferred shares
          relative to the average net assets of common stockholders. Expense
          ratios relative to the average net assets of common and preferred
          stockholders are 1.03%, 1.03%, 0.98%, 0.95%, 0.95%, 0.94%, 1.05%,
          1.05%, 1.07, and 1.08, respectively. Ratios to average net assets of
          net investment income before preferred stock dividends are 8.86%,
          10.76%, 10.52%, 9.79%, 10.72%, 9.17%, 9.16%, 10.83%, 10.68%, and
          12.13%, respectively. Ratios to average net assets of preferred stock
          dividends are 1.01%, 2.28%, 2.30%, 1.45%, 2.21%, 1.78%, 1.45%, 1.87%,
          1.20% and 1.13%, respectively.

/(5)/     Includes expenses of both preferred and common stock.

/(6)/     Includes rights offering costs and dealer manager fees of $0.06 per
          share offset by an increase to net asset value of $0.03 per share
          resulting from issuing the shares at $9.75 per share.

Note: Contained above is operating performance for a share of Common Stock
outstanding, total investment return, ratios to average net assets of
Stockholders and other supplemental data for each of the periods indicated. This
information has been determined based upon financial information provided in the
financial statements and market value data for the Fund's Common Stock.

                                       16

<PAGE>

                                    THE OFFER

Terms of the Offer

         The Fund is issuing to Record Date Stockholders transferable Rights to
subscribe for an aggregate of [# of shares] Shares. Each Record Date Stockholder
is being issued one transferable Right for each whole share of Common Stock
owned on the Record Date. The number of Rights issued to a Record Date
Stockholder will be rounded up to the nearest number of Rights evenly divisible
by __. In the case of shares of Common Stock held of record by Cede & Co.
("Cede"), as nominee for the Depository Trust Company ("DTC"), or any other
depository or nominee, the number of Rights issued to Cede or such other
depository or nominee will be adjusted to permit rounding up (to the nearest
number of Rights evenly divisible by __) of the Rights to be received by
beneficial owners for whom it is the holder of record only if Cede or such other
depository or nominee provides to the Fund on or before the close of business on
______, 2002 a written representation of the number of Rights required for such
rounding.

         The Rights entitle the Stockholder to acquire at the Subscription Price
one Share for every __ Rights held (1-for-__). Rights may be exercised at any
time during the Subscription Period, which commences on [Start Subscription
Period] and ends at 5:00 p.m., New York City time, on [Expiration Date], unless
extended by the Fund ("Expiration Date"). A Stockholder's right to acquire,
during the Subscription Period at the Subscription Price, one Share for every __
Rights held is hereinafter referred to as the "Primary Subscription." A
Stockholder who exercises Rights pursuant to the Primary Subscription is
hereinafter referred to as an "Exercising Stockholder." The Rights will be
listed for trading on the AMEX under the symbol "FAX.R" during the course of the
offering. The Shares, once issued, will be listed on the AMEX and the PSE under
the symbol "FAX." The Rights will be evidenced by subscription certificates
which will be mailed to Record Date Stockholders, except as discussed below
under "Foreign Stockholders."

         The Rights are transferable among Record Date Stockholders and
non-Record Date Stockholders. Holders of Rights who are not Record Date
Stockholders ("Rights Holders") may purchase Shares in the Primary Subscription,
but are not entitled to subscribe for Shares pursuant to the Over-Subscription
Privilege described below. Record Date Stockholders and Rights Holders
purchasing Shares in the Primary Subscription and Record Date Stockholders who
purchase Shares pursuant to the Over-Subscription Privilege are hereinafter
referred to as "Exercising Rights Holders."

         Shares not subscribed for in the Primary Subscription will be offered,
pursuant to the Over-Subscription Privilege, to those Record Date Stockholders
who have exercised all Rights issued to them and who wish to acquire more than
the number of Shares they are entitled to purchase pursuant to the exercise of
their Rights. Shares acquired pursuant to the Over-Subscription Privilege are
subject to allotment, as more fully discussed below under "The Offer-
Over-Subscription Privilege." For purposes of determining the number of Shares a
Stockholder may acquire pursuant to the Offer, broker-dealers, trust companies,
banks or others whose Shares are held of record by Cede or by any other
depository or nominee will be deemed to be the holders of the Rights that are
issued to Cede or the other depository or nominee on their behalf.

         The first regular monthly distribution to be paid on Shares acquired
upon exercise of Rights will be the first monthly distribution the record date
for which occurs after the issuance of those Shares. The record date for
distributions is generally the last business day of the month in which the
distribution is declared. It is the Fund's present policy to pay distributions
on the Friday nearest the middle of the month following the record date for such
distribution. As a result of the timing of the Offer, with respect

                                       17

<PAGE>

to Shares issued in connection with Rights exercised before the end of the
Subscription Period, it is expected that the first distribution received by the
holders of those Shares will be paid in mid-[month year]. With respect to Shares
issued in connection with Rights exercised after the end of the Subscription
Period, it is expected that the first distribution received by the holders of
those Shares will be paid in mid-[month year].

         There is no minimum number of Rights which must be exercised in order
for the Offer to close.

Background

         The Fund seeks to maintain a stable monthly cash distribution
consistent with its investment objective of seeking current income. To this end,
in February 1989, the Fund began paying a regular monthly distribution in place
of the previous quarterly payments and, in September 1993, the Fund adopted a
policy of supplementing monthly distributions paid out of available net
investment income with realized capital gains. In September 1999, the Fund
adopted a managed distribution policy that calls for supplementing monthly
distributions paid out of available net investment income with realized capital
gains and returns of paid-in capital to the extent necessary to maintain a
stable monthly distribution rate. As interest rates have fallen in Australia, on
the basis of the advice of the Investment Manager and Investment Adviser, the
Fund's Board of Directors from time to time has reduced the level of monthly
distribution payments (principally downward) to reflect the then-current
interest rate environment. The last reduction occurred in February 2002, when
the regular monthly distribution was reduced from 4.5 cents per share of Common
Stock to 3.5 cents per share of Common Stock.

         In August 1997, in order to address the prospect of declining
distributions, the Fund's Investment Manager and Investment Adviser, proposed to
the Board of Directors that the Fund's investment policies be expanded to enable
the Fund to invest up to 35% of its assets in Asian debt securities. The
Investment Manager and Investment Adviser indicated that in their view the
relatively high level of interest rates then available in Asian markets compared
with interest rates then available in Australia and New Zealand offered an
attractive opportunity to increase the Fund's net investment income above the
then current level, although they also emphasized that this would introduce an
extra element of risk in implementing the Fund's investment objective. After
in-depth consideration, the Fund's Board determined to recommend to the Fund's
Common and Preferred Stockholders that the Fund's investment policies and
investment structure be amended in order to enable the Fund to invest up to 35%
of its assets in Asian debt securities. That proposal was approved by the Common
and Preferred stockholders on May 14, 1998.

         The introduction of Asian bonds into the portfolio in 1998 contributed
significantly to yield, currency and capital gains. The portfolio's Asian bond
exposure has incorporated both U.S. dollar denominated Asian bonds (Yankees) and
Asian currency-denominated bonds. This diversification has partly shielded the
portfolio from the negative impact of the depreciation, versus the U.S. dollar,
of the Australian dollar over the past four years. The Investment Manager and
Investment Adviser believed that it would be desirable to extend the investment
mandate to boost earnings.

         In December 2000, the Investment Manager and Investment Adviser
proposed to the Board of Directors that the Fund's investment objective and
policies be further amended to permit the Fund to increase its investments in
Asian debt securities to 80% of the Fund's total assets. The Investment Manager
and Investment Adviser indicated that, related to this proposal, they would also
recommend that the Fund: (i) increase the percentage of the Fund's total assets
permitted to be invested in securities rated below investment grade; (ii) have
the ability to invest in securities rated below B-; (iii) increase its then
current geographic and currency limits; and (iv) adjust its derivatives
constraints in line with the proposed new geographic and currency limits. The
Investment Manager and Investment Adviser indicated that, in

                                       18

<PAGE>

their view, the relatively higher level of interest rates available in Asian
markets compared with interest rates then available in Australia and New Zealand
offered an attractive opportunity to enhance the Fund's earnings. The Investment
Manager and Investment Adviser suggested several scenarios, which were not
mutually exclusive, by which the Fund could implement an increased exposure into
Asia, including the sale of portfolio securities, the use of proceeds from
maturing Australian debt securities, or the raising of additional capital. The
Board considered the funding scenarios presented by the Investment Manager and
Investment Adviser, and also noted that the Investment Manager and Investment
Adviser did not envisage investing the maximum allowable percentage of 80% of
the Funds assets immediately upon obtaining stockholder approval of the
proposal. The Investment Manager and Investment Adviser proposed to implement
the increased investment in Asian debt securities gradually, with an initial
target of 50% investment in Asia over the 18 months following stockholder
approval.

Purpose of the Offer

         Following approval by the Common and Preferred stockholders in June
2001, the Investment Manager and Investment Adviser began a thorough analysis of
how best to implement the increased investment in Asian debt securities in terms
of both the timing of investment and its appropriate funding. The Fund's
increased investment in Asian debt securities has been constrained by the fact
that the Fund could potentially have to realize significant foreign exchange
losses if Australian securities are sold or mature and the proceeds are
converted into the relevant Asian local currencies or into U.S. dollars in order
to purchase Asian debt securities. However, by using the proceeds of a rights
offering rather than reallocating assets currently in its portfolio, the Fund
would not necessarily have to realize the substantial foreign exchange losses
that might otherwise be realized if the portfolio were internally restructured.

         At the regularly scheduled meeting of the Board of Directors held on
June 19, 2002, the Investment Manager proposed that the Directors consider
approval of a rights offering, and outlined the reasons therefor. The Directors
determined that, prior to the next regularly scheduled meeting of the Board of
Directors to be held in September 2002, the Rights Offering Committee of the
Board should evaluate a formal proposal of the Investment Manager and the
Investment Adviser. The Directors agreed that the Rights Offering Committee
should consider the benefits and costs to the Fund's existing stockholders,
including the dilutionary impact of a rights offering relative to the other
options available to the Fund, before making a recommendation to the Board. The
Rights Offering Committee is composed of four Directors: Messrs. Neville J.
Miles, William J. Potter, Peter D. Sacks and John T. Sheehy, who are not
"interested persons" (as that term is defined in Section 2(a)(19) of the 1940
Act) of the Fund, the Investment Manager, the Investment Adviser or the Dealer
Managers.

         In August 2002, the Investment Manager and Investment Adviser jointly
prepared a lengthy written report addressing the timing of further investments
in Asian debt securities and the most appropriate method of funding any further
investments in light of then current market conditions ("Aberdeen Report"). The
Aberdeen Report concluded that further investments in Asian debt securities
should be funded using a combination of (i) the proceeds of selective selling of
existing Australian assets to purchase increased Asian and New Zealand domestic
bonds; and (ii) the proceeds of a rights offering to fund further investment in
Asian Yankee bonds. The Aberdeen Report presented a variety of ratios of number
of rights to number of outstanding shares for the Board of Directors to consider
when determining whether to approve the Offer.

         The Aberdeen Report was first circulated to the members of the Rights
Offering Committee for their review. Subsequently, on August 22, 2002, the
Rights Offering Committee met with representatives of the Investment Manager and
the Investment Adviser to consider the Aberdeen Report. On August 27, 2002, the
Rights Offering Committee again met with representatives of the Investment
Manager and the Investment Adviser, together with representatives of a potential
dealer manager. During both of these

                                       19

<PAGE>

meetings, as well as on other occasions, the members of the Rights Offering
Committee had the opportunity to consult with counsel to the Independent
Directors of the Fund ("Independent Counsel"), as well as with counsel to the
Fund, the Investment Manager and the Investment Adviser ("Fund Counsel). After
extensive discussions, the Rights Offering Committee agreed to recommend to the
full Board that the Fund proceed with the Offer. The Aberdeen Report was then
circulated to the full Board of Directors, together with the recommendation of
the Rights Offering Committee.

         The full Board considered the matter at its regular quarterly meeting
held on September 12, 2002. The members of the Rights Offering Committee
reviewed with the full Board the provisions of the Aberdeen Report, and
explained the reasons why the Committee had determined to recommend that the
Board approve the Offer. The Directors then engaged in an extensive discussion
regarding the proposal and the Aberdeen Report with representatives of the
Investment Manager and the Investment Adviser. During this meeting, as well as
on other occasions, the independent directors had the opportunity to consult
with Independent Counsel and Fund Counsel. The Board determined, by the
unanimous vote of all of the Directors who are not "interested persons" (as that
term is defined in Section 2(a)(19) of the 1940 Act) of the Fund, the Investment
Manager, the Investment Adviser or the Dealer Managers, as well as the unanimous
vote of the full Board, to authorize the Fund to engage in a rights offering.
The Directors authorized the members of the Rights Offering Committee to make
further determinations regarding the terms and structure of the Offer, upon
consultation with the representatives of the Investment Manager and the
Investment Adviser, the dealer managers, Independent Counsel and Fund Counsel.

         On October 3, 2002, the members of the Rights Offering Committee met
with representatives of the Investment Manager, the Investment Adviser, a
potential dealer manager, Independent Counsel and Fund Counsel. A lengthy
discussion was held, during which the Committee determined that the reasons for
the Fund to engage in the Offer remained compelling. The Committee agreed to
recommend to the full Board that the Fund proceed with the Offer and file a
registration statement with the SEC. The Board subsequently unanimously approved
proceeding with the Offer and filing the registration statement.

         The Investment Manager and Investment Adviser believe that an increase
in the size of the Fund should result in an incidental modest reduction in the
Fund's expense ratio, which would be of long-term benefit to Stockholders. The
Offer also seeks to reward Stockholders by giving them the right to purchase
additional Shares at a discount, although Stockholders who do not fully exercise
their Rights will own, upon completion of the Offer, a smaller proportional
interest in the Fund than they owned prior to the Offer. See "The Offer" and
"Risk Factors and Special Considerations."

         THERE CAN BE NO ASSURANCE THAT THE FUND OR ITS STOCKHOLDERS WILL
ACHIEVE ANY OF THE FOREGOING OBJECTIVES OR BENEFITS THROUGH THE OFFER.

         The Board of Directors has also considered the impact of the Offer on
the Fund's NAV per share. The Subscription Price per share is $____, which
represents a ____% discount to the Fund's NAV per share as of _________, 2002
[(the last trading date on which the Fund publicly reported its net asset value
prior to the date of this Prospectus)]. Assuming that all rights are exercised
and there is no change in the Fund's NAV per share, the Offer (after expenses)
should result in a decrease in the Fund's NAV per share, and, therefore, the
Offer (after expenses) is expected to result in a dilution to the Fund's NAV per
share, which could be substantial. Although the Fund has sought to restrict
potential dilution, the extent of dilution depends on the amount, if any, by
which the Subscription Price less fees paid to the Dealer Managers and other
expenses of the Offer represents a discount to NAV on the date new Shares are
issued.

                                       20

<PAGE>

         In determining that the Offer was in the best interests of the Fund and
its stockholders, the Board of Directors retained the Dealer Managers to provide
the Fund with financial advisory, marketing and soliciting services related to
the Offer, including the structure, timing and terms of the Offer. In addition
to the foregoing, the Board of Directors considered, among other things, using a
variable pricing versus fixed pricing mechanism, the benefits and drawbacks of
conducting a non-transferable versus a transferable rights offering, the effect
on the Fund if the Offer is under-subscribed and the experience of the Dealer
Managers in conducting rights offerings.

         The Fund has made five prior rights offerings which the Investment
Manager and Investment Adviser believe had a generally favorable effect on
returns to Common Stock holders. In each case, tactical investment of the
proceeds enabled the Fund to continue to make distributions despite declining
interest rates. In the case of the 1992 rights offering, the 1995 rights
offering, the 1996 rights offering and the 1998 rights offering, the Fund used
the net proceeds to capture higher yields then available, and in 1993 it sought
to reduce the Fund's exposure to long-term securities in order to reduce
volatility in the Fund's NAV in a period of changing market conditions.

         In the case of the Fund's prior rights offerings in 1992, 1994, 1995
and 1996, the Fund sought to emphasize investment in the Australian Eurobond
market and to provide modest reductions in the Fund's expense ratio. In this
respect, overall, the Fund's investment in Australian dollar Eurobonds rose from
15.8% of its total assets at October 31, 1992, immediately prior to the
investment of the proceeds of the 1992 offering, to 24% of the Fund's total
assets at January 31, 1994, the last day of the quarter in which the proceeds of
the 1993 offer were invested. Prior to the 1995 rights offering, 33.8% of the
Fund's total assets were invested in Eurobonds. Following the investment of the
proceeds of that offering, the Fund's holding in Eurobonds represented 36.9% of
its assets. Immediately prior to the 1996 rights offering, 26.24% of the Fund's
total assets were invested in Eurobonds. Following the investment of the
proceeds of the 1996 rights offering, the Fund's holding in Eurobonds
represented 28.2% of its assets at October 31, 1996 and 30.8% of its assets at
April 30, 1997. The Fund intends to continue its investment approach of
emphasizing the Eurobond markets, where securities are exempt from the 10%
withholding tax imposed on domestic Australian issues. See "Taxation -
Australian Taxes."

         The Fund's expense ratio was also favorably affected by the rights
offerings. For the six months ended April 30, 2002 and the ten fiscal years
ended October 31, 2001, 2000, 1999, 1998, 1997, 1996, 1995, 1994, 1993 and 1992,
the Fund's annualized expense ratios were, respectively, 1.53%, 1.51%, 1.36%,
1.26%, 1.47%, 1.25%, 1.29%, 1.47%, 1.41%, 1.44% and 1.43%, compared with expense
ratios of 1.59% and 1.54% for the 1991 and 1990 fiscal years. In the opinion of
the Investment Adviser, the expense ratios for the 1999, 1997, 1996, 1995, 1994
and 1992 fiscal years (which are the fiscal years in which the proceeds of the
1998, 1996, 1995, 1993 and 1992 rights offerings were invested) were favorably
affected by the rights offerings, since the proceeds served to offset a decrease
in the total net assets of the Fund in those years occasioned by unfavorable
currency and market value movements.

         Although the Fund has sought to restrict potential dilution, the extent
of dilution depends on the amount, if any, by which the Subscription Price less
fees paid to the Dealer Managers and other expenses of the Offer represents a
discount to NAV on the date new Shares are issued. The dilution was $0.03 per
share in the 1992 offering, $0.11 per share in the case of the 1993 offering,
$0.38 per share in the case of the 1995 offering, $0.40 per share in the case of
the 1996 offering, and $0.61 per share in the case of the 1998 offering.

         Because their fees are based on the magnitude of the Fund's assets, the
Fund's Investment Manager and Investment Adviser, as well as the Administrator,
will benefit from the Offer. See "Management Agreement and Advisory Agreement."
It is not possible to state precisely the amount of additional compensation
these entities will receive as a result of the Offer because it is not known how

                                       21

<PAGE>

many Shares will be subscribed for and because the net proceeds of the Offer
will be invested in additional portfolio securities which will fluctuate in
value.

         Although the Board of Directors has no present intention of proposing
further rights offerings or further Preferred Stock offerings, the Board may
consider, from time to time, making additional offerings when, in its view,
investment opportunities are presented that lend themselves to the investment of
new funds and further rights offerings or further Preferred Stock offerings
would be in the best interests of the Fund and its stockholders. Any rights
offerings will be made in accordance with the 1940 Act, but may or may not be
made on terms similar to the Offer.

Over-Subscription Privilege

         Shares not subscribed for by Record Date Stockholders or Rights Holders
("Excess Shares") will be offered, by means of the Over-Subscription Privilege,
to the Record Date Stockholders who have exercised all exercisable Rights issued
to them and who wish to acquire more than the number of Shares for which the
Rights issued to them are exercisable. Record Date Stockholders should indicate,
on the Subscription Certificate which they submit with respect to the exercise
of the Rights issued to them, how many Excess Shares they are willing to acquire
pursuant to the Over-Subscription Privilege. If sufficient Excess Shares remain,
all Record Date Stockholders over-subscription requests will be honored in full.
If Record Date Stockholder requests for Shares pursuant to the Over-Subscription
Privilege exceed the Excess Shares available, the available Excess Shares will
be allocated pro-rata among Record Date Stockholders who oversubscribe based on
the number of Rights originally issued to such Record Date Stockholders. The
percentage of remaining Shares each over-subscribing Exercising Stockholder may
acquire will be rounded down to result in delivery of whole Shares. The
allocation process may involve a series of allocations to assure that the total
number of Shares available for over-subscriptions is distributed on a pro-rata
basis.

         Banks, brokers, trustees and other nominee holders of Rights will be
required to certify to the Subscription Agent, before any Over-Subscription
Privilege may be exercised with respect to any particular beneficial owner, as
to the aggregate number of Rights exercised pursuant to the Primary Subscription
and the number of Shares subscribed for pursuant to the Over-Subscription
Privilege by such beneficial owner and that such beneficial owner's Primary
Subscription was exercised in full. Nominee Holder Over-Subscription Forms and
Beneficial Owner Certification Forms will be distributed to banks, brokers,
trustees and other nominee holders with the Subscription Certificates.

         The Fund will not offer or sell in connection with the Offer any Shares
that are not subscribed for pursuant to the Primary Subscription or the
Over-Subscription Privilege.

         The Fund has been advised that certain Directors that own
shares in the Fund, who owned _____ shares in the aggregate on the Record Date,
intend to exercise all of the Rights initially issued to them. If additional
Shares remain after all over-subscriptions other than the over-subscriptions
submitted by these Directors are honored in full, such Directors may purchase
all or any of the remaining Shares. If additional Shares do not remain after all
over-subscriptions by Stockholders other than such Directors are honored, then
such Directors will not receive Shares pursuant to the Over-Subscription
Privilege. Rule 144 under the Securities Act of 1933, as amended ("1933 Act"),
generally provides that an "affiliate" of the Fund is entitled to sell, within
any three-month period, a number of shares that does not exceed the greater of
1% of the then outstanding shares of Common Stock or the average weekly reported
trading volume of the Common Stock during the four calendar weeks preceding the
sale. Sales under Rule 144

                                       22

<PAGE>

are also subject to certain restrictions on the manner of sale, to notice
requirements and to the availability of current public information about the
Fund. In addition, any profit resulting from a Director's sale of shares within
a period of less than six months from the purchases may have to be returned to
the Fund.

The Subscription Price

         The Subscription Price for the Shares to be issued pursuant to the
Offer will be $____ per Share.

         The Fund announced the Offer after the close of trading on the AMEX on
_______, 2002. The net asset value per share of Common Stock at the close of
business on _______, 2002 (the last trading date on which the Fund publicly
reported its net asset value prior to the announcement) and on ____________,
2002 (the last trading date on which the Fund publicly reported its net asset
value prior to the date of this Prospectus) was $_____ and $_____, respectively,
and the last reported sales price of a share of the Fund's Common Stock on the
AMEX on those dates was $_____ and $______, respectively.

Expiration of the Offer

         The Offer will expire at 5:00 p.m., New York City time, on [Expiration
Date], 2002, unless extended by the Fund. The Rights will expire on the
Expiration Date and thereafter may not be exercised.

         Any extension of the Offer will be followed as promptly as practicable
by announcement thereof, and in no event later than 9:00 a.m., New York City
time, on the next business day following the previously scheduled Expiration
Date. Without limiting the manner in which the Fund may choose to make such
announcement, the Fund will not, unless otherwise required by law, have any
obligation to publish, advertise or otherwise communicate any such announcement
other than by making a release to the Dow Jones News Service or such other means
of announcement as the Fund deems appropriate.

Subscription Agent

         The subscription agent is [name] ("Subscription Agent"). The
Subscription Agent will receive for its administrative, processing, invoicing
and other services as Subscription Agent, a fee estimated to be approximately
$[_______] which includes reimbursement for all out-of-pocket expenses related
to the Offer. The Subscription Agent is also the Fund's transfer agent,
dividend-paying agent and registrar for the Common Stock. Questions regarding
the Subscription Certificates should be directed by mail to [name] [address] or
by telephone to [telephone number] (toll free). STOCKHOLDERS MAY ALSO SUBSCRIBE
FOR THE OFFER BY CONTACTING THEIR BROKER-DEALER, TRUST COMPANY, BANK, OR OTHER
NOMINEE.

         Completed Subscription Certificates must be sent together with proper
payment of the Subscription Price for all Shares subscribed for in the Primary
Subscription and the Over-Subscription Privilege (for Record Date Stockholders)
to [name] by one of the methods described below. Alternatively, Notices of
Guaranteed Delivery may be sent by facsimile to (____) ____-______ to be
received by the Subscription Agent prior to 5:00 p.m., New York City time, on
the Expiration Date. Facsimiles should be confirmed by telephone at (____)
____-______. The Fund will accept only properly completed and executed
Subscription Certificates actually received at any of the addresses listed
below, prior to 5:00 p.m., New York City time, on the Expiration Date or by the
close of business on the third business day after the Expiration Date following
timely receipt of a Notice of Guaranteed Delivery. See "Payment for Shares"
below.

================================================================================
    Subscription Certificate
        Delivery Method                                   Address/Number
================================================================================

                                       23

<PAGE>

================================================================================
    Subscription Certificate
        Delivery Method                            Address/Number
- --------------------------------------------------------------------------------
By Notice of Guaranteed Delivery     Contact your broker-dealer, trust company,
                                     bank, or other nominee to notify the Fund
                                     of your intent to exercise the Rights.

- --------------------------------------------------------------------------------
By First Class Mail Only             Aberdeen Asia-Pacific Income Fund, Inc.
                                     [name of subscription agent]
(No Overnight /Express Mail)         [address]
- --------------------------------------------------------------------------------
By Hand to New York Delivery Window  Aberdeen Asia-Pacific Income Fund, Inc.
                                     Securities Transfer & Reporting Services,
                                     Inc.
                                     [name of subscription agent]
                                     [address]
- --------------------------------------------------------------------------------
By Express Mail or Overnight Courier Aberdeen Asia-Pacific Income Fund, Inc.
                                     [name of subscription agent]
                                     [address]
================================================================================

         DELIVERY TO AN ADDRESS OTHER THAN ONE OF THE ADDRESSES LISTED ABOVE
WILL NOT CONSTITUTE VALID DELIVERY.

Information Agent

         Any questions or requests for assistance concerning the method of
subscribing for Shares or for additional copies of this Prospectus or
Subscription Certificates or Notices of Guaranteed Delivery may be directed to
the Information Agent at its telephone number and address listed below:

                     The Information Agent for the Offer is:

                              Georgeson Shareholder
                              Communications, Inc.

                                 17 State Street
                               New York, NY 10004
                     Toll Free: (800) ____-_____, Ext. ____
                                       or
                        Call Collect: (____) _____-______

         Stockholders may also contact their brokers or nominees for information
with respect to the Offer. The Information Agent will receive a fee estimated to
be $327,000, which includes reimbursement for its out-of-pocket expenses related
to the Offer.

Methods for Exercising Rights

         Rights are evidenced by Subscription Certificates that, except as
described below under "Foreign Restrictions," will be mailed to Record Date
Stockholders or, if a Stockholder's shares are held by Cede or any other
depository or nominee on their behalf, to Cede or such depository or nominee.
Rights may be exercised by completing and signing the Subscription Certificate
that accompanies this Prospectus and mailing it in the envelope provided, or
otherwise delivering the completed and signed Subscription Certificate to the
Subscription Agent, together with payment in full for the Shares at the
Subscription

                                       24

<PAGE>

Price by the Expiration Date. Rights may also be exercised by contacting your
broker, banker or trust company, who can arrange, on your behalf, to guarantee
delivery of payment and delivery of a properly completed and executed
Subscription Certificate pursuant to a Notice of Guaranteed Delivery by the
close of business on the third Business day after the Expiration Date. A fee may
be charged for this service. Completed Subscription Certificates and related
payments must be received by the Subscription Agent prior to 5:00 p.m., New York
City time, on or before the Expiration Date (unless payment is effected by means
of a Notice of Guaranteed Delivery as described below under "Payment for
Shares") at the offices of the Subscription Agent at the address set forth
above. Fractional shares will not be issued upon the exercise of Rights.

         Exercising Stockholders Who Are Record Owners. Exercising Stockholders
who are owners of record may choose either option set forth under "Payment for
Shares" below. If time is of the essence, alternative (2) will permit delivery
of the Subscription Certificate and payment after the Expiration Date.

         Stockholders Whose Shares Are Held by a Nominee. Stockholders whose
shares of Common Stock are held by a nominee, such as a bank, broker or trustee,
must contact that nominee to exercise their Rights. In that case, the nominee
will complete the Subscription Certificate on behalf of the Stockholder and
arrange for proper payment by one of the methods set forth under "Payment for
Shares" below.

         Nominees. Nominees who hold shares of Common Stock for the account of
others should notify the respective beneficial owners of the shares as soon as
possible to ascertain the beneficial owners' intentions and to obtain
instructions with respect to the Rights. If the beneficial owner so instructs,
the nominee should complete the Subscription Certificate and submit it to the
Subscription Agent with the proper payment as described below under "Payment for
Shares" below.

         All questions as to the validity, form, eligibility (including times of
receipt and matters pertaining to beneficial ownership) and the acceptance of
subscription forms and the Subscription Price will be determined by the Fund,
which determinations will be final and binding. No alternative, conditional or
contingent subscriptions will be accepted. The Fund reserves the right to reject
any or all subscriptions not properly submitted or the acceptance of which
would, in the opinion of Fund's counsel, be unlawful.

Payment for Shares

         Stockholders who wish to acquire Shares pursuant to the Offer may
choose between the following methods of payment:

              1.      An Exercising Rights Holder may send the Subscription
Certificate together with payment for the Shares acquired in the Primary
Subscription and any additional Shares subscribed for pursuant to the
Over-Subscription Privilege (for Record Date Stockholders) to the Subscription
Agent based on the Subscription Price of $____ per Share. To be accepted, the
payment, together with the executed Subscription Certificate, must be received
by the Subscription Agent at one of the Subscription Agent's offices set forth
above, prior to 5:00 p.m., New York City time, on the Expiration Date. The
Subscription Agent will deposit all funds received by it for the purchase of
Shares into a segregated interest-bearing account (the interest from which will
accrue to the benefit of the Fund) pending proration and distribution of Shares.
A PAYMENT PURSUANT TO THIS METHOD MUST BE IN U.S. DOLLARS BY MONEY ORDER OR
CHECK DRAWN ON A BANK OR BRANCH LOCATED IN THE UNITED STATES, MUST BE PAYABLE TO
ABERDEEN ASIA-PACIFIC INCOME FUND, INC. AND MUST ACCOMPANY A PROPERLY COMPLETED
AND EXECUTED SUBSCRIPTION CERTIFICATE FOR SUCH SUBSCRIPTION CERTIFICATE TO BE
ACCEPTED. EXERCISE BY THIS METHOD IS SUBJECT TO ACTUAL COLLECTION OF CHECKS BY
5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED
PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, STOCKHOLDERS ARE

                                       25

<PAGE>

STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF A CERTIFIED OR
CASHIER'S CHECK OR MONEY ORDER.

                 2.     Alternatively, an Exercising Rights Holder may acquire
Shares, and a subscription will be accepted by the Subscription Agent if, prior
to 5:00 p.m., New York City time, on the Expiration Date, the Subscription Agent
has received a Notice of Guaranteed Delivery by facsimile or otherwise from a
financial institution that is a member of the Securities Transfer Agents
Medallion Program, the Stock Exchange Medallion Program or the NYSE Medallion
Signature Program guaranteeing delivery of (i) payment of the Subscription Price
of $____ per Share for the Shares subscribed for in the Primary Subscription and
any additional Shares subscribed for pursuant to the Over-Subscription Privilege
(for Record Date Stockholders), and (ii) a properly completed and executed
Subscription Certificate. The Subscription Agent will not honor a Notice of
Guaranteed Delivery unless a properly completed and executed Subscription
Certificate and full payment for the Shares is received by the Subscription
Agent by the close of business on ___________, 2002, the third business day
after the Expiration Date.

         On a date within eight business days following the Expiration Date
("Confirmation Date"), the Subscription Agent will send to each Exercising
Rights Holder (or, if shares of Common Stock are held by Cede or any other
depository or nominee, to Cede or such other depository or nominee) a
confirmation showing (i) the number of Shares purchased pursuant to the Primary
Subscription and (ii) the number of Shares, if any, acquired pursuant to the
Over-Subscription Privilege (for Record Date Stockholders). All payments by an
Exercising Rights Holder must be in U.S. dollars by money order or check drawn
on a bank or branch located in the United States and payable to ABERDEEN
ASIA-PACIFIC INCOME FUND, INC.

         The Subscription Agent will deposit all funds received by it prior to
the final payment date into a segregated interest-bearing account (which
interest will accrue to the benefit of the Fund) pending proration and
distribution of the Shares.

         WHICHEVER OF THE TWO METHODS DESCRIBED ABOVE IS USED, ISSUANCE OF THE
SHARES PURCHASED IS SUBJECT TO COLLECTION OF CHECKS AND ACTUAL PAYMENT. If a
holder of Rights who subscribes for Shares pursuant to the Primary Subscription
or Over-Subscription Privilege (for Record Date Stockholders) does not make
payment of any amounts due by the Expiration Date or the date guaranteed
payments are due under a notice of guaranteed delivery, the Subscription Agent
reserves the right to take any or all of the following actions: (i) find other
Record Date Stockholders for such subscribed and unpaid for Shares; (ii) apply
any payment actually received by it toward the purchase of the greatest whole
number of Shares which could be acquired by such holder upon exercise of the
Primary Subscription and/or Over-Subscription Privilege, and/or (iii) exercise
any and all other rights or remedies to which it may be entitled, including,
without limitation, the right to set off against payments actually received by
it with respect to such subscribed Shares.

         THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE FUND WILL BE AT THE ELECTION AND RISK OF THE
EXERCISING RIGHTS HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH
CERTIFICATES AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO
ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO 5:00
P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL
CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, YOU ARE STRONGLY URGED TO
PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK OR MONEY
ORDER.

         All questions concerning the timeliness, validity, form and eligibility
of any exercise of Rights will be determined by the Fund, whose determinations
will be final and binding. The Fund in its sole

                                       26

<PAGE>

discretion may waive any defect or irregularity, or permit a defect or
irregularity to be corrected within such time as it may determine, or reject the
purported exercise of any Right. Subscriptions will not be deemed to have been
received or accepted until all irregularities have been waived or cured within
such time as the Fund determines in its sole discretion. The Subscription Agent
will not be under any duty to give notification of any defect or irregularity in
connection with the submission of Subscription Certificates or incur any
liability for failure to give such notification.

     EXERCISING RIGHTS HOLDERS WILL HAVE NO RIGHT TO RESCIND THEIR SUBSCRIPTION
AFTER RECEIPT OF THEIR PAYMENT FOR SHARES BY THE SUBSCRIPTION AGENT, EXCEPT AS
PROVIDED BELOW UNDER "NOTICE OF NAV DECLINE."

Sale of Rights

     The Rights are Transferable until the Expiration Date. The Rights will be
listed for trading on the AMEX, subject to notice of issuance. The Fund will
use its best efforts to ensure that an adequate trading market for the Rights
will exist, although no assurance can be given that a market for the Rights will
develop. Trading in the Rights on the AMEX is expected to be conducted on a
"when issued" basis beginning on or about __________, 2002, until and including
on or about ___________, 2002, and thereafter are expected to trade on a
"regular-way" basis until and including ____________, 2002, the last business
day prior to the Expiration Date. Exercising Rights Holders are encouraged to
contact their broker, bank or financial advisor for more information about
trading of the rights.

     Sales Through Subscription Agent and Dealer Managers. Record Date
Stockholders who do not wish to exercise any or all of their Rights may instruct
the Subscription Agent to sell any unexercised Rights through or to the Dealer
Managers. Subscription Certificates representing the Rights to be sold through
or to the Dealer Managers must be received by the Subscription Agent on or
before ____________, 2002, (or if the offer is extended, until two business days
prior to the Expiration Date). Upon the timely receipt by the Subscription Agent
of appropriate instructions to sell Rights, the Subscription Agent will ask the
Dealer Managers either to purchase or to use its best efforts to complete the
sale and the Subscription Agent will remit the proceeds of sale to the selling
Record Date Stockholder. If the Rights can be sold, sales of such Rights will be
deemed to have been effected at the weighted-average price received by the
Dealer Managers on the day such Rights are sold. The sale price of any Rights
sold to the Dealer Managers will be based upon the then current market price for
the Rights. The Dealer Managers will also attempt to sell all Rights which
remain unclaimed as a result of Subscription Certificates being returned by the
postal authorities to the Subscription Agent as undeliverable as of the fourth
business day prior to the Expiration Date. The Subscription Agent will hold the
proceeds from those sales for the benefit of such non-claiming Record Date
Stockholders until such proceeds are either claimed or revert to the state.
There can be no assurance that the Dealer Managers will purchase or be able to
complete the sale of any such Rights and neither the Fund nor the Dealer
Managers has guaranteed any minimum sales price for the Rights. If a Record Date
Stockholder does not utilize the services of the Subscription Agent and chooses
to use another broker-dealer or other financial institution to sell Rights, then
the other broker dealer or financial institution may charge a fee to sell the
Rights.

     Other Transfers. The Rights evidenced by a Subscription Certificate may be
transferred in whole by endorsing the Subscription Certificate for transfer in
accordance with the accompanying instructions. A portion of the Rights evidenced
by a single Subscription Certificate (but not fractional Rights) may be
transferred by delivering to the Subscription Agent a Subscription Certificate
properly endorsed for transfer, with instructions to register such portion of
the Rights evidenced thereby in the name of the transferee and to issue a new
Subscription Certificate to the transferee evidencing such transferred Rights.
In such event, a new Subscription Certificate evidencing the balance of the
Rights, if any, will be issued

                                       27

<PAGE>

to the Record Date Stockholder or, if the Record Date Stockholder so instructs,
to an additional transferee. The signature on the Subscription Certificate must
correspond with the name as written upon the face of the Subscription
Certificate in every particular, without alteration or enlargement, or any
change. A signature guarantee must be provided by an eligible financial
institution as defined in Rule 17Ad-15 of the Securities Exchange Act of 1934,
as amended ("1934 Act"), subject to the standards and procedures adopted by the
Fund.

     Record Date Stockholders wishing to transfer all or a portion of their
Rights should allow at least five business days prior to the Expiration Date
for: (i) the transfer instructions to be received and processed by the
Subscription Agent; (ii) a new Subscription Certificate to be issued and
transmitted to the transferee or transferees with respect to transferred Rights,
and to the transferor with respect to retained Rights, if any; and (iii) the
Rights evidenced by such new Subscription Certificate to be exercised or sold by
the recipients thereof. Neither the Fund nor the Subscription Agent nor the
Dealer Managers shall have any liability to a transferee or transferor of Rights
if Subscription Certificates are not received in time for exercise or sale prior
to the Expiration Date.

     Except for the fees charged by the Subscription Agent and Dealer Managers
(which will be paid by the Fund), all commissions, fees and other expenses
(including brokerage commissions and transfer taxes) incurred or charged in
connection with the purchase, sale or exercise of Rights will be for the account
of the transferor of the Rights, and none of such commissions, fees or expenses
will be paid by the Fund, the Subscription Agent or the Dealer Managers.

     The Fund anticipates that the Rights will be eligible for transfer through,
and that the exercise of the Primary Subscription (but not the Over-Subscription
Privilege) may be effected through, the facilities of DTC. Rights exercised
through DTC are referred to as "DTC Exercised Rights." Record Date Stockholders
of DTC Exercised Rights may exercise the Over-Subscription Privilege in respect
of such DTC Exercised Rights by properly executing and delivering to the
Subscription Agent, at or prior to 5:00 p.m., New York City time, on the
Expiration Date, a Nominee Holder Over-Subscription Subscription Certificate or
a substantially similar form satisfactory to the Subscription Agent, together
with payment of the Subscription Price for the number of Shares for which the
Over-Subscription Privilege is to be exercised.

Foreign Restrictions

     Subscription Certificates will not be mailed to Record Date Stockholders
whose record addresses are outside the United States (the term "United States"
includes the states, the District of Columbia, and the territories and
possessions of the United States) ("Foreign Record Date Stockholders"). Foreign
Record Date Stockholders will receive written notice of he Offer. The Rights to
which such Subscription Certificates relate will be held by the Subscription
Agent for such Foreign Record Date Stockholders' accounts until instructions are
received to exercise the Rights. If no instructions have been received by 5:00
p.m., New York City time on __________, 2002, three business days prior to the
Expiration Date, the Rights of those Foreign Record Date Stockholders will be
transferred by the Subscription Agent to the Dealer Managers who will either
purchase the Rights or use their best efforts to sell the Rights. The net
proceeds, if any, from the sale of those Rights by or to the Dealer Managers
will be remitted to Foreign Record Date Stockholders.

Notice of NAV Decline

     The Fund, as required by the SEC's registration form, will suspend the
Offer until it amends this Prospectus if, subsequent to the date of this
Prospectus, the Fund's NAV declines more than 10% from its

                                       28

<PAGE>

NAV as of that date. Accordingly, the Expiration Date would be extended and Fund
would notify Record Date Stockholders of the decline and permit Exercising
Rights Holders to cancel their exercise of Rights.

Delivery of Stock Certificates

     Participants in the Fund's Dividend Reinvestment and Cash Purchase Plan
("Plan") will have any Shares that they acquire pursuant to the Offer credited
to their Stockholder dividend reinvestment accounts in the Plan. Stockholders
whose Shares are held of record by Cede or by any other depository or nominee on
their behalf or their broker-dealers' behalf will have any Shares that they
acquire credited to the account of Cede or the other depository or nominee. With
respect to all other Stockholders, stock certificates for all Shares acquired
will be mailed after payment for all the Shares subscribed for has cleared,
which may take up to 15 days from the date of receipt of the payment.

     The first regular monthly distribution to be paid on Shares acquired upon
exercise of Rights will be the first monthly distribution the record date for
which occurs after the issuance of the Shares. The Shares issued in the Offer
will not be entitled to the distribution to be declared to Stockholders of
record on [month day, year] which is payable in [month year]. Whether a
Stockholder is entitled to the distribution to be declared to Stockholders of
record on [month day, year] which is payable in [month year] will depend on the
date Shares are actually issued to the Stockholder.

Federal Income Tax Consequences of the Offer

     For Federal income tax purposes, neither the receipt nor the exercise of
the Rights by Stockholders will result in taxable income to holders of Common
Stock, and no loss will be realized if the Rights expire without exercise.

     A Record Date Stockholder's basis in a Right will be zero unless either (i)
the fair market value of the Right on the date of distribution is 15% or more of
the fair market value of the Shares with respect to which the Right was
distributed, or (ii) the Record Date Stockholder elects, in his or her Federal
income tax return for the taxable year in which the Right is received, to
allocate part of the basis of the Shares to the Right. If either of clauses (i)
and (ii) is applicable, then if the Right is exercised, the Record Date
Stockholder will allocate his or her basis in the Shares with respect to which
the Right was distributed between the Shares and the Right in proportion to the
fair market values of each on the date of distribution.

     The holding period of a Right received by a Record Date Stockholder
includes the holding period of the shares of Common Stock with regard to which
the Right is issued. If the Right is exercised, the holding period of the Shares
acquired begins on the date the Right is exercised.

     If a Right is sold, a gain or loss will be realized by the holder in an
amount equal to the difference between the basis of the Right sold and the
amount realized on its disposition.

     A Record Date Stockholder's basis for determining gain or loss upon the
sale of a Share acquired upon the exercise of a Right will be equal to the sum
of the Record Date Stockholder's basis in the Right, if any, and the
Subscription Price per Share. A Record Date Stockholder's gain or loss
recognized upon a sale of a Share acquired upon the exercise of a Right will be
capital gain or loss (assuming the Share was held as a capital asset at the time
of sale) and will be long-term capital gain or loss if the Share is held for
more than one year.

     The foregoing is a general summary of the material U.S. federal income tax
consequences of the Offer under the provisions of the U.S. Internal Revenue Code
of 1986, as amended ("Code"), and

                                       29

<PAGE>

Treasury regulations presently in effect that are generally applicable to Record
Date Stockholders that are United States persons within the meaning of the Code,
and does not cover foreign, state or local taxes. The Code and Treasury
regulations are subject to change by legislative or administrative action, which
may be retroactive. Exercising Rights Holders should consult their tax advisors
regarding specific questions as to foreign, Federal, state or local taxes.

ERISA Considerations

     Stockholders who are employee benefit plans subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (including
corporate savings and 401(k) plans), Keogh or H.R. 10 plans of self-employed
individuals and individual retirement accounts (collectively, "Retirement
Plans") should be aware that additional contributions of cash to a Retirement
Plan (other than rollover contributions or trustee-to-trustee transfers from
other Retirement Plans) in order to exercise Rights would be treated as
contributions to the Retirement Plan and, when taken together with contributions
previously made, may result in, among other things, excise taxes for excess or
nondeductible contributions. In case of Retirement Plans qualified under Section
401(a) of the Code and certain other Retirement Plans, additional cash
contributions could cause the maximum contribution limitations of Section 415 of
the Code or other qualification rules to be violated. It may also be a
reportable distribution and there may be other adverse tax and ERISA
consequences if Rights are sold or transferred by a Retirement Plan.

     Retirement Plans and other tax exempt entities, including governmental
plans, should also be aware that if they borrow in order to finance their
exercise of Rights, they may become subject to the tax on unrelated business
taxable income ("UBTI") under Section 511 of the Code. If any portion of an
Individual Retirement Account ("IRA") is used as security for a loan, the
portion so used is also treated as distributed to the IRA depositor.

     ERISA contains fiduciary responsibility requirements, and ERISA and the
Code contain prohibited transaction rules that may impact the exercise of
Rights. Due to the complexity of these rules and the penalties for
noncompliance, Retirement Plans should consult with their counsel and other
advisers regarding the consequences of their exercise of Rights under ERISA and
the Code.

                                 USE OF PROCEEDS

     If [# of shares] Shares are sold at the Subscription Price of $________,
the net proceeds of the Offer are estimated to be approximately $____________,
after deducting commissions and expenses payable by the Fund estimated at
approximately $___________. The Investment Manager and Investment Adviser
anticipate that investment of the net proceeds in Asian and New Zealand debt
securities, in accordance with the Fund's investment objective and policies,
will take approximately two to four months from their receipt by the Fund,
depending on market conditions and the availability of appropriate securities.
See "The Offer - Purpose of the Offer," "Investment Objective and Policies" and
"Investment Restrictions."

     Pending such investment, the proceeds will be invested in U.S. government
securities and other high-quality, short-term money market instruments, which is
not in accordance with the Fund's primary investment objective. The Fund invests
in various developing and developed markets whose liquidity may delay the
investment of the proceeds in a manner consistent with the Fund's primary
investment objective. There is a risk that the Fund will not be able to invest
all of the proceeds within four months. To the extent that the Fund is not able
to invest the proceeds within four months, the proceeds will continue to be
invested in U.S. government securities. As a result of this short-term
investment of the proceeds, a lower yield may be realized.

                                       30

<PAGE>

                                    THE FUND

     The Fund is a non-diversified, closed-end management investment company
registered under the 1940 Act. It commenced operations in April 1986 and was the
first publicly offered United States registered investment company organized to
invest primarily in Australian debt securities. The Fund's investment objective
is to seek current income. The Fund may also achieve incidental capital
appreciation. The Fund was incorporated under the laws of the State of Maryland
on March 14, 1986 under the name "The First Australia Prime Income Fund, Inc."
Effective May 1, 2001, the Fund's name was changed to "Aberdeen Asia-Pacific
Income Fund, Inc." to reflect the fact that the Fund's Investment Manager and
Investment Adviser had been acquired by Aberdeen Asset Management PLC in 2000,
and to further reflect the Fund's new investment objective and policies approved
by stockholders in 2001.

     In May 1998, the Fund's Common and Preferred stockholders approved a series
of proposals allowing the Fund, among other things, to: (1) invest up to 35% of
its assets in Asian debt securities; (2) invest in Asian debt securities for
which there is no established relevant market; (3) invest up to 15% of its total
assets in Asian debt securities rated, or considered by the Investment Manager
to be, below investment grade at the time of investment, and to reduce the
percentage of its investments in debt securities which are, or are considered by
the Investment Manager to be, rated AA or A quality; and (4) utilize derivatives
in furtherance of its investment objective and policies.

     In June 2001, the Fund's Common and Preferred Stockholders approved a
series of proposals allowing the Fund, among other things, to: (1) increase to a
maximum of 80% the Fund's investments in Asian debt securities; (2) reduce the
minimum investment in Australian debt securities to 20%; (3) increase to a
maximum of 35% the Fund's investments in Asian debt securities rated, or
considered by the Investment Manager to be, below investment grade at the time
of investment; (4) invest to a maximum of 10% in securities rated, or considered
by the Investment Manager to be, below B-; and (5) expand the categories of
derivatives which may be utilized by the Fund.

Description of Common Stock

     The Fund is authorized to issue 400,000,000 shares of Common Stock. Each
share has equal voting, dividend, distribution and liquidation rights. The
shares outstanding and the Shares offered hereby, when issued and paid for
pursuant to the terms of the Offer, will be fully paid and non-assessable.
Shares of Common Stock are not redeemable and have no preemptive, conversion or
cumulative voting rights.

     The number of shares of Common Stock outstanding as of July 31, 2002 was
264,654,000. The number of shares outstanding as of July 31, 2002 adjusted to
give effect to the Offer, assuming that all Rights are exercised and the
applicable Shares issued, would be __________.

     The Fund's shares are publicly held and listed and traded on the AMEX and
the PSE. Prior to April 9, 2001, the NAV of the Fund was determined on the last
business day of each week. On April 9, 2001, the Fund began determining its NAV
on a daily basis. The following table sets forth for the quarters indicated the
highest and lowest Friday (or other last business day of a week) closing prices
on the AMEX per share of Common Stock and the NAV per share and the premium or
discount from NAV on the date of each of the high and low market prices for
periods through April 9, 2001. For periods ending after April 9, 2001, the table
sets forth for the quarters indicated the highest and lowest daily closing
prices on the AMEX per share of Common Stock and the NAV per share and the
premium or discount from NAV on the date of each of the high and low market
prices. The table also sets forth the number of shares traded on the AMEX during
the respective quarter.

                                       31

<PAGE>

<TABLE>
<CAPTION>
                                    NAV Per Share
                                         on                           AMEX
                                      Date of                 Market Price Per Share
                                    Market Price              and Related Premium (+)/            Reported
                                   High and Low/(1)/             Discount (-)/(2)(3)/               AMEX
                                 -------------------   ------------------------------------
Quarter Ended                     High         Low          High                  Low              Volume
- -------------                    ------       ------   ----------------     ---------------    --------------
<S>                              <C>          <C>      <C>                  <C>                <C>
January 31, 2000..........        6.27         6.23     6.0625/(3.31)%        5.00/(19.74)%      65,951,500
April 30, 2000 ...........        5.99         5.57     5.1875/(13.40)%       4.25/(23.70)%      50,653,600
July 31, 2000.............        5.62         5.39     4.625/(17.70)%        4.125/(23.47)%     36,714,700
October 31, 2000..........        5.58         4.88     4.625/(17.11)%        3.75/(23.16)%      39,986,000
January 31, 2001..........        5.28         4.92     4.42/(16.29)%         3.83/(22.15)%      59,526,100
April 30, 2001............        5.26         4.64     4.32/(17.87)%         3.68/(20.69)%      42,087,400
July 31, 2001.............        4.80         4.82     4.14/(13.75)%         3.83/(20.54)%      28,581,600
October 31, 2001..........        4.91         4.51     4.40/(10.39)%         3.86/(14.41)%      30,914,100
January 31, 2002..........        4.76         4.57     4.17/(12.39)%         3.84/(15.97)%      41,236,700
April 30, 2002............        4.77         4.55     4.45/(6.71)%          3.97/(12.75)%      40,654,200
July 31, 2002.............        5.06         4.81     4.93/(2.57)%          4.28/(11.02)%      51,062,300
</TABLE>

- ---------------------
(1)  Based on the Fund's computations.

(2)  Highest and lowest Friday (or other last business day of the week) closing
     market price per share as reported on the AMEX for periods through April 9,
     2001. Highest and lowest daily closing market price per share as reported
     on the AMEX for periods ending after April 9, 2001.

(3)  "Related Premium(+)/Discount(-)" represents the premium or discount from
     NAV of the shares on the date of the respective high and low market price
     for the respective quarter.

     On [Record Date], the per share NAV was $____ and the share market price
was $____, representing a ____% discount from such NAV.

     The Fund's shares have traded in the market above, at and below NAV since
the commencement of the Fund's operations. The Fund cannot determine the reasons
for the Fund's shares trading at a premium or discount to NAV, nor can the Fund
predict whether its shares will trade in the future at a premium or discount to
NAV, and if so, the level of any premium or discount. Shares of closed-end
investment companies frequently trade at a discount from NAV.

     The Fund's shares have traded in the market below, at and above NAV since
the commencement of the Fund's operations. However, it is frequently the case
that Fund shares trade at a discount to net asset value. In an effort to
minimize the spread between market value and net asset value that may otherwise
exist, on March 1, 2001, the Board of Directors approved a stock repurchase
program. The stock repurchase program allows the Fund to repurchase up to 10% of
its outstanding Common Stock in the open market during any 12-month period, if
and when the discount to net asset value is at least 10%. Through July 31, 2002,
there have been 2,723,300 shares repurchased and cancelled under this program.

     When the Fund repurchases its shares for a price below their net asset
value, the net asset value of the shares that remain outstanding will be
enhanced, but this does not necessarily mean that the market price of those
outstanding shares will be affected, either positively or negatively. Any
acquisition of shares by the Fund will decrease the total assets of the Fund and
therefore may increase the Fund's expense ratio. Furthermore, if the Fund
borrows to finance share repurchases, interest on such borrowings will reduce
the Fund's net investment income. If the Fund must liquidate a portion of its
investment portfolio in connection with a share repurchase, such liquidation
might be at a time when independent investment judgment would not dictate such
action, increasing the Fund's overall portfolio turnover and making it more
difficult for the Fund to achieve its investment objective.

                                       32

<PAGE>

Description of Preferred Stock

     The Fund currently has outstanding an aggregate of 24,000 shares of
Preferred Stock. The Preferred Stock has been issued in nine series, Series A
through I. The first three series were issued on January 19, 1989, the fourth
series on August 1, 1989, the fifth series on December 16, 1992, the sixth
series on December 20, 1993, the seventh series on July 27, 1995 and the eighth
and ninth series on September 9, 1996. The shares of Preferred Stock are senior
securities having priority over the shares of Common Stock as to distribution of
assets and payment of dividends. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Fund, the holders of Preferred
Stock are entitled to receive a preferential liquidating distribution of $25,000
per share ("Liquidation Preference"), plus accrued and unpaid dividends (whether
or not declared), before any payment is made to holders of Common Stock. The
average market value of a share of Preferred Stock has been equal to the
Liquidation Preference. The following tables set forth certain information
relating to the Preferred Stock.

                           Preferred Stock, Series A-I

<TABLE>
<CAPTION>
                                                Total Amount of       Asset Coverage Per       Liquidation
                                                 Preferred Stock       $25,000 Share of       Preference Per
Period Ended                                     Outstanding/(1)/    Preferred Stock/(2)/   $25,000 Share/(3)(4)/
- ------------                                     ----------------    --------------------   ---------------------
<S>                                              <C>                 <C>                    <C>
October 31, 1992...........................        $300,000,000          $ 106,521                $25,000
October 31, 1993...........................        $350,000,000          $ 100,006                $25,000
October 31, 1994...........................        $400,000,000          $  93,040                $25,000
October 31, 1995...........................        $475,000,000          $ 101,432                $25,000
October 31, 1996...........................        $600,000,000          $  80,496                $25,000
October 31, 1997...........................        $600,000,000          $  71,793                $25,000
October 31, 1998...........................        $600,000,000          $  59,506                $25,000
October 31, 1999...........................        $600,000,000          $  69,057                $25,000
October 31, 2000...........................        $600,000,000          $  53,306                $25,000
October 31, 2001...........................        $600,000,000          $  51,743                $25,000
April 30, 2002.............................        $600,000,000          $  52,596                $25,000
</TABLE>

- -------------------
(1)  Based on the number of shares of Preferred Stock outstanding multiplied by
     the Liquidation Preference per share.

(2)  Asset coverage per share of Preferred Stock is derived by subtracting the
     aggregate Liquidation Preference of all of the series of Preferred Stock
     outstanding ($300,000,000 through 1992, $350,000,000 in 1993, $400,000,000
     in 1994, $475,000,000 in 1995 and $600,000,000 from 1996) from the total
     assets of the Fund less (i) all liabilities and indebtedness not
     represented by the Preferred Stock and (ii) any accrued but unpaid
     dividends on the Preferred Stock as at the end of the fiscal periods
     indicated. This sum is then divided by the number of shares of Preferred
     Stock outstanding.

(3)  Plus accrued and unpaid dividends, if any.

(4)  The liquidation preference as of October 31, 1995 was $100,000 per share of
     Preferred Stock, Series A-F, and $25,000 per share of Preferred Stock,
     Series G. Effective April 25, 1996, by means of stock splits, the
     liquidation preference of Preferred Stock, Series A-F was reduced to
     $25,000 per share and an additional aggregate 12,000 shares of Preferred
     Stock, Series A-F were issued.

     The dividend rates on the outstanding Preferred Stock are established
through an auction process. The dividend rates on the series A-D shares are set
every 28 days and the dividend rates on the Series E, F, G, H and I shares are
set every seven days. Generally, the dividend rate has represented a discount
from the 30-day commercial paper rate. As of July 31, 2002, the annual dividend
rates on Series A through I were, respectively, 1.899%, 1.940%, 1.880%, 2.000%,
1.800%, 1.950%, 1.870%, 1.880% and 1.850%. At these rates, the annual return the
Fund's portfolio must experience (net of expenses) in order to cover dividend
payments on all series is 0.62%.

                                       33

<PAGE>

     The Fund may use interest rate swaps to hedge the Fund's liability with
respect to the Preferred Stock. At present, the Fund has been authorized by the
Board of Directors to hedge up to one-third of the Fund's liability with respect
to the Preferred Stock. See "Portfolio Securities - Derivative Securities -
Swaps," "Risk Factors and Special Considerations - Use of Derivatives" and "Risk
Factors and Special Considerations - Preferred Stock - Leverage Risk."

     The following table is designed to illustrate the effect on the return to a
holder of the Fund's Common Stock of the leverage obtained by the issuance of
the Preferred Stock, assuming hypothetical annual returns on the Fund's
portfolio of minus 10 to plus 10 percent. As can be seen, leverage generally
increases the returns to Stockholders when portfolio returns are positive and
decreases returns when the portfolio returns are negative. Actual returns may be
greater or less than those appearing in the table and may be enhanced or
diminished by fluctuations in foreign currency. See "Risk Factors and Special
Considerations - Preferred Stock - Leverage Risk."

<TABLE>
   <S>                                                 <C>      <C>      <C>     <C>     <C>
   Assumed Portfolio Return (net of expenses)........    -10%     -5%       0%      5%     10%
   Corresponding Common Stock Return(1)..............   ____%   ____%    ____%   ____%   ____%
</TABLE>

- ------------
(1)  In order to compute "Corresponding Common Stock Return," the "Assumed
     Portfolio Return" is multiplied by the total value of Fund assets as of the
     beginning of the fiscal year (November 1, 2002) to obtain an assumed return
     to the Fund. This rate is then reduced by the value of Preferred Stock
     dividends that would be paid during the year ($__________) based on the
     dividend rates in effect at the beginning of the fiscal year (for Series A
     through I, respectively, ____%, ____%, ____%, ____%, ____%, ____%, ____%,
     ____%, and ____%) in order to determine the return available to holders of
     the Fund's Common Stock. Return available to holders of the Fund's Common
     Stock is then divided by the value of the Fund's net assets attributable to
     holders of Common Stock as of the beginning of the fiscal year
     ($_____________) to determine "Corresponding Common Stock Return."

                              INVESTMENT OBJECTIVE

     The Fund's investment objective is to seek current income. The Fund may
also achieve incidental capital appreciation. The Fund's investment objective
may not be changed without the approval of the holders of a majority of the
outstanding shares of the Common Stock and the Preferred Stock, voting together
as a single class, as well as by the holders of a majority of the outstanding
shares of the Fund's Preferred Stock voting as a separate class without regard
to series. A majority vote, as defined by the 1940 Act, means the affirmative
vote of the lesser of (i) 67% of the relevant shares represented at a meeting at
which more than 50% of such shares are represented, or (ii) more than 50% of the
relevant shares.

     For as long as the name of the Fund remains Aberdeen Asia-Pacific Income
Fund, Inc., it shall be the policy of the Fund normally to invest at least 80%
of its net assets plus the amount of any borrowings for investment purposes, in
Asian debt securities, Australian debt securities and New Zealand debt
securities. This 80% investment policy is a non-fundamental policy of the Fund
and may be changed by the Board of Directors upon 60 days' prior written notice
to stockholders.

                               INVESTMENT POLICIES

     To achieve its investment objective, the Fund may invest up to 80% of its
total assets in "Asian debt securities," which include: (1) debt securities of
Asian Country issuers, including securities issued by Asian Country governmental
entities, as well as by banks, companies and other entities which are located in
Asian Countries, whether or not denominated in an Asian Country currency; (2)
debt securities of other issuers, denominated in, or linked to, the currency of
an Asian Country, including securities issued by supranational issuers, such as
The World Bank and derivative debt securities that replicate, or substitute for,
the currency of an Asian Country; (3) debt securities issued by entities which,
although not located in an Asian Country, derive at least 50% of their revenues
from Asian Countries or have at least 50% of

                                       34

<PAGE>

their assets located in Asian Countries; and (4) debt securities issued by a
wholly-owned subsidiary of an entity located in an Asian Country, provided that
the debt securities are guaranteed by the parent entity located in the Asian
Country. With reference to items (3) and (4) above, Asian debt securities may be
denominated in an Asian Country currency or in Australian, New Zealand or U.S.
dollars. The maximum country exposure to any one Asian Country (other than
Korea) is limited to 20% of the Fund's total assets and the maximum currency
exposure to any one Asian Country currency (other than Korea) is limited to 10%
of the Fund's total assets. The maximum country exposure for Korea is limited to
40% of the Fund's total assets, and the maximum currency exposure for Korea is
limited to 25% of the Fund's total assets.

       "Asian Countries" (each, an "Asian Country") include China, Hong Kong,
India, Indonesia, Japan, Malaysia, Pakistan, the Philippines, Singapore, South
Korea, Taiwan, Thailand, and Vietnam, and such other countries on the Asian
continent approved for investment by the Board of Directors upon the
recommendation of the Investment Manager.

       At least 20% of the Fund's total assets will be invested in "Australian
debt securities," which include: (1) debt securities of Australian issuers,
including securities issued by Australian governmental entities, as well as by
banks, companies and other entities which are located in Australia, whether or
not denominated in the Australian dollar; (2) debt securities of other issuers,
denominated in, or linked to, the Australian dollar, including securities issued
by supranational issuers, such as The World Bank and derivative debt securities
that replicate, or substitute for, the Australian dollar; (3) debt securities
issued by entities which, although not located in Australia, derive at least 50%
of their revenues from Australia or have at least 50% of their assets located in
Australia; and (4) debt securities issued by a wholly-owned subsidiary of an
entity located in Australia, provided that the debt securities are guaranteed by
the parent entity located in Australia. With reference to items (3) and (4)
above, Australian debt securities may be denominated in Australian, New Zealand
or U.S. dollars.

       The Fund may also invest in "New Zealand debt securities," which include:
(1) debt securities of New Zealand issuers, including securities issued by New
Zealand governmental entities, as well as by banks, companies and other entities
which are located in New Zealand, whether or not denominated in the New Zealand
dollar; (2) debt securities of other issuers, denominated in, or linked to, the
New Zealand dollar, including securities issued by supranational issuers, such
as The World Bank and derivative debt securities that replicate, or substitute
for, the New Zealand dollar; (3) debt securities issued by entities which,
although not located in New Zealand, derive at least 50% of their revenues from
New Zealand or have at least 50% of their assets located in Zealand; and (4)
debt securities issued by a wholly-owned subsidiary of an entity located in New
Zealand, provided that the debt securities are guaranteed by the parent entity
located in New Zealand. With reference to items (3) and (4) above, New Zealand
debt securities may be denominated in Australian, New Zealand or U.S. dollars.
The maximum country exposure for New Zealand is limited to 35% of the Fund's
total assets, and the maximum currency exposure for New Zealand is limited to
35% of the Fund's total assets.

       During periods when, in the Investment Manager's judgment, economic
conditions warrant a temporary defensive investment policy, the Fund may
temporarily invest up to 100% of its assets in U.S. debt securities.

       The Fund may invest up to 10% of the Fund's total assets in secondary
market bank loans, and up to an additional 10% of the Fund's total assets in
convertible securities and other hybrid securities, and up to an additional 10%
of the Fund's total assets in asset-backed securities.

       In order to accommodate investment in Asian markets, the Fund may invest
up to 35% of its total assets in Asian debt securities rated by S&P or Moody's
(provided that, with the approval of the Fund's

                                       35

<PAGE>

Board of Directors, the ratings of other recognized rating services may be
used), or judged by the Investment Manager to be, below investment grade at the
time of investment. The Fund may invest up to 35% of its total assets in Asian
debt securities much of which may be deemed to be illiquid.

       The Fund may invest up to 10% of its total assets in securities rated by
S&P or Moody's (provided that, with the approval of the Fund's Board of
Directors, the ratings of other recognized ratings services may be used), or
judged by the Investment Manager to be, below B- at the time of investment.

       The Fund may enter into repurchase agreements with banks and
broker-dealers pursuant to which the Fund may acquire a security for a
relatively short period (usually no more than a week) subject to the obligations
of the seller to repurchase and the Fund to resell such security at a fixed time
and price. The Fund will enter into repurchase agreements only with parties who
meet creditworthiness standards approved by the Fund's Board of Directors, i.e.,
banks or broker-dealers which have been determined by the Fund's Investment
Manager to present no serious risk of becoming involved in bankruptcy
proceedings within the period contemplated by the repurchase transaction.

       The Fund may use derivatives to manage currency, interest rate and credit
risk and as a substitute for physical securities.

       As a non-diversified company, there is no investment restriction on the
percentage of the Fund's assets that may be invested at any time in the
securities of any issuer. However, the Fund intends to limit its investments in
the securities of any issuer, except for securities issued or guaranteed as to
payment of principal and interest by Australian, New Zealand or Asian Country
governmental entities, to 5% of its total assets at the time of purchase. The
Fund may invest without limitation in securities of Australian governmental
entities and may, at the time of purchase, invest up to 35% of its total assets
in New Zealand governmental securities, invest up to 40% of its total assets in
Korean governmental securities, and invest up to 15% of its total assets in
governmental securities of any Asian Country (other than Korea). The Fund
intends to invest in a variety of debt securities, with differing issuers,
maturities and interest rates, and to comply with the diversification and other
requirements of the Code applicable to regulated investment companies so that
the Fund will not be subject to U.S. Federal income taxes on its net investment
income. The average U.S. dollar weighted maturity of the Fund's portfolio is not
expected to exceed 10 years.

                              PORTFOLIO SECURITIES

       The principal types of debt securities in which the Fund is permitted to
invest include those described below. The list is not exclusive, but is
indicative of the kinds of securities which the Fund's investment objectives,
policies and restrictions permit it to buy.

Asian Debt Securities

       "Asian debt securities" include: (1) debt securities of Asian Country
issuers, including securities issued by Asian Country governmental entities, as
well as by banks, companies and other entities which are located in Asian
Countries, whether or not denominated in an Asian Country currency; (2) debt
securities of other issuers, denominated in, or linked to, the currency of an
Asian Country, including securities issued by supranational issuers, such as The
World Bank and derivative debt securities that replicate, or substitute for, the
currency of an Asian Country; (3) debt securities issued by entities which,
although not located in an Asian Country, derive at least 50% of their revenues
from Asian Countries or have at least 50% of their assets located in Asian
Countries; and (4) debt securities issued by a wholly-owned subsidiary of an
entity located in an Asian Country, provided that the debt securities are
guaranteed by the parent entity located in the Asian Country. With reference to
items (3) and (4) above,

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<PAGE>

Asian debt securities may be denominated in an Asian Country currency or in
Australian, New Zealand or U.S. dollars. The maximum country exposure to any one
Asian Country (other than Korea) is limited to 20% of the Fund's total assets
and the maximum currency exposure to any one Asian Country currency (other than
Korea) is limited to 10% of the Fund's total assets. The maximum country
exposure for Korea is limited to 40% of the Fund's total assets, and the maximum
currency exposure for Korea is limited to 25% of the Fund's total assets. "Asian
Countries" (each, an "Asian Country") include China, Hong Kong, India,
Indonesia, Japan, Malaysia, Pakistan, the Philippines, Singapore, South Korea,
Taiwan, Thailand, and Vietnam, and such other countries on the Asian continent
approved for investment by the Board of Directors upon the recommendation of the
Investment Manager.

       In order to accommodate investment in Asian markets, the Fund may invest
up to 35% of its total assets in Asian debt securities rated by S&P or Moody's
(provided that, with the approval of the Fund's Board of Directors, the ratings
of other recognized rating services may be used), or judged by the Investment
Manager to be, below investment grade at the time of investment. The Fund may
invest up to 35% of its total assets in Asian debt securities much of which may
be deemed to be illiquid. The Fund may invest up to 10% of its total assets in
securities rated by S&P or Moody's (provided that, with the approval of the
Fund's Board of Directors, the ratings of other recognized ratings services may
be used), or judged by the Investment Manager to be, below B- at the time of
investment. Debt securities rated below investment grade are sometimes referred
to as ",junk bonds." For information regarding the risks of investing in
securities rated below investment grade, see "Risk Factors and Special
Considerations - Risks Involved in Asian Investment - Credit Risk."

       The Fund is also permitted to invest in Asian Yankee bonds in order to
gain exposure to certain Asian debt markets without exposing the fund to Asian
currency risk. Asian Yankee bonds are U.S. dollar-denominated debt securities
issued by obligors located in Asian countries. The bonds may be issued in the
United States and may be registered under U.S. securities law. Asian Yankee
bonds may be purchased from brokers operating in the United States, or may be
purchased outside the United States through offices located outside the United
States of brokers doing business in the United States. Asian Yankee bonds are
subject to credit risk relating primarily to the issuer of the bond and
liquidity risk relating to the specific issue. The bonds are also affected by
movements in U.S. interest rates.

Australian Securities and New Zealand Securities

       Australian Governmental Entities. The Fund is permitted to invest in
Federal Commonwealth of Australia ("Commonwealth") government bonds and treasury
notes and state government and semi-government bonds and notes. Commonwealth
government bonds and treasury notes represent the obligations of the
Commonwealth and are sold by the Reserve Bank of Australia (the central bank)
through public tenders. Bonds have maturities up to approximately 13 years while
notes are issued in maturities of seven, 13 and 26 weeks. The Commonwealth also
guarantees as to payment of principal and interest similar debt obligations
issued by its instrumentalities. State government and semi-government bonds and
notes are issued by various states and state instrumentalities and, in the case
of state instrumentalities, are guaranteed by the applicable state government.
Maturities range from less than one year to approximately 20 years. Australian
federal and state government debt securities are frequently listed on the
Australian Stock Exchange Limited but most trading is by dealers in an active
public secondary market.

       New Zealand Governmental Entities. The Fund is permitted to invest in New
Zealand government and treasury notes and state government and semi-government
bonds and notes. New Zealand government bonds and treasury notes represent the
obligations of the government of New Zealand and are sold through public
tenders. Bonds have maturities up to 10 years. The New Zealand government also
guarantees as to payment of principal and interest similar debt obligations
issued by its

                                       37

<PAGE>

instrumentalities. State government and semi-government bonds and notes are
issued by various states and state instrumentalities and, in the case of state
instrumentalities, are guaranteed by the applicable state government. Maturities
range from less than one year to 15 years. Federal and state government debt
securities are frequently listed on the stock exchanges but most trading is by
dealers in an active public secondary market.

       Commercial Banks. The Fund is permitted to invest in bills of exchange,
certificates of deposit and promissory notes issued or guaranteed, as to payment
of principal and interest, by Australian and New Zealand commercial banks. These
commercial banks are generally comparable to U.S. banks and are subject to
regulation by Australian and New Zealand government authorities, respectively.
The Investment Manager and Investment Adviser do not believe that there are any
special risks associated with these securities arising out of the fact that they
are issued by banks. Bills of exchange are negotiable instruments, issued to
finance current transactions, which generally mature within six months and
which, are accepted or endorsed by a commercial bank and thus carry the bank's
credit. Certificates of deposit are negotiable instruments issued by commercial
banks with maturities ranging from a few days to several years. Promissory notes
are negotiable instruments endorsed and therefore guaranteed by a commercial
bank or backed by a bank letter of credit as to payment of principal and
interest. Maturities generally range up to 180 days. Bank bills, certificates of
deposit and promissory, notes are usually issued at a discount from face value
and are traded by dealers in an active public secondary market.

       Companies. The Fund is permitted to invest in publicly-traded notes and
debentures or bills of exchange issued or guaranteed as to the payment of
principal and interest by Australian and New Zealand companies, whether or not
guaranteed or backed by a commercial bank. These securities have maturities
generally ranging from less than one year to five years and are traded by
dealers in an active public secondary market.

       Australian Mortgage-Backed Securities. The Fund is permitted to invest in
Australian mortgage-backed securities, which represent part ownership by the
Fund in a pool of mortgage loans. These loans are made by private lenders and
may have guarantees from Australian federal and state governmental entities,
companies and agencies. The securities would have to satisfy the Fund's general
credit criteria to qualify for purchase. Characteristics of several of the major
mortgage-backed securities are summarized below:

              FANMACs: FANMAC securities are securities issued by a trustee
       against housing loans made through the New South Wales Department of
       Housing and consist of a series of closed trusts or pools. The mortgage
       manager is the First Australian National Mortgage Acceptance Corporation
       Ltd. ("FANMAC"). FANMAC is owned 26% by the Government of the State of
       New South Wales with the remainder owned by other institutions. The
       Government of the State of New South Wales has provided the FANMAC Trust
       with a guarantee as to availability of funds to meet payment. The
       securities have been rated by Australian Ratings Pty. Ltd. ("Australia
       Ratings") and S&P. FANMAC securities are subject to a call provision
       under which borrowers (mortgagors) can repay early and the investors in a
       particular pool can be repaid on a pro rata basis.

              NMMC AUSSIE MACS and National Mortgage Market Bonds: National
       Mortgage Market Corporation Ltd. ("NMMC") has issued both AUSSIE MACs,
       which are medium-term bearer securities, and National Mortgage Market
       Bonds. NMMC is a private company which is 26% owned by the Government of
       the State of Victoria and 74% by private institutions. Both AUSSIE MACS
       and National Mortgage Market Bonds are rated by Australian Ratings.

                                       38

<PAGE>

              MTCs: Mortgage Trust Certificates ("MTCs") are securities issued
       against specific mortgages by a trustee and are similar to "pass through"
       certificates. MTCs are issued on a continuous basis, insured by
       Australian insurance companies against both mortgage default and an early
       call, and rated by Australian Ratings.

              MMSs and ANNIE MAEs: MMSs are mortgage-backed securities issued by
       MGICA Securities Ltd., a wholly-owned subsidiary of AMP Society Ltd., an
       Australian insurance company. ANNIE MAEs are securities issued by
       Australian National Mortgage Pool Agency Ltd., an affiliate of Bank of
       America. Both MMSs and ANNIE MAEs are issued against pools of mortgages
       and are rated by Australian Ratings.

       Other Debt Securities including Australian Dollar Denominated Global or
Eurobonds. The Fund is permitted to invest in Australian and New Zealand
dollar-denominated debt securities, similar in nature to those described above,
regardless of the domicile of the issuers. Thus, the Fund is permitted to invest
in Australian and New Zealand dollar denominated global or Eurobonds that expose
the Fund to the Australian and New Zealand interest rate structure and which are
traded by reference to similar debt securities of Australian and New Zealand
domiciled issuers.

U.S. Securities

       Government. The Fund is permitted to invest in U.S. government
securities, including obligations issued or guaranteed by U.S. government
agencies or instrumentalities, some of which are backed by the full faith and
credit of the U.S. Treasury (such as direct pass-through certificates of the
Government National Mortgage Association), some of which are supported by the
right of the issuer to borrow from the U.S. government (such as obligations of
Federal Home Loan Banks), and some of which are backed only by the credit of the
issuer itself. Government obligations do not generally involve the credit risks
associated with other types of interest bearing securities, although, as a
result, the yields available from U.S. government obligations are generally
lower than the yields available from corporate interest bearing securities. Like
other interest bearing securities, however, the value of Government obligations
changes as interest rates fluctuate.

       Corporations and Banks. The Fund is permitted to invest for defensive and
other temporary purposes in U.S. corporate debt instruments rated at the time of
investment Aa or better by Moody's or AA or better by S&P, finance company and
corporate commercial paper, and other short-term obligations, in each case rated
at the time of investment Prime-1 or Prime-2 by Moody's or A-2 or better by S&P.
The Fund is also permitted to invest in obligations of U.S. Federal or state
chartered banks and bank holding companies rated at the time of investment Aa or
better by Moody's or AA or better by S&P (including certificates of deposit,
bankers' acceptances and other short-term debt obligations).

Derivative Securities

       The Fund can use derivatives with respect to its Australian fixed income
securities to modify interest rate risk, and can use over-the-counter
derivatives to hedge Australian dollar currency risk associated with investments
by the Fund in Australia. With respect to its Asian debt securities, the Fund
will invest in derivatives for two main purposes: (1) to modify interest rate
risk and adjust currency risk within the portfolio, and (2) to enable the Fund
to replicate or substitute for a particular security in order to gain access to
a particular Asian market or security, where either the physical security is too
expensive, or there is an insufficient supply of the particular security.
Derivatives will not be utilized to leverage the Fund.

                                       39

<PAGE>

       By directly investing into Asia, the Fund will take on exposure to the
currencies of the countries in which it holds securities. The Fund will seek to
manage currency risk when the perceived outlook for a particular currency is for
depreciation against other currencies. The most effective way of doing this is
through the use of currency forwards (and occasionally options), which provide
an efficient means of implementing currency strategies. Also, investment in
Asian Yankee bonds involves exposure to both fluctuations in U.S. interest rates
and the credit standing of a particular Asian issuer. There may be times when
the Fund wishes to reduce the U.S. interest rate exposure embedded in Asian
Yankee bonds. This can be done by selling U.S. Treasury Bond futures.

       Investment in Asian fixed income securities may at certain times be more
efficiently achieved using derivative securities to replicate physical
securities. These types of derivatives carry identical market price risks to the
equivalent physical securities but provide a number of transactional benefits.
For example, by using derivatives, the Fund may be able to implement investment
decisions at lower costs, increase the after-tax yield, obtain prices that are
not available in the underlying cash market, or settle in U.S. dollars. In less
developed markets, liquidity and credit quality can be enhanced and transaction
costs reduced by using derivatives rather than the underlying securities. This
is due to the fact that the investor assumes the lower counterparty risk of the
issuer of the derivatives (for example, an international bank rated A- or
better), rather than that of a (local currency) domestic issuer. In certain
circumstances, due to lack of available direct investment opportunity or
government regulations, the only means of gaining exposure to particular Asian
countries is through derivatives.

       The derivatives used for adjusting currency exposures or replicating
underlying securities and credit exposures are usually over-the-counter ("OTC")
securities. OTC securities carry credit risk associated with the counterparty
institution. See "Risk Factors and Special Considerations - Use of Derivatives."
To manage this risk, the Fund will only use counterparty institutions rated A-
or better by recognized international ratings agencies, except in the case of
Korean futures exchange margin accounts which, in some cases, are unrated. The
Fund will limit these Korean futures exchange margin accounts to 2% of total
assets. Only up to 10% of total assets may be put at risk in derivatives
transactions with any single counterparty (aggregate interest rate, currency and
credit derivatives exposure). A maximum of 20% of total assets may be at risk in
currency-linked notes. All futures and forwards are to be measured on a notional
exposure basis and, therefore, they will be cash-backed.

       A maximum of 35% of total assets may be at risk in exchange-traded
derivatives. For derivatives traded on the Sydney Futures Exchange, the maximum
gross exposure (long positions + short positions) will be 20% of total assets
and the maximum net exposure (long positions-short positions) will be 15% of
total assets. A maximum of 20% of total assets may be at risk in derivatives
traded on the Chicago Board of Trade. A maximum of 7% of total assets may be at
risk in derivatives traded on any one Asian futures exchange. The Fund will only
use the exchange-traded (as opposed to over-the-counter) interest rate
derivatives in the Australian component of its portfolio.

       The types of derivatives used by the Fund and the techniques employed may
change over time as new derivatives and strategies are developed or regulatory
changes occur. The Fund will not use derivatives where it would contravene the
guidelines set by the rating agencies for the Preferred Stock.

       In general, derivatives will not be utilized to leverage the Fund,
although they may be used to hedge the interest rate risk associated with the
Fund's outstanding leverage. The Fund may use interest rate swaps to hedge the
Fund's liability with respect to the Preferred Stock. At present, the Fund has
been authorized by its Board of Directors to hedge up to one-third of the Fund's
liability with respect to the Preferred Stock. See "Portfolio Securities -
Derivative Securities - Swaps," "Risk Factors and Special Considerations - Use
of Derivatives" and "Risk Factors and Special Considerations - Preferred Stock -
Leverage Risk."

                                       40

<PAGE>

       Forward Currency Contracts. The Fund may enter into forward currency
contracts. A forward currency contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract.

       The cost to the Fund of engaging in forward currency contracts will vary
with factors such as the length of the contract period and the market conditions
then prevailing. Because forward currency contracts are usually conducted on a
principal basis, no fees or commissions are involved, although the price charged
in the transaction includes a dealer's markup. The use of forward currency
contracts in this manner is intended to fix a rate of exchange that can be
achieved at a certain time in the future.

       Futures Contracts. The Fund may enter into futures contracts in U.S.
domestic markets or on exchanges located outside the United States for both
hedging and non-hedging purposes. Foreign markets may offer advantages such as
trading opportunities or arbitrage possibilities not available in the United
States. Foreign markets, however, may have greater risk potential than domestic
markets. For example, some foreign exchanges are principal markets so that no
common clearing facility exists and an investor may look only to the broker for
performance of the contract. In addition, any profits the Fund might realize in
trading could be eliminated by adverse changes in the exchange rate, or the Fund
could incur losses as a result of those changes. Transactions on foreign
exchanges may include both commodities which are traded on U.S. exchanges and
those which are not. Unlike trading on U.S. commodity exchanges, trading on
foreign commodity exchanges is not regulated by the Commodity Futures Trading
Commission ("CFTC").

       Engaging in these transactions involves risk of loss to the Fund which
could adversely affect the value of the Fund's net assets. No assurance can be
given that a liquid market will exist for any particular futures contract at any
particular time. Many futures exchanges and boards of trade limit the amount of
fluctuation permitted in futures contract prices during a single trading day.
Once the daily limit has been reached in a particular contract, no trades may be
made that day at a price beyond that limit or trading may be suspended for
specified periods during the trading day. Futures contract prices could move to
the limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and potentially
subjecting the Fund to substantial losses.

       Successful use of futures by the Fund also is subject to the Investment
Manager's and Investment Adviser's ability to predict correctly movements in the
direction of the relevant market, and, to the extent the transaction is entered
into for hedging purposes, to ascertain the appropriate correlation between the
transaction being hedged and the price movements of the futures contract. The
Fund may not use more than 5% of its assets for initial margin for speculative
commodity futures or options positions.

       The Fund also may purchase and write options to buy or sell those futures
contracts in which it may invest. Such investment strategies will be used for
hedging purposes and for non-hedging purposes, subject to applicable law. An
option on a futures contract provides the holder with the right to enter into a

                                       41

<PAGE>

"long" position in the underlying futures contract, in the case of a call
option, or a "short" position in the underlying futures contract, in the case of
a put option, at a fixed exercise price up to a stated expiration date or, in
the case of certain options, on such date. Upon exercise of the option by the
holder, the contract market clearinghouse establishes a corresponding short
position for the writer of the option, in the case of a call option, or a
corresponding long position in the case of a put option. In the event that an
option is exercised, the parties will be subject to all the risks associated
with the trading of futures contracts, such as payment of initial and variation
margin deposits. In addition, the writer of an option on a futures contract,
unlike the holder, is subject to initial and variation margin requirements on
the option position.

       A position in an option on a futures contract may be terminated by the
purchaser or seller prior to expiration by effecting an offsetting purchase or
sale transaction, subject to the continued availability of a liquid secondary
market, which is the purchase or sale of an option of the same type (i.e., the
same exercise price and expiration date) as the option previously purchased or
sold. The difference between the premiums paid and received represents the
Fund's profit or loss on the transaction.

       Options on futures contracts that are written or purchased by the Fund on
U.S. exchanges are traded on the same contract market as the underlying futures
contract, and, like futures contracts, are subject to regulation by the CFTC and
the performance guarantee of the exchange clearinghouse. The Fund may not use
more than 5% of its assets for initial margin for speculative commodity futures
or options positions.

       Swaps. The Fund may enter into interest rate swaps, currency swaps and
other types of available swap agreements, including swaps on securities,
financial commodities and indices, and related types of derivatives, such as
caps, collars and floors. A swap is an agreement between two parties pursuant to
which each party agrees to make one or more payments to the other on regularly
scheduled dates over a stated term, based on different interest rates, currency
exchange rates, security or commodity prices, the prices or rates of other types
of financial instruments or assets or the levels of specified indices. Under a
typical swap, one party may agree to pay a fixed rate or a floating rate
determined by reference to a specified instrument, rate or index, multiplied in
each case by a specified amount (the "notional amount"), while the other party
agrees to pay an amount equal to a different floating rate multiplied by the
same notational amount. On each payment date, the obligations of parties are
netted, with only the net amount paid by one party to the other. All swap
agreements entered into by the Fund with the same counterparty are generally
governed by a single master agreement, which provides for the netting of all
amounts owed by the parties under the agreement upon the occurrence of an event
of default, thereby reducing the credit risk to which such party is exposed.

       Swap agreements are typically individually negotiated and structured to
provide exposure to a variety of different types of investments or market
factors. Swap agreements may be entered into for hedging or non-hedging purposes
and, therefore, may increase or decrease the Fund's exposure to the underlying
instrument, rate, asset or index. Swap agreements can take many different forms
and are known by a variety of names. The Fund is not limited to any particular
form or variety of swap agreement if the Adviser determines it is consistent
with the Fund's investment objective and policies.

                                       42

<PAGE>

Secondary Market Bank Loans

       The Fund may invest up to 10% of its total assets in these loans, which
are private transactions not subject to securities laws or traded on any
exchange. Increasingly, however, they are being sold directly by banks to
investors or traded by specialized brokers, especially when the loan becomes
distressed, thereby adding liquidity to the market.

Convertible and Other Hybrid Securities

       The Fund may invest up to 10% of its total assets in these securities,
which are debt obligations that are convertible into common stock at some future
point in time. These are subject to the same rating criteria as other
fixed-income securities. Hybrid securities also include bonds with warrants
attached.

Asset Backed Securities

       The Fund may invest up to 10% of its total assets in these securities,
which are securities whose principal and interest payments are collateralized by
pools of assets, such as mortgages, auto loans, credit card receivables, leases,
installment contracts and personal property.

Private Placements

       Certain debt securities purchased by the Fund may have been placed
privately. These securities are somewhat less liquid than securities which are
widely traded by the public and there may be contractual restrictions on their
resale to the public. Therefore, although these securities may be resold in
privately negotiated transactions, the prices realized from such sales may be
less than what might have been realized on a more active public trading market.

Repurchase and Securities Lending Agreements

       The Fund is permitted to invest in repurchase agreements with banks and
broker-dealers. A repurchase agreement is a contract under which the Fund
acquires a security for a relatively short period (usually no more than one
week) subject to the obligations of the seller to repurchase and the Fund to
resell such security at a fixed time and price (representing the Fund's cost
plus interest). The Investment Manager monitors the value of such securities
daily to determine that the value equals or exceeds the repurchase price. Under
the 1940 Act, repurchase agreements are considered to be loans made by the Fund
which are collateralized by the securities subject to repurchase. Repurchase
agreements may involve risks in the event of default or insolvency of the
seller, including possible delays or restrictions upon the Fund's ability to
dispose of the underlying securities. The Fund will enter into repurchase
agreements only with parties who meet creditworthiness standards approved by the
Fund's Board of Directors, i.e., banks or broker-dealers which have been
determined by the Investment Manager to present no serious risk of becoming
involved in bankruptcy proceedings within the time frame contemplated by the
repurchase transaction.

                                       43

<PAGE>

       The Fund may also lend to banks and broker-dealers portfolio securities
with an aggregate market value of up to 15% of its total assets when it deems
advisable. Any such loans must be secured by collateral (consisting of any
combination of cash, U.S. Government securities, irrevocable letters of credit
or other high-quality debt securities) in an amount at least equal (on a daily
marked-to-market basis) to the current market value of the securities loaned.
The Fund may terminate the loans at any time and obtain the return of the
securities. The Fund will continue to receive any interest or dividends paid on
the loaned securities and will continue to have voting rights with respect to
the securities. In connection with the lending of its portfolio securities, the
Fund is exposed to the risk of delay in recovery of the securities loaned or
possible loss of right in the collateral should the borrower become insolvent.
State Street Bank and Trust Company provides securities lending services for the
Fund pursuant to a Securities Lending Authorization Agreement. Under that
Agreement, State Street has the sole discretion to determine the
creditworthiness standards of the securities borrowers. Under most
circumstances, the Fund will be indemnified by State Street from any losses
which may be experienced in the event that the securities borrowers approved by
State Street default by delay or failure to return the borrowed securities.

Borrowings

       The Fund has the ability to borrow money to the extent permitted, or as
not prohibited, by the 1940 Act. The 1940 Act requires the 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.

                             INVESTMENT RESTRICTIONS

       The Fund has elected to be classified as a non-diversified closed-end
management investment company and will invest its assets only in a manner
consistent with this classification under applicable law.

       The Fund will not:

              1.     issue senior securities, except (a) insofar as the Fund may
be deemed to have issued a senior security in connection with any repurchase or
securities lending agreement or any borrowing agreement permitted by these
investment restrictions and (b) that the Fund may issue one or more series of
its preferred stock, if permitted by its Articles of Incorporation, including
Articles of Amendment and Articles Supplementary thereto;

              2.     borrow money, except as permitted under, or to the extent
not prohibited by, the 1940 Act, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;

              3.     engage in the business of underwriting securities issued by
others, except to the extent that the Fund may be deemed to be an underwriter in
connection with the disposition of portfolio securities;

              4.     purchase or sell real estate, which term does not include
securities of companies that deal in real estate or mortgages or investments
secured by real estate or interests therein, except that the Fund reserves
freedom of action to hold and to sell real estate acquired as a result of the
Fund's ownership of securities;

              5.     purchase physical commodities or contracts relating to
physical commodities;

                                       44

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              6.     make loans to other persons, except as permitted under, or
to the extent not prohibited by, the 1940 Act, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time;

              7.     concentrate its investments in a particular industry or
group of industries, as those terms are used in the 1940 Act, as amended or
modified by regulatory authority having jurisdiction from time to time, except
that at any time the Fund has invested more than 25% of its total assets in
securities of issuers of a particular country, the Fund may invest more than 25%
of its assets, and up to the amount of its total assets invested in securities
of issuers of that country, in securities issued or guaranteed, as to payment of
principal and interest, by the government (including governmental subdivisions)
or governmental entities or instrumentalities of that country.

       For purposes of Restriction 7, above, "securities of issuers of a
particular country" shall include: (a) securities of issuers located in that
country; (b) securities that are denominated in, or linked to, the currency of
that country, including securities of supranational issuers and derivative
securities that replicate, or substitute for, the currency of that country; (c)
securities of issuers that derive at least 50% of their revenues from that
country or have at least 50% of their assets located in that country; (d)
securities issued by a parent or subsidiary of, and guaranteed by, an entity
located in that country; (e) securities issued by the government (including
governmental subdivisions) or governmental entities or instrumentalities of that
country; and (f) repurchase agreements with respect to any of the foregoing
securities.

                     RISK FACTORS AND SPECIAL CONSIDERATIONS

       This Prospectus contains certain forward-looking statements. Actual
results could differ materially from those projected in the forward-looking
statements as a result of uncertainties set forth below and elsewhere in the
Prospectus. Investing in the Shares involves certain risks and considerations
not typically associated with investing in the United States. The following
discusses risks and special considerations with respect to the Offer and with
respect to an investment in the Fund. In managing the Fund, the Investment
Manager and Investment Adviser will manage all risks in accordance with their
stated investment guidelines.

Dilution - Net Asset Value and Non-Participation in the Offer

       Assuming that Rights are exercised, Record Date Stockholders who do not
fully exercise their Rights should expect that they will, at the completion of
the Offer, own a smaller proportional interest in the Fund than would otherwise
be the case if they exercised their Rights. The Fund cannot state precisely the
amount of any such dilution in share ownership because the Fund does not know at
this time what proportion of the Shares will be purchased as a result of the
Offer.

       As of the date of this Prospectus, the Subscription Price per share for
the Offer is less than the Fund's NAV per share. Assuming that all Rights are
exercised and there is no change in the NAV per share, Stockholders would
experience an immediate dilution of the aggregate NAV of their shares of Common
Stock as a result of the Offer. The amount of any decrease in NAV is not
predictable because it is not known at this time what the NAV per share will be
at the Expiration Date or what proportion of the Shares will be purchased as a
result of the Offer. Such dilution could be substantial.

       For example, assuming that all Rights are exercised at the Subscription
Price of $____ and the NAV per share at the Expiration Date was $____, the
Fund's NAV per share (after payment of the Dealer Managers and soliciting fees
and estimated offering expenses) would be reduced by approximately $____ per
share (or ____%).

                                       45

<PAGE>

       The fact that the Rights are transferable may reduce the effects of any
dilution as a result of the Offer. You can transfer or sell your Rights. The
cash received from the sale of Rights is partial compensation for any possible
dilution. There can be no assurances, however, that a market for the Rights will
develop or the Rights will have any value in that market.

Current Distribution Rate

       In February 1989, the Fund began to pay regular monthly distributions.
These distributions have been paid from net investment income and supplemented
by realized capital gains and return of paid-in capital. The amount of monthly
distributions has been adjusted (principally downward) from time to time to
reflect the current interest rate environment. For the current fiscal year, the
distributions to date have exceeded the sum of net investment income and
realized capital gains. To the extent total distributions for the year exceed
the Fund's net investment income, the difference will be deemed for income tax
purposes to have been distributed from realized capital gains or will be treated
as return of capital, as applicable. Although the Fund anticipates that
investment of the proceeds in higher yielding Asian debt securities will enable
the Fund to increase the Fund's net investment income above the current level,
Stockholders are cautioned that there can be no guarantee of future performance.

       The Fund's investment in Asian debt securities involves risks and
uncertainties so that actual results may differ materially from those
anticipated as a result of various factors. If the anticipated results are not
achieved, the Fund may not be able to maintain the current level of monthly
distributions. The Fund undertakes no obligation to update or revise the
disclosure in this Prospectus with regard to the effect of increased investment
in Asia on the Fund's distribution rate, to reflect current events or
circumstances after the date of this Prospectus or to reflect the occurrence of
unanticipated events.

       The Board of Directors reviews the level of distributions on a continuing
basis at its quarterly Board meetings. The first regular monthly distribution to
be paid on Shares acquired upon exercise of Rights will be the first monthly
distribution the record date for which occurs after the issuance of the Shares.
The Shares issued in the Offer will not be entitled to the distribution to be
declared to Stockholders of record on [month day, year] which is payable in
[month year]. Whether a Stockholder is entitled to the distribution to be
declared to Stockholders of record on [month day, year] which is payable in
[month year] will depend on the date Shares are actually issued to the
Stockholder.

Interest Rate Fluctuations

       Fluctuations in interest rates in the relevant bond markets can affect
the Fund's NAV and distribution rate. The Fund's NAV is adversely affected
during periods of rising interest rates in those bond markets and is favorably
affected during periods when interest rates fall. Moreover, the Fund may
recognize capital losses, impacting its ability to supplement distributable
income, when bonds in the Fund's portfolio are sold or mature at a price which
is less than the Fund's cost.

       In addition to fluctuation in interest rates, any overall downward trend
in interest rates can be expected to ultimately reduce available yields to Fund
Stockholders, which could in turn result in a reduction in the amount of the
Fund's monthly distributions. Although interest rates in Australia and New
Zealand were higher than interest rates in the U.S. at the inception of the Fund
in 1986, yields on Australian and New Zealand debt securities have generally
declined in recent years and are currently more comparable to yields available
in the U.S. Although relatively high levels of interest rates are currently
available in Asian debt markets, there can be no assurance that these rates will
continue to be obtainable.

                                       46

<PAGE>

     Changes in the level of interest rates in the relevant markets in which the
Fund invests will affect the market price of its portfolio securities and the
net asset value of the Fund at any given time. These changes are usually more
substantial in Asian countries. The level of interest rate risk will vary from
country to country depending on political and economic factors and monetary
policy. See, e.g., "Appendix A - Economic Information - Asian Economic Data."

Currency Exchange Rate Fluctuations

     The Fund may invest up to 80% of its assets in Asian debt securities,
including, but not limited to, debt securities which are denominated in, or
linked to, the currency of an Asian Country, and derivative debt securities that
replicate, or substitute for, the currency of an Asian Country (see "Portfolio
Securities - Asian Debt Securities"). In addition, at least 20% of the Fund's
total assets must be invested in Australian debt securities, including, but not
limited to, debt securities which are denominated in, or linked to the
Australian dollar, and derivative securities that replicate, or substitute for,
the Australian dollar.

     Currency exchange rates can fluctuate significantly over short periods and
can be subject to unpredictable changes based on a variety of factors including
political developments and currency controls by foreign governments. A change in
the value of the currency in which a portfolio security is denominated against
the U.S. dollar will generally result in a change in the U.S. dollar value of
the Fund's assets. If the exchange rate for a foreign currency declines compared
to the U.S. dollar, the Fund's NAV would decline. In addition, although most of
the Fund's income will be received or realized primarily in foreign currencies,
the Fund will be required to compute and distribute its income in U.S. dollars.
Therefore, for example, if the exchange rate for a foreign currency declines
after the Fund's income has been accrued and translated into U.S. dollars, but
before the income has been received or converted into U.S. dollars, the Fund
could be required to liquidate portfolio securities to make distributions.
Similarly, if the exchange rate declines between the time the Fund incurs
expenses in U.S. dollars and the time the expenses are paid, the amount of
foreign currency required to be converted into U.S. dollars in order to pay the
expenses in U.S. dollars will be greater than the foreign currency equivalent of
the expenses at the time they were incurred.

     Currency exchange rate fluctuations can decrease or eliminate income
available for distribution or conversely increase income available for
distribution. For example, in some situations, if certain currency exchange
losses exceed net investment income for a taxable year, the Fund would not be
able to make ordinary income distributions and all or a portion of distributions
made before the losses were realized but in the same taxable year would be
recharacterized as a return of capital to stockholders for U.S. Federal income
tax purposes thus reducing Stockholders' cost basis in their Fund shares, or as
capital gain, rather than as an ordinary income dividend.

     The Investment Manager and Investment Adviser expect to hedge foreign
currency risks in accordance with their views by engaging in foreign currency
exchange transactions. These may include buying and selling foreign currency
options, foreign currency futures, options on foreign currency futures and swap
arrangements. Many of these activities constitute "derivatives" transactions.
See "Use of Derivatives" below. There can be no assurance that the Fund will
employ a currency hedge at any given time, nor can there be any assurance that
the Fund will be able to do this hedging successfully. Moreover, currency
fluctuations against the U.S. dollar in many foreign countries in which the Fund
invests have historically been profound and negative. Although exchange rates
against the U.S. dollar have been favorable in recent months, there can be no
assurance that favorable exchange rates will continue. Nor can there be any
assurance that currency fluctuations against the U.S. dollar will not return to
being profound and negative.

                                       47

<PAGE>

     Investments made in the local currencies of an Asian country may not be
freely convertible into other currencies. Exchange rate fluctuations and local
currency devaluation could have a material effect on the value of these
securities. See "Appendix A - Economic Information - Asian Economic Data."

Risks Involved in Asian Investment

     In June 2001, holders of the Fund's Common Stock and Preferred Stock
approved a series of proposals allowing the Fund, among other things, to (1)
increase to a maximum of 80% the Fund's investments in Asian debt securities;
(2) reduce the minimum investment in Australian debt securities to 20%; (3)
increase to a maximum of 35% the Fund's investments in Asian debt securities
rated, or considered by the Investment Manager to be, below investment grade at
the time of investment; (4) invest to a maximum of 10% in securities rated, or
considered by the Investment Manager to be, below B-; and (5) expand the
categories of derivatives which may be utilized by the Fund. Increased
investment in Asian debt markets will expose the Fund to greater foreign
exchange risk, interest rate risk, credit risk, political and economic risk
("event risk") and liquidity risk than would be the case if the Fund invested
only in Australian and New Zealand securities. The following summarizes the main
risks involved in investing in Asian bond and short-term money market securities
relative to similar types of securities in Australia and the U.S.

     Credit Risk. The proposals approved by the holders of the Fund's Common
Stock and Preferred Stock in June 2001 permit the Fund to invest up to 35% of
its total assets in Asian debt securities which, at the time of investment, are
rated below investment grade (i.e., securities that have been rated below BBB-
by S&P or Baa3 by Moody's) or, if unrated, are in the opinion of the Investment
Manager, of equivalent quality. Among other things, investment in securities
which are rated below investment grade requires skilled credit analysis and
reduces the overall credit quality of the Fund's portfolio.

     Investments in securities rated below investment grade are subject to
greater market fluctuations and risk of loss of income and principal than
investments in securities with investment grade credit ratings. The former will
generally provide higher yields due to the higher premia required by investors
for taking the associated credit risk.

     Investments in debt securities expose the Fund to credit risk (that is, the
risk of default on interest and/or principal payments). Credit risk is
influenced by changes in general economic and political conditions and changes
in the financial condition of the issuers. During periods of economic downturn
or rising interest rates, issuers of securities with a low credit rating may
experience financial weakness that could affect their ability to make payments
of interest and principal.

     Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may also decrease the value and liquidity of securities
with low credit ratings, especially in markets characterized by a low volume of
trading.

     Unrated Securities. The Fund is permitted to invest in unrated debt
     securities. Unrated securities, while not necessarily of lower quality than
     rated securities, generally do not have a broad market. Before purchasing
     an unrated security, the Investment Manager and Investment Adviser intend
     to analyze the creditworthiness of the issuer of the security and of any
     financial institution or other party responsible for payments on the
     security in order to assign a rating to the security.

     Below-Investment Grade Securities. Ratings of debt securities represent the
     rating agency's opinion regarding their quality and are not a guarantee of
     quality. Rating agencies attempt to evaluate the safety of principal and
     interest payments and do not evaluate the risks of fluctuations

                                       48

<PAGE>

     in market value. Because rating agencies may fail to make timely changes in
     credit ratings in response to subsequent events, the Investment Manager and
     Investment Adviser will continuously monitor the issuers of securities held
     to determine whether the issuers have sufficient cash flows and profits to
     meet principal and interest payments.

     The achievement of the Fund's investment objective will be more dependent
     on the Investment Manager or the Investment Adviser's own credit analysis
     than might be the case for a fund which invests in higher quality bonds.
     The Fund may retain a security the rating of which has been changed. The
     market values of lower quality debt securities tend to reflect individual
     developments of the issuer to a greater extent than do higher quality
     securities, which react primarily to fluctuations in the general level of
     interest rates.

     Issuers of lower quality debt securities tend to be highly leveraged. Those
     issuers may also not have available to them traditional methods of
     financing. For example, during an economic downturn or a sustained period
     of rising interest rates, highly leveraged issuers of lower quality
     securities may experience financial stress. During these periods, issuers
     may not have sufficient revenue to meet their interest payment obligations.
     An issuer's ability to service debt obligations may also be adversely
     affected by specific developments affecting the issuer, such as the
     issuer's inability to meet specific projected business forecasts or the
     unavailability of additional financing. Similarly, certain emerging market
     governments that issue lower quality debt securities are among the largest
     debtors to commercial banks, foreign governments and supranational
     organizations such as The World Bank, and may not be able or willing to
     make principal and/or interest repayments as they come due. The risk of
     loss due to default by the issuer is significantly greater for the holders
     of lower quality securities because these securities are generally
     unsecured and are often subordinated to higher ranking creditors of the
     issuer.

     The Fund may also incur additional expense to the extent that it is
     required to seek recovery on a default in the payment of principal or
     interest on its portfolio holdings, and the Fund may have limited legal
     recourse in the event of a default. Debt securities issued by governments
     in emerging Asian markets can differ from debt obligations issued by
     private entities in that remedies for defaults generally must be pursued in
     the courts of the defaulting government, and legal recourse may be
     diminished. Political conditions, in terms of a government's willingness to
     meet the terms of its debt obligations, are also of considerable
     significance. There can be no assurance that the holders of commercial bank
     debt may not contest payments to the holders of debt securities issued by
     governments in the event of default by the governments under commercial
     bank loan agreements.

     The Investment Manager and Investment Adviser will attempt to minimize the
     speculative risks associated with investments in lower quality securities
     through credit analysis and by carefully monitoring such current trends as
     interest rates and political developments.

     Management of Credit Risk. At the upper end of the credit rating spectrum,
recognized international ratings agencies such as S&P and Moody's provide
extensive risk credit analysis for investors. However, in emerging markets such
as those in Asia, where issues are often unrated or are at the lower end of the
credit risk spectrum, the Investment Manager and Investment Adviser believe that
opportunities exist for skilled analysts to add value through extensive company
research and detailed credit assessment.

     The Investment Manager and Investment Adviser also consider external credit
assessments available from rating agencies such as S&P and Moody's, as well as
any reports on the issuer which may be available from brokers or other sources.
A chart showing the current S&P and Moody's credit ratings

                                       49

<PAGE>

on long-term foreign sovereign debt for the Asian countries in which the Fund
currently invests is included in Appendix A.

     Low-credit debt can sometimes become equity. Due to the conversion of
convertible notes and warrants, the Fund may from time to time become an (often)
involuntary holder of equities until such stock can be sold as and when an
optimal price can be achieved, given market conditions. It may be in the
interests of stockholders for the Fund to hold such stock for short-term
periods.

     Similarly, distressed companies can sometimes restructure via
debt-for-equity swaps in order to stay solvent and viable. In this case, the
investor becomes an involuntary equity holder and, once again, it may be in the
best interests of stockholders that the Fund hold such securities for short
periods of time, especially in extreme market conditions, until optimal prices
can be obtained.

     Political and Economic Risk. The Fund's investments could in the future be
adversely affected by any increase in taxes or by political, economic or
diplomatic developments in the Asian Countries. Moreover, accounting, auditing
and financial reporting standards and other regulatory practices and
requirements vary from those applicable to entities subject to regulation in the
United States.

     Securities of Asian issuers may involve different, and sometimes greater,
risks than securities of U.S. and Australian issuers. Asian economies are
considered to be more politically volatile than the traditional Western style
democracies. Investments in securities of issuers in Asian countries involve
greater political risk, including in some countries, the possibility of
expropriation, confiscatory taxation or nationalization of assets, and the
establishment of foreign exchange controls. Central authorities also tend to
exercise a high degree of control over the economies and in many cases have
ownership over core productive assets.

     With their strong reliance on international trade, the Asian economies tend
to be sensitive both to economic changes in their own region and to changes
affecting their major trading partners. These include changes in growth,
inflation, foreign exchange rates, current account positions, government
policies, taxation and tariffs. See, e.g., "Appendix A - Economic Information -
Asian Economic Data."

     Liquidity Risk. While the Fund ordinarily invests only in debt securities
for which there is an active secondary market, the Fund may invest in Asian debt
securities for which there is no established secondary market. The securities
markets that exist in emerging Asian countries are substantially smaller, less
developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries.

     In some Asian countries, there is no established secondary market for
securities. Therefore, liquidity in these countries is generally low and
transaction costs high. Reduced liquidity often creates higher volatility, as
well as difficulties in obtaining accurate market quotations for financial
reporting purposes and for calculating net asset values, and sometimes also an
inability to buy and sell securities. Market quotations on many securities may
only by available from a limited number of dealers and may not necessarily
represent firm bids from those dealers or prices for actual sales.

     In addition, the markets for below investment grade securities may be
substantially smaller, less developed, less liquid and more volatile than the
markets for prime rated securities, which may make obtaining accurate market
quotations for financial reporting purposes and for calculating net asset values
more difficult. Market quotations on many sub-investment grade securities may
only be available from a limited number of dealers and may not necessarily
represent firm bids from those dealers or prices for actual sales.

                                       50

<PAGE>

     Tax Risk. Income earned on investments in Asian countries may be subject to
applicable withholding taxes and other taxes imposed by the governments of these
countries. There can be no assurance that foreign tax laws will not be changed
in a manner which adversely affects foreign investors.

     Legal and Accounting Risk. The legal systems in many Asian countries are
less developed than those in more developed countries, with the administration
of laws and regulations often subject to considerable discretion. While the
development of the legal systems is a positive step, there is a risk that
foreign investors will be adversely affected by new laws or changes to existing
laws.

     Accounting and auditing standards applied in certain Asian countries
frequently do not conform with the accepted international standards used in
Australia and the U.S. In some cases, accounting policies, for example the use
of the constant purchasing power method, can cause some distortion. Also,
substantially less financial information is generally publicly available about
issuers in Asian countries and, where available, may not be independently
verifiable.

Use of Derivatives

     Consistent with its investment objective, the Fund may invest in a broad
array of financial instruments and securities in which the value of the
instrument or security is "derived" from the performance of an underlying asset
or a "benchmark" such as a security index, an interest rate or a foreign
currency ("derivatives"). Derivatives are most often used to manage investment
risk, to increase or decrease exposure to an asset class or benchmark (as a
hedge or to enhance return), or to create an investment position directly (often
because it is more efficient or less costly than direct investment). There is no
guarantee that these results can be achieved through the use of derivatives and
any success in their use depends on a variety of factors including the ability
of the Investment Manager and Investment Adviser to predict correctly the
direction of interest rates, securities prices, currency exchange rates and
other factors.

     The primary risk of derivatives is the same as the risk of the underlying
asset, namely that the value of the underlying asset may increase or decrease.
Adverse movements in the value of the underlying asset can expose the Fund to
losses. In addition, risks in the use of derivatives include:

     .    an imperfect correlation between the price of derivatives and the
          movement of the securities prices, interest rates or currency exchange
          rates being hedged or replicated;

     .    the possible absence of a liquid secondary market for any particular
          derivative at any time;

     .    the potential loss if the counterparty to the transaction does not
          perform as promised;

     .    the possible need to defer closing out certain positions to avoid
          adverse tax consequences, as well as the possibility that derivative
          transactions may result in acceleration of gain, deferral of losses or
          a change in the character of gain realized;

     .    the risk that the financial intermediary "manufacturing" the
          over-the-counter derivative, being the most active market maker and
          offering the best price for repurchase, will not continue to create a
          credible market in the derivative;

     .    because certain derivatives are "manufactured" by financial
          institutions, the risk that the Fund may develop a substantial
          exposure to financial institution counterparties; and

                                       51

<PAGE>


     .    the risk that a full and complete appreciation of the complexity of
          derivatives and how future value is affected by various factors
          including changing interest rates, exchange rates and credit quality
          is not attained.

     The Fund may use interest rate swaps to hedge the Fund's liability with
respect to the Preferred Stock. At present, the Fund has been authorized by its
Board of Directors to hedge up to one-third of the Fund's liability with respect
to the Preferred Stock. This allows the Fund to lock in the relatively low
current U.S. dollar interest rates with respect to up to one-third of the Fund's
outstanding Preferred Stock. A significant type of risk associated with interest
rate swaps is the risk that the counterparty may default or file for bankruptcy,
in which case the Fund would bear the risk of loss of the amount expected to be
received under the swap agreement. See "Portfolio Securities - Derivative
Securities - Swaps." There can be no assurance that the Fund will have an
interest rate swap in place at any given time, nor can there be any assurance
that, if an interest rate swap is in place, it will be successful in hedging the
Fund's interest rate risk with respect to the Preferred Stock.

Call or Buy-Back Features

     Debt securities occasionally have call or buy-back features that would
permit an issuer to call or repurchase the security from the holder. The
Investment Manager and Investment Adviser anticipate that these securities could
be sold only to a limited number of dealers or institutional investors as there
may not be an established retail secondary market for many of these securities,
or where there is a market, the securities may not be easily tradable.

Preferred Stock - Leverage Risk

     The Fund has issued US$600 million of Preferred Stock, which is tantamount
to borrowing this sum of money. The Preferred Stock creates an opportunity for
the holders of the Fund's Common Stock to experience greater capital
appreciation and higher yields, while at the same time increasing exposure to
capital risk. The net cost of the Preferred Stock is an expense which could
limit the Fund's net investment income in any given period.

     Capital raised through leverage is subject to interest and other costs, and
these costs could exceed the income earned by the Fund on the proceeds of such
leverage. There can be no assurance that the Fund's income from the proceeds of
leverage will exceed these costs. However, the Investment Manager and Investment
Adviser seek to use leverage for the purposes of making additional investments
only if they believe, at the time of using leverage, that the total return on
the assets purchased with such funds will exceed interest payments and other
costs on the leverage. In the event of a default on one or more loans or other
interest-bearing instruments held by the Fund, the use of leverage would
exaggerate the effect on the Fund's net asset value. The holders of the Fund's
Preferred Stock and the Fund's lenders, if any, will have priority to the Fund's
assets over the holders of the Fund's Common Stock.

     The Preferred Stock results in leveraging, which is usually considered
speculative and involves certain risks to the holders of Common Stock. These
risks include a higher volatility of the NAV of the Common Stock, potentially
more volatility in the market value of the Common Stock, and the relatively
greater effect on the NAV of the Common Stock caused by favorable or adverse
changes in currency exchange rates. In addition, fluctuations in the dividend
rates on the Preferred Stock will affect the return to holders of Common Stock,
with increases in the Preferred Stock dividend rates decreasing such return. So
long as the Fund is able to realize a higher net return on its investment
portfolio than the then-current dividend rate of the Preferred Stock, the effect
of leverage will be to cause holders of Common Stock to realize a higher current
rate of return than if the Fund were not leveraged. On the other hand, interest

                                       52

<PAGE>

rates on U.S. dollar-denominated and foreign currency denominated obligations
change from time to time as does their relationship to each other depending on
such factors as supply and demand forces, monetary and tax policies within each
country and investor expectations. Changes in such factors could cause the
relationship between such rates to change so that rates on U.S.
dollar-denominated obligations may substantially increase relative to the
foreign currency denominated obligations in which the Fund may be invested. To
the extent that the current dividend rate on the Preferred Stock approaches the
net return on the Fund's investment portfolio, the benefit of leverage to
holders of Common Stock will be reduced, and if the current dividend rate on the
Preferred Stock were to exceed the net return on the Fund's portfolio, the
Fund's leveraged capital structure would result in a lower rate of return to
holders of Common Stock than if the Fund were not leveraged. Further, because
any decline in the NAV of the Fund's investments will be borne entirely by
holders of Common Stock, in a declining market, the Fund's leverage would result
in a greater decrease in NAV to holders of Common Stock than if the Fund were
not leveraged. This would likely be reflected in a greater decline in the market
price for shares of Common Stock. If the Fund's current investment income were
not sufficient to meet dividend requirements on the Preferred Stock, it could be
necessary for the Fund to liquidate certain of its investments, thereby further
reducing the NAV attributable to the Fund's Common Stock.

     In order to reduce the risk that the dividend requirements on the Preferred
Stock will exceed the net return of the Fund's investment portfolio, the Fund
may use interest rate swaps to hedge the Fund's liability with respect to the
Preferred Stock. At present, the Fund has been authorized by its Board of
Directors to hedge up to one-third of the Fund's liability with respect to the
Preferred Stock. This allows the Fund to lock in the relatively low current U.S.
dollar interest rates with respect to up to one-third of the Fund's outstanding
Preferred Stock. There can be no assurance that the Fund will have an interest
rate swap in place at any given time, nor can there be any assurance that, if an
interest rate swap is in place, it will be successful in hedging the Fund's
leverage risk with respect to the Preferred Stock. See "Risk Factors and Special
Considerations - Use of Derivatives."

     During certain periods of the Fund's operations, Australian and New Zealand
long-term debt obligations have produced higher yields than U.S. short-term
obligations. The difference between the U.S. short-term rates paid by the Fund
on the Preferred Stock and the net Australian and New Zealand long-term debt
rates received by the Fund has, during such periods, provided holders of Common
Stock with a higher yield. Holders of Common Stock have generally benefited from
the Fund's issuance of the Preferred Stock which commenced in 1989. Since the
fiscal quarter beginning August 1, 1997, there have been periods during which
the shrinking yield differential between Australia and U.S. rates and a
depreciating Australian dollar have resulted in the Preferred Stock having a
negative impact on returns to holders of Common Stock. During the 12 months to
July 31, 2002, the key investment trend was an end to the unilateral strength of
the U.S. dollar. The Australian dollar and most Asian currencies strengthened
against the U.S. dollar over the period, with the Australian dollar rising 7.5%.
Further, with U.S. interest rates at historic lows, the differential between the
cost of the Preferred Stock and the rates at which the Fund invests remains
positive. Offsetting these impacts slightly have been capital losses as bond
yields have risen in line with signs of global recovery.

     The proposed increased investment of a more significant percentage of the
Fund's total assets in higher yielding Asian debt securities is expected to
increase the Fund's net investment income above the current level. See "The
Offer - Purpose of the Offer." The implementation of this strategy is proposed
to occur within approximately two to four months of the completion of the Offer
by a combination of investing the net proceeds of the Offer together with the
proceeds from the sale of existing Australian portfolio securities. Stockholders
are cautioned that there can be no guarantee of future performance and the
Fund's investment in Asian debt securities involves risks and uncertainties, so
that actual results may differ materially from those anticipated as a result of
various factors. The Fund undertakes no obligation to update or revise the
disclosure in this Prospectus with regard to the effect of increased investment
in

                                       53

<PAGE>

global markets, including Asia, on the Fund's leverage to reflect current events
or circumstances after the date of this Prospectus or to reflect the occurrence
of unanticipated events.

     The Fund has the authority to redeem the Preferred Stock for any reason and
may redeem all or part of the Preferred Stock if it anticipates that the Fund's
leveraged capital structure will result in a lower rate of return to holders of
the Common Stock than that obtainable if the Common Stock were unleveraged for
any significant amount of time. The Fund may also need to redeem all or a
portion of the Preferred Stock to the extent required by the 1940 Act, the terms
of the Preferred Stock or by rating agencies rating the Preferred Stock. The
leveraging of the Common Stock would be eliminated during any period that
Preferred Stock is not outstanding. See "The Fund - Description of Preferred
Stock."

     Because the Investment Manager's and the Investment Adviser's fees are
based on the average net assets of the Fund which include the Preferred Stock,
the Investment Manager and Investment Adviser have benefited from the Fund's
determination not to redeem the Preferred Stock.

     The Fund's leveraged capital structure creates special risks not associated
with unleveraged funds having similar investment objectives and policies. The
amounts borrowed pursuant to any credit facility or obtained through the
issuance of Preferred Stock may constitute a substantial lien and burden by
reason of their prior claim against the income of the Fund and against the net
assets of the Fund in liquidation. The holders of the Fund's Preferred Stock
have priority to the Fund's assets over the holders of the Fund's Common Stock
to the extent of the aggregate liquidation preference.

     The Fund will not be permitted to declare dividends or other distributions,
including dividends and distributions with respect to Common Stock or Preferred
Stock, or purchase or redeem Common Stock or Preferred Stock unless (i) at the
time thereof the Fund meets certain asset coverage requirements and (ii) there
is no event of default under any credit facility program that is continuing. In
the event of a default under a credit facility program, the lenders may have the
right to cause a liquidation of the collateral and, if any such default is not
cured, the lenders may be able to control the liquidation as well. In addition,
the Fund will not be permitted to pay dividends on, or redeem or repurchase,
Common Stock unless all accrued dividends on the Preferred Stock, or accrued
interest on borrowings, if any, have been paid or set aside for payment.

     The Fund may be subject to certain restrictions imposed by lenders to the
Fund or by guidelines of one or more rating agencies which may issue ratings for
the Fund's Preferred Stock. These restrictions impose asset coverage, fund
composition requirements or limits on investment techniques, such as the use of
financial derivative products, that are more stringent than those imposed by the
1940 Act. These covenants or guidelines could impede the Investment Manager from
fully managing the Fund's portfolio in accordance with the Fund's investment
objective and guidelines.

Net Asset Value Discount

     Shares of closed-end investment companies frequently trade at a discount
from NAV. This characteristic is a risk separate and distinct from the risk that
NAV will decrease. The Fund's shares have frequently traded at prices below NAV
since the commencement of the Fund's operations. In the 12-month period ended
July 31, 2002, the Fund's shares have traded in the market at an average
discount to NAV of 10.29%. The Fund cannot predict whether its shares in the
future will trade at, below or above NAV. The risk that shares of a closed-end
fund might trade at a discount is more significant for investors who wish to
sell their shares in a relatively short period of time. For those investors,
realization of gain or loss on their investment is likely to be more dependent
upon the existence of a premium or discount than upon portfolio performance.

                                       54

<PAGE>

Foreign Custody

     The Fund generally holds its foreign securities and cash in foreign banks
and securities depositories. Some foreign banks and securities depositories may
be recently organized or new to the foreign custody business. There may be
limited or no regulatory oversight over their operations. Also, the laws of
certain countries may put limits on the Fund's ability to recover its assets if
a foreign bank, depository or issuer of a security, or any of their agents, goes
bankrupt. In addition, it is often more expensive for the Fund to buy, sell and
hold securities in certain foreign markets than in the United States. The
increased expense of investing in foreign markets reduces the amount the Fund
can earn on its investments and typically results in a higher operating expense
ratio for the Fund than for investment companies invested only in the United
States.

Non-Diversified Status

     The Fund is classified as a "non-diversified" management investment company
under the 1940 Act, which means that the Fund is not limited by the 1940 Act as
to the proportion of its assets that may be invested in the securities of a
single issuer. As a non-diversified investment company, the Fund may invest a
greater proportion of its assets in the obligations of a smaller number of
issuers and, as a result, will be subject to greater risk with respect to its
portfolio securities. Although, with respect to 50% of its assets, the Fund must
diversify its holdings in order to be treated as a regulated investment company
under the provisions of the Code, the Fund may be more susceptible to any single
economic, political or regulatory occurrence than would be the case if it had
elected to diversify its holdings sufficiently to be classified as a
"diversified" management investment company under the 1940 Act.

See "Taxation - United States Taxes."

Tax Considerations

     The Fund intends to qualify and to continue to qualify as a regulated
investment company under the Code. If it so qualifies, it generally will be
relieved of U.S. Federal income tax on its net investment income and capital
gains, if any, which it generally distributes in accordance with requirements
under the Code. To the extent that the Fund has earnings available for
distribution, its distributions in the hands of stockholders generally are
expected to be treated as ordinary dividend income, although certain
distributions may be designated by the Fund as capital gain dividends which
would be treated as long-term capital gain. Dividends paid by the Fund (both
ordinary and capital) will not qualify for the corporate dividends-received
deduction. Distributions in excess of the Fund's investment company taxable
income and net capital gains will first reduce a stockholder's basis in his
shares and, after the stockholder's basis is reduced to zero, will constitute
capital gains to a stockholder who holds his shares as capital assets.

     Subject to certain limitations imposed by the Code, foreign taxes withheld
from distributions or otherwise paid by the Fund may be creditable or deductible
by U.S. stockholders for U.S. income tax purposes, if the Fund is eligible to
and makes an election to treat the stockholders as having paid those taxes for
U.S. Federal income tax purposes. No assurance can be given that the Fund will
be eligible to make this election each year but it intends to do so if it is
eligible. If the election is made, the foreign withholding taxes paid by the
Fund will be includable in the U.S. Federal taxable income of stockholders.
Non-U.S. investors may not be able to credit or deduct the foreign taxes, but
they may be deemed to have additional income from the Fund, equal to their share
of the foreign taxes, that is subject to the U.S. withholding tax. Investors
should review carefully the information discussed under the heading "Taxation"
and should discuss with their tax advisers the specific tax consequences of
investing in the Fund.

                                       55

<PAGE>

Anti-Takeover Provisions

     The Fund has provisions in its Articles of Amendment and Restatement, as
amended to date ("Articles") that could have the effect of limiting (i) the
ability of other entities or persons to acquire control of the Fund, (ii) the
Fund's freedom to engage in certain transactions, and (iii) the ability of the
Fund's Directors or stockholders to amend the Articles or effect changes in the
Fund's management.

     The By-Laws provide for a staggered election of those Directors who are
elected by the holders of Common Stock, with such Directors divided into three
classes, each having a term of three years. 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 Board of Directors. This system of electing 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. Other provisions require the approval of holders of 75% of the
outstanding shares of the Common Stock and Preferred Stock voting both together
as a single class and separately as to each class to approve certain
transactions including certain mergers, asset dispositions and conversion of the
Fund to open-end status. However, certain provisions of the 1940 Act may
nevertheless require a separate additional vote of the holders of Preferred
Stock.

     Articles Supplementary approved by the Board of Directors subject the Fund
to certain provisions of the Maryland General Corporation Law with respect to
unsolicited takeovers. These provisions limit the ability of stockholders to
remove directors, provide that the number of directors may be fixed only by the
Board, provide that certain vacancies on the Board of Directors may be filled
only by the vote of the remaining directors, and limit the ability of
stockholders to call a special meeting of stockholders.

     The foregoing provisions may be regarded as "anti-takeover" provisions and
may have the effect of depriving Stockholders of an opportunity to sell their
shares at a premium over prevailing market prices. See "Capital Stock - Certain
Provisions of the Articles, By-Laws and Articles Supplementary."

                              PORTFOLIO COMPOSITION

     The following sets forth certain information with respect to the
composition of the Fund's investment portfolio (excluding $187,493,152 held in
U.S. dollar and Australian dollar denominated short-term investments) as of July
31, 2002 based on the then applicable exchange rates shown in the table below:

            -------------------------------------------------------
                               Exchange Rates
            -------------------------------------------------------
                   Currency                 Currency per US$1
            -------------------------------------------------------
             United States Dollar                  N/A
            -------------------------------------------------------
             Australian Dollar                   A$0.5443
            -------------------------------------------------------
             New Zealand Dollar                 NZ$0.4689
            -------------------------------------------------------
             South Korean Won                   KRW1188.09
            -------------------------------------------------------
             Thai Baht                           THB42.02
            -------------------------------------------------------
             Philippines Peso                    PHP51.28
            -------------------------------------------------------
             Malaysian Ringgit                   MYR3.80
            -------------------------------------------------------
             Singapore Dollar                    SGD1.76
            ------------------------------------------------------

                                       56

<PAGE>

                                  The Portfolio

<TABLE>
<CAPTION>
                                                                      Number of      Market Value     % of long-
Australia                                                               Issues      in U.S. dollars   term assets
- ---------                                                               ------      ---------------   -----------
<S>                                                                   <C>          <C>                <C>
Commonwealth Government Bonds...................................      18            $372,029,347        22.4%
Australian Semi-Government Bonds................................      19             286,450,900        17.3%
Australian Corporate Bonds......................................      11              53,533,729         3.2%
A$ Eurobonds....................................................      30             253,083,691        15.3%
                                                                                    ------------        ----
Sub-total                                                                            965,097,667        58.2%

                                                                      Number of      Market Value     % of long-
South Korea                                                             Issues      in U.S. dollars   term assets
- -----------                                                             ------      ---------------   -----------
South Korean Government Bonds...................................      7               76,335,006         4.6%
                                                                                    ------------        ----
Sub-total                                                                             76,335,006         4.6%

                                                                      Number of      Market Value     % of long-
Thailand                                                                Issues      in U.S. dollars   term assets
- --------                                                                ------      ---------------   -----------
Thailand Government Bonds.......................................      10              28,357,999         1.7%
                                                                                    ------------        ----
Sub-total                                                                             28,357,999         1.7%

                                                                      Number of      Market Value     % of long-
Philippines                                                             Issues      in U.S. dollars   term assets
- -----------                                                             ------      ---------------   -----------
Philippines Government Bonds....................................      2               11,137,742         0.7%
                                                                                    ------------        ----
Sub-total                                                                             11,137,742         0.7%

                                                                      Number of      Market Value     % of long-
Malaysia                                                                Issues      in U.S. dollars   term assets
- --------                                                                ------      ---------------   -----------
Malaysian Government Bonds......................................      3               12,241,136         0.7%
Malaysian Corporate Bonds.......................................      2                6,258,563         0.4%
                                                                                    ------------        ----
Sub-total                                                                             18,499,699         1.1%

                                                                      Number of      Market Value     % of long-
Singapore                                                               Issues      in U.S. dollars   term assets
- ---------                                                               ------      ---------------   -----------
Singapore Government Bonds......................................      2               16,149,015         1.0%
                                                                                    ------------        ----
Sub-total                                                                             16,149,015         1.0%

                                                                      Number of      Market Value     % of long-
Europe                                                                  Issues      in U.S. dollars   term assets
- ------                                                                  ------      ---------------   -----------
European Corporate Bonds........................................      1                4,209,045         0.3%
                                                                                    ------------        ----
Sub-total                                                                              4,209,045         0.3%

                                                                      Number of      Market Value     % of long-
Hong Kong                                                               Issues      in U.S. dollars   term assets
- ---------                                                               ------      ---------------   -----------
Hong Kong Corporate Bonds.......................................      1                1,908,423         0.1%
                                                                                    ------------        ----
Sub-total                                                                              1,908,423         0.1%

                                                                      Number of      Market Value     % of long-
Japan                                                                   Issues      in U.S. dollars   term assets
- -----                                                                   ------      ---------------   -----------
Japanese Government Bonds.......................................      2               12,373,057         0.7%
                                                                                    ------------        ----
Sub-total                                                                             12,373,057         0.7%

                                                                      Number of      Market Value     % of long-
United States                                                           Issues      in U.S. dollars   term assets
- -------------                                                           ------      ---------------   -----------
Yankee Bonds....................................................      76             523,555,534        31.6%
                                                                                    ------------        ----
</TABLE>

                                       57

<PAGE>

Sub-total                                                  523,555,534    31.6%

Total long-term investments                            $ 1,657,623,187     100%

<TABLE>
<CAPTION>
Moody's and/or S&P Ratings*                                              % of total market value of
- ---------------------------                                                  long-term portfolio
                                                                         --------------------------
<S>                                                                      <C>
Aaa/AAA.........................................................                    46.5%
Aa/AA...........................................................                    13.7%
A/A.............................................................                    11.2%
BBB/Baa.........................................................                    16.6%
BB/Ba...........................................................                     9.1%
B...............................................................                     2.8%
CCC.............................................................                     0.1%
Total Portfolio Rated by Moody's and/or S&P.....................                   100.0%
</TABLE>

- --------------------
*        Reflects the lower of the Moody's or S&P rating. S&P rating categories
         may be further modified by a, plus (+) or minus (-) in AA and A
         ratings. Moody's rating categories may be further modified by 1
         (highest), 2 or 3 (lowest) in Aa and A ratings.

                             MANAGEMENT OF THE FUND

Directors and Officers

         The Fund's By-Laws provide that the Directors to be elected by holders
of the Fund's Common Stock will be divided into three classes, as nearly equal
in number as possible, each of which will serve for three years with one class
being elected each year. Each year, the term of one class expires. Section 18 of
the 1940 Act requires that the holders of the Preferred Stock, voting separately
as a single class without regard to series, have the right to elect at least two
Directors at all times. The officers of the Fund serve at the pleasure of the
Board of Directors.

         Although the Fund is a Maryland corporation, certain of its Directors
and officers (Messrs. Elsum, Gilbert, Malone, Miles, O'Connell, Sacks, Schrafl,
Sherman, Pittard, Bignell and Randall) are non-residents of the United States
and have all, or a substantial part, of their assets located outside the United
States. None of the Directors or officers has authorized an agent for service of
process in the United States. As a result, it may be difficult for U.S.
investors to effect service of process upon the Directors and officers within
the United States or to effectively enforce judgments of courts of the United
States predicated upon civil liabilities of the Directors or officers under the
Federal securities laws of the United States. The Fund has been advised by
local counsel in each jurisdiction in which the Fund's directors and officers
reside, other than those listed below, that it is unlikely that the courts of
those jurisdictions would adjudge civil liability against Directors and officers
resident in those jurisdictions in an original action predicated solely on a
violation of the Federal securities laws of the United States. Although there is
no arrangement in place between those jurisdictions and the United States for
the reciprocal enforcement of judgments, a judgment against the Directors and
officers in an original action predicated on such provisions rendered by a court
in the United States would be enforceable by action or counterclaim or be
recognized by the courts of those jurisdictions as a defense to an action or as
conclusive of an issue in that action unless obtained by fraud or otherwise than
in accordance with the principles of natural justice or unless contrary to
public policy or unless the proceedings in the United States court were not duly
served on the defendant in the original action. There is doubt as to the
enforceability in Australia, Canada, _______, and _______, the countries in
which other Directors and officers are resident, of these civil liability
provisions, whether or not the liabilities are based upon judgments of courts in
the United States or are pursuant to original actions.

                                       58

<PAGE>

     The By-Laws of the Fund provide that the Fund will indemnify Directors and
officers of the Fund against liabilities and expenses, including the advancement
of expenses actually and reasonably incurred in connection with claims or
litigation in which they may be involved because of their offices with the Fund.
Neither the Articles of Incorporation nor the By-Laws of the Fund protects or
indemnifies a Director or officer against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.

     The names of the Directors and officers of the Fund, their addresses, ages
and principal occupations during the past five years are provided in the tables
below. Directors that are deemed "interested persons" (as that term is defined
in Section 2(a)(19) of the 1940 Act) of the Fund, the Investment Manager, the
Investment Adviser and the Dealer Managers are included in the table titled
"Interested Directors." Directors who are not interested persons as described
above are referred to as Independent Directors.

Interested Directors

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
                                                                                  Number
                                      Term of                                    of Funds
                                      Office                                     in Fund
                                       and                                       Complex
                       Position(s)    Length                                     Overseen
   Name, Address        Held With     of Time       Principal Occupation(s)         by        Other Directorships Held by
      and Age            the Fund     Served        During Past Five Years       Director               Director
- ------------------------------------------------------------------------------------------------------------------------------
<S>                     <C>          <C>         <C>                             <C>        <C>
Martin J. Gilbert*      Chairman of   Term       Mr. Gilbert is the Chief            2      Chairman of the Board and
One Albyn Place         the Board     expires    Executive and an Executive                 Director, Aberdeen Global Income
Aberdeen, AB10 1YG      Class III     2003;      Director of Aberdeen Asset                 Fund, Inc. (since 2001);
United Kingdom          Director      Director   Management PLC, which was                  Director, Aberdeen Asia-Pacific
                                      since 2001 established in 1983 and is the             Income Investment Company Limited
                                                 parent company of the Fund's               (since 2000); Director, Aberdeen
Age: 47                                          Investment Manager and                     Asset Management Holdings Limited
                                                 Investment Adviser.  He is one             (since 2000); Director, Aberdeen
                                                 of the founding directors of               Asian Smaller Companies
                                                 Aberdeen Asset Management PLC              Investment Trust PLC (since
                                                 and has been involved in the               1995); Director, Aberdeen Asset
                                                 investment management industry             Management Asia Limited (since
                                                 since 1982, after he qualified             1991); Director, Aberdeen Asset
                                                 as a chartered accountant.  He             Management Ireland Limited (since
                                                 has been Chairman of the Board             1998); Director, Aberdeen Asset
                                                 of the Fund and of Aberdeen                Managers Jersey Limited (since
                                                 Global Income Fund, Inc. since             1999); Director, Aberdeen Asset
                                                 2001.  He has been a Director              Managers Limited (since 1987);
                                                 of Aberdeen Asset Management               Director, Aberdeen Convertible
                                                 Limited (the Fund's Investment             Income Trust PLC (since 1995);
                                                 Adviser) and Aberdeen Asset                Director, Aberdeen Development
                                                 Managers (C.I.) Limited (the               Capital PLC (since 1986);
                                                 Fund's Investment Manager)                 Director, Aberdeen Emerging Asia
                                                 since 2001.                                Investment Trust Limited (since
                                                                                            1990); Director, Aberdeen
                                                                                            Emerging Economies Investment
                                                                                            Trust PLC (since 1993); Director,
                                                                                            Aberdeen Football Club PLC (since
                                                                                            1997); Director, Aberdeen Fund
                                                                                            Managers, Inc. (since 1995);
                                                                                            Director, Aberdeen Global (since
                                                                                            1998); Director,
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       59

<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
                                                                                  Number
                                      Term of                                    of Funds
                                      Office                                     in Fund
                                       and                                       Complex
                       Position(s)    Length                                     Overseen
   Name, Address        Held With     of Time       Principal Occupation(s)         by        Other Directorships Held by
      and Age            the Fund     Served        During Past Five Years       Director               Director
- ------------------------------------------------------------------------------------------------------------------------------
<S>                     <C>          <C>         <C>                             <C>        <C>
                                                                                            Aberdeen Graham Asset Management
                                                                                            Limited (since 1999); Director,
                                                                                            Aberdeen Growth VCT I PLC (since
                                                                                            2001); Director, Aberdeen
                                                                                            International Fund Managers
                                                                                            Limited (since 1998); Director,
                                                                                            Aberdeen International Fund PLC
                                                                                            (since 1997); Director, Aberdeen
                                                                                            Private Investors Limited (since
                                                                                            2001); Director, Aberdeen
                                                                                            Property Investors International
                                                                                            Limited (since 2001); Director,
                                                                                            Aberdeen Umbrella Cash Fund PLC
                                                                                            (since 1998); Director, Aberdeen
                                                                                            Unit Trust Managers Limited
                                                                                            (since 1987); Director, Aberdeen
                                                                                            Fund Managers Ireland Limited
                                                                                            (since 2000); Director, APFM
                                                                                            Wind-Up Limited (since 1994);
                                                                                            Director, Argosy Asset Management
                                                                                            Luxembourg SA (since 1991);
                                                                                            Director, Asset Value Investors
                                                                                            Limited (since 2001); Director,
                                                                                            Balgranach Properties Limited
                                                                                            (since 1998); Director, Bogey One
                                                                                            Limited (since 1998); Director,
                                                                                            Broadgate Investment Trust PLC
                                                                                            (since 1995); Director, Chaucer
                                                                                            Holdings PLC (since 1993);
                                                                                            Director, FirstGroup PLC (since
                                                                                            1995); Director, Grampian Country
                                                                                            Food Group Limited (since 1996);
                                                                                            Director, Healthcare Reform
                                                                                            Investment Trust PLC (since
                                                                                            1996); Director, Inner Workings
                                                                                            Group PLC (since 1999); Director,
                                                                                            Jersey Phoenix Trust Limited
                                                                                            (since 1999); Director, Lombard
                                                                                            International Assurance SA (since
                                                                                            1991); Director, Murray Johnstone
                                                                                            Holdings Limited (since 2001);
                                                                                            Director, Murray Johnstone
                                                                                            International Limited (since
                                                                                            2001); Director, Murray Johnstone
                                                                                            Limited (since 2001); Director,
                                                                                            Murray Johnstone Unit Trust
                                                                                            Management Limited (since 2001);
                                                                                            Director, New Asia (Isle of Man)
                                                                                            Limited (since 1996); Director,
                                                                                            Phoenix Aberdeen International
                                                                                            Advisors LLC (since 1996);
                                                                                            Director, Primary Health
                                                                                            Properties PLC (since 1996);
                                                                                            Director, Property Management
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
                                       60

<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Number
                                   Term of                                       of Funds
                                   Office                                        in Fund
                                     and                                         Complex
                    Position(s)    Length                                        Overseen
   Name, Address     Held With     of Time    Principal Occupation(s) During        by
      and Age        the Fund      Served             Past Five Years            Director     Other Directorships Held by Director
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                 <C>            <C>        <C>                                <C>          <C>
                                                                                              Employment Services Limited (since
                                                                                              2000); Director, Property Partners
                                                                                              (Two Rivers) Limited (since 2001);
                                                                                              Director, Property Partners (Whitgift)
                                                                                              Limited (since 2000); Director, Regent
                                                                                              Property Partners (Residential)
                                                                                              Limited (since 2000); Director, Regent
                                                                                              Property Partners (Retail Parks)
                                                                                              Limited (since 2000); Director, Regent
                                                                                              Retail Parks (St. John's
                                                                                              Wolverhampton) Limited (since 2001);
                                                                                              Director, Scottish Medicine PLC (since
                                                                                              1998); Director, Templar Hotels LTD
                                                                                              (since 1990); Director, Tenon Nominees
                                                                                              Limited (since 1987); Director, The
                                                                                              London Market Fund PLC (since 1999);
                                                                                              Director, The Tavemers Trust PLC
                                                                                              (since 2000); Director, Themis
                                                                                              Investment Management Limited (since
                                                                                              2000); Director, Aberdeen Emerging
                                                                                              Economies Investment Trust PLC (since
                                                                                              1993); Director, Aberdeen Growth VCT I
                                                                                              (since 2001); Director, Aberdeen
                                                                                              Property Investors UK Limited (since
                                                                                              2001); Director, Aberdeen
                                                                                              International India Opportunities Fund
                                                                                              (Mauritius) Limited; Director,
                                                                                              Aberdeen Latin American Investment
                                                                                              Trust PLC (from 1994 to 1998);
                                                                                              Director, Aberdeen New Thai Investment
                                                                                              Trust PLC (from 1989 to 2000);
                                                                                              Director, Aberdeen Investment Services
                                                                                              SA (from 1998 to 2000); Director,
                                                                                              Aberdeen High Income Trust PLC (from
                                                                                              1994 to 1999); Director, Aberdeen
                                                                                              Preferred Income Trust PLC (from 1997
                                                                                              to 1998); Director, Aberdeen Growth
                                                                                              VCT II PLC (from 2001 to 2002);
                                                                                              Director, AM Wind-Up Limited (1997 to
                                                                                              1998); Director, Aberdeen Property
                                                                                              Investors Limited (from 2000 to 2002);
                                                                                              Director, Arthur House (No 10) Limited
                                                                                              (from 1997 to 1998); Director, PFM
                                                                                              Developments Limited (during 1998);
                                                                                              Director, Prolific Objective Asset
                                                                                              Management Limited (during 1999);
                                                                                              Director, Prolific Objective Limited
                                                                                              (from 1997 to 1999); Director,
                                                                                              Prolific Technology
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       61

<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Number
                                   Term of                                       of Funds
                                   Office                                        in Fund
                                     and                                         Complex
                    Position(s)    Length                                        Overseen
   Name, Address     Held With     of Time    Principal Occupation(s) During        by
      and Age        the Fund      Served             Past Five Years            Director     Other Directorships Held by Director
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                 <C>            <C>        <C>                                <C>          <C>
                                                                                              Limited (from 1997 to 1998); Director,
                                                                                              Prolific Unit Trust Nominees Limited
                                                                                              (from 1997 to 1998); Director, The
                                                                                              Taverners Trust PLC (from 1996 to
                                                                                              2000); Director, UTM Wind-Up II
                                                                                              Limited (from 1997 to 2000); Director,
                                                                                              UTM Wind-Up Limited (from 1997 to
                                                                                              2000); Director, Aberdeen Atlas Fund
                                                                                              (from 1991 to 1999); Director,
                                                                                              Aberdeen Capital Management
                                                                                              International Limited (from 1998 to
                                                                                              1999); Director, Abtrust Pointon
                                                                                              Pension Fund Managers Limited (from
                                                                                              1995 to 2000); Director, Abtrust
                                                                                              Securities Limited (from 1991 to
                                                                                              1999); Director, Archer Dedicated PLC
                                                                                              (from 1995 to 1998); Director, Arthur
                                                                                              House (No 9) Limited (from 1990 to
                                                                                              1998); Director, Arthur House
                                                                                              Management Limited (from 1995 to
                                                                                              1999); Director, CGA Nominees Limited
                                                                                              (from 1991 to 1998); Director,
                                                                                              Criterion Properties PLC (from 1993 to
                                                                                              2000); Director, Easyfollow Limited
                                                                                              (from 1990 to 2000); Director,
                                                                                              Grampian Enterprise Limited (from 1997
                                                                                              to 2001); Director, Old Mutual
                                                                                              Services Company (IOM) Limited (during
                                                                                              2002); Director, Pointon York Nominees
                                                                                              Limited (from 1994 to 2001); Director,
                                                                                              Prosperity Investment Management
                                                                                              Limited (during 1998); Director, The
                                                                                              Turkey Trust PLC (from 1996 to 1998);
                                                                                              Director, Prosperity Unit Trust
                                                                                              Management Limited (from 1994 to
                                                                                              1998).
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       62

<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Number
                                      Term of                                    of Funds
                                       Office                                    in Fund
                                        and                                      Complex
                        Position(s)    Length                                    Overseen
     Name, Address       Held With    of Time      Principal Occupation(s)          by       Other Directorships Held by Director
        and Age           the Fund     Served       During Past Five Years       Director
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                      <C>         <C>       <C>                               <C>         <C>
Beverley Hendry*         Class I     Term as   Mr. Hendry has served as             1        Director, Aberdeen Investment
Las Olas Place           Director;   Director  Executive Director of Aberdeen                Services S.A. (since 1998);
300 S.E. 2/nd/ Street,   Assistant    expires  Asset Management PLC (parent                  Director, Aberdeen Fund Managers
Suite 820                Treasurer     2004;   company of the Fund's                         Ireland Limited (since 2000);
Fort Lauderdale, FL                  Director  Investment Manager and                        Director, Phoenix Aberdeen
33301                                   and    Investment Adviser) since                     International Advisors LLC (since
                                      officer  1991.  He has also served as                  1996); Director, Aberdeen Asset
Age: 48                                since   Chief Executive Director of                   Managers Ireland Limited (since
                                       2001    Aberdeen Fund Managers, Inc.                  1999); Director, The America Monthly
                                               (affiliate of the Fund's                      Income Trust (since 2000).
                                               Investment Manager and
                                               Investment Adviser) since
                                               1995.  He has been a Director
                                               of Aberdeen Asset Managers
                                               (C.I.) Limited (the Fund's
                                               Investment Manager) since 2001.

- ------------------------------------------------------------------------------------------------------------------------------------
Brian M. Sherman*        Class II      Term    Mr. Sherman has 36 years             1        Vice President (from 1992 to 2000),
2 Paddington Street      Director     expires  experience in international                   Director (from 1992 to 2000) and
Paddington, NSW                        2005;   funds management, stockbroking,               Chairman (from 1995 to 2000),
2021 Australia                       Director  and in particular, 24 years in                Aberdeen Global Income Fund, Inc.;
                                       since   the funds management industry                 President (from 1985 to 2001) and
Age: 58                                1986    in Australia, managing money in               Director (from 1985 to 2000),
                                               equities and bonds. He was                    Aberdeen Australia Equity Fund,
                                               Chairman of the Fund from 2000                Inc.; Joint Managing Director (from
                                               to 2001 and President of the                  1986 to 2001) and Chairman (from
                                               Fund to 2001. Until December                  1995 to 2001), Director (since
                                               2000, he was Chairman and Joint               1986), Aberdeen Asia-Pacific Income
                                               Managing Director of the Fund's               Investment Company Limited;
                                               Investment Adviser, and a                     Chairman, Sherman Group Limited
                                               Director of the Fund's                        (investment company) (since 2001);
                                               Investment Manager. Mr. Sherman               Joint Managing Director, EquitiLink
                                               has been the President of the                 Limited (holding company) (from 1988
                                               Board of Directors of the                     to 2000); Director, EquitiLink
                                               Australian Museum since 2001.                 Holdings Pty. Limited (holding
                                                                                             company) (from 1998 to 2000);
                                                                                             Director, Aberdeen Leaders Limited
                                                                                             (investment company) (since 1987);
                                                                                             Director, EquitiLink eLink Limited
                                                                                             (investment company) (from 1998 to
                                                                                             2002); Director, Ten Network
                                                                                             Holdings Limited (television
                                                                                             network) (since 1998); Director,
                                                                                             EIML Australia Pty. Limited
                                                                                             (investment company) (from 1985 to
                                                                                             2000); Director, Telecasters North
                                                                                             Queensland Ltd. (from 1992 to 1998);
                                                                                             Director, Kirman Pty. Limited (since
                                                                                             1981); Director, Kirman Holdings
                                                                                             Pty. Limited (since 1993); Director,
                                                                                             Hestian Pty. Limited (since 1983);
                                                                                             Director, EquitiLink International
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       63

<PAGE>

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                 Number
                                       Term of                                  of Funds
                                       Office                                   in Fund
                                        and                                     Complex
                         Position(s)   Length                                   Overseen
     Name, Address        Held With   of Time      Principal Occupation(s)         by          Other Directorships Held by
        and Age            the Fund    Served       During Past Five Years      Director               Director
- -----------------------------------------------------------------------------------------------------------------------------
      <S>                 <C>         <C>           <C>                         <C>           <C>
                                                                                              Management
                                                                                              Limited (from 1985 to 2000).
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>

- -----------------------------
*    Mr. Sherman is deemed to be an interested person because of his ownership
     of securities of Aberdeen Asset Management PLC, the parent company of the
     Fund's Investment Manager and Investment Adviser. Messrs. Gilbert and
     Hendry are deemed to be interested persons because of their affiliation
     with the Fund's Investment Manager and Investment Adviser.

