0000912938-15-000015.txt : 20150128
0000912938-15-000015.hdr.sgml : 20150128
20150128115309
ACCESSION NUMBER: 0000912938-15-000015
CONFORMED SUBMISSION TYPE: NSAR-B
PUBLIC DOCUMENT COUNT: 3
CONFORMED PERIOD OF REPORT: 20141130
FILED AS OF DATE: 20150128
DATE AS OF CHANGE: 20150128
EFFECTIVENESS DATE: 20150128
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: MFS CALIFORNIA MUNICIPAL FUND
CENTRAL INDEX KEY: 0001092896
IRS NUMBER: 043483817
STATE OF INCORPORATION: MA
FISCAL YEAR END: 1130
FILING VALUES:
FORM TYPE: NSAR-B
SEC ACT: 1940 Act
SEC FILE NUMBER: 811-09537
FILM NUMBER: 15553786
BUSINESS ADDRESS:
STREET 1: 111 HUNTINGTON AVENUE
STREET 2: 24TH FLOOR
CITY: BOSTON
STATE: MA
ZIP: 02199
BUSINESS PHONE: 6179545000
MAIL ADDRESS:
STREET 1: 111 HUNTINGTON AVENUE
STREET 2: 24TH FLOOR
CITY: BOSTON
STATE: MA
ZIP: 02199
FORMER COMPANY:
FORMER CONFORMED NAME: MFS CALIFORNIA INSURED MUNICIPAL FUND
DATE OF NAME CHANGE: 20070629
FORMER COMPANY:
FORMER CONFORMED NAME: COLONIAL CALIFORNIA INSURED MUNICIPAL FUND
DATE OF NAME CHANGE: 19990927
FORMER COMPANY:
FORMER CONFORMED NAME: PREMIER CALIFORNIA MUNICIPAL INCOME FUND
DATE OF NAME CHANGE: 19990809
NSAR-B
1
answer.fil
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PAGE 2
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PAGE 3
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022 A000008 BANK OF NEW YORK CO., INC.
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PAGE 5
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PAGE 9
SIGNATURE KASEY PHILLIPS
TITLE ASSISTANT TREASURER
EX-99.77B ACCT LTTR
2
b77.txt
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of
MFS California Municipal Fund
In planning and performing our audit of the financial statements of MFS
California Municipal Fund (the Fund) as of and for the year ended November 30,
2014, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), we considered the Fund's internal control over
financial reporting, including controls over safeguarding securities, as a basis
for designing our auditing procedures for the purpose of expressing our opinion
on the financial statements and to comply with the requirements of Form N-SAR,
but not for the purpose of expressing an opinion on the effectiveness of the
Fund's internal control over financial reporting. Accordingly, we express no
such opinion.
The management of the Fund is responsible for establishing and maintaining
effective internal control over financial reporting. In fulfilling this
responsibility, estimates and judgments by management are required to assess the
expected benefits and related costs of controls. A company's internal control
over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. A company's internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of a company's assets
that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
A deficiency in internal control over financial reporting exists when the design
or operation of a control does not allow management or employees, in the normal
course of performing their assigned functions, to prevent or detect
misstatements on a timely basis. A material weakness is a deficiency, or a
combination of deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement of the
company's annual or interim financial statements will not be prevented or
detected on a timely basis.
Our consideration of the Fund's internal control over financial reporting was
for the limited purpose described in the first paragraph and would not
necessarily disclose all deficiencies in internal control that might be material
weaknesses under standards established by the Public Company Accounting
Oversight Board (United States). However, we noted no deficiencies in the Fund's
internal control over financial reporting and its operation, including controls
over safeguarding securities, which we consider to be a material weakness as
defined above as of November 30, 2014.
This report is intended solely for the information and use of management and the
Board of Trustees of MFS California Municipal Fund and the Securities and
Exchange Commission and is not intended to be and should not be used by anyone
other than these specified parties.
/s/ ERNST & YOUNG, LLP
Boston, Massachusetts
January 15, 2015
EX-99.77Q1 OTHR EXHB
3
q771a.txt
AMENDED STOCKTICKERAND RESTATED BY-STOCKTICKERLAWS
OF
MFS CALIFORNIA MUNICIPAL FUND
ARTICLE 1
Agreement and Declaration of Trust and Principal Office
1.1 Agreement and Declaration of Trust. These By-Laws shall be subject to
the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of MFS California Municipal Fund (the "Trust"), a
Massachusetts business trust established by the Declaration of Trust of the
Trust.
1.2 Principal Office of the Trust. The principal office of the Trust shall
be located in placeCityBoston, StateMassachusetts.
ARTICLE 2
Shareholders
2.1 Shareholder Meetings. Except as provided in the next sentence,
regular meetings of the shareholders for the election of Trustees and the
transaction of such other business as may properly come before the meeting shall
be held, so long as Shares are listed for trading on the American Stock Exchange
(or successor exchange), on at least an annual basis, on such day and at such
place as shall be designated by a majority of the Trustees. In the event that
such a meeting is not held in any annual period if so required, whether the
omission be by oversight or otherwise, a subsequent special meeting may be
called by a majority of the Trustees and held in lieu of such meeting with the
same effect as if held within such annual period. A Special meeting of the
shareholders of the Trust may be called at any time by a majority of the
Trustees, by the president or, if a majority of the Trustees and the president
shall fail to call any meeting of shareholders for a period of 30 days after
written application of one or more shareholders who hold at least 10% of all
outstanding shares of the Trust, then such shareholders may call such meeting.