Independent Directors

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------

                                       Term of                                   Number
                                       Office                                   of Funds
                                         and                                    in Fund
                                       Length                                   Complex
                          Position(s)    of                                     Overseen
      Name, Address        Held With    Time        Principal Occupation(s)        by          Other Directorships Held by
         and Age           the Fund    Served       During Past Five Years      Director               Director

- -----------------------------------------------------------------------------------------------------------------------------
<S>                         <C>         <C>       <C>                           <C>           <C>
Anthony E. Aaronson         Class I      Term     Mr. Aaronson has extensive          2       Director, Aberdeen
110 E. 9/th/ Street         Director    expires   experience in the management                Australia Equity Fund, Inc.
Suite 721B                               2004;    of private investments.  He                 (since 1985); Tony Aaronson
Los Angeles, CA 90079                   Director  served as Chairman of the                   Textiles (since 1992).
                                         since    Audit Committee of the Fund
Age: 65                                   1986    from the inception of the Fund
                                                  until 2000.  He was Vice
                                                  President of the Textile
                                                  Association of Los Angeles
                                                  from 1996 to 1998.
- -----------------------------------------------------------------------------------------------------------------------------

David L. Elsum, A.M.++      Class III    Term     Mr. Elsum has over 20 years of      3       Director, Aberdeen
9 May Grove                 Director    expires   experience in investment and                Australia Equity Fund, Inc.
South Yarra, Victoria 3141               2003;    insurance markets.  He was a                (since 1985), Aberdeen
Australia                               Director  member of the Corporations and              Global Income Fund, Inc.
                                         since    Securities Panel of the                     (since 1992), and Aberdeen
Age: 64                                   1986    Australian Securities                       Asia-Pacific Income
                                                  Commission until 2000, was a                Investment Company Limited
                                                  member of the Australian                    (since 1986); Chairman,
                                                  Federal Government                          Audit Victoria (government
                                                  Administrative Appeals                      statutory authority) (from
                                                  Tribunal until 2001, and has                1997 to 2000); Chairman,
                                                  been a member of the State of               Melbourne Wholesale Fish
                                                  Victoria Regulator-General                  Market Pty. Ltd.; Chairman,
                                                  Appeal Panel since 2001.  Mr.               Queen Victoria Market Pty.
                                                  Elsum is Chairman of Stodart                Ltd. (municipal market);
                                                  Investment Pty. Ltd.                        Director, Financial Planning
                                                  Previously, he was founding                 Association Limited
                                                  Managing Director of Capel                  (industry association);
                                                  Court Investment Bank.                      Director, Aberdeen Leaders
                                                  Subsequently, Mr. Elsum was                 Limited (investment company).
                                                  Chief Executive of several
                                                  major public companies
                                                  including The MLC Limited
                                                  (insurance) and President of
                                                  the State of Victoria
                                                  Superannuation Fund (pension
                                                  fund management).
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       64

<PAGE>

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
                                                                                  Number
                                         Term of                                  of Funds
                                          Office                                  in Fund
                                           and                                    Complex
                         Position(s)      Length                                  Overseen
     Name, Address        Held With       of Time    Principal Occupation(s)         by       Other Directorships Held by
        and Age           the Fund        Served      During Past Five Years      Director             Director
- ---------------------------------------------------------------------------------------------------------------------------------
<S>                      <C>            <C>       <C>                           <C>          <C>
Howard A. Knight           Class II       Term    Mr. Knight has over 30 years        2      Director, Aberdeen
421 Glenbrook Road, #2     Director      expires  of experience in financial                 Australia Equity Fund, Inc.
Stamford, CT 06906                        2005;   markets and has been actively              (since 1993); Director,
                                         Director involved in the Australian                 Lions Gate Entertainment
Age: 60                                   since   financial markets for more                 Corp. (film production and
                                          1993    than 25 years.  From 1991 to               distribution) (since 1998);
                                                  1994, he served as President               Director, SBS Broadcasting
                                                  of Investment Banking, Equity              SA (from 1993 to 2001);
                                                  Transactions and Corporate                 Director, Agaton Fitness AG
                                                  Strategy at Prudential                     (since 1996).
                                                  Securities.  From 1996 to
                                                  2001, Mr. Knight served as
                                                  Vice Chairman and Chief
                                                  Operating Officer of SBS
                                                  Broadcasting SA (European
                                                  television and radio
                                                  broadcasting), where he was
                                                  actively involved in
                                                  investment management and
                                                  capital markets. Mr. Knight is
                                                  currently an independent
                                                  director and management
                                                  adviser.
- ---------------------------------------------------------------------------------------------------------------------------------
P. Gerald Malone           Class II       Term    Mr. Malone has been chairman        1      Director, Aberdeen
48 Barmouth Road           Director      expires  or a director of several                   Asia-Pacific Income
London, SW182DP                           2005;   companies in the health care               Investment Company Limited
United Kingdom                          Director  industry since 1998.  He was               (since 2001); Chairman
                                          since   Minister of Health between                 (since 2000) and Director
Age: 52                                   2001    1994 and 1997, and a Member of             (since 1999), Regent GM
                                                  Parliament from Winchester                 Laboratories Ltd. (generic
                                                  between 1992 and 1997.                     pharmaceutical manufacturer);
                                                                                             Director, Chiltern Invadex plc
                                                                                             (manufacturers of patient
                                                                                             handling and showering equipment)
                                                                                             (since 1999); Director, Ultrasis
                                                                                             plc (developers of health care
                                                                                             software) (since 2000); Director,
                                                                                             European Growth and Income Trust
                                                                                             plc (investment trust) (since 2000);
                                                                                             Director, Quinta dos Pinhieros
                                                                                             Limited (real estate) (since 2001).
- ---------------------------------------------------------------------------------------------------------------------------------

</TABLE>

                                       65

<PAGE>

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                    Number
                                        Term of                                    of Funds
                                        Office                                     in Fund
                                          and                                      Complex
                         Position(s)    Length                                     Overseen
  Name, Address           Held With     of time   Principal Occupation(s) During      by       Other Directorships Held by
     and age              the Fund      Served           Past Five Years           Director             Director
- -----------------------------------------------------------------------------------------------------------------------------
<S>                       <C>           <C>       <C>                              <C>       <C>
Neville J. Miles*         Class I        Term     Mr. Miles has over 20 years of      3      Director, Aberdeen Australia
2 Paddington Street       Director      expires   international investment                   Equity Fund, Inc. (since 1996),
Paddington, NSW 2021                     2004;    banking experience. He was                 Aberdeen Global Income Fund,
Australia                               Director  formerly head of Corporate                 Inc. (since 1999), and Aberdeen
                                         since    Treasury at Westpac Banking                Asia-Pacific Income Investment
Age: 56                                  1996     Corporation and Managing                   Company Limited (since 2000);
                                                  Director of Ord Minnett                    Director, Aberdeen Leaders
                                                  Securities Limited                         Limited (investment company);
                                                  (stockbrokers). Mr. Miles has              Executive Director, EL&C
                                                  extensive experience in the                Ballieu Limited (stockbrokers)
                                                  areas of corporate                         (from 1994 to 1997); Director,
                                                  acquisitions and equity                    Ballyshaw Pty.
                                                  offerings. He is currently an              Ltd.(investing/consulting);
                                                  investor and real estate                   Director, Dawnglade Pty. Ltd.
                                                  developer.                                 (real estate investment);
                                                                                             Director, Villepen Pty. Ltd.
                                                                                             (real estate development)
                                                                                             (since 1999); Director, Sonic
                                                                                             Communications Pty. Ltd. (since
                                                                                             2000) Director, ComServe (since 2002).

- -----------------------------------------------------------------------------------------------------------------------------
Peter J. O'Connell        Class III      Term     Mr. O'Connell is involved in        2      Director, Aberdeen Australia
3 Spring Street           Director      expires   modern technology developments             Equity Fund, Inc. (since 1999);
Suite 8, Level 6                         2003;    and has extensive business                 Chief Executive Officer, Lang
Sydney, NSW 2000                        Director  experience in the Asian                    Holdings (Aust) Pty. Ltd.
Australia                                since    region. Mr. O'Connell is                   (technology consulting) (since
                                         1999     admitted as a solicitor in                 2001); Chief Executive Officer,
Age: 49                                           Australia and he has been                  Ten Ventures Pty. Ltd.
                                                  Chief Executive Officer of                 (establishment of media-based
                                                  Smart Device Marketing Company             internet businesses) (from 1999
                                                  since 2001.                                to 2000); Chief of Operations,
                                                                                             Consolidated Press Holdings
                                                                                             Pty. Limited (supervision of
                                                                                             private equity investments)
                                                                                             (from 1997 to 1999); Chief
                                                                                             Executive Officer (from 1994 to
                                                                                             1996) and Director (from
                                                                                             1994-1999), Hargrave
                                                                                             Consultants Pty. Ltd.
                                                                                             (technology consulting);
                                                                                             Director, A.C.N. 088 899 230
                                                                                             Limited (during 1999);
                                                                                             Director, ACP New Zealand
                                                                                             Mastheads Pty. Ltd. (from
                                                                                             1997-1998); Director, Shield
                                                                                             Telecommunications Ltd. (during
                                                                                             2001); Director, Aspinalls
                                                                                             London Limited (from
                                                                                             1997-1999); Director, Clonmel
                                                                                             Nominees Pty.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       66

<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Number
                                        Term of                                    of Funds
                                        Office                                     in Fund
                                         and                                       Complex
                           Position(s)  Length                                     Overseen
    Name, Address           Held With   of Time   Principal Occupation(s) During      by         Other Directorships Held by
       and Age               the Fund   Served           Past Five Years           Director                Director
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                        <C>          <C>       <C>                              <C>           <C>
                                                                                                   Limited (from 1998-1999);
                                                                                                   Director, Consolidated Meat
                                                                                                   Group (from 1998-1999);
                                                                                                   Director, Easycall (Asia)
                                                                                                   Telecommunications Ltd.
                                                                                                   (from 1997-2000); Director,
                                                                                                   FAI Insurances Ltd. (from
                                                                                                   1996-1999); Director,
                                                                                                   Guzman Pty. Ltd. (from
                                                                                                   1987-1999); Director,
                                                                                                   Hargrave Consultants Pty.
                                                                                                   Limited (1994-1999);
                                                                                                   Director, Huntsman
                                                                                                   Australia R&D Company Pty.
                                                                                                   Limited (from 1998-1999);
                                                                                                   Director, Manboom2 Pty.
                                                                                                   Limited (from 1998-1999);
                                                                                                   Director, Mangosports.com
                                                                                                   Pty. Limited (from
                                                                                                   2000-2002); Director,
                                                                                                   Moneymakers Television Show
                                                                                                   Pty. Limited (from
                                                                                                   1995-2000); Director,
                                                                                                   Moonstone Diamond
                                                                                                   Corporation (from
                                                                                                   1998-1999); Director, Optus
                                                                                                   Communications Pty. Limited
                                                                                                   (from 1992-1998); Chairman
                                                                                                   and Director, Perisher Blue
                                                                                                   Pty. Limited (from
                                                                                                   1997-1999); Director, Sky
                                                                                                   Television Pty. Limited
                                                                                                   (from 1997-1999); Director,
                                                                                                   TCom World Limited (from
                                                                                                   2000-2001); Chairman and
                                                                                                   Director, Ticketek Pty.
                                                                                                   Limited (from 1996-1999);
                                                                                                   Director, Vysden Resources
                                                                                                   NL (from 1993-1998);
                                                                                                   Director, V10 Corp.
                                                                                                   Investments Pty. Ltd.
                                                                                                   (during 2000); Director,
                                                                                                   V10 Investments Pty. Ltd.
                                                                                                   (during 2000).
- ----------------------------------------------------------------------------------------------------------------------------------
 William J. Potter++*      Class II        Term     Mr. Potter has extensive             3         Director, Aberdeen Australia
 236 West 27/th/ Street    Director      expires    experience in investment                       Equity Fund, Inc. (since 1985),
 3/rd/ Floor                               2003;    banking and fund management.                   Aberdeen Global Income Fund, Inc.
 New York, NY 10001                      Director   Mr. Potter has held senior                     (since 1992), and Aberdeen
                                           since    positions with Toronto                         Asia-Pacific Income Investment
 Age: 54                                   1986     Dominion Bank, Barclays Bank                   Company Limited (since 1986);
                                                    PLC, and Prudential                            President, Ridgewood Group
                                                    Securities, Inc., as well as                   International Ltd. (international
                                                    board of director positions                    consulting and merchant banking
                                                    with investment funds                          company) (since 1989);
                                                    involving over $20 billion in                  President, Ridgewood Capital
                                                    assets since 1983.  Mr. Potter                 Funding,
                                                    has been involved in the
                                                    Australian capital markets
                                                    since 1974,
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       67

<PAGE>

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
                                                                                     Number
                                       Term of                                      of Funds
                                        Office                                       in Fund
                                         and                                         Complex
                            Position(s) Length                                      Overseen
Name, Address                Held With  of Time   Principal Occupation(s) During       By           Other Directorship Held by
   and Age                   the Fund   Served           Past Five Years            Director               Director
- ---------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>       <C>        <C>                               <C>       <C>
                                                  including management and board             Inc. (private placement securities
                                                  of director positions with a               firm) (since 1989); Director,
                                                  noted Australian brokerage                 International Panorama,
                                                  house. Mr. Potter is                       Inc. (mining) (since
                                                  President of a U.S. investment             1994); Director, National
                                                  bank and has securities                    Foreign Trade Counsel
                                                  licenses in both the U.S. and              (trade association) (since
                                                  Canada. Mr. Potter also has                1984); Director,
                                                  extensive securities                       Alexandria Bancorp (banking
                                                  underwriting experience in                 group in Cayman Islands)
                                                  various capital markets with               (since 1991); [Director,
                                                  an emphasis on natural                     Vanstone Investments
                                                  resources.                                 (software) (since 1990)];
                                                                                             Director, E.C. Power, Inc.
                                                                                             (energy company) (since
                                                                                             1996); Director, Serapec
                                                                                             S.A. (energy company)
                                                                                             (since 1996).
- ---------------------------------------------------------------------------------------------------------------------------------
Peter D. Sacks++            Class II     Term     Mr. Sacks is currently              3      Director, Aberdeen
445 King Street West,       Director    expires   Managing Partner of Toron                  Australia Equity Fund, Inc.
4/th/ Floor                              2005;    Capital Markets, Inc., a                   (since 1999), Aberdeen
Toronto, Ontario M5V 1K4               Director   company he established in 1998             Global Income Fund, Inc.
Canada                                   since    to design and manage                       (since 1992), and Aberdeen
                                         1993     customized equity, fixed                   Asia-Pacific Income
                                                  income and currency portfolios             Investment Company Limited
Age: 57                                           for individual and corporate.              (since 1998); Director,
                                                  Mr. Sacks also serves on the               First Horizon Holdings LTD
                                                  Boards of Directors of Toron               (since 1998); Director,
                                                  Capital Markets, Inc., Toron               First Horizon Capital Corp.
                                                  Capital Management, Ltd. and               (since 1998); Director,
                                                  Toron Asset Management, Inc.               Cirrus Financial Concepts
                                                                                             Inc (since 1998).
- ---------------------------------------------------------------------------------------------------------------------------------
Dr. Anton E. Schrafl        Preferred    Term     Dr. Schrafl was Deputy             2       Director, Aberdeen Global
Wiesenstrasse 7             Stock       expires   Chairman of Holcim imited,                 Income Fund, Inc. (since
CH-8001 Zurich              Director     2003;    La global manufacturer and                 1993) and Aberdeen
Switzerland                            Director   distributor of cement and                  Asia-Pacific Income
                                         since    allied products until May                  Investment Company Limited
Age: 70                                  1998     2002. He also serves on the                (since 1998).
                                                  Board of Directors of
                                                  Organogenesis, Inc., a medical
                                                  products company involved in
                                                  biotechnological tissue
                                                  engineering, and Apogee
                                                  Technology Inc., a
                                                  manufacturer of digital
                                                  amplifiers.
- ---------------------------------------------------------------------------------------------------------------------------------
John T. Sheehy *            Preferred    Term     Mr. Sheehy has over 30 years'       3      Director, Aberdeen
560 Sylvan Avenue           Stock       expires   experience in investment                   Australia Equity Fund, Inc.
Englewood Cliffs, NJ        Director     2003;    banking with companies such as             (since 1985), Aberdeen
07632                                   Director  J.P. Morgan & Company and                  Global Income Fund, Inc.
                                         since    Bear, Stearns & Co. Inc. His               (since 1992), and Aberdeen
Age: 59                                  1986     specialty areas include                    Asia-Pacific Income
                                                  securities valuation, public               Investment Company Limited
                                                  offerings and private                      (since 1986); Member, The
                                                  placements of debt and equity              Value Group LLC (private
                                                  securities, mergers and                    equity) (since 1997);
                                                  acquisitions and management                Director, Video City, Inc.
                                                  buyout transactions. He has                (video retail merchandising)
                                                  been                                       (since 1997);
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       68

<PAGE>

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                 Number
                                   Term of                                      of Funds
                                   Office                                       in Fund
                                    and                                         Complex
                    Position(s)    Length                                       Overseen
Name, Address       Held With      of Time    Principal Occupation(s) During       by         Other Directorships Held by
   and Age          the Fund       Served            Past Five Years            Director                Director
- -----------------------------------------------------------------------------------------------------------------------------
<S>                 <C>            <C>        <C>                               <C>           <C>
                                                  Senior Managing Director                     Managing Director,
                                                  of B.V. Murray and Company                   Black & Co. (investment
                                                  (investment banking) since                   banking) (from 1996 to
                                                  2001.                                        1997); Director, Cross
                                                                                               Point Foods, Corp. (from
                                                                                               2000 to 2001).
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>

- -----------------------------

+        Messrs. Elsum, Miles and Potter are members of the Contract Review
         Committee.

++       Messrs. Aaronson, Sacks and Sheehy are members of the Audit and
         Valuation Committee.

*        Messrs. Miles, Potter and Sheehy are members of the Nominating
         Committee.

Officers Who Are Not Directors

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
      Name, Address         Position(s) Held    Term of Office* and
         and Age              With the Fund     Length of Time Served     Principal Occupation(s) During Past Five Years
- -------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>                   <C>                  <C>
Hugh Young                      President           Since 2001         Managing Director (since 1991) of Aberdeen Asset
21 Church Street                                                       Management PLC (parent company of the Fund's
#01-01 Capital Square Two                                              Investment Manager and Investment Adviser), Managing
Singapore 0490480                                                      Director (since 1992) of Aberdeen Asset Management
                                                                       Asia Limited (affiliate of the Fund's Investment
Age: 44                                                                Manager and Investment Adviser), Managing Director
                                                                       (since 2000) of Aberdeen International Fund Managers
                                                                       Limited (affiliate of the Fund's Investment Manager
                                                                       and Investment Adviser), Director (since 2001) of the
                                                                       Investment Manager and the Investment Adviser,
                                                                       President (since 2001) of the Fund and of Aberdeen
                                                                       Australia Equity Fund, Inc. and Aberdeen Global Income
                                                                       Fund, Inc.

                                                                       Mr. Young holds the following positions: Director,
                                                                       Aberdeen Australia Equity Fund, Inc. (since 2001);
                                                                       Director, Aberdeen Asset Management Holdings Limited
                                                                       (since 2000); Director, Aberdeen Asia Total Return
                                                                       (since 1998); Director, Aberdeen Asian Smaller
                                                                       Companies Investment Trust PLC (since 1995); Director,
                                                                       Aberdeen Emerging Asia Investment Trust Limited (since
                                                                       1990); Director, Aberdeen Asset Management Asia
                                                                       Limited (since 1991); Director, Aberdeen India Fund
                                                                       Limited (since 1996); Director, Aberdeen Islamic Fund
                                                                       Managers Limited (since 2000); Director, Aberdeen New
                                                                       Dawn Investment Trust PLC (since 1989); Director,
                                                                       Aberdeen New Thai Investment Trust PLC (since 1989);
                                                                       Director, Aberdeen International Fund Managers Limited
                                                                       (since 1998); Director, Aberdeen International
                                                                       Management Ireland Limited (since 2000); Director,
                                                                       Apollo Europe Fund Limited (since 1996); Director,
                                                                       Apollo Investment Management Limited (since 1994);
                                                                       Director, Apollo Hedge Fund Limited (since 1996);
                                                                       Director, Apollo Japan Fund Limited (since 1995);
                                                                       Director, Apollo Tiger Fund Limited (since 1994);
                                                                       Director, Apollo Californian Fund Limited (since
                                                                       1997); Director, JF Philippine Fund Limited (since
                                                                       1991); Director, Phoenix Aberdeen International
                                                                       Advisors LLC (since 1996); Director,
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       69

<PAGE>

<TABLE>
<S>                             <C>                <C>            <C>
- ---------------------------------------------------------------------------------------------------------------------------
                                                                   Apollo Protector Fund Limited (since 1994); Director,
                                                                   Aberdeen Global (since 1998); Director, Aberdeen PCC
                                                                   Limited (since 2000); Director, Aberdeen Guernsey
                                                                   Limited (since 1999); Director, The London Market
                                                                   Fund PLC (since 1999); Director, Aberdeen Goh Equity
                                                                   Private PTE Limited (since 2001); Director, Murray
                                                                   Johnstone Asia Limited (since 2000); Senior Vice
                                                                   President, Phoenix-Aberdeen Series Fund (since 1996);
                                                                   Director, Aberdeen Goh Private Equity Fund 1 Pte
                                                                   Limited (since 2001); Director, MIMB Aberdeen Asset
                                                                   Management Sdn Bhd (since 1998); Director, Aberdeen
                                                                   Asset Management Company Limited (since 2002).
- ---------------------------------------------------------------------------------------------------------------------------
Christian Pittard                 Treasurer and    Since 2001      Managing Director (since 2001) of the Fund's
P.O. Box 641                        Assistant                      Investment Manager; Managing Director (since 1998) of
One Seaton Place                    Secretary                      Aberdeen Private Wealth; Chartered Accountant
St. Helier, Jersey JE4 8YJ                                         (1994-1998), KPMG and Quorum Trust Group (1998).
Channel Islands
                                                                   Mr. Pittard holds the following positions: Director,
Age: 29                                                            Aberdeen Asset Managers Jersey Limited (since 1999);
                                                                   Director, Aberdeen Guernsey Limited (since 2001);
                                                                   Director, Aberdeen PCC Limited (since 2001);
                                                                   Director, Beta Gran Caribe Limited (since 2001);
                                                                   Director, Pelas Limited (since 2000); Director,
                                                                   Insurance Development Holdings A.G. (since 2000).
- ---------------------------------------------------------------------------------------------------------------------------
Michael Karagianis               Vice President,   Since 2002      Vice President (since 2002) and Assistant Vice
One Bow Churchyard                 (formerly                       President (from 2001 to 2002) of the Fund; Director
London EC4M 9HH                  Assistant Vice                    of Economics and Investment Strategy (since 1999) of
United Kingdom                     President)                      the Fund's Investment Adviser; Director of Portfolio
                                                                   Investment (1995-1999) of County Investment
                                                                   Management; Director, Ashmede Pty. Ltd. (since 1997).
Age: 37
- ---------------------------------------------------------------------------------------------------------------------------
James Blair                      Assistant Vice    Since 2002      Director, Head of Regional Fixed Income, Aberdeen
21 Church Street #01-01            President                       Asset Management Asia and Aberdeen Asset Management
Capital Square Two                                                 Limited; Director, Aberdeen Asset Management Asia
Singapore 049480                                                   (since 2001); Director, Aberdeen Asset Management
                                                                   Limited (since 2001); Director, Head of Fixed Income,
                                                                   EquitiLink Investment Management (from 1997 to
Age: 36                                                            2001).
- ---------------------------------------------------------------------------------------------------------------------------
Simon Bignell                      Assistant       Since 2001      Director (since 2001) of the Fund's Investment
P.O. Box 641                       Treasurer                       Manager; Assistant Treasurer (since 2001) of the
One Seaton Place                                                   Fund; Director (1995-2001) of Kleinwort Benson
St. Helier, Jersey JE4 8YJ                                         (Jersey) Fund Managers Limited (fund administration).
Channel Islands

Age: 41
- ---------------------------------------------------------------------------------------------------------------------------
Timothy Sullivan                   Assistant       Since 2001      Vice President, Aberdeen Fund Managers, Inc. (doing
45 Broadway, 31/st/ Floor          Treasurer                       business under the name Aberdeen Asset Management
New York, NY 10006                                                 Investor Relations) (investor relations service
                                                                   provider and affiliate of the Fund's Investment
Age: 41                                                            Manager and Investment Adviser); Managing Director
                                                                   (1995-2002) of EquitiLink USA, Inc. (former investor
                                                                   relations service provider and affiliate of the
                                                                   Fund's Investment Manager and Investment Adviser);
                                                                   Vice President (1997-1999) of the Bank of New York.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       70

<PAGE>

<TABLE>
<S>                             <C>            <C>                   <C>
- -------------------------------------------------------------------------------------------------------------------------
Jack Benintende                 Assistant      Since 2000            Vice President (since 2000) of Prudential
Gateway Center 3                Treasurer                            Investments LLC, the Fund's Administrator; Senior
100 Mulberry Street                                                  Manager (1998-2000) and Manager (1995-1998) of
Newark, New Jersey                                                   PricewaterhouseCoopers LLP.
07102

Age: 38
- -------------------------------------------------------------------------------------------------------------------------
Roy M. Randall                  Secretary      Since 1986            Partner of Stikeman, Elliott, Australian counsel to
Level 40, Chifley Tower                                              the Fund.
Two Chifley Square
Sydney, NSW 2000
Australia

Age: 66
- -------------------------------------------------------------------------------------------------------------------------
Allan S. Mostoff                Assistant      Since 1986            Partner of Dechert, U.S. counsel to the Fund and
1775 Eye Street, N.W.           Secretary                            the Investment Manager and Investment Adviser.
Washington, DC 20006

Age: 70
- -------------------------------------------------------------------------------------------------------------------------
Sander M. Bieber                Assistant      Since 1999            Partner of Dechert, U.S. counsel to the Fund and
1775 Eye Street, N.W.           Secretary                            the Investment Manager and Investment Adviser.
Washington, DC 20006

Age: 52
- -------------------------------------------------------------------------------------------------------------------------
Margaret A. Bancroft            Assistant      Since 1989            Partner of Dechert, U.S. counsel to the Fund and
30 Rockefeller Plaza            Secretary                            the Investment Manager and Investment Adviser.
New York, NY 10112

Age: 64
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

- --------------------------
*        Officers hold their positions with the Fund until a successor has been
         duly elected and qualified. Officers are generally elected annually at
         the meeting of the Board of Directors next following the annual meeting
         of stockholders. The officers were last elected on June 19, 2002.

Ownership of Securities

         As of the date of this Prospectus, the Fund's Directors and executive
officers, as a group, owned less than 1% of the Fund's outstanding shares of
Common Stock, and no shares of the Fund's Preferred Stock. The information as to
ownership of securities which appears below is based on statements furnished to
the Fund by its Directors and executive officers.

         For the period ended December 31, 2001, the dollar range of equity
securities owned beneficially by each Director in the Fund and in any registered
investment companies overseen by the Director within the same family of
investment companies as the Fund is as follows:

                                       71

<PAGE>

Interested Directors

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
                                                                                   Aggregate Dollar Range of Equity
                                                                                Securities in All Registered Investment
                                            Dollar Range of Equity                 Companies Overseen by Director in
     Name of Director                       Securities in the Fund                   Family of Investment Companies
- -------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                                 <C>
Martin J. Gilbert                                         0                                              0
- -------------------------------------------------------------------------------------------------------------------------
Beverley Hendry                                           0                                              0
- -------------------------------------------------------------------------------------------------------------------------
Brian M. Sherman                                          0                                  10,001-50,000
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

Independent Directors

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
                                                                                   Aggregate Dollar Range of Equity
                                                                                Securities in All Registered Investment
                                            Dollar Range of Equity                 Companies Overseen by Director in
     Name of Director                       Securities in the Fund                   Family of Investment Companies
- -------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                                 <C>
Anthony E. Aaronson                                1-10,000                                  10,001-50,000
- -------------------------------------------------------------------------------------------------------------------------
David L. Elsum                                     1-10,000                                  10,001-50,000
- -------------------------------------------------------------------------------------------------------------------------
Howard A. Knight                                          0                                  10,001-50,000
- -------------------------------------------------------------------------------------------------------------------------
P. Gerald Malone                                          0                                              0
- -------------------------------------------------------------------------------------------------------------------------
Neville J. Miles                                   1-10,000                                  10,001-50,000
- -------------------------------------------------------------------------------------------------------------------------
Peter J. O'Connell                                        0                                              0
- -------------------------------------------------------------------------------------------------------------------------
William J. Potter                                  1-10,000                                       1-10,000
- -------------------------------------------------------------------------------------------------------------------------
Peter D. Sacks                                     1-10,000                                       1-10,000
- -------------------------------------------------------------------------------------------------------------------------
Dr. Anton E. Schrafl                                      0                                              0
- -------------------------------------------------------------------------------------------------------------------------
John T. Sheehy                                            0                                  10,001-50,000
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

     Messrs. Hugh Young and Christian Pittard serve as executive officers of the
Fund. As of December 31, 2001, the executive officers of the Fund owned no
shares of the Fund's Common Stock or Preferred Stock.

Board Committees and Meetings

     The Board of Directors has a standing Audit and Valuation Committee,
composed entirely of Directors who are not "interested persons" (as that term is
defined in Section 2(a)(19) of the 1940 Act) of the Fund or the Fund's
Investment Manager or Investment Adviser ("Independent Directors") and who are
"independent" as defined in the AMEX listing standards. The Audit and Valuation
Committee reviews both the audit and non-audit work of the Fund's independent
public accountants, submits recommendations to the Board of Directors as to the
selection of independent public accountants and reviews compliance of the Fund
with regulations of the SEC and the Internal Revenue Service, and other related
matters.

     The Fund adopted an Audit Committee Charter on March 16, 2000, and on
December 11, 2001 amended this charter to be an Audit and Valuation Committee
Charter. The Audit and Valuation Committee has received the written disclosures
and the letter required by Independence Standards Board Standard No. 1 from
PricewaterhouseCoopers LLP ("PwC"), the Fund's independent accountants, and has
discussed with PwC its independence. The Audit and Valuation Committee has also
reviewed and discussed the audited financial statements with Fund management and
PwC, and discussed certain matters with PwC required to be discussed by
Statement on Auditing Standards No. 61. Based on the foregoing, the Audit and
Valuation Committee recommended to the Board of Directors that the Fund's
audited financial statements be included in the Fund's Annual Report to
Shareholders for the fiscal year ended October 31, 2001. The members of the
Fund's Audit and Valuation Committee are Messrs. Anthony E. Aaronson, Peter D.
Sacks, and John T. Sheehy.

                                       72

<PAGE>

     The Board of Directors also has a standing Contract Review Committee,
composed entirely of Independent Directors. The Contract Review Committee
reviews and makes recommendations to the Board with respect to entering into,
renewal or amendment of the Fund's management agreement, advisory agreement,
administration agreement, investor relations services agreement and other
agreements. The members of the Fund's Contract Review Committee are Messrs.
David L. Elsum, Neville J. Miles and William J. Potter.

     The Board of Directors also has a standing Nominating Committee, composed
entirely of Independent Directors. The Nominating Committee considers candidates
for service as Fund directors and remuneration to be paid to Fund directors. The
Nominating Committee will not consider nominees recommended by security holders.
The members of the Fund's Nominating Committee are Messrs. Neville J. Miles,
William J. Potter and John T. Sheehy.

     During the Fund's fiscal year ended October 31, 2001, the Board of
Directors held four regularly scheduled meetings and two special meetings, the
Audit Committee held two meetings, the Contract Review Committee held one
meeting, and the Nominating Committee held one meeting.

Compensation of Directors and Certain Officers

     The following table sets forth information regarding compensation of
Directors by the Fund and by the fund complex of which the Fund is a part for
the fiscal year ended October 31, 2001. Officers of the Fund and Directors who
are interested persons of the Fund do not receive any compensation directly from
the Fund or any other fund in the fund complex for performing their duties as
officers or directors, respectively. In the column headed "Total Compensation
From Fund and Fund Complex Paid to Directors," the number in parentheses
indicates the total number of boards in the fund complex on which the Director
serves or served at any time during the fiscal year ended October 31, 2001. In
June 2001, the Board of Directors, upon the recommendation of the Fund's
Nominating Committee, approved an increase in the fees payable to each
Independent Director of the Fund from a $13,750 per year retainer fee, a fee of
$1,000 per meeting for attendance at in-person Board meetings, and a fee of
$1,000 per meeting for attendance at telephonic Board meetings, to an aggregate
fee of $21,000 per year. Members of the Fund's Audit Committee, Contract Review
Committee, and Nominating Committee receive a fee of $500 per committee meeting
attended, and the Chairman of each of these Committees receives an additional
fee of $500 per committee meeting attended.

                                       73

<PAGE>

                               Compensation Table
                       Fiscal Year Ended October 31, 2001

<TABLE>
<CAPTION>
                                                               Pension or                                Total
                                                               Retirement          Extimated       Compensation From
                                           Aggregate        Benefits Accrued         Annual          Fund and Fund
                                          Compensation         As Part of        Benefits Upon      Complex Paid to
          Name of Director                 From Fund         Fund Expenses         Retirement          Directors
                                        ---------------   --------------------  ---------------   --------------------
<S>                                       <C>               <C>                  <C>               <C>
Anthony E. Aaronson ..............          $22,375               N/A                 N/A             $  39,125(2)
David L. Elsum....................          $21,875               N/A                 N/A             $  53,625(3)
Laurence S. Freedman*.............          $     0               N/A                 N/A             $       0(3)
Martin J. Gilbert.................          $     0               N/A                 N/A             $       0(2)
Beverley Hendry...................          $     0               N/A                 N/A             $       0(1)
Harry A. Jacobs, Jr.*.............          $     0               N/A                 N/A             $       0(2)
Howard A. Knight..................          $21,375               N/A                 N/A             $  37,125(2)
P Gerald Malone...................          $15,937               N/A                 N/A             $  15,937(1)
Neville J. Miles..................          $22,375               N/A                 N/A             $  54,125(3)
Peter O'Connell...................          $21,375               N/A                 N/A             $  37,125(2)
William J. Potter.................          $21,875               N/A                 N/A             $  55,625(3)
Peter D. Sacks....................          $22,375               N/A                 N/A             $  55,125(3)
Dr. Anton E. Schrafl..............          $18,375               N/A                 N/A             $  32,375(2)
John T. Sheehy....................          $23,375               N/A                 N/A             $  57,125(3)
Brian M. Sherman++................          $     0               N/A                 N/A             $       0(3)
Marvin Yontef*....................          $ 4,437               N/A                 N/A             $   4,437(1)
</TABLE>

- ----------------------
*    Messrs. Freedman, Jacobs and Yontef resigned from the Board of Directors
     effective December 2000.

++   Mr. Sherman is paid consulting fees by the Fund's Investment Manager equal
     to the fees paid to the Fund's independent directors. For the fiscal year
     ended October 31, 2001, the amount of the consulting fees paid to Mr.
     Sherman was $16,432.

                                 CODE OF ETHICS

     The Fund, the Investment Manager and the Investment Adviser have adopted a
joint code of ethics ("Code of Ethics") in accordance with Rule 17j-1 under the
1940 Act. Subject to certain conditions and restrictions, the Code of Ethics
permits personnel who are subject to the Code of Ethics to invest in securities,
including securities that may be purchased or held by the Fund.

     The Fund's Dealer Managers have also each adopted a code of ethics in
accordance with Rule 17j-1 under the 1940 Act. Subject to certain conditions and
restrictions, each of these codes of ethics permits personnel who are subject to
it to invest in securities, including securities that may be purchased or held
by the Fund.

     Each of these codes of ethics may be reviewed and copied at the Public
Reference Room of the SEC in Washington, D.C. Information on the operation of
the Public Reference Room may be obtained by calling the SEC at 1-202-942-8090.
These codes of ethics are also available on the EDGAR Database on the SEC's
Internet site at http://www.sec.gov. Copies of these codes of ethics may be
obtained, after paying a duplicating fee, by electronic request to
publicinfo@sec.gov, or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.

                                       74

<PAGE>

                   MANAGEMENT AGREEMENT AND ADVISORY AGREEMENT

     Aberdeen Asset Managers (C.I.) Limited ("Investment Manager") serves as
investment manager to the Fund pursuant to a management agreement dated December
21, 2000 ("Management Agreement"). The Investment Manager is a Jersey, Channel
Islands corporation organized in October 1985. The registered office of the
Investment Manager is located at 17 Bond Street, St. Helier, Jersey JE4 5XB,
Channel Islands. Aberdeen Asset Management Limited ("Investment Adviser") serves
as investment adviser to the Fund pursuant to an advisory agreement dated
December 21, 2000 ("Advisory Agreement"). The Investment Adviser is a
wholly-owned subsidiary of Aberdeen Asset Management Holdings Limited ("AAMHL"),
an Australian corporation. The registered offices of the Investment Adviser and
AAMHL are located at Level 6, 201 Kent Street, Sydney, NSW 2000, Australia. Both
the Investment Manager and AAMHL are wholly-owned subsidiaries of Aberdeen Asset
Management PLC, a United Kingdom corporation. The registered offices of Aberdeen
Asset Management PLC are located on One Albyn Place, Aberdeen, Scotland AB10
1YG.

     Pursuant to the existing and previous management agreements and advisory
agreements with the Fund, the Investment Manager and Investment Adviser have
served in these capacities since the Fund was organized in 1986. The current
Management Agreement and Advisory Agreement (collectively, "Agreements") were
approved by the Fund's Board of Directors, and separately by a majority of the
Fund's Independent Directors, at an in-person meeting held on October 10, 2000,
and subsequently by the Fund's stockholders at a special meeting of stockholders
held on November 29, 2000. The approvals of the Agreements by the Fund's
Directors and stockholders occurred in connection with the acquisition of the
Investment Manager and the Investment Adviser ("Acquisition") by Aberdeen Asset
Management PLC ("Aberdeen"). The Agreements were executed upon the effectiveness
of the Acquisition. See "Management Agreement and Advisory Agreement -
Relationship of Certain Directors and Service Providers to Investment Manager
and Investment Adviser." The information considered by the Fund's Directors, as
well as by a specially appointed Due Diligence Committee of Independent
Directors, in connection with the Acquisition is discussed below under
"Management Agreement and Advisory Agreement - Considerations in Approving
Management Agreement and Advisory Agreement."

     Each of the Investment Manager and the Investment Adviser has all, or a
substantial part of, its assets located outside the United States. As a result,
it may be difficult for U.S. investors to enforce judgments of the courts of the
United States against the Investment Manager and the Investment Adviser
predicated on the civil liability provisions of the Federal securities laws of
the United States. The Fund has been advised that there is substantial doubt as
to the enforceability in the courts of Australia of judgments against the
Investment Adviser predicated upon the civil liability provisions of the Federal
securities laws of the United States. The Fund also has been advised that it is
unlikely that the courts of Jersey would adjudge civil liability against the
Investment Manager in an original action predicated solely on the Federal
securities laws of the United States. However, although there is no arrangement
in place between Jersey and the United States for the reciprocal enforcement of
judgments, the Fund has been advised by Jersey counsel that a judgment rendered
by a court in the United States against the Investment Manager predicated upon a
violation of the Federal securities laws of the U.S. would be enforceable by
action or counterclaim or be recognized by the Jersey courts as a defense to an
action, or as conclusive of an issue in an action, unless obtained by fraud or
otherwise than in accordance with the principles of natural justice or unless
contrary to public policy or unless the proceedings in the United States court
were not duly served on the defendant in the original action. The Investment
Manager and the Investment Adviser are advised by U.S. counsel with respect to
the Federal securities laws of the United States.

                                       75

<PAGE>

Terms of the Management Agreement

     The Management Agreement provides that the Investment Manager will manage,
in accordance with the Fund's stated investment objective, policies and
limitations and subject to the supervision of the Fund's Board of Directors, the
Fund's investments and make investment decisions on behalf of the Fund including
the selection of, and placing of orders with, brokers and dealers to execute
portfolio transactions on behalf of the Fund. The Management Agreement further
provides that the Investment Manager will not be liable for any error of
judgment or for any loss suffered by the Fund in connection with matters to
which the Management Agreement relates, except a loss resulting from a breach of
fiduciary duty with respect to receipt of compensation for services (in which
case any award of damages shall be limited as provided in the 1940 Act) or a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of, or from reckless disregard by the Investment Manager
of, its duties and obligations under the Management Agreement.

     The Management Agreement provides that the Investment Manager may, at its
expense, employ, consult or associate with itself, such person or persons as it
believes necessary to assist it in carrying out its obligations thereunder,
provided, however, that if any such person would be an "investment adviser" (as
that term is defined under the 1940 Act) to the Fund, (a) the Fund is a party to
any contract with such a person and (b) the contract is approved by the Fund's
Directors, Independent Directors and stockholders, as required by the 1940 Act.

     Management Fee. The Management Agreement provides that the Fund will pay
the Investment Manager a fee at the annual rate of 0.65% of the Fund's average
weekly net assets applicable to shares of Common Stock and Preferred Stock up to
$200 million, 0.60% of such assets between $200 million and $500 million, 0.55%
of such assets between $500 million and $900 million, 0.50% of such assets
between $900 million and $1,750 million, and 0.45% of such assets in excess of
$1,750 million, computed based upon net asset value applicable to shares of
Common Stock and Preferred Stock at the end of each week and payable at the end
of each calendar month. Because of the Fund's objective, its expense ratio, of
which this fee is a component, may be higher than that of closed-end investment
companies of comparable size investing in U.S. securities.

     For the fiscal years ended October 31, 2001, 2000 and 1999, the Fund paid
or accrued on behalf of the Investment Manager aggregate management fees of
$10,220,699, $11,262,870, and $12,366,523, respectively. During the same
periods, the Investment Manager informed the Fund that it paid aggregate
advisory fees of $4,398,088, $4,861,276, and $5,352,389, respectively, to the
Investment Adviser.

     Payment of Expenses. The Management Agreement obligates the Investment
Manager to bear all expenses of its employees, except as provided in the
following sentence, and overhead incurred in connection with its duties under
the Management Agreement and to pay all salaries and fees of the Fund's
Directors and officers who are interested persons (as defined in the 1940 Act)
of the Investment Manager. The Fund will bear all of its own expenses,
including: expenses of organizing the Fund; fees of the Fund's Independent
Directors; out-of-pocket expenses for all Directors and officers of the Fund,
including expenses incurred by the Manager's employees, who serve as Directors
and officers of the Fund, which may be reimbursed by the Fund under the Fund's
policy governing reimbursement of Fund-related expenses, and other expenses
incurred by the Fund in connection with meetings of Directors and stockholders;
interest expense; taxes and governmental fees including any original issue taxes
or transfer taxes applicable to the sale or delivery of shares or certificates
therefor; brokerage commissions and other expenses incurred in acquiring or
disposing of the Fund's portfolio securities; expenses in connection with the
issuance, offering, distribution, sale or underwriting of securities issued by
the Fund; expenses of registering and qualifying the Fund's shares for sale with
the SEC and in various states and foreign jurisdictions; auditing, accounting,
insurance and legal costs; custodian, dividend disbursing and transfer

                                       76

<PAGE>

agent expenses; and the expenses of stockholders' meetings and of the
preparation and distribution of proxies and reports to stockholders.

     Duration and Termination. The Management Agreement took effect on December
21, 2000 and will continue in effect until December 21, 2002. The Management
Agreement provides that it will continue in effect for successive 12-month
periods, if not sooner terminated, provided that each continuance is
specifically approved annually by (1) the vote of the majority of the Fund's
Independent Directors cast in person at a meeting called for the purpose of
voting on such approval and (2) either (a) the vote of a majority of the
outstanding voting securities of the Fund, or (b) the vote of a majority of the
Fund's Board of Directors. The Management Agreement may be terminated at any
time by the Fund without the payment of any penalty, upon vote of a majority of
the Fund's Directors or a majority of the outstanding voting securities of the
Fund on 60 days written notice to the Investment Manager. The Management
Agreement will terminate automatically in the event of its assignment (as
defined in the 1940 Act). In addition, the Investment Manager may terminate the
Management Agreement on 90 days written notice to the Fund.

Terms of the Advisory Agreement

     The Advisory Agreement provides that the Investment Adviser will make
recommendations to the Investment Manager as to specific portfolio securities to
be purchased, retained or sold by the Fund and will provide or obtain such
research and statistical data as may be necessary in connection therewith. The
Advisory Agreement further provides that the Investment Adviser will give the
Investment Manager and the Fund the benefit of the Investment Adviser's best
judgment and efforts in rendering services under the Advisory Agreement.

     The Advisory Agreement provides that neither the Investment Manager nor the
Investment Adviser will be liable for any error of judgment or for any loss
suffered by the Fund in connection with matters to which the Advisory Agreement
relates, except a loss resulting from a breach of fiduciary duty with respect to
receipt of compensation for services (in which case any award of damages shall
be limited as provided in the 1940 Act) or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Investment Manager
or the Investment Adviser, as appropriate, in the performance of, or from
reckless disregard by such party of such party's obligations and duties under,
the Advisory Agreement.

     Advisory Fee. Under the Advisory Agreement, the Investment Manager pays the
Investment Adviser an advisory fee at the annual rate of 0.25% of the Fund's
average weekly net assets applicable to the shares of Common and Preferred Stock
up to $1,200 million and 0.20% of such assets in excess of $1,200 million,
computed based upon net asset value applicable to shares of Common Stock and
Preferred Stock at the end of each week and payable at the end of each calendar
month.

     Payment of Expenses. The Advisory Agreement obligates the Investment
Adviser to bear all expenses of its employees, except certain expenses incurred
by the Investment Adviser's employees who serve as officers and directors of the
Fund which are reimbursed by the Fund under the Fund's policy governing
reimbursement of Fund-related expenses. The Advisory Agreement also obligates
the Investment Adviser to bear all overhead incurred in connection with its
duties under the Advisory Agreement and to pay all salaries and fees of the
Fund's Directors and officers who are interested persons (as defined in the 1940
Act) of the Investment Adviser but who are not interested persons of the
Investment Manager.

     Duration and Termination. The Advisory Agreement took effect on December
21, 2000 and will continue in effect until December 21, 2002. The Advisory
Agreement provides that it will continue in effect for successive 12-month
periods, if not sooner terminated, provided that each continuance is

                                       77

<PAGE>

specifically approved annually by (1) the vote of the majority of the Fund's
Independent Directors cast in person at a meeting called for the purpose of
voting on such approval and (2) either (a) the vote of a majority of the
outstanding voting securities of the Fund, or (b) the vote of a majority of the
Fund's Board of Directors. The Advisory Agreement may be terminated with respect
to the Fund at any time by the Fund without the payment of any penalty, upon
vote of a majority of the Fund's Directors or a majority of the outstanding
voting securities of the Fund on 60 days written notice to the Investment
Manager and the Investment Adviser. The Advisory Agreement will terminate
automatically as to any party in the event of its assignment (as defined in the
1940 Act) by that party. In addition, the Investment Manager or the Investment
Adviser may terminate the Advisory Agreement as to such party on 90 days written
notice to the Fund and the other party.

Considerations in Approving Management Agreement and Advisory Agreement

     In connection with the Acquisition by Aberdeen of the Investment Manager
(then known as EquitiLink International Management Limited ("EIML")) and the
Investment Adviser (then known as EquitiLink Australia Limited ("EAL")), the
Fund's Board of Directors, as well as a specially appointed Due Diligence
Committee consisting of Independent Directors ("Due Diligence Committee"),
extensively reviewed information regarding the proposed Acquisition and its
implications for the Fund and its ongoing management. The Due Diligence
Committee requested and reviewed extensive information regarding the Acquisition
and its potential impact on EIML and EAL and on the management of the Fund
subsequent to the Acquisition. Members of the Due Diligence Committee and Fund
counsel met with Aberdeen representatives on various occasions and further
discussion was conducted in the course of a video conference among the Due
Diligence Committee, Aberdeen representatives and Fund counsel. The results of
the Due Diligence Committee's investigations were presented in a report to the
Board. The report discussed a variety of issues that the Due Diligence Committee
had specifically reviewed regarding the Acquisition, including the terms of the
Acquisition; Aberdeen's experience with closed-end funds; its experience with
other acquired entities; Aberdeen's strategic plans and their consistency with
Aberdeen's intentions regarding the Fund (including the Fund's Preferred Stock);
Aberdeen's business, financial and performance history and current status; its
regulatory history; and its plans for continuing the quality of service being
provided to the Fund.

     At its meeting on October 10, 2000, the Board reviewed the Due Diligence
Committee's report. It also received assurances from EIML and EAL that the
quality of service to the Fund would be maintained subsequent to the
Acquisition. The Board also noted that Aberdeen would give the Fund access to
increased expertise in Asian investments and to the facilities of an
international management organization. In their separate deliberations with
respect to continuing to retain EIML and EAL as investment manager and
investment adviser of the Fund, respectively, subsequent to the Acquisition, the
Fund's Independent Directors considered comparative data on investment
performance, advisory fees and other fees and expense ratios, profitability and
ancillary benefits to EIML, EAL and their affiliates from their relationship to
the Fund, financial resources of EIML and EAL before and after the Acquisition,
and the incentives to assure both continuity of management and quality of
service to the Fund subsequent to the Acquisition. They also noted that the
Acquisition arrangements and applicable legal requirements provided assurances
that Fund fees and expenses would not be increased. In determining to approve
the Agreements to take effect subsequent to the Acquisition, the Board noted
that Aberdeen had built its own business internally, as well as through
acquisition, and that the Acquisition was consistent with Aberdeen's strategic
plans. The Board also reviewed information indicating the seriousness of
Aberdeen's support for the Fund, its experience with closed-end funds, and the
consistency of its investment philosophy with that of EIML and EAL. The Board
was informed that the Acquisition would be conducted in reliance on Section
15(f) under the 1940 Act. Among other things, this legal provision would require
that for at least three years subsequent to the Acquisition, at least 75% of the
Fund's directors not be persons affiliated with the Fund's previous or current
management, and that no "unfair

                                       78

<PAGE>

burden" be placed on the Fund for two years following the Acquisition. Based on
their review and evaluation of the information presented by the Due Diligence
Committee and at the meeting, the Fund's Independent Directors determined that
the Acquisition would cause no reduction in the quality of services to be
provided to the Fund and that it might provide certain benefits to the Fund. The
Agreements were therefore approved by the Independent Directors as well as by
the full Board.

Experience of the Investment Manager and Investment Adviser

     General. The Fund's Investment Manager is Aberdeen Asset Managers (C.I.)
Limited, an investment management company organized in Jersey, Channel Islands.
The Investment Manager manages, in accordance with the Fund's stated investment
objective, policies and limitations and subject to the supervision of the Fund's
Board of Directors, the Fund's investments and makes investment decisions on
behalf of the Fund, including the selection of, and placing of orders with,
broker-dealers to execute portfolio transactions on behalf of the Fund and the
making of investments in U.S. dollar-denominated securities. The Investment
Manager's affiliate, Aberdeen Asset Management Limited, an Australian
corporation, acts as the Fund's Investment Adviser, makes recommendations to the
Investment Manager as to specific portfolio securities to be purchased, retained
or sold by the Fund, and providing or obtaining such research and statistical
data as may be necessary in connection therewith. The Investment Manager and the
Investment Adviser also serve in these capacities for Aberdeen Asia-Pacific
Income Investment Company Limited, a closed-end management investment company,
the shares of which are listed on the TSX, also investing primarily in
Australian and Asian debt securities, which commenced operations in 1986; The
First Asia Income Fund, a closed-end unit trust the units of which are listed on
the TSX, investing primarily in debt securities of issuers in Australia, New
Zealand and Asian countries, which commenced operations in 1997; Aberdeen Global
Income Fund, Inc., a non-diversified, closed-end management investment company
whose shares are traded on the NYSE, investing in global fixed income
securities, which commenced operations in 1992; and Aberdeen Australia Equity
Fund, Inc., a non-diversified closed-end management investment company, the
shares of which are listed on the AMEX and the PSE, investing primarily in
Australian listed equity securities, which commenced operations in 1985. The
Investment Manager also manages Aberdeen Scots Trust and Aberdeen G(7) Trust,
each of which is a Canadian unit investment trust. The Investment Manager and
the Investment Adviser are registered with the SEC under the Investment Advisers
Act of 1940, as amended.

     The Investment Manager and Investment Adviser, together with other
affiliates of Aberdeen Asset Management PLC, (collectively, the "Aberdeen
Group") form a globally diversified management firm. The Investment Manager and
the Investment Adviser are parties to a memorandum of understanding ("MOU") with
three affiliated Aberdeen organizations, Aberdeen Asset Management Asia Limited
("Aberdeen Singapore"), Aberdeen Asset Managers Limited ("Aberdeen UK") and
[name of Aberdeen Thailand entity] ("Aberdeen Thailand"). Pursuant to the MOU,
the Investment Manager and the Investment Adviser have retained the services of
investment professionals from Aberdeen Singapore, Aberdeen UK and Aberdeen
Thailand to provide portfolio management and/or trading services to the Fund, as
well as other U.S. funds managed by the Investment Manager and the Investment
Adviser. Pursuant to the MOU, Aberdeen Singapore, Aberdeen UK and Aberdeen
Thailand are Participating Affiliates of the Investment Manager and the
Investment Adviser as that term is used in relief granted by the staff of the
SEC allowing U.S. registered advisers to use portfolio management and trading
resources of unregistered advisory affiliates subject to the control and
supervision of a registered adviser. The MOU also designates certain advisory
personnel of the Participating Affiliates as Aberdeen Affiliate Associated
Persons for purposes of supervision and control.

     As of the date of this prospectus, the Aberdeen Group had approximately US
$___ billion in assets under management. The Aberdeen Group is one of the
largest dedicated managers/advisers on Asian bonds globally, with approximately
US $___ billion of such assets under management as of the date of this
prospectus. In Australia, the Aberdeen Group manages several Australian
institutional domestic bond mandates, in addition to advising the Fund and other
listed closed-end funds.

     As noted above, both the Investment Manager and the Investment Adviser are
affiliates of Aberdeen Asset Management PLC ("Aberdeen"), which is subject to
regulation by the Financial Services Authority ("FSA") in the United Kingdom.
Beginning in December 2001, the FSA commenced a series of fact-finding exercises
in order to examine the split capital closed-end fund ("SCCEF") market. In May
2002, the FSA indicated it was continuing to study the SCCEF market. Aberdeen,
through affiliates, manages or advises 19 of 134 SCCEFs listed in the United
Kingdom, which as of August 31, 2002, represented 6.45% of the Aberdeen Group's
funds under management. Aberdeen is cooperating with the fact finding exercise
being conducted by the FSA. Aberdeen Unit Trust Managers Limited, an affiliate
of the Investment Manager and the Investment Adviser, manages Aberdeen
Progressive Growth Unit Trust, an authorized unit trust (i.e. mutual fund) which
invests primarily in zero dividend preference shares, a class of shares issued
by SCCEFs. In June 2002, Aberdeen informed investors in that fund that it was
Aberdeen's intention to present to them a capital restoration plan. Details of
this proposal continue to be under consideration, and are subject to formal
approval by Aberdeen's Board of Directors and shareholders. The Investment
Manager and the Investment Adviser do not believe that either of these matters
will impact their ability to continue to perform their services under their
respective agreements with the Fund.


Portfolio Management

     The Investment Adviser provides the overall investment advice to the Fund,
on matters including broad investment structure, compliance testing, and
maintenance of tests pertaining to collateral, through a team of investment
managers/analysts employed, or supervised, by the Investment Adviser. Members of
the Investment Adviser's team based in Sydney, Australia provide investment
research and analysis with respect to the Australian and New Zealand components
of the Fund's portfolio. Input on interest rate strategy is also provided by a
team of investment professionals from Aberdeen UK, who also develop the Aberdeen
outlook for U.S. Treasuries. Investment research and analysis for the Asian
component of the Fund's portfolio is provided by a team of investment
managers/analysts employed by Aberdeen Singapore, with further analysis
regarding Thai domestic corporate bonds provided by investment managers/analysts
employed by Aberdeen Thailand. The equity analysts of Aberdeen Singapore also
provide expertise regarding regional corporate and bank issues.

     The various teams meet individually, and confer with each other, regularly
to analyze economic, political and credit events, as well as developments in the
bond, currency, and various related markets. Members of the Sydney team,
together with members of the Singapore team, discuss and set the relative
weightings of the Fund's Australian, Asian and New Zealand securities.

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Relationship of Certain Directors and Service Providers to Investment Manager
and Investment Adviser

     Mr. Martin Gilbert, a Director of the Fund, also serves as a director of
the Investment Manager and the Investment Adviser and as the Chief Executive and
an Executive Director of Aberdeen Asset Management PLC ("Aberdeen"), the parent
company of the Investment Manager and Investment Adviser. Mr. Gilbert is also a
shareholder of Aberdeen. Mr. Beverley Hendry, a Director of the Fund, also
serves as an Executive Director of Aberdeen and is a shareholder of Aberdeen.

     In connection with the Acquisition of the Investment Manager and Investment
Adviser by Aberdeen, all of the shares of the Investment Manager, of the parent
of the Investment Adviser, and of EquitiLink International (Channel Islands)
Limited ("EICIL") were transferred to Aberdeen, pursuant to a Share Sale
Agreement between (i) Aberdeen on the one side, and (ii) entities of which Mr.
Laurence S. Freedman, the former Chairman of the Fund, and Mr. Brian M. Sherman,
a Director and former President of the Fund, are the principal shareholders, and
the shareholders of EICIL, on the other side. Total consideration for the sale
was US $80 million, subject to certain adjustments. The consideration was paid
in a combination of cash and preference shares issued by Aberdeen. At the time
of the execution of the Share Sale Agreement, Messrs. Freedman and Sherman were
directors and the principal shareholders of the Investment Manager, and also
served as, respectively, Joint Managing Director, and Joint Managing Director
and Chairman, of the Investment Adviser. In connection with this sale, Messrs.
Freedman and Sherman resigned as Joint Managing Directors of the Investment
Adviser and as directors of the Investment Manager.

     Effective as of March 1, 2000, EquitiLink USA. Inc. ("EUSA"), a
wholly-owned subsidiary of the Investment Manager, located at 45 Broadway, New
York, New York 10006, entered into an agreement to provide investor relations
services to the Fund ("Investor Relations Services Agreement"). Investor
relations services generally include (i) drafting, coordinating and distributing
press releases, monthly performance reviews, quarterly reports and letters to
shareholders on special issues; (ii) responding to shareholder letters and
requests for information; (iii) managing shareholder and broker toll-free
telephone services and mailing lists for the Fund; (iv) arranging and
coordinating communication between analysts and/or brokers and Fund management,
as well as, media interviews for Fund management with print, broadcast and
electronic reporters to discuss the Fund and the markets in which it invests;
and (v) providing quarterly reports to the Fund's Board of Directors on recent
investor relations activities.

     Effective January 1, 2002, the rights of EUSA under the Investor Relations
Services Agreement were assigned to, and the obligations of EUSA thereunder were
assumed by, Aberdeen Fund Managers, Inc., an affiliate of the Investment Manager
and Investment Adviser, located at Las Olas Place, 300 South East 2/nd/ Street,
Suite 820, Fort Lauderdale, Florida 33301. Aberdeen Fund Managers, Inc., doing
business as Aberdeen Asset Management Investor Relations, has retained the
employees of EUSA, and provides services under the Investor Relations Services
Agreement, at 45 Broadway, New York, New York 10006. The Board of Directors of
the Fund, and the Independent Directors voting separately, approved this
assignment and assumption. For its services under the terms of the Investor
Relations Services Agreement, Aberdeen Asset Management Investor Relations
receives a monthly retainer of $10,000, plus reimbursement of reasonable
out-of-pocket expenses.

                            ADMINISTRATION AGREEMENT

     Pursuant to an Administration Agreement effective as of December 9, 1988,
amended as of June 1, 1996 ("Administration Agreement"), Prudential Investments
LLC ("Administrator"), an affiliate of Prudential Securities Incorporated,
provides office facilities and personnel adequate to perform the

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following services for the Fund: oversee the determination and publication of
the Fund's NAV in accordance with its policy as adopted from time to time by the
Board of Directors; oversee the maintenance of the books and records of the Fund
required under Rule 31a-1(b) (4) under the 1940 Act; prepare the Fund's U.S.
Federal, state and local income tax returns; prepare financial information for
the Fund's proxy statements and quarterly and annual reports to stockholders;
prepare the fund's periodic financial reports to the SEC; and respond to or
refer to the Fund's officers or transfer agent stockholder inquiries relating to
the Fund.

     The Fund pays the Administrator a fee computed at the annual rate of 0.15%
of the Fund's average weekly net assets applicable to shares of Common Stock and
Preferred Stock up to $900 million, and 0.10% of such assets between $900
million and $1,750 million and 0.07% of such assets in excess of $1,750 million,
based upon NAV applicable to shares of Common Stock and Preferred Stock at the
end of each week and payable at the end of each calendar month. For the fiscal
years ended October 31, 2001, 2000 and 1999, the Fund paid the Administrator a
fee of $2,304,331, $2,466,446, and $2,638,126, respectively. The Administrator's
offices are located at Gateway Center 3, 100 Mulberry Street, Newark, New Jersey
07102.

                      PORTFOLIO TRANSACTIONS AND BROKERAGE

     Portfolio transactions of the Fund are primarily effected with dealers
acting as a principal for their own account. During the fiscal years ended
October 31, 2001, 2000 and 1999, the Fund paid no brokerage commissions.

     The primary objective in placing orders for the purchase and sale of
securities for the Fund's portfolio is to obtain best execution taking into
account such factors as price, commission (if any), size of order, difficulty of
execution and skill required of the broker. In selecting broker-dealers to
execute the securities transactions, consideration will be given to such factors
as the price of security, the rate of the commission, the size and difficulty of
the order, the reliability, integrity, financial condition, general execution
and operational capabilities of competing broker-dealers, and the brokerage and
research services which they provide to the Fund.

     Purchases and sales of fixed-income securities will usually be principal
transactions. Such portfolio securities normally will be purchased or sold from
or to issuers directly or to dealers serving as market makers for the securities
at a net price. Generally, transactions in fixed-income securities do not
involve brokerage commissions. The cost of executing the Fund's portfolio
securities transactions will consist primarily of dealer spreads and
underwriting commissions. The Fund will not engage in transactions with any
affiliated person in which such person acts as principal, except as may be
permitted by rule or order of exemption under the 1940 Act.

     The Fund has authorized the Investment Adviser to pay higher commissions in
recognition of brokerage services which, in the opinion of the Investment
Manager, are necessary for the achievement of better execution, provided the
Investment Manager believes this to be in the best interest of the Fund. Subject
to best execution, orders may be placed with brokers who supply research, market
and statistical information ("research") to the Fund, the Investment Manager and
the Investment Adviser. The research may be used by the Investment Manager and
the Investment Adviser in advising other clients, and the Fund's commissions to
brokers supplying research may not represent the lowest obtainable commission
rates. Although research from brokers supplying research may be useful to the
Investment Manager and the Investment Adviser, it will be only supplementary to
their own efforts.

     Some securities considered for investment by the Fund may also be
appropriate for other clients served by the Investment Manager. If purchase or
sale of securities consistent with the investment

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<PAGE>

policies of the Fund and one or more of these other clients served by the
Investment Manager is considered at or about the same time, transactions in such
securities will be allocated among the Fund and clients in a manner deemed fair
and reasonable by the Investment Manager. In making these allocations, the main
factors to be considered will be the respective investment objectives of the
Fund and other clients, the relative size of the portfolio holdings of the same
or comparable securities, the availability cash for investment by the Fund and
other clients, the size of investment commitments the Fund and other clients
generally hold, and opinions of the persons responsible for recommending
investments to the Fund and other clients.

                         NET ASSET VALUE OF COMMON STOCK

     The Common Stock is listed on the AMEX and the PSE. The NAV per share of
Common Stock is generally determined each day during which the NYSE is open for
trading and each other day that the calculation of the NAV is required for
regulatory purposes ("Valuation Date"). The NAV per share is calculated by
dividing the value of net assets of the Fund (the value of its assets less its
liabilities, its accumulated and unpaid dividends (whether or not earned or
declared) on outstanding shares of Preferred Stock and the aggregate liquidation
value of such outstanding shares of Preferred Stock) by the total number of
shares of Common Stock outstanding.

     The Board of Directors has approved procedures ("Pricing and Valuation
Procedures") to value the Fund's securities in order to determine the NAV. The
value of a security traded or dealt in upon any recognized securities exchange
for that security (and that is not subject to restrictions against sale by the
Fund on such exchanges) is to be determined as of the Valuation Date as the last
quoted sale price as of the Valuation Date, on the principal exchange (if sold
on the principal exchange on the Valuation Date) or on another recognized
exchange (if not sold on the principal exchange but sold on such other exchange
on the Valuation Date). If no sale occurred on the Valuation Date, the security
is to be valued at bid price unless there is no current bid in which case the
security is to be valued at the mean between the closing bid price and asked
price, provided that the spread between the bid price and the asked price is
determined to be reasonable. Securities not traded or dealt in upon any
recognized exchange, for which OTC market quotations are readily available, are
valued at the mean between the closing bid price and asked price, provided that
the spread between the bid and asked price is determined to be reasonable.
Securities and other assets for which market prices are not readily available
are valued at fair value, as determined by, or pursuant to, the Pricing and
Valuation Procedures.

     The Pricing and Valuation Procedures provide that the aggregate value of
all foreign securities denominated in foreign currencies shall be incorporated
in the aggregate value of the respective currency portfolio and converted into
U.S. dollars according to the procedures normally employed by the Administrator
in calculating the Fund's NAV.

     Shares of closed-end investment companies frequently trade at a discount
from NAV, but in certain instances have traded above NAV. The Fund's shares have
traded in the market below, at or above NAV since the commencement of the Fund's
operations. The Fund cannot predict whether its shares will trade above or below
NAV in the future.

                          DIVIDENDS AND DISTRIBUTIONS;
                  DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN

     It is the Fund's present policy, which may be changed by the Board of
Directors, to provide investors with a stable monthly distribution of U.S. 3.5
cents per month out of current income, supplemented by realized capital gains
and, to the extent necessary, paid-in-capital; although there can be no
assurance that the Fund will continue to be able to do so. See "Risk Factors and
Special

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<PAGE>

Considerations -- Current Distribution Rate." Under United States tax
accounting rules, the amount of distributable income for each fiscal period
depends on the actual exchange rates during the entire year between the U.S.
dollar and the currencies in which Fund assets are denominated and on the
aggregate gains and losses realized by the Fund during the entire year.
Therefore, the exact amount of distributable income for each fiscal year can
only be determined as of the end of the Fund's fiscal year, October 31st.
See "Taxation - United States Taxes."

     The Fund distributes to stockholders, at least annually, substantially all
of its net investment income and net realized capital gains. Shares purchased
pursuant to the Offer will be issued after the record date for the monthly
distribution payable in [month year], and accordingly, the Fund will not pay
such monthly distribution with respect to such Shares.

     Pursuant to the Fund's Dividend Reinvestment and Cash Purchase Plan
("Plan"), Stockholders may elect to have all distributions automatically
reinvested by [name], the Plan Agent, in Fund shares on a monthly basis.
Stockholders who do not participate in the Plan will receive all distributions
in cash paid by check in U.S. dollars mailed directly to the Stockholder.

     Any Stockholder may enroll in the Plan by contacting the Plan Agent.

     If shares are held of record by a Stockholder, the Stockholder can
participate directly in the Plan. If shares are held in the name of a brokerage
firm, bank, or other nominee, a Stockholder must instruct its nominee to
participate on the Stockholder's behalf. If the Stockholder's brokerage firm,
bank or other nominee is unable to participate on its behalf, the Stockholder
must request it to re-register such shares in the Stockholder's own name which
will enable the Stockholder's participation in the Plan.

     The Plan Agent will administer the Plan on the basis of the number of
shares certified from time to time as representing the total amount registered
in a Stockholder's name or held by a nominee. Nominees should provide to the
Plan Agent a listing of participating beneficial owners.

     If the Fund declares an income dividend or capital gains distribution
payable in stock to Stockholders who are not Plan participants, the participants
will receive that dividend or distribution in newly-issued shares on identical
terms and conditions.

     In every other case Plan participants will receive shares on the following
basis: If the market price of the Fund's Common Stock plus any brokerage
commission is equal to or exceeds NAV, Stockholders will receive newly-issued
shares valued at the greater of NAV or 95% of current market price. If, on the
other hand, the NAV plus any brokerage commission exceeds the market price, the
Plan Agent will buy shares in the open market. If the market price plus any
applicable brokerage commission exceeds NAV before the Plan Agent has completed
its purchases, the Fund will issue new shares to complete the program. All
reinvestments are in full and fractional shares carried to three decimal places.

     Participants in the Plan have the option of making additional cash payments
to the Plan Agent, in any amount of at least US$100 monthly. The Plan Agent will
use all funds received from participants (as well as any dividends and capital
gains distributions received in cash) to purchase Fund shares in the open market
on or about the fifteenth of each month. Interest will not be paid on any
uninvested cash payments. Cash payments received within five business days of
the investment date will be held by the Plan Agent until the following month's
investment date. A participant may withdraw a voluntary cash payment by written
notice, if the notice is received by the Plan Agent not less than 48 hours
before such payment is to be invested.

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<PAGE>

     The Plan Agent maintains all Stockholder accounts in the Plan and furnishes
written confirmation of all transactions in the account, including information
needed by Stockholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in non-certificated form in
the name of the participant, and each Stockholder's proxy will include those
shares purchased pursuant to the Plan.

     There is no direct charge to Plan participants for reinvesting dividends or
capital gains distributions. The Plan Agent's fees for the handling of
reinvestment of dividends and distributions will be paid by the Fund. There are
no brokerage charges with respect to shares issued directly by the Fund as a
result of dividends or capital gains distributions payable either in stock or in
cash. However, each participant will pay a pro rata share of brokerage
commissions incurred with respect to the Plan Agent's open market purchases in
connection with the reinvestment of dividends or capital gains distributions.

     With respect to purchases from voluntary cash payments, the Plan Agent will
charge a service fee of $0.75 for each such purchase from a participant, plus a
pro rata share of the brokerage commissions. Brokerage charges for purchasing
small amounts of stock for individual accounts through the Plan are expected to
be less than the usual brokerage charges for such transactions because the Plan
Agent will be purchasing stock for all participants in blocks and prorating the
lower commission thus attainable.

     The automatic reinvestment of dividends and distributions will not relieve
Plan participants of any income tax that may be payable on such dividends or
distributions.

     The Fund reserves the right to amend or terminate the Plan as applied to
any voluntary cash payments made and any dividend or distribution paid
subsequent to notice of the change sent to the members of the Plan at least 90
days before the record date for such dividend or distribution. The Plan also may
be amended or terminated by the Plan Agent by at least 90 days written notice to
members of the Plan. All correspondence concerning the Plan should be directed
to the Plan Agent at [address]1, Attention: Dividend Reinvestment Department.

                                    TAXATION

     The following is intended to be a general summary of certain tax
consequences that may result to the Fund and its stockholders. It is not
intended as a complete discussion of all such tax consequences, nor does it
purport to deal with all categories of investors. Investors are therefore
advised to consult with their tax advisers before making an investment in the
Fund. The summary is based on the laws in effect on the date of this Prospectus,
which are subject to change.

United States Taxes

     Tax Treatment of the Fund - General. The Fund intends to continue to
qualify annually to be treated as a regulated investment company under the Code.

     To qualify as a regulated investment company, the Fund must, among other
things, (a) derive in each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, gains from the
sale or other disposition of stock, securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities or currencies ("Qualifying Income Requirement"); (b) diversify its
holdings so that, at the end of each quarter of the taxable year (i) at least
50% of the market value of the Fund's assets is represented by cash and cash
items, U.S. government securities, the securities of other regulated investment
companies and other securities, with such other securities of any one issuer
limited for purposes of this calculation to an amount not greater than 5% of the
value of the Fund's total assets and 10% of the outstanding voting

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<PAGE>

securities of such issuer, and (ii) not more than 25% of the value of its total
assets is invested in the securities of any one issuer (other than U.S.
government securities or the securities of other regulated investment
companies); and (c) distribute at least 90% of its investment company taxable
income (which includes, among other items, dividends, interest, and net
short-term capital gains in excess of net long-term capital losses) each taxable
year. The U.S. Treasury Department has authority to promulgate regulations
pursuant to which gains from foreign currency (and options, futures and forward
contracts on foreign currency) not directly related to a regulated investment
company's business of investing in stocks and securities would not be treated as
qualifying income for purposes of the Qualifying Income Requirement. To date,
such regulations have not been promulgated.

     As a regulated investment company, the Fund generally will not be subject
to U.S. Federal income tax on its investment company taxable income and net
capital gains (net long-term capital gains in excess of the sum of net
short-term capital losses and capital loss carryovers from prior years), if any,
that it distributes to stockholders. However, the Fund would be subject to
corporate income tax (currently at a 35% rate) on any undistributed income. The
Fund intends to distribute to its stockholders, at least annually, substantially
all of its investment company taxable income and net capital gains. Amounts not
distributed on a timely basis in accordance with a calendar year distribution
requirement are subject to a non-deductible 4% excise tax. To prevent imposition
of the tax, the Fund must distribute during each calendar year an amount equal
to the sum of (1) at least 98% of its ordinary income (not taking into account
any capital gains or losses) for the calendar year, (2) at least 98% of its
capital gains in excess of its capital losses (adjusted for certain ordinary
losses) for the 12-month period ending on October 31st of the calendar year, and
(3) all such ordinary income and capital gains for previous years that were not
distributed during such years. A distribution will be treated as having been
paid on December 31st if it is declared by the Fund in October, November or
December with a record date in such month and is paid by the Fund in January of
the following year. Accordingly, such distributions will be taxable to
stockholders in the calendar year in which the distributions are declared. To
prevent application of the excise tax, the Fund intends to make its
distributions in accordance with the calendar year distribution requirement. The
Fund may distribute net capital gains at least annually and designate them as
capital gain dividends where appropriate, or, alternatively, the Fund may choose
to retain net capital gains and pay corporate income tax (and, possibly, an
excise tax) thereon. In the event that the Fund retains net capital gains, the
Fund would most likely make an election which would require each stockholder of
record on the last day of the Fund's taxable year to include in gross income for
U.S. Federal tax purposes his or her proportionate share of the Fund's
undistributed net capital gain. If such an election were made, each stockholder
would be entitled to credit his or her proportionate share of the tax paid by
the Fund against his or her Federal income tax liabilities and to claim a refund
to the extent that the credit exceeds such liabilities. Tax-qualified pension
plans and individual retirement accounts ("IRAs") (through their custodian or
trustee), as well as nonresident aliens and foreign corporations, can obtain a
refund of their proportionate shares of the tax paid by the Fund by filing a
U.S. Federal income tax return. In addition, the stockholder would be entitled
to increase the basis of the shares for U.S. Federal tax purposes by an amount
equal to 65% of his or her proportionate share of the undistributed net capital
gain.

     If in any taxable year the Fund fails to qualify as a regulated investment
company under the Code, the Fund would be taxed in the same manner as an
ordinary corporation and distributions to its stockholders would not be
deductible by the Fund in computing its taxable income. In addition, in the
event of a failure to qualify, the Fund's distributions, to the extent derived
from the Fund's current or accumulated earnings and profits, would constitute
dividends (eligible for the corporate dividends-received deduction) which are
taxable to stockholders as ordinary income, even though those distributions
might otherwise (at least in part) have been treated in the stockholders' hands
as long-term capital gains. If the Fund fails to qualify as a regulated
investment company in any year, it must pay out its earnings and profits
accumulated in that year and may be required to recognize any net unrealized
gains on its entire portfolio in order to requalify as a regulated investment
company.

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<PAGE>

     Distributions. For Federal income tax purposes, dividends paid by the Fund
out of its investment company taxable income will be taxable to a U.S.
stockholder as ordinary income. Because none of the Fund's income is expected to
consist of dividends paid by U.S. corporations, none of the dividends paid by
the Fund is expected to be eligible for the corporate dividends-received
deduction. To the extent that the Fund designates distributions of net capital
gains as capital gain dividends, such distributions will be taxable to a
stockholder as long-term gain, regardless of how long the stockholder has held
the Fund's shares, and are not eligible for the dividends-received deduction.
Distributions in excess of the Fund's investment company taxable income and net
capital gains will first reduce a stockholder's basis in his shares and, after
the stockholder's basis is reduced to zero, will constitute capital gains to a
stockholder who holds his shares as capital assets.

     Stockholders participating in the Plan receiving a distribution in the form
of newly-issued shares will be treated for U.S. Federal income tax purposes as
receiving a distribution in an amount equal to the fair market value, determined
as of the distribution date, of the shares received and will have a cost basis
in each share received equal to the fair market value of a share of the Fund on
the distribution date. Stockholders participating in the Plan receiving a
distribution in the form of shares purchased by the Plan Agent in the open
market will be treated for U.S. Federal income tax purposes as receiving a
distribution of the cash that such stockholder would have received had it not
elected to have such distribution reinvested and will have a cost basis in such
shares equal to the amount of such distribution. Stockholders will be notified
annually as to the U.S. Federal tax status of distributions, and stockholders
receiving distributions in the form of newly-issued shares will receive a report
as to the fair market value of the shares received.

     The Fund presently intends that it will designate as capital gain dividends
a proportionate part of the dividends paid to holders of Preferred and Common
Stock.

     Under United States tax accounting rules, the amount of distributable
income for each fiscal period depends on the actual exchange rates during the
entire year between the U.S. dollar and the currencies in which Fund assets are
denominated and on the aggregate gains and losses realized by the Fund during
the entire year. Therefore, the exact amount of distributable income for each
fiscal year can only be determined as of the end of the Fund's fiscal year,
October 31st.

     Sale of Shares. Upon the sale or other disposition of shares of the Fund,
or upon receipt of a distribution in complete liquidation of the Fund, a
stockholder may realize a taxable gain or loss depending upon his basis in the
shares. The gain or loss generally will be treated as capital gain or loss if
the shares are capital assets in the stockholder's hands and generally will be
long-term or short-term gain, depending upon the stockholder's holding period
for the shares. Any loss realized on a sale or exchange 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 disposed of. In
that case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss realized by a stockholder on a disposition of Fund
shares held by the stockholder for six months or less will be treated as
long-term capital loss to the extent of any distributions of capital gain
dividends received by the stockholder with respect to the shares.

     Issuance of Preferred Stock. The Internal Revenue Service has in a revenue
ruling taken the position that a regulated investment company which has two or
more classes of shares cannot effectively designate distributions made to each
class in any year, as consisting of more than that class's proportionate share
of particular types of income including capital gain and foreign source income.
When both Common Stock and Preferred Stock are outstanding, the Fund intends to
designate distributions made to each class as consisting of particular types of
income in accordance with the class's proportionate shares of such income. Thus,
the Fund intends to designate as capital gain dividends a proportionate part

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<PAGE>

of the dividends paid to holders of Preferred and Common Stock. Also, if the
Fund is eligible to and does elect to pass foreign taxes through to its
stockholders, the Fund intends to designate dividends paid to each class of
stockholders as consisting of a proportionate share of the foreign taxes paid by
the Fund.

     If the Fund does not meet its asset maintenance requirements (See "Capital
Stock - Asset Coverage"), it may be required to suspend distributions to the
holders of its Common and/or Preferred Stock until such coverage is restored.
Suspension of distributions might prevent the Fund from qualifying as a
regulated investment company for Federal income tax purposes, or, if the Fund
retains such qualification, would cause the Fund to incur income and excise
taxes on its undistributed income. Further, the Fund may be required to redeem
Preferred Stock in order to restore asset coverage to an acceptable level. In
order to effect these redemptions, the Fund may be required to dispose of assets
for cash, and this may result in recognition of gain or loss to the Fund for tax
purposes. This gain or loss (or gain or loss from the remittance to the United
States of proceeds from the disposition of assets) may be treated, in whole or
in part for Federal income tax purposes, as gain or loss due to fluctuations in
foreign currency values, which under current law is ordinary rather than capital
in character. Ordinary gain or loss will increase, decrease, or possibly
eliminate the Fund's investment company taxable income distributable to holders
of Common Stock. For example, if losses attributable to foreign currency
fluctuations exceed other investment company taxable income during a taxable
year, the Fund would not be able to make ordinary income dividend distributions,
and all or a portion of distributions made would be treated as a return of
capital to stockholders for Federal income tax purposes, rather than as an
ordinary income dividend, reducing each stockholder's tax basis in his Fund
shares. Conversely, gain (including gain attributable to foreign currency
fluctuations) arising from the sale of Fund assets to redeem Preferred Stock
would increase the amounts required to be distributed to holders of Common Stock
in order for the Fund to retain its qualification as a regulated investment
company and/or to avoid imposition of income or excise taxes on the Fund.

     Currency Fluctuations - "Section 988" Gains or Losses. Under the Code, the
gains or losses attributable to fluctuations in exchange rates which occur
between the time the Fund accrues receivables or liabilities denominated in a
currency which is not a functional currency for the Fund and the time the Fund
actually collects such receivables or pays such liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on disposition of debt
securities denominated in a currency which is not a functional currency of the
Fund, gains or losses attributable to fluctuations in the value of the currency
between the date of acquisition of the security and the date of disposition are
also treated as ordinary gain or loss. These gains or losses, referred to under
the Code as "Section 988" gains or losses, may increase or decrease the amount
of the Fund's investment company taxable income to be distributed to its
stockholders as ordinary income.

     The Fund uses the Australian dollar as its functional currency in
accounting for its investments in Australia, New Zealand and the Asian
Countries. Gains and losses on non-Australian investments will first be
translated into the Australian dollar equivalent, which may result in Section
988 gains or losses as described above, and then into their U.S. dollar
equivalent for purposes of computing U.S. tax liabilities. Because the
Australian dollar is the functional currency of the Fund, the Fund is not
required to take into account gains or losses attributable to fluctuations in
the value of this functional currency, which otherwise would be treated as
Section 988 gains or losses, described above. However, remittances from
Australia, New Zealand or any one of the Asian Countries to the United States
will result in recognition of ordinary gains or losses attributable to
fluctuations in the value of the Australian dollar.

     Certain Securities Transactions.

               Options, Futures and Forward Contracts. Any regulated futures
contracts and certain options (namely, non-equity options and dealer equity
options) in which the Fund may invest may be

                                       87

<PAGE>

"section 1256 contracts." Gains (or losses) on these contracts generally are
considered to be 60% long-term and 40% short-term capital gains or losses. Also,
Section 1256 contracts held by the Fund at the end of each taxable year (and on
certain other dates prescribed in the Code) are "marked to market" with the
result that unrealized gains or losses are treated as though they were realized.

          Transactions in options, futures and forward contracts undertaken by
the Fund may result in "straddles" under the Code. The straddle rules may affect
the character of gains (or losses) realized by the Fund, and losses realized by
the Fund on positions that are part of a straddle may be deferred under the
straddle rules, rather than being taken into account in calculating the taxable
income for the taxable year in which the losses are realized. In addition,
certain carrying charges (including interest expense) associated with positions
in a straddle may be required to be capitalized rather than deducted currently.
Certain elections that the Fund may make with respect to its straddle positions
may also affect the amount, character and timing of the recognition of gains or
losses from the affected positions.

          The straddle rules may increase the amount of short-term capital gain
realized by the Fund, which is taxed as ordinary income when distributed to
stockholders. Because application of the straddle rules may affect the character
of gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to stockholders as ordinary income or long-term capital gain may be
increased or decreased substantially as compared to a fund that did not engage
in such transactions.

          Constructive Sales. Under certain circumstances, the Fund may
recognize gain from a constructive sale of an "appreciated financial position"
it holds if it enters into a short sale, forward contract or other transaction
that substantially reduces the risk of loss with respect to the appreciated
position. In that event, the Fund would be treated as if it had sold and
immediately repurchased the property and would be taxed on any gain (but not
loss) from the constructive sale. The character of gain from a constructive sale
would depend upon the Fund's holding period in the property. Loss from a
constructive sale would be recognized when the property was subsequently
disposed of, and its character would depend on the Fund's holding period and the
application of various loss deferral provisions of the Code. Constructive sale
treatment does not apply to transactions closed before the end of the 30th day
after the close of the taxable year, if certain conditions are met.

          Foreign Withholding Taxes. Income received by the Fund from sources
within foreign countries may be subject to withholding and other taxes imposed
by such countries. For example, the Fund's interest income derived from
Australian sources generally is subject to a 10% Australian withholding tax. If
more than 50% of the value of the Fund's total assets at the close of its
taxable year consists of securities of foreign corporations, the Fund will be
eligible and intends to elect to "pass-through" to the Fund's stockholders the
amount of foreign taxes paid by the Fund. Pursuant to this election, a
stockholder will be required to include in gross income (in addition to taxable
dividends actually received) his proportionate share of the foreign taxes paid
by the Fund, and will be entitled either to deduct (as an itemized deduction)
his pro rata share of foreign taxes in computing his taxable income or to use it
as a foreign tax credit against his U.S. Federal income tax liability, subject
to limitations. No deduction for foreign taxes may be claimed by an individual
stockholder who does not itemize deductions. The deduction for foreign taxes is
not allowable in, computing alternative minimum taxable income of non-corporate
stockholders. A foreign stockholder may be subject to U.S. withholding tax on
such foreign taxes included in income, and may be unable to claim a deduction or
credit for such taxes. Each stockholder will be notified within 60 days after
the close of the Fund's taxable year whether the foreign taxes paid by the Fund
will "pass-through" for the year and of the amount of such taxes deemed paid by
the stockholder.

                                       88

<PAGE>

     Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the stockholder's U.S. tax attributable to his foreign source
taxable income. For this purpose, if the pass-through election is made, the
source of the Fund's income flows through to its stockholders. With respect to
the Fund, certain gain from the sale of securities will be treated as derived
from U.S. sources and currency fluctuation gains, including fluctuation gains
from certain foreign currency denominated debt securities, receivables and
payables, may be treated as ordinary income derived from U.S. sources. The
limitation on the foreign tax credit is applied separately to foreign source
passive income (as defined for purposes of the foreign tax credit), including
the foreign source passive income passed through by the Fund. Stockholders may
be unable to claim a credit for the full amount of their proportionate share of
the foreign taxes paid by the Fund. The foreign tax credit limitation rules do
not apply to certain electing individual taxpayers who have limited creditable
foreign taxes and no foreign source income other than passive investment-type
income. The foreign tax credit is eliminated with respect to foreign taxes
withheld on dividends if the dividend paying shares or the shares of the Fund
are held by the Fund or the stockholder, as the case may be, for less than 16
days (46 days in the case of Preferred Stock) during the 30-day period (90-day
period for Preferred Stock) beginning 15 days (45 days for Preferred Stock)
before the shares become ex-dividend. In addition, if the Fund fails to satisfy
these holding period requirements, it cannot elect to "pass through" to
stockholders the ability to claim a deduction for the related foreign taxes. The
foreign tax credit can be used to offset only 90% of the alternative minimum tax
(as computed under the Code for purposes of this limitation) imposed on
corporations and individuals. If the Fund is not eligible to make the election
to "pass through" to its stockholders its foreign taxes, the foreign taxes it
pays will reduce its income and distributions by the Fund will be treated as
U.S. source income.

     The foregoing is only a general description of the foreign tax credit and,
because application of the credit depends on the particular circumstances of
each stockholder, stockholders are advised to consult their own tax advisers.

     Assuming that the Fund is eligible and does elect to pass foreign taxes
through to its stockholders, the Fund currently intends to designate Common and
Preferred stockholders' proportionate shares of foreign taxes in the same
proportion as the income subject to such taxes is distributed to each such
stockholder.

     Backup Withholding. The Fund may be required to withhold U.S. Federal
income tax at the rate of 30% of all taxable distributions payable to
stockholders who fail to provide the Fund with their correct taxpayer
identification number or to make required certifications, or when the Internal
Revenue Service has notified the Fund or a stockholder that the stockholder is
subject to backup withholding. Corporate stockholders and certain other
stockholders specified in the Code generally are exempt from such backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against the stockholder's U.S. Federal. income tax liability.

     Foreign Stockholders. The tax consequences to a foreign stockholder of an
investment in the Fund may be different from and more adverse than the tax
consequences to U.S. investors described herein. Foreign stockholders are
advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in the Fund.

Australian Taxes

     The following discussion is based upon the advice of Stikeman, Elliott,
Australian counsel for the Fund and is a general and non-exhaustive summary of
Australian tax considerations which may be applicable to the Fund under current
law.

                                       89

<PAGE>

     Under current Australian law, the Fund will be regarded as a non-resident
of Australia. Pursuant to the United States Australia Double Tax Agreement
("Agreement") and assuming the Fund to be a resident of the United States for
the purposes of the Agreement, the Fund will not be regarded as having a
permanent establishment in Australia if it has no fixed place of business or
place of management in Australia and if there is no person (other than a broker
or other agent of independent status) in Australia who has authority to conclude
contracts on behalf of the Fund and habitually exercises that authority. The
Fund does not intend to have a fixed place of business or place of management in
Australia or to give any person (other than a broker or other agent of
independent status) in Australia the authority to conclude contracts on behalf
of the Fund, and accordingly none of the Fund's profits arising from the
disposal of its assets should be subject to Australian taxes. The Fund will be
subject to an interest withholding tax at the rate of 10% on all interest
payments (including discounts on money market securities) under corporate debt
instruments, money market securities and Australian Commonwealth Government and
State Government securities (unless the particular issue qualifies for exemption
from interest withholding tax). Australian interest withholding tax does not
apply to interest on Eurodollar obligations issued by non-residents of Australia
where the interest is not an expense incurred by that person in carrying on
business in Australia at or through a permanent establishment in Australia of
that non-resident. See "Taxation - United States Taxes - Foreign Withholding
Taxes." Generally, the Fund will not be subject to a stamp duty on its
investments in government and semi-government securities, promissory notes and
bills of exchange.

New Zealand Taxes

     The following discussion is based upon the advice of [New Zealand Counsel],
New Zealand counsel for the Fund and is a general and non-exhaustive summary of
New Zealand tax considerations which may be applicable to the Fund under current
New Zealand tax law.

     Under current New Zealand law, the Fund will be regarded as a non-resident
of New Zealand and will be relieved of New Zealand taxes on business profits
under the Convention between the United States of America and New Zealand for
the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with
Respect to Taxes on Income ("Convention"), if the Fund does not have a permanent
establishment in New Zealand, and assuming the Fund to be a resident of the
United States as that phrase is defined in the Convention, and that the Fund's
principal class of shares will be the subject of regular and substantial trading
on a recognized stock exchange (as so defined).

     Pursuant to the Convention, the Fund will not be regarded as having a
permanent establishment in New Zealand if it has no fixed place of business,
place of management, branch or office in New Zealand and if there is no person
(other than a broker, general commission agent, or other agent of independent
status acting, in each case, in the ordinary course of its business) who acts on
behalf of the Fund and has and habitually exercises in New Zealand an authority
to conclude contracts in the name of the Fund. The Fund does not intend to have
a fixed place of business, place of management, branch, or office in New Zealand
or to give any person (other than a broker, general commission agent, or other
agent of independent status acting, in each case, in the ordinary course of its
business) the authority to conclude contracts in the name of the Fund in New
Zealand, and accordingly none of the business profits or gains from the
alienation of debt securities, except for interest (as provided below), of the
Fund should be subject to New Zealand taxes. Interest (as defined for New
Zealand tax law purposes) paid to the Fund by an "approved issuer" on debt
obligations that the "approved issuer" has issued and in respect of which a
prescribed "approved issuer levy" has been paid, will be subject to New Zealand
interest non-resident withholding tax at the rate of zero percent. All other
interest (as so defined) paid to the Fund will be subject to a New Zealand
interest non-resident withholding tax at the rate of 10% on the gross amount of
all payments of interest (as so defined) deemed to be derived from New Zealand
under corporate debt instruments, money market securities and New Zealand
government and local authority debt securities,

                                       90

<PAGE>

except, in the latter two cases, where interest is payable out of New Zealand
and in the case of local authority debt securities the approval of the New
Zealand government has been given for that interest payable on such debt
securities to be exempted from New Zealand income tax.

     The issue to and transfer by the Fund of debt instruments will not be
subject to New Zealand stamp duty or Goods and Services Tax.

Korean Taxes

                            [insert re: Korean taxes]

Other Taxes

     The discussions above regarding Australian, New Zealand and Korean tax
issues describe the tax effects of the Fund's activities in the primary markets
in which the Fund invests. The Fund has not sought similar advice from counsel
in other jurisdictions in which the Fund invests or may invest in the future.
However, the Fund believes, but cannot represent, that its business profits
should not be subject to taxation in any jurisdiction not mentioned specifically
above provided that the Fund is not resident in any such jurisdiction and is not
carrying on a trade in such jurisdiction through a branch or agency for the
purposes of taxation in such jurisdiction. The Board of Directors of the Fund
intends to conduct the affairs of the Fund so that it does not become resident
in other country for tax purposes. There can be no assurance, however, that the
Fund will not become subject to taxation in any jurisdiction in which it
invests.

                                  CAPITAL STOCK

General

     Set forth below is information with respect to the Fund's outstanding
securities as of July 31, 2002:

<TABLE>
<CAPTION>
                                                                                Number of
                                                                               Shares Held
                                                                               by the Fund       Number of Shares
                                                       Number of Shares         or for its          Issued and
                 Title of Class                           Authorized             Account           Outstanding
                 --------------                           ----------             -------           -----------
<S>                                                <C>                         <C>               <C>
Common Stock ..................................   400,000,000 shares               -0-             264,654,000
Preferred Stock ...............................   100,000,000 shares               -0-                  24,000
</TABLE>

Common Stock

     The Fund's Articles authorize the issuance of up to 400,000,000 shares of
Common Stock. At July 31, 2002, there were 264,654,000 outstanding shares of
Common Stock of the Fund, all of which are fully paid and non-assessable. All
shares of Common Stock are equal as to dividends, assets and voting privileges
and have no conversion, preemptive or other subscription rights. In the event of
liquidation, each share of Common Stock is entitled to its proportion of the
Fund's assets after the payment of debts and expenses and after payment of the
aggregate liquidation preference to holders of Preferred Stock, including the
liquidation preference of $25,000 per share, plus accumulated but unpaid
dividends (whether or not earned or declared), on the outstanding shares of
Preferred Stock. Holders of shares of Common Stock are entitled to one vote per
share and do not have cumulative voting rights. The Fund

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<PAGE>

will hold regular annual meetings of stockholders in accordance with the laws of
Maryland and the rules of the AMEX.

     The shares of the Fund's Common Stock commenced trading on the AMEX on
April 24, 1986. For the quarter ended July 31, 2002, the highest trading price
was $4.93 and the lowest trading price was $4.28. During the same period, the
net asset value ranged from a low of $4.81 to a high of $5.06. Total trading
volume during the period was 51,062,300 shares. On July 31, 2002, the closing
price on the AMEX was $4.50 and the net asset value was $4.92.

Preferred Stock

     The Fund's Articles authorize the issuance of up to 100,000,000 shares of
Preferred Stock, $0.01 par value, in one or more series, with rights as
determined by the Board of Directors, by action by the Board of Directors
without the approval of the holders of Common Stock. As of July 31, 2002, an
aggregate of 24,000 shares of Preferred Stock in nine series, designated as
Series A, Series B, Series C, Series D, Series E, Series F, Series G, Series H
and Series I, with an aggregate liquidation preference of $600 million, was
outstanding. Under the 1940 Act, the Fund is permitted to have outstanding more
than one series of Preferred Stock so long as no single series has a priority
over another series as to the distribution of assets of the Fund or the payment
of dividends. Although the Fund has no current intention to issue additional
shares of Preferred Stock, it may issue additional shares of Preferred Stock at
a time the Board deems appropriate after completion of this Offer.

Beneficial Ownership

     To the best of the Fund's knowledge, as of October 1, 2002, no person or
group beneficially owned more than 5% of the outstanding shares of Common Stock
or Preferred Stock of the Fund.

No Preemptive Rights

     No holder of shares of the Fund has any preemptive right to acquire from
the Fund any capital stock of the Fund whether now or hereafter authorized.

Liquidation Preference

     In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Fund, the holders of shares of any series of Preferred Stock
would be entitled to receive a preferential liquidating distribution (to equal
the liquidation value of $25,000 per share plus accrued and unpaid dividends,
whether or not declared) before any distribution of assets is made to holders of
Common Stock. After payment of the full amount of the liquidating distribution
to which they are entitled, the Preferred Stockholders would not be entitled to
any further participation in any distribution of assets by the Fund.

Voting Rights

     Except as otherwise required by applicable law, or by terms of the Fund's
Articles or as may be established at the time of the issuance of any series of
Preferred Stock, holders of shares of Preferred Stock, voting as a separate
class, are entitled to elect two of the Fund's Directors, and the remaining
Directors will be elected by holders of Common Stock. If at any time dividends
on shares of the Fund's Preferred Stock are unpaid in an amount equal to two
full years' dividends, the holders of outstanding shares of Preferred Stock,
voting as a separate class, will be entitled to elect a majority of the Fund's
Directors until all dividends in default have been paid or declared and set
apart for payment.

     The terms of the Preferred Stock require a separate class vote of the
Preferred Stock with respect to matters which would affect adversely any
preferences, rights, or powers applicable to the Preferred Stock. Moreover, the
affirmative vote of the holders of a majority of the outstanding shares of
Preferred Stock, voting as a separate class, would be required to approve any
plan of reorganization adversely

                                       92

<PAGE>

affecting these shares or any action requiring a vote of security holders under
Section 13 (a) of the 1940 Act.

Redemption, Purchase and Sale of Preferred Stock by the Fund

     The terms of the Preferred Stock provide that the shares are redeemable by
the Fund in whole or in part, at the liquidation value of $25,000 per share plus
accrued dividends per share, that the Fund may tender for or purchase shares of
Preferred Stock and that the Fund may subsequently resell any shares so tendered
for or purchased. Any redemption or purchase of shares of Preferred Stock by the
Fund will reduce the leverage applicable to shares of Common Stock, while any
resale of shares by the Fund will increase such leverage. The Fund may also need
to redeem all or a portion of the Preferred Stock pursuant to the requirements
of either the 1940 Act or the rating agencies rating the Preferred Stock. The
leveraging of the Common Stock would be eliminated during any period that
Preferred Stock is not outstanding.

Asset Coverage

     Under the 1940 Act, the Fund is not permitted to issue shares of Preferred
Stock unless immediately after the issuance the asset coverage of the Fund's
portfolio is at least 200% of the liquidation value of the outstanding Preferred
Stock ($25,000 plus any accrued and unpaid dividends). In addition, the Fund is
not permitted to declare any cash dividend or other distribution on its Common
Stock unless, at the time of the declaration, the NAV of the Fund's portfolio
(determined after deducting the amount of any dividend or other distribution) is
at least 200% of the liquidation value of the Preferred Stock.

     Under the terms of the Preferred Stock, the Fund may be required to suspend
distributions to holders of Common Stock in order to maintain the asset coverage
required by the 1940 Act. The suspension of distributions might prevent the Fund
from qualifying as a regulated investment company for Federal income tax
purposes, or, if the Fund retains the qualification, may cause the Fund to incur
income and excise taxes on its undistributed income. Further, the Fund may be
required to redeem Preferred Stock in order to restore asset coverage to an
acceptable level. In order to effect such redemptions, the Fund may be required
to dispose of assets for cash, which may result in recognition of gain or loss
to the Fund for tax purposes. This gain or loss may be treated, in whole or in
part for Federal income tax purposes, as gain or loss due to fluctuations in
foreign currency values, which under current law is ordinary rather than capital
in character. Ordinary gain or loss will increase, decrease, or possibly
eliminate the Fund's investment company taxable income distributable to holders
of Common Stock. For example, if losses attributable to foreign currency
fluctuations exceed other investment company taxable income during a taxable
year, the Fund would not be able to make ordinary dividend distributions, or
distributions made would be treated as a return of capital to stockholders for
Federal income tax purposes, rather than as an ordinary dividend, reducing each
stockholder's tax basis in his Fund shares. Conversely, gain (including gain
attributable to foreign currency fluctuations) arising from the sale of Fund
assets to redeem Preferred Stock would increase the amounts required to be
distributed to holders of Common Stock in order for the Fund to retain its
qualification as a regulated investment company and/or to avoid imposition of
income or excise taxes on the Fund. See "Taxation."

     The Fund's outstanding Preferred Stock is currently rated Aa2 by Moody's
and AA by S&P. In order to retain these ratings, the Fund is required to
maintain portfolio holdings meeting specified guidelines of these rating
agencies. The guidelines impose asset coverage requirements that are more
stringent than those imposed by the 1940 Act.

                                       93

<PAGE>

Rating Agency Guidelines

     The Fund intends that, so long as shares of Preferred Stock are
outstanding, the composition of its portfolio will reflect guidelines
established by the rating agencies in connection with the Fund's receipt of a
rating for the Preferred Stock of at least Aa2 from Moody's and at least AA from
S&P. Moody's and S&P issue ratings for various securities reflecting the
perceived creditworthiness of those securities. The guidelines are designed to
ensure that assets underlying outstanding debt or preferred stock will be
sufficiently varied and will be of sufficient quality and amount to justify
investment grade ratings. The guidelines do not have the force of law but have
been adopted by the Fund in order to receive the above-described ratings for
shares of Preferred Stock, which ratings are generally relied upon by
institutional investors in purchasing such securities. The guidelines provide a
set of tests for portfolio composition and asset coverage that supplement (and
in some cases are more restrictive than) the applicable requirements under the
1940 Act.

     The Fund intends to maintain a portfolio value at least equal to the
discounted value of the assets in its portfolio which satisfies minimum values
set by each of the rating agencies. Upon any failure to do this, the Fund will
seek to alter the composition of its portfolio to satisfy the rating agency. To
the extent it is not able to do so in a timely basis, the Fund may redeem shares
of Preferred Stock in accordance with their terms.

     A securities rating is not a recommendation to buy, sell or hold securities
and is subject to revision or withdrawal at any time by the assigning rating
agency. Each rating should be evaluated independently of any other rating.

Certain Provisions of the Articles, By-Laws and Articles Supplementary

     The Fund has provisions in its Articles and By-Laws that could have the
effect of limiting (i) the ability of other entities or persons to acquire
control of the Fund, (ii) the Fund's freedom to engage in certain transactions,
and (iii) the ability of the Fund's Directors or stockholders to amend the
Articles or By-Laws or effect changes in the Fund's management. The provisions
of the Articles and By-Laws may be regarded as "anti-takeover" provisions.

     Article Ninth of the Fund's Articles stipulates that a "fair price" be paid
for the Fund's shares in the event of a proposed merger or other business
combination which is not approved by either 75% of the Continuing Directors of
the Board of Directors (as defined therein) or the holders of 75% of the
outstanding shares of the Fund voting both as a single class and separately as
to each class ("Fair Price Provision"). The stipulated "fair price" is the
higher of:

                                       94

<PAGE>

          i.   the highest per share price (including any brokerage commissions,
     transfer taxes and soliciting dealers' fees) paid by an Interested Party
     (as hereinafter defined) for any shares acquired by it (a) within the
     two-year period immediately prior to the first public announcement of the
     proposal of a business combination ("Announcement Date"), or (b) in the
     transaction in which an Interested Party first becomes the beneficial owner
     of voting shares of the Fund (a "Threshold Transaction"), whichever is
     higher, and

          ii.   in the case of Common Stock, the NAV per share of Common Stock
     on the Announcement Date or on the date of the Threshold Transaction,
     whichever is higher, and in the case of any Preferred Stock, the highest
     preferential amount per share to which the holders of shares of a class of
     Preferred Stock would be entitled in the event of any voluntary or
     involuntary liquidation, dissolution or winding up of the affairs of the
     Fund, regardless of whether the business combination to be consummated
     constitutes such an event.

     Article Ninth requires the same super-majority vote to amend the Articles
to "open-end" the Fund by making the Fund's Common Stock redeemable or to adopt
any stockholder proposal as to specific investment decisions with respect to the
Fund's assets. Stockholders of an open-end investment company may require the
company to redeem their shares in kind or in cash at any time (except in certain
circumstances authorized by the 1940 Act) at their NAV less any redemption
charge. If shares are redeemed in kind, stockholders may incur brokerage
commissions. Conversion to open-end status would require the redemption of all
outstanding shares of Preferred Stock.

     An "Interested Party" includes any person, other than an investment company
advised by the Investment Manager or any of its affiliates, which proposes to
enter into a business combination with the Fund.

     The By-Laws provide for a staggered election of those Directors who are
elected by the holders of Common Stock, with such Directors divided into three
classes, each having a term of three years. 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 Board of Directors. Such system of electing Directors
is intended to help maintain the continuity of management by making it more
difficult for the Fund's stockholders to change the majority of Directors. Other
provisions require the approval of holders of 75% of the outstanding shares of
the Common and Preferred Stock voting both together as a single class and
separately as to each class to approve certain transactions including certain
mergers, asset dispositions and conversion of the Fund to open-end status.
However, certain provisions of the 1940 Act may nevertheless require a separate
additional vote of the holders of Preferred Stock.

     Articles Supplementary approved by the Board of Directors in August 2000
subject the Fund to certain provisions of Subtitle 8 of the Maryland General
Corporation Law with respect to unsolicited takeovers. These provisions (i)
provide that the stockholders of the Fund may remove any director by the
affirmative vote of at least two-thirds of all the votes entitled to be cast by
the stockholders generally in the election of directors, (ii) require that the
number of directors of the Fund shall be fixed only by the vote of the Board of
Directors, (iii) provide that a vacancy on the Board of Directors due to an
increase in the size of the Board or the death, resignation or removal of a
director, may be filled only by the affirmative vote of the majority of the
remaining directors in office, even if the remaining directors do not constitute
a quorum, and (iv) provide that the Secretary of the Fund may call a special
meeting of stockholders only on the written request of the stockholders entitled
to cast at least a majority of all votes entitled to be cast at the meeting.

                                       95

<PAGE>

     The foregoing provisions may be regarded as "anti-takeover" provisions and
may have the effect of depriving Stockholders of an opportunity to sell their
shares at a premium over prevailing market prices.

               CUSTODIAN, DIVIDEND PAYING AGENTS, TRANSFER AGENTS,
                          REGISTRARS AND AUCTION AGENT

     Pursuant to a Custodian Contract dated April 11, 1986, as amended from time
to time, State Street Bank and Trust Company ("State Street"), One Heritage
Drive, North Quincy, Massachusetts 02171, acts as the Fund's custodian for
assets of the Fund held in the United States. The Board has delegated various
foreign custody responsibilities to State Street, as the "Foreign Custody
Manager" for the Fund to the extent permitted under the 1940 Act and the rules
thereunder. State Street has entered into agreements with foreign sub-custodians
in accordance with delegation instructions approved by the Board. State Street,
its branches and sub-custodian generally hold certificates for the securities in
their custody, but may, in certain cases, have book records with domestic and
foreign securities depositories, which in turn have book records with the
transfer agents of the issuers of the securities. See "Risk Factors and Special
Considerations - Foreign Custody."

     [Name of transfer agent] [address], acts as the Fund's dividend paying
agent, transfer agent and registrar for the Fund's Common Stock. Bankers Trust,
4 Albany Street, New York, New York 10006, acts as Auction Agent for the
Preferred Stock and also acts as transfer agent, registrar, dividend disbursing
agent and redemption agent for the Preferred Stock.

                                     EXPERTS

     The financial statements, insofar as they relate to the periods through
October 31, 2001, included in this Prospectus have been so included in reliance
on the report of PricewaterhouseCoopers LLP, the Fund's independent accountants,
given on the authority of said firm as experts in accounting and auditing. The
principal place of business of PricewaterhouseCoopers LLP is located at 1177
Avenue of the Americas, New York, New York 10036. The audit services they
provide include examination of the financial statements of the Fund, services
relating to filings by the Fund with the SEC and consultation on matters related
to the preparation and filing of tax returns.

                            DISTRIBUTION ARRANGEMENTS

     [Dealer Managers] will act as Dealer Managers for the Offer ("Dealer
Managers"). Under the terms and subject to the conditions contained in the
Dealer Manager Agreement dated [date on cover], among the Fund and the Dealer
Managers ("Dealer Manager Agreement"), the Dealer Managers will provide
financial advisory and marketing services in connection with the Offer and will
solicit the exercise of Rights and participation in the Over-Subscription
Privilege. The Offer is not contingent upon any number of Rights being
exercised. The Fund has agreed to pay the Dealer Managers a fee for their
financial advisory, marketing and soliciting services equal to 3.75% of the
aggregate Subscription Price for Shares issued pursuant to the Offer. The Dealer
Manager fee will be borne by the Fund and indirectly by all of the Fund's
Stockholders, including those who do not exercise their Rights.

     The Dealer Managers will reallow to broker-dealers included in the selling
group to be formed and managed by the Dealer Managers ("Selling Group Members')
selling fees equal to 2.50% of the Subscription Price per Share for each Share
issued pursuant to the Offer as a result of their selling efforts. In addition,
the Dealer Managers will reallow to other broker-dealers that have executed and
delivered a soliciting dealer agreement and have solicited the exercise of
Rights, solicitation fees equal to 0.50% of

                                       96

<PAGE>

the Subscription Price per Share for each Share issued pursuant to the exercise
of Rights as a result of their soliciting efforts, subject to a maximum fee
based upon the number of shares of Common Stock held by each broker-dealer
through DTC on the Record Date. Fees will be paid to the broker-dealer
designated on the applicable portion of the Subscription Certificates or, in the
absence of such designation, to the Dealer Managers.

     In addition, the Fund may reimburse the Dealer Managers up to an aggregate
of $150,000 for their reasonable expenses incurred in connection with the Offer.
The Fund has agreed to indemnify the Dealer Managers or contribute to losses
arising out of certain liabilities including liabilities under the 1933 Act. The
Dealer Manager Agreement also provides that the Dealer Managers will not be
subject to any liability to the Fund in rendering the services contemplated by
such Agreement except for any act of bad faith, willful misconduct or gross
negligence of the Dealer Managers or reckless disregard by the Dealer Managers
of their obligations and duties under such Agreement.

     Prudential Investments LLC, an affiliate of Prudential Securities
Incorporated, acts as the Fund's Administrator and receives compensation from
the Fund in connection with its services. See "Administration Agreement."

     Prior to the expiration of the Offer, the Dealer Managers may independently
offer for sale shares of Common Stock, including Shares acquired through
purchasing and exercising the Rights, at prices they set. The Dealer Managers
may realize profits or losses independent of any fees described in this
Prospectus.

     In the ordinary course of their businesses, the Dealer Managers and their
respective affiliates may engage in investment banking or financial transactions
with the Fund, the Investment Manager, the Investment Adviser and their
affiliates.

     The Fund will bear the expenses of the Offer, which will be paid from the
proceeds of the Offer. These expenses include, but are not limited to: the
expense of preparation and printing of the Prospectus for the Offer, the expense
of counsel and auditors in connection with the Offer, the out-of-pocket expenses
incurred by the Officers of the Fund and others in connection with the Offer.

     The principal business address of [Dealer Manager 1] is _________________.
The principal business address of [Dealer Manager 2] is ______________________.
The principal business address of [Dealer Manager 3] is ______________________.
The principal business address of [Dealer Manager 4] is ______________________.


                                       97

<PAGE>


                                 LEGAL MATTERS

     The validity of the shares offered hereby will be passed on for the Fund by
Dechert, 1775 Eye Street, NW, Washington, DC 20006 and certain legal matters
relating to the offering will be passed on for the Dealer Managers by [Dealer
Managers' counsel], [address]. Dechert and [Dealer Managers' counsel] will rely
as to matters of Maryland law on the opinion of Venable, Baetjer and Howard, Two
Hopkins Plaza, Suite 1800, Baltimore, MD 21201-2978. Matters of Australian law
will be passed on for the Fund by Stikeman, Elliott, Level 40 Chifley Tower, 2
Chifley Square, Sydney, NSW 2000, Australia. Matters of New Zealand law will be
passed on for the Fund by [New Zealand Counsel], [address], New Zealand. Matters
of the law of Jersey, Channel Islands will be passed on for the Fund by [Jersey
Counsel], [address], Jersey, Channel Islands. Matters of United Kingdom law will
be passed on by [UK Counsel], [address], United Kingdom. Matters of Swiss Law
will be passed on for the Fund by [Swiss Counsel], [address], Switzerland.
Matters of the law of Singapore will be passed on by [Singapore Counsel],
[address], Singapore.

     Roy M. Randall, a partner of Stikeman, Elliott in Australia, serves as
Secretary of the Fund. Margaret A. Bancroft, Sander M. Bieber and Allan S.
Mostoff, members of Dechert, each serves as Assistant Secretary to the Fund.

                                       98

<PAGE>

Portfolio of Investments

October 31, 2001

Principal
Amount
Local
Currency**                                  Value
(000)         Description                   (US$)
- ---------------------------------------------------
LONG-TERM INVESTMENTS--106.5%
AUSTRALIA--63.6%
Government and Semi-Government--45.8%
Commonwealth of Australia--23.4%
A$
             Australia Postal Corporation
    22,000     6.00%,  3/25/09        $  11,432,154
             Commonwealth Bank of Australia
     5,000     6.00%,   8/1/03            2,595,537
     2,800    7.625%,   8/5/03            1,486,526
    12,000     5.25%,  12/1/04            6,181,279
     8,000     6.00%,   9/1/05            4,224,019
    10,000     6.75%,  12/1/07            5,491,313
     4,000     6.25%,  2/10/09            2,074,114
    10,000     6.25%,   9/1/09            5,344,842
             Commonwealth of Australia
    45,000     9.50%,  8/15/03           24,267,494
    40,000     9.00%,  9/15/04           22,723,549
    45,450     7.50%,  7/15/05           25,308,427
    41,000    10.00%, 10/15/07           26,194,736
    67,000     8.75%,  8/15/08           41,081,368
    98,000     7.50%,  9/15/09           57,049,173
    65,000     5.75%,  6/15/11           34,045,214
    40,000     6.50%,  5/15/13           21,743,218
                                      -------------
                                        291,242,963
                                      -------------
New South Wales--4.5%
             New South Wales Treasury Corporation
    20,000    12.60%,   5/1/06           13,162,363
    20,000     8.00%,   3/1/08           11,603,586
    55,000     7.00%,  12/1/10           30,687,706
                                      -------------
                                         55,453,655
                                      -------------
Queensland--4.3%
             Queensland Treasury Corporation
    20,000     6.50%,  6/14/05           10,709,160
    15,200     6.00%,  7/14/09            7,993,623
    40,000     6.00%,  6/14/11           20,918,290
    10,000     6.00%, 10/14/15            5,193,263
    17,000     6.00%,  6/14/21            8,829,702
                                      -------------
                                         53,644,038
                                      -------------
South Australia--3.4%
             South Australian Financing Authority
    20,000    10.00%,  1/15/03           10,765,725
    55,000     7.50%, 10/15/07           31,068,704
                                      -------------
                                         41,834,429
                                      -------------
Tasmania--0.5%
A$
             Tasmanian Public Finance Corporation
    10,000     9.00%, 11/15/04        $   5,664,381
                                      -------------
Victoria--5.8%
             Treasury Corporation of Victoria
    36,000    12.50%, 10/15/03           20,401,734
    10,000     6.00%, 11/15/06            5,276,576
    20,500    10.25%, 11/15/06           12,762,903
    25,000     7.50%,  8/15/08           14,226,437
    40,000     5.50%,  9/15/10           20,172,273
                                      -------------
                                         72,839,923
                                      -------------
Western Australia--3.9%
             Western Australia Treasury Corporation
    26,000     8.00%, 10/15/07           15,041,025
    50,000     7.50%, 10/15/09           28,616,052
    10,000     7.00%,  4/15/11            5,563,429
                                      -------------
                                         49,220,506
                                      -------------
             Total Australian
             government and
             semi-government
             (cost $688,070,064)        569,899,895
                                      -------------
Eurobonds--14.8%
Banking and Finance--6.5%
             Bank Austria AG
    11,278   10.875%, 11/17/04            6,638,152
             Commonwealth Bank of Australia
    10,000     9.00%,  8/15/05            5,738,470
             Federal National
             Mortgage Association Global
    52,065    6.375%,  8/15/07           27,795,994
             GE Capital Australia Limited
    23,000     6.25%,  8/15/03           11,951,797
             Jem Bonds Limited
    10,000     9.00%,  7/15/06            5,824,553
             KFW International Finance
     5,513    9.125%,  7/26/05            3,175,342
             Northern Territory Authority
     8,000     6.50%,  7/15/05            4,185,832
     5,000    10.03%,   8/9/05            2,967,720
             Principal Finance Global Fund
    16,650     7.00%,  7/15/05            8,831,782
             Progress Trust
     2,000     6.00%, 10/15/30            1,022,805
             Puma
     5,000     7.47%,  2/21/33            2,616,019
                                      -------------
                                         80,748,466
                                      -------------

See Notes to Financial Statements.    Aberdeen Asia-Pacific Income Fund, Inc. 13

<PAGE>

Portfolio of Investments (continued)

October 31, 2001

Principal
Amount
Local
Currency**                                  Value
(000)         Description                   (US$)
- -------------------------------------------------------
Semi-Government and Local
Government--6.3%
A$

              New South Wales Treasury Corporation
     7,000       10.50%, 12/7/04        $     4,104,988
    34,000       12.60%, 5/1/06              22,447,761
     7,000        9.25%, 6/20/06              4,049,098
    40,000        8.00%, 3/1/08              23,140,642
              Queensland Treasury Corporation
    20,000       12.00%, 6/15/05             12,561,522
    20,000        8.00%, 9/14/07             11,583,808
                                        ---------------
                                             77,887,819
                                        ---------------
Supranational Global--2.0%
              EFIC
     2,000       11.00%, 12/29/04             1,187,806
              Eurofima
     8,170       9.875%, 1/17/07              5,004,533
    20,000        6.50%, 8/22/11             10,713,526
              European Investment Bank
     5,000        6.00%, 7/15/05              2,627,721
              Kingdom of Sweden
     8,287       7.875%, 4/23/07              4,695,916
              Quebec Province
     1,500        5.75%, 2/15/06                771,820
                                        ---------------
                                             25,001,322
                                        ---------------
              Total Australian
              eurobonds
              (cost $228,389,294)           183,637,607
                                        ---------------
Corporate Bonds--3.0%
Banking and Finance--0.6%
              DSL Bank
    15,000        6.25%, 11/15/06             7,920,794
                                        ---------------
Floating Rate Notes*--0.1%
              Crusade Trust
     1,122       4.613%, 7/10/29                564,161
                                        ---------------

Services--2.3%
              Melbourne Airport
     2,000        6.75%, 6/15/08              1,056,105
              Telstra Corporation
     2,000        7.80%, 7/17/03              1,065,260
     7,000        8.00%, 9/15/04              3,805,609
    30,000       12.00%, 5/15/06             19,003,449
     2,000        8.75%, 1/15/20              1,307,222
              Westpac Banking Corporation
     5,000        7.00%, 8/2/10               2,663,115
                                        ---------------
                                             28,900,760
                                        ---------------

              Total Australian
              corporate bonds
              (cost $47,587,023)        $    37,385,715
                                        ---------------
              Total Australian
              long-term investments
              (cost $964,046,381)           790,923,217
                                        ---------------
JAPAN--1.0%
Government Bonds--1.0%
JPY
              Inchon Metropolitan City
   500,000        3.70%, 4/26/06              4,348,004
              PTT Exploration & Production
   900,000        3.35%, 9/19/07              7,808,034
                                        ---------------
              Total Japan long-term
              investments
              (cost $12,209,493)             12,156,038
                                        ---------------
KOREA--4.0%
Government Bonds--4.0%
KRW
              Korea Deposit Insurance Fund Bond
10,000,000        9.90%, 10/23/03             8,419,830
19,000,000        8.72%, 3/12/04             15,731,293
 2,000,000       15.00%, 7/3/04               1,890,008
              Korea Treasury Bonds
10,000,000        7.70%, 8/16/03              8,117,738
 9,320,000        7.15%, 4/11/06              7,598,291
 9,933,000        6.91%, 7/18/11              7,749,894
                                        ---------------
              Total Korea long-term
              investments
              (cost $51,480,659)             49,507,054
                                        ---------------
MALAYSIA--1.3%
Government Bonds--0.8%
MYR

              Malaysia Government Bonds
     2,000       4.427%, 3/31/03                537,886
    17,300        5.00%, 4/15/05              4,859,985
    11,390       6.844%, 10/1/09              3,727,603
                                        ---------------

              Total Malaysia
              government bonds
              (cost $8,355,799)               9,125,474
                                        ---------------
Corporate Bonds--0.5%
              British American Tobacco Corporation
     9,000        7.10%, 11/2/04              2,609,645
              YTL Corporation Berhad
    13,000        8.50%, 6/29/04              3,846,118
                                        ---------------

14 Aberdeen Asia-Pacific Income Fund, Inc.    See Notes to Financial Statements.

<PAGE>

Portfolio of Investments (continued)

October 31, 2001

Principal
Amount
Local
Currency**                                  Value
(000)         Description                   (US$)
- -------------------------------------------------------
              Total Malaysia
              corporate bonds
              (cost $6,315,790)         $     6,455,763
                                        ---------------
              Total Malaysia
              long-term investments
              (cost $14,671,589)             15,581,237
                                        ---------------
PHILIPPINES--0.6%
Government Bonds--0.6%
PHP

              Philippine Government Bond
  372,800        18.00%, 11/26/08
              (cost $9,306,966)               7,385,609
                                        ---------------
SINGAPORE--1.3%
Government Bonds--1.3%
SGD

              Singapore Government Bonds
    1,200         3.00%, 11/1/02                670,270
    8,640         4.00%, 2/1/05               5,061,465
   16,870        4.625%, 7/1/10              10,391,495
                                        ---------------
              Total Singapore
              government bonds
              (cost $15,434,727)             16,123,230
                                        ---------------
Corporate Bonds--0.0%
              General Motors
              Acceptance
              Corporation
    1,000         3.95%, 4/25/03
              (cost $580,135)                   558,104
                                        ---------------
              Total Singapore
              long-term investments
              (cost $16,014,862)             16,681,334
                                        ---------------
THAILAND--2.2%
Government Bonds--2.0%
THB

              Eastern Water Resources
  115,000         9.00%, 7/22/04 (a)          2,826,232
              Export-Import Bank of Thailand
   80,000         7.25%, 5/6/04 (a)           1,931,512
              Thailand Government Bonds
   34,400         8.25%, 10/14/03 (a)           846,359
  185,000         6.25%, 6/15/04 (a)          4,459,743
  363,100         8.50%, 10/14/05 (a)         9,576,135
   44,000         8.00%, 12/8/06 (a)          1,147,992
   68,000         5.60%, 7/7/07 (a)           1,598,834
   85,000         8.50%, 12/8/08 (a)          2,299,716
                                        ---------------

              Total Thailand
              government bonds
              (cost $26,497,861)        $    24,686,523
                                        ---------------
Corporate Bonds--0.2%
 THB

              Advance Information Services PLC
   96,000         6.25%, 3/31/03 (a)
              (cost $2,533,260)               2,193,531
                                        ---------------
              Total Thailand
              long-term investments
              (cost $29,031,121)             26,880,054
                                        ---------------
UNITED STATES--32.5%
Government Bonds--6.6%
USD

              United States Treasury Notes
   79,000        4.625%, 5/15/06
              (cost $82,022,813)             82,629,260
                                        ---------------
Yankee Bonds--25.9%
              ASAT Finance LLC
    3,900        12.50%, 11/1/06              3,042,000
              Bangkok Bank Public Company
   12,500         8.75%, 3/15/07             12,265,625
              Bangkok Sentral Ng
    4,000         8.60%, 6/15/27              2,757,000
              China Development Bank
    4,000         8.25%, 5/15/09              4,586,000
              China Peoples Republic
    3,000         6.80%, 5/23/11              3,251,964
              China Telecom Limited
    4,000        7.875%, 11/2/04              4,388,461
              Cho Hung Bank
    5,500       11.875%, 4/1/05               5,801,125
    1,500       11.875%, 4/1/10               1,560,000
              Citi Pacific Finance
    4,750        7.625%, 6/1/11               4,745,531
              CKWB (Cayman Islands) Limited
   10,300        7.625%, 7/5/11              10,339,998
              Dao Heng Bank Limited
    4,500         7.75%, 1/24/07              4,921,150
              DBS Group Holdings
    5,000        7.125%, 5/15/11              5,239,742
              Embarc Ireland Limited
    5,500         7.70%, 8/18/03 (b)          4,526,530
              Export-Import Bank Korea
    2,000         6.50%, 11/15/06             2,214,020
    6,000         7.10%, 3/15/07              6,461,580
              Flextronics International Limited
    2,500        9.875%, 7/1/10               2,612,500

See Notes to Financial Statements. Aberdeen Asia-Pacific Income Fund, Inc.    15

<PAGE>

Portfolio of Investments (continued)

October 31, 2001

Principal
Amount
Local
Currency**                                  Value
(000)         Description                   (US$)
- -------------------------------------------------------
 USD
              GH Water Supply Holdings Limited
    1,900         7.00%, 6/22/08     $        1,648,250
              Globe Telecom Incorporated
    9,000        13.00%, 8/1/09               9,690,750
              Hanvit Bank
    4,000        11.75%, 3/1/10               4,219,000
    3,500        12.75%, 3/1/10               3,762,206
              Hutchison Whampoa International Limited
    6,000         7.00%, 2/16/11              6,146,575
              Hyundai Motor Co. Limited
    2,000         7.33%, 12/12/05             2,019,093
              Industrial Finance Corporation
    1,000        7.375%, 1/14/07              1,052,750
              Korea Development Bank
    8,000        7.125%, 4/22/04              8,532,152
              Korea Electric Power Corporation
    9,000         7.75%, 4/1/13               9,624,240
   12,500         7.00%, 2/1/27              13,233,125
              Kowloon Canton Ry Corporation
   18,000         8.00%, 3/15/10             21,145,500
              Kumgang Korea Chemical Co. Limited
    2,000        7.625%, 6/20/08              2,051,133
              LG Caltex Oil Corporation
    5,000         7.50%, 7/15/07              5,131,584
    3,000         7.75%, 7/25/11              3,176,014
              Malaysia
    5,000         8.75%, 6/1/09               5,629,500
   13,000         7.50%, 7/15/11             13,432,770
              National Power Corporation
    7,000         8.40%, 12/15/16             5,212,984
              Oversea-Chinese Banking Corporation
    9,000         7.75%, 9/6/11               9,486,924
              Petroliam Nasional Berhad
    5,000        8.875%, 8/1/04               5,604,757
   15,000         7.75%, 8/15/15             15,375,000
              Philippine Long Distance Telcom
    1,000         8.35%, 3/6/17                 595,100
              Pohang Iron & Steel Corporation
    4,000        7.125%, 11/1/06              4,251,667
              PTT Exploration & Production
    6,500        7.625%, 10/1/06              6,936,875
              Reliance Industries Limited
    7,250        10.25%, 1/15/97              6,156,584

 USD
              Republic of Philippines
    2,500        9.875%, 3/16/10     $        2,419,321
   12,500        9.875%, 1/15/19             10,000,000
    3,500         9.50%, 10/21/24             3,487,168
    7,636       10.625%, 3/16/25              6,624,118
              Republic of South Korea
    5,500         8.75%, 4/15/03              5,938,955
   14,500        8.875%, 4/15/08             17,133,873
              SK Corporation
    3,900         7.50%, 5/31/06              4,112,141
              Telekom Malaysia
    3,000        7.875%, 8/1/25               2,743,500
              Tenaga Nasional Berhad
    7,750        7.625%, 4/1/11               7,569,795
    5,000         7.50%, 11/1/25              3,928,000
   11,000         7.50%, 1/15/96              8,270,900
              Total Access Communication Public
    7,000        8.375%, 11/4/06              6,160,000
                                       ----------------
              Total United States
              yankee bonds
              (cost $303,722,914)           321,215,530
                                       ----------------
              Total United States
              long-term investments
              (cost $385,745,727)           403,844,790
                                       ----------------
              Total long-term
              investments
              (cost $1,482,506,798)       1,322,959,333
                                       ----------------
SHORT-TERM INVESTMENTS--39.8%
Australia--29.9%
Government and Semi-Government--4.4%
Commonwealth of Australia--2.1%
A$
              Australian Capital Territory
   10,000        12.00%, 11/15/01             5,047,245
              Commonwealth Bank of Australia
   10,000         5.50%, 3/1/02               5,053,861
              Commonwealth of Australia
   30,000        12.00%, 11/15/01            15,128,359
                                       ----------------
                                             25,229,465
                                       ----------------
New South Wales--2.3%
              New South Wales Treasury
              Corporation
   57,000        12.00%, 12/1/01             28,832,076
                                       ----------------

16 Aberdeen Asia-Pacific Income Fund, Inc. See Notes to Financial Statements.

<PAGE>

Portfolio of Investments (continued)

As of October 31, 2001

Principal
Amount
Local
Currency**                                Value
(000)          Description                (US$)
- ---------------------------------------------------
             Total Australian
             government and
             semi-government
             (cost $90,922,398)        $ 54,061,541
                                       ------------
Eurobonds--9.8%
Banking and Finance--5.3%
A$
             Banque National de Paris
    14,000     9.00%, 8/13/02             7,298,950
             Federal National Mortgage Association
             Global
    35,000     6.50%, 7/10/02            17,897,119
             GE Capital Australia Limited
    10,000     6.50%, 12/3/01             5,040,000
    15,000     7.00%, 10/15/02            7,745,886
             National Australia Bank Limited
    10,000     6.25%, 10/15/02            5,130,407
             State Bank of New South Wales
    28,000     10.75%, 3/12/02           14,408,823
     6,400     9.00%, 9/17/02             3,352,708
             State Bank of South Australia
    10,000     11.00%, 4/10/02            5,173,997
                                       ------------
                                         66,047,890
                                       ------------
Semi-Government and Local Government--3.1%
             New South Wales Treasury
             Corporation
    25,000     8.00%, 12/1/01            12,613,709
    50,000     12.00%, 12/1/01           25,295,207
                                       ------------
                                         37,908,916
                                       ------------
Supranational Global--1.4%
             European Bank of Reconstruction &
             Development
    34,000     9.00%, 10/15/02           17,900,696
                                       ------------
             Total Australian
             eurobonds
             (cost $179,684,158)        121,857,502
                                       ------------
Corporate Bonds--0.8%
Asset Backed--0.0%
             FANMAC 22
       920     11.40%, 12/15/01             466,509
             FANMAC 25
       236     10.33%, 6/15/02              122,633
                                       ------------
                                            589,142
                                       ------------
Services--0.8%
A$
             Merrill Lynch & Co. Australia
    10,000     7.625%, 3/15/02         $  5,089,535
             Telstra Corporation
     8,000     11.50%, 10/15/02           4,293,004
                                       ------------
                                          9,382,539
                                       ------------
             Total Australian
             corporate bonds
             (cost $14,069,192)           9,971,681
                                       ------------
Demand Deposits--14.9%
             Banque National de Paris Demand
             Deposit
   197,077     4.50%, 11/1/01            99,178,871
             Dresdner Call Deposit
   172,035     3.00%, 11/1/01            86,576,385
                                       ------------
             Total Australian
             demand deposits
             (cost $190,902,025)        185,755,256
                                       ------------
             Total Australian
             short-term investments
             (cost $475,577,773)        371,645,980
                                       ------------
Korea--3.7%
Government Bonds--3.7%
KRW
             Korea Development Bank
10,000,000     8.40%, 11/20/01            7,762,742
 5,000,000     6.40%, 1/5/02              3,886,057
 5,000,000     6.82%, 2/26/02             3,901,511
             Korea Monetary Stabilization Bond
19,040,000     8.97%, 2/8/02             14,931,431
10,000,000     8.99%, 2/14/02             7,847,792
 4,409,000     7.75%, 7/19/02             3,493,287
             Korea Treasury Bond
 5,000,000     7.10%, 12/9/01             3,884,431
                                       ------------
             Total Korea short-term
             investments
             (cost $51,149,139)          45,707,251
                                       ------------
New Zealand--0.4%
Demand Deposits--0.4%
NZD
             New Zealand Call Deposit
    12,166     4.00%, 11/1/01
             (cost $5,526,796)            5,018,280
                                       ------------


See Notes to Financial Statements.    Aberdeen Asia-Pacific Income Fund, Inc. 17

<PAGE>

Portfolio of Investments (continued)

October 31, 2001

Principal
Amount
Local
Currency**                                Value
(000)          Description                (US$)
- ---------------------------------------------------
United States--5.8%
Yankee Bonds--1.8%
USD
             Cho Hung Bank
     7,500     8.84%, 1/7/02           $  7,462,500
             Embarc Ireland
     6,900     7.01%, 6/28/02(c)          5,462,812
             Industrial Bank of Korea
     4,000     8.375%, 9/30/02            4,168,082
             Total Access Communication Public
     4,500     7.625%, 11/4/01            4,455,000
                                       ------------
             Total United States
             yankee bonds
             (cost $21,729,572)          21,548,394
                                       ------------
Repurchase Agreement--4.0%
USD
    49,594   State Street Bank &
             Trust Company, 2.48%
             due 11/1/01 in the
             amount of $49,597,416
             (cost $49,594,000;
             collateralized by United
             States Treasury Bond
             8.875% due 8/15/17;
             value including accrued
             interest - $50,595,278)   $ 49,594,000
                                       ------------
             Total United States
             short-term investments
             (cost $71,323,572)          71,142,394
                                       ------------
             Total short-term
             investments
             (cost $603,577,280)        493,513,905
                                       ------------

- ------------------------------------------------------------------------------
Total Investments--146.3% (cost $2,086,084,078)                  1,816,473,238
Other assets in excess of liabilities--2.0%                         25,368,059
Liquidation value of preferred stock--(48.3%)                     (600,000,000)
- ------------------------------------------------------------------------------
Net Assets Applicable to Common Shareholders--100%             $ 1,241,841,297
- ------------------------------------------------------------------------------
Net asset value per common share ($1,241,841,297 / 266,781,600 shares of
common stock issued and outstanding)                           $          4.65
- ------------------------------------------------------------------------------

- ------------------------------

 * The interest rate reflected for floating rate notes is the rate in effect at
October 31, 2001.
** Portfolio securities are listed in currency in which they
are traded.
A$--Australian dollar
JPY--Japanese Yen
KRW--South Korean Won
MYR--Malaysian Ringgit
NZD--New Zealand dollar
PHP--Philippine peso
SGD--Singapore dollar
THB--Thailand Baht
USD--United States dollar
(a) Securities pledged as collateral.
(b) Value of security is linked to the value of Government of Korea 7.70%,
    8/16/03 and the movement of the South Korean Won.
(c) Value of security is linked to the value of Korea Development Bank 7.01%,
    6/26/02 and the movement of the South Korean Won.

18 Aberdeen Asia-Pacific Income Fund, Inc.    See Notes to Financial Statements.

<PAGE>

Statement of Assets and Liabilities

October 31, 2001

<TABLE>
<S>                                                             <C>
Assets
Investments, at value (cost $2,086,084,078) ................... $ 1,816,473,238
Foreign currency, at value (cost $9,056,207) ..................       9,910,620
Cash ..........................................................         295,618
Interest receivable ...........................................      32,087,918
Unrealized appreciation on interest rate and currency
  swaps .......................................................         910,310
Other assets ..................................................         421,891
Unrealized appreciation on forward currency contracts .........         256,655
                                                                ---------------
    Total assets ..............................................   1,860,356,250
                                                                ---------------

Liabilities
Dividends and distributions payable-common stock ..............      12,005,172
Payable for investments purchased .............................       1,780,465
Withholding taxes payable .....................................       1,502,782
Accrued expenses and other liabilities ........................       1,392,964
Dividends payable-preferred stock .............................         858,317
Investment management fee payable .............................         787,081
Administration fee payable ....................................         154,281
Unrealized depreciation on forward currency contracts .........          33,891
                                                                ---------------
    Total liabilities .........................................      18,514,953
                                                                ---------------

Total Net Assets .............................................. $ 1,841,841,297
                                                                ===============

Total net assets were composed of:
  Common stock:
    Par value ($.01 per share, applicable to 266,781,600
      shares) ................................................. $     2,667,816
    Paid-in capital in excess of par ..........................   1,897,699,485
  Preferred stock ($.01 par value per share and $25,000
    liquidation value per share applicable to 24,000
    shares; Note 4) ...........................................     600,000,000
                                                                ---------------
                                                                  2,500,367,301
  Distributions in excess of net investment income ............     (14,366,271)
  Accumulated net realized loss on investments ................      (1,256,709)
  Net unrealized appreciation on investments ..................      17,359,333
  Accumulated net realized and unrealized foreign
    exchange losses ...........................................    (660,262,357)
                                                                ---------------
  Total net assets ............................................ $ 1,841,841,297
                                                                ===============
  Net assets applicable to common shareholders ................ $ 1,241,841,297
                                                                ===============

Net asset value per common share: ($1,241,841,297 /
  266,781,600 shares of common stock issued and
  outstanding) ................................................ $          4.65
                                                                ===============
</TABLE>

See Notes to Financial Statements.    Aberdeen Asia-Pacific Income Fund, Inc. 19

<PAGE>

Statement of Operations

Year Ended October 31, 2001

Net Investment Income
Income
  Interest (net of foreign withholding taxes of
  $6,646,088) .............................................   $ 159,437,344
                                                              -------------
Expenses
  Investment management fee ...............................      10,220,699
  Custodian's fees and expenses ...........................       2,350,000
  Administration fee ......................................       2,304,331
  Auction agent's fees and broker commissions .............       1,670,000
  Reports to shareholders .................................         810,000
  Directors' fees and expenses ............................         611,000
  Transfer agent's fees and expenses ......................         600,000
  Legal fees and expenses .................................         450,000
  Insurance expense .......................................         226,000
  Independent accountant's fees and expenses ..............         178,000
  Investor relations fees and expenses ....................         140,000
  Miscellaneous ...........................................          65,018
                                                              -------------
  Total operating expenses ................................      19,625,048
                                                              -------------
Net investment income .....................................     139,812,296
                                                              -------------
Realized and Unrealized Gains (Losses) on Investments
and Foreign Currencies
Net realized gain on:
  Investment transactions .................................       3,740,038
                                                              -------------
Net change in unrealized appreciation (depreciation) on:
  Investments .............................................      66,981,548
  Interest rate and currency swaps ........................       1,436,707
                                                              -------------
                                                                 68,418,255
                                                              -------------
Net gain on investments ...................................      72,158,293
                                                              -------------
Net increase in total net assets from operations
  before net foreign exchange losses ......................     211,970,589
Net realized and unrealized foreign exchange
  losses ..................................................     (73,152,895)
                                                              -------------
Net Increase In Total Net Assets Resulting From
Operations ................................................   $ 138,817,694
                                                              =============

20 Aberdeen Asia-Pacific Income Fund, Inc.    See Notes to Financial Statements.

<PAGE>

Statement of Cash Flows

Year Ended October 31, 2001


Increase (Decrease) in Cash (Including Foreign
Currency)
Cash flows used for operating activities
  Interest received (net of foreign withholding taxes) .......... $ 164,438,302
  Expenses paid .................................................   (19,997,135)
  Purchases of short-term portfolio investments, net ............    (4,306,775)
  Purchases of long-term portfolio investments ..................  (770,159,197)
  Proceeds from sales of long-term portfolio investments ........   940,610,773
  Other .........................................................      (155,381)
                                                                  -------------
    Net cash provided from operating activities .................   310,430,587
                                                                  -------------
Cash flows provided from financing activities
  Dividends and distributions paid to preferred shareholders ....   (30,424,686)
  Dividends and distributions paid to common shareholders .......  (144,274,866)
  Cost of Fund shares reacquired in repurchase program ..........    (2,412,750)
                                                                  -------------
    Net cash used for financing activities ......................  (177,112,302)
                                                                  -------------
Effect of changes in exchange rate ..............................  (138,446,373)
                                                                  -------------
Net decrease in cash ............................................    (5,128,088)
  Cash at beginning of year .....................................    15,334,326
                                                                  -------------
  Cash at end of year ........................................... $  10,206,238
                                                                  =============
Reconciliation of Net Increase in Total Net Assets
from Operations to Net Cash (Including Foreign
Currency) Provided From Operating Activities
Net increase in total net assets resulting from operations ...... $ 138,817,694
                                                                  -------------
  Decrease in investments .......................................   143,220,090
  Net realized gain on investment transactions ..................    (3,740,038)
  Increase in unrealized appreciation on forward
  currency contracts ............................................      (565,610)
  Net change in unrealized appreciation on investments ..........   (68,418,255)
  Net realized and unrealized foreign exchange losses ...........    73,152,895
  Decrease in interest receivable ...............................     5,675,489
  Net increase in other assets ..................................      (155,381)
  Increase in payable for investments purchased .................    (1,433,004)
  Decrease in receivable for investments sold ...................    24,923,325
  Decrease in accrued expenses and other liabilities ............    (1,046,618)
                                                                  -------------
    Total adjustments ...........................................   171,612,893
                                                                  -------------
Net cash provided from operating activities ..................... $ 310,430,587
                                                                  =============

See Notes to Financial Statements.    Aberdeen Asia-Pacific Income Fund, Inc. 21

<PAGE>

Statement of Changes in Net Assets

<TABLE>
<CAPTION>
                                                          Year Ended October 31,
                                                ----------------------------------------
                                                       2001                  2000
                                                ------------------    ------------------
<S>                                             <C>                   <C>
Increase (Decrease) in Net Assets
Operations
  Net investment income .....................   $      139,812,296    $      161,018,972
  Net realized gains on
    investment transactions .................            3,740,038             3,392,579
  Net change in unrealized
    appreciation (depreciation)
    on investments ..........................           68,418,255           (82,969,078)
                                                ------------------    ------------------
  Net increase in total net
    assets resulting from
    operations before net foreign
    exchange losses .........................          211,970,589            81,442,473
  Net realized and unrealized
    foreign exchange losses .................          (73,152,895)         (262,673,773)
                                                ------------------    ------------------
Net increase/decrease in total
  net assets resulting from
  operations ................................          138,817,694          (181,231,300)
                                                ------------------    ------------------
Dividends from net investment
  income
  Common shares .............................          (58,797,328)         (103,990,974)
  Preferred shares ..........................          (29,663,738)          (35,131,943)
                                                ------------------    ------------------
                                                       (88,461,066)         (139,122,917)
                                                ------------------    ------------------
Tax return of capital
  distribution ..............................          (85,450,731)          (56,431,030)
                                                ------------------    ------------------
Distributions from net realized
  capital gains
  Common shares .............................                   --                    --
  Preferred shares ..........................                   --            (1,231,344)
                                                ------------------    ------------------
                                                                --            (1,231,344)
                                                ------------------    ------------------
Cost of Fund shares reacquired in
  repurchase program (595,700 and
  0 shares, respectively) ...................           (2,412,750)                   --
                                                ------------------    ------------------
Total decrease ..............................          (37,506,853)         (378,016,591)
Total Net Assets
Beginning of period .........................        1,879,348,150         2,257,364,741
                                                ------------------    ------------------
End of period ...............................   $    1,841,841,297    $    1,879,348,150
                                                ==================    ==================
</TABLE>

22 Aberdeen Asia-Pacific Income Fund, Inc.    See Notes to Financial Statements.

<PAGE>

Notes to Financial Statements

Aberdeen Asia-Pacific Income Fund, Inc. (formerly known as the First Australia
Prime Income Fund, Inc.) (the `Fund') was incorporated in Maryland on March 14,
1986 as a closed-end, non-diversified management investment company. The Fund's
investment objective is to seek current income. The Fund may also achieve
incidental capital appreciation. The Fund will seek to achieve its investment
objective through investment in Asian debt securities and Australian debt
securities. There can be no assurance that the Fund will achieve its objectives.
The ability of issuers of debt securities held by the Fund to meet their
obligations may be affected by economic developments in a specific industry,
country or region.

Note 1. Accounting Policies

The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.

Basis of Presentation:
The financial statements of the Fund are prepared in accordance with accounting
principles generally accepted in the United States of America, using the United
States dollar as both the functional and reporting currency.

Security Valuation:
Investments are stated at value. Investments for which market quotations are
readily available are valued based on prices provided by a pricing service or
the lower of the quotations from two leading brokers in the relevant debt
securities market, in the event that a price cannot be obtained by the pricing
service. Securities for which market quotations are not readily available are
valued at fair value using methods determined in good faith by or under the
direction of the Fund's Board of Directors.

Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.

Repurchase Agreements:
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian takes possession of the
underlying collateral securities, the value of which exceeds the principal
amount of the repurchase transaction, including accrued interest. To the extent
that any repurchase transaction exceeds one business day, the collateral is
valued on a daily basis to determine its adequacy. If the seller defaults and
the value of the collateral declines

                                      Aberdeen Asia-Pacific Income Fund, Inc. 23

<PAGE>

Notes to Financial Statements (continued)

or if bankruptcy proceedings are commenced with respect to the seller of the
security, realization of the collateral by the Fund may be delayed or limited.

Foreign Currency Translation:
Australian dollar ("A$"), New Zealand dollar ("NZD") and Asian currency amounts
are translated into United States dollars on the following basis:

(i)  market value of investment securities, other assets and liabilities--at the
exchange rates at the end of the reporting periods;

(ii) purchases and sales of investment securities, income and expenses--at the
rates of exchange prevailing on the respective dates of such transactions.

The Fund isolates that portion of the results of operations arising as a result
of changes in the foreign exchange rates from the fluctuations arising from
changes in the market prices of the securities held at October 31, 2001.
Similarly, the Fund isolates the effect of changes in foreign exchange rates
from the fluctuations arising from changes in the market prices of portfolio
securities sold during the reporting periods.

Net realized and unrealized foreign exchange losses include realized foreign
exchange gains and losses from sales and maturities of portfolio securities,
sales of foreign currencies, currency gains or losses realized between the trade
and settlement dates on securities transactions, the difference between the
amounts of interest, discount and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent amounts actually received or paid
and changes in unrealized foreign exchange gains and losses in the value of
portfolio securities and other assets and liabilities arising as a result of
changes in the exchange rate. Accumulated net realized and unrealized foreign
exchange losses shown in the composition of net assets at October 31, 2001
represent foreign exchange losses for book purposes that have not yet been
recognized for tax purposes.

Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of domestic origin, including
unanticipated movements in the value of the foreign currency relative to the
U.S. dollar.

The exchange rate at October 31, 2001 was US$.50 to A$1.00 for the Australian
dollar.

Securities Transactions and Investment Income:
Securities transactions are recorded on the trade date. Realized and unrealized
gains

24 Aberdeen Asia-Pacific Income Fund, Inc.

<PAGE>

Notes to Financial Statements (continued)

and losses from security and currency transactions are calculated on the
identified cost basis. Interest income is recorded on an accrual basis.
Discounts on short-term securities are accreted over the life of the security.
Original issue discount is accreted over the life of the security based upon the
effective yield. Market discounts on long-term securities are recognized upon
disposition. Expenses are recorded on the accrual basis which may require the
use of certain estimates by management. Actual results could differ from those
estimates.

In November 2000, a revised AICPA Audit and Accounting Guide, Audits of
Investment Companies (the "Guide"), was issued, and is effective for the fiscal
years beginning after December 15, 2000. The revised Guide requires the Fund to
amortize market discount and premiums on all fixed-income securities. Upon
initial adoption, the Fund will be required to adjust the cost of its
fixed-income securities by the cumulative amount that would have been recognized
had the amortization been in effect from the purchase date of each holding.
Adopting this accounting principle will not affect the Fund's net asset value,
but will change the classification of certain amounts between interest income
and realized and unrealized gain/loss in the Statement of Operations. The Fund
estimates that the initial adjustment required upon adoption of market discount
and premium amortization will decrease the recorded cost of its investments (but
not their market value) by approximately $53,371,000. Additionally, had this
principle been in effect during the year ended October 31, 2001, the Fund
estimates that net investment income would have increased by approximately $0.05
per share (1.0% of net assets), and realized and unrealized gain per share would
have decreased by the same amount. Because the Fund determines its required
distributions under Federal income tax laws, adoption of this principle will not
affect the amount or composition of distributions paid to shareholders.

Forward Currency Contracts:
A forward currency contract is a commitment to purchase or sell a foreign
currency at a future date at a negotiated forward rate. The Fund enters into
forward currency contracts in order to hedge its exposure to changes in foreign
currency exchange rates on its foreign portfolio holdings or on specific
receivables and payables denominated in a foreign currency. The contracts are
valued daily at current exchange rates and any unrealized gain or loss is
included in net unrealized appreciation or depreciation. Gain or loss is
realized on the settlement date of the contract equal to the difference between
the settlement value of the original and renegotiated forward contracts. This
gain or loss, if any, is included in net realized gain (loss) on

                                      Aberdeen Asia-Pacific Income Fund, Inc. 25

<PAGE>

Notes to Financial Statements (continued)

foreign currency transactions. Risks may arise upon entering into these
contracts from the potential inability of the counterparties to meet the terms
of their contracts.

Financial Futures Contracts:
A financial futures contract is an agreement to purchase (long) or sell (short)
an agreed amount of securities or commodities at a set price for delivery on a
future date. Upon entering into a financial futures contract, the Fund is
required to pledge to the broker an amount of cash and/or other assets equal to
a certain percentage of the contract amount. This amount is known as the
`initial margin.' Subsequent payments, known as `variation margin,' are made or
received by the Fund when the contract expires or is closed, depending on the
daily fluctuations in the value of the underlying security or commodity. Such
variation margin is recorded for financial statement purposes on a daily basis
as unrealized gain or loss. When the contract expires or is closed, the gain or
loss is realized and is presented in the statement of operations as net realized
gain (loss) on financial futures contracts.

The Fund invests in financial futures contracts in order to hedge existing
portfolio securities, or securities the Fund intends to purchase, against
fluctuations in value. Under a variety of circumstances, the Fund may not
achieve the anticipated benefits of the financial futures contracts and may
realize a loss. The use of futures transactions involves the risk of imperfect
correlation in movements in the price of futures contracts and the underlying
assets.

Interest Rate and Currency Swap:
An interest rate and currency swap is an agreement between two parties which
involves exchanging principal and fixed rate interest payments in one currency
for principal and fixed rate interest payments in another currency for a
specified period of time. Interest rate and currency swaps involve the accrual
and exchange of interest payments between the parties.

During the term of the swap, changes in the value of the swap are recognized as
unrealized gains or losses by `marking-to-market' to reflect the market value of
the swap. When the swap is terminated, the Fund will record a realized gain or
loss equal to the difference, if any, between the proceeds from (or cost of) the
closing transaction and the Fund's basis in the contract.

26 Aberdeen Asia-Pacific Income Fund, Inc.

<PAGE>

Notes to Financial Statements (continued)

The Fund is exposed to credit loss in the event of non-performance by the other
party to the currency rate swap. However, the Fund does not anticipate
non-performance by any counterparty.

Dividends and Distributions:
It is the Fund's current policy to pay dividends from net investment income
supplemented by net realized foreign exchange gains, net realized short-term
capital gains and return of capital distributions if necessary, on a monthly
basis. The Fund will also declare and pay distributions at least annually from
net realized gains on investment transactions and net realized foreign exchange
gains, if any. Dividends and distributions to common shareholders are recorded
on the ex-dividend date. Dividends and distributions to preferred shareholders
are accrued on a weekly basis and are determined as described in Note 4.

Income distributions and capital and currency gains distributions are determined
in accordance with income tax regulations which may differ from accounting
principles generally accepted in the United States of America. These differences
are primarily due to differing treatments for foreign currencies, loss deferrals
and recognition of market discount.

Taxes:
For federal income and excise tax purposes, the Fund's transactions are
accounted for using the Australian dollar as the functional currency.
Accordingly, only realized currency gains and losses resulting from the
repatriation of Australian dollars into United States dollars or transactions in
New Zealand dollars or Asian country currencies are recognized for tax purposes.

No provision has been made for United States income taxes because it is the
Fund's policy to continue to meet the requirements of the United States Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income to shareholders. The chart below summarizes the
withholding tax rates in effect on interest income at the period end.

                                            Withholding
                       Country               Tax Rate
                   -------------------------------------
                   Australia                     10%
                   Japan                         10
                   Korea                         12
                   Malaysia                      30
                   New Zealand                   10

                                      Aberdeen Asia-Pacific Income Fund, Inc. 27

<PAGE>

Notes to Financial Statements (continued)

                                             Withholding
                       Country                Tax Rate
                   -------------------------------------
                   Philippines                   15%
                   Singapore                     30
                   Thailand                      10


Cash Flow Information:
The Fund invests in securities and distributes dividends from net investment
income and net realized gains from investment and currency transactions which
are paid in cash or are reinvested at the discretion of shareholders. These
activities are reported in the Statement of Changes in Net Assets and additional
information on cash receipts and cash payments is presented in the Statement of
Cash Flows. Cash includes domestic and foreign currency.

Reclassification of Capital Accounts:
The Fund accounts and reports for distributions to shareholders in accordance
with Statement of Position 93-2: Determination, Disclosure, and Financial
Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies. To reflect reclassifications arising from
permanent book/tax differences for the fiscal year ended October 31, 2001, the
Fund decreased distributions in excess of net investment income by $35,561,787,
decreased accumulated net realized gains on investments by $4,152,007, decreased
accumulated net realized and unrealized foreign exchange losses by $54,040,951
and decreased paid-in capital in excess of par by $85,450,731. Net realized
gains and net assets were not affected by this change.

Note 2. Agreements

Aberdeen Asset Managers (C.I.) Limited (formerly known as EquitiLink
International Management Limited) (the `Investment Manager') serves as
investment manager to the Fund and Aberdeen Asset Management Limited (formerly
known as EquitiLink Australia Limited) (the `Investment Adviser') serves as
investment adviser to the Fund pursuant to a management agreement and an
advisory agreement, respectively, each dated December 22, 2000. The Investment
Manager and the Investment Adviser are wholly owned subsidiaries of Aberdeen
Asset Management PLC.

The Investment Manager makes investment decisions on behalf of the Fund on the
basis of recommendations and information furnished to it by the Investment
Adviser, including the selection of and the placement of orders with brokers and
dealers to execute portfolio transactions on behalf of the Fund.

28 Aberdeen Asia-Pacific Income Fund, Inc.

<PAGE>

Notes to Financial Statements (continued)

The management agreement provides the Investment Manager with a fee, computed
weekly and payable monthly, at the following annual rates: 0.65% of the Fund's
average weekly total net assets of common and preferred shareholders up to $200
million, 0.60% of such assets between $200 million and $500 million, 0.55% of
such assets between $500 million and $900 million, 0.50% of such assets between
$900 million and $1,750 million and 0.45% of such assets in excess of $1,750
million.

The Investment Manager pays fees to the Investment Adviser for its services
rendered. The Investment Manager informed the Fund that it paid $4,398,088 to
the Investment Adviser during the year ended October 31, 2001.

Prudential Investments LLC (formerly known as Prudential Investments Fund
Management LLC) (the "Administrator") serves as administrator to the Fund
pursuant to an agreement dated December 9, 1988. The administration agreement
provides the Administrator with a fee at the annual rate of 0.15% of the Fund's
average weekly total net assets of common and preferred shareholders up to $900
million, 0.10% of such assets between $900 million and $1,750 million and 0.07%
of such assets in excess of $1,750 million. During the year, the Administrator
remitted $240,000 to the Investment Manager for certain compliance related
administrative services provided.

Under terms of an Investor Relations Services Agreement, EquitiLink USA, Inc.
(doing business under the name Aberdeen Asset Management ("Aberdeen")), a wholly
owned subsidiary of the Investment Manager, serves as the Fund's investor
relations services provider. This agreement provides Aberdeen with a monthly
retainer fee of $10,000 plus out-of-pocket expenses. During the year ended
October 31, 2001, the Fund incurred fees of approximately $120,000 for the
services of Aberdeen. As of October 31, 2001, $10,000 of this amount was due to
Aberdeen. Investor relations fees and expenses in the Statement of Operations
include certain out-of-pocket expenses.

Note 3. Portfolio Securities

Purchases and sales of investment securities, other than short-term investments,
for the year ended October 31, 2001 aggregated $772,757,360 and $919,735,488,
respectively.

The Fund entered into two interest rate and foreign currency swaps on February
16, 1999. Under the terms of the first swap, the Fund receives interest at a
rate of 11.50% based on a notional amount of KRW5,124,367,250 and pays interest
at a rate of 3.70% based on a notional amount of JPY500,000,000. Under the terms
of

                                      Aberdeen Asia-Pacific Income Fund, Inc. 29

<PAGE>

Notes to Financial Statements (continued)

the second swap, the Fund receives interest at a rate of 13.05% based on a
notional amount of THB290,920,192 and pays interest at a rate of 3.35% based on
a notional amount of JPY900,000,000. Net receipts or payments of such amounts
are exchanged semi-annually. At October 31, 2001 the unrealized appreciation on
currency swaps was $1,230,392. The swaps are scheduled to terminate on April 26,
2006.

The Fund entered into an interest rate swap agreement on September 1, 2000.
Under the terms of the agreement, the Fund receives a floating rate of interest
based on a notional value of SGD 4,000,000 and pays interest at a fixed rate of
4.835% based on a notional value of SGD 4,000,000. Net receipts of payments of
such amounts are exchanged semi-annually. At October 31, 2001 the unrealized
depreciation on this interest rate swap was $320,082. The swap is scheduled to
terminate on September 6, 2010.

Net interest income of $912,607 on interest rate and currency swaps during the
period is included in interest income in the Statement of Operations.

At October 31, 2001 the Fund had outstanding forward currency contracts to buy
and sell foreign currency as follows:

                                Value at
     Foreign Currency          Settlement        Current
       Sale Contract         Date Receivable      Value       Appreciation
- ---------------------------  ---------------   -----------   --------------
Australian Dollar
  settlement date 11/1/01      $ 7,582,875     $ 7,548,750      $ 34,125
Thailand Baht
  settlement date 12/17/01       7,100,000       7,083,799        16,201
                               -----------     -----------      --------
                               $14,682,875     $14,632,549      $ 50,326
                               ===========     ===========      ========

                                Value at
     Foreign Currency          Settlement        Current      Appreciation
     Purchase Contract        Date Payable        Value      (Depreciation)
- ---------------------------  ---------------   -----------   --------------
Indian Rupee
  settlement date 2/4/02       $ 6,600,000     $ 6,734,746      $134,746

Philippine Peso
  settlement date 12/24/01      10,136,000      10,104,130       (31,870)

South Korean Won
  settlement date 1/30/02        3,700,000       3,728,660        28,660

Taiwan Dollar
  settlement date 1/24/02        6,581,000       6,621,381        40,381

Thailand Baht
  settlement date 11/26/01         836,000         833,979        (2,021)
  settlement date 12/17/01       7,100,000       7,100,395           395

30 Aberdeen Asia-Pacific Income Fund, Inc.

<PAGE>

Notes to Financial Statements (continued)

                                Value at
     Foreign Currency          Settlement        Current      Appreciation
     Purchase Contract        Date Payable        Value      (Depreciation)
- ---------------------------  ---------------   -----------   --------------
Yuan Renminbi
  settlement date 1/24/02        6,581,000       6,583,147         2,147
                               -----------     -----------      --------
                               $41,534,000     $41,706,438      $172,438
                               ===========     ===========      ========

The United States federal income tax basis of the Fund's investments at October
31, 2001 was $1,801,280,426 and accordingly, net unrealized appreciation for
United States federal income tax purposes was $15,192,812 (gross unrealized
appreciation--$47,117,106; gross unrealized depreciation--$31,924,294).

For federal income tax purposes, the Fund had a capital loss carryforward as of
October 31, 2000 of approximately $191,000 of which $191,000 was utilized to
offset the Fund's net taxable gains realized in the year ended October 31, 2001.

Note 4. Capital

There are 400 million shares of common stock authorized. At October 31, 2001,
there were 266,781,600 common shares issued and outstanding.

The Preferred Stock shareholders have rights as determined by the Board of
Directors. The 24,000 shares of Auction Market Preferred Stock ("Preferred
Stock") outstanding consist of nine series as follows: Series A--3,000 shares,
Series B--3,000 shares, Series C--2,000 shares, Series D--4,000 shares, Series
E--2,000 shares, Series F--2,000 shares, Series G--3,000 shares, Series H--2,500
shares and Series I--2,500 shares.

Dividends on each series of Preferred Stock are cumulative at a rate established
at the initial public offering and are typically reset every 28 days for Series
A through D and every seven days for Series E through I based on the results of
an auction. Dividend rates ranged from 6.8% to 2.6% during the year ended
October 31, 2001. Under the Investment Company Act of 1940, the Fund may not
declare dividends or make other distributions on shares of common stock or
purchase any such shares if, at the time of the declaration, distribution or
purchase, asset coverage with respect to the outstanding Preferred Stock would
be less than 200%.

The Preferred Stock is redeemable at the option of the Fund, in whole or in
part, on any dividend payment date at liquidation value plus any accumulated but
unpaid dividends. The Preferred Stock is also subject to mandatory redemption at
liquidation value plus any accumulated but unpaid dividends if certain
requirements relating to the composition of the assets and liabilities of the
Fund as set forth in the Articles of Incorporation are not satisfied.

                                      Aberdeen Asia-Pacific Income Fund, Inc. 31

<PAGE>

Notes to Financial Statements (continued)

The holders of Preferred Stock have voting rights equal to the holders of common
stock (one vote per share) and will vote together with holders of shares of
common stock as a single class. However, holders of Preferred Stock are also
entitled to elect two of the Fund's directors.

On March 1, 2001, the Board of Directors approved a stock repurchase program.
The stock repurchase program allows the Fund to repurchase up to 10% of its
outstanding common stock in the open market during any 12 month period if and
when the discount to net asset value is at least 10%. Through October 31, 2001,
there had been 595,700 shares repurchased and cancelled under this program.

Note 5. Dividends And Distributions

On November 12, 2001, the Board of Directors declared a monthly distribution of
4.5 cents per share payable on December 14, 2001 to all shareholders of record
as of November 30, 2001 (ex-dividend date of November 28, 2001).

On December 11, 2001, the Board of Directors declared a monthly distribution of
4.5 cents per share payable on January 11, 2002 to all shareholders of record as
of December 31, 2001 (ex-dividend date of December 27, 2001). The Fund also
announced that the Board intends to reduce the monthly distribution from 4.5
cents per share to 3.5 cents per share, beginning with the distribution payable
on February 8, 2002 to all shareholders of record as of January 31, 2002
(ex-dividend date January 29, 2002).

Subsequent to October 31, 2001, dividends and distributions declared and paid on
Preferred Stock totaled approximately $2,173,635 for the nine outstanding
preferred share series in the aggregate through December 21, 2001.

32 Aberdeen Asia-Pacific Income Fund, Inc.

<PAGE>

Financial Highlights

<TABLE>
<CAPTION>
                                                                         Year Ended
                                                                      October 31, 2001
                                                                      ----------------
<S>                                                                   <C>
PER SHARE OPERATING PERFORMANCE*:
Net asset value per common share, beginning of period ..............      $     4.78
                                                                          ----------
Net investment income ..............................................             .53
Net realized and unrealized gain (loss) on investments and
  foreign currencies ...............................................            (.01)
                                                                          ----------
 Total from investment operations ..................................             .52
                                                                          ----------
Dividends from net investment income to preferred
  shareholders .....................................................            (.11)
Dividends from net investment income to common
  shareholders .....................................................            (.22)
Tax return of capital distribution .................................            (.32)
Distributions from net capital and currency gains to
  preferred shareholders ...........................................              --
Distributions from net capital and currency gains to common
shareholders .......................................................              --
                                                                          ----------
 Total dividends and distributions .................................            (.65)
                                                                          ----------
Capital reduction with respect to issuance of shares ...............              --
Increase resulting from Fund share repurchase ......................              --##
                                                                          ----------
Net asset value per common share, end of period ....................      $     4.65
                                                                          ==========
Market price per common share, end of period .......................      $     4.02
                                                                          ==========
TOTAL INVESTMENT RETURN BASED ON+:
Market value .......................................................           18.74%
Net asset value ....................................................           10.91%
RATIOS TO AVERAGE NET ASSETS OF COMMON
SHAREHOLDERS/SUPPLEMENTAL DATA#:
Expenses++ .........................................................            1.51%
Net investment income available to common shareholders .............            8.48%
Portfolio turnover rate ............................................              47%
Net assets of common shareholders, end of period (000 omitted) .....      $1,241,841
Average net assets of common shareholders (000 omitted) ............      $1,299,044
Senior securities (preferred stock) outstanding (000 omitted) ......      $  600,000
Asset coverage of preferred stock at period-end ....................             308%
</TABLE>

- ------------------------------

*    Calculated based upon average shares outstanding during the period.

+    Total investment return is calculated assuming a purchase of common stock
     on the first day and a sale on the last day of each period reported.
     Dividends and distributions are assumed, for purposes of this calculation,
     to be reinvested at prices obtained under the Fund's dividend reinvestment
     plan. Total investment return does not reflect brokerage commissions.

++   Includes expenses of both preferred and common stock.

#    Ratios calculated on the basis of income, expenses and preferred share
     dividends applicable to both the common and preferred shares relative to
     the average net assets of common shareholders. Expense ratios relative to
     the average net assets of common and preferred shareholders are 1.03%,
     .98%, .95%, .95% and .94%, respectively. Ratios to average net assets of
     net investment income before preferred stock dividends are 10.76%,10.52%,
     9.79%, 10.72% and 9.17%, respectively. Ratios to average net assets of
     preferred stock dividends are 2.28%, 2.30%, 1.45%, 2.21% and 1.78%,
     respectively.

##   Less than $0.005 per share.

34 Aberdeen Asia-Pacific Income Fund, Inc.    See Notes to Financial Statements.

<PAGE>

Financial Highlights (continued)

                   Year Ended October 31,
- -----------------------------------------------------------
   2000            1999            1998            1997
- -----------     -----------     -----------     -----------

$      6.20     $      7.33     $      8.85     $      9.93
- -----------     -----------     -----------     -----------
        .60             .67             .82             .87
      (1.28)           (.35)          (1.45)           (.96)
- -----------     -----------     -----------     -----------
       (.68)            .32            (.63)           (.09)
- -----------     -----------     -----------     -----------
       (.13)           (.10)           (.17)           (.17)
       (.39)           (.63)           (.51)           (.82)
       (.21)             --              --              --
       (.01)           (.02)             --              --
         --            (.09)           (.21)             --
- -----------     -----------     -----------     -----------
       (.74)           (.84)           (.89)           (.99)
- -----------     -----------     -----------     -----------
         --            (.61)             --              --
         --              --              --              --
- -----------     -----------     -----------     -----------
$      4.78     $      6.20     $      7.33     $      8.85
===========     ===========     ===========     ===========
$      3.86     $      6.00     $     5.625     $     8.125
===========     ===========     ===========     ===========

     (26.73)%         20.96%         (23.19)%         (0.42)%
     (12.19)%         (5.15)%         (8.10)%         (2.37)%


       1.36%           1.26%           1.47%           1.25%
       8.22%           8.34%           8.51%           7.39%
         64%             89%             61%             85%
$ 1,279,346     $ 1,657,365     $ 1,428,142     $ 1,723,025
$ 1,530,638     $ 1,775,894     $ 1,485,690     $ 1,848,378
$   600,000     $   600,000     $   600,000     $   600,000
        316%            376%            338%            387%

NOTE: Contained above is operating performance for a share of common stock
      outstanding, total investment return, ratios to average net assets of
      common shareholders and other supplemental data for each of the years
      indicated. This information has been determined based upon financial
      information provided in the financial statements and market value data for
      the Fund's common shares.

See Notes to Financial Statements.    Aberdeen Asia-Pacific Income Fund, Inc. 35

<PAGE>

Report of Independent Accountants

To the Shareholders and Board of Directors of
Aberdeen Asia-Pacific Income Fund, Inc.

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations, of cash
flows and of changes in net assets and the financial highlights present fairly,
in all material respects, the financial position of Aberdeen Asia-Pacific Income
Fund, Inc. (the `Fund,' formerly known as The First Australia Prime Income Fund,
Inc.) at October 31, 2001, the results of its operations and its cash flows for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as `financial statements') are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 2001 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
December 21, 2001

36 Aberdeen Asia-Pacific Income Fund, Inc.

<PAGE>

Portfolio of Investments (unaudited)

April 30, 2002

Principal
Amount
Local
Currency**                                Value
(000)            Description              (US$)
- ---------------------------------------------------
LONG-TERM INVESTMENTS--124.1%
AUSTRALIA--75.0%
Government and Semi-Government--52.1%
Commonwealth of Australia--30.6%
A$
             Australia Postal Corporation
    22,000     6.00%, 3/25/09       $    11,540,031
             Commonwealth Bank of Australia
     5,000     6.00%, 8/1/03              2,709,758
     2,800    7.625%, 8/5/03              1,541,488
    12,000     5.25%, 12/1/04             6,384,865
     8,000     6.00%, 9/1/05              4,323,328
    10,000     6.75%, 12/1/07             5,552,489
     4,000     6.25%, 2/10/09             2,142,431
    10,000     6.25%, 9/1/09              5,371,917
             Commonwealth of Australia
    45,000     9.50%, 8/15/03            25,491,069
    40,000     9.00%, 9/15/04            23,169,612
    45,450     7.50%, 7/15/05            25,775,142
    10,000    10.00%, 2/15/06            6,163,351
    50,000     6.75%, 11/15/06           27,974,401
    71,000    10.00%, 10/15/07           45,492,309
    77,000     8.75%, 8/15/08            47,389,710
   108,000     7.50%, 9/15/09            62,980,347
    95,000     5.75%, 6/15/11            49,717,233
    60,000     6.50%, 5/15/13            32,953,597
                                    ---------------
                                        386,673,078
                                    ---------------
New South Wales--4.4%
             New South Wales Treasury Corporation
    20,000    12.60%, 5/1/06             13,277,145
    20,000     8.00%, 3/1/08             11,766,763
    55,000     7.00%, 12/1/10            30,774,794
                                    ---------------
                                         55,818,702
                                    ---------------
Queensland--4.3%
             Queensland Treasury Corporation
    20,000     6.50%, 6/14/05            10,977,456
    15,200     6.00%, 7/14/09             8,062,113
    40,000     6.00%, 6/14/11            20,939,457
    10,000     6.00%, 10/14/15            5,106,858
    17,000     6.00%, 6/14/21             8,560,623
                                    ---------------
                                         53,646,507
                                    ---------------
South Australia--2.5%
             South Australian Financing Authority
    55,000     7.50%, 10/15/07          31,449,589
                                    ---------------
Tasmania--0.5%
A$
             Tasmanian Public Finance Corporation
    10,000     9.00%, 11/15/04      $     5,780,714
                                    ---------------
Victoria--5.9%
             Treasury Corporation of Victoria
    36,000     12.50%, 10/15/03          21,266,752
    10,000      6.00%, 11/15/06           5,385,690
    20,500     10.25%, 11/15/06          12,878,096
    25,000      7.50%, 8/15/08           14,357,016
    40,000      5.50%, 9/15/10           20,320,905
                                    ---------------
                                         74,208,459
                                    ---------------
Western Australia--3.9%
             Western Australia Treasury Corporation
    26,000     8.00%, 10/15/07           15,219,578
    50,000     7.50%, 10/15/09           28,787,323
    10,000     7.00%, 4/15/11             5,588,974
                                    ---------------
                                         49,595,875
                                    ---------------
             Total Australian government
             and semi-government
             (cost $740,529,683)        657,172,924
                                    ---------------
Eurobonds--19.3%
Banking and Finance--10.0%
             ANZ Banking Corporation
    10,000     6.75%,3/22/12              5,266,973
             Bank Austria AG
    11,278   10.875%, 11/17/04            6,755,183
             BHP Finance Limited
     5,000     6.25%, 8/15/08             2,621,378
             Commonwealth Bank of Australia
    10,000     9.00%, 8/15/05             5,854,676
             Dexia Municipal Agency
    15,000     6.00%, 10/15/07            7,982,812
             Federal National Mortgage Association Global
    52,065    6.375%, 8/15/07            28,263,120
             GE Capital Australia Limited
    45,000     6.25%, 8/15/03            24,374,705
    10,000     6.25%, 4/15/05             5,393,448
    10,000     6.75%, 9/15/07             5,437,182
             Jem Bonds Limited
    10,000     9.00%, 7/15/06             5,938,681
             KFW International Finance
     5,513    9.125%, 7/26/05             3,234,802
             Northern Territory Authority
     8,000     6.50%, 7/15/05             4,240,468

See Notes to Financial Statements.    Aberdeen Asia-Pacific Income Fund, Inc. 15

<PAGE>

Portfolio of Investments (unaudited) (continued)

April 30, 2002

Principal
Amount
Local
Currency**                                  Value
(000)         Description                   (US$)
- -------------------------------------------------------
A$

    5,000        10.03%, 8/9/05        $      3,008,473
   10,000         5.75%, 9/14/07              5,283,564
              Principal Finance Global Fund
   16,650         7.00%, 7/15/05              9,135,804
              Progress Trust
    2,000         6.00%, 10/15/30             1,078,609
              Puma
    5,000         7.47%, 2/21/33              2,732,471
                                       ----------------
                                            126,602,349
                                       ----------------
Semi-Government and Local
Government--6.3%
              New South Wales Treasury Corporation
    7,000        10.50%, 12/7/04              4,173,461
   34,000        12.60%, 5/1/06              22,603,295
    7,000         9.25%, 6/20/06              4,111,617
   40,000         8.00%, 3/1/08              23,455,950
              Queensland Treasury Corporation
   20,000        12.00%, 6/15/05             12,666,444
   20,000         8.00%, 9/14/07             11,711,555
                                       ----------------
                                             78,722,322
                                       ----------------
Supranational Global--3.0%
              EFIC
    2,000        11.00%, 12/29/04             1,207,581
              Eurofima
    8,170        9.875%, 1/17/07              5,062,766
   30,000         6.50%, 8/22/11             16,190,692
              European Investment Bank
   19,000         6.00%, 7/15/05             10,269,790
              Kingdom of Sweden
    8,287        7.875%, 4/23/07              4,776,290
              Quebec Province
    1,500         5.75%, 2/15/06                795,378
                                       ----------------
                                             38,302,497
                                       ----------------
              Total Australian
              eurobonds
              (cost $277,509,590)           243,627,168
                                       ----------------

Corporate Bonds--3.6%
Banking and Finance--0.6%
              DSL Bank
   15,000         6.25%, 11/15/06             8,103,435
                                       ----------------
Floating Rate Notes*--0.0%
              Crusade Trust
      911       4.6133%, 7/10/29                488,514
                                       ----------------
Services--3.0%
A$

              GPT Management Limited
   10,000         6.50%, 10/15/07      $      5,324,237
              ING Office Finance
    4,500         6.25%, 8/19/08              2,395,259
              Melbourne Airport
    2,000         6.75%, 6/15/08              1,083,463
              Telstra Corporation
    2,000         7.80%, 7/17/03              1,104,242
    7,000         8.00%, 9/15/04              3,934,363
   30,000        12.00%, 5/15/06             19,390,126
    2,000         8.75%, 1/15/20              1,265,807
              Westpac Banking Corporation
    5,000         7.00%, 8/2/10               2,696,389
                                       ----------------
                                             37,193,886
                                       ----------------
              Total Australian
              corporate bonds
              (cost $53,578,406)             45,785,835
                                       ----------------
              Total Australian
              long-term investments
              (cost $1,071,617,679)         946,585,927
                                       ----------------
EUROPEAN COMMUNITY--0.3%
Corporate Bonds--0.3%
EUR

              Oversea - Chinese Banking
              Corporation
    4,000         7.25%, 9/6/11
              (cost $3,548,626)               3,766,472
                                       ----------------
HONG KONG--0.2%
Corporate Bonds--0.2%
HKD

              GH Water Supply Holdings Limited
   16,794         8.00%, 12/22/10
              (cost $1,832,847)               1,959,498
                                       ----------------
JAPAN--0.9%
Government Bonds--0.9%
JPY

              Inchon Metropolitan City
  500,000         3.70%, 4/26/06              4,147,194
              PTT Exploration & Production
  900,000         3.35%, 9/19/07              7,447,427
                                       ----------------
              Total Japan long-term
              investments
              (cost $11,925,954)             11,594,621
                                       ----------------

16 Aberdeen Asia-Pacific Income Fund, Inc. See Notes to Financial Statements.

<PAGE>

Portfolio of Investments (unaudited) (continued)

April 30, 2002

Principal
Amount
Local
Currency**                                Value
(000)          Description                (US$)
- ---------------------------------------------------
KOREA--5.5%
Government Bonds--5.5%
 KRW

             Korea Deposit Insurance Fund Bond
10,000,000     9.99%, 10/23/03     $      8,170,472
19,000,000     8.72%,  3/12/04           15,520,961
 2,000,000    15.00%,   7/3/04            1,835,169
             Korea Treasury Bonds
10,000,000     5.88%, 7/6/03              7,759,360
10,000,000     7.70%, 8/16/03             7,930,914
19,170,000     7.15%, 4/11/06            15,096,903
16,674,000     6.91%, 7/18/11            12,646,753
                                   ----------------
             Total Korea long-term
             investments
             (cost $70,585,301)          68,960,532
                                   ----------------
MALAYSIA--1.2%
Government Bonds--0.7%
MYR

             Malaysia Government Bonds
    17,300     5.00%, 4/15/05             4,784,991
    11,390     6.844%, 10/1/09            3,450,983
                                   ----------------
             Total Malaysia
             government bonds
             (cost $7,649,399)            8,235,974
                                   ----------------
Corporate Bonds--0.5%
             British American Tobacco Corporation
     9,000     7.10%, 11/2/04             2,546,973
             YTL Corporation Berhad
    13,000     8.50%, 6/29/04             3,729,249
                                   ----------------
             Total Malaysia
             corporate bonds
             (cost $6,169,119)            6,276,222
                                   ----------------
             Total Malaysia
             long-term investments
             (cost $13,818,518)          14,512,196
                                   ----------------
PHILIPPINES--0.7%
Government Bonds--0.7%
PHP
             Philippine Government Bond
   372,800     18.00%, 11/26/08
               (cost $9,090,832)          9,314,651
                                   ----------------
SINGAPORE--1.2%
Government Bonds--1.2%
SGD
             Singapore Government Bonds
     6,000     4.00%, 2/1/05              3,489,307
    20,872     4.625%, 7/1/10            12,194,583
                                   ----------------
             Total Singapore
             long-term investments
             (cost $15,217,268)    $     15,683,890
                                   ----------------
THAILAND--2.0%
Government Bonds--2.0%
THB
              Eastern Water Resources
   115,000     9.00%, 7/22/04             2,953,984
              Export-Import Bank of Thailand
    80,000     7.25%, 5/6/04              2,002,190
              Thailand Government Bonds
    34,400     8.25%, 10/14/03              862,215
   185,000     6.25%, 6/15/04             4,597,060
   363,100     8.50%, 10/14/05            9,877,774
    44,000     8.00%, 12/8/06             1,205,932
    68,000     5.60%, 7/7/07              1,696,641
    85,000     8.50%, 12/8/08             2,419,308
                                   ----------------
              Total Thailand
              long-term investments
              (cost $25,882,506)         25,615,104
                                   ----------------
UNITED STATES--37.1%
Yankee Bonds--37.1%
USD
             AES China Generating Co. Limited
     5,200     10.125%, 12/15/06          4,888,000
             Bangkok Bank Public Company
    12,500     8.75%, 3/15/07            13,468,750
     5,250     9.025%, 3/15/29            5,070,000
             Bangkok Sentral Ng
     4,000     8.60%, 6/15/27             3,397,575
             Cable & Wireless Optus Finance
     5,800     8.00%, 6/22/10             6,453,722
             China Development Bank
     4,000     8.25%, 5/15/09             4,505,240
             China Telecom Limited
     4,000     7.875%, 11/2/04            4,309,773
             Cho Hung Bank
     7,500     6.95%,   1/7/05            8,137,500
     7,000     11.875%, 4/1/10            8,116,875
             CKWB (Cayman Islands) Limited
    14,200     7.625%, 7/5/11            14,400,554
             CLP Power HK Finance
     2,500     6.25%, 5/8/12              2,504,161
             CNOOC Finance Limited
     4,875     6.375%, 3/8/12             4,906,200
             Dao Heng Bank Limited
     4,500     7.75%, 1/24/07             4,793,856

See Notes to Financial Statements.    Aberdeen Asia-Pacific Income Fund, Inc. 17

<PAGE>

Portfolio of Investments (unaudited) (continued)

April 30, 2002

Principal
Amount
Local
Currency**                                  Value
(000)         Description                   (US$)
- -------------------------------------------------------
 USD
              DBS Capital Funding Corporation
    7,000        7.657%, 3/15/11       $      7,247,800
              DBS Group Holdings
    5,000        7.125%, 5/15/11              5,065,000
              Embarc Ireland Limited(a)
    5,500         7.70%, 8/18/03              4,385,150
              Export-Import Bank Korea
    2,000         6.50%, 11/15/06             2,048,600
    6,000         7.10%, 3/15/07              6,337,680
              Flextronics International Limited
    2,500        9.875%, 7/1/10               2,700,000
              GH Water Supply Holdings Limited
    1,900         7.00%, 6/22/08              1,847,372
              Globe Telecom Incorporated
    9,000        13.00%, 8/1/09              10,597,500
    3,250         9.75%, 4/15/12              3,367,975
              Hanvit Bank
    4,000        11.75%, 3/1/10               4,609,904
    3,500        12.75%, 3/1/10               4,126,252
              Hutchison Whampoa International Limited
    6,000         7.00%, 2/16/11              6,161,217
              Hysan Limited
    6,500         7.00%, 2/1/12               6,512,188
              Hyundai Motor Co. Limited
    2,000         7.33%, 12/12/05             2,079,338
              Industrial Finance Corporation
    1,000        7.375%, 1/14/07              1,021,761
              Jardine Strategic Finance Limited
    3,500        6.375%, 11/8/11              3,403,468
              Kia Motors Corporation
    4,000        9.375%, 7/11/06              4,275,336
              Kingdom of Thailand
    2,700         7.07%, 9/30/13              2,533,256
              Korea Development Bank
    8,000        7.125%, 4/22/04              8,452,265
    3,000         5.25%, 11/16/06             2,992,500
              Korea Electric Power Corporation
    9,000         7.75%, 4/1/13               9,588,240
   12,500         7.00%, 2/1/27              12,838,625
              Kowloon Canton Ry Corporation
   18,000         8.00%, 3/15/10             20,111,040
              Kumgang Korea Chemical Co. Limited
    2,000        7.625%, 6/20/08              2,062,358
              LG Caltex Oil Corporation
    5,000         7.50%, 7/15/07              4,973,816
    3,000         7.75%, 7/25/11              3,024,900
              Malaysia
    5,000         8.75%, 6/1/09               5,729,500
   22,000         7.50%, 7/15/11             23,324,620
              MEI Euro Finance Limited
    4,000        10.00%, 3/19/07       $      3,946,000
              National Power Corporation
    7,000         8.40%, 12/15/16             5,976,901
              Oversea - Chinese Banking Corporation
   13,000         7.75%, 9/6/11              13,275,320
              PCCW-HKTC Capital Limited
    8,000         7.75%, 11/15/11             7,924,096
              People's Republic of China
    1,000         6.80%, 5/23/11              1,056,871
   10,000         9.00%, 1/15/96             10,318,690
              Petroliam Nasional Berhad
    5,000        8.875%, 8/1/04               5,489,263
   15,000         7.75%, 8/15/15             15,920,250
              Philippine Long Distance Telcom
    2,000       10.625%, 5/15/07              2,038,400
    1,000       11.375%, 5/12/12              1,017,500
    1,000         8.35%, 3/6/17                 775,608
              Pohang Iron & Steel Corporation
    4,000        7.125%, 11/1/06              4,238,732
              PTT Exploration & Production
    6,500        7.625%, 10/1/06              6,927,750
              Quezon Power (Philippines) Limited
    4,137         8.86%, 6/15/17              3,109,473
              Reliance Industries Limited
    7,250        10.25%, 1/15/97              6,389,657
              Republic of Philippines
    6,000        8.375%, 3/12/09              6,075,000
    2,500        9.875%, 3/16/10              2,709,375
   14,100        9.375%, 1/18/17             14,720,400
    2,000        6.50%*, 12/1/17              1,830,000
   19,350        9.875%, 1/15/19             20,195,053
    3,500         9.50%, 10/21/24             3,787,452
    9,936       10.625%, 3/16/25             10,780,560
              Republic of South Korea
   14,500        8.875%, 4/15/08             16,878,000
              Singapore Telecom
    2,600        6.375%, 12/1/11              2,582,277
              SK Corporation
    3,900         7.50%, 5/31/06              4,117,829
              Telekom Malaysia
    3,000        7.875%, 8/1/25               2,960,700
              Telekomunikasi Selular Finance Limited
    4,000         9.75%, 4/30/07              4,010,000
              Tenaga Nasional Berhad
    7,750        7.625%, 4/1/11               7,533,000
    5,000         7.50%, 11/1/25              4,590,000
   14,000         7.50%, 1/15/96             11,949,000

18 Aberdeen Asia-Pacific Income Fund, Inc. See Notes to Financial Statements.

<PAGE>

Portfolio of Investments (unaudited) (continued)

April 30, 2002


Principal
Amount
Local
Currency**                                  Value
(000)         Description                   (US$)
- -------------------------------------------------------
 USD

              Thai Farmers Bank PLC
     2,400        8.25%,   8/21/16     $      2,314,080
              Total Access Communication Public
     7,000       8.375%,   11/4/06            6,872,600
                                       ----------------
              Total United States
              long-term investments
              (cost $426,690,137)           468,679,704
                                       ----------------
              Total long-term
              investments
              (cost $1,650,209,668)       1,566,672,595
                                       ----------------

SHORT-TERM INVESTMENTS--19.8%
AUSTRALIA--10.6%
Government and Semi-Government--0.9%
South Australia--0.9%
A$

              South Australian Financing Authority
    20,000       10.00%,   1/15/03
              (cost $17,401,576)             11,111,690
                                       ----------------

Eurobonds--4.9%
Banking and Finance--3.4%
              Banque National de Paris
    14,000        9.00%,   8/13/02            7,599,542
              Federal National Mortgage Association
              Global
    35,000        6.50%,   7/10/02           18,855,495
              GE Capital Australia Limited
    15,000        7.00%,  10/15/02            8,127,558
              National Australia Bank Limited
    10,000        6.25%,  10/15/02            5,402,599
              State Bank of New South Wales
     6,400        9.00%,   9/17/02            3,487,262
                                       ----------------
                                             43,472,456
                                       ----------------

Supranational Global--1.5%
              European Bank of Reconstruction &
              Development
    34,000        9.00%,  10/15/02           18,590,480
                                       ----------------
              Total Australian
              eurobonds
              (cost $76,543,408)             62,062,936
                                       ----------------

Corporate Bonds--0.4%
Asset Backed--0.0%
              FANMAC 25
       216       10.33%,   6/15/02              116,541
                                       ----------------

Services--0.4%
A$

              Telstra Corporation
     8,000       11.50%,  10/15/02     $      4,419,930
                                       ----------------
              Total Australian
              corporate bonds
              (cost $6,249,058)               4,536,471
                                       ----------------

Demand Deposits--4.4%
              Banque National de Paris Demand
              Deposit
   103,138        4.00%,    5/1/02
              (cost $54,353,228)             55,378,350
                                       ----------------
              Total Australian
              short-term investments
              (cost $154,547,270)           133,089,447
                                       ----------------

KOREA--0.9%
Government Bonds--0.9%
KRW
              Korea Monetary Stabilization Bond
 4,409,000        7.75%,   7/19/02            3,431,664
              Korea Treasury Bonds
10,000,000        7.10%,  11/10/02            7,818,863
                                       ----------------
              Total Korea short-term
              investments
              (cost $11,587,575)             11,250,527
                                       ----------------

MALAYSIA--0.0%
Government Bonds--0.0%
MYR
              Malaysia Government Bonds
     2,000       4.427%,   3/31/03
              (cost $524,537)                   533,494
                                       ----------------

NEW ZEALAND--0.3%
Demand Deposits--0.3%
NZD
              New Zealand Call Deposit
     7,441        4.00%,    5/1/02
              (cost $3,345,220)               3,329,904
                                       ----------------

SINGAPORE--0.1%
Government Bonds--0.1%
SGD
              Singapore Government Bonds
     1,200        3.00%,   11/1/02
              (cost $692,132)                   669,612
                                       ----------------

See Notes to Financial Statements.    Aberdeen Asia-Pacific Income Fund, Inc. 19

<PAGE>

Portfolio of Investments (unaudited) (continued)

April 30, 2002

Principal
Amount
Local
Currency**                                Value
(000)          Description                (US$)
- ---------------------------------------------------
Corporate Bonds--0.0%
SGD
             General Motors Acceptance
             Corporation
     1,000     3.95%, 4/25/03
             (cost $580,136)           $    559,393
                                       ------------
             Total Singapore
             short-term investments
             (cost $1,272,268)            1,229,005
                                       ------------
THAILAND--0.2%
Corporate Bonds--0.2%
THB
             Advance Information Services PLC
    96,000     6.25%, 3/31/03
             (cost $2,533,260)            2,284,909
                                       ------------
UNITED STATES--7.7%
Yankee Bonds--1.2%
USD
             Embarc Ireland
     6,900     7.01%, 6/28/02(b)          5,454,472
             Industrial Bank of Korea
     4,000     8.375%, 9/30/02            4,082,373
             Republic of South Korea
     5,500     8.75%, 4/15/03             5,809,375
                                       ------------
             Total United States
             yankee bonds
             (cost $15,726,622)          15,346,220
                                       ------------

Repurchase Agreement--6.5%
USD
    82,116   State Street Bank &
             Trust Company 1.77%
             due 5/1/02 in the
             amount of $82,119,982
             (cost $82,116,000;
             collateralized by United
             States Treasury Bond
             5.625% due 5/15/08;
             value including accrued
             interest - $83,766,800)   $ 82,116,000
                                       ------------
             Total United States
             short-term investments
             (cost $97,842,622)          97,462,220
                                       ------------
             Total short-term
             investments
             (cost $271,652,752)        249,179,506
                                       ------------

- -------------------------------------------------------------------------------
Total Investments--143.9% (cost $1,921,862,420)                   1,815,852,101
Other assets in excess of liabilities--3.6%                          46,457,159
Liquidation value of preferred stock--(47.5%)                      (600,000,000)
- -------------------------------------------------------------------------------
Net Assets Applicable to Common Shareholders--100%              $ 1,262,309,260
- -------------------------------------------------------------------------------
Net asset value per common share ($1,262,309,260 / 264,698,700 shares of
common stock issued and outstanding)                            $          4.77
- -------------------------------------------------------------------------------

- ------------------------------------

* The interest rate reflected for floating rate notes is the rate in effect at
April 30, 2002.
** Portfolio securities are listed in currency in which they are
traded.
A$--Australian dollar
EUR--Euro
HKD--Hong Kong Dollar
JPY--Japanese Yen
KRW--South Korean Won
MYR--Malaysian Ringgit
NZD--New Zealand dollar
PHP--Philippine peso
SGD--Singapore dollar
THB--Thailand Baht
USD--United States dollar
(a) Value of security is linked to the value of Government of Korea 7.70%,
8/16/03 and the movement of the South Korean won.
(b) Value of security is linked to the value of Korea Development Bank 7.01%,
6/2/02 and the movement of the South Korean

See Notes to Financial Statements.

<PAGE>

Statement of Assets and Liabilities (unaudited)

April 30, 2002

<TABLE>
<CAPTION>
<S>                                                                             <C>
Assets
Investments, at value (cost $1,921,862,420) ................................... $ 1,815,852,101
Foreign currency, at value (cost $25,272,180) .................................      26,408,726
Cash ..........................................................................       9,144,984
Interest receivable ...........................................................      30,476,112
Unrealized appreciation on interest rate and currency swaps ...................       2,810,247
Unrealized appreciation on forward currency contracts .........................         546,760
Other assets ..................................................................         255,374
                                                                                ---------------
    Total assets ..............................................................   1,885,494,304
                                                                                ---------------
Liabilities
Payable for investments purchased .............................................       9,634,369
Dividends payable-common stock ................................................       9,264,454
Withholding taxes payable .....................................................       1,439,070
Accrued expenses and other liabilities ........................................       1,190,369
Investment management fee payable .............................................         790,029
Dividends payable-preferred stock .............................................         712,013
Administration fee payable ....................................................         154,740
                                                                                ---------------
    Total liabilities .........................................................      23,185,044
                                                                                ---------------
Preferred stock ($.01 par value per share and $25,000 liquidation
  value per share applicable to 24,000 shares; Note 5) ........................     600,000,000
                                                                                ---------------
Net Assets Applicable to Common Shareholders .................................. $ 1,262,309,260
                                                                                ===============
Total net assets were composed of:
  Common stock:
    Par value ($.01 per share, applicable to 264,698,700 shares) .............. $     2,646,987
    Paid-in capital in excess of par ..........................................   1,889,417,415
                                                                                ---------------
                                                                                  1,892,064,402
  Distributions in excess of net investment income ............................     (80,598,479)
  Accumulated net realized loss on investments ................................        (887,366)
  Net unrealized appreciation on investments ..................................      14,886,857
  Accumulated net realized and unrealized foreign exchange losses .............    (563,156,154)
                                                                                ---------------
Net Assets Applicable to Common Shareholders .................................. $ 1,262,309,260
                                                                                ===============

Net asset value per common share: ($1,262,309,260 / 264,698,700
  shares of common stock issued and outstanding) .............................. $          4.77
                                                                                ===============
</TABLE>

See Notes to Financial Statements.    Aberdeen Asia-Pacific Income Fund, Inc. 21

<PAGE>

Statement of Operations (unaudited)

Six Months Ended April 30, 2002

Net Investment Income
Income
  Interest (net of foreign withholding taxes of $2,909,147) ...... $ 63,828,932
                                                                   ------------
Expenses
  Investment management fee ......................................    4,935,300
  Administration fee .............................................    1,122,976
  Custodian's fees and expenses ..................................    1,050,000
  Auction agent's fees and broker commissions ....................      800,000
  Reports to shareholders ........................................      375,000
  Directors' fees and expenses ...................................      308,000
  Transfer agent's fees and expenses .............................      225,000
  Legal fees and expenses ........................................      225,000
  Insurance expense ..............................................      147,000
  Independent accountant's fees and expenses .....................       90,000
  Investor relations fees and expenses ...........................       88,000
  Miscellaneous ..................................................       45,493
                                                                   ------------
  Total operating expenses .......................................    9,411,769
                                                                   ------------
Net investment income ............................................   54,417,163
                                                                   ------------
Realized and Unrealized Gains (Losses) on Investments
and Foreign Currencies
Net realized gain on:
  Investment transactions ........................................      369,343
                                                                   ------------
Net change in unrealized appreciation (depreciation) on:
  Investments ....................................................  (57,675,488)
  Interest rate and currency swaps ...............................    1,832,109
                                                                   ------------
                                                                    (55,843,379)
                                                                   ------------
Net loss on investments ..........................................  (55,474,036)
                                                                   ------------
Net decrease in total net assets from operations before net
  foreign exchange gains .........................................   (1,056,873)
Net realized and unrealized foreign exchange gains ...............   97,106,203
Dividends on Preferred Stock .....................................   (6,207,876)
                                                                   ------------
Net Increase In Net Assets Applicable to Common
Shareholders Resulting From Operations ........................... $ 89,841,454
                                                                   ============

22 Aberdeen Asia-Pacific Income Fund, Inc.    See Notes to Financial Statements.

<PAGE>

Statement of Cash Flows (unaudited)

Six Months Ended April 30, 2002

<TABLE>
<S>                                                              <C>
Increase (Decrease) in Cash (Including Foreign
Currency)
Cash flows used for operating activities
  Interest received (excluding premium amortization
    of $4,401,239) ...............................................     $   69,778,265
  Expenses paid ..................................................         (9,610,957)
  Proceeds from sales of short-term portfolio investments, net ...        109,923,115
  Purchases of long-term portfolio investments ...................       (282,629,667)
  Proceeds from sales of long-term portfolio investments .........        280,478,100
  Dividends and distributions paid to preferred shareholders .....         (6,354,180)
  Other ..........................................................            166,517
                                                                       --------------
    Net cash provided from operating activities ..................        161,751,193
                                                                       --------------
Cash flows used for financing activities
  Dividends and distributions paid to common shareholders ........        (63,811,310)
  Cost of Fund shares reacquired in repurchase program ...........         (8,302,899)
                                                                       --------------
    Net cash used for financing activities .......................        (72,114,209)
                                                                       --------------
Effect of changes in exchange rate ...............................        (64,289,512)
                                                                       --------------
Net increase in cash .............................................         25,347,472
  Cash at beginning of period ....................................         10,206,238
                                                                       --------------
  Cash at end of period ..........................................     $   35,553,710
                                                                       ==============
Reconciliation of Net Increase in Total Net Assets
from Operations to Net Cash (Including Foreign
Currency) Provided From Operating Activities
Net increase in total net assets resulting from operations .......     $   89,841,454
                                                                       --------------
  Decrease in investments ........................................        110,850,755
  Net realized gain on investment transactions ...................           (369,343)
  Increase in unrealized appreciation on forward
  currency contracts .............................................           (323,996)
  Net change in unrealized appreciation on investments ...........         55,843,379
  Net realized and unrealized foreign exchange gains .............        (97,106,203)
  Decrease in interest receivable ................................          1,611,806
  Net decrease in other assets ...................................            166,517
  Increase in payable for investments purchased ..................          7,853,904
  Decrease in accrued expenses and other liabilities .............           (262,900)
  Dividends and distributions paid to preferred shareholders .....         (6,354,180)
                                                                       --------------
    Total adjustments ............................................         71,909,739
                                                                       --------------
Net cash provided from operating activities ......................     $  161,751,193
                                                                       ==============
</TABLE>

See Notes to Financial Statements.    Aberdeen Asia-Pacific Income Fund, Inc. 23

<PAGE>

Statement of Changes in Net Assets (unaudited)

                                           Six Months                Year
                                              Ended                 Ended
                                          April 30, 2002      October 31, 2001
                                       ------------------    ------------------
Increase (Decrease) in Net Assets
Operations
  Net investment income ................   $   54,417,163        $  139,812,296
  Net realized gains on
    investment transactions ............          369,343             3,740,038
  Net change in unrealized
    appreciation (depreciation)
    on investments .....................      (55,843,379)           68,418,255
                                           --------------        --------------
  Net increase/decrease in total
    net assets resulting from
    operations before net foreign
    exchange gains (losses) ............       (1,056,873)          211,970,589
  Net realized and unrealized
    foreign exchange gains (losses) ....       97,106,203           (73,152,895)
  Dividends on Preferred Stock .........       (6,207,876)          (29,663,738)
                                           --------------        --------------
Net increase in total net assets
  resulting from operations ............       89,841,454           109,153,956
                                           --------------        --------------
Dividends from net investment income
  Common shares ........................      (61,070,592)          (58,797,328)
                                           --------------        --------------
Tax return of capital
  distribution .........................               --           (85,450,731)
                                           --------------        --------------
Cost of Fund shares reacquired in
  repurchase program (2,082,900
  and 595,700 shares,
  respectively) ........................       (8,302,899)           (2,412,750)
                                           --------------        --------------
Total increase (decrease) in net
  assets applicable to common
  shareholders .........................       20,467,963           (37,506,853)
Total Net Assets Applicable to
  Common Shareholders
Beginning of period(a) .................    1,241,841,297         1,279,348,150
                                           --------------        --------------
End of period ..........................   $1,262,309,260        $1,241,841,297
                                           ==============        ==============

(a) Amounts have been restated to conform to new requirements under generally
    accepted accounting principles.

24 Aberdeen Asia-Pacific Income Fund, Inc.    See Notes to Financial Statements.

<PAGE>

Notes to Financial Statements (unaudited)

Aberdeen Asia-Pacific Income Fund, Inc. (the "Fund") was incorporated in
Maryland on March 14, 1986 as a closed-end, non-diversified management
investment company. The Fund's investment objective is to seek current income.
The Fund may also achieve incidental capital appreciation. The Fund will seek to
achieve its investment objective through investment in Asian debt securities and
Australian debt securities. There can be no assurance that the Fund will achieve
its objectives. The ability of issuers of debt securities held by the Fund to
meet their obligations may be affected by economic developments in a specific
industry, country or region.

Note 1. Accounting Policies

The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.

Basis of Presentation:
The financial statements of the Fund are prepared in accordance with accounting
principles generally accepted in the United States of America, using the United
States dollar as both the functional and reporting currency.

Security Valuation:
Investments are stated at value. Investments for which market quotations are
readily available are valued based on prices provided by a pricing service or
the lower of the quotations from two leading brokers in the relevant debt
securities market, in the event that a price cannot be obtained by the pricing
service. Securities for which market quotations are not readily available are
valued at fair value using methods determined in good faith by or under the
direction of the Fund's Board of Directors.

Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.

Repurchase Agreements:
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian takes possession of the
underlying collateral securities, the value of which exceeds the principal
amount of the repurchase transaction, including accrued interest. To the extent
that any repurchase transaction exceeds one business day, the collateral is
valued on a daily basis to determine its adequacy. If the seller defaults and
the value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of the collateral by the
Fund may be delayed or limited.

                                      Aberdeen Asia-Pacific Income Fund, Inc. 25

<PAGE>

Notes to Financial Statements (unaudited) (continued)

Foreign Currency Translation:
Australian dollar ("A$"), New Zealand dollar ("NZD") and Asian currency amounts
are translated into United States dollars on the following basis:

(i)  market value of investment securities, other assets and liabilities--at the
exchange rates at the end of the reporting periods;

(ii) purchases and sales of investment securities, income and expenses--at the
rates of exchange prevailing on the respective dates of such transactions.

The Fund isolates that portion of the results of operations arising as a result
of changes in the foreign exchange rates from the fluctuations arising from
changes in the market prices of the securities held at April 30, 2002.
Similarly, the Fund isolates the effect of changes in foreign exchange rates
from the fluctuations arising from changes in the market prices of portfolio
securities sold during the reporting periods.

Net realized and unrealized foreign exchange gains include realized foreign
exchange gains and losses from sales and maturities of portfolio securities,
sales of foreign currencies, currency gains or losses realized between the trade
and settlement dates on securities transactions, the difference between the
amounts of interest, discount and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent amounts actually received or paid
and changes in unrealized foreign exchange gains and losses in the value of
portfolio securities and other assets and liabilities arising as a result of
changes in the exchange rate. Accumulated net realized and unrealized foreign
exchange gains shown in the composition of net assets at April 30, 2002
represent foreign exchange gains for book purposes that have not yet been
recognized for tax purposes.

Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of domestic origin, including
unanticipated movements in the value of the foreign currency relative to the
U.S. dollar.

The exchange rate at April 30, 2002 was US$.54 to A$1.00 for the Australian
dollar.

Securities Transactions and Investment Income:
Securities transactions are recorded on the trade date. Realized and unrealized
gains and losses from security and currency transactions are calculated on the
identified cost basis. Interest income is recorded on an accrual basis.
Discounts on short-term

26 Aberdeen Asia-Pacific Income Fund, Inc.

<PAGE>

Notes to Financial Statements (unaudited) (continued)

securities are accreted over the life of the security. Original issue discount
is accreted over the life of the security based upon the effective yield. Market
discounts on long-term securities are recognized upon disposition. Expenses are
recorded on the accrual basis which may require the use of certain estimates by
management. Actual results could differ from those estimates.

Changes in Accounting Principles:
As required, effective November 1, 2001, the Fund adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began amortizing
premiums on debt securities for financial statement reporting purposes. This
change had no impact on the net asset value of the Fund. Prior to November 1,
2001, the Fund did not amortize premiums on debt securities. Upon initial
adoption, the Fund was required to adjust the cost of its fixed-income
securities by the cumulative amounts of amortization that would have been
recognized had the amortization been in effect from the purchase date of each
holding. Adopting the accounting principle does not affect the Fund's net asset
value, but changes the classification of certain amounts between interest income
and realized and unrealized gain (loss) in the Statement of Operations. The
cumulative adjustment upon adoption resulted in an increase to distributions in
excess of net investment income and an increase to unrealized appreciation on
investments of $53,370,903. Because the Fund determines its required
distributions under Federal income tax laws, adoption of this principle does not
affect the amount or composition of distributions paid to shareholders.

In July 2001, a Securities and Exchange Commission staff announcement, Emerging
Issues Task Force Discussion ("EITF D-98"), Classification and Measurement of
Redeemable Securities, was issued providing new guidance related to the
presentation of preferred shares in financial statements. EITF D-98 is required
to be applied beginning with fiscal quarters ending after December 15, 2001 on a
retroactive basis, by restating the prior year's financial statements. In
accordance with the announcement, the Fund has presented its preferred shares
outside of net assets and has presented dividends to preferred shareholders (on
such preferred shares) in the net change in net assets attributable to common
shareholders resulting from operations for all periods presented. Therefore,
beginning net assets attributable to common shareholders have been restated and
dividend activity related to preferred shares has been reclassified from the
capital activity in the statements of changes in net assets and the financial
highlights to operating activity. The application of EITF

                                      Aberdeen Asia-Pacific Income Fund, Inc. 27

<PAGE>

Notes to Financial Statements (unaudited) (continued)

D-98 related entirely to presentation and had no impact on net asset value or
the allocation of net income or capital gains or losses to common shareholders.

Forward Currency Contracts:
A forward currency contract is a commitment to purchase or sell a foreign
currency at a future date at a negotiated forward rate. The Fund enters into
forward currency contracts in order to hedge its exposure to changes in foreign
currency exchange rates on its foreign portfolio holdings or on specific
receivables and payables denominated in a foreign currency. The contracts are
valued daily at current exchange rates and any unrealized gain or loss is
included in net unrealized appreciation or depreciation on investments. Gain or
loss is realized on the settlement date of the contract equal to the difference
between the settlement value of the original and renegotiated forward contracts.
This gain or loss, if any, is included in net realized gain (loss) on foreign
currency transactions. Risks may arise upon entering into these contracts from
the potential inability of the counterparties to meet the terms of their
contracts.

Financial Futures Contracts:
A financial futures contract is an agreement to purchase (long) or sell (short)
an agreed amount of securities or commodities at a set price for delivery on a
future date. Upon entering into a financial futures contract, the Fund is
required to pledge to the broker an amount of cash and/or other assets equal to
a certain percentage of the contract amount. This amount is known as the
`initial margin.' Subsequent payments, known as `variation margin,' are made or
received by the Fund when the contract expires or is closed, depending on the
daily fluctuations in the value of the underlying security or commodity. Such
variation margin is recorded for financial statement purposes on a daily basis
as unrealized gain or loss. When the contract expires or is closed, the gain or
loss is realized and is presented in the statement of operations as net realized
gain (loss) on financial futures contracts.

The Fund invests in financial futures contracts in order to hedge existing
portfolio securities, or securities the Fund intends to purchase, against
fluctuations in value. Under a variety of circumstances, the Fund may not
achieve the anticipated benefits of the financial futures contracts and may
realize a loss. The use of futures transactions involves the risk of imperfect
correlation in movements in the price of futures contracts and the underlying
assets.

28 Aberdeen Asia-Pacific Income Fund, Inc.

<PAGE>

Notes to Financial Statements (unaudited) (continued)

Securities Lending:
The Fund's investment policies permit the Fund to lend to banks and
broker-dealers, portfolio securities with an aggregate market value of up to 15%
of the Fund's total assets when it deems advisable. Pursuant to a securities
lending agreement (`Agreement') between the Fund and State Street Bank and Trust
Company (`State Street'), any loans made under the Agreement must be secured by
collateral (consisting of any combination of cash, U.S. Government securities,
irrevocable letters of credit or other hiqh-quality debt securities) in an
amount at least equal (on a daily marked-to-market basis) to the current market
value of the securities loaned. A proposed amendment to the Agreement provides
that the cash collateral may be invested in State Street Navigator Securities
Lending Trust, an affiliate of State Street, and proceeds from this investment
would be divided 70% as to the Fund and 30% as to State Street.

The Agreement also provides that the Fund may terminate the loans at any time
and obtain the return of the securities, and that the Fund will continue to
receive any interest or dividends obtained on any of the loaned securities and
will continue to have voting rights with respect to the securities.

In the event the Fund lends its portfolio securities, the Fund may be exposed to
counterparty risk, which may result in the delay in recovery of the loaned
securities or possible loss of right in the collateral should the borrower
become insolvent. However, under the proposed amendment to the Agreement, State
Street will indemnify the Fund in the case of borrower default.

Interest Rate and Currency Swap:
An interest rate and currency swap is an agreement between two parties which
involves exchanging principal and fixed rate interest payments in one currency
for principal and fixed rate interest payments in another currency for a
specified period of time. Interest rate and currency swaps involve the accrual
and exchange of interest payments between the parties.

During the term of the swap, changes in the value of the swap are recognized as
unrealized gains or losses by `marking-to-market' to reflect the market value of
the swap. When the swap is terminated, the Fund will record a realized gain or
loss equal to the difference, if any, between the proceeds from (or cost of) the
closing transaction and the Fund's basis in the contract.

                                      Aberdeen Asia-Pacific Income Fund, Inc. 29

<PAGE>

Notes to Financial Statements (unaudited) (continued)

The Fund is exposed to credit loss in the event of non-performance by the other
party to the currency rate swap. However, the Fund does not anticipate
non-performance by any counterparty.

Dividends and Distributions:
It is the Fund's current policy to pay dividends from net investment income
supplemented by net realized foreign exchange gains, net realized short-term
capital gains and return of capital distributions if necessary, on a monthly
basis. The Fund will also declare and pay distributions at least annually from
net realized gains on investment transactions and net realized foreign exchange
gains, if any. Dividends and distributions to common shareholders are recorded
on the ex-dividend date. Dividends and distributions to preferred shareholders
are accrued on a weekly basis and are determined as described in Note 4.

Income distributions and capital and currency gains distributions are determined
in accordance with income tax regulations which may differ from accounting
principles generally accepted in the United States of America. These differences
are primarily due to differing treatments for foreign currencies, loss deferrals
and recognition of market discount.

Taxes:
For federal income and excise tax purposes, the Fund's transactions are
accounted for using the Australian dollar as the functional currency.
Accordingly, only realized currency gains and losses resulting from the
repatriation of Australian dollars into United States dollars or transactions in
New Zealand dollars or Asian country currencies are recognized for tax purposes.

No provision has been made for United States income taxes because it is the
Fund's policy to continue to meet the requirements of the United States Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income to shareholders. The chart below summarizes the
withholding tax rates in effect on interest income at the period end.

                                            Withholding
                    Country                   Tax Rate
                   ------------------------------------
                   Australia                     10%
                   Japan                         10
                   Korea                         12
                   Malaysia                      30
                   New Zealand                   10

30 Aberdeen Asia-Pacific Income Fund, Inc.

<PAGE>

Notes to Financial Statements (unaudited) (continued)

                                            Withholding
                     Country                  Tax Rate
                   ------------------------------------
                   Philippines                   15%
                   Singapore                     30
                   Thailand                      10

Cash Flow Information:
The Fund invests in securities and makes distributions to common shareholders
from net investment income and net realized gains from investment and currency
transactions, and to the extent necessary, from return of paid-in capital. These
distributions are paid in cash or are reinvested at the discretion of
shareholders. These activities are reported in the Statement of Changes in Net
Assets and additional information on cash receipts and cash payments is
presented in the Statement of Cash Flows. Cash includes domestic and foreign
currency.

Note 2. Agreements

Aberdeen Asset Managers (C.I.) Limited (the "Investment Manager") serves as
investment manager to the Fund and Aberdeen Asset Management Limited (the
`Investment Adviser') serves as investment adviser to the Fund pursuant to a
management agreement and an advisory agreement, respectively, each dated
December 22, 2000. The Investment Manager and the Investment Adviser are wholly
owned subsidiaries of Aberdeen Asset Management PLC.

The Investment Manager makes investment decisions on behalf of the Fund on the
basis of recommendations and information furnished to it by the Investment
Adviser, including the selection of and the placement of orders with brokers and
dealers to execute portfolio transactions on behalf of the Fund.

The management agreement provides the Investment Manager with a fee, computed
weekly and payable monthly, at the following annual rates: 0.65% of the Fund's
average weekly total net assets of common and preferred shareholders up to $200
million, 0.60% of such assets between $200 million and $500 million, 0.55% of
such assets between $500 million and $900 million, 0.50% of such assets between
$900 million and $1,750 million and 0.45% of such assets in excess of $1,750
million.

The Investment Manager pays fees to the Investment Adviser for its services
rendered. The Investment Manager informed the Fund that it paid $2,137,975 to
the Investment Adviser during the period ended April 30, 2002.

                                      Aberdeen Asia-Pacific Income Fund, Inc. 31

<PAGE>

Notes to Financial Statements (unaudited) (continued)

Prudential Investments LLC (formerly known as Prudential Investments Fund
Management LLC) (the "Administrator") serves as administrator to the Fund
pursuant to an agreement dated December 9, 1988. The administration agreement
provides the Administrator with a fee at the annual rate of 0.15% of the Fund's
average weekly total net assets of common and preferred shareholders up to $900
million, 0.10% of such assets between $900 million and $1,750 million and 0.07%
of such assets in excess of $1,750 million. During the six months, the
Administrator remitted $120,000 to the Investment Manager for certain compliance
related administrative services provided.

Under terms of an Investor Relations Services Agreement, Aberdeen Asset
Management ("Aberdeen"), a wholly owned subsidiary of the Investment Manager,
serves as the Fund's investor relations services provider. This agreement
provides Aberdeen with a monthly retainer fee of $10,000 plus out-of-pocket
expenses. During the six months ended April 30, 2002, the Fund incurred fees of
approximately $60,000 for the services of Aberdeen. As of April 30, 2002,
$10,000 of this amount was due to Aberdeen. Investor relations fees and expenses
in the Statement of Operations include certain out-of-pocket expenses.

Note 3. Portfolio Securities

Purchases and sales of investment securities, other than short-term investments,
for the six months ended April 30, 2002 aggregated $348,280,447 and
$280,478,100, respectively.

The Fund entered into two interest rate and foreign currency swaps on February
16, 1999. Under the terms of the first swap, the Fund receives interest at a
rate of 11.50% based on a notional amount of KRW5,124,367,250 and pays interest
at a rate of 3.70% based on a notional amount of JPY500,000,000. Under the terms
of the second swap, the Fund receives interest at a rate of 13.05% based on a
notional amount of THB290,920,192 and pays interest at a rate of 3.35% based on
a notional amount of JPY900,000,000. Net receipts or payments of such amounts
are exchanged semi-annually. At April 30, 2002 the unrealized appreciation on
currency swaps was $2,892,540. The swaps are scheduled to terminate on April 26,
2006.

The Fund entered into an interest rate swap agreement on September 1, 2000.
Under the terms of the agreement, the Fund receives a floating rate of interest
based on a notional value of SGD 4,000,000 and pays interest at a fixed rate of
4.835%

32 Aberdeen Asia-Pacific Income Fund, Inc.

<PAGE>

Notes to Financial Statements (unaudited) (continued)

based on a notional value of SGD 4,000,000. Net receipts of payments of such
amounts are exchanged semi-annually. At April 30, 2002 the unrealized
depreciation on this interest rate swap was $150,121. The swap is scheduled to
terminate on September 6, 2010.

Net interest income of $426,341 on interest rate and currency swaps during the
period is included in interest income in the Statement of Operations. At April
30, 2002 the Fund had outstanding forward currency contracts to buy and sell
foreign currency as follows:

                                Value at
     Foreign Currency          Settlement        Current
       Sale Contract         Date Receivable      Value       Appreciation
- ---------------------------  ---------------   -----------   --------------
Thailand Baht
  settlement date 6/18/02      $ 7,100,000     $ 7,099,935      $     65
                               ===========     ===========      ========

                                Value at
     Foreign Currency          Settlement        Current
     Purchase Contract        Date Payable        Value       Appreciation
- ---------------------------  ---------------   -----------   --------------
Indian Rupee
  settlement date 5/6/02       $ 6,867,000     $ 6,928,729      $ 61,729

Philippine Peso
  settlement date 5/23/02        3,660,000       3,698,291        38,291
  settlement date 6/26/02        6,306,264       6,381,893        75,629
  settlement date 7/29/02       10,400,000      10,429,525        29,525

South Korean Won
  settlement date 6/28/02       16,700,000      16,780,326        80,326
  settlement date 7/9/02         6,500,000       6,745,578       245,578

Taiwan Dollar
  settlement date 7/25/02        7,500,000       7,501,081         1,081

Thailand Baht
  settlement date 6/18/02        7,100,000       7,109,779         9,779

Yuan Renminbi
  settlement date 7/24/02        3,680,000       3,684,757         4,757
                               -----------     -----------      --------
                               $68,713,264     $69,259,959      $546,695
                               ===========     ===========      ========

                                      Aberdeen Asia-Pacific Income Fund, Inc. 33

<PAGE>

Notes to Financial Statements (unaudited) (continued)

Note 4. Tax Information

The United States federal income tax basis of the Fund's investments and the net
unrealized appreciation as of April 30, 2002 were as follows:

                                                         Net
  Tax Basis                                           Unrealized
of Investments     Appreciation     Depreciation     Depreciation
- --------------     ------------     ------------     ------------
$1,818,513,877     $41,121,460      $(43,783,236)    $(2,661,776)

The difference between book basis and tax basis was primarily attributable to
deferred losses on wash sales and methodologies governing currency conversion.

Note 5. Capital

There are 400 million shares of common stock authorized. At April 30, 2002,
there were 264,698,700 common shares issued and outstanding.

The Preferred Stock shareholders have rights as determined by the Board of
Directors. The 24,000 shares of Auction Market Preferred Stock ("Preferred
Stock") outstanding consist of nine series as follows: Series A--3,000 shares,
Series B--3,000 shares, Series C--2,000 shares, Series D--4,000 shares, Series
E--2,000 shares, Series F--2,000 shares, Series G--3,000 shares, Series H--2,500
shares and Series I--2,500 shares.

Dividends on each series of Preferred Stock are cumulative at a rate established
at the initial public offering and are typically reset every 28 days for Series
A through D and every seven days for Series E through I based on the results of
an auction. Dividend rates ranged from 2.7% to 1.7% during the six months ended
April 30, 2002. Under the Investment Company Act of 1940, the Fund may not
declare dividends or make other distributions on shares of common stock or
purchase any such shares if, at the time of the declaration, distribution or
purchase, asset coverage with respect to the outstanding Preferred Stock would
be less than 200%.

The Preferred Stock is redeemable at the option of the Fund, in whole or in
part, on any dividend payment date at liquidation value plus any accumulated but
unpaid dividends. The Preferred Stock is also subject to mandatory redemption at
liquidation value plus any accumulated but unpaid dividends if certain
requirements relating to the composition of the assets and liabilities of the
Fund as set forth in the Articles of Incorporation are not satisfied.

34 Aberdeen Asia-Pacific Income Fund, Inc.

<PAGE>

Notes to Financial Statements (unaudited) (continued)

The holders of Preferred Stock have voting rights equal to the holders of common
stock (one vote per share) and will vote together with holders of shares of
common stock as a single class. However, holders of Preferred Stock are also
entitled to elect two of the Fund's directors.

On March 1, 2001, the Board of Directors approved a stock repurchase program.
The stock repurchase program allows the Fund to repurchase up to 10% of its
outstanding common stock in the open market during any 12 month period if and
when the discount to net asset value is at least 10%. Through April 30, 2002,
there had been 2,678,600 shares repurchased and cancelled under this program.

Note 6. Dividends and Distributions

On May 13, 2002 and June 19, 2002, the Board of Directors declared a monthly
distribution of 3.5 cents per share payable on June 7, 2002 and July 12, 2002 to
all shareholders of record as of May 31, 2002 and June 28, 2002 (ex-dividend
dates May 29, 2002 and June 26, 2002, respectively).

Subsequent to April 30, 2002, dividends and distributions declared and paid on
Preferred Stock totaled approximately $1,053,210 for the nine outstanding
preferred share series in the aggregate through June 21, 2002.

                                      Aberdeen Asia-Pacific Income Fund, Inc. 35

<PAGE>

Financial Highlights (unaudited)

<TABLE>
<CAPTION>
                                                                                        Six Months
                                                                                          Ended
                                                                                      April 30, 2002
                                                                                     ----------------
<S>                                                                                    <C>
PER SHARE OPERATING PERFORMANCE*:
Net asset value per common share, beginning of period ............................     $       4.65
                                                                                       -------------
Net investment income ............................................................              .20
Net realized and unrealized gain (loss) on investments and foreign currencies ....              .16
                                                                                       -------------
 Total from investment operations ................................................              .36
                                                                                       -------------
Dividends from net investment income to preferred shareholders ...................             (.02)
Dividends from net investment income to common shareholders ......................             (.22)
Tax return of capital distribution ...............................................               --
Distributions from net capital and currency gains to preferred shareholders ......               --
Distributions from net capital and currency gains to common shareholders .........               --
                                                                                       -------------
 Total dividends and distributions ...............................................             (.24)
                                                                                       -------------
Capital reduction with respect to issuance of shares .............................               --
Increase resulting from Fund share repurchase ....................................               --##
                                                                                       -------------
Net asset value per common share, end of period ..................................     $       4.77
                                                                                       =============
Market price per common share, end of period .....................................     $       4.45
                                                                                       =============
TOTAL INVESTMENT RETURN BASED ON+:
Market value .....................................................................            17.02%
Net asset value ..................................................................             8.44%
RATIOS TO AVERAGE NET ASSETS OF COMMON
SHAREHOLDERS/SUPPLEMENTAL DATA#:
Expenses++ .......................................................................             1.53%
Net investment income available to common shareholders ...........................             7.85%
Portfolio turnover rate ..........................................................               18%
Net assets of common shareholders, end of period (000 omitted) ...................     $  1,262,309
Average net assets of common shareholders (000 omitted) ..........................     $  1,237,975
Senior securities (preferred stock) outstanding (000 omitted) ....................     $    600,000
Asset coverage of preferred stock at period-end ..................................              312%
</TABLE>

- ------------------------------
  *  Calculated based upon average shares outstanding during the period.

  +  Total investment return is calculated assuming a purchase of common stock
     on the first day and a sale on the last day of each period reported.
     Dividends and distributions are assumed, for purposes of this calculation,
     to be reinvested at prices obtained under the Fund's dividend reinvestment
     plan. Total investment return does not reflect brokerage commissions.

 ++  Includes expenses of both preferred and common stock.

  #  Ratios calculated on the basis of income, expenses and preferred share
     dividends applicable to both the common and preferred shares relative to
     the average net assets of common shareholders. Expense ratios relative to
     the average net assets of common and preferred shareholders are 1.03%,
     1.03%, .98%, .95%, .95% and .94%, respectively. Ratios to average net
     assets of net investment income before preferred stock dividends are 8.86%,
     10.76%, 10.52%, 9.79%, 10.72% and 9.17%, respectively. Ratios to average
     net assets of preferred stock dividends are 1.01%, 2.28%, 2.30%, 1.45%,
     2.21% and 1.78%, respectively.

 ##  Less than $0.005 per share.

36 Aberdeen Asia-Pacific Income Fund, Inc.    See Notes to Financial Statements.

<PAGE>

Financial Highlights (unaudited) (continued)

                          Year Ended October 31,
- ---------------------------------------------------------------------------
   2001            2000            1999            1998            1997
- -----------     -----------     -----------     -----------     -----------

$      4.78     $      6.20     $      7.33     $      8.85     $      9.93
- -----------     -----------     -----------     -----------     -----------
        .53             .60             .67             .82             .87
       (.01)          (1.28)           (.35)          (1.45)           (.96)
- -----------     -----------     -----------     -----------     -----------
        .52            (.68)            .32            (.63)           (.09)
- -----------     -----------     -----------     -----------     -----------
       (.11)           (.13)           (.10)           (.17)           (.17)
       (.22)           (.39)           (.63)           (.51)           (.82)
       (.32)           (.21)             --              --              --
         --            (.01)           (.02)             --              --
         --              --            (.09)           (.21)             --
- -----------     -----------     -----------     -----------     -----------
       (.65)           (.74)           (.84)           (.89)           (.99)
- -----------     -----------     -----------     -----------     -----------
         --              --            (.61)             --              --
         --##            --              --              --              --
- -----------     -----------     -----------     -----------     -----------
$      4.65     $      4.78     $      6.20     $      7.33     $      8.85
===========     ===========     ===========     ===========     ===========

$      4.02     $      3.86     $      6.00     $     5.625     $     8.125
===========     ===========     ===========     ===========     ===========

      18.74%         (26.73)%         20.96%         (23.19)%         (0.42)%
      10.91%         (12.19)%         (5.15)%         (8.10)%         (2.37)%

       1.51%           1.36%           1.26%           1.47%           1.25%
       8.48%           8.22%           8.34%           8.51%           7.39%
         47%             64%             89%             61%             85%
$ 1,241,841     $ 1,279,346     $ 1,657,365     $ 1,428,142     $ 1,723,025
$ 1,299,044     $ 1,530,638     $ 1,775,894     $ 1,485,690     $ 1,848,378
$   600,000     $   600,000     $   600,000     $   600,000     $   600,000
        308%            316%            376%            338%            387%

NOTE: Contained above is operating performance for a share of common stock
      outstanding, total investment return, ratios to average net assets of
      common shareholders and other supplemental data for each of the years
      indicated. This information has been determined based upon financial
      information provided in the financial statements and market value data for
      the Fund's common shares.

See Notes to Financial Statements.    Aberdeen Asia-Pacific Income Fund, Inc. 37

<PAGE>

                                                                      APPENDIX A

                              ECONOMIC INFORMATION

<PAGE>

                                                                      APPENDIX B

                                  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 edged." 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 fluctuations 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 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 sometime 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
because 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.

       Unrated: When no rating has been assigned, or when 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:

       1. An application for rating was not received or accepted.

<PAGE>

       2. The issue or issuer belongs to a group of securities that are not
rated as a matter of policy.

       3. There is a lack of essential data pertaining to the issue or issuer.

       4. 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 redemptions; or for other reasons.

       Note: Moody's applies numerical modifiers 1, 2 and 3 in each general
rating classification from Aa through B. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the
lower end of that generic rating category.

STANDARD & POOR'S CORPORATION

       AAA: Bonds rated AAA have the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.

       AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.

       A: Bonds rated A have a very strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in the higher rated
categories.

       BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.

       BB: Bonds rated BB have less near-term vulnerability to default than
other speculative issues. However, they face major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.

       B: Bonds rated B have a greater vulnerability to default but currently
have the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.

       CCC: Bonds rated CCC have a currently identifiable vulnerability to
default, and are dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, they are not likely
to pay interest and repay principal.

       Plus (+) or Minus (-): The ratings from "AA to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

       NR: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.


<PAGE>

No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the Offer made by this Prospectus and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Fund, the Investment Adviser or any of the Dealer Managers.
This Prospectus does not constitute an offer to sell or the solicitation of any
offer to buy any security other than the shares of Common Stock offered by this
Prospectus, nor does it constitute an offer to sell or a solicitation of any
offer to buy the shares of Common Stock by anyone in any jurisdiction in which
such offer or solicitation is not authorized, or in which the person making such
offer or solicitation is not qualified to do so, or to any such person to whom
it is unlawful to make such offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that information contained herein is correct as of any time
subsequent to the date hereof. However, if any material change occurs while this
Prospectus is required by law to be delivered, the Prospectus will be amended or
supplemented accordingly.

                              --------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
- ----
<S>                                                                      <C>
Prospectus Summary ...................................................
Fund Expenses ........................................................
Financial Highlights .................................................
The Offer ............................................................
Use of Proceeds ......................................................
The Fund .............................................................
Investment Objective .................................................
Investment Policies ..................................................
Investment Restrictions ..............................................
Portfolio Securities .................................................
Risk Factors and Special Considerations ..............................
Portfolio Composition ................................................
Comparison of Fund Total Returns to the Fund's Bond Indices ..........
Management of the Fund ...............................................
Code of Ethics .......................................................
Management Agreement and Advisory Agreement ..........................
Administration Agreement .............................................
Portfolio Transactions and Brokerage .................................
Net Asset Value of Common Stock ......................................
Dividend and Distributions: Dividend Reinvestment and
  Cash Purchase Plan .................................................
Taxation .............................................................
Capital Stock ........................................................
Custodian, Dividend Paying Agents, Transfer Agents,
  Registrars and Auction Agent .......................................
Experts ..............................................................
Distribution Arrangements ............................................
Legal Proceedings ....................................................
Legal Matters ........................................................
Financial Statements .................................................  F-1
Report of Independent Accountants ....................................
Appendix A ...........................................................  A-1
Appendix B ...........................................................  B-1
</TABLE>

Until ________, all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
Prospectus. This delivery requirement is in addition to the obligation of
dealers to deliver a Prospectus when acting as Underwriters and with respect to
their unsold allotments or subscriptions.



                                 [# of shares]

                             Shares of Common Stock


                              ABERDEEN ASIA-PACIFIC
                                INCOME FUND, INC.


                                   Managed by
                         Aberdeen Asset Managers (C.I.)
                                     Limited


                            Issuable Upon Exercise of

                             Transferable Rights to

                               Subscribe for Such

                             Shares of Common Stock

                        --------------------------------
                               P R O S P E C T U S
                        --------------------------------


                                 Dealer Managers






                                [record date +2]

                                      103

<PAGE>

                                     PART C

Item 24.      Financial Statements and Exhibits

1.     Financial Statements:

       (i)    Portfolio of Investments as of October 31, 2001
       (ii)   Statement of Assets and Liabilities as of October 31, 2001
       (iii)  Statement of Operations for the fiscal year ended October 31, 2001
       (iv)   Statement of Cash Flows for the fiscal year ended October 31, 2001
       (v)    Statement of Changes in Net Assets for the fiscal years ended
              October 31, 2001 and October 31, 2000
       (vi)   Notes to the Financial Statements
       (vii)  Financial Highlights
       (viii) Report of Independent Accountants

       (i)    Portfolio of Investments as of April 30, 2002
       (ii)   Statement of Assets and Liabilities as of April 30, 2002
       (iii)  Statement of Operations for the six months ended April 30, 2002
       (iv)   Statement of Cash Flows for the six months ended April 30, 2002
       (v)    Statement of Changes in Net Assets for the six months ended April
              30, 2002 (unaudited) and fiscal year ended October 31, 2001
              (audited)
       (vi)   Notes to the Financial Statements
       (vii)  Financial Highlights

2.     Exhibits:

(a)(1) Articles of Amendment and Restatement dated December 9, 1988.

(a)(2) Articles Supplementary Creating Auction Market Preferred Stock, Series A,
       B and C dated January 17, 1989.

(a)(3) Articles Supplementary Creating Auction Market Preferred Stock, Series D
       dated July 25, 1989.

(a)(4) Certificate of Correction dated August 8, 1989.

(a)(5) Articles of Amendment dated May 20, 1991.

(a)(6) Articles Supplementary Creating Auction Market Preferred Stock, Series E
       dated December 18, 1992.

(a)(7) Articles Supplementary Creating Auction Market Preferred Stock, Series
       F dated December 15, 1993.

<PAGE>

(a)(8)  Articles Supplementary Creating Auction Market Preferred Stock, Series G
        dated July 25, 1995 (Previously filed as Exhibit (d)(2) to
        Post-Effective Amendment No. 25 to Registrant's Registration Statement
        filed with the Securities and Exchange Commission ("SEC") via EDGAR on
        July 14, 1995 and incorporated herein by reference).

(a)(9)  Articles of Amendment dated April 25, 1996 (Previously filed as Exhibit
        (a)(3) to Post-Effective Amendment No. 27 to Registrant's Registration
        Statement on Form N-2 filed with the SEC via EDGAR on May 1, 1996 and
        incorporated herein by reference).

(a)(10) Articles Supplementary Creating Auction Market Preferred Stock, Series H
        and I dated September 9, 1996 (Previously filed as Exhibit (d)(2) to
        Post-Effective Amendment No. 28 to Registrant's Registration Statement
        filed with the SEC via EDGAR on July 19,1996 and incorporated herein by
        reference).

(a)(11) Amendment to Articles Supplementary dated November 15, 1996 (Previously
        filed as Exhibit (a)(5) to Post-Effective Amendment No. 33 to
        Registrant's Registration Statement on Form N-2 filed with the SEC via
        EDGAR on August 30, 2001 ("PEA 33") and incorporated herein by
        reference).

(a)(12) Articles of Amendment dated July 28, 1997 (Previously filed as Exhibit
        (a)(4) to Post-Effective Amendment No. 30 to Registrant's Registration
        Statement on Form N-2 filed with the SEC via EDGAR on August 19, 1998
        and incorporated herein by reference).

(a)(13) Amendment to Articles Supplementary dated November 1998 (Previously
        filed as Exhibit (a)(6) to PEA 33 and incorporated herein by reference).

(a)(14) Amendment to Articles Supplementary dated November 21, 1998 (Previously
        filed as Exhibit (a)(7) to PEA 33 and incorporated herein by reference).

(a)(15) Amendment to Articles Supplementary dated November 17, 1999 (Previously
        filed as Exhibit (a)(8) to PEA 33 and incorporated herein by reference).

(a)(16) Articles Supplementary dated August 16, 2000 (Previously filed as
        Exhibit (a)(9) to PEA 33 and incorporated herein by reference).

(a)(17) Articles Supplementary dated August 16, 2000.

(a)(18) Articles of Amendment dated April 19, 2001.

(a)(19) Amendment to Articles Supplementary dated September 12, 2002.

(b)     By-Laws as Amended and Restated through September 12, 2002.

(c)     Not Applicable.

                                       C-2

<PAGE>

(d)(1)   Form of Share Certificate for Common Stock.*

(d)(2)   Form of Share Certificate for Auction Market Preferred Stock.*

(d)(3)   Form of Subscription Certificate.*

(d)(4)   Form of Nominee Holder Over-Subscription Form.*

(d)(5)   Form of Beneficial Owner Certificate.*

(d)(6)   Form of Subscription Rights Agency Agreement.*

(e)      Dividend Reinvestment and Cash Purchase Plan.*

(f)      Not applicable.

(g)(1)   Investment Advisory Agreement dated December 21, 2000 (Previously filed
         as Exhibit (g)(6) to PEA 33 and incorporated herein by reference).

(g)(2)   Management Agreement dated December 21, 2000 (Previously filed as
         Exhibit (g)(5) to PEA 33 and incorporated herein by reference).

(h)(1)   Form of Dealer Manager Agreement.*

(h)(2)   Form of Selling Group Agreement.*

(h)(3)   Form of Soliciting Dealer Agreement.*

(i)      Not applicable.

(j)(1)   Custodian Contract between the Registrant and State Street Bank and
         Trust Company ("State Street") dated April 11, 1986.

(j)(2)   Amendment No. 1 to Custody Agreement between Registrant and State
         Street dated 1986.

(j)(3)   Amendment No. 2 to Custody Agreement between the Registrant and State
         Street dated November 26, 1986.

(j)(4)   Amendment No. 3 to Custodian Agreement dated December 4, 1998.

(k)(1)   Transfer Agency Agreement between the Registrant and State Street dated
         April 11, 1986.

                                       C-3

<PAGE>

(k)(2)   Administration Agreement between the Registrant and Prudential Mutual
         Fund Management, Inc. (now known as Prudential Investments LLC) dated
         December 9, 1988.

(k)(3)   Amendment to Administration Agreement effective June 1, 1996
         (Previously filed as Exhibit (k)(3) to Post-Effective Amendment No. 31
         to Registrant's Registration Statement on Form N-2 filed with the SEC
         via EDGAR on September 28, 1998 and incorporated herein by reference).

(k)(4)   Investor Relations Services Agreement dated as of March 1, 2000.

(k)(5)   Assignment and Assumption of Investor Relations Services Agreement
         dated as of January 1, 2002.

(l)      Opinion and Consent of Fund Counsel.*

(m)      Forms ADV-NR of the Investment Manager and the Investment Adviser.*

(n)(1)   Opinion and Consent of UK counsel.*

(n)(2)   Opinion and Consent of Swiss counsel.*

(n)(3)   Opinion and Consent of Singapore counsel.*

(n)(4)   Opinion and Consent of New Zealand counsel.*

(n)(5)   Opinion and Consent of Canadian counsel.*

(n)(6)   Opinion and Consent of Jersey, Channel Islands counsel to the
         Investment Manager.*

(n)(7)   Opinion and Consent of counsel to Underwriter.*

(n)(8)   Opinion and Consent of Maryland counsel.*

(n)(9)   Opinion and Consent of PricewaterhouseCoopers LLP, Independent
         Accountants.*

(o)      Not applicable.

(p)      Not applicable.

(q)      Not applicable.

(r)(1)   Code of Ethics for Registrant, Investment Adviser and Investment
         Manager.

                                       C-4

<PAGE>

(r)(2)   Codes of Ethics for Dealer Managers.*

(s)      Powers of Attorney.

- -----------

* To be filed by further pre-effective amendment.

Item 25.   Marketing Arrangements

           See Delaer Manager Agreement to be filed as Exhibit (h)(1)

Item 26.   Other Expenses of Issuance and Distribution

The following table sets forth estimated expenses to be incurred in connection
with the offering described in the Registration Statement:


Registration fees                                                       $ ______
Printing                                                                $ ______
Fees and expenses of qualification under state securities               $ ______
   laws (including fees of counsel)
Legal fees and expenses                                                 $ ______
Reimbursement of Dealer Manager expenses                                $ ______
Auditing fees and expenses                                              $ ______
American Stock Exchange listing fees                                    $ ______
Pacific Stock Exchange listing fees                                     $ ______
Subscription Agent fees and expenses                                    $ ______
Information Agent fees and expenses                                     $ ______
Engraving and printing stock certificates                               $ ______
NASD Fee                                                                $ ______
Marketing Costs                                                         $ ______
Miscellaneous                                                           $ ______
Total                                                                   $ ______

Item 27.   Persons Controlled by or Under Common Control

           None.

Item 28.   Number of Holders of Securities

<TABLE>
<CAPTION>
                                                                           NUMBER OF
                                                                            RECORD
TITLE OF CLASS                                                              HOLDERS
<S>                                                                            <C>
Common Stock ($.01 par value per share)
Auction Market Preferred Stock, Series A ($.01 par value per share)            1
Auction Market Preferred Stock, Series B ($.01 par value per share)            1
</TABLE>

                                       C-5

<PAGE>

Auction Market Preferred Stock, Series C ($.01 par value per share)            1
Auction Market Preferred Stock, Series D ($.01 par value per share)            1
Auction Market Preferred Stock, Series E ($.01 par value per share)            1
Auction Market Preferred Stock, Series F ($.01 par value per share)            1
Auction Market Preferred Stock, Series G ($.01 par value per share)            1
Auction Market Preferred Stock, Series H ($.01 par value per share)            1
Auction Market Preferred Stock, Series I ($.01 par value per share)            1


Item 29.   Indemnification

Section 2-418 of the General Corporate Law of Maryland, the state in which the
Registrant was organized, empowers a corporation, subject to certain
limitations, to indemnify its directors and officers against expenses (including
attorney's fees, judgments, fines and certain settlements), including the
advancement of expenses, actually and reasonably incurred by them in connection
with any suit or proceeding to which they are a party. In order to obtain
advancements on expenses a director or officer must, among other requirements
stated in the Registrant's By-laws, provide a written affirmation of good faith
belief that the standard of conduct necessary for indemnification has been met
and a written undertaking to repay any advance if it is determined that such
standard was not met. Indemnification of directors and officers will not be
provided when a director of officer shows willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of their
office. The indemnification of directors and officers continues after such
person has ceased being a director or officer, with regard to the duties
performed while employed or in offices with the Registrant, and the benefits of
indemnification inure to the heirs, executors and administrators of such person.
Employees and agents who are not directors or officers of the Registrant may be
indemnified.

Article IX of the Registrant's By-Laws (as amended to date) provides:

Section 1. Indemnification of Directors and Officers. The Corporation shall
           indemnify its Directors and officers to the fullest extent permitted
           by the Maryland General Corporation Law and the Investment Company
           Act of 1940, as amended (the "1940 Act"). The Corporation shall
           indemnify its Directors and officers who, while serving as Directors
           or officers, also serve at the request of the Corporation as a
           director, officer, partner, trustee, employee, agent or fiduciary of
           another corporation, partnership, joint venture, trust, other
           enterprise or employee benefit plan to the fullest extent consistent
           with law. The indemnification and other rights provided by this
           Article shall continue as to a person who has ceased to be a Director
           or officer and shall inure to the benefit of the heirs, executors and
           administrators of such a person. This Article shall not protect any
           such person against any liability to the Company 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 conduct of his office
           ("disabling conduct").

                                       C-6

<PAGE>

Section 2. Advances. Any current or former Director or officer of the
           Corporation seeking indemnification within the scope of this Article
           shall be entitled to advances from the Corporation for payment of the
           reasonable expenses incurred by him in connection with the matter as
           to which he is seeking indemnification in the manner and to the
           fullest extent permissible under the Maryland General Corporation Law
           and the 1940 Act, without a preliminary determination of entitlement
           to indemnification (except as provided below). The person seeking
           advances shall provide to the Corporation a written affirmation of
           his good faith belief that the standard of conduct necessary for
           indemnification by the Corporation has been met and a written
           undertaking to repay any such advance if it should ultimately be
           determined that the standard of conduct has not been met. In
           addition, at least one of the following additional conditions shall
           be met: (i) the person seeking advances shall provide security in
           form and amount acceptable to the Corporation for his undertaking;
           (ii) the Corporation is insured against losses arising by reason of
           the advance; or (iii) a majority of a quorum of Directors of the
           Corporation who are neither "interested persons" as defined in
           section 2(a)(19) of the 1940 Act nor parties to the proceeding
           ("disinterested non-party directors"), or independent legal counsel,
           in a written opinion, shall have determined, based on a review of
           facts readily available to the Corporation at the time the advance is
           proposed to be made, that there is reason to believe that the person
           seeking indemnification will ultimately be found to be entitled to
           indemnification.

Section 3. Procedure. At the request of any person claiming indemnification
           under this Article, the Board of Directors shall determine, or cause
           to be determined, in a manner consistent with the Maryland General
           Corporation Law and the 1940 Act, whether the standards required by
           this Article have been met. Indemnification shall be made only
           following: (i) a final decision on the merits by a court or other
           body before whom the proceeding was brought that the person to be
           indemnified was not liable by reason of disabling conduct or (ii) in
           the absence of such a decision, a reasonable determination, based
           upon a review of the facts, that the person to be indemnified was not
           liable by reason of disabling conduct by (A) the vote of a majority
           of a quorum of disinterested non-party directors or (B) an
           independent legal counsel in a written opinion.

Section 4. Indemnification of Employees and Agents. Employees and agents who are
           not officers or Directors of the Corporation may be indemnified, and
           reasonable expenses may be advanced to such employees or agents, as
           may be provided by action of the Board of Directors or by contract,
           subject to any limitations imposed by the Investment Company Act of
           1940, as amended.

Section 5. Other Rights. The Board of Directors may make further provision
           consistent with law for indemnification and advance of expenses to
           Directors, officers, employees and agents by resolution, agreement or
           otherwise. The indemnification provided by this Article shall not be
           deemed exclusive of any other right, with respect to indemnification
           or otherwise, to which those seeking indemnification may be entitled
           under any insurance or other agreement or resolution of stockholders
           or disinterested directors or otherwise.

                                       C-7

<PAGE>

Section 6. Amendments. References in the Article are to the Maryland General
           Corporation Law and to the Investment Company Act of 1940, as
           amended. No amendment of these By-Laws shall affect any right of any
           person under this Article based on any event, omission or proceeding
           prior to the amendment.

Section 7. Insurance. The Corporation may purchase and maintain insurance on
           behalf of any person who is or was a Director, officer, employee or
           agent of the Corporation or who, while a Director, officer, employee
           or agent of the Corporation, is or was serving at the request of the
           Corporation as a Director, officer, partner, trustee, employee or
           agent of another foreign or domestic corporation, partnership, joint
           venture, trust, other enterprise or employee benefit plan, against
           any liability asserted against and incurred by such person in any
           such capacity or arising out of such person's position; provided that
           no insurance may be purchased by the Corporation on behalf of any
           person against any liability to the Corporation or to its
           stockholders to which he would otherwise be subject by reason of
           willful misfeasance, bad faith, gross negligence or reckless
           disregard of the duties involved in the conduct of his office.

Reference is made to Section 7 of the Dealer Manager Agreement, filed as Exhibit
(h)(1), for provisions relating to limitation of liability of the Investment
Manager and Investment Adviser. Reference is made to Section 3 of the Management
Agreement, filed on August 30, 2001 as Exhibit (g)(5) to PEA 33, for provisions
relating to limitation of liability of the Investment Manager. Reference is made
to Section III of the Advisory Agreement, filed on August 30, 2001 as Exhibit
(g)(6) to PEA 33, for provisions relating to limitation of liability of the
Investment Adviser.

Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

                                       C-8

<PAGE>

Item 30.    Business and Other Connections of Investment Adviser

- --------------------------------------------------------------------------------
Name, Principal Business Address   Capacity, Name of Company (Description of
                                   Company).
- --------------------------------------------------------------------------------
Chong Yoon Chou                    Director, Aberdeen Asset Management Asia Ltd.
Level 6, 201 Kent Street           (Funds management company); Alternate
Sydney NSW 2000 Australia          Director, MIDF Aberdeen Asset Management Sdn
                                   Bhd (Funds management company - JV with
                                   Aberdeen Asia).
- --------------------------------------------------------------------------------
Christopher Fishwick               Director, Aberdeen Asia-Pacific Income
No. 1 Seaton Place                 Investment Company Limited; Director,
St. Helier, Jersey JE4 8YJ         Aberdeen Asset Management PLC; Director,
                                   Aberdeen Asset Managers Jersey Limited;
                                   Director, Aberdeen Australia Equity Income
                                   Fund; Director, Aberdeen Convertible Income
                                   Trust PLC
                                   Alternate to; Director, Aberdeen Graham Asset
                                   Management Limited; Director, Aberdeen High
                                   Income Trust PLC; Director, Aberdeen
                                   Preferred Income Trust PLC; Director, Chaucer
                                   Holdings PLC; Director, European Growth &
                                   Income Trust PLC; Director, Jersey Phoenix
                                   Trust Limited; Director, Leverage Income Fund
                                   Limited; Director, Phoenix-Aberdeen
                                   International Advisors LLC; Director, Real
                                   Estate Opportunities Limited; Director
                                   The Enhanced Zero Trust PLC; Director, The
                                   European Technology and Income Company
                                   Limited; Director, The First Australia Fund
                                   Inc; Director, The Media and Income Trust
                                   PLC; Director, The Smaller Companies
                                   Investment Trust PLC; Director, The Taverners
                                   Trust PLC; Director, The Technology and
                                   Income Trust Limited; Director, Themis
                                   Investment Management Limited; Director,
                                   Treasury Holdings LImited; Director, Aberdeen
                                   Preferred Securities PLC; Director, Aberdeen
                                   Unit Trust Managers Limited.
- --------------------------------------------------------------------------------
Alan Goodson                       Director, Aberdeen Asset Managers Jersey
No. 1 Seaton Place                 Limited (Fund Management); Officer, Aberdeen
St. Helier, Jersey JE4 8YJ         Prime Wealth Management Limited (Private
                                   Client Asset Management).
- --------------------------------------------------------------------------------
Melissa Hall                       Director and Officer, Aberdeen Asset
Level 6, 201 Kent Street           Management Holdings Limited (EL) (Holding
Sydney NSW 2000 Australia          Company); Director and Officer, AESOT Pty
                                   Ltd. (Trustee Company); Officer, EquitiLink
                                   Holdings Limited (Holding Company); Officer,
                                   Aberdeen Leaders Limited (ML) (Listed
                                   Company); Officer, EquitiLink eLink Limited
                                   (FRDF) (Listed Company); Director and
                                   Officer, En Holdings Ltd. (Trustee Company);
                                   Officer, EquitiLink Pacific Ltd. (Dormant
                                   Company); Officer, EquitiLink Portfolio
                                   Management (Subsidiary Company); Officer,
                                   Aberdeen Asset Management Limited (EAL)
                                   (Subsidiary); Officer, EL Retirement Fund
                                   (Trustee Company); Director and Officer,
                                   Sarrun Pty Ltd. (Trustee Company).
- --------------------------------------------------------------------------------
Christian Hamon                    Director, Trident Fund Services (Jersey)
No. 1 Seaton Place                 Limited (Fund Administration Services).
St. Helier, Jersey JE4 8YJ
- --------------------------------------------------------------------------------
Charles Macrae                     Employee, Aberdeen Asset Management PLC (Head
Level 6, 201 Kent Street           of Aberdeen's company secretarial unit based
Sydney NSW 2000 Australia          in London, overseeing the provision of
                                   services to Aberdeen's UK and Jersey
                                   registered closed end funds); Officer,
                                   Aberdeen Asset Management Holdings Limited
                                   (Holding company for the Australian
                                   Subsidiary).
- --------------------------------------------------------------------------------
Joe Tham                           Officer, Aberdeen Asset Management Holdings
- --------------------------------------------------------------------------------

                                       C-9

<PAGE>

- --------------------------------------------------------------------------------
Level 6, 201 Kent Street           Limited (EL) (Holding company of Australian
Sydney NSW 2000 Australia          Subsidiary); Officer, AESOT Pty Ltd. (Trustee
                                   Company for Aberdeen employee share ownership
                                   scheme); Officer, Aberdeen Leaders Limited
                                   (Closed end listed investment company);
                                   Officer, EquitiLink eLink Limited (FRDF)
                                   (Closed end listed investment company);
                                   Officer, Chifley Financial Services Limited
                                   (Financial Services Company previously owned
                                   by Aberdeen); Officer, Chifley Operating
                                   Services Limited (Financial Services Company
                                   previously owned by Aberdeen).
- --------------------------------------------------------------------------------

Item 31.    Location of Accounts and Records

<TABLE>
<S>                              <C>                                   <C>
Prudential Investments LLC       Aberdeen Asset Managers (C.I.)        State Street Bank and Trust
100 Mulberry Street              Limited                               Company
Gateway Center 3                 P.O. Box 578, 17 Bond Street          One Heritage Drive
Newark, NJ 07102-4077            St. Helier, Jersey                    North Quincy, MA 02171
For records pursuant to Rule     JE4 5XB Channel Islands               For all other records.
31a-1(b)(4).                     For records pursuant to Rule
                                 31a-1(b)(5),(6),(9),(10) and (11)
                                 and Rule 31a-1(f).
</TABLE>

Item 32.    Management Services

            Not applicable.

Item 33.    Undertakings

            (1) The Registrant undertakes to suspend the offering of its shares
            until it amends its prospectus if (a) subsequent to the effective
            date of its Registration Statement, the NAV of its shares declines
            more than 10% from its NAV as of the effective date of the
            Registration Statement or (b) the NAV increases to an amount greater
            than its net proceeds as stated in the prospectus.

            (2) Not applicable.

            (3) The Registrant hereby undertakes to supplement the prospectus,
            after the expiration of the subscription period, to set forth the
            results of the subscription offer, the transactions by underwriters
            during the subscription period, amount of unsubscribed securities to
            be purchase by underwriters, and the terms of any

                                      C-10

<PAGE>

            subsequent reoffering thereof. The Registrant further hereby
            undertakes to file a post-effective amendment to set forth the terms
            of any public offering made by the underwriters of the securities
            being registered if such terms differ from those set forth on the
            cover page of the prospectus.

            (4) Not applicable.

            (5) (a) The Registrant hereby undertakes that for the purpose of
            determining any liability under the Securities Act, the information
            omitted from the form of prospectus filed as part of this
            registration statement in reliance upon Rule 430A and contained in a
            form of prospectus filed by the Registrant under Rule 497(h) under
            the Securities Act of 1933 shall be deemed to be part of this
            registration statement as of the time it was declared effective.

                (b) The Registrant hereby undertakes that for the purposes of
            determining any liability under the Securities Act, each
            post-effective amendment that contains a form of prospectus shall be
            deemed to be a new Registration Statement relating to the securities
            offered therein, and the offering of such securities at that time
            shall be deemed to be the initial bona fide offering thereof.

            (6) The Registrant undertakes to send by first class mail or other
            means designed to ensure equally prompt delivery, within two
            business days of receipt of a written or oral request, any Statement
            of Additional Information.

                                      C-11

<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the District of Columbia on this 8th day of October, 2002.

                     ABERDEEN ASIA-PACIFIC INCOME FUND, INC.

                                        *
                                  ------------
                                   Hugh Young
                                    President

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated:

     *                               President (Principal
- ----------------
Hugh Young                           Executive Officer)         October 8, 2002

                                     Treasurer and
                                     Assistant Secretary
     *                               (Principal Financial
- ----------------                     and Accounting
Christian Pittard                    Officer)                   October 8, 2002
- -----------------

     *
- ----------------
Martin J. Gilbert                    Chairman, Director         October 8, 2002

     *
- ----------------
Anthony E. Aaronson                  Director                   October 8, 2002

     *
- ----------------
David L. Elsum                       Director                   October 8, 2002

     *
- ----------------
Beverley Hendry                      Director                   October 8, 2002

     *
- ----------------
Howard A. Knight                     Director                   October 8, 2002

     *
- ----------------
P. Gerald Malone                     Director                   October 8, 2002

                                      C-12

<PAGE>

         *
- ----------------
Neville J. Miles                           Director             October 8 2002

         *
- ----------------
Peter J. O'Connell                         Director             October 8 2002

         *
- ----------------
William J. Potter                          Director             October 8 2002

         *
- ----------------
Peter D. Sacks                             Director             October 8 2002

         *
- ----------------
Anton E. Schrafl                           Director             October 8, 2002

         *
- ----------------
John T. Sheehy                             Director             October 8, 2002

         *
- ----------------
Brian M. Sherman                           Director             October 8, 2002

*By      /s/ Sander M. Bieber
             --------------------
         Sander M. Bieber
         as Attorney-in-Fact

                                      C-13

<PAGE>

                                  Exhibit Index

(a)(1)   Articles of Amendment and Restatement dated December 9, 1988.

(a)(2)   Articles Supplementary Creating Auction Market Preferred Stock, Series
         A, B and C dated January 17, 1989.

(a)(3)   Articles Supplementary Creating Auction Market Preferred Stock, Series
         D dated July 25, 1989.

(a)(4)   Certificate of Correction dated August 8, 1989.

(a)(5)   Articles of Amendment dated May 20, 1991.

(a)(6)   Articles Supplementary Creating Auction Market Preferred Stock, Series
         E dated December 18, 1992.

(a)(7)   Articles Supplementary Creating Auction Market Preferred Stock, Series
         F dated December 15, 1993.

(a)(17)  Articles Supplementary dated August 16, 2000.

(a)(18)  Articles of Amendment dated April 19, 2001.

(a)(19)  Amendment to Articles Supplementary dated September 12, 2002.

(b)      By-Laws as Amended and Restated through September 12, 2002.

(j)(1)   Custodian Contract between the Registrant and State Street Bank and
         Trust Company ("State Street") dated April 11, 1986.

(j)(2)   Amendment No. 1 to Custody Agreement between Registrant and State
         Street dated 1986.

(j)(3)   Amendment No. 2 to Custody Agreement between the Registrant and State
         Street dated November 26, 1986.

(j)(4)   Amendment No. 3 to Custodian Agreement dated December 4, 1998.

(k)(1)   Transfer Agency Agreement between the Registrant and State Street dated
         April 11, 1986.

(k)(2)   Administration Agreement between the Registrant and Prudential Mutual
         Fund Management, Inc. (now known as Prudential Investments LLC) dated
         December 9, 1988.

(k)(4)   Investor Relations Services Agreement dated as of March 1, 2000.

                                      C-14

<PAGE>

(k)(5)   Assignment and Assumption of Investor Relations Services Agreement
         dated as of January 1, 2002.

(r)(1)   Code of Ethics for Registrant, Investment Adviser and Investment
         Manager.

(s)      Powers of Attorney.

                                      C-15

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.A1
<SEQUENCE>3
<FILENAME>dex99a1.txt
<DESCRIPTION>EXHIBIT A1
<TEXT>
<PAGE>

                                                                  EXHIBIT (A)(1)

                   THE FIRST AUSTRALIA PRIME INCOME FUND, INC.

                      ARTICLES OF AMENDMENT AND RESTATEMENT

     The First Australia Prime Income Fund, Inc., a Maryland corporation, having
its principal office in this state in Baltimore City, Maryland (which is
hereafter called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:

     FIRST:    The Corporation desires to amend and restate the charter of the
Corporation as currently in effect.

     SECOND:   The charter of the Corporation is hereby amended and restated to
read in its entirety as follows:

                                   * * * * *

                  THE FIRST AUSTRALIA PRIME INCOME FUND, INC.

                      ARTICLES OF AMENDMENT AND RESTATEMENT

FIRST:    I, Richard S. Seltzer, whose post office address is 477 Madison
Avenue, New York, New York 10022, being at least eighteen years of age do, under
and by virtue of the General Laws of the State of Maryland authorizing the
formation of corporations, associate myself as incorporator with the intention
of forming a corporation.

SECOND:   The name of the corporation is THE FIRST AUSTRALIA PRIME INCOME FUND,
INC. (the "Corporation").

THIRD:    Corporate Purposes.

          (a)  The purposes for which the Corporation is formed are to act as a
closed-end, non-diversified management investment company registered as such
with the Securities and Exchange Commission pursuant to the Investment Company
Act of 1940, and to exercise and enjoy all of the powers, rights and privileges
granted to or conferred upon corporations by the General Laws of the State of
Maryland now or hereafter in force, including:

<PAGE>

               (1)  To hold, invest and reinvest the funds of the Corporation,
and to purchase, subscribe for or otherwise acquire, to hold for investment or
otherwise, to trade and deal in, sell, assign, negotiate, transfer, exchange,
lend, pledge or otherwise dispose of or turn to account or realize upon,
securities (which term "securities" shall, for the purpose of these Articles,
include stocks, shares, bonds, debentures, bills, time notes and deposits, any
other evidence of indebtedness and futures contracts; and any certificates,
receipts, warrants, options or other instruments representing rights or
obligations to receive, purchase, subscribe for or sell the same, or evidencing
or representing any other rights or interest, including all rights of equitable
ownership therein or in any property or assets; and all negotiable or
non-negotiable instruments and money market instruments, including bank
certificates of deposit, finance paper, commercial paper, bankers' acceptances
and all kinds of repurchase and reverse repurchase agreements) of any
corporation, association, trust, firm or other organization however and wherever
established or organized, as well as securities issued by any government of any
state, municipality or other political subdivision or any other governmental or
quasi-governmental agency or instrumentality thereof.

               (2)  To enjoy all rights, powers and privileges of ownership or
interest in all securities held by the Corporation and to do all acts for the
preservation, protection, improvement and enhancement in value of all such
securities.

               (3)  To issue and sell shares of its own capital stock and
securities convertible or exchangeable, with or without the payment of
additional consideration, into such capital stock in such amounts and on such
terms and conditions, for such purposes and for such amount or kind of
consideration (including securities) now or hereafter permitted by the laws of

                                       -2-

<PAGE>

the State of Maryland and by these Articles of Incorporation, as its Board of
Directors may, and which is hereby authorized to, determine.

                (4) To purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel shares of its capital stock, in any manner and to
the extent now or hereafter permitted by the laws of the State of Maryland and
by the Charter.

                (5) To conduct and carry on its business, or any part thereof,
to have one or more offices, and to exercise any or all of its corporate powers
and rights, in the State of Maryland and in any other states, territories,
districts and dependencies of the United States, and in any foreign countries.

                (6) In general, to carry on any other business in connection
with or incidental to its corporate purposes, to do everything necessary,
suitable or proper for the accomplishment of such purposes or for the attainment
of any object or the furtherance of any power hereinbefore set forth, either
alone or in association with others, to do every other act or thing incidental
or appurtenant to or growing out of or connected with its business or purposes,
objects or powers, and, subject to the foregoing, to have and exercise all the
powers, rights and privileges conferred upon corporations by the laws of the
State of Maryland as in force from time to time.

           (b)  The foregoing clauses (1) - (6) inclusive shall be construed
both as objects and powers, and the enumeration of specific powers shall not be
held to limit or restrict in any manner the general powers of the Corporation,
except as set forth, in this Article Third.

           (c)  Incident to meeting the purposes specified above, the
corporation also shall have the power:

                                      -3-

<PAGE>

                (1) To acquire (by purchase, lease or otherwise) and to hold,
use, maintain, develop and dispose (by sale or otherwise) of any property, real
or personal, and any interest therein.

                (2) To borrow money and, in this connection, issue notes or
other evidences of indebtedness.

                (3) Subject to any applicable provisions of law, to buy, hold,
sell and otherwise deal in and with foreign exchange, including the purchase and
sale of futures contracts.

Fourth:   Address and Resident Agent.

          The post office address of the principal office of the Corporation in
the State of Maryland is The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202-3242. The name and address of the resident agent of
the Corporation in the State of Maryland is The Corporation Trust Incorporated,
whose post office address is 32 South Street, Baltimore, Maryland 21202-3242.

Fifth:    Capital Stock.

          The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 300,000,000 shares with an
aggregate par value of $3,000,000, initially divided into two classes, of
200,000,000 shares of Common Stock, $.01 par value per share (Common Stock), and
of 100,000,000 shares of Preferred Stock, $.01 par value per share (Preferred
Stock), with a maximum liquidation preference of $500,000,000. The Board of
Directors may classify and reclassify any unissued shares of stock of any class
by setting or changing in any one or more respects the preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms or conditions of redemption of such shares of stock.

                                      -4-

<PAGE>

           The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption, of the Common Stock and the Preferred Stock are as
follows:

           (a) Common Stock

                  (i)   Dividends. Subject to law and to the preferences of the
Preferred Stock, the holders of the Common Stock shall be entitled to receive
dividends at such time and in such amounts as may be determined by the Board of
Directors.

                  (ii)  Voting. Except as provided by law and in or pursuant to
this Article Fifth, each outstanding share of Common Stock is entitled to one
vote on each matter submitted to a vote of the stockholders of the Corporation.

                  (iii) Liquidation. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
after payment or provision for payment of the debts and other liabilities of the
Corporation and the preferential amounts to which the holders of the Preferred
Stock shall be entitled upon liquidation, the holders of the Common Stock shall
be entitled to share in the remaining assets of the Corporation according to
their respective interests.

           (b) Preferred Stock

                  (i)   Authority of the Board of Directors to issue in one or
more series. All shares of any one series of Preferred Stock shall be identical
except as to the respective dates of their issue, the dates from which dividends
on shares of the series issued on different dates shall cumulate, dividend
rates, dividend periods and dividend payment dates. Authority is expressly
granted to the Board of Directors to authorize the issue of one or more series
of Preferred Stock, and to fix by resolution or resolutions providing for the
issue of each

                                      -5-

<PAGE>

such series the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemptions, of such series, to the full extent now or hereafter
permitted by law and subject to this Article Fifth, including but not limited to
the following:

                     (A) The number of shares of such series, which may
subsequently be increased (except as otherwise provided by the resolution or
resolutions of the Board of Directors providing for the issue of such series) or
decreased (to a number not less than the number of shares then outstanding) by
resolution or resolutions of the Board of Directors, and the distinctive
designation of the series;

                     (B) The rates or amounts, the periods, and the times or
payment, of dividends on shares of such series;

                     (C) The voting powers, if any, of the holders of such
series in addition to the voting powers provided by law and in this Article
Fifth;

                     (D) The terms and conditions, if any, upon which the shares
of such series shall be convertible into or exchangeable for shares of any other
series, class or classes, or any other securities, to the full extent now or
hereafter permitted by law;

                     (E) The time or times during which, the price or prices at
which, and the terms and conditions on which, the shares of such series may be
redeemed by the Corporation;

                     (F) The terms of any sinking fund to be applied to the
purchase or redemption, or both, of shares of such series, and the terms and
amount of any sinking fund payments and the manner of their application; and

                                      -6-

<PAGE>

                     (G) The amount which the holders of each series shall be
entitled to receive in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation.

All shares of Preferred Stock, regardless of series, shall be of equal rank, and
there shall be no priority of one series over any other series in any payment of
dividends nor upon any distribution of assets.

                (ii)  Dividends. The holders of Preferred Stock of each series
shall be entitled to receive, when and as declared by the Board of Directors,
cumulative cash dividends at the rates or amounts, for the periods, and at the
times, determined as, or in the manner, specified for such series by the Board
of Directors as authorized in the preceding part (i).

                (iii) Voting. At any meeting of stockholders of the Corporation
at which Directors are to be elected, the holders of Preferred Stock of all
series, voting separately as a single class, shall be entitled to elect two
members of the Board of Directors, and the holders of Common Stock, voting
separately as a single class, shall be entitled to elect the balance of the
members of the Board of Directors.

                If at any time dividends on any outstanding Preferred Stock of
any series shall be unpaid in an amount equal to two full years' dividends, the
number of Directors constituting the Board of Directors shall automatically be
increased by the smallest number that, when added to the number of Directors
then constituting the Board of Directors, shall together with the two Directors
elected by the holders of Preferred Stock pursuant to the preceding paragraph,
will constitute a majority of such increased number; and at a special meeting of
stockholders, which shall be called and held as soon as practicable, and at all
subsequent

                                      -7-

<PAGE>

meetings at which Directors are to be elected, the holders of Preferred Stock of
all series voting separately as a single class shall be entitled to elect the
smallest number of additional Directors of the Corporation who, together with
the two Directors elected by the holders of Preferred Stock pursuant to the
preceding paragraph, will constitute a majority of the total number of Directors
of the Corporation so increased. The terms of office of the persons who are
Directors at the time of that election shall continue. If the Corporation
thereafter shall pay, or declare and set apart for payment, in full all
dividends payable on all outstanding shares of Preferred Stock of all series for
all past dividend periods, the voting rights stated in this paragraph shall
cease, and the terms of office of all additional Directors elected by the
holders of Preferred Stock (but not of the Directors elected by the holders of
Common Stock or the two Directors regularly elected by the holders of Preferred
Stock) shall terminate automatically. At all subsequent meetings of stockholders
at which Directors are to be elected, the holders of shares of Preferred Stock
and of Common Stock shall have the right to elect the members of the Board of
Directors as stated in the preceding paragraph, subject to the revesting of the
rights of the holders of the Preferred Stock as provided in the first sentence
of this paragraph in the event of any subsequent arrearage in the payment of two
full years' dividends on the shares of Preferred Stock of any series.

                Any vacancy in the office of any Director elected by the holders
of shares of Preferred Stock may be filled by the remaining Directors (or
Director) so elected or, if not so filled, by the holders of shares of Preferred
Stock of all series, voting separately as a single class, at any meeting of
stockholders for the election of Directors held thereafter.

                In addition to any approval by stockholders that might otherwise
be required, the approval of the holders of a majority of any outstanding shares
of Preferred Stock of all series, voting separately as a single class, shall be
required to (a) adopt any plan of

                                      -8-

<PAGE>

reorganization that would adversely affect holders of the Preferred Stock, or
(b) take any action requiring a vote of security holders pursuant to Section 13
(a) of the Investment Company Act of 1940, including, among other things,
changes in the Corporation's investment objective or changes in its fundamental
investment restrictions.

                (iv) Liquidation. In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the holders
of Preferred Stock of each series shall be entitled to receive only such amount
or amounts, including accumulated and unpaid dividends, as shall have been fixed
by the Articles of Incorporation or by the resolution or resolutions of the
Board of Directors providing for the issue of such series. If, upon any such
liquidation, dissolution or winding up of the Corporation, either voluntary or
involuntary, the assets of the Corporation available for distribution among the
holders of all outstanding shares of Preferred Stock of all series should be
insufficient to permit the payment in full to such holders of the amounts to
which they are entitled, then such available assets shall be distributed among
the holders of shares of Preferred Stock ratably in any such distribution of
assets according to the respective amounts that would be payable on all such
shares if all amounts thereon were paid in full. A consolidation or merger of
the Corporation with or into one or more other corporations or a sale, lease or
exchange of all or substantially all of the assets of the Corporation shall not
be deemed to be a voluntary or involuntary liquidation, dissolution or winding
up, within the meaning of this Article Fifth.

           (c)  All stock.

                No premptive rights. No holder of shares of the Corporation,
whether now or hereafter authorized, shall be entitled as of right to acquire
from the Corporation any shares of the Corporation, whether now or hereafter
authorized.

                                      -9-

<PAGE>

SIXTH:     Board of Directors.

           The number of Directors of the Corporation shall be not less than
three, and the names of those persons who shall act as Directors until the first
annual meeting and until their successors are elected and qualified are Laurence
S. Freedman, John M. Maconochie and Brian M. Sherman.

SEVENTH:   Management of the Affairs of the Corporation.

           (a) All corporate powers and authority of the Corporation (except as
at the time otherwise provided by statute, by the Charter or by the By-Laws)
shall be vested in and exercised by the Board of Directors.

           (b) The Board of Directors shall have the power to adopt, alter or
repeal the By-Laws of the Corporation except to the extent that the By-Laws
otherwise provide.

           (c) The Board of Directors shall have power from time to time to
determine whether and to what extent, and at what times and places and under
what conditions and regulations, the accounts and books of the Corporation
(other than the stock ledger) or any of them shall be open to the inspection of
stockholders, and no stockholder shall have any right to inspect any account,
book or document of the Corporation except to the extent permitted by statute or
the By-Laws.

           (d) The Board of Directors shall have the power to determine, as
provided herein, or if provision is not made herein, in accordance with
generally accepted accounting principles, what constitutes net income, total
assets and the net asset value of the shares of Common Stock of the Corporation.

                                      -10-

<PAGE>

           (e) The Board of Directors shall have the power to distribute
dividends from funds legally available therefor in such amounts, if any, and in
such manner and to the stockholders of record as of such date, as the Board of
Directors may determine.

EIGHTH:    Required Vote.

           (a) Commencing with the fiscal year of the Corporation which begins
on November 1, 1991, and in each fiscal year thereafter, if (i) the Corporation
has not yet adopted the amendment described in this Section, and (ii) shares of
the Corporation's Common Stock have traded on the principal securities exchange
where listed at an average discount from net asset value of more than 5%,
determined on the basis of the discount as of the end of the last trading day in
each week during the period of 12 calendar weeks next preceding November 15 in
each year, the Corporation will submit to its stockholders at the next
succeeding annual meeting of stockholders a proposal, to the extent consistent
with the Investment Company Act of 1940, to amend these Articles of
Incorporation to provide that, upon the adoption of such amendment by the
holders of a majority of the Corporation's outstanding shares of Common Stock,
each share of the Corporation's Common Stock may be presented to the Corporation
as of the last trading day of each fiscal quarter, upon written notice delivered
to the Corporation's transfer agent not less than 30 days prior thereto, for
payment to the holder at net asset value per share at the close of business on
the date of presentment.

           (b) Notwithstanding any provision of law requiring the authorization
of any action by a greater proportion than a majority of the total number of
shares of all classes of stock or of the total number of shares of any class of
stock, such action shall be valid and effective if authorized by the affirmative
vote of the holders of a majority of the total number of shares of all

                                      -11-

<PAGE>

classes outstanding and entitled to vote thereon, except as otherwise provided
in the Investment Company Act of 1940 or the Charter.

NINTH:     Special Vote of Stockholders.

           (a) Except as otherwise provided in this Article Ninth, the vote of
the holders of at least 75% of the voting power of the then outstanding shares
of Voting Stock (as hereinafter defined), in addition to any vote of the
Directors of the Corporation as may be required by law or by the By-Laws, shall
be necessary to effect any of the following actions:

               (i)   any amendment to the Charter to make the Corporation's
Common Stock a "redeemable security" (as such term is defined in the Investment
Company Act of 1940) unless the continuing Directors (as hereinafter defined) of
the Corporation, by a vote of at least 75% of such Directors, approve such
amendment;

               (ii)  any stockholder proposal as to specific investment
decisions made or to be made with respect to the Corporation's assets; or

               (iii) any Business Combination (as hereinafter defined) unless
either the condition in clause (A) below is satisfied or the conditions in
clauses (B), (C), (D), (E) and (F) below are satisfied:

                   (A) The Business Combination shall have been approved by a
vote of at least 75% of the Continuing Directors.

                   (B) The aggregate amount of cash and the Fair Market Value
(as hereinafter defined), as of the date of the consummation of the Business
Combination, or consideration other than cash to be received per share by
holders of any class of outstanding Voting Stock in such Business Combination
shall be at least equal to the higher of the following:

                                      -12-

<PAGE>

               (x) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by an Interested
Party (as hereinafter defined) for any shares acquired by it (aa) within the
two-year period immediately prior to the first public announcement of the
proposal of the Business Combination (the "Announcement Date "), or (bb) in the
Threshold Transaction (as hereinafter defined), whichever is higher; and

               (y) in the case of Common Stock, the net asset value per share of
such Common Stock on the Announcement Date or on the date of the Threshold
Transaction, whichever is higher, and in the case of any Preferred Shares, the
highest preferential amount per share to which the holders of shares of such
class of Preferred Shares would be entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the Fund,
regardless of whether the Business Combination to be consummated constitutes
such an event.

               (C) The consideration to be received by holders of the particular
class of outstanding Voting Stock shall be in cash or in the same form as the
Interested Party has previously paid for shares of any class of Voting Stock. If
the Interested Party has paid for shares of any class of voting Stock with
varying forms of consideration, the form of consideration for such class of
Voting Stock shall be either cash or the form used to acquire the largest number
of shares of such class of Voting Stock previously acquired by it.

               (D) After the occurrence of the Threshold Transaction, and prior
to the consummation of such Business Combination, such Interested Party shall
not have become the beneficial owner of any additional shares of Voting Stock
except by virtue of the Threshold Transaction.

                                      -13-

<PAGE>

               (E)  After the occurrence of the Threshold Transaction, such
Interested Party shall not have received the benefit, directly or indirectly
(except proportionately as a shareholder of the Corporation), of any loans,
advances, guarantees, pledges or other financial assistance or any tax credits
or other tax advantages provided by the Corporation, whether in anticipation of
or in connection with such Business Combination or otherwise.

               (F)  A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 and the rules and
regulations thereunder (or any subsequent provisions replacing such Acts, rules
or regulations) shall be prepared and mailed by the Interested Party, at such
interested Party's expense, to the shareholders of the Corporation at least 30
days prior to the consummation of such Business Combination (whether or not such
proxy or information statement is required to be mailed pursuant to such Act or
subsequent provisions).

     (b)  For the purposes of this Article Ninth:

             (i)  "Business Combination" shall mean any of the transactions
described or referred to in any one or more of the following subparagraphs:

               (A)  any merger or consolidation of the Corporation with or into
any other person;

               (B)  any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) to or with
any other person of any assets of the Corporation having an aggregate Fair
Market Value of $1,000,000 or more except for portfolio transactions of the
Corporation effected in the ordinary course of the Corporation's business;

                                      -14-

<PAGE>

               (C)  the issuance or transfer by the Corporation (in one
transaction or a series of transactions) of any securities of the Corporation to
any other person in exchange for cash, securities or other property (or a
combination thereof) having an aggregate Fair Market Value of $1,000,000 or more
excluding (x) sales of any securities of the Corporation in connection with a
public offering thereof, (y) issuances of any securities of the Corporation
pursuant to a dividend reinvestment plan adopted by the Corporation and (z)
issuances of any securities of the Corporation upon the exercise of any stock
subscription rights distributed by the Corporation;

          (ii)  "Continuing Director" means any member of the Board of Directors
of the Corporation who is not an Interested Party or an Affiliate of an
Interested Party and has been a member of the Board of Directors for a period of
at least 12 months, or is a successor of a Continuing Director who is
unaffiliated with an Interested Party and is recommended to succeed a Continuing
Director by a majority of the Continuing Directors then on the Board of
Directors.

          (iii) "Interested Party" shall mean any person, other than an
investment company advised by the Corporation's initial investment manager or
any of its Affiliates, which enters, or proposes to enter, into a Business
Combination with the Corporation.

          (iv)  "Person" shall mean an individual, a corporation, a trust or a
partnership.

          (v)   "Voting Stock" shall mean capital stock of the Corporation
entitled to vote in the election of Directors, as well as any class of capital
stock of the corporation entitled, as a class, to elect one or more Directors.

          (vi)  A Person shall be a "beneficial owner" of any Voting Stock:

                                      -15-

<PAGE>

               (A)  which such Person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns, directly or indirectly; or

               (B)  which such Person or any of its Affiliates or Associates has
the right to acquire (whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options; or

               (C)  which is beneficially owned, directly or indirectly, by any
other Person with which such Person or any of its Affiliates or Associates has
any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock.

          (vii)  "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934.

          (viii) "Fair Market Value" means:

               (A)  in the case of stock, the highest closing sale price during
the 30-day period immediately preceding the relevant date of a share of such
stock on any principal United States securities exchange registered under the
Securities Exchange Act of 1934 on which such stock is listed, or, if such stock
is not listed on any such exchange, the highest closing bid quotation with
respect to a share of such stock during the 30-day period preceding the relevant
date on the National Association of Securities Dealers, Inc. Automated Quotation
Systems (NASDAQ) or any system then in use, or if no such quotations are
available, the fair market value on the relevant date of a share of such stock
as determined by 75% of the Continuing Directors in good faith, and

                                      -16-

<PAGE>

               (B)  in the case of property other than cash or stock, the fair
market value of such property on the relevant date as determined by 75% of the
Continuing Directors in good faith.

          (ix)   "Threshold Transaction" means the transaction by or as a result
of which an Interested Party first becomes the beneficial owner of Voting Stock.

          (x)    In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to be received"
as used in subparagraph (a) (iii) (B) above stall include the shares of Common
Stock and/or the shares of any other class of outstanding Voting Stock retained
by the holders of such shares.

          (xi)   Continuing Directors of the Corporation, acting by a vote of
75% shall have the power and duty to determine, on the basis of information
known to them after reasonable inquiry, all facts necessary to determine (a) the
number of shares of Voting Stock beneficially owned by any person, (b) whether a
person is an Affiliate or Associate of another, (c) whether the requirements of
subparagraph (a) (iii) above have been met with respect to any Business
Combination, and (d) whether the assets which are the subject of any Business
Combination have, or the consideration to be received for the any issuance or
transfer of securities by the Corporation in any Business Combination has, an
aggregate Fair Market Value of $1,000,000 or more.

     (c) The provisions of this Article Ninth may not be amended, altered or
repealed except by the approval of both (i) 75% of the outstanding shares of the
Fund voting as a single class, and (ii) 75% of the outstanding shares of each
class of shares voting separately, with shares of Preferred stock of all series
voting separately as a single class.

                                 *  *  *  *  *

                                      -17-

<PAGE>

     THIRD:   (a) As of immediately before the amendment and restatement the
total number of shares of stock of all classes which the Corporation has
authority to issue is 200,000,000 shares of common stock, par value $.01 per
share.

         (b)  As amended and restated, the total number of shares of stock of
all classes which the Corporation has authority to issue is 300,000,000 shares,
of which 100,000,000 shares are preferred stock, par value $.01 per share, and
200,000,000 shares are common stock, par value $.01 per share.

         (c)  The aggregate par value of all shares having a par value is
$2,000,000 before the amendment and restatement and $3,000,000 as amended and
restated.

         (d)  The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption, of the Common Stock and the Preferred Stock are as
follows:

         (a)  Common Stock

                 (i)   Dividends. Subject to law and to the preferences of the
Preferred Stock, the holders of the Common Stock shall be entitled to receive
dividends at such time and in such amounts as may be determined by the Board of
Directors.

                 (ii)  Voting. Except as provided by law and in or pursuant to
Article Fifth of the Charter, each outstanding share of Common Stock is entitled
to one vote on each matter submitted to a vote of the stockholders of the
Corporation.

                 (iii) Liquidation. In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, after
payment or provision for payment of the debts and other liabilities of the
Corporation and the preferential amounts to which the holders of the Preferred
Stock shall be entitled upon liquidation, the holders of the

                                      -18-

<PAGE>

Common Stock shall be entitled to share in the remaining assets of the
Corporation according to their respective interests.

          (b)  Preferred Stock

                 (i)  Authority of the Board of Directors to issue in one or
more series. All shares of any one series of Preferred Stock shall be identical
except as to the respective dates of their issue, the dates from which dividends
on shares of the series issued on different dates shall cumulate, dividend
rates, dividend periods and dividend payment dates. Authority is expressly
granted to the Board of Directors to authorize the issue of one or more series
of Preferred Stock, and to fix by resolution or resolutions providing for the
issue of each such series the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemptions, of such series, to the full extent now or hereafter
permitted by law and subject to this Article Fifth of the Charter, including but
not limited to the following:

                    (A)  The number of shares of such series, which may
subsequently be increased (except as otherwise provided by the resolution or
resolutions of the Board of Directors providing for the issue of such series) or
decreased (to a number not less than the number of shares then outstanding ) by
resolution or resolutions of the Board of Directors, and the distinctive
designation of the series;

                    (B)  The rates or amounts, the periods, and the times of
payment, of dividends on shares of such series;

                    (C)  The voting powers, if any, of the holders of such
series in addition to the voting powers provided by law and in Article Fifth of
the Charter;

                                      -19-

<PAGE>

                    (D)  The terms and conditions, if any, upon which the shares
of such series shall be convertible into or exchangeable for shares of any other
series, class or classes, or any other securities, to the full extent now or
hereafter permitted by law;

                    (E)  The time or times during which, the price or prices at
which, and the terms and conditions on which, the shares of such series may be
redeemed by the Corporation;

                    (F)  The terms of any sinking fund to be applied to the
purchase or redemption, or both, of shares of such series, and the terms and
amount of any sinking fund payments and the manner of their application; and

                    (G)  The amount which the holders of each series shall be
entitled to receive in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation.

All shares of Preferred Stock, regardless of series, shall be of equal rank, and
there shall be no priority of one series over any other series in any payment of
dividends nor upon any distribution of assets.

                (ii)  Dividends. The holders of Preferred Stock of each series
shall be entitled to receive, when and as declared by the Board of Directors,
cumulative cash dividends at the rates or amounts, for the periods, and at the
times, determined as, or in the manner, specified for such series by the Board
of Directors as authorized in the preceding part (i).

                (iii) Voting. At any meeting of stockholders of the Corporation
at which Directors are to be elected, the holders of Preferred Stock of all
series, voting separately as a single class, shall be entitled to elect two
members of the Board of Directors, and the holders of

                                      -20-

<PAGE>

Common Stock, voting separately as a single class, shall be entitled to elect
the balance of the members of the Board of Directors.

          If at any time dividends on any outstanding Preferred Stock of any
series shall be unpaid in an amount equal to two full years' dividends, the
number of Directors constituting the Board of Directors shall automatically be
increased by the smallest number that, when added to the number of Directors
then constituting the Board of Directors; shall together with the two Directors
elected by the holders of preferred stock pursuant to the preceding paragraph,
will constitute a majority of such increased number; and at a special meeting of
stockholders, which shall be called and held as soon as practicable, and at all
subsequent meetings at which Directors are to be elected, the holders of
Preferred Stock of all series voting separately as a single class shall be
entitled to elect the smallest number of additional Directors of the Corporation
who, together with the two Directors elected by the holders of Preferred Stock
pursuant to the preceding paragraph, will constitute a majority of the total
number of Directors of the Corporation so increased. The terms of office of the
persons who are Directors at the time of that election shall continue. If the
Corporation thereafter shall pay, or declare and set apart for payment, in full
all dividends payable on all outstanding shares of Preferred Stock of all series
for all past dividend periods, the voting rights stated in this paragraph shall
cease, and the terms of office of all additional Directors elected by the
holders of Preferred Stock (but not of the Directors elected by the holders of
Common Stock or the two Directors regularly elected by the holders of Preferred
Stock) shall terminate automatically. At all subsequent meetings of stockholders
at which Directors are to be elected, the holders of shares of Preferred Stock
and of Common Stock shall have the right to elect the members of the Board of
Directors as stated in the preceding paragraph, subject to the revesting of the
rights of the holders of the Preferred

                                      -21-

<PAGE>

Stock as provided in the first sentence of this paragraph in the event of any
subsequent arrearage in the payment of two full years' dividends on the shares
of Preferred Stock of any series.

          Any vacancy in the office of any Director elected by the holders of
shares of Preferred Stock may be filled by the remaining Directors (or Director)
so elected or, if not so filled, by the holders of shares of Preferred Stock of
all series, voting separately as a single class, at any meeting of stockholders
for the election of Directors held thereafter.

          In addition to any approval by stockholders that might otherwise be
required, the approval of the holders of a majority of any outstanding shares of
Preferred Stock of all series, voting separately as a single class, shall be
required to (a) adopt any plan of reorganization that would adversely affect
holders of the Preferred Stock, or (b) take any action requiring a vote of
security holders pursuant to Section 13(a) of the Investment Company Act of
1940, including, among other things, changes in the Corporation's investment
objective or changes in its fundamental investment restrictions.

          (iv)   Liquidation. In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
Preferred Stock of each series shall be entitled to receive only such amount or
amounts, including accumulated and unpaid dividends, as shall have been fixed by
the Charter or by the resolution or resolutions of the Board of Directors
providing for the issue of such series. If, upon any such liquidation,
dissolution or winding up of the Corporation, either voluntary or involuntary,
the assets of the Corporation available for distribution among the holders of
all outstanding shares of Preferred Stock of all series should be insufficient
to permit the payment in full to such holders of the amounts to which they are
entitled, then such available assets shall be distributed among the holders of
shares of Preferred Stock ratably in any such distribution of assets according
to the

                                      -22-

<PAGE>

respective amounts that would be payable on all such shares if all amounts
thereon were paid in full. A consolidation or merger of the Corporation with or
into one or more other corporations or a sale, lease or exchange of all or
substantially all of the assets of the Corporation shall not be deemed to be a
voluntary or involuntary liquidation, dissolution or winding up, within the
meaning of Article Fifth of the Charter.

          (c)  All stock

               No preemptive rights. No holder of shares of the Corporation,
whether now or hereafter authorized, shall be entitled as of right to acquire
from the Corporation any shares of the Corporation, whether now or hereafter
authorized.

     FOURTH:   The foregoing Articles of Amendment and Restatement have been
advised by the board of directors of the Corporation and approved by the
stockholders.

     IN WITNESS WHEREOF, The First Australia Prime Income Fund, Inc. has caused
these presents to be signed in its name and on its behalf by its President and
witnessed by its Secretary on December 9, 1988.

WITNESS:                                     THE FIRST AUSTRALIA PRIME
                                                INCOME FUND, INC.

/s/ R. Randall                               By /s/ Brian M. Sherman
Secretary                                      President

     THE UNDERSIGNED, President of The First Australia Prime Income Fund, Inc.
who executed on behalf of the Corporation the foregoing Articles of Amendment
and Restatement of which this certificate is made a part, hereby acknowledges in
the name and on behalf of said Corporation the foregoing Articles of Amendment
and Restatement to be the corporate act of said Corporation and hereby certifies
that to the best of his knowledge, information, and belief the matters and facts
set forth therein with respect to the authorization and approval thereof are
true in all material respects under the penalties of perjury.

                                              /s/ Brian M. Sherman
                                              President

                                      -23-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.A2
<SEQUENCE>4
<FILENAME>dex99a2.txt
<DESCRIPTION>EXHIBIT A2
<TEXT>
<PAGE>

                                                                  EXHIBIT (a)(2)

                   THE FIRST AUSTRALIA PRIME INCOME FUND, INC.

                 Articles Supplementary creating three series of

                         Auction Market Preferred Stock

         The First Australia Prime Income Fund, Inc., a Maryland corporation
having its principal Maryland office in the City of Baltimore in the State of
Maryland (the "Corporation"), certifies to the State Department of Assessments
and Taxation of Maryland that:

         FIRST: Pursuant to authority expressly vested in the board of directors
of the Corporation by article fifth of its charter, the board of directors has
authorized the issuance of three series of up to 750 shares each of its
authorized preferred stock, per value $.01 per share, liquidation preference
$100,000 per share, designated respectively: Auction Market Preferred Stock,
Series A, Auction Market Preferred Stock, Series B and Auction Market Preferred
Stock, Series C.

         SECOND: Pursuant to section 2-411 of the Maryland General Corporation
Law and authority granted by Article IV of the Corporation's by-laws, the board
of directors of the Corporation has appointed a pricing committee (the "Pricing
Committee") and has authorized such Pricing Committee to fix, consistent with,
and subject to, the authorization referred to in Article FIRST of these Articles
Supplementary, the terms of the shares of Auction Market Preferred Stock, Series
A, Auction Market Preferred Stock, Series B and Auction Market Preferred Stock,
Series C.

         THIRD: The preferences, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, of the shares
of such series of preferred stock are as follows:

                                   DESIGNATION

         SERIES A: A series of 750 shares of preferred stock, par value $.01 per
share, liquidation preference $100,000 per share, is hereby designated "Auction
Market Preferred Stock, Series A." Each share of Auction Market Preferred Stock,
Series A shall be issued on the Date of Original issue (as herein defined); have
an Initial Dividend Payment Date (as herein defined) of February 14, 1989; and
have such other preferences, limitations and relative voting rights, in addition
to those required by applicable law or set forth in the Corporation's Articles
of Incorporation applicable to preferred stock of the Corporation, as are set
forth in these Articles Supplementary. The Auction Market Preferred Stock,
Series A shall constitute a separate series of preferred stock of the
Corporation, and each share of Auction Market Preferred Stock, Series A shall be
identical except as provided in paragraph 3 of these Articles Supplementary.

         SERIES B: A series of 750 shares of preferred stock, par value $.01 per
share, liquidation preference $100,000 per share, is hereby designated "Auction
Market Preferred Stock, Series B." Each share of Auction Market Preferred Stock,
Series B shall be issued on the Date of Original Issue; have an Initial Dividend
Payment Date of February 22, 1989; and have such other preferences, limitations
and relative voting rights, in addition to those required by applicable law or
set forth in the Corporation's Articles of Incorporation applicable to preferred

<PAGE>

stock of the Corporation, as are set forth in these Articles Supplementary. The
Auction Market Preferred Stock, Series B shall constitute a separate series of
preferred stock of the Corporation, and each share of Auction Market Preferred
Stock, Series B shall be identical except as provided in paragraph 3 of these
Articles Supplementary.

         SERIES C: A series of 500 shares of preferred stock, par value $.01 per
share, liquidation preference $100,000 per share, is hereby designated "Auction
Market Preferred Stock, Series C." Each share of Auction Market Preferred Stock,
Series C shall be issued on the Date of Original Issue; have an Initial Dividend
Payment Date of February 28, 1989; and have such other preferences, limitations
and relative voting rights, in addition to those required by applicable law or
set forth in the Corporation's Articles of Incorporation applicable to preferred
stock of the Corporation, as are set forth in these Articles Supplementary. The
Auction Market Preferred Stock, Series C shall constitute a separate series of
preferred stock of the Corporation, and each share of Auction Market Preferred
Stock, Series C shall be identical except as provided in paragraph 3 of these
Articles Supplementary.

         1.  Definitions.

         Capitalized terms not defined in this paragraph 1 shall have the
respective meanings specified in paragraph 8(a) hereof. Unless the context or
use indicates another or different meaning, the following terms shall have the
following meanings, whether used in the singular or plural:

         "`AA' Composite Commercial Paper Rate," on any date, means (i) the
interest equivalent of the 30-day rate on commercial paper placed on behalf of
issuers whose corporate bonds are rated "AA" by S&P, or the equivalent of such
rating by S&P or another rating agency, as such 30-day rate is made available on
a discount basis or otherwise by the Federal Reserve Bank of New York for the
Business Day immediately preceding such date, or (ii) in the event that the
Federal Reserve Bank of New York does not make available such a rate, then the
arithmetic average of the interest equivalent of the 30-day rate on commercial
paper placed on behalf of such issuers, as quoted to the Auction Agent on a
discount basis or otherwise by the Commercial Paper Dealers for the close of
business on the Business Day immediately preceding such date. If any Commercial
Paper Dealer does not quote a rate required to determine the 30-day "AA"
Composite Commercial Paper Rate, the 30-day "AA" Composite Commercial Paper Rate
will be determined on the basis of the quotation or quotations furnished by any
Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers
selected by the Corporation to provide such rate or rates not being supplied by
the Commercial Paper Dealer. "Interest Equivalent" as used herein means the
equivalent yield on a 360-day basis of a discount basis security to an interest
bearing security.

         "Accountant's Confirmation" has the meaning set forth in paragraph
7(b)(iii) hereof.

         "Agent Member" means the member of the Securities Depository that will
act on behalf of an Existing Holder or Potential Holder and that is identified
as such in such holder's Purchaser's Letter.

                                       2

<PAGE>

         "AMPS" means either the Auction Market Preferred Stock, Series A; the
Auction Market Preferred Stock, Series B or the Auction Market Preferred Stock,
Series C.

         "AMPS Basic Maintenance Amount" means, as of any date, the dollar
amount equal to the sum of (a) $100,000 times the number of shares of AMPS then
outstanding; (b) the aggregate liquidation preference of other Preferred Stock
then outstanding, if any; (c) the Dividend Coverage Amount; (d) the aggregate
Projected Dividend Amount; (e) the aggregate principal amount of any then
outstanding indebtedness of the Corporation for money borrowed; (f) projected
expenses of the Corporation for the next succeeding three-month period; and (g)
the greater of $200,000 or the Corporation's current liabilities as of such date
to the extent not otherwise reflected in any of (a) through (f) above. The Board
of Directors shall have the authority, to the extent permitted by Maryland law,
to adjust, modify, alter or change from time to time the elements comprising the
AMPS Basic Maintenance Amount from those set forth in these Articles
Supplementary if the Board of Directors determines and the Rating Agencies
advise the Corporation in writing that the change will not adversely affect
their respective then-current ratings of the AMPS.

         "AMPS Basic Maintenance Cure Date," with respect to the failure by the
Corporation to maintain the AMPS Basic Maintenance Amount (as required paragraph
7(b) hereof) as of each Valuation Date, means the fifth Business Day following
such Valuation Date.

         "ANNIE MAEs" are securities issued against mortgage pools by Australian
National Mortgage Pool Agency Ltd., an affiliate of Security Pacific National
Bank and are rated by Australian Ratings.

         "Applicable Percentage" has the meaning set forth under "Maximum
Applicable Rate" below.

         "Applicable Rate" has the meaning specified in paragraph 3(c)(i) below.

         "Articles of Incorporation" means the Articles of Incorporation of the
Corporation, as amended and restated from time to time, including as amended by
these Articles Supplementary.

         "Auction" means each operation of the Auction Procedures.

         "Auction Agent" means Manufacturers Hanover Trust Company unless and
until another commercial bank, trust company, or other financial institution
appointed by a resolution of the Board of Directors enters into an agreement
with the Corporation to follow the Auction Procedures for the purpose of
determining the Applicable Rate and to act as transfer agent, registrar, paying
agent and redemption agent.

         "Auction Agent Agreement" has the meaning specified in paragraph
3(c)(i) below.

         "Auction Date" has the meaning specified in paragraph 8(a) below.

         "Auction Procedures" means the procedures for conducting Auctions set
forth in paragraph 8 below.

                                       3

<PAGE>

         "Australian Corporate Bonds" means debt obligations of Australian
corporations (other than Australian Government Securities, Australian
Semi-Government Securities, Bank Bills and Australian Short-Term Securities).

         "Australian Currency" means such coin or currency of Australia as at
the time shall be legal tender for payment of public and private debts.

         "Australian Ratings" means Australian Ratings Pty Ltd or its
successors.

         "Australian Government Securities" means all publicly traded securities
issued and guaranteed by the Government of the Commonwealth of Australia with a
fixed maturity (i.e. no perpetuals).

         "Australian Semi-Government Securities" means the following publicly
traded semi-government securities with a fixed maturity (i.e. no perpetuals) and
which are explicitly guaranteed by the Commonwealth of Australia or the
respective Australian state, provided, that if the calculation is being made for
Moody's, the then-current rating by Moody's of any outstanding senior long-term
debt issue explicitly guaranteed by the respective Australian state is identical
to the then-current Moody's rating of any senior long-term debt denominated in
the same currency which debt is guaranteed by the Commonwealth of Australia:

         1. Electricity Trust of South Australia, a body established under the
Electricity Trust of South Australia Act 1946 (South Australia).

         2. Gas & Fuel Corporation of Victoria, a corporation established under
the Gas and Fuel Corporation Act 1950 (Victoria).

         3. Melbourne & Metropolitan Board of Works, a board constituted under
section 4 of the Melbourne & Metropolitan Board of Works Act 1958 (Victoria).

         4. New South Wales Treasury Corporation, a corporation constituted
under section 4 of the Treasury Corporation Act 1983 (New South Wales).

         5. A Territory authority being an authority within the meaning of that
term under section 43 of the Northern Territory (Self Government) Act
(Commonwealth) provided that the specific issue is guaranteed by the Treasurer
of the Commonwealth of Australia.

         6. The State Electricity Commission of Qld, a commission constituted
under the Electricity Act 1976 (Qld).

         7. Queensland Treasury Corporation, a corporation established under the
Treasury Corporation Act 1988 (Qld).

         8. South Australian Financing Authority an authority established under
the Government Financing Authority Act 1982 (South Australia).

         9. State Electricity Commission of Victoria, a commission established
under the State Electricity Commission Act 1953 (Victoria).

                                       4

<PAGE>

         10. State Energy Commission of Western Australia, a commission
established under the State Energy Commission Act 1979 (Western Australia).

         11. The Australian Telecommunications Commission a commission
established under section 4 of the Telecommunications Act 1975 (Commonwealth).

         12. Victorian Public Authorities Finance Agency an agency constituted
under section 3 of the Victorian Public Authorities Act 1984 (Victoria).

         13. Australian industry Development Corporation a body established
under section 5 of the Australian Industries Development Corporation Act
(Commonwealth).

         14. South Australian Finance Trust Limited, a body corporate proclaimed
by the Governor of South Australia to be a semi-government authority pursuant to
the Public Finance and Audit Act 1987 (South Australia).

         The Board of Directors shall have the authority to adjust, modify,
alter or change from time to time the list of securities as set forth above if
the Board of Directors determines and each Rating Agency advises the Corporation
in writing that the change or specification will not adversely affect its
then-current rating of the AMPS.

         "Australian Short Term Securities" means promissory notes and other
short term commercial paper issued by Australian institutions rated A-1+ by S&P
and Prime-1 by Moody's or with a long-term rating from S&P at least as high as
their then-current comparable rating of AMPS and with a long-term foreign
currency debt rating from Moody's of at least Aa3.

         "Authorized Newspaper" means The Wall Street Journal, or if not
published on such date, The New York Times, or if neither of such papers is
published on such date, a newspaper, printed in the English language, of general
circulation in the Borough of Manhattan, The City of New York, that carries
financial news and is customarily published on each Business Day, whether or not
published on Saturdays, Sundays or holidays.

         "Bank Bills" means bills of exchange (as defined in the Bills of
Exchange Act of the Commonwealth of Australia) issued, accepted or endorsed by
Australian banks (x) with a rating from S&P at least as high as their
then-current comparable rating of the AMPS and (y)(i) if the Bank Bill has a
remaining term to maturity from the date of determination of 30 days or less,
rated Prime-1 by Moody's, (ii) with a long-term foreign currency debt rating
from Moody's of at least Aa3 or (iii) as otherwise approved in writing by
Moody's.

         "Board of Directors" means the Board of Directors of the Corporation
or, except as used in paragraph 6 hereof, any duly authorized and empowered
committee thereof.

         "Business Day" means a day on which the New York Stock Exchange is open
for trading and which is not a Saturday, Sunday or other day on which banks in
The City of New York are authorized or obligated by law to close; provided, that
for purposes of determining Valuation Dates and Cure Dates, "Business Day" means
a day on which the New York Stock Exchange and the Australian Stock Exchange
Limited are open for trading and which is not a Saturday,

                                       5

<PAGE>

Sunday or other day on which banks in The City of New York or in Sydney,
Australia are authorized or obligated by law to close.

         "Cash" means such coin or currency of the United States of America as
at the time shall be legal tender for payment of public and private debts.

         "Certificate of Minimum Liquidity" has the meaning specified in
paragraph 7(c)(i) below.

         "Commercial Paper Dealers" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated and such other commercial paper dealer or dealers as the
Corporation may from time to time appoint, or, in lieu of any thereof, their
respective affiliates or successors.

         "Commission" means the Securities and Exchange Commission.

         "Common Stock" means shares of the common stock, par value $.01 per
share, of the Corporation.

         "Corporate Bonds" means debt obligations of U.S. corporations (other
than Short Term Money Market Instruments or U.S. Government Obligations) rated
Aa or better by Moody's or AA or better by S&P, which corporate debt obligations
(a) provide for the periodic payment of interest thereon in cash, (b) do not
provide for conversion or exchange into equity capital at any time over their
respective lives, (c) have been registered under the Securities Act of 1933, as
amended, and (d) have not had notice given in respect thereof that any such
corporate debt obligations are the subject of an offer by the issuer thereof of
exchange or tender for cash, securities or any other type of consideration
(except that corporate debt obligations in an amount not exceeding 10% of the
aggregate value of the Corporation's assets at any time shall not be subject to
the provisions of this clause (d)). In addition, no corporate debt obligation
held by the Corporation shall be deemed a Corporate Bond (i) if it fails to meet
the criteria in column (1) below or (ii) to the extent (and only to the
proportionate extent) the acquisition or holding thereof by the Corporation
causes the Corporation to exceed any applicable limitation set forth in column
(2) or (3) below as of any relevant date of determination (provided that in the
event that the Corporation shall exceed any such limitation, the Corporation
shall designate, in its sole discretion, the particular Corporate Bond(s) and/or
portions thereof which shall be deemed to have caused the Corporation to exceed
such limitation):

                                       6

<PAGE>

<TABLE>
<CAPTION>
                                      Column 1                Column 2               Column 3
                                      --------                --------               --------
                                                         Maximum Percent of     Maximum Percent of
                                                        Value of Corporation   Value of Corporation
                                                         Assets, Including       Assets, Including
                                                         Eligible Portfolio     Eligible Portfolio
                                 Minimum Original      Property, Invested in    Property, Invested
Rating                            Issue Size of              any One           in any One Industry
   (1)                              Each Issue              Issuer (2)             Category(2)
- -------                          ------------------    ----------------------   --------------------
                                  ($ in millions)
<S>                                     <C>                       <C>                   <C>
Aaa/AAA ......................          $100                      10.0%                 50.0%
Aa/AA ........................          100                       10.0                  33.3
</TABLE>

(1)  In the event that a Corporate Bond has received a different rating from
     each of the Rating Agencies, the lower of the two ratings will be
     controlling. Rating designations include (+) or (-) modifiers to the rating
     where appropriate

(2)  The referenced percentages represent maximum cumulative totals for the
     related rating category and each lower rating category.

     The Board of Directors shall be authorized to adjust, modify, alter or
change from time to time the assets (and/or the characteristics thereof)
included within the definition of Corporate Bonds for purposes of determining
compliance with the AMPS Basic Maintenance Amount to encompass other assets
constituting, and/or other characteristics of, corporate debt obligations from
those set forth in these Articles Supplementary if the Board of Directors
determines and the Rating Agencies advise the Corporation in writing that the
change will not adversely affect their respective then-current ratings of the
AMPS.

     "Corporation" means The First Australia Prime Income Fund, Inc.

     "Cure Date" means the AMPS Basic Maintenance Cure Date or the 1940 Act Cure
Date, as the case may be.

     "Date of Original Issue" means, with respect to any share of AMPS, the date
on which the Corporation originally issues such share.

     "Deposit Securities" means Cash, U.S. Government Obligations and Short Term
Money Market Instruments. Except for purposes of determining compliance with the
AMPS Basic Maintenance Amount, each Deposit Security shall be deemed to have a
value equal to its principal or face amount payable at maturity plus any
interest payable thereon after delivery of such Deposit Security but only if
payable on or prior to the applicable payment date in advance of which the
relevant deposit is made.

                                       7

<PAGE>

         "Discount Factor" means, for any asset held by the Corporation, the
number set forth opposite each such type of asset in the following table or such
other factor required under the guidelines established by the Rating Agencies
from time to time (it being understood that any asset held by the Corporation
and not listed in the following table or as provided in writing by the Rating
Agencies shall have a Discounted Value of zero):

<TABLE>
<CAPTION>
                                                                            Moody's       S&P
                                                                            Discount    Discount
     Type of Eligible Portfolio Property                                    Factor       Factor
     -------------------------------------------------------------------- -----------    -------
<S>                                                                           <C>         <C>
     Cash and Short Term Money Market Instruments:                            1.00        1.00

     Australian Government Securities: with a current outstanding issue
          size less than A $100,000,000 and with a remaining term to
          maturity equal to or longer than 56 days from the date of
          determination                                                       1.85        1.60(4)

          with a current outstanding issue size of at least A
          $100,000,000 but less than or equal to $150,000,000 and with a
          remaining term to maturity equal to or longer than 56 days from
          the date of determination                                           1.85        1.50

          with a current outstanding issue size greater than A
          $150,000,000 and with a remaining term to maturity equal to or
          longer than 56 days from the date of determination                  1.60        1.50

          with any current outstanding issue size and with a remaining
          term to security shorter than 56 days from the date of
          determination                                                       1.00        1.00(4)

     Australian Semi-Government Securities:

          with a current outstanding issue size less than A $100,000,000 and
          with a remaining term to maturity equal to or longer than 56 days
          from the date of determination                                      1.85        1.65(4)
</TABLE>

                                       8

<PAGE>

<TABLE>
<S>                                                                              <C>         <C>
              with a current outstanding issue size of at least A $100,000,000
              but less than or equal to $150,000,000 and with a remaining term
              to maturity equal to or longer than 56 days from the date of
              determination                                                       1.85       1.55

              with a current outstanding issue size greater than A
              $150,000,000 and with a remaining term to maturity equal to or
              longer than 56 days from the date of determination                  1.60       1.55


              with any current outstanding issue size and with a remaining term
              to maturity shorter than 56 days from the date of determination     1.00       1.00(4)

         Bank Bills (with maturities of not greater than 56 days from the last
              Valuation Date at which the AMPS Basic Maintenance Amount
              was met)                                                            1.00       1.00

         Australian Currency                                                      1.43       1.75

         GNMA Certificates with fixed interest rates:                               (1)      1.30

         GNMA Certificates with adjustable interest rates:                        1.59       1.30

         FHLMC and FNMA Certificates with fixed interest rates:                     (1)      1.35

         FHLMC and FNMA Certificates with adjustable interest rates:              1.58       1.35

         FHLMC Multifamily Securities:                                              (1)      1.65

         FHLMC and FNMA Certificates with variable interest rates:                  (1)      1.35

         GNMA Graduated Payment Securities:                                      (1)(2)      1.50(3)

         U.S. Government Obligations having a remaining term to maturity of
           90 days or less:                                                       1.08       1.00
</TABLE>

                                       9

<PAGE>

<TABLE>
<S>                                                                              <C>          <C>
         U.S. Government Obligations having a remaining term to maturity of
              more than 90 days but not more than one year:                      1.08        1.25

         U.S. Government obligations having a remaining term to maturity of
              more than one year but not more than two years:                    1.14        1.25

         U.S. Government Obligations having a remaining term to maturity of
              more than two years but not more than three years:                 1.19        1.25

         U.S. Government obligations having a remaining term to maturity of
              more than three years but not more than four years:                1.25        1.25

         U.S. Government obligations having a remaining term to maturity of
              more than four years but not more than five years:                 1.31        1.25

         U.S. Government Obligations having a remaining term to maturity of
              more than five years but not more than seven years:                1.39        1.33

         U.S. Government Obligations having a remaining term to maturity of
              more than seven years but not more than 10 years:                  1.47        1.33

         U.S. Government Obligations having a remaining term to maturity of
              more than 10 years but not more than 15 years:                     1.53        1.35

         U.S. Government Obligations having a remaining term to maturity of
              more than 15 years but not more than 20 years:                     1.60        1.45
</TABLE>

                                       10

<PAGE>

<TABLE>
<S>                                                                              <C>         <C>
         U.S. Government Obligations having a remaining term to maturity of
              more than 20 years but not more than 30 years:                     1.61        1.45
</TABLE>

- -----------------------
(1)      The Discount Factor determined therefor in writing by the Rating
         Agencies.