Each call of a meeting shall state the place, date, hour and purposes of the
meeting.
2.2 Advance Notice of Shareholder Nominees for Trustees and Other
Shareholder Proposals.
(a) As used in this Section 2.2, the term "annual meeting" refers to any
annual meeting of shareholders as well as any special meeting held in lieu of an
annual meeting as described in the first two sentences of Section 2.1 of these
Bylaws, and the term "special meeting" refers to all meetings of shareholders
other than an annual meeting or a special meeting in lieu of an annual meeting.
(b) The matters proposed by shareholders to be considered and brought
before any annual or special meeting of shareholders shall be limited to only
such matters, including the nomination and election of Trustees, as shall be
brought properly before such meeting in compliance with the procedures set forth
in this Section 2.2. Only persons who are nominated in accordance with the
procedures set forth in this Section 2.2 shall be eligible for election as
Trustees, and no proposal to fix the number of Trustees shall be brought before
an annual or special meeting of shareholders or otherwise considered unless in
accordance with the procedures set forth in this Section 2.2, except as may be
otherwise provided in these Bylaws with respect to the right of holders of
preferred shares of beneficial interest, if any, of the Trust to nominate and
elect a specified number of Trustees in certain circumstances.
(c) For any matter to be properly before any annual meeting, the matter
must be (i) specified in the notice of meeting given by or at the direction of a
majority of the Trustees pursuant to Section 2.4 of these Bylaws, or (ii)
brought before the meeting in the manner specified in this Section 2.2(c) by a
shareholder of record entitled to vote at the meeting or by a shareholder (a
"Beneficial Owner") that holds Shares entitled to vote at the meeting through a
nominee or "street name" holder of record and that can demonstrate to the Trust
such indirect ownership and such Beneficial Owner's entitlement to vote such
Shares, provided that the shareholder was the shareholder of record or the
Beneficial Owner held such Shares at the time the notice provided for in this
Section 2.2(c) is delivered to the secretary.
In addition to any other requirements under applicable law and the
Declaration of Trust and these Bylaws, persons nominated by shareholders for
election as Trustees and any other proposals by shareholders may be properly
brought before an annual meeting only pursuant to timely notice (the
"Shareholder Notice") in writing to the secretary. To be timely, the
Shareholder Notice must be delivered to or mailed and received at the principal
executive offices of the Trust not less than forty-five (45) nor more than sixty
(60) days prior to the first anniversary date of the date on which the Trust
first sent its proxy materials for the prior year's annual meeting; provided,
however, with respect to the annual meetings to be held in the calendar years
2008 and 2009, the Shareholder Notice must be so delivered or mailed and so
received on or before March 18, 2008, and May 1, 2009, respectively; provided
further, however, if and only if the annual meeting is not scheduled to be held
within a period that commences thirty (30) days before the first anniversary
date of the annual meeting for the preceding year and ends thirty (30) days
after such anniversary date (an annual meeting date outside such period being
referred to herein as an "Other Annual Meeting Date"), such Shareholder Notice
must be given in the manner provided herein by the later of the close of
business on (i) the date forty-five (45) days prior to such Other Annual Meeting
Date or (ii) the tenth (10th) business day following the date such Other Annual
Meeting Date is first publicly announced or disclosed.
Any shareholder desiring to nominate any person or persons (as the case
may be) for election as a Trustee or Trustees of the Trust shall deliver, as
part of such Shareholder Notice: (i) a statement in writing setting forth (A)
the name, age, date of birth, business address, residence address and
nationality of the person or persons to be nominated; (B) the class or series
and number of all Shares of the Trust owned of record or beneficially by each
such person or persons, as reported to such shareholder by such nominee(s); (C)
any other information regarding each such person required by paragraphs (a),
(d), (e) and (f) of Item 401 of Regulation S-K or paragraph (b) of Item 22 of
Rule 14a-101 (Schedule 14A) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), adopted by the Securities and Exchange Commission
(or the corresponding provisions of any regulation or rule subsequently adopted
by the Securities and Exchange Commission or any successor agency applicable to
the Trust); (D) any other information regarding the person or persons to be
nominated that would be required to be disclosed in a proxy statement or other
filings required to be made in connection with solicitation of proxies for
election of Trustees or directors pursuant to Section 14 of the Exchange Act and
the rules and regulations promulgated thereunder; and (E) whether such
shareholder believes any nominee is or will be an "interested person" of the
Trust (as defined in the Investment Company Act of 1940, as amended) and, if not
an "interested person," information regarding each nominee that will be
sufficient for the Trust to make such determination; and (ii) the written and
signed consent of the person or persons to be nominated to be named as nominees
and to serve as Trustees if elected. In addition, a majority of the Trustees
may require any proposed nominee to furnish such other information as they may
reasonably require or deem necessary to determine the eligibility of such
proposed nominee to serve as a Trustee. Any Shareholder Notice required by this
Section 2.2(c) in respect of a proposal to fix the number of Trustees shall also
set forth a description of and the text of the proposal, which description and
text shall state a fixed number of Trustees that otherwise complies with
applicable law, these Bylaws and the Declaration of Trust.