(2)      Unless the Rating Agencies shall agree, GNMA Graduated Payment
         Securities with a coupon rate lower than 5% shall not be included in
         Eligible Portfolio Property.

(3)      A Discount Factor of 1.50 applies in the case of GNMA Graduated Payment
         Securities as to which the Corporation notifies the Auction Agent that
         scheduled principal payments are being made to holders; in the case of
         GNMA Graduated Payment Securities as to which the Fund notifies the
         Auction Agent that scheduled principal payments are not being made to
         holders, the Discount Factor shall be that which is determined in
         writing by the Rating Agencies.

(4)      Provided that the current outstanding issue size (as determined on each
         Quarterly Valuation Date) is equal to or greater than A $10,000,000.

         The Board of Directors shall have the authority to adjust, modify,
alter or change from time to time the initial Discount Factor as set forth above
applied to determine the Discounted Value of any item of Eligible Portfolio
Property or may specify from time to time a Discount Factor for any asset
constituting Eligible Portfolio Property if the Board of Directors determines
and each Rating Agency advises the Corporation in writing that the change or
specification will not adversely affect its then-current rating of the AMPS.

         "Discounted Value," with respect to any asset held by the Corporation,
means the quotient of the Market Value of such asset divided by the applicable
Discount Factor; provided that in no event shall the Discounted Value of any
asset constituting Eligible Portfolio Property as of any date exceed the unpaid
principal balance or face amount of such asset as of that date; provided further
that the Discounted Value of all Australian Government Securities, Australian
Semi-Government Securities and Bank Bills shall be further discounted by the
Discount Factor applicable to Australian Currency.

         "Dividend Coverage Amount," as of any date of determination, means:

                  (a)  the aggregate of the product, with respect to each series
                  of AMPS, of

                       (i)   the number of shares of AMPS of each series
                  outstanding on such date multiplied by $100,000,

                       (ii)  the Applicable Rate in effect as of such date for
                  each such series, and

                       (iii) a fraction, the numerator of which is the number of
                  days in the Dividend Period for such series ending on the next
                  Dividend Payment Date

                                       11

<PAGE>

                  (determined by including the first day thereof but excluding
                  the last day thereof) and the denominator of which is 360;

                      plus

                  (b) dividends projected to accumulate from the last dividend
         payment date with respect to each series of Preferred Stock, not
         including the AMPS, until the next dividend payment date for such
         series;

                      plus

                  (c) dividends accumulated but unpaid for any prior dividend
         periods with respect to any shares of Preferred Stock;

                      less

                  (d) the combined valve of any Dividend Coverage Assets
         irrevocably deposited by the Corporation for the payment of dividends
         on the AMPS and other Preferred Stock, if any.

         "Dividend Coverage Assets," as of any date of determination, means
Deposit Securities with maturity dates not later than the day preceding the next
Dividend Payment Date; provided that if the applicable date of determination is
a Dividend Payment Date, any Deposit Securities to be applied to the dividends
payable on the AMPS on such date shall not be included in Dividend Coverage
Assets.

         "Dividend Payment Date" means, with respect to each series of AMPS,
each date of payment of dividends on such series as provided in paragraph 3(b)
below.

         "Dividend Period" means, with respect to each series of AMPS, the
Initial Dividend Period for such series and each subsequent period commencing on
a Dividend Payment Date for such series and ending on and including the calendar
day prior to the next Dividend Payment Data for such series.

         "dollar" or "$" shall mean U.S. dollars. Amounts in Australian or New
Zealand dollars shall be converted to U.S. dollars at the rates reported by
Morgan Guaranty Trust Company for the date of determination or such other source
as shall have been approved in writing by the Rating Agencies.

         "Eligible Portfolio Property" means Australian Government Securities,
Australian Semi-Government Securities, Cash, Bank Bills, Australian Currency,
U.S. Government Obligations, Short Term Money Market Instruments, FNMA
Certificates, FHLMC Certificates, FHLMC Multifamily Securities, GNMA
Certificates, and GNMA Graduated Payment Securities; provided, (i) if the
determination is being made for Moody's, that not more than 20% in the aggregate
of the total Eligible Portfolio Property shall consist of Australian Government
Securities and/or Australian Semi-Government Securities with a current
outstanding issue size less than A $150,000,000 and (ii) if the determination is
being made for S&P that no Australian Government Securities or Australian
Semi-Government Securities contained in Eligible Portfolio

                                       12

<PAGE>

Property shall have a current outstanding issue size less than A $10,000,000 (as
determined on each Quarterly Valuation Date); provided further that, if the
determination is being made for S&P, not more than 10% of the total Eligible
Portfolio Property shall consist of Australian Semi-Government Securities issued
by any single issuer and that not more than 20% of the total Eligible Portfolio
Property shall consist of Australian Semi-Government Securities guaranteed by
any single state (except that in the case of each of Victoria and New South
Wales, such percentage shall be 25%). The Board of Directors shall have the
authority to specify from time to time other assets as Eligible Portfolio
Property if the Board of Directors determines and the Rating Agencies advise the
Corporation in writing that the specification will not adversely affect their
respective then-current ratings of the AMPS.

         "FANMAC Certificates" are securities issued by a trustee against
housing loans made through the New South Wales Department of Housing and consist
of a series of closed trusts or pools. The mortgage manager is the First
Australian National Mortgage Acceptance Corporation Ltd. ("FANMAC"). FANMAC is
owned partially by the Government of the State of New South Wales with the
remainder owned by other institutions. The Government of the State of New South
Wales has provided the FANMAC Trust with an assurance as to availability of
funds to meet payments. The securities have been rated by Australian Ratings and
S&P. FANMAC securities are subject to a call provision under which borrowers
(mortgagors) can repay early and the investors in a particular pool can be
repaid on a pro rata basis.

         "FHLMC" means the Federal Home Loan Mortgage Corporation created by
Title III of the Emergency Home Finance Act of 1970, and includes any successor
thereto.

         "FHLMC Certificate" means a mortgage participation certificate in
physical or book-entry form, the timely payment of interest on and the ultimate
collection of principal of which is guaranteed by FHLMC, and which evidences a
proportional undivided interest in, or participation interest in, specified
pools of fixed-, variable- or adjustable-rate, fully amortizing, level pay
mortgage loans with terms up to 30 years, secured by first liens on one- to
four-family residences.

         "FHLMC Multifamily Security" means a "Plan B Multifamily Security" in
physical or book-entry form, the timely payment of interest on and the ultimate
collection of principal of which is guaranteed by FHLMC, and which evidences a
proportional undivided interest in, or participation interest in, specified
pools of fixed-rate, fully amortizing, level pay mortgage loans with terms up to
30 years, secured by first-priority mortgages on multifamily residences
containing 5 or more units and which are designed primarily for residential use,
the inclusion of which in the Eligible Portfolio Property will not, in and of
itself, impair, or cause the APS to fail to retain, the rating assigned to such
AMPS by each of the Rating Agencies, as evidenced by a letter to such effect
from each of the Rating Agencies.

         "FNMA" means the Federal National Mortgage Association, a United States
Government-sponsored private corporation established pursuant to Title VIII of
the Housing and Urban Development Act of 1968, and includes any successor
thereto.

         "FNMA Certificate" means a mortgage pass-through certificate in
physical or book-entry form, the full and timely payment of principal of and
interest on which is guaranteed by FNMA,

                                       13

<PAGE>

and which evidences a proportional undivided interest in specified pools of
fixed-, variable- or adjustable-rate, fully amortizing, level pay mortgage loans
with terms up to 30 years, secured by first liens on 1 to 4 family residences.

         "GNMA" means the Government National Mortgage Association, and includes
any successor thereto.

         "GNMA Certificate" means a fully modified pass-through certificate in
physical or book-entry form, the full and timely payment of principal of and
interest on which is guaranteed by GNMA and which evidences a proportional
undivided interest in specified pools of fixed-, variable- or adjustable-rate,
fully amortizing, level pay mortgage loans with terms up to 30 years, secured by
first liens on 1 to 4 family residences.

         "GNMA Graduated Payment Security" means a fully modified pass-through
certificate in physical or book-entry form, the full and timely payment of
principal of and interest on which is guaranteed by GNMA, which obligation is
backed by the full faith and credit of the United States, and which evidences a
proportional undivided interest in specified pools of graduated payment mortgage
loans with terms up to 30 years, with payments that increase annually at a
predetermined rate for up to the first five or ten years of the mortgage loan
and that are secured by first-priority mortgages on one- to four-unit
residences; provided that such loans shall be past the graduated payment period.

         "GNMA Multifamily Security" means a fully modified pass-through
certificate in physical or book-entry form, the full and timely payment of
principal of and interest on which is guaranteed by GNMA, which obligation is
backed by the full faith and credit of the United States, and which evidences a
proportional undivided interest in specified pools of fixed-rate mortgage, level
pay loans with terms up to 30 years secured by first-priority mortgages on
multifamily residences, the inclusion of which in the Eligible Portfolio
Property will not, in and of itself, impair or cause the AMPS to fail to retain
the rating assigned to such AMPS by each of the Rating Agencies as evidenced by
a letter to such effect from each of the Rating Agencies.

         "Holder" means a Person in whose name one or more outstanding shares of
AMPS are registered on the Stock Books.

         "Independent Accountants" means the Corporation's independent
accountants, which shall be a nationally recognized accounting firm.

         "Industry Category" means, as to any Corporate Bond, any of the
industry categories set forth in the following table:

         1.   Aerospace and Defense


         2.   Airlines


         3.   Automobile/Auto Parts/Truck Manufacturing


         4.   Banks/Savings and Loans

                                       14

<PAGE>

         5.       Finance Companies/Consumer Credit


         6.       Financial Services - Brokerage/Syndication/Leasing


         7.       Building/Construction


         8.       Real Estate Development/REITS


         9.       Broadcasting - TV, Cable, and Radio


         10.      Publishing


         11.      Electronics/Computers


         12.      Electrical Equipment


         13.      Diversified/Conglomerate Services


         14.      Diversified/Conglomerate Manufacturing


         15.      Leisure/Amusement/Motion Pictures


         16.      Agricultural Chemicals


         17.      Chemicals


         18.      Food


         19.      Beverage


         20.      Tobacco


         2l.      Retail


         22.      Consumer Durable Goods/Home Furnishings


         23.      Grocery/Convenience Stores


         24.      Healthcare/Drugs/Hospital Supplies


         25.      Childcare/Toys


         26.      Personal Care Products/Cosmetics


         27.      Hotel/Gaming


         28.      Insurance Companies


         29.      Machinery

                                       15

<PAGE>

         30.      Metals/Mining


         31.      Oil/Natural Gas


         32.      Oil Services


         33.      Packaging/Containers


         34.      Paper/Forest Products/Printing


         35.      Pollution Control/Waste Removal


         36.      Electric Utilities


         37.      Other Utilities


         38.      Rail/Trucking/Overnight Delivery


         39.      Telephone/Communications


         40.      Textiles/Apparel


         41.      Transportation


         42.      Agricultural/Agricultural Equipment


         43.      Miscellaneous

         The Board of Directors shall have the authority to change the industry
categories applicable with respect to the Corporation from those set forth in
these Articles Supplementary if the Board of Directors determines and the Rating
Agencies advise the Corporation in writing that the change will not adversely
affect their respective then-current ratings of the AMPS.

         "Initial Dividend Payment Date" has the meaning set forth in paragraph
         3(b) below.

         "Initial Dividend Period" has the meaning specified in paragraph 3(b)
         below.

         "Investment Company Act" means the Investment Company act of 1940 (15
U.S. Code (S) 80 et seq.), as amended from time to time.

         "Lien" has the meaning set forth in paragraph 3(d)(iv) below.

         "Market Value" means the amount determined with respect to specific
assets of the Corporation in the manner set forth below:

                  (a) as to Australian Securities, the product of (i) the
         outstanding aggregate principal balance of the security as determined
         by the Corporation by any method which the Corporation believes
         reliable, as of the applicable Reporting Date and (ii) the dollar value
         of the lower of two bid prices per dollar of outstanding principal
         amount as of such

                                       16

<PAGE>

         applicable Reporting Date for such security, provided by two recognized
         securities dealers in Australia making a market in such security (as
         evidenced by such dealer's participation in the dealer panel for such
         security) to the Corporation or its agent, at least one of which shall
         be provided in writing or by telecopy, telex, other electronic
         transcription, computer obtained quotation reducible to written form or
         similar means (and in turn provided to the Corporation by any such
         means by such agent); plus, (i) if the determination is being made for
         Moody's, accrued interest to the date of determination if the next
         interest coupon on such security is due and payable within 56 days of
         such date of determination and (ii) if the determination is being made
         for S&P, accrued interest.

                  (b) the product of (i) as to GNMA Certificates, GNMA Graduated
         Payment Securities, FNMA Certificates, FHLMC Certificates and FHLMC
         Multifamily Securities, the aggregate unpaid principal amount of the
         mortgage loans evidenced by each such certificate or security, as the
         case may be, as of the close of business in New York City on the last
         Business Day prior to such date of determination and (ii) the lower of
         the bid prices for the same kind of certificate or, if not available,
         some other security having, as nearly as practicable, comparable
         interest rates and maturities, as quoted to the Corporation by two
         nationally recognized securities dealers, who are members of the
         National Association of Securities Dealers selected by the Corporation
         and making a market therein, with at least one such quotation in
         writing plus, (i) if the determination is being made for Moody's,
         accrued interest to the date of determination if the next interest
         coupon on such security is due and payable within 56 days of such date
         of determination and (ii) if the determination is using made for S&P,
         accrued interest;

                  (c) as to Australian Currency and Bank Bills and to Cash,
         demand deposits and bankers' acceptances included in Short Term Money
         Market Instruments, the face value thereof; and

                  (d) as to next Business Day repurchase agreements, the face
         value thereof plus accrued interest.

         Without amending the Articles of Incorporation, (i) the calculation of
         the Market Value of an asset constituting Eligible Portfolio Property
         may be changed to any method recognized by the Rating Agencies from
         that set forth in these Articles Supplementary and (ii) a method
         recognized by the Rating Agencies for calculating the Market Value of
         any asset identified as Eligible Portfolio Property may be specified if
         the Board of Directors determines and the Rating Agencies advise the
         Corporation in writing that the change or specification will not
         adversely affect their respective then-current ratings of the AMPS.

         "Maximum Applicable Rate" at any Auction will be the rate obtained by
multiplying the 30-day "AA" Composite Commercial Paper Rate on the date of such
Auction by the Applicable Percentage determined as set forth below based on the
lower of the credit rating or ratings assigned to the AMPS by Moody's and S&P
(or if Moody's or S&P or both shall not make such rating available, the
equivalent of either or both of such ratings by a Substitute Rating Agency or
two Substitute Rating Agencies or, in the event that only one such rating shall
be available, the percentage will be based on such rating).

                                       17

<PAGE>

                                                                    Applicable
                            Credit Rating                           Percentage

- ---------------------------------------- --------------------------------------
S&P                             Moody's
- ---                             -------

AA-or Above                     "aa3" or Above                         150%


A-to A+                         "a3" to "a1"                           160%


BBB- to BBB+                    "baa3" to "baa1"                       250%


Below BBB-                      Below "baa3"                           275%

         The Corporation shall take all reasonable action necessary to enable
S&P and Moody's to provide a rating for the AMPS. If either S&P or Moody's shall
not make such a rating available, or neither S&P nor Moody's shall make such a
rating available, Merrill Lynch, Pierce, Fenner & Smith Incorporated or its
respective affiliates and successors, after consultation with the Corporation,
shall select a nationally recognized securities rating agency or two nationally
recognized securities rating agencies to act as a Substitute Rating Agency or
Substitute Rating Agencies, as the case may be.

         "Minimum Liquidity Level is met" means, as of any date of
determination, that the aggregate Market Value of the Dividend Coverage Assets
equals or exceeds the Dividend Coverage Amount.

         "Moody's" means Moody's Investors Service, Inc. or its successors.

         "MMSs" are mortgage-backed securities issued against mortgage pools by
MGICA Securities Ltd., a wholly-owned subsidiary of AMP Society Ltd., an
Australian insurance company, and rated by Australian Ratings.

         "MTCs" are securities issued against specific mortgages by a trustee
and are similar to "pass-through" certificates. MTCs are issued on a continuous
basis, insured by Australian insurance companies against both mortgage default
and an early call, and rated by Australian Ratings.

         "New Zealand Securities" means those New Zealand government,
semi-government and other securities determined from time to time in writing by
the Rating Agencies.

         "NMMC Securities" National Mortgage Market Corporation Ltd. ("NMMC")
has issued both AUSSIE MACs, which are medium term bearer securities, and
National Mortgage Market Bonds. NMMC is a private company which is owned
partially by the Government of the State of Victoria and partially by private
institutions. Both AUSSIE MACs and National Mortgage Bonds are rated by
Australian Ratings.

         "Notice of Redemption" has the meaning specified in paragraph 5(a)
below.

                                       18

<PAGE>

         "Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer, the Secretary, any Assistant Treasurer, any Assistant
Secretary or Assistant Controller of the Corporation.

         "Officers' Certificate" means a certificate signed by an Officer of the
Corporation.

         "Other AMPS" means the auction market preferred stock or remarketed
preferred stock or similar adjustable rate preferred stock of the Corporation
other than the AMPS.

         "Other Permitted Assets" means Australian Corporate Bonds, Australian
Short Term Securities, New Zealand Securities, FANMAC Certificates, NMMC
Securities, MTCs, MMSs, ANNIE MAEs, GNMA Multifamily Securities and Corporate
Bonds.

         "Paying Agent" means Manufacturers Hanover Trust Company and its
successors or any other paying agent appointed by the Corporation to perform the
functions performed by the Paying Agent.

         "Person" means an individual, a corporation, a company, a voluntary
association, a partnership, a trust, an unincorporated organization or a
government or any agency, instrumentality or political subdivision thereof.

         "Preferred Stock" means the preferred stock of the Corporation
including the AMPS.

         "Portfolio Calculation" shall have the meaning specified in paragraph
7(b)(ii).

         "Portfolio Valuation Report" means a report executed by the Corporation
and delivered to the Auction Agent and the Rating Agencies with respect to the
valuation (in U.S. dollars) of the Eligible Portfolio Property, as described in
paragraph 7 hereof; provided, that all or any portion of any such report may be
prepared by the custodian for the Eligible Portfolio Property, EquitiLink
Australia Limited, The Prudential Insurance Company of America, Prudential
Mutual Fund Management, Inc. and/or EquitiLink International Management Limited;
provided further that such Portfolio Valuation Report may be delivered to the
Auction Agent and the Rating Agencies in summary form, however, the Corporation
shall retain a copy of the full Portfolio Valuation Report in its files and make
such report available to its Independent Accountants and the Rating Agencies
upon their request.

         "Projected Dividend Amount" for the AMPS and other Preferred Stock, if
any, shall mean, if the date of determination is a Valuation Date, the amount of
dividends, based on the number of shares of AMPS and other Preferred Stock, if
any, outstanding on such Valuation Date, projected to accumulate on such shares
from the next succeeding Dividend Payment Date or Dates until the 63rd day after
such Valuation Date, at the following dividend rates:

                  (a) if the Valuation Date is the Date of Original issue or a
         Dividend Payment Date, for the period beginning on (and including) the
         first following Dividend Payment Dates and ending on (and including)
         the 63rd day following such Valuation Date, the product of 2.40 and (x)
         the Maximum Applicable Rate on the Date of Original Issue (in the case
         of the Date of Original Issue) or (y) the Maximum Applicable Rate as of
         the last occurring Auction Date (in the case of any Dividend Payment
         Date); and

                                       19

<PAGE>

                  (b) if such Valuation Date is not the Date of Original issue
         or a Dividend Payment Date, (i) for the period beginning on (and
         including) the first following Dividend Payment Dates and ending on
         (but not including) the sooner of the second following Dividend Payment
         Date for such shares or the 64th day following such Valuation Date, the
         product of 2.40 and (x) the Maximum Applicable Rate on the Date of
         Original Issue (in the case of a Valuation Date occurring prior to the
         first Auction Date) or (y) the Maximum Applicable Rate on the last
         occurring Auction Date (in the case of any other Valuation Date), (ii)
         for the period, if any, beginning on (and including) the second
         following Dividend Payment Date and ending on (but not including) the
         64th day following such Valuation Date, the product of 2.40 and the
         rate specified in clause (x) or (y) above and (iii) for the period, if
         any, beginning on (and including) the third following Dividend Payment
         Date and ending on (but not including) the 64th day following such
         Valuation Date, the product of 2.94 and the rate specified in clause
         (x) or (y) above.

         If the date of determination is not a Valuation Date, then the
Projected Dividend Amount on such date of determination shall equal the
Projected Dividend Amount therefor on the immediately preceding Valuation Date,
adjusted to reflect any decrease in the number of shares of AMPS outstanding.
The calculation of the Projected Dividend Amount may be made on bases other than
those set forth above if the Board of Directors determines and the Rating
Agencies shall have advised the Corporation in writing that the revised
calculation of the Projected Dividend Amount would not adversely affect their
respective then-current ratings of the AMPS.

         "Purchaser's Letter" shall mean a letter in which a prospective
purchaser agrees, among other things, that ownership of shares of AMPS will be
maintained in book entry form by the Securities Depository for such prospective
purchaser's Agent Member, and which is required to be executed by each purchaser
of shares of AMPS.

         "Quarterly Valuation Date" means, so long as any shares of AMPS are
outstanding, the last Valuation Date of January, April, July and October of each
year, commencing April 1989.

         "Rating Agencies" means Moody's and S&P or their successors so long as
such rating agency is then rating the AMPS.

         "Reporting Date," with respect to any price referred to in the
definition of the Market Value of an item of Eligible Portfolio Property, shall
mean the date as of which the Market Value of such item of Eligible Portfolio
Property is to be determined or, if no such price is available as provided above
for such date, the next closest prior date as of which such price is so
available; provided, that no such price shall be deemed to be available as of
Reporting Date if such price is not available as of a date within one Business
Day next preceding the date as of which the determination of such Market Value
is to be made.

         "Securities Depository" means The Depository Trust Company and any
successor thereto.

         "Scheduled Payment Day" has the meaning specified in paragraph 3(b)
below.

                                       20

<PAGE>

         "Short Term Money Market Instruments" means the following kinds of
instruments, if on the date of purchase or other acquisition by the Corporation
of such instrument the remaining term to maturity thereof is not more than 30
days:

                  (a) demand deposits in, certificates of deposit of, and
         bankers' acceptances issued by, any depository institution, the
         deposits of which are insured by the Federal Deposit Insurance
         Corporation or the Federal Savings and Loan Insurance Corporation,
         provided that, at the time of the Corporation's investment therein, the
         commercial paper or other unsecured short-term debt obligations of such
         depository institution are rated Prime-1 by Moody's and A-1+ by S&P and
         are issued by institutions whose long-term debt obligations are rated
         at least A-2 by Moody's;

                  (b) repurchase obligations with respect to a U.S. Government
         Obligation, FNMA Certificate, FHLMC Certificate or GNMA Certificate
         entered into with a depository institution, (x) the deposits of which
         are insured by the Federal Deposit Insurance Corporation or the Federal
         Savings and Loan Insurance Corporation, (y) the commercial paper or
         other unsecured short-term debt obligations of which are rated Prime-1
         by Moody's and A-1+ by S&P, and (z) the long-term debt obligations of
         which are rated at least A-2 by Moody's, which securities must be
         repurchased within one Business Day from the date such repurchase
         obligation was entered into; and

                  (c) commercial paper rated at the time of the Corporation's
         investment therein Prime-1 by Moody's and A-1+ by S&P and issued by
         institutions whose long-term debt obligations are rated at least A-2 by
         Moody's.

         "S&P" means Standard & Poor's Corporation or any successor thereto.

         "Stock Books" means the stock transfer books of the Corporation
maintained by the Paying Agent with respect to the shares of AMPS.

         "Subsequent Dividend Period" has the meaning specified in paragraph
3(b) below.

         "Substitute Commercial Paper Dealers" means such substitute commercial
paper dealer or dealers as the Corporation may from time to time appoint or, in
lieu of any thereof, their respective affiliates or successors.

         "Substitute Rating Agency" and "Substitute Rating Agencies" mean a
nationally recognized securities rating agency or two nationally recognized
securities rating agencies, respectively, selected by Merrill Lynch, Pierce,
Fenner & Smith Incorporated, or its affiliate or successor, in consultation with
the Corporation to act as the substitute rating agency or substitute rating
agencies, as the case may be, to determine the credit ratings of the shares of
AMPS.

         "Type I Corporate Bonds" as of any date means Corporate Bonds whose
Moody's rating is Aaa and whose S&P rating is AAA as of such date.

         "Type II Corporate Bonds" as of any date means Corporate Bonds whose
Moody's rating is at least Aa and whose S&P rating is at least AA+ to AA- as of
such date.

                                       21

<PAGE>

         "U.S. Government Obligations" means direct obligations of the United
States, provided that such direct obligations are entitled to the full faith and
credit of the United States and that any such obligations, other than United
States Treasury Bills, provide for the periodic payment of interest and the full
payment of principal at maturity or call or redemption.

         "Valuation Date" means each Friday of each month or, if such day is not
a Business Day, the next preceding Business Day, provided, that the first
Valuation Date may occur on any other date established by the Corporation;
provided, further, that such date shall not be earlier than 4 Business Days
prior to, and not later than, the Date of Original Issue.

         "Voting Period" has the meaning specified in paragraph 6(b) below.

         "1940 Act AMPS Asset Coverage Ratio" means, as of the date of
determination, the ratio of the Fund's net assets to its senior securities
representing indebtedness plus the liquidation value of its Preferred Stock,
including the shares of AMPS.

         "1940 Act AMPS Asset Coverage Requirement" means the requirement that
the Corporation maintain, with respect to shares of AMPS, as of the last Friday
of each month in which any shares of AMPS are outstanding, asset coverage of at
least 200% with respect to senior securities representing indebtedness plus the
liquidation value of its Preferred Stock, including the shares of AMPS (or such
other asset coverage as may in the future be specified in or under the
Investment Company Act as the minimum asset coverage for senior securities which
are stock of a closed-end investment company as a condition of paying dividends
on its common stock).

         "1940 Act Cure Date," with respect to the failure by the Corporation to
maintain the 1940 Act AMPS Asset Coverage Requirement (as required by paragraph
7(a) hereof) as of the last Valuation Date of each month, means the last
Valuation Date of the following month.

         2. Fractional Shares. No fractional shares of AMPS shall be issued.

         3. Dividends.

            (a) Holders of shares of AMPS shall be entitled to receive, when,
         as, and if declared by the Board of Directors, out of funds legally
         available therefor, cumulative cash dividends at the Applicable Rate
         per annum (determined as set forth below) payable on the respective
         dates set forth below.

            (b) Dividends on the shares of AMPS shall accumulate from the Date
         of Original Issue. Accumulated dividends shall be payable commencing on
         February 14, 1989 (the 27th day after the Date of Original Issue), with
         respect to the Auction Market Preferred Stock, Series A; on February
         22, 1989 (the 35th day after the Date of Original Issue), with respect
         to the Auction Market Preferred Stock, Series B; and on February 28,
         1989 (the 41st day after the Date of Original Issue), with respect to
         the Auction Market Preferred Stock, Series C (hereinafter, with respect
         to a series of AMPS such date is referred to as the "Initial Dividend
         Payment Date") and on each day thereafter which is the last day of each
         succeeding 28-day period after such date. If any such last day (the
         "Scheduled Payment Day") is not a Business Day or, unless the
         Securities Depository

                                       22

<PAGE>

         shall make dividend payments in same-day funds, the day succeeding the
         Scheduled Payment Day is not a Business Day, dividends payable on such
         Scheduled Payment Day shall be paid on the first Business Day
         succeeding such Scheduled Payment Day that is next succeeded by a day
         which is also a Business Day; provided, however, that if the Securities
         Depository shall make dividend payments with respect to the shares of
         AMPS in same-day funds, such next succeeding day need not be a Business
         Day. Any date on which a dividend on the AMPS is payable pursuant to
         this paragraph 3(b) is herein called a "Dividend Payment Date". The
         period beginning on (and including) the Date of Original Issue and
         ending on (but not including) the Initial Dividend Payment Date for a
         series is referred to herein as the "Initial Dividend Period" for such
         series. Each successive period commencing on, and including, the
         Dividend Payment Date for the previous Dividend Period and ending on
         and including the calendar day preceding the next succeeding Dividend
         Payment Date is referred to herein as a "Subsequent Dividend Period"
         and the Initial Dividend Period and each Subsequent Dividend Period
         together are sometimes referred to herein as "Dividend Periods". The
         record date for the payment of dividends on each series of AMPS will be
         the Auction Date for such series immediately preceding the Dividend
         Payment Date.

                  (c) (i) The Applicable Rate for the Auction Market Preferred
                  Stock, Series A shall be 9.4% per annum for the Initial
                  Dividend Period; for the Auction Market Preferred Stock,
                  Series B shall be 9.4% per annum for the Initial Dividend
                  Period; and for the Auction Market Preferred Stock, Series C
                  shall be 9.4% per annum for the Initial Dividend Period. For
                  the purpose of calculating the rate of dividends per annum
                  payable on shares of AMPS (the "Applicable Rate") for each
                  Subsequent Dividend Period the Corporation shall enter into an
                  agreement with the Auction Agent (the "Auction Agent
                  Agreement"). The Applicable Rate on the shares of AMPS for
                  each Subsequent Dividend Period shall be determined by the
                  Auction Agent in accordance with the Auction Agent Agreement,
                  which shall provide that the Auction Agent will follow the
                  Auction Procedures described in paragraph 8 hereof to
                  determine the Applicable Rate. In the event there is no
                  Auction Agent on the Business Day prior to the first day of a
                  Dividend Period, the Applicable Rate for such Dividend Period
                  shall be equal to the Maximum Applicable Rate that could have
                  resulted pursuant to the Auction Procedures, as determined by
                  the Corporation, on such Business Day. If no Auction is held
                  on any Auction Date for any other reason, the Applicable Rate
                  for the Dividend Period beginning on the Business Day
                  following such Auction Date shall be equal to the Maximum
                  Applicable Rate that could have resulted pursuant to the
                  Auction Procedures, as determined by the Auction Agent (or, if
                  there is no Auction Agent, by the Corporation), on such
                  Business Day. The Corporation shall exercise its best efforts
                  to maintain an Auction Agent pursuant to an agreement
                  containing terms no less favorable to the Corporation than the
                  terms of the Auction Agent Agreement.

                          (ii) The amount of dividends per share payable on
                  shares of AMPS for each Dividend Period or part thereof shall
                  be determined by the Corporation and shall be an amount equal
                  to $100,000 per share of AMPS multiplied by the product of (1)
                  the Applicable Rate for such Dividend Period and

                                       23

<PAGE>

                  (2) a fraction the numerator of which shall be the actual
                  number of days in such Dividend Period or part thereof and the
                  denominator of which shall be 360. All dollar amounts used in
                  or resulting from such calculations will be rounded to the
                  nearest cent (with 0.5 cents being rounded up).

                         (iii) If the Corporation fails to deposit, in same-day
                  funds, with the Paying Agent by 12:00 noon, New York City
                  time, (A) on any Dividend Payment Date for any series of AMPS
                  an amount sufficient to pay the dividends (whether or not
                  earned or declared) payable on such Dividend Payment Date or
                  (B) on any redemption date for any series of AMPS an amount
                  sufficient to redeem on such date fixed for redemption the
                  shares of such series as to which notice of redemption has
                  been given (including an amount equal to dividends thereon,
                  whether or not earned or declared, accumulated but unpaid to
                  such redemption date), then, in either case, beginning with
                  the Dividend Payment Date or redemption date, as the case may
                  be, on which such failure occurs and continuing until the
                  Dividend Payment Date that is or immediately follows the date
                  the Corporation remedies such failure as provided in the third
                  sentence of this paragraph, the Applicable Rate for each
                  Dividend Period for the series to which such Dividend Payment
                  Date or such redemption date relates shall be equal to 275% of
                  the "AA" Composite Commercial Paper Rate in effect on the
                  second Business Day preceding the first day of such Dividend
                  Period. Notwithstanding the foregoing, if the Corporation
                  remedies such failure by depositing, in same-day funds, with
                  the Paying Agent by 12:00 noon, New York City time, on the
                  first, second or third Business Day following such Dividend
                  Payment Date or date fixed for redemption, as the case may be,
                  an amount equal to (x) the unpaid dividends or unpaid
                  redemption payments plus (y) a late charge computed at an
                  annual rate of 275% of the "AA" Composite Commercial Paper
                  Rate in effect on the second Business Day preceding the date
                  of such failure applied to the amount of such unpaid dividends
                  or unpaid redemption payments based on the number of days
                  elapsed from the applicable Dividend Payment Date or date
                  fixed for redemption to the date on which funds for such
                  dividends or redemption payments are deposited with the Paying
                  Agent divided by 360, then the Applicable Rate for the
                  then-current Dividend Period will be that established on the
                  immediately preceding Auction Date. If, subsequent to the
                  three-Business Day grace period referred to in the preceding
                  sentence, the Corporation remedies such failure to pay
                  dividends or the redemption payments by depositing with the
                  Paying Agent all amounts required by the first sentence of
                  this paragraph plus all dividends (computed at the rate
                  specified in the first sentence of this paragraph) accumulated
                  (whether or not earned or declared) but unpaid to the Dividend
                  Payment Date that is or immediately precedes the date of such
                  remedy, then the Applicable Rate in respect of each Dividend
                  Period commencing after such remedy will be determined in
                  accordance with the Auction Procedures until such time as
                  there is another failure to pay either dividends or the
                  redemption payments with respect to shares of AMPS of such
                  series. In the event of any such remedy described in the
                  preceding sentence, the Corporation will, not more than 30 nor
                  less than five Business Days prior to the next Action Date for
                  such series, notify

                                       24

<PAGE>

                  the Auction Agent, all Holders and the Securities Depository
                  in writing of the date of the next Auction.

                  (d) (i) The Corporation will not issue any other series or
                  class of stock which is senior to the AMPS. The Corporation
                  will not issue any series or class of stock which is on a
                  parity with the shares of AMPS unless it has been advised in
                  writing by the Rating Agencies that such issuance will not
                  adversely affect their respective then-current ratings of the
                  AMPS. No Holders of shares of AMPS shall be entitled to any
                  dividends, whether payable in cash, property or stock, in
                  excess of full cumulative dividends, as provided in this
                  paragraph 3, on shares of AMPS. No interest, or sum of money
                  in lieu of interest, shall be payable in respect of any
                  dividend payments on any shares of AMPS that may be in
                  arrears.

                         (ii)  For so long as shares of AMPS are outstanding,
                  the Corporation shall not declare, pay or set apart for
                  payment any dividend or other distribution in respect of the
                  Common Stock or any other stock of the Corporation ranking
                  junior to the shares of AMPS as to dividends or upon
                  liquidation, or call for redemption, redeem, purchase or
                  otherwise acquire for consideration any shares of Common Stock
                  or any other stock of the Corporation ranking junior to the
                  shares of AMPS as to dividends or upon liquidation (except by
                  conversion into or exchange for stock of the Corporation
                  ranking junior to the shares of AMPS as to dividends and upon
                  liquidation), unless, in each case, immediately thereafter,
                  (A) the AMPS Basic Maintenance Amount would be met, (B) the
                  1940 Act AMPS Assets Coverage Requirement would be met, (C)
                  all mandatory redemptions of shares of Preferred Stock
                  pursuant to paragraph 5(b) hereof have been completed, (D) the
                  Minimum Liquidity Level would be met and (E) all accumulated
                  and unpaid dividends for all past dividend periods for all
                  Preferred Stock shall have been or are contemporaneously paid
                  in full (or declared and sufficient Deposit Securities have
                  been set apart for their payment). Prior to the payment of any
                  such dividend or other distribution, the Corporation will
                  provide the Auction Agent and the Rating Agencies with a
                  Portfolio Valuation Report (which may be the regular weekly
                  report) and a certificate demonstrating compliance with the
                  foregoing conditions.

                         (iii) Any dividend payment made on the shares of AMPS
                  shall first be credited against the dividends accumulated with
                  respect to the earliest Dividend Period for which dividends
                  have not been paid.

                         (iv)  For so long as any shares of AMPS are
                  outstanding, the Corporation shall not create, incur or suffer
                  to exist, or agree to create, incur or suffer to exist, or
                  consent to cause or permit in the future (upon the happening
                  of a contingency or otherwise) the creation, incurrence or
                  existence of any material lien, mortgage, pledge, charge,
                  security interest, security agreement, conditional sale or
                  trust receipt or other material encumbrance of any kind
                  (collectively "Liens") upon any of its Eligible Portfolio
                  Property, except for (A) Liens the validity of which are being
                  contested in good faith by appropriate proceedings,

                                       25

<PAGE>

                  (B) Liens for taxes that are not then due and payable or that
                  can be paid thereafter without penalty, (C) Liens to secure
                  payment for services rendered by the Auction Agent in
                  connection with the AMPS and (D) Liens otherwise incurred in
                  connection with borrowings made in the ordinary course of
                  business in accordance with the Corporation's stated
                  investment objective, policies and restrictions.

                  (e) Not later than 12:00 noon, New York City time, on the
         Business Day next preceding each Dividend Payment Date, the Corporation
         shall deposit with the Paying Agent Deposit Securities constituting
         immediately available funds in an amount sufficient to pay the
         dividends that are payable on such Dividend Payment Date. The
         Corporation may direct the Paying Agent with respect to the investment
         of any such Deposit Securities, provided that the proceeds of any such
         investment will be available at the opening of business on such
         Dividend Payment Date in immediately available funds.

                  (f) Dividends in arrears for any past Dividend Period may be
         declared and paid to the Holders at any time, without reference to any
         regular Dividend Payment Date.

                  (g) For dividends paid in respect of any fiscal year of the
         Corporation, any dividends declared on the AMPS shall be paid first
         from earned surplus, to the extent thereof, and then from any other
         legally available source, and any dividends declared on the Common
         Stock shall be paid from earned surplus or other sources to the extent
         not distributed to the Existing Holders. Further, for dividends paid in
         respect of any fiscal year of the Corporation, any dividends declared
         on AMPS shall be paid from current and accumulated earnings and profits
         (within the meaning of the Internal Revenue Code of 1986, as amended
         (the "Code")) to the extent available, pro rata from investment company
         taxable income (as that term is defined in section 852(b)(2) of the
         Code and before taking into account the deduction for dividends paid)
         and from net capital gain (as that term is defined in Code section
         1222(11)). To the extent current and accumulated earnings and profits
         remain after satisfying the Existing Holders, dividends paid in respect
         of any fiscal year of the Corporation declared on the Common Stock
         shall be paid from current and accumulated earnings and profits, from
         investment company taxable income (before the deduction for dividends
         paid) and from net capital gain, to the extent not distributed to
         Existing Holders. Distributions of net capital gain of the Corporation
         for a taxable year to Existing Holders and holders of Common Stock
         shall be designated by the Corporation as capital gain dividends (under
         Code section 852(b)(3)) in the same proportion as net capital gain of
         the Corporation for the taxable year in respect of which the
         distribution is made is distributed to such Existing Holders and
         holders of Common Stock. Designations of foreign taxes deemed paid by
         stockholders (pursuant to Code section 853) shall be made in the same
         proportion as income subject to such taxes is distributed to
         stockholders for the taxable year in respect of which the distribution
         is made. The Board of Directors or any duly authorized Committee
         thereof may change the allocation of income and/or designations
         described herein if, in its sole judgment, it deems it advisable to do
         so for the purpose of maintaining the qualification of the Corporation
         as a regulated investment company for federal income tax purposes
         and/or to avoid tax consequences which, in the sole judgment of the
         Board of Directors, would be adverse to the Corporation or its
         stockholders.

                                       26

<PAGE>

         4.       Liquidation Rights

                  (a) In the event of any liquidation, dissolution or winding up
         of the Corporation, whether voluntary or involuntary, the Holders of
         shares of AMPS shall be entitled to receive out of the assets of the
         Corporation available for distribution to stockholders, but before any
         distribution or payment shall be made in respect of the Common Stock or
         any other stock of the Corporation ranking junior to the AMPS as to
         liquidation payments, a liquidation distribution in the amount of
         $100,000 per share, plus an amount equal to all unpaid dividends
         accumulated to and including the date fixed for such distribution or
         payment (whether or not earned or declared by the Corporation, but
         excluding interest thereon), but such Holders shall be entitled to no
         further participation in any distribution or payment in connection with
         any such liquidation, dissolution or winding up.

                  (b) If, upon any such liquidation, dissolution or winding up
         of the Corporation, whether voluntary or involuntary, the assets of the
         Corporation available for distribution among the Holders of all
         outstanding shares of AMPS shall be insufficient to permit the payment
         in full to such Holders of the amounts to which they are entitled, then
         such available assets shall be distributed among the Holders of shares
         of Preferred Stock, including the AMPS, ratably in any such
         distribution of assets according to the respective amounts which would
         be payable on all such shares if all amounts thereon were paid in full.

                  (c) Neither the consolidation or merger of the Corporation
         with or into any other corporation or corporations, nor the sale, lease
         or exchange by the Corporation of all or substantially all of its
         property and assets, shall be deemed to be a voluntary or involuntary
         liquidation, dissolution or winding up of the Corporation for purposes
         of this paragraph 4.

         5.       Redemption.

         Shares of the AMPS shall be redeemable by the Corporation as provided
         below:

                  (a) To the extent permitted under the Investment Company Act
         and Maryland law, the Corporation at its option, upon filing with the
         Commission, mailing and publishing a Notice of Redemption as described
         in paragraph 5(e) hereof, may redeem shares of AMPS, in whole or in
         part, on the next succeeding scheduled Dividend Payment Dates for those
         shares of AMPS called for redemption, out of funds legally available
         therefor, at a redemption price equal to $100,000 per share plus an
         amount equal to dividends thereon (whether or not earned or declared)
         accumulated to but unpaid through the date fixed for redemption. The
         Corporation may not give a Notice of Redemption relating to an optional
         redemption as described in this paragraph unless, at the time of giving
         such Notice of Redemption, the Corporation has available Deposit
         Securities with maturity or tender dates not later than the day
         preceding the applicable redemption date and having a value not less
         than the amount due to Holders of shares of AMPS by reason of the
         redemption of their shares on such redemption date.

                                       27

<PAGE>

                  (b) The Corporation shall redeem, at a redemption price of
         $100,000 per share plus accumulated but unpaid dividends through the
         date of redemption, shares of AMPS to the extent permitted under the
         Investment Company Act and Maryland law, on the next succeeding
         scheduled Dividend Payment Dates applicable to those shares of AMPS
         called for redemption, if the Corporation fails to maintain the AMPS
         Basic Maintenance Amount or 1940 Act AMPS Asset Coverage Requirement,
         as the case may be, and such failure is not cured on or before the Cure
         Date as reflected in a Portfolio Valuation Report delivered to the
         Auction Agent and the Rating Agencies and confirmed by the
         Corporation's Independent Accountants. The number of shares to be
         redeemed shall be equal to the lesser of (i) the minimum number of
         shares of AMPS the redemption of which, if deemed to have occurred
         immediately prior to the opening of business on the Cure Date, together
         with all shares of other Preferred Stock subject to redemption or
         retirement, would result in the satisfaction of the AMPS Basic
         Maintenance Amount or the 1940 Act AMPS Asset Coverage Requirement, as
         the case may be, on such Cure Date (provided that, if there is no such
         minimum number of shares the redemption of which would have such
         result, all shares of AMPS together with all shares of other Preferred
         Stock subject to redemption or retirement then outstanding shall be
         redeemed), and (ii) the maximum number of shares of AMPS together with
         all shares of other Preferred Stock subject to redemption or retirement
         that can be redeemed out of funds expected to be legally available
         therefor on such redemption date. In determining the number of shares
         of AMPS required to be redeemed in accordance with the foregoing, the
         Corporation shall allocate the amount required to achieve (x) the 1940
         Act AMPS Asset Coverage Requirement, pro rata among the AMPS and any
         other Preferred Stock and (y) the AMPS Basic Maintenance Amount, pro
         rata, among the AMPS and any Other AMPS. The Corporation shall effect
         such redemption not later than 45 days after such Cure Date, except
         that if the Corporation does not have funds legally available for the
         redemption of all the required number of shares of AMPS which are
         subject to mandatory redemption, the next Dividend Payment Date with
         respect to any share to be redeemed is more than 45 days after such
         Cure Date or the Corporation otherwise is unable to effect such
         redemption on or prior to such Cure Date, the Corporation shall redeem
         those shares of AMPS which it was unable to redeem on the earliest
         practicable date on which it is able to effect such redemption.

                  (c) Notwithstanding the other provisions of this paragraph 5,
         no shares of AMPS may be redeemed other than as specified below, unless
         all accumulated and unpaid dividends on all outstanding shares of AMPS
         and other Preferred Stock for all past dividend periods shall have been
         or are contemporaneously paid or declared and Deposit Securities
         maturing on or prior to the date fixed for redemption are set apart for
         the payment of such dividends; provided, however, that the Corporation
         without regard to such limitations, (x) may redeem, purchase or
         otherwise acquire shares of AMPS (A) with other Preferred Stock as a
         whole, pursuant to an optional redemption or (B) pursuant to a purchase
         or exchange offer made for all of the outstanding shares of AMPS and
         other Preferred Stock, and (y) shall redeem, purchase or otherwise
         acquire shares of AMPS with other Preferred Stock as a whole pursuant
         to a mandatory redemption, to the extent permitted under the Investment
         Company Act, Maryland law and the Articles of Incorporation.

                                       28

<PAGE>

                  (d) If fewer than all the outstanding shares of AMPS are to be
         redeemed, the shares to be redeemed shall be identified by the Board of
         Directors by lot, on a pro rata basis, or in such other manner as will
         not discriminate unfairly against any record holder of shares of such
         AMPS.

                  (e) Whenever shares of AMPS are to be redeemed, the
         Corporation shall, not fewer than 30 days prior to the applicable
         redemption date, file with the Commission as required under the
         Investment Company Act, a written notice of redemption (a "Notice of
         Redemption"). The Notice of Redemption shall be (i) mailed by
         first-class mail, postage prepaid, to each holder of shares of AMPS to
         be redeemed, and (ii) published by the Corporation in an Authorized
         Newspaper, not fewer than 15 nor more than 20 days prior to such
         redemption date. Not fewer than five nor more than 10 days before such
         mailing date, the Corporation shall mail the Notice of Redemption to
         the Paying Agent. Each Notice of Redemption shall state (A) the series
         of AMPS to be redeemed, (B) the redemption date, (C) the redemption
         price, (D) the place or places where such AMPS are to be redeemed, (E)
         that dividends on the shares to be redeemed will cease to accumulate on
         such redemption date, (F) the provision of these Articles Supplementary
         under which the redemption is being made, (G) if less than all the
         outstanding shares of AMPS are to be redeemed, the number of shares to
         be redeemed and the basis upon which the shares to be redeemed are to
         be selected and (H) the CUSIP number or numbers of the shares to be
         redeemed. No defect in the Notice of Redemption or in the mailing or
         publication thereof shall affect the validity of the redemption
         proceedings, except as required by applicable law.

                  (f) On each redemption date, the Securities Depository shall
         surrender the certificate evidencing the shares of AMPS. Each Holder of
         shares of AMPS that were called for redemption shall then be entitled
         to receive payment of the redemption price for each share. If fewer
         than all of the shares represented by such certificate are to be
         redeemed, the Corporation shall issue a new certificate for the shares
         not redeemed.

                  (g) If the Corporation shall give a Notice of Redemption, then
         by 12:00 noon, New York City time, on the Business Day next preceding
         the date fixed for redemption the Corporation shall deposit with the
         Paying Agent Deposit Securities constituting immediately available
         funds in an amount sufficient to redeem the shares of AMPS to be
         redeemed. In such event the Corporation shall give the Paying Agent
         irrevocable instructions and authority to pay the redemption price to
         the holders of the shares of AMPS called for redemption upon the
         redemption date. The Corporation may direct the Paying Agent with
         respect to the investment of any Deposit Securities so deposited
         provided that the proceeds of any such investment will be available at
         the opening of business on such redemption date. The Deposit Securities
         deposited with the Paying Agent pursuant to the immediately preceding
         sentence and the shares of AMPS to be redeemed and funds deposited with
         a paying agent with irrevocable instructions to pay the redemption
         price with respect to any other shares of Preferred Stock for which a
         notice of redemption has been duly given shall be excluded from the
         calculation of the AMPS Basic Maintenance Amount, the 1940 Act AMPS
         Asset Coverage Ratio, and the 1940 Act AMPS Asset Coverage Requirement.
         Upon the date of such deposit, or if no such deposit is made, then upon
         such date fixed for redemption (unless the Corporation

                                       29

<PAGE>

         shall default in making payment of the redemption price), all rights of
         the Holders of the shares of AMPS so called for redemption shall cease
         and terminate except the right of the Holders thereof to receive the
         redemption price thereof inclusive of accumulated but unpaid dividends,
         but without any interest, and such shares shall no longer be deemed
         outstanding for any purpose. The Corporation shall be entitled to
         receive, promptly after the date fixed for redemption, any cash in
         excess of the aggregate redemption price of the shares of AMPS called
         for redemption on such date and any remaining Deposit Securities. Any
         assets so deposited which are unclaimed at the end of one year from
         such redemption date shall, to the extent permitted by law, be repaid
         to the Corporation, after which the Holders of the shares of AMPS so
         called for redemption shall look only to the Corporation for payment
         thereof. The Corporation shall be entitled to receive, from time to
         time after the date fixed for redemption, any interest on the Deposit
         Securities so deposited.

              (h) Shares of AMPS that have been redeemed, purchased or otherwise
         acquired by the Corporation may not be reissued, shall not be deemed
         outstanding, and shall be retired and cancelled. Shares with respect to
         which a Notice of Redemption has been given as provided in paragraph
         5(e) above shall not be deemed outstanding for purposes of the Auction
         Procedures set forth in paragraph 8 hereof.

              (i) In addition to redemption rights expressly established under
         these Articles Supplementary, the Corporation may repurchase shares of
         AMPS to the extent nor or hereafter permitted by the laws of the State
         of Maryland and by the Investment Company Act.

              (j) If the Corporation shall not have funds legally available for
         the redemption of all the shares of the AMPS to be redeemed on any
         redemption date (or is otherwise legally unable to effect such
         redemption), the Corporation shall redeem on such redemption date the
         number of shares of AMPS as it shall be legally able to redeem, ratably
         from each Existing Holder whose shares are to be redeemed and the
         remainder of the shares of the AMPS required to be redeemed shall be
         redeemed, as provided in paragraph 5(b) above.

         6.   Voting Rights.

              (a) General. Each holder of AMPS shall be entitled to one vote for
         each share held on each matter on which the holders of the AMPS are
         entitled to vote and, except as otherwise provided in the Articles of
         Incorporation, these Articles Supplementary or by law, the holders of
         the AMPS and the Common Stock shall vote together as one class on all
         matters submitted to the stockholders; provided, however, that at any
         meeting of stockholders of the Corporation at which directors are to be
         elected, the holders of Preferred Stock of all series, voting
         separately as a single class, shall be entitled to elect two members of
         the Board of Directors, and the holders of Common Stock, voting
         separately as a single class, shall be entitled to elect the balance of
         the members of the Board of Directors; provided, further, however, that
         the identity of the two directors representing the holders of
         outstanding shares of Preferred Stock may be designated by

                                       30

<PAGE>

         the Board of Directors until the first meeting of the Corporation's
         stockholders at which holders of shares of Preferred Stock shall be
         entitled to vote for the election of directors.

              (b)  Right to Elect Majority of Board of Directors.

                   (i) During any period in which (A) dividends on any
              outstanding Preferred Stock of any series shall be due and unpaid
              in an amount equal to two full years' dividends; or (B) the
              Corporation fails to redeem any shares of Preferred Stock that are
              required to be redeemed pursuant to paragraph 5(b) above or that
              would have been so redeemed but for the requirement that
              redemption be made out of legally available funds, or (C) holders
              of any other shares of Preferred Stock are entitled to elect a
              majority of the directors of the Corporation (the "Voting
              Period"), the number of directors constituting the Board of
              Directors shall automatically be increased by the smallest number
              that, when added to the two directors elected by the holders of
              Preferred Stock pursuant to paragraph 6(a) above, will constitute
              a majority of the total number of directors so increased; and at a
              special meeting of stockholders, which shall be called and held as
              soon as practicable, and at all subsequent meetings at which
              directors are to be elected, the holders of Preferred Stock of all
              series voting separately as a single class shall be entitled to
              elect the smallest number of additional directors of the
              Corporation who, together with the two directors elected by the
              holders of Preferred Stock pursuant to paragraph 6(a) above, will
              constitute a majority of the total number of directors of the
              Corporation so increased. The terms of office of the persons who
              are directors at the time of that election shall continue.

                       (ii) If the Corporation thereafter shall pay, or declare
              and set apart for payment, in full all dividends payable on all
              outstanding shares of Preferred Stock of all series for all past
              dividend periods and if the Corporation has remedied any failure
              to redeem shares of Preferred Stock that are required to be
              redeemed pursuant to paragraph 5(b) above, and holders of no other
              series of Preferred Stock are entitled to elect a majority of the
              directors of the Corporation the Voting Period and the voting
              rights stated in this paragraph 6(b) shall cease, and the terms of
              office of all additional directors elected by the holders of
              Preferred Stock (but not of the directors elected by the holders
              of Common Stock or the two directors regularly elected by the
              holders of Preferred Stock as provided in paragraph 6(a) shall
              terminate automatically, subject always, however, to the revesting
              of such voting rights in the holders of shares of Preferred Stock
              upon the further occurrence of any of the events described in
              clauses (A), (B) or (C) of paragraph 6(b)(i).

                   (c) Voting Procedures.

                       (i)  As soon as practicable after the accrual of any
              right of the holders of shares of Preferred Stock to elect
              directors pursuant to paragraph 6(b), the Corporation shall call a
              special meeting of, and mail a notice to, such holders of shares
              of Preferred Stock. Such special meeting shall be held not less
              than 10 nor more than 80 days after the date of mailing of such
              notice. If the Corporation

                                       31

<PAGE>

              fails to send such notice, the meeting may be called by any holder
              of shares of Preferred Stock on like notice. The record date for
              determining the holders of shares of Preferred Stock entitled to
              notice of and to vote at such special meeting shall be the close
              of business on the fifth Business Day preceding the day on which
              such notice is given. At any such special meeting and at each
              meeting at which directors are elected held during a Voting
              Period, the holders of shares of Preferred Stock, voting together
              as a class (to the exclusion of the holders of shares of Common
              Stock), shall be entitled to elect the number of directors
              prescribed in paragraph 6(b) above on a one-vote-per-share basis.
              At any such meeting or adjournment thereof in the absence of a
              quorum, a majority of the holders of shares of Preferred Stock,
              present in person or by proxy or any officer of the Corporation
              present entitled to preside or act as Secretary of such meeting
              shall have the power to adjourn the meeting without further notice
              to a date not more than 120 days after the original record date
              for such meeting.

                       (ii)  For purposes of determining any rights of the
              holders of shares of Preferred Stock to vote on any matter,
              whether such right is created by the Articles of Incorporation,
              these Articles Supplementary by statute or otherwise, no holder of
              shares of Preferred Stock shall be entitled to vote and no share
              of Preferred Stock shall be deemed to be "outstanding" for the
              purpose of voting or determining the number of shares required to
              constitute a quorum, if prior to or concurrently with the time of
              determination of shares entitled to vote or shares deemed
              outstanding for quorum purposes, as the case may be, such share
              shall have been redeemed or called for redemption as provided in
              paragraph 5(e) and sufficient Deposit Securities with maturities
              on or prior to the redemption date shall have been deposited in
              trust with the Paying Agent to effect such redemption.

                       (iii) The directors elected by the holders of shares of
              Preferred Stock pursuant to paragraph 6(b) shall (subject to the
              provisions of any applicable law) be subject to removal only by
              the vote of the holders of a majority of shares of Preferred Stock
              outstanding. Any vacancy on the Board of Directors occurring by
              reason of such removal or otherwise (in the case of directors
              subject to election by the holders of shares of Preferred Stock)
              may be filled only by vote of the holders of at least a majority
              of shares of Preferred Stock outstanding, and if not so filled
              such vacancy shall (subject to the provisions of any applicable
              law) be filled by a majority of the remaining directors (or the
              remaining director) who were elected by the holders of shares of
              Preferred Stock. Any other vacancy on the Board of Directors
              during a Voting Period shall be filled as provided in the
              Corporation's By-Laws.

                       (iv)  At any time when the holders of shares of Preferred
              Stock become entitled to elect additional directors pursuant to
              paragraph 6(b), the maximum number of directors fixed by the
              By-Laws of the Corporation or otherwise shall automatically be
              increased by the number of such additional directors if required;
              and at such time as the holders of shares of Preferred Stock shall
              no longer be entitled to elect directors pursuant to paragraph
              6(b), such exact

                                       32

<PAGE>

              number shall automatically be decreased by the number by which
              they were increased by reason of this provision.

              (d)  Certain Corporate Acts. So long as any shares of AMPS are
         outstanding, the Corporation shall not, subject to the requirements of
         the Investment Company Act and Maryland law, without the affirmative
         vote or consent of the holders of at least two-thirds of the votes of
         the shares of AMPS outstanding at the time, either in person or by
         proxy, either in writing or at a meeting (voting separately as one
         class) in addition to any vote required by Article Fifth of the
         Articles of Incorporation: (x) amend, alter or repeal the provisions of
         the Articles of Incorporation including these Articles Supplementary,
         whether by merger, consolidation or otherwise, so as to materially and
         adversely affect any right, preference, privilege or voting power of
         such shares of AMPS or the Holders thereof, or (y) create, authorize,
         issue, incur or suffer to exist any indebtedness for borrowed money or
         any direct or indirect guarantee of any such indebtedness, provided,
         however, that the Corporation may authorize the issuance of
         indebtedness for borrowed money, for temporary or emergency purposes or
         for the clearance of transactions, in an aggregate amount not to exceed
         the lesser of $10,000,000 or 10% of the aggregate liquidation
         preference of the shares of AMPS outstanding at any one time without
         any such consent or approval, provided that, with or without the
         consent or approval of the holders, such action would not result in the
         lowering of the then-current rating of the shares of AMPS by the Rating
         Agencies (as evidenced in writing by the Rating Agencies); provided
         that any increase in the amount of the authorized AMPS or the creation
         and issuance of other series of Preferred Stock, or any increase in the
         amount of authorized shares of such series or of any other series of
         Preferred Stock, in each case ranking on a parity with or junior to the
         AMPS will not be deemed to materially and adversely affect such rights,
         preferences, privileges or voting powers unless such issuance would
         cause the Corporation not to satisfy the 1940 Act AMPS Asset Coverage
         Requirement or the AMPS Basic Maintenance Amount.

         The foregoing voting provisions shall not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of AMPS shall have been redeemed, or
called for redemption and sufficient funds shall have been deposited in trust to
effect such redemption.

              (e)  Exclusive Remedy. Unless otherwise required by law, the
         Holders shall not have any relative rights or preferences or other
         special rights other than those specifically set forth herein. In the
         event that the Corporation fails to pay an dividends on the shares of
         AMPS or the Corporation fails to redeem any shares of AMPS which it is
         required to redeem, or any other event occurs which requires the
         mandatory redemption of AMPS and the required Notice of Redemption has
         not been given, the exclusive remedy of the Holders shall be the right
         to vote for directors pursuant to the provisions of this paragraph 6.
         In no event shall the Holders have any right to sue for, or bring a
         proceeding with respect to, such dividends or redemptions or damages
         for the failure to receive the same.

              (f)  Notification to Rating Agencies. In the event a vote of
         holders of AMPS is required pursuant to the provisions of Section 13(a)
         of the Investment Company Act,

                                       33

<PAGE>

         the Corporation shall, not later than ten business days prior to the
         date on which such vote is to be taken, notify the Rating Agencies that
         such vote is to be taken and the nature of the action with respect to
         which such vote is to be taken.

         7.   Asset and Liquidity Coverage.

              (a)  1940 Act AMPS Asset Coverage Requirement.

                   The Corporation shall maintain, as of the last Valuation Date
         of each month in which any share of AMPS is outstanding, the 1940 Act
         AMPS Asset Coverage Requirement. The calculation of the 1940 Act AMPS
         Asset Coverage Ratio shall be included in each Portfolio Valuation
         Report.

              (b)  AMPS Basic Maintenance Amount.

                   (i)   For so long as any shares of AMPS are outstanding, the
              Corporation will maintain, on each Valuation Date, Eligible
              Portfolio Property having an aggregate Discounted Value at least
              equal to the AMPS Basic Maintenance Amount, each as of such
              Valuation Date.

                   (ii)  On the Date of Original Issue and on or before 10:00
              A.M., New York City time, on the fourth Business Day after any
              other Valuation Date thereafter, the Corporation shall complete
              and deliver to the Auction Agent a summary Portfolio Valuation
              Report, which will be deemed to have been delivered to the Auction
              Agent (A) if the Auction Agent receives a copy or telecopy, telex
              or other electronic transcription thereof, or (B) if the Auction
              Agent receives a telecopy, telex or other electronic transcription
              setting forth at least the applicable Discounted Value of the
              aggregate of all Eligible Portfolio Property (the "Portfolio
              Calculation") and the AMPS Basic Maintenance Amount each as of the
              relevant Valuation Date and on the same day the Corporation mails
              to the Auction Agent for delivery on the next Business Day the
              summary Portfolio Valuation Report. A failure by the Corporation
              to deliver a Portfolio Valuation Report to the Auction Agent under
              this paragraph 7(b)(ii) shall be deemed to be delivery of a
              Portfolio Valuation Report indicating a Discounted Value for all
              Eligible Portfolio Property of less than the AMPS Basic
              Maintenance Amount, as of the relevant Valuation Date. The
              Corporation shall also deliver promptly copies of each Portfolio
              Valuation Report to each of the Rating Agencies.

                   (iii) Within seven Business Days after the date of delivery
              to the Auction Agent of the first Portfolio Valuation Report and
              each Portfolio Valuation Report in accordance with paragraph
              7(b)(ii) above relating to a Quarterly Valuation Date, the
              Corporation shall deliver to the Auction Agent and the Rating
              Agencies a report or reports (the "Accountant's Confirmation")
              reviewing the Portfolio Calculation, prepared by the Corporation's
              Independent Accountants, relating to such Portfolio Valuation
              Report (and reviewing the Portfolio Calculation relating to any
              other Portfolio Valuation Report, randomly

                                       34

<PAGE>

              selected by the Independent Accountants, that was delivered by the
              Corporation during the quarter ending on such Quarterly Valuation
              Date) substantially to the effect that (A) the Independent
              Accountants have read such Portfolio Valuation Reports (each, a
              "Report"); (B) with respect to the 1940 Act AMPS Asset Coverage
              Ratio, AMPS Basic Maintenance Amount and Minimum Liquidity Level,
              the results of the calculations set forth in each Report have been
              recalculated and are numerically correct; (C) with respect to the
              excess or deficiency of the Discounted Value amount when compared
              to the AMPS Basic Maintenance Amount, the results of the
              calculation set forth in each Report have been recalculated and
              are numerically correct; (D) with respect to the excess or
              deficiency of the Dividend Coverage Assets amount when compared to
              the Minimum Liquidity Level, the results of the calculation set
              forth in each Report have been recalculated and are numerically
              correct; (E) with respect to the lower of two bid prices provided
              to the Corporation for purposes of valuing securities in the
              portfolio, the Independent Accountants have traced the price used
              in each Report to the lower of the two bid prices listed in the
              Report and verified that such information agrees (in the event
              such information does not agree, the Independent Accountants will
              provide a listing in their report of such differences); (F) that
              the assets listed in each Report conform with the definition of
              Eligible Portfolio Property; and (G) the calculations used by the
              Corporation in calculating the 1940 Act AMPS Asset Coverage Ratio,
              the AMPS Basic Maintenance Amount and the Minimum Liquidity Level
              are in compliance with the format set forth in the form of
              Portfolio Valuation Report attached as an exhibit to the Auction
              Agent Agreement. If any letter reviewing the Portfolio Calculation
              delivered pursuant to this paragraph shows that an error was made
              in the Portfolio Valuation Report for such Quarterly Valuation
              Date, or shows that a lower aggregate Discounted Value for the
              aggregate of all Eligible Portfolio Property was determined by the
              Independent Accounts, the calculation or determination made by
              such Independent Accounts shall be final and conclusive and shall
              be binding on the Corporation, and the Corporation shall promptly
              amend the Portfolio Valuation Report and deliver the amended
              Portfolio Valuation Report to the Auction Agent.

              (c)  Liquidity Coverage.

                   (i) As of each Valuation Date as long as any shares of AMPS
              are outstanding, the Corporation shall determine (A) the Market
              Value of the Dividend Coverage Assets owned by the Corporation as
              of that Valuation Date, (B) the Dividend Coverage Amount on that
              Valuation Date, and (C) whether the Minimum Liquidity Level is met
              as of that Valuation Date. The calculations of the Dividend
              Coverage Assets, the Dividend Coverage Amount and whether the
              Minimum Liquidity Level is met shall be set forth in a certificate
              (a "Certificate of Minimum Liquidity") dated as of the Valuation
              Date. The Portfolio Valuation Report and the Certificate of
              Minimum Liquidity may be combined in one certificate. The
              Corporation shall cause the Certificate of Minimum Liquidity to be
              delivered to the Auction Agent not later than the close of
              business on the third Business Day after the Valuation Date. The
              Minimum Liquidity Level shall be deemed to be met as of any date
              of determination if the Corporation has timely

                                       35

<PAGE>

     delivered a Certificate of Minimum Liquidity relating to such date, which
     states that the same has been met and which is not manifestly inaccurate.
     In the event that a Certificate of Minimum Liquidity is not delivered to
     the Auction Agent when required, the Minimum Liquidity Level shall be
     deemed not to have been met as of the applicable date.

           (ii)   If the Minimum Liquidity Level is not met as of any Valuation
     Date, then the Corporation shall purchase or otherwise acquire Dividend
     Coverage Assets (with the proceeds from the liquidation of Eligible
     Portfolio Property or otherwise) to the extent necessary so that the
     Minimum Liquidity Level is met as of the fifth Business Day following such
     Valuation Date. The Corporation shall, by such fifth Business Day, provide
     to the Auction Agent a Certificate of Minimum Liquidity setting forth the
     calculations of the Dividend Coverage Assets and the Dividend Coverage
     Amount and showing that the Minimum Liquidity Level is met as of such fifth
     Business Day together with a report of the custodian of the Corporation's
     assets confirming the amount of the Corporation's Dividend Coverage Assets
     as of such fifth Business Day.

     (d)   Calculation of AMPS Basic Maintenance Amount; Accounting Treatment.

           (i)    Eligible Portfolio Property of the Corporation shall be
     determined on an accrual basis in accordance with customary practice under
     which Eligible Portfolio Property purchased and not yet received are so
     reflected as Eligible Portfolio Property.

           (ii)   Dividends on the Common Stock which are payable in Common
     Stock shall, after the effective date of any election by a holder of Common
     Stock to receive such dividend, be excluded from current liabilities.

           (iii)  Withholding taxes with respect to interest earned on any asset
     of the Corporation if such interest is not included in Eligible Portfolio
     Property, shall be excluded from current liabilities.

           (iv)   With respect to Eligible Portfolio Property sold by the
     Corporation as of or prior to the Valuation Date, (x) if the determination
     is being made for Moody's, the sales price of such property will be
     reflected as Cash or Australian Currency, as appropriate, in Eligible
     Portfolio Property, to the extent that such receivable is due and payable
     within 5 Business Days (determined as for a Valuation Date) and is not
     subject to any dispute and (y) if the determination is being made for S&P,
     the Market Value of such property will be reflected in Eligible Portfolio
     Property and will be discounted at the appropriate Discount Factor.

     (e)   Other Permitted Assets. In addition to Eligible Portfolio Property,
the Corporation may own Other Permitted Assets and may also own other
securities, if the inclusion of any such type of other securities is deemed by
the Board of Directors to be in the best interest of the Corporation. Other
Permitted Assets and such other securities

                                       36

<PAGE>

     may be included in Eligible Portfolio Property if the Rating Agencies have
     advised the Corporation in writing that the inclusion of such Other
     Permitted Assets or other securities in Eligible Portfolio Property would
     not adversely affect their respective then-current ratings of the shares of
     AMPS.

           (f)    Failure to Satisfy AMPS Basic Maintenance Amount. Within ten
     Business Days after the date of delivery to the Auction Agent of a
     Portfolio Valuation Report in accordance with paragraph 7(b) above relating
     to any Valuation Date on which the Corporation failed to satisfy the AMPS
     Basic Maintenance Amount, and relating to the Cure Date with respect to
     such failure to satisfy the AMPS Basic Maintenance Amount, the Independent
     Accountants will provide to the Auction Agent and the Rating Agencies an
     Accountant's Confirmation as to such Portfolio Valuation Report.

     8.    Auction Procedures.

           (a)    Certain Definitions.

                  Capitalized terms not defined in this paragraph 8(a) shall
     have the respective meanings specified in paragraph 1. As used in this
     paragraph 8, the following terms shall have the following meanings, unless
     the context otherwise requires:

                  (i)    "Affiliate" shall mean any Person known to the Auction
           Agent to be controlled by, in control of, or under common control
           with, the Corporation.

                  (ii)   "Agent Member" shall mean the member of the Securities
           Depository that will act on behalf of an Existing Holder or a
           Potential Holder and is identified as such in such holder's
           Purchaser's Letter.

                  (iii)  "AMPS" shall man the shares of AMPS being auctioned
           pursuant to this paragraph 8.

                  (iv)   "Auction" shall mean the periodic operation of the
           procedures set forth in this paragraph 8.

                  (v)    "Auction Date' shall mean the first Business Day next
           preceding the first day of a Dividend Period.

                  (vi)   "Available AMPS" shall have the meaning specified in
           paragraph 8(d)(i) below.

                  (vii)  "Bid" and "Bids" shall have the respective meanings
           specified in paragraph 8(b)(i) below.

                  (viii) "Bidder" and "Bidders" shall have the respective
           meanings specified in paragraph 8(b)(i) below.

                  (ix)   "Broker-Dealers" shall mean any broker-dealer, or other
           entity permitted by law to perform the functions required of a
           Broker-Dealer in this

                                       37

<PAGE>

           paragraph 8, that has been selected by the Corporation and has
           entered into a Broker-Dealer Agreement with the Auction Agent that
           remains effective.

                  (x)     "Broker-Dealer Agreement" shall mean an agreement
           between the Auction Agent and a Broker-Dealer pursuant to which such
           Broker-Dealer agrees to follow the procedures specified in this
           paragraph 8.

                  (xi)    "Existing Holder", when used with respect to shares of
           AMPS, shall mean a Person who has signed a Purchaser's Letter and is
           listed as the beneficial owner of such shares of AMPS in the records
           of the Auction Agent.

                  (xii)   "Hold Order" and "Hold Orders" shall have the
           respective meanings specified in paragraph 8(b)(i) below.

                  (xiii)  "Order" shall have the meaning specified in paragraph
           8(b)(i) below.

                  (xiv)   "Outstanding" shall mean, as of any date, shares of
           AMPS theretofore issued by the Corporation except, without
           duplication, (A) any shares of AMPS theretofore cancelled or
           delivered to the Auction Agent for cancellation, or redeemed by the
           Corporation, or as to which a Notice of Redemption shall have been
           given and moneys shall have been deposited in trust by the
           Corporation pursuant to paragraph 5(g) and (B) any shares of AMPS as
           to which the Corporation or any Affiliate thereof shall be an
           Existing Holder.

                  (xv)    "Person" shall mean and include an individual, a
           partnership, a corporation, a trust, an unincorporated association, a
           joint venture or other entity or a government or any agency or
           political subdivision thereof.

                  (xvi)   "Potential Holder" shall mean any Person, including
           any Existing Holder, (A) who shall have executed a Purchaser's Letter
           and (B) who may be interested in acquiring shares of AMPS (or, in the
           case of an Existing Holder, additional shares of AMPS).

                  (xvii)  "Securities Depository" shall mean The Depository
           Trust Company and its successors and assigns or any other securities
           depository selected by the Corporation which agrees to follow the
           procedures required to be followed by such securities depository in
           connection with shares of AMP.

                  (xviii) "Sell Order" and "Sell Orders" shall have the
           respective meanings specified in paragraph 8(b)(i) below.

                  (xix)   "Submission Deadline" shall mean 12:30 P.M., New York
           City time, on any Auction Date or such other time on any Auction Date
           (as may be specified by the Auction Agent from time to time) as the
           time by which each Broker-Dealer must submit to the Auction Agent in
           writing all Orders obtained by it for the Auction to be conducted on
           such Auction Date.

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<PAGE>

                  (xx)    "Submitted Bid" and "Submitted Bids" shall have the
           respective meanings specified in paragraph 8(d)(I) below.

                  (xxi)   "Submitted Hold Order" and "Submitted Hold Orders"
           shall have the respective meanings specified in paragraph 8(d)(i)
           below.

                  (xxii)  "Submitted Order and "Submitted Orders" shall have the
           respective meanings specified in paragraph 8(d)(i) below.

                  (xxiii) "Submitted Sell Order" and "Submitted Sell Orders"
           shall have the respective meanings specified is paragraph 8(d)(i)
           below.

                  (xxiv)  "Sufficient Clearing Bids" shall have the meaning
           specified in paragraph 8(d)(i) below.

                  (xxv)   "Winning Bid Rate" shall have the meaning specified in
           paragraph 8(d)(i) below.

           (b)    Orders by Existing Holders and Potential Holders.

                  (i)     On or prior to the Submission Dead-line on each
           Auction Date:

                          (A)   each Existing Holder may submit to a
                  Broker-Dealer information as to:

                                (1)  the number of Outstanding shares, if any,
                          of AMPS held by such Existing Holder which such
                          Existing Holder desires to continue to hold without
                          regard to the Applicable Rate for the next Dividend
                          Period;

                                (2)  the number of Outstanding shares, if any,
                          of AMPS held by such Existing Holder which such
                          Existing Holder desires to continue to hold, provided
                          that the Applicable Rate for the next succeeding
                          Dividend Period shall not be less than the rate per
                          annum then specified by such Existing Holder; and/or

                                (3)  the number of Outstanding shares, if any,
                          of AMPS held by such Existing Holder which such
                          Existing Holder offers to sell without regard to the
                          Applicable Rate for the next succeeding Dividend
                          Periods; and

           (B)    each Broker-Dealer, using a list of Potential Holders that
           shall be maintained in good faith for the purposes of conducting a
           competitive Auction, shall contact potential Holders, including
           Persons that are not Existing Holders, on such list to determine the
           number of Outstanding shares, if any, of AMPS which each such
           Potential Holder offers to purchase provided that the Applicable Rate
           for the next succeeding Dividend Period shall not be less than the
           rate per annum specified by such Potential holder.

                                       39

<PAGE>

                 For the purposes hereof, the communication to a Broker-Dealer
           of information referred to in clause (A) or (B) of this paragraph
           8(b)(i) is hereinafter referred to as an "Order" and collectively as
           "Orders" and each Existing Holder and each Potential Holder placing
           an Order is hereinafter referred to as a "Bidder" and collectively as
           "Bidders"; an Order containing the information referred to in clause
           (A)(l) of this paragraph 8(b) is hereinafter referred to as a "Hold
           Order" and collectively as "Hold Orders"; an Order containing the
           information referred to in clause (A)(2) or (B) of this paragraph
           8(b) is hereinafter referred to as a "Bid" and collectively as
           "Bids"; and an Order containing the information referred to in clause
           (A)(3) of this paragraph 8(b) is hereinafter referred to as a "Sell
           Order" and collectively as "Sell Orders".

                             (ii) (A)  A Bid by an Existing Holder shall
                 constitute an irrevocable offer to sell;

                                  (1)  the number of Outstanding shares of AMPS
                       specified in such Bid if the Applicable Rate determined
                       on such Auction Date shall be less than the rate per
                       annum specified in such Bid;

                                  (2)  such number or a lesser number of
                       Outstanding shares of AMPS to be determined as set forth
                       in paragraph 8(e)(i)(D) if the Applicable Rate determined
                       on such Auction Date shall be equal to the rate per annum
                       specified therein; or

                                  (3)  a lesser number of Outstanding shares of
                       AMPS to be determined as set forth in paragraph
                       8(e)(ii)(C) if such specified rate, per annum, shall be
                       higher than the Maximum Applicable Rate and Sufficient
                       Clearing Bids do not exist.

                 (B)   A Sell Order by an Existing Holder shall constitute an
           irrevocable offer to sell:

                             (1)  the number of Outstanding shares of AMPS
                       specified in such Sell Order; or

                             (2)  such number or a lesser number of Outstanding
                       shares of AMPS to be determined as set forth in paragraph
                       8(e)(ii) (C) if Sufficient Clearing Bids do not exist.

                 (C)   A Bid by a Potential Holder shall constitute an
           irrevocable offer to purchase:

                             (1)  the number of Outstanding shares of AMPS
                       specified in such Bid if the Applicable Date determined
                       on such Auction Date shall be higher than the rate per
                       annum specified in such Bid; or

                             (2)  such number or a lesser number of Outstanding
                       shares of AMPS to be determined as set forth in paragraph
                       8(e)(i)(E) if the

                                       40

<PAGE>

            Applicable Rate determined on such Auction Date shall be equal to
            the rate per annum specified therein.

            (c)  Submission of Orders by Broker-Dealers to Auction Agent.

                 (i)    Each Broker-Dealer shall submit in writing to the
      Auction Agent prior to the Submission Deadline on each Auction Date all
      Orders obtained by such Broker-Dealer specifying with respect to each
      Order:

                        (A)    the name of the Bidder placing such Order;

                        (B)    the aggregate number of Outstanding shares of
            AMPS that are the subject of such Order;

                        (C)    to the extent that such Bidder is an Existing
            Holder:

                               (1)  the number of Outstanding shares, if any, of
            AMPS subject to any Hold Order placed by such Existing Holder;

                               (2)  the number of Outstanding shares, if any, of
            AMPS subject to any Bid placed by such Existing Holder and the rate
            per annum specified in such Bid; and

                               (3)  the number of Outstanding shares, if any, of
            AMPS subject to any Sell Order placed by such Existing Holder; and

            (D)  to the extent such Bidder is a Potential Holder the rate per
      annum specified in such Potential Holder's Bid.

                 (ii)   If any rate per annum specified in any Bid contains more
      than three figures to the right of the decimal point, the auction Agent
      shall round such rate up to the next highest one thousandth (.001) of 1%.

                 (iii)  If an Order or Orders covering all of the Outstanding
      shares of AMPS held by an Existing Holder is not submitted to the Auction
      Agent prior to the Submission Deadline, the Auction Agent shall deem a
      Hold Order to have been submitted or behalf of such Existing Holder
      covering the number of Outstanding shares of AMPS held by such Existing
      Holder and not subject to Orders submitted to the Auction Agent.

                 (iv)   If one or more Orders on behalf of an Existing Holder
      covering in the aggregate more than the number of Outstanding shares of
      AMPS held by an Existing Holder are submitted to the Auction Agent, such
      Orders shall be considered valid as follows and in the following order of
      priority:

            (A)  any Hold Order submitted on behalf of such Existing Holder
      shall be considered valid up to and including the number of Outstanding
      shares of AMPS held by such Existing Holder; provided that if more than
      one Hold Order

                                       41

<PAGE>

           is submitted on behalf of such Existing Holder and the number of
           shares of AMPS subject to such Hold Orders exceeds the number of
           Outstanding shares of AMPS held by such Existing Holder, the number
           of shares of AMPS subject to each of such Hold Orders shall be
           reduced pro rata so that such Hold Orders, in the aggregate, cover
           the number of Outstanding shares of AMPS held by such Existing
           Holder;

                (B) any Bids submitted on behalf of such Existing Holder shall
           be considered valid, in the ascending order of their respective rates
           per annum if more than one Bid is submitted on behalf of such
           Existing Holder, up to and including the excess of the number of
           Outstanding shares of AMPS held by such Existing Holder over the
           number of shares of AMPS subject to any Hold Order referred to in
           paragraph 8(c)(iv)(A) above (and if more than one Bid submitted on
           behalf of such Existing Holder specifies the same rate per annum and
           together they cover more than the remaining number of shares than can
           be the subject of valid Bids after application of paragraph
           8(c)(iv)(A) above and of the foregoing portion of this paragraph
           8(c)(iv)(B) to any Bid or Bids specifying a lower rate or rates per
           annum, the number of shares subject to each of such Bids shall be
           reduced pro rata so that such Bids, in the aggregate, cover exactly
           such remaining number of shares); and the number of shares, if any,
           subject to Bids not valid under this paragraph 8(c)(iv)(B) shall be
           treated as the subject of a Bid by a Potential Holder; and

                (C) any Sell Order shall be considered valid up to and including
           the excess of the number of Outstanding shares of AMPS held by such
           Existing Holder over the number of shares of AMPS subject to Hold
           Orders referred to in paragraph 8(c)(iv)(A) and Bids referred to in
           paragraph 8(c)(iv)(B), provided that if more than one Sell Order is
           submitted on behalf of any Existing Holder and the number of shares
           of AMPS subject to such Sell Orders is greater than such excess, the
           number of shares of AMPS subject to each of such Sell Orders shall be
           reduced pro rata so that such Sell Orders, in the aggregate, cover
           exactly the number of shares of AMPS equal to such excess.

                    (v) If more than one Bid is submitted on behalf of any
           Potential Holder, each Bid submitted shall be a separate Bid with the
           rate and number of shares of AMPS therein specified.

                (d) Determination of Sufficient Clearing Bids, Winning Bid Rate
and Applicable Rate.

                    (i) Not earlier than the Submission Deadline on each Auction
           Date, the Auction Agent shall assemble all Orders submitted or deemed
           submitted to it by the Broker-Dealers (each such Order as submitted
           or deemed submitted by a Broker-Dealer being hereinafter referred to
           as a "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell
           Order," as the case may be, or as a "Submitted Order" and
           collectively as "Submitted Hold Orders," "Submitted

                                       42

<PAGE>

           Bids" or "Submitted Sell Orders," as the case may be, or as
           "Submitted Orders") and shall determine:

                (A) the excess of the total number of Outstanding shares of AMPS
           over the number of Outstanding shares of AMPS that are the subject of
           Submitted Hold Orders (such excess being hereinafter referred to as
           the "Available AMPS");

                (B) from the Submitted Orders whether the number of Outstanding
           shares of AMPS that are the subject of Submitted Bids by Potential
           Holders specifying one or more rates per annum equal to or lower than
           the Maximum Applicable Rate exceeds or is equal to the sum of:

                    (1) the number of Outstanding shares of AMPS that are the
                subject of Submitted Bids by Existing solders specifying one or
                more rates per annum higher than the Maximum Applicable Rate;
                and

                    (2) the number of Outstanding shares of AMPS that are
                subject to Submitted Sell Orders

           (if such excess or such equality exists (other than because the
           number of Outstanding shares of AMPS in clauses (1) and (2) above are
           each zero because all of the Outstanding shares of AMPS are the
           subject of Submitted Hold Orders), such Submitted Bids by Potential
           Holders being hereinafter referred to collectively as "Sufficient
           Clearing Bids"); and

                (C) if Sufficient Clearing Bids exist, the lowest rate per annum
           specified in the Submitted Bids (the "Winning Bid Rate") that if:

                    (1) each Submitted Bid from Existing Holders specifying the
                Winning Bid Rate and all other Submitted Bids from Existing
                Holders specifying lower rates per annum were rejected, thus
                entitling such Existing Holders to continue to hold the shares
                of AMPS that are the subject of such Submitted Bids, and

                    (2) each Submitted Bid from Potential Holders specifying the
                Winning Bid Rate and all other Submitted Bids from Potential
                Holders specifying lower rates per annum were accepted, thus
                entitling those Potential Holders to purchase the shares of AMPS
                that are the subject of such Submitted Bids, would result in the
                number of shares subject to all Submitted Bids specifying the
                Winning Bid Rate or a lower rate per annum being at least equal
                to the Available AMPS.

                        (ii) Promptly after the Auction Agent has made the
           determinations pursuant to paragraph 8(d)(i), the Auction Agent shall
           advise the Corporation of the Maximum Applicable Rate and, based on
           all such determinations, the Applicable Rate for the next succeeding
           Dividend Period as follows:

                                       43

<PAGE>

                (A) if Sufficient Clearing Bids exist, that the Applicable Rate
           for the next succeeding Dividend Period shall be equal to the Winning
           Bid Rate;

                (B) if Sufficient Clearing Bids do not exist (other than because
           all of the Outstanding shares of AMPS are the subject of Submitted
           Hold Orders), that the Applicable Rate for the next succeeding
           Dividend Period shall be equal to the Maximum Applicable Rate; or

                (C) if all the shares of AMPS are the subject of Submitted Hold
           Orders, that the Applicable Rate for the next succeeding Dividend
           Period shall be equal to ___% of the 30-day "AA" Composite Commercial
           Paper Rate on the date of the Auction.

                (e) Acceptance and Rejection of Submitted Bids and Submitted
Sell Orders and Allocations of Shares.

                Based on the determinations made pursuant to paragraph 8(d)(i),
the Submitted Bids and Submitted Sell Orders shall be accepted or rejected and
the Auction Agent shall take such other action as set forth below:

                    (i) If Sufficient Clearing Bids have been made, subject to
           the provisions of paragraphs 8(e)(iii) and 8(e)(iv), Submitted Bids
           and Submitted Sell Orders shall be accepted or rejected in the
           following order of priority and all other Submitted Bids shall be
           rejected:

                        (A) the Submitted Sell Orders of Existing Holders shall
                be accepted and the Submitted Bid of each of the Existing
                Holders specifying any rate per annum that is higher than the
                Winning Bid Rate shall be accepted, thus requiring each such
                Existing Holder to sell the Outstanding shares of AMPS that are
                the subject of such Submitted Sell Order or Submitted Bid;

                        (B) the Submitted Bid of each of the Existing Holders
                specifying any rate per annum that is lower than the Winning Bid
                Rate shall be accepted, thus entitling each such Existing Holder
                to continue to hold the Outstanding shares of AMPS that are the
                subject of such Submitted Bid;

                        (C) the Submitted Bid of each of the Potential Holders
                specifying any rate per annul that is lower than the Winning Bid
                Rate shall be accepted;

                        (D) the Submitted Bid of each of the Existing Holders
                specifying a rate per annum that is equal to the Winning Bid
                Rate shall be rejected, thus entitling such Existing Holder to
                continue to hold the Outstanding shares of AMPS that are the
                subject of such Submitted Bid, unless the number of Outstanding
                shares of AMPS subject to all such Submitted Bids shall be
                greater than the number of Outstanding shares of

                                       44

<PAGE>

                    AMPS (Remaining Shares") equal to the excess of the
                    Available AMPS over the number of Outstanding shares of AMPS
                    subject to Submitted Bids described in paragraphs 8(e)(i)(B)
                    and 8(e)(i)C), in which event the Submitted Bids of each
                    such Existing Holder shall be accepted, and each such
                    Existing Holder shall be required to sell Outstanding shares
                    of AMPS, but only in an amount equal to the difference
                    between (1) the number of Outstanding shares of AMPS then
                    held by such Existing Holder subject to such Submitted Bid
                    and (2) the number of shares of AMPS obtained by multiplying
                    (x) the number of Remaining Shares by (y) a fraction the
                    numerator of which shall be the number of Outstanding shares
                    of AMPS held by such Existing Holder subject to such
                    Submitted Bid and the denominator of which shall be the sum
                    of the numbers of Outstanding shares of AMPS subject to such
                    Submitted Bids made by all such Existing Holders that
                    specified a rate per annum equal to the Winning Bid Rate;
                    and

                              (E) the Submitted Bid of each of the Potential
                    Holders specifying a rate per annum that is equal to the
                    Winning Bid Rate shall be accepted, but only in an amount
                    equal to the number of Outstanding shares of AMPS obtained
                    by multiplying (x) the difference between the Available AMPS
                    and the number of shares of AMPS subject to Submitted Bids
                    described in paragraphs 8(e)(i)(B), 8(e)(i)(C) and
                    8(e)(i)(D) by (y) a fraction the numerator of which shall be
                    the number of Outstanding shares of AMPS subject to such
                    Submitted Bids and the denominator of which shall be the sum
                    of the numbers of Outstanding shares of AMPS subject to such
                    Submitted Bids made by all such Potential Holders that
                    specified rates per annum equal to the Winning Bid Rate.

                        (ii)  If Sufficient Clearing Bids have not been made
           (other than because all of the Outstanding shares of AMPS are subject
           to Submitted Hold Orders), subject to the provisions of paragraph
           8(e)-(iii), Submitted Orders shall be accepted or rejected as follows
           in the following order of priority and all other Submitted Bids shall
           be rejected:

                              (A) the Submitted Bid of each Existing Holder
                    specifying any rate per annum that is equal to or lower than
                    the Maximum Applicable Rate shall be rejected, thus
                    entitling such Existing Holder to continue to hold the
                    Outstanding shares of AMPS that are the subject of such
                    Submitted Bid;

                              (B) the Submitted Bid of each Potential Holder
                    specifying any rate per annum that is equal to or lower than
                    the Maximum Applicable Rate shall be accepted, thus
                    requiring such Potential Holder to purchase the Outstanding
                    shares of AMPS that are the subject of such Submitted Bid;
                    and

                                       45

<PAGE>

                          (C)  the Submitted Bid of each Existing Holder
                specifying any rate per annum that is higher than the Maximum
                Applicable Rate shall be accepted, thus requiring each such
                Existing Holder to sell the shares of AMPS that are the subject
                of such Submitted Bid, and the Submitted Sell Order of each
                Existing Holder shall be accepted, in both cases only in an
                amount equal to the difference between (1) the number of
                Outstanding shares of AMPS then held by such Existing Holder
                subject to such Submitted Bid or Submitted Sell Order and (2)
                the number of Outstanding shares of AMPS obtained by multiplying
                (x) the difference between the Available AMPS and the aggregate
                number of Outstanding shares of AMPS subject to Submitted Bids
                described in paragraphs 8(e)-(ii)(A) and 8(e)(ii)(B) by (y) a
                fraction the numerator of which shall be the number of
                Outstanding shares of AMPS held by such Existing Holder subject
                to such Submitted Bid or Submitted Sell Order and the
                denominator of which shall be the number of Outstanding shares
                of AMPS subject to all such Submitted Bids and Submitted Sell
                Orders.

                    (iii) If, as a result of the procedures described in
           paragraphs 8(e)(i) or 8(e)(ii), any Existing Holder would be entitled
           or required to sell, or any Potential Holder would be entitled or
           required to purchase, a fraction of a share of AMPS on any Auction
           Date, the Auction Agent shall, in such manner as in its sole
           discretion it shall determine round up or down the number of shares
           of AMPS to be purchased or sold by any Existing Holder or Potential
           Holder on such Auction Date so that each Outstanding share of AMPS
           purchased or sold by each Existing Holder or Potential Holder on such
           Auction Date shall be a whole share of AMPS.

                    (iv)  If, as a result of the procedures described in
           paragraph 8(e)(i), any Potential Holder would be entitled or required
           to purchase less than a whole share of AMPs on any Auction Date, the
           Auction Agent shall, in such manner as in its sole discretion it
           shall determine, allocate shares of AMPS for purchase among Potential
           Holders so that only whole shares of AMPS are purchased on such
           Auction Date by any Potential Holder, even if such allocation results
           in one or more of such Potential Holders not purchasing any shares of
           AMPS on such Auction Date.

                    (v)   Based on the results of each Auction, the Auction
           Agent shall determine, with respect to each Broker-Dealer that
           submitted Bids or Sell Orders on behalf of Existing Holders or
           Potential Holders, the aggregate number of Outstanding shares of AMPS
           to be purchased and the aggregate number of Outstanding shares of
           AMPS to be sold by such Potential Holders and Existing Holders and,
           to the extent that such aggregate number of Outstanding shares to be
           sold differ, the Auction Agent shall determine to which other
           Broker-Dealer or Broker-Dealers acting for one or more purchasers
           such Broker-Dealer shall deliver, or from which other Broker-Dealer
           or Broker-Dealers acting for one or more sellers such Broker-Dealer
           shall receive, as the case may be, Outstanding shares of AMPS.

                                       46

<PAGE>

                (f) Participation in Auctions.

     Neither the corporation nor any Affiliate of the Corporation may submit an
Order in any Auction.

     9.   Miscellaneous.

                (a) To the extent permitted by applicable law, the Board of
Directors may interpret or adjust the provisions hereof to resolve any
inconsistency or ambiguity, remedy any formal defect or make any other change or
modification which does not adversely affect the rights of Holders of shares of
AMPS and if such inconsistency or ambiguity reflects an incorrect provision
hereof then the Board of Directors may authorize the filing of a Certificate of
Amendment or a Certificate of Correction, as the case may be.

                (b) If there is a Securities Depository, one certificate for all
of the shares of AMPS of any series shall be issued to the Securities Depository
and registered in the name of the Securities Depository or its nominee. Such
certificate shall bear a legend to the effect that such certificate is issued
subject to the provisions contained in these Articles Supplementary and each
Purchaser's Letter. The Corporation will also issue stop-transfer instructions
to the Paying Agent for the shares of AMPS. Except as provided in paragraph (c)
below, the Securities Depository or its nominee will be the Holder, and no
beneficial owner shall receive certificates representing its ownership interest
in such shares.

                (c) If there is no Securities Depository, the Corporation may at
its option issue one or more new certificates with respect to such shares
(without the legend referred to in paragraph 9(b) registered in the names of the
beneficial owners or their nominees and rescind the stop-transfer instruction
referred to in paragraph 9(b) with respect to such shares.

                (d) The Corporation shall exercise its best efforts to maintain
an Auction Agent pursuant to an agreement containing terms not materially less
favorable to the Corporation than the terms of the Auction Agent Agreement first
entered into by the Corporation pursuant to the resolutions adopted by the Board
of Directors on December 13, 1988.

                (e) The Corporation shall use its best efforts to maintain a
rating of the AMPS from each of the Rating Agencies.

                (f) All notices or communications, unless otherwise specified in
the By-laws of the Corporation or these Articles Supplementary, shall be
sufficiently given if in writing and delivered in person or mailed by
first-class mail, postage pre-paid. Notice shall be deemed given on the earlier
of the date received or the date seven days after which such notice is mailed.

                (g) So long as any shares of AMPS shall be outstanding, the
Corporation shall not engage in "short sales" or "hedging" or enter into
"futures contracts" or "option contracts" with respect to the Eligible Portfolio
Property.

                                       47

<PAGE>

     IN WITNESS WHEREOF, THE FIRST AUSTRALIA PRIME INCOME FUND, INC., has caused
these presents to be signed in its name and on its behalf by its President and
its corporate seal to be hereunder affixed and attested by its Secretary on this
17/th/ day of January 1989, and its President acknowledges that these Articles
Supplementary are the act and deed of The First Australia Prime Income Fund,
Inc., and, under the penalties of perjury, that the matters and facts set forth
herein with respect to authorization and approval are true in all material
respects to the best of his knowledge, information and belief.

                                             THE FIRST AUSTRALIA PRIME INCOME
                                             FUND, INC.



                                             By:  /s/ Brian Sherman
                                                  ---------------------------
                                                  President

ATTEST:


  /s/ RM Randall
- --------------------------
         Secretary


                                       48

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.A3
<SEQUENCE>5
<FILENAME>dex99a3.txt
<DESCRIPTION>EXHIBIT A3
<TEXT>
<PAGE>

                                                                  EXHIBIT (a)(3)

                   THE FIRST AUSTRALIA PRIME INCOME FUND, INC.

                  Articles Supplementary creating one series of
                         Auction Market, Preferred Stock

                  The First Australia Prime Income Fund, Inc., a Maryland
corporation having its principal Maryland office in the City of Baltimore in the
State of Maryland (the "Corporation"), certifies to the State Department of
Assessments and Taxation of Maryland that:

                  FIRST: Pursuant to authority expressly vested in the board of
directors of the Corporation by article fifth of its charter, the board of
directors has authorized the issuance of one series of up to 1,000 shares of its
authorized preferred stock, par value $.01 per share, liquidation preference
$100,000 per share, designated Auction Market Preferred Stock, Series D.

                  SECOND: Pursuant to Section 2-411 of the Maryland General
Corporation Law and authority granted by Article IV of the Corporation's
by-laws, the board of directors of the Corporation has appointed a pricing
committee (the "Pricing Committee") and has authorized such Pricing Committee to
fix, consistent with, and subject to, the authorization referred to in Article
FIRST of these Articles Supplementary, the terms of the shares of Auction Market
Preferred Stock, Series D.

                  THIRD: The preferences, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption, of the shares of such series of preferred stock are as follows:

                                   DESIGNATION

                  SERIES D: A series of 1,000 shares of preferred stock, par
value $.01 per share, liquidation preference $100,000 per share, is hereby
designated "Auction Market Preferred Stock, Series D." Each share of Auction
Market Preferred Stock, Series D shall be issued on the Date of Original Issue
(as herein defined); have an Initial Dividend Payment Date (as herein defined)
of August 22, 1989; and have such other preferences, limitations and relative
voting rights, in addition to those required by applicable law or set forth in
the Corporation's Articles of Incorporation applicable to preferred stock of the
Corporation, as are set forth in these Articles Supplementary. The Auction
Market Preferred Stock, Series D shall constitute a separate series of preferred
stock of the Corporation, and each share of Auction Market Preferred Stock,
Series D shall be identical.

                  1. Definitions.

                  Capitalized terms not defined in this paragraph 1 shall have
the respective meanings specified in paragraph 8(a) hereof. Unless the context
or use indicates another or different meaning, the following terms shall have
the following meanings, whether used in the singular or plural:

                  "'AA' Composite Commercial Paper Rate," on any date, means (i)
the interest equivalent of the 30-day rate on commercial paper placed on behalf
of issuers whose corporate bonds are rated "AA" by S&P, or the equivalent of
such rating by S&P or another rating agency,

                                       1

<PAGE>

as such 30-day rate is made available on a discount basis or otherwise by the
Federal Reserve Bank of New York for the Business Day immediately preceding such
date, or (ii) in the event that the Federal Reserve Bank of New York does not
make available such a rate, then the arithmetic average of the interest
equivalent of the 30-day rate on commercial paper placed on behalf of such
issuers, as quoted to the Auction Agent on a discount basis or otherwise by the
Commercial Paper Dealers for the close of business on the Business Day
immediately preceding such date. If any Commercial Paper Dealer does not quote a
rate required to determine the 30-day "AA" Composite Commercial Paper Rate, the
30-day "AA" Composite Commercial Paper Rate will be determined on the basis of
the quotation or quotations furnished by any Substitute Commercial Paper Dealer
or Substitute Commercial Paper Dealers selected by the Corporation to provide
such rate or rates not being supplied by the Commercial Paper Dealer. "Interest
Equivalent" as used herein means the equivalent yield on a 360-day basis of a
discount basis security to an interest bearing security.

                  "Accountant's Confirmation" has the meaning set forth in
Paragraph 7(b)(iii) hereof.

                  "Agent Member" means the member of the Securities Depository
that will act on behalf of an Existing Holder or Potential Holder and that is
identified as such in such holder's Purchaser's Letter.

                  "AMPS" means the Auction Market Preferred Stock, Series D.

                  "AMPS Basic Maintenance Amount" means, as of any date, the
dollar amount equal to the sum of (a) $100,000 times the number of shares of
AMPS then outstanding; (b) the aggregate liquidation preference of other
Preferred Stock then outstanding, if any; (c) the Dividend Coverage Amount; (d)
the aggregate Projected Dividend Amount; (e) the aggregate principal amount of
any then outstanding indebtedness of the Corporation for money borrowed; (f)
projected expenses of the Corporation for the next succeeding three month
period; and (g) the greater of $200,000 or the Corporation's current liabilities
as of such date to the extent not otherwise reflected in any of (a) through (f)
above. The Board of Directors shall have the authority, to the extent permitted
by Maryland law, to adjust, modify, alter or change from time to time the
elements comprising the AMPS Basic Maintenance Amount from those set forth in
these Articles Supplementary if the Rating Agencies advise the Corporation in
writing that the change will not adversely affect their respective then-current
ratings of the AMPS.

                  "AMPS Basic Maintenance Cure Date," with respect to the
failure by the Corporation to maintain the AMPS Basic Maintenance Amount (as
required by paragraph 7(b) hereof) as of each Valuation Date, means the fifth
Business Day following such Valuation Date.

                  "ANNIE MAEs" are securities issued against mortgage pools by
Australian National Mortgage Pool Agency Ltd., an affiliate of Security Pacific
National Bank and are rated by Australian Ratings.

                  "Applicable Percentage" has the meaning set forth under
"Maximum Applicable Rate" below.

                  "Applicable Rate" has the meaning specified in paragraph
3(c)(i) below.

                                       2

<PAGE>

                  "Articles of Incorporation" means the Articles of
Incorporation of the Corporation, as amended and restated from time to time,
including as amended by these Articles Supplementary.

                  "Auction" means each operation of the Auction Procedures.

                  "Auction Agent" means Manufacturers Hanover Trust Company
unless and until another commercial bank, trust company, or other financial
institution appointed by a resolution of the Board of Directors enters into an
agreement with the Corporation to follow the Auction Procedures for the purpose
of determining the Applicable Rate and to act as transfer agent, registrar,
paying agent and redemption agent.

                  "Auction Agent Agreement" has the meaning specified in
paragraph 3(c)(i) below.

                  "Auction Date" has the meaning specified in paragraph 8(a)
below.

                  "Auction Procedures" means the procedures for conducting
Auctions set forth in paragraph 8 below.

                  "Australian Corporate Bonds" means debt obligations of
Australian corporations (other than Australian Government Securities, Australian
Semi-Government Securities, Bank Bills, Eurobonds and Australian Short-Term
Securities) provided, that such debt obligations shall not be deemed to be
Eligible Portfolio Property unless they are issued by the corporations listed
below and such obligations have the following characteristics: (a) the principal
amount outstanding on the date of determination is at least equal to A$50
million, (b) the security is publicly traded, (c) the security is non-callable,
(d) the security is rated at least AA- by S&P, (e) the security has a tender
panel and (f) the maturity date of the security is not later than the 10th
anniversary of the issuance date of such security.

                  Issuers with a public long-term S&P rating or whose parent has
a public long-term S&P rating and there is an explicit guarantee backing the
subsidiary's debt service payments ("Guaranteed Australian Corporate Bonds"):

                  FANMAC Premier Trust Co. No. 6-13
                  Ford Credit Australia
                  National Australia Bank
                  State Bank of Victoria

                  Issuers, which shall be designated in writing from time to
time by S&P, without a public long-term S&P rating but whose parent has a
long-term S&P rating but has not explicitly guaranteed the subsidiary's debt
service payments ("Non-Guaranteed Corporate Bonds").

In addition, if the determination is being made for S&P, (a) not more than 10%
of the aggregate Market Value of the Eligible Portfolio Property of the
Corporation can consist of Australian Corporate Bonds issued by a single issuer,
(b) not more than 50% (if the issue is rated AAA by S&P) or 33.3% (if the issue
is rated AA or A by S&P) or 20% (if the issue is rated BBB by S&P) of the
aggregate Market Value of the Eligible Portfolio Property of the Corporation can
consist

                                       3

<PAGE>

of Australian Corporate Bonds from issues representing a single industry, (c)
not more than 5% of the then-outstanding principal amount of any one issue can
be included in Eligible Portfolio Property and (d) not more than 20% of the
outstanding aggregate principal amount of the Australian Corporate Bonds held by
the Corporation and included in Eligible Portfolio Property shall be comprised
of securities with a then-outstanding issue size of less than A$150 million.

                  The Board of Directors shall have the authority to adjust,
modify, alter or change from time to time the list of securities and eligibility
criteria as set forth above if each Rating Agency advises the Corporation in
writing that the change or specification will not adversely affect its
then-current rating of the AMPS

                  "Australian Currency" means such coin or currency of Australia
as at the time shall be legal tender for payment of public and private debts

                  "Austalian Ratings" means Australian Ratings Pty Ltd or its
successors.

                  "Australian Government Securities" means all publicly traded
securities issued and guaranteed by the Government of the Commonwealth of
Australia with a fixed maturity (i.e. no perpetuals).

                  "Australian Securities" means ANNIE MAEs, Australian Corporate
Bonds, Australian Government Securities, Australian Semi-Government Securities,
Australian Short-Term Securities, Bank Bills, Eurobonds, MMSs, MTCs, New Zealand
Securities, NMMC Securities.

                  "Australian Semi-Government Securities" means the following
publicly traded semi-government securities with a fixed maturity (i.e. no
perpetuals) and which are explicitly guaranteed by the Commonwealth of Australia
or the respective Australian state, provided, that if the calculation is being
made for Moody's, the then-current rating by Moody's of any outstanding senior
long-term debt issue explicitly guaranteed by the respective Australian state is
identical to the then-current Moody's rating of any senior long-term debt
denominated in the same currency which debt is guaranteed by the Commonwealth of
Australia:

                  1. Electricity Trust of South Australia, a body established
         under the Electricity Trust of South Australia Act 1946 (South
         Australia).

                  2. Gas & Fuel Corporation of Victoria, a corporation
         established under the Gas and Fuel Corporation Act 1950 (Victoria).

                  3. Melbourne & Metropolitan Board of Works, a board
         constituted under section 4 of the Melbourne & Metropolitan Board of
         Works Act 1958 (Victoria).

                  4. New South Wales Treasury Corporation, a corporation
         constituted under section 4 of the Treasury Corporation Act 1983 (New
         South Wales).

                  5. A Territory authority being an authority within the meaning
         of that term under section 43 of the Northern Territory (Self
         Government) Act (Commonwealth)

                                       4





<PAGE>

         provided that the specific issue is guaranteed by the Treasurer of the
         Commonwealth of Australia.

                  6. The State Electricity Commission of Qld, a commission
         constituted under the Electricity Act 1976 (Qld).

                  7. Queensland Treasury Corporation, a corporation established
         under the Treasury Corporation Act 1988 (Qld).

                  8. South Australian Financing Authority an authority
         established under the Government Financing Authority Act 1982 (South
         Australia).

                  9. State Electricity Commission of Victoria, a commission
         established under the State Electricity Commission Act 1958 (Victoria).

                  10. State Energy Commission of Western Australia, a commission
         established under the State Energy Commission Act 1979 (Western
         Australia).

                  11. The Australian Telecommunications Commission, a commission
         established under section 4 of the Telecommunications Act 1975
         (Commonwealth).

                  12. Victorian Public Authorities Finance Agency an agency
         constituted under section 3 of the Victorian Public Authorities Act
         1984 (Victoria).

                  13. Australian Industry Development Corporation a body
         established under Section 5 of the Australian Industries Development
         Corporation Act (Commonwealth).

                  14. South Australian Finance Trust Limited, a body corporate
         proclaimed by the Governor of South Australia to be a semi-government
         authority pursuant to the Public Finance and Audit Act 1987 (South
         Australia).

                  15. The Western Australian Treasury Corporation.

                  16. Hydro-Electricity Commission of Tasmania.

                  17. Tasmanian Public Finance Corp.

                  18. Tasmanian Development Authority.

                  The Board of Directors shall have the authority to adjust,
modify, alter or change from time to time the list of securities as set forth
above if each Rating Agency advises the Corporation in writing that the change
or specification will not adversely affect its then-current rating of the AMPS.

                  "Australian Short-Term Securities" means promissory notes and
other short-term commercial paper issued by Australian institutions rated A-l+
by S&P and Prime-1 by Moody's

                                       5

<PAGE>

or with a long-term rating from S&P at least as high as their then-current
comparable rating of AMPS and with a long-term foreign currency debt rating from
Moody's of at least Aa3.

                  "Authorized Newspaper" means The Wall Street Journal, or if
not published on such date, The New York Times, or if neither of such papers is
published on such date, a newspaper, printed in the English language, of general
circulation in the Borough of Manhattan, The City of New York, that carries
financial news and is customarily published on each Business Day, whether or not
published on Saturdays, Sundays or holidays.

                  "Bank Bills" means bills of exchange (as defined in the Bills
of Exchange Act of the Commonwealth of Australia) issued, accepted or endorsed
by Australian banks (x) with a rating from S&P at least as high as their
then-current comparable rating of the AMPS and (y) (i) if the Bank Bill has a
remaining term to maturity from the date of determination of 30 days or less,
rated Prime-1 by Moody's, (ii) with a long-term foreign currency debt rating
from Moody's of at least Aa3 or (iii) as otherwise approved in writing by
Moody's.

                  "Board of Directors" means the Board of Directors of the
Corporation or, except as used in paragraph 6 hereof, any duly authorized and
empowered committee thereof.

                  "Business Day" means a day on which the New York Stock
Exchange is open for trading and which is not a Saturday, Sunday or other day on
which banks in The City of New York are authorized or obligated by law to close;
provided, that for purposes of determining Valuation Dates, Cure Dates and any
Failure to Cure, "Business Day" means a day on which the New York Stock Exchange
and the Australian Stock Exchange Limited are open for trading and which is not
a Saturday, Sunday or other day on which banks in The City of New York or in
Sydney, Australia are authorized or obligated by law to close.

                  "Cash" means such coin or currency of the United States of
America as at the time shall be legal tender for payment of public and private
debts.

                  "Certificate of Minimum Liquidity" has the meaning specified
in paragraph 7(c)(i) below.

                  "Commercial Paper Dealers" means Merrill Lynch, Pierce, Fenner
& Smith Incorporated and such other commercial paper dealer or dealers as the
Corporation may from time to time appoint, or, in lieu of any thereof, their
respective affiliates or successors.

                  "Commission" means the Securities and Exchange Commission.

                  "Common Stock" means shares of the common stock, par value
$.01 per share, of the Corporation.

                  "Corporate Bonds" means debt obligations of U.S. corporations
(other than Short-Term Money Market Instruments or U.S. Government Obligations)
rated Aa or better by Moody's or AA or better by S&P, which corporate debt
obligations (a) provide for the periodic payment of interest thereon in cash,
(b) do not provide for conversion or exchange into equity capital at any time
over their respective lives, (c) have been registered under the Securities Act
of 1933, as amended, and (d) have not had notice given in respect thereof that
any such corporate

                                       6

<PAGE>

debt obligations are the subject of an offer by the issuer thereof of exchange
or tender for cash, securities or any other type of consideration (except that
corporate debt obligations in an amount not exceeding 10% of the aggregate value
of the Corporation's assets at any time shall not be subject to the provisions
of this clause (d)). In addition, no corporate debt obligation held by the
Corporation shall be deemed a Corporate Bond (i) if it fails to meet the
criteria in column (1) below or (ii) to the extent (and only to the
proportionate extent) the acquisition or holding thereof by the Corporation
causes the Corporation to exceed any applicable limitation set forth in column
(2) or (3) below as of any relevant date of determination (provided that in the
event that the Corporation shall exceed any such limitation, the Corporation
shall designate, in its sole discretion, the particular Corporate Bond(s) and/or
portions thereof which shall be deemed to have caused the Corporation to exceed
such limitation):

<TABLE>
<CAPTION>
                           Column 1                   Column 2                    Column 3
                           --------                   --------                    --------

                                                                              Maximum Percent of
                                                 Maximum Percent of         Value of Corporation
                                                Value of Corporation          Assets, Including
                            Minimum               Assets, Including           Eligible Portfolio
                            Original              Eligible Portfolio         Property, Invested in
Rating                    Issue Size of         Property, Invested in          any One Industry
(1)                        Each Issue             any One Issuer (2)             Category (2)
- ------------------  -----------------------  ---------------------------  ----------------------------
                        ($ in millions)
<S>                 <C>                      <C>                          <C>
Aaa/AAA                      $100                      10.0%                        50.0%
Aa/AA                         100                      10.0                         33.3
</TABLE>

(1)  In the event that a Corporate Bond has received a different rating from
     each of the Rating Agencies, the lower of the two ratings will be
     controlling. Rating designations include (+) or (-) modifiers to the rating
     where appropriate.

(2)  The referenced percentages represent maximum cumulative totals for the
     related rating category and each lower rating category.

The Board of Directors shall be authorized to adjust, modify, alter or change
from time to time the assets (and/or the characteristics thereof) included
within the definition of Corporate Bonds for purposes of determining compliance
with the AMPS Basic Maintenance Amount to encompass other assets constituting,
and/or other characteristics of, corporate debt obligations from those set forth
in these Articles Supplementary if the Rating Agencies advise the Corporation in
writing that the change will not adversely affect their respective then-current
ratings of the AMPS.

                  "Corporation" means The First Australia Prime Income Fund,
Inc.

                  "Cure Date" means the AMPS Basic Maintenance Cure Date or the
1940 Act Cure Date, as the case may be.

                  "Date of Original Issue" means, with respect to any share of
AMPS, the date on which the corporation originally issues such share.

                                       7

<PAGE>

                  "Deposit Securities" means Cash, U. S. Government Obligations
and Short-Term Money Market Instruments. Except for purposes of determining
compliance with the AMPS Basic Maintenance Amount, each Deposit Security shall
bc deemed to have a value equal to its principal or face amount payable at
maturity plus any interest payable thereon after delivery of such Deposit
Security but only if payable on or prior to the applicable payment date in
advance of which the relevant deposit is made.

                  "Discount Factor" means, for any asset held by the
Corporation, the number set forth opposite each such type of asset in the
following table or such other factor required under the guidelines established
by the Rating Agencies from time to time (it being understood that any asset
held by the Corporation and not listed in the following table or as provided in
writing by the Rating Agencies shall have a Discounted Value of zero):

<TABLE>
<CAPTION>
                                                                                    Moody's              S&P
                                                                                    Discount           Discount
Type of Eligible Portfolio Property                                                  Factor             Factor
- -----------------------------------                                              --------------     --------------
<S>                                                                              <C>                <C>
Cash and Short-Term Money Market Instruments                                           1.00             1.00

Australian Government Securities:
     with a current outstanding issue size less than A$100,000,000 and with a
     remaining term to maturity equal to or longer than 46 days from the date
     of determination                                                                  1.85             1.50(4)

     with a current outstanding issue size of at least A$100,000,000 but less
     than or equal to A$150,000,000 and with a remaining term to maturity equal
     to or longer than 46 days from the date of determination                          1.85             1.40

     with a current outstanding issue size greater than A$150,000,000 and with a
     remaining term to maturity equal to or longer than 46 days from the date
     of determination                                                                  1.60             1.40

     with any current outstanding issue size and with a remaining term to
     maturity shorter than 46 days from the date of determination                      1.00             1.00(4)

Australian Semi-Government Securities (5):
     with a current outstanding issue size less than A$100,000,000 and with a
     remaining term to maturity equal to or longer than 46 days from the date
     of determination                                                                  1.85             1.55(4)

     with a current outstanding issue size of at least A$100,000,000 but less
     than or equal to A$150,000,000 and with a remaining term to maturity equal
     to or longer than 46 days from the date of determination                          1.85             1.45
</TABLE>

                                       8

<PAGE>

<TABLE>
<CAPTION>
                                                                                    Moody's             S&P
                                                                                    Discount          Discount
Type of Eligible Portfolio Property                                                  Factor            Factor
- -----------------------------------                                              --------------    --------------
<S>                                                                              <C>               <C>
     with a current outstanding issue size greater than A$150,000,000 and with a
     remaining term to maturity equal to or longer than 46 days from the date
     of determination                                                                  1.60             1.45

     with any current outstanding issue size and with a remaining term to
     maturity shorter than 46 days from the date of determination                      1.00             1.00(4)

Australian Semi-Government Securities (Tasmanian) (6):
     with a current outstanding issue size less than A$100,000,000 and with a
     remaining term to maturity equal to or longer than 46 days from the date
     of determination                                                                  1.94             1.60(4)

     with a current outstanding issue size of at least A$100,000,000 but less
     than or equal to A$150,000,000 and with a remaining term to maturity equal
     to or longer than 46 days from the date of determination                          1.94             1.50

     with a current outstanding issue size greater than A$150,000,000 and with a
     remaining term to maturity equal to or longer than 46 days from the date
     of determination                                                                  1.69             1.50

     with any current outstanding issue size and with a remaining term to
     maturity shorter than 46 days from the date of determination                      1.05             1.00(4)

Bank Bills:
     with maturities of less than or equal to 46 days from the last Valuation
     Date at which the AMPS Basic Maintenance Amount was met                           1.00             1.00

     with maturities of 47-56 days from the last Valuation Date on which the
     AMPS Basic Maintenance Amount was met                                             1.00             1.40

     with maturities of 57-90 days from the last Valuation Date on which the
     AMPS Basic Maintenance Amount was met                                             1.35             1.40

     with maturities of 91-180 days from the last Valuation Date on which the
     AMPS Basic Maintenance Amount was met                                             1.35             1.45
</TABLE>

                                       9

<PAGE>

<TABLE>
<CAPTION>
                                                                                    Moody's              S&P
                                                                                    Discount           Discount
Type of Eligible Portfolio Property                                                  Factor             Factor
- -----------------------------------                                              --------------     --------------
<S>                                                                              <C>                <C>
Australian Currency                                                                    1.43              1.57(7)

Guaranteed Eurobonds:
     with a current outstanding issue size less than or equal to A$100 million
     with a remaining term to maturity of more than 56 days                           _____              2.00

     with a current outstanding issue size exceeding A$l00 million with a
     remaining term to maturity of more than 56 days                                   ____              1.90

     with any current outstanding issue size and with a remaining term to
     maturity of less than 56 days                                                     ____              1.00

Non-Guaranteed Eurobonds:
     with a current outstanding issue size less than or equal to A$100 million
     with a remaining term to maturity of more than 56 days                            ____              2.15

     with a current outstanding issue size exceeding A$100 million with a
     remaining term to maturity of more than 56 days                                   ____              2.00

     with any current outstanding issue size and with a remaining term to
     maturity of less than 56 days                                                     ____              1.00

Guaranteed Australian Corporate Bonds:
     with a current outstanding issue size less than or equal to A$150 million
     with a remaining term to maturity of more than 56 days                            ____              1.70

     with a current outstanding issue size exceeding A$150 million with a
     remaining term to maturity of more than 56 days                                   ____              1.60

     with any current outstanding issue size and with a remaining term to
     maturity of less than 56 days                                                     ____              1.00

Non-Guaranteed Australian Corporate Bonds:
     with a current outstanding issue size less than or equal to A$150 million
     with a remaining term to maturity of more than 56 days                            ____              1.80
</TABLE>

                                       10

<PAGE>

<TABLE>
<CAPTION>
                                                                                    Moody's              S&P
                                                                                    Discount           Discount
Type of Eligible Portfolio Property                                                  Factor             Factor
- -----------------------------------                                              --------------     --------------
<S>                                                                              <C>                <C>
with a current outstanding issue size exceeding A$150 million with a remaining
term to maturity of more than 56 days                                                  ____              1.70

with any current outstanding issue size and with a remaining term to maturity
of less than 56 days                                                                   ____              1.00

GNMA Certificates with fixed interest rates                                             (1)              1.30
GNMA Certificates with adjustable interest rates                                       1.59              1.30
FHLMC and FNMA Certificates with fixed interest rates                                   (1)              1.35
FHLMC and FNMA Certificates with adjustable interest rates                             1.58              1.35
FHLMC Multifamily Securities                                                            (1)              1.65
FHLMC and FNMA Certificates with variable interest rates                                (1)              1.35
GNMA Graduated Payment Securities                                                     (1)(2)             1.50(3)
U.S. Government Obligations having a remaining term to maturity of 90 days or
     less                                                                              1.08              1.00
U.S. Government Obligations having a remaining term to maturity of more than 90
     days but not more than one year                                                   1.08              1.25
U.S. Government Obligations having a remaining term to maturity of more than
     one year but not more than two years                                              1.14              1.25
U.S. Government Obligations having a remaining term to maturity of more than
     two years but not more than three years                                           1.19              1.25
U.S. Government Obligations having remaining term to maturity of more than
     three years but not more than four years                                          1.25              1.25
U.S. Government Obligations having a remaining term to maturity of more than
     four years but not more than five years                                           1.31              1.25
U.S. Government Obligations having a remaining term to maturity of more than
     five years but not more than seven years                                          1.39              1.33
U.S. Government Obligations having a remaining term to maturity of more than
     seven years but not more than 10 years                                            1.47              1.33
U.S. Government obligations having a remaining term to maturity of more than 10
     years but not more than 15 years                                                  1.53              1.35
U.S. Government Obligations having a remaining term to maturity of more than 15
     years but not more than 20 years                                                  1.60              1.45
U.S. Government Obligations having a remaining term to maturity of more than 20
     years but not more than 30 years                                                  1.61              1.45
</TABLE>

- -----------------
(1)  The Discount Factor determined therefor in writing by the Rating Agencies.

(2)  Unless the Rating Agencies shall agree, GNMA Graduated Payment Securities
     with a coupon rate lower than 5% shall not be included in Eligible
     Portfolio Property.

                                       11


<PAGE>

(3)  A Discount Factor of 1.50 applies in the case of GNMA Graduated Payment
     Securities as to which the Corporation notifies the Auction Agent that
     scheduled principal payments are being made to holders; in the case of GNMA
     Graduated Payment Securities as to which the Fund notifies the Auction
     Agent that scheduled principal payments are not being made to holders, the
     Discount Factor shall be that which is determined in writing by the Rating
     Agencies.

(4)  Provided that the current outstanding issue size (as determined on each
     Quarterly Valuation Date) is equal to or greater than A $10,000,000.

(5)  Excluding securities of Hydro-Electricity Commission of Tasmania, Tasmanian
     Public Finance Corp. and Tasmanian Development Authority.

(6)  Securities of Hydro-Electricity Commission of Tasmania, Tasmanian Public
     Finance Corp. and Tasmanian Development Authority.

(7)  If the determination is being made (A) while the Corporation is not in
     compliance with the Credit Line Test as defined under the definition of
     Forward Contract or (B) following a Valuation Date related to a Failure to
     Cure, but prior to the consummation of any mandatory redemption required
     pursuant to paragraph 5(b), if a Forward Contract shall not be in place as
     provided in the definition of Forward Contract, then the Discount Factor
     will be 1.65 for all currency attributable to Australian Government
     Securities, Australian Semi-Government Securities and Bank Bills and will
     be 1.75 for all currency attributable to Australian Corporate Bonds and
     Eurobonds.

The Board of Directors shall have the authority to adjust, modify, alter or
change from time to time the initial Discount Factor as set forth above applied
to determine the Discounted Value of any item of Eligible Portfolio Property or
may specify from time to time a Discount Factor for any asset constituting
Eligible Portfolio Property if each Rating Agency advises the Corporation in
writing that the change or specification will not adversely affect its
then-current rating of the AMPS .

                  "Discounted Value," with respect to any asset held by the
Corporation, means the quotient of the Market Value of such asset divided by the
applicable Discount Factor; provided that in no event shall the Discounted Value
of any asset constituting Eligible Portfolio Property as of any date exceed the
unpaid principal balance or face amount of such asset as of that date; provided
further that the Discounted Value of all Australian Securities shall be further
discounted by the Discount Factor applicable to Australian Currency.

                  "Dividend Coverage Amount," as of any date of determination,
means:

                         (a)  the aggregate of the product of

                              (i)   the number of shares of AMPS outstanding on
                  such date multiplied by $100,000,

                              (ii) the Applicable Rate in effect as of such
                  date, and

                                       12



<PAGE>

                       (iii) a fraction, the numerator of which is the number of
               days in the Dividend Period ending on the next Dividend Payment
               Date (determined by including the first day thereof but excluding
               the last day thereof) and the denominator of which is 360;

                       plus

                   (b) dividends projected to accumulate from the last dividend
payment date with respect to each series of Preferred Stock, not including the
AMPS, until the next dividend payment date for such series;

                       plus

                   (c) dividends accumulated but unpaid for any prior dividend
periods with respect to any shares of Preferred Stock;

                       less

                   (d) the combined value of any Dividend Coverage Assets
irrevocably deposited by the Corporation for the payment of dividends on the
AMPS and other Preferred Stock, if any.

               "Dividend Coverage Assets," as of any date of determination,
means Deposit Securities with maturity dates not later than the day preceding
the next Dividend Payment Date; provided that if the applicable date of
determination is a Dividend Payment Date, any Deposit Securities to be applied
to the dividends payable on the AMPS on such date shall not be included in
Dividend Coverage Assets.

               "Dividend Payment Date" means each date of payment of dividends
as provided in paragraph 3(b) below.

               "Dividend Period" means the Initial Dividend Period and each
subsequent period commencing on a Dividend Payment Date and ending on and
including the calendar day prior to the next Dividend Payment Date.

               "dollar" or "$" shall mean U.S. dollars. Amounts in Australian or
New Zealand dollars shall be converted to U.S. dollars at the rates reported by
Morgan Guaranty Trust Company for the date of determination or such other source
as shall have been approved in writing by the Rating Agencies.

               "Eligible Portfolio Property" means Australian Government
Securities, Australian Semi-Government Securities, Cash, Bank Bills, Australian
Currency, U.S. Government Obligations, Short-Term Money Market Instruments, FNMA
Certificates, FHLMC Certificates, FHLMC Multifamily Securities, GNMA
Certificates, and GNMA Graduated Payment Securities and, if the calculation is
being made for S&P, Eurobonds and Australian Corporate Bonds; provided, (i) if
the determination is being made for Moody's, (x) that not more than 20% in the
aggregate of the total Market Value of Eligible Portfolio Property shall consist
of Australian Government Securities and/or Australian Semi-Government Securities
with a current outstanding

                                       13

<PAGE>

issue size less than A$150,000,000 and (y) that not more than 10% in the
aggregate of the total Market Value of Eligible Portfolio Property shall consist
of Australian Semi-Government Securities described under items 16, 17 and 18 of
such definition and (ii) if the determination is being made for S&P that no
Australian Government Securities or Australian Semi-Government Securities
contained in Eligible Portfolio Property shall have a current outstanding issue
size less than A$10,000,000 (as determined on each Quarterly Valuation Date);
provided further that, if the determination is being made for S&P, not more than
10% in the aggregate of the total Market Value of the Eligible Portfolio
Property shall consist of Australian Semi-Government Securities issued by any
single issuer and that not more than 20% in the aggregate of the total Market
Value of the Eligible Portfolio Property shall consist of Australian
Semi-Government Securities guaranteed by any single state (except that in the
case of each of Victoria and New South Wales, such percentage shall be 25%). The
Board of Directors shall have the authority to specify from time to time other
assets as Eligible Portfolio Property if the Rating Agencies advise the
Corporation in writing that the specification will not adversely affect their
respective then-current ratings of the AMPS.

               "Eurobonds" means debt securities which are denominated in
Australian Currency, are issued by the issuers listed below and which have the
following characteristics: (a) the principal amount outstanding on the date of
determination is at least equal to A$50 million, (b) the security is publicly
traded, (c) the security is non-callable, (d) the security is rated at least AA-
by S&P and (e) the maturity date of the security is not later than the 10th
anniversary of the issuance date of such security.

               Issuers with a public long-term S&P rating or whose parent has a
public long-term S&P rating and there is an explicit guarantee backing the
subsidiary's debt service payments ("Guaranteed Eurobonds"):

                       Australian Telecom
                       Finnish Export Credit Corp.
                       National Australia Bank
                       State Bank of New South Wales.
                       State Electricity of Victoria
                       Swedish Export Credit Corp.

               Issuers, which shall be designated in writing from time to time
by S&P, without a public long-term S&P rating but whose parent has a long-term
S&P rating but has not explicitly guaranteed the subsidiary's debt service
payments ("Non-Guaranteed Eurobonds").

In addition, if the determination is being made for S&P, (a) not more than 10%
of the aggregate Market value of the Eligible Portfolio Property of the
Corporation can consist of Eurobonds from a single issuer, (b) not more than 50%
(if the issue is rated AAA by S&P) or 33.3% (if the issue is rated AA or A by
S&P) or 20% (if the issue it rated BBB by S&P) of the aggregate Market Value of
the Eligible Portfolio Property of the Corporation can consist of Eurobonds from
issues representing a single industry, (c) not more than 5% of the then
outstanding principal amount of any one issue can be included in Eligible
Portfolio Property and (d) not more than 20% of the outstanding aggregate
principal amount of the Eurobonds held by the Corporation and included

                                       14

<PAGE>

in Eligible Portfolio Property shall be comprised of securities with an
outstanding issue size of less than A$100 million.

               The Board of Directors shall have the authority to adjust,
modify, alter or change from time to time the list of securities and eligibility
criteria as set forth above if each Rating Agency advises the Corporation in
writing that the change or specification will not adversely affect its
then-current rating of the AMPS.

               "Failure to Cure" shall mean a failure by the Corporation to
maintain the AMPS Basic Maintenance Amount or 1940 Act AMPS Asset Coverage
Requirement, as the case may be, which failure is not cured on or before the
third day following the related Valuation Date as reflected in a Portfolio
Valuation Report delivered to S&P and confirmed by the Corporation's Independent
Accountants.

               "FANMAC Certificates" are securities issued by a trustee against
housing loans made through the New South Wales Department of Housing and consist
of a series of closed trusts or pools. The mortgage manager is the First
Australian National Mortgage Acceptance Corporation Ltd. ("FANMAC"). FANMAC is
owned partially by the Government of the State of New South Wales with the
remainder owned by other institutions. The Government of the State of New South
Wales has provided the FANMAC Trust with an assurance as to availability of
funds to meet payments. The securities have been rated by Australian Ratings and
S&P. FANMAC securities are subject to a call provision under which borrowers
(mortgagors) can repay early and the investors in a particular pool can be
repaid on a pro rata basis.

               "FHLMC" means the Federal Home Loan Mortgage Corporation created
by Title III of the Emergency Home Finance Act of 1970, and includes any
successor thereto.

               "FHLMC Certificate" means a mortgage participation certificate in
physical or book-entry form, the timely payment of interest on and the ultimate
collection of principal of which is guaranteed by FHLMC, and which evidences a
proportional undivided interest in, or participation interest in, specified
pools of fixed-, variable- or adjustable-rate, fully amortizing, level pay
mortgage loans with terms up to 30 years, secured by first liens on one- to
four-family residences.

               "FHLMC Multifamily Security" means a "Plan B Multifamily
Security" in physical or book-entry form, the timely payment of interest on and
the ultimate collection of principal of which is guaranteed by FHLMC, and which
evidences a proportional undivided interest in, or participation interest in,
specified pools of fixed-rate, fully amortizing, level pay mortgage loans with
terms up to 30 year, secured by first priority mortgages on multifamily
residences containing 5 or more units and which are designed primarily for
residential use, the inclusion of which in the Eligible Portfolio Property will
not, in and of itself, impair, or cause the AMPS to fail to retain, the rating
assigned to such AMPS by each of the Rating Agencies, as evidenced by a letter
to such effect from each of the Rating Agencies.

               "FNMA" means the Federal National Mortgage Association, a United
States Government-sponsored private corporation established pursuant to Title
VIII of the Housing and Urban Development Act of 1966, and includes any
successor thereto.

                                       15

<PAGE>

               "FNMA Certificate" means a mortgage pass-through certificate in
physical or book-entry form, the full and timely payment of principal of and
interest on which is guaranteed by FNMA, and which evidences a proportional
undivided interest in specified pools of fixed-, variable- or adjustable-rate,
fully amortizing, level pay mortgage loans with terms up to 30 years, secured by
first liens on 1 to 4 family residences.

               "Forward Contract" means a contract, entered into following a
Failure to Cure, between the Corporation and a commercial bank or other
financial institution whose short-term debt is rated at least A-l+ by S&P or
whose long-term debt is rated at least AA by S&P (an "Eligible Bank"), which
provides that the Corporation will sell a specified amount of Australian
Currency to such Eligible Bank on a specified date for a specified amount of
U.S. dollars. The date of payment in U.S. dollars shall not be later than the
30th day following the Valuation Date related to the Failure to Cure and the
amount of U.S. dollars shall be sufficient to redeem all shares of AMPS required
to be redeemed. On the Date of Original Issue and on each Quarterly Valuation
Date thereafter, the Corporation will confirm in writing to S&P that the
Corporation has a credit line with an Eligible Bank (the "Credit Line Test").
The Credit Line Test shall be deemed to be satisfied on any date if the
Corporation has delivered such confirmation to S&P on the Date of Original Issue
or the most recent Quarterly Valuation Date, as the case may be. The Board of
Directors shall have the authority, to the extent permitted by Maryland law, to
adjust, modify, alter or change from time to time the elements comprising the
Forward Contract from those set forth in these Articles Supplementary if S&P
advises the Corporation in writing that the change will not adversely affect its
then-current rating of the AMPS.

               "GNMA" means the Government National Mortgage Association, and
includes any successor thereto.

               "GNMA Certificate" means a fully modified pass-through
certificate in physical or book-entry form, the full and timely payment of
principal of and interest on which is guaranteed by GNMA and which evidences a
proportional undivided interest in specified pools of fixed- variable- or
adjustable-rate, fully amortizing, level pay mortgage loans with terms up to 30
years, secured by first liens on 1 to 4 family residences.

               "GNMA Graduated Payment Security" means a fully modified
pass-through certificate in physical or book-entry form, the full and timely
payment of principal of and interest on which is guaranteed by GNMA, which
obligation is backed by the full faith and credit of the United States, and
which evidences a proportional undivided interest in specified pools of
graduated payment mortgage loans with terms up to 30 years, with payments that
increase annually at a predetermined rate for up to the first five or ten years
of the mortgage loan and that are secured by first-priority mortgages on one- to
four-unit residences; provided that such loans shall be past the graduated
payment period.

               "GNMA Multifamily Security" means a fully modified pass-through
certificate in physical or book-entry form, the full and timely payment of
principal of and interest on which is guaranteed by GNMA, which obligation is
backed by the full faith and credit of the United States, and which evidences a
proportional undivided interest in specified pools of fixed-rate mortgage, level
pay loans with terms up to 30 years secured by first-priority mortgages on
multifamily residences, the inclusion of which in the Eligible Portfolio
Property will not, in and

                                       16

<PAGE>

of itself, impair or cause the AMPS to fail to retain the rating assigned to
such AMPS by each of the Rating Agencies as evidenced by a letter to such effect
from each of the Rating Agencies.

               "Holder" means a Person in whose name one or more outstanding
shares of AMPS are registered on the Stock Books.

               "Independent Accountants" means the Corporation's independent
accountants, which shall be a nationally recognized accounting firm.

               "Industry Category" means, as to any Corporate Bond, any of the
industry categories set forth in the following table:

               1.   Aerospace and Defense
               2.   Airlines
               3.   Automobile/Auto Parts/Truck Manufacturing
               4.   Banks/Savings and Loans
               5.   Finance Companies/Consumer Credit
               6.   Financial Services - Brokerage/Syndication/Leasing
               7.   Building/Construction
               8.   Real Estate Development/REITS
               9.   Broadcasting - TV, Cable, and Radio
               10.  Publishing
               11.  Electronics/Computers
               12.  Electrical Equipment
               13.  Diversified/Conglomerate Services
               14.  Diversified/Conglomerate Manufacturing
               15.  Leisure/Amusement/Motion Pictures
               16.  Agricultural Chemicals
               17.  Chemicals
               18.  Food
               19.  Beverage
               20.  Tobacco
               21.  Retail
               22.  Consumer Durable Goods/Home Furnishings
               23.  Grocery/Convenience Stores
               24.  Healthcare/Drugs/Hospital Supplies
               25.  Childcare/Toys
               26.  Personal Care Products/Cosmetics
               27.  Hotel/Gaming
               28.  Insurance Companies
               29.  Machinery
               30.  Metals/Mining
               31.  Oil/Natural Gas
               32.  Oil Services
               33.  Packaging/Containers
               34.  Paper/Forest Products/Printing
               35.  Pollution Control/Waste Removal

                                       17

<PAGE>

               36.  Electric Utilities
               37.  Other Utilities
               38.  Rail/Trucking/Overnight Delivery
               39.  Telephone/Communications
               40.  Textiles/Apparel
               41.  Transportation
               42.  Agricultural/Agricultural Equipment
               43.  Miscellaneous

The Board of Directors shall have the authority to change the industry
categories applicable with respect to the Corporation from those set forth in
these Articles Supplementary if the Rating Agencies advise the Corporation in
writing that the change will not adversely affect their respective then-current
ratings of the AMPS.

               "Initial Dividend Payment Date" has the meaning set forth in
paragraph 3(b) below.

               "Initial Dividend Period "has the meaning specified in paragraph
3(b) below.

               "Investment Company Act" means the Investment Company Act of 1940
(15 U.S. Code (S) 80 et seq.), as, amended from time to time.

               "Lien" has the meaning set forth in paragraph 3(d)(iv) below.

               "Market Value" means the amount determined with respect to
specific assets of the Corporation in the manner set forth below:

                        (a) as to Australian Securities, the product of (i) the
         outstanding aggregate principal balance of the security as determined
         by the Corporation by any method which the Corporation believes
         reliable, as of the applicable Reporting Date and (ii) the dollar value
         of the lower of two bid prices per dollar of outstanding principal
         amount as of such applicable Reporting Date for such security, provided
         by two recognized securities dealers in Australia making a market in
         such security (as evidenced by such dealer's participation in the
         dealer panel for such security) to the Corporation or its agent, at
         least one of which shall be provided in writing or by telecopy, telex,
         other electronic transcription, computer obtained quotation reducible
         to written form or similar means (and in turn provided to the
         Corporation by any such means by such agent); plus, (x) if the
         determination is being made for Moody's, accrued interest to the date
         of determination if the next interest coupon on such security is due
         and payable within 56 days of such date of determination and (y) if the
         determination is being made for S&P, accrued interest.

                        (b) as to GNMA Certificates, GNMA Graduated Payment
         Securities, FNMA Certificates, FHLMC Certificates and FHLMC Multifamily
         Securities, the product of (i) the aggregate unpaid principal amount of
         the mortgage loans evidenced by each such certificate or security, as
         the case may be, as of the close of business in New York City on the
         last Business Day prior to such date of determination and (ii) the
         lower of the bid prices for the same kind of certificate or, if not
         available, some other security

                                       18

<PAGE>

         having, as nearly as practicable, comparable interest rates and
         maturities, as quoted to the Corporation by two nationally recognized
         securities dealers, who are members of the National Association of
         Securities Dealers selected by the Corporation and making a market
         therein, with at least one such quotation in writing plus, (x) if the
         determination is being made for Moody's, accrued interest to the date
         of determination if the next interest coupon on such security is due
         and payable within 56 days of such date of determination and (y) if the
         determination is being made for S&P, accrued interest;

                        (c) as to Australian Currency and Bank Bills and to
         Cash, demand deposits and bankers' acceptances included in Short-Term
         Money Market Instruments, the face value thereof; and

                        (d) as to next Business Day repurchase agreements, the
         face value thereof plus accrued interest.

Without amending the Articles of Incorporation, (i) the calculation of the
Market Value of an asset constituting Eligible Portfolio Property may be changed
to any method recognized by the Rating Agencies from that set forth in these
Articles Supplementary and (ii) a method recognized by the Rating Agencies for
calculating the Market Value of any asset identified as Eligible Portfolio
Property may be specified if the Rating Agencies advise the Corporation in
writing that the change or specification will not adversely affect their
respective then-current ratings of the AMPS.

               "Maximum Applicable Rate" at any Auction will be the rate
obtained by multiplying the 30 day "AA" Composite Commercial Paper Rate on the
date of such Auction by the Applicable Percentage determined as set forth below
based on the lower of the credit rating or ratings assigned to the AMPS by
Moody's and S&P (or if Moody's or S&P or both shall not make such rating
available, the equivalent of either or both of such ratings by a Substitute
Rating Agency or two Substitute Rating Agencies or, in the event that only one
such rating shall be available, the percentage will be based on such rating).

                                                   Applicable
                     Credit Rating                 Percentage
- ----------------------------------------------------------------

S&P                     Moody's
- ---                     -------

AA-or Above             "aa3" or Above                150%
A-to A+                 "a3" to "a1"                  160%
BBB- to BBB+            "baa3" to baa1"               250%
Below BBB-              Below "baa3"                  275%

               The Corporation shall take all reasonable action necessary to
enable S&P and Moody's to provide a rating for the AMPS. If either S&P or
Moody's shall not make such a rating available, or neither S&P nor Moody's shall
make such a rating available, Merrill Lynch, Pierce, Fenner & Smith Incorporated
or its respective affiliates and successors, after consultation with the
Corporation, shall select a nationally recognized securities rating agency or
two

                                       19

<PAGE>

nationally recognized securities rating agencies to act as a Substitute Rating
Agency or Substitute Rating Agencies, as the case may be.

               "Minimum Liquidity Level is met" means, as of any date of
determination, that the aggregate Market Value of the Dividend Coverage Assets
equals or exceeds the Dividend Coverage Amount.

               "Moody's" means Moody's Investors Service, Inc. or its
successors.

               "MMSs" are mortgage backed securities issued against mortgage
pools by MGICA Securities Ltd., a wholly-owned subsidiary of AMP Society Ltd.,
an Australian insurance company, and rated by Australian Ratings.

               "MTCs" are securities issued against specific mortgages by a
trustee and are similar to "pass-through" certificates. MTCs are issued on a
continuous basis, insured by Australian insurance companies against both
mortgage default and an early call, and rated by Australian Ratings.

               "New Zealand Securities" means those New Zealand government,
semi-government and other securities determined from time to time in writing by
the Rating Agencies.

               "NMMC Securities" National Mortgage Market Corporation Ltd.
("NMMC") has issued both AUSSIE MACs, which are medium term bearer securities,
and National Mortgage Market Bonds. NMMC is a private company which is owned
partially by the Government of the State of Victoria and partially by private
institutions. Both AUSSIE MACs and National Mortgage Bonds are rated by
Australian Ratings.

               "Notice of Redemption" has the meaning specified in paragraph
5(e) below.

               "Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer, the Secretary, any Assistant Treasurer, any
Assistant Secretary or Assistant Controller of the Corporation.

               "Officers' Certificate" means a certificate signed by an Officer
of the Corporation.

               "Other AMPS" means the auction market preferred stock or
remarketed preferred stock or similar adjustable rate preferred stock of the
Corporation other than the AMPS.

               "Other Permitted Assets" means Australian Corporate Bonds,
Eurobonds, Australian Short Term Securities, New Zealand Securities, FANMAC
Certificates, NMMC Securities, MTCs, MMSs, ANNIE MAEs, GNMA Multifamily
Securities and Corporate Bonds.

               "Paying Agent" means Manufacturers Hanover Trust Company and its
successors or any other paying agent appointed by the Corporation to perform the
functions performed by the Paying Agent.

                                       20

<PAGE>

               "Person" means an individual, a corporation, a company, a
voluntary association, a partnership, a trust, an unincorporated organization or
a government or any agency, instrumentality or political subdivision thereof.

               "Preferred Stock" means the preferred stock of the Corporation
including the AMPS.

               "Portfolio Calculation" shall have the meaning specified in
paragraph 7(b)(ii).

               "Portfolio Valuation Report" means a report executed by the
Corporation and delivered to the Auction Agent and the Rating Agencies with
respect to the valuation (in U.S. dollars) of the Eligible Portfolio Property,
as described in paragraph 7 hereof; provided, that all or any portion of any
such report may be prepared by the custodian for the Eligible Portfolio
Property, EquitiLink Australia Limited, The Prudential Insurance Company of
America, Prudential Mutual Fund Management, Inc. and/or EquitiLink International
Management Limited; provided further that such Portfolio Valuation Report may be
delivered to the Auction Agent and the Rating Agencies in summary form, however
the Corporation shall retain a copy of the full Portfolio Valuation Report in
its files and make such report available to its Independent Accountants and the
Rating Agencies upon their request.

               "Projected Dividend Amount" for the AMPS and other Preferred
Stock, if any, shall mean, if the date of determination is a Valuation Date, the
amount of dividends, based on the number of shares of AMPS and other Preferred
Stock, if any, outstanding on such Valuation Date, projected to accumulate on
such shares from the next succeeding Dividend Payment Date or Dates until the
63rd day after such Valuation Date, at the following dividend rates:

                        (a) if the Valuation Date is the Date of Original Issue
         or a Dividend Payment Date, for the period beginning on (and including)
         the first following Dividend Payment Dates and ending on (and
         including) the 63rd day following such Valuation Date, the product of
         2.40 and (x) the Maximum Applicable Rate on the Date of Original Issue
         (in the case of the Date of Original Issue) or (y) the Maximum
         Applicable Rate as of the last occurring Auction Date (in the case of
         any Dividend Payment Date); and

                        (b) if such Valuation Date is not the Date of Original
         Issue or a Dividend Payment Date, (i) for the period beginning on (and
         including) the first following Dividend Payment Dates and ending on
         (but not including) the sooner of the second following Dividend Payment
         Date for such shares or the 64th day following such Valuation Date, the
         product of 2.40 and (x) the Maximum Applicable Rate on the Date of
         Original Issue (in the case of a Valuation Date occurring prior to the
         first Auction Date) or (y) the Maximum Applicable Rate on the last
         occurring Auction Date (in the case of any other Valuation Date), (ii)
         for the period, if any, beginning on (and including) the second
         following Dividend Payment Date and ending on (but not including) the
         64th day following such Valuation Date, the product of 2.40 and the
         rate specified in clause (x) or (y) above and (iii) for the period, if
         any, beginning on (and including) the third following

                                       21

<PAGE>

         Dividend Payment Date and ending on (but not including) the 64th day
         following such Valuation Date, the product of 2.94 and the rate
         specified in clause (x) or (y) above.

If the date of determination is not a Valuation Date, then the Projected
Dividend Amount on such date of determination shall equal the Projected Dividend
Amount therefor on the immediately preceding Valuation Date, adjusted to reflect
any decrease in the number of shares of AMPS outstanding. The calculation of the
Projected Dividend Amount may be made on bases other than those set forth above
if the Rating Agencies shall have advised the Corporation in writing that the
revised calculation of the Projected Dividend Amount would not adversely affect
their respective then-current ratings of the AMPS.

               "Purchaser's Letter" shall mean a letter in which a prospective
purchaser agrees, among other things, that ownership of shares of AMPS will be
maintained in book entry form by the Securities Depository for such prospective
purchaser's Agent Member, and which is required to be executed by each purchaser
of shares of AMPS.

               "Quarterly Valuation Date" means, so long as any shares of AMPS
are outstanding, the last Valuation Date of January, April, July and October of
each year.

               "Rating Agencies" means Moody's and S&P or their successors so
long as such rating agency is then rating the AMPS.

               "Reporting Date," with respect to any price referred to in the
definition of the Market Value of an item of Eligible Portfolio Property, shall
mean the date as of which the Market Value of such item of Eligible Portfolio
Property is to be determined or, if no such price is available as provided above
for such date, the next closest prior date as of which such price is so
available; provided, that no such price shall be deemed to be available as of a
Reporting Date if such price is not available as of a date within one Business
Day next preceding the date as of which the determination of such Market Value
is to be made.

               "Securities Depository" means The Depository Trust Company and
any successor thereto.

               "Scheduled Payment Day" has the meaning specified in paragraph
3(b) below.

               "Short-Term Money Market Instruments" means the following kinds
of instruments, if on the date of purchase or other acquisition by the
Corporation of such instrument the remaining term to maturity thereof is not
more than 30 days:

                        (a) demand deposits in, certificates of deposit of, and
         bankers' acceptances issued by, any depository institution, the
         deposits of which are insured by the Federal Deposit Insurance
         Corporation or the Federal Savings and Loan Insurance Corporation,
         provided that, at the time of the Corporation's investment therein, the
         commercial paper or other unsecured short-term debt obligations of such
         depository institution are rated Prime-1 by Moody's and A-l+ by S&P and
         are issued by institutions whose long-term debt obligations are rated
         at least A-2 by Moody's;

                                       22

<PAGE>

                        (b) repurchase obligations with respect to a U.S.
         Government Obligation, FNMA Certificate, FHLMC Certificate or GNMA
         Certificate entered into with a depository institution, (x) the
         deposits of which are insured by the Federal Deposit Insurance
         Corporation or the Federal Savings and Loan Insurance Corporation, (y)
         the commercial paper or other unsecured short-term debt obligations of
         which are rated Prime-1 by Moody's and A-l+ by S&P, and (z) the
         long-term debt obligations of which are rated at least A-2 by Moody's,
         which securities must be repurchased within one Business Day from the
         date such repurchase obligation was entered into; and

                        (c) commercial paper rated at the time of the
         Corporation's investment therein Prime-1 by Moody's and A-l+ by S&P and
         issued by institutions whose long-term debt obligations are rated at
         least A-2 by Moody's.

               "S&P" means Standard & Poor's Corporation or any successor
thereto.

               "Stock Books" means the stock transfer books of the Corporation
maintained by the Paying Agent with respect to the shares of AMPS.

               "Subsequent Dividend Period" has the meaning specified in
paragraph 3(b) below.

               "Substitute Commercial Paper Dealers" means such substitute
commercial paper dealer or dealers as the Corporation may from time to time
appoint or, in lieu of any thereof, their respective affiliates or successors.

               "Substitute Rating Agency" and "Substitute Rating Agencies" mean
a nationally recognized securities rating agency or two nationally recognized
securities rating agencies, respectively, selected by Merrill Lynch, Pierce,
Penner & Smith Incorporated, or its affiliate or successor, in consultation with
the Corporation to act as the substitute rating agency or substitute rating
agencies, as the case may be, to determine the credit ratings of the shares of
AMPS.

               "Type I Corporate Bonds" as of any date means Corporate Bonds
whose Moody's rating is Aaa and whose S&P rating is AAA as of such date.

               "Type II Corporate Bonds" as of any date means Corporate Bonds
whose Moody's rating is at least Aa and whose S&P rating is at least AA+ to AA-
as of such date.

               "U.S. Government Obligations" means direct obligations of the
United States, provided that such direct obligations are entitled to the full
faith and credit of the United States and that any such obligations, other than
United States Treasury Bills, provide for the periodic payment of interest and
the full payment of principal at maturity or call for redemption.

               "Valuation Date" means each Friday of each month or, if such day
is not a Business Day, the next preceding Business Day, provided, that the first
Valuation Date may occur on any other date established by the Corporation;
provided, further, that such date shall not be earlier than 4 Business Days
prior to, and not later than, the Date of Original Issue.

               "Voting Period" has the meaning specified in paragraph 6(b)
below.

                                       23

<PAGE>

               "1940 Act AMPS Asset Coverage Ratio" means, as of the date of
determination, the ratio of the Fund's net assets to its senior securities
representing indebtedness plus the liquidation value of its Preferred Stock,
including the shares of AMPS.

               "1940 Act AMPS Asset Coverage Requirement" means the requirement
that the Corporation maintain, with respect to shares of AMPS, as of the last
Friday of each month in which any shares of AMPS are outstanding, asset coverage
of at least 200% with respect to senior securities representing indebtedness
plus the liquidation value of its Preferred Stock, including the shares of AMPS
(or such other asset coverage as may in the future be specified in or under the
Investment Company Act as the minimum asset coverage for senior securities which
are stock of a closed-end investment company as a condition of paying dividend
on its common stock).

               "1940 Act Cure Date," with respect to the failure by the
Corporation to maintain the 1940 Act AMPS Asset Coverage Requirement (as
required by paragraph 7(a) hereof) as of last Valuation Date of each month,
means the last Valuation Date of the following month.

               2.  Fractional Shares. No fractional shares of AMPS shall be
issued.

               3.  Dividends.

                   (a) Holders of shares of AMPS shall be entitled to receive,
when, as, and if declared by the Board of Directors, out of funds legally
available therefor, cumulative cash dividends at the Applicable Rate per annum
(determined as set forth below) payable on the respective dates set forth below.

                   (b) Dividends on the shares of AMPS shall accumulate from the
Date of Original Issue. Accumulated dividends shall be payable commencing on
August 22, 1989 (the 21st day after the Date of Original Issue), with respect to
the Auction Market Preferred Stock, Series D (hereinafter such date is referred
to as the "Initial Dividend Payment Date") and on each day thereafter which is
the last day of each succeeding 28-day period after such date. If any such last
day (the "Scheduled Payment Day") is not a Business Day or, unless the
Securities Depository shall make dividend payments in same-day funds, the day
succeeding the Scheduled Payment Day is not a Business Day, dividends payable on
such Scheduled Payment Day shall be paid on the first Business Day succeeding
such Scheduled Payment Day that is next succeeded by a day which is also a
Business Day; provided, however, that if the Securities Depository shall make
dividend payments with respect to the shares of AMPS in same-day funds, such
next succeeding day need not be a Business Day. Any date on which a dividend on
the AMPS is payable pursuant to this paragraph 3(b) is herein called a "Dividend
Payment Date". The period beginning on (and including) the Date of Original
Issue and ending on (but not including) the Initial Dividend Payment Date is
referred to herein as the "Initial Dividend Period". Each successive period
commencing on, and including, the Dividend Payment Date for the previous
Dividend Period and ending on and including the calendar day preceding the next
succeeding Dividend Payment Date is referred to herein as a "Subsequent Dividend
Period" and the Initial Dividend Period and each Subsequent Dividend Period
together are sometimes referred to herein as "Dividend Periods." The record date
for the payment of dividends will be the Auction Date immediately preceding the
Dividend Payment Date.

                                       24

<PAGE>

                       (c)  (i)   The Applicable Rate for the Auction Market
Preferred Stock, Series D shall be 9.125% per annum for the Initial Dividend
Period. For the purpose of calculating the rate of dividends per annum payable
on shares of AMPS (the "Applicable Rate") for each Subsequent Dividend Period
the Corporation shall enter into an agreement with the Auction Agent (the
"Auction Agent Agreement"). The Applicable Rate on the shares of AMPS for each
Subsequent Dividend Period shall be determined by the Auction Agent in
accordance with the Auction Agent Agreement, which shall provide that the
Auction Agent will follow the Auction Procedures described in paragraph 8 hereof
to determine the Applicable Rate. In the event there is no Auction Agent on the
Business Day prior to the first day of a Dividend Period, the Applicable Rate
for such Dividend Period shall be equal to the Maximum Applicable Rate that
could have resulted pursuant to the Auction Procedures, as determined by the
Corporation, on such Business Day. If no Auction is held on any Auction Date for
any other reason, the Applicable Rate for the Dividend Period beginning on the
Business Day following such Auction Date shall be equal to the Maximum
Applicable Rate that could have resulted pursuant to the Auction Procedures, as
determined by the Auction Agent (or, if there is no Auction Agent, by the
Corporation), on such Business Day. The Corporation shall exercise its best
efforts to maintain an Auction Agent pursuant to an agreement containing terms
no less favorable to the Corporation than the terms of the Auction Agent
Agreement.

                            (ii)  The amount of dividends per share payable on
                  shares of AMPS for each Dividend Period or part thereof shall
                  be determined by the Corporation and shall be an amount equal
                  to $100,000 per share of AMPS multiplied by the product of (1)
                  the Applicable Rate for such Dividend Period and (2) a
                  fraction, the numerator of which shall be the actual number of
                  days in such Dividend Period or part thereof and the
                  denominator of which shall be 360. All dollar amounts used in
                  or resulting from such calculations will be rounded to the
                  nearest cent (with 0.5 cents being rounded up).

                            (iii) If the Corporation fails to deposit, in
                  same-day funds, with the Paying Agent by 12:00 noon, New York
                  City time, (A) on any Dividend Payment Date an amount
                  sufficient to pay the dividends (whether or not earned or
                  declared) payable on such Dividend Payment Date or (B) on any
                  redemption date for the AMPS an amount sufficient to redeem on
                  such date fixed for redemption the shares as to which notice
                  of redemption has been given (including an amount equal to
                  dividends thereon, whether or not earned or declared,
                  accumulated but unpaid to such redemption date), then, in
                  either case, beginning with the Dividend Payment Date or
                  redemption date, as the case may be, on which such failure
                  occurs and continuing until the Dividend Payment Date that is
                  or immediately follows the date the Corporation remedies such
                  failure as provided in the third sentence of this paragraph,
                  the Applicable Rate for each Dividend Period shall be equal to
                  275% of the "AA" Composite Commercial Paper Rate in effect on
                  the second Business Day preceding the first day of such
                  Dividend Period. Notwithstanding the foregoing, if the
                  Corporation remedies such failure by depositing, in same-day
                  funds, with the Paying Agent by 12:00 noon, New York City
                  time, on the first, second or third Business Day following
                  such Dividend Payment Date or date fixed for redemption, as
                  the case may be, an amount equal to (x) the unpaid dividends
                  or unpaid redemption payments plus (y) a late charge

                                       25

<PAGE>

                  computed at an annual rate of 275% of the "AA" Composite
                  Commercial Paper Rate in effect on the second Business Day
                  preceding the date of such failure applied to the amount of
                  such unpaid dividends or unpaid redemption payments based on
                  the number of days elapsed from the applicable Dividend
                  Payment Date or date fixed for redemption to the date on which
                  funds for such dividends or redemption payments are deposited
                  with the Paying Agent divided by 360, then the Applicable Rate
                  for the then-current Dividend Period will be that established
                  on the immediately preceding Auction Date. If, subsequent to
                  the three Business Day grace period referred to in the
                  preceding sentence, the Corporation remedies such failure to
                  pay dividends or the redemption payments by depositing with
                  the Paying Agent all amounts required by the first sentence of
                  this paragraph plus all dividends (computed at the rate
                  specified in the first sentence of this paragraph) accumulated
                  (whether or not earned or declared) but unpaid to the Dividend
                  Payment Date that is or immediately precedes the date of such
                  remedy, then the Applicable Rate in respect of each Dividend
                  Period commencing after such remedy will be determined in
                  accordance with the Auction Procedures until such time as
                  there is another failure to pay either dividends or the
                  redemption payments with respect to shares of AMPS. In the
                  event of any such remedy described in the preceding sentence,
                  the Corporation will, not more than 30 nor less than five
                  Business Days prior to the next Auction Date, notify the
                  Auction Agent, all Holders and the Securities Depository in
                  writing of the date of the next Auction.

                            (d)   (i)  The Corporation will not issue any other
series or class of stock which is senior to the AMPS. The Corporation will not
issue any series or class of stock which is on a parity with the shares of AMPS
unless it has been advised in writing by the Rating Agencies that such issuance
will not adversely affect their respective then-current ratings of the AMPS. No
Holders of shares of AMPS shall be entitled to any dividends, whether payable in
cash, property or stock, in excess of full cumulative dividends, as provided in
this paragraph 3, on shares of AMPS. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payments on any shares of
AMPS that may be in arrears.

                                  (ii) For so long as shares of AMPS are
                  outstanding, the Corporation shall not declare, pay or set
                  apart for payment any dividend or other distribution in
                  respect of the Common Stock or any other stock of the
                  Corporation ranking junior to the shares of AMPS as to
                  dividends or upon liquidation, or call for redemption, redeem,
                  purchase or otherwise acquire for consideration any shares of
                  Common Stock or any other stock of the Corporation ranking
                  junior to the shares of AMPS as to dividends or upon
                  liquidation (except by conversion into or exchange for stock
                  of the Corporation ranking junior to the shares of AMPS as to
                  dividends and upon liquidation), unless, in each case,
                  immediately thereafter, (A) the AMPS Basic Maintenance Amount
                  would be met, (B) the 1940 Act AMPS Assets Coverage
                  Requirement would be met, (C) all mandatory redemptions of
                  shares of Preferred Stock pursuant to paragraph 5(b) hereof
                  have been completed, (D) the Minimum Liquidity Level would be
                  met and (E) all accumulated and unpaid dividends for all past
                  dividend periods for all Preferred Stock shall have been or
                  are contemporaneously paid in full (or declared and sufficient
                  Deposit Securities have been set apart for their payment).
                  Prior to the

                                       26

<PAGE>

                  payment of any such dividend or other distribution, the
                  Corporation will provide the Auction Agent and the Rating
                  Agencies with a Portfolio Valuation Report (which may be the
                  regular weekly report) and a certificate demonstrating
                  compliance with the foregoing conditions.

                            (iii) Any dividend payment made on the shares of
                  AMPS shall first be credited against the dividends accumulated
                  with respect to the earliest Dividend Period for which
                  dividends have not been paid.

                            (iv)  For so long as any shares of AMPS are
                  outstanding, the Corporation shall not create, incur or suffer
                  to exist, or agree to create, incur or suffer to exist, or
                  consent to cause or permit in the future (upon the happening
                  of a contingency or otherwise) the creation, incurrence or
                  existence of any material lien, mortgage, pledge, charge,
                  security interest, security agreement, conditional sale or
                  trust receipt or other material encumbrance of any kind
                  (collectively "Liens") upon any of its Eligible Portfolio
                  Property, except for (A) Liens the validity of which are being
                  contested in good faith by appropriate proceedings, (B) Liens
                  for taxes that are not then due and payable or that can be
                  paid thereafter without penalty, (C) Liens to secure payment
                  for services rendered by the Auction Agent in connection with
                  the AMPS and (D ) Liens otherwise incurred in connection with
                  borrowings made in the ordinary course of business in
                  accordance with the Corporation's stated investment objective,
                  policies and restrictions.

                        (e) Not later than 12:00 noon, New York City time, on
the Business Day next preceding each Dividend Payment Date, the Corporation
shall deposit with the Paying Agent Deposit Securities constituting immediately
available funds in an amount sufficient to pay the dividends that are payable on
such Dividend Payment Date. The Corporation may direct the Paying Agent with
respect to the investment of any such Deposit Securities, provided that the
proceeds of any such investment will be available at the opening of business on
such Dividend Payment Date in immediately available funds.

                        (f) Dividends in arrears for any past Dividend Period
may be declared and paid to the Holders at any time, without reference to any
regular Dividend Payment Date.

                        (g) For dividends paid in respect of any fiscal year of
the Corporation, any dividends declared on the AMPS shall be paid first from
earned surplus, to the extent thereof, and then from any other legally available
source, and any dividends declared on the Common Stock shall be paid from earned
surplus or other sources to the extent not distributed to the Existing Holders.
Further, for dividends paid in respect of any fiscal year of the Corporation,
any dividends declared on AMPS shall be paid from current and accumulated
earnings and profits (within the meaning of the Internal Revenue Code of 1986,
as amended (the "Code")) to the extent available, pro rata from investment
company taxable income (as that term is defined in Section 852(b)(2) of the Code
and before taking into account the deduction for dividends paid) and from net
capital gain (as that term is defined in Code Section 1222(11)). To the extent
current and accumulated earnings and profits remain after satisfying the
Existing Holders, dividends paid in respect of any fiscal year of the
Corporation declared on the Common Stock

                                       27

<PAGE>

shall be paid from current and accumulated earnings and profits, from investment
company taxable income (before the deduction for dividends paid) and from net
capital gain, to the extent not distributed to Existing Holders. Distributions
of net capital gain of the Corporation for a taxable year to Existing Holders
and holders of Common Stock shall be designated by the Corporation as capital
gain dividends (under Code Section 852(b)(3)) in the same proportion as net
capital gain of the Corporation for the taxable year in respect of which the
distribution is made is distributed to such Existing Holders and holders of
Common Stock. Designations of foreign taxes deemed paid by stockholders
(pursuant to Code Section 853) shall be made in the same proportion as income
subject to such taxes is distributed to stockholders for the taxable year in
respect of which the distribution is made. The Board of Directors or any duly
authorized committee thereof may change the allocation of income and/or
designations described herein if, in its sole judgment, it deems it advisable to
do so for the purpose of maintaining the qualification of the Corporation as a
regulated investment company for federal income tax purposes and/or to avoid tax
consequences which, in the sole judgment of the Board of Directors, would be
adverse to the Corporation or its stockholders.

                  4.    Liquidation Rights

                        (a)  In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the Holders of
shares of AMPS shall be entitled to receive out of the assets of the Corporation
available for distribution to stockholders, but before any distribution or
payment shall be made in respect of the Common Stock or any other stock of the
Corporation ranking junior to the AMPS as to liquidation payments, a liquidation
distribution in the amount of $100,000 per share, plus an amount equal to all
unpaid dividends accumulated to and including the date fixed for such
distribution or payment (whether or not earned or declared by the Corporation,
but excluding interest thereon), but such Holders shall be entitled to no
further participation in any distribution or payment in connection with any such
liquidation, dissolution or winding up.

                        (b)  If, upon any such liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the assets of
the Corporation available for distribution among the Holders of all outstanding
shares of AMPS shall be insufficient to permit the payment in full to such
Holders of the amounts to which they are entitled, then such available assets
shall be distributed among the Holders of shares of Preferred Stock, including
the AMPS, ratably in any such distribution of assets according to the respective
amounts which would be payable on all such shares if all amounts thereon were
paid in full.

                        (c)  Neither the consolidation or merger of the
Corporation with or into any other corporation or corporations, nor the sale,
lease or exchange by the Corporation of all or substantially all of its property
and assets, shall be deemed to be a voluntary or involuntary liquidation,
dissolution or winding up of the Corporation for purposes of this paragraph 4.

                  5.    Redemption.

                  Shares of the AMPS shall be redeemable by the Corporation as
provided below:

                                       28

<PAGE>

                            (a)   To the extent permitted under the Investment
Company Act and Maryland law, the Corporation at its option, upon filing with
the Commission, mailing and publishing a Notice of Redemption as described in
paragraph 5(e) hereof, may redeem shares of AMPS, in whole or in part, on the
next succeeding scheduled Dividend Payment Dates for those shares of AMPS called
for redemption, out of funds legally available therefor, at a redemption price
equal to $100,000 per share plus an amount equal to dividends thereon (whether
or not earned or declared) accumulated to but unpaid through the date fixed for
redemption. The Corporation may not give a Notice of Redemption relating to an
optional redemption as described in this paragraph unless, at the time of giving
such Notice of Redemption, the Corporation has available Deposit Securities with
maturity or tender dates not later than the day preceding the applicable
redemption date and having a value not less than the amount due to Holders of
shares of AMPS by reason of the redemption of their shares on such redemption
date.

                            (b)   The Corporation shall redeem, at a redemption
price of $100,000 per share plus accumulated but unpaid dividends through the
date of redemption, shares of AMPS to the extent permitted under the Investment
Company Act and Maryland law, on the date fixed by the Board of Directors
applicable to those shares of AMPS called for redemption, if the Corporation
fails to maintain the AMPS Basic Maintenance Amount or 1940 Act AMPS Asset
Coverage Requirement, as the case may be, and such failure is not cured on or
before the Cure Date as reflected in a Portfolio Valuation Report delivered to
the Auction Agent and the Rating Agencies and confirmed by the Corporation's
Independent Accountants. The number of shares to be redeemed shall be equal to
the lesser of (i) the minimum number of shares of AMPS the redemption of which,
if deemed to have occurred immediately prior to the opening of business on the
Cure Date, together with all shares other Preferred Stock subject to redemption
or retirement, would result in the satisfaction of the AMPS Basic Maintenance
Amount or the 1940 Act AMPS Asset Coverage Requirement, as the case may be, on
such Cure Date (provided that, if there is no such minimum number of shares the
redemption of which would have such result, all shares of AMPS together with all
shares of other Preferred Stock subject to redemption or retirement then
outstanding shall be redeemed), and (ii) the maximum number of shares of AMPS
together with all shares of other Preferred Stock subject to redemption or
retirement that can be redeemed out of funds expected to be legally available
therefor on such redemption date. In determining the number of shares of AMPS
required to be redeemed in accordance with the foregoing, the Corporation shall
allocate the amount required to achieve (x) the 1940 Act AMPS Asset Coverage
Requirement, pro rata among the AMPS and any other Preferred Stock and (y) the
AMPS Basic Maintenance Amount, pro rata, among the AMPS and any Other AMPS. The
Corporation shall effect such redemption not later than 45 days after such Cure
Date, except that if the Corporation does not have funds legally available for
the redemption of all the required number of shares of AMPS which are subject to
mandatory redemption, the next Dividend Payment Date with respect to any share
to be redeemed is more than 45 days after such Cure Date or the Corporation
otherwise is unable to effect such redemption on or prior to such 45th day, the
Corporation shall redeem those shares of AMPS which it was unable to redeem on
the earliest practicable date on which it is able to effect such redemption.
Within 30 days after the Cure Date, the Corporation shall transfer to or
maintain with State Street Bank and Trust Company, the Corporation's custodian,
Deposit Securities in an amount sufficient to redeem the number of shares of
AMPS to be redeemed.

                                       29

<PAGE>

                            (c)   Notwithstanding the other provisions of this
paragraph 5, no shares of AMPS may be redeemed other than as specified below,
unless all accumulated and unpaid dividends on all outstanding shares of AMPS
and other Preferred Stock for all past dividend periods shall have been or are
contemporaneously paid or declared and Deposit Securities maturing on or prior
to the date fixed for redemption are set apart for the payment of such
dividends; provided, however, that the Corporation without regard to such
limitations, (x) may redeem, purchase or otherwise acquire shares of AMPS (A)
with other Preferred Stock as a whole, pursuant to an optional redemption or (B)
pursuant to a purchase or exchange offer made for all of the outstanding shares
of AMPS and other Preferred Stock, and (y) shall redeem, purchase or otherwise,
acquire shares of AMPS with other Preferred Stock as a whole if required
pursuant to a mandatory redemption, to the extent permitted under the Investment
Company Act, Maryland law and the Articles of Incorporation.

                            (d)   If fewer than all the outstanding shares of
AMPS are to be redeemed, the shares to be redeemed shall be identified by the
Board of Directors by lot, on a pro rata basis, or such other manner as will not
discriminate unfairly against any record holder of shares of such AMPS.

                            (e)   Whenever shares of AMPS are to be redeemed,
the Corporation shall, not fewer than 30 days prior to the applicable redemption
date, file with the Commission as required under the Investment Company Act, a
written notice of redemption (a "Notice of Redemption"). The Notice of
Redemption shall be (i) mailed by first class mail, postage prepaid, to each
holder of shares of AMPS to be redeemed, and (ii) published by the Corporation
in an Authorized Newspaper, not fewer than 15 nor more than 20 days prior to
such redemption date. Not fewer than five nor more than 10 days before such
mailing date, the Corporation shall mail the Notice of Redemption to the Paying
Agent. Each Notice of Redemption shall state (A) the series of AMPS or Other
AMPS to be redeemed, (B) the redemption date, (C) the redemption price, (D) the
place or places where such AMPS are to be redeemed, (E) that dividends on the
shares to be redeemed will cease to accumulate on such redemption date, (F) the
provision of these Articles Supplementary under which the redemption is being
made, (G) if less than all the outstanding shares of AMPS are to be redeemed,
the number of shares to be redeemed and the basis upon which the shares to be
redeemed are to be selected and (H) the CUSIP number or numbers of the shares to
be redeemed. No defect in the Notice of Redemption or in the mailing or
publication thereof shall affect the validity of the redemption proceedings,
except as required by applicable law.

                            (f)   On each redemption date, the Securities
Depository shall surrender the certificate evidencing the shares of AMPS. Each
Holder of shares of AMPS that were called for redemption shall then be entitled
to receive payment of the redemption price for each share. If fewer than all of
the shares represented by such certificate are to be redeemed, the Corporation
shall issue a new certificate for the shares not redeemed.

                            (g)   If the Corporation shall give a Notice of
Redemption, then by 12:00 noon, New York City time, on the Business Day next
preceding the date fixed for redemption the Corporation shall deposit with the
Paying Agent Deposit Securities constituting immediately available funds in an
amount sufficient to redeem the shares of AMPS to be redeemed. In such event the
Corporation shall give the Paying Agent irrevocable instructions

                                       30

<PAGE>

and authority to pay the redemption price to the holders of the shares of AMPS
called for redemption upon the redemption date. The Corporation may direct the
Paying Agent with respect to the investment of any Deposit Securities so
deposited provided that the proceeds of any such investment will be available at
the opening of business oh such redemption date. The Deposit Securities
deposited with the Paying Agent pursuant to the immediately preceding sentence
and the shares of AMPS to be redeemed and funds deposited with a paying agent
with irrevocable instructions to pay the redemption price with respect to any
other shares of Preferred Stock for which a notice of redemption has been duly
given shall be excluded from the calculation of the AMPS Basic Maintenance
Amount, the 1940 Act AMPS Asset Coverage Ratio, and the 1940 Act AMPS Asset
Coverage Requirement. Upon the date of such deposit, or if no such deposit is
made, then upon such date fixed for redemption (unless the Corporation shall
default in making payment of the redemption price), all rights of the Holders of
the shares of AMPS so called for redemption shall cease and terminate except the
right of the Holders thereof to receive the redemption price thereof inclusive
of accumulated but unpaid dividends, but without any interest, and such shares
shall no longer be deemed outstanding for any purpose. The Corporation shall be
entitled to receive, promptly after the date fixed for redemption, any cash in
excess of the aggregate redemption price of the shares of AMPS called for
redemption on such date and any remaining Deposit Securities. Any assets so
deposited which are unclaimed at the end of one year from such redemption date
shall, to the extent permitted by law, be repaid to the Corporation, after which
the Holders of the shares of AMPS so called for redemption shall look only to
the Corporation for payment thereof. The Corporation shall be entitled to
receive, from time to time after the date fixed for redemption, any interest on
the Deposit Securities so deposited.

                       (h)  Shares of AMPS that have been redeemed, purchased or
otherwise acquired by the Corporation may not be reissued, shall not be deemed
outstanding, and shall be retired and cancelled. Shares with respect to which a
Notice of Redemption has been given as provided in paragraph 5(e) above shall
not be deemed outstanding for purposes of the Auction Procedures set forth in
paragraph 8 hereof.

                       (i)  In addition to redemption rights expressly
established under these Articles Supplementary, the Corporation may repurchase
shares of AMPS to the extent now or hereafter permitted by the laws of the State
of Maryland and by the Investment Company Act.

                       (j)  If the Corporation shall not have funds legally
available for the redemption of all the shares of the AMPS to be redeemed on any
redemption date (or is otherwise legally unable to effect such redemption), the
Corporation shall redeem on such redemption date the number of shares of AMPS as
it shall be legally able to redeem, ratably from each Existing Holder whose
shares are to be redeemed and the remainder of the shares of the AMPS required
to be redeemed shall be redeemed, as provided in paragraph 5(b) above.

                  6.   Voting Rights

                       (a)  General. Each holder of AMPS shall be entitled to
one vote for each share held on each matter on which the holders of the AMPS are
entitled to vote and, except as otherwise provided in the Articles of
Incorporation, these Articles Supplementary or by law, the holders of the AMPS
and the Common Stock shall vote together as one class on all matters

                                       31

<PAGE>

submitted to the stockholders; provided, however, that at any meeting of
stockholders of the Corporation at which directors are to be elected, the
holders of Preferred Stock of all series, voting separately as a single class,
shall be entitled to elect two members of the Board of Directors, and the
holders of Common Stock, voting separately as a single class, shall be entitled
to elect the balance of the members of the Board of Directors; provided,
further, however, that the identity of the two directors representing the
holders of outstanding shares of Preferred Stock may be designated by the Board
of Directors until the first meeting of the Corporation's stockholders at which
holders of shares of Preferred Stock shall be entitled to vote for the election
of directors.

                       (b)  Right to Elect Majority of Board of Directors.

                       (i)  During any period in which (A) dividends on any
         outstanding Preferred Stock of any series shall be due and unpaid in an
         amount equal to two full years' dividends; or (B) the Corporation fails
         to redeem any shares of Preferred Stock that are required to be
         redeemed pursuant to paragraph 5(b) above or that would have been so
         redeemed but for the requirement that redemption be made out of legally
         available funds, or (C) holders of any other shares of Preferred Stock
         are entitled to elect a majority of the directors of the Corporation
         (the "Voting Period"), the number of directors constituting the Board
         of Directors shall automatically be increased by the smallest number
         that, when added to the two directors elected by the holders of
         Preferred Stock pursuant to paragraph 6(a) above, will constitute a
         majority of the total number of directors so increased; and at a
         special meeting of stockholders, which shall be called and held as soon
         as practicable, and at all subsequent meetings at which directors are
         to be elected, the holders of Preferred Stock of all series voting
         separately as a single class shall be entitled to elect the smallest
         number of additional directors of the Corporation who, together with
         the two directors elected by the holders of Preferred stock pursuant to
         paragraph 6(a) above, will constitute a majority of the total number of
         directors of the Corporation so increased. The terms of office of the
         persons who are directors at the time of that election shall continue.

                       (ii) If the Corporation thereafter shall pay, or
         declare and set apart for payment, in full all dividends payable on all
         outstanding shares of Preferred Stock of all series for all past
         dividend periods and if the Corporation has remedied any failure to
         redeem shares of Preferred Stock that are required to be redeemed
         pursuant to paragraph 5(b) above, and holders of no other series of
         Preferred Stock are entitled to elect a majority of the directors of
         the Corporation the Voting Period and the voting rights stated in this
         paragraph 6(b) shall cease, and the terms of office of all additional
         directors elected by the holders of Preferred Stock (but not of the
         directors elected by the holders of Common Stock or the two directors
         regularly elected by its holders of Preferred Stock) as provided in
         paragraph 6(a) shall terminate automatically, subject always, however,
         to the revesting of such voting rights in the holders of shares of
         Preferred Stock upon the further occurrence of any of the events
         described in clauses (A), (B) or (C) of paragraph 6(b)(i).

                                       32

<PAGE>

                  (c)      Voting Procedures.

                           (i)   As soon as practicable after the accrual of any
         right of the holders of shares of Preferred Stock to elect directors
         pursuant to paragraph 6(b), the Corporation shall call a special
         meeting of, and mail a notice to, such holders of shares of Preferred
         Stock. Such special meeting shall be held not less then 10 nor more
         than 80 days after the date of mailing of such notice. If the
         Corporation fails to send such notice, the meeting may be called by any
         holder of shares of Preferred Stock on like notice. The record date for
         determining the holders of shares of Preferred Stock entitled to notice
         of and to vote at such special meeting shall be the close of business
         on the fifth Business Day preceding the day on which such notice is
         given. At any such special meeting and at each meeting at which
         directors are elected held during a Voting Period, the holders of
         shares of Preferred Stock, voting together as a class (to the exclusion
         of the holders of shares of Common Stock), shall be entitled to elect
         the number of directors prescribed in paragraph 6(b) above on a
         one-vote-per-share basis. At any such meeting or adjournment thereof in
         the absence of a quorum, a majority of the holders of shares of
         Preferred Stock, present in person or by proxy or any officer of the
         Corporation present entitled to preside or act as Secretary of such
         meeting shall have the power to adjourn the meeting without further
         notice to a date not more than 120 days after the original record date
         for such meeting.

                           (ii)  For purposes of determining any rights of the
         holders of shares of Preferred Stock to vote on any matter, whether
         such right is created by the Articles of Incorporation, these Articles
         Supplementary, by statute or otherwise, no holder of shares of
         Preferred Stock shall be entitled to vote and no share of Preferred
         Stock shall be deemed to be "outstanding" for the purpose of voting or
         determining the number of shares required to constitute a quorum, if
         prior to or concurrently with the time of determination of shares
         entitled to vote or shares deemed outstanding for quorum purposes, as
         the case may be, such share shall have been redeemed or called for
         redemption as provided in paragraph 5(e) and sufficient Deposit
         Securities with maturities on or prior to the redemption date shall
         have been deposited in trust with the Paying Agent to effect such
         redemption.

                           (iii) The directors elected by the holders of shares
         of Preferred Stock pursuant to paragraph 6(b) shall (subject to the
         provisions of any applicable law) be subject to removal only by the
         vote of the holders of a majority of shares of Preferred Stock
         outstanding. Any vacancy on the Board of Directors occurring by reason
         of such removal or otherwise (in the case of directors subject to
         election by the holders of shares of Preferred Stock) may be filled
         only by vote of the holders of at least a majority of shares of
         Preferred Stock outstanding, and if not so filled such vacancy shall
         (subject to the provisions of any applicable law) be filled by a
         majority of the remaining directors (or the remaining director) who
         were elected by the holders of shares of Preferred Stock. Any other
         vacancy on the Board of Directors during a Voting Period shall be
         filled as provided in the Corporation's By-Laws.

                                       33

<PAGE>

                            (iv) At any time when the holders of shares of
         Preferred Stock become entitled to elect additional directors pursuant
         to paragraph 6(b), the maximum number of directors fixed by the By-Laws
         of the Corporation or otherwise shall automatically be increased by the
         number of such additional directors if required; and at such time as
         the holders of shares of Preferred Stock shall no longer be entitled to
         elect directors pursuant to paragraph 6(b), such exact number shall
         automatically be decreased by the number by which they were increased
         by reason of this provision.

                       (d)  Certain Corporate Acts. So long as any of AMPS are
outstanding, the Corporation shall not, subject to the requirements of the
Investment Company Act and Maryland law, without the affirmative vote or consent
of the holders of at least two-thirds of the votes of the shares of AMPS
outstanding at the time, either in person or by proxy, either in writing or at a
meeting (voting separately as one class) in addition any vote required by
Article Fifth of the Articles of Incorporation: (x) amend, alter or repeal the
provisions of the Articles of Incorporation including these Articles
Supplementary, whether by merger, consolidation or otherwise, so as to
materially and adversely affect any right, preference, privilege or voting power
of such shares of AMPS or the Holders thereof, or (y) create, authorize, issue,
incur or suffer to exist any indebtedness for borrowed money or any direct or
indirect guarantee of any such indebtedness, provided, however, that the
Corporation may authorize the issuance of indebtedness for borrowed money, for
temporary or emergency purposes or for the clearance of transactions, in an
aggregate amount not to exceed the lesser of $10,000,000 or 10% of the aggregate
liquidation preference of the shares of AMPS outstanding at any one time without
any such consent or approval, provided that, with or without the consent or
approval of the holders, such action would not result in the lowering of the
then-current ratings of the shares of AMPS by the Rating Agencies (as evidenced
in writing by the Rating Agencies); provided that any increase in the amount of
the authorized AMPS or the creation and issuance of other series of Preferred
Stock, or any increase in the amount of authorized shares of such series or of
any other series of Preferred Stock, in each case ranking on a parity with or
junior to the AMPS will not be deemed to materially and adversely affect such
rights, preferences, privileges or voting powers unless such issuance would
cause the Corporation not to satisfy the 1940 Act AMPS Asset Coverage
Requirement or the AMPS Basic Maintenance Amount.

                       The foregoing voting provisions shall not apply if, at or
prior to the time when the act with respect to which such vote would otherwise
be required shall be effected, all outstanding shares of AMPS shall have been
redeemed or called for redemption and sufficient funds shall have been deposited
in trust to effect such redemption.

                       (e)  Exclusive Remedy. Unless otherwise required by law,
the Holders shall not have any relative rights or preferences or other special
rights other than those specifically set forth herein. In the event that the
Corporation fails to pay any dividends on the shares of AMPS or the Corporation
fails to redeem any shares of AMPS which it is required to redeem, or any other
event occurs which requires the mandatory redemption of AMPS and the required
Notice of Redemption has not been given, the exclusive remedy of the Holders
shall be the right to vote for directors pursuant to the provisions of this
paragraph 6. In no event shall the Holders have any right to sue for, or bring a
proceeding with respect to, such dividends or redemptions or damages for the
failure to receive the same.

                                       34

<PAGE>

                       (f)  Notification to Rating Agencies. In the event a vote
of holders of AMPS is required pursuant to the provisions of Section 13(a) of
the Investment Company Act, the Corporation shall, not later than ten Business
Days prior to the date on which such vote is to be taken, notify the Rating
Agencies that such vote is to be taken and the nature of the action with respect
to which such vote is to be taken.

                   7.  Asset and Liquidity Coverage.

                       (a)  1940 Act AMPS Asset Coverage Requirement.

                   The Corporation shall maintain, as of the last Valuation Date
of each month in which any share of AMPS is outstanding, the 1940 Act AMPS Asset
Coverage Requirement. The calculation of the 1940 Act AMPS Asset Coverage Ratio
shall be included in each Portfolio Valuation Report.

                       (b)  AMPS Basic Maintenance Amount.

                            (i)   For so long as any shares of AMPS are
         outstanding, the Corporation will maintain, on each Valuation Date,
         Eligible Portfolio Property having an aggregate Discounted Value at
         least equal to the AMPS Basic Maintenance Amount, each as of such
         Valuation Date.

                            (ii)  On the Date of Original Issue and on or before
         10:00 A.M., New York City time, on the fourth Business Day after any
         other Valuation Date thereafter, the Corporation shall complete and
         deliver to the Auction Agent a summary Portfolio Valuation Report,
         which will be deemed to have been delivered to the Auction Agent (A) if
         the Auction Agent receives a copy or telecopy, telex or other
         electronic transcription thereof, or (B) if the Auction Agent receives
         a telecopy, telex or other electronic transcription setting forth at
         least the applicable Discounted Value of the aggregate of all Eligible
         Portfolio Property (the "Portfolio Calculation") and the AMPS Basic
         Maintenance Amount each as of the relevant Valuation Date and on the
         same day the Corporation mails to the Auction Agent for delivery on the
         next Business Day the summary Portfolio Valuation Report. A failure by
         the Corporation to deliver a Portfolio Valuation Report to the Auction
         Agent under this paragraph 7(b)(ii) shall be deemed to be delivery of a
         Portfolio Valuation Report indicating a Discounted Value for all
         Eligible Portfolio Property of less than the AMPS Basic Maintenance
         Amount, as of the relevant Valuation Date. The Corporation shall also
         deliver promptly copies of each Portfolio Valuation Report to each of
         the Rating Agencies.

                            (iii) Within seven Business Days after the date of
         delivery to the Auction Agent of the first Portfolio Valuation Report
         and each Portfolio Valuation Report in accordance with paragraph
         7(b)(ii) above relating to a Quarterly Valuation Date, the Corporation
         shall deliver to the Auction Agent and the Rating Agencies a report or
         reports (the "Accountant's Confirmation") reviewing the Portfolio
         Calculation, prepared by the Corporation's Independent

                                       35

<PAGE>

         Accountants, relating to such Portfolio Valuation Report (and reviewing
         the Portfolio Calculation relating to any other Portfolio Valuation
         Report, randomly selected by the Independent Accountants, that was
         delivered by the Corporation during the quarter ending on such
         Quarterly Valuation Date) substantially to the effect that (A) the
         Independent Accountants have read such Portfolio Valuation Reports
         (each, a "Report"), (B) with respect to the 1940 Act AMPS Asset
         Coverage Ratio, AMPS Basic Maintenance Amount and Minimum Liquidity
         Level, the results of the calculations set forth in each Report have
         been recalculated and are numerically correct; (C) with respect to the
         excess or deficiency of the Discounted Value amount when compared to
         the AMPS Basic Maintenance Amount, the results of the calculation set
         forth in each Report have been recalculated and are numerically
         correct; (D) with respect to the excess or deficiency of the Dividend
         Coverage Assets amount when compared to the Minimum Liquidity Level,
         the results of the calculation set forth in each Report have been
         recalculated and are numerically correct; (E) with respect to the lower
         of two bid prices provided to the Corporation for purposes of valuing
         securities in the portfolio, the Independent Accountants have traced
         the price used in each Report to the lower of the two bid prices listed
         in the Report and verified that such information agrees (in the event
         such information does not agree, the Independent Accountants will
         provide a listing in their report of such differences); (F) that the
         assets listed in each Report conform with the definition of Eligible
         Portfolio Property; and (G) the calculations used by the Corporation in
         calculating the 1940 Act AMPS Asset Coverage Ratio, the AMPS Basic
         Maintenance Amount and the Minimum Liquidity Level are in compliance
         with the format set forth in the form of Portfolio Valuation Report
         attached as an exhibit to the Auction Agent Agreement. If any letter
         reviewing the Portfolio Calculation delivered pursuant to this
         paragraph shows that a lower aggregate Discounted Value for the
         aggregate of all Eligible Portfolio Property was determined by the
         Independent Accountants, the calculation or determination made by such
         Independent Accountants shall be final and conclusive and shall be
         binding on the Corporation, and the Corporation shall promptly amend
         the Portfolio Valuation Report and deliver the amended Portfolio
         Valuation Report to the Auction Agent.

                  (c)    Liquidity Coverage.

                         (i)   As of each Valuation Date as long as any shares
         of AMPS are outstanding, the Corporation shall determine (A) the Market
         Value of the Dividend Coverage Assets owned by the Corporation as of
         that Valuation Date, (B) the Dividend Coverage Amount on that Valuation
         Date, and (C) whether the Minimum Liquidity Level is met as of that
         Valuation Date. The calculations of the Dividend Coverage Assets, the
         Dividend Coverage Amount and whether the Minimum Liquidity Level is met
         shall be set forth in a certificate (a "Certificate of Minimum
         Liquidity") dated as of the Valuation Date. The Portfolio Valuation
         Report and the Certificate of Minimum Liquidity may be combined in one
         certificate. The Corporation shall cause the Certificate of Minimum
         Liquidity to be delivered to the Auction Agent not later than the close
         of business on the third Business Day after the Valuation Date. The
         Minimum Liquidity Level shall be

                                       36

<PAGE>

         deemed to be met as of any date of determination if the Corporation has
         timely delivered a Certificate of Minimum Liquidity relating to such
         date, which states that the same has been met and which is not
         manifestly inaccurate. In the event that a Certificate of Minimum
         Liquidity is not delivered to the Auction Agent when required, the
         Minimum Liquidity Level shall be deemed not to have been met as of the
         applicable date.

                       (ii)  If the Minimum Liquidity Level is not met as of any
         Valuation Date, then the Corporation shall purchase or otherwise
         acquire Dividend Coverage Assets (with the proceeds from the
         liquidation of Eligible Portfolio Property or otherwise) to the extent
         necessary so that the Minimum Liquidity Level is met as of the fifth
         Business Day following such Valuation Date. The Corporation shall, by
         such fifth Business Day, provide to the Auction Agent a Certificate of
         Minimum Liquidity setting forth the calculations of the Dividend
         Coverage Assets and the Dividend Coverage Amount and showing that the
         Minimum Liquidity Level is met as of such fifth Business Day together
         with a report of the custodian of the Corporation's assets confirming
         the amount of the Corporation's Dividend Coverage Assets as of such
         fifth Business Day.

                  (d)  Calculation of AMPS Basic Maintenance Amount; Accounting
         Treatment.

                       (i)   Eligible Portfolio Property of the Corporation
         shall be determined on an accrual basis in accordance with customary
         practice under which Eligible Portfolio Property purchased and not yet
         received are so reflected as Eligible Portfolio Property.

                       (ii)  Dividends on the Common Stock which are payable in
         Common Stock shall, after the effective date of any election by a
         holder of Common Stock to receive such dividend, be excluded from
         current liabilities.

                       (iii) Withholding taxes with respect to interest earned
         on any asset of the Corporation if such interest is not included in
         Eligible Portfolio Property, shall be excluded from current
         liabilities.

                       (iv)  With respect to Eligible Portfolio Property sold by
         the Corporation as of or prior to the Valuation Date, (x) if the
         determination is being made for Moody's, the sales price of such
         property will be reflected as Cash or Australian Currency, as
         appropriate, in Eligible Portfolio Property, to the extent that such
         receivable is due and payable within 5 Business Days (determined as for
         a Valuation Date) and is not subject to any dispute and (y) if the
         determination is being made for S&P, the Market Value of such property
         will be reflected in Eligible Portfolio Property and will be discounted
         at the appropriate Discount Factor.

                  (e)  Other Permitted Assets. In addition to Eligible Portfolio
Property, the Corporation may own Other Permitted Assets and may also own other
securities, if the inclusion of any such type of other securities is deemed by
the Board of Directors to be in the best interest

                                       37

<PAGE>

of the Corporation. Other Permitted Assets and such other securities may be
included in Eligible Portfolio Property if the Rating Agencies have advised the
Corporation in writing that the inclusion of such Other Permitted Assets or
other securities in Eligible Portfolio Property would not adversely affect their
respective then-current ratings of the shares of AMPS.

         (f) Failure to Satisfy AMPS Basic Maintenance Amount. Within ten
Business Days after the date of delivery to the Auction Agent of a Portfolio
Valuation Report in accordance with paragraph 7(b) above relating to any
Valuation Date on which the Corporation failed to satisfy the AMPS Basic
Maintenance Amount, and relating to the Cure Date with respect to such failure
to satisfy the AMPS Basic Maintenance Amount, the Independent Accountants will
provide to the Auction Agent and the Rating Agencies an Accountant's
Confirmation as to such Portfolio Valuation Report.

     8.  Auction Procedures.

         (a) Certain Definitions.

         Capitalized terms not defined in this paragraph 8(a) shall have the
respective meanings specified in paragraph 1. As used in this paragraph 8, the
following terms shall have the following meanings, unless the context otherwise
requires:

             (i)    "Affiliate" shall mean any Person known to the Auction Agent
         to be controlled by, in control of, or under common control with, the
         Corporation.

             (ii)   "Agent member" shall mean the member of the Securities
         Depository that will act on behalf of an Existing Holder or a Potential
         Holder and is identified as such in such holder's Purchaser's Letter.

             (iii)  "AMPS" shall mean the shares of AMPS being auctioned
         pursuant to this paragraph.

             (iv)   "Auction" shall mean the periodic operation of the
         procedures set forth in this paragraph 8.

             (v)    "Auction Date" shall mean the first Business Day next
         preceding the first day of a Dividend Period.

             (vi)   "Available AMPS" shall have the meaning specified in
         paragraph 8(d)(i) below.

             (vii)  "Bid" and "Bids" shall have the respective meanings
         specified in paragraph 8(b)(i) below.

             (viii) "Bidder" and "Bidders" shall have the respective meanings
         specified in paragraph 8(b)(i) below.

                                       38

<PAGE>

              (ix)   "Broker-Dealer" shall mean any broker-dealer, or other
         entity permitted by law to perform the functions required of a
         Broker-Dealer in this paragraph 8, that has been selected by the
         Corporation and has entered into a Broker-Dealer Agreement with the
         Auction Agent that remains effective.

              (x)    "Broker-Dealer Agreement" shall mean an agreement between
         the Auction Agent and a Broker-Dealer pursuant to which such
         Broker-Dealer agrees to follow the procedures specified in this
         paragraph 8.

              (xi)   "Existing Holder", when used with respect to shares of
         AMPS, shall mean a Person who has signed a Purchaser's Letter and is
         listed as the beneficial owner of such shares of AMPS in the records of
         the Auction Agent.

              (xii)  "Hold Order" and "Hold Orders" shall have the respective
         meanings specified in paragraph 8(b)(i) below.

              (xiii) "Order" shall have the meaning specified in paragraph
         8(b)(i) below.

              (xiv)  "Outstanding" shall mean, as of any date, shares of AMPS
         theretofore issued by the Corporation except, without duplication, (A)
         any shares of AMPS theretofore cancelled or delivered to the Auction
         Agent for cancellation, or redeemed by the Corporation, or as to which
         a Notice of Redemption shall have been given and moneys shall have been
         deposited in trust by the Corporation pursuant to paragraph 5(g) and
         (B) any shares of AMPS as to which the Corporation or any Affiliate
         thereof shall be an Existing Holder.

              (xv)   "Person" shall mean and include an individual, a
         partnership, a corporation, a trust, an unincorporated association, a
         joint venture or other entity or a government or any agency or
         political subdivision thereof.

              (xvi)  "Potential Holder" shall mean any Person, including any
         Existing Holder, (A) who shall have executed a Purchaser's Letter and
         (B) who may be interested in acquiring shares of AMPS (or, in the case
         of an Existing Holder, additional shares of AMPS).

              (xvii) "Securities Depository" shall mean The Depository Trust
         Company and its successors and assigns or any other securities
         depository selected by the Corporation which agrees to follow the
         procedures required to be followed by such securities depository in
         connection with shares of AMP.

              (xviii) "Sell Order" and "Sell Orders" shall have the respective
         meanings specified in paragraph 8(b)(i) below.

              (xix) "Submission Deadline" shall mean 12:30 P.M., New York City
         time, on any Auction Date or such other time on any Auction Date (as
         may be specified by the Auction Agent from time to time) as the time by
         which each

                                       39

<PAGE>

         Broker-Dealer must submit to the Auction Agent in writing all Orders
         obtained by it for the Auction to be conducted on such Auction Date.

                     (xx)    "Submitted Bid" and "Submitted Bids" shall have the
         respective meanings specified in paragraph 8(d)(1) below.

                     (xxi)   "Submitted Hold Order" and "Submitted Hold Orders"
         shall have the respective meanings specified in paragraph 8(d)(i)
         below.

                     (xxii)  "Submitted Order" and "Submitted Orders" shall have
         the respective meanings specified in paragraph B(d)(i) below.

                     (xxiii) "Submitted Sell Order" and "Submitted Sell Orders"
         shall have the respective meanings specified in paragraph 8(d)(i)
         below.

                     (xxiv)  "Sufficient Clearing Bids" shall have the meaning
         specified in paragraph 8(d)(i) below.

                     (xxv)   "Winning Bid Rate" shall have the meaning specified
         in paragraph 8(d)(i) below.

             (b)     Orders by Existing Holders and Potential Holders.

                     (i) On or prior to the Submission Deadline on each Auction
         Date:

             (A)     each Existing Holder may submit to a Broker-Dealer
         information as to:

                     (1) the number of Outstanding shares, if any, of AMPS held
             by such Existing Holder which such Existing Holder desires to
             continue to hold without regard to the Applicable Rate for the next
             Dividend Period;

                     (2) the number of Outstanding shares, if any, of AMPS held
             by such Existing Holder which such Existing Holder desires to
             continue to hold, provided that the Applicable Rate for the next
             succeeding Dividend Period shall not be less than the rate per
             annum then specified by such Existing Holder; and/or

                     (3) the number of Outstanding shares, if any, of AMPS held
             by such Existing Holder which such Existing Holder offers to sell
             without regard to the Applicable Rate for the next succeeding
             Dividend Period; and

             (B)     each Broker-Dealer, using a list of Potential Holders
         that shall be maintained in good faith for the purposes of conducting a
         competitive Auction, shall contact Potential Holders, including Persons
         that are not Existing Holders, on such list to determine the number of
         Outstanding shares, if any, of AMPS which each such Potential Holder
         offers to purchase provided that the Applicable Rate for the next
         succeeding

                                       40

<PAGE>

         Dividend Period shall not be less than the rate per annum specified by
         such Potential Holder.

         For the purposes hereof, the communication to a Broker-Dealer of
information referred to in clause (A) or (B) of this paragraph 8(b)(i) is
hereinafter referred to as an "Order" and collectively as "Orders" and each
Existing Holder and each Potential Holder placing an Order is hereinafter
referred to as a "Bidder" and collectively as "Bidders"; an Order containing the
information referred to in clause (A)(1) of this paragraph 8(b) is hereinafter
referred to as a "Hold Order" and collectively as "Hold Orders"; an Order
containing the information referred to in clause (A)(2) or (B) of this paragraph
8(b) is hereinafter referred to as a "Bid" and collectively as "Bids"; and an
Order containing the information reverted to in clause (A)(3) of this paragraph
8(b) is hereinafter referred to as a "Sell Order" and collectively as "Sell
Orders".

                     (ii) (A) A Bid by an Existing Holder shall constitute an
         irrevocable offer to sell:

                     (1)  the number of Outstanding shares of AMPS specified in
             such Bid if the Applicable Rate determined on such Auction Date
             shall be less than the rate per annum specified in such Bid;

                     (2)  such number or a lesser number of Outstanding shares
         of AMPS to be determined as set forth in paragraph 8(e)(i)(D) if the
         Applicable Rate determined on such Auction Date shall be equal to the
         rate per annum specified therein; or

                     (3)  a lesser number of Outstanding shares of AMPS to be
             determined as set forth in paragraph 8(e)(ii)(C) if such specified
             rate, per annum, shall be higher than the Maximum Applicable Rate
             and Sufficient Clearing Bids do not exist.

             (B)     A Sell Order by an Existing Holder shall constitute an
         irrevocable offer to sell:

                     (1)  the number of Outstanding shares of AMPS special such
             Sell Order; or

                     (2)  such number or a lesser number of Outstanding shares
         of AMPS to be determined as set forth in paragraph 8(e)(ii)(C) if
         Sufficient Clearing Bids do not exist.

             (C)     A Bid by a Potential Holder shall constitute an irrevocable
         offer to purchase:

                     (1)  the number of Outstanding shares of AMPS specified in
             such Bid if the Applicable Rate determined on such Auction Date
             shall be higher than the rate per annum specified in such Bid; or

                                       41

<PAGE>

                 (2)   such number or a lesser number of Outstanding shares of
             AMPS to be determined as set forth in paragraph 8(e)(i)(E) if the
             Applicable Rate determined on such Auction Date shall be equal to
             the rate per annum specified therein.

             (c) Submission of Orders by Broker-Dealers to Auction Agent.

                 (i)   Each Broker-Dealer shall submit in writing to the Auction
         Agent prior to the Submission Deadline on each Auction Date all Orders
         obtained by such Broker-Dealer specifying with respect to each order:

             (A) the name of the Bidder placing such Order;

             (B) the aggregate number of Outstanding shares of AMPS that are the
         subject of such Order;

             (C) to the extent that such Bidder is an Existing Holder:

                 (1)   the number of Outstanding shares, if any, of AMPS subject
         to any Hold Order placed by such Existing Holder;

                 (2)   the number of Outstanding shares, if any, of AMPS subject
         to any Bid placed by such Existing Holder and the rate per annum
         specified in such Bid; and,

                 (3)   the number of Outstanding shares, if any, of AMPS subject
         to any Sell Order placed by such Existing Holder; and

             (D) to the extent such Bidder is a Potential Holder the rate per
         annum specified in such Potential Holder's Bid.

                 (ii)  If any rate per annum specified in any Bid contains more
         than three figures to the right of the decimal point, the Auction Agent
         shall round such rate up to the next highest one thousandth (.001) of
         1%.

                 (iii) If an Order or Orders covering all of the Outstanding
         shares of AMPS held by an Existing Holder is not submitted to the
         Auction Agent prior to the Submission Deadline, the Auction Agent shall
         deem a Hold Order to have been submitted on behalf of such Existing
         Holder covering the number of Outstanding shares of AMPS held by such
         Existing Holder and not subject to Orders submitted to the Auction
         Agent.

                 (iv)  If one or more Orders on behalf of an Existing Holder
         covering in the aggregate more than the number of Outstanding shares of
         AMPS held by an Existing Holder are submitted to the Auction Agent,
         such Orders shall be considered valid as follows and in the following
         order of priority:

                                       42

<PAGE>

                  (A) any Hold Order submitted on behalf of such Existing Holder
         shall be considered valid up to and including the number of Outstanding
         shares of AMPS held by such Existing Holder; provided that if more than
         one Hold Order is submitted on behalf of such Existing Holder and the
         number of shares of AMPS subject to such Holders exceeds the number of
         Outstanding shares of AMPS held by such Existing Holder, the number of
         shares of AMPS subject to each of such Hold Orders shall be reduced pro
         rata so that such Hold Orders, in the aggregate, cover the number of
         Outstanding shares of AMPS held by such Existing Holder;

                  (B) any Bids submitted on behalf of such Existing Holder shall
         be considered valid, in the ascending order of their respective rates
         per annum if more than one Bid is submitted on behalf of such Existing
         Holder, up to and including the excess of the number of Outstanding
         shares of AMPS held by such Existing Holder over the number of shares
         of AMPS subject to any Hold Order referred to in paragraph 8(c)(iv)(A)
         above (and if more than one Bid submitted on behalf of such Existing
         Holder specifies the same rate per annum and together they cover more
         than the remaining number of shares than can be the subject of valid
         Bids after application of paragraph 8(c)(iv)(A) above and of the
         foregoing portion of this paragraph 8(c)(iv)(B) to any Bid or Bids
         specifying a lower rate or rates per annum, the number of shares
         subject to each of such Bids shall be reduced pro rata so that such
         Bids, in the aggregate, cover exactly such remaining number of shares);
         and the number of shares, if any, subject to Bids not valid under this
         paragraph 8(c)(iv)(B) shall be treated as the subject of a Bid by a
         Potential Holder; and

                  (C) any Sell Order shall be considered valid up to and
         including the excess of the number of Outstanding shares of AMPS held
         by such Existing Holder over the number of shares of AMPS subject to
         Hold Orders referred to in paragraph 8(c)(iv)(A) and Bids referred to
         in paragraph 8(c)(iv)(B), provided that if more than one Sell Order is
         submitted on behalf of any Existing Holder and the number of shares of
         AMPS subject to such Sell Orders is greater than such excess, the
         number of shares of AMPS subject to each of such Sell Orders shall be
         reduced pro rata so that such Sell Orders, in the aggregate cover
         exactly the number of shares of AMPS equal to such excess.

                      (v) If more than one Bid is submitted on behalf of any
         Potential Holder, each Bid submitted shall be a separate Bid with the
         rate and number of shares of AMPS therein specified.

                  (d) Determination of Sufficient Clearing Bids, Winning Bid
         Rate and Available Rate.

                      (i) Not earlier than the Submission Deadline on each
         Auction Date, the Auction Agent shall assemble all Orders submitted or
         deemed submitted to it by the Broker-Dealers (each such Order as
         submitted or deemed submitted by a Broker-Dealer being hereinafter
         referred to as a "Submitted Hold Order," a "Submitted Bid" or a
         "Submitted Sell Order," as the case may be, or as a "Submitted Order"
         and collectively as "Submitted Hold Orders," "Submitted Bids" or
         "Submitted Sell Orders," as the case may be, or as "Submitted Orders")
         and shall determine:

                                       43

<PAGE>

                  (A) the excess of the total number of Outstanding shares of
         AMPS over the number of Outstanding shares of AMPS that are the subject
         of Submitted Hold Orders (such excess being hereinafter referred to as
         the "Available AMPS");

                  (B) from the Submitted Orders whether the number of
         Outstanding shares of AMPS that are the subject of Submitted Bids by
         Potential Holders specifying one or more rates per annum equal to or
         lower than the Maximum Applicable Rate exceeds or is equal to the sum
         of:

                      (1)  the number of Outstanding shares of AMPS that are the
         subject of Submitted Bids by Existing Holders specifying one or more
         rates per annum higher than the Maximum Applicable Rate; and

                      (2)  the number of Outstanding shares of AMPS that are
         subject to Submitted Sell Orders.

        (if such excess or such equality exists (other than because the number
        of Outstanding shares of AMPS in clauses (1) and (2) above are each zero
        because all of the Outstanding shares of AMPS are the subject of
        Submitted Hold Orders), such Submitted Bids by Potential Holders being
        hereinafter referred to collectively as "Sufficient Clearing Bids"); and

                  (C) if Sufficient Clearing Bids exist, the lowest rate per
         annum specified in the Submitted Bids (the "Winning Bid Rate") that if:

                      (1)  each Submitted Bid from Existing Holders specifying
                  the Winning Bid Rate and all other Submitted Bids from
                  Existing Holders specifying lower rates per annum were
                  rejected, thus entitling such Existing Holders to continue to
                  hold the shares of AMPS that are the subject of such Submitted
                  Bids, and

                      (2)  each Submitted Bid from Potential Holders specifying
                  the Winning Bid Rate and all other Submitted Bids from
                  Potential Holders specifying lower rates per annum were
                  accepted, thus entitling those Potential Holders to purchase
                  the shares of AMPS that are the subject of such Submitted
                  Bids,

        would result in the number of shares subject to all Submitted Bids
        specifying the Winning Bid Rate or a lower rate per annum being at
        least equal to the Available AMPS.

                      (ii) Promptly after the Auction Agent has made the
        determinations pursuant to paragraph 8(d)(i), the Auction Agent shall
        advise the Corporation of the Maximum Applicable Rate and, based on all
        such determinations, the Applicable Rate for the next succeeding
        Dividend Period as follows:

                  (A) if Sufficient Clearing Bids exist, that the Applicable
         Rate for the next succeeding Dividend Period shall be equal to the
         Winning Bid Rate;

                                       44

<PAGE>

                  (B) if Sufficient Clearing Bids do not exist (other than
         because all of the Outstanding shares of AMPS are the subject of
         Submitted Hold Orders), that the Applicable Rate for the next
         succeeding Dividend Period shall be equal to the Maximum Applicable
         Rate; or

                  (C) if all the shares of AMPS are the subject of Submitted
         Hold Orders, that the Applicable Rate for the next succeeding Dividend
         Period shall be equal to 90% of the 30 day "AA" Composite Commercial
         Paper Rate an the date of the Auction.

                      (e) Acceptance and Rejection of Submitted Bids and
Submitted Sell Orders and Allocations of Shares.

                      Based on the determinations made pursuant to paragraph
8(d)(i), the Submitted Bids and Submitted Sell Orders shall be accepted or
rejected and the Auction Agent shall take such other action as set forth below:

                      (i) If Sufficient Clearing Bids have been made, subject to
         the provisions of paragraphs 8(e)(iii) and 8(e)(iv), Submitted Bids and
         Submitted Sell Orders shall be accepted or rejected in the following
         order of priority and all other Submitted Bids shall be rejected:

                  (A) the Submitted Sell Orders of Existing Holders shall be
         accepted and the Submitted Bid of each of the Existing Holders
         specifying any rate per annum that is higher than the Winning Bid Rate
         shall be accepted, thus requiring each such Existing Holder to sell the
         Outstanding shares of AMPS that are the subject of such Submitted Sell
         Order or Submitted Bid;

                  (B) the Submitted Bid of each of the Existing Holders
         specifying any rate per annum that is lower than the Winning Bid Rate
         shall be accepted, thus entitling each such Existing Holder to continue
         to hold the Outstanding shares of AMPS that are the subject of such
         Submitted Bid;

                  (C) the Submitted Bid of each of the Potential Holders
         specifying any rate per annum that is lower than the Winning Bid Rate
         shall be accepted, thus requiring each such Potential Holder to
         purchase the shares of AMPS that are the subject of such Submitted
         Bids;

                  (D) the Submitted Bid of each of the Existing Holders
         specifying a rate per annum that is equal to the Winning Bid Rate shall
         be rejected, thus entitling such Existing Holder to continue to hold
         the Outstanding shares of AMPS that are the subject of such Submitted
         Bid, unless the number of Outstanding shares of AMPS subject to all
         such Submitted Bids shall be greater than the number of Outstanding
         shares of AMPS ("Remaining Shares") equal to the excess of the
         Available AMPS over the number of Outstanding shares of AMPS subject to
         Submitted Bids described in paragraphs 8(e)(i)(B) and 8(e)(i)(C), in
         which event the Submitted Bids of each such Existing Holder shall be
         accepted, and each such Existing Holder shall be required to sell
         Outstanding shares of AMPS, but only if an amount equal to the
         difference between (1) the number of Outstanding shares of AMPS then
         held by such Existing Holder subject to such

                                       45

<PAGE>

         Submitted Bid and (2) the number of shares of AMPS obtained by
         multiplying (x) the number of Remaining Shares by (y) a fraction the
         numerator of which shall be the number of Outstanding shares of AMPS
         held by such Existing Holder subject to such Submitted Bid and the
         denominator of which shall be the sum of the numbers of Outstanding
         shares of AMPS subject to such Submitted Bids made by all such Existing
         Holders that specified a rate per annum equal to the Winning Bid Rate;
         and

                  (E) the Submitted Bid of each of the Potential Holders
         specifying a rate per annum that is equal to the Winning Bid Rate shall
         be accepted, thus requiring each such Potential Holder to purchase the
         shares of AMPS that are the subject of such Submitted Bids; but only in
         an amount equal to the number of Outstanding shares of AMPS obtained by
         multiplying (x) the difference between the Available AMPS and the
         number of shares of AMPS subject to Submitted Bids described in
         paragraphs 8(e)(i)(B), 8(e)(i)(C) and 8(e)(i)(D) by (y) a fraction the
         numerator of which shall be the number of Outstanding shares of AMPS
         subject to such Submitted Bid and the denominator of which shall be the
         sum of the numbers of Outstanding shares of AMPS subject to such
         Submitted Bids made by all such Potential Holders that specified rates
         per annum equal to the Winning Bid Rate.

                      (ii) If Sufficient Clearing Bids have not been made (other
than because all of the Outstanding shares of AMPS are subject to Submitted Hold
Orders), subject to the provisions of paragraph 8(e)(iii), Submitted Orders
shall be accepted or rejected as follows in the following order of priority and
all other Submitted Bids shall be rejected:

                  (A) the Submitted Bid of each Existing Holder specifying any
         rate per annum that is equal to or lower than the Maximum Applicable
         Rate shall be rejected, thus entitling such Existing Holder to continue
         to hold the Outstanding shares of AMPS that are the subject of such
         Submitted Bid;

                  (B) the Submitted Bid of each Potential Holder specifying any
         rate per annum that is equal to or lower than the Maximum Applicable
         Rate shall be accepted, thus requiring such Potential Holder to
         purchase the Outstanding shares of AMPS that are the subject of such
         Submitted Bid; and

                  (C) the Submitted Bid of each Existing Holder specifying any
         rate per annum that is higher than the Maximum Applicable Rate shall be
         accepted and the Submitted Sell Order of each Existing Holder shall be
         accepted, thus requiring each such Existing Holder to sell the shares
         of AMPS that are the subject of such Submitted Bid or Submitted Sell
         Order, in both cases only in an amount equal to the difference between
         (1) the number of Outstanding shares of AMPS then held by such Existing
         Holder subject to such Submitted Bid or Submitted Sell Order and (2)
         the number of Outstanding shares of AMPS obtained by multiplying (x)
         the difference between the Available AMPS and the aggregate number of
         Outstanding shares of AMPS subject to Submitted Bids described in
         paragraphs 8(e)(ii)(A) and 8(e)(ii)(B) by (y) a fraction the numerator
         of which shall be the number of Outstanding shares of AMPS held by such
         Existing Holder subject to such Submitted Bid or Submitted Sell Order
         and the denominator of which

                                       46

<PAGE>

         shall be the number of Outstanding shares of AMPS subject to all such
         Submitted Bids and Submitted Sell Orders.

                  (iii) If, as a result of the procedures described in
paragraphs 8(e)(i) or 8(e)(ii), any Existing Holder would be entitled or
required to sell, or any Potential Holder would be entitled or required to
purchase, a fraction of a share of AMPS on any Auction Date, the Auction Agent
shall, in such manner as in its sole discretion it shall determine, round up or
down the number of shares of AMPS to be purchased or sold by any Existing Holder
or Potential Holder on such Auction Date so that each Outstanding share of AMPS
purchased or sold by each Existing Holder or Potential Holder on such Auction
Date shall be a whole share of AMPS.

                  (iv) If, as a result of the procedures described in paragraph
8(e)(i), any Potential Holder would be entitled or required to purchase less
than a whole share of AMPS on any Auction Date, the Auction Agent shall, in such
manner as in its sole discretion it shall determine, allocate shares of AMPS for
purchase among Potential Holders so that only whole shares of AMPS are purchased
on such Auction Date by any Potential Holder, even if such allocation results in
one or more of such Potential Holders not purchasing any shares of AMPS on such
Auction Date.

                  (v) Based on the results of each Auction, the Auction Agent
shall determine, with respect to each Broker-Dealer that submitted Bids or Sell
Orders on behalf of Existing Holders or Potential Holders, the aggregate number
of Outstanding shares of AMPS to be purchased and the aggregate number of
Outstanding shares of AMPS to be sold by such Potential Holders and Existing
Holders and, to the extent that such aggregate number of Outstanding shares to
be sold differ, the Auction Agent shall determine to which other Broker-Dealer
or Broker-Dealers acting for one or more purchasers such Broker-Dealer shall
deliver, or from which other Broker-Dealer or Broker-Dealers acting for one or
more sellers such Broker-Dealer shall receive, as the case may be, Outstanding
shares of AMPS.

            (f)   Participation in Auctions.

                  Neither the Corporation nor any Affiliate of the Corporation
may submit an order in any Auction.

             9.   Miscellaneous.

                  (a) To the extent permitted by applicable law, the Board of
Directors may interpret or adjust the provisions hereof to resolve any
inconsistency or ambiguity, remedy any formal defect or make any other change or
modification which does not adversely affect the rights of Holders of shares of
AMPS and if such inconsistency or ambiguity reflects an incorrect provision
hereof then the Board of Directors nay authorize the filing of a Certificate of
Amendment or a Certificate of Correction, as the case may be.

                  (b) If there is a Securities Depository, one certificate for
all of the shares of AMPS shall be issued to the Securities Depository and
registered in the name of the Securities Depository or its nominee. Such
certificate shall bear a legend to the effect that such certificate is issued
subject to the provisions contained in these Articles Supplementary and each
Purchaser's Letter. The Corporation will also issue stop-transfer instructions
to the Paying

                                       47

<PAGE>

Agent for the shares of AMPS. Except as provided in paragraph (c) below, the
Securities Depository or its nominee will be the Holder, and no beneficial owner
shall receive certificates representing its ownership interest in such shares.

                  (c) If there is no Securities Depository, the Corporation may
at its option issue one or more new certificates with respect to such shares
(without the legend referred to in paragraph 9(b) registered in the names of the
beneficial owners or their nominees and rescind the stop-transfer instruction
referred to in paragraph 9(b) with respect to such shares.

                  (d) The Corporation shall exercise its best efforts to
maintain an Auction Agent pursuant to an agreement containing terms not
materially less favorable to the Corporation than the terms of the Auction Agent
Agreement first entered into by the Corporation pursuant to the resolutions
adopted by the Board of Directors on December 13, 1988.

                  (e) The Corporation shall use its best efforts to maintain a
rating of the AMPS from each of the Rating Agencies.

                  (f) All notices or communications, unless otherwise specified
in the By-laws of the Corporation or these Articles Supplementary, shall be
sufficiently given if in writing and delivered in person or mailed by first
class mail, postage prepaid. Notice shall be deemed given on the earlier of the
date received or the date seven days after which such notice is mailed.

                  (g) So long as any shares of AMPS shall be outstanding, the
Corporation shall not engage in "short sales" or "hedging" or enter into
"futures contracts" or "option contracts" (other than Forward Contracts) with
respect to the Eligible Portfolio Property.

                  IN WITNESS WHEREOF, THE FIRST AUSTRALIA PRIME INCOME FUND,
INC., has caused these presents to be signed in its name and on its behalf by
its President and its corporate seal to be hereunder affixed and attested by its
Assistant Secretary on this 25/th/ day of July, 1989, and its President
acknowledges that these Articles Supplementary are the act and deed of The First
Australia Prime Income Fund, Inc., and, under the penalties of perjury, that the
matters and facts set forth herein with respect to authorization and approval
are true in all material respects to the best of his knowledge, information and
belief.

                                     THE FIRST AUSTRALIA PRIME INCOME FUND, INC.


                                     By:  /s/ Margaret A. Bancroft
                                          -------------------------------
                                          Attorney-in-fact
                                          for Brian M. Sherman, President

ATTEST:


/s/ Margaret A. Bancroft
- ----------------------------
Assistant Secretary

                                       48

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.A4
<SEQUENCE>6
<FILENAME>dex99a4.txt
<DESCRIPTION>EXHIBIT A4
<TEXT>
<PAGE>

                                                                  EXHIBIT (a)(4)

                   THE FIRST AUSTRALIA PRIME INCOME FUND, INC.

                            CERTIFICATE OF CORRECTION

               The First Australia Prime Income Fund, Inc., a Maryland
corporation having its principal Maryland office in the City of Baltimore in the
State of Maryland (the "Corporation"), hereby sets forth the following
corrections to the Corporation's Articles Supplementary filed January 17, 1989:

               1.   The title of the document being corrected is Articles
Supplementary creating three series of Auction Market Preferred Stock (the
"Articles").

               2.   The name of each party to the document being corrected is
The First Australia Prime Income Fund, Inc.

               3.   The date that the document being corrected was filed is
January 17, 1989.

               4.   The following provisions of the Articles are hereby
corrected as follows:

               (a)  The following defined terms are hereby added to paragraph 1
of the Articles, incorporated in the correct alphabetical order:

               "Australian Securities" means ANNIE MAEs, Australian Corporate
Bonds, Australian Government Securities, Australian Semi-Government Securities,
Australian Short-Term Securities, Bank Bills, Eurobonds, MMSs, MTCs, New Zealand
Securities and NMMC Securities.

               "Eurobonds" means debt securities which are denominated in
Australian Currency, are issued by the issuers listed below and which have the
following characteristics: (a) the principal amount outstanding on the date of
determination is at least equal to A$50 million, (b) the security is publicly
traded, (c) the security is non-callable, (d) the security is rated at least AA-
by S&P and (e) the maturity date of the security is not later than the 10th
anniversary of the issuance date of such security.

               Issuers with a public long-term S&P rating or whose parent has a
public long-term S&P rating and there is an explicit guarantee backing the
subsidiary's debt service payments ("Guaranteed Eurobonds"):

               Australian Telecom
               Finnish Export Credit Corp.
               National Australia Bank
               State Bank of New South Wales
               State Electricity of Victoria
               Swedish Export Credit Corp.

               Issuers, which shall be designated in writing from time to time
by S&P, without a public long-term S&P rating but whose parent has a long-term
S&P rating but has not explicitly guaranteed the subsidiary's debt service
payments ("Non-guaranteed Eurobonds").

<PAGE>

In addition, if the determination is being made for S&P, (a) not more than l0%
of the aggregate Discounted Value of the Eligible Portfolio Property of the
Corporation can consist of Eurobonds-from a single issuer, (b) not more than 50%
(if the issue is rated AAA by S&P) or 33.3% (if the issue is rated AA or A by
S&P) or 20% (if the issue is rated BBB by S&P) of the aggregate Discounted Value
of the Eligible Portfolio Property of the Corporation can consist of Eurobonds
from issues representing a single industry, (c) not more than 5% of the
then-outstanding principal amount of any one issue can be included is Eligible
Portfolio Property and (d) not more than 20% of the outstanding aggregate
principal amount of the Eurobonds held by the Corporation and included is
Eligible Portfolio Property shall be comprised of securities with an outstanding
issue size of less than A$100 million.

               The Board of Directors shall have the authority to adjust,
modify, alter or change from time to time the list of securities and eligibility
criteria as set forth above if each Rating Agency advises the Corporation is
writing that the change or specification will not adversely affect its
then-current rating of the AMPS.

               "Failure to Cure" shall mean a failure by the Corporation to
maintain the AMPS Basic Maintenance Amount or 1940 Act AMPS Asset Coverage
Requirement, as the case may be, which failure is not cured on or before the
third day following the related Valuation Date as reflected in a Portfolio
Valuation Report delivered to S&P and confirmed by the Corporation's Independent
Accountants.

               "Forward Contract" means a contract, entered into following a
Failure to Cure, between the Corporation and a commercial bank or other
financial institution whose short-term debt is rated at least A-1+ by S&P or
whose long-term debt is rated at least AA by S&P (an "Eligible Bank"), which
provides that the Corporation will sell a specified amount of Australian
Currency to such Eligible Bank on a specified date for a specified amount of
U.S. dollars. The date of payment in U.S. dollars shall not be later than the
30th day following the Valuation Date related to the Failure to Cure and the
amount of U.S. dollars shall be sufficient to redeem all shares of AMPS required
to be redeemed. On the Date of Original Issue and on each Quarterly Valuation
Date thereafter, the Corporation will confirm in writing to S&P that the
Corporation has a credit-line with an Eligible Bank (the "Credit Line Test").
The Credit Line Test shall be deemed to be satisfied on any date if the
Corporation has delivered such confirmation to S&P on the Date of Original Issue
or the most recent Quarterly Valuation Date, as the case may be. The Board of
Directors shall have the authority, to the extent permitted by Maryland law, to
adjust, modify, alter or change from time to tine the elements comprising the
Forward Contract from those set forth in these Articles Supplementary if S&P
advises the Corporation in writing that the change will not adversely affect its
then-current rating of the AMPS.

               (b)  The last sentence of the definition of "AMPS Basic
Maintenance Amount" in paragraph 1 of the Articles on page 4, which now reads as
follows:

          "The Board of Directors shall have the authority, to the extent
          permitted by Maryland law, to adjust, modify, alter or change from
          time to time the elements comprising the AMPS Basic Maintenance Amount
          from those set forth in these Articles Supplementary if the Board of
          Directors determines and the Rating

                                       2

<PAGE>

          Agencies advise the Corporation in writing that the change will not
          adversely affect their respective then-current ratings of the AMPS."

is corrected to read as follows:

          "The Board of Directors shall have the authority, to the extent
          permitted by Maryland law, to adjust, modify, alter or change from
          time to time the elements comprising the AMPS Basic Maintenance Amount
          from those set forth in these Articles Supplementary if the Rating
          Agencies advise the Corporation in writing that the change will not
          adversely affect their respective then-current ratings of the AMPS."

               (c) The definition of "Australian Corporate Bonds" in paragraph 1
of the Articles on page 5, which now reads as follow:

          "Australian Corporate Bonds" means debt obligations of Australian
          corporations (other than Australian Government Securities, Australian
          Semi-Government Securities, Bank Bills and Australian Short-Term
          Securities).

is corrected to read as follows:

          "Australian Corporate Bonds" means debt obligations of Australian
          corporations (other than Australian Government Securities, Australian
          Semi-Government Securities, Bank Bills, Eurobonds and Australian
          Short-Term Securities) provided, that such debt obligations shall not
          be deemed to be Eligible Portfolio Property unless they are issued by
          the corporations listed below and such obligations have the following
          characteristics: (a) the principal amount outstanding on the date of
          determination is at least equal to A$50 million, (b) the security is
          publicly traded, (c) the security is non-callable, (d) the security is
          rated at least AA- by S&P, (e) the security has a tender panel and (f)
          the maturity date of the security is not later than the 10th
          anniversary of the issuance date of such security.

          Issuers with a public long-term S&P rating or whose parent has a
          public long-term S&P rating and there is an explicit guarantee backing
          the subsidiary's debt service payments ("Guaranteed Australian
          Corporate Bonds"):

          FANMAC Premier Trust Co. No. 6-13
          Ford Credit Australia
          National Australia Bank
          State Bank of Victoria

          Issuers, which shall be designated in writing from time to time by
          S&P, without a public long-term S&P rating but whose parent has a
          long-term S&P rating but has not explicitly guaranteed the
          subsidiary's debt service payments ("Non-Guaranteed Corporate Bonds").

                                       3

<PAGE>

          In addition, if the determination is being made for S&P, (a) not more
          than 10% of the aggregate Discounted Value of the Eligible Portfolio
          Property of the Corporation can consist of Australian Corporate Bonds
          issued by a single issuer, (b) not more than 50% (if the issue is
          rated AAA by S&P) or 33.3% (if the issue is rated AA or A by S&P) or
          20% (if the issue is rated BBB by S&P) of the aggregate Discounted
          Value of the Eligible Portfolio Property of the Corporation can
          consist of Australian Corporate Bonds from issues representing a
          single industry, (c) not more than 5% of the then-outstanding
          principal amount of any one issue can be included in Eligible
          Portfolio Property and (d) not more than 20% of the outstanding
          aggregate principal amount of the Australian Corporate Bonds held by
          the Corporation and included in Eligible Portfolio Property shall be
          comprised of securities with a then-outstanding issue size of less
          than A$150 million.

          The Board of Directors shall have the authority to adjust, modify,
          alter or change from time to time the list of securities and
          eligibility criteria as set forth above if each Rating Agency advises
          the Corporation in writing that the change or specification will not
          adversely affect its then-current rating of the AMPS.

               (d)  The following items are added to the definition of
"Australian Semi-Government Securities" in paragraph 1 of the Articles on page
6:

          15.  The Western Australian Treasury Corporation.

          16.  Hydro-Electricity Commission of Tasmania.

          17.  Tasmanian Public Finance Corp.

          18.  Tasmanian Development Authority.

               (e)  The last sentence of the definition of "Australian
Semi-Government Securities" in paragraph 1 of the Articles on page 6, which now
reads as follows:

          "The Board of Directors shall have the authority to adjust, modify,
          alter or change from time to time the list of securities as set forth
          above if the Board of Directors determines and each Rating Agency
          advises the Corporation in writing that the change or specification
          will not adversely affect its then-current rating of the AMPS."

is corrected to read as follows

          "The Board of Directors shall have the authority to adjust, modify,
          alter or change from time to time the list of securities as set forth
          above if each Rating Agency advises the Corporation in writing that
          the change or specification will not adversely affect its then-current
          rating of the AMPS."

               (f)  The definition of "Business Day" in paragraph 1 of the
Articles on page 7, which now reads an follows:

                                       4

<PAGE>

          "Business Day" means a day on which the New York Sock Exchange is open
          for trading and which is not a Saturday, Sunday or other day on which
          banks in The City of New York are authorized or obligated by law to
          close; provided, that for purposes of determining Valuation Dates and
          Cure Dates, "Business Day" means as day on which the New York Stock
          Exchange and the Australian Stock Exchange Limited are open for
          trading and which is not a Saturday, Sunday or other day on which
          banks in The City of New York or in Sydney, Australia are authorized
          or obligated by law to close.

is corrected to read as follows:

          "Business Day" means a day on which the New York Stock Exchange is
          open for trading and which is not a Saturday, Sunday or other day on
          which banks in The City of New York are authorized or obligated by law
          to close; provided, that for purposes of determining Valuation Dates,
          Cure Dates and any Failure to Cure, "Business Day" means a day on
          which the New York Stock Exchange and the Australian Stock Exchange
          Limited are open for trading and which is not a Saturday, Sunday or
          other day on which banks in The City of New York or in Sydney,
          Australia are authorized or obligated by law to close.

               (g)  The last sentence of the definition of "Corporate Bonds" in
paragraph 1 of the Articles on page 9, which now reads as follows:

          "The Board of Directors shall be authorized to adjust, modify, alter
          or change from time to time the assets (and/or the characteristics
          thereof) included within the definition of Corporate Bonds for
          purposes of determining compliance with the AMPS Basic Maintenance
          Amount to encompass other assets constituting, and/or other
          characteristics of, corporate debt obligations from those set forth in
          these Articles Supplementary if the Board of Directors determines and
          the Rating Agencies advise the Corporation in writing that the change
          will not adversely affect their respective then-current ratings of the
          AMPS."

is corrected to read as follows:

          "The Board of Directors shall be authorized to adjust, modify, alter
          or change from time to time the assets (and/or the characteristics
          thereof) included within the definition of Corporate Bonds for
          purposes of determining compliance with the AMPS Basic Maintenance
          Amount to encompass other assets constituting, and/or other
          characteristics of, corporate debt obligations from those set forth in
          these Articles Supplementary if the Rating Agencies advise the
          Corporation in writing that the change will not adversely affect their
          respective then-current ratings of the AMPS."

               (h)  The following terms are added to the definition of "Discount
Factors" in paragraph 1 of the Articles:

                                       5

<PAGE>

<TABLE>
<CAPTION>
Type of Eligible Portfolio Property                              Moody's Discount Factor         S&P Discount Factor
- -----------------------------------                              -----------------------         -------------------
<S>                                                              <C>                             <C>
Guaranteed Eurobonds:
   with a current outstanding issue size less
   than or equal to A$100 million and with a
   remaining term to maturity of more than 56 days                        _____                         2.00

   with a current outstanding issue size exceeding
   A$100 million and with a remaining term to
   maturity of more than 56 days                                          _____                         1.90

   with any current outstanding issue size and with a
   remaining term to maturity of less than 56 days                        _____                         1.00

Non-Guaranteed Eurobonds:
   with a current outstanding issue size less than or
   equal to A$100 million and with a remaining term to
   maturity of more than 56 days                                          _____                         2.15

   with a current outstanding issue size exceeding
   A$100 million and with a remaining term to
   maturity of more than 56 days                                          _____                         2.00

   with any current outstanding issue size and with a
   remaining term to maturity of leas than 56 days                        _____                         1.00

Guaranteed Australian Corporate Bonds:
   with a current outstanding issue size less than or
   equal to A$150 million and with a remaining term to
   maturity of more than 56 days                                          _____                         1.70

   with a current outstanding issue size exceeding
   A$150 million and with a remaining term to maturity of
   more than 56 days                                                      _____                         1.60

   with any current outstanding issue size and with a
   remaining term to maturity of less than 56 days                        _____                         1.00
</TABLE>

                                        6

<PAGE>

<TABLE>
<S>                                                                        <C>                           <C>
Non-Guaranteed Australian Corporate Bonds:
   with a current outstanding issue size less than or
   equal to A$150 million and with a remaining term to
   maturity of less than 56 days                                           _____                         1.80

   with a current outstanding issue size exceeding
   A$150 million and with a remaining term to
   maturity of more than 56 days                                           _____                         1.70

   with any current outstanding issue size and with a
   remaining term to maturity of less than 56 days                         _____                         1.00
</TABLE>

               (i)  The discount factors for "Australian Government Securities",
"Australian Semi-Government Securities", Bank Bills" and "Australian Currency"
in the definition of "Discount Factors" in paragraph 1 of the Articles on pages
10 and 11, which now read a follows:

<TABLE>
<CAPTION>
Type of Eligible Portfolio Property                              Moody's Discount Factor         S&P Discount Factor
- -----------------------------------                              -----------------------         -------------------
<S>                                                              <C>                             <C>
Australian Government Securities:
   with a current outstanding issue size less than
   A$100,000,000 and with a remaining term to maturity
   equal to or longer than 56 days from the data of
   determination                                                           1.85                          1.60(4)

   with a current outstanding issue size of at least
   A$100,000,000 but less than or equal to $150,000,000
   and with a remaining term to maturity equal to or
   longer than 56 days from the date of determination                      1.85                          1.50

   with a current outstanding issue size greater than
   A$150,000,000 and with a remaining term to maturity
   equal to or longer than 56 days from the date of
   determination                                                           1.60                          1.50

   with any current outstanding issue size and with a
   remaining term to maturity shorter than 56 days from
   the date of determination                                               1.00                          1.00(4)

Australian Semi-Government Securities:
   with a current outstanding issue size less than
   A$100,000,000 and with a remaining term to maturity
   equal to or longer than 56
</TABLE>

                                        7

<PAGE>

<TABLE>
<S>                                                                      <C>                         <C>
   days from the date of determination                                     1.85                        1.65(4)

   with a current outstanding issue size of at least
   A$100,000,000 but less than or equal to A$150,000,000
   and with a remaining term to maturity equal to or
   longer than 56 days from the date of determination                      1.85                        1.55

   with a current outstanding issue size greater than
   A$150,000,000 and with a remaining term to maturity
   equal to or longer than 56 days from the date of
   determination                                                           1.60                        1.55

   with any current outstanding issue size and with a
   remaining term to maturity shorter than 56 days from
   the date of determination                                               1.00                        1.00(4)

Bank Bills (with maturities of not greater than 56 days
   from the last Valuation Date at which the AMPS Basic
   Maintenance Amount was met)                                             1.00                        1.00

Australian Currency are corrected to read as follows:                      1.43                        1.75

Australian Government Securities:
   with a current outstanding issue size less than
   A$100,000,000 and with a remaining term to maturity
   equal to or longer than 46 days from the date of
   determination                                                           1.85                        1.50(4)

   with a current outstanding issue size of at least
   A$100,000,000 but less than or equal to $150,000,000
   and with a remaining term to maturity equal to or
   longer than 46 days from the date of determination                      1.85                        1.40

   with a current outstanding issue size greater than
   A$150,000,000 and with a remaining term to maturity equal
   to or longer than 46 days from the date of
   determination                                                           1.60                        1.40

   with any current outstanding issue size and with a
   remaining term to maturity shorter than 46 days from
   the date of determination                                               1.00                        1.00(4)

Australian Semi-Government Securities (5):
   with a current outstanding issue size less
</TABLE>

                                        8

<PAGE>

<TABLE>
<S>                                                                        <C>                       <C>
   than A$100,000,000 and with a remaining term to
   maturity equal to or longer than 46 days from the date of
   determination                                                           1.85                      1.55(4)

   with a current outstanding issue size of at least
   A$100,000,000 but less than or equal to $150,000,000
   and with a remaining term to maturity equal to or
   longer than 46 days from the date of determination
                                                                           1.85                      1.45
   with a current outstanding issue size greater than
   A$150,000,000 and with a remaining term to maturity equal
   to or longer than 46 days from the date of
   determination                                                           1.60                      1.45

   with any current outstanding issue size and with a
   remaining term to maturity shorter than 46 days from
   the date of determination                                               1.00                      1.00(4)

Australian Semi-Government Securities: (Tasmanian) (6):
   with a current outstanding issue size less than
   A$100,000,000 and with a remaining term to maturity
   equal to or longer than 46 days from the date of
   determination                                                           1.94                      1.60(4)

   with a current outstanding issue size of at least
   A$100,000,000 but less than or equal to $150,000,000
   and with a remaining term to maturity equal to or
   longer than 46 days from the date of determination                      1.94                      1.50

   with a current outstanding issue size greater than
   A$150,000,000 and with a remaining term to maturity
   equal to or longer than 46 days from the date of
   determination                                                           1.68                      1.50(4)

   with any current outstanding issue size and with a
   remaining term to maturity shorter than 46 days from
   the date of determination                                               1.05                      1.00(4)

Bank Bills:
   with maturities of less than or equal to 46 days from
   the last Valuation Date at which the AMPS Basic
   Maintenance Amount was met                                              1.00                      1.00

   with maturities of 47-56 days from the last
</TABLE>

                                       9

<PAGE>

   Valuation Date on which the AMPS Basic
   Maintenance Amount was met                            1.00       1.40

   with maturities of 57-90 days from the last
   Valuation Date an which the AMPS Basic
   Maintenance Amount was met                            1.35       1.40

   with maturities of 91-180 days from the last
   Valuation Date on which the AMPS Basic
   Maintenance Amount was met                            1.35       1.45

Australian Currency                                      1.43       1.57(7)


              (j) The following footnotes are added to the definition of
"Discount Factors" in paragraph 1 of the Articles on page 13:

         (5)  Excluding securities of Hydro-Electricity Commission of Tasmania,
              Tasmanian Public Finance Corp. and Tasmanian Development
              Authority.

         (6)  Securities of Hydro-Electricity Commission of Tasmania, Tasmanian
              Public Finance Corp. and Tasmanian Development Authority.

         (7)  If the determination is being made (A) while the Corporation is
              not in compliance with the Credit Line Test as defined under the
              definition of Forward Contract or (B) following a Valuation Date
              related to a Failure to Cure, but prior to the consummation of any
              mandatory redemption required pursuant to paragraph 5(b), if a
              Forward Contract shall not be in place as provided in the
              definition of Forward Contact, then the Discount Factor will be
              1.65 for all currency attributable to Australian Government
              Securities, Australian Semi-Government Securities and Bank Bills
              and will be 1.75 for all currency attributable to Australian
              Corporate Bonds and Eurobonds.

              (k) The last sentence of the definition of "Discount Factors" in
paragraph 1 of the Articles on page 13, which now reads as follows:

         "The Board of Directors shall have the authority to adjust, modify,
         alter or change from time to time the initial Discount Factor as set
         forth above applied to determine the Discounted Value of any item of
         Eligible Portfolio Property or may specify from time to time a Discount
         Factor for any asset constituting Eligible Portfolio Property if the
         Board of Directors determines and each Rating Agency advises the
         Corporation in writing that the change or specification will not
         adversely affect its then-current rating of the AMPS."

is corrected to read as follows:

                                       10

<PAGE>

         "The Board of Directors shall have the authority to adjust, modify,
         alter or change from time to time the initial Discount Factor as set
         forth above applied to determine the Discounted Value of any item of
         Eligible Portfolio Property or may specify from time to time a Discount
         Factor for any asset constituting Eligible Portfolio Property if each
         Rating Agency advises the Corporation in writing that the change or
         specification will not adversely affect its then-current rating of the
         AMPS."

              (l) The definition of "Discounted Value" in paragraph 1 of the
Articles on pages 13 and 14, which now reads as follows:

         "Discounted Value", with respect to any asset held by the Corporation,
         means the quotient of the Market Value of such asset divided by the
         applicable Discount Factor; provided that in no event shall the
         Discounted Value of any asset constituting Eligible Portfolio Property
         as of any date exceed the unpaid principal balance or face amount of
         such asset as of that date; provided further that the Discounted Value
         of all Australian Government Securities, Australian Semi-Government
         Securities and Bank Bills shall be further discounted by the Discount
         Factor applicable to Australian Currency.

is corrected to read as follows:

         "Discounted Value," with respect to any asset held by the Corporation,
         means the quotient of the Market Value of such asset divided by the
         applicable Discount Factor; provided that in no event shall the
         Discounted Value of any asset constituting Eligible Portfolio Property
         as of any date exceed the unpaid principal balance or face amount of
         such asset as of that date; provided further that the Discounted Value
         of all Australian Securities shall be further discounted by the
         Discount Factor applicable to Australian Currency.

              (m) The definition of "Eligible Portfolio Property" in paragraph 1
of the Articles on page 15, which now reads as follows:

         "Eligible Portfolio Property" means Australian Government Securities,
         Australian Semi-Government Securities, Cash, Bank Bills, Australian
         Currency, U.S. Government Obligations, Short-Term Money Market
         Instruments, FNMA Certificates, FHLMC Certificates, FHLMC Multifamily
         Securities, GNMA Certificates, and GNMA Graduated Payment Securities;
         provided, (i) if the determination is being made for Moody's, that not
         more than 20% in the aggregate of the total Eligible Portfolio Property
         shall consist of Australian Government Securities and/or Australian
         Semi-Government Securities with a current outstanding issue size less
         than A$150,000,000 and (ii) if the determination is being made for S&P
         that no Australian Government Securities or Australian Semi-Government
         Securities contained in Eligible Portfolio Property shall have a
         current outstanding issue size less than A$10,000,000 (as determined on
         each Quarterly Valuation Date); provided further that, if the
         determination is being made for S&P, not more than l0% of the total
         Eligible Portfolio Property

                                       11

<PAGE>

         shall consist of Australian Semi-Government Securities issued by any
         single issuer and that not more than 20% of the total Eligible
         Portfolio Property shall consist of Australian Semi-Government
         Securities guaranteed by any single state (except that in the case of
         each of Victoria and New South Wales, such percentage shall be 25%).
         The Board of Directors shall have the authority to specify from time to
         time other assets as Eligible Portfolio Property if the Board of
         Directors determines and the Rating Agencies advise the Corporation in
         writing that the specification will net adversely affect their
         respective then-current ratings of the AMPS.

is corrected to read as follows:

         "Eligible Portfolio Property" meant Australian Government Securities,
         Australian Semi-Government Securities, Cash, Bank Bills, Australian
         Currency, U.S. Government Obligations, Short Term Money Market
         Instruments, FNMA Certificates, FHLMC Certificates, FHLMC Multifamily
         Securities, GNMA Certificates and GNMA Graduated Payment Securities
         and, if the calculation is being made for S&P, Eurobonds and Australian
         Corporate Bonds; provided, (i) if the determination is being made for
         Moody's, (x) that not more than 20% in the aggregate of the total
         Discounted Value of Eligible Portfolio Property shall consist of
         Australian Government Securities and/or Australian Semi-Government
         Securities with a current outstanding issue size less than
         A$150,000,000 and (y) that not more than l0% in the aggregate of the
         total Discounted Value of Eligible Portfolio Property shall consist of
         Australian Semi-Government Securities described under items 16, 17 and
         18 of such definition and (ii) if the determination is being made for
         S&P that no Australian Government Securities or Australian
         Semi-Government Securities contained in Eligible Portfolio Property
         shall have a current outstanding issue size less than A$10,000,000 (as
         determined on each Quarterly Valuation Date); provided further that, if
         the determination is being made for S&P, not more than l0% in the
         aggregate of the total Discounted Value of the Eligible Portfolio
         Property shall consist of Australian Semi-Government Securities issued
         by any single issuer and that not more than 20% in the aggregate of the
         total Discounted Value of the Eligible Portfolio Property shall consist
         of Australian Semi-Government Securities guaranteed by any single state
         (except that in the case of each of Victoria and New South Wales, such
         percentage shall be 25%). The Board of Directors shall have the
         authority to specify from time-to time other assets a Eligible
         Portfolio Property if the Rating Agencies advise the Corporation in
         writing that the specification will not adversely affect their
         respective then-current ratings of the AMPS.

              (n) The last sentence of the definition of "Industry Category" in
paragraph 1 of the Articles on page 19, which now reads as follows:

         "The Board of Directors shall have the authority to change the industry
         categories applicable with respect to the Corporation from those set
         forth in these Articles Supplementary if the Board of Directors
         determines and the Rating Agencies

                                       12

<PAGE>

         advise the Corporation in writing that the change will not adversely
         affect their respective then-current ratings of the AMPS."

is corrected to read as follows:

         "The Board of Directors shall have the authority to change the industry
         categories applicable with respect to the Corporation from those set
         forth in these Articles Supplementary if the Rating Agencies advise the
         Corporation in writing that the change will not adversely affect their
         respective then-current ratings of the AMPS."

              (o)  Clause (b) of the definition of "Market Value" in paragraph 1
of the Articles on pages 19 and 20, which now reads as follows:

              "(b) the product of (i) as to GNMA Certificates, GNMA Graduated
         Payment Securities, FNMA Certificates, FHLMC Certificates and FHLMC
         Multifamily Securities, the aggregate unpaid principal amount of the
         mortgage loans evidenced by each such certificate or security, as the
         case may be, as of the close of business in New York City on the last
         Business Day prior to such date of determination and (ii) the lower of
         the bid prices for the same kind of certificate or, if not available,
         some other security having, as nearly as practicable, comparable
         interest rates and maturities, as quoted to the Corporation by two
         nationally recognized securities dealers, who are members of the
         National Association of Securities Dealers selected by the Corporation
         and making a market therein, with at least one such quotation in
         writing plus, (i) if the determination is being made for Moody's,
         accrued interest to the date of determination if the next interest
         coupon on such security is due and payable within 56 days of such date
         of determination and (ii) if the determination is being made for S&P,
         accrued interest;"

is corrected to read as follows:

              "(b) as to GNMA Certificates, GNMA Graduated Payment Securities,.
         FNMA Certificates, FHLMC Certificates and FHLMC Multifamily Securities,
         the product of (i) the aggregate unpaid principal amount of the
         mortgage loans evidenced by each such certificate or security, as the
         case may be, as of the close of business in New York City on the last
         Business Day prior to such date of determination and (ii) the lower of
         the bid prices for the same kind of certificate or, if not available,
         some other security having, as nearly as practicable, comparable
         interest rates and maturities, as quoted to the Corporation by two
         nationally recognized securities dealers, who are members of the
         National Association of Securities Dealers selected by the Corporation
         and making a market therein, with a market therein with at least one
         such quotation in writing plus, (x) if the determination is being made
         for Moody's, accrued interest to the date of determination if the next
         interest coupon on such security is due and payable within 56 days of
         such date of determination and (y) if the determination is being made
         for S&P, accrued interest;"

                                       13

<PAGE>

          (p)  The last sentence of the definition of "Market Value" in
paragraph 1 of the Articles an page 20, which now reads as follows:

          "Without amending the Articles of Incorporation, (i) the calculation
     of the Market Value of an asset constituting Eligible Portfolio Property
     may be changed to any method recognized by the Rating Agencies from that
     set forth in these Articles Supplementary and (ii) a method recognized by
     the Rating Agencies for calculating the Market Value of any asset
     identified as Eligible Portfolio Property may be specified if the Board of
     Directors determines and the Rating Agencies advise the Corporation in
     writing that the change or specification will not adversely affect their
     respective then-current ratings of the AMPS."

is corrected to read as follows:

          "Without amending the Articles of Incorporation, (i) the calculation
     of the Market Value of an asset constituting Eligible Portfolio Property
     may be changed to any method recognized by the Rating Agencies from that
     set forth in these Articles Supplementary and (ii) a method recognized by
     the Rating Agencies for calculating the Market Value of any asset
     identified as Eligible Portfolio Property may be specified if the Rating
     Agencies advise the Corporation in writing that the change or specification
     will not adversely affect their respective then-current ratings of the
     AMPS."

          (q)  The definition of "Other Permitted Assets" in paragraph 1 of the
Articles on page 22, which now reads as follows:

          "Other Permitted Assets" means Australian Corporate Bonds, Australian
     Short Term Securities, New Zealand Securities, FANMAC Certificates, NMMC
     Securities, MTCs, MMSs, ANNIE MAEs, GNMA Multifamily Securities and
     Corporate Bonds.

is corrected to read as follows:

          "Other Permitted Assets" means Australian Corporate Bonds, Eurobonds,
     Australian Short Term Securities, New Zealand Securities, FANMAC
     Certificates, NMMC Securities, MTCs, MMSs, ANNIE MAEs, GNMA Multifamily
     Securities and Corporate Bonds.

          (r)  The last sentence of the definition of "Projected Dividend
Amount" in paragraph 1 of the Articles an page 24, which now reads as follows:

          "The calculation of the Projected Dividend Amount may be made on bases
     other than those set forth above if the Board of Directors determines and
     the Rating Agencies shall have advised the Corporation in writing that the
     revised calculation of the Projected Divided Amount would not adversely
     affect their respective then-current ratings of the AMPS."

is corrected to read as follows:

                                       14

<PAGE>

          "The calculation of the Projected Dividend Amount may be made on bases
     other than those set forth above if the Rating Agencies shall have advised
     the Corporation in writing that the revised calculation of the Projected
     Dividend Amount would not adversely affect their respective then-current
     ratings of the AMPS."

          (s)  The first sentence of paragraph 5(b) of the Articles on page 34,
which now reads an follows:

          "The Corporation shall redeem, at a redemption price of $100,000 per
     share plus accumulated but unpaid dividends through the date of redemption,
     shares of AMPS to the extent permitted under the Investment Company Act and
     Maryland Law, on the next succeeding scheduled Dividend Payment Dates
     applicable to those shares of AMPS called for redemption, if the
     Corporation fails to maintain the AMPS Basic Maintenance Amount or 1940 Act
     AMPS Asset Coverage Requirement, as the case may be, and such failure is
     not cured on or before the Cure Date as reflected in a Portfolio Valuation
     Report delivered to the Auction Agent and the Rating Agencies and confirmed
     by the Corporation's Independent Accountants."

is correct to read as follows:

          "The Corporation shall redeem, at a redemption price of $100,000 per
     share plus accumulated but unpaid dividends through the date of redemption,
     shares of AMPS to the extent permitted under the Investment Company Act and
     Maryland Law, on the date fixed by the Board of Directors applicable to
     those shares of AMPS called for redemption, if the Corporation fails to
     maintain the AMPS Basic Maintenance Amount or 1940 Act AMPS Asset Coverage
     Requirement, as the case may be, and such failure is not cured on or before
     the Cure Date as reflected in a Portfolio Valuation Report delivered to the
     Auction Agent and the Rating Agencies and confirmed by the Corporation's
     Independent Accountants."

          (t)  The last sentence of paragraph 5(b) of the Articles on pages 34
and 35, which now reads as follows:

          "The Corporation shall effect such redemption not later than 45 days
     after such Cure Date, except that if the Corporation does not have funds
     legally available for the redemption of all the required number of shares
     of AMPS which are subject to mandatory redemption, the next Dividend
     Payment Date with respect to any share to be redeemed is more than 45 days
     after such Cure Date or the Corporation otherwise is unable to affect such
     redemption on or prior to such Cure Date, the Corporation shall redeem
     those shares of AMPS which it was unable to redeem on the earliest
     practicable date on which it is able to effect such redemption."

is corrected to read as follows:

                                       15

<PAGE>

          "The Corporation shall effect such redemption not later than 45 days
     after such Cure Date, except that if the Corporation does not have funds
     legally available for the redemption of all the required number of shares
     of AMPS which are subject to mandatory redemption, the next Dividend
     Payment Date with respect to any share to be redeemed is more than 45 days
     after such Cure Date or the Corporation otherwise is unable to effect such
     redemption on or prior to such 45th day, the Corporation shall redeem those
     shares of AMPS which it was unable to redeem on the earliest practicable
     date on which it is able to effect such redemption. Within 30 days after
     the Cure Date, the Corporation shall transfer to or maintain with State
     Street Bank and Trust Company, the Corporation's custodian, Deposit
     Securities in an amount sufficient to redeem the number of shares of AMPS
     to be redeemed."

          (u)  Paragraph 5(c) of the Articles on page 35, which now reads as
follows:

          "(c) Notwithstanding the other provisions of this paragraph 5, no
     shares of AMPS may be redeemed other than as specified below, unless all
     accumulated and unpaid dividends on all outstanding shares of AMPS and
     other Preferred Stock for all past dividend periods shall have been or are
     contemporaneously paid or declared and Deposit Securities maturing on or
     prior to the date fixed for redemption are set apart for the payment of
     such dividends; provided, however, that the Corporation without regard to
     such limitations, (x) may redeem, purchase or otherwise acquire shares of
     AMPS (A) with other Preferred Stock as a whole, pursuant to an optional
     redemption or (B) pursuant to a purchase or exchange offer made for all of
     the outstanding shares of AMPS and other Preferred Stock, and (y) shall
     redeem, purchase or otherwise acquire shares of AMPS with other Preferred
     Stock as a whole pursuant to a mandatory redemption, to the extent
     permitted under the Investment Company Act, Maryland law and the Articles
     of Incorporation."

is corrected to read as follows:

          "(c) Notwithstanding the other provisions of this paragraph 5, no
     shares of AMPS may be redeemed other than as specified below, unless all
     accumulated and unpaid dividends on all outstanding shares of AMPS and
     other Preferred Stock for all past dividend periods shall have been or are
     contemporaneously paid or declared and Deposit Securities maturing on or
     prior to the date fixed for redemption are set apart for the payment of
     such dividends; provided, however, that the Corporation without regard to
     such limitations, (x) may redeem, purchase or otherwise acquire shares of
     AMPS (A) with other Preferred Stock as a whole, pursuant to an optional
     redemption or (B) pursuant to a purchase or exchange offer made for all of
     the outstanding shares of AMPS and other Preferred Stock, and (y) shall
     redeem, purchase or otherwise acquire shares of AMPS with other Preferred
     Stock as a whole if required pursuant to a mandatory redemption, to the
     extent permitted under the Investment Company Act, Maryland law and the
     Articles of Incorporation."

                                       16

<PAGE>

          (v)  The last sentence of paragraph 7(b)(iii) of the Articles on page
44, which now reads as follows:

          "If any letter reviewing the Portfolio Calculation delivered pursuant
     to this paragraph shows that an error was made in the Portfolio Valuation
     Report for such Quarterly Valuation Date, or shows that a lower aggregate
     Discounted Value for the aggregate of all Eligible Portfolio Property was
     determined by the Independent Accountants, the calculation or determination
     made by such Independent Accountants shall be final and conclusive and
     shall be binding on the Corporation, and the Corporation shall promptly
     amend the Portfolio Valuation Report and deliver the amended Portfolio
     Valuation Report to the Auction Agent."

is corrected to read as follows:

          "If any letter reviewing the Portfolio Calculation delivered pursuant
     to this paragraph shows that a lower aggregate Discounted Value for the
     aggregate of all Eligible Portfolio Property was determined by the
     Independent Accountants, the calculation or determination made by such
     Independent Accountants shall be final and conclusive and shall be binding
     on the Corporation, and the Corporation shall promptly amend the Portfolio
     Valuation Report and deliver the amended Portfolio Valuation Report to the
     Auction Agent."

          (w)  Clause (C) of paragraph 8(d)(ii) of the Articles on page 55,
which now reads as follows:

          "(C) if all the shares of AMPS are the subject of Submitted Hold
     Orders, that the Applicable Rate for the next succeeding Dividend Period
     shall be equal to ____% of the 30-day "AA" Composite Commercial Paper Rate
     on the date of the Auction."

is corrected to read as follows:

          "(C) if all the shares of AMPS are the subject of Submitted Hold
     Orders, that the Applicable Rate for the next succeeding Dividend Period
     shall be equal to 90% of the 30-day "AA" Composite Commercial Paper Rate on
     the date of the Auction."

          (x)  Clauses (C) and (E) of paragraph 8(e)(i) of the Articles on page
56 and 57, which now read as follows:

          "(C) the Submitted Bid of each of the Potential Holders specifying any
     rate per annum that is lower than the Winning Bid Rate shall be accepted;

          (E)  the Submitted Bid of each of the Potential Holders specifying a
     rate per annum that is equal to the Winning Bid Rate shall be accepted, but
     only in an amount equal to the number of Outstanding shares of AMPS
     obtained by multiplying (x) the difference between the Available AMPS and
     the number of

                                       17

<PAGE>

         shares of AMPS subject to Submitted Bids described in paragraphs
         8(e)(i)(B), 8(e) (i)(C) and 8(e)(i)(D) by (y) a fraction the numerator
         of which shall be the number of Outstanding shares of AMPS subject to
         such Submitted Bids and the denominator of which shall be the sum of
         the numbers of Outstanding shares of AMPS subject to such Submitted
         Bids made by all such Potential Holders that specified rates per annum
         equal to the Winning Bid Rate."

are corrected to read as follows:

                  "(C) the Submitted Bid of each of the Potential Holders
         specifying any rate per annum that is lower than the Winning Bid Rate
         shall be accepted, thus requiring each such Potential Holder to
         purchase the shares of AMPS that are the subject of such Submitted
         Bids;

                  (E)  the Submitted Bid of each of the Potential Holders
         specifying a rate per annum that is equal to the Winning Bid Rate shall
         be accepted, thus requiring each such Potential Holder to purchase the
         shares of AMPS that are the subject of such Submitted Bids; but only in
         an amount equal to the number of Outstanding shares of AMPS obtained by
         multiplying (x) the difference between the Available AMPS and the
         number of shares of AMPS subject to Submitted Bids described in
         paragraphs 8(e)(i)(B), 8(e)(i)(C) and 8(e)(i)(D) by (y) a fraction the
         numerator of which shall be the number of Outstanding shares of AMPS
         subject to such Submitted Bid and the denominator of which shall be the
         sum of the numbers of Outstanding shares of AMPS subject to such
         Submitted Bids made by all such Potential Holders that specified rates
         per annum equal to the Winning Bid Rate."

                  (y) Clause (C) of paragraph 8(e)(ii) of the Articles on pages
         57 and 58, which now reads as follows:

                  "(C) the Submitted Bid of each Existing Holder specifying any
         rate per annum that is higher than the Maximum Applicable Rate shall be
         accepted, thus requiring each such Existing Holder to sell the shares
         of AMPS that are the subject of such Submitted Bid, and the Submitted
         Sell Order of each Existing Holder shall be accepted, in both cases
         only in an amount equal to the difference between (1) the number of
         Outstanding shares of AMPS then held by such Existing Holder subject to
         such Submitted Bid or Submitted Sell Order and (2) the number of
         Outstanding shares of AMPS obtained by multiplying (x) the difference
         between the Available AMPS and the aggregate number of Outstanding
         shares of AMPS subject to Submitted Bids described in paragraphs
         8(e)(ii)(A) and 8(e)(ii)(B) by (y) a fraction the numerator of which
         shall be the number of Outstanding shares of AMPS held by such Existing
         Holder subject to such Submitted Bid or Submitted Sell Order and the
         denominator of which shall be the number of Outstanding shares of AMPS
         subject to all such Submitted Bids and Submitted Sell Orders."

                                       18

<PAGE>

is corrected to read as follows:

                  "(C) the Submitted Bid of each Existing Holder specifying any
         rate per annum that is higher than the Maximum Applicable Rates shall
         be accepted and the Submitted Sell Order of each Existing Holder shall
         be accepted, thus requiring each such Existing Holder to sell the
         shares of AMPS that are the subject of such Submitted Bid or Submitted
         Sell Order, in both cases only in an amount equal to the difference
         between (1) the number of Outstanding shares of AMPS then held by such
         Existing Holder subject to such Submitted Bid or Submitted Sell Order
         and (2) the number of Outstanding shares of AMPS obtained by
         multiplying (x) the difference between the Available AMPS and the
         aggregate number of Outstanding shares of AMPS subject to Submitted
         Bids described in paragraphs 8(e)(ii)(A) and 8(e)(ii)(B) by (y) a
         fraction the numerator of which shall be the number of Outstanding
         shares of AMPS held by such Existing Holder subject to such Submitted
         Bid or Submitted Sell Order and the denominator of which shall be the
         number of Outstanding shares of AMPS subject to all such Submitted Bids
         and Submitted Sell Orders."

                  (z)  Paragraph 9(g) of the Articles on page 60, which now
         reads as follows:

                  "(g) So long as any shares of AMPS shall be outstanding, the
         Corporation shall not engage in "short sales" or "hedging" or enter
         into "futures contracts" or "option contracts" with respect to the
         Eligible Portfolio Property."

is corrected to read as follows:

                  "(g) So long at any shares of AMPS shall be outstanding, the
         Corporation shall not engage in "short sales" or "hedging" or enter
         into "futures contracts" or "option contracts" (other than Forward
         Contracts) with respect to the Eligible Portfolio Property."

                  5.   The execution of the Articles was not defective.

                                       19

<PAGE>

                  IN WITNESS WHEREOF, THE FIRST AUSTRALIA PRIME INCOME FUND,
INC. has caused these presents to be signed in its name and on its behalf by its
President and its corporate seal to be hereunder affixed and attested by its
Assistant Secretary on this 8th day of August, 1989, and its President
acknowledges that this Certificate of Correction is the act and deed of The
First Australia Prime Income Fund, Inc., and, under the penalties of perjury,
that the matters and facts set forth herein are true in all material respects to
the best of his knowledge, information and belief.

                                            THE FIRST AUSTRALIA PRIME INCOME
                                                  FUND, INC.


                                            By:  /s/ Margaret A. Bancroft
                                                 -------------------------------
                                                      Attorney-in-fact
                                                 for Brian M. Sherman, President

ATTEST:


/s/ Margaret A. Bancroft
- ------------------------
Assistant Secretary

                                       20

<PAGE>

                                                                       EXHIBIT C

         RESOLVED, that the Board of Directors hereby approves and authorizes
the creation and issuance of up to six series of 500 shares each of its
authorized preferred stock, par value $.0l per share, liquidation preference
$100,000 per share, at a price to the public of $100,000 per share, with a
maximum underwriting discount of 10% per share, designated, respectively:
Auction Market Preferred Stock, Series A, Auction Market Preferred Stock, Series
B, Auction Market Preferred Stock, Series C, Auction Market Preferred Stock,
Series D, Auction Market Preferred Stock, Series E and Auction Market Preferred
Stock, Series F (collectively, the "AMPS"); and further

         RESOLVED, that the Board of Directors hereby appoints a pricing
committee from among its members consisting of Anthony E. Aaronson, Richard H.
Bushnell, David Lindsay Elsum, John T. Sheehy and Brian M. Sherman or in his
absence, Laurence S. Freedman (the "Pricing Committee") and delegates to the
Pricing Committee all of the Board of Directors' power and authority to fix,
consistent with, and subject to, the immediately preceding resolution, the terms
of the shares of each series of AMPS through the adoption by the Pricing
Committee of one or more resolutions setting forth the terms of each such series
as contemplated by Article Fifth of the Corporation's charter ("Articles
Supplementary"); provided however, that the dividend rate for the initial
dividend period for each series of AMPS shall not exceed a rate equal to 50% par
annum; and provided, further that the maximum applicable dividend rate for all
subsequent dividend periods for each series of AMPS shall not exceed the rate
determined by using an Applicable Percentage (as defined in the related Articles
Supplementary) of 400%; and further

         RESOLVED, that, subject to and conditioned upon the filing of Articles
Supplementary in the form adopted by the Pricing Committee designating and
fixing the terms and conditions of each series of AMPS, and the issuance and
sale of shares of the AMPS in accordance with the foregoing, an initial cash
dividend is declared on the outstanding shares of each of the series, at such
time, under such procedures, and to holders of record on such date or dates as
are determined under the procedural set forth in the relevant Articles
Supplementary; and further

         RESOLVED, that there shall, as provided in this resolution but without
further action on the part of the Board of Directors, be deemed to be declared,
and be declared, as of 5:00 p.m., New York City time, on each applicable Auction
Date (as defined in the relevant Articles Supplementary) for each series of
AMPS, a cash dividend on the outstanding shares of such series, payable on the
applicable Dividend Payment Date (as defined in the relevant Articles
Supplementary) next succeeding for such series, to holders of such series as of
5:00 p.m., New York City time, on the applicable Auction Date, in an amount and
a manner determined in accordance with the relevant Articles Supplementary;
provided however, that such declaration shall not be affective, and the
Corporation shall not pay, or deposit for payment with any paying agent as may
be contemplated by the relevant Articles Supplementary, any such dividend unless
a determination shall have been made, as of the date of declaration, by or under
the direction of the Principal Accounting Officer of the Fund, based on a review
of the Fund's internal financial statements, a fair valuation or other method
reasonable in the circumstances, and after giving effect to the proposed
dividend that: (i) the dividend will not prevent the Fund from paying its debts
as they become due in the usual course of business; (ii) the Fund's total assets
will exceed

<PAGE>

the sum of the Fund's total liabilities and the aggregate amount payable to the
holders of the relevant series of AMPS were the Fund to be liquidated on the
date of the distribution; (iii) the dividend will otherwise comply with the
terms and conditions of the Articles Supplementary; and (iv) declaration or
payment of the dividend will not otherwise violate applicable law, including but
not limited to Section 18(a)(1)(B) of the Investment Company Act of 1940; and
further

     RESOLVED, that each of the proper officers of the Fund or Margaret A.
Bancroft, Allen S. Mostoff or Richard S. Seltzer, who are hereby appointed as
their attorneys-in-fact be, and each of them hereby is, authorized to enter into
(i) one or more Purchase Agreements with Merrill Lynch Capital Markets, Merrill,
Lynch, Pierce, Fenner & Smith Incorporated and Prudential-Bache Securities Inc.
as representatives of the several Underwriters and (ii) related Pricing
Agreements attached as Exhibits to such Purchase Agreements with Merrill Lynch
Capital Markets, Merrill Lynch, Pierce, Fenner Smith Incorporated and
Prudential-Bache Securities, Inc. as representatives of several Underwriters,
and each of the proper officers is hereby authorized to execute and deliver over
such Purchase Agreements and Pricing Agreements, their execution and delivery
thereof to constitute conclusive evidence of the approval thereof by this Board;
and further

     RESOLVED, that each of the proper officers of the Fund, be and each of them
hereby is, authorized to cause the certificates representing the AMPS to be
prepared in temporary form, it required, and in definitive form in accordance
with the resolutions adopted by the Pricing Committee; and the President or any
Vice President and the Secretary or any Assistant Secretary of the Company be
and each of them hereby is authorized to execute either manually or by use of
facsimile signatures (and any such forms of AMPS so executed shall remain valid
notwithstanding that the officer who had executed the same shall cease to be
such an officer) in the name and on behalf of the Fund and under its corporate
seal (or a facsimile thereof), all of such AMPS to be numbered in the manner
said officers shall determine, and to deliver the AMPS so executed to The
Depository Trust Company or such other entity as may be appointed to serve as
Securities Depositary for any series of AMPS; and further

     RESOLVED, that the filing of a Registration Statement on Form N-2 on
November 16, 1988 with the Securities and Exchange Commission covering the
offering of 500 shares each of Auction Market Preferred Stock, Series A, Auction
Market Preferred Stock, Series B and Auction Market Preferred Stock, Series C is
hereby ratified and affirmed (the "Series A through C Registration Statement");
and further

     RESOLVED, that the each of proper officers of the Fund or Margaret A.
Bancroft, Allan S. Mostoff or Richard S. Seltzer, who are hereby appointed as
their attorneys-in-fact be, and each of them hereby is, authorized and directed
on behalf of the Fund to execute and file with the Securities and Exchange
Commission one or more Registration Statements on Form N-2 or other appropriate
form covering the offering of Auction Market Preferred Stock, Series D, Auction
Market Preferred Stock, Series E and Auction Market Preferred Stock, Series F
and any amendments, supplements or post-effective amendments to the Series A
through C Registration Statement or any Registration Statement or Registration
Statements covering the Series D, Series E or Series F Auction Market Preferred
Stock, in such form as may be approved by said officers of the Fund or by any
attorney-in-fact acting pursuant to the authority hereby conferred upon

                                      -2-

<PAGE>

each of them, the execution and filing of such amendments, supplements or
post-effective amendments to constitute conclusive evidence of the approval
thereof by this Board; and further

     RESOLVED, that each of the proper officers of the Fund or Margaret A.
Bancroft, Allen S. Mostoff or Richard S. Seltzer, who are hereby appointed as
their attorneys-in-fact, be and each of them hereby is, authorized in the name
and on behalf of the Fund to take any and all action which they, or any of them,
may deem necessary or advisable in order to effect the registration or
qualification (or exemption therefrom) of the AMPS under the Blue Sky or
securities laws of any of the States of the United States of America, to effect
the registration or licensing of the Fund as a dealer or broker in securities
under such laws and in connection therewith to execute, acknowledge, verify,
deliver, file or cause to be published any applications, reports, issuer's
covenants, consents to service of process, appointments or attorneys to receive
services of process and other papers and instruments which may be required under
such laws and to take any and all further action which they may deem necessary
or advisable in order to maintain any such registration, qualification or
license for as long as they deem necessary as required by law or by the
Representatives of the several Underwriters; and further

     RESOLVED, that upon issuance of any series of AMPS, the proper officers of
the Fund be, and each of them hereby is, authorized to take such steps an are
necessary and appropriate to increase the amount of coverage under the Fund's
Joint Fidelity Bond in accordance with Rule 17g-1 under the Investment Company
Act of 1940; and further

     RESOLVED, that each of the proper officers of the Fund or Margaret A.
Bancroft, Allan S. Mostoff or Richard S. Seltzer, who are hereby appointed as
their attorneys-in-fact be, and each of them hereby is, authorized to take such
further steps and to certify, execute and deliver such further forms,
resolutions, agreements, certificates and other documents as they, or any of
them, shall deem necessary or appropriate in connection with the foregoing,
including without limitation, the execution and delivery of Auction Agent
Agreements and Depository Agreements, their execution and delivery thereof
constituting conclusive evidence of the approval thereof by this Board, and

     (ii) that the Board of Directors of the Fund at a meeting held on December
          21, 1988, adopted the following resolutions:

     RESOLVED, that the resolutions adopted by the Board of Directors at its
December 13, 1988 meeting are hereby ratified and confirmed subject to the
following modifications.

     (i)  RESOLVED, that the Board of Directors hereby approves and authorizes
          the creation and issuance of up to six series of up to 750 shares each
          of its authorized preferred stock, par value $.01 per share for each
          series, liquidation preference $100,000 per share, at a price to the
          public of $100,000 per share (provided, however, that in no event
          shall the price to the public exceed $300,000,000 in the aggregate),
          with a maximum underwriting discount of 10% per share for each series,
          designated, respectively: Auction Market Preferred Stock, Series A,
          Auction Market Preferred Stock, Series B, Auction Market Preferred
          Stock, Series C, Auction Market Preferred Stock, Series D, Auction
          Market Preferred

                                      -3-

<PAGE>

            Stock, Series E, and Auction Market Preferred Stock, Series F
            (collectively, the "AMPS"); and further

     (ii)   RESOLVED, that each of the proper officers of the Fund or Margaret
            A. Bancroft, Allan S. Mostoff or Richard S. Seltzer, who are hereby
            appointed as their attorneys-in-fact be, and each of them hereby is,
            authorized and directed to execute and file, on behalf of the Fund
            an amendment to the Registration Statement on Form-N-2 filed on
            November 16, 1988 with the Securities and Exchange Commission which
            will provide for the offering of 750 shares each of Auction Market
            Preferred Stock, Series A, and Auction Market Preferred Stock,
            Series B in lieu of an offering of 500 shares each of Auction Market
            Preferred Stock, Series A, Auction Market Preferred Stock, Series B
            and Auction Market Preferred Stock, Series C (the "Series A-B
            Registration Statement") together with such other amendments,
            supplements or post-effective amendments to the Series A-B
            Registration Statement in such form as may be approved by said
            officers of the Fund or by any attorney-in-fact acting pursuant to
            authority hereby conferred upon each of them, the execution and
            filing of such amendments, supplements or post-effective amendments
            to constitute conclusive evidence of the approval thereof by this
            Board; and further

     (iii)  RESOLVED, that each of the proper officers of the Fund Margaret A.
            Bancroft, Allen S. Mostoff or Richard S. Seltzer, who are hereby
            appointed as their attorneys-in-fact be, and each of them hereby is
            authorized and on behalf of the Fund to execute and file, with the
            Securities and Exchange Commission one or more Registration
            Statements on Form N-2 or other appropriate form covering the
            offering of Auction Market Preferred Stock, Series C, Auction Market
            Preferred Stock, Series D, Auction Market Preferred Stock, Series E
            and Auction Market Preferred Stock, Series F and any amendments,
            supplements or post-effective amendments to any Registration
            Statement or Registration Statements covering the Series C, D, E and
            F Auction Market Preferred Stock in such form as may be approved by
            said officers of the Fund or by any attorney-in-fact acting pursuant
            to the authority hereby conferred upon each of them, the execution
            and filing of such amendments, supplements or post-effective
            amendments to constitute conclusive evidence of the approval thereof
            by this Board.

                                      -4-

<PAGE>

                   THE FIRST AUSTRALIA PRIME INCOME FUND, INC.

                       Certificate of Assistant Secretary

     THE UNDERSIGNED, Allan S. Mostoff, Assistant Secretary of The First
Australia Prime Income Fund, Inc. (the "Fund"), hereby certifies as follows:

     (a)    There have been no amendments or supplements to the Articles of
            Incorporation of the Fund since the filing on July 26, 1989 of
            Articles Supplementary dated July 25, 1989, and no action has been
            taken looking toward any further amendment or supplement or toward
            the dissolution of the Fund.

     (b)    A copy of the Fund's current By-Laws are attached hereto, and they
            are in full force and effect as of the date hereof.

     (c)    The Purchase Agreement dated July 25, 1989 among the Fund,
            EquitiLink International Management Limited, EquitiLink Australia
            Limited, The Prudential Insurance Company of America, Prudential
            Mutual Fund Management, Inc., and Merrill Lynch Capital Markets,
            Merrill Lynch, Pierce, Fenner & Smith Incorporated and
            Prudential-Bache Securities Inc. as representative of the several
            underwriters (the "Underwriters") (the "Purchase Agreement") for the
            sale of 1,000 shares of the Fund's Auction Market Preferred Stock,
            Series D (the "AMPS") was approved by the Board of Directors of the
            Fund in the resolutions referred to in a certificate previously
            provided.

     (d)    Final pricing arrangements for the sale of the AMPS were approved by
            the Pricing Committee of the Board of Directors on July 25, 1989 in
            the resolutions referred to in a certificate previously provided.

     (e)    A confirmed copy of the Purchase Agreement and the Pricing Agreement
            are attached hereto.

     (f)    The Fund is not subject to any order or decree, known to me, of any
            court, regulatory body, administrative agency, or governmental body,
            of the State of Maryland having jurisdiction over the Fund or any of
            its properties or operations.

     (g)    At April 30, 1989, there were 85,893,793 shares of Common Stock of
            the Fund outstanding, all of which were fully paid and
            nonassessable, and the average weekly trading volume of the Fund's
            Common Stock for the six months ended April 30, 1989, was
            approximately 578,123 shares.

<PAGE>

     IN WITNESS WHEREOF, I have hereunto signed by name and affixed the
corporate seal of the Fund as of August 1, 1989.

                                           /s/ Allan S. Mastoff
                                           ----------------------------
                                           Name:
                                           Title: Assistant Secretary

                                      -2-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.A5
<SEQUENCE>7
<FILENAME>dex99a5.txt
<DESCRIPTION>EXHIBIT A5
<TEXT>
<PAGE>

                                                                  EXHIBIT (A)(5)

                   THE FIRST AUSTRALIA PRIME INCOME FUND, INC.

                              ARTICLES OF AMENDMENT

     The First Australia Prime Income Fund, Inc., a Maryland Corporation having
its principal office in this State in Baltimore City, Maryland (hereinafter
called the Corporation), hereby certifies to the State Department of Assessments
and Taxation of Maryland, that:

     FIRST: The Charter of the Corporation is hereby amended by striking out
Article (a) of the Articles of Incorporation, as heretofore amended and
restated, so that Article Eighth shall read in its entirety as follows.

     Notwithstanding any provision of law requiring the authorization of any
     action by a greater proportion than a majority of the total number of
     shares of all classes of stock, such action shall be valid and effective if
     authorized by the affirmative vote of the holders of a majority of the
     total number of shares of all classes outstanding and entitled to vote
     thereon, except as otherwise provided in the Investment Company Act of 1940
     or the Charter.

     SECOND: The board of directors of the Corporation by unanimous written
consent pursuant to Section 2-408 of the Corporations and Associations Article
of the Annotated Code of Maryland duly adopted a resolution which set forth the
foregoing amendment to the Charter, declared said amendment of the Charter as
proposed to be advisable and directed that the amendment be submitted for
consideration by the stockholders of the Corporation at the 1991 annual meeting
of stockholders.

     THIRD: Notice setting forth the said amendment of the Charter and stating
that a purpose of the meeting of the annual meeting of stockholders to be held
on April 4, 1991 would be to take action thereon, was given, as required by law,
to all stockholders entitled to vote thereon. The amendment of the Charter of
the Corporation as hereinabove set forth was approved by the stockholders of the
Corporation at said meeting by the affirmative vote of a majority of the total
number of shares of each class outstanding and entitled to vote thereon.

     FOURTH: The amendment of the Charter of the Corporation as hereinabove set
forth has been duly advised by the board of directors and approved by the
stockholders of the Corporation.

     IN WITNESS WHEREOF, The First Australia Prime Income Fund, Inc. has caused
these presents to be signed in its name and on its behalf by its President and
its Assistant Secretary on May 20, 1991.

                                   THE FIRST AUSTRALIA PRIME INCOME FUND, INC.



                                   By  /s/ Brian M. Sherman
                                       Brian M. Sherman
                                       President

<PAGE>

Attest:



/s/ Margaret A. Bancroft
Margaret A. Bancroft
Assistant Secretary

     THE UNDERSIGNED, President of The First Australia Prime Income Fund, Inc.,
who executed on behalf of said Corporation the foregoing Articles of Amendment,
of which this certificate is made a part, hereby acknowledges, in the name and
on behalf of said Corporation, the foregoing Articles of Amendment to be the
corporate act of said Corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth therein with
respect to the approval thereof are true in all material respects, under the
penalties of perjury.

                                            By  /s/ Brian M. Sherman
                                                Brian M. Sherman
                                                President


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.A6
<SEQUENCE>8
<FILENAME>dex99a6.txt
<DESCRIPTION>EXHIBIT A6
<TEXT>
<PAGE>

                                                                 EXHIBIT (A)(6)

                  THE FIRST AUSTRALIA PRIME INCOME FUND, INC.

                  Articles Supplementary creating a series of
                         Auction Market Preferred Stock

                  The First Australia Prime Income Fund, Inc., a Maryland
corporation having its principal Maryland office in the City of Baltimore in the
State of Maryland (the "Corporation"), certifies to the State Department of
Assessments and Taxation of Maryland that:

                  FIRST:  Pursuant to authority expressly vested in the board of
directors of the Corporation by article fifth of its charter, the board of
directors authorized the issuance of a series of up to 1,000 shares of its
authorized preferred stock, par value $.01 per share, liquidation preference
$100,000 per share, designated Auction Market Preferred Stock, Series E.

                  SECOND: Pursuant to section 2-411 of the Maryland General
Corporation law and authority granted by article fourth of the Corporation's
by-laws, the board of directors of the Corporation has appointed a pricing
committee (the "Pricing Committee") and has authorized such Pricing Committee to
fix, consistent with, and subject to, the authorization referred to in Article
FIRST of these Articles Supplementary, the terms of the shares of Auction Market
Preferred Stock, Series E.

                  THIRD:  The preferences, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption, of the shares of such series of preferred stock are as follows:

                                   DESIGNATION

                  SERIES E: A series of 500 share of preferred stock, par value
$.01 per share, liquidation preference $100,000 per share, is hereby designated
"Auction Market Preferred Stock Series E." Each share of Auction Market
Preferred Stock, Series E shall be issued on the Date of Original Issue (as
herein defined); have an Initial Dividend Payment Date (as herein defined) of
January 5, 1993; and have such other preferences, limitations and relative
voting rights, in additional to those required by applicable law or set forth in
the Corporation's Articles of Incorporation applicable to preferred stock of the
Corporation; as are set forth in these Articles Supplementary. The Auction
Market Preferred Stock, Series E shall constitute a separate series of preferred
stock of the Corporation, and each share or Auction Market Preferred Stock,
Series E shall be identical.

                  1.   Definitions

                  Capitalized terms not defined in this paragraph 1 shall have
the respective meanings specified in paragraph 8(a) hereof. Unless the context
or use indicates another or different meaning, the following terms shall have
the following meanings, whether used in the singular or plural:

                  " `AA' Composite Commercial Paper Rate," on any date, means
(i) the interest equivalent of the 30-day rate on commercial paper placed on
behalf of issuers whose corporate bonds are rated "AA" by S&P, or the equivalent
of such rating by S&P or another rating agency, as such 30-day rate is made
available on a discount basis or otherwise by the Federal Reserve Bank of New
York for the Business Day immediately preceding such date, or (ii) in the event
that the Federal Reserve Bank of New York does not make available such a rate,
then the arithmetic average of the interest equivalent of the 30-day rate on
commercial paper placed on behalf of such issuers, as quoted to the Auction
Agent on a discount basis or otherwise by the Commercial Paper Dealers for the
close of business on the Business Day immediately preceding such date. If any
Commercial Paper Dealer does not quote a rate required to

<PAGE>

determine the 30-day "AA" Composite Commercial Paper Rate, the 30-day "AA"
Composite Commercial Paper Rate will be determined on the basis of the quotation
or quotations furnished by any Substitute Commercial Paper Dealer or Substitute
Commercial Paper Dealers selected by the Corporation to provide such rate or
rates not being supplied by the Commercial Paper Dealer. "Interest Equivalent"
as used herein means the equivalent yield on a 360-day basis of a discount basis
security to an interest bearing security.

                  "Accountant's Confirmation" has the meaning set forth in
paragraph 7(b)(iii) hereof.

                  "Administrator" means Prudential Mutual Funds Management, Inc.
or any successor administrator to the Corporation who acts in such capacity.

                  "Agent Member" means the member of the Securities Depository
that will act on behalf of an Existing Holder or Potential Holder and that is
identified as such in such holder's Purchaser's Letter.

                  "AMPS" means the Auction Market Preferred Stock, Series E, and
where appropriate, any other series of the Corporation's Auction Market
Preferred Stock.

                  "AMPS Basic Maintenance Amount" means, as of any date, the
dollar amount equal to the sum of (a) $100,000 times the number of shares of
AMPS then outstanding; (b) the aggregate liquidation preference of other
Preferred Stock then outstanding, if any; (c) the Dividend Coverage Amount; (d)
the aggregate Projected Dividend Amount; (e) the aggregate principal amount of
any then outstanding indebtedness of the Corporation for money borrowed; (f)
projected expenses of the Corporation for the next succeeding three-month
period; and (g) the greater of $200,000 or the Corporation's current liabilities
as of such date to the extent not otherwise reflected in any of (a) through (f)
above. The Board of Directors shall have the authority, to the extent permitted
by Maryland law, to adjust, modify, alter or change from time to time the
elements comprising the AMPS Basic Maintenance Amount from those set forth in
these Articles Supplementary if the Rating Agencies advise the Corporation in
writing that the change will not adversely affect their respective then-current
ratings of the AMPS.

                  "AMPS Basic Maintenance Cure Date," with respect to the
failure by the Corporation to maintain the AMPS Basic Maintenance Amount (as
required by paragraph 7(b) hereof) as of each Valuation Date, means the fifth
Business Day following such Valuation Date.

                  "ANNIE MAEs" are securities issued against mortgage pools by
Australian National Mortgage Pool Agency Ltd., an affiliate of Security Pacific
National Bank.

                  "Applicable Percentage" has the meaning set forth under
"Maximum Applicable Rate" below.

                  "Applicable Rate" has the meaning specified in paragraph
3(c)(i) below.

                  "Articles of Incorporation" means the Articles of
Incorporation of the Corporation, as amended and restated from time to time,
including as amended by these Articles Supplementary.

                  "Auction" means each operation of the Auction Procedures.

                  "Auction Agent" means Chemical Bank unless and until another
commercial bank, trust company, or other financial institution appointed by a
resolution of the Board of Directors enters into an

                                       2

<PAGE>

agreement with the Corporation to follow the Auction Procedures for the purpose
of determining the Applicable Rate and to act as transfer agent, registrar,
paying agent and redemption agent.

                  "Auction Agent Agreement" has the meaning specified in
paragraph 3(c)(i) below.

                  "Auction Date" has the meaning specified in paragraph 8(a)
below.

                  "Auction Procedures" means the procedures for conducting
Auctions set forth in paragraph 8 below.

                  "Australian Bank Bills" means bills of exchange (as defined in
the Bills of Exchange Act of the Commonwealth of Australia) issued, accepted or
endorsed by Australian banks with (x) in the case of S&P (i) a rating from S&P
at least as high as S&P's then-current rating for the AMPS or (ii) in the case
of any Bank Bill with a remaining term to maturity from the date of
determination of 365 days or less, a rating from S&P at least as high as S&P's
short-term rating comparable to its then-current rating for the AMPS and (y) in
the case of Moody's (i) a long-term foreign currency debt rating from Moody's of
at least Aa3 or (ii) in the case of any Bank Bill with a remaining term to
maturity from the date of determination of 180 days or less, a rating from
Moody's of Prime-1 or (iii) any other rating as Moody's shall approve in
writing.

                  "Australian Corporate Bonds" means debt obligations of
Australian corporations (other than Australian Government Securities, Australian
Semi-Government Securities, Australian Bank Bills, Australian Eurobonds,
Australian Exchangeable Eurobonds and Australian Short-Term Securities)
provided, that such debt obligations shall not be deemed to be Eligible
Portfolio Property by S&P unless they have the following characteristics: (a)
the principal amount outstanding on the date of determination is at least equal
to A$50 million, (b) the security is publicly traded, (c) the security is
non-callable, or, if the security is callable, the basis for pricing is to the
call date, (d) the security is rated at least AA- by S&P, (e) the security has a
tender panel, (f) the maturity date of the security is not later than the 10/th/
anniversary of the Valuation Date of such security and (g) the security is
issued by one of the following issuers:

                  (i)  Issuers with a public long-term S&P rating or whose
         parent has a public long-term rating and there is an explicit guarantee
         backing the subsidiary's debt service payments ("Guaranteed Australian
         Corporate Bonds"). These issuers currently include:

                  FANMAC Premier Trust Co. No. 1-22 and any subsequent issues
                  rated by S&P - Australian Ratings
                  Ford Credit Australia
                  National Australia Bank
                  State Bank of Victoria
                  Custom Credit Corporation, Ltd.

                  (ii) Issuers, which shall be designated in writing from time
         to time by S&P, without a public long-term S&P rating but whose parent
         has a long term S&P rating but has not explicitly guaranteed the
         subsidiary's debt service Payments ("Non-Guaranteed Corporate Bonds").

                  In addition, if the determination is being made for S&P, (a)
not more than 10% of the aggregate Discounted Value of the Eligible Portfolio
Property of the Corporation can consist of Australian Corporate Bonds issued by
a single issuer, (b) not more than 50% (if the issue is rated AAA by S&P) or
33.3% (if the issue is rated AA or A by S&P) or 20% (if the issue is rated BBB
by S&P) of the aggregate Discounted Value of the Eligible Portfolio Property of
the Corporation can consist of

                                       3

<PAGE>

Australian Corporate Bonds from issues representing a single industry, (c) not
more than 5% of the then-outstanding principal amount of any one issue can be
included in Eligible Portfolio Property and (d) not more than 20% of the
outstanding aggregate principal amount of the Australian Corporate Bonds held by
the Corporation and included in Eligible Portfolio Property shall be comprised
of securities with a then outstanding issue size of less than A$100 million.

                  The Board of Directors shall have the authority to adjust,
modify, alter or change from time to time the list of securities and eligibility
criteria as set forth above if each Rating Agency advises the Corporation in
writing that the change or specification will not adversely affect its
than-current rating of the AMPS.

                  "Australian Currency" means such coin or currency of Australia
as at the time shall be legal tender for payment of public and private debts, as
well as cash deposits with Offshore Banking Units of Banque Nationale de Paris.

                  "Australian Eurobonds" (including guaranteed and
non-guaranteed Eurobonds) means debt securities which are denominated in
Australian Currency, and which have the following characteristics: (a) the
principal amount outstanding on the date of determination is at least equal to
A$50 million, (b) the security is publicly traded, (c) the security is
non-callable, or, if the security is callable, the basis for pricing is to the
call date, (d) the security is rated at least AA- by S&P, (e) the maturity date
of the security is not later than the 10/th/ anniversary of the Valuation Date
of such security and (f) the security is issued by one of the following issuers:

                  (i)  Issuers with a public long-term S&P rating or whose
         parent has a public long-term S&P rating and there is an explicit
         guarantee backing the subsidiary's debt service payments ("Australian
         Guaranteed Eurobonds"). These issuers currently include:

                               Australian Telecom
                               Finnish Export Credit Corp.
                               National Australia Bank
                               State Bank of New South Wales
                               State Electricity of Victoria
                               Swedish Export Credit Corp.

                  (ii) Issuers, which shall be designated in writing from time
to time by S&P, without a public long-term S&P rating but whose parent has a
long-term S&P rating but has not explicitly guaranteed the subsidiary's debt
service payments ("Australian Non-Guaranteed Eurobonds").

                  In addition, if the determination is being made for S&P, (a)
not more than 10% of the aggregate Discounted Value of the Eligible Portfolio
Property of the Corporation can consist of Australian Eurobonds from a single
issuer, (b) not more than 50% (if the issue is rated AAA by S&P) or 33.3% (if
the issue is rated AA or A by S&P) or 20% (if the issue is rated BBB by S&P) of
the aggregate Discounted Value of the Eligible Portfolio Property of the
Corporation can consist of Australian Eurobonds from issues representing a
single industry, (c) not more than 5% of the then outstanding principal amount
of any one issue can be included in Eligible Portfolio Property and (d) not more
than 20% of the outstanding aggregate principal amount of the Australian
Eurobonds held by the Corporation and included in the S&P Eligible Portfolio
Property shall be comprised of securities with an outstanding issue size of less
than A$50 million.

                  The Board of Directors shall have the authority to adjust,
modify, alter or change from time to time the list of securities and eligible
criteria as set forth above if each Rating Agency advises the

                                       4

<PAGE>

Corporation in writing that the change or specification will not adversely
affect its then current rating of the AMPS.

                  "Australian Exchangeable Eurobonds" means securities which are
denominated in Australian Currency issued by the New South Wales Treasury
Corporation or the Queensland Treasury Corporation which confer upon the holder
an option to exchange such securities for, respectively, a like principle amount
of New South Wales Treasury Inscribed Stock or Queensland Treasury Corporation
Inscribed Stock of identical maturity and coupon.

                  "Australian Government Securities" means, in the case of S&P,
all publicly traded securities issued and guaranteed by the Government of the
Commonwealth of Australia with fixed maturities (i.e., no perpetuals) and in the
case of Moody's, any publicly traded security which is (i) either issued by the
Government of the Commonwealth of Australia and is rated Aaa by Moody's or is
guaranteed by the Government of the Commonwealth of Australia and is rated Aaa
by Moody's (ii) is denominated and payable in Australian Currency or is
convertible into a security constituting Eligible Portfolio Property by Moody's
and (iii) is not a variable rate, indexed-linked, zero coupon or stripped
security.

                  "Australian Ratings" means Australian Ratings Pty Ltd or its
successors.

                  "Australian Securities" means ANNIE MAEs, Australian Bank
Bills, Australian Corporate Bonds, Australian Eurobonds, Australian Exchangeable
Eurobonds, Australian Government Securities, Australian Semi-Government
Securities, Australian Short-term Securities, MMSs, MTCs, and NMMC Securities.

                  Australian Semi-Government Securities means publicly traded
semi-government securities with a fixed maturity (i.e., no perpetuals) issued by
the following entities which, except as indicated are explicitly guaranteed by
the Government of the Commonwealth of Australia or the respective Australian
State and which, in the case of S&P, include Australian Exchangeable Eurobonds
and in the case of Moody's are (i) either rated Aaa by Moody's or are guaranteed
by either the Commonwealth of Australia and rated Aaa or any semi-sovereign
Australian entity whose domestic currency long-term debt is rated Aaa by Moody's
(ii) are denominated and payable in Australian currency or are convertible into
a security constituting Eligible Portfolio Property by Moody's and (iii) are not
a variable rate, indexed-linked, zero coupon or stripped security.

                  1.  Electricity Trust of South Australia, a body established
         under the Electricity Trust of South Australia Act 1946 (South
         Australia).

                  2.  Gas & Fuel Corporation of Victoria, a corporation
         established under the Gas and Fuel Corporation Act 1950 (Victoria).

                  3.  Melbourne & Metropolitan Board of Works, a board
         constituted under section 4 of the Melbourne & Metropolitan Board of
         Works Act 1958 (Victoria).

                  4.  New South Wales Treasury Corporation, a corporation
         constituted under section 4 of the Treasury Corporation Act 1983 (New
         South Wales), including its Australian Convertible Eurobond issues, in
         the case of S&P.

                  5.  A Territory authority being an authority within the
         meaning of that term under section 43 of the Northern Territory (Self
         Government) Act (Commonwealth) provided that the specific issue is
         guaranteed by the Treasurer of the Commonwealth of Australia.

                                       5

<PAGE>

                  6.  The State Electricity Commission of Qld a commission
         constituted under the Electricity Act 1976 (Qld).

                  7.  Queensland Treasury Corporation, a corporation established
         under the Treasury Corporation Act 1988 (Qld), including its Australian
         Convertible Eurobond issues, in the case of S&P.

                  8.  South Australian Government Financing Authority, an
         authority established under the Government Financing Authority Act 1982
         (South Australia).

                  9.  State Electricity Commission of Victoria, a commission
         established under the State Electricity Commission Act 1958 (Victoria).

                  10. State Energy Commission of Western Australia, a commission
         established under the State Energy Commission Act 1979 (Western
         Australia).

                  11. The Australian Telecommunications Commission, a commission
         established under section 4 of the Telecommunications Act 1975
         (Commonwealth).

                  12. (with respect to S&P only), and without any guarantee by
         the Commonwealth of Australia or the respective Australian State:
         Australian and Overseas Telecommunications Corporation, Limited.

                  13. Victorian Public Authorities Finance Agency an agency
         constituted under section 3 of the Victorian Public Authorities Act
         1984 (Victoria).

                  14. Australian Industry Development Corporation a body
         established under section 5 of the Australian Industries Development
         Corporation Act (Commonwealth).

                  15. South Australian Finance Trust Limited, a body corporate
         proclaimed by the Governor of South Australia to be a semi-government
         authority pursuant to the Public Finance and Audit Act 1987 (South
         Australia).

                  16. The Western Australian Treasury Corporation.

                  17. Hydro-Electricity Commission of Tasmania.

                  18. Tasmanian Public Finance Corp.

                  19. Tasmanian Development Authority.

                  20. Australian Trade Commission.

                  21. (with respect to S&P only) FANMAC Premier Trust Co. (Nos.
         1-22) and any subsequent issues rated by S&P - Australian Ratings.

                  22. (with respect to S&P only) Australian Wool Corporation.

                  23. Commonwealth Bank of Australia.

                  24. State Bank of New South Wales.

                                       6

<PAGE>

                  25. In the case of S&P, Australian Exchangeable Eurobonds.

                  The Board of Directors shall have the authority to adjust,
modify, alter or change from time to time the list of securities as set forth
above if each Rating Agency advises the Corporation in writing that the change
or specification will not adversely affect its then current rating of AMPS.

                  "Australian Short Term Securities" means promissory notes and
other short term commercial paper issued by Australian institutions which, for
purposes of S&P, are rated A-1+ by S&P or have a long-term rating from S&P at
least as high as their then-current comparable rating of AMPS and, for purposes
of Moody's are rated Prime-1 by Moody's or have a long-term foreign currency
debt rating from Moody's of at least Aa3 and a maturity of less than 270 days in
the case of commercial paper.

                  "Authorized Newspaper" means The Wall Street Journal, or if
not published on such date, The New York Times, or if neither of such papers is
published on such date, a newspaper, printed in the English language, of general
circulation in the Borough of Manhattan, The City of New York, that carries
financial news and is customarily published on each Business Day, whether or not
published on Saturdays, Sundays or holidays.

                  "Board of Directors" means the Board of Directors of the
Corporation or, except as used in paragraphs 3(a) and 6 hereof, any duly
authorized and empowered committee thereof.

                  "Business Day" means a day on which the New York Stock
Exchange is open for trading and which is not a Saturday, Sunday or other day on
which banks in The City of New York are authorized or obligated by law to close;
provided, that for purposes of determining Valuation Dates, Cure Dates and any
Failure to Cure, "Business Day" means a day on which the New York Stock Exchange
and the Australian Stock Exchange Limited are open for trading and which is not
a Saturday, Sunday or other day on which banks in The City of New York or in
Sydney, Australia are authorized or obligated by law to close.

                  "Cash" means such coin or currency of the United States of
America as at the time shall be legal tender for payment of public and private
debts.

                  "Certificate of Minimum Liquidity" has the meaning specified
in paragraph 7(c)(i) below.

                  "Commercial Paper Dealers" means Merrill Lynch, Pierce, Fenner
& Smith Incorporated and such other commercial paper dealer or dealers as the
Corporation may from time to time appoint, or, in lieu of any thereof, their
respective affiliates or successors.

                  "Commission" means the Securities and Exchange Commission.

                  "Common Stock" means shares of the common stock, par value
$.01 share, of the Corporation.

                  "Corporate Bonds" means debt obligations of U.S. corporations
(other than Short Term Money Market Instruments or U.S. Government Obligations)
rated Aa or better by Moody's or AA or better by S&P, which corporate debt
obligations (a) provide for the periodic payment of interest thereon in cash,
(b) do not provide for conversion or exchange into equity capital at any time
over their respective lives, (c) have been registered under the Securities Act
of 1933, as amended, and (d) have not had notice given in respect thereof that
any such corporate debt obligations are the subject of an offer by the issuer
thereof of exchange or tender for cash, securities or any other type of
consideration (except that corporate

                                       7

<PAGE>

debt obligations in an amount not exceeding 10% of the aggregate value of the
Corporation's assets at any time shall not be subject to the provisions of this
clause (d)). In addition, no corporate debt obligation held by the Corporation
shall be deemed a Corporate Bond (i) if it fails to meet the criteria in column
(1) below or (ii) to the extent (and only to the proportionate extent) the
acquisition or holding thereof by the Corporation causes the Corporation to
exceed any applicable limitation set forth in column (2) or (3) below as of any
relevant date of determination (provided that in the event that the Corporation
shall exceed any such limitation, the Corporation shall designate, in its sole
discretion, the particular Corporate Bond(s) and/or portions thereof which shall
be deemed to have caused the Corporation to exceed such limitation):

<TABLE>
<CAPTION>
                                       Column 1                        Column 2                          Column 3
                                       --------                        --------                          --------

                                                                  Maximum Percent of Value          Maximum Percent of Value
                                                                 of Corporation Assets,            of Corporation Assets,
                                                                Including Eligible Portfolio      Including Eligible Portfolio
        Rating                   Minimum Original Issue          Property, Invested in any         Property  Invested in any
           (1)                     Size of Each Issue                 One Issuer(2)                One Industry Category(2)
    ----------------           --------------------------      -----------------------------     -----------------------------
                                    ($ in millions)
<S>                            <C>                             <C>                               <C>
Aaa/AAA .................                $100                             10.0%                              50.0%
Aa/AA ...................                 100                             10.0                               33.3
</TABLE>

_________________

(1)      In the event that a Corporate Bond has received a different rating from
         each of the Rating Agencies, the lower of the two ratings will be
         controlling. Rating designations include (+) or (-) modifiers to the
         rating where appropriate.

(2)      The referenced percentages represent maximum cumulative totals for the
         related rating category and each lower rating category.

                  The Board of Directors shall be authorized to adjust, modify,
alter or change from time to time the assets (and/or the characteristics
thereof) included within the definition of Corporate Bonds for purposes of
determining compliance with the AMPS Basic Maintenance Amount to encompass other
assets constituting, and/or other characteristics of, corporate debt obligations
from those set forth in these Articles Supplementary if the Rating Agencies
advise the Corporation in writing that the change will not adversely affect
their respective then-current ratings of the AMPS.

                  "Corporation" means The First Australia Prime Income Fund,
Inc.

                  "Custodian" means State Street Bank and Trust Company or any
successor custodian to the Corporation who acts in such capacity.

                  "Cure Date" means the AMPS Basic Maintenance Cure Date or the
1940 Act Cure Date, as the case may be.

                  "Date of Original Issue" means, with respect to any share of
AMPS, the date on which the Corporation originally issues such share.

                  "Deposit Securities" means Cash, U.S. Government Obligations,
Repurchase Agreements and Short Term Money Market Instruments. Except for
purposes of determining compliance with the AMPS Basic Maintenance Amount, each
Deposit Security shall be deemed to have a value equal to its principal or face
amount payable at maturity plus any interest payable thereon after delivery of
such Deposit Security but only if payable on or prior to the applicable payment
date in advance of which the relevant deposit is made.