Without limiting the foregoing, any shareholder who gives a Shareholder
Notice of any matter proposed to be brought before a shareholder meeting
(whether or not involving nominees for Trustees) shall deliver, as part of such
Shareholder Notice: (i) the description of and text of the proposal to be
presented; (ii) a brief written statement of the reasons why such shareholder
favors the proposal; (iii) such shareholder's name and address as they appear on
the Trust's books; (iv) any other information relating to the shareholder that
would be required to be disclosed in a proxy statement or other filings required
to be made in connection with the solicitation of proxies with respect to the
matter(s) proposed pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder; (v) the class or series and number of all
Shares of the Trust owned beneficially and of record by such shareholder; (vi)
any material interest of such shareholder in the matter proposed (other than as
a shareholder); (vii) a representation that the shareholder intends to appear in
person or by proxy at the shareholder meeting to act on the matter(s) proposed;
(viii) if the proposal involves nominee(s) for Trustees, a description of all
arrangements or understandings between the shareholder and each proposed nominee
and any other person or persons (including their names) pursuant to which the
nomination(s) are to be made by the shareholder; and (ix) in the case of a
Beneficial Owner, evidence establishing such Beneficial Owner's indirect
ownership of, and entitlement to vote, Shares at the meeting of shareholders.
As used in this Section 2.2, Shares "beneficially owned" shall mean all Shares
which such person is deemed to beneficially own pursuant to Rules 13d-3 and 13d-
5 under the Exchange Act.
(d) For any matter to be properly before any special meeting, the matter
must be specified in the notice of meeting given by or at the direction of a
majority of the Trustees pursuant to Section 2.4 of these Bylaws. In the event
the Trust calls a special meeting for the purpose of electing one or more
Trustees, any shareholder may nominate a person or persons (as the case may be)
for election to such position(s) as specified in the Trust's notice of meeting
if and only if the shareholder provides a notice containing the information
required in the Shareholder Notice to the secretary required with respect to
annual meetings by Section 2.2(c) hereof, and such notice is delivered to or
mailed and received at the principal executive office of the Trust not later
than the close of business on the tenth (10th) day following the day on which
the date of the special meeting and of the nominees proposed by a majority of
the Trustees to be elected at such meeting are publicly announced or disclosed.
(e) For purposes of this Section 2.2, a matter shall be deemed to have
been "publicly announced or disclosed" if such matter is disclosed in a press
release reported by the Dow Jones News Service, Associated Press or comparable
national news service, in a document publicly filed by the Trust with the
Securities and Exchange Commission, or in a Web site accessible to the public
maintained by the Trust or by its investment adviser or an affiliate of such
investment adviser with respect to the Trust.
(f) In no event shall an adjournment or postponement (or a public
announcement thereof) of a meeting of shareholders commence a new time period
(or extend any time period) for the giving of notice as provided in this Section
2.2.
(g) The person presiding at any meeting of shareholders, in addition to
making any other determinations that may be appropriate to the conduct of the
meeting, shall have the power and duty to (i) determine whether a nomination or
proposal of other matters to be brought before a meeting and notice thereof have
been duly made and given in the manner provided in this Section 2.2 and
elsewhere in these Bylaws and the Declaration of Trust and (ii) if not so made
or given, to direct and declare at the meeting that such nomination and/or such
other matters shall be disregarded and shall not be considered. Any
determination by the person presiding shall be binding on all parties absent
manifest error.
(h) Notwithstanding anything to the contrary in this Section 2.2 or
otherwise in these Bylaws, unless required by federal law, no matter shall be
considered at or brought before any annual or special meeting unless such matter
has been approved for these purposes by a majority of the Trustees and, in
particular, no Beneficial Owner shall have any rights as a shareholder except as
may be required by federal law. Furthermore, nothing in this Section 2.2 shall
be construed as creating any implication or presumption as to the requirements
of federal law.
2.3 Place of Meetings. All meetings of the shareholders shall be held
at the principal office of the Trust, or, to the extent permitted by the
Declaration of Trust, at such other place within the country-regionplaceUnited
States as shall be designated by the Trustees or the president of the Trust.
2.4 Notice of Meetings. A written notice of each meeting of
shareholders, stating the place, date and hour and the purposes of the meeting,
shall be given at least seven days before the meeting to each shareholder
entitled to vote thereat by leaving such notice with him or at his residence or
usual place of business or by mailing it, postage prepaid, and addressed to such
shareholder at his address as it appears in the records of the Trust. Such
notice shall be given by the secretary or an assistant secretary or by an
officer designated by the Trustees. No notice of any meeting of shareholders
need be given to a shareholder if a written waiver of notice, executed before or
after the meeting by such shareholder or his attorney thereunto duly authorized,
is filed with the records of the meeting.
2.5 Ballots. No ballot shall be required for any election unless
requested by a shareholder present or represented at the meeting and entitled to
vote in the election.
2.6 Proxies. Shareholders entitled to vote may vote either in person or
by proxy in writing dated not more than six months before the meeting named
therein, which proxies shall be filed with the secretary or other person
responsible to record the proceedings of the meeting before being voted. Unless
otherwise specifically limited by their terms, such proxies shall entitle the
holders thereof to vote at any adjournment of such meeting but shall not be
valid after the final adjournment of such meeting. The placing of a
shareholder's name on a proxy pursuant to telephonic or electronically
transmitted instructions obtained pursuant to procedures reasonably designed to
verify that such instructions have been authorized by such shareholder shall
constitute execution of such proxy by or on behalf of such shareholder.