                                       8

<PAGE>

                  "Discount Factor" means, for any asset held by the
Corporation, the number set forth opposite each such type of asset in the
following table or such other factor required under the guidelines established
by the Rating Agencies from time to time (it being understood that any asset
held by the Corporation and not listed in the following table or as provided in
writing by the Rating Agencies shall have a Discounted Value of zero):

<TABLE>
<CAPTION>
                                                            Moody's Discount Factor           S&P Discount Factor
  Type of Eligible Portfolio Property                              Factor                             (2)
<S>                                                         <C>                               <C>
Cash and Short Term Money Market Instruments                       1.000(1)                           1.000
other than commercial paper with a remaining
term to maturity equal to or less than 46 days

commercial paper with a remaining term to                          1.150                              1.000
maturity equal to or less than 46 days

Repurchase Agreements                                              1.000                              1.000

Australian Government Securities: with any                         1.000(1)                           1.000
current outstanding issue size and with a
remaining term to maturity shorter than 46 days
from the Valuation Date

with a current outstanding issue size less than                    1.730                              1.470
A$100,000,000 and with a remaining term to
maturity equal to or longer than 46 days but not
more than 2 years from the Valuation Date

with a current outstanding issue size of at                        1.730                              1.340
least A$100,000,000 but less than or equal to
A$150,000,000 and with a remaining term to
maturity equal to or longer than 46 days but not
more than 2 years from the Valuation Date

with a current outstanding issue size greater                      1.520                              1.340
than A$150,000,000 and with a remaining term to
maturity equal to or longer than 46 days but not
more than 2 years from the Valuation Date

                    -0-

with a current outstanding issue size less than                    1.730                              1.580
A$100,000,000 and with a remaining term to
maturity longer than 2 years but not more than
5 years from the Valuation Date
</TABLE>

                                       9

<PAGE>

<TABLE>
<S>                                                              <C>                         <C>
with a current outstanding issue size of at                      1.730                       1.436
least A$100,000,000 but less than or equal
to A$150,000,000 and with a remaining term
to maturity longer than 2 years but not more
than 5 years from the Valuation Date

with a current outstanding issue size greater                    1.730                       1.436
than A$150,000,000 and with a remaining term
to maturity longer than 2 years but nor more
than 5 years from the Valuation Date

                 -0-

with a current outstanding issue size less than                  1.730                       1.608
A$100,000,000 and with a remaining term to
maturity longer than 5 years but not more than
10 years from the Valuation Date

                 -0-

with a current outstanding issue size of at                      1.730                       1.462
least A$100,000,000 but less than or equal to
A$150,000,000 and with a remaining term to
maturity longer than 5 years but not more than
10 years from the Valuation Date

with a current outstanding issue size greater                    1.520                       1.462
than A$150,000,000 and with a remaining term to
maturity longer than 5 years but not more than
10 years from the Valuation Date

                 -0-

with a current outstanding issue size less than                  1.730                       1.679
A$100,000,000 and with a remaining term to
maturity longer than 10 years but not more than
20 years from the Valuation Date

with a current outstanding issue size greater                    1.730                       1.526
than A$100,000,000 but less than or equal to
A$150,000,000 and with a remaining term to
maturity longer than 10 years but not more than
20 years from the Valuation Date
</TABLE>

                                       10

<PAGE>

<TABLE>
<S>                                                                 <C>                       <C>
with a current outstanding issue size greater                      1.520                     1.526
than A$150,000,000 and with a remaining term to
maturity longer than 10 years but not more than
20 years from the Valuation Date

Australian Semi-Government Securities (3): with                    1.000(1)                  1.000
any current outstanding issue size and with a
remaining term to maturity shorter than 46 days
from the Valuation Date

with a current outstanding issue size less than                    1.730                     1.639
A$100,000,000 and with a remaining term to
maturity equal to or longer than 46 days but not
more than 2 years from the Valuation Date

with a current outstanding issue size of at                        1.730                     1.490
least A$100,000,000 but less than or equal to
A$150,000,000 and with a remaining term to
maturity equal to or longer than 46 days but not
more than 2 years from the Valuation Date

with a current outstanding issue size greater                      1.520                     1.490
than A$150,000,000 and with a remaining term to
maturity equal to or longer than 46 days but not
more than 2 yeas from the Valuation Date

                    -0-

with a current outstanding issue size less than                    1.730                     1.745
A$100,000,000 and with a remaining term to
maturity longer than 2 years but not more than 5
years from the Valuation Date

with a current outstanding issue size of at                        1.730                     1.586
least A$100,000,000 but less than or equal to
A$150,000,000 and with a remaining term to
maturity longer than 2 years but not more than 5
years from the Valuation Date

with a current outstanding issue size greater                      1.520                     1.586
than A$150,000,000 and with a remaining term to
maturity longer than 2 years but not more than 5
years from the
</TABLE>

                                       11

<PAGE>

<TABLE>
<S>                                                             <C>                      <C>
Valuation Date

                -0-

with a current outstanding issue size greater                   1.730                    1.773
than A$100,000,000 and with a remaining term to
maturity longer than 5 years but not more than
10 years from the Valuation Date

with a current outstanding issue size of at                     1.730                    1.612
least A$100,000,000 but less than or equal to
A$150,000,000 and with a remaining term to
maturity longer than 5 years but not more than
10 years from the Valuation Date

with a current outstanding issue size greater                   1.520                    1.612
than A$150,000,000 and with a remaining term to
maturity longer than 5 years but not more than
10 years from the Valuation Date

                -0-

with a current outstanding issue size less than                 1.730                    1.844
A$100,000,000 and with a remaining term to
maturity longer than 10 years but not more than
20 years from the Valuation Date

with a current outstanding issue size of at                     1.730                    1.676
least A$100,000,000 but less than or equal to
A$150,000,000 and with a remaining term to
maturity longer than 10 years but not ore than
20 years from the Valuation Date

with a current outstanding issue size greater                   1.520                    1.676
than A$150,000,000 and with a remaining term to
maturity longer than 10 years but not more than
20 years from the Valuation Date

                -0-

Australian Semi-Government Securities                           1.050                    1.000
(Tasmanian) (4):
with any current outstanding issue size and
with a remaining term to maturity shorter than
46 days from the Valuation
</TABLE>

                                       12

<PAGE>

<TABLE>
<S>                                                               <C>                   <C>
Date

with a current outstanding issue size less than                   1.820                 1.694
A$100,000,000 and with a remaining term to
maturity equal to or longer than 46 days but not
more than 2 years from the Valuation Date

with a current outstanding issue size of at                       1.820                 1.540
least A$100,000,000 but less than or equal to
A$150,000,000 and with a remaining term to
maturity equal to or longer than 46 days but not
more than 2 years from the Valuation Date

with a current outstanding issue size greater                     1.600                 1.540
than A$150,000,000 and with a remaining term to
maturity equal to or longer than 46 days but not
more than 2 years from the Valuation Date

                  -0-

with a current outstanding issue size less than                   1.820                 1.800
A$100,000,000 and with a remaining term to
maturity longer than 2 years but not more than 5
years from the Valuation Date

with a current outstanding issue size of at                       1.820                 1.636
least A$100,000,000 but less than or equal to
A$150,000,000 and with a remaining term to
maturity longer than 2 years but not more than 5
years from the Valuation Date

with a current outstanding issue size greater                     1.600                 1.636
than A$150,000,000 and with a remaining term to
maturity longer than 2 years but not more than 5
years from the Valuation Date

                  -0-

with a current outstanding issue size less than                   1.820                 1.828
A$100,000,000 and with a remaining term to maturity
longer than 5 years but not more than 10 years
from the Valuation Date
</TABLE>

                                       13

<PAGE>

<TABLE>
<S>                                                             <C>                      <C>
with a current outstanding issue size of at                     1.820                    1.662
least A$100,000,000 but less than or equal to
A$150,000,000 and with a remaining term to
maturity longer than 5 years but not more than
10 years from the Valuation Date

with a current outstanding issue size greater                   1.600                    1.662
than A$150,000,0000 and with a remaining term to
maturity longer than 5 years but not more than
10 years from the Valuation Date

                    -0-

with a current outstanding issue size less than                 1.820                    1.899
A$100,000,000 and with a remaining term to
maturity longer than 10 years but not more than
20 years from the Valuation Date

with a current outstanding issue size of at                     1.820                    1.726
least A$100,000,000 but less than or equal to
A$150,000,000 and with a remaining term to
maturity longer than 10 years but not more than
20 years from the Valuation Date

with a current outstanding issue size greater                   1.600                    1.726
than A$150,000,000 and with a remaining term to
maturity longer than 10 years but not more than
20 years from the Valuation Date

                    -0-

Australian Bank Bills:                                          1.000(1)                 1.000
with maturities of less than or equal to 46 days
from the Valuation Date

with maturities of 47-56 days from the last                     1.350                    1.400
Valuation Date

with maturities of 57-90 days from the Valuation                1.350                    1.400
Date

with maturities of 91-180 days from the                         1.350                    1.450
Valuation Date

Australian Currency                                             1.350*                   1.570
</TABLE>

                                       14

<PAGE>

- --------------------
*        If any Overseas Banking Unit constituting Australian Currency has a
         maturity of more than 46 days from the Valuation Date, the principal
         amount of the cash deposit shall be offset by an amount equal to the
         penalty for early withdrawal and in the event interest earned on any
         Overseas Banking Unit is not exempt from interest withholding tax, the
         Corporation may not include interest earned as a component of the value
         of the deposit unless taxes incurred on interest earned have been paid.

<TABLE>
<S>                                                            <C>                    <C>
Australian Guaranteed Eurobonds:                               -----                  2.000
with a current outstanding issue size less than
or equal to A$50,000,000 with a remaining term
to maturity of more than 56 days from the
Valuation Date

with a current outstanding issue size exceeding                -----                  1.900
A$50,000,000 with a remaining term to maturity
of more than 56 days from the Valuation Date

with any current outstanding issue size and with               -----                  1.000
a remaining term to maturity of less than 56
days from the Valuation Date

Australian Non-Guaranteed Eurobonds:                           -----                  2.150
with a current outstanding issue size less than
or equal to A$50,000,000 with a remaining term
to maturity of more than 56 days from the
Valuation Date

with a current outstanding issue size exceeding                -----                  2.000
A$50,000,000 with a remaining term to maturity
of more than 56 days from the Valuation Date

with any current outstanding issue size and with               -----                  1.000
a remaining term to maturity of less than 56
days from the Valuation Date

Guaranteed Australian Corporate Bonds:                         -----                  1.700
with a current outstanding issue size less than
or equal to A$100,000,000 with a remaining term
to maturity of more than 56 days from the
Valuation Date

with a current outstanding issue size exceeding                -----                  1.600
A$100,000,000 with a remaining term to maturity
of more than 56 days from the Valuation Date
</TABLE>

                                       15

<PAGE>

<TABLE>
<S>                                                              <C>                         <C>
with any current outstanding issue size and with                 -----                       1.000
a remaining term to maturity of less than 56
days from the Valuation Date

Non-Guaranteed Australian Corporate Bonds:                       -----                       1.800
with a current outstanding issue size less than
or equal to A$100,000,000 with a remaining term
to maturity of more than 56 days from the
Valuation Date

with a current outstanding issue size exceeding                  -----                       1.700
A$100,000,000 with a remaining term to maturity
of more than 56 days from the Valuation Date

with any current outstanding issue size and with                 -----                       1.000
a remaining term to maturity of less than 56
days from the Valuation Date

Guaranteed Australian Corporate Bonds:                           -----                        1.70
with a current outstanding issue size less than
or equal to A$150,000,000 with a remaining term
to maturity of more than 56 days

with a current outstanding issue size exceeding                  -----                        1.60
A$150,000,000 with a remaining term to maturity
of more than 56 days

with any current outstanding issue size and with                 -----                        1.00
a remaining term to maturity of less than 56 days

Australian Exchangeable Eurobonds                                2.050                        ____**

Non-Guaranteed Australian Corporate Bonds:                       -----                        1.80
with a current outstanding issue size less than
or equal to A$150,000,000 with a remaining term
to maturity of more than 56 days
</TABLE>



- --------------
**       Included in Australian Semi-Government categories.

                                       16

<PAGE>

<TABLE>
<S>                                                                <C>                       <C>
GNMA Certificates with fixed interest rates                        (5)                       1.300

GNMA Certificates with adjustable interest rate                    1.480                     1.300

FHLMC and FNMA Certificates with fixed interest                    (7)                       1.350
rates

FHLMC and FNMA Certificates with adjustable                        1.610                     1.350
interest rates

FHLMC Multifamily Securities                                                                 1.650

FHLMC and FNMA Certificates with variable                                                    1.350
interest rates

GNMA Graduated Payment Securities                                                            1.500(5)(6)(7)

U.S. Government Obligations having a remaining                     1.060                     1.000
term to maturity of 90 days or less

U.S. Government Obligations having a remaining                     1.060                     1.060
term to maturity of more than 90 days but not
more than one year

U.S. Government Obligations having a remaining                     1.110                     1.200
term to maturity of more than one year but not
more than two years

U.S. Government Obligations having a remaining                     1.150                     1.200
term to maturity of more than two years but not
more than three years

U.S. Government Obligations having a remaining                     1.200                     1.200
term to maturity of more than three years but
not more than four years

U.S. Government Obligations having a remaining                     1.240                     1.200
term to maturity of more than four years but not
more than five years

U.S. Government Obligations having a remaining                     1.290                     1.250
term to maturity of more than five years but not
more than seven years

U.S. Government Obligations having a remaining                     1.340                     1.250
term to maturity of more than seven years but
not more than 10 years
</TABLE>

                                       17

<PAGE>

<TABLE>
<S>                                                            <C>                    <C>
U.S. Government Obligations having a remaining                 1.370                  1.300
term to maturity of more than 10 years but not
more than 15 years

U.S. Government Obligations having a remaining                 1.410                  1.380
term to maturity of more than 15 years but not
more than 20 years

U.S. Government Obligation having a remaining                  1.420                  1.380
term to maturity of more than 20 years but not
more than 30 years
</TABLE>

- -------------
(1)      In the case of Moody's, the remaining term to maturity of Eligible
         Portfolio Property with a Moody's Discount Factor of 1.000 shall be
         measured from the last Valuation Date on which the AMPS Basic
         Maintenance Amount was met for the purpose of determining the number of
         shares of AMPS to be redeemed which would result in satisfaction of the
         AMPS to be redeemed which would result in satisfaction of the AMPS
         Basic Maintenance Amount as contemplated by paragraph 5(b) hereof.

(2)      Provided that in the case of S&P, the current outstanding issue size
         (as determined on each Quarterly Valuation Date) is equal to or greater
         than A$10,000,000.

(3)      Excluding securities of Hydro-Electricity Commission of Tasmania,
         Tasmanian Public Finance Corp. and Tasmanian Development Authority.

(4)      Securities of Hydro-Electricity Commission of Tasmania, Tasmanian
         Public Finance Corp. and Tasmanian Development Authority.

(5)      The Discount Factor determined therefor in writing by the Rating
         Agency.

(6)      Unless the Rating Agencies shall agree in writing, GNMA Graduated
         Payment Securities with a coupon rate lower than 5% shall not be
         included in Eligible Portfolio Property.

(7)      A Discount Factor of 1.50 applies in the case of GNMA Graduated Payment
         Securities as to which the Corporation notifies the Auction Agent that
         scheduled principal payments are being made to holders; in the case of
         GNMA Graduated Payment Securities as to which the Corporation notifies
         the Auction Agent that scheduled principal payments are not being made
         to holders, the Discount Factor shall be that which is determined in
         writing by the Rating Agencies.

                  The Board of Directors shall have the authority to adjust,
modify, alter or change from time to time the initial Discount Factor as set
forth above applied to determine the Discounted Value of any item of Eligible
Portfolio Property or may specify from time to time a Discount Factor for any
asset constituting Eligible Portfolio Property if each Rating Agency advises the
Corporation in writing that the change or specifications will not adversely
affect its then-current rating of the AMPs.

                  "Discounted Value," with respect to any asset held by the
Corporation, means the quotient of the Market Value of such asset divided by the
applicable Discount Factor; provided that in no event shall the Discounted Value
of any asset constituting Eligible Portfolio Property as of any date exceed the
unpaid principal balance or face amount of such asset as of that date; provided
further that the

                                       18

<PAGE>

Discounted Value of all Australian Securities and New Zealand securities shall
be further discounted by the Discount Factor applicable to, respectively,
Australian Currency and New Zealand currency.

                  "Dividend Coverage Amount," as of any date of determination,
means:

                  (a)    the aggregate of the product with respect to each
         series of AMPS of

                         (i)    the number of shares of AMPS of each series
         outstanding on such date multiplied by $100,000,

                         (ii)   the Applicable Rate in effect as of such date
         for each such series, and

                         (iii)  a fraction, the numerator of which is the
         number of days in the Dividend Period for each series ending on the
         next Dividend Payment Date (determined by including the first day
         thereof but excluding the last day thereof) and the denominator of
         which is 360;

                                      plus

                  (b)    dividends projected to accumulate from the last
dividend payment date with respect to each series of Preferred Stock, not
including the AMPS, until the next dividend payment date for such series;

                                      plus

                  (c)    dividends accumulated but unpaid for any prior dividend
periods with respect to any shares of Preferred Stock;

                                      less

                  (d)    the combined value of any Dividend Coverage Assets
irrevocable deposited by the Corporation for the payment of dividends on the
AMPS and other Preferred Stock, if any.

                  "Dividend Coverage Assets," as of any date of determination,
means Deposit Securities with maturity dates not later than the day preceding
the next Dividend Payment Date; provided that if the applicable date of
determination is a Dividend Payment Date, any Deposit Securities to be applied
to the dividends payable on the AMPS on such date shall not be included in
Dividend Coverage Assets.

                  "Dividend Payment Date", with respect to each series of AMPS,
means each date of payment of dividends as provided in paragraph 3(b) below.

                  "Dividend Period" means the Initial Dividend Period and each
subsequent Period commencing on a Dividend Payment Date and ending on and
including the calendar day prior to the next Dividend Payment Date.

                  "Dollar" or "$" shall mean U.S. dollars. Amounts in Australian
or New Zealand dollars shall be converted to U.S. dollars at the rates reported
by Morgan Guaranty Trust Company for the date of determination or such other
source as shall have been approved in writing by the Rating Agencies.

                  "Eligible Portfolio Property" means Australian Bank Bills,
Australian Currency, Australian Exchangeable Eurobonds, Australian Government
Securities, Australian Semi-Government

                                       19

<PAGE>

Securities, Cash, U.S. Government Obligations, Repurchase Agreements, Short Term
Money Market Instruments, FNMA Certificates, FHLMC Certificates, FHLMC
Multifamily Securities GNMA Certificates, and GNMA Graduated Payment Securities
and, if the calculation is being made for S&P, Australian Eurobonds and
Australian Corporate Bonds; provided, (i) if the determination is being made by
Moody's, (x) that not more than 20% in the aggregate of the total Discounted
Value of Eligible Portfolio Property shall consist either of Australian
Government and/or Australian Semi-Government Securities with a current
outstanding issue size less than A$150,000,000 and (y) not more than 10% in the
aggregate of the total Discounted Value of Eligible Portfolio Property shall
consist of Australian Semi-Government Securities described under items 17, 18
and 19 of such definition or Australian Exchangeable Eurobonds described under
item 25 of such definition and (ii) if the determination is being made for S&P
that no Australian Government Securities or Australian Semi-Government
Securities contained in Eligible Portfolio Property shall have current
outstanding issue size less than A$10,000,000 (as determined on each Quarterly
Valuation Date); provided further that, if the determination is being made for
S&P, not more than 10% in the aggregate of the total Discounted Value of the
Eligible Portfolio Property shall consist of Australian Semi-Government
Securities issued by any single issuer (except that in the case of New South
Wales Treasury Corporation, such percentage shall be 25%) and that not more than
20% in the aggregate of the total Market Value of the Eligible Portfolio
Property shall consist of Australian Semi-Government Securities guaranteed by
any single state (except that in the case of each of Victoria and New South
Wales, such percentage shall be 25%). The Board of Directors shall have the
authority to specify from time to time other assets as Eligible Portfolio
Property if the Rating Agencies advise the Corporation in writing that the
specification will not adversely affect their respective then-current ratings of
the AMPS; it being understood that the components of Eligible Portfolio Property
may differ between S&P and Moody's.

                  "Failure to Cure" shall mean a failure by the Corporation to
maintain the AMPS Basic Maintenance Amount or 1940 Act AMPS Asset Coverage
Requirement, as the case may be, which failure is not cured by the relevant Cure
Date.

                  "FANMAC Certificates" are securities issued by a trustee
against housing loans made through the New South Wales Department of Housing and
consist of a series of closed trusts or pools. The mortgage manager is the First
Australian National Mortgage Acceptance Corporation Ltd. ("FANMAC"). FANMAC is
owned partially by the Government of the State of New South Wales with the
remainder owned by other institutions. The Government of the State of New South
Wales has provided the FANMAC Trust with an assurance as to availability of
funds to meet payments. The securities have been rated by Australian Ratings and
S&P. FANMAC securities are subject to a call provision under which borrowers
(mortgagors) can repay early and the investors in a particular pool can be
repaid on a pro rata basis.

                  "FHLMC" means the Federal Home Loan Mortgage Corporation
created by Title III of the Emergency Home Finance Act of 1970, and includes any
successor thereto.

                  "FHLMC Certificate" means a mortgage participation certificate
in physical or book-entry form, the timely payment of interest on the ultimate
collection of principal of which is guaranteed by FHLMC, and which evidences a
proportional undivided interest in, or participation interest in, specified
pools of fixed-, variable- or adjustable-rate, fully amortizing, level pay
mortgage loans with terms up to 30 years, secured by first liens on one- to
four-family residences.

                  "FHLMC Multifamily Security" means a "Plan B Multifamily
Security" in physical or book-entry form, the timely payment of interest on and
the ultimate collection of principal of which is guaranteed by FHLMC, and which
evidences a proportional undivided interest in, or participation interest in,
specified pools of fixed-rate, fully amortizing, level pay mortgage loans with
terms up to 30 years,

                                       20

<PAGE>

secured by first-priority mortgages on multifamily residences containing 5 or
more units and which are designed primarily for residential use, the inclusion
of which in the Eligible Portfolio Property will not, in and of itself, impair,
or cause the AMPS to fail to retain, the rating assigned to such AMPS by each of
the Rating Agencies, as evidenced by a letter to such effect from each of the
Rating Agencies.

                  "FNMA" means the Federal National Mortgage Association, a
United States Government-sponsored private corporation established pursuant to
Title VIII of the Housing and Urban Development Act of 1968, and includes any
successor thereto.

                  "FNMA Certificate" means a mortgage pass-through certificate
in physical or book-entry form, the full and timely payment of principal of and
interest on which is guaranteed by FNMA, and which evidences a proportional
undivided interest in specified pools of fixed-, variable- or adjustable-rate,
fully amortizing, level pay mortgage loans with terms up to 30 years, secured by
first liens on one to four family residences.

                  "Forward Contract" means a contract, entered into following a
Failure to Cure, between the Corporation and a commercial bank or other
financial institution whose short-term debt is rated at least A-1+ by S&P or
whose long-term debt is rated at least AA by S&P (an "Eligible Bank"), which
provides that the Corporation will sell a specified amount of Australian
Currency to such Eligible Bank on a specified date for a specified amount of
U.S. dollars. The date of payment in U.S. dollars shall not be later than the
30/th/ day following the Valuation Date related to the Failure to Cure and the
amount of U.S. dollars shall be sufficient to redeem all shares of AMPS required
to be redeemed. On the Date of Original Issue and on each Quarterly Valuation
Date thereafter, the Corporation will confirm in writing to S&P that the
Corporation has a credit-line with an Eligible Bank (the "Credit Line Test").
The Credit Line Test shall be deemed to be satisfied on any date if the
Corporation has delivered such confirmation to S&P on the Date of Original Issue
or the most recent Quarterly Valuation Date, as the case may be. The Board of
Directors shall have the authority, to the extent permitted by Maryland law, to
adjust, modify, alter or change from time to tome the elements comprising the
Forward Contract from those set forth in these Articles Supplementary if S&P
advises the Corporation in writing that the change will not adversely affect its
then-current rating of the AMPS.

                  "GNMA" means the Government National Mortgage Association, and
includes any successor thereto.

                  "GNMA Certificate" means a fully modified pass-through
certificate in physical or book-entry form, the full and timely payment of
principal of and interest on which is guaranteed by GNMA and which evidences a
proportional undivided interest in specified pools of fixed-, variable- or
adjustable-rate, fully amortizing, level pay mortgage loans with terms up to 30
years, secured by first liens on one to four family residences.

                  "GNMA Graduated Payment Security" means a fully modified
pass-through certificate in physical or book-entry form, the full and timely
payment of principal of and interest on which is guaranteed by GNMA, which
obligation is backed by the full faith and credit of the United States, and
which evidences a proportional undivided interest in specified pools of
graduated payment mortgage loans with terms up to 30 years, with Payments that
increase annually at a predetermined rate for up to the first five or ten years
of the mortgage loan and that are secured by first-priority mortgages on one- to
four unit residences; provided that such loans shall be past the graduated
payment period.

                  "GNMA Multifamily Security" means a fully modified certificate
in physical or book-entry form, the full and timely payment of principal of and
interest on which is guaranteed by GNMA, which obligation is backed by the full
faith and credit of the United States, and which evidences a

                                       21

<PAGE>

proportional undivided interest in specified pools of fixed rate mortgage, level
pay loans with terms up to 30 years secured by first-priority mortgages on
multifamily residences, the inclusion of which in the Eligible Portfolio
Property will not, in and of itself, impair or cause the AMPS to fail to retain
the rating assigned to such AMPS by each of the Rating Agencies as evidenced by
a letter to such effect from each of the Rating Agencies.

                  "Holder" means a Person in whose name one or more outstanding
shares of AMPS are registered on the Stock Books.

                  "Independent Accountants" means the Corporation's independent
accountants, which shall be a nationally recognized accounting firm.

                  "Industry Category" means, as to any Corporate Bond, any of
the industry categories set forth in the following table:

                  (1)  Aerospace and Defense: Major Contractor, Subsystems,
         Research, Aircraft Manufacturing, Arms, Ammunition;

                  (2)  Automobile: Automotive Equipment, Auto-Manufacturing,
         Auto Parts Manufacturing, Personal Use Trailers, Motor Homes, Dealers;

                  (3)  Banking: Bank Holding, Savings and Loans, Consumer
         Credit, Small Loan, Agency, Factoring, Receivables;

                  (4)  Beverage, Food and Tobacco: Beer and Ale, Distillers,
         Wines and Liquors, Distributors, Soft Drink Syrup, Bottlers, Bakery,
         Mill Sugar, Canned Foods, Corn Refiners, Dairy Products, Meat Products,
         Poultry Products, Snacks, Packaged Foods, Distributors, Candy, Gum,
         Seafood, Frozen Food, Cigarettes, Cigars, Leaf/Snuff, Vegetable Oil;

                  (5)  Buildings and Real Estate: Brick, Cement, Climate
         Controls, Contracting, Engineering, Construction, Hardware, Forest
         Products (building-related only), Plumbing, Roofing, Wallboard, Real
         Estate, Real Estate Development, REITs, Land Development;

                  (6)  Chemicals, Plastics and Rubber: Chemicals
         (non-agriculture), Industrial Gases, Sulphur, Plastics, Plastic
         Products, Abrasives, Coatings, Paints, Varnish, Fabricating;

                  (7)  Containers, Packaging and Glass: Glass, Fiberglass,
         Containers made of: Glass, Metal, Paper, Plastic, Wood or Fiberglass;

                  (8)  Personal and Non-Durable Consumer Products (Manufacturing
         Only): Soaps, Perfumes, Cosmetics, Toiletries, Cleaning Supplies,
         School Supplies;

                  (9)  Diversified/Conglomerate Manufacturing;

                  (10) Diversified/Conglomerate Service;

                  (11) Diversified Natural Resources, Precious Metals and
         Minerals: Fabricating, Distribution, Mining and Sales;

                  (12) Ecological: Pollution Control, Waste Removal, Waste
         Treatment, Waste Disposal;

                                       22

<PAGE>

                  (13) Electronics: Computer Hardware, Electric Equipment,
         Components, Controllers, Motors, Household Appliances, Information
         Service Communication Systems, Radios, TVs; Tape Machines, Speakers,
         Printers, Drivers, Technology;

                  (14) Finance: Investment Brokerage, Leasing, Syndicating,
         Securities;

                  (15) Farming and Agriculture: Livestock, Grains, Produce,
         Agricultural Chemicals, Agricultural Equipment, Fertilizers;

                  (16) Grocery: Grocery Stores, Convenience Food Stores;

                  (17) Healthcare, Education and Childcare: Ethical Drugs,
         Proprietary Drugs, Research, Health Care Center, Nursing Homes, HMOs,
         Hospitals, Hospital Supplies, Medical Equipment;

                  (18) Home and Office Furnishings, Housewares, and Durable
         Consumer Products: Carpets, Floor Coverings, Furniture, Cooking,
         Ranges;

                  (19) Hotels, Motels, Inns and Gaming;

                  (20) Insurance: Life, Property and Casualty, Broker, Agent,
         Surety;

                  (21) Leisure, Amusement, Motion Pictures, Entertainment:
         Boating, Bowling, Billiards, Musical Instruments, Fishing, Photo
         Equipment, Records, Tapes, Sports, Outdoor Equipment (Camping),
         Tourism, Resorts, Games, Toy Manufacturing, Motion Picture Production
         Theaters, Motion Picture Distribution;

                  (22) Machinery (Non-Agriculture, Non-Construction,
         Non-Electronic): Industrial, Machine Tools, Steam Generators;

                  (23) Mining, Steel, Iron and Non-Precious Metals: Coal,
         Cooper, Land, Uranium, Zinc, Aluminum, Stainless Steel, Integrated
         Steel, One Production, Refractories, Steel Mill Machinery, Mini-Mills,
         Fabricating, Distribution and Sales;

                  (24) Oil and Gas: Crude Producer, Retailer, Well Supply,
         Service and Drilling;

                  (25) Personal, Food and Miscellaneous Services;

                  (26) Printing, Publishing and Broadcasting: Graphic Arts,
         Paper, Paper Products, Business Forms, Magazines, Books, Periodicals,
         Newspaper, Textbooks, Radio, TV, Cable, Broadcasting Equipment;

                  (27) Cargo Transport: Rail, Shipping, Railroads, Rail-Care
         Builders, Ship Builders, Containers, Container Builders, Parts,
         Overnight Mail, Trucking, Truck Manufacturing, Trailer Manufacturing,
         Air Cargo, Transport;

                  (28) Retail Stores: Apparel, Toy, Variety, Drugs, Department,
         Mail Order Catalog, Showroom;

                  (29) Telecommunications: Local, Long Distance, Independent,
         Telephone, Telegraph, Satellite, Equipment, Research, Cellular;

                                       23



<PAGE>

                  (30) Textiles and Leather: Producer, Synthetic Fiber, Apparel
         Manufacturer, Leather Shoes;

                  (31) Personal Transportation: Air, Bus, Rail, Car Rental;

                  (32) Utilities: Electric, Water, Hydro Power, Gas,
         Diversified.

                  The Board of Directors shall have the authority to change the
industry categories applicable with respect to the Corporation from those set
forth in these Articles Supplementary if the Rating Agencies advise the
Corporation in writing that the change will not adversely affect their
respective then-current ratings of the AMPS.

                  "Initial Dividend Payment Date" has the meaning set forth in
paragraph 3(b) below.

                  "Initial Dividend Period" has the meaning specified in
paragraph 3(b) below.

                  "Investment Company Act" means the Investment Company Act of
1940 (15 U.S. Code (S) 80 et seq.), as amended from time to time.

                  "Lien" has the meaning set forth in paragraph 3(d) (iv) below.

                  "Market Value" means the amount determined with respect to
specific assets of the Corporation in the manner set forth below, it being
understood that Market Value shall include any interest accrued thereon but, in
the case of Moody's, only if the next interest coupon on such asset is due and
payable within 47 days of the Reporting Date, and that a designated Pricing
Service may be used where indicated.

                  (a)  as to Australian Securities, the Administrator or the
Custodian shall value such securities at the last trade price quoted by a
designated Pricing Service if such trade price reflects a trade on, or within 1
local business day prior to, the Reporting Date. If no such trade price is
available, the Administrator or the Custodian shall value such securities, where
practicable, at the bid prices or the mean between the bid and asked price
quoted by a designated Pricing Service on the Reporting Date, or if such quotes
are not readily available, at fair value as determined by a designated Pricing
Service (or the Administrator or Custodian if the Rating Agencies so permit)
using methods which include: consideration of yields or prices of assets of
comparable quality, type of issue, coupon, maturity and rating; indications as
to value from dealers; and general market conditions. Either the Administrator
or the Custodian or a designated Pricing Service may employ electronic data
processing techniques and/or a matrix system to determine valuations. In the
event the Administrator or the Custodian or a designated Pricing Service is
unable to value a security, the security shall be valued at the lower of two
dealer bids (both of which shall be in writing or by telecopy, telex or other
electronic transcription, computer obtained quotation reduced to written form or
similar means) provided to the Corporation, by two recognized securities dealers
in Australia, with respect to Australian Securities, such securities dealers
making a market in the applicable securities.

                  (b)  as to GNMA Certificates, GNMA Graduated Payment
Securities, FNMA Certificates, FHLMC Certificates and FHLMC Multifamily
Securities, the Pricing Service (or the Administrator or the Custodian, if the
Rating Agencies so permit) shall value such securities as the product of (i) the
aggregate unpaid principal amount of the mortgage loans evidenced by each such
certificate or security, as the case may be, as of the close of business in New
York City on the last Business Day prior to such date of determination and (ii)
the lower of the bid prices for the same kind of certificate or, if not
available, some other security having, as nearly as practicable, comparable
interest

                                       24

<PAGE>

rates and maturities, as quoted to the Corporation by two nationally recognized
securities dealers, who are members of the National Association of Securities
Dealers selected by the Corporation and making a market therein, with at least
one such quotation in writing plus, (x) if the determination is being made for
Moody's accrued interest to the date of determination if the next interest
coupon on such security is due and payable within 46 days of such date of
determination and (y) if the determination is being made for S&P, accrued
interest;

                  (c) as to Australian Currency and as to Cash, demand deposits
(and in the case of S&P only, bankers' acceptances) included in Short Term Money
Market Instruments, the Administrator or the Custodian shall value such currency
or securities as the face value thereof;

                  (d) as to next Business Day repurchase agreements, the face
value thereof; and

                  (e) as to U.S. Government Obligations, the Administrator or
the Custodian shall value such securities at the bid prices quoted by a
designated Pricing Service or the mean between the bid and asked price quoted by
a designated Pricing Service on the Reporting Date, or if such quotes are not
readily available, at fair value as determined by a designated Pricing Service
(or the Administrator or the Custodian, if the Rating Agencies so permit) using
methods which include: consideration of yields or prices of assets of comparable
quality, type of issue, coupon, maturity and rating; indications as to value
from dealers; and general market conditions. Either the Administrator, the
Custodian or a designated Pricing Service may employ electronic data processing
techniques and/or a matrix system to determine valuations. In the event the
Administrator or the Custodian or a designated Pricing Service is unable to
value a security, the security shall be valued at the lower of two dealer bids
(at least one of which shall be in writing or by telecopy, telex or other
electronic transcription, computer obtained quotation reduced to written form or
similar means) provided for the Corporation by two nationally recognized
securities dealers, who are members of the National Association of Securities
Dealers selected by the Corporation and making a market therein.

                  Without amending the Articles of Incorporation, (i) the
calculation of the Market Value of an asset constituting Eligible Portfolio
Property may be changed to any method recognized by the Rating Agencies from
that set forth in these Articles Supplementary and (ii) a method recognized by
the Rating Agencies for calculating the Market Value of any asset identified as
Eligible Portfolio Property may be specified if the Rating Agencies advise the
Corporation in writing that the change or specification will not adversely
affect their respective then-current ratings of the AMPS.

                  "Maximum Applicable Rate" at any Auction will be the rate
obtained by multiplying the 30-day "AA" Composite Commercial Paper Rate on the
date of such Auction by the Applicable Percentage determined as set forth below
based on the lower of the credit rating or ratings assigned to the AMPS by
Moody's and S&P (or if Moody's or S&P or both shall not make such rating
available, the equivalent of either or both of such ratings by a Substitute
Rating Agency or two Substitute Rating Agencies or, in the event that only one
such rating shall be available, the percentage will be based on such rating).

                                                               Applicable
                 Credit Rating                                 Percentage
                 --------------------------------------------------------

        S&P                          Moody's
        ---                          -------
    AA- or Above                  "aa3" or Above                  150%
    A- to A+                      "a3" to "al"                    160%

                                       25

<PAGE>

        BBB- to BBB+                 "baa3" to "baal"                   250%
        Below BBB-                   Below "baa3"                       275%

                  The Corporation shall take all reasonable action necessary to
enable S&P and Moody's to provide a rating for the AMPS. If either S&P or
Moody's shall not make such a rating available, or neither S&P nor Moody's shall
make such a rating available, Merrill Lynch, Pierce, Fenner & Smith Incorporated
or its respective affiliates and successors, after consultation with the
Corporation, shall select a nationally recognized securities rating agency or
two nationally recognized securities rating agencies to act as a Substitute
Rating Agency or Substitute Rating Agencies, as the case may be.

                  "Minimum Liquidity Level is met" means, as of any date of
determination, that the aggregate Market Value of the Dividend Coverage Assets
equals or exceeds the Dividend Coverage Amount.

                  "Moody's means Moody's Investors Service, Inc. or its
successors.

                  "MMSs" are mortgage-backed securities issued against mortgage
pools by MGICA Securities Ltd., a wholly-owned subsidiary of AMP Society Ltd.,
an Australian insurance company, and rated by Australian Ratings.

                  "MTCs" are securities issued against specific mortgages by a
trustee and are similar to "pass-through" certificates. MTCs are issued on a
continuous basis, insured by Australian insurance companies against both
mortgage default and an early call, and rated by Australian Ratings.

                  "New Zealand Securities" means those New Zealand government,
semi-government and other securities determined from time to time in writing by
the Rating Agencies.

                  "1940 Act AMPS Asset Coverage Ratio" means, as of the date of
determination, the ratio of the Fund's net assets to its senior securities
representing indebtedness plus the liquidation value of its Preferred Stock,
including the shares of AMPS.

                  "1940 Act AMPS Asset Coverage Requirement" means the
requirement that the Corporation maintain, with respect to shares of AMPS, as of
the last Friday of each month in which any shares of AMPS are outstanding, asset
coverage of at least 200% with respect to senior securities representing
indebtedness plus the liquidation value of its Preferred Stock, including the
shares of AMPS (or such other asset coverage as may in the future be specified
in or under the Investment Company Act as the minimum asset coverage for senior
securities which are stock of a closed-end investment company as a condition of
paying dividends on its common stock).

                  "1940 Act Cure Date," with respect to the failure by
Corporation to maintain the 1940 Act AMPS Asset Coverage Requirement (as
required by paragraph 7(a) hereof) as of the Valuation Date of each month, means
the last Valuation Date of the following month.

                  "NMMC Securities" National Mortgage Market Corporation Ltd.
("NMMC") has issued both AUSSIE MACs, which are medium term bearer securities,
and National Mortgage Market Bonds. NMMC is a private company which is owned
partially by the Government of the State of Victoria and partially by private
institutions. Both AUSSIE MACs and National Mortgage Bonds are rated by
Australian Ratings.

                  "Notice of Redemption" has the meaning specified in paragraph
5(f) below.

                                       26

<PAGE>

                  "Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer, the Secretary, any Assistant Treasurer, any
Assistant Secretary or Assistant Controller of the Corporation.

                  "Officers' Certificate" means a certificate signed by an
Officer of the Corporation.

                  "Offshore Banking Units" means cash deposits denominated in
the currency of Australia deposited with an Australian branch of a foreign bank
authorized to operate as an offshore banking unit by the Government of
Australia's Australian Taxation Office which, in the case of Moody's is (i) a
branch carrying the same credit rating as the parent bank, (ii) is a deposit
rated at least P-5 under circumstances in which the rating of the deposit is
capped at the sovereign rating ceiling of the parent bank's home country, as
well as the bank deposit rating ceiling of Australia, or (iii) is a deposit held
by a branch whose parent bank is rated at least Aa3/P-1 under circumstances in
which the rating of the parent bank is capped at the sovereign rating ceiling of
the parent bank's home country, as well as the bank deposit rating ceiling of
Australia and which, to date, are limited to cash deposits with an overseas
banking unit of Banque Nationale de Paris.

                  "Other AMPS" means the auction market preferred stock or
remarketed preferred stock or similar adjustable rate preferred stock of the
Corporation other than the AMPS.

                  "Other Permitted Assets" means Australian Corporate Bonds,
Australian Eurobonds, Australian Exchangeable Eurobonds, Australian Short Term
Securities, New Zealand Securities, FANMAC Certificates, NMMC Securities, MTCs,
MMSs, ANNIE MAEs, GNMA Multifamily Securities and Corporate Bonds.

                  "Paying Agent" means Chemical Bank and its successors or any
other paying agent appointed by the Corporation to perform the functions
performed by the Paying Agent.

                  "Person" means an individual, a corporation, a company, a
voluntary association, a partnership, a trust, an unincorporated organization or
a government or any agency, instrumentality or political subdivision thereof.

                  "Preferred Stock" means the preferred stock of the Corporation
including the AMPS.

                  "Portfolio Calculation" shall have the meaning specified in
paragraph 7(b)(ii)

                  "Portfolio Valuation Report" means a report executed by the
Corporation with respect to the valuation (in U.S. dollars) of the Eligible
Portfolio Property, as described in paragraph 7 hereof; provided, that all or
any portion of any such report may be prepared by the custodian for the Eligible
Portfolio Property, EquitiLink Australia Limited, The Prudential Insurance
Company of America, Prudential Mutual Fund Management, Inc. and or EquitiLink
International Management Limited, provided further that such Portfolio Valuation
Report may be delivered to the Auction Agent and the Rating Agencies in summary
form, however, the Corporation shall retain a copy of the full Portfolio
Valuation Report in its files and make such report available to its Independent
Accountants and the Rating Agencies upon their request.

                  "Pricing Service" shall mean any of Reuters Information
Services, Inc., Telerate Systems, Inc., Bloomberg L.P. or any other pricing
service designated by the Board of Directors of the Corporation provided the
Corporation obtains written assurance from S&P and Moody's that such designation
will not impair the rating then assigned by S&P and Moody's to the AMPS.

                                       27

<PAGE>

                  "Projected Dividend Amount" for the AMPS and other Preferred
Stock, if any, shall mean, if the date of determination is a Valuation Date, the
amount of dividends, based on the number of shares of AMPS and other Preferred
Stock, if any, outstanding on such Valuation Date, projected to accumulate on
such shares from the next succeeding Dividend Payment Date or Dates until the
63/rd/ day after such Valuation Date, at the following dividend rates:

                  (a) if the Valuation Date is the Date of Original Issue or a
Dividend Payment Date, for the month beginning on (and including) the first
following Dividend Payment Dates and ending on (and including) the 63/rd/ day
following such Valuation Date, the product of 2.40 and (x) the Maximum
Application Rate on the Date of Original Issue (in the case of the Date of
Original Issue) or (y) the Maximum Application Rate as of the last occurring
Auction Date (in the case of any Dividend Payment Date); and

                  (b) if such Valuation Date is not the Date of Original Issue
or a Dividend Payment Date, (i) for the period beginning on (and including) the
first following Dividend Payment Dates and ending on (but not including) the
sooner of the second following Dividend Payment Date for such shares of the
64/th/ day following such Valuation Date the product of 2.40 and (x) the Maximum
Applicable Rate on the Date of Original Issue (in the case of a Valuation Date
occurring prior to the first Auction Date) or (y) the Maximum Applicable Rate on
the last occurring Auction Date (in the case of any other Valuation Date), (ii)
for the period, if any, beginning on (and including) the second following
Dividend Payment Date and ending on (but not including) the 64/th/ day following
such Valuation Date, the product of 2.40 and the rate specified in clause (x) or
(y) above and (iii) for the period, if any, beginning on (and including) the
third following Dividend Payment Date and ending on (but not including) the
64/th/ day following such Valuation Date the product of 2.94 and the rate
specified in clause (x) or (y) above.

                  If the date of determination is not a Valuation Date, then the
Projected Dividend Amount on such date of determination shall equal the
Projected Dividend Amount therefor on the immediately Preceding Valuation Date,
adjusted to reflect any decrease in the number of shares of AMPS outstanding.
The calculation of the Projected Dividend Amount may be made on bases other than
those set forth above if the Rating Agencies shall have advised the Corporation
in writing that the revised calculation of the Projected Dividend Amount would
not adversely affect their respective then-current ratings of the AMPS.

                  "Purchaser's Letter" shall mean a letter in which a
prospective purchaser agrees, among other things, that ownership of shares of
AMPS will be maintained in book entry form by the Securities Depository for such
prospective Purchaser's Agent Member, and which is required to be executed by
each Purchaser of shares of AMPS.

                  "Quarterly Valuation Date" means, so long as any shares of
AMPS are outstanding, the last Valuation Date of January, April, July and
October of each year.

                  "Rating" means a rating assigned by S&P or Moody's to a
particular security or to a particular issuer; provided, however, in the case of
S&P, a particular unrated security will be deemed to have received the rating
S&P has assigned to a rated debt security if S&P shall have received a letter
from the President, Vice President, or Treasurer of the Corporation certifying
that the unrated issue is identical to the rated issue in respect of (i) its
terms, (ii) its ranking, (iii) its issuer and (iv) guarantees and any other
support mechanisms provided by the issuer or any third party to enhance the
credit of the rated security; and

                  "Rating Agencies" means Moody's and S&P or their successors so
long as such rating agency is then rating the AMPS.

                                       28

<PAGE>

                  "Reporting Date," with respect to any price referred to in the
definition of the Market Value of an item of Eligible Portfolio Property, shall
mean the date as of which the Market Value of such item of Eligible Portfolio
Property is to be determined.

                  "Repurchase Agreements" means, repurchase obligations with
respect to a U.S. Government Obligation, FNMA Certificate, FHLMC Certificate or
GNMA Certificate under which the Fund buys such securities from counterparties
who agree to buy back such securities within one Business Day from the date such
repurchase obligations were entered into where the counterparty is either (i) a
depository institution the deposits of which (x) are insured by the Federal
Deposit Insurance Corporation, or the Federal Savings and Loan Insurance
Corporation, (y) the commercial paper or other unsecured short-term debt
obligations of which are rated Prime-1 by Moody's and A-1+ by S&P, and (z) the
long-term debt obligations of which are rated at least A-2 by Moody's; or (ii) a
broker-dealer registered as such with the Securities and Exchange Commission
under the Securities Act of 1934, as amended, (x) the commercial paper or other
unsecured short-term debt obligation of which are rated Prime-1 by Moody's and
A-1+ by S&P and (z) the long-term debt obligations of which are rated at least
A-2 by Moody's.

                  "Securities Depository" means The Depository Trust Company and
any successor thereto.

                  "Scheduled Payment Day" has the meaning specified in paragraph
3(b) below.

                  "Short Term Money Market Instruments" means the following
kinds of instruments, if on the date of purchase or other acquisition by the
Corporation of such instrument the remaining term to maturity thereof is not
more than 30 days:

                  (a) demand deposits in, certificates of deposit of, and (in
the case of S&P only) bankers' acceptances issued by, any depository
institution, the deposits of which are insured by the Federal Deposit Insurance
Corporation or the Federal Savings and Loan Insurance Corporation, provided
that, at the time of the Corporation's investment therein, the commercial paper
or other unsecured short-term debt obligations of such depository institution
are rated Prime-1 by Moody's and A-1+ by S&P and are issued by institutions
where long-term debt obligations are rated at least A-2 by Moody's;

                  (b) commercial paper rated at the time of the Corporation's
investment therein Prime-1 by Moody's and A-1+ by S&P and issued by institutions
whose long-term debt obligations are rated at least A-2 by Moody's; provided,
however, that in the case of Moody's such commercial paper must have a maturity
of 270 days or less.

                  "S&P" means Standard & Poor's Corporation or any successor
thereto.

                  "Stock Books" means the stock transfer books of the
Corporation maintained by the Paying Agent with respect to the shares of AMPS.

                  "Subsequent Dividend Period" has the meaning specified in
paragraph 3(b) below.

                  "Substitute Commercial Paper Dealers" means such substitute
commercial paper dealer or dealers as the Corporation may from time to time
appoint or, in lieu of any thereof, their respective affiliates or successors.

                  "Substitute Rating Agency" and "Substitute Rating Agencies"
mean a nationally recognized securities rating agency or two nationally
recognized securities rating agencies, respectively, selected by Merrill Lynch,
Pierce, Fenner & Smith Incorporated, or its affiliate or successor, in

                                       29

<PAGE>

consultation with the Corporation to act as the substitute rating agency or
substitute rating agencies, as the case may be, to determine the credit ratings
of the shares of AMPS.

                  "Type I Corporate Bonds" as of any date means Corporate Bonds
whose Moody's rating is Aaa and whose S&P rating is AAA as of such date.

                  "Type II Corporate Bonds" as of any date means Corporate Bonds
whose Moody's rating is at least Aa and whose S&P rating is at least AA+ to AA-
as of such date.

                  "U.S. Government Obligations" means direct obligations of the
United States, provided that such direct obligations are entitled to the full
faith and credit of the United States and that any such obligations, other than
United States Treasury Bills, provide for the periodic payment of interest and
the full payment of principal at maturity or call for redemption.

                  "Valuation Date" means each Friday or, if such day is not a
Business Day, the next preceding Business Day, provided, that the first
Valuation Date may occur on any other date established by the Corporation;
provided, further, that such date shall not be earlier than 4 Business Days
prior to, and not later than, the Date of Original Issue.

                  "Voting Period" has the meaning specified in paragraph 6(b)
below.

                  2.   Fractional Shares. No fractional shares of AMPS shall be
issued.

                  3.   Dividends.

                  (a)  Holders of shares of AMPS shall be entitled to receive,
when, as, and if declared by the Board of Directors out of funds legally
available therefor, cumulative cash dividends at the Applicable Rate per annum
(determined as set forth below) payable on the respective dates set forth

                  (b)  Dividends on the shares of AMPS shall accumulate from the
Date of Original Issue. Accumulated dividends shall be payable commencing on
January 5, 1993 (the 13/th/ day after the Date of Original Issue), with respect
to the Auction Market Preferred Stock, Series E (hereinafter, the "Initial
Dividend Payment Date"); and on each day thereafter which is the last day of
each succeeding 7 day period after such date. If any such last day (the
"Scheduled Payment Day") is not a Business Day or, unless the Securities
Depository shall make dividend payments in same-day funds, the day succeeding
the Scheduled Payment Day is not a Business Day, dividends payable on such
Scheduled Payment Date be paid on the first Business Day succeeding such
Scheduled Payment Day that is next succeeded by a day which is also a Business
Day; provided, however, that if the Securities Depository shall make dividend
payments with respect to the shares of AMPS in same-day funds, such next
succeeding day need not be a Business Day. Any date on which a dividend on the
AMPS is payable pursuant to this paragraph 3(b) is herein called a "Dividend
Payment Date". The period beginning on (and including) the Date of Original
Issue and ending on (but not including) the Initial Dividend Payment Date is
referred to herein as the "Initial Dividend Period". Each successive period
commencing on, and including, the Dividend Payment Date for the previous
Dividend Period and ending on and including the calendar day preceding the next
succeeding Dividend Payment Date is referred to herein as a "Subsequent Dividend
Period" and the Initial Dividend Period and each Subsequent Dividend Period
together are sometimes referred to herein as "Dividend Periods". The record date
for the payment of dividends on each series of AMPS will be the Auction Date
immediately preceding the Dividend Payment Date.

                  (c)  (i) The Applicable Rate for the Auction Market Preferred
Stock, Series E shall be 4.125% per annum for the Initial Dividend Period. For
the purpose of calculating the rate of

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<PAGE>

dividends per annum payable on shares of AMPS (the "Applicable Rate") for each
Subsequent Dividend Period (the Corporation shall enter into an agreement with
the Auction Agent (the "Auction Agent Agreement"). The Applicable Rate on the
shares of AMPS for each Subsequent Dividend Period shall be determined by the
Auction Agent in accordance with the Auction Agent Agreement, which shall
provide that the Auction Agent will follow the Auction Procedures described in
paragraph 8 hereof to determine the Applicable Rate. In the event there is no
Auction Agent on the Business Day prior to the first day of a Dividend Period,
the Applicable Rate for such Dividend Period shall be equal to the Maximum
Applicable Rate that could have resulted pursuant to the Auction Procedures, as
determined by the Corporation, on such Business Day. If no Auction is held on
any Auction Date for any other reason, the Applicable Rate for the Dividend
Period beginning on the Business Day following such Auction Date shall be equal
to the Maximum Applicable Rate that could have resulted pursuant to the Auction
Procedures, as determined by the Auction Agent (or, if there is no Auction
Agent, by the Corporation), on such Business Day. The Corporation shall exercise
its best efforts to maintain an Auction Agent pursuant to an agreement
containing terms no less favorable to the Corporation than the terms of the
Auction Agent Agreement.

                           (ii) The amount of dividends per share payable on
         shares of AMPS for each Dividend Period or part thereof shall be
         determined by the Corporation and shall be an amount equal to $100,000
         per share of AMPS multiplied by the product of (1 the Applicable Rate
         for such Dividend Period and (2) a fraction, the numerator of which
         shall be the actual number of days in such Dividend Period or part
         thereof and the denominator of which shall be 360. All dollar amounts
         used in or resulting from such calculations will be rounded to the
         nearest cent (with 0.5 cents begin rounded up).

                           (iii) If the Corporation fails to deposit, in
         same-day funds, with the Paying Agent by 12:00 noon, New York City
         time, (A) on any Dividend Payment Date for any series of AMPS an amount
         sufficient to pay the dividends (whether or not earned or declared)
         payable on such Dividend Payment Date for any series of AMPS or (B) on
         any redemption date for any series of AMPS an amount sufficient to
         redeem on such date fixed for redemption the shares of such series as
         to which notice of redemption has been given (including an amount equal
         to dividends thereon, whether or not earned or declared, accumulated
         but unpaid to such redemption date), then, in either case, beginning
         with the Dividend Payment Date or redemption date, as the case may be,
         on which such failure occurs and continuing until the Dividend Payment
         Date that is or immediately follows the date the Corporation remedies
         such failure as provided in the third sentence of this paragraph, the
         Applicable Rate for each Dividend period for the series to which such
         Dividend Payment Date or such redemption date relates shall be equal to
         275% of the "AA" Composite Commercial Paper Rate in effect on the
         second Business Day preceding the first day of such Dividend Period.
         Notwithstanding the foregoing, if the Corporation remedies such failure
         by depositing, in same-day funds, with the Paying Agent by 12:00 noon,
         New York City time, on the first, second or third Business Day
         following such Dividend Payment Date or date fixed for redemption, as
         the case may be, an amount equal to (x) the unpaid dividends or unpaid
         redemption payments plus (y) a late charge computed at an annual rate
         of 275% of the "AA" Composite Commercial Paper Rate in effect on the
         second Business Day preceding the date of such failure applied to the
         amount of such unpaid dividends or unpaid redemption payments based on
         the number of days elapsed from the applicable Dividend Payment Date or
         date fixed for redemption to the date on which funds for such dividends
         or redemption payments are deposited with the Paying Agent divided by
         360, then the Applicable Rate for the then-current Dividend Period will
         be that established on the immediately preceding Auction Date. If,
         subsequent to the three-Business Day grace period referred to in the
         preceding sentence, the Corporation remedies such failure to pay
         dividends or the redemption payments by depositing with the Paying
         Agent all amounts required by the first sentence of this paragraph plus
         all

                                       31

<PAGE>

         dividends(computed at the rate specified in the first sentence of this
         paragraph) accumulated (whether or not earned or declared) but unpaid
         to the Dividend Payment Date that is or immediately precedes the date
         of such remedy, then the Applicable Rate in respect of each Dividend
         Period commencing after such remedy will be determined in accordance
         with the Auction Procedures until such time as there is another failure
         to pay either dividends or the redemption payments with respect to
         shares of AMPS. In the event of any such remedy described in the
         preceding sentence, the Corporation will, not more than 30 nor less
         five Business Days prior to the next Auction Date, notify the Auction
         Agent, all Holders and the Securities Depository in writing of the date
         of the next Auction.

                  (d)  (i)    The Corporation will not issue any other series or
         class of stock which is senior to the AMPS. The Corporation will not
         issue any series or class of stock which is on a parity with the shares
         of AMPS unless it has been advised in writing by the Rating Agencies
         that such issuance will not adversely affect their respective
         then-current ratings of the AMPS. No Holders of shares of AMPS shall be
         entitled to any dividends, whether payable in cash, property or stock,
         in excess of full cumulative dividends, as provided in this paragraph
         3, on shares of AMPS. No interest, or sum of money in lieu of interest,
         shall be payable in respect of any dividend payments on any shares of
         AMPS that may be in arrears.

                       (ii)   For as long as shares of AMPS are outstanding,
         the Corporation shall not declare, pay or set apart for payment any
         dividend or other distribution in respect of the Common Stock or any
         other stock of the Corporation ranking junior to the shares of AMPS as
         to dividends or upon liquidation, or call for redemption, redeem,
         purchase or otherwise acquire for consideration any shares of Common
         Stock or any other stock of the Corporation ranking junior to the
         shares of AMPS as to dividends or upon liquidation), unless, in each
         case, immediately thereafter, (A) the AMPS Basic Maintenance Amount
         would be met, (B) the 1940 Act AMPS Assets Coverage Requirement would
         be met, (C) all mandatory redemptions of shares of Preferred Stock
         pursuant to paragraph 5(b) hereof have been completed, (D) the Minimum
         Liquidity Level would be met and (E) all accumulated and unpaid
         dividends for all past dividend periods for all Preferred Stock shall
         have been or are contemporaneously paid in full (or declared and
         sufficient Deposit Securities have been set apart for their payment).
         Prior to the payment of any such dividend or other distribution, the
         Corporation will provide the Auction Agent and the Rating Agencies with
         a Portfolio Valuation Report (which may be the regular weekly report)
         and a certificate demonstrating compliance with the foregoing
         conditions.

                       (iii)  Any dividend payment made on the shares of AMPS
         shall first be credited against the dividends accumulated with respect
         to the earliest Dividend Period for which dividends have not been paid.

                       (iv)   For so long as any shares of AMPS are outstanding,
         the Corporation shall not create, incur or suffer to exist, or agree to
         create, incur or suffer to exist, or consent to cause or permit in the
         future (upon the happening of a contingency or otherwise) the creation,
         incurrence or existence of any material lien, mortgage, pledge, charge,
         security interest, security agreement, conditional sale or trust
         receipt or other material encumbrance of any kind (collectively
         "Liens") upon any of its Eligible Portfolio Property, except for (A)
         Liens the validity of which are being contested in good faith by
         appropriate proceedings, (B) Liens for taxes that are not then due and
         payable or that can be paid thereafter without penalty, (C) Liens to
         secure payment for services rendered by the Auction Agent in connection
         with the AMPS and (D) Liens otherwise incurred in connection with
         borrowings made in the ordinary course of business in accordance with
         the Corporation's stated investment objective, policies and
         restrictions.

                                       32

<PAGE>

                  (e) Not later than 12:00 noon, New York City time, on the
Business Day next preceding such Dividend Payment Date, the Corporation shall
deposit with the Paying Agent Deposit Securities constituting immediately
available funds in an amount sufficient to pay the dividends that are payable on
such Dividend Payment Date. The Corporation may direct the Paying Agent with
respect to the investment of any such Deposit Securities, provided that the
proceeds of any such investment will be available at the opening of business on
such Dividend Payment Date in immediately available funds.

                  (f) Dividends in arrears for any past Dividend Period may be
declared and paid to the Holders at any time, without reference to any regular
Dividend Payment Date.

                  (g) For dividends paid in respect of any fiscal year of the
Corporation, any dividends declared on the AMPS shall be paid first from earned
surplus, to the extent thereof, and then from any other legally available
source, and any dividends declared on the Common Stock shall be paid from earned
surplus or other sources to the extent not distributed to the Existing Holders.
Further, for dividends paid in respect of any fiscal year of the Corporation,
any dividends declared on AMPS shall be paid from current and accumulated
earnings and profits (within the meaning of the Internal Revenue Code of 1986,
as amended (the "Code")) to the extent available, pro rata from investment
company taxable income (as that term is defined in section 852(b)(2) of the Code
and before taking into account the deduction for dividends paid) and from net
capital gain (as that term is defined in Code section 1222(11)). To the extent
current and accumulated earnings and profits remain after satisfying the
Existing Holders, dividends paid in respect of any fiscal year of the
Corporation declared on the Common Stock shall be paid from current and
accumulated earnings and profits, from investment company taxable income (before
the deduction for dividends paid) and from net capital gain, to the extent not
distributed to Existing Holders. Distributions of net capital gain of the
Corporation for a taxable year to Existing Holders and holders of Common Stock
shall be designated by the Corporation as capital gain dividends (under Code
section 852(b)(3)) in the same proportion as net capital gain of the Corporation
for the taxable year in respect of which the distribution is made is distributed
to such Existing Holders and holders of Common Stock. Designations of foreign
taxes deemed paid by stockholders (pursuant to Code section 853) shall be made
in the same proportion as income subject to such taxes is distributed to
stockholders for the taxable year in respect of which the distribution is made.
The Board of Directors or any duly authorized committee thereof may change the
allocation of income and/or designations described herein, if, in its sole
judgment, it deems it advisable to do so for the purpose of maintaining the
qualification of the Corporation as a regulated investment company for federal
income tax purposes and/or to avoid tax consequences which, in the sole judgment
of the Board of Directors, would be adverse to the Corporation or its
stockholders.

                  4.  Liquidation Rights

                  (a) In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the Holders of shares of
AMPS shall be entitled to receive out of the assets of the Corporation available
for distribution to stockholders, but before any distribution or payment shall
be made in respect of the Common Stock or any other stock of the Corporation
ranking junior to the AMPS as to liquidation payments, a liquidation
distribution in the amount of $100,000 per share, plus an amount equal to all
unpaid dividends accumulated to and including the date fixed for such
distribution or payment (whether or not earned or declared by the Corporation,
but excluding interest thereon), but such Holders shall be entitled to no
further participation in any distribution or payment in connection with any such
liquidation, dissolution or winding up.

                  (b) If, upon any such liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the assets of the
Corporation available for distribution among the Holders of all outstanding
shares of AMPS shall be insufficient to permit the payment in full of such

                                       33

<PAGE>

Holders of the amounts to which they are entitled, then such available assets
shall be distributed among the Holders of shares of Preferred Stock, including
the AMPS, ratably in any such distribution of assets according to the respective
amounts which would be payable on all such shares if all amounts thereon were
paid in full.

                  (c) Neither the consolidation or merger of the Corporation
with or into any other corporation or corporations, nor the sale, lease or
exchange by the Corporation of all or substantially all of its property and
assets, shall be deemed to be a voluntary or involuntary liquidation,
dissolution or winding up of the Corporation for purposes of this paragraph 4.

                  5.  Redemption

                  Shares of the AMPS shall be redeemable by the Corporation as
provided below:

                  (a) To the extent permitted under the Investment Company Act
and Maryland law, the Corporation at its option, upon filing with the
Commission, mailing and publishing a Notice of Redemption as described in
paragraph 5(f) hereof, may redeem shares of AMPS, in whole or in part, on the
next succeeding scheduled Dividend Payment Dates for those shares of AMPS called
for redemption, out of funds legally available therefor, at a redemption price
equal to $100,000 per share plus an amount equal to dividends thereon (whether
or not earned or declared) accumulated to but unpaid through the date fixed for
redemption. The Corporation may not give a Notice of Redemption relating to an
optional redemption as described in this paragraph unless, at the time of giving
such Notice of Redemption, the Corporation has available Deposit Securities with
maturity or tender dates not later than the day preceding the applicable
redemption date and having a value not less than the amount due to Holders of
shares of AMPS by reason of the redemption of their shares on such redemption
date.

                  (b) The Corporation shall redeem, at a redemption price of
$100,000 per share plus accumulated but unpaid dividends through the date of
redemption, shares of AMPS to the extent permitted under the Investment Company
Act and Maryland law, on the date fixed by the Board of Directors applicable to
those shares of AMPS called for redemption, if the Corporation fails to maintain
the AMPS Basic Maintenance Amount or 1940 Act AMPS Asset Coverage Requirement,
as the case may be, and such failure is not cured on or before the Cure Date as
reflected in a Portfolio Valuation Report delivered to the Auction Agent and the
Rating Agencies and confirmed by the Corporation's Independent Accountants. The
number of shares to be redeemed shall be equal to the lesser of (i) the minimum
number of shares of AMPS the redemption of which, if deemed to have occurred
immediately prior to the opening of business on the Cure Date, together with all
shares of other Preferred Stock subject to redemption or retirement, would
result in the satisfaction of the AMPS Basic Maintenance Amount or the 1940 Act
AMPS Asset Coverage Requirement, as the case may be, on such Cure Date (provided
that, if there is no such minimum number of shares the redemption of which would
have such result, all shares of AMPS together with all shares of other Preferred
Stock subject to redemption or retirement then outstanding shall be redeemed),
and (ii) the maximum number of shares of AMPS together with all shares of other
Preferred Stock subject to redemption or retirement that can be redeemed out of
funds expected to be legally available therefor on such redemption date. In
determining the number of shares of AMPS required to be redeemed in accordance
with the foregoing, the Corporation shall allocate the amount required to
achieve (x) the 1940 Act AMPS Asset Coverage Requirement, pro rata among the
AMPS and any other Preferred Stock and (y) the AMPS Basic Maintenance Amount,
pro rata, among the AMPS and any other AMPS. The Corporation shall effect such
redemption not later than 30 days after such Cure Date, except that if the
Corporation does not have funds legally available for the redemption of all the
required number of shares of AMPS which are subject to mandatory redemption, the
next Dividend Payment Date with respect to any share to be redeemed in more than
30 days after such Cure Date or the Corporation otherwise is unable to effect
such redemption on or prior to such 30/th/ day, the Corporation

                                       34

<PAGE>

shall redeem those shares of AMPS which it was unable to redeem on the earliest
practicable date on which it is able to effect such redemption.

                  (c) So long as the AMPS shall be rated by Moody's, the
Corporation shall, by the fifth Business Day after a Failure to Cure, be
required to hold an amount, composed of Cash or any other asset constituting
Eligible Portfolio Property which has a Moody's Discount Package as of such
fifth Business Day of 1.000 and which matures prior to the date set for
redemption which has an aggregate Discounted Value at least equal to the
redemption payment for the shares of AMPS to be redeemed; provided, however,
that this obligation may be satisfied by depositing Cash in trust as
contemplated by paragraph 5(h) below; and provided further that the Corporation
shall sell assets prior to such fifth Business Day if necessary to meet the
requirements of this paragraph (c), it being understood that in no event shall
it sell any asset prior to maturity which had a Moody's Discount Factor of 1.000
measured as of the last Valuation Date on which the AMPS Basic Maintenance
Amount was met if it would be necessary to utilize such asset in order to make
any redemption payment contemplated by this paragraph 5.

                  (d) Notwithstanding the other provisions of this paragraph 5,
no shares of AMPS may be redeemed other than as specified below, unless all
accumulated and unpaid dividends on all outstanding shares AMPS and other
Preferred Stock for all past dividend periods shall have been or are
contemporaneously paid or declared and Deposit Securities maturing on or prior
to the date fixed for redemption are set apart for the payment of such
dividends; provided, however, that the Corporation without regard to such
limitations, (x) may redeem, purchase or otherwise acquire shares of AMPS (A)
with other Preferred Stock as a whole, pursuant to an optional redemption or (B)
pursuant to a purchase or exchange offer made for all of the outstanding shares
of AMPS and other Preferred Stock, and (y) shall redeem, purchase or otherwise
acquire shares of AMPS with other Preferred Stock as a whole if required
pursuant to a mandatory redemption, to the extent permitted under the Investment
Company Act, Maryland law and the Articles of Incorporation.

                  (e) If fewer than all the outstanding shares of AMPS are to be
redeemed, the shares to be redeemed shall be identified by the Board of
Directors by lot, on a pro rata basis, or in such other manner as will not
discriminate unfairly against any record holder of shares of such AMPS.

                  (f) Whenever shares of AMPS are to be redeemed, the
Corporation shall, not fewer that 30 days prior to the applicable redemption
date, file with the Commission as required under the Investment Company Act, a
written notice of redemption (a "Notice of Redemption"). The Notice of
Redemptions shall be (i) mailed by first-class mail, postage prepaid to each
holder of shares of AMPS to be redeemed, and (ii) published by the Corporation
in an Authorized Newspaper, not fewer than 15 nor more than 20 days prior to
such redemption date. Not fewer than five nor more than 10 days before such
mailing date, the Corporation shall mail the Notice of Redemption to the Paying
Agent. Each Notice of Redemption shall state (A) the series of AMPS or Other
AMPS to be redeemed, (B) the redemption date, (C) the redemption price, (D) the
place or places where such AMPS are to be redeemed, (E) that dividends on the
shares to be redeemed will cease to accumulate on such redemption date, (F) the
provisions of these Articles Supplementary under which the redemption is being
made, (G) if less than all the outstanding shares of AMPS are to be redeemed,
the number of shares to be redeemed and the basis upon which the shares to be
redeemed are to be selected and (H) the CUSIP number or numbers of the shares to
be redeemed. No defect in the Notice of Redemption or in the mailing or
publication thereof shall affect the validity of the redemption proceedings,
except as required by applicable law.

                  (g) On each redemption date, the Securities Depository shall
surrender the certificates evidencing the shares of AMPS. Each Holder of shares
of AMPS that were called for redemption shall then be entitled to receive
payment of the redemption price for each share. If fewer than

                                       35

<PAGE>

all of the shares represented by such certificate are to be redeemed, the
Corporation shall issue a new certificate for the shares not redeemed.

                  (h) If the Corporation shall give a Notice of Redemption, then
by 12:00 noon, New York City time, on the Business Day next proceeding the date
fixed for redemption the Corporation shall deposit with the Paying Agent Deposit
Securities constituting immediately available funds in an amount sufficient to
redeem the shares of AMPS to be redeemed. In such event the Corporation shall
give the Paying Agent irrevocable instructions and authority to pay the
redemption price to the holders of the shares of AMPS called for redemption upon
the redemption date. The Corporation may direct the Paying Agent with respect to
the investment of any Deposit Securities so deposited provided that the proceeds
of any such investment will be available at the opening of business on such
redemption date. The Deposit Securities deposited with the Paying Agent pursuant
to the immediately preceding sentence and the shares of AMPS to be redeemed and
funds deposited with a paying agent with irrevocable instructions to pay the
redemption price with respect to any other shares of Preferred Stock for which a
notice of redemption has been duly given shall be excluded from the calculation
of the AMPS Basic Maintenance Amount, the 1940 Act AMPS Asset Coverage Ratio,
and the 1940 Act AMPS Asset Coverage Requirement. Upon the date of such deposit,
or if no such deposit is made, then upon such date fixed for redemption (unless
the Corporation shall default in making payment of the redemption price), all
rights of the Holders of the shares of AMPs so called for redemption shall cease
and terminate except the right of the Holders thereof to receive the redemption
price thereof inclusive of accumulated but unpaid dividends, but without any
interest, and such shares shall no longer be deemed outstanding for any purpose.
The Corporation shall be entitled to receive, promptly after the date fixed for
redemption, any cash in excess of the aggregate redemption price of the shares
of AMPS called for redemption on such date and any remaining Deposit Securities.
Any assets so deposited which are unclaimed at the end of one year from such
redemption date shall, to the extent permitted by law, be repaid to the
Corporation, after which the Holders of the shares of AMPS so called for
redemption shall look only to the Corporation for payment thereof. The
Corporation shall be entitled to receive, from time to time after the date fixed
for redemption, any interest on the Deposit Securities so deposited.

                  (i) Shares of AMPS that have been redeemed, purchased or
otherwise acquired by the Corporation may not be reissued, shall not be deemed
outstanding, and shall be retired and cancelled. Shares with respect to which a
Notice of Redemption has been given as provided in paragraph 5 (a) above shall
not be deemed outstanding for purposes of the Auction Procedures set forth in
paragraph 8 hereof.

                  (j) In addition to redemption rights expressly established
under these Articles Supplementary, the Corporation may repurchase shares of
AMPS to the extent now or hereafter permitted by the laws of the State of
Maryland and by the Investment Company Act.

                  (k) If the Corporation shall not have funds legally available
for the redemption of all the shares of the AMPS to be redeemed on any
redemption date (or is otherwise legally unable to effect such redemption), the
Corporation shall redeem on such redemption date the number of shares of AMPS as
it shall be legally able to redeem, ratably from such Existing Holder whose
shares are to be redeemed and the remainder of the shares of the AMPS required
to be redeemed shall be redeemed, as provided in paragraph 5(b) above.

                  6.  Voting Rights

                  (a) General. Each holder of AMPS shall be entitled to one vote
for each share held on each matter on which the holders of the AMPS are entitled
to vote and, except as otherwise provided in the Articles of Incorporation,
these Articles Supplementary or by law, the holders of the AMPS and the Common
Stock shall vote together as one class on all matters submitted to the

                                       36

<PAGE>

stockholders; provided, however, that at any meeting of stockholders of the
Corporation at which directors are to be elected, the holders of Preferred Stock
of all series, voting separately as a single class, shall be entitled to elect
two members of the Board of Directors, and the holders of Common Stock, voting
separately as a single class, shall be entitled to elect the balance of the
members of the Board of Directors; provided, further, however, that the identity
of the two directors representing the holders of outstanding shares of Preferred
Stock may be designated by the Board of Directors until the first meeting of the
Corporation's stockholders at which holders of shares of Preferred stock shall
be entitled to vote for the election of directors.

                  (b)   Right to Elect Majority of Board of Directors.

                        (i)   During any period in which (A) dividends on any
         outstanding Preferred Stock of any series shall be due and unpaid in an
         amount equal to two full years' dividends; or (B) the Corporation fails
         to redeem any shares of Preferred Stock that are required to be
         redeemed pursuant to paragraph 5(b) above or that would have been so
         redeemed but for the requirement that redemption be made out of legally
         available funds, or (C) holders of any other shares of Preferred Stock
         are entitled to elect a majority of the directors of the Corporation
         (the "Voting Period"), the number of directors constituting the Board
         of Directors shall automatically be increased by the smallest number
         than, when added to the two directors elected by the holders of
         Preferred Stock pursuant to paragraph 6(a) above, will constitute a
         majority of the total number of directors so increased; and at a
         special meeting of stockholders, which shall be called and held as soon
         as practicable, and at all subsequent meetings at which directors are
         to be elected, the holders of Preferred Stock of all series voting
         separately as a single class shall be entitled to elect the smallest
         number of additional directors of the Corporation who, together with
         the two directors elected by the holders of Preferred Stock pursuant to
         paragraph 6(a) above, will constitute a majority of the total number of
         directors of the Corporation so increased. The terms of office of the
         persons who are directors at the time of that election shall continue.

                        (ii)  If the corporation thereafter shall pay, or
declare and set apart for payment, in full all dividends payable on all
outstanding shares of Preferred Stock of all series for all past dividend
periods and if the Corporation has remedied any failure to redeem shares of
Preferred Stock that are required to be redeemed pursuant to paragraph 5(b)
above, and holders of no other series of Preferred Stock are entitled to elect a
majority of the directors of the Corporation the Voting Period and the voting
rights stated in this paragraph 6(b) shall cease, and the terms of office of all
additional directors elected by the holders of Preferred Stock (but not of the
directors elected by the holders of Common Stock or the two directors regularly
elected by the holders of Preferred Stock as provided in paragraph 6(a) shall
terminate automatically, subject always, however, to the revesting of such
voting rights in the holders of shares of Preferred Stock upon the further
occurrence of any of the events described in clauses (A), (B) or (C) of
paragraph 6(b) (i).

                  (C)   Voting Procedures.

                        (i)   As soon as practicable after the accrual of any
         right of the holders of shares of Preferred Stock to elect directors
         pursuant to paragraph 6(b), the Corporation shall call a special
         meeting of, and mail a notice to, such holders of shares of Preferred
         Stock. Such special meeting shall be held not less than 10 nor more
         than 80 days after the date of mailing of such notice. If the
         Corporation fails to send such notice, the meeting may be called by any
         holder of shares of Preferred Stock on like notice. The record date for
         determining the holders of shares of Preferred Stock entitled the
         notice of and to vote at such special meeting shall be the close of
         business on the fifth Business Day preceding the day in which such
         notice is given. At any such special meeting and at each meeting at
         which directors are elected held during a Voting Period,

                                       37

<PAGE>

         the holders of shares of Preferred Stock, voting together as a class
         (to the exclusion of the holders of shares of Common Stock), shall be
         entitled to elect the number of directors prescribed in paragraph 6(b)
         above on a one-vote-per-share basis. At any such meeting or adjournment
         thereof in the absence of a quorum, a majority of the holders of shares
         of Preferred Stock, present in person or by proxy or any officer of the
         Corporation present entitled to preside or act as Secretary of such
         meeting shall have the power to adjourn the meeting without further
         notice to a date not more than 120 days after the original record date
         for such meeting.

                        (ii) For purposes of determining any rights of the
         holders of shares of Preferred Stock to vote on any matter, whether
         such right is created by the Articles of Incorporation, these Articles
         Supplementary, by statute or otherwise, no holder of shares of
         Preferred Stock shall be entitled to vote and no share of Preferred
         Stock shall be deemed to be "outstanding" for the purpose of voting or
         determining the number of shares required to constitute a quorum, if
         prior to or concurrently with the time of determination of shares
         entitled to vote or shares deemed outstanding for quorum purposes, as
         the case may be, such share shall have been redeemed or called for
         redemption as provided in paragraph 5(e) and sufficient Deposit
         Securities with maturities on or prior to the redemption date shall
         have been deposited in trust with the Paying Agent to effect such
         redemption.

                        (iii) The directors elected by the holders of shares of
         Preferred Stock, pursuant to paragraph 6(b) shall (subject to the
         provisions of any applicable law) be subject to removal only by the
         vote of the holders of a majority of shares of Preferred Stock
         outstanding. Any vacancy on the Board of Directors occurring by reason
         of such removal or otherwise (in the case of directors subject to
         election by the holders of shares of Preferred Stock) may be filled
         only by vote of the holders of at least a majority of shares of
         Preferred Stock outstanding, and if not so filled such vacancy shall
         (subject to the provisions of any applicable law) be filled by a
         majority of the remaining directors (or the remaining director) who
         were elected by the holders of shares of Preferred Stock. Any other
         vacancy on the Board of Directors during a Voting Period shall be
         filled as provided in the Corporation's By-Laws.

                        (iv)  At any time when the holders of shares of
         Preferred Stock become entitled to elect additional directors pursuant
         to paragraph 6(b), the maximum number of directors fixed by the By-Laws
         of the Corporation or otherwise shall automatically be increased by the
         number of such additional directors if required; and at such time as
         the holders of shares of Preferred Stock shall no longer be entitled to
         elect directors pursuant to paragraph 6(b), such exact number shall
         automatically be decreased by the number by which they were increased
         by reason of this provision.

                  (d)   Corporate Acts. So long as any shares of AMPS are
outstanding, the Corporation shall not, subject to the requirements of the
Investment Company Act and Maryland law, without the affirmative vote or consent
of the holders of at least two-thirds of the votes of the shares of AMPS
outstanding at the time, either in person or by proxy, either in writing or at a
meeting (voting separately as one class) in addition to any vote required by
Article Fifth of the Articles of Incorporation: (x) amend, alter or repeal the
provisions of the Articles of Incorporation including these Articles
Supplementary, whether by merger, consolidation or otherwise, so as to
materially and adversely affect any right, preference, privilege or voting power
of such shares of AMPS or the Holders thereof, or (y) create, authorize, issue,
incur or suffer to exist any indebtedness for borrowed money or any direct or
indirect guarantee of any such indebtedness, provided, however, that the
Corporation may authorize the issuance of indebtedness for borrowed money, for
temporary or emergency purposes or for the clearance of transactions, in an
aggregate amount not to exceed the lesser of $10,000,000 or 10% of the aggregate
liquidation preference of the shares of AMPS outstanding at any one time without
any such consent or

                                       38

<PAGE>

approval, provided that, with or without the consent or approval of the holders,
such action would not result in the lowering of the then-current rating of the
shares of AMPS by the Rating Agencies (as evidenced in writing by the Rating
Agencies); provided that any increase in the amount of the authorized AMPS or
the creation and issuance of other series of Preferred Stock, or any increase in
the amount of authorized shares of such series or of any other series of
Preferred Stock, in each case ranking on a parity with or junior to the AMPS
will not be deemed to materially and adversely affect such rights, preferences,
privileges or voting powers unless such issuance would cause the Corporation not
to satisfy the 1940 Act AMPS Asset Coverage Requirement or the AMPS Basic
Maintenance Amount.

                  The foregoing voting provisions shall not apply if, at or
prior to the time when the act with respect to which such vote would otherwise
be required shall be effected, all outstanding shares of AMPS shall have been
redeemed or called for redemption and sufficient funds shall have been deposited
in trust to effect such redemption.

                  (e) Exclusive Remedy.Unless otherwise required by law, the
Holders shall not have any relative rights or preferences or other special
rights other than those specifically set forth herein. In the event that the
Corporation fails to pay any dividends on the shares of AMPS or the Corporation
fails to redeem any shares of AMPS which it is required to redeem, or any other
event occurs which requires the mandatory redemption of AMPS and the required
Notice of Redemption has not been given, the exclusive remedy of the Holders
shall be the right to vote for directors pursuant to the provisions of this
paragraph 6. In no event shall the Holders have any right to sue for, or bring a
proceeding with respect to, such dividends or redemption or damages for the
failure to receive the same.

                  (f) Notification to Rating Agencies. In the event a vote of
holders of AMPS is required pursuant to the provisions of Section 13(a) of the
Investment Company Act, the Corporation shall, not later than ten Business Days
prior to the date on which such vote is to be taken, notify the Rating Agencies
that such vote is to be taken and the nature of the action with respect to which
such vote is to be taken.

                  7.  Asset and Liquidity Coverage.

                  (a) 1940 Act AMPS Asset Coverage Requirement.

                  The Corporation shall maintain, as of the last Valuation Date
of each month in which any share of AMPS is outstanding, the 1940 Act AMPS Asset
Coverage Requirement. The calculation of the 1940 Act AMPS Asset Coverage Ratio
shall be included in each Portfolio Valuation Report.

                  (b) AMPS Basic Maintenance Amount

                                    (i)  For so long as any shares of AMPS are
         outstanding, the Corporation will maintain, on each Valuation Date, as
         evidenced by the completion of a Portfolio Valuation Report, Eligible
         Portfolio Property having an aggregate Discounted Value at least equal
         to the AMPS Basic Maintenance Amount, each as of such Valuation Date.

                                    (ii) On or before 10:00 a.m. New York City
         time on the fourth Business Day after (A) the Date of Original
         Issuance, (B) each Quarterly Valuation Date thereafter, (C) any
         Valuation Date on which the Corporation shall fail to react the AMPS
         Basic Maintenance Amount, (D) any Valuation Date on which it cures its
         failure to satisfy the AMPS Basic Maintenance Amount, (E) any Valuation
         Date on which it fails to meet AMPS Basic

                                       39

<PAGE>

         Maintenance Amount by 25% or more, or (F) any Valuation Date as may be
         specified by S&P, the Corporation shall complete and deliver to Moody's
         and S&P and the Auction Agent, in the case of clauses (A) and (B) and
         to the relevant Rating Agency, in the case of clauses (C) - (F), a
         Portfolio Valuation Report as of the relevant Valuation Date. In
         addition, on or before 5:00 p.m., New York City time, on the first
         business Day after a date on which shares of Common Stock are
         repurchased by the Corporation, the Corporation will also complete and
         deliver to the Auction Agent, S&P and Moody's a Portfolio Valuation
         Report as of the close of business on the date the Common Stock was
         repurchased. All such Portfolio Valuation Reports shall be deemed to
         have been delivered to Moody's, S&P or the Auction Agent upon receipt
         of a copy or telecopy, telex or other electronic transcription thereof
         if on the same day the Corporation mails the Portfolio Valuation Report
         for delivery on the next possible Business Day. A failure by the
         Corporation to deliver a Portfolio Valuation Maintenance Report as
         contemplated by this paragraph 7(b)(ii) shall be deemed to be delivery
         of a Portfolio Valuation Maintenance Report indicating a failure to
         satisfy the Portfolio Valuation Amount.

                  (iii) Within seven Business Days after the required date of
delivery of the initial Portfolio Valuation Report or any Portfolio Valuation
Report delivered with respect to a Quarterly Valuation Date in accordance with
paragraph 7(b)(ii) above, the Corporation shall deliver to the Auction Agent and
the Rating Agencies a report or reports (the "Accountant's Confirmation")
reviewing the portfolio calculations, prepared by the Corporation's Independent
Accountants, relating to such Portfolio Valuation Report (as well as to any
other Portfolio Valuation Report randomly selected by the Independent
Accountants that was prepared during the quarter ending on such Quarterly
Valuation Date) substantially to the effect that (A) the Independent Accountants
have read such Portfolio Valuation Report (each a "Report"); (B) with respect to
the 1940 Act AMPS Asset Coverage Ratio, AMPS Basic Maintenance Amount and
Minimum Liquidity Level, the result of the calculations set forth in each Report
have been recalculated and are numerically correct; (C) with respect to the
excess or deficiency of the aggregate Discounted Value of the Eligible Portfolio
Property amount when compared to the AMPS Basic Maintenance Amount, the results
of the calculation set forth in each Report have been recalculated and are
numerically correct; (D) with respect to the excess or deficiency of the
Dividend Coverage Assets amount when compared to the Minimum Liquidity Level,
the result of the calculations set forth in each Report have been recalculated
and are numerically correct; (E) with respect to (x) any trade price, bid or
mean price (or such alternative permissible factor used in calculating the
Market Value) provided to the Corporation for purposes of valuing securities in
the Corporation's portfolio, the Independent Accountant has compared the price
used in such Report to the trade price, the bid or mean price listed in such
Report as provided to the Corporation and verified that such information agrees;
(y) with respect to the lower of two bid prices provided to the Corporation for
purposes of valuing securities in the portfolio, the Independent Accountants
have compared the price used in each Report with the lower of the two bid prices
listed in the Report and verified that such information agrees (in the event
such information does not agree, the Independent Accountants will provide a
listing in their report of such differences); and (F) that the assets listed in
each Report conform with the definition of Eligible Portfolio Property. If any
letter reviewing the portfolio calculations delivered pursuant to this paragraph
shows that an error was made in an Portfolio Valuation Report for a particular
Valuation Date for which such Accountant's Confirmation was required to be
delivered or shows that a lower aggregate Discounted Value for the aggregate of
all Eligible Portfolio Property was determined by the Independent Accountants,
the calculation or determination made by such Independent Accountants shall be
final and conclusive and shall be binding on the Corporation, and the
Corporation shall promptly amend the Portfolio Valuation Report and deliver the
amended Portfolio Valuation Report to the Auction Agent, S&P and Moody's.

                  (iv)  For so long as share of AMPS are rated by Moody's, in
managing the Corporation's portfolio, the Investment Manager will not alter the
composition of the Corporation's portfolio if, in the reasonable belief of the
Investment Manager, the effect of any such alteration would be

                                       40

<PAGE>

to cause the Corporation to have Eligible Portfolio Property with an aggregate
Discounted Value, as of the immediately preceding Valuation Date, less than the
AMPS Basic Maintenance Amount as of such Valuation Date; provided, however, that
in the event that, as of the immediately preceding Valuation Date, the aggregate
Discounted Value of Eligible Portfolio Property exceeded the AMPS Basic
Maintenance Amount by 25% or less, the Investment Manager will not alter the
composition of the Corporation's portfolio in a manner reasonably expected to
reduce the aggregate Discounted Value of Eligible Portfolio Property unless the
Corporation shall have confirmed that, after giving effect to such alteration,
the aggregate Discounted Value of Eligible Portfolio Property would exceed the
AMPS Basic Maintenance Amount.

                  (c)      Liquidity Coverage.

                           (i)   As of each Valuation Date as long as any shares
         of AMPS are outstanding, the Corporation shall determine (A) the Market
         Value of the Dividend Coverage Assets owned by the Corporation as of
         that Valuation Date, (B) the Dividend Coverage Amount on that Valuation
         Date, and (C) whether the Minimum Liquidity Level is met as of the
         Valuation Date. The calculations of the Dividend Coverage Assets, the
         Dividend Coverage Amount and whether the minimum Liquidity Level is met
         shall be set forth in a certificate (a "Certificate of Minimum
         Liquidity") dated as of the Valuation Date. The Portfolio Valuation
         Report and the Certificate of Minimum Liquidity may be combined in one
         certificate. The Corporation shall cause the Certificate of Minimum
         Liquidity to be delivered to the Auction Agent not later than the close
         of business on the third Business Day after the Valuation Date. The
         Minimum Liquidity Level shall be deemed to be met as of any date of
         determination if the Corporation has timely delivered a Certificate of
         Minimum Liquidity relating to such date, which states that the same has
         been met and which is not manifestly inaccurate. In the event that a
         Certificate of Minimum Liquidity is not delivered to the Auction Agent
         when required, the Minimum Liquidity Level shall be deemed not to have
         been met as of the applicable date.

                           (ii)  If the Minimum Liquidity Level is not met as of
         any Valuation Date, then the Corporation shall purchase or otherwise
         acquire Dividend Coverage Assets (with the proceeds from the
         liquidation of Eligible Portfolio Property or otherwise) to the extent
         necessary so that the Minimum Liquidity Level is met as of the fifth
         Business Day following such Valuation Date. The Corporation shall, by
         such fifth Business Day, provide to the Auction Agent a Certificate of
         Minimum Liquidity setting forth the calculations of the Dividend
         Coverage Assets and the Dividend Coverage Amount and showing that the
         Minimum Liquidity Level is met as of such fifth Business Day together
         with a report of the custodian of the Corporation's assets confirming
         the amount of the Corporation's Dividend Coverage Assets as of such
         fifth Business Day.

                  (d)      Calculation of AMPS Basic Maintenance Amount;
                           Accounting Treatment:

                           (i)   Eligible Portfolio Property of the Corporation
         shall be determined on an accrual basis in accordance with customary
         practice under which Eligible Portfolio Property purchased and not yet
         received are so reflected as Eligible Portfolio Property.

                           (ii)  Dividends on the Common Stock which are payable
         in Common Stock shall, after the effective date of any election by a
         holder of Common Stock to receive such dividend, be excluded from
         current liabilities.

                                       41

<PAGE>

                           (iii) Withholding taxes with respect to interest
         earned on any asset of the Corporation if such interest is not included
         in Eligible Portfolio Property, shall be excluded from current
         liabilities.

                           (iv)  With respect to Eligible Portfolio Property
         sold by the Corporation as of or prior to the Valuation Date, (x) if
         the determination is being made for Moody's the sales price of such
         property will be reflected as Cash or Australian Currency, as
         appropriate, in Eligible Portfolio Property, to the extent that such
         receivable is due and payable within 5 Business Days (determined as for
         a Valuation Date) and is not subject to any dispute and (y) if the
         determination is being made for S&P, the Market Value of such Property
         will be reflected in Eligible Portfolio Property and will be discounted
         at the appropriate Discount Factor.

                  (e)      Other Permitted Assets. In addition to Eligible
Portfolio Property, the Corporation may own other Permitted Assets and may also
own other securities, if the inclusion of any such type of other securities is
deemed by the Board of Directors to be in the best interest of the Corporation.
Other Permitted Assets and such other securities may be included in Eligible
Portfolio Property if the Rating Agencies have advised the Corporation in
writing that the inclusion of such Other Permitted Assets or other securities in
Eligible Portfolio Property would not adversely affect their respective
then-current ratings of the shares of AMPS.

                  8.       Auction Procedures.

                  (a)      Certain Definitions.

                  Capitalized terms not defined in this paragraph 8(a) shall
have the respective meaning specified in paragraph 1. As used in this paragraph
8, the following terms shall have the following meanings, unless the context
otherwise requires:

                           (i)   "Affiliate" shall mean any Person known to the
         Auction Agent to be controlled by, in control of, or under common
         control with, the Corporation.

                           (ii)  "Agent Member" shall mean the member of the
         Securities Depository that will act on behalf of an Existing Holder or
         a Potential Holder and is identified as such in such holder's
         Purchaser's Letter.

                           (iii) "AMPS" shall mean the shares of AMPS being
         auctioned pursuant to this paragraph 8.

                           (iv)  "Auction" shall mean the periodic operation of
         the procedures set forth in this paragraph 8.

                           (v)   "Auction Date" shall mean the first Business
         Day next preceding the first day of a Dividend Period.

                           (vi)  "Available AMPS" shall have the respective
         meanings specified in specified in paragraph 8(d)(i) below.

                           (vii) "Bid" and "Bids" shall have the respective
         meanings specified in paragraph 8(b)(i) below.

                                       42

<PAGE>

                           (viii)  "Bidder" and "Bidders" shall have the
         respective meanings specified in paragraph 8(b)(i) below.

                           (ix)    "Broker-Dealer" shall mean any broker-dealer,
         or other entity permitted by law to perform the functions required of a
         Broker-Dealer in this paragraph 8, that has been selected by the
         Corporation and has entered into a Broker-Dealer Agreement with the
         Auction Agent that remains effective.

                           (x)     "Broker-Dealer Agreement" shall mean an
         agreement between the Auction Agent and a Broker-Dealer pursuant to
         which such Broker-Dealer agrees to follow the procedures specified in
         this paragraph 8.

                           (xi)    "Existing Holder", when used with respect to
         shares of AMPS, shall mean a Person who has signed a Purchaser's Letter
         and is listed as the beneficial owner of such shares of AMPS in the
         records of the Auction Agent.

                           (xii)   "Hold Order" and "Hold Orders" shall have the
         respective meaning specified in paragraph 8(b)(i) below.

                           (xiii)  "Order" shall have the meaning specified in
         paragraph 8(b)(i) below.

                           (xiv)   "Outstanding" shall mean, as of any date,
         shares of AMPS theretofore issued by the Corporation except, without
         duplication, (A) any shares of AMPS theretofore cancelled or delivered
         to the Auction Agent for cancellation, or redeemed by the Corporation,
         or as to which a Notice of Redemption shall have been given and moneys
         shall have been deposited in trust by the Corporation pursuant to
         paragraph 5(g) and (B) any shares of AMPS as to which the Corporation
         or any Affiliate thereof shall be an Existing Holder.

                           (xv)    "Person" shall mean and include an
         individual, partnership, a corporation, a trust, an unincorporated
         association, a joint venture or other entity or a government or any
         agency or political subdivision thereof.

                           (xvi)   "Potential Holder" shall mean any Person,
         including any Existing Holder, (A) who shall have executed a
         Purchaser's Letter and (B) who may be interested in acquiring shares of
         AMPS (or, in the case of an Existing Holder, additional shares of
         AMPS).

                           (xvii)  "Securities Depository" shall mean The
         Depositor Trust Company and its successors and assigns or any other
         securities depository selected by the Corporation which agrees to
         follow the procedures required to be followed by such securities
         depository in connection with shares of AMP.

                           (xviii) "Sell Order" and "Sell Orders" shall have the
         respective meanings specified in paragraph 8(b)(i) below.

                           (xix)   "Submission Deadline" shall mean 12:30 P.M.,
         New York City time, on any Auction Date or such other time on any
         Auction Date (as may be specified by the Auction Agent from time to
         time) as the time by which each Broker-Dealer must submit to the
         Auction Agent in writing all Orders obtained by it for the Auction to
         be conducted on such Auction Date.

                           (xx)    "Submitted Bid" any "Submitted Bids" shall
         have the respective meanings specified in paragraph 8(d)(i) below.

                                       43

<PAGE>

                           (xxi)   "Submitted Hold Order" and "Submitted Hold
         Orders" shall have the respective meanings specified in paragraph
         8(d)(i) below.

                           (xxii)  "Submitted Order" and "Submitted Orders"
         shall have the respective meanings specified in paragraph 8(d)(i)
         below.

                           (xxiii) "Submitted Sell Order" and "Submitted Sell
         Orders" shall have the respective meanings specified in paragraph
         8(d)(i) below.

                           (xxiv)  "Sufficient Clearing Bids" shall have the
         meaning specified in paragraph 8(d)(i) below.

                           (xxv)   "Winning Bid Rate" shall have the meaning
         specified in paragraph 8(d)(i) below.

                  (b)      Orders by Existing Holders and Potential Holders.

                           (i)     On or prior to the Submission Deadline on
         each Auction Date:

                                   (A) each Existing Holder may submit to a
                  Broker-Dealer information as to:

                                       (1) the number of Outstanding shares, if
                           any, of AMPS held by such Existing Holder which such
                           Existing Holder desires to continue to hold without
                           regard to the Applicable Rate for the next Dividend
                           Period;

                                       (2) the number of Outstanding shares, if
                           any, of AMPS held by such Existing Holder which such
                           Existing Holder desires to continue to hold, provided
                           that the Applicable Rate for the next succeeding
                           Dividend Period shall not be less than the rate per
                           annum then specified by such Existing Holder; and/or

                                       (3) the number of Outstanding shares, if
                           any, of AMPS held by such Existing Holder which such
                           Existing Holder offers to sell without regard to the
                           Applicable Rate for the next succeeding Dividend
                           Period; and

                                   (B) each Broker-Dealer, using a list of
                  Potential Holders that shall be maintained in good faith for
                  the purposes of conducting a competitive Auction, shall
                  contact Potential Holders including Persons that are not
                  Existing Holders, on such list to determine the number of
                  Outstanding shares, if any, of AMPS which each such Potential
                  Holder offers to purchase provided that the Applicable Rate
                  for the next succeeding Dividend Period shall not be less than
                  the rate per annum specified by such Potential Holder.

                  For the purposes hereof, the communication to a Broker-Dealer
of information referred to in clause (A) or (B) of this paragraph 8(b)(i) is
hereinafter referred to as an "Order" and collectively as "Orders" and each
Existing Holder and each Potential Holder placing an Order is hereinafter
referred to as a "Bidder" and collectively as "Bidders"; an order containing the
information referred to in clause (A)(1) of this paragraph 8(b)(i) is
hereinafter referred to as a "Hold Order" and collectively as "Hold Orders"; an
Order containing the information referred to in clause (A)(2) or (B) of this
paragraph 8(b)(i) is hereinafter referred to as a "Bid" and collectively as
"Bids"; and an Order containing the information

                                       44

<PAGE>

referred to in clause (A)(3) of this paragraph 8(b) is hereinafter referred to
as a "Sell Order" and collectively as "Sell Orders".

                           (ii)(A) A bid by an Existing Holder shall constitute
                  an irrevocable offer to sell:

                                   (1)  the number of Outstanding shares of AMPS
                           specified in such Bid if the Applicable Rate
                           determined on such Auction Date shall be less than
                           the rate per annum specified in such Bid;

                                   (2)  such number or a lesser number of
                           Outstanding shares of AMPS to be determined as set
                           forth in paragraph 8(e)(i)(D) if the Applicable Rate
                           determined on such Auction Date shall be equal to the
                           rate per annum specified therein; or

                                   (3)  a lesser number of Outstanding shares of
                           AMPS to be determined as set forth in paragraph
                           8(e)(ii)(C) if such specified rate, per annum, shall
                           be higher than the Maximum Applicable Rate and
                           Sufficient Clearing Bids do not exist.

                           (B)     A Sell Order by an Existing Holder shall
                  constitute an irrevocable offer to sell;

                                   (1)  the number of Outstanding shares of AMPS
                           specified in such Sell Order; or

                                   (2)  such number or a lesser number of
                           Outstanding shares of AMPS to be determined as set
                           forth in paragraph 8(e)(ii)(C) if Sufficient Clearing
                           Bids do not exist.

                           (C)     A Bid by a Potential Holder shall constitute
                  an irrevocable offer to purchase:

                                   (1)  the number of Outstanding shares of AMPS
                           specified in such Bid if the Applicable Rate
                           determined on such Auction Date shall be higher than
                           the rate per annum specified in such Bid; or

                                   (2)  such number or a lesser number of
                           outstanding shares of AMPS to be determined as set
                           forth in paragraph 8(e)(i)(E) if the Applicable Rate
                           determined on such Auction Date shall be equal to the
                           rate per annum specified therein.

                  (c)      Submission of Orders by Broker-Dealers to Auction
                           Agent.


                           (i)     Each Broker-Dealer shall submit in writing to
         the Auction Agent prior to the Submission Deadline on each Auction Date
         all Orders obtained by such Broker-Dealer specifying with respect to
         each Order:

                                   (A)  the name of the Bidder placing such
                  Order;

                                   (B)  the aggregate number of Outstanding
                  shares of AMPS that are the subject of such Order;

                                       45



<PAGE>

                     (C) to the extent that such Bidder is an Existing Holder:

                         (1)  the number of Outstanding shares, if any, of AMPS
               subject to any Hold Order placed by such Existing Holder;

                         (2)  the number of Outstanding shares, if any, of AMPS
               subject to any Bid placed by such Existing Holder and the rate
               per annum specified in such Bid; and

                         (3)  the number of Outstanding shares, if any, of AMPS
               subject to any Sell Order placed by such Existing Holder; and

                     (D) to the extent such Bidder is a Potential Holder the
          rate per annum specified in such Potential Holder's Bid.

               (ii)  If any rate per annum specified in any Bid contains more
     than three figures to the right of the decimal point, the Auction Agent
     shall round such rate up to the next highest one thousandth (.001) of 1%.

               (iii) If an Order or Orders covering all of the Outstanding
     shares of AMPS held by an Existing Holder is not submitted to the Auction
     Agent prior to the Submission Deadline, the Auction Agent shall deem a Hold
     Order to have been submitted on behalf of such Existing Holder covering the
     number of Outstanding shares of AMPS held by such Existing Holder and not
     subject to Orders submitted to the Auction Agent.

               (iv)  If one or more Orders on behalf of an Existing Holder
     covering in the aggregate more than the number of Outstanding shares of
     AMPS held by an Existing Holder are submitted to the Auction Agent, such
     Orders shall be considered valid as follow and in the following order of
     Priority:

                     (A) any Hold Order submitted on behalf of such Existing
          Holder shall be considered valid up to and including the number of
          Outstanding shares of AMPS held by such Existing Holder; provided that
          if more than one Hold Order is submitted on behalf of such Existing
          Holder and the number of shares of AMPS subject to such Hold Orders
          exceeds the number of Outstanding shares of AMPS held by such Existing
          Holder, the number of shares of AMPS subject to each of such Hold
          Orders shall be reduced pro rata so that such Hold Orders, in the
          aggregate, cover the number of Outstanding shares of AMPS held by such
          Existing Holder;

                     (B) any Bids submitted on behalf of such Existing Holder
          shall be considered valid, in the ascending order of their respective
          rates per annum if more than one Bid is submitted on behalf of such
          Existing Holder, up to and including the excess of the number of
          Outstanding shares of AMPS held by such Existing Holder over the
          number of shares of AMPS subject to any Hold Order referred to in
          paragraph 8(c)(iv)(A) above (and if more than one Bid submitted on
          behalf of such Existing Holder specifies the same rate per annum and
          together they cover more than the remaining number of shares than can
          be the subject of valid Bids after application of paragraph
          8(c)(iv)(A) above and of the foregoing portion of this paragraph
          8(c)(iv)(B) to any Bid or Bids specifying a lower rate or rates per
          annum, the number of shares subject to each of such Bids shall be
          reduced pro rata so that such Bids, in the aggregate, cover exactly
          such remaining number of shares); and the number of shares, if any,
          subject to Bids not valid

                                       46

<PAGE>

          under this paragraph 8(c)(iv)(B) shall be treated as the subject of a
          Bid by a Potential Holder; and

                    (C)  any Sell Order shall be considered valid up to and
          including the excess of the number of Outstanding shares of AMPS held
          by such Existing Holder over the number of shares of AMPS subject to
          Hold Orders referred to in paragraph 8(c)(iv)(A) and Bids referred to
          in paragraph 8(c)(iv)(B), provided that if more than one Sell Order is
          submitted on behalf of any Existing Holder and the number of shares of
          AMPS subject to such Sell Orders is greater than such excess, the
          number of shares of AMPS subject to each of such Sell Orders shall be
          reduced pro rata so that such Sell Orders; in the aggregate, cover
          exactly the number of shares of AMPS equal to such excess.

               (v)  If more than one Bid is submitted on behalf of any Potential
     Holder, each Bid submitted shall be a separate Bid with the rate and number
     of shares of AMPS therein specified.

          (d)  Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate.

               (i)  Not earlier than the Submission Deadline on each Auction
     Date, the Auction Agent shall assemble all Orders submitted or deemed
     submitted to it by the Broker-Dealers (each such Order as submitted or
     deemed submitted by a Broker-Dealer being hereinafter referred to as a
     "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order, as
     the case may be, or as a "Submitted Order" and collectively as "Submitted
     Hold Orders," "Submitted Bids" or "Submitted Sell Orders," as the case may
     be, or as "Submitted Orders") and shall determine:

                    (A)  the excess of the total number of Outstanding shares of
          AMPS over the number of Outstanding shares of AMPS that are subject of
          Submitted Hold Orders (such excess being hereinafter referred to as
          the "Available AMPS");

                    (B)  from the Submitted Orders whether the number of
          Outstanding shares of AMPS that are the subject of Submitted Bids by
          Potential Holders specifying one or more rates per annum equal to or
          lower than the Maximum Applicable Rate exceeds or is equal to the sum
          of:

                         (1)  the number of Outstanding shares of AMPS that are
               the subject of Submitted Bids by Existing Holders specifying one
               or more rates per annum higher than the Maximum Applicable Rate;
               and

                         (2)  the number of Outstanding shares of AMPS that are
               subject to Submitted Sell Orders (if such excess or such equality
               exists (other than because the number of Outstanding shares of
               AMPS in clauses (1) and (2) above are each zero because all of
               the Outstanding shares of AMPS are the subject of Submitted Hold
               Orders), such Submitted Bids by Potential Holders being
               hereinafter referred to collectively as "Sufficient Clearing
               Bids"); and

                    (C)  if Sufficient Clearing Bids exist, the lowest rate per
          annum specified in the Submitted Bids (the "Winning Bid Rate") that
          if:

                                       47

<PAGE>

                         (1)  each Submitted Bid from Existing Holders
               specifying the Winning Bid Rate and all other Submitted Bids from
               Existing Holders specifying lower rates per annum were rejected,
               thus entitling such Existing Holders to continue to hold the
               shares of AMPS that are the subject of such Submitted Bids, and

                         (2)  each Submitted Bid from Potential Holders
               specifying the Winning Bid Rate and all other Submitted Bids from
               Potential Holders specifying lower rates per annum were accepted,
               thus entitling those Potential Holders to purchase the shares of
               AMPS that are the subject of such Submitted Bids, would result in
               the number of shares subject to all submitted Bids specifying the
               Winning Bid Rate or a lower rate per annum being at least equal
               to the Available AMPS.

               (ii) Promptly after the Auction Agent has made the determination
     pursuant to paragraph 8(d)(i), the Auction Agent shall advise the
     Corporation of the Maximum Applicable Rate and, based on all such
     determinations, the Applicable Rate for the next succeeding Dividend Period
     as follows:

                    (A)  if Sufficient Clearing bids exist, that the Applicable
          Rate for the next succeeding Dividend Period shall be equal to the
          Winning Bid Rate;

                    (B)  if Sufficient Clearing Bids do not exist (other than
          because all of the Outstanding shares of AMPS are the subject of
          Submitted Hold Orders), that the Applicable Rate for the next
          succeeding Dividend Period shall be equal to the Maximum Applicable
          Rate; or

                    (C)  if all the shares of AMPS are the subject of Submitted
          Hold Orders, that the Applicable Rate for the next succeeding Dividend
          Period shall be equal to 90% of the 30-day "AA" Composite Commercial
          Paper Rate on the date of the Auction.

          (e)  Acceptance and Rejection of Submitted Bids and Submitted Sell
Orders and Allocations of Shares.

          Based on the determinations made pursuant to paragraph 8(d)(i), the
Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the
Auction Agent shall take such other action as set forth below:

               (i)  If Sufficient Clearing Bids have been made, subject to the
     provisions of paragraph 8(e)(iii) and 8(e)(iv), Submitted Bids and
     Submitted Sell Orders shall be accepted or rejected in the following order
     of priority and all other Submitted Bids shall be rejected:

                    (A)  the Submitted Sell Orders and Existing Holders shall be
          accepted and the Submitted Bids of each of the Existing Holders
          specifying any rate per annum that is higher than the Winning Bid Rate
          shall be accepted, thus requiring each such Existing Holder to sell
          the Outstanding shares of AMPS that are the subject of such Submitted
          Sell Order or Submitted Bid;

                    (B)  the Submitted Bid of each of the Existing Holders
          specifying any rate per annum that is lower than the Winning Bid Rate
          shall be accepted, thus entitling

                                       48

<PAGE>

          each such Existing Holder to continue to hold the Outstanding shares
          of AMPS that are the subject of such Submitted Bid;

                    (C)  the Submitted Bid of each of the Potential Holders
          specifying any rate per annum that is lower than the Winning Bid Rate
          shall be accepted, thus requiring each such Potential Holder to
          purchase the shares of AMPS that are the subject of such Submitted
          Bids;

                    (D)  the Submitted Bid of each of the Existing Holders
          specifying a rate per annum that is equal to the Winning Bid Rate
          shall be rejected, thus entitling such Existing Holder to continue to
          hold the Outstanding shares of AMPS that are the subject of such
          Submitted Bid, unless the number of Outstanding shares of AMPS subject
          to all such Submitted Bids shall be greater than the number of
          Outstanding shares of AMPS ("Remaining Shares") equal to the excess of
          the Available AMPS over the number of Outstanding shares of AMPS
          subject to Submitted Bids described in paragraphs 8(e)(i)(B) and
          8(e)(i)(C), in which event the Submitted Bids of each such Existing
          Holder shall be accepted, and each such Existing Holder shall be
          required to sell Outstanding shares of AMPS obtained by multiplying
          (x) the number of Remaining Shares by (y) a fraction the numerator of
          which shall be the number of Outstanding shares of AMPS held by such
          Existing Holder subject to such Submitted Bid and the denominator of
          which shall be the sum of the numbers of Outstanding shares of AMPS
          subject to such Submitted bids made by all such Existing Holders that
          specified a rate per annum equal to the Winning Bid Rate; and

                    (E)  the Submitted Bid of each of the Potential Holders
          specifying a rate per annum that is equal to the Winning Bid Rate
          shall be accepted, thus requiring each such Potential Holder to
          purchase the shares of AMPS that are the subject of such Submitted
          Bids; but only in an amount equal to the number of Outstanding Shares
          of AMPS obtained by multiplying (x) the difference between the
          Available AMPS and the number of shares of AMPS subject to Submitted
          Bids described in paragraphs 8(e)(i)(B), 8(e)(i)(C) and 8(e)(i)(D) by
          (y) a fraction the numerator of which shall be the number of
          Outstanding shares of AMPS subject to such Submitted Bid and the
          denominator of which shall be the sum of the numbers of Outstanding
          shares of AMPS subject to such Submitted Bids made by all such
          Potential Holders that specified rates per annum equal to the Winning
          Bid Rate.

               (ii) If Sufficient Clearing bids have not been made (other than
     because all of the Outstanding shares of AMPS are subject to Submitted Hold
     Orders), subject to the provisions of paragraph 8(e)(iii), Submitted Orders
     shall be accepted or rejected as follows in the following order of priority
     and all other Submitted Bids shall be rejected:

                    (A)  the Submitted Bid of each Existing Holder specifying
          any rate per annum that is equal to or lower than the Maximum
          Applicable rate shall be rejected, thus entitling such Existing Holder
          to continue to hold the Outstanding shares of AMPS that are the
          subject of such Submitted Bid;

                    (B)  the Submitted Bid of each Potential Holder specifying
          any rate per annum that is equal to or lower than the Maximum
          Applicable Rate shall be accepted, thus requiring such Potential
          Holder to purchase the Outstanding shares of AMPS that are the subject
          of such Submitted Bid; and

                                       49

<PAGE>

                     (C)  the Submitted Bid of each Existing Holder specifying
          any rate per annum that is higher than the Maximum Applicable Rate
          shall be accepted and the Submitted Sell Order of each Existing Holder
          shall be accepted, thus requiring each such Existing Holder to sell
          the shares of AMPS that are the subject of such Submitted Bid or
          Submitted Sell Order, in both cases only in an amount equal to the
          difference between (1) the number of Outstanding shares of AMPS then
          held by such Existing Holder subject to such Submitted Bid or
          Submitted Sell Order and (2) the number of Outstanding shares of AMPS
          obtained by multiplying (x) the difference between the Available AMPS
          and the aggregate number of Outstanding shares of AMPS subject to
          Submitted Bids described in paragraphs 8(e)(ii)(A) and 8(e)(ii)(B) by
          (y) a fraction the numerator of which shall be the number of AMPS held
          by such Existing Holder subject to such Submitted Bid or Submitted
          Sell Order and the denominator of which shall be the number of
          Outstanding shares of AMPS subject to all such Submitted Bids and
          Submitted Sell Orders.

               (iii) If, as a result of the procedures described in paragraphs
     8(e)(i) or 8(e)(ii), any Existing Holder would be entitled to or required
     to sell, or any Potential Holder would be entitled or required to purchase,
     a fraction of a share of AMPS on any Auction Date, the Auction Agent shall,
     in such manner as in its sole discretion it shall determine, round up or
     down the number of shares of AMPS to be purchased or sold by any Existing
     Holder or Potential Holder on such Auction Date so that each Outstanding
     share of AMPS purchased or sold by each Existing Holder or Potential Holder
     on such Auction Date shall be a whole share of AMPS.

               (iv)  If, as a result of the procedures described in paragraph
     8(e)(i), any Potential Holder would be entitled or required to purchase
     less than a whole shares of AMPS on any Auction Date, the Auction Agent
     shall, in such manner as in its sole discretion it shall determine,
     allocate shares of AMPS for purchase among Potential Holders so that only
     whole shares of AMPS are purchased on such Auction Date by any Potential
     Holder, even if such allocation results in one or more of such Potential
     Holders not purchasing any shares of AMPS on such Auction Date.

               (v)   Based on the results of each Auction, the Auction Agent
     shall determine, with respect to each Broker-Dealer that submitted Bids or
     Sell Orders on behalf of Existing Holders or Potential Holders, the
     aggregate number of Outstanding shares of AMPS to be purchased and the
     aggregate number of Outstanding shares of AMPS to be sold by such Potential
     Holders and Existing Holders and, to the extent that such aggregate number
     of Outstanding shares to be sold differ, the Auction Agent shall determine
     to which other Broker-Dealer or Broker-Dealers acting for one or more
     purchasers such Broker-Dealer shall deliver, or from which other
     Broker-Dealer of Broker-Dealers acting for one or more sellers such
     Broker-Dealer shall receive, as the case may be, Outstanding shares of
     AMPS.

          (f)  Participation in Auctions.

          Neither the Corporation nor any Affiliate of the Corporation may
submit an Order in any Auction.

          9.   Miscellaneous.

          (a)  To the extent permitted by applicable law, the Board of
Directors may interpret or adjust the provisions hereof to resolve any
inconsistency or ambiguity, remedy any formal defect or make any other change or
modification which does not adversely affect the rights of Holders of shares of
AMPS and if such inconsistency or ambiguity reflects an incorrect provision
hereof than the Board of

                                       50

<PAGE>

Directors may authorize the filing of a Certificate of Amendment or a
Certificate of Correction, as the case may be.

          (b)  If there is a Securities Depository, one certificate for all of
the shares of AMPS of any series shall be issued to the Securities Depository
and registered in the name of the Securities Depository or its nominee. Such
certificate shall bear a legend to the effect that such certificate is issued
subject to the provisions contained in these Articles Supplementary and each
Purchaser's Letter. The Corporation will also issue stop-transfer instructions
to the Paying Agent for the shares of AMPS. Except as provided in paragraph (c)
below, the Securities Depository or its nominee will be the Holder, and no
beneficial owner shall receive certificates representing its ownership interest
in such shares.

          (c)  If there is no Securities Depository, the Corporation may at its
option issue one or more new certificates with respect to such shares (without
the legend referred to in paragraph 9(b) registered in the names of the
beneficial owners or their nominees and rescind the stop-transfer instruction
referred to in paragraph 9(b) with respect to such shares.

          (d)  The Corporation shall exercise its best efforts to maintain an
Auction Agent pursuant to an agreement containing terms not materially less
favorable to the Corporation than the terms of the Auction Agent Agreement first
entered into by the Corporation pursuant to the resolutions adopted by the Board
of Directors on December 13, 1988.

          (e)  The Corporation shall use its best efforts to maintain a rating
of the AMPS from each of the Rating Agencies.

          (f)  All notice of communications, unless otherwise specified in the
By-laws of the Corporation or these Articles Supplementary, shall be
sufficiently given if in writing and delivered in person or mailed by
first-class mail, postage prepaid. Notice shall be deemed given on the earlier
of the date received or the date seven days after which such notice is mailed.

          (g)  So long as any shares of AMPS shall be outstanding, the
Corporation shall not engage in "short sales" or "hedging" or enter into
"futures contracts" or "option contracts" (other than Forward Contracts) with
respect to the Eligible Portfolio Property.

                                       51

<PAGE>

IN WITNESS WHEREOF, THE FIRST AUSTRALIA PRIME INCOME FUND, INC., has caused
these presents to be signed in its name and on its behalf by its President and
its corporate seal to be hereunder affixed and attested by its Assistant
Secretary on this 18th day of December 1992, and its President acknowledges that
these Articles Supplementary are the act and deed of The First Australian Prime
Income Fund, Inc., and, under the penalties of perjury, that the matters and
facts set forth herein with respect to authorization and approval are true in
all material respects to the best of his knowledge, information and belief.


                                                     THE FIRST AUSTRALIA PRIME
                                                     INCOME FUND, INC.


                                                     By:  /s/ Brian M. Sherman
                                                          Brian M. Sherman
                                                          President


ATTEST:


/s/Margaret A. Bancroft
Assistant Secretary

                                       52

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.A7
<SEQUENCE>9
<FILENAME>dex99a7.txt
<DESCRIPTION>EXHIBIT A7
<TEXT>
<PAGE>

                                                                 EXHIBIT (A)(7)

                  THE FIRST AUSTRALIA PRIME INCOME FUND, INC.

                   Articles Supplementary creating a series of
                         Auction Market Preferred Stock

         The First Australia Prime Income Fund, Inc., a Maryland corporation
having its principal Maryland office in the City of Baltimore in the State of
Maryland (the "Corporation"), certifies to the State Department of Assessments
and Taxation of Maryland that:

         FIRST: Pursuant to authority expressly vested in the board of directors
of the Corporation by article fifth of its charter, the board of directors
authorized the issuance of a series of up to 500 shares of its authorized
preferred stock, par value $.01 per share, liquidation preference $100,000 per
share, designated Auction Market Preferred Stock, Series F.

         SECOND: Pursuant to section 2-411 of the Maryland General Corporation
law and authority granted by article fourth of the Corporation's by-laws, the
board of directors of the Corporation has appointed a pricing committee (the
"Pricing Committee") and has authorized such Pricing Committee to fix,
consistent with and subject to, the authorization referred to in Article FIRST
of these Articles Supplementary, the terms of the shares of Auction Market
Preferred Stock, Series F.

         THIRD: The preferences, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, of the shares
of such series of preferred stock are as follows:

                                   DESIGNATION

         Series F: A series of 500 shares of preferred stock, par value $.01 per
share, liquidation preference $100,000 per share, is hereby designated "Auction
Market Preferred Stock Series F." Each share of Auction Market Preferred Stock,
Series F shall be issued on the Date of Original Issue (as herein defined); have
an Initial Dividend Payment Date (as herein defined) of January 10, 1994; and
have such other preferences, limitations and relative voting rights, in addition
to those required by applicable law or set forth in the Corporation's Articles
of Incorporation applicable to preferred stock of the Corporation, as are set
forth in these Articles Supplementary. The Auction Market Preferred Stock,
Series F shall constitute a separate series of preferred stock of the
Corporation, and each share of Auction Market Preferred Stock, Series F shall be
identical.

         1.  Definitions.

             Capitalized terms not defined in this paragraph 1 shall have the
respective meanings specified in paragraph 8(a) hereof. Unless the context or
use indicates another or different meaning, the following terms shall have the
following meanings, whether used in the singular or plural:

             "`AA' Composite Commercial Paper Rate," on any date, means (i) the
interest equivalent of the 30-day rate on commercial paper placed on behalf of
issuers whose corporate bonds are rated "AA" by S&P, or the equivalent of such
rating by S&P or another rating agency,

<PAGE>

as such 30-day rate is made available on a discount basis or otherwise by the
Federal Reserve Bank of New York for the Business Day immediately preceding such
date, or (ii) in the event that the Federal Reserve Bank of New York does not
make available such a rate, then the arithmetic average of the interest
equivalent of the 30-day rate on commercial paper placed on behalf of such
issuers, as quoted to the Auction Agent on a discount basis or otherwise by the
Commercial Paper Dealers for the close of business on the Business Day
immediately preceding such date. If any Commercial Paper Dealer does not quote a
rate required to determine the 30-day "AA" Composite Commercial Paper Rate, the
30-day "AA" Composite Commercial Paper Rate will be determined on the basis of
the quotation or quotations furnished by any Substitute Commercial Paper Dealer
or Substitute Commercial Paper Dealers selected by the Corporation to provide
such rate or rates not being supplied by the Commercial Paper Dealer. "Interest
Equivalent" as used herein means the equivalent yield on a 360-day basis of a
discount basis security to an interest bearing security.

             "Accountant's Confirmation" has the meaning set forth in paragraph
7(b)(iii) hereof.

             "Administrator" means Prudential Mutual Funds Management, Inc. or
any successor administrator to the Corporation who acts in such capacity.

             "Affiliate" shall mean any Person known to the Auction Agent to be
controlled by, in control of, or under common control with, the Corporation.

             "Agent Member" means the member of the Securities Depository that
will act on behalf of a Beneficial Owner or a Potential Beneficial Owner.

             "AMPS" means the Auction Market Preferred Stock, Series F, and
where appropriate, any other series of the Corporation's Auction Market
Preferred Stock.

             "AMPS Basic Maintenance Amount" means, as of any date, the dollar
amount equal to the sum of (a) $100,000 times the number of shares of AMPS then
outstanding; (b) the aggregate liquidation preference of other Preferred Stock
then outstanding, if any; (c) the Dividend Coverage Amount; (d) the aggregate
Projected Dividend Amount; (e) the aggregate principal amount of any then
outstanding indebtedness of the Corporation for money borrowed; (f) projected
expenses of the Corporation for the next succeeding three-month period; and (g)
the greater of $200,00 or the Corporation's current liabilities as of such date
to the extent not otherwise reflected in any of (a) through (f) above. The Board
of Directors shall have the authority, to the extent permitted by Maryland law,
to adjust, modify, alter or change from time to time the elements comprising the
AMPS Basic Maintenance Amount from those set forth in these Articles
Supplementary if the Rating Agencies advise the Corporation in writing that the
change will not adversely affect their respective then-current ratings of the
AMPS.

             "AMPS Basic Maintenance Cure Date," with respect to the failure by
the Corporation to maintain the AMPS Basic Maintenance Amount (as required by
paragraph 7(b) hereof) as of each Valuation Date, means the fifth Business Day
following such Valuation Date.

             "ANNIE MAEs" are securities issued against mortgage pools by
Australian National Mortgage Pool Agency Ltd., an affiliate of Security Pacific
National Bank.

                                       2

<PAGE>

             "Applicable Percentage has the meaning set forth under "Maximum
Applicable Rate" below.

             "Applicable Rate" has the meaning specified in paragraph 3(c)(i)
below.

             "Articles of Incorporation" means the Articles of Incorporation of
the Corporation, as amended and restated from time to time, including as amended
by these Articles Supplementary.

             "Auction" means each operation of the Auction Procedures.

             "Auction Agent" means Chemical Bank unless and until another
commercial bank, trust company, or other financial institution appointed by a
resolution of the Board of Directors enters into an agreement with the
Corporation to follow the Auction Procedures for the purpose of determining the
Applicable Rate and to act as transfer agent, registrar, paying agent and
redemption agent.

             "Auction Agent Agreement" has the meaning specified in paragraph
3(c)(i) below.

             "Auction Date" has the meaning specified in paragraph 8(a) below.

             "Auction Procedures" means the procedures for conducting Auctions
set forth in paragraph 8 below.

             "Australian Bank Bills" means bills of exchange (as defined in the
Bills of Exchange Act of the Commonwealth of Australia) issued, accepted or
endorsed by Australian banks with (x) in the case of S&P (i) a rating from S&P
at least as high as S&P's then-current rating for the AMPS or (ii) in the case
of any Bank Bill with a remaining term to maturity from the date of
determination of 365 days or less, a rating from S&P at least as high as S&P's
short-term rating comparable to its then-current rating for the AMPS and (y) in
the case of Moody's (i) a long-term foreign currency debt rating from Moody's of
at least Aa3 or (ii) in the case of any Bank Bill with a remaining term to
maturity from the date of determination of 180 days or less, a rating from
Moody's of Prime-1 or (iii) any other rating as Moody's shall approve in
writing.

             "Australian Corporate Bonds" means debt obligations of Australian
corporations (other than Australian Government Securities, Australian
Semi-Government Securities, Australian Bank Bills, Australian Eurobonds,
Australian Exchangeable Eurobonds and Australian Short-Term Securities)
provided, that such debt obligations shall not be deemed to be Eligible
Portfolio Property by S&P unless they have the following characteristics: (a)
the principal amount outstanding on the date of determination is at least equal
to A$50 million, (b) the security is publicly traded, (c) the security is
non-callable, or, if the security is callable, the basis for pricing is to the
call date, (d) the security is rated at least AA- by S&P, (e) the security has a
tender panel, (f) the maturity date of the security is not later than the 10th
anniversary of the Valuation Date of such security and (g) the security is
issued by one of the following issuers:

                                       3

<PAGE>

               (i)  issuers with a public long-term S&P rating or whose parent
         has a public long-term rating and there is an explicit guarantee
         backing the subsidiary's debt service payments ("Guaranteed Australian
         Corporate Bonds"). These issuers currently include:

                    FANMAC Premier Trust Co. No. 1-22 and any subsequent issues
                    rated by
                    S&P - Australian Ratings
                    Ford Credit Australia
                    National Australia Bank
                    State Bank of Victoria
                    Custom Credit Corporation Ltd.

               (ii) Issuers, which shall be designated in writing from time to
         time by S&P, without a public long-term S&P rating but whose parent has
         a long-term S&P rating but has not explicitly guaranteed the
         subsidiary's debt service Payments ("Non-Guaranteed Corporate Bonds").

               In addition, if the determination is being made for S&P, (a) not
more than 10% of the aggregate Discounted Value of the Eligible Portfolio
Property of the Corporation can consist Australian Corporate Bonds issued by a
single issuer, (b) not more than 50% (if the issue is rated AAA by S&P) or 33.3%
(if the issue is rated AA or A by S&P) or 20% (if the issue is rated BBB by S&P)
of the aggregate Discounted Value of the Eligible Portfolio Property of the
Corporation can consist of Australian Corporate Bonds from issues representing a
single industry, (c) not more than 5% of the then-outstanding principal amount
of any one issue can be included in Eligible Portfolio Property and (d) not more
than 20% of the outstanding aggregate principal amount of the Australian
Corporate Bonds held by the Corporation and included in Eligible Portfolio
Property shall be comprised of securities with a then outstanding issue size of
less than A$100 million.

               The Board of Directors shall have the authority to adjust,
modify, alter or change from time to time the list of securities and eligibility
criteria as set forth above if each Rating Agency advises the Corporation in
writing that the change or specification will not adversely affect its
then-current rating of the AMPS.

               "Australian Currency" means such coin or currency of Australia as
at the time shall be legal tender for payment of public and private debts, as
well as cash deposits with Offshore Banking Units of Banque Nationale de Paris.

               "Australian Eurobonds"(including guaranteed and non-guaranteed
Eurobonds) means debt securities which are denominated in Australian Currency,
and which have the following characteristics: (a) the principal amount
outstanding on the date of determination is at least equal to A$50 million, (b)
the security is publicly traded, (c) the security is non-callable, or, if the
security is callable, the basis for pricing is to the call date, (d) the
security is rated at least AA- by S&P, (e) the maturity date of the security is
not later than the 10th anniversary of the Valuation Date of such security and
(f) the security is issued by one of the following issuers:

                                       4

<PAGE>

               (i)  Issuers with a public long-term S&P rating or whose parent
         has a public long-term S&P rating and there is an explicit guarantee
         backing the subsidiary's debt service payments ("Australian Guaranteed
         Eurobonds"). These issuers currently include:

                    Australian Telecon
                    Finnish Import Credit Corp.
                    National Australia Bank
                    State Bank of New South Wales
                    State Electricity of Victoria
                    Swedish Export Credit Corp.

               (ii) Issuers, which shall be designated in writing from time to
         time by S&P, without a public long-term S&P rating but whose parent has
         a long-term S&P rating but has not explicitly guaranteed the
         subsidiary's debt service payments ("Australian Non-Guaranteed
         Eurobonds").

               In addition, if the determination is being made for S&P, (a) not
more than 10% of the aggregate Discounted Value of the Eligible Portfolio
Property of the Corporation can consist of Australian Eurobonds from a single
issuer, (b) not more than 50% (if the issue is rated AAA by S&P) or 33.3% (if
the issue is rated AA or A by S&P) or 20% (if the issue is rated BBB by S&P) of
the aggregate Discounted Value of the Eligible Portfolio Property of the
Corporation can consist of Australian Eurobonds from issues representing a
single industry, (c) not more than 5% of the then outstanding principal amount
of any one issue can be included in Eligible Portfolio Property and (d) not more
than 20% of the outstanding aggregate principal amount of the Australian
Eurobonds held by the Corporation and included in S&P Eligible Portfolio
Property shall be comprised of securities with an outstanding issue size of less
than A$50 million.

               The Board of Directors shall have the authority to adjust,
modify, alter or change from time to time the list of securities and eligible
criteria set forth above if each Rating Agency advises the Corporation in
writing that the change or specification will not adversely affect its then
current rating of the AMPS.

               "Australian Exchangeable Eurobonds" means securities which are
denominated in Australian Currency issued by the New South Wales Treasury
Corporation or the Queensland Treasury Corporation which confer upon the holder
an option to exchange such securities for, respectively, a like principle amount
of New South Wales Treasury Inscribed Stock or Queensland Treasury Corporation
Inscribed Stock of identical maturity and coupon.

               "Australian Government Securities" means, in the case of S&P, all
publicly traded securities issued and guaranteed by the Government of the
Commonwealth of Australia with fixed maturities (i.e., no perpetuals) and in the
case of Moody's, any publicly traded security which is (i) either issued by the
Government of the Commonwealth of Australia and is rated Aaa by Moody's or is
guaranteed by the Government of the Commonwealth of Australia and is rated Aaa
by Moody's (ii) is denominated and payable in Australian Currency or is
convertible into a security constituting Eligible Portfolio Property by Moody's
and (iii) is not a variable rate, indexed-linked, zero coupon or stripped
security.

                                       5

<PAGE>

               "Australian Ratings" means Australian Ratings Pty Ltd or its
successors.

               "Australian Securities" means ANNIE MAEs, Australian Bank Bills,
Australian Corporate Bonds, Australian Eurobonds, Australian Exchangeable
Eurobonds, Australian Government Securities, Australian Semi-Government
Securities, Australian Short-term Securities, MMSs, MTCs, and NMMC Securities.

               "Australian Semi-Government Securities" means publicly traded
semi-government securities with a fixed maturity (i.e., no perpetuals) issued by
the following entities which, except as indicated are explicitly guaranteed by
the Government of the Commonwealth of Australia or the respective Australian
State and which, in the case of S&P, include Australian Exchangeable
Eurobondsand in the case of Moody's are (i) either rated Aaa by Moody's or are
guaranteed by either the Commonwealth of Australia and rated Aaa or any
semi-sovereign Australian entity whose domestic currency long-term debt is rated
Aaa by Moody's, (ii) are denominated and payable in Australian currency or are
convertible into a security constituting Eligible Portfolio Property by Moody's
and (iii) are not a variable rate, indexed-linked, zero coupon or stripped
security.

               1. Electricity Trust of South Australia, a body established under
         the Electricity Trust of South Australia Act 1946 (South Australia).

               2. Gas & Fuel Corporation of Victoria, a corporation established
         under the Gas and Fuel Corporation Act 1950 (Victoria).

               3. Melbourne & Metropolitan Board of Works, a board constituted
         under section 4 of the Melbourne & Metropolitan Board of Works Act 1958
         (Victoria).

               4. New South Wales Treasury Corporation, a corporation
         constituted under section 4 of the Treasury Corporation Act 1983 (New
         South Wales), including its Australian Convertible Eurobond issues, in
         the case of S&P.

               5. A Territory authority being an authority within the meaning of
         that term under section 43 of the Northern Territory (Self Government)
         Act (Commonwealth) provided that the specific issue is guaranteed by
         the Treasurer of the Commonwealth of Australia.

               6. The State Electricity Commission of Qld a commission
         constituted under the Electricity Act 1976 (Qld).

               7. Queensland Treasury Corporation, a corporation established
         under the Treasury Corporation Act 1988 (Qld), including its Australian
         convertible Eurobond issues, in the case of S&P.

               8. South Australian Government Financing Authority, an authority
         established under the Government Financing Authority Act 1982 (South
         Australia).

               9. State Electricity Commission of Victoria, a commission
         established under the State Electricity Commission Act 1958 (Victoria).

                                       6

<PAGE>

               10. State Energy Commission of Western Australia, a commission
         established under the State Energy Commission Act 1979 (Western
         Australia).

               11. The Australian Telecommunications Commission, a commission
         established under section 4 of the Telecommunications Act 1975
         (Commonwealth).

               12. (with respect to S&P only) and without any guarantee by the
         Commonwealth of Australia or the respective Australian State:
         Australian and Overseas Telecommunications Corporation, Limited.

               13. Victorian Public Authorities Finance Agency, an agency
         constituted under section 3 of the Victorian Public Authorities Act
         1984 (Victoria).

               14. Australian Industry Development Corporation a body
         established under section 5 of the Australian Industries Development
         Corporation Act (Commonwealth).

               15. South Australian Finance Trust Limited, a body corporate
         proclaimed by the Governor of South Australia to be a semi-government
         authority pursuant to the Public Finance and Audit Act 1987 (South
         Australia).

               16. The Western Australian Treasury Corporation.

               17. Hydro-Electricity Commission of Tasmania.

               18. Tasmanian Public Finance Corp.

               19. Tasmanian Development Authority.

               20. Australian Trade Commission.

               21. (with respect to S&P only) FANMAC Premier Trust Co. (Nos.
         1-22) and any subsequent issues rated by S&P - Australian Ratings.

               22. (with respect to S&P only) Australian Wool Corporation.

               23. Commonwealth Bank of Australia.

               24. State Bank of New South Wales.

               25. In the case of S&P, Australian Exchangeable Eurobonds.

               The Board of Directors shall have the authority to adjust,
modify, alter or change from time to time the list of securities as set forth
above if each Rating Agency advises the Corporation in writing that the change
or specification will not adversely affect its then current rating of AMPS.

               "Australian Short-Term Securities" means promissory notes and
other short-term commercial paper issued by Australian institutions which, for
purposes of S&P, are rated A-1+ by S&P or have a long-term rating from S&P at
least as high as their then-current comparable

                                       7

<PAGE>

rating of AMPS and, for purposes of Moody's, are rated Prime-1 by Moody's or
have a long-term foreign currency debt rating from Moody's of at least Aa3 and a
maturity of less than 270 days in the case of commercial paper.

               "Authorized Newspaper" means The Wall Street Journal, or if not
published on such date, The New York Times, or if neither of such papers is
published on such date, a newspaper, printed in the English language, of general
circulation in the Borough of Manhattan, The City of New York, that carries
financial news and is customarily published on each Business Day, whether or not
published on Saturdays, Sundays or holidays.

               "Beneficial Owner" means a customer of a Broker-Dealer who is
listed on the records of that Broker-Dealer (or, if applicable, the Auction
Agent) as a holder of shares of AMPS or a Broker-Dealer that holds AMPS for its
own account.

               "Board of Directors" means the Board of Directors of the
Corporation or, except as used in paragraphs 3(a) and 6 hereof, any duly
authorized and empowered committee thereof.

               "Business Day" means a day on which the New York Stock Exchange
is open for trading and which is not a Saturday, Sunday or other day on which
banks in The City of New York are authorized or obligated by law to close;
provided, that for purposes of determining Valuation Dates, Cure Dates and any
Failure to Cure, "Business Day" means a day on which the New York Stock Exchange
and the Australian Stock Exchange Limited are open for trading and which is not
a Saturday, Sunday or other day on which banks in The City of New York or in
Sydney, Australia are authorized or obligated by law to close.

               "Cash" means such coin or currency of the United States of
America as at the time shall be legal tender for payment of public and private
debts.

               "Certificate of Minimum Liquidity" has the meaning specified in
paragraph 7(c)(i) below.

               "Commercial Paper Dealers" means Merrill Lynch, Pierce, Fenner &
Smith Incorporated and such other commercial paper dealer or dealers as the
Corporation may from time to time appoint, or, in lieu of any thereof, their
respective affiliates or successors.

               "Commission" means the Securities and Exchange Commission.

               "Common Stock" means shares of the common stock, par value $.01
per share, of the Corporation.

               "Corporate Bonds" means debt obligations of U.S. corporations
(other than Short-Term Money Market Instruments or U.S. Government Obligations)
rated Aa or better by Moody's or AA or better by S&P, which corporate debt
obligations (a) provide for the periodic payment of interest thereon in cash,
(b) do not provide for conversion or exchange into equity capital at any time
over their respective lives, (c) have been registered under the Securities Act
of 1933, as amended, and (d) have not had notice given in respect thereof that
any such corporate debt obligations are the subject of an offer by the issuer
thereof of exchange or tender for cash, securities or any other type of
consideration (except that corporate debt obligations in an amount

                                       8

<PAGE>

not exceeding 10% of the aggregate value of the Corporation's assets at any time
shall not be subject to the provisions of this clause (d)). In addition, no
corporate debt obligation held by the Corporation shall be deemed a Corporate
Bond (i) if it fails to meet the criteria in Column 1 below or (ii) to the
extent (and only to the proportionate extent) the acquisition or holding thereof
by the Corporation causes the Corporation to exceed any applicable limitation
set forth in column (2) or (3) below as of any relevant date of determination
(provided that in the event that the Corporation shall exceed any such
limitation, the Corporation shall designate, in its sole discretion, the
particular Corporate Bond(s) and/or portions thereof which shall be deemed to
have caused the Corporation to exceed such limitation):

<TABLE>
<CAPTION>
                          Column 1              Column 2                     Column 3
                          --------              --------                     --------

                                                                     Maximum Percent of
                                           Maximum Percent of       Value of Corporation
                     Minimum Original     Value of Corporation        Assets, Including
                    Issue Size of Each      Assets, Including         Eligible Portfolio
                           Issue           Eligible Portfolio       Property, Invested in
                           -----          Property, Invested in        any One Industry
Rating (1)            ($ in millions)       any One Issuer (2)           Category (2)
- ----------                                  ------------------           ------------
<S>                        <C>                    <C>                       <C>
Aaa/AAA .......            $100                   10.0%                     50.0%
Aa/AA .........             100                   10.0                      33.3
</TABLE>

- ------------------

(1)      In the event that a Corporate Bond has received a different rating from
         each of the Rating Agencies, the lower of the two ratings will be
         controlling. Rating designations include (+) or (-) modifiers to the
         rating where appropriate.

(2)      The referenced percentages represent maximum cumulative totals for the
         related rating category and each lower rating category.

               The Board of Directors shall be authorized to adjust, modify,
alter or change from time to time the assets (and/or the characteristics
thereof) included within the definition of Corporate Bonds for purposes of
determining compliance with the AMPS Basic Maintenance Amount to encompass other
assets constituting, and/or other characteristics of, corporate debt obligations
from those set forth in these Articles Supplementary if the Rating Agencies
advise the Corporation in writing that the change will not adversely affect
their respective then-current ratings of the AMPS.

               "Corporation" means The First Australia Prime Income Fund, Inc.

               "Custodian" means State Street Bank and Trust Company or any
successor custodian to the Corporation who acts in such capacity.

               "Cure Date" means the AMPS Basic Maintenance Cure Date or the
1940 Act Cure Date, as the case may be.

               "Date of Original Issue" means, with respect to any share of
AMPS, the date on which the Corporation originally issues such share.

                                       9

<PAGE>

         "Deposit Securities" means Cash, U.S. Government Obligations,
Repurchase Agreements and Short-Term Money Market Instruments. Except for
purposes of determining compliance with the AMPS Basic Maintenance Amount, each
Deposit Security shall be deemed to have a value equal to its principal or face
amount payable at maturity plus any interest payable thereon after delivery of
such Deposit Security but only if payable on or prior to the applicable payment
date in advance of which the relevant deposit is made.

         "Discount Factor" means, for any asset held by the Corporation, the
number set forth opposite each such type of asset in the following table or such
other factor required under the guidelines established by the Rating Agencies
from time to time (it being understood that any asset held by the Corporation
and not listed in the following table or as provided in writing by the Rating
Agencies shall have a Discounted Value of zero):

                                                         Moody's
                                                         Discount   S&P Discount
Type of Eligible Portfolio Property                      Factor     Factor(2)
- -----------------------------------                      ------     ---------

Cash and Short-Term Money Market Instruments
     other than commercial paper with a
     remaining term to maturity equal to or
     less than 46 days                                    1.000(1)         1.000

     commercial paper with a remaining term
     to maturity equal to or less than 46
     days                                                 1.150            1.000

Repurchase Agreements                                     1.000            1.000

Australian Government Securities: with any
     current outstanding issue size and with
     a remaining term to maturity shorter
     than 46 days form the Valuation Date                 1.000(1)         1.000

     with a current outstanding issue size
     less than A$100,000,000 and with a
     remaining term to maturity equal to or
     longer than 46 days but not more than 2
     years from the Valuation Date                        1.730            1.470

     with a current outstanding issue size of
     at least A$100,000,000 but less than or
     equal to A$150,000,000 and with a
     remaining term to maturity equal to or
     longer than 46 days but not more than 2
     years form the Valuation Date                        1.730            1.340

     with a current outstanding issue size
     greater than A$150,000,000 and with a
     remaining term to maturity equal to or
     longer than 46 days but not more than 2
     years from the Valuation Date                        1.520            1.340

                                       10

<PAGE>

                                                         Moody's
                                                         Discount   S&P Discount
Type of Eligible Portfolio Property                      Factor     Factor(2)
- -----------------------------------                      ------     ---------

                     - 0 -

     with a current outstanding issue size
     less than A$100,000,000 and with a
     remaining term to maturity longer than 2
     years but not more than 5 years from the
     Valuation Date                                       1.730     1.580

     with a current outstanding issue size of
     at least A$100,000,000 but less than or
     equal to A$150,000,000 and with a
     remaining term to maturity longer than 2
     years but not more than 5 years from the
     Valuation Date                                       1.730     1.436

     with a current outstanding issue size
     greater than A$150,000,000 and with a
     remaining term to maturity longer than 2
     years but not more than 5 years from the
     Valuation Date                                       1.730     1.436

                     - 0 -

     with a current outstanding issue size
     less than A$100,000,000 and with a
     remaining term to maturity longer than 5
     years but not more than 10 years from
     the Valuation Date                                   1.730     1.608

     with a current outstanding issue size of
     at least A$100,000,000 but less than or
     equal to A$150,000,000 and with a
     remaining term to maturity longer than 5
     years but not more than 10 years from
     the Valuation Date                                   1.730     1.462

     with a current outstanding issue size
     greater than A$150,000,000 and with a
     remaining term to maturity longer than 5
     years but not more than 10 years from
     the Valuation Date                                   1.520     1.462

                     - 0 -

     with a current outstanding issue size
     less than A$100,000,000 and with a
     remaining term to maturity longer than
     10 years but not more than 20 years from
     the Valuation Date                                   1.730     1.679

                                       11

<PAGE>

                                                         Moody's
                                                         Discount   S&P Discount
Type of Eligible Portfolio Property                      Factor     Factor(2)
- -----------------------------------                      ------     ---------

     with a current outstanding issue size of
     at least A$100,000,000 but less than or
     equal to A$150,000,000 and with a
     remaining term to maturity longer than
     10 years but not more than 20 years from
     the Valuation Date                                  1.730      1.526

     with a current outstanding issue size
     greater than A$150,000,000 and with a
     remaining term to maturity longer than
     10 years but not more than 20 years from
     the Valuation Date                                  1.520      1.526

Australian Semi-Government Securities (3):
     with a current outstanding issue size
     and with a remaining term to maturity
     shorter than 46 days from the Valuation
     Date                                                1.000(1)   1.000

     with a current outstanding issue size
     less than A$100,000,000 and with a
     remaining term to maturity equal to or
     longer than 46 days but not more than 2
     years from the Valuation Date                       1.730      1.639

     with a current outstanding issue size of
     at least A$100,000,000 but less than or
     equal to $A150,000,000 and with a
     remaining term to maturity equal to or
     longer than 46 days but not more than 2
     years from the Valuation Date                       1.730      1.490

     with a current outstanding issue size
     greater than A$150,000,000 and with a
     remaining term to maturity equal to or
     longer than 46 days but more than 2
     years from the Valuation Date                       1.520      1.490

                     - 0 -

     with a current outstanding issue size
     less than A$100,000,000 and with a
     remaining term to maturity longer than 2
     years but not more than 5 years from the
     Valuation Date                                      1.730      1.745
                                       12

<PAGE>

                                                         Moody's
                                                         Discount   S&P Discount
Type of Eligible Portfolio Property                      Factor     Factor(2)
- -----------------------------------                      ------     ---------

     with a current outstanding issue size of
     at least A$100,000,000 but less than or
     equal to A$150,000,000 and with a
     remaining term to maturity longer than 2
     years but not more than 5 years from the
     Valuation Date                                      1.730      1.586

     with a current outstanding issue size
     greater than A$150,000,000 and with a
     remaining term to maturity longer than 2
     years but not more than 5 years from the
     Valuation Date                                      1.520      1.586

                     - 0 -

     with a current outstanding issue size
     less than A$100,000,000 and with a
     remaining term to maturity longer than 5
     years but not more than 10 years from
     the Valuation Date                                  1.730      1.773

     with a current outstanding issue size of
     at least A$100,000,000 but less than or
     equal to A$150,000,000 and with a
     remaining term to maturity longer than 5
     years but not more than 10 years from
     the Valuation Date                                  1.730      1.612

     with a current outstanding issue size
     greater than A$150,000,000 and with a
     remaining term to maturity longer than 5
     years but not more than 10 years from
     the Valuation Date                                  1.520      1.612

                     - 0 -

     with a current outstanding issue size
     less than A$100,000,000 and with a
     remaining term to maturity longer than
     10 years but not more than 20 years from
     the Valuation Date                                  1.730      1.844

     with a current outstanding issue size of
     at least A$100,000,000 but less than or
     equal to A$150,000,000 and with a
     remaining term to maturity longer than
     10 years but not more than 20 years from
     the Valuation Date                                  1.730      1.676


     with a current outstanding issue size
     greater than A$150,000,000 and with a
     remaining term to

                                       13

<PAGE>

                                                         Moody's
                                                         Discount   S&P Discount
Type of Eligible Portfolio Property                      Factor     Factor(2)
- -----------------------------------                      ------     ---------

     maturity longer than 10 years but not
     more than 20 years from the Valuation
     Date                                                1.520      1.676
                     - 0 -

Australian Semi-Government Securities
     (Tasmanian) (4):
     with any outstanding issue size and with
     a remaining term to maturity shorter
     than 46 days from the Valuation Date                1.050      1.000

     with a current outstanding issue size
     less than A$100,000,000 and with a
     remaining term to maturity equal to or
     longer than 46 days but not more than 2
     years from the Valuation Date                       1.820      1.694

     with a current outstanding issue size of
     at least A$100,000,000 but less than or
     equal to A$150,000,000 and with a
     remaining term to maturity equal to or
     longer than 46 days but not more than 2
     years from the Valuation Date                       1.820      1.540

     with a current outstanding issue size
     greater than A$150,000,000 and with a
     remaining term to maturity equal to or
     longer than 46 days but not more than 2
     years from the Valuation Date                       1.600      1.540

                     - 0 -

     with a current outstanding issue size
     less than A$100,000,000 and with a
     remaining term to maturity longer than 2
     years but not more than 5 years from the
     Valuation Date                                      1.820      1.800

     with a current outstanding issue size of
     at least A$100,000,000 but less than or
     equal to A$150,000,000 and with a
     remaining term to maturity longer than 2
     years but not more than 5 years from the
     Valuation Date                                      1.820      1.636

     with a current outstanding issue size
     greater than A$150,000,000 and with a
     remaining term to maturity longer than 2
     years but not more than 5

                                       14

<PAGE>

                                                         Moody's
                                                         Discount   S&P Discount
Type of Eligible Portfolio Property                      Factor     Factor(2)
- -----------------------------------                      ------     ---------

     years from the Valuation Date                       1.600      1.636

                     - 0 -

     with a current outstanding issue size
     less than A$100,000,000 and with a
     remaining term to maturity longer than 5
     years but not more than 10 years from
     the Valuation Date                                  1.820      1.828

     with a current outstanding issue size of
     at least A$100,000,000 but less than or
     equal to A$150,000,000 and with a
     remaining term to maturity longer than 5
     years but not more than 10 years from
     the Valuation Date                                  1.820      1.662

     with a current outstanding issue size
     greater than A$150,000,000 and with a
     remaining term to maturity longer than 5
     years but not more than 10 years from
     the Valuation Date                                  1.600      1.662

                     - 0 -

     with a current outstanding issue size
     less than A$100,000,000 and with a
     remaining term to maturity longer than
     10 years but not more than 20 years from
     the Valuation Date                                  1.820      1.899

     with a current outstanding issue size of
     at least A$100,000,000 but less than or
     equal to A$150,000,000 and with a
     remaining term to maturity longer than
     10 years but not more than 20 years from
     the Valuation Date                                  1.820      1.726

     with a current outstanding issue size
     greater than A$150,000,000 and with a
     remaining term to maturity longer than
     10 years but not more than 20 years from
     the Valuation Date                                  1.600      1.726

                     - 0 -

                                       15

<PAGE>

                                                         Moody's
                                                         Discount   S&P Discount
Type of Eligible Portfolio Property                      Factor     Factor(2)
- -----------------------------------                      ------     ---------

Australian Bank Bills:
     with maturities of less than or equal to
     46 days from the Valuation Date                     1.000(1)   1.000

     with maturities of 47-56 days from the
     last Valuation Date                                 1.350      1.400

     with maturities of 57-90 days from the
     Valuation Date                                      1.350      1.400

     with maturities of 91-180 days from the
     Valuation Date                                      1.350      1.450

Australian Currency                                      1.350*     1.570

Australian Guaranteed Eurobonds:
     with a current outstanding issue size
     less than or equal to A$50,000,000 with
     a remaining term to maturity of more
     than 56 days from the Valuation Date                ----       2.000

     with a current outstanding issue size
     exceeding A$50,000,000 with a remaining
     term to maturity of more than 56 days
     from the Valuation Date                             ----       1.900

     with any current outstanding issue size
     and with a remaining term to maturity of
     less than 56 days from the Valuation
     Date                                                ----       1.000

Australian Non-Guaranteed Eurobonds:
     with a current outstanding issue size
     less than or equal to A$50,000,000 with
     a remaining term to maturity of more
     than 56 days from the Valuation Date                ----       2.150

________________________

*     If any Overseas Banking Unit constituting Australian Currency has a
      maturity of more than 46 days from the Valuation Date, the principal
      amount of the cash deposits shall be offset by an amount equal to the
      penalty for early withdrawal and in the event interest earned on any
      Overseas Banking Unit is not exempt from interest withholding tax, the
      Corporation may not include interest earned as a component of the value of
      the deposit unless taxes incurred on interest earned have been paid.

                                       16

<PAGE>

                                                         Moody's
                                                         Discount   S&P Discount
Type of Eligible Portfolio Property                      Factor     Factor(2)
- -----------------------------------                      ------     ---------

     with a current outstanding issue size
     exceeding A$50,000,000 with a remaining
     term to maturity of more than 56 days
     from the Valuation Date                             ----       2.000

     with any current outstanding issue size
     and with a remaining term to maturity of
     less than 56 days from the Valuation
     Date                                                ----       1.000

Guaranteed Australian Corporate Bonds:
     with a current outstanding issue size
     less than or equal to A$100,000,000 with
     a remaining term to maturity of more
     than 56 days from the Valuation Date                ----       1.700

     with a current outstanding issue size
     exceeding A$100,000,000 with a remaining
     term to maturity of more than 56 days
     from the Valuation Date                             ----       1.600

     with any current outstanding issue size
     and with a remaining term to maturity of
     less than 56 days from Valuation Date               ----       1.000

Non-Guaranteed Australian Corporate Bonds:
     with a current outstanding issue size
     less than or equal to A$100,000,000 with
     a remaining term to maturity of more
     than 56 days from the Valuation Date                ----       1.800

     with a current outstanding issue size
     exceeding A$100,000,000 with a remaining
     term to maturity of more than 56 days
     from the Valuation Date                             ----       1.700

     with any current outstanding issue size
     and with a remaining term to maturity of
     less than 56 days from Valuation Date               ----       1.000

Guaranteed Australian Corporate Bonds:
     with a current outstanding issue size
     less than or equal to A$150,000,000 with
     a remaining term to maturity of more
     than 56 days                                        ----       1.70

     with a current outstanding issue size
     exceeding A$150,000,000 with a remaining
     term to maturity of more than 56 days               ----       1.60

                                       17

<PAGE>

                                                         Moody's
                                                         Discount S&P Discount
Type of Eligible Portfolio Property                      Factor   Factor(2)
- -----------------------------------                      ------   ---------

     with any current outstanding issue size
     and with a remaining term to maturity of
     less than 56 days                                   ----     1.00

Australian Exchangeable Eurobonds                        2.050    ____**

Non-Guaranteed Australian Corporate Bonds:
     with a current outstanding issue size
     less than or equal to A$150,000,000 with
     a remaining term to maturity of more
     than 56 days                                        ----     1.80

GNMA Certificates with fixed interest  rates             (5)      1.300

GNMA Certificates with adjustable interest rates         1.480    1.300

FHLMC and FNMA Certificates with fixed interest rates    (7)      1.350

FHLMC and FNMA Certificates with adjustable interest
     rates                                               1.610    1.350

FHLMC Multifamily Securities                                      1.650

FHLMC and FNMA Certificates with variable interest rates          1.350

GNMA Graduated Payment Securities                                 1.500(5)(6)(7)

U.S. Government Obligations having a remaining term to
     maturity of 90 days or less                         1.060    1.000

U.S. Government Obligations having a remaining term to
     maturity of more than 90 days but not more than
     one year                                            1.060    1.060

U.S. Government Obligations having a remaining term to
     maturity of more than 1 year but not more than two
     years                                               1.110    1.200

U.S. Government Obligations having a remaining term
     to maturity of more than two years but not more

____________________

**   Included in Australian Semi-Government categories.

                                       18

<PAGE>

                                                         Moody's
                                                         Discount   S&P Discount
Type of Eligible Portfolio Property                      Factor     Factor(2)
- -----------------------------------                      ------     ---------

     to maturity of more than two years but
     not more than three years                           1.150      1.200

U.S. Government Obligations having a
     remaining term to maturity of more than
     three years but not more than four years            1.200      1.200

U.S. Government Obligations having a
     remaining term to maturity of more than
     four years but not more than five years             1.240      1.200

U.S. Government Obligations having a
     remaining term to maturity of more than
     five years but not more than seven years            1.290      1.250

U.S. Government Obligations having a
     remaining term to maturity of more than
     seven years but not more than 10 years              1.340      1.250

U.S. Government Obligations having a
     remaining term to maturity of more than
     10 years but not more than 15 years                 1.370      1.300

U.S. Government Obligations having a
     remaining term to maturity of more than
     15 years but not more than 20 years                 1.410      1.380

U.S. Government Obligations having a
     remaining term to maturity of more than
     20 years but not more than 30 years                 1.420      1.380

___________________________
(1)    In the case of Moody's, the remaining term to maturity of Eligible
       Portfolio Property with a Moody's Discount Factor of 1.000 shall be
       measured from the last Valuation Date on which the AMPS Basic Maintenance
       Amount was met for the purpose of determining the number of shares of
       AMPS to be redeemed which would result in satisfaction of the AMPS Basic
       Maintenance Amount as contemplated by paragraph 5(b) hereof.

(2)    Provided that in the case of S&P, the current outstanding issue size (as
       determined on each Quarterly Valuation Date) is equal to or greater than
       A$10,000,000.

(3)    Excluding securities of Hydro-Electricity Commission of Tasmania,
       Tasmanian Public Finance Corp. and Tasmanian Development Authority.

                                       19

<PAGE>

(4)  Securities of Hydro-Electricity Commission of Tasmania, Tasmanian Public
     Finance Corp. and Tasmanian Development Authority.

(5)  The Discount Factor determined therefor in writing by the Rating Agency.

(6)  Unless the Rating Agencies shall agree in writing, GNMA Graduated Payment
     Securities with a coupon rate lower than 5% shall not be included in
     Eligible Portfolio Property.

(7)  A Discount Factor of 1.50 applies in the case of GNMA Graduated Payment
     Securities as to which the Corporation notifies the Auction Agent that
     scheduled principal payments are being made to holders; in the case of GNMA
     Graduated Payment Securities as to which the Corporation notifies the
     Auction Agent that scheduled principal payments are not being made to
     holders, the Discount Factor shall be that which is determined in writing
     by the Rating Agencies.

                  The Board of Directors shall have the authority to adjust,
modify, alter or change from time to time the initial Discount Factor as set
forth above applied to determine the Discounted Value of any item of Eligible
Portfolio Property or may specify from time to time a Discount Factor for any
asset constituting Eligible Portfolio Property if each Rating Agency advises the
Corporation in writing that the change or specification will not adversely
affect its then-current rating of the AMPS.

                  "Discounted Value," with respect to any asset held by the
Corporation, means the quotient of the Market value of such asset divided by the
applicable Discount Factor; provided that in no event shall the Discounted Value
of any asset constituting Eligible Portfolio Property as of any date exceed the
unpaid principal balance or face amount of such asset as of that date; provided
further that the Discounted Value of all Australian Securities and New Zealand
securities shall be further discounted by the Discount Factor applicable to,
respectively, Australian Currency and New Zealand currency.

                  "Dividend Coverage Amount," as of any date of determination,
means:

                  (a)    the aggregate of the product with respect to each
series of AMPS of

                         (i)   the number of shares of AMPS of each series
                  outstanding on such date multiplied by $100,000,

                         (ii)  the Applicable Rate in effect as of such date for
                  each such series, and

                         (iii) a fraction, the numerator of which is the
                  number of days in the Dividend Period for each series ending
                  on the next Dividend Payment Date (determined by including the
                  first day thereof but excluding the last day thereof) and the
                  denominator of which is 360;

                         plus

                                       20

<PAGE>

                  (b) dividends projected to accumulate from the last dividend
payment date with respect to each series of Preferred Stock, not including the
AMPS, until the next dividend payment date for such series;

                      plus

                  (c) dividends accumulated but unpaid for any prior dividend
periods with respect to any shares of Preferred Stock;

                      less

                  (d) the combined value of any Dividend Coverage Assets
irrevocably deposited by the Corporation for the payment of dividends on the
AMPS and other Preferred Stock, if any.

                  "Dividend Coverage Assets," as of any date of determination,
means Deposit Securities with maturity dates not later than the day preceding
the next Dividend Payment Date; provided that if the applicable date of
determination is a Dividend Payment Date, any Deposit Securities to be applied
to the dividends payable on the AMPS on such date shall not be included in
Dividend Coverage Assets.

                  "Dividend Payment Date", with respect to each series of AMPS,
means each date of payment of dividends as provided in paragraph 3(b) below.

                  "Dividend Period" means the Initial Dividend Period and each
subsequent Period commencing on a Dividend Payment Date and ending on and
including the calendar day prior to the next Dividend Payment Date.

                  "Dollar" or "$" shall mean U.S. dollars. Amounts in Australian
or New Zealand dollars shall be converted to U.S. dollars at the rates reported
by Morgan Guaranty Trust Company for the date of determination or such other
sources shall have been approved in writing by the Rating Agencies.

                  "Eligible Portfolio Property" means Australian Bank Bills,
Australian Currency, Australian Exchangeable Eurobonds, Australian
Government-Securities, Australian Semi-Government Securities, Cash, U.S.
Government Obligations, Repurchase Agreements, Short-Term Money Market
Instruments, FNMA Certificates, FHLMC Certificates, FHLMC Multifamily
Securities, GNMA Certificates, and GNMA Graduated Payment Securities and, if the
calculation is being made for S&P, Australian Eurobonds and Australian Corporate
Bonds; provided, (i) if the determination is being made by Moody's, (x) that not
more than 20% in the aggregate of the total Discounted Value of Eligible
Portfolio Property shall consist either of Australian Government and/or
Australian Semi-Government Securities with a current outstanding Issue size less
than A$150,000,000 and (y) not more than 10% in the aggregate of the total
Discounted Value of Eligible Portfolio Property shall consist of Australian
Semi-Government Securities described under items 17, 18 and 19 of such
definition or Australian Exchangeable Eurobonds described under item 25 of such
definition and (ii) if the determination is being made for S&P that no
Australian Government Securities or Australian Semi-Government Securities
contained in Eligible Portfolio Property shall have a current outstanding

                                       21

<PAGE>

issue size less than A$10,000,000 (as determined on each Quarterly Valuation
Date); provided further, that if the determination is being made for S&P, not
more than 10% in the aggregate of the total Discounted Value of the Eligible
Portfolio Property shall consist of Australian Semi-Government Securities issued
by any single issuer (except that in the case of New South Wales Treasury
Corporation, such percentage shall be 25%) and that not more than 20% in the
aggregate of the total Market Value of the Eligible Portfolio Property shall
consist of Australian Semi-Government Securities guaranteed by any single state
(except that in the case of each of Victoria and New South Wales, such
percentage shall be 25%). The Board of Directors shall have the authority to
specify from time to time other assets as Eligible Portfolio Property if the
Rating Agencies advise the Corporation in writing that the specification will
not adversely affect their respective then-current ratings of the AMPS; it being
understood that the components of Eligible Portfolio Property may differ between
S&P and Moody's.

                  "Existing Holder" means a Broker-Dealer or any such other
Person as may be permitted by the Corporation that is listed as the holder of
record of shares of AMPS in the record, of the Auction Agent.

                  "Failure to Cure" shall mean a failure by the Corporation to
maintain the AMPS Basic Maintenance Amount or 1940 Act AMPS Asset Coverage
Requirement, as the case may be, which failure is not cured by the relevant Cure
Date.

                  "FANMAC Certificates" are securities issued by a trustee
against housing loans made through the New South Wales Department of Housing and
consist of a series of closed trusts or pools. The mortgage manager is the First
Australian National Mortgage Acceptance Corporation Ltd. ("FANMAC"). FANMAC is
owned partially by the Government of the State of New South Wales with the
remainder owned by other institutions. The Government of the State of New South
Wales has provided the FANMAC Trust with an assurance as to availability of
funds to meet payments. The securities have been rated by Australian Ratings and
S&P. FANMAC securities are subject to a call provision under which borrowers
(mortgagors) can repay early and the investors in a particular pool can be
repaid on a pro rata basis.

                  "FHLMC" means the Federal Home Loan Mortgage Corporation
created by Title III of the Emergency Home Finance Act of 1970, and includes any
successor thereto.

                  "FHLMC Certificate" means a mortgage participation certificate
in physical or book-entry form, the timely payment of interest on and the
ultimate collection of principal of which is guaranteed by FHLMC, and which
evidences a proportional undivided interest in, or participation interest in,
specified pools of fixed-, variable- or adjustable-rate, fully amortizing, level
pay mortgage loans with terms up to 30 years, secured by first liens on one- to
four-family residences.

                  "FHLMC Multifamily Security" means a "Plan B Multi-family
Security" in physical or book-entry form, the timely payment of interest on and
the ultimate collection of principal of which is guaranteed by FHLMC, and which
evidences a proportional undivided interest in, or participation interest in,
specified pools of fixed-rate, fully amortizing, level pay mortgage loans with
terms up to 30 years, secured by first priority mortgages on multifamily
residences containing 5 or more units and which are designed primarily for
residential use, the

                                       22

<PAGE>

inclusion of which in the Eligible Portfolio Property will not, in and of
itself, impair, or cause the AMPS to fail to retain, the rating assigned to such
AMPS by each of the Rating Agencies, as evidenced by a letter to such effect
from each of the Rating Agencies.

                  "FNMA" means the Federal National Mortgage Association, a
United States Government-sponsored private corporation established pursuant to
Title VIII of the Housing and Urban Development Act of 1968, and includes any
successor thereto.

                  "FNMA Certificate" means a mortgage pass-through certificate
in physical or book-entry form, the full and timely payment of principal of and
interest on which is guaranteed by FNMA, and which evidences a proportional
undivided interest in specified pools of fixed-, variable- or adjustable-rate,
fully amortizing, level pay mortgage loans with terms up to 30 years, secured by
first liens on one to four-family residences.

                  "Forward Contract" means a contract, entered into following a
Failure to Cure, between the Corporation and a commercial bank or other
financial institution whose short-term debt is rated at least A-l+ by S&P or
whose long-term debt is rated all least AA by S&P (an "Eligible Bank"), which
provides that the Corporation will sell a specified amount of Australian
Currency to such Eligible Bank on a specified date for a specified amount of
U.S. dollars. The date of payment in U.S. dollars shall not be later than the
30th day following the Valuation Date related to the Failure to Cure and the
amount of U.S. dollars shall be sufficient to redeem all shares of AMPS required
to be redeemed. On the Date of Original Issue and on each Quarterly Valuation
Date thereafter, the Corporation will confirm in writing to S&P that the
Corporation has a credit-line with an Eligible Bank (the "Credit Line Test").
The Credit Line Test shall be deemed to be satisfied on any date if the
Corporation has delivered such confirmation to S&P on the Date of Original Issue
or the most recent Quarterly Valuation Date, as the case may be. The Board of
Directors shall have the authority, to the extent permitted by Maryland law, to
adjust, modify, alter or change from time to time the elements comprising the
Forward Contract from those set forth in these Articles Supplementary if S&P
advises the Corporation in writing that the change will not adversely affect its
then-current rating of the AMPS

                  "GNMA" means the Government National Mortgage Association, and
includes any successor thereto.

                  "GNMA Certificate" means a fully modified pass-through
certificate in physical or book-entry form, the full and timely payment of
principal of and interest on which is guaranteed by GNMA and which evidences a
proportional undivided interest in specified pools of fixed-, variable- or
adjustable-rate, fully amortizing, level pay mortgage loans with terms up to 30
years, secured by first liens on one to four family residences.

                  "GNMA Graduated Payment Security" means a fully modified
pass-through certificate in physical or book-entry form, the full and timely
payment of principal of and interest on which is guaranteed by GNMA, which
obligation is backed by the full faith and credit of the United States, and
which evidences a proportional undivided interest in specified pools of
graduated payment mortgage loans with terms up to 30 years, with Payments that
increase annually at a predetermined rate for up to the first five or ten years
of the mortgage loan and that

                                       23

<PAGE>

are secured by first-priority mortgages on one- to four unit residences;
provided that such loans shall be past the graduated payment period.

                  "GNMA Multifamily Security" means a fully modified certificate
in physical or book-entry form, the full and timely payment of principal of and
interest on which is guaranteed by GNMA, which obligation is backed by the full
faith and credit of the United States, and which evidences a proportional
undivided interest in specified pools of fixed-rate mortgage, level pay loans
with terms up to 30 years secured by first-priority mortgages on multifamily
residences, the inclusion of which in the Eligible Portfolio Property will not,
in and of itself, impair or cause the AMPS to fail to retain the rating assigned
to such AMPS by each of the Rating Agencies as evidenced by a letter to such
effect from each of the Rating Agencies.

                  "Holder" means a Person identified as a holder of shares of
AMPS in the Stock Register.

                  "Independent Accountants" means the Corporation's independent
accountants, which shall be a nationally recognized accounting firm.

                  "Industry Category" means, as to any Corporate Bond, any of
the industry categories set forth in the following table:

                  (1) Aerospace and Defense: Major Contractor, Subsystems,
         Research, Aircraft Manufacturing, Arms, Ammunition;

                  (2) Automobile: Automotive Equipment, Auto-Manufacturing, Auto
         Parts Manufacturing, Personal Use Trailers, Motor Homes, Dealers;

                  (3) Banking: Bank Holding, Savings and Loans, Consumer Credit,
         Small Loan, Agency, Factoring, Receivables;

                  (4) Beverage, Food and Tobacco: Beer and Ale, Distillers,
         Wines and Liquors, Distributors, Soft Drink Syrup, Bottlers, Bakery,
         Mill Sugar, Canned Foods, Corn Refiners, Dairy Products, Meat Products,
         Poultry Products, Snacks, Packaged Foods, Distributors, Candy, Gum,
         Seafood, Frozen Food, Cigarettes, Cigars, Leaf/Snuff, Vegetable Oil;

                  (5) Buildings and Real Estate: Brick, Cement, Climate
         Controls, Contracting, Engineering, Construction, Hardware, Forest
         Products (building-related only), Plumbing, Roofing, Wallboard, Real
         Estate, Real Estate Development, REITs, Land Development;

                  (6) Chemicals, Plastics and Rubber: Chemicals
         (non-agriculture), Industrial Gases, Sulphur, Plastics, Plastic
         Products, Abrasives, Coatings, Paints, Varnish, Fabricating;

                  (7) Containers, Packaging and Glass: Glass, Fiberglass,
         Containers made of: Glass, Metal, Paper, Plastic, Wood or Fiberglass;

                                       24



<PAGE>

                  (8)  Personal and Non-Durable Consumer Products (Manufacturing
         Only): Soaps, Perfumes, Cosmetics, Toiletries, Cleaning Supplies,
         School Supplies;

                  (9)  Diversified/Conglomerate Manufacturing;

                  (10) Diversified/Conglomerate Service;

                  (11) Diversified Natural Resources, Precious Metals and
         Minerals: Fabricating, Distribution, Minerals and Sales;

                  (12) Ecological: Pollution Control, Waste Removal, Waste
         Treatment, Waste Disposal;

                  (13) Electronics: Computer Hardware, Electric Equipment,
         Components, Controllers, Motors, Household Appliances, Information
         Service Communication Systems, Radios, TVs, Tape Machines, Speakers,
         Printers, Drivers, Technology;

                  (14) Finance: Investment Brokerage, Leasing, Syndicating,
         Securities;

                  (15) Farming and Agriculture: Livestock, Grains, Produce,
         Agricultural Chemicals, Agricultural Equipment, Fertilizers;

                  (16) Grocery: Grocery Stores, Convenience Food Stores;

                  (17) Healthcare, Education and Childcare: Ethical Drugs,
         Proprietary Drugs, Research, Health Care Centers, Nursing Homes, HMOs,
         Hospitals, Hospital Supplies, Medical Equipment;

                  (18) Home and office Furnishings, Housewares, and Durable
         Consumer Products: Carpets, Floor Coverings, Furniture, Cooking,
         Ranges;

                  (19) Hotels, Motels, Inns and Gaming;

                  (20) Insurance: Life, Property and Casualty, Broker, Agent,
         Surety;

                  (21) Leisure, Amusement, Motion Pictures, Entertainment:
         Boating, Bowling, Billiards, Musical Instruments, Fishing. Photo
         Equipment, Records, Tapes, Sports, Outdoor Equipment (Camping),
         Tourism, Resorts, Games, Toy Manufacturing, Motion Picture Production
         Theaters, Motion Picture Distribution;

                  (22) Machinery (Non -Agriculture, Non- Construction,
         Non-Electronic): Industrial, Machine Tools, Steam Generators;

                  (23) Mining, Steel, Iron and Non-Precious Metals: Coal,
         Cooper, Lead, Uranium, Zinc, Aluminum, Stainless Steel, Integrated
         Steel, Ore Production, Refractories, Steel Mill Machinery, Mini-Mills,
         Fabricating, Distribution and Sales;

                  (24) Oil and Gas: Crude Producer, Retailer, Well Supply,
         Service and Drilling;

                                       25



<PAGE>

                  (25) Personal, Food and Miscellaneous Services;

                  (26) Printing, Publishing and Broadcasting: Graphic Arts,
         Paper, Paper Products, Business Forms, Magazines, Books, Periodicals,
         Newspapers, Textbooks, Radio, TV, Cable, Broadcasting Equipment;

                  (27) Cargo Transport: Rail, Shipping, Railroads, Rail-care
         Builders, Ship Builders, Containers, Container Builders, Parts,
         Overnight Mail, Trucking, Truck Manufacturing, Trailer Manufacturing,
         Air Cargo, Transport;

                  (28) Retail Stores: Apparel, Toy, Variety, Drugs, Department,
         Mail Order Catalog, Showroom;

                  (29) Telecommunications: Local, Long Distance, Independent,
         Telephone, Telegraph, Satellite, Equipment, Research, Cellular;

                  (30) Textiles and Leather: Producer, Synthetic Fiber, Apparel
         Manufacturer, Leather Shoes;

                  (31) Personal Transportation: Air, Bus, Rail, Car Rental;

                  (32) Utilities: Electric, Water, Hydro Power, Gas,
         Diversified.

                  The Board of Directors shall have the authority to change the
industry categories applicable with respect to the Corporation from those set
forth in these Articles Supplementary if the Rating Agencies advise the
Corporation in writing that the change will not adversely affect their
respective then-current ratings of the AMPS.

                  "Initial Dividend Payment Date" has the meaning set forth in
paragraph 3(b) below.

                  "Initial Dividend Period" has the meaning specified in
paragraph 3(b) below.

                  "Investment Company Act" means the Investment Company Act of
1940 (15 U.S. Code (S) 80 et seq.), as amended from time to time.

                  "Lien" has the meaning set forth in paragraph 3(d)(iv) below.

                  "Market Value" means the amount determined with respect to
specific assets of the Corporation in the manner set forth below, it being
understood that Market Value shall include any interest accrued thereon but, in
the case of Moody's, only if the next interest coupon on such asset is due and
payable within 47 days of the Reporting Date, and that a designated Pricing
Service may be used where indicated.

                  (a)  as to Australian Securities, the Administrator or the
Custodian shall value such securities at the last trade price quoted by a
designated Pricing Service if such trade price reflects a trade on, or within 1
local business day prior to, the Reporting Date. If no such trade price is
available, the Administrator or the Custodian shall value such securities, where

                                       26

<PAGE>

practicable, at the bid prices or the mean between the bid and asked price
quoted by a designated Pricing Service on the Reporting Date, or if such quotes
are not readily available, at fair value as determined by a designated Pricing
Service (or the Administrator or Custodian if the Rating Agencies so permit)
using methods which include: consideration of yields or prices of assets of
comparable quality, type of issue, coupon, maturity and rating; indications as
to value from dealers; and general market conditions. Either the Administrator
or the Custodian or a designated Pricing Service may employ electronic data
processing techniques and/or a matrix system to determine valuations. In the
event the Administrator or the Custodian or a designated Pricing Service is
unable to value a security, the security shall be valued at the lower of two
dealer bids (both of which shall be in writing or by telecopy, telex or other
electronic transcription, computer obtained quotation reduced to written form or
similar means) provided to the Corporation, by two recognized securities dealers
in Australia, with respect to Australian Securities, such securities dealers
making a market in the applicable securities.

                  (b)  as to GNMA Certificates, GNMA Graduated Payment
Securities, FNMA Certificates, FHLMC Certificates and FHLMC Multifamily
Securities, the Pricing Service (or the Administrator or the Custodian, if the
Rating Agencies so permit) shall value such securities as the product of (i) the
aggregate unpaid principal amount of the mortgage loans evidenced by each such
certificate or security, as the case may be, as of the close of business in New
York City on the last Business Day prior to such date of determination and (ii)
the lower of the bid prices for the same kind of certificate or, if not
available, some other security having, as nearly as practicable, comparable
interest rates and maturities, as quoted to the Corporation by two nationally
recognized securities dealers, who are members of the National Association of
Securities Dealers selected by the Corporation and making a market therein, with
at least one such quotation in writing plus, (x) if the determination is being
made for Moody's, accrued interest to the date of determination if the next
interest coupon on such security is due and payable within 46 days of such date
of determination and (y) if the determination is being made for S&P, accrued
interest;

                  (c)  as to Australian Currency and as to Cash, demand deposits
(and in the case of S&P only, bankers' acceptances) included in Short-Term Money
Market Instruments, the Administrator or the Custodian shall value such currency
or securities as the face value thereof;

                  (d)  as to next Business Day repurchase agreements, the face
value thereof; and

                  (e)  as to U.S. Government Obligations, the Administrator or
the Custodian shall value such securities at the bid prices quoted by a
designated Pricing Service or the mean between the bid and asked price quoted by
a designated Pricing Service on the Reporting Date, or if such quotes are not
readily available, at fair value as determined by a designated Pricing Service
(or the Administrator or the Custodian, if the Rating Agencies so permit) using
methods which include: consideration of yields or prices of assets of comparable
quality, type of issue, coupon, maturity and rating; indications as to value
from dealers; and general market conditions. Either the Administrator, the
Custodian or a designated Pricing Service may employ electronic data processing
techniques and or a matrix system to determine valuations. In the event the
Administrator or the Custodian or a designated Pricing Service is unable to
value a security, the security shall be valued at the lower of two dealer bids
(at least one of which shall be in writing

                                       27

<PAGE>

or by telecopy, telex or other electronic transcription, computer obtained
quotation reduced to written form or similar means) provided for the Corporation
by two nationally recognized securities dealers, who are members of the National
Association of Securities Dealers selected by the Corporation and making a
market therein.

                  Without amending the Articles of Incorporation, (i) the
calculation of the Market Value of an asset constituting Eligible Portfolio
Property may be changed to any method recognized by the Rating Agencies from
that set forth in these Articles Supplementary and (ii) a method recognized by
the Rating Agencies for calculating the Market Value of any asset identified as
Eligible Portfolio Property may be specified if the Rating Agencies advise the
Corporation in writing that the change or specification will not adversely
affect their respective then-current ratings of the AMPS.

                  "Maximum Applicable Rate" at any Auction will be the rate
obtained by multiplying the 30-day "AA" Composite Commercial Paper Rate on the
date of such Auction by the Applicable Percentage determined as set forth below
based on the lower of the credit rating or ratings assigned to the AMPS by
Moody's and S&P (or if Moody's or S&P or both shall not make such rating
available, the equivalent of either or both of such ratings by a Substitute
Rating Agency or two Substitute Rating Agencies or, in the event that only one
such rating shall be available, the percentage will be based on such rating).

                                            Applicable
                       Credit Rating                              Percentage
     ---------------------------------------------------------------------------
             S&P                         Moody's
             ---                         -------

             AA-or Above              "aa3" or Above                 150%
             A- to A+                 "a3" to "al"                   160%
             BBB- to BBB+             "baa3" to "baa1"               250%
             Below BBB-               Below "baa3"                   275%

                  The Corporation shall take all reasonable action necessary to
enable S&P and Moody's to provide a rating for the AMPS. If either S&P or
Moody's shall not make such a rating available, or neither S&P nor Moody's shall
make such a rating available, Merrill Lynch, Tierce, Fenner & Smith Incorporated
or its respective affiliates and successors, after consultation with the
Corporation, shall select a nationally recognized securities rating agency or
two nationally recognized securities rating agencies to act as a Substitute
Rating Agency or Substitute Rating Agencies, as the case may be.

                  "Minimum Liquidity Level is met" means, as of any date of
determination, that the aggregate Market Value of the Dividend Coverage Assets
equals or exceeds the Dividend Coverage Amount.

                  "Moody's" means Moody's Investors Service, Inc. or its
successors.

                                       28



<PAGE>

                  "MMSs" are mortgage-backed securities issued against mortgage
pools by MGICA Securities Ltd., a wholly-owned subsidiary of AMP Society Ltd.,
an Australian insurance company, and rated by Australian Ratings.

                  "MTCs" are securities issued against specific mortgages by a
trustee and are similar to "pass-through" certificates. MTCs are issued on a
continuous basis, insured by Australian insurance companies against both
mortgage default and an early call, and rated by Australian Ratings.

                  "New Zealand Securities" means those New Zealand government,
semi-government and other securities determined from time to time in writing by
the Rating Agencies.

                  "1940 Act AMPS Asset Coverage Ratio" means, as of `the date of
determination, the ratio of the Fund's net assets to its senior securities
representing indebtedness plus the liquidation value of its Preferred Stock,
including the shares of AMPS.

                  "1940 Act AMPS Asset Coverage Requirement" means the
requirement that the Corporation maintain, with respect to shares of AMPS, as of
the last Friday of each month in which any shares of AMPS are outstanding, asset
coverage of at least 200% with respect to senior securities representing
indebtedness plus the liquidation value of its Preferred Stock, including the
shares of AMPS (or such other asset coverage as may in the future be specified
in or under the Investment Company Act as the minimum asset coverage for senior
securities which are stock of a closed-end investment company as a condition of
paying dividends on its common stock).

                  "1940 Act Cure Date," with respect to the failure by
Corporation to maintain the 1940 Act AMPS Asset Coverage Requirement (as
required by paragraph 7(a) hereof) as of the Valuation Date of each month, means
the last Valuation Date of the following month.

                  "NMMC Securities" National Mortgage Market Corporation Ltd.
("NMMC") has issued both AUSSIE MACs, which are medium term bearer securities,
and National Mortgage Market Bonds. NMMC is a private company which is owned
partially by the Government of the State of Victoria and partially by private
institutions. Both AUSSIE MACs and National Mortgage Bonds are rated by
Australian Ratings.

                  "Notice of Redemption" has the meaning specified in paragraph
5(f) below.

                  "Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer, the Secretary, any Assistant Treasurer, any
Assistant Secretary or Assistant Controller of the Corporation.

                  "Officers' Certificate" means a certificate signed by an
officer of the Corporation.

                  "Offshore Banking Units" means cash deposits denominated in
the currency of Australia deposited with an Australian branch of a foreign bank
authorized to operate as an offshore banking unit by the Government of
Australia's Australian Taxation office which, in the case of Moody's is (i) a
branch carrying the same credit rating as the parent bank, (ii) is a deposit
rated at least P-1 under circumstances in which the rating of the deposit is
capped at the

                                       29

<PAGE>

sovereign rating ceiling of the parent bank's home country, as well as the bank
deposit rating ceiling of Australia, or (iii) is a deposit held by a branch
whose parent bank is rated at least Aa3/P-1 under circumstances in which the
rating of the parent bank is capped at the sovereign rating ceiling of the
parent bank's home country, as well as the bank deposit rating ceiling of
Australia and which, to date, are limited to cash deposits with an overseas
banking unit of Banque Nationale de Paris.

                  "Other AMPS" means the auction market preferred stock or
remarketed preferred stock or similar adjustable rate preferred stock of the
Corporation other than the AMPS.

                  "Other Permitted Assets" means Australian Corporate Bonds,
Australian Eurobonds, Australian Exchangeable Eurobonds, Australian Short-Term
Securities, New Zealand Securities, FANMAC Certificates, NMMC Securities, MTCs,
MMSs, ANNIE MAEs, GNMA Multifamily Securities and Corporate Bonds.

                  "Paying Agent" means Chemical Bank and its successors or any
other paying agent appointed by the Corporation to perform the functions
performed by the Paying Agent.

                  "Person" means an individual, a corporation, a company, a
voluntary association, a partnership, a trust, an unincorporated organization or
a government or any agency, instrumentality or political subdivision thereof.

                  "Preferred Stock" means the preferred stock of the Corporation
including the AMPS.

                  "Portfolio Calculation" shall have the meaning specified in
paragraph 7 (b) (ii).

                  "Portfolio Valuation Report" means a report executed by the
Corporation with respect to the valuation (in U.S. dollars) of the Eligible
Portfolio Property, as described in paragraph 7 hereof; provided, that all or
any portion of any such report may be prepared by the custodian for the Eligible
Portfolio Property, EquitiLink Australia Limited, The Prudential Insurance
Company of America, Prudential Mutual Fund Management, Inc. and or EquitiLink
International Management Limited; provided further that such Portfolio Valuation
Report may be delivered to the Auction Agent and the Rating Agencies in summary
form, however, the Corporation shall retain a copy of the full Portfolio
Valuation Report in its files and make such report available to its Independent
Accountants and the Rating Agencies upon their request.

                  "Potential Beneficial Owner" means a customer of a
Broker-Dealer or a Broker-Dealer that is not a Beneficial Owner of shares of
AMPS but that wishes to purchase such shares, or that is a Beneficial owner that
wishes to purchase additional shares of AMPS.

                  "Potential Holder" shall mean any Broker-Dealer or any such
other Person as may be permitted by the Corporation, including any Existing
Holder, who may be interested in acquiring shares of AMPS (or, in the case of an
Existing Holder, additional shares of AMPS).

                  "Pricing Service" shall mean any of Reuters Information
Services, Inc., Telerate Systems, Inc., Bloomberg L.P. or any other pricing
service designated by the Board of Directors of the Corporation provided the
Corporation obtains written assurance from S&P and Moody's

                                       30


<PAGE>

that such designation will not impair the rating then assigned by S&P and
Moody's to the AMPS.

                  "Projected Dividend Amount" for the AMPS and other Preferred
Stock, if any, shall mean, if the date of determination is a Valuation Date, the
amount of dividends, based on the number of shares of AMPS and other Preferred
Stock, if any, outstanding on such Valuation Date, projected to accumulate on
such shares from the next succeeding Dividend Payment Date or Dates until the
63rd day after such valuation Date, at the following dividend rates:

                  (a) if the Valuation Date is the Date of Original issue or a
Dividend Payment Date, for the period beginning on (and including) the first
following Dividend Payment Dates and ending on (and including) the 63rd day
following such Valuation Date, the product of 2.40 and (x) the Maximum
Applicable Rate on the Date of Original Issue (in the case of the Date of
Original Issue) or (y) the Maximum Applicable Rate as of the last occurring
Auction Date (in the case of any Dividend Payment Date); and

                  (b) if such Valuation Date is not the Date of Original Issue
or a Dividend Payment Date, (i) for the period beginning on (and including) the
first following Dividend Payment Dates and ending on (but not including) the
sooner of the second following Dividend Payment Date for such shares or the 64th
day following such Valuation Date, the product of 2.40 and (x) the Maximum
Applicable Rate on the Date of Original Issue (in the case of a Valuation Date
occurring prior to the first Auction Date) or (y) the Maximum Applicable Rate on
the last occurring Auction Date (in the case of any other Valuation Date), (ii)
for the period, if any, beginning on (and including) the second following
Dividend Payment Date and ending on (but not including) the 64th day following
such Valuation Date, the product of 2.40 and the rate specified in clause (x) or
(y) above and (iii) for the period, if any, beginning on (and including) the
third following Dividend Payment Date and ending on (but not including) the 64th
day following such Valuation Date the product of 2.94 and the rate specified in
clause (x) or (y) above.

                  If the date of determination is not a Valuation Date, then the
Projected Dividend Amount on such date of determination shall equal the
Projected Dividend Amount therefor on the immediately Preceding Valuation Date,
adjusted to reflect any decrease in the number of shares of AMPS outstanding.
The calculation of the Projected Dividend Amount may be made on bases other than
those set forth above if the Rating Agencies shall have advised the Corporation
in writing that the revised calculation of the Projected Dividend Amount would
not adversely affect their respective then-current ratings of the AMPS.

                  "Quarterly Valuation Date" means, so long as any shares or
AMPS are outstanding, the last Valuation Date of January, April, July and
October of each year.

                  "Rating" means a rating assigned by S&P or Moody's to a
particular security or to a particular issuer; provided, however, in the case of
S&P, a particular unrated security will be deemed to have received the rating
S&P has assigned to a rated debt security if S&P shall have received a letter
from the President, Vice President, or Treasurer of the Corporation certifying
that the unrated issue it identical to the rated issue in respect of (i) its
terms, (ii) its ranking, (iii)

                                       31

<PAGE>

its issuer and (iv) guarantees and any other support mechanisms provided by the
issuer or any third party to enhance the credit of the rated security; and

                  "Rating Agencies" means Moody's and S&P or their successors so
long as such rating agency is then rating the AMPS.

                  "Reporting Date," with respect to any price referred to in the
definition of the Market Value of an item of Eligible Portfolio Property, shall
mean the date as of which the Market Value of such item of Eligible Portfolio
Property is to be determined.

                  "Repurchase Agreements" means, repurchase obligations with
respect to a U.S. Government Obligation, FNMA Certificate, FHLMC Certificate or
GNMA Certificate under which the Fund buys such securities from counterparties
who agree to buy back such securities within one Business Day from the date such
repurchase obligations were entered into where the counterparty is either (i) a
depository institution the deposits of which (x) are insured by the Federal
Deposit insurance Corporation or the Federal Savings and Loan Insurance
Corporation (y) the commercial paper or other unsecured short-term debt
obligations of which are rated Prime-1 by Moody's and A-1+ by S&P, and (z) the
long-term debt obligations of which are rated at least A-2 by Moody's; or (ii)
broker-dealer registered as such with the Securities and Exchange Commission
under the Securities Act of 1934, as amended, (x) the commercial paper or other
unsecured short-term debt obligation of which are rated Prime-1 by Moody's and
A-1+ by S&P and (z) the long-term debt obligations of which are rated at least
A-2 by Moody's.

                  "Securities Depository" means The Depository Trust Company and
any successor thereto.

                  "Scheduled Payment Day" has the meaning specified in paragraph
3(b) below.

                  "Short-Term Money Market Instruments" means the following
kinds of instruments, if on the date of purchase or other acquisition by the
Corporation of such instrument the remaining term to maturity thereof is not
more than 30 days:

                  (a) demand deposits in, certificates of deposit of, and (in
the case of S&P only) bankers' acceptances issued by, any depository
institution, the deposits of which are insured by the Federal Deposit Insurance
Corporation or the Federal Savings and Loan Insurance Corporation, provided
that, at the time of the Corporation's investment therein, the commercial paper
or other unsecured short-term debt obligations of such depository institution
are rated Prime-1 by Moody's and A-1+ by S&P and are issued by institutions
whose long-term debt obligations are rated at least A-2 by Moody's;

                  (b) commercial paper rated at the time of the Corporation's
investment therein Prime-1 by Moody's and A-1+ by S&P and issued by institutions
where long-term debt obligations are rated at least A-2 by Moody's; provided,
however, that in the case of Moody's such commercial paper must have a maturity
of 270 days or less.

                  "S&P" means Standard & Poor's Corporation or any successor
thereto.

                                       32

<PAGE>

                  "Stock Books" means the books maintained by the Auction Agent
setting forth at all times a current list, as determined by the Auction Agent of
Existing Holders of AMPS.

                  "Stock Register" means the register of Holders maintained on
behalf of the Corporation by the Auction Agent in its capacity as transfer agent
and registrar for the AMPS.

                  "Subsequent Dividend Period, has the meaning specified in
paragraph 3(b) below.

                  "Substitute Commercial Paper Dealers" means such substitute
commercial paper dealer or dealers as the Corporation may from time to time
appoint or, in lieu of any thereof, their respective affiliates or successors.

                  "Substitute Rating Agency" and "Substitute Rating Agencies"
mean a nationally recognized securities rating agency or two nationally
recognized securities rating agencies, respectively, selected by Merrill Lynch,
Pierce, Fenner & Smith Incorporated, or its affiliate or successor, in
consultation with the Corporation to act as the substitute rating agency or
substitute rating agencies, as the case may be, to determine the credit ratings
of the shares of AMPS.

                  "Type I Corporate Bonds" as of any date means Corporate Bonds
whose Moody's rating is Aaa and whose S&P rating is AAA as of such date.

                  "Type II Corporate Bonds" as of any date means Corporate Bonds
whose Moody's rating is at least Aa and whose S&P rating is at least AA+ to AA-
as of such date.

                  "U.S. Government Obligations" means direct obligations of the
United States, provided that such direct obligations are entitled to the full
faith and credit of the United States and that any such obligations, other than
United States Treasury Bills, provide for the periodic payment of interest and
the full payment of principal at maturity or call for redemption.

                  "Valuation Date" means each Friday or, if such day is not a
Business Day, the next preceding Business Day, provided, that the first
Valuation Date may occur on any other date established by the Corporation;
provided, further, that such date shall not be earlier than 4 Business Days
prior to, and not later than, the Date of Original Issue.

                  "Voting Period" has the meaning specified in paragraph 6 (b)
below.

         2.       Fractional Shares. No fractional shares of AMPS shall be
                  issued.

         3.       Dividends.


                  (a) Holders of shares of AMPS shall be entitled to receive,
when, as, and if declared by the Board of Directors out of funds legally
available therefor, cumulative cash dividends at the Applicable Rate per annum
(determined as set forth below) payable on the respective dates set forth

                  (b) Dividends on the shares of AMPS shall accumulate from the
Date of Original Issue. Accumulated dividends shall be payable commencing on
January 10, 1994 (the 21st day after the Date of Original Issue), with respect
to the Auction Market Preferred Stock,

                                       33

<PAGE>

Series F (hereinafter, the "Initial Dividend Payment Date"); and on each day
thereafter which is the last day of each succeeding 7 day period after such
date. If any such last day (the "Scheduled Payment Day") is not a Business Day,
dividends payable on such Scheduled Payment Day shall be paid on the first
Business Day succeeding such Scheduled Payment Day. Any date on which a dividend
on the AMPS is payable pursuant to this paragraph 3(b) is herein called a
"Dividend Payment Date". The period beginning on (and including) the Date of
Original Issue and ending on (but not including) the Initial Dividend Payment
Date is referred to herein as the "Initial Dividend Period". Each successive
period commencing on and including, the Dividend Payment Date for the previous
Dividend Period and ending on and including the calendar day preceding the next
succeeding Dividend Payment Date is referred to herein as a "Subsequent Dividend
Period" and the Initial Dividend Period and each Subsequent Dividend Period
together are sometimes referred to herein as "Dividend Periods". The record date
for the payment of dividends on each series of AMPS will be the Auction Date
immediately preceding the Dividend Payment Date.

                           (c)   (i) The Applicable Rate for the Auction Market
         Preferred Stock, Series F shall be 3.5% per annum for the Initial
         Dividend Period. For the purpose of calculating the rate of dividends
         per annum payable on shares of AMPS (the "Applicable Rate") for each
         Subsequent Dividend Period the Corporation shall enter into an
         agreement with the Auction Agent (the "Auction Agent Agreement"). The
         Applicable Rate on the shares of AMPS for each Subsequent Dividend
         Period shall be determined by the Auction Agent in accordance with the
         Auction Agent Agreement, which shall provide that the Auction Agent
         will follow the Auction Procedures described in paragraph 8 hereof to
         determine the Applicable Rate. In the event there is no Auction Agent
         on the Business Day prior to the first day of a Dividend Period, the
         Applicable Rate for such Dividend Period shall be equal to the Maximum
         Applicable Rate that could have resulted pursuant to the Auction
         Procedures, as determined by the Corporation, on such Business Day. If
         no Auction is held on any Auction Date for any other reason, the
         Applicable Rate for the Dividend Period beginning on the Business Day
         following such Auction Date shall be equal to the Maximum Applicable
         Rate that could have resulted pursuant to the Auction Procedures, as
         determined by the Auction Agent (or, if there is no Auction Agent, by
         the Corporation), on such Business Day. The Corporation shall exercise
         its best efforts to maintain an Auction Agent pursuant to an agreement
         containing terms no less favorable to the Corporation than the terms of
         the Auction Agent Agreement.

                           (ii)  The amount of dividends per share payable on
         shares of AMPS for each Dividend Period or part thereof shall be
         determined by the Corporation and shall be an amount equal to $100,000
         per share of AMPS multiplied by the product of (1) the Applicable Rate
         for such Dividend Period and (2) a fraction, the numerator of which
         shall be the actual number of days in such Dividend Period or part
         thereof and the denominator of which shall be 360. All dollar amounts
         used in or resulting from such calculations will be rounded to the
         nearest cent (with 0.5 cents being rounded up.)

                           (iii) If the Corporation fails to deposit, in
         same-day funds, with the Paying Agent by 12:00 noon, New York City
         time, (A) on any Dividend Payment Date for any series of AMPS an amount
         sufficient to pay the dividends (whether or not earned or declared)
         payable on such Dividend Payment Date for any series of AMPS or (B) on

                                       34

<PAGE>

     any redemption date for any series of AMPS an amount sufficient to redeem
     on such date fixed for redemption the shares of such series as to which
     notice of redemption has been given (including an amount equal to dividends
     thereon, whether or not earned or declared, accumulated but unpaid to such
     redemption date), then, in either case, beginning with the Dividend Payment
     Date or redemption date, as the case may be, on which such failure occurs
     and continuing until the Dividend Payment that is or immediately follows
     the date the Corporation remedies such failure as provided in the third
     sentence of this paragraph, the Applicable Rate for each Dividend Period
     for the series to which such Dividend Payment Date or such redemption date
     relates shall be equal to 275% of the "AA" Composite Commercial Paper Rate
     in effect on the second Business Day preceding the first day of such
     Dividend Period. Notwithstanding the foregoing, if the Corporation remedies
     such failure by depositing, in same-day funds, with the Paying Agent by
     12:00 noon, New York City time, on the first, second or third Business Day
     following such Dividend Payment Date or date fixed for redemption, as the
     case may be, an amount equal to (x) the unpaid dividends or unpaid
     redemption payments plus (y) a late charge computed at an annual rate of
     275% of the "AA" Composite Commercial Paper Rate in effect on the second
     Business Day preceding the date of such failure applied to the amount of
     such unpaid dividends or unpaid redemption payments based on the number of
     days elapsed from the applicable Dividend Payment Date or date fixed for
     redemption to the date on which funds for such dividends or redemption
     payments are deposited with the Paying Agent divided by 360, then the
     Applicable Rate for the then-current Dividend Period will be that
     established on the immediately preceding Auction Date. If, subsequent to
     the three-Business Day grace period referred to in the preceding sentence,
     the Corporation remedies such failure to pay dividends or the redemption
     payments by depositing with the Paying Agent all amounts required by the
     first sentence of this paragraph plus all dividends (computed at the rate
     specified in the first sentence of this paragraph) accumulated (whether or
     not earned or declared) but unpaid to the Dividend Payment Date that is or
     immediately precedes the date of such remedy, then the Applicable Rate in
     respect of each Dividend Period commencing after such remedy will be
     determined in accordance with the Auction Procedures until such time as
     there is another failure to pay either dividends or the redemption payments
     with respect to shares of AMPS. In the event of any such remedy described
     in the preceding sentence, the Corporation will, not more than 30 nor less
     five Business Days prior to the next Auction Date, notify the Auction
     Agent, all Holders and the Securities Depository in writing of the date of
     the next Auction.

             (d) (i) The Corporation will not issue any other series or class of
     stock which is senior to the AMPS. The Corporation will not issue any
     series or class of stock which is on a parity with the shares of AMPS
     unless it has been advised in writing by the Rating Agencies that such
     issuance will not adversely affect their respective then-current rating of
     the AMPS. No Holders of shares of AMPS shall be entitled to any dividends,
     whether payable in cash, property or stock, in excess of full cumulative
     dividends, as provided in this paragraph 3, on shares of AMPS. No interest,
     or sum of money in lieu of interest, shall be payable in respect of any
     dividend payments on any shares of AMPS that may be in arrears.

                                       35

<PAGE>

               (ii)  For so long as shares of AMPS are outstanding, the
     Corporation shall not declare, pay or set apart for payment any dividend or
     other distribution in respect of the Common Stock or any other stock of the
     corporation ranking junior to the shares of AMPS as to dividends or upon
     liquidation, or call for redemption, redeem, purchase or otherwise acquire
     for consideration any shares of Common Stock or any other stock of the
     Corporation ranking junior to the shares of AMPS as to dividends or upon
     liquidation), unless, in each case, immediately thereafter, (A) the AMPS
     Basic Maintenance Amount would be met, (B) the 1940 Act AMPS assets
     Coverage Requirement would be met, (C) all mandatory redemptions of shares
     of Preferred Stock pursuant to paragraph 5(b) hereof have been completed,
     (D) the Minimum Liquidity Level would be met and (E) all accumulated and
     unpaid dividends for all past dividend periods for all Preferred Stock
     shall have been or are contemporaneously paid in full (or declared and
     sufficient Deposit Securities have been set apart for their payment). Prior
     to the payment of any such dividend or other distribution, the Corporation
     will provide the Auction Agent and the Rating Agencies with a Portfolio
     Valuation Report (which may be the regular weekly report) and a certificate
     demonstrating compliance with the foregoing conditions.

               (iii) Any dividend payment made on the shares of AMPS shall first
     be credited against the dividends accumulated with respect to the earliest
     Dividend Period for which dividends have not been paid.

               (iv)  For so long as any shares of AMPS are outstanding, the
     Corporation shall not create, incur or suffer to exist, or agree to create,
     incur or suffer to exist, or consent to cause or permit in the future (upon
     the happening of a contingency or otherwise) the creation, incurrence or
     existence of any material lien, mortgage, pledge, charge, security
     interest, security agreement, conditional sale or trust receipt or other
     material encumbrance of any kind (collectively "Liens") upon any of its
     Eligible Portfolio Property, except for (A) Liens the validity of which are
     being contest in good faith by appropriate proceedings, (B) Liens for taxes
     that are not then due and payable or that can be paid thereafter without
     penalty, (C) Liens to secure payment for services rendered by the Auction
     Agent in connection with the AMPS and (D) Liens otherwise incurred in
     connection with borrowings made in the ordinary course of business in
     accordance with the Corporation's stated investment objective, policies and
     restrictions.

          (e)  Not later than 12:00 noon, New York City time, on the Business
Day next preceding each Dividend Payment Date, the Corporation shall deposit
with the Paying Agent Deposit Securities constitution immediately available
funds in an amount sufficient to pay the dividends that are payable on such
Dividend Payment Date. The Corporation may direct the Paying Agent with respect
to the investment of any such Deposit Securities, provided that the proceeds of
any such investment will be available at the opening of business on such
Dividend Payment Date in immediately available funds.

          (f)  Dividends in arrears for any past Dividend Period may be declared
and paid to the Holders at any time, without reference to any regular Dividend
Payment Date.

                                       36

<PAGE>

          (g)  For dividends paid in respect of any fiscal year of the
Corporation, any dividends declared on the AMPS shall be paid first from earned
surplus, to the extent thereof, and then from any other legally available
source, and any dividends declared on the Common Stock shall be paid from earned
surplus or other sources to the extent not distributed to the Existing Holders.
Further, for dividends paid in respect of any fiscal year of the Corporation,
any dividends declared on AMPS shall be paid from current and accumulated
earnings and profits (within the meaning of the Internal Revenue Code of 1986,
as amended (the "Code")) to the extent available, pro rata from investment
company taxable income (as that term is defined in section 852(b)(2) of the Code
and before taking into account the deduction for dividends paid) and from net
capital gain (as that term is defined in Code section 1222(11)). To the extent
current and accumulated earnings and profits remain after satisfying the
Existing Holders, dividends paid in respect of any fiscal year of the
Corporation declared on the Common Stock shall be paid from current and
accumulated earnings and profits, from investment company taxable income (before
the deduction for dividends paid) and from net capital gain, to the extent not
distributed to Existing Holders. Distributions of net capital gain of the
Corporation for a taxable year to Existing Holders and holders of Common Stock
shall be designated by the Corporation as capital gain dividends (under Code
section 852(b)(3)) in the same proportion as net capital gain of the Corporation
for the taxable year in respect of which the distribution is made is distributed
to such Existing Holders and holders of Common Stock. Designations of foreign
taxes deemed paid by stockholders (pursuant to Code section 853) shall be made
in the same proportion as income subject to such taxes is distributed to
stockholders for the taxable year in respect of which the distribution is made.
The Board of Directors or any duly authorized committee thereof may change the
allocation of income and/or designations described herein, if, in its sole
judgment, it deems it advisable to do so for the purpose of maintaining the
qualification of the Corporation as a regulated investment company for federal
income tax purposes and or to avoid tax consequences which, in the sole
judgement of the Board of Directors, would be adverse to the corporation or its
stockholders.

     4.   Liquidation Rights

          (a)  In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the Holders of shares of AMPS
shall be entitled to receive out of the assets of the Corporation available for
distribution to stockholders, but before any distribution or payment shall be
made in respect of the Common Stock or any other stock of the Corporation
ranking junior to the AMPS as to liquidation payments, a liquidation
distribution in the amount of $100,000 per share, plus an amount equal to all
unpaid dividends accumulated to and including the date fixed for such
distribution or payment (whether or not earned or declared by the Corporation,
but excluding interest thereon), but such Holders shall be entitled to no
further participation in any distribution or payment in connection with any such
liquidation, dissolution or winding up.

          (b)  If, upon any such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets of the Corporation
available for distribution among the Holders of all outstanding shares of AMPS
shall be insufficient to permit the payment in full of such Holders of the
amounts to which they are entitled, then such available assets shall be
distributed among the Holders of shares of Preferred Stock, including the AMPS,

                                       37

<PAGE>

ratably in any such distribution of assets according to the respective amounts
which would be payable on all such shares if all amounts thereon were paid in
full.

          (c)  Neither the consolidation or merger of the Corporation with or
into any other corporation or corporations, nor the sale, lease or exchange by
the Corporation of all or substantially all of its property and assets, shall be
deemed to be a voluntary or involuntary liquidation, dissolution or winding up
of the Corporation for purposes of this paragraph 4.

     5.   Redemption

          Shares of the AMPS shall be redeemable by the Corporation as provided
below:

          (a)  To the extent permitted under the Investment Company Act and
Maryland law, the corporation at its option, upon filing with the Commission,
mailing and publishing a Notice of Redemption as described in paragraph 5 (f)
hereof, may redeem shares of AMPS, in whole or in part, on the next succeeding
scheduled Dividend Payment Dates for those shares of AMPS called for redemption,
out of funds legally available therefor, at a redemption price equal to $100,000
per share plus an amount equal to dividends thereon (whether or not earned or
declared) accumulated to but unpaid through the date fixed for redemption. The
Corporation may not give a Notice of Redemption relating to an optional
redemption as described in this paragraph unless, at the time of giving such
Notice of Redemption, the Corporation has available Deposit Securities with
maturity or tender dates not later than the day preceding the applicable
redemption date and having a value not less than the amount due to Holders of
shares of AMPS by reason of the redemption of their shares on such redemption
date.

          (b)  The Corporation shall redeem, at a redemption price of $100,000
per share plus accumulated but unpaid dividends through the date of redemption,
shares of AMPS to the extend permitted under the Investment Company Act and
Maryland law, on the date fixed by the Board of Directors applicable to those
shares of AMPS called for redemption, if the Corporation fails to maintain the
AMPS Basic Maintenance Amount or 1940 Act AMPS Asset Coverage Requirement, as
the case may be, and such failure is not cured on or before the cure Date as
reflected in a Portfolio Valuation Report delivered to the Auction Agent and the
Rating Agencies and confirmed by the Corporation's Independent Accountants. The
number of shares to be redeemed shall be equal to the lesser of (i) the minimum
number of shares of AMPS the redemption of which, if deemed to have occurred
immediately prior to the opening of business on the Cure Date, together with all
shares of other Preferred Stock subject to redemption or retirement, would
result in the satisfaction of the AMPS basic Maintenance Amount or the 1940 Act
AMPS Asset Coverage Requirement, as the case may be, on such Cure Date (provided
that, if there is no such minimum number of shares the redemption of which would
have such result, all shares of AMPS together with all shares of other Preferred
Stock subject to redemption or retirement then outstanding shall be redeemed),
and (ii) the maximum number of shares of AMPS together with all shares of other
Preferred Stock subject to redemption or retirement that can be redeemed out of
funds expected to be legally available therefor on such redemption date. In
determining the number of shares of AMPS required to be redeemed in accordance
with the foregoing, the Corporation shall allocate the amount required to
achieve (x) the 1940 Act AMPS Asset Coverage Requirement, pro rata among the
AMPS and any other Preferred Stock and (y) the AMPS Basic Maintenance Amount,
pro rata, among the AMPS and any Other AMPS. The

                                       38

<PAGE>

Corporation shall effect such redemption not later than 30 days after such Cure
Date, except that if the Corporation does not have funds legally available for
the redemption of all the required number of shares of AMPS which are subject to
mandatory redemption, the next Dividend Payment Date with respect to any share
to be redeemed is more than 30 days after such cure Date or the Corporation
otherwise is unable to affect such redemption on or prior to such 30th day, the
Corporation shall redeem those shares of AMPS which it was unable to redeem on
the earliest practicable date on which it is able to effect such redemption.

          (c)  So long as the AMPS shall be rated by Moody's, the Corporation
shall, by the fifth Business Day after a Failure to Cure, be required to hold an
amount, composed of Cash or any other asset constituting Eligible Portfolio
Property which has a Moody's Discount Factor as of such fifth Business Day of
1.000 and which matures prior to the date set for redemption which as an
aggregate Discounted Value at least equal to the redemption payment for the
shares of AMPS to be redeemed; provided, however, that this obligation may be
satisfied by depositing Cash in trust as contemplated by paragraph 5(h) below;
and provided further that the Corporation shall sell assets prior to such fifth
Business Day if necessary to meet the requirements of this paragraph (c), it
being understood that in no event shall it sell any asset prior to maturity
which had a Moody's Discount Factor of 1.000 measured as of the last Valuation
Date on which the AMPS Basic Maintenance Amount was met if it would be necessary
to utilize such asset in order to make any redemption payment contemplated by
this paragraph 5.

          (d)  Notwithstanding the other provisions of this paragraph 5, no
shares of AMPS may be redeemed other than as specified below, unless all
accumulated and unpaid dividends on all outstanding shares of AMPS and other
Preferred Stock for all past dividend periods shall have been or are
contemporaneously paid or declared and Deposit Securities maturing on or prior
to the date fixed for redemption are set apart for the payment of such
dividends; provided, however, that the Corporation without regard to such
limitations, (x) may redeem, purchase or otherwise acquire shares of AMPS (A)
with other Preferred Stock as a whole, pursuant to an optional redemption or (B)
pursuant to a purchase or exchange offer made for all of the outstanding shares
of AMPS and other Preferred Stock, and (y) shall redeem, purchase or otherwise
acquire shares of AMPS with other Preferred Stock as a whole if required
pursuant to a mandatory redemption, to the extent permitted under the Investment
Company Act, Maryland law and the Articles of Incorporation.

          (e)  If fewer than all the outstanding shares of AMPS are to be
redeemed, the shares to be redeemed shall be identified by the Board of
Directors by lot, on a pro rata basis, or in such other manner as will not
discriminate unfairly against any record holder of shares of such AMPS.

          (f)  Whenever shares of AMPS are to be redeemed, the Corporation
shall, not fewer than 30 days prior to the applicable redemption date, file with
the Commission as required under the Investment Company Act, a written notice of
redemption (a "Notice of Redemption"). The Notice of Redemption shall be (i)
mailed by first-class mail, postage prepaid, to each holder of shares of AMPS to
be redeemed, and (ii) published by the corporation in an Authorized Newspaper,
not fewer than 15 nor more than 20 days prior to such redemption date. Not fewer
than five nor more than 10 days before such mailing date, the Corporation shall
mail the Notice of Redemption to the Paying Agent. Each Notice of Redemption
shall state (A) the series of

                                       39

<PAGE>

AMPS or Other AMPS to be redeemed, (B) the redemption date, (C) the redemption
price, (D) the place or places where such AMPS are to be redeemed, (E) that
dividends on the shares to be redeemed will cease to accumulate on such
redemption date, (F) the provision of these Articles Supplementary under which
the redemption is being made, (G) if less than all the outstanding shares of
AMPS are to be redeemed, the number of shares to be redeemed and the basis upon
which the shares to be redeemed are to be selected and (H) the CUSIP number or
numbers of the shares to be redeemed. No defect in the Notice of Redemption or
in the mailing or publication thereof shall affect the validity of the
redemption proceedings, except as required by applicable law.

          (g)  On each redemption date, the Securities Depository shall
surrender the certificate evidencing the shares of AMPS. Each Holder of shares
of AMPS that were called for redemption shall then be entitled to receive
payment of the redemption price for each share. If fewer than all of the shares
represented by such certificate are to be redeemed, the Corporation shall issue
a new certificate for the shares not redeemed.

          (h)  If the Corporation shall give a Notice of Redemption, then by
12:00 noon, New York City time, on the Business Day next preceding the date
fixed for redemption the Corporation shall deposit with the Paying Agent Deposit
Securities constituting immediately available funds in an amount sufficient to
redeem the shares of AMPS to be redeemed. In such event the Corporation shall
give the Paying Agent irrevocable instructions and authority to pay the
redemption price to the holders of the shares of AMPS called for redemption upon
the redemption date. The Corporation may direct the Paying Agent with respect to
the investment of any Deposit Securities so deposited provided that the proceeds
of any such investment will be available at the opening of business on such
redemption date. The Deposit Securities deposited with the Paying Agent pursuant
to the immediately preceding sentence and the shares of AMPS to be redeemed and
funds deposited with a paying agent with irrevocable instructions to pay the
redemption price with respect to any other shares of Preferred Stock for which a
notice of redemption has been duly given shall be excluded from the calculation
of the AMPS Basic Maintenance Amount, the 1940 Act AMPS Asset Coverage Ratio,
and the 1940 Act AMPS Asset Coverage Requirement. Upon the date of such deposit,
or if no such deposit is made, then upon such date fixed for redemption (unless
the Corporation shall default in making payment of the redemption price), all
rights of the Holders of the shares of AMPS so called for redemption shall cease
and terminate except the right of the Holders thereof to receive the redemption
price thereof inclusive of accumulated but unpaid dividends, but without any
interest, and such shares shall no longer be deemed outstanding for any purpose.
The Corporation shall be entitled to receive, promptly after the date fixed for
redemption, any cash in excess of the aggregate redemption price of the shares
of AMPS called for redemption on such date and any remaining Deposit Securities.
Any assets so deposited which are unclaimed at the end of one year from such
redemption date shall, to the extent permitted by law, be repaid to the
Corporation, after which the Holders of the shares of AMPS so called for
redemption shall look only to the Corporation for payment thereof. The
Corporation shall be entitled to receive, from time to time after the date fixed
for redemption, any interest on the Deposit Securities so deposited.

          (i)  Shares of AMPS that have been redeemed, purchased or otherwise
acquired by the Corporation may not be reissued, shall not be deemed
outstanding, and shall be retired and cancelled. Shares with respect to which a
Notice of Redemption has been given as

                                       40

<PAGE>

provided in paragraph 5(e) above shall not be deemed outstanding for purposes of
the Auction Procedures set forth in paragraph 8 hereof.

          (j)  In addition to redemption rights expressly established under
these Articles Supplementary, the Corporation may repurchase shares of AMPS to
the extent now or hereafter permitted by the laws of the State of Maryland and
by the Investment Company Act.

          (k)  If the Corporation shall not have funds legally available for the
redemption of all the shares of the AMPS to be redeemed on any redemption date
(or is otherwise legally unable to effect such redemption), the Corporation
shall redeem on such redemption date the number of shares of AMPS as it shall be
legally able to redeem, ratably from each Existing Holder whose shares are to be
redeemed and the remainder of the shares of the AMPS required to be redeemed
shall be redeemed, as provided in paragraph 5(b) above.

     6.   Voting Rights

          (a)  General. Each holder of AMPS shall be entitled to one vote for
each share held on each matter on which the holders of the AMPS are entitled to
vote and, except as otherwise provided in the Articles of Incorporation, these
Articles Supplementary or by law, the holders of the AMPS and the Common Stock
shall vote together as one class on all matters submitted to the stockholders;
provided, however, that at any meeting of stockholders of the Corporation at
which directors are to be elected, the holders of Preferred Stock of all series,
voting separately as a single class, shall be entitled to elect two members of
the Board of Directors, and the holders of Common Stock, voting separately as a
single class, shall be entitled to elect the balance of the members of the Board
of Directors; provided, further, however, that the identity of the two directors
representing the holders of outstanding shares of preferred Stock may be
designated by the Board of Directors until the first meeting of the
Corporation's stockholders at which holders of shares of Preferred Stock shall
be entitled to vote for the election of directors.

          (b)  Right to Elect Majority of Board of Directors.

               (i) During any period in which (A) dividends on any outstanding
     Preferred Stock of any series shall be due and unpaid in an amount equal to
     two full years' dividends; or (B) the Corporation fails to redeem any
     shares of Preferred Stock that are required to be redeemed pursuant to
     paragraph 5(b) above or that would have been so redeemed but for the
     requirement that redemption be made out of legally available funds, or (C)
     holders of any other shares of Preferred Stock are entitled to elect a
     majority of the directors of the Corporation (the "Voting Period"), the
     number of directors constituting the Board of Directors shall automatically
     be increased by the smallest number that, when added to the two directors
     elected by the holders of Preferred Stock pursuant to paragraph 6(a) above,
     will constitute a majority of the total number of directors so increased;
     and at a special meeting of stockholders, which shall be called and held as
     soon as practicable, and at all subsequent meetings at which directors are
     to be elected, the holders of Preferred Stock of all series voting
     separately as a single class shall be entitled to elect the smallest number
     of additional directors of the Corporation who, together with the two
     directors elected by the holders of Preferred Stock pursuant to

                                       41

<PAGE>

     paragraph 6(a) above, will constitute a majority of the total number of
     directors of the Corporation so increased. The terms of office of the
     persons who are directors at the time of the election shall continue.

               (ii) If the Corporation thereafter shall pay, or declare and set
     apart for payment, in full all dividends payable on all outstanding shares
     of Preferred Stock of all series for all past dividend periods and if the
     Corporation has remedied any failure to redeem shares of Preferred Stock
     that are required to be redeemed pursuant to paragraph 5(b) above, and
     holders of no other series of Preferred Stock are entitled to elect a
     majority of the directors of the Corporation the Voting Period and the
     voting rights stated in this paragraph 6(b) shall cease, and the terms of
     office of all additional directors elected by the holders of Preferred
     Stock (but not of the directors elected by the holders of Common Stock or
     the two directors regularly elected by the holders of Preferred Stock as
     provided in paragraph 6(a) shall terminate automatically, subject always,
     however, to the revesting of such voting rights in the holders of shares of
     Preferred Stock upon the further occurrence of any of the events described
     in clauses (A), (B), or (C) of paragraph 6(b)(i).

          (c)  Voting Procedures

               (i)  As soon as practicable after the accrual of any right of the
     holders of shares of Preferred Stock to elect directors pursuant to
     paragraph 6(b), the Corporation shall call a special meeting of, and mail a
     notice to, such holders of shares of Preferred Stock. Such special meeting
     shall be held not less than 10 nor more than 80 days after the date of
     mailing of such notice. If the Corporation fails to send such notice, the
     meeting may be called by any holder of shares of Preferred Stock on like
     notice. The record date for determining the holders of shares of Preferred
     Stock entitled to notice of and to vote at such special meeting shall be
     the close of business on the fifth Business Day preceding the day in which
     such notice is given. At any such special meeting and at each meeting which
     directors are elected held during a Voting Period, the holders of shares of
     Preferred Stock, voting together as a class (to the exclusion of the
     holders of shares of Common Stock), shall be entitled to elect the number
     of directors prescribed in paragraph 6(b) above on a one-vote-per-share
     basis. At any such meeting or adjournment thereof in the absence of a
     quorum, a majority of the holders of shares of Preferred Stock, present in
     person or by proxy or any officer of the Corporation present entitled to
     preside or act as Secretary of such meeting shall have the power to adjourn
     the meeting without further notice to a date not more than 120 days after
     the original record date for such meeting.

               (ii) For purposes of determining any rights of the holders of
     shares of Preferred Stock to vote on any matter, whether such right is
     created by the Articles of Incorporation, these Articles Supplementary, by
     statute or otherwise, no holder of shares of Preferred Stock shall be
     entitled to vote and no share of Preferred Stock shall be deemed to be
     "outstanding" for the purpose of voting or determining the number of shares
     required to constitute a quorum, if prior to or concurrently with the time
     of determination of shares entitled to vote or shares deemed outstanding
     for quorum purposes, as they case may be, such share shall have been
     redeemed or called for

                                       42

<PAGE>

     redemption as provided in paragraph 5(e) and sufficient Deposit Securities
     with maturities on or prior to the redemption date shall have been
     deposited in trust with the Paying Agent to effect such redemption.

               (iii) The directors elected by the holders of shares of Preferred
     Stock pursuant to paragraph 6(b) shall (subject to the provisions of any
     applicable law) be subject to removal only by the vote of the holders of a
     majority of shares of Preferred Stock outstanding. Any vacancy on the Board
     of Directors occurring by reason of such removal or otherwise (in the case
     of directors subject to election by the holders of shares of Preferred
     Stock) may be filled only by vote of the holders of at least a majority of
     shares of Preferred Stock outstanding, and if not so filled such vacancy
     shall (subject to the provisions of any applicable law) be filled by a
     majority of the remaining directors (or the remaining director) who were
     elected by the holders of shares of Preferred Stock. Any other vacancy on
     the Board of Directors during a Voting Period shall be filled as provided
     in the Corporation's By-Laws.

               (iv)  At any time when the holders of shares of Preferred Stock
     become entitled to elect additional directors pursuant to paragraph 6(b),
     the maximum number of directors fixed by the By-Laws of the corporation or
     otherwise shall automatically be increased by the number of such additional
     directors if required; and at such time as the holders of shares of
     Preferred Stock shall no longer be entitled to elect directors pursuant to
     paragraph 6(b), such exact number shall automatically be decreased by the
     number by which they were increased by reason of this provision.

          (d)  Corporate Acts. So long as any shares of AMPS are outstanding,
the Corporation shall not, subject to the requirements of the Investment Company
Act and Maryland law, without the affirmative vote or consent of the holders of
at least two-thirds of the votes of the shares of AMPS outstanding at the time,
either in person or by proxy, either in writing or at a meeting (voting
separately as one class) in addition to any vote required by Article Fifth of
the Articles of Incorporation: (x) amend, alter or repeal the provisions of the
Articles of Incorporation including these Articles Supplementary, whether by
merger, consolidation or otherwise , so as to materially and adversely affect
any right, preference, privilege or voting power of such shares of AMPS or the
Holders thereof, or (y) create, authorize, issue, incur or suffer to exist any
indebtedness for borrowed money or any direct or indirect guarantee of any such
indebtedness, provided, however, that the Corporation may authorize the issuance
of indebtedness for borrowed money, for temporary or emergency purposes or for
the clearance of transactions, in an aggregate amount not to exceed the lesser
of $10,000,000 or 10% of the aggregate liquidation preference of the shares of
AMPS outstanding at any one time without any such consent or approval, provided
that, with or without the consent or approval of the holders, such action would
not result in the lowering of the then-current rating of the shares of AMPS by
the Rating Agencies (as evidenced in writing by the Rating Agencies); provided
that any increase in the amount of the authorized AMPS or the creation and
issuance of other series of Preferred Stock, or any increase in the amount of
authorized shares of such series or of any other series of Preferred Stock, in
each case ranking on a parity with or junior to the AMPS will not be deemed to
materially and adversely affect such rights, preference, privileges or voting
powers unless such issuance would cause the Corporation not to satisfy the 1940
ACT AMPS Asset Coverage Requirement or the AMPS Basic Maintenance Amount.

                                       43

<PAGE>

          The foregoing voting provisions shall not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of AMPS shall have been redeemed or
called for redemption and sufficient funds shall have been deposited in trust to
effect such redemption.

          (e)  Exclusive Remedy. Unless otherwise required by law, the Holders
shall not have any relative rights or preferences or other special rights other
than those specifically set forth herein. In the event that the Corporation
fails to pay any dividends on the shares of AMPS or the Corporation fails to
redeem any shares of AMPS which it is required to redeem, or any other event
occurs which requires the mandatory redemption of AMPS and the required Notice
of Redemption has not been given, the exclusive remedy of the Holders shall be
the right to vote for directors pursuant to the provisions of this paragraph 6.
In no event shall the Holders have any right to sue for, or bring a proceeding
with respect to, such dividends or redemptions or damages for the failure to
receive the same.

          (f)  Notification to Rating Agencies. In the event a vote of holders
of AMPS is required pursuant to the provisions of Section 13(a) of the
Investment Company Act, the Corporation shall, not later than ten Business Days
prior to the date on which such vote is to be taken, notifying the Rating
Agencies that such vote is to be taken and the nature of the action with respect
to which such vote is to be taken.

     7.   Asset and Liquidity Coverage.

          (a)  1940 Act AMPS Asset Coverage Requirement.

          The Corporation shall maintain, as of the last Valuation Date of each
month in which any share of AMPS is outstanding, the 1940 Act AMPS Asset
Coverage Requirement. The calculation of the 1940 Act AMPS Asset Coverage Ratio
shall be included in each Portfolio Valuation Report.

          (b)  AMPS Basic Maintenance Amount.

               (i)  For so long as any shares of AMPS are outstanding, the
     Corporation will maintain, on each Valuation Date, as evidenced by the
     completion of a Portfolio Valuation Report, Eligible Portfolio Property
     having an aggregate Discounted Value at least equal to the AMPS Basic
     Maintenance Amount, each as of such Valuation Date.

               (ii) On or before 10:00 a.m. New York City time on the fourth
     Business Day after (A) the Date of Original Issuance, (B) each Quarterly
     Valuation Date thereafter, (c) any Valuation Date on which the Corporation
     shall fail to meet the AMPS Basic Maintenance Amount, (D) any Valuation
     Date on which it cures its failure to satisfy the AMPS Basic Maintenance
     Amount, (E) any Valuation Date on which it fails to meet AMPS Basic
     Maintenance Amount by 25% or more, or (F) any Valuation Date as may be
     specified by S&P, the Corporation shall complete and deliver to Moody's and
     S&P and the Auction Agent, in the case of clauses (A) and (B) and to the
     relevant Rating Agency, in the case of clauses (C)-(F), a Portfolio
     Valuation Report as of the relevant Valuation Date. In addition, on or
     before 5:00 p.m., New York City time, on the first

                                       44

<PAGE>

         business Day after a date on which shares of Common Stock are
         repurchased by the Corporation, the Corporation will also complete and
         deliver to the Auction Agent, S&P and Moody's a Portfolio Valuation
         Report as of the close of business on the date the Common Stock was
         repurchased. All such Portfolio Valuation Reports shall be deemed to
         have been delivered to Moody's, S&P or the Auction Agent upon receipt
         of a copy or telecopy or other electronic transcription thereof it on
         the same day the Corporation mails the Portfolio Valuation Report for
         delivery on the next possible Business Day. A failure by the
         Corporation to deliver a Portfolio Valuation Maintenance Report as
         contemplated by this paragraph 7(b)(ii) shall be deemed to be a
         delivery of a Portfolio Valuation Maintenance Report indicating a
         failure to satisfy the Portfolio Valuation Amount.

                           (iii) Within seven Business Days after the required
         date of delivery of the initial Portfolio Valuation Report or any
         Portfolio Valuation Report delivered with respect to a Quarterly
         Valuation Date in accordance with paragraph 7(b)(ii) above, the
         Corporation shall deliver to the Auction Agent and the Rating Agencies
         a report or reports (the "Accountant's Confirmation") reviewing the
         portfolio calculations, prepared by the Corporation's Independent
         Accountants, relating to such Portfolio Valuation Report (as well as to
         any other Portfolio Valuation Report randomly selected by the
         Independent Accountants that was prepared during the quarter ending on
         such Quarterly Valuation Date) substantially to the effect that (A) the
         Independent Accountants have read such Portfolio Valuation Report
         (each, a "Report"); (B) with respect to the 1940 Act AMPS Asset
         Coverage Ratio, AMPS Basic Maintenance Amount and Minimum Liquidity
         Level, the result of the calculations set forth in each Report have
         been recalculated and are numerically correct; (C) with respect to the
         excess or deficiency of the aggregate Discounted Value of the Eligible
         Portfolio Property amount when compared to the AMPS Basic Maintenance
         Amount, the results of the calculation set forth in each Report have
         been recalculated and are numerically correct: (D) with respect to the
         excess or deficiency of the Dividend Coverage Assets amount when
         compared to the Minimum Liquidity Level, the result of the calculations
         set for in each Report have been recalculated and are numerically
         correct; (E) with respect to (x) any trade price, bid or mean price (or
         such alternative permissible factor used in calculating the Market
         Value) provided to the Corporation for purposes of valuing securities
         in the Corporation's portfolio, the Independent Accountant has compared
         the price used in such Report to the trade price, the bid or mean price
         listed in such Report as provided to the Corporation and verified that
         such information agrees; (y) with respect to the lower of two bid
         prices provided to the Corporation for purposes of valuing securities
         in the portfolio, the Independent Accountants have compared the price
         used in each Report with the lower of the two bid prices listed in the
         Report and verified that such information agrees (in the event such
         information does not agree, the Independent Accountants will provide a
         listing in their report of such differences); and (F) that the assets
         listed in each Report conform with the definition of Eligible Portfolio
         Property. If any letter reviewing the portfolio calculations delivered
         pursuant to this paragraph shows that an error was made in an Portfolio
         Valuation Report for a particular Valuation Date for which such
         Accountant's Confirmation was required to be delivered or shows that a
         lower aggregate Discounted Value for the aggregate of all Eligible
         Portfolio Property was determined by the Independent Accountants, the
         calculation or determination made by such Independent Accountants shall
         be final and conclusive and shall be binding on the Corporation, and

                                       45

<PAGE>

         the Corporation shall promptly amend the Portfolio Valuation Report and
         deliver the amended Portfolio Valuation Report to the Auction Agent,
         S&P and Moody's.

                           (iv)  For so long as shares of AMPS are rated by
         Moody's, in managing the Corporation's portfolio, the Investment
         Manager will not alter the composition of the Corporation's portfolio
         if, in the reasonable belief of the Investment Manager, the effect of
         any such alteration would be to cause the Corporation to have Eligible
         Portfolio Property with an aggregate Discounted Value, as of the
         immediately preceding Valuation Date, less than the AMPS Basic
         Maintenance Amount as of such Valuation Date; provided, however, that
         in the event that, as of the immediately preceding Valuation Date, the
         aggregate Discounted Value of Eligible Portfolio Property exceeded the
         AMPS Basic Maintenance Amount by 25% or less, the Investment Manager
         will not alter the composition of the Corporation's portfolio in a
         manner reasonably expected to reduce the aggregate Discounted Value of
         Eligible Portfolio Property unless the Corporation shall have confirmed
         that, after giving effect to such alteration, the aggregate Discounted
         Value of Eligible Portfolio Property would exceed the AMPS Basic
         Maintenance Amount.

                  (c)      Liquidity Coverage.

                           (i)   As of each Valuation Date as long as any shares
         of AMPS are outstanding, the Corporation shall determined (A) the
         Market Value of the Dividend Coverage Assets owned by the Corporation
         as of that Valuation Date, (B) the Dividend Coverage Amount on that
         Valuation Date, and (C) whether the Minimum Liquidity Level is met as
         of the Valuation Date. The calculations of the Dividend Coverage
         Assets, the Dividend Coverage Amount and whether the minimum Liquidity
         Level is met shall be set forth in a certificate (a "Certificate of
         Minimum Liquidity") dated as of the Valuation Date. The Portfolio
         Valuation Report and the Certificate of Minimum Liquidity may be
         combined in one certificate. The Corporation shall cause the
         Certificate of Minimum Liquidity to be delivered to the Auction Agent
         not later than the close of business on the third Business Day after
         the Valuation Date. The Minimum Liquidity Level shall be deemed to be
         met as of any date of determination if the Corporation has timely
         delivered a Certificate of Minimum Liquidity relating to such date,
         which states that the same has been met and which is not manifestly
         inaccurate. In the event that a Certificate of Minimum Liquidity is not
         delivered to the Auction Agent when required, the Minimum Liquidity
         Level shall be deemed not to have been met as of the applicable date.

                           (ii)  If the Minimum Liquidity Level is not met as of
         any Valuation Date, then the Corporation shall purchase or otherwise
         acquire Dividend Coverage Assets (with the proceeds from the
         liquidation of Eligible Portfolio Property or otherwise) to the extent
         necessary so that the Minimum Liquidity Level is met as of the fifth
         Business Day following such Valuation Date. The Corporation shall, by
         such fifth Business Day, provide to the Auction Agent a Certificate of
         Minimum Liquidity setting forth the calculations of the Dividend
         Coverage Assets and the Dividend Coverage Amount and showing that the
         Minimum Liquidity Level is met as of such fifth Business Day together
         with a report of the custodian of the Corporation's assets confirming
         the amount of the Corporation's Dividend Coverage Assets as of such
         fifth Business Day.

                                       46

<PAGE>

                  (d)      Calculation of AMPS Basic Maintenance Amount;
Accounting Treatment.

                           (i)   Eligible Portfolio Property of the Corporation
         shall be determined on an accrual basis in accordance with customary
         practice under which Eligible Portfolio Property purchased and not yet
         received are so reflected as Eligible Portfolio Property.

                           (ii)  Dividends on the Common Stock which are payable
         in Common Stock shall, after the effective date of any election by a
         holder of Common Stock to receive such dividend, be excluded from
         current liabilities.

                           (iii) Withholding taxes with respect to interest
         earned on any asset of the Corporation if such interest is not included
         in Eligible Portfolio Property, shall be excluded from current
         liabilities.

                           (iv)  With respect to Eligible Portfolio Property
         sold by the Corporation as of or prior to the Valuation Date, (x) if
         the determination is being made for Moody's, the sales price of such
         property will be reflected as Cash or Australian Currency, as
         appropriate, in Eligible Portfolio Property, to the extent that such
         receivable is due and payable within 5 Business Days (determined as for
         a Valuation Date) and is not subject to any dispute and (y) if the
         determination is being made for S&P, the Market Value of such Property
         will be reflected in Eligible Portfolio Property and will be discounted
         at the appropriate Discount Factor.

                  (e)      Other Permitted Assets. In addition to Eligible
Portfolio Property, the Corporation may own Other Permitted Assets and may also
own other securities, if the inclusion of any such type of other securities is
deemed by the Board of Directors to be in the best interest of the Corporation.
Other Permitted Assets and such other securities may be included in Eligible
Portfolio Property if the Rating Agencies have advised the Corporation in
writing that the inclusion of such Other Permitted Assets or other securities in
Eligible Portfolio Property would not adversely affect their respective
then-current ratings of the shares of AMPS.

                  8.       Auction Procedures.

(a)      Certain Definitions.

                  As used in this Paragraph 8, the following terms shall have
the following meanings, unless the context otherwise requires:

                           (i)   "AMPS" shall mean the shares of AMPS being
         auctioned pursuant to this Paragraph 8.

                           (ii)  "Auction Date" shall mean the first Business
         Day preceding the first day of a Dividend Period.

                           (iii) "Available AMPS" shall have the meaning
         specified in Paragraph 8(d)(i) below.

                                       47

<PAGE>

                           (iv)     "Bid" shall have the meaning specified in
         Paragraph 8 (b)(i) below.

                           (v)      "Bidder" shall have the meaning specified in
         Paragraph 8(b)(i) below.

                           (vi)     "Hold Order" shall have the meaning
         specified in Paragraph 8 (b) (i) below.

                           (vii)    "Maximum Applicable Rate" at any Auction
         will be the rate obtained by multiplying the 30-day "AA" Composite
         Commercial Paper Rate on the date of such Auction by the Applicable
         Percentage determined as set forth below based on the lower of the
         credit rating or ratings assigned to the AMPS by Moody's and S&P (or if
         Moody's or S&P or both shall not make such rating available, the
         equivalent of either or both of such ratings by a Substitute Rating
         Agency or two Substitute Rating Agencies or, in the event that only one
         such rating shall be available, the percentage will be based on such
         rating).

                                                               Applicable
                         Credit Ratings                        Percentage
                         --------------                        ----------
        S&P                         Moody's
        ---                         -------
        AA-- or Above               "aa3" or Above             150%
        A- to A+                    "a3" to "al"               160%
        BBB- to BBB+                "baa3" to "baa1"           250%
        Below BBB-                  Below "baa3"               275%


The Corporation shall take all reasonable action necessary to enable S&P and
Moody's to provide a rating for the AMPS. If either S&P or Moody's shall not
make such a rating available, or if neither S&P nor Moody's shall make such a
rating available, Merrill Lynch, Pierce, Fenner & Smith Incorporated or its
affiliates and successors, after consultation with the Corporation, shall select
a nationally recognized statistical rating organization or two nationally
recognized statistical rating organizations to act as a Substitute Rating Agency
or Substitute Rating Agencies, as the case may be.

                           (viii)   "Order" shall have the meaning specified in
         Paragraph 8(b)(i) below.

                           (ix)     "Sell Order" shall have the meaning
         specified in Paragraph 8 (b) (i) below.

                           (x)      "Submission Deadline" shall mean 1:00 p.m.,
         New York City time, on any Auction Date or such other time on any
         Auction Date as may be specified by the Auction Agent from time to time
         as the time by which each Broker-Dealer must submit to the Auction
         Agent in writing all Orders obtained by it for the Auction to be
         conducted on such Auction Date.

                                       48

<PAGE>

                           (xi)   "Submitted Bid" shall have the meaning
         specified in Paragraph 8(d)(i) below.

                           (xii)  "Submitted Hold Order" shall have the meaning
         specified in Paragraph 8(d)(i) below.

                           (xiii) "Submitted Order" shall have the meaning
         specified in Paragraph 8(d)(i) below.

                           (xiv)  "Submitted Sell Order" shall have the meaning
         specified in Paragraph 8(d)(i) below.

                           (xv)   "Sufficient Clearing Bids" shall have the
         meaning specified in Paragraph 8(d)(i) below.

                           (xvi)  "Winning Bid Rate" shall have the meaning
         specified in Paragraph 8(d)(i) below.

                  (b)      Orders by Beneficial Owners, Potential Beneficial
Owners, Existing Holders and Potential Holders.

                           (i)    Unless otherwise permitted by the Corporation,
         Beneficial Owners and Potential Beneficial Owners may only participate
         in Auctions through their Broker-Dealers. Broker-Dealers will submit
         the Orders of their respective customers who are Beneficial Owners and
         Potential Beneficial Owners to the Auction Agent, designating
         themselves as Existing Holders in respect of shares subject to orders
         submitted or deemed submitted to them by Beneficial Owners and as
         Potential Holders in respect of shares subject to Orders submitted to
         them by Potential Beneficial owners. A Broker-Dealer may also hold
         shares of AMPS in its own account as a Beneficial Owner. A
         Broker-Dealer may thus submit Orders to the Auction Agent as a
         Beneficial owner or a Potential Beneficial Owner and therefore
         participate in an Auction as an Existing Holder or Potential Holder on
         behalf of both itself and its customers. On or prior to the Submission
         Deadline on each Auction Date:

                           (A)    each Beneficial owner may submit to its
         Broker-Dealer information as to:

                                  (1)  the number of outstanding shares, if any,
                  of AMPS held by such Beneficial owner which such Beneficial
                  Owner desires to continue to hold without regard to the
                  Applicable Rate for the next succeeding Dividend Period;

                                  (2)  the number of outstanding shares, if any,
                  of AMPS held by such Beneficial owner which such Beneficial
                  Owner desires to continue to hold, provided that the
                  Applicable Rate for the next succeeding Dividend Period shall
                  not be less than the rate per annum specified by such
                  Beneficial owner; and/or

                                       49

<PAGE>

                                   (3) the number of outstanding shares, if any,
                  of AMPS held by such Beneficial owner which such Beneficial
                  Owner offers to sell without regard to the Applicable Rate for
                  the next succeeding Dividend Period; and

                           (B)     each Broker-Dealer, using a list of Potential
         Beneficial Owners that shall be maintained in good faith for the
         purpose of conducting a competitive Auction, shall contact Potential
         Beneficial Owners, including Persons that are not Beneficial Owners, on
         such list to determine the number of outstanding shares, if any, of
         AMPS which each such Potential Beneficial owner offers to purchase,
         provided that the Applicable Rate for the next succeeding Dividend
         Period shall not be less than the rate per annum specified by such
         Potential Beneficial Owner.

                  For the purposes hereof, the communications by a Beneficial
Owner or Potential Beneficial owner to a Broker-Dealer, or the communication by
a Broker-Dealer acting for its own account to the Auction Agent, or the
communications by a Broker-Dealer on behalf of a Beneficial owner or Potential
Beneficial Owner to the Auction Agent, of information referred to in clause (A)
or (B) of this Paragraph 8(b)(i) is hereinafter referred to as an "Order" and
each Beneficial Owner and each Potential Beneficial Owner placing an Order,
including a Broker-Dealer acting in such capacity for its own account and each
Broker-Dealer placing an Order on behalf of a Beneficial Owner or Potential
Beneficial Owner, is hereinafter referred to as a "Bidder"; an order containing
the information referred to in clause (A)(1) of this Paragraph 8(b)(i) or clause
(C) of Paragraph 8(b)(ii) is hereinafter referred to as a "Hold Order"; an Order
containing the information referred to in clause (A)(2) of this Paragraph
8(b)(i) is hereinafter referred to as a "Bid"; and an Order containing the
information referred to in clause (A)(3) of this Paragraph 8(b)(i) is
hereinafter referred to as a "Sell Order." Inasmuch as a Broker-Dealer
participates in an Auction as an Existing Holder or a Potential Holder only to
represent the interests of a Beneficial Owner or Potential Beneficial Owner,
whether it be its customers or itself, all discussion herein relating to the
consequences of an Auction for Existing Holders and Potential Holders also
applies to the underlying beneficial ownership interests represented.

                           (ii)(A) A Bid by an Existing Holder shall constitute
         an irrevocable offer to sell:

                                  (1)  the number of outstanding shares of AMPS
                  specified in such Bid if the Applicable Rate determined on
                  such Auction Date shall be less than the rate per annum
                  specified in such Bid; or

                                  (2)  such number or a lesser number of
                  outstanding shares of AMPS to be determined as set forth in
                  Paragraph 8(e)(i)(D) if the Applicable Rate determined on such
                  Auction Date shall be equal to the rate per annum specified
                  therein; or

                                  (3)  a lesser number of outstanding shares of
                  AMPS to be determined as set forth in Paragraph 8(e)(ii)(C) if
                  such specified rate per annum shall be higher than the Maximum
                  Applicable Rate and Sufficient Clearing Bids do not exist.

                                       50

<PAGE>

                           (B) A Sell Order by an Existing Holder shall
         constitute an irrevocable offer to sell:

                               (1)     the number of outstanding shares of AMPS
                  specified in such Sell order; or

                               (2)     such number or a lesser number of
                  outstanding shares of AMPS to be determined as set forth in
                  Paragraph 8(e)(ii)(C) if Sufficient Clearing Bids do not
                  exist.

                           (C) A Bid by a Potential Holder shall constitute an
         irrevocable offer to purchase:

                               (1)     the number of outstanding shares of AMPS
                  specified in such Bid if the Applicable Rate determined on
                  such Auction Date shall be higher than the rate per annum
                  specified in such Bid; or

                               (2)     such number or a lesser number of
                  outstanding shares of AMPS to be determined as set forth in
                  Paragraph 8(e)(i)(E) if the Applicable Rate determined on such
                  Auction Date shall be equal to the rate per annum specified
                  therein.

                  (c)      Submissions of Orders by Broker-Dealers to Auction
                           Agent.

                           (i) Each Broker-Dealer shall submit in writing or
         through the Auction Agent's Auction Processing System to the Auction
         Agent prior to the Submission Deadline on each Auction Date all orders
         obtained by such Broker-Dealer, designating itself (unless otherwise
         permitted by the Corporation) as an Existing Holder in respect of
         shares subject to Orders submitted or deemed submitted to it by
         Beneficial Owners and as a Potential Holder in respect of shares
         subject to Orders submitted to it by Potential Beneficial Owners, and
         specifying with respect to each Order:

                           (A) the name of the Bidder placing such order (which
         shall be the Broker-Dealer unless otherwise permitted by the
         Corporation);

                           (B) the aggregate number of outstanding shares of
         AMPS that are the subject of such Order;

                           (C) to the extent that such Bidder is an Existing
         Holder:

                               (1)     the number of outstanding shares, if any,
                  of AMPS subject to any Hold Order placed by such Existing
                  Holder;

                               (2)     the number of outstanding shares, if
                  any, of AMPS subject to any Bid placed by such Existing Holder
                  and the rate per annum specified in such Bid; and

                                       51

<PAGE>

                                 (3)  the number of outstanding shares, if any,
                  of  AMPS subject to any Sell order placed by such Existing
                  Holder; and

                           (D)   to the extent such Bidder is a Potential
         Holder, the rate per annum specified in such Potential Holder's Bid.

                           (ii)  If any rate per annum specified in any Bid
         contains more than three figures to the right of the decimal point, the
         Auction Agent shall round such rate up to the next highest
         one-thousandth (.001) of 1%.

                           (iii) If an Order or Orders covering all of the
         outstanding shares of AMPS held by an Existing Holder are not submitted
         to the Auction Agent prior to the Submission Deadline, the Auction
         Agent shall deem a Hold Order to have been submitted on behalf of such
         Existing Holder covering the number of outstanding shares of AMPS held
         by such Existing Holder and not subject to Orders submitted to the
         Auction Agent.

                           (iv)  If one or more Orders on behalf of an Existing
         Holder covering in the aggregate more than the number of outstanding
         shares of AMPS held by such Existing Holder are submitted to the
         Auction Agent, such Orders shall be considered valid as follows and in
         the following order of priority:

                           (A)   any Hold Order submitted on behalf of such
         Existing Holder shall be considered valid up to and including the
         number of outstanding shares of AMPS held by such Existing Holder;
         provided that if more than on Hold Order is submitted on behalf of such
         Existing Holder and the number of shares of AMPS subject to such Hold
         Orders exceeds the number of outstanding shares of AMPS held by such
         Existing Holder, the number of shares of AMPS subject to each of such
         Hold Orders shall be reduced pro rata so that such Hold Orders, in the
         Aggregate, cover exactly the number of outstanding shares of AMPS held
         by such Existing Holder;

                           (B)   any Bids submitted on behalf of such Existing
         Holder shall be considered valid, in the ascending order of their
         respective rates per annum if more than one Bid is submitted on behalf
         of such Existing Holder, up to an including the excess of the number of
         outstanding shares of AMPS held by such Existing Holder over the number
         of shares of AMPS of AMPS subject to any Hold Order referred to in
         Paragraph 8(c)(iv)(A) above (and if more than one Bid submitted on
         behalf of such Existing Holder specified the same rate per annum and
         together they cover more than the remaining number of shares that can
         be the subject of valid Bids after application of Paragraph 8(c)(iv)(A)
         above and of the foregoing portion of this Paragraph 8(c)(iv)(B) to any
         Bid or Bids specifying a lower rate or rates per annum, the number of
         shares subject to each of such Bids, in the aggregate, cover exactly
         such remaining number of shares); and the number of shares, if any,
         subject to Bids not valid under this Paragraph 8(c)(iv)(B) shall be
         treated as the subject of a Bid by a Potential Holder; and

                           (C)   any Sell order shall be considered valid up to
         an including the excess of the number of outstanding shares of AMPS
         held by such Existing Holder over the number of shares of AMPS subject
         to Hold Orders referred to in Paragraph

                                       52

<PAGE>

         8(c)(iv)(A) and Bids referred to in Paragraph 8(c)(iv)(B); provided
         that if more than one Sell Order is submitted on behalf of any Existing
         Holder and the number of shares of AMPS subject to such Sell Orders is
         greater than such excess, the number of shares of AMPS subject to each
         Sell orders shall be reduced pro rata so that such Sell Orders, in the
         aggregate, cover exactly the number of shares of AMPS equal to such
         excess.

                           (v)   If more than one Bid is submitted on behalf of
         any Potential Holder, each Bid submitted shall be a separate Bid with
         the rate per annum and number of shares of AMPS therein specified.

                           (vi)  Any Order submitted by a Beneficial Owner or a
         Potential Beneficial Owner to its Broker-Dealer, or by a Broker-Dealer
         to the Auction Agent, prior to the Submission Deadline on any Auction
         Date shall be irrevocable.

                  (d)      Determination of Sufficient Clearing Bids, Winning
                           Bid Rate and Applicable Rate.

                           (i)   Not earlier than the Submission Deadline on
         each Auction Date, the Auction Agent shall assemble all Orders
         submitted or deemed submitted to it by the Broker-Dealers (each such
         Order as submitted or deemed submitted by a Broker-Dealer being
         hereinafter referred to individually as a "Submitted Hold Order," a
         "Submitted Bid" or a "Submitted Sell Order," as the case may be, or as
         a "Submitted Order") and shall determine:

                           (A)   the excess of the total number of outstanding
         shares of AMPS over the number of Outstanding shares of AMPS that are
         the subject of Submitted Hold Orders (such excess being hereinafter
         referred to as the "Available AMPS");

                           (B)   from the Submitted Orders whether the number of
         outstanding shares of AMPS that are the subject of Submitted Bids by
         Potential Holders specifying one or more rate per annum equal to or
         lower than the Maximum Applicable Rate exceeds or is equal to the sum
         of:

                                 (1) the number of outstanding shares of AMPS
                  that are the subject of Submitted Bids by Existing Holders
                  specifying one or more rates per annum higher than the Maximum
                  Applicable Rate, and

                                 (2) the number of outstanding shares of AMPS
                  that are subject to Submitted Sell orders;

                                 If such excess or such equality exists
                  (other than because the number of outstanding shares of AMPS
                  in clauses (1) and (2) above are each zero because all of the
                  outstanding shares of AMPS are the subject of Submitted Hold
                  Orders), then "Sufficient Clearing Bids" exist; and

                           (C)   If Sufficient Clearing Bids exist, the lowest
         rate per annum specified in the Submitted Bids (the "Winning Bid Rate")
         that if:

                                       53

<PAGE>

                                 (1)   each Submitted Bid from Existing Holders
                  specifying the Winning Bid Rate and all other submitted bids
                  from Existing Holders specifying lower rates per annum were
                  rejected, thus entitling such Existing Holders to continue to
                  hold the shares of AMPS that are the subject of such Submitted
                  Bids, and

                                 (2)   each Submitted Bid from Potential
                  Holders specify the Winning Bid Rate and all other Submitted
                  Bids from Potential Holders specifying lower rates per annum
                  were accepted, thus entitling the Potential Holders to
                  purchase the shares of AMPS that are the subject of such
                  Submitted Bids.

         would result in the number of shares subject to all Submitted Bids
         specifying the Winning Bid Rate or a lower rate per annum being at
         least equal to the Available AMPS.

                           (ii)  Promptly after the Auction Agent has made the
         determinations pursuant to Paragraph 8(d)(i), the Auction Agent shall
         advise the Corporation of Maximum Applicable Rate and, based on such
         determinations, the Applicable Rate for the next succeeding Dividend
         Period as follows:

                           (A)   if Sufficient Clearing Bids exist, that the
         Applicable Rate for the next succeeding Dividend Period shall be equal
         to the Winning Bid Rate;

                           (B)   if Sufficient Clearing Bids do not exist (other
         than because all of the outstanding shares of AMPS are the subject of
         Submitted Hold Orders), that the Applicable Rate for the next
         succeeding Dividend Period shall be equal to the Maximum Applicable
         Rate; or

                           (C)   if all the outstanding shares of AMPS are the
         subject of Submitted Hold Orders, that the Applicable Rate for the next
         succeeding Dividend Period shall be 90% of the 30-day "AA" Composite
         Commercial Paper Rate.

                  (e)      Acceptance and Rejection of Submitted Bids and
                           Submitted Sell Orders and Allocation of Shares.

                  Based on the determinations made pursuant to Paragraph
8(d)(i), the Submitted Bids and Submitted Sell Orders shall be accepted or
rejected and the Auction Agent shall take such other action as set forth below:

                           (i) If Sufficient Clearing Bids have been made,
         subject to the provisions of Paragraph 8(e)(iii) and Paragraph
         8(e)(iv), Submitted Bids and Submitted Sell orders shall be accepted or
         rejected in the following order of priority and all other Submitted
         Bids shall be rejected:

                           (A) the Submitted Sell Orders of Existing Holders
         shall be accepted and the Submitted Bid of each of the Existing Holders
         specifying any rate per annum that is higher than the Winning Bid Rate
         shall be accepted, thus requiring each such Existing Holder to sell the
         outstanding shares of AMPS that are the subject of such Submitted Sell
         order or Submitted Bid;

                                       54

<PAGE>

                           (B)   the Submitted Bid of each of the Existing
         Holders specifying any rate per annum that is lower than the Winning
         Bid Rate shall be rejected, thus entitling each such Existing Holder to
         continue to hold the outstanding shares of AMPS that are the subject of
         such Submitted Bid;

                           (C)   the Submitted Bid of each of the Potential
         Holders specifying any rate per annum that is lower than the Winning
         Bid Rate shall be accepted;

                           (D)   the Submitted Bid of each of the Existing
         Holders specifying a rate per annum that is equal to the Winning Bid
         Rate shall be rejected, thus entitling each such Existing Holder to
         continue to hold the outstanding shares of AMPS that are the subject of
         such Submitted Bid, unless the number of outstanding shares of AMPS
         subject to all such Submitted Bids shall be greater than the number of
         outstanding shares of AMPS ("Remaining Shares") equal to the excess of
         Available AMPS over the number of outstanding shares of AMPS subject to
         Submitted Bids described in Paragraph 8(e)(i)(B) and Paragraph
         8(i)(i)(C), in which event the Submitted Bids of each such Existing
         Holder shall be accepted, and each such Existing Holder shall be
         required to sell outstanding shares of AMPS, but only in an amount
         equal to the difference between (1) the number of outstanding shares of
         AMPS then held by such Existing Holder subject to such Submitted Bid
         and (2) the number of shares of AMPS obtained by multiplying (x) the
         number of Remaining Shares by (y) a fraction the numerator of which
         shall be the number of outstanding shares of AMPS held by such Existing
         Holder subject to such Submitted bid and the denominator of which shall
         be the sum of the numbers of outstanding shares of AMPS subject to such
         Submitted Bids made by all such Existing Holders that specified a rate
         per annum equal to the Winning Bid Rate; and

                           (E)   the Submitted Bid of each of the Potential
         Holders specifying a rate per annum that is equal to the Winning Bid
         Rate shall be accepted but only in an amount equal to the number of
         outstanding shares of AMPS obtained by multiplying (x) the difference
         between the Available AMPS and the number of outstanding shares of AMPS
         subject to Submitted Bids described in Paragraph 8(e)(i)(B), Paragraph
         8(e)(i)(C) and Paragraph 8(e)(i)(D) by (y) a fraction the numerator of
         which shall be the number of outstanding shares of AMPS subject to such
         Submitted Bid and the denominator of which shall be the sum of the
         number of outstanding shares of AMPS subject to such Submitted Bids
         made by all such Potential Holders that specified rates per annum equal
         to the Winning Bid Rate.

                           (ii)  If Sufficient Clearing Bids have not been made
(other than because all of the outstanding shares of AMPS are subject to
Submitted Hold Orders), subject to the provisions of Paragraph 8(e)(iii),
Submitted Orders shall be accepted or rejected as follows in the following order
of priority and all other Submitted Bids shall be rejected:

                     (A)   the Submitted Bid of each Existing Holder specifying
any rate per annum that is equal to or lower than the Maximum Applicable Rate
shall be rejected, thus entitling such Existing Holder to continue to hold the
outstanding shares of AMPS that are the subject of such Submitted Bid;

                                       55

<PAGE>

                  (B)  the Submitted Aid of each Potential Holder specifying any
rate per annum that is equal to or lower than the Maximum Applicable Rate shall
be accepted, thus requiring such Potential Holder to purchase the outstanding
shares of AMPS that are the subject of such Submitted Bid; and

                  (C)  the Submitted Bids of each Existing Holder specifying any
rate per annum that is higher than the Maximum Applicable Rate shall be accepted
and the Submitted Sell Orders of each Existing Holder shall be accepted, in both
cases only in an amount equal to the difference between (1) the number of
outstanding shares of AMPS then held by such Existing Holder subject to such
Submitted Bid or Submitted Sell Order and (2) the number of share of AMPS
obtained by multiplying (x) the difference between the Available AMPS and the
aggregate number of outstanding shares of AMPS subject to Submitted Bids
described in Paragraph 8(e)(ii)(A) and Paragraph 8(e)(ii)(B) by (y) a fraction
the numerator of which shall be the number of outstanding shares of AMPS held by
such Existing Holder subject to such Submitted Bid or Submitted Sell Order and
the denominator of which shall be the number of outstanding shares of AMPS
subject to all such Submitted Bids and Submitted Sell Orders.

                       (iii)   If, as a result of the procedures described in
Paragraph 8(e)(i) or Paragraph 8(e)(ii), any Existing Holder would be entitled
or required to sell, or any Potential Holder would be entitled or required to
purchase, a fraction of a share of AMPS on any Auction Date, the Auction Agent
shall, in such manner as in its sole discretion it shall determine, round up or
down the number of shares of AMPS to be purchased or sold by an Existing Holder
or Potential Holder on such Auction Date so that each outstanding shares of AMPS
purchased or sold by each Existing Holder or Potential Holder on such Auction
Date shall be a whole share of AMPS.

                       (iv)    If, as a result of the procedures described in
Paragraph 8(e)(i), any Potential Holder would be entitled or required to
purchase less than a whole share of AMPS on any Auction Date, the Auction Agent,
in such manner as in its sole discretion it shall determine, shall allocate
shares of AMPS for purchase among Potential Holders so that only whole shares of
AMPS are purchased on such Auction Date by any Potential Holder, even if such
allocation results in one or more of such Potential Holders not purchasing any
shares of AMPS on such Auction Date.

                       (v)     Based on the results of each Auction, the Auction
Agent shall determine, with respect to each Broker-Dealer that submitted Bids or
Sell Orders on behalf of Existing Holders or Potential Holders, the aggregate
number of the outstanding shares of AMPS to be purchased and the aggregate
number of outstanding shares of AMPS to be sold by such Potential Holders and
Existing Holders and, to the extent that such aggregate number of outstanding
shares to be purchased and such aggregate number of outstanding shares to be
sold differ, the Auction Agent shall determine to which other Broker-Dealer or
Broker-Dealers acting for one or more purchasers such Broker-Dealer shall
deliver, or from which other Broker-Dealer or Broker-Dealers acting for one or
more sellers such Broker-Dealer shall receive, as the case may be, outstanding
shares of AMPS.

                                       56

<PAGE>

         9.       Miscellaneous

                  (a) To the extent permitted by applicable law, the Board of
Directors may interpret or adjust the provisions of the Articles Supplementary
to resolve any inconsistency or ambiguity, remedy any formal defect or make any
other change or modification which does not adversely affect the rights of
Beneficial owners of shares of AMPS and if such inconsistency or ambiguity
reflects an incorrect provision thereof then the Board of Directors may
authorize the filing of a Certificate of Correction.

                  (b) A Beneficial owner or an Existing Holder (A) may sell,
transfer or otherwise dispose of shares of AMPS only pursuant to a Bid or Sell
Order in accordance with the procedures described in Paragraph 8 or to or
through a Broker-Dealer, provided that in the case of all transfers other than
pursuant to Auctions such Existing Holder or Broker-Dealer (acting on its own
behalf or on behalf of a Beneficial Owner), if applicable, or its Agent Member
advises the Auction Agent of such transfer and (B) except as otherwise required
by law, shall have the ownership of the shares of AMPS held by it maintained in
book entry form by the Securities Depository in the account of its Agent Member,
which in turn will maintain records of such Beneficial Owner's beneficial
ownership. Neither the Corporation nor any Affiliate shall submit an order in
any Auction. Any Beneficial Owner that is an Affiliate shall not sell, transfer
or otherwise dispose of shares of AMPS to any Person other than the Corporation.
All of the outstanding shares of AMPS shall be represented by a single
certificate registered in the name of the nominee of the Securities Depository
unless otherwise required by law or unless there is no Securities Depository. If
there is no Securities Depository, at the Corporation's option and upon its
receipt of such documents as it deems appropriate, any shares of AMPS may be
registered in the Stock Register in the name of the Beneficial Owner thereof and
such Beneficial Owner thereupon will be entitled to receive certificates
therefor and required to deliver certificates therefor upon transfer or exchange
thereof.

                  (c) The Corporation will exercise its best efforts to maintain
an Auction Agent pursuant to an agreement containing terms not materially less
favorable to the Corporation than the terms of the Auction Agent Agreement first
entered into by the Corporation pursuant to the resolutions adopted by the Board
of Directors on December 13, 1988.

                  (d) The Corporation will use its best efforts to maintain a
rating of the AMPS from each of the Rating Agencies.

                  (e) All notices or communications, unless otherwise specified
in the By-laws of the Corporation or the Articles Supplementary, will be
sufficiently given if in writing and delivered in person or mailed by
first-class mail, postage prepaid. Notice will be deemed given on the earlier of
the date received or the date seven days after which such notice is mailed.

                  (f) So long as any shares of AMPS are outstanding, the
Corporation will not engage in "short sales" or "hedging" or enter into "futures
contracts" or "option contracts" (other than Forward Contracts) with respect to
the Eligible Portfolio Property.

                                       57

<PAGE>

IN WITNESS WHEREOF, THE FIRST AUSTRALIA PRIME INCOME FUND, INC., has caused
these presents to be signed in its name and on its behalf by its President and
its corporate seal to be hereunder affixed and attested by its Assistant
Secretary on this 15th day of December, 1993, and its President acknowledges
that these Articles Supplementary are the act and deed of The First Australia
Prime Income Fund, Inc., and, under the penalties of perjury, that the matters
and facts set forth herein with respect to authorization and approval are true
in all material respects to the best of his knowledge, information and belief.

                                             THE FIRST AUSTRALIA PRIME INCOME
                                             FUND, INC.



                                              By: /s/ Brian M. Sherman
                                                  ----------------------------
                                                  Brian M. Sherman, President



ATTEST:

/s/ Margaret A. Bancroft
- ------------------------
Assistant Secretary

                                       58

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.A17
<SEQUENCE>10
<FILENAME>dex99a17.txt
<DESCRIPTION>EXHIBIT A17
<TEXT>
<PAGE>

                                                                 EXHIBIT (A)(17)

                   THE FIRST AUSTRALIA PRIME INCOME FUND, INC.

                             ARTICLES SUPPLEMENTARY

         THE FIRST AUSTRALIA PRIME INCOME FUND, INC., a Maryland corporation
having its principal Maryland office in Baltimore, Maryland (the "Corporation"),
certifies that:

         FIRST: Pursuant to Section 3-802 of the Maryland General Corporation
Law (the "MGCL"), the Board of Directors of the Corporation ("the Board") at its
meeting held on June 8, 2000, by unanimous resolution, elected to be subject to
certain provisions of Subtitle 8 of the MGCL, entitled, "Corporations and Real
Estate Investment Trusts -- Unsolicited Takeovers."

         SECOND: Pursuant to such resolution, the Corporation through its Board,
has elected to be subject to the following provisions of Subtitle 8:

         (i)      Section 3-804(a): Under Section 3-804(a), the stockholders of
                  the Corporation may remove any director by the affirmative
                  vote of at least two-thirds of all the votes entitled to be
                  cast by the stockholders generally in the election of
                  directors.

         (ii)     Section 3-804(b): Under Section 3-804(b), the number of
                  directors of the Corporation shall be fixed only by the vote
                  of the Board.

         (iii)    Section 3-804(c): Under Section 3-804(c), a vacancy on the
                  Board due to an increase in the size of the Board or the
                  death, resignation, or removal of a director, may be filled
                  only by the affirmative vote of the majority of the remaining
                  directors in office, even if the remaining directors do not
                  constitute a quorum. Any director so elected to fill a vacancy
                  shall hold office for the remainder of the full term of the
                  class of directors in which the vacancy occurred, and until a
                  successor is elected and qualifies.

         (iv)     Section 3-805: Under Section 3-805, the Secretary of the
                  Corporation may call a special meeting of stockholders only on
                  the written request of the stockholders entitled to cast at
                  least a majority of all votes entitled to be cast at the
                  meeting; and in accordance with the procedures set forth under
                  Section 2-502(b)(2) and (3) and (e) of the MGCL.

         THIRD: The filing of these Articles Supplementary, pursuant to Section
3-802(d)(1), was approved by the Board by Unanimous Written Consent in lieu of
meeting on August 16, 2000.

         FOURTH: Pursuant to Section 3-802(d)(3) of the MGCL, the filing of
these Articles Supplementary does not require the approval of stockholders.

         FIFTH: The undersigned Chairman acknowledges that these Articles
Supplementary are the act of the Corporation and that to the best of his
knowledge, information, and belief, all matters and facts set forth herein
relating to the authorization and approval of the Articles


<PAGE>

Supplementary are true in all material respects and that this statement is made
under the penalty of perjury.

         IN WITNESS WHEREOF, the Corporation has caused these Articles
Supplementary to be signed in its name and on behalf by its Chairman and
attested to by its Assistant Secretary on this 16th day of August, 2000.

                                        THE FIRST AUSTRALIA PRIME INCOME
                                        FUND, INC.

                                        By: /s/ Laurence S. Freedman
                                            ----------------------------
                                            Laurence S. Freedman
                                            Chairman

ATTEST


/s/ Sander M. Bieber
- --------------------
Sander M. Bieber
Assistant Secretary

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.A18
<SEQUENCE>11
<FILENAME>dex99a18.txt
<DESCRIPTION>EXHIBIT A18
<TEXT>
<PAGE>

                                                                  Exhibit(A)(18)

                              ARTICLES OF AMENDMENT

                                       OF

                   THE FIRST AUSTRALIA PRIME INCOME FUND, INC.

The First Australia Prime Income Fund, Inc., a Maryland Corporation having its
principal office in this State in Baltimore City, Maryland (hereinafter called
the Corporation), hereby certifies to the State Department of Assessments and
Taxation of Maryland, that:

FIRST: The Charter of the Corporation is hereby amended by striking out Article
II of the Articles of Incorporation, as heretofore amended and restated, so that
Article II shall read in its entirety as follows:

The name of the corporation is ABERDEEN ASIA-PACIFIC INCOME FUND, INC. (the
"Corporation").

SECOND: This amendment was approved by the board of directors of the Corporation
at a meeting held March 1, 2001 and is limited to a change expressly authorized
by Section 2-605 of the Maryland General Corporation Law to be made without
action by stockholders.

THIRD: The foregoing amendment shall become effective on May 1, 2001.

IN WITNESS WHEREOF, the Corporation has caused these presents to be signed in
its name and on its behalf by its Vice President and witnessed by its Assistant
Secretary on April 19, 2001.

THE FIRST AUSTRALIA PRIME INCOME FUND, INC.

By:  /s/ Ouma Sananikone                Attest: /s/ Sander Bieber
     ----------------------------               -------------------------------
     Ouma Sananikone                            Sander Bieber
     Vice President                             Assistant Secretary

THE UNDERSIGNED, Vice President and Chief Investment Officer of The First
Australia Prime Income Fund, Inc., who executed on behalf of said Corporation
the foregoing Articles of Amendment, of which this certificate is made a part,
hereby acknowledges, in the name and on behalf of said Corporation, the
foregoing Articles of Amendment to be the corporate act of said Corporation and
further certifies that, to the best of her knowledge, information and belief,
the matters and facts set forth therein with respect to the approval thereof are
true in all material respects, under the penalties of perjury.

By:    /s/ Ouma Sananikone
       --------------------------
       Ouma Sananikone
       Vice President

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.A19
<SEQUENCE>12
<FILENAME>dex99a19.txt
<DESCRIPTION>EXHIBIT A19
<TEXT>
<PAGE>

                                                                 EXHIBIT (A)(19)


             UNANIMOUS WRITTEN CONSENT OF THE AMPS PRICING COMMITTEE
                          OF THE BOARD OF DIRECTORS OF
                     ABERDEEN ASIA-PACIFIC INCOME FUND, INC.

                            Pursuant to Section 2-408
                                     of the
                        Maryland General Corporation Law

         Pursuant to the authority delegated to them by the Board of Directors,
the undersigned, constituting all of the members of the AMPS Pricing Committee
of the Board of Directors, hereby adopt the following:

         WHEREAS, at its regular meeting held March 14, 2002, the Board of
Directors of Aberdeen Asia-Pacific Income Fund, Inc. ("Fund") determined that it
would be in the best interest of the Fund and its shareholders (both common and
preferred) for the Fund to engage in an interest rate swap transaction with
respect to the interest rate exposure generated by up to one-third of the Fund's
outstanding preferred stock;

         WHEREAS, the Articles Supplementary defining the terms of the Fund's
Auction Market Preferred Stock, Series A-I, as each has been amended from time
to time ("Articles Supplementary"), require that the Fund seek confirmation from
Standard & Poor's Rating Service ("S&P") and/or Moody's Investors Service, Inc.
("Moody's") that such activity would not adversely affect the respective ratings
of the AMPS by S&P and/or Moody's before engaging in such activity;

         WHEREAS, by notifications dated April 19, 2002, May 10, 2002 and May
13, 2002, Moody's has approved the use of interest rate swaps to hedge the
interest rate exposure generated by up to one-third of the Fund's outstanding
preferred stock and the inclusion of such interest rate swaps as Eligible
Portfolio Property within the meaning of the Articles Supplementary, subject to
a series of conditions;

         WHEREAS, by a notification dated May 6, 2002, August 13, 2002 and
August 26, 2002, S&P has approved the use of interest rate swaps to hedge the
interest rate exposure generated by up to one-third of the Fund's outstanding
preferred stock and include such interest rate swaps as Eligible Portfolio
Property within the meaning of the Articles Supplementary, subject to a series
of conditions; and

         WHEREAS, the conditions precedent to using interest rate swaps to hedge
the interest rate exposure generated by up to one-third of the Fund's
outstanding preferred stock include the requirement that the S&P and Moody's
conditions be included in the Articles Supplementary prior to implementing the
proposed hedge;

         NOW THEREFORE, BE IT RESOLVED, that the Articles Supplementary are
hereby amended to:

<PAGE>

FAX Unanimous Written Consent
AMPS Interest Rate Swaps
Page 2 of 4


1.   Add the following definitions of section 1 of the Articles Supplementary:

     (a)  "AMPS Interest Rate Swap" means a contractual agreement whereby the
          Corporation contracts with an Eligible AMPS Interest Rate Swap
          Counterparty to engage, for a period of time not to exceed two years,
          in an interest rate swap with a notional value of up to one-third of
          the value of the aggregate liquidation preference of all of the AMPS
          (in any and all series) Outstanding at the time the interest rate swap
          commences. If the Corporation fails to maintain the AMPS Basic
          Maintenance Amount (as required by paragraph 7(b) hereof) as of each
          Valuation Date, and will not be able to cure such failure by the AMPS
          Basic Maintenance Cure Date, the Corporation must terminate any
          then-outstanding AMPS Interest Rate Swaps by the close of business on
          the AMPS Basic Maintenance Cure Date.

     (b)  "Eligible AMPS Interest Rate Swap Counterparty" means (i) with respect
          to S&P, a counterparty with at least an A-1+ short-term rating or,
          alternatively, an AA- long-term rating from S&P; and (ii) with respect
          to Moody's, a counterparty with at least an Aa3 long-term rating from
          Moody's. In the event that an Eligible AMPS Interest Rate Swap
          Counterparty's ratings are downgraded below A-1+ or AA- by S&P, or Aa3
          by Moody's, respectively, the counterparty will cease to be an
          Eligible AMPS Interest Rate Swap Counterparty and the counterparty
          must be replaced promptly.

2.   Amend the following definitions of section 1 of the Articles Supplementary:

     (a)  In the definition of "Discount Factor," add the following row and
          footnotes to the end of the table of discount factors:

<TABLE>
<CAPTION>
          ---------------------------------------------------------------------------------
                                                          Moody's               S&P
                                                         Discount            Discount
          Type of Eligible Portfolio Property             Factor              Factor
          ---------------------------------------------------------------------------------
          <S>                                           <C>                  <C>
          AMPS Interest Rate Swaps                      1.18/1.22(8)         1.0526(9)
          ---------------------------------------------------------------------------------
</TABLE>

          ________________

          (8)  With respect to Moody's, the discount factor of 1.18 will be
               applied when the Eligible AMPS Interest Rate Swap Counterparty is
               rated Aaa, and the discount factor of 1.22 will be applied when
               the Eligible AMPS Interest Rate Swap Counterparty is rated Aa1 -
               Aa3, to the extent the AMPS Interest Rate Swap is "in the money"
               based on the then-current marked to market valuation of the AMPS
               Interest Rate Swap provided by the Eligible AMPS Interest Rate
               Swap Counterparty. To the extent that the AMPS Interest Rate Swap
               is "out of the money," 100% of the Market Value of the AMPS
               Interest Rate Swap will be deemed a current liability of the
               Corporation for purposes of calculating the AMPS Basic
               Maintenance Amount and will not be included in Eligible Portfolio
               Property.

<PAGE>

FAX Unanimous Written Consent
AMPS Interest Rate Swaps
Page 3 of 4


          (9)  With respect to S&P, to the extent the AMPS Interest Rate Swap is
               "in the money" based on the then-current marked to market
               valuation of the AMPS Interest Rate Swap provided by the Eligible
               AMPS Interest Rate Swap Counterparty, the discount factor in the
               table should be applied. To the extent that the AMPS Interest
               Rate Swap is "out of the money," 100% of the Market Value of the
               AMPS Interest Rate Swap will be deemed a current liability of the
               Corporation for purposes of calculating the AMPS Basic
               Maintenance Amount and will not be included in Eligible Portfolio
               Property.

     (b)  For the definition of "Market Value" --

          (i)  For each of the Series A-D of the Articles Supplementary:

               (1)  remove the word "and" from the end of subparagraph (c);

               (2)  replace the period at the end of subparagraph (d) with ";
                    and" and

               (3)  add new subparagraph (e) to read as follows: "(e) as to AMPS
                    Interest Rate Swaps, the Administrator shall determine the
                    net value of the interest rate swaps on a daily
                    marked-to-market basis in accordance with their Valuation
                    Procedures, as such Valuation Procedures may be amended from
                    time by the Board of Directors of the Corporation, based on
                    price information received from the Eligible AMPS Interest
                    Rate Swap Counterparty."

          (ii) For each of the Series E-I of the Articles Supplementary:

               (1)  remove the word "and" from the end of subparagraph (d);

               (2)  replace the period at the end of subparagraph (e) with ";
                    and" and

               (3)  add new subparagraph (f) to read as follows: "(f) as to AMPS
                    Interest Rate Swaps, the Administrator shall determine the
                    net value of the interest rate swaps on a daily
                    marked-to-market basis in accordance with their Valuation
                    Procedures, as such Valuation Procedures may be amended from
                    time by the Board of Directors of the Corporation, based on
                    price information received from the Eligible AMPS Interest
                    Rate Swap Counterparty."

     (c)  In the definition of "Eligible Portfolio Property," add the phrase
          "AMPS Interest Rate Swaps (to the extent they are "in the money"),"
          immediately after the phrase "Repurchase Agreements," and immediately
          before the phrase "Short Term Money Market Instruments."

<PAGE>

FAX Unanimous Written Consent
AMPS Interest Rate Swaps
Page 4 of 4


     IN WITNESS WHEREOF, each of the undersigned has executed a counterpart of
the consent on the date shown below.

/s/ Neville J. Miles                          /s/ William J. Potter
- -----------------------                       -----------------------
Neville J. Miles                              William J. Potter



/s/ Peter D. Sacks                            /s/ John T. Sheehy
- -----------------------                       -----------------------
Peter D. Sacks                                John T. Sheehy








Dated: September 12, 2002

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.B
<SEQUENCE>13
<FILENAME>dex99b.txt
<DESCRIPTION>EXHIBIT B
<TEXT>
<PAGE>

                                                                     Exhibit (b)

                     ABERDEEN ASIA-PACIFIC INCOME FUND, INC.

                             A Maryland Corporation

                                     BY-LAWS

                              Amended and Restated

                            as of September 12, 2002

<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<S>                                                                                   <C>
ARTICLE I NAME OF CORPORATION, LOCATION OF OFFICES AND SEAL .......................    1

   Section 1.  Name ...............................................................    1
   Section 2.  Principal Offices ..................................................    1
   Section 3.  Seal ...............................................................    1

ARTICLE II STOCKHOLDERS ...........................................................    2

   Section 1.  Place of Meeting ...................................................    2
   Section 2.  Annual Meetings. ...................................................    2
   Section 3.  Special Meetings. ..................................................    2
   Section 4.  Notice of Meetings. ................................................    3
   Section 5.  Quorum; Adjournment of Meetings ....................................    3
   Section 6.  Voting and Inspector ...............................................    4
   Section 7.  Stockholders Entitled to Vote ......................................    5
   Section 8.  Validity of Proxies, Ballots .......................................    5
   Section 9.  Conduct of Stockholders' Meetings. .................................    6
   Section 10. Action Without a Meeting ...........................................    6
   Section 11. Stockholder Proposals ..............................................    6

ARTICLE III BOARD OF DIRECTORS ....................................................    9

   Section 1.  Powers .............................................................    9
   Section 2.  Number and Term. ...................................................   10
   Section 3.  Election ...........................................................   12
   Section 4.  Vacancies and Newly Created Directorships ..........................   12
   Section 5.  Removal ............................................................   13
   Section 6.  Place of Meeting ...................................................   13
   Section 7.  Annual and Regular Meetings ........................................   14
   Section 8.  Special Meetings ...................................................   14
   Section 9.  Waiver of Notice ...................................................   14
   Section 10. Quorum and Voting ..................................................   15
   Section 11. Action Without a Meeting ...........................................   15
   Section 12. Compensation of Directors ..........................................   15

ARTICLE IV COMMITTEES .............................................................   15

   Section 1.  Organization .......................................................   15
   Section 2.  Proceedings and Quorum .............................................   16
</TABLE>

                                        i

<PAGE>

<TABLE>
<S>                                                                            <C>
ARTICLE V OFFICERS ..........................................................  17

   Section 1.  General ......................................................  17
   Section 2.  Election, Tenure and Qualifications ..........................  17
   Section 3.  Removal and Resignation ......................................  17
   Section 4.  President ....................................................  18
   Section 5.  Chairman .....................................................  18
   Section 6.  Vice President ...............................................  18
   Section 7.  Treasurer and Assistant Treasurers ...........................  19
   Section 8.  Secretary and Assistant Secretaries ..........................  19
   Section 9.  Subordinate Officers .........................................  20
   Section 10. Remuneration .................................................  20
   Section 11. Surety Bonds .................................................  20

ARTICLE VI CAPITAL STOCK ....................................................  21

   Section 1.  Certificates of Stock ........................................  21
   Section 2.  Transfer of Shares ...........................................  21
   Section 3.  Stock Ledgers ................................................  21
   Section 4.  Transfer Agents and Registrars ...............................  22
   Section 5.  Fixing of Record Date ........................................  22
   Section 6.  Lost, Stolen or Destroyed Certificates .......................  22

ARTICLE VII FISCAL YEAR AND ACCOUNTANT ......................................  23

   Section 1.  Fiscal Year ..................................................  23
   Section 2.  Accountant ...................................................  23

ARTICLE VIII CUSTODY OF SECURITIES ..........................................  23

   Section 1.  Employment of a Custodian ....................................  23
   Section 2.  Termination of Custodian Agreement ...........................  24

ARTICLE IX INDEMNIFICATION AND ADVANCEMENT OF EXPENSES ......................  24

   Section 1.  Indemnification of Directors and Officers ....................  24
   Section 2.  Advances .....................................................  25
   Section 3.  Procedure ....................................................  26
   Section 4.  Indemnification of Employees and Agents ......................  26
   Section 5.  Other Rights .................................................  26
   Section 6.  Amendments ...................................................  27
   Section 7.  Insurance ....................................................  27
</TABLE>

                                      -ii-

<PAGE>

<TABLE>
<S>                                                                           <C>
ARTICLE X AMENDMENTS ......................................................   27

   Section 1.  General ....................................................   27
</TABLE>

                                      -iii-

<PAGE>

                                     BY-LAWS

                                       OF

                     ABERDEEN ASIA-PACIFIC INCOME FUND, INC.

                            (A MARYLAND CORPORATION)

                                    ARTICLE I

                        NAME OF CORPORATION, LOCATION OF
                                OFFICES AND SEAL

Section 1.  Name. The name of the Corporation is Aberdeen Asia-Pacific Income
Fund, Inc.

Section 2.  Principal Offices. The principal office of the Corporation in the
State of Maryland shall be located in Baltimore, Maryland. The Corporation may,
in addition, establish and maintain such other offices and places of business as
the Board of Directors may, from time to time, determine.

Section 3.  Seal. The corporate seal of the Corporation shall be circular in
form and shall bear the name of the Corporation, the year of its incorporation,
and the word "Maryland." The form of the seal shall be subject to alteration by
the Board of Directors and the seal may be used by causing it or a facsimile to
be impressed or affixed or printed or otherwise reproduced. Any officer or
Director of the Corporation shall have authority to affix the corporate seal of
the Corporation to any document requiring the same.

                                        1

<PAGE>

                                   ARTICLE II

                                  STOCKHOLDERS

Section 1.  Place of Meeting. All meetings of the stockholders shall be held at
the principal office of the Corporation in the State of Maryland or at such
other place within the United States as may from time to time be designated by
the Board of Directors and stated in the notice of such meeting.

Section 2.  Annual Meetings. An annual meeting of stockholders for election of
Directors and the transaction of such other business as may properly come before
the meeting shall be held at such time and place within the United States as the
Board of Directors, or any duly constituted committee of the Board, shall select
between March 21 and April 19.

Section 3.  Special Meetings. Special meetings of stockholders may be called at
any time by the President or a majority of the Board of Directors and shall be
held at such time and place as may be stated in the notice of the meeting.

     Special meetings of the stockholders shall be called by the Secretary upon
receipt of the written request of the holders of shares entitled to not less
than a majority of all the votes entitled to be cast at such meeting, provided
that (1) the information specified in Article II, Section 11 is given; and (2)
the stockholders requesting such meeting shall have paid to the Corporation the
reasonably estimated cost of preparing and mailing the notice thereof, which the
Secretary shall determine and specify to such stockholders. No special meeting
shall be called upon the request of stockholders to consider any matter which is
substantially the same as a matter voted upon at

                                       -2-

<PAGE>

any special meeting of the stockholders held during the preceding 12 months,
unless requested by the holders of a majority of all shares entitled to be voted
at such meeting.

Section 4.  Notice of Meetings. The Secretary shall cause written or printed
notice of the place, date and hour, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, to be given, not less than
10 and not more than 90 days before the date of the meeting, to each stockholder
entitled to vote at, or entitled to notice of, such meeting by leaving the same
with such stockholder or at such stockholder's residence or usual place of
business or by mailing it, postage prepaid, and addressed to such stockholder at
his address as it appears on the records of the Corporation at the time of such
mailing, or by transmitting it to the stockholder by electronic mail to any
electronic mail address of the stockholder or by any other electronic means. If
mailed, notice shall be deemed to be given when deposited in the United States
mail addressed to the stockholder as aforesaid. Notice of any stockholders'
meeting need not be given to any stockholder who shall sign a written waiver of
such notice either before or after the time of such meeting, which waiver shall
be filed with the records of such meeting, or to any stockholder who is present
at such meeting in person or by proxy. Notice of adjournment of a stockholders'
meeting to another time or place need not be given if such time and place are
announced at the meeting.

Section 5.  Quorum; Adjournment of Meetings. The presence at any stockholders'
meeting, in person or by proxy, of stockholders entitled to cast a majority of
all votes entitled to be cast constitutes a quorum for the transaction of
business. In the absence of a quorum, the holders of a majority of shares
entitled to vote at the meeting and present in person or by proxy,

                                       -3-

<PAGE>

or, if no stockholder entitled to vote is present in person or by proxy, any
officer present entitled to preside or act as Secretary of such meeting may
adjourn the meeting without determining the date of the new meeting or from time
to time without further notice to a date not more than 120 days after the
original record date. Any business that might have been transacted at the
meeting originally called may be transacted at any such adjourned meeting at
which a quorum is present.

Section 6.  Voting and Inspector. Unless otherwise provided by the Charter, at
each stockholders' meeting, each stockholder entitled to vote thereat shall be
entitled to one vote for each share of stock of the Corporation validly issued
and outstanding and standing in his name on the books of the Corporation on the
record date fixed in accordance with Section 5 of Article VI hereof (and each
stockholder of record holding fractional shares, if any, shall have
proportionate voting rights). Stockholders may vote their shares owned of record
either in person or by proxy appointed by instrument in writing subscribed by
such stockholder or his duly authorized attorney. Except as otherwise
specifically provided in the Charter or these By-Laws or as required by
provisions of the Investment Company Act of 1940, as amended from time to time,
all matters shall be decided by a vote of the majority of all votes validly cast
at a meeting at which a quorum is present. The vote upon any question shall be
by ballot whenever requested by any person entitled to vote, but, unless such a
request is made, voting may be conducted in any way approved by the meeting.

     At any election of Directors, the Chairman of the meeting may, and upon the
request of the holders of ten percent (10%) of the stock entitled to vote at
such election shall, appoint one inspector of election who shall first subscribe
an oath or affirmation to execute faithfully the

                                       -4-

<PAGE>

duties of inspector at such election with strict impartiality and according to
the best of his ability, and shall after the election make a certificate of the
result of the vote taken. No candidate for the office of Director shall be
appointed such Inspector.

Section 7.  Stockholders Entitled to Vote. If the Board of Directors sets a
record date for the determination of stockholders entitled to notice of or to
vote at any stockholders' meeting in accordance with Section 5 of Article VI
hereof, each stockholder of the Corporation shall be entitled to vote, in person
or by proxy, each share of stock standing in his name on the books of the
Corporation on such record date. If no record date has been fixed, the record
date for the determination of stockholders entitled to notice of or to vote at a
meeting of stockholders shall be the later of the close of business on the day
on which notice of the meeting is mailed or the thirtieth day before the
meeting, or, if notice is waived by all stockholders, at the close of business
on the tenth day next preceding the day on which the meeting is held.

Section 8.  Validity of Proxies, Ballots. The right to vote by proxy shall exist
only if the instrument authorizing such proxy to act shall have been signed by
the stockholder or by his duly authorized attorney. Unless a proxy provides
otherwise, it shall not be valid more than eleven months after its date. At
every meeting of the stockholders, all proxies shall be received and taken in
charge of and all ballots shall be received and canvassed by the Secretary of
the Corporation or the person acting as Secretary of the meeting before being
voted, who shall decide all questions touching the qualification of voters, the
validity of the proxies and the acceptance or rejection of votes, unless an
inspector of election has been appointed by the Chairman of the meeting in which
event such inspector of election shall decide all such

                                       -5-

<PAGE>

questions. A proxy with respect to stock held in the name of two or more persons
shall be valid if executed by one of them unless at or prior to exercise of such
proxy the Corporation receives a specific written notice to the contrary from
any one of them. A proxy purporting to be executed by on or behalf of a
stockholder shall be deemed valid unless challenged at or prior to its exercise.

Section 9.  Conduct of Stockholders' Meetings. The meetings of the stockholders
shall be presided over by the President, or if he is not present, by the
Chairman, or if he is not present, by any Vice President, or if none of them is
present, then by any other officer of the Corporation appointed by the President
to act on his behalf shall preside over the meeting. The Secretary of the
Corporation, if present, shall act as a Secretary of such meeting, or if he is
not present, an Assistant Secretary shall so act; if neither the Secretary nor
any Assistant Secretary is present, then any such person appointed by the
Secretary to act on his behalf shall act as the Secretary of such meeting.

Section 10. Action Without a Meeting. Any action to be taken by stockholders may
be taken without a meeting to the fullest extent permitted by law.

Section 11. Stockholder Proposals.

       (a)  No business proposed by a stockholder to be considered at an annual
meeting of stockholders shall be considered by the stockholders at that meeting
unless no less than 90 days nor more than 120 days prior to the first
anniversary date ("anniversary date") of the annual meeting for the preceding
year, or, with respect to annual meetings not scheduled to be held

                                       -6-

<PAGE>

within a period that commences 30 days before the anniversary date and ends 30
days after the anniversary date, by the later of the close of business on the
date 90 days prior to such meeting or 14 days following the date such meeting is
first publicly announced or disclosed, the Secretary of the Corporation receives
a written notice from the stockholder proposing a business matter to be
considered at an annual meeting that sets forth the information required by
Section 11(c) of this Article II.

     (b)  No business matter shall be considered at a special meeting of
stockholders unless such matter is specifically listed as a purpose of the
special meeting and listed as a matter proposed to be acted on at the special
meeting pursuant to the Corporation's notice of meeting.

          (i)   In the event a special meeting is called at the request of
     stockholders, pursuant to Section 3 of this Article II, the written request
     shall be delivered to the Secretary of the Corporation, and shall state the
     business proposed by stockholders to be the purpose of the meeting and the
     matters proposed to be acted upon, and shall set forth the information
     required by Section 11(c) of this Article II.

          (ii)  In the event the Corporation calls a special meeting of
     stockholders for the purpose of electing one or more directors to the Board
     of Directors, any stockholder may nominate a person or persons (as the case
     may be) for election to such position(s) as specified in the Corporation's
     notice of meeting, if the stockholder delivers a written notice to the
     Secretary of the Corporation, which shall set forth the information
     required by Section 11(c) of this Article II, not later than the close of
     business 21 days following

                                       -7-

<PAGE>

     the day on which the date of the special meeting and the nominees proposed
     by the Board of Directors to be elected at such meeting are publicly
     announced or disclosed.

     (c)  The written notice or written request to the Secretary of the
Corporation, required to be provided pursuant to Section 11(a) or 11(b) of this
Article II, shall include the following information: (1) the nature of the
proposed business with reasonable particularity, including the exact text of any
proposal to be presented for adoption, and the reasons for conducting that
business at the meeting of stockholders, (2) with respect to each such
stockholder, that stockholder's name and address (as they appear on the records
of the Corporation), business address and telephone number, residence address
and telephone number, and the number of shares of each class of stock of the
Corporation beneficially owned by that stockholder, (3) any interest of the
stockholder in the proposed business, (4) the name or names of each person
nominated by the stockholder to be elected or reelected as a director, if any,
and (5) with respect to each nominee, that nominee's name, business address and
telephone number, and residence address and telephone number, the number of
shares, if any, of each class of stock of the Corporation owned directly and
beneficially by that nominee, and all information relating to that nominee that
is required to be disclosed in solicitations of proxies for elections of
directors, or is otherwise required, pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended ("Exchange Act") (or any provisions
of law subsequently replacing Regulation 14A), together with a notarized letter
signed by the nominee stating his or her acceptance of the nomination by that
stockholder, stating his or her intention to serve as director if elected, and
consenting to being named as a nominee for director in any proxy statement
relating to such election.

                                       -8-

<PAGE>

      (d)   The chairman of the annual or special meeting shall determine
whether notice of matters proposed to be brought before a meeting has been duly
given in the manner provided by this Section 11. If the facts warrant, the
chairman shall declare to the meeting that business has not been properly
brought before the meeting in accordance with the provisions of this Section 11,
and, it, therefore, shall not be considered or transacted.

      (e)   The requirement of the Corporation to include in the Corporation's
proxy statement a stockholder proposal shall be governed by Rule 14a-8 under the
Exchange Act (or any provisions of law subsequently replacing Rule 14a-8) ("Rule
14a-8"). Accordingly, the deadline for including a stockholder proposal in the
Corporation's proxy statement shall be governed by Rule 14a-8.

      (f)   The adjournment of an annual or special meeting, or any announcement
thereof, shall not commence a new period for the giving of notice as provided in
this Section 11.

      (g)   For purposes of this Section 11, a meeting date shall be deemed to
have been "publicly announced or disclosed" if such date is disclosed in a press
release disseminated by the Corporation to a national news service or contained
in a document publicly filed by the Corporation with the Securities and Exchange
Commission.

                                   ARTICLE III

                               BOARD OF DIRECTORS

Section 1.  Powers. Except as otherwise provided by law, by the Charter or by
these By-Laws, the business and affairs of the Corporation shall be managed
under the direction of, and all the powers of the Corporation shall be exercised
by or under authority of, its Board of Directors.

                                       -9-

<PAGE>

Section 2.  Number and Term. The Board of Directors shall consist of no fewer
than three, nor more than twenty-seven Directors, as specified by resolution of
the majority of the entire Board of Directors, provided that at least 40% of the
entire Board of Directors shall be persons who are not interested persons of the
Corporation as defined in the Investment Company Act of 1940, as amended. The
total number of Directors of the Corporation may be fixed only by a vote of the
Board of Directors.

      (a)   Directors Elected by Common Stockholders. The Directors elected by
common stockholders shall be divided into three classes, as nearly equal in
number as possible, and shall be designated as Class I, Class II, and Class III
Directors, respectively. The Class I Directors to be originally elected for a
term expiring at the annual meeting held in 1989 for the 1988 fiscal year. The
Class II Directors to be originally elected for a term expiring at the annual
meeting held in 1990 for the 1989 fiscal year. The Class III Directors to be
originally elected for a term expiring at the annual meeting held in 1991 for
the 1990 fiscal year. After expiration of the terms of office specified for such
Directors, the Directors of each class shall serve for terms of three (3) years,
or, when filling a vacancy, for the unexpired portion of such term and until
their successors are elected and have qualified.

      (b)   Directors Elected by Preferred Stockholders. At any meeting of
stockholders of the Corporation at which Directors are to be elected, the
holders of preferred stock of all series, voting separately as a single class,
shall be entitled to elect two members of the Board of Directors, and the
holders of common stock, voting separately as a single class, shall be entitled
to elect the balance of the members of the Board of Directors.

                                      -10-

<PAGE>

     If at any time dividends on any outstanding preferred stock of any series
shall be unpaid in an amount equal to two full years' dividends, the number of
Directors constituting the Board of Directors shall automatically be increased
by the smallest number that, together with the two Directors elected by the
holders of preferred stock pursuant to the preceding paragraph, will constitute
a majority of such increased number; and at a special meeting of stockholders,
which shall be called and held as soon as practicable, and at all subsequent
meetings at which Directors are to be elected, the holders of preferred stock of
all series voting separately as a single class shall be entitled to elect the
smallest number of additional Directors of the Corporation who, together with
the two Directors elected by the holders of preferred stock pursuant to the
preceding paragraph, will constitute a majority of the total number of Directors
of the Corporation so increased. The terms of office of the persons who are
Directors at the time of that election shall continue. If the Corporation
thereafter shall pay, or declare and set apart for payment, in full all
dividends payable on all outstanding shares of preferred stock of all series for
all past dividend periods, the voting rights stated in this paragraph shall
cease, and the terms of office of all additional Directors elected by the
holders of preferred stock (but not of the Directors elected by the holders of
common stock or the two Directors regularly elected by the holders of preferred
stock) shall terminate automatically. At all subsequent meetings of stockholders
at which Directors are to be elected, the holders of shares of preferred stock
and of common stock shall have the right to elect the members of the Board of
Directors as stated in the preceding paragraph, subject to the revesting of the
rights of the holders of the preferred stock as provided in the first sentence
of this paragraph in the event of any subsequent arrearage in the payment of two
full years' dividends on the shares of preferred stock of any series.

                                      -11-

<PAGE>

Section 3.  Election. At the first annual meeting of stockholders and at each
annual meeting thereafter, Directors to be elected by common stockholders and
Directors to be elected by preferred stockholders shall be elected by vote of
the holders of a majority of the shares of each respective class of stock
present in person or by proxy and entitled to vote thereon.

Section 4.  Vacancies and Newly Created Directorships.

       (a)  Directors Elected by Common Stockholders. Any vacancy, by reason of
death, resignation, removal or otherwise, in the office of any Director elected
by the holders of shares of common stock, or any vacancy resulting from an
increase in the number of Directors elected by the holders of shares of common
stock, may be filled solely by the affirmative vote of a majority of the
remaining Directors (or Director) so elected, even if the remaining directors so
elected do not constitute a quorum.

       (b)  Directors Elected by Preferred Stockholders. Any vacancy, by reason
of death, resignation, removal or otherwise, in the office of any Director
elected by the holders of shares of preferred stock, or (subject to the
provisions of Section 2(b) of Article III) any vacancy resulting from an
increase in the number of Directors elected by the holders of shares of
preferred stock, may be filled solely by the remaining Directors (or Director)
so elected, even if the remaining Directors so elected do not constitute a
quorum; provided, however, if preferred stock of any series is issued and, at
the time of such issuance, no existing Directors have been elected by preferred
stockholders, then a majority of the Corporation's Directors, whether or not
sufficient to constitute a quorum, may fill such vacancy or vacancies.

                                      -12-

<PAGE>

       (c)  Notwithstanding the foregoing, the provisions in (a) and (b) above,
are contingent upon the condition that immediately after filling any such
vacancy, at least two-thirds (2/3) of the total Directors then holding office
shall have been elected to such office by the stockholders of the Corporation.
In the event that at any time, other than the time preceding the first annual
stockholders' meeting, less than a majority of the total Directors of the
Corporation holding office at that time were elected by the stockholders, a
meeting of the stockholders shall be held promptly and in any event within 60
days for the purpose of electing Directors to fill any existing vacancies in the
Board of Directors unless the Securities and Exchange Commission shall by order
extend such period.

Section 5.  Removal. At any meeting of stockholders duly called and at which a
quorum is present, the stockholders of any class of stock may, by the
affirmative vote of the holders of at least two-thirds (2/3) of the votes
entitled to be cast thereon, remove for cause any Director or Directors of the
class from office.

Section 6.  Place of Meeting. The Directors may hold their meetings, have one or
more offices, and keep the books of the Corporation, outside the State of
Maryland, and within or without the United States of America, at any office or
offices of the Corporation or at any other place as they may from time to time
by resolution determine, or in the case of meetings, as they may from time to
time by resolution determine or as shall be specified or fixed in the respective
notices or waivers of notice thereof; provided, however, that Board meetings
shall not be held in Australia.

                                      -13-

<PAGE>

Section 7.  Annual and Regular Meetings. The annual meeting of the Board of
Directors for choosing officers and transacting other proper business shall be
the next regularly scheduled Board Meeting following the annual stockholders'
meeting, at such time and place as the Board may determine. The Board of
Directors from time to time may provide by resolution for the holding of regular
meetings and fix their time and place as the Board of Directors may determine.
Notice of such annual and regular meetings need not be in writing, provided that
notice of any change in the time or place of such meetings shall be communicated
promptly to each Director not present at the meeting at which such change was
made in the manner provided in Section 8 of this Article III for notice of
special meetings. Members of the Board of Directors or any committee designated
thereby may participate in a meeting of such Board or committee by means of a
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other at the same time, and
participation by such means shall constitute presence in person at a meeting.

Section 8.  Special Meetings. Special meetings of the Board of Directors may be
held at any time or place and for any purpose when called by the President, the
Secretary or two or more of the Directors. Notice of special meetings, stating
the time and place, shall be communicated to each Director personally by
telephone or transmitted to him by telegraph, telefax, telex, cable, wireless,
electronic mail or any other electronic method, at least one day before the
meeting.

Section 9.  Waiver of Notice. No notice of any meeting of the Board of Directors
or a committee of the Board need be given to any Director who is present at the
meeting or who

                                      -14-

<PAGE>

waives notice of such meeting in writing (which waiver shall be filed with the
records of such meeting), either before or after the meeting.

Section 10. Quorum and Voting. At all meetings of the Board of Directors, the
presence of a majority of the number of Directors then in office shall
constitute a quorum for the transaction of business. In the absence of a quorum,
a majority of the Directors present may adjourn the meeting, from time to time,
until a quorum shall be present. The action of a majority of the Directors
present at a meeting at which a quorum is present shall be the action of the
Board of Directors, unless the concurrence of a greater proportion is required
for such action by law, by the Charter or by these By-Laws.

Section 11. Action Without a Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if a written consent to such action is signed by all
members of the Board or of such committee, as the case may be, and such written
consent is filed with the minutes of proceedings of the Board or committee.

Section 12. Compensation of Directors. Directors shall be entitled to receive
such compensation from the Corporation for their services as may from time to
time be determined by resolution of the Board of Directors.

                                   ARTICLE IV

                                   COMMITTEES

Section 1.  Organization. By resolution adopted by the Board of Directors, the
Board may designate one or more committees, including an Executive Committee,
composed of two or more

                                      -15-

<PAGE>

Directors. The Chairmen of such committees shall be elected by the Board of
Directors. The Board of Directors shall have the power at any time to change the
members of such committees and to fill vacancies in the committees. The Board
may delegate to these committees any of its powers, except the power to
authorize the issuance of stock (other than as provided in the next sentence),
declare a dividend or distribution on stock, recommend to stockholders any
action requiring stockholder approval, amend these By-Laws, or approve any
merger or share exchange which does not require stockholder approval. If the
Board of Directors has given general authorization for the issuance of stock, a
committee of the Board, in accordance with a general formula or method specified
by the Board by resolution or by adoption of a stock option or other plan, may
fix the terms of stock subject to classification or reclassification and the
terms on which any stock may be issued, including all terms and conditions
required or permitted to be established or authorized by the Board of Directors.

Section 2.  Proceedings and Quorum. In the absence of an appropriate resolution
of the Board of Directors, each committee, consistent with law, may adopt such
rules and regulations governing its proceedings, quorum and manner of acting as
it shall deem proper and desirable. In the event any member of any committee is
absent from any meeting, the members thereof present at the meeting, whether or
not they constitute a quorum, may appoint a member of the Board of Directors to
act in the place of such absent member.

                                      -16-

<PAGE>

                                    ARTICLE V

                                    OFFICERS

Section 1. General. The officers of the Corporation shall be a President, a
Chairman (who shall be a Director), a Secretary and a Treasurer, and may include
one or more Vice Presidents, Assistant Secretaries or Assistant Treasurers, and
such other officers as may be appointed in accordance with the provisions of
Section 9 of this Article.

Section 2. Election, Tenure and Qualifications. The officers of the Corporation,
except those appointed as provided in Section 9 of this Article V, shall be
elected by the Board of Directors at its first meeting or such meetings as shall
be held prior to its first annual meeting, and thereafter annually at its annual
meeting. If any officers are not chosen at any annual meeting, such officers may
be chosen at any subsequent regular or special meeting of the Board. Except as
otherwise provided in this Article V, each officer chosen by the Board of
Directors shall hold office until the next annual meeting of the Board of
Directors and until his successor shall have been elected and qualified. Any
person may hold one or more offices of the Corporation except the offices of
President and Vice President.

Section 3. Removal and Resignation. Whenever in the judgment of the Board of
Directors the best interest of the Corporation will be served thereby, any
officer may be removed from office by the vote of a majority of the members of
the Board of Directors given at a regular meeting or any special meeting called
for such purpose. Any officer may resign his office at any time by delivering a
written resignation to the Board of Directors, the President, the Secretary, or

                                      -17-

<PAGE>

any Assistant Secretary. Unless otherwise specified therein, such resignation
shall take effect upon delivery.

Section 4. President. The President shall be the chief executive officer of the
Corporation and he shall preside at all stockholders' meetings. Subject to the
supervision of the Board of Directors, he shall have general charge of the
business, affairs and property of the Corporation and general supervision over
its officers, employees and agents. Except as the Board of Directors may
otherwise order, he may sign in the name and on behalf of the Corporation all
deeds, bonds, contracts, or agreements. He shall exercise such other powers and
perform such other duties as from time to time may be assigned to him by the
Board of Directors.

Section 5. Chairman. The Chairman shall be the Chairman of the Board of
Directors and shall preside at all Directors' meetings. Except as the Board of
Directors may otherwise order, he may sign in the name and on behalf of the
Corporation all deeds, bonds, contracts, or agreements. He shall exercise such
other powers and perform such other duties as from time to time may be assigned
to him by the Board of Directors.

Section 6. Vice President. The Board of Directors may from time to time elect
one or more Vice Presidents who shall have such powers and perform such duties
as from time to time may be assigned to them by the Board of Directors or the
President. At the request or in the absence or disability of the President, the
Vice President (or, if there are two or more Vice Presidents, then the senior of
the Vice Presidents present and able to act) may perform all the duties of the
President and, when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.

                                      -18-

<PAGE>

Section 7. Treasurer and Assistant Treasurers. The Treasurer shall be the
principal financial and accounting officer of the Corporation and shall have
general charge of the finances and books of account of the Corporation. Except
as otherwise provided by the Board of Directors, he shall have general
supervision of the funds and property of the Corporation and of the performance
by the Custodian of its duties with respect thereto. He shall render to the
Board of Directors, whenever directed by the Board, an account of the financial
condition of the Corporation and of all his transactions as Treasurer; and as
soon as possible after the close of each fiscal year he shall make and submit to
the Board of Directors a like report for such fiscal year. He shall perform all
acts incidental to the Office of Treasurer, subject to the control of the Board
of Directors.

         Any Assistant Treasurer may perform such duties of the Treasurer as the
Treasurer or the Board of Directors may assign, and, in the absence of the
Treasurer, he may perform all the duties of the Treasurer.

Section 8. Secretary and Assistant Secretaries. The Secretary shall attend to
the giving and serving of all notices of the Corporation and shall record all
proceedings of the meetings of the stockholders and Directors in books to be
kept for that purpose. He shall keep in safe custody the seal of the
Corporation, and shall have charge of the records of the Corporation, including
the stock books and such other books and papers as the Board of Directors may
direct and such books, reports, certificates and other documents required by law
to be kept, all of which shall at all reasonable times be open to inspection by
any Director. He shall perform such other duties as appertain to his office or
as may be required by the Board of Directors.