ARTICLE 3
Trustees
3.1 Committees and Advisory Board. The Trustees may appoint from their
number an executive committee and other committees. Except as the Trustees may
otherwise determine, any such committee may make rules for the conduct of its
business. The Trustees may appoint an advisory board to consist of not less
than two nor more than five members. The members of the advisory board shall be
compensated in such manner as the Trustees may determine and shall confer with
and advise the Trustees regarding the investments and other affairs of the
Trust. Each member of the advisory board shall hold office until the first
meeting of the Trustees following the next meeting of the shareholders and until
his successor is elected and qualified, or until he sooner dies, resigns, is
removed, or becomes disqualified, or until the advisory board is sooner
abolished by the Trustees.
In addition, the Trustees may appoint a Dividend Committee of not less
than three persons, at least one of whom shall be a Trustee of the Trust.
No special compensation shall be payable to members of the Dividend
Committee. Each member of the Dividend Committee will hold office until his or
her successor is elected and qualified or until the member dies, resigns, is
removed, becomes disqualified or until the Committee is abolished by the
Trustees.
3.2 Regular Meetings. Regular meetings of the Trustees may be held without
call or notice at such places and at such times as the Trustees may from time to
time determine, provided that notice of the first regular meeting following any
such determination shall be given to absent Trustees.
3.3 Special Meetings. Special meetings of the Trustees may be held at any
time and at any place designated in the call of the meeting, when called by the
board chair, the president or the treasurer or by two or more Trustees,
sufficient notice thereof being given to each Trustee by the secretary or an
assistant secretary or by the board chair, the officer or one of the Trustees
calling the meeting.
3.4 Notice. It shall be sufficient notice of a special meeting to a
Trustee to send notice by mail at least forty-eight hours or by telegram or
telecopier at least twenty-four hours before the meeting addressed to the
Trustee at his or her usual or last known business or residence address or to
give notice to him or her in person or by telephone at least twenty-four hours
before the meeting. Notice of a meeting need not be given to any Trustee if a
written waiver of notice, executed by him or her before or after the meeting, is
filed with the records of the meeting, or to any Trustee who attends the meeting
without protesting prior thereto or at its commencement the lack of notice to
him or her. Neither notice of a meeting nor a waiver of a notice need specify
the purposes of the meeting.
3.5 Quorum. At any meeting of the Trustees one-third of the Trustees then
in office shall constitute a quorum; provided, however, a quorum shall not be
less than two unless the number of Trustees then in office shall be one. Any
meeting may be adjourned from time to time by a majority of the votes cast upon
the question, whether or not a quorum is present, and the meeting may be held as
adjourned without further notice.
ARTICLE 4
Officers and Agents
4.1 Enumeration; Qualification. The officers of the Trust shall be a
president, a treasurer and a secretary who shall be elected by the Trustees. In
addition, there shall be a Chief Compliance Officer, who shall be elected or
appointed by a majority of the Trustees, including a majority of the Trustees
who are not interested persons of the Trust as defined under the Investment
Company Act of 1940 (the "1940 Act") (the "Independent Trustees"), and otherwise
in accordance with rule 38a-1 (or any successor rule) thereunder, as such rule
may be amended from time to time ("Rule 38a-1"). The Trustees from time to time
may in their discretion elect or appoint such other officers, if any, as the
business of the Trust may require pursuant to section 4.3 of these By-Laws. The
Trust may also have such agents, if any, as the Trustees from time to time may
in their discretion appoint. Any officer may be but none need be a Trustee or
shareholder. Any two or more offices may be held by the same person.
4.2 Powers. Subject to the other provisions of these By-Laws, each officer
shall have, in addition to the duties and powers herein and in the Declaration
of Trust set forth, such duties and powers as are commonly incident to his or
her office as if the Trust were organized as a Massachusetts business
corporation and such other duties and powers as the Trustees may from time to
time designate, including without limitation the power to make purchases and
sales of portfolio securities of the Trust pursuant to recommendations of the
Trust's investment adviser in accordance with the policies and objectives of the
Trust set forth in its prospectus and with such general or specific instructions
as the Trustees may from time to time have issued. The Chief Compliance Officer
shall perform the duties and have the responsibilities of the chief compliance
officer of the Trust in accordance with Rule 38a-1, and shall perform such other
duties and have such other responsibilities as from time to time may be assigned
to him by the Trustees. The Chief Compliance Officer shall report directly to
the Trustees or a Committee of the Trustees in carrying out his functions.
4.3 Election. The president, the treasurer and the secretary shall be
elected annually by the Trustees at their first meeting following the annual
meeting of the shareholders. The Chief Compliance Officer shall be elected
pursuant to Section 4.1 of these By-Laws. Other elected officers, if any, may
be elected or appointed by the Trustees at said meeting or at any other time.
Assistant officers may be appointed by the elected officers.
4.4 Tenure. The president, the treasurer, the secretary and the Chief
Compliance Officer shall hold office until their respective successors are
chosen and qualified, or in each case until he or she sooner dies, resigns, is
removed or becomes disqualified, provided that any removal of the Chief
Compliance Officer shall also require the vote or consent of a majority of the
independent Trustees and otherwise be in accordance with the provisions of Rule
38a-1. Each other officer shall hold office at the pleasure of the Trustees.
Each agent shall retain his or her authority at the pleasure of the Trustees.
4.5 President and Vice Presidents. The president shall be the chief
executive officer of the Trust. The president shall preside at all meetings of
the shareholders at which he or she is present, except as otherwise voted by the
Trustees. Any vice president shall have such duties and powers as shall be
designated from time to time by the Trustees.