                                      -19-

<PAGE>

         Any Assistant Secretary may perform such duties of the Secretary as the
Secretary or the Board of Directors may assign, and, in the absence of the
Secretary, he may perform all the duties of the Secretary.

Section 9. Subordinate Officers. The Board of Directors from time to time may
appoint such other officers or agents as it may deem advisable, each of whom
shall have such title, hold office for such period, have such authority and
perform such duties as the Board of Directors may determine. The Board of
Directors from time to time may delegate to one or more officers or agents the
power to appoint any such subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties.

Section 10. Remuneration. The salaries or other compensation of the officers of
the Corporation shall be fixed from time to time by resolution of the Board of
Directors, except that the Board of Directors may by resolution delegate to any
person or group of persons the power to fix the salaries or other compensation
of any subordinate officers or agents appointed in accordance with the
provisions of Section 9 of this Article V.

Section 11. Surety Bonds. The Board of Directors may require any officer or
agent of the Corporation to execute a bond (including, without limitation, any
bond required by the Investment Company Act of 1940, as amended, and the rules
and regulations of the Securities and Exchange Commission) to the Corporation in
such sum and with such surety or sureties as the Board of Directors may
determine, conditioned upon the faithful performance of his duties to the
Corporation, including responsibility for negligence and for the accounting of
any of the Corporation's property, funds or securities that may come into his
hands.

                                      -20-

<PAGE>

                                   ARTICLE VI

                                  CAPITAL STOCK

Section 1. Certificates of Stock. The interest of each stockholder of the
Corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may from time to time prescribe. No certificate shall
be valid unless it is signed by the President or a Vice President and
countersigned by the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer of the Corporation and sealed with its seal, or bears the
facsimile signatures of such officers and a facsimile of such seal.

Section 2. Transfer of Shares. Shares of the Corporation shall be transferable
on the books of the Corporation by the holder thereof in person or by his duly
authorized attorney or legal representative upon surrender and cancellation of a
certificate or certificates for the same number of shares of the same class,
duly endorsed or accompanied by proper instruments of assignment and transfer,
with such proof of the authenticity of the signature as the Corporation or its
agents may reasonably require. The shares of stock of the Corporation may be
freely transferred, and the Board of Directors may, from time to time, adopt
rules and regulations with reference to the method of transfer of the shares of
stock of the Corporation.

Section 3. Stock Ledgers. The stock ledgers of the Corporation, containing the
names and addresses of the stockholders and the number of shares held by them
respectively, shall be kept at the principal offices of the Corporation or, if
the Corporation employs a transfer agent, at the offices of the transfer agent
of the Corporation.

                                      -21-

<PAGE>

Section 4. Transfer Agents and Registrars. The Board of Directors may from time
to time appoint or remove transfer agents and/or registrars of transfers of
shares of stock of the Corporation, and it may appoint the same person as both
transfer agent and registrar. Upon any such appointment being made all
certificates representing shares of capital stock thereafter issued shall be
countersigned by one of such transfer agents or by one of such registrars of
transfers or by both and shall not be valid unless so countersigned. If the same
person shall be both transfer agent and registrar, only one countersignature by
such person shall be required.

Section 5. Fixing of Record Date. The Board of Directors may fix in advance a
date as a record date for the determination of the stockholders entitled to
notice of, or to vote at, any stockholders' meeting or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or to
receive payment of any dividend or other distribution or to be allotted any
other rights, or for the purpose of any other lawful action, provided that (1)
such record date shall not exceed 90 days preceding the date on which the
particular action requiring such determination will be taken; (2) the transfer
books shall remain open regardless of the fixing of a record date; (3) in the
case of a meeting of stockholders, the record date shall be at least 10 days
before the date of the meeting; and (4) in the event a dividend or other
distribution is declared, the record date for stockholders entitled to a
dividend or distribution shall be at least 10 days after the date on which the
dividend is declared (declaration date).

Section 6. Lost, Stolen or Destroyed Certificates. Before issuing a new
certificate for stock of the Corporation alleged to have been lost, stolen or
destroyed, the Board of Directors or any officer authorized by the Board may, in
its discretion, require the owner of the lost, stolen or

                                      -22-

<PAGE>

destroyed certificate (or his legal representative) to give the Corporation a
bond or other indemnity, in such form and in such amount as the Board or any
such officer may direct and with such surety or sureties as may be satisfactory
to the Board or any such officer, sufficient to indemnify the Corporation
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.

                                   ARTICLE VII

                           FISCAL YEAR AND ACCOUNTANT

Section 1.  Fiscal Year. The fiscal year of the Corporation shall, unless
otherwise ordered by the Board of Directors, be twelve calendar months ending on
the 31st day of October.

Section 2.  Accountant. The Corporation shall employ an independent public
accountant or a firm of independent public accountants as its Accountants to
examine the accounts of the Corporation and to sign and certify financial
statements filed by the Corporation. The employment of the Accountant shall be
conditioned upon the right of the Corporation to terminate the employment
forthwith without any penalty by vote of a majority of the outstanding voting
securities at any stockholders' meeting called for that purpose.

                                  ARTICLE VIII

                              CUSTODY OF SECURITIES

Section 1.  Employment of a Custodian. The Corporation shall place and at all
times maintain in the custody of a Custodian (including any sub-custodian for
the Custodian) all funds, securities and similar investments owned by the
Corporation. The Custodian (and any sub-custodian) shall be a bank or trust
company of good standing having a capital, surplus and

                                      -23-

<PAGE>

undivided profits aggregating not less than fifty million dollars ($50,000,000)
or such other financial institution as shall be permitted by rule or order of
the United States Securities and Exchange Commission. The Custodian shall be
appointed from time to time by the Board of Directors, which shall fix its
remuneration.

Section 2.  Termination of Custodian Agreement. Upon termination of the
agreement for services with the Custodian or inability of the Custodian to
continue to serve, the Board of Directors shall promptly appoint a successor
Custodian, but in the event that no successor Custodian can be found who has the
required qualifications and is willing to serve, the Board of Directors shall
call as promptly as possible a special meeting of the stockholders to determine
whether the Corporation shall function without a Custodian or shall be
liquidated. If so directed by vote of the holders of a majority of the
outstanding shares of stock of the Corporation, the Custodian shall deliver and
pay over all property of the Corporation held by it as specified in such vote.

                                   ARTICLE IX

                   INDEMNIFICATION AND ADVANCEMENT OF EXPENSES

Section 1.  Indemnification of Directors and Officers. The Corporation shall
indemnify its Directors and officers to the fullest extent permitted by the
Maryland General Corporation Law and the Investment Company Act of 1940, as
amended (the "1940 Act"). The Corporation shall indemnify its Directors and
officers who, while serving as Directors or officers, also serve at the request
of the Corporation as a director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust, other
enterprise or employee benefit plan to

                                      -24-

<PAGE>

the fullest extent consistent with law. The indemnification and other rights
provided by this Article shall continue as to a person who has ceased to be a
Director or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. This Article shall not protect any such person
against any liability to the Company 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 conduct of
his office ("disabling conduct").

Section 2.  Advances. Any current or former Director or officer of the
Corporation seeking indemnification within the scope of this Article shall be
entitled to advances from the Corporation for payment of the reasonable expenses
incurred by him in connection with the matter as to which he is seeking
indemnification in the manner and to the fullest extent permissible under the
Maryland General Corporation Law and the 1940 Act, without a preliminary
determination of entitlement to indemnification (except as provided below). The
person seeking advances shall provide to the Corporation a written affirmation
of his good faith belief that the standard of conduct necessary for
indemnification by the Corporation has been met and a written undertaking to
repay any such advance if it should ultimately be determined that the standard
of conduct has not been met. In addition, at least one of the following
additional conditions shall be met: (i) the person seeking advances shall
provide security in form and amount acceptable to the Corporation for his
undertaking; (ii) the Corporation is insured against losses arising by reason of
the advance; or (iii) a majority of a quorum of Directors of the Corporation who
are neither "interested persons" as defined in section 2(a)(19) of the 1940 Act
nor parties to the proceeding ("disinterested non-party directors"), or
independent legal counsel,

                                      -25-

<PAGE>

in a written opinion, shall have determined, based on a review of facts readily
available to the Corporation at the time the advance is proposed to be made,
that there is reason to believe that the person seeking indemnification will
ultimately be found to be entitled to indemnification.

Section 3.  Procedure. At the request of any person claiming indemnification
under this Article, the Board of Directors shall determine, or cause to be
determined, in a manner consistent with the Maryland General Corporation Law and
the 1940 Act, whether the standards required by this Article have been met.
Indemnification shall be made only following: (i) a final decision on the merits
by a court or other body before whom the proceeding was brought that the person
to be indemnified was not liable by reason of disabling conduct or (ii) in the
absence of such a decision, a reasonable determination, based upon a review of
the facts, that the person to be indemnified was not liable by reason of
disabling conduct by (A) the vote of a majority of a quorum of disinterested
non-party directors or (B) an independent legal counsel in a written opinion.

Section 4.  Indemnification of Employees and Agents. Employees and agents who
are not officers or Directors of the Corporation may be indemnified, and
reasonable expenses may be advanced to such employees or agents, as may be
provided by action of the Board of Directors or by contract, subject to any
limitations imposed by the Investment Company Act of 1940, as amended.

Section 5.  Other Rights.  The Board of Directors may make further provision
consistent with law for indemnification and advance of expenses to Directors,
officers, employees and agents by resolution, agreement or otherwise. The
indemnification provided by this Article shall

                                      -26-

<PAGE>

not be deemed exclusive of any other right, with respect to indemnification or
otherwise, to which those seeking indemnification may be entitled under any
insurance or other agreement or resolution of stockholders or disinterested
directors or otherwise.

Section 6.  Amendments. References in the Article are to the Maryland General
Corporation Law and to the Investment Company Act of 1940, as amended. No
amendment of these By-Laws shall affect any right of any person under this
Article based on any event, omission or proceeding prior to the amendment.

Section 7.  Insurance. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a Director, officer, employee or agent of the
Corporation or who, while a Director, officer, employee or agent of the
Corporation, is or was serving at the request of the Corporation as a Director,
officer, partner, trustee, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust, other enterprise or employee
benefit plan, against any liability asserted against and incurred by such person
in any such capacity or arising out of such person's position; provided that no
insurance may be purchased by the Corporation on behalf of any person against
any liability to the Corporation or to its stockholders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.

                                   ARTICLE X

                                   AMENDMENTS

Section 1.  General.  Except as otherwise provided in the Charter or any
Articles Supplementary of the Fund, and as provided in the next succeeding
sentence, all By-Laws of the

                                      -27-

<PAGE>

Corporation, whether adopted by the Board of Directors or the stockholders,
shall be subject to amendment, alteration or repeal, and new By-Laws may be made
by the affirmative vote of a majority of either: (a) the holders of record of
the outstanding shares of stock of the Corporation entitled to vote, at any
annual or special meeting, the notice or waiver of notice of which shall have
specified or summarized the proposed amendment, alteration, repeal or new
By-Law; or (b) the Directors, at any regular or special meeting the notice or
waiver of notice of which shall have specified or summarized the proposed
amendment, alteration, repeal or new By-Law. The provisions of Article III,
Section 2 of the By-Laws shall be subject to amendment, alterations or repeal by
the affirmative vote of either: (i) the holders of record of 75% of each class
of the outstanding shares of stock of the Corporation entitled to vote, at any
annual or special meeting, the notice or waiver of notice of which shall have
specified or summarized the proposed amendment, alteration or repeal; or (ii)
75% of the Directors, at a regular or special meeting the notice or waiver of
notice of which shall have specified or summarized the proposed amendment,
alteration or repeal.

                                      -28-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.J1
<SEQUENCE>14
<FILENAME>dex99j1.txt
<DESCRIPTION>EXHIBIT J1
<TEXT>
<PAGE>

                                                                  EXHIBIT (j)(1)





                               CUSTODIAN CONTRACT
                                     Between
                   THE FIRST AUSTRALIA PRIME INCOME FUND, INC.
                                       and
                       STATE STREET BANK AND TRUST COMPANY

<PAGE>

                                TABLE OF CONTENTS
                                -----------------

<TABLE>
<CAPTION>
                                                                                   Page
                                                                                   ----
<S>                                                                                 <C>
1.    Employment of Custodian and Property to be Held by It ....................    1

2.    Duties of the Custodian with Respect to Property of the Fund Held By
      the Custodian in the United States .......................................    2

      2.1.    Holding Securities................................................    2
      2.2.    Delivery of Securities............................................    2
      2.3.    Registration of Securities........................................    5
      2.4.    Bank Accounts.....................................................    6
      2.5.    Investment and Availability of Federal Funds......................    7
      2.6.    Collection of Income..............................................    7
      2.7.    Payment of Fund Moneys............................................    8
      2.8.    Liability for Payment in Advance of Receipt of Securities
              Purchased.........................................................   10
      2.9.    Appointment of Agents.............................................   10
      2.10.   Deposit of Securities in Securities Systems.......................   10
      2.11.   Segregated Account................................................   13
      2.12.   Ownership Certificates for Tax Purposes...........................   14
      2.13.   Proxies...........................................................   14
      2.14.   Communications Relating to Fund Portfolio Securities..............   14
      2.15.   Reports to Fund by Independent Public Accountants.................   15

3.    Duties of the Custodian with Respect to Property of the Fund Held
      Outside of the United States..............................................   15

      3.1.    Appointment of Foreign Sub-Custodians.............................   15
      3.2.    Assets to be Held.................................................   16
      3.3.    Foreign Securities Depositories...................................   16
      3.4.    Segregation of Securities.........................................   16
      3.5.    Agreements with Foreign Banking Institutions......................   17
      3.6.    Access of Independent Accountants of the Fund.....................   17
      3.7.    Reports by Custodian..............................................   17
      3.8.    Transactions in Foreign Custody Account...........................   18
      3.9.    Liability of Foreign Sub-Custodians...............................   19
      3.10.   Liability of Custodian............................................   19
      3.11.   Monitoring Responsibilities.......................................   20
      3.12.   Branches of U.S Banks.............................................   20

4.    Proper Instructions ......................................................   20

5.    Actions Permitted without Express Authority ..............................   21

6.    Evidence of Authority ....................................................   21

7.    Duties of Custodian with Respect to the Books of Account and Calculations
      of Net Asset Value and Net Income ........................................   22
</TABLE>

<PAGE>

<TABLE>
<S>                                                                         <C>
8.      Records .........................................................   22

9.      Opinion of Fund's Independent Accountant ........................   23

10.     Compensation of Custodian .......................................   23

11.     Responsibility of Custodian .....................................   23

12.     Effective Period; Termination and Amendment .....................   25

13.     Successor Custodian .............................................   26

14.     Interpretive and Additional Provisions ..........................   27

15.     Massachusetts Law to Apply ......................................   28

16.     Prior Contracts .................................................   28
</TABLE>

<PAGE>



                               CUSTODIAN CONTRACT

         This Contract between The First Australia Prime Income Fund, Inc., a
corporation organized and existing under the laws of Maryland, having its
principal place of business at One Seaport Plaza, New York, New York 10292,
hereinafter called the "Fund", and State Street Bank and Trust Company, a
Massachusetts corporation, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian",

         WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:

1.       Employment of Custodian and Property to be Held by It

         The Fund hereby employs the Custodian as the custodian of its assets,
including securities it desires to be held in places within the United States
("domestic securities")and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Articles of
Incorporation. The Fund agrees to deliver to the Custodian all securities and
cash owned by it, and all payments of income, payments of principal or capital
distributions received by it with respect to all securities owned by the Fund
from time to time, and the cash consideration received by it for such shares of
common stock, $.01 par value, ("Shares") of the Fund as may be issued or sold
from time to time. The Custodian shall not be responsible for any property of
the Fund held or received by the Fund and not delivered to the Custodian.

         Upon receipt of "Proper Instructions" (within the meaning of Article
4), the Custodian shall from time to time employ one or more sub-custodians
located in the United States, but only in accordance with an applicable vote by
the Board of Directors of the Fund, and provided that the Custodian shall have
no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such sub-

<PAGE>

custodian has to the Custodian. The Custodian may employ as sub-custodians for
the Fund's securities and other assets the foreign banking institutions and
foreign securities depositories designated in Schedule "A" hereto but only in
accordance with the provisions of Article 3.

2.       Duties of the Custodian with Respect to Property of the Fund Held By
the Custodian in the United States

2.1.     Holding Securities. The Custodian shall hold and physically segregate
         for the account of the Fund all non-cash property, to be held by it in
         the United States, including all domestic securities owned by the Fund,
         other than securities which are maintained pursuant to Section 2.10 in
         a clearing agency which acts as a securities depository or in a
         book-entry system authorized by the U.S. Department of the Treasury,
         collectively referred to herein as "Securities System".

2.2.     Delivery of Securities. The Custodian shall release and deliver
         domestic securities owned by the Fund held by the Custodian or in a
         Securities System account of the Custodian only upon receipt of Proper
         Instructions, which may be continuing instructions when deemed
         appropriate by the parties, and only in the following cases

              1)   Upon sale of such securities for the account of the Fund and
                   receipt of payment therefor;

              2)   Upon the receipt of payment in connection with any repurchase
                   agreement related to such securities entered into by the
                   Fund;

              3)   In the case of a sale effected through a Securities System,
                   in accordance with the provisions of Section 2.10 hereof;

              4)   To the depository agent in connection with tender or other
                   similar offers for portfolio securities of the Fund;

                                      -2-

<PAGE>

              5)   To the issuer thereof or its agent when such securities are
                   called, redeemed, retired or otherwise become payable;
                   provided that, in any such case, the cash or other
                   consideration is to be delivered to the Custodian;

              6)   To the issuer thereof, or its agent, for transfer into the
                   name of the Fund or into the name of any nominee or nominees
                   of the Custodian or into the name or nominee name of any
                   agent appointed pursuant to Section 2.9 or into the name or
                   nominee name of any sub-custodian appointed pursuant to
                   Article 1; or for exchange for a different number of bonds,
                   certificates or other evidence representing the same
                   aggregate face amount or number of units; provided that, in
                   any such case, the new securities are to be delivered to the
                   Custodian;

              7)   To the broker selling the same for examination in accordance
                   with the "street delivery" custom;

              8)   For exchange or conversion pursuant to any plan of merger,
                   consolidation, recapitalization, reorganization or
                   readjustment of the securities of the issuer of such
                   securities, or pursuant to provisions for conversion
                   contained in such securities, or pursuant to any deposit
                   agreement; provided that, in any such case, the new
                   securities and cash, if any, are to be delivered to the
                   Custodian;

              9)   In the case of warrants, rights or similar securities, the
                   surrender thereof in the exercise of such warrants, rights or
                   similar securities or the surrender of interim receipts or
                   temporary securities for definitive

                                      -3-

<PAGE>

                   securities; provided that, in any such case, the new
                   securities and cash, if any, are to be delivered to the
                   Custodian;

              10)  For delivery in connection with any loans of securities made
                   by the Fund, but only against receipt of adequate collateral
                   as agreed upon from time to time by the Custodian and the
                   Fund, which may be in the form of cash or obligations issued
                   by the United States government, its agencies or
                   instrumentalities, except that in connection with any loans
                   for which collateral is to be credited to the Custodian's
                   account in the book-entry system authorized by the U.S.
                   Department of the Treasury, the Custodian will not be held
                   liable or responsible for the delivery of securities owned by
                   the Fund prior to the receipt of such collateral;

              11)  For delivery as security in connection with any borrowings by
                   the Fund requiring a pledge of assets by the Fund, but only
                   against receipt of amounts borrowed;

              12)  For delivery in accordance with the provisions of any
                   agreement among the Fund, the Custodian and a broker-dealer
                   registered under the Securities Exchange Act of 1934 (the
                   "Exchange Act") and a member of The National Association of
                   Securities Dealers, Inc. ("NASD"), relating to compliance
                   with the rules of The Options Clearing Corporation and of any
                   registered national securities exchange, or of any similar
                   organization or organizations, regarding escrow or other
                   arrangements in connection with transactions by the Fund;

                                      -4-

<PAGE>

              13)  For delivery in accordance with the provisions of any
                   agreement among the Fund, the Custodian, and a Futures
                   Commission Merchant registered under the Commodity Exchange
                   Act, relating to compliance with the rules of the Commodity
                   Futures Trading Commission and/or any Contract Market, or any
                   similar organization or organizations, regarding account
                   deposits in connection with transactions by the Fund;

              14)  Upon receipt of instructions from the transfer agent
                   ("Transfer Agent") for the Fund, for delivery to such
                   Transfer Agent or to the holders of shares in connection with
                   distributions in kind, as may be described from time to time
                   in the Fund's currently effective prospectus and statement of
                   additional information ("prospectus"), in satisfaction of
                   requests by holders of Shares for repurchase or redemption;
                   and

              15)  For any other proper corporate purpose, but only upon receipt
                   of, in addition to Proper Instructions, a certified copy of a
                   resolution of the Board of Directors or of the Executive
                   Committee signed by an officer of the Fund and certified by
                   the Secretary or an Assistant Secretary, specifying the
                   securities to be delivered, setting forth the purpose for
                   which such delivery is to be made, declaring such purposes to
                   be proper corporate purposes, and naming the person or
                   persons to whom delivery of such securities shall be made.

2.3.     Registration of Securities. Domestic securities held by the Custodian
         (other than bearer securities) shall be registered in the name of the
         Fund or in the name of any

                                      -5-

<PAGE>

         nominee of the Fund or of any nominee of the Custodian which nominee
         shall be assigned exclusively to the Fund, unless the Fund has
         authorized in writing the appointment of a nominee to be used in common
         with other registered investment companies having the same investment
         adviser as the Fund, or in the name or nominee name of any agent
         appointed pursuant to Section 2.9 or in the name or nominee name of any
         sub-custodian appointed pursuant to Article 1. All securities accepted
         by the Custodian on behalf of the Fund under the terms of this Contract
         shall be in "street name" or other good delivery form.

2.4.     Bank Accounts. The Custodian shall open and maintain a separate bank
         account or accounts in the United States in the name of the Fund,
         subject only to draft or order by the Custodian acting pursuant to the
         terms of this Contract, and shall hold in such account or accounts,
         subject to the provisions hereof, all cash received by it from or for
         the account of the Fund, other than cash maintained by the Fund in a
         bank account established and used in accordance with Rule 17f-3 under
         the Investment Company Act of 1940. Funds held by the Custodian for the
         Fund may be deposited by it to its credit as Custodian in the Banking
         Department of the Custodian or in such other banks or trust companies
         as it may in its discretion deem necessary or desirable; provided,
         however, that every such bank or trust company shall be qualified to
         act as a custodian under the Investment Company Act of 1940 and that
         each such bank or trust company and the funds to be deposited with each
         such bank or trust company shall be approved by vote of a majority of
         the Board of Directors of the Fund. Such funds shall be deposited by
         the Custodian in its capacity as Custodian and shall be withdrawable by
         the Custodian only in that capacity.

                                      -6-

<PAGE>

2.5.          Investment and Availability of Federal Funds. Upon mutual
              agreement between the Fund and the Custodian, the Custodian
              shall, upon the receipt of Proper Instructions,

                     1)        invest in such instruments as may be set forth in
                               such instructions on the same day as received all
                               federal funds received after a time agreed upon
                               between the Custodian and the Fund; and

                     2)        make federal funds available to the Fund as of
                               specified times agreed upon from time to time by
                               the Fund and the Custodian in the amount of
                               checks received in payment for Shares of the Fund
                               which are deposited into the Fund's account.

2.6.          Collection of Income. The Custodian shall collect on a timely
              basis all income and other payments with respect to United States
              registered securities held hereunder to which the Fund shall be
              entitled either by law or pursuant to custom in the securities
              business, and shall collect on a timely basis all income and other
              payments with respect to United States bearer securities if, on
              the date of payment by the issuer, such securities are held by the
              Custodian or agent thereof and shall credit such income, as
              collected, to the Fund's custodian account. Without limiting the
              generality of the foregoing, the Custodian shall detach and
              present for payment all coupons and other income items requiring
              presentation as and when they become due and shall collect
              interest when due on securities held hereunder. Income due the
              Fund on United States securities loaned pursuant to the provisions
              of Section 2.2 (10) shall be the responsibility of the Fund. The
              Custodian will have no duty or responsibility in connection
              therewith, other than to provide the Fund with such information or
              data as

                                      -7-

<PAGE>

              may be necessary to assist the Fund in arranging for the timely
              delivery to the Custodian of the income to which the Fund is
              properly entitled.

2.7.          Payment of Fund Moneys. Upon receipt of Proper Instructions, which
              may be continuing instructions when deemed appropriate by the
              parties, the Custodian shall pay out moneys of the Fund in the
              following cases only:

                     1)        Upon the purchase of domestic securities, futures
                               contracts or options on futures contracts for the
                               account of the Fund but only (a) against the
                               delivery of such securities, or evidence of title
                               to futures contracts or options on futures
                               contracts, to the Custodian (or any bank, banking
                               firm or trust company doing business in the
                               United States or abroad which is qualified under
                               the Investment Company Act of 1940, as amended,
                               to act as a custodian and has been designated by
                               the Custodian as its agent for this purpose)
                               registered in the name of the Fund or in the name
                               of a nominee of the Custodian referred to in
                               Section 2.3 hereof or in proper form for
                               transfer; (b) in the case of a purchase effected
                               through a Securities System, in accordance with
                               the conditions set forth in Section 2.10 hereof
                               or (c) in the case of repurchase agreements
                               entered into between the Fund and the Custodian,
                               or another bank, or a broker-dealer which is a
                               member of NASD, (i) against delivery of the
                               securities either in certificate form or through
                               an entry crediting the Custodian's account at the
                               Federal Reserve Bank with such securities or (ii)
                               against delivery of the receipt evidencing
                               purchase by the Fund of securities owned by the
                               Custodian

                                      -8-

<PAGE>

                               along with written evidence of the agreement by
                               the Custodian to repurchase such securities from
                               the Fund;

                     2)        In connection with conversion, exchange or
                               surrender of securities owned by the Fund as set
                               forth in Section 2.2 hereof;

                     3)        For the redemption or repurchase of Shares issued
                               by the Fund as set forth in Article 4 hereof;

                     4)        For the payment of any expense or liability
                               incurred by the Fund, including but not limited
                               to the following payments for the account of the
                               Fund: interest, taxes, management, accounting,
                               transfer agent and legal fees, and operating
                               expenses of the Fund whether or not such expenses
                               are to be in whole or part capitalized or treated
                               as deferred expenses;

                     5)        For the payment of any dividends declared
                               pursuant to the governing documents of the Fund;

                     6)        For payment of the amount of dividends received
                               in respect of securities sold short;

                     7)        For any other proper purpose, but only upon
                               receipt of, in addition to Proper Instructions, a
                               certified copy of a resolution of the Board of
                               Directors or of the Executive Committee of the
                               Fund signed by an officer of the Fund and
                               certified by its Secretary or an Assistant
                               Secretary, specifying the amount of such payment,
                               setting forth the purpose for which such payment
                               is to be made, declaring such purpose

                                      -9-

<PAGE>

                     to be a proper purpose, and naming the person or persons to
                     whom such payment is to be made.

2.8.          Liability for Payment in Advance of Receipt of Securities
              Purchased. In any and every case where payment for purchase of
              domestic securities for the account of the Fund is made by the
              Custodian in advance of receipt of the securities purchased in the
              absence of specific written instructions from the Fund to so pay
              in advance, the Custodian shall be absolutely liable to the Fund
              for such securities to the same extent as if the securities had
              been received by the Custodian, except that in the case of
              repurchase agreements entered into by the Fund with a bank which
              is a member of the Federal Reserve System, the Custodian may
              transfer funds to the account of such bank prior to the receipt of
              written evidence that the securities subject to such repurchase
              agreement have been transferred by book-entry into a segregated
              non-proprietary account of the Custodian maintained with the
              Federal Reserve Bank of Boston or of the safe-keeping receipt,
              provided that such securities have in fact been so transferred by
              book-entry.

2.9.          Appointment of Agents. The Custodian may at any time or times in
              its discretion appoint (and may at any time remove) any other bank
              or trust company which is itself qualified under the Investment
              Company Act of 1940, as amended, to act as a custodian, as its
              agent to carry out such of the provisions of this Article 2 as the
              Custodian may from time to time direct; provided, however, that
              the appointment of any agent shall not relieve the Custodian of
              its responsibilities or liabilities hereunder.

2.10.         Deposit of Securities in Securities Systems. The Custodian may
              deposit and/or maintain domestic securities owned by the Fund in a
              clearing agency registered with

                                      -10-

<PAGE>

              the Securities and Exchange Commission under Section 17A of the
              Securities Exchange Act of 1934, which acts as a securities
              depository, or in the book-entry system authorized by the U.S.
              Department of the Treasury and certain federal agencies,
              collectively referred to herein as "Securities System" in
              accordance with applicable Federal Reserve Board and Securities
              and Exchange Commission rules and regulations, if any, and subject
              to the following provisions:

                     1)        The Custodian may keep domestic securities of the
                               Fund in a Securities System provided that such
                               securities are represented in an account
                               ("Account") of the Custodian in the Securities
                               System which shall not include any assets of the
                               Custodian other than assets held as a fiduciary,
                               custodian or otherwise for customers;

                     2)        The records of the Custodian with respect to
                               domestic securities of the Fund which are
                               maintained in a Securities System shall identify
                               by book-entry those securities belonging to the
                               Fund;

                     3)        The Custodian shall pay for domestic securities
                               purchased for the account of the Fund upon (i)
                               receipt of advice from the Securities System that
                               such securities have been transferred to the
                               Account, and (ii) the making of an entry on the
                               records of the Custodian to reflect such payment
                               and transfer for the account of the Fund. The
                               Custodian shall transfer domestic securities sold
                               for the account of the Fund upon (i) receipt of
                               advice from the Securities System that payment
                               for such securities has been transferred to the
                               Account, and (ii) the making of an entry on the
                               records of the Custodian to reflect such transfer
                               and

                                      -11-

<PAGE>

                               payment for the account of the Fund. Copies of
                               all advices from the Securities System of
                               transfers of domestic securities for the account
                               of the Fund shall identify the Fund, be
                               maintained for the Fund by the Custodian and be
                               provided to the Fund at its request. Upon
                               request, the Custodian shall furnish the Fund
                               confirmation of each transfer to or from the
                               account of the Fund in the form of a written
                               advice or notice and shall furnish to the Fund
                               copies of daily transaction sheets reflecting
                               each day's transactions in the Securities System
                               for the account of the Fund.

                     4)        The Custodian shall provide the Fund with any
                               report obtained by the Custodian on the
                               Securities System's accounting system, internal
                               accounting control and procedures for
                               safeguarding domestic securities deposited in the
                               Securities System;

                     5)        The Custodian shall have received the initial or
                               annual certificate, as the case may be, required
                               by Article 13 hereof;

                     6)        Anything to the contrary in this Contract
                               notwithstanding, the Custodian shall be liable to
                               the Fund for any loss or damage to the Fund
                               resulting from use of the Securities System by
                               reason of any negligence, misfeasance or
                               misconduct of the Custodian or any of its agents
                               or of any of its or their employees or from
                               failure of the Custodian or any such agent to
                               enforce effectively such rights as it may have
                               against the Securities System; at the election of
                               the Fund, it shall be entitled to be subrogated
                               to the rights of the Custodian with

                                      -12-

<PAGE>

                               respect to any claim against the Securities
                               System or any other person which the Custodian
                               may have as a consequence of any such loss or
                               damage if and to the extent that the Fund has not
                               been made whole for any such loss or damage.

2.11.         Segregated Account. The Custodian shall upon receipt of Proper
              Instructions establish and maintain a segregated account or
              accounts for and on behalf of the Fund, into which account or
              accounts may be transferred cash and/or securities, including
              securities maintained in an account by the Custodian pursuant to
              Section 2.10 hereof, (i) in accordance with the provisions of any
              agreement among the Fund, the Custodian and a broker-dealer
              registered under the Exchange Act and a member of the NASD (or any
              futures commission merchant registered under the Commodity
              Exchange Act), relating to compliance with the rules of The
              Options Clearing Corporation and of any registered national
              securities exchange (or the Commodity Futures Trading Commission
              or any registered contract market), or of any similar organization
              or organizations, regarding escrow or other arrangements in
              connection with transactions by the Fund, (ii) for purposes of
              segregating cash or government securities in connection with
              options purchased, sold or written by the Fund or commodity
              futures contracts or options thereon purchased or sold by the
              Fund, (iii) for the purposes of compliance by the Fund with the
              procedures required by Investment Company Act Release No. 10666,
              or any subsequent release or releases of the Securities and
              Exchange Commission relating to the maintenance of segregated
              accounts by registered investment companies and (iv) for other
              proper corporate purposes, but only, in the case of clause (iv),
              upon receipt of, in addition to Proper

                                      -13-

<PAGE>

              Instructions, a certified copy of a resolution of the Board of
              Directors or of the Executive Committee signed by an officer of
              the Fund and certified by the Secretary or an Assistant Secretary,
              setting forth the purpose or purposes of such segregated account
              and declaring such purposes to be proper corporate purposes.

2.12.         Ownership Certificates for Tax Purposes. The Custodian shall
              execute ownership and other certificates and affidavits for all
              federal and state tax purposes in connection with receipt of
              income or other payments with respect to domestic securities of
              the Fund held by it and in connection with transfers of such
              securities.

2.13.         Proxies. The Custodian shall, with respect to the domestic
              securities held hereunder, cause to be promptly executed by the
              registered holder of such securities, if the securities are
              registered otherwise than in the name of the Fund or a nominee of
              the Fund, all proxies, without indication of the manner in which
              such proxies are to be voted, and shall promptly deliver to the
              Fund such proxies, all proxy soliciting materials and all notices
              relating to such securities.

2.14.         Communications Relating to Fund Portfolio Securities. The
              Custodian shall transmit promptly to the Fund all written
              information (including, without limitation, pendency of calls and
              maturities of domestic securities and expirations of rights in
              connection therewith and notices of exercise of call and put
              options written by the Fund and the maturity of futures contracts
              purchased or sold by the Fund) received by the Custodian from
              issuers of the domestic securities being held for the Fund. With
              respect to tender or exchange offers, the Custodian shall transmit
              promptly to the Fund all written information received by the
              Custodian from issuers of the domestic securities whose tender or
              exchange is sought and from the party (or his agents)

                                      -14-

<PAGE>

              making the tender or exchange offer. If the Fund desires to take
              action with respect to any tender offer, exchange offer or any
              other similar transaction, the Fund shall notify the Custodian at
              least three business days prior to the date on which the Custodian
              is to take such action.

2.15.         Reports to Fund by Independent Public Accountants. The Custodian
              shall provide the Fund, at such times as the Fund may reasonably
              require, with reports by independent public accountants on the
              accounting system, internal accounting control and procedures for
              safeguarding securities, futures contracts and options on futures
              contracts, including domestic securities deposited and/or
              maintained in a Securities System, relating to the services
              provided by the Custodian under this Contract; such reports, which
              shall be of sufficient scope sad in sufficient detail, as may
              reasonably be required by the Fund, to provide reasonable
              assurance that any material inadequacies would be disclosed by
              such examination, and, if there are no such inadequacies, shall so
              state.

3.             Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States

3.1.          Appointment of Foreign Sub-Custodians.

              The Custodian is authorized and instructed to employ as
              sub-custodians for the Fund's securities and other assets
              maintained outside of the United States the foreign banking
              institutions and foreign securities depositories designated on
              Schedule A hereto ("foreign sub-custodians"). Upon receipt of
              "Proper Instructions", together with a certified resolution of the
              Fund's Board of Directors, the Custodian and the Fund may agree to
              amend Schedule A hereto from time to time to designate

                                      -15-

<PAGE>

              additional foreign banking institutions and foreign securities
              depositories to act as sub-custodians. Upon receipt of Proper
              Instructions from the Fund the Custodian shall cease the
              employment of any one or more of such sub-custodians for
              maintaining custody of the Fund's assets.

3.2.          Assets to be Held. The Custodian shall limit the securities and
              other assets maintained in the custody of the foreign
              sub-custodians to: (a) "foreign securities", as defined in
              paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of
              1940, and (b) cash and cash equivalents in such amounts as the
              Custodian or the Fund may determine to reasonably necessary to
              effect the Fund's foreign securities transactions.

3.3.          Foreign Securities Depositories. Except as may otherwise be agreed
              upon in writing by the Custodian and the Fund, assets of the Fund
              shall be maintained in foreign securities depositories only
              through arrangements implemented by the foreign banking
              institutions serving as sub-custodians pursuant to the terms
              hereof.

3.4.          Segregation of Securities. The Custodian shall identify on its
              books as belonging to the Fund, the foreign securities of the Fund
              held by each foreign sub-custodian. Each agreement pursuant to
              which the Custodian employs a foreign banking institution shall
              require that such institution establish a custody account for the
              Custodian on behalf of the Fund and physically segregate in that
              account, securities and other assets of the Fund, and, in the
              event that such institution deposits the Fund's securities in a
              foreign securities depository, that it shall identify on its books
              as belonging to the Custodian, as agent for the Fund, the
              securities so deposited (all collectively referred to as the
              "Account").

                                      -16-

<PAGE>

3.5.          Agreements with Foreign Banking Institutions. Each agreement with
              a foreign banking institution shall be substantially in the form
              set forth in Exhibit 1 hereto and shall provide that: (a) the
              Fund's assets will not be subject to any right, charge, security
              interest, lien or claim of any kind in favor of the foreign
              banking institutions or its creditors, except a claim of payment
              for their safe custody or administration; (b) beneficial ownership
              for the Fund's assets will be freely transferable without the
              payment of money or value other than for custody or
              administration; (c) adequate records will be maintained
              identifying the assets as belonging to the Fund; (d) officers of
              or auditors employed by, or other representatives of the
              Custodian, including to the extent permitted under applicable law
              the independent public accountants for the Fund, will be given
              access to the books and records of the foreign banking institution
              relating to its actions under its agreement with the Custodian;
              and (e) assets of the Fund held by the foreign sub-custodian will
              be subject only to the instructions of the Custodian or its
              agents.

3.6.          Access of Independent Accountants of the Fund. Upon request of the
              Fund, the Custodian will use its best efforts to arrange for the
              independent accountants of the Fund to be afforded access to the
              books and records of any foreign banking institution employed as a
              foreign sub-custodian insofar as such books and records relate to
              the performance of such foreign banking institutions under its
              agreement with the Custodian.

3.7.          Reports by Custodian. The Custodian will supply to the Fund from
              time to time, as mutually agreed upon, statements in respect of
              the securities and other assets of the Fund held by foreign
              sub-custodians, including but not limited to an identification of

                                      -17-

<PAGE>

              entities having possession of the Fund's securities and other
              assets and advices or notifications of any transfers of securities
              to or from each custodial account maintained by a foreign banking
              institution for the Custodian on behalf of the Fund indicating, as
              to securities acquired for the Fund, the identity of the entity
              having physical possession of such securities.

3.8.          Transactions in Foreign Custody Account. (a) Upon receipt of
              Proper Instructions, which may be continuing instructions when
              deemed appropriate by the parties, the Custodian shall make or
              cause its foreign sub-custodian to transfer, exchange, or deliver
              foreign securities owned by the Fund, but except to the extent
              explicitly provided herein only in any of the cases specified in
              Section 2.2 (b) Upon receipt of Proper Instructions, which may be
              continuing instructions when deemed appropriate by the parties the
              Custodian shall pay out or cause its foreign sub-custodians to pay
              out monies of the Fund, but except to the extent explicitly
              provided herein only in any of the cases specified in Section 2.8.
              (c) Notwithstanding any provision of this Contract to the
              contrary, settlement and payment for securities received for the
              account of the Fund and delivery of securities maintained for the
              account of the Fund may be effected in accordance with the
              customary or established securities trading or securities
              processing practices and procedures in the jurisdiction or market
              in which the transaction occurs, including, without limitation,
              delivering securities to the purchaser thereof or to a dealer
              therefor (or an agent for such purchaser or dealer) against a
              receipt with the expectation of receiving later payment for such
              securities from such purchaser or dealer. (d) Securities
              maintained in the custody of a foreign sub-custodian may be
              maintained in the name of such entity's nominee to the same

                                      -18-

<PAGE>

              extent as set forth in Section 2.3 of this Contract and the Fund
              agrees to hold any such nominee harmless from any liability as a
              holder of record of such securities.

3.9.          Liability of Foreign Sub-Custodians. Each agreement pursuant to
              which the Custodian employs a foreign banking institution as a
              foreign sub-custodian shall require the institution to exercise
              reasonable care in the performance of its duties and to indemnify,
              and hold harmless, the Custodian and the Fund from and against any
              loss, damage, cost, expense, liability or claim arising out of or
              in connection with the institution's performance of such
              obligations. At the election of the Fund, it shall be entitled to
              be subrogated to the rights of the Custodian with respect to any
              claims against a foreign banking institution as a consequence of
              any such loss, damage, cost, expense, liability or claim if and to
              the extent that the Fund has not been made whole for any such
              loss, damage, cost, expense, liability or claim.

3.10.         Liability of Custodian. The Custodian shall be liable for the acts
              or omissions of a foreign banking institution to the same extent
              as set forth with respect to sub-custodians generally in Section 1
              of the Custodian Contract and, regardless of whether assets are
              maintained in the custody of a foreign banking institution, a
              foreign securities depository or a branch of a U.S. bank as
              contemplated by Section 3.12 hereof, the Custodian shall not be
              liable for any loss, damage, cost, expense, liability or claim
              resulting from, or caused by, the direction of or authorization by
              the Fund to maintain custody of any securities or cash of the Fund
              in a foreign country including, but not limited to, losses
              resulting from nationalization, expropriation, currency
              restrictions, or acts of war or terrorism.

                                      -19-

<PAGE>

3.11.         Monitoring Responsibilities. The Custodian shall furnish annually
              to the Fund, during the month of June, information concerning the
              foreign sub-custodians employed by the Custodian. Such information
              shall be similar in kind and scope to that furnished to the Fund
              in connection with the initial approval of this Contract. In
              addition, the Custodian will promptly inform the Fund in the event
              that the Custodian learns of a material adverse change in the
              financial condition of a foreign sub-custodian or is notified by a
              foreign banking institution employed as a foreign sub-custodian
              that there appears to be a substantial likelihood that its
              shareholders' equity will decline below $200 million (U.S. dollars
              or the equivalent thereof) or that its shareholders' equity has
              declined below $200 million (in each case computed in accordance
              with generally accepted U.S. accounting principles).

3.12.         Branches of U.S. Banks. Except as otherwise set forth in this
              Contract, the provisions hereof shall not apply where the custody
              of the Fund assets maintained in a foreign branch of a banking
              institution which is a "bank" as defined by Section 2(a) (5) of
              the Investment Company Act of 1940 which meets the qualification
              set forth in Section 26(a) of said Act. The appointment of any
              such branch as a sub-custodian shall be governed by Article 1 of
              this Contract.

4.            Proper Instructions

              Proper Instructions as used herein means a writing signed or
initialled by one or more person or persons as the Board of Directors shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific statement of
the purpose for which such action is requested. Oral instructions will be
considered Proper Instructions if the Custodian reasonably believes them to have
been given by a person

                                      -20-

<PAGE>

authorized to give such instructions with respect to the transaction involved.
The Fund shall cause all oral instructions to be confirmed in writing. Upon
receipt of a certificate of the Secretary or an Assistant Secretary as to the
authorization by the Board of Directors of the Fund accompanied by a detailed
description of procedures approved by the Board of Directors, Proper
Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board of Directors
and the Custodian are satisfied that such procedures afford adequate safeguards
for the Fund's assets.

5.            Actions Permitted without Express Authority

              The Custodian may in its discretion, without express authority
from the Fund:

                         1)   make payments to itself or others for minor
                              expenses of handling securities or other similar
                              items relating to its duties under this Contract,
                              provided that all such payments shall be accounted
                              for to the Fund;

                         2)   surrender securities in temporary form for
                              securities in definitive form;

                         3)   endorse for collection, in the name of the Fund,
                              checks, drafts and other negotiable instruments;
                              and

                         4)   in general, attend to all non-discretionary
                              details in connection with the sale, exchange,
                              substitution, purchase, transfer and other
                              dealings with the securities and property of the
                              Fund except as otherwise directed by the Board of
                              Directors of the Fund.

6.            Evidence of Authority

              The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been

                                      -21-

<PAGE>

properly executed by or on behalf of the Fund. The Custodian may receive and
accept a certified copy of a vote of the Board of Directors of the Fund as
conclusive evidence (a) of the authority of any person to act in accordance with
such vote or (b) of any determination or of any action by the Board of Directors
pursuant to the Articles of Incorporation as described in such vote, and such
vote may be considered as in full force and effect until receipt by the
Custodian of written notice to the contrary.

7.            Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income

              The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board of Directors of the
Fund to keep the books of account of the Fund and/or compute the net asset value
per share of the outstanding shares of the Fund or, if directed in writing to do
so by the Fund, shall itself keep such books of account and/or compute such net
asset value per share. If so directed, the Custodian shall also calculate daily
the net income of the Fund as described in the Fund's currently effective
prospectus and shall advise the Fund and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing by an officer of the
Fund to do so, shall advise the Transfer Agent periodically of the division of
such net income among its various components. The calculations of the net asset
value per share and the daily income of the Fund shall be made at the time or
times described from time to time in the Fund's currently effective prospectus.

8.            Records

              The Custodian shall create and maintain all records relating to
its activities and obligations under this Contract in such manner as will meet
the obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-

                                      -22-

<PAGE>

1 and 31a-2 thereunder, applicable federal and state tax laws and any other law
or administrative rules or procedures which may be applicable to the Fund. All
such records shall be the property of the Fund and shall at all times during the
regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the Securities and Exchange Commission. The Custodian shall, at the Fund's
request, supply the Fund with a tabulation of securities owned by the Fund and
held by the Custodian and shall, when requested to do so by the Fund and for
such compensation as shall be agreed upon between the Fund and the Custodian,
include certificate numbers in such tabulations.

9.            Opinion of Fund's Independent Accountant

              The Custodian shall take all reasonable action, as the Fund may
from time to time request, to obtain from year to year favorable opinions from
the Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-1A, and Form N-SAR or other
annual reports to the Securities and Exchange Commission and with respect to any
other requirements of such Commission.

10.           Compensation of Custodian

              The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund and the Custodian

11.           Responsibility of Custodian

              So long as and to the extent that it is in the exercise of
reasonable care, the Custodian shall not be responsible for the title, validity
or genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties.
The Custodian shall be held to the

                                      -23-

<PAGE>

exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. Notwithstanding the
foregoing, the responsibility of the Custodian with respect to redemptions
effected by check shall be in accordance with a separate Agreement entered into
between the Custodian and the Fund.

              The Custodian shall be liable for the acts or omissions of a
foreign banking institution appointed pursuant to the provisions of Article 3 to
the same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States and, regardless of whether assets are maintained in
the custody of a foreign banking institution, a foreign securities depository or
a branch of a U.S. bank as contemplated by paragraph 3.12 hereof, the Custodian
shall not be liable for any loss, damage, cost, expense, liability or claim
resulting from, or caused by, the direction of or authorization by the Fund to
maintain custody or any securities or cash of the Fund in a foreign country
including, but not limited to, losses resulting from nationalization,
expropriation, currency restrictions, or acts of war or terrorism.

              If the Fund requires the Custodian to take any action with respect
to securities, which action involves the payment of money or which action may,
in the opinion of the Custodian, result in the Custodian or its nominee assigned
to the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.

                                      -24-

<PAGE>

         If the Fund requires the Custodian to advance cash or securities for
any purpose or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of the Fund
assets to the extent necessary to obtain reimbursement.

12.      Effective Period, Termination and Amendment

         This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at anytime by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that the Custodian shall not act under Section 2.10 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Directors of the Fund have approved the initial use
of a particular Securities System and the receipt of an annual certificate of
the Secretary or an Assistant Secretary that the Board of Directors have
reviewed the use by the Fund of such Securities System, as required in each case
by Rule 17f-4 under the Investment Company Act of 1940, as amended; provided
further, however, that the Fund shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any provision
of the Articles of Incorporation, and further provided, that the Fund may at any
time by action of its Board of Directors (i) substitute another bank or trust
company for the Custodian by

                                      -25-

<PAGE>

giving notice as described above to the Custodian, or (ii) immediately terminate
this Contract in the event of the appointment of a conservator or receiver for
the Custodian by the Comptroller of the Currency or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.

         Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.

13.      Successor Custodian

         If a successor custodian shall be appointed by the Board of Directors
of the Fund, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Fund's securities held in a
Securities System.

         If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.

         In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than

                                      -26-

<PAGE>

$25,000,000, all securities, funds and other properties held by the Custodian
and all instruments held by the Custodian relative thereto and all other
property held by it under this Contract and to transfer to an account of such
successor custodian all of the Fund's securities held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the Custodian
under this Contract.

         In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of vote referred to or of the
Board of Directors to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.

14.      Interpretive and Additional Provisions

         In connection with the operation of this Contract, the Custodian and
the Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Articles of Incorporation of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Contract.

                                      -27-

<PAGE>

15.      Massachusetts Law to Apply

         This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.

16.      Prior Contracts

         This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody of
the Fund's assets.

         IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 11th day of April, 1986.


ATTEST                                THE FIRST AUSTRALIA PRIME INCOME
                                         FUND, INC.


/s/ Allan S. Mostoff                  By /s/ Robert F. Gunia
- --------------------                     -------------------
Assistant Secretary                      Robert F. Gunia, Assistant Treasurer


ATTEST                                STATE STREET BANK AND TRUST COMPANY


Signature Illegible on Original       By Signature Illegible on Original
- -------------------------------          -------------------------------
Assistant Secretary                      Vice President

                                      -28-

<PAGE>

                                   Schedule A

         The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Directors of The First Australia
Prime Income Fund, Inc. for use as sub-custodians for the Fund's securities and
other assets:

              Australia and New Zealand Banking Group Limited Banque Bruxelles
Lambert S.A.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.J2
<SEQUENCE>15
<FILENAME>dex99j2.txt
<DESCRIPTION>EXHIBIT J2
<TEXT>
<PAGE>

                                                                  EXHIBIT (j)(2)

                         AMENDMENT TO CUSTODIAN CONTRACT

         AGREEMENT made by and between State Street Bank and Trust Company (the
"Custodian") and The First Australia Prime Income Fund, Inc. (the "Fund").

         WHEREAS, the Custodian and the Fund are parties to a Custodian Contract
dated April 11, 1986 (the "Custodian Contract") governing the terms and
conditions under which the Custodian maintains custody of the securities and
other assets of the Fund; and

         WHEREAS, the parties hereto desire to amend the Custodian Contract to
provide for the maintenance of certain of the Fund's foreign securities and
other assets in the custody of State Street London Limited (the "Trust
Company"); a company incorporated under the laws of the United Kingdom with the
power to act as a trustee and as a custodian of securities;

         NOW THEREFORE, in consideration of the premises and covenants contained
herein, the Custodian and the Fund hereby amend the terms of the Custodian
Contract and agree to the following terms and conditions:

         1. The Fund hereby authorizes and instructs the Custodian to employ the
services of the Trust Company, as the sub-custodian in the United Kingdom, to
hold securities and other assets of the Fund, subject to the terms of the
Custodian Contract and to the terms and conditions hereof.

         2. The securities to be held by the Trust Company shall be limited to
"foreign securities" as defined by paragraph (c) (1) of Rule 17f-5 under the
Investment Company Act of 1940 (the "1940 Act").

<PAGE>

         3. Cash held for the Fund in the United Kingdom shall be maintained in
an interest bearing account established for the Fund with the Trust Company,
which account shall be subject to the direction of the Custodian, the Trust
Company, or both.

         4. The Custodian represents that it has obtained an order from the
Securities and Exchange Commission, pursuant to Section 6(c) of the 1940 Act,
exempting the Custodian and the Fund from the provisions of Section 17(f) of
said Act, to the extent necessary to permit the securities and other assets of
the Fund to be maintained in the custody of the Trust Company.

         5. In delegating custody duties and obligations to the Trust Company as
permitted hereunder, the Custodian agrees that it shall not be relieved of any
responsibility to the Fund for any loss due to such delegation to the Trust
Company, except: such loss as may result from: (a) political risk (including,
but not limited to, exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or (b) other
risk of loss (excluding bankruptcy or insolvency of the Trust Company not caused
by a political risk) for which neither the Custodian nor the Trust Company would
be liable (including, but not limited to, losses due to Acts of God, nuclear
incident and other losses under circumstances where the Custodian and the Trust
Company have exercised reasonable care).

         6. Except as specifically superseded or modified herein, the terms and
conditions of the Custodian Contract, shall continue to apply with full force
and effect.

         IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the day of , 1986.

                                      -2-

<PAGE>

ATTEST:                              THE FIRST AUSTRALIA PRIME INCOME FUND, INC.


/s/ Allan Mostoff                    By: /s/ illegible signature
- ------------------------------           -----------------------
(Assistant Secretary)                    (Title)
                                         (Assistant Treasurer)


ATTEST:                              STATE STREET BANK AND TRUST COMPANY


/s/ illegible signature              By: /s/ illegible signature
- ------------------------------           -----------------------
(Assistant Secretary)                    (Vice President)

                                      -3-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.J3
<SEQUENCE>16
<FILENAME>dex99j3.txt
<DESCRIPTION>EXHIBIT J3
<TEXT>
<PAGE>

                                                                  EXHIBIT (j)(3)



                                   Schedule A

         The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Directors of The First Australia
Prime Income Fund, Inc. for use as subcustodians for the Fund's securities and
other assets:

                 Australia and New Zealand Banking Group Limited
                 WESTPAC Banking Corporation (New Zealand)
                 Chase AMP Bank Limited

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.J4
<SEQUENCE>17
<FILENAME>dex99j4.txt
<DESCRIPTION>EXHIBIT J4
<TEXT>
<PAGE>

                                                                  EXHIBIT (j)(4)

                         AMENDMENT TO CUSTODIAN CONTRACT

     This Amendment to the Custodian Contract is made as of December 4, 1998 by
and between The First Australia Prime Income Fund, Inc. (the "Fund") and State
Street Bank and Trust Company (the "Custodian"). Capitalized terms used in this
Amendment without definition shall have the respective meanings given to such
terms in the Custodian Contract referred to below.

     WHEREAS, the Fund and the Custodian entered into a Custodian Contract dated
as of April 11, 1986 (as amended and in effect from time to time, the
"Contract"); and

     WHEREAS, the Fund and the Custodian desire to amend certain provisions of
the Contract to reflect revisions to Rule 17f-5 ("Rule 17f-5") promulgated under
the Investment Company Act of 1940, as amended (the "1940 Act"); and

     WHEREAS, the Fund and the Custodian desire to amend and restate certain
other provisions of the Contract relating to the custody of assets of the Fund
held outside of the United States.

     NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter contained, the parties hereby agree to amend the
Contract, pursuant to the terms thereof, as follows:

I.   Article 3 of the Contract is hereby deleted, and Articles 4 through 16 of
     the Contract are hereby renumbered, as of the effective date of this
     Amendment, as Articles 5 through 17, respectively and cross references
     throughout are hereby amended to conform.

II.  New Articles 3 and 4 of the Contract are hereby added, as of the effective
     date of this Amendment, as set forth below.

3.   The Custodian as Foreign Custody Manager.

3.1. Definitions.

Capitalized terms in this Article 3 shall have the following meanings:

"Country Risk" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment; economic and financial infrastructure
(including any Mandatory Securities Depositories operating in the country);
prevailing or developing custody and settlement practices; and laws and
regulations applicable to the safekeeping and recovery of Foreign Assets held in
custody in that country.

"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule
17f-5, including, but not limited to, a majority-owned or indirect subsidiary of
a U.S. Bank (as defined in Rule 17f-5), a bank holding company meeting the
requirements of an Eligible Foreign Custodian (as set forth in Rule 17f-5 or by
other appropriate action of the U.S. Securities and Exchange Commission (the
"SEC")), or a foreign branch of a Bank (as defined in Section 2(a)(5) of the

<PAGE>

1940 Act) meeting the requirements of a custodian under Section 17(f) of the
1940 Act, except that the term does not include Mandatory Securities
Depositories.

"Foreign Assets" means any of the Fund's investments (including foreign
currencies) for which the primary market is outside the United States and such
cash and cash equivalents as are reasonably necessary to effect the Fund's
transactions in such investments.

"Foreign Custody Manager" has the meaning set forth in section (a)(2) of Rule
17f-5.

"Mandatory Securities Depository" means a foreign securities depository or
clearing agency that, either as a legal or practical matter, must be used if the
Fund determines to place Foreign Assets in a country outside the United States
(i) because required by law or regulation; (ii) because securities cannot be
withdrawn from such foreign securities depository or clearing agency; or (iii)
because maintaining or effecting trades in securities outside the foreign
securities depository or clearing agency is not consistent with prevailing or
developing custodial or market practices.

3.2. Delegation to the Custodian as Foreign Custody Manager.

The Fund, by resolution adopted by its Board of Directors (the "Board"), hereby
delegates to the Custodian, subject to Section (b) of Rule 17f-5, the
responsibilities set forth in this Article 3 with respect to Foreign Assets held
outside the United States, and the Custodian hereby accepts such delegation, as
Foreign Custody Manager of the Fund.

3.3. Countries Covered.

The Foreign Custody Manager shall be responsible for performing the delegated
responsibilities defined below only with respect to the countries and custody
arrangements for each such country listed on Schedule A to this Contract, which
list of countries may be amended from time to time by the Fund with the
agreement of the Foreign Custody Manager. The Foreign Custody Manager shall list
on Schedule A the Eligible Foreign Custodians selected by the Foreign Custody
Manager to maintain the Fund's assets, which list of Eligible Foreign Custodians
may be amended from time to time in the sole discretion of the Foreign Custody
Manager. Mandatory Securities Depositories are listed on Schedule B to this
Contract, which Schedule B may be amended from time to time by the Foreign
Custody Manager. The Foreign Custody Manager will provide amended versions of
Schedules A and B in accordance with Section 3.7 of this Article 3.

Upon the receipt by the Foreign Custody Manager of Proper Instructions to open
an account, or to place or maintain Foreign Assets, in a country listed on
Schedule A, and the fulfillment by the Fund of the applicable account opening
requirements for such country, the Foreign Custody Manager shall be deemed to
have been delegated by the Board responsibility as Foreign Custody Manager with
respect to that country and to have accepted such delegation. Execution of this
Amendment by the Fund shall be deemed to be a Proper Instruction to open an
account, or to place or maintain Foreign Assets, in each country listed on
Schedule A in which the Custodian has previously placed or currently maintains
Foreign Assets pursuant to the terms of the Contract. Following the receipt of
Proper Instructions directing the Foreign Custody Manager to close the account
of the Fund with the Eligible Foreign Custodian selected by the Foreign Custody
Manager in a designated country, the delegation by the Board to the Custodian as
Foreign Custody Manager for that country shall be deemed to have been withdrawn
and the

                                       2

<PAGE>

Custodian shall immediately cease to be the Foreign Custody Manager of the Fund
with respect to that country.

The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Fund. Thirty (30) days (or such longer period as to which the parties agree in
writing) after receipt of any such notice by the Fund, the Custodian shall have
no further responsibility as Foreign Custody Manager to the Fund with respect to
the country as to which the Custodian's acceptance of delegation is withdrawn.

3.4. Scope of Delegated Responsibilities.

     3.4.1. Selection of Eligible Foreign Custodians.

Subject to the provisions of this Article 3, the Foreign Custody Manager may
place and maintain the Foreign Assets in the care of the Eligible Foreign
Custodian selected by the Foreign Custody Manager in each country listed on
Schedule A, as amended from time to time.

In performing its delegated responsibilities as Foreign Custody Manager to place
or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign
Custody Manager shall determine that the Foreign Assets will be subject to
reasonable care, based on the standards applicable to custodians in the country
in which the Foreign Assets will be held by that Eligible Foreign Custodian,
after considering all factors relevant to the safekeeping of such assets,
including, without limitation the factors specified in Rule 17f-5(c)(l).

     3.4.2. Contracts With Eligible Foreign Custodians.

The Foreign Custody Manager shall determine that the contract (or the rules or
established practices or procedures in the case of an Eligible Foreign Custodian
that is a foreign securities depository or clearing agency) governing the
foreign custody arrangements with each Eligible Foreign Custodian selected by
the Foreign Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).

     3.4.3. Monitoring.

In each case in which the Foreign Custody Manager maintains Foreign Assets with
an Eligible Foreign Custodian selected by the Foreign Custody Manager, the
Foreign Custody Manager shall establish a system to monitor (i) the
appropriateness of maintaining the Foreign Assets with such Eligible Foreign
Custodian and (ii) the contract governing the custody arrangements established
by the Foreign Custody Manager with the Eligible Foreign Custodian (or the rules
or established practices and procedures in the case of an Eligible Foreign
Custodian selected by the Foreign Custody Manager which is a foreign securities
depository or clearing agency that is not a Mandatory Securities Depository). In
the event the Foreign Custody Manager determines that the custody arrangements
with an Eligible Foreign Custodian it has selected are no longer appropriate,
the Foreign Custody Manager shall notify the Board in accordance with Section
3.7 hereunder.

                                       3

<PAGE>

3.5. Guidelines for the Exercise of Delegated Authority.

For purposes of this Article 3, the Board shall be deemed to have considered and
determined to accept such Country Risk as is incurred by placing and maintaining
the Foreign Assets in each country for which the Custodian is serving as Foreign
Custody Manager of the Fund, and the Board shall be deemed to be monitoring on a
continuing basis such Country Risk to the extent that the Board considers
necessary or appropriate. The Fund and the Custodian each expressly acknowledge
that the Foreign Custody Manager shall not be delegated any responsibilities
under this Article 3 with respect to Mandatory Securities Depositories.

3.6. Standard of Care as Foreign Custody Manager of the Fund.

In performing the responsibilities delegated to it, the Foreign Custody Manager
agrees to exercise reasonable care, prudence and diligence such as a person
having responsibility for the safekeeping of assets of management investment
companies registered under the 1940 Act would exercise.

3.7. Reporting Requirements.

The Foreign Custody Manager shall report the withdrawal of the Foreign Assets
from an Eligible Foreign Custodian and the placement of such Foreign Assets with
another Eligible Foreign Custodian by providing to the Board amended Schedules A
or B at the end of the calendar quarter in which an amendment to either Schedule
has occurred. The Foreign Custody Manager shall make written reports notifying
the Board of any other material change in the foreign custody arrangements of
the Fund described in this Article 3 after the occurrence of the material
change.

3.8. Representations with Respect to Rule 17f-5.

The Foreign Custody Manager represents to the Fund that it is a U.S. Bank as
defined in section (a)(7) of Rule 17f-5.

The Fund represents to the Custodian that the Board has determined that it is
reasonable for the Board to rely on the Custodian to perform the
responsibilities delegated pursuant to this Contract to the Custodian as the
Foreign Custody Manager of the Fund.

3.9. Effective Date and Termination of the Custodian as Foreign Custody Manager.

The Board's delegation to the Custodian as Foreign Custody Manager of the Fund
shall be effective as of the date hereof and shall remain in effect until
terminated at any time, without penalty, by written notice from the terminating
party to the non-terminating party. Termination will become effective thirty
(30) days after receipt by the non-terminating party of such notice. The
provisions of Section 3.3 hereof shall govern the delegation to and termination
of the Custodian as Foreign Custody Manager of the Fund with respect to
designated countries.

                                       4

<PAGE>

4.   Duties of the Custodian with Respect to Property of the Fund Held Outside
     the United States

4.1. Definitions.

Capitalized terms in this Article 4 shall have the following meanings:

"Foreign Securities System" means either a clearing agency or a securities
depository listed on Schedule A hereto or a Mandatory Securities Depository
listed on Schedule B hereto.

"Foreign Sub-Custodian" means a foreign banking institution serving as an
Eligible Foreign Custodian.

4.2. Holding Securities.

The Custodian shall identify on its books as belonging to the Fund the foreign
securities held by each Foreign Sub-Custodian or Foreign Securities System. The
Custodian may hold foreign securities for all of its customers, including the
Fund, with any Foreign Sub-Custodian in an account that is identified as
belonging to the Custodian for the benefit of its customers, provided however,
that (i) the records of the Custodian with respect to foreign securities of the
Fund which are maintained in such account shall identify those securities as
belonging to the Fund and (ii), to the extent permitted and customary in the
market in which the account is maintained, the Custodian shall require that
securities so held by the Foreign Sub-Custodian be held separately from any
assets of such Foreign Sub-Custodian or of other customers of such Foreign
Sub-Custodian.

4.3. Foreign Securities Systems.

Foreign securities shall be maintained in a Foreign Securities System in a
designated country only through arrangements implemented by the Foreign
Sub-Custodian in such country pursuant to the terms of this Contract.

4.4. Transactions in Foreign Custody Account.

     4.4.1. Delivery of Foreign Assets.

The Custodian or a Foreign Sub-Custodian shall release and deliver foreign
securities of the Fund held by such Foreign Sub-Custodian, or in a Foreign
Securities System account, only upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by the parties, and only in
the following cases:

     (i)    upon the sale of such foreign securities for the Fund in accordance
            with commercially reasonable market practice in the country where
            such Assets are held or traded, including, without limitation: (A)
            delivery against expectation of receiving later payment; or (B) in
            the case of a sale effected through a Foreign Securities System, in
            accordance with the rules governing the operation of the Foreign
            Securities System;

                                       5

<PAGE>

     (ii)   in connection with any repurchase agreement related to foreign
            securities;

     (iii)  to the depository agent in connection with tender or other similar
            offers for foreign securities of the Fund;

     (iv)   to the issuer thereof or its agent when such foreign securities are
            called, redeemed, retired or otherwise become payable;

     (v)    to the issuer thereof, or its agent, for transfer into the name of
            the Custodian (or the name of the respective Foreign Sub-Custodian
            or of any nominee of the Custodian or such Foreign Sub-Custodian) or
            for exchange for a different number of bonds, certificates or other
            evidence representing the same aggregate face amount or number of
            units;

     (vi)   to brokers, clearing banks or other clearing agents for examination
            or trade execution in accordance with market custom; provided that
            in any such case the Foreign Sub-Custodian shall have no
            responsibility or liability for any loss arising from the delivery
            of such securities prior to receiving payment for such securities
            except as may arise from the Foreign Sub-Custodian's own negligence
            or willful misconduct;

     (vii)  for exchange or conversion pursuant to any plan of merger,
            consolidation, recapitalization, reorganization or readjustment of
            the securities of the issuer of such securities, or pursuant to
            provisions for conversion contained in such securities, or pursuant
            to any deposit agreement;

     (viii) in the case of warrants, rights or similar foreign securities, the
            surrender thereof in the exercise of such warrants, rights or
            similar securities or the surrender of interim receipts or temporary
            securities for definitive securities;

     (ix)   for delivery as security in connection with any borrowing by the
            Fund requiring a pledge of assets by the Fund;

     (x)    in connection with trading in options and futures contracts,
            including delivery as original margin and variation margin;

     (xi)   in connection with the lending of foreign securities; and

     (xii)  for any other proper purpose, but only upon receipt of, in addition
            to Proper Instructions, a copy of a resolution of the Board or of an
            Executive Committee of the Board so authorized by the Board, signed
            by an officer of the Fund and certified by its Secretary or an
            Assistant Secretary that the resolution was duly adopted and is in
            full force and effect (a "Certified Resolution"), specifying the
            Foreign Assets to be delivered, setting forth the purpose for which
            such delivery is to be made, declaring such purpose to be a proper
            corporate purpose, and naming the person or persons to whom delivery
            of such Assets shall be made.

                                       6

<PAGE>

     4.4.2. Payment of Fund Monies.

Upon receipt of Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out, or direct the
respective Foreign Sub-Custodian or the respective Foreign Securities System to
pay out, monies of the Fund in the following cases only:

     (i)    upon the purchase of foreign securities for the Fund, unless
            otherwise directed by Proper Instructions, by (A) delivering money
            to the seller thereof or to a dealer therefor (or an agent for such
            seller or dealer) against expectation of receiving later delivery of
            such foreign securities; or (B) in the case of a purchase effected
            through a Foreign Securities System, in accordance with the rules
            governing the operation of such Foreign Securities System;

     (ii)   in connection with the conversion, exchange or surrender of foreign
            securities of the Fund;

     (iii)  for the payment of any expense or liability of the Fund including
            but not limited to the following payments: interest, taxes,
            investment advisory fees, transfer agency fees, fees under this
            Contract, legal fees, accounting fees, and other operating expenses;

     (iv)   for the purchase or sale of foreign exchange or foreign exchange
            contracts for the Fund, including transactions executed with or
            through the Custodian or its Foreign Sub-Custodians;

     (v)    in connection with trading in options and futures contracts,
            including delivery as original margin and variation margin;

     (vi)   for payment of part or all of the dividends received in respect of
            securities sold short;

     (vii)  in connection with the borrowing or lending of foreign securities;
            and

     (viii) for any other proper purpose, but only upon receipt of, in addition
            to Proper Instructions, a Certified Resolution specifying the amount
            of such payment, setting forth the purpose for which such payment is
            to be made, declaring such purpose to be a proper corporate purpose,
            and naming the person or persons to whom such payment is to be made.

     4.4.3. Market Conditions; Market Information.

Notwithstanding any provision of this Contract to the contrary, settlement and
payment for Foreign Assets received for the account of the Fund and delivery of
Foreign Assets maintained for the account of the Fund may be effected in
accordance with the customary established securities trading or processing
practices and procedures in the country or market in which the transaction
occurs, including, without limitation, delivering Foreign Assets to the
purchaser

                                       7

<PAGE>

thereof or to a dealer therefor (or an agent for such purchaser or dealer) with
the expectation of receiving later payment for such Foreign Assets from such
purchaser or dealer.

The Custodian shall provide to the Board the information with respect to custody
and settlement practices in countries in which the Custodian employs a Foreign
Sub-Custodian, including without limitation information relating to Foreign
Securities Systems, described on Schedule C hereto at the time or times set
forth on such Schedule. The Custodian may revise Schedule C from time to time,
provided that no such revision shall result in the Board being provided with
substantively less information than had been previously provided hereunder.

4.5. Registration of Foreign Securities.

The foreign securities maintained in the custody of a Foreign Sub-Custodian
(other than bearer securities) shall be registered in the name of the Fund or in
the name of the Custodian or in the name of any Foreign Sub-Custodian or in the
name of any nominee of the foregoing, and the Fund agrees to hold any such
nominee harmless from any liability as a holder of record of such foreign
securities. The Custodian or a Foreign Sub-Custodian shall not be obligated to
accept securities on behalf of the Fund under the terms of this Contract unless
the form of such securities and the manner in which they are delivered are in
accordance with reasonable market practice.

4.6. Bank Accounts.

The Custodian shall identify on its books as belonging to the Fund cash
(including cash denominated in foreign currencies) deposited with the Custodian.
Where the Custodian is unable to maintain, or market practice does not
facilitate the maintenance of, cash on the books of the Custodian, a bank
account or bank accounts opened and maintained outside the United States on
behalf of the Fund with a Foreign Sub-Custodian shall be subject only to draft
or order by the Custodian or such Foreign Sub-Custodian, acting pursuant to the
terms of this Contract to hold cash received by or from or for the account of
the Fund.

4.7. Collection of Income.

The Custodian shall use reasonable commercial efforts to collect all income and
other payments with respect to the Foreign Assets held hereunder to which the
Fund shall be entitled and shall credit such income, as collected, to the Fund.
In the event that extraordinary measures are required to collect such income,
the Fund and the Custodian shall consult as to such measures and as to the
compensation and expenses of the Custodian relating to such measures.

4.8. Shareholder Rights.

With respect to the foreign securities held under this Article 4, the Custodian
will use reasonable commercial efforts to facilitate the exercise of voting and
other shareholder rights, subject always to the laws, regulations and practical
constraints that may exist in the country where such securities are issued. The
Fund acknowledges that local conditions, including lack of regulation, onerous
procedural obligations, lack of notice and other factors may have the effect of
severely limiting the ability of the Fund to exercise shareholder rights.

                                       8

<PAGE>

4.9.  Communications Relating to Foreign Securities.

The Custodian shall transmit promptly to the Fund written information
(including, without limitation, pendency of calls and maturities of foreign
securities and expirations of rights in connection therewith) received by the
Custodian via the Foreign Sub-Custodians from issuers of the foreign securities
being held for the account of the Fund. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Fund written information so
received by the Custodian from issuers of the foreign securities whose tender or
exchange is sought or from the party (or its agents) making the tender or
exchange offer. The Custodian shall not be liable for any untimely exercise of
any tender, exchange or other right or power in connection with foreign
securities or other property of the Fund at any time held by it unless (i) the
Custodian or the respective Foreign Sub-Custodian is in actual possession of
such foreign securities or property and (ii) the Custodian receives Proper
Instructions with regard to the exercise of any such right or power, and both
(i) and (ii) occur at least three business days prior to the date on which the
Custodian is to take action to exercise such right or power.

4.10. Liability of Foreign Sub-Custodians and Foreign Securities Systems.

Each agreement pursuant to which the Custodian employs a Foreign Sub-Custodian
shall, to the extent possible, require the Foreign Sub-Custodian to exercise
reasonable care in the performance of its duties and, to the extent possible, to
indemnify, and hold harmless, the Custodian from and against any loss, damage,
cost, expense, liability or claim arising out of or in connection with such
Foreign Sub-Custodian's performance of such obligations. At the election of the
Fund, the Fund shall be entitled to be subrogated to the rights of the Custodian
with respect to any claims against a Foreign Sub-Custodian as a consequence of
any such loss, damage, cost, expense, liability or claim if and to the extent
that the Fund has not been made whole for any such loss, damage, cost, expense,
liability or claim.

4.11. Tax Law.

The Custodian shall have no responsibility or liability for any obligations now
or hereafter imposed on the Fund or the Custodian as custodian of the Fund by
the tax law of the United States or of any state or political subdivision
thereof. It shall be the responsibility of the Fund to notify the Custodian of
the obligations imposed on the Fund with respect to the Fund or the Custodian as
custodian of the Fund by the tax law of countries other than those mentioned in
the above sentence, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting. The sole responsibility of the Custodian with regard to such tax law
shall be to use reasonable efforts to assist the Fund with respect to any claim
for exemption or refund under the tax law of countries for which the Fund has
provided such information.

4.12. Liability of Custodian.

Except as may arise from the Custodian's own negligence or willful misconduct or
the negligence or willful misconduct of a Sub-Custodian, the Custodian shall be
without liability to the Fund for any loss, liability, claim or expense
resulting from or caused by anything which is (A) part of Country Risk or (B)
part of the "prevailing country risk" of the Fund, as such term is

                                       9

<PAGE>

used in SEC Release Nos. IC-22658; IS-1080 (May 12, 1997) or as such term or
other similar terms are now or in the future interpreted by the SEC or by the
staff of the Division of Investment Management of the SEC.

The Custodian shall be liable for the acts or omissions of a Foreign
Sub-Custodian to the same extent as set forth with respect to sub-custodians
generally in the Contract and, regardless of whether assets are maintained in
the custody of a Foreign Sub-Custodian or a Foreign Securities Depository, the
Custodian shall not be liable for any loss, damage, cost, expense, liability or
claim resulting from nationalization, expropriation, currency restrictions, or
acts of war or terrorism, or any other loss where the Sub-Custodian has
otherwise acted with reasonable care.

III.  Except as specifically superseded or modified herein, the terms and
      provisions of the Contract shall continue to apply with full force and
      effect. In the event of any conflict between the terms of the Contract
      prior to this Amendment and this Amendment, the terms of this Amendment
      shall prevail. If the Custodian is delegated the responsibilities of
      Foreign Custody Manager pursuant to the terms of Article 3 hereof, in the
      event of any conflict between the provisions of Articles 3 and 4 hereof,
      the provisions of Article 3 shall prevail.

      IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed in its name and behalf by its duly authorized representative as of the
date first above written.


Witnessed By:                              STATE STREET BANK AND TRUST
                                           COMPANY


/s/ Marc L. Parsons                        By:    /s/ Ronald E. Logue
- --------------------------                        ------------------------------
Marc L. Parsons                            Name:  Ronald E. Logue
Associate Counsel                          Title: Executive Vice President


Witnessed By:                              THE FIRST AUSTRALIA PRIME INCOME
                                           FUND, INC.


/s/ illegible signature                    By:    /s/ illegible signature
- -------------------------------                   ------------------------------
Name:                                      Name:
Title:                                     Title:

                                       10

<PAGE>

                                                                      SCHEDULE A

                                  STATE STREET
                             GLOBAL CUSTODY NETWORK
                  SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES

<TABLE>
<CAPTION>
Country                       Subcustodian                                   Non-Mandatory Depositories
<S>                           <C>                                            <C>
Argentina                     Citibank, N.A.                                 --

Australia                     Westpac Banking Corporation  -                 --

Austria                       Erste Bank der Oesterreichischen               --
                              Sparkassen AG

Bahrain                       British Bank of the Middle East                --
                              (as delegate of The Hongkong and Shanghai
                              Banking Corporation Limited)

Bangladesh                    Standard Chartered Bank                        --

Belgium                       Generale de Banque                             --

Bermuda                       The Bank of Bermuda Limited                    --

Bolivia                       Banco Boliviano Americano S.A.                 --

Botswana                      Barclays Bank of Botswana Limited              --

Brazil                        Citibank, N.A.                                 --

Bulgaria                      ING Bank N.V.                                  --

Canada                        Canada Trustco Mortgage Company                --

Chile                         Citibank, N.A.                                 --

People's Republic of China    The Hongkong and Shanghai                      --
                              Banking Corporation Limited,
                              Shanghai and Shenzhen branches

Colombia                      Cititrust Colombia S.A.                        --
                              Sociedad Fiduciaria

Costa Rica                    Banco BCT S.A.                                 --

Croatia                       Privredna Banka Zagreb d.d.                    --
</TABLE>

                                                                               1

<PAGE>

                                                                      SCHEDULE A

                                  STATE STREET
                             GLOBAL CUSTODY NETWORK
                  SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES

<TABLE>
<CAPTION>
Country                       Subcustodian                                   Non-Mandatory Depositories
<S>                           <C>                                            <C>
Cyprus                        Barclays Bank Plc.                             --
                              Cyprus Offshore Banking Unit

Czech Republic                Ceskoslovenska Obchodni                        --
                              Banka, A.S.

Denmark                       Den Danske Bank                                --

Ecuador                       Citibank, N.A.                                 --

Egypt                         National Bank of Egypt                         --

Estonia                       Hansabank                                      --

Finland                       Merita Bank Limited                            --

France                        Banque Paribas                                 --

Germany                       Dresdner Bank AG                               --

Ghana                         Barclays Bank of Ghana Limited                 --

Greece                        National Bank of Greece S.A.                   The Bank of Greece, System
                                                                             for Monitoring Transactions in
                                                                             Securities in Book-Entry Form

Hong Kong                     Standard Chartered Bank                        --

Hungary                       Citibank Budapest Rt.                          --

Iceland                       Icebank Ltd.

India                         Deutsche Bank AG                               --

                              The Hongkong and Shanghai
                              Banking Corporation Limited

Indonesia                     Standard Chartered Bank                        --

Ireland                       Bank of Ireland                                --

Israel                        Bank Hapoalim B.M.                             --

Italy                         Banque Paribas                                 --
</TABLE>

                                                                               2

<PAGE>

                                                                      SCHEDULE A

                                  STATE STREET
                             GLOBAL CUSTODY NETWORK
                  SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES

<TABLE>
<CAPTION>
Country                       Subcustodian                                   Non-Mandatory Depositories
<S>                           <C>                                            <C>
Ivory Coast                   Societe Generale de Banques                    --
                              en Cote d'Ivoire

Jamaica                       Scotiabank Jamaica Trust and Merchant          --
                              Bank Ltd.

Japan                         The Daiwa Bank, Limited                        Japan Securities Depository Center

                              The Fuji Bank, Limited

Jordan                        British Bank of the Middle East (as            --
                              delegate of The Hongkong and  Shanghai
                              Banking Corporation Limited)

Kenya                         Barclays Bank of Kenya Limited                 --

Republic of Korea             The Hongkong and Shanghai Banking              --
                              Corporation Limited

Latvia                        JSC Hansabank-Latvija                          --

Lebanon                       British Bank of the Middle East
                              (as delegate of The Hongkong and Shanghai
                              Banking Corporation Limited)

Lithuania                     Vilniaus Bankas AB                             --

Malaysia                      Standard Chartered Bank                        --
                              Malaysia Berhad

Mauritius                     The Hongkong and Shanghai                      --
                              Banking Corporation Limited

Mexico                        Citibank Mexico, S.A.                          --

Morocco                       Banque Commerciale du Maroc                    --

Namibia                       (via) Standard Bank of South Africa            --

The Netherlands               MeesPierson N.V.                               --
</TABLE>

                                                                               3

<PAGE>

                                                                      SCHEDULE A

                                  STATE STREET
                             GLOBAL CUSTODY NETWORK
                  SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES

<TABLE>
<CAPTION>
Country                       Subcustodian                                   Non-Mandatory Depositories
<S>                           <C>                                            <C>
New Zealand                   ANZ Banking Group                              --
                              (New Zealand) Limited

Norway                        Christiania Bank og                            --
                              Kreditkasse

Oman                          British Bank of the Middle East (as            --
                              delegate of The Hongkong and Shanghai
                              Banking Corporation Limited)

Pakistan                      Deutsche Bank AG                               --

Peru                          Citibank, N.A.                                 --

Philippines                   Standard Chartered Bank                        --

Poland                        Citibank (Poland) S.A.                         --
                              Bank Polska Kasa Opieki S.A.

Portugal                      Banco Comercial Portugues                      --

Romania                       ING Bank N.V.                                  --

Russia                        Credit Suisse First Boston AO, Moscow (as      --
                              delegate of Credit Suisse First Boston,
                              Zurich)

Singapore                     The Development Bank                           --
                              of Singapore Limited

Slovak Republic               Ceskoslovenska Obchodna                        --
                              Banka, A.S.

Slovenia                      Bank Austria d.d.                              --

South Africa                  Standard Bank of South Africa Limited          --

Spain                         Banco Santander, S.A.                          --

Sri Lanka                     The Hongkong and Shanghai                      --
                              Banking Corporation Limited
</TABLE>

                                                                               4

<PAGE>

                                                                      SCHEDULE A

                                  STATE STREET
                             GLOBAL CUSTODY NETWORK
                  SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES

<TABLE>
<CAPTION>
Country                       Subcustodian                                   Non-Mandatory Depositories
<S>                           <C>                                            <C>
Swaziland                     Standard Bank Swaziland Limited                --

Sweden                        Skandinaviska Enskilda Banken                  --

Switzerland                   UBS AG                                         --

Taiwan - R.O.C.               Central Trust of China                         --

Thailand                      Standard Chartered Bank                        --

Trinidad & Tobago             Republic Bank Limited                          --

Tunisia                       Banque Internationale Arabe de Tunisie         --

Turkey                        Citibank, N.A.                                 --
                              Ottoman Bank

Ukraine                       ING Bank, Ukraine                              --

United Kingdom                State Street Bank and Trust Company,           --
                              London Branch

Uruguay                       Citibank, N.A.                                 --

Venezuela                     Citibank, N.A.                                 --

Zambia                        Barclays Bank of Zambia Limited                --

Zimbabwe                      Barclays Bank of Zimbabwe Limited              --
</TABLE>

Euroclear (The Euroclear System)/State Street London Limited

Cedel, S.A. (Cedel Bank, societe anonyme)/State Street London Limited

INTERSETTLE (for EASDAQ Securities)

                                                                               5

<PAGE>

                                                                      SCHEDULE B

                                  STATE STREET
                             GLOBAL CUSTODY NETWORK
                             MANDATORY* DEPOSITORIES


Country                         Mandatory Depositories

Argentina                       Caja de Valores S.A.

Australia                       Austraclear Limited

Reserve                         Bank Information and Transfer System

Austria                         Oesterreichische Kontrollbank AG
                                (Wertpapiersammelbank Division)

Belgium                         Caisse Interprofessionnelle de Depot et de
                                Virement de Titres S.A.

                                Banque Nationale de Belgique

Brazil                          Companhia Brasileira de Liquidacao e Custodia
                                (CBLC)

                                Bolsa de Valores de Rio de Janeiro
                                All SSB clients presently use CBLC

                                Central de Custodia e de Liquidacao
                                Financeira de Titulos

Bulgaria                        Central Depository AD
                                Bulgarian National Bank

Canada                          The Canadian Depository for Securities Limited

People's Republic of China      Shanghai Securities Central Clearing and
                                Registration Corporation

                                Shenzhen Securities Central Clearing Co., Ltd

Costa Rica                      Central de Valores S.A. (CEVAL)

Croatia                         Ministry of Finance

                                National Bank of Croatia

* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.

                                                                               1

<PAGE>

                                                                      SCHEDULE B

                                  STATE STREET
                             GLOBAL CUSTODY NETWORK
                             MANDATORY* DEPOSITORIES

Country                         Mandatory Depositories

Czech Republic                  Stredisko cennych papiru

                                Czech National Bank

Denmark                         Vaerdipapircentralen (the Danish Securities
                                Center)

Egypt                           Misr Company for Clearing, Settlement, and
                                Central Depository

Estonia                         Eesti Vaartpaberite Keskdepositoorium

Finland                         The Finnish Central Securities Depository

France                          Societe Interprofessionnelle pour la
                                Compensation des Valeurs Mobilieres (SICOVAM)

Germany                         Deutsche Borse Clearing AG

Greece                          The Central Securities Depository (Apothetirion
                                Titlon AE)

Hong Kong                       The Central Clearing and Settlement System

                                Central Money Markets Unit

Hungary                         The Central Depository and Clearing House
                                (Budapest) Ltd. (KELER) [Mandatory for Gov't
                                Bonds only; SSB does not use for other
                                securities]

India                           The National Securities Depository Limited

Indonesia                       Bank Indonesia

Ireland                         Central Bank of Ireland Securities Settlement
                                Office

* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.

                                                                               2

<PAGE>


                                                                      SCHEDULE B

                                  STATE STREET
                             GLOBAL CUSTODY NETWORK
                             MANDATORY* DEPOSITORIES

Country                         Mandatory Depositories

Israel                          The Tel Aviv Stock Exchange Clearing House Ltd.

                                Bank of Israel

Italy                           Monte Titoli S.p.A.

                                Banca d'Italia

Jamaica                         The Jamaican Central Securities Depository

Japan                           Bank of Japan Net System

Kenya                           Central Bank of Kenya

Republic of Korea               Korea Securities Depository Corporation

Latvia                          The Latvian Central Depository

Lebanon                         The Custodian and Clearing Center of Financial
                                Instruments for Lebanon and the Middle East
                                (MIDCLEAR) S.A.L.

                                The Central Bank of Lebanon

Lithuania                       The Central Securities Depository of Lithuania

Malaysia                        The Malaysian Central Depository Sdn. Bhd.

Malaysia (cont.)                Bank Negara Malaysia, Scripless Securities
                                Trading and Safekeeping System

Mauritius                       The Central Depository & Settlement Co. Ltd.

Mexico                          S.D. INDEVAL, S.A. de C.V. (Instituto pare el
                                Deposito de Valores)

* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.

                                                                               3

<PAGE>

                                                                      SCHEDULE B

                                  STATE STREET
                             GLOBAL CUSTODY NETWORK
                             MANDATORY* DEPOSITORIES

Country                         Mandatory Depositories

Morocco                         Maroclear

The Netherlands                 Nederlands Centraal Instituut voor Giraal
                                Effectenverkeer B.V. (NECIGEF)

                                De Nederlandsche Bank N.V.

New Zealand                     New Zealand Central Securities Depository
                                Limited

Norway                          Verdipapirsentralen (the Norwegian Registry of
                                Securities)

Oman                            Muscat Securities Market

Pakistan                        Central Depository Company of Pakistan Limited

Peru                            Caja de Valores y Liquidaciones S.A. (CAVALI)

Philippines                     The Philippines Central Depository, Inc.

                                The Registry of Scripless Securities (ROSS) of
                                the Bureau of the Treasury

Poland                          The National Depository of Securities (Krajowy
                                Depozyt Papierow Wartosciowych)

                                Central Treasury Bills Registrar

Portugal                        Central de Valores Mobiliarios (Central)

Romania                         National Securities Clearing, Settlement and
                                Depository Co.

                                Bucharest Stock Exchange Registry Division

Singapore                       The Central Depository (Pte) Limited

* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.

                                                                               4

<PAGE>

                                                                      SCHEDULE B

                                  STATE STREET
                             GLOBAL CUSTODY NETWORK
                             MANDATORY* DEPOSITORIES

Country                         Mandatory Depositories

                                Monetary Authority of Singapore

Slovak Republic                 Stredisko Cennych Papierov

                                National Bank of Slovakia

Slovenia                        Klirinsko Depotna Druzba d.d.

South Africa                    The Central Depository Limited

Spain                           Servicio de Compensacion y Liquidacion de
                                Valores, S.A.

                                Banco de Espana, Central de Anotaciones en
                                Cuenta

Sri Lanka                       Central Depository System (Pvt) Limited

Sweden                          Vardepapperscentralen AB (the Swedish Central
                                Securities Depository)

Switzerland                     Schweizerische Effekten - Giro AG

Taiwan - R.O.C.                 The Taiwan Securities Central Depository Co.,
                                Ltd.

Thailand                        Thailand Securities Depository Company Limited

Tunisia                         Societe Tunisienne Interprofessionelle de
                                Compensation et de Depot de Valeurs Mobilieres

                                Central Bank of Tunisia

                                Tunisian Treasury

Turkey                          Takas ve Saklama Bankasi A.S. (TAKASBANK)

                                Central Bank of Turkey

Ukraine                         The National Bank of Ukraine

* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.

                                                                               5

<PAGE>

                                                                      SCHEDULE B

                                  STATE STREET
                             GLOBAL CUSTODY NETWORK
                             MANDATORY* DEPOSITORIES

Country                         Non-Mandatory Depositories

United Kingdom                  The Bank of England, The Central Gilts Office
                                and The Central Moneymarkets Office

Uruguay                         Central Bank of Uruguay

Venezuela                       Central Bank of Venezuela

Zambia                          Lusaka Central Depository Limited

                                Bank of Zambia

* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.

                                                                               6

<PAGE>

                                   SCHEDULE C

                               MARKET INFORMATION

<TABLE>
<CAPTION>
Publication/Type of Information                                Brief Description
- -------------------------------                                -----------------
(Frequency)
<S>                                             <C>
The Guide to Custody in World Markets           An overview of safekeeping and settlement practices and
- -------------------------------------           procedures in each market in which State Street Bank and Trust
(annually)                                      Company offers custodial services.

Global Custody Network Review                   Information relating to the operating history and structure of
- -----------------------------                   depositories and subcustodians located in the markets s in which
(annually)                                      State Street Bank and Trust Company offers custodial services,
                                                including transnational depositories.

Global Legal Survey                             With respect to each market in which State Street Bank and Trust
- -------------------                             Company offers custodial services, opinions relating to whether
(annually)                                      local law restricts (i) access of a fund's independent public
                                                accountants to books and records of a Foreign Sub-Custodian or
                                                Foreign Securities System, (ii) the Fund's ability to recover in
                                                the event of bankruptcy or insolvency of a Foreign
                                                Sub-Custodian or Foreign Securities System, (iii) the
                                                Fund's ability to recover in the event of a loss by a Foreign
                                                Sub-Custodian or Foreign Securities System, and (iv) the
                                                ability of a foreign investor to convert cash and cash
                                                equivalents to U.S. dollars.

Subcustodian Agreements                         Copies of the subcustodian contracts State Street Bank and Trust
- -----------------------                         Company has entered into with each subcustodian in the markets in
(annually)                                      which State Street Bank and Trust Company offers subcustody
                                                services to its US mutual fund clients.

Network Bulletins (weekly):                     Developments of interest to investors in the markets in which State
                                                Street Bank and Trust Company offers custodial services.

Foreign Custody Advisories (as necessary):      With respect to markets in which State Street Bank and Trust Company
                                                offers custodial services which exhibit special custody risks,
                                                developments which may impact State Street's ability to deliver
                                                expected levels of service.
</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.K1
<SEQUENCE>18
<FILENAME>dex99k1.txt
<DESCRIPTION>EXHIBIT K1
<TEXT>
<PAGE>

                                                                  EXHIBIT (k)(1)



                                   REGISTRAR,
                      TRANSFER AGENCY AND SERVICE AGREEMENT

                                     between

                   THE FIRST AUSTRALIA PRIME INCOME FUND, INC.

                                       and

                       STATE STREET BANK AND TRUST COMPANY

<PAGE>

                                TABLE OF CONTENTS
                                -----------------

<TABLE>
<CAPTION>
                                                                               Page

<S>                                                                            <C>
Article 1   Terms of Appointment; Duties of the Bank .......................     1

Article 2   Fees and Expenses ..............................................     2

Article 3   Representations and Warranties of the Bank .....................     3

Article 4   Representations and Warranties of the Fund .....................     3

Article 5   Indemnification ................................................     4

Article 6   Covenants of the Fund and the Bank .............................     6

Article 7   Termination of Agreement .......................................     7

Article 8   Assignment .....................................................     8

Article 9   Amendment ......................................................     8

Article 10  Massachusetts Law to Apply .....................................     8

Article 11  Merger of Agreement ............................................     8
</TABLE>

                                      -i-

<PAGE>

                   REGISTRAR, TRANSFER AGENCY AND SERVICE AGREEMENT

         AGREEMENT made as of the 11th day of April, 1986, by and between THE
FIRST AUSTRALIA PRIME INCOME FUND, INC., a Maryland corporation, having its
principal office and place of business at One Seaport Plaza, New York, New York
10292, (the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts
corporation having its principal office and place of business at 225 Franklin
Street, Boston, Massachusetts 02110 (the "Bank").

         WHEREAS, the Fund desires to appoint the Bank as its registrar,
transfer agent, dividend disbursing agent and agent in connection with certain
other activities and the Bank desires to accept such appointment;

         NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:

                   Article 1  Terms of Appointment; Duties of the Bank

         1.01. Subject to the terms and conditions set forth in this Agreement,
the Fund hereby employs and appoints the Bank to act as, and the Bank agrees to
act as registrar of the Fund's Common Stock, $.01 par value (the "Common
Stock"), transfer agent for the authorized and issued shares of Common Stock
("Shares"), dividend disbursing agent and agent for the shareholders of the Fund
(the "Shareholders") in connection with any dividend reinvestment as set out in
the prospectus of the Fund, corresponding to the date of this Agreement (the
"Dividend Reinvestment Plan").

         1.02. The Bank agrees that it will perform the following services:

               (a) In accordance with procedures established from time to time
by agreement between the Fund and the Bank, the Bank shall:

                   (i) issue shares of the Common Stock from the Fund's
                       authorized but unissued Common Stock or from shares held
                       in the Fund's treasury

<PAGE>

                          upon receipt of appropriate instructions and record
                          the appropriate number of Shares, as authorized by the
                          Shareholders and hold such Shares in the appropriate
                          Shareholder account;

                   (ii)   effect transfers of Shares by the registered owners
                          thereof upon receipt of appropriate documentation;

                   (iii)  prepare and transmit payments for dividends and
                          distributions declared by the Fund; and

                   (iv)   act as agent for Shareholders pursuant to the Dividend
                          Reinvestment Plan as amended from time to time in
                          accordance with the terms of the agreement to be
                          entered into between the Shareholders anal the Bank in
                          substantially the form attached as Exhibit A hereto.

               (b) In addition to and not in lieu of the services set forth in
the above paragraph (a), the Bank shall: (i) perform all of the customary
services of a registrar, transfer agent, dividend disbursing agent and agent of
the dividend reinvestment and cash purchase plan as consistent with those
regulations in effect as at the date of this Agreement as more fully described
in the attached fee schedule, including but not limited to: maintaining all
Shareholder accounts, preparing Shareholder meeting lists, mailing proxies,
receiving and tabulating proxies and mailing Shareholder reports to current
Shareholders, withholding taxes on U.S. resident and non-resident alien accounts
where applicable, preparing and filing U.S. Treasury Department Forms 1099 and
other appropriate forms required with respect to dividends and distributions by
federal authorities for all registered Shareholders, preparing and mailing
confirmation forms and statements of account to Shareholders for all confirmable
transactions in Shareholder accounts, and providing Shareholder account
information.

                                      -2-

<PAGE>

                          Article 2 Fees and Expenses

         2.01. For the performance by the Bank of the provisions of pursuant to
this Agreement, the Fund agrees to pay the Bank an annual maintenance fee as set
out in the initial fee schedule attached hereto. Such fee and out-of-pocket
expenses and advances identified under Section 2.02 below may be changed from
time to time subject to mutual written agreement between the Fund and the Bank.

         2.02. In addition to the fee paid under Section 2.01 above, the Fund
agrees to reimburse the Bank for out-of-pocket expenses or advances incurred by
the Bank for the items set out in the fee schedule attached hereto. In addition,
the Fund agrees to reimburse the Bank any other expenses incurred by the Bank at
the request or with the consent of the Fund.

         2.03. The Fund agrees to pay all fees and reimbursable expenses within
five days following the mailing of the respective billing notice. Postage and
the cost of materials for mailing of dividends, proxies, Fund reports and other
mailings to all Shareholder accounts shall be advanced to the Bank by the Fund
at least seven (7) days prior to the mailing date of such materials.

              Article 3 Representations and Warranties of the Bank

         The Bank represents and warrants to the Fund that:

         3.01. It is a trust company duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.

         3.02. It is duly qualified to carry on its business in the Commonwealth
of Massachusetts.

         3.03. It is empowered under applicable laws and by its charter and
by-laws to enter into and perform this Agreement.

         3.04. All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.

                                      -3-

<PAGE>

         3.05. It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.

              Article 4 Representations and Warranties of the Fund

         The Fund represents and warrants to the Bank that:

         4.01. It is a corporation duly organized and existing and in good
standing under the laws of Maryland, with an authorized capital stock of
70,000,000 shares of Common Stock.

         4.02. It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement.

         4.03. All corporate proceedings required by said Articles of
Incorporation and By-Laws have been taken to authorize it to enter into and
perform this Agreement.

         4.04. It is a closed-end, non-diversified management investment company
registered under the Investment Company Act of 1940.

         4.05. A registration statement under the Securities Act of 1933 is
currently effective and will remain effective and appropriate state securities
law filings have been made and will continue to be made with respect to all
Shares of the Fund being offered for sale; information to the contrary will
result in immediate notification to the Bank.

                           Article 5 Indemnification

         5.01. The Bank shall not be responsible for, and the Fund shall
indemnify and hold the Bank harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and liability arising
out of or attributable to:

               (a) All actions of the Bank or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.

                                      -4-

<PAGE>

               (b) The Fund's refusal or failure to comply with the terms of
this Agreement, or which arise out of the Fund's lack of good faith, negligence
or willful misconduct or which arise out of the breach of any representation or
warranty of the Fund hereunder.

               (c) The reliance on or use by the Bank or its agents or
subcontractors of information, records and documents which (i) are received by
the Bank or its agents or subcontractors and furnished to it by or on behalf. of
the Fund, and (ii) have been prepared and/or maintained by the Fund or any other
person or firm on behalf of the Fund.

               (d) The reliance on, or the carrying out by the Bank or its
agents or subcontractors of any instructions or requests of the Fund's
representative.

               (e) The offer or sale of shares of Common Stock or of Shares in
violation of any requirement under the federal securities laws or regulations or
the securities laws or regulations of any state that such Shares be registered
in such state or in violation of any stop order or other determination or ruling
by any federal agency or any state with respect to the offer or sale of such
shares of Common Stock or Shares in such state.

         5.02. The Bank shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs, charges, counsel fees, expenses and
liability arising out of or attributable to any action or failure or omission to
act by the Bank as a result of the Bank's lack of good faith, negligence or
willful misconduct.

         5.03. At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel (including counsel to the Fund)
with respect to any matter arising in connection with the services to be
performed by the Bank under this Agreement, and the Bank and its agents or
subcontractors shall not be liable and shall be indemnified by the Fund for any
action taken or omitted by it in reliance upon such instructions or upon the
opinion of such counsel. The Bank, its

                                      -5-

<PAGE>

agents and subcontractors shall be protected and indemnified in acting upon any
paper or document furnished by or on behalf of the Fund, reasonably believed to
be genuine and to have been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided the Bank or its
agents or subcontractors by telephone, in person, machine readable input, telex,
CRT data entry or other similar means authorized by the Fund, and shall not be
held to have notice of any change of authority of any person, until receipt of
written notice thereof from the Fund. The Bank, its agents and subcontractors
shall also be protected and indemnified in recognizing stock certificates which
are reasonably believed to bear the proper manual or facsimile signatures of the
officers of the Fund, and the proper countersignature of any former transfer
agent or former registrar, or of a co-transfer agent or co-registrar.

         5.04. In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any losses, damages, costs, charges, counsel fees, payments, expenses
or liability resulting from such failure to perform or otherwise from such
causes.

         5.05. Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for any
act or failure to act hereunder.

         5.06. In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or

                                      -6-

<PAGE>

make any compromise in any case in which the other party may be required to
indemnify it except with the other party's prior written consent.

                  Article 6 Covenants of the Fund and the Bank

         6.01. The Fund shall promptly furnish to the Bank the following:

               (a) A certified copy of the resolution of the Board of Directors
of the Fund authorizing the appointment of the Bank and the execution and
delivery of this Agreement.

               (b) A copy of the Articles of Incorporation and By-Laws of the
Fund and all amendments thereto.

         6.02. The Bank shall establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of stock certificates, check
forms and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such certificates, forms and
devices.

         6.03. The Bank shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the Bank
hereunder are the property of the Fund and will be preserved, maintained and
made available in accordance with such Section and Rules, and will be
surrendered promptly to the Fund on and in accordance with its request.

         6.04. The Bank and the Fund agree that all books, records, information
and data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law.

                                      -7-

<PAGE>

         6.05. In case of any requests or demands for the inspection of the
Shareholder records of the Fund, the Bank will endeavor to notify the Fund and
to secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.

         6.06. The Fund shall make all required filings under federal and state
securities laws.

                       Article 7 Termination of Agreement

         7.01. This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other.

         7.02. Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and material will
be borne by the Fund. Additionally, the Bank reserves the right to charge for
any other reasonable expenses associated with such termination and/or a charge
equivalent to the average of three (3) month's fees.

                              Article 8 Assignment

         8.01. Except as provided in Section 8.03 below, neither this Agreement
nor any rights or obligations hereunder may be assigned by either party without
the written consent of the other party.

         8.02. This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.

         8.03. The Bank may, without further consent on the part of the Fund,
subcontract for the performance hereof with (i) Boston Financial Data Services,
Inc., a Massachusetts corporation ("BFDS") which is duly registered as a
transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of
1934 ("Section 17A(c)(1)), or (ii) a BFDS subsidiary duly registered as a
transfer

                                      -8-

<PAGE>

agent pursuant to Section 17A(c)(1); provided, however, that the Bank shall be
as fully responsible to the Fund for the acts and omissions of any subcontractor
as it is for its own acts and omissions.

                               Article 9 Amendment

         9.01.  This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the Board
of Directors of the Fund.

                      Article 10 Massachusetts Law to Apply

         10.01. This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.

                         Article 11 Merger of Agreement

         11.01. This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
hereof whether oral or written.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.

                                      -9-

<PAGE>

                                 THE FIRST AUSTRALIA PRIME INCOME FUND, INC.


                                 BY: /s/ Robert F. Gunia
                                     ---------------------------------
                                     Robert F. Gunia, Assistant Treasurer

ATTEST:


/s/ Allan Mostoff
- -------------------------
Assistant Secretary

                                 STATE STREET BANK AND TRUST COMPANY


                                 BY: /s/ Illegible signature
                                     ---------------------------------
                                     Vice President

ATTEST:


/s/ Illegible signature
- -------------------------
Assistant Secretary

                                      -10-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.K2
<SEQUENCE>19
<FILENAME>dex99k2.txt
<DESCRIPTION>EXHIBIT K2
<TEXT>
<PAGE>

                                                                  EXHIBIT (k)(2)


                   THE FIRST AUSTRALIA PRIME INCOME FUND, INC.

                            ADMINISTRATION AGREEMENT

         ADMINISTRATION AGREEMENT, made this 9th day of December, 1988, between
THE FIRST AUSTRALIA PRIME INCOME FUND, INC., a Maryland corporation (the
"Fund"), and PRUDENTIAL MUTUAL FUND MANAGEMENT, INC., a Delaware corporation
(the "Administrator").

         WHEREAS, the Fund is a non-diversified closed-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"Investment Company Act"); and

         WHEREAS, the Fund has retained an investment manager and investment
adviser for the purpose of investing its assets in securities and desires to
retain the Administrator for certain administrative services, and the
Administrator is willing to furnish such administrative services on the terms
and conditions hereinafter set forth;

         NOW, THEREFORE, the parties agree as follows:

         1. The Fund hereby appoints the Administrator to provide the services
set forth below, subject to the overall supervision of the Board of Directors of
the Fund, for the period and on the terms set forth in this Agreement. The
Administrator hereby accepts such appointment and agrees during such period to
render the services herein described and to assume the obligations set forth
herein, for the compensation herein provided.

         2. Subject to the supervision of the Board of Directors of the Fund,
the Administrator shall provide office facilities and personnel adequate to
perform the following services for the Fund:

<PAGE>

              (a) oversee the determination and publication of the Fund's net
         asset value in accordance with the Fund's policy as adopted from time
         to time by the Board of Directors;

              (b) oversee the maintenance of the books and records of the Fund
         required under Rule 31a-1(b)(4) under the Investment Company Act;

              (c) prepare the Fund's U.S. federal, state and local income tax
         returns;

              (d) prepare the financial information for the Fund's proxy
         statements and quarterly and annual reports to shareholders:

              (e) prepare the Fund's periodic financial reports to the
         Securities and Exchange Commission:

              (f) respond to or refer to the Fund's officers or transfer agent
         shareholder inquires relating to the Fund; and

              (g) prepare reports related to Preferred Stock, as required by any
         rating agencies.

         All services to be furnished by the Administrator, under this Agreement
may be furnished through the medium of any directors, officers or employees of
the Administrator.

         Each party shall bear all expenses of its employees and overhead
incurred by it in connection with its duties under this Agreement. The
Administrator further agrees to pay all salaries and fees of the Fund's
directors and officers who are interested persons (as such term is defined in
the Investment Company Act) of the Administrator. The Fund will bear all of its
own expenses, including expenses of organizing the Fund; fees of any investment
manager or investment adviser; fees of the Fund's directors who are not
interested persons (as such term is

                                      -2-

<PAGE>

defined in the Investment Company Act) of the Administrator; out-of-pocket
travel expenses for all directors and other expenses incurred by the Fund in
connection with the directors' meetings; interest expense; taxes and
governmental fees; brokerage commissions and other expenses incurred in
acquiring or disposing of the Fund's portfolio securities; expenses of preparing
stock certificates; expenses in connection with the issuance, offering,
distribution, sale or underwriting of securities issued by the Fund; expenses of
registering and qualifying the Fund's shares for sale with the Securities and
Exchange Commission and in various states and foreign jurisdictions; auditing,
accounting, insurance and legal costs; custodian, dividend disbursing and
transfer agent expenses; expenses of obtaining and maintaining, stock exchange
listings of the Fund's shares; and the expenses of shareholders' meetings and of
the preparation and distribution of proxies and reports to shareholders.

         3. The Fund will pay the Administrator a fee at the annual rate of
0.15% of the Fund's average weekly net assets applicable to Common and Preferred
stock up to $900 million and 0.10% of such assets in excess of $900 million,
computed based upon net asset value applicable to Common and Preferred Stock at
the end of each week and payable at the end of each calendar month.

         4. The Administrator assumes no responsibility under this Agreement
other than to render the service called for hereunder, and specifically assumes
no responsibilities for investment advice of the investment or reinvestment of
the Fund's assets.

         5. The Administrator shall not be liable for any error of judgment or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on its part in the

                                      -3-

<PAGE>

performance of, or from reckless disregard by it of its obligations and duties
under, this Agreement.

         6. This Agreement is effective as of December 9, 1988, and shall
continue in effect until December 31, 1989. If not sooner terminated, this
Agreement shall continue in effect for successive periods of twelve months
thereafter, provided that each such continuance shall be specifically approved
annually by the vote of a majority of the Fund's Board of Directors who are not
parties to this Agreement or interested persons (as such term is defined in the
Investment Company Act) of any such party, cast in person at a meeting called
for the purpose of voting on such approval and either (a) the vote of a majority
of the outstanding voting securities of the Fund, voting as a single class, or
(b) the vote of a majority of the Fund's Board of Directors: Notwithstanding the
foregoing, this Agreement may be terminated at any time by the Fund's Board of
Directors or a majority of the outstanding voting securities of the Fund, voting
as a single class, on 60 days' prior written notice to the Administrator. The
Administrator may terminate this Agreement at any time on not less than 120
days' prior written notice to the Fund. This Agreement shall automatically
terminate in the event of its assignment (as such term is defined in the
Investment company Act).

         7. Nothing in this Agreement shall limit or restrict the right of any
director, officer or employee of the Administrator who may also be a director,
officer or employee of the Fund to engage in any other business or to devote his
time and attention in part to the management or other aspects of any business,
whether of a similar or dissimilar nature, nor limit or restrict the right of
the Administrator to engage in any other business or to render services of any
kind to any other corporation, firm, individual or association.

                                      -4-

<PAGE>

         8.  During the term of this Agreement, the Fund agrees to furnish the
Administrator at its principal office prior to use thereof all prospectuses,
proxy statements, reports to stockholders, sales literature, or other material
prepared for distribution to stockholders of the Fund or the Fund or the public
that refer in any way to the Administrator, and not to use such material if the
Administrator reasonably objects in writing within five business days (or such
other time as may be mutually agreed) after receipt thereof. In the event of
termination of this Agreement, the Fund will continue to furnish to the
Administrator copies of any of the above-mentioned materials that refer in any
way to the Administrator. The Fund shall furnish or otherwise make available to
the Administrator such other information relating to the business affairs of the
Fund as the Administrator at any time, or from time to time, reasonably requests
in order to discharge its obligations hereunder.

         9.  The Agreement may be amended by mutual written consent.

         10. Any notice or other communication required to be given pursuant to
this Agreement shall be deemed duly given if delivered or mailed by registered
mail, postage prepaid, (1) to the Administrator at One Seaport Plaza, New York,
New York 10292, Attention: President; with a copy to the Fund c/o EquitiLink
International Management Limited, Union House, Union Street, St. Helier, Jersey,
Channel Islands.

         11. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York:

                                      -5-

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.

                                    THE FIRST AUSTRALIA PRIME INCOME FUND, INC.


                                    BY: /s/ Brian M. Sherman
                                        --------------------------------

                                    PRUDENTIAL MUTUAL FUND MANAGEMENT, INC.


                                    BY: /s/ illegible signature
                                        --------------------------------

                                      -6-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.K4
<SEQUENCE>20
<FILENAME>dex99k4.txt
<DESCRIPTION>EXHIBIT K4
<TEXT>
<PAGE>

                                                                  EXHIBIT (K)(4)

                      INVESTOR RELATIONS SERVICES AGREEMENT

     AGREEMENT dated as of March 1, 2000 between The First Australia Prime
Income Fund, Inc. (hereinafter referred to as the "Fund"), a closed-end
investment management company, and EquitiLink USA, Inc. (hereinafter referred to
as "EUSA").

     In consideration of the mutual agreements herein made, the Fund and EUSA
understand and agree as follows:

     1.   EUSA agrees, during the term of this Agreement, to be responsible for:

     (a)  drafting, coordinating and distributing:

          (i)   monthly dividend releases;

          (ii)  monthly performance reviews;

          (iii) disclosure releases issued in conjunction with the performance
                reviews to meet legal requirements; and

          (iv)  releases on extraordinary topics, including, but not limited to,
                results of annual meetings, market events, and major factors
                affecting the Fund;

     (b)  developing and coordinating letters to shareholders on special issues;

     (c)  coordinating and distributing weekly "This Week in Asia" and "This
          Week in Australia" releases to brokers;

     (d)  managing shareholder and broker toll-free telephone services for the
          Fund;

     (e)  responding to shareholder letters and requests for information
          forwarded by EquitiLink International Management Limited, the Fund's
          investment manager or received by EUSA directly;

     (f)  arranging regular media interviews for Fund management with print,
          broadcast and electronic reporters to discuss the Fund and the markets
          in which it invests;

     (g)  updating and maintaining North American portion of EquitiLink website,
          including, but not limited to, the portion of the website specifically
          related to the Fund, on at least a monthly basis;

     (h)  maintaining broker and shareholder mailing lists;

<PAGE>

     (i)  coordinating the preparation, printing and distribution of the
          quarterly reports;

     (j)  developing and maintaining a broker e-mail list to facilitate ongoing
          communications with brokers;

     (k)  developing and implementing marketing activities on an ongoing basis;

     (l)  providing Lipper Analytical Services and all other appropriate news
          and information services with weekly and monthly price, net asset
          value, total assets and dividend information to be used in the
          calculation of fund and international company ranking tables;

     (m)  disseminating daily market quotes on the Fund to EquitiLink
          International Management Limited and EquitiLink Australia Limited; and

     (n)  providing quarterly reports to the Fund's Board of Directors on its
          activities, including such information as the Board of Directors may
          reasonably request.

     2.   In rendering the services required under the Agreement, EUSA may,
subject to the approval of the Fund's Board of Directors, cause such services or
any portion thereof to be provided by another person pursuant to a written
agreement; provided, that, in such event, EUSA shall remain responsible for
monitoring and overseeing the performance by such person of its obligations to
the Fund under that written agreement. The fees and appropriate out-of-pocket
expenses of such other person will be paid or reimbursed by EUSA.

     3.   The Fund agrees, during the term of this Agreement, to pay to EUSA as
compensation for the foregoing a monthly retainer of $10,000 per month. The Fund
shall reimburse EUSA for its reasonable out-of-pocket expenses incurred in
carrying out its obligations under this Agreement, including, but not limited
to, telephone and telecopier charges; copying costs; messenger services;
financial advertising; electronic news distribution; news wire service charges;
transportation, meals and lodging; and mailing, postage and courier costs.
Out-of-pocket expenses in excess of $3000 will be specifically approved by the
Fund prior to expenditure. At the end of each month, EUSA shall bill the Fund,
and the Fund shall reimburse EUSA for all expenses and disbursements made on the
Fund's behalf. EUSA will maintain accurate and complete records of all
out-of-pocket expenditures incurred on behalf of the Fund and will be prepared
to supply any supporting detail reasonably required by the Fund's independent
auditors. Invoices are due and payable within thirty (30) days of receipt.

<PAGE>

     4.   EUSA agrees to preserve the confidentiality of all non-public
information provided to EUSA by the Fund or its agents, or information developed
by EUSA based upon such non-public information. EUSA shall not disclose such
information except when required to do so pursuant to court order, subpoena, or
other judicial process. Non-public information shall not include information
which (a) was or becomes generally available to the public other than as a
result of a disclosure by EUSA or its directors, officers, employees, agents or
advisors; (b) was available to the public prior to its disclosure to EUSA by the
Fund or its representatives; (c) becomes available to EUSA on a non-confidential
basis from a source other than the Fund or its representatives, provided that
such source is not known by EUSA (i) to be subject to a confidentiality
agreement with the Fund or another party with respect to the information or (ii)
to be subject to an obligation, by statute or common law to maintain the
confidentiality of the information; or (d) is independently developed by EUSA.

     5.   This Agreement shall remain in full force and effect for an initial
term to expire December 31, 2000. From and after December 31, 2000, this
Agreement shall continue in effect from year to year, provided such continuance
is approved annually by the Board of Directors of the Fund.

     6.   At any time after the expiration of the initial term of this Agreement
on December 31, 2000, this Agreement may be terminated by either party at any
time on sixty (60) days' written notice, without payment of penalty, provided
that such termination by the Fund shall be directed or approved by the vote of a
majority of the Directors of the Fund in office at the time. During said sixty
(60) day notice period, the parties shall continue to perform all of their
obligations under this Agreement.

     7.   The Fund hereby acknowledges that EUSA shall rely upon the accuracy of
all information provided by the Fund to it. The Fund assumes full and complete
responsibility and liability for the financial and other information furnished
to EUSA for its use on the Fund's behalf under this Agreement and the Fund shall
indemnify and hold harmless EUSA from and against any demands, claims, or
liability relating thereto. The Fund shall pay EUSA any amounts payable by EUSA
in settlement of any claims or in satisfaction of any judgments resulting from
EUSA's use of any financial or other information furnished by the Fund in
connection with the services rendered by EUSA hereunder, together with all costs
and expenses incurred in connection therewith, including, without limitation,
reasonable attorney's fees and costs of litigation. Without limiting the
foregoing, the Fund shall reimburse EUSA for all costs and expenses, including
reasonable attorney's fees, incurred in responding to any subpoena or other
court process in any action or proceeding or investigation in which the Fund or
its affiliates are a party or are otherwise involved. Notwithstanding the above,
the Fund shall not be liable for any loss, claim, damage or liability which was
the direct result of EUSA's willful misfeasance, bad faith, gross negligence or
reckless disregard of its duties under this Agreement. The provisions of this
paragraph shall survive the expiration or termination of this Agreement.

     8.   This Agreement may be amended only on the written consent of both
parties.

<PAGE>

     9.   This agreement shall be interpreted according to and governed by the
laws of the State of New York.

     10.  A waiver by either party of any breach, act or omission of the other
party is not deemed to be a waiver of any subsequent similar breach, act or
omission.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their authorized officers as of the date first set forth above.


                                            THE FIRST AUSTRALIA FUND, INC.


                                            By: /s/ David Manor
                                                ----------------------------
                                                  Name:  David Manor
                                                  Title: Treasurer


                                            EQUITILINK USA, INC.


                                            By: /s/ Richard P Strickler
                                                ----------------------------
                                                  Name:  Richard P Strickler
                                                  Title: Managing Director

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.K5
<SEQUENCE>21
<FILENAME>dex99k5.txt
<DESCRIPTION>EXHIBIT K5
<TEXT>
<PAGE>

                                                                  EXHIBIT (K)(5)

                            ASSIGNMENT AND ASSUMPTION

     Assignment and Assumption dated as of January 1, 2002, between EquitiLink
USA, Inc., a Delaware Corporation authorized to transact business under the name
Aberdeen Asset Management (the "Assignor") and Aberdeen Fund Managers Inc., a
Delaware Corporation authorized to transact business under the name Aberdeen
Asset Management, Inc. (the "Assignee").

     Whereas, the Assignor entered into an Investor Relations Services Agreement
dated as of March 1, 2000 (the "Agreement") between the Assignor and The First
Australia Prime Income Fund, Inc., a closed-end management investment company
now known as Aberdeen Asia-Pacific Income Fund, Inc. (the "Fund"), and

     Whereas, the Assignor desires to assign its rights under the Agreement to
the Assignee, in consideration of the assumption by the Assignee of all
obligations and liabilities of the Assignor under the Agreement, and

     Whereas, the Assignor is a wholly-owned subsidiary of Aberdeen Asset
Managers (C.I.) Limited ("AAMCIL"), the Fund's Investment Manager, and the
Assignee is an affiliate of AAMCIL, and

     Whereas, the Board of Directors of the Fund, at a Board meeting held on
March 14, 2002, approved the assignment by the Assignor of its rights under the
Agreement to the Assignee.

     Now, therefore, the Assignor hereby assigns to the Assignee the entire
right, title and interest of the Assignor under the Agreement, and the Assignee
hereby undertakes, assumes and agrees to perform and discharge all obligations
and liabilities of the Assignor under the Agreement.

     IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Assumption to be duly executed by their authorized officers as of the date first
set forth above.

                                         EquitiLink USA, Inc.

                                     By /s/ Timothy P Sullivan
                                        ----------------------------------------
                                         Name:  Timothy P Sullivan
                                         Title: Secretary

                                         Aberdeen Fund Managers, Inc.

                                     By /s/ Beverly Hendry
                                        ----------------------------------------
                                         Name:  Beverly Hendry
                                         Title: Director
                                                Chief Executive Officer

The undersigned hereby consents to this Assignment and Assumption.

                                         Aberdeen Asia-Pacific Income Fund, Inc.

                                     By /s/ Simon Bignell
                                        ----------------------------------------
                                         Name:  Simon Bignell
                                         Title: Assistant Treasurer


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.R1
<SEQUENCE>22
<FILENAME>dex99r1.txt
<DESCRIPTION>EXHIBIT R1
<TEXT>
<PAGE>

                                                                   Exhibit(r)(1)

                                 CODE OF ETHICS

In accordance with Rule 17j-1 under the Investment Company Act of 1940 ("1940
Act"), this Code of Ethics ("CODE") has been adopted by the Board of Directors
of:

(1)  The First Australia Fund, Inc. ("IAF");

(2)  The First Australia Prime Income Fund, Inc. ("FAX");

(3)  The First Commonwealth Fund, Inc. ("FCO");

(4)  EquitiLink Australia Limited ("EAL");

(5)  EquitiLink International Management Limited ("EIML").

The purpose of this CODE is to provide regulations and procedures consistent
with the 1940 Act and Rule 17j-1 designed to give effect to the general
prohibitions set forth in Rule 17j-1.

1.   DEFINITIONS

(1)  Access Person - any director, officer or any Advisory Person of a FUND, EAL
     or EIML.

(2)  Advisory Person - includes: (a) any natural person in a control
     relationship (25% ownership) to a FUND, EAL or EIML who obtains information
     concerning recommendations made to a FUND with regard to the purchase or
     sale of Covered Securities by a FUND; and (b) each employee of a FUND, EAL
     or EIML (or of any company in a control relationship to a FUND, EAL or
     EIML), who, in connection with his or her regular functions or duties,
     makes, participates in, or obtains information regarding the purchase or
     sale of Covered Securities by a FUND or whose functions relate to the
     making of any recommendations with respect to the purchases or sales.

(3)  Beneficial Ownership - generally means having a direct or indirect
     pecuniary interest in a security and is legally defined to be beneficial
     ownership as used in Rule 16a-1(a)(2) under Section 16 of the Securities
     Exchange Act of 1934. Among other things, beneficial ownership is presumed
     regarding securities and accounts held in the name of a spouse or any other
     family member living in the same household. Beneficial ownership also
     extends to transactions by entities over which a person has ownership,
     voting or investment control, including corporations (and similar
     entities), trusts and foundations.

(4)  Compliance Officer - person designated by the Board of Directors of EIML,
     EAL or a FUND to fulfill the responsibilities assigned to the Compliance
     Officer hereunder.

<PAGE>

(5)  Covered Security - any security as defined in Section 2(a)(36) of the 1940
     Act (a broad definition that includes any interest or instrument commonly
     known as a security), but excluding (a) direct obligations of the U.S.
     Government, (b) bankers' acceptances, bank certificates of deposit,
     commercial paper and high quality short-term debt instruments, including
     repurchase agreements, and (c) shares of open-end registered investment
     companies.

(6)  EAL - EquitiLink Australia Limited, the FUNDs' investment adviser.

(7)  EIML - EquitiLink International Management Limited, the FUNDs' investment
     manager.

(8)  FUND - each of IAF, FAX, FCO, and any other trust, fund or investment
     company managed or advised by EIML and/or EAL listed in the Schedule to
     this CODE.

(9)  Initial Public Offering - (a) an offering of securities registered under
     the Securities Act of 1933, the issuer of which, immediately before the
     registration, was not subject to the reporting requirements of Sections 13
     or 15(d) of the Securities Exchange Act of 1934, and (b) an initial public
     offering of any shares newly listed on the Australian Stock Exchange or (c)
     a similar offering of securities in another market.

(10) Investment Personnel or Investment Person- (a) any employee of a FUND, EAL
     OR EIML (or of any company in a control relationship to a FUND, EAL OR
     EIML) who, in connection with his or her regular functions or duties, makes
     or participates in making recommendations regarding the purchase or sale of
     securities by the FUND; or (b) any natural person who controls a FUND, EAL
     OR EIML and who obtains information concerning recommendations made to the
     FUND regarding the purchase or sale of securities by the FUND.

(11) Limited Offering - a private placement of securities, including an offering
     that is exempt from registration under the Securities Act of 1933 pursuant
     to Section 4(2) or Section 4(6) or pursuant to Rule 504, Rule 505, or Rule
     506 under that Act.

(12) Security held or to be acquired - any Covered Security that, within the
     most recent 15 days (i) is or has been held by a FUND, (ii) is being
     considered by a FUND or EAL or EIML for purchase by the FUND, or (iii) any
     option to purchase or sell, and any security convertible into or
     exchangeable for, one of the foregoing.

2.   RULE 17J-1

Rule 17j-1(a) of the 1940 Act makes it unlawful for any director, officer or
employee of a FUND, EIML or EAL (as well as other affiliated persons of a FUND,
EIML or EAL), in connection with the purchase and sale by such person of a
"Security held or to be acquired" by that FUND:

(1)  to employ any device, scheme or artifice to defraud the FUND;

(2)  to make to the FUND any untrue statement of a material fact or omit to
     state to the FUND a material fact necessary in order to make the statements
     made, in light of the circumstances under which they are made, not
     misleading;

                                       2

<PAGE>

(3)  to engage in any act, practice, or course of business which operates or
     would operate as a fraud or deceit upon the FUND; or

(4)  to engage in any manipulative practice with respect to the FUND.

3.   GENERAL PRINCIPLES

Conflicts of interest may arise when certain Access Persons trade for their own
account. For this reason, all Access Persons and Investment Personnel must, at
all times, adhere to the following duties and obligations.

The following principles shall apply to each Access Person, and each FUND, EIML
and EAL, as applicable, shall be governed by these principles.

(1)  No Access Person shall engage in any act, practice or course of conduct
     that would violate the provisions of Rule 17j-1 set forth above.

(2)  The interests of the FUNDS and their shareholders and investors are
     paramount and come before the interests of any Access Person.

(3)  Personal investing activities of all Access Persons shall be conducted in a
     manner that shall avoid actual or potential conflicts of interest with the
     FUNDS and their shareholders.

(4)  Access Persons shall not use such positions, or any investment
     opportunities presented by virtue of such positions, to the detriment of
     the FUNDS and their shareholders.

4.   SUBSTANTIVE RESTRICTIONS

The following Substantive Restrictions are imposed on personal trading
activities:

(1)  Investments in Initial Public Offerings

     There is generally a prohibition on Investment Personnel from participating
     in Initial Public Offerings. However, an Investment Person may participate
     in Initial Public Offerings if he or she obtains the prior approval of the
     Compliance Officer. The Compliance Officer may approve the participation of
     an Investment Person in the Initial Public Offering if he or she determines
     that it is clear that, in view of the nature of the security, the nature of
     the offering, the market for such security, or other factors deemed
     relevant, such participation by the Investment Person will not create a
     material conflict with a FUND. A record of any decision to permit
     investment by an Investment Person in an Initial Public Offering, and the
     reasons for the decision, shall be kept in accordance with the requirements
     of Section 8(6), below.

(2)  Investments in Limited Offerings

     Investment Personnel must seek prior approval from the Compliance Officer
     for investments in Limited Offerings. Such approval shall take into
     account, among other

                                       3

<PAGE>

     factors, whether the investment opportunity should be reserved for a FUND
     and whether the opportunity is being offered to such person because of his
     or her position with a FUND, EAL or EIML. A record of any decision to
     permit investment by an Investment Person in a Limited Offering, and the
     reasons for the decision, shall be kept in accordance with the requirements
     of Section 8(6), below.

     Any Investment Person who has been authorized to acquire securities in a
     Limited Offering must disclose his or her interest if he or she is involved
     in a FUND's consideration of an investment in such issuer. Any decision to
     acquire such issuer's securities on behalf of a FUND shall be subject to
     prior review and approval by the Compliance Officer who shall consult with
     Investment Personnel who have no personal interest in the issuer.

(3)  Pre-Clearance

     Each Access Person shall obtain the prior approval of the Compliance
     Officer of all personal securities transactions. The Compliance Officer
     shall approve a transaction if:

     A.   the FUNDS have no intention of acquiring the relevant securities at
          the present time for any of the following reasons:

          (i)  no available uninvested cash; or

          (ii) a FUND's weightings/holdings are such that it would not be
               prudent or in conformity with current asset allocation or current
               investment policy to acquire the relevant securities; or

     B.   the Compliance Officer determines that it is clear that, in view of
          the nature of the security and the market for such security, the
          acquisition of such security by the Access Person will not affect the
          price to be paid or received by a FUND or the availability of such
          security for purchase by a FUND, or

     C.   the Compliance Officer reasonably forms the view that such transaction
          should be approved for such other reasons as he or she may determine.

(4)  Blackout Periods

     The price paid or received by a FUND for any security should not be
     affected by a buying or selling interest on the part of an Access Person,
     or otherwise result in an inappropriate advantage to the Access Person.

     To that end, no Access Person shall enter an order for the purchase or sale
     of a security which a FUND is, or is considering, purchasing or selling
     until the day after the FUND's transactions in that security have been
     completed unless the Compliance Officer determines that it is clear that,
     in view of the nature of the security and the market for such security, the
     order of the Access Person will not affect the price paid or received by
     the FUND.

                                       4

<PAGE>

(5)  Short Term Trading Profits

     Investment Personnel cannot profit from the purchase and sale, or sale and
     purchase, of the same (or equivalent) securities within seven days of a
     transaction in that security by a Fund unless the prior approval of the
     Compliance Officer is first obtained prior to such purchase and sale. The
     Compliance Officer shall approve such purchase or sale if he determines
     that it is clear that, in view of the nature of the security and the market
     for such security, the trade by the FUND in the relevant security will not,
     or is unlikely to, affect the profit likely to be received by the
     Investment Person from such purchase and sale, or sale and purchase.

     Nothing in this restriction shall be deemed to prohibit avoidance of loss
     through trading within a period shorter than seven calendar days.

(6)  Gifts

     Investment Personnel cannot receive any gift or other thing of more than de
     minimus value from any person or entity that does business with or on
     behalf of any FUND.

     The Compliance Officer's approval is required prior to acceptance of any
     gift or thing of value in excess of US $100.

(7)  No Directorships

     No Investment Personnel shall serve on the boards of directors of publicly
     traded companies, or in any similar capacity, absent the prior approval of
     such service by the Compliance Officer based on a determination that such
     board representation would be consistent with the interest of the FUNDS and
     their shareholders. In the event such a request is approved, procedures
     shall be developed to avoid potential conflicts of interest, including
     conflicts arising from the receipt of material, non-public information.

(8)  Disgorgement

     Any profits derived from securities transactions in violation of paragraphs
     (1), (2), (3), (4) or (5) above, shall be forfeited and paid to the
     appropriate FUND or FUNDS for the benefit of its or their shareholders.

     Gifts accepted in violation of paragraph (6) shall be forfeited, if
     practicable, and/or dealt with in any manner determined appropriate and in
     the best interests of any affected FUND and its shareholders.

(9)  Exempted Transactions

     The provisions of Sections 4(3), 4(4) and 4(5) of this CODE shall not apply
     to purchases or sales of securities that:

                                       5

<PAGE>

     A    are effected in an account or in a manner over which the indicated
          Access Person has no direct or indirect influence or control;

     B    are not authorized investments -- that is, securities that a FUND is
          not permitted to purchase or sell in accordance with its investment
          policies and restrictions;

     C    are effected pursuant to a systematic dividend reinvestment, cash
          purchase or withdrawal plan;

     D    are effected in connection with the exercise or sale of rights to
          purchase additional securities from an issuer and granted by such
          issuer pro rata to all holders of a class of its securities; or

     E    are direct obligations of the U.S. Government, bankers' acceptances,
          bank certificates of deposit, commercial paper and high quality
          short-term debt instruments, including repurchase agreements, or
          shares of open-end registered investment companies.

(10) Exempted Persons

     A    The provisions of Sections 4(3) and 4(4) of this CODE shall not apply
          to any director of a FUND who is not an "interested person" of the
          FUND (as defined in Section 2(a)(19) of the Investment Company Act of
          1940).

     B    The provisions of Sections 4(3), 4(4) and 4(5) of this CODE shall not
          apply to any officer of a FUND who in connection with his or her
          regular duties does not obtain information about the purchase or sale
          of a security of a FUND and whose functions do not relate to the
          making of such recommendations; except that persons referred to in
          paragraphs A and B of this Section 4(10) shall not be so exempted with
          respect to securities transactions where such director or officer knew
          during the 15 day period immediately preceding or after the date of a
          transaction in a security by the director or officer, such security is
          or was purchased or sold by a FUND or a purchase or sale of such
          security is or was considered by a FUND, EAL or EIML.

5.   ACCESS PERSON REPORTS

To enable each FUND to determine with reasonable assurance whether the
provisions of Rule 17j-1(a) and this CODE are being observed by its Access
Persons, the following reporting requirements apply, except as noted in Section
5(5) below.

(1)  Initial Holdings Report. Within 10 days of commencement of employment by
     EIML, EAL, or a FUND or otherwise assuming the status of "Access Person,"
     and annually thereafter, each Access Person shall disclose in writing, in a
     form acceptable to the Compliance Officer, all direct or indirect
     Beneficial Ownership interests of such Access Person in Covered Securities.
     Information to be reported includes:

                                       6

<PAGE>

     A.   title, number of shares and principal amount of each Covered Security
          in which the Access Person had any direct or indirect Beneficial
          Ownership interest when the person became an Access Person;

     B.   name of any broker, dealer or bank with whom the Access Person
          maintained an account in which any securities were held for the direct
          or indirect benefit of the Access Person as of the date the person
          became an Access Person;

     C.   the date the report is submitted by the Access Person.

(2)  Quarterly Transaction Report. Each Access Person shall report to the
     Compliance Officer within 10 days of the end of each calendar quarter:

     A.   with respect to any transaction during the quarter in a Covered
          Security in which the Access Person had any direct or indirect
          beneficial ownership:

          (i)   the date of the transaction, the title, the interest rate and
                maturity date (if applicable), the number of shares and the
                principal amount of each Covered Security involved;

          (ii)  the nature of the transaction (i.e., purchase, sale or any other
                type of acquisition or disposition);

          (iii) the price of the Covered Security at which the transaction was
                effected;

          (iv)  the name of the broker, dealer or bank with or through which the
                transaction was effected; and

          (v)   the date that the report is submitted by the Access Person.

     B.   with respect to any account established by the Access Person in which
          any securities were held during the quarter for the direct or indirect
          benefit of the Access Person:

          (i)   the name of the broker, dealer or bank with whom the Access
                Person established the account;

          (ii)  the date the account was established; and

          (iii) the date that the report is submitted by the Access Person.

(3)  Annual Holdings Report. Each Access Person shall report annually, within 10
     days of the close of each calendar year, the following information, which
     must be current as of a date no more than 30 days before the report is
     submitted:

     A.   the title, number of shares and principal amount of each Covered
          Security in which the Access Person had any direct or indirect
          beneficial ownership;

                                       7

<PAGE>

     B.   the name of any broker, dealer or bank with whom the Access Person
          maintains an account in which any securities are held for the direct
          or indirect benefit of the Access Person; and

     C.   the date the report is submitted.

(4)  Any report required to be submitted pursuant to this Section 5 may contain
     a statement that the report will not be construed as an admission that the
     person making the report has any direct or indirect beneficial ownership in
     the Covered Security to which the report relates.

(5)  Exceptions from Reporting Requirements.

     A.   A person need not submit reports pursuant to this Section 5 with
          respect to transactions effected for, and Covered Securities held in,
          any account over which the person has no direct or indirect influence
          or control;

     B.   A director of a FUND who is not an "interested person" of the FUND (as
          defined in Section 2(a)(19) of the Investment Company Act of 1940),
          and who would be required to make a report solely by reason of being a
          director of a FUND, need not make:

          (i)  an Initial Holdings Report or an Annual Holdings Report;

          (ii) a Quarterly Transaction Report unless the director knew or, in
               the ordinary course of fulfilling his or her official duties as a
               director of a FUND, should have known that, during the 15-day
               period immediately preceding or after the director's transaction
               in a Covered Security, the Fund purchased or sold such Covered
               Security or the Fund or EAL or EIML considered purchasing or
               selling the Covered Security.

(7)  Any report may contain a statement that the report shall not be construed
     as an admission by the person making such report that he or she has any
     direct or indirect Beneficial Ownership in the security to which the report
     relates.

(8)  Reports under this CODE shall not relieve any Access Person from
     responsibility to report other information required to be reported by law
     or to comply with other applicable requirements of the Federal and State
     securities laws and other laws.

6.   COMPLIANCE PROCEDURES

(1)  Notification to Access Persons: The Compliance officer shall notify each
     Access Person that he or she is subject to this reporting requirement, of
     his or her classification as "Access Person", "Advisory Person" and/or
     "Investment Personnel" under this CODE, and shall deliver a copy of this
     CODE to each Access Person.

                                       8

<PAGE>

     The Compliance Officer shall annually obtain written assurances from each
     Access Person that he or she is aware of his or her classification and
     obligations under this CODE and has complied with the CODE and with its
     reporting requirements.

(2)  Monitoring of Access Persons: The Compliance Officer shall cause a system
     of monitoring personal investment activity by Access Persons to be designed
     that would identify abusive or inappropriate trading patterns or other
     practices of Access Persons.

     The Compliance Officer shall report on such system to the Board of
     Directors of the FUNDS at the next Board meeting following its design and
     thereafter in connection with the annual review of this CODE.

7.   REPORT TO THE BOARD

The Compliance Officer shall report to the Board of Directors of each FUND at
each meeting regarding the following matters not previously reported:

(1)  significant issues arising under the Code, including material violations of
     the Code, violations that, in the aggregate, are material, and any
     sanctions imposed.

(2)  with respect to any transaction not required to be reported to the Board of
     Directors by the operation of Section 7(1) that the Compliance Officer
     believes nonetheless may evidence violation of this policy.

(3)  the results of monitoring of personal investment activities of Access
     Persons in accordance with the procedures referred to in Section 6(2).

The Board of Directors shall consider reports made to it hereunder and upon
discovering that a violation of this CODE has occurred, the Board of Directors
may impose such sanctions, in addition to any forfeiture imposed pursuant to
Section 4(8) hereof, as it deems appropriate, including, among other things, a
letter of sanction or suspension or termination of the employment of the
violator.

The Compliance Officer shall report to the Board of Directors on an annual basis
concerning existing personal investing procedures, violations during the prior
year and any recommended changes in existing restrictions or procedures.

The Board of Directors shall review the CODE and the operation of these policies
at least once a year.

8.   RECORD-KEEPING

EIML, EAL and the FUNDs shall maintain the following records at their principal
offices:

(1)  this CODE and any related procedures, and any CODE that has been in effect
     during the past five years shall be maintained in an easily accessible
     place;

                                       9

<PAGE>

(2)  a record of any violation of the CODE and of any action taken as a result
     of the violation, to be maintained in an easily accessible place for at
     least five years after the end of the fiscal year in which the violation
     occurs;

(3)  a copy of each report under this CODE by (or duplicate brokers' advice for
     the account of) an Access Person, to be maintained for at least five years
     after the end of the fiscal year in which the report is made, the first two
     years in an easily accessible place;

(4)  a record of all persons, currently or within the past five years, who are
     or were required to make or to review reports, to be maintained in an
     easily accessible place;

(5)  a copy of each report by the Compliance Officer to the Board of Directors,
     to be maintained for at least five years after the end of the fiscal year
     in which it is made, the first two years in an easily accessible place; and

(6)  a record of any decision, and the reasons supporting the decision, to
     approve an acquisition by an Investment Person of securities offered in an
     Initial Public Offering or in a Limited Offering, to be maintained for at
     least five years after the end of the fiscal year in which the approval is
     granted.

9.   APPROVAL REQUIREMENTS

This CODE of EIML, EAL, and the FUNDS and any material changes to the CODE must
be approved, as relevant, by each FUND's Board of Directors. Each such approval
must be based on a determination that the CODE contains provisions reasonably
necessary to prevent Access Persons from engaging in any conduct prohibited by
Rule 17j-1. Before approving a CODE of EIML, EAL, or the FUNDS or any amendment
thereto, the Board of Directors of the FUNDS must receive a certification from
the relevant entity that it has adopted procedures reasonably necessary to
prevent its Access Persons from violating its CODE. Before initially retaining
any investment adviser, sub-adviser or principal underwriter for a FUND, the
FUND's Board of Directors must approve the CODE of the relevant entity (unless
the entity is not required by Rule 17j-1 to adopt a Code of Ethics), and must
approve any material change to that CODE within six months after the adoption of
the change.

                                       10

<PAGE>

                                    SCHEDULE

                             OTHER FUNDS MANAGED BY
                   EOUITILINK INTERNATIONAL MANAGEMENT LIMITED

The First Asia Income Fund ("FAIF")

                  FUNDS MANAGED BY EOUITILINK AUSTRALIA LIMITED

Wholesale Trusts

EquitiLink Diversified Fund
EquitiLink Balanced (PST) Fund
EquitiLink Australian Equity Fund
EquitiLink Australian Industrials Fund
EquitiLink Australian Resources Fund
EquitiLink Equity Income Fund
EquitiLink SafeLink (Wholesale) Fund
EquitiLink International Equity Fund
EquitiLink Global Resources Fund
EquitiLink Australian Bond Fund
EquitiLink Asian Income Fund

Investment Companies

MaxiLink Limited
eLink Limited
First Australia Prime Income Investment Company Limited

Australian Wholesale Funds - Pooled

Australian Public Superannuation Fund
EquitiLink Retirement Fund

                                       11

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.S
<SEQUENCE>23
<FILENAME>dex99s.txt
<DESCRIPTION>EXHIBIT S
<TEXT>
<PAGE>

                                                                      EXHIBIT(S)

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Allan S. Mostoff, Sander M. Bieber, Olivia P. Adler, Jennifer O.
Epstein and Wendy Fox, and each of them, as his or her true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution
for such attorney-in-fact in such attorney-in-fact's name, place and stead, to
sign any and all registration statements applicable to ABERDEEN ASIA-PACIFIC
INCOME FUND, INC. (the "Fund"), and any amendments or supplements thereto, and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he or she might or could do in person in his or her capacity as
a Director or Officer of the Fund, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has duly executed this Power of
Attorney on the date indicated below.


/s/ Christian Pittard                                         February 7, 2002
- ---------------------                                         ----------------
Signature                                                     Date



Christian Pittard
- -----------------
Printed Name

<PAGE>

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Allan S. Mostoff, Sander M. Bieber, Olivia P. Adler, Jennifer O.
Epstein and Wendy Fox, and each of them, as his or her true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution
for such attorney-in-fact in such attorney-in-fact's name, place and stead, to
sign any and all registration statements applicable to ABERDEEN ASIA-PACIFIC
INCOME FUND, INC. (the "Fund"), and any amendments or supplements thereto, and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he or she might or could do in person in his or her capacity as
a Director or Officer of the Fund, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has duly executed this Power of
Attorney on the date indicated below.


/s/ Hugh Young                                       June 12, 2001
- --------------                                       -------------
Signature                                            Date


Hugh Young
- ----------
Printed Name

<PAGE>

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Allan S. Mostoff, Sander M. Bieber, Olivia P. Adler, Jennifer O.
Epstein and Wendy Fox, and each of them, as his or her true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution
for such attorney-in-fact in such attorney-in-fact's name, place and stead, to
sign any and all registration statements applicable to ABERDEEN ASIA-PACIFIC
INCOME FUND, INC. (the "Fund"), and any amendments or supplements thereto, and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he or she might or could do in person in his or her capacity as
a Director or Officer of the Fund, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has duly executed this Power of
Attorney on the date indicated below.


/s/ Martin Gilbert                                            June 12, 2001
- ------------------                                            -------------
Signature                                                     Date


Martin Gilbert
- --------------
Printed Name

<PAGE>

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Allan S. Mostoff, Sander M. Bieber, Olivia P. Adler, Jennifer O.
Epstein and Wendy Fox, and each of them, as his or her true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution
for such attorney-in-fact in such attorney-in-fact's name, place and stead, to
sign any and all registration statements applicable to ABERDEEN ASIA-PACIFIC
INCOME FUND, INC. (the "Fund"), and any amendments or supplements thereto, and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he or she might or could do in person in his or her capacity as
a Director or Officer of the Fund, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has duly executed this Power of
Attorney on the date indicated below.


/s/ Beverley Hendry                                           June 12, 2001
- -------------------                                           -------------
Signature                                                     Date


Beverley Hendry
- ---------------
Printed Name

<PAGE>

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Allan S. Mostoff, Sander M. Bieber, Olivia P. Adler, Jennifer O.
Epstein and Wendy Fox, and each of them, as his or her true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution
for such attorney-in-fact in such attorney-in-fact's name, place and stead, to
sign any and all registration statements applicable to ABERDEEN ASIA-PACIFIC
INCOME FUND, INC. (the "Fund"), and any amendments or supplements thereto, and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he or she might or could do in person in his or her capacity as
a Director or Officer of the Fund, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has duly executed this Power of
Attorney on the date indicated below.


/s/ Brian M. Sherman                                          June 12, 2001
- --------------------                                          -------------
Signature                                                     Date


Brian M. Sherman
- ----------------
Printed Name

<PAGE>

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Allan S. Mostoff, Sander M. Bieber, Olivia P. Adler, Jennifer O.
Epstein and Wendy Fox, and each of them, as his or her true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution
for such attorney-in-fact in such attorney-in-fact's name, place and stead, to
sign any and all registration statements applicable to ABERDEEN ASIA-PACIFIC
INCOME FUND, INC. (the "Fund"), and any amendments or supplements thereto, and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he or she might or could do in person in his or her capacity as
a Director or Officer of the Fund, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has duly executed this Power of
Attorney on the date indicated below.

/s/Anthony E. Aaronson                                        June 12, 2001
- ----------------------                                        -------------
Signature                                                     Date


Anthony E. Aaronson
- -------------------
Printed Name

<PAGE>

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Allan S. Mostoff, Sander M. Bieber, Olivia P. Adler, Jennifer O.
Epstein and Wendy Fox, and each of them, as his or her true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution
for such attorney-in-fact in such attorney-in-fact's name, place and stead, to
sign any and all registration statements applicable to ABERDEEN ASIA-PACIFIC
INCOME FUND, INC. (the "Fund"), and any amendments or supplements thereto, and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he or she might or could do in person in his or her capacity as
a Director or Officer of the Fund, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has duly executed this Power of
Attorney on the date indicated below.


/s/ David L. Elsum                                            June 11, 2001
- ------------------                                            -------------
Signature                                                     Date


David L. Elsum
- --------------
Printed Name

<PAGE>

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Allan S. Mostoff, Sander M. Bieber, Olivia P. Adler, Jennifer O.
Epstein and Wendy Fox, and each of them, as his or her true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution
for such attorney-in-fact in such attorney-in-fact's name, place and stead, to
sign any and all registration statements applicable to ABERDEEN ASIA-PACIFIC
INCOME FUND, INC. (the "Fund"), and any amendments or supplements thereto, and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he or she might or could do in person in his or her capacity as
a Director or Officer of the Fund, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has duly executed this Power of
Attorney on the date indicated below.


/s/ Howard A. Knight                                          June 12, 2001
- --------------------                                          -------------
Signature                                                     Date


Howard A. Knight
- ----------------
Printed Name

<PAGE>

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Allan S. Mostoff, Sander M. Bieber, Olivia P. Adler, Jennifer O.
Epstein and Wendy Fox, and each of them, as his or her true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution
for such attorney-in-fact in such attorney-in-fact's name, place and stead, to
sign any and all registration statements applicable to ABERDEEN ASIA-PACIFIC
INCOME FUND, INC. (the "Fund"), and any amendments or supplements thereto, and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he or she might or could do in person in his or her capacity as
a Director or Officer of the Fund, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has duly executed this Power of
Attorney on the date indicated below.


/s/ P. Gerald Malone                                          June 12, 2001
- --------------------                                          -------------
Signature                                                     Date


P. Gerald Malone
- ----------------
Printed Name

<PAGE>

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Allan S. Mostoff, Sander M. Bieber, Olivia P. Adler, Jennifer O.
Epstein and Wendy Fox, and each of them, as his or her true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution
for such attorney-in-fact in such attorney-in-fact's name, place and stead, to
sign any and all registration statements applicable to ABERDEEN ASIA-PACIFIC
INCOME FUND, INC. (the "Fund"), and any amendments or supplements thereto, and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he or she might or could do in person in his or her capacity as
a Director or Officer of the Fund, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has duly executed this Power of
Attorney on the date indicated below.


/s/ Neville J. Miles                                          June 12, 2001
- --------------------                                          -------------
Signature                                                     Date


Neville J. Miles
- ----------------
Printed Name

<PAGE>

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Allan S. Mostoff, Sander M. Bieber, Olivia P. Adler, Jennifer O.
Epstein and Wendy Fox, and each of them, as his or her true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution
for such attorney-in-fact in such attorney-in-fact's name, place and stead, to
sign any and all registration statements applicable to ABERDEEN ASIA-PACIFIC
INCOME FUND, INC. (the "Fund"), and any amendments or supplements thereto, and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he or she might or could do in person in his or her capacity as
a Director or Officer of the Fund, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has duly executed this Power of
Attorney on the date indicated below.


/s/ William J. Potter                                         June 12, 2001
- ---------------------                                         -------------
Signature                                                     Date


William J. Potter
- -----------------
Printed Name

<PAGE>

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Allan S. Mostoff, Sander M. Bieber, Olivia P. Adler, Jennifer O.
Epstein and Wendy Fox, and each of them, as his or her true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution
for such attorney-in-fact in such attorney-in-fact's name, place and stead, to
sign any and all registration statements applicable to ABERDEEN ASIA-PACIFIC
INCOME FUND, INC. (the "Fund"), and any amendments or supplements thereto, and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he or she might or could do in person in his or her capacity as
a Director or Officer of the Fund, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has duly executed this Power of
Attorney on the date indicated below.


/s/ Peter D. Sacks                                            June 11, 2001
- ------------------                                            -------------
Signature                                                     Date


Peter D. Sacks
- --------------
Printed Name

<PAGE>

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Allan S. Mostoff, Sander M. Bieber, Olivia P. Adler, Jennifer O.
Epstein and Wendy Fox, and each of them, as his or her true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution
for such attorney-in-fact in such attorney-in-fact's name, place and stead, to
sign any and all registration statements applicable to ABERDEEN ASIA-PACIFIC
INCOME FUND, INC. (the "Fund"), and any amendments or supplements thereto, and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he or she might or could do in person in his or her capacity as
a Director or Officer of the Fund, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has duly executed this Power of
Attorney on the date indicated below.


/s/ Dr. Anton E. Schrafl                             June 12, 2001
- ------------------------                             -------------
Signature                                            Date


Dr. Anton E. Schrafl
- --------------------
Printed Name

<PAGE>

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Allan S. Mostoff, Sander M. Bieber, Olivia P. Adler, Jennifer O.
Epstein and Wendy Fox, and each of them, as his or her true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution
for such attorney-in-fact in such attorney-in-fact's name, place and stead, to
sign any and all registration statements applicable to ABERDEEN ASIA-PACIFIC
INCOME FUND, INC. (the "Fund"), and any amendments or supplements thereto, and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he or she might or could do in person in his or her capacity as
a Director or Officer of the Fund, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has duly executed this Power of
Attorney on the date indicated below.


/s/ John T. Sheehy                                            June 12, 2001
- ------------------                                            -------------
Signature                                                     Date


John T. Sheehy
- --------------
Printed Name

<PAGE>

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Allan S. Mostoff, Sander M. Bieber, Olivia P. Adler, Jennifer O.
Epstein and Wendy Fox, and each of them, as his or her true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution
for such attorney-in-fact in such attorney-in-fact's name, place and stead, to
sign any and all registration statements applicable to ABERDEEN ASIA-PACIFIC
INCOME FUND, INC. (the "Fund"), and any amendments or supplements thereto, and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he or she might or could do in person in his or her capacity as
a Director or Officer of the Fund, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has duly executed this Power of
Attorney on the date indicated below.


/s/ Peter J. O'Connell                                        June 12, 2001
- ----------------------                                        -------------
Signature                                                     Date


Peter J. O'Connell
- ------------------
Printed Name

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