4.6 Treasurer, Controller and Chief Accounting Officer. The treasurer shall
be the chief financial officer of the Trust and, subject to any arrangement made
by the Trustees with a bank or trust company or other organization as custodian
or transfer or shareholder services agent, shall be in charge of its valuable
papers and shall have such duties and powers as shall be designated from time to
time by the Trustees or by the president. Any assistant treasurer shall have
such duties and powers as shall be designated from time to time by the Trustees.
The controller shall be the officer of the Trust primarily responsible for
ensuring all expenditures of the Trust are reasonable and appropriate. The
controller shall be responsible for oversight and maintenance of liquidity and
leverage facilities available to the Trust and shall have such other duties and
powers as may be designated from time to time by the Trustees or the President.
The chief accounting officer of the Trust shall be in charge of its books
and accounting records. The chief accounting officer shall be responsible for
preparation of financial statements of the Trust and shall have such other
duties and powers as may be designated from time to time by the Trustees or the
President.
4.7 Secretary and Assistant Secretaries. The secretary shall record all
proceedings of the shareholders and the Trustees in books to be kept therefor,
which books shall be kept at the principal office of the Trust. In the absence
of the secretary from any meeting of shareholders or Trustees, an assistant
secretary, or if there be none or he or she is absent, a temporary clerk chosen
at the meeting shall record the proceedings thereof in the aforesaid books.
4.8 Board Chair. The Trustees shall annually elect one of their
number to serve as their chair. The board chair shall hold such position until
his or her successor is chosen and qualified, or until he or she sooner dies,
resigns, is removed or becomes disqualified. The board chair shall hold such
position at the pleasure of the Trustees. The board chair shall preside at all
meetings of the Trustees at which he or she is present and shall perform any
other duties and responsibilities prescribed from time to time by the Trustees.
In the absence of the board chair, or in the event that such position is vacant,
the Trustees present at any meeting shall designate one of their number to
preside at such meeting. The board chair shall not be considered an officer of
the Trust.
ARTICLE 5
Resignations and Removals
Any Trustee, officer or advisory board member may resign at any time by
delivering his or her resignation in writing to the president, the treasurer or
the secretary or to a meeting of the Trustees. The Trustees may remove any
officer elected by them with or without cause by the vote or consent of a
majority of the Trustees then in office provided that any removal of the Chief
Compliance Officer shall also require the vote or consent of a majority of the
Independent Trustees and otherwise be in accordance with Rule 38a-1. Except to
the extent expressly provided in a written agreement with the Trust, no Trustee,
officer, or advisory board member resigning, and no officer or advisory board
member removed shall have any right to any compensation for any period following
his or her resignation or removal, or any right to damages on account of such
removal.
ARTICLE 6
Vacancies
A vacancy in any office may be filled at any time. Each successor shall
hold office for the unexpired term, and in the case of the president, the
treasurer and the secretary, until his or her successor is chosen and qualified,
or in each case until he or she sooner dies, resigns, is removed or becomes
disqualified. A vacancy in the office of the Chief Compliance Officer shall be
filled in accordance with Section 4.1 of these By-Laws.
ARTICLE 7
Certificates for Shares of Beneficial Interest
7.1 Share Certificates. Except as provided in Section 12.1, in lieu of
issuing certificates for shares, the Trustees or the transfer agent shall keep
accounts upon the books of the Trust for the record holders of such shares.
7.2 Discontinuance of Issuance of Certificates. Except as provided in
Section 12.1, the Trustees have discontinued the issuance of share certificates
and may, by written notice to each shareholder, require the surrender of share
certificates to the Trust for cancellation. Such surrender and cancellation
shall not affect the ownership of shares in the Trust.
ARTICLE 8
Record Date and Closing Transfer Books
The Trustees may fix in advance a time, which shall not be more than 90
days before the date of any meeting of shareholders or the date for the payment
of any dividend or making of any other distribution to shareholders, as the
record date for determining the shareholders having the right to notice and to
vote at such meeting and any adjournment thereof or the right to receive such
dividend or distribution, and in such case only shareholders of record on such
record date shall have such right, notwithstanding any transfer of shares on the
books of the Trust after the record date; or without fixing such record date the
Trustees may for any of such purposes close the transfer books for all or any
part of such period.
ARTICLE 9
Seal
The seal of the Trust shall, subject to alteration by the Trustees,
consist of a flat-faced circular die with the word "Massachusetts" together with
the name of the Trust and the year of its organization, cut or engraved thereon;
but, unless otherwise required by the Trustees, the seal shall not be necessary
to be placed on, and its absence shall not impair the validity of, any document,
instrument or other paper executed and delivered by or on behalf of the Trust.
ARTICLE 10
Execution of Papers
Except as the Trustees may generally or in particular cases authorize the
execution thereof in some other manner, all deeds, leases, transfers, contracts,
bonds, notes, checks, drafts and other obligations made, accepted or endorsed by
the Trust shall be signed, and all transfers of securities standing in the name
of the Trust shall be executed, by the president or by one of the vice
presidents or by the treasurer or by whomsoever else shall be designated for
that purpose by the vote of the Trustees and need not bear the seal of the
Trust.
ARTICLE 11
Fiscal Year
Except as from time to time otherwise provided by the Trustees, the fiscal
year of the Trust shall end on November 30.
ARTICLE 12
Shares of Beneficial Interest
The Trust has an unlimited number of common shares, without par value,
which may be issued from time to time by the Trustees of the Trust. The Trust
also has a class of preferred shares, without par value, which may be issued by
the Trustees from time to time in one or more series and with such designations,
preferences and other rights, qualifications, limitations and restrictions as
are determined by the Board of Trustees or a duly authorized committee thereof.
A Statement Creating One Series of Municipal Auction Rate Cumulative Preferred
Shares, one type of such preferred shares, is set forth in this Article 12. A
Statement Establishing and Fixing the Rights and Preferences of another type of
such preferred shares, Variable Rate Municipal Term Preferred Shares, is
attached to these By-Laws as Exhibit 2, which is hereby incorporated by
reference into and made a part of these By-Laws.
12.1 Statement Creating One Series of Municipal Auction Rate Cumulative
Preferred Shares.
There is one series of Municipal Auction Rate Cumulative Preferred Shares.
PART I
DESIGNATION
SERIES TH: A series of 978 preferred shares, without par value,
liquidation preference $25,000 per share plus accumulated but unpaid dividends,
if any, thereon (whether or not earned or declared), is hereby designated
"Municipal Auction Rate Cumulative Preferred Shares, Series TH" and is referred
to below as "Series TH Municipal Preferred." Each share of Series TH Municipal
Preferred shall be issued on dateYear1999Day17Month12lstransDecember 17, 1999;
have an Applicable Rate for its Initial Rate Period equal to 3.90% per annum;
have an initial Dividend Payment Date of Monday,
dateYear1999Day27Month12lstransDecember 27, 1999; and have such other
preferences, limitations and relative voting and other rights, in addition to
those required by applicable law or set forth in the Trust's Declaration of
Trust, as are set forth in Part I and Part II of this Section 12.1. Series TH
Municipal Preferred shall constitute a separate series of Municipal Preferred of
the Trust. The Board of Trustees of the Trust may, in their discretion,
increase the number of shares of Municipal Preferred or VMTP Shares authorized
under these By-Laws to authorize the issuance of another series of Municipal
Preferred or VMTP Shares so long as such issuance is permitted by paragraph 5 of
Part I of this Section 12.1 and by the VMTP Shares Statement.
These By-Laws and the VMTP Shares Statement attached as Exhibit 2 are
intended such that the Municipal Preferred and VMTP Shares are in parity with
each other, such that neither shall have a preference or priority over the other
with respect to the payment of dividends and the distribution of assets of the
Trust upon dissolution, liquidation, or winding up of the affairs of the Trust
and shall be interpreted accordingly.
Unless otherwise provided, defined terms used in this Statement apply only
to shares of Municipal Preferred and defined terms used in Exhibit 2 apply only
to VMTP Shares.
1. Definitions. Unless the context or use indicates another or
different meaning or intent, in Part I and Part II of this Section 12.1 the
following terms have the following meanings, whether used in the singular or
plural:
"'AA' Composite Commercial Paper Rate," on any date for any Rate Period of
shares of a series of Municipal Preferred, shall mean (i) (A) in the case of any
Minimum Rate Period or any Special Rate Period of fewer than 49 Rate Period
Days, the interest equivalent of the 30-day rate; provided, however, that if
such Rate Period is a Minimum Rate Period and the "AA" Composite Commercial
Paper Rate is being used to determine the Applicable Rate for shares of such
series when all of the Outstanding shares of such series are subject to
Submitted Hold Orders, then the interest equivalent of the seven-day rate, and
(B) in the case of any Special Rate Period of (1) 49 or more but fewer than 70
Rate Period Days, the interest equivalent of the 60-day rate; (2) 70 or more but
fewer than 85 Rate Period Days, the arithmetic average of the interest
equivalent of the 60-day and 90-day rates; (3) 85 or more but fewer than 99 Rate
Period Days, the interest equivalent of the 90-day rate; (4) 99 or more but
fewer than 120 Rate Period Days, the arithmetic average of the interest
equivalent of the 90-day and 120-day rates; (5) 120 or more but fewer than 141
Rate Period Days, the interest equivalent of the 120-day rate; (6) 141 or more
but fewer than 162 Rate Period Days, the arithmetic average of the interest
equivalent of the 120-day and 180-day rates; and (7) 162 or more but fewer than
183 Rate Period Days, the interest equivalent of the 180-day rate, in each case
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
made available on a discount basis or otherwise by the Federal Reserve Bank of
New York for the Business Day next preceding such date; or (ii) in the event
that the Federal Reserve Bank of New York does not make available any such rate,
then the arithmetic average of such rates, as quoted on a discount basis or
otherwise, by the Commercial Paper Dealers to the Auction Agent for the close of
business on the Business Day next preceding such date. If any Commercial Paper
Dealer does not quote a rate required to determine the "AA" Composite Commercial
Paper Rate, the "AA" Composite Commercial Paper Rate shall be determined on the
basis of the quotation or quotations furnished by the remaining Commercial Paper
Dealer or Commercial Paper Dealers and any Substitute Commercial Paper Dealer or
Substitute Commercial Paper Dealers selected by the Trust to provide such rate
or rates not being supplied by any Commercial Paper Dealer or Commercial Paper
Dealers, as the case may be, or, if the Trust does not select any such
Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers, by
the remaining Commercial Paper Dealer or Commercial Paper Dealers. For purposes
of this definition, the "interest equivalent" of a rate stated on a discount
basis (a "discount rate") for commercial paper of a given days' maturity shall
be equal to the quotient (rounded upwards to the next higher one-thousandth
(.001) of 1% of (A) the discount rate divided by (B) the difference between (x)
1.00 and (y) a fraction the numerator of which shall be the product of the
discount rate times the number of days in which such commercial paper matures
and the denominator of which shall be 360.
"Accountant's Confirmation" shall have the meaning specified in paragraph
7(c) of Part I of this Section 12.1.
"Affiliate" shall mean, for purposes of the definition of "Outstanding,"
any Person known to the Auction Agent to be controlled by, in control of or
under common control with the Trust; provided, however, that no Broker-Dealer
controlled by, in control of or under common control with the Trust shall be
deemed to be an Affiliate nor shall any corporation or any Person controlled by,
in control of or under common control with such corporation, one of the
trustees, directors or executive officers of which is a trustee of the Trust be
deemed to be an Affiliate solely because such trustee, director or executive
officer is also a trustee of the Trust.
"Agent Member" shall mean a member of or participant in the Securities
Depository that will act on behalf of a Bidder.
"Applicable Rate" shall have the meaning specified in paragraph 2(e)(i) of
Part I of this Section 12.1.
"Auction" shall mean each periodic implementation of the Auction
Procedures.
"Auction Agency Agreement" shall mean the agreement between the Trust and
the Auction Agent which provides, among other things, that the Auction Agent
will follow the Auction Procedures for purposes of determining the Applicable
Rate for shares of a series of Municipal Preferred so long as the Applicable
Rate for shares of such series is to be based on the results of an Auction.
"Auction Agent" shall mean the entity appointed as such by a resolution of
the Board of Trustees in accordance with paragraph 6 of Part II of this
Section 12.1.
"Auction Date," with respect to any Rate Period, shall mean the Business
Day next preceding the first day of such Rate Period.
"Auction Procedures" shall mean the procedures for conducting Auctions set
forth in Part II of this Section 12.1.
"Available Municipal Preferred" shall have the meaning specified in
paragraph 3(a) of Part II of this Section 12.1.
"Benchmark Rate" shall have the meaning specified in paragraph 3(c) of
Part II of this Section 12.1.
"Beneficial Owner" with respect to shares of a series of Municipal
Preferred, 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 such series.
"Bid" and "Bids" shall have the respective meanings specified in paragraph
1(a) of Part II of this Section 12.1.
"Bidder" and "Bidders" shall have the respective meanings specified in
paragraph 1(a) of Part II of this Section 12.1; provided, however, that neither
the Trust nor any affiliate thereof shall be permitted to be a Bidder in an
Auction, except that any Broker-Dealer that is an affiliate of the Trust may be
a Bidder in an Auction, but only if the Orders placed by such Broker-Dealer are
not for its own account.
"Board of Trustees" shall mean the Board of Trustees of the Trust or any
duly authorized committee thereof.
"Broker-Dealer" shall mean any broker-dealer, commercial bank or other
entity permitted by law to perform the functions required of a Broker-Dealer in
Part II of this Section 12.1, that is a member of, or a participant in, the
Securities Depository or is an affiliate of such member or participant, has been
selected by the Trust and has entered into a Broker-Dealer Agreement that
remains effective.
"Broker-Dealer Agreement" shall mean an agreement among the Trust, the
Auction Agent and a Broker-Dealer pursuant to which such Broker-Dealer agrees to
follow the procedures specified in Part II of this Section 12.1.
"Business Day" shall mean a day on which the New York Stock Exchange is
open for trading, and which is neither a Saturday, Sunday nor any other day on
which banks in The City of New York, New York are authorized by law to close.
"By-Laws" means these Amended and Restated By-Laws of the Trust.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commercial Paper Dealers" means Barclays Capital, Inc., J.P. Morgan
Securities LLC, HSBC Securities, Inc., and Goldman Sachs & Co. and such other
commercial paper dealer or dealers as the Trust may from time to time approve,
or, in lieu of any thereof, their respective affiliates or successors.
"Common Shares" means the common shares of beneficial interest, without
par value, of the Trust.
"Date of Original Issue" with respect to shares of a series of Municipal
Preferred, shall mean the date on which the Trust originally issued such shares.
"Declaration" shall mean the Agreement and Declaration of Trust dated
August 10, 1999, of the Trust, as amended by Amendment No. 1 dated September 24,
1999, to the Agreement and Declaration of Trust of the Trust, Amendment No. 2
dated June 29, 2007, to the Agreement and Declaration of Trust of the Trust, and
Amendment No. 3 dated September 29, 2010, all on file with the Secretary of The
Commonwealth of Massachusetts and as hereafter restated or amended from time to
time.
"Deposit Securities" shall mean cash and Municipal Obligations rated at
least A-1+ or SP-1+ by S&P, except that, for purposes of subparagraph (a)(v) of
paragraph 11 of Part I of this Section 12.1, such Municipal Obligations shall be
considered "Deposit Securities" only if they are also rated P-1, stocktickerMIG-
1 or VMIG-1 by Moody's.
"Discounted Value," as of any Valuation Date, shall mean, (a) with respect
to a Moody's Eligible Asset that is not currently callable as of such Valuation
Date at the option of the issuer thereof, the quotient of (i) the Market Value
thereof divided by (2) the product of (A) the applicable Moody's Discount Factor
multiplied by (B) the sum of 1 plus the Moody's Liquidity Factor; or (b) with
respect to a Moody's Eligible Asset that is currently callable as of such
Valuation Date at the option of the issuer thereof, the quotient of (1) the
lesser of the Market Value or call price thereof, including any call premium,
divided by (2) the product of (A) the applicable Moody's Discount Factor
multiplied by (B) the sum of 1 plus the Moody's Liquidity Factor.
"Dividend Payment Date," with respect to shares of a series of Municipal
Preferred, shall mean any date on which dividends are payable on shares of such
series pursuant to the provisions of paragraph 2(d) of Part I of this
Section 12.1.
"Dividend Period," with respect to shares of a series of Municipal
Preferred, shall mean the period from and including the Date of Original Issue
of shares of such series to but excluding the initial Dividend Payment Date for
shares of such series and any period thereafter from and including one Dividend
Payment Date for shares of such series to but excluding the next succeeding
Dividend Payment Date for shares of such series.
"Escrowed Bonds" means Municipal Obligations that (i) have been determined
to be legally defeased in accordance with S&P's legal defeasance criteria, (ii)
have been determined to be economically defeased in accordance with S&P's
economic defeasance criteria and assigned a rating of stocktickerAAA by S&P,
(iii) are not rated by S&P but have been determined to be legally defeased by
Moody's, or (iv) have been determined to be economically defeased by Moody's and
assigned a rating no lower than the rating that is Moody's equivalent of S&P's
stocktickerAAA rating.
"Existing Holder," with respect to shares of a series of Municipal
Preferred, shall mean a Broker-Dealer (or any such other Person as may be
permitted by the Trust) that is listed on the records of the Auction Agent as a
holder of shares of such series.
"Failure to Deposit," with respect to shares of a series of Municipal
Preferred, shall mean a failure by the Trust to pay to the Auction Agent, not
later than 12:00 Noon, New York City time, (A) on the Business Day next
preceding any Dividend Payment Date for shares of such series, in funds
available on such Dividend Payment Date in The City of New York, New York, the
full amount of any dividend (whether or not earned or declared) to be paid on
such Dividend Payment Date on any share of such series or (B) on the Business
Day next preceding any redemption date in funds available on such redemption
date for shares of such series in The City of New York, New York, the Redemption
Price to be paid on such redemption date for any shares of such series after
notice of redemption is mailed pursuant to paragraph 11(c) of Part I of this
Section 12.1; provided, however, that the foregoing clause (B) shall not apply
to the Trust's failure to pay the Redemption Price in respect of shares of
Municipal Preferred when the related Notice of Redemption provides that
redemption of such shares is subject to one or more conditions precedent and any
such condition precedent shall not have been satisfied at the time or times and
in the manner specified in such Notice of Redemption.
"Federal Tax Rate Increase" shall have the meaning specified in the
definition of "Moody's Volatility Factor."
"Fitch" means Fitch Ratings, part of the Fitch Group, which is a majority
owned subsidiary of Fimalac, S.A., and any successor or successors thereto.
"Fitch Criteria" means the Closed-End Fund Criteria Report issued by Fitch
entitled "Rating Closed-End Fund Debt and Preferred Stock" dated August 16, 2011
and attached to this Statement as Exhibit 1, which is hereby incorporated by
reference into and made a part of this Statement. The Trust may, but is not
required to, amend or restate the Fitch Criteria as well as any defined terms in
this Statement that refer to or are based on the Fitch Criteria (including,
without limitation, Fitch Municipal Preferred Asset Coverage, Fitch Municipal
Preferred Asset Coverage Report, Fitch Net OC, Fitch Net OC Test, Fitch Total OC
and Fitch Total OC Test) from time to time, through an amendment or restatement
of this Statement, Exhibit 1 or otherwise, to reflect revised criteria issued by
Fitch by resolution of the Board of Trustees of the Trust and without
shareholder approval.
"Fitch Municipal Preferred Asset Coverage" means, as of a particular date
or time, sufficient asset coverage with respect to shares of Municipal Preferred
such that the Trust is satisfying both the (i) Fitch Total OC Test and the (ii)
Fitch Net OC Test as of such date or time.
"Fitch Municipal Preferred Asset Coverage Report" means, with respect to
Fitch Municipal Preferred Asset Coverage, a report including the information to
be provided to Fitch as called for in the second bullet under "Information Used
to Determine a Rating - Surveillance" in the Fitch Criteria.
"Fitch Net OC" has the meaning given to such term in the Fitch Criteria to
be consistent with a AAA rating of the Municipal Preferred by Fitch, and shall
be calculated with respect to the Trust in accordance with the applicable
formula and related guidance provided in the Fitch Criteria and by Fitch
(including with respect to discount factors, if any, or other treatment to be
applied with respect to securities or other assets held by the Trust which are
not specifically referenced in the Fitch Criteria), and the good faith
determinations of the Trust or its agents of the Fitch Net OC and related
interpretations of the Fitch Criteria shall be conclusive and binding on all
parties.
"Fitch Net OC Test" means an asset coverage test with respect to the
Municipal Preferred that shall be satisfied as of a particular date or time if
the Trust has Fitch Net OC in excess of one-hundred percent (100%) as of such
date or time.
"Fitch Total OC" has the meaning given to such term in the Fitch Criteria
to be consistent with a AAA rating of the Municipal Preferred by Fitch, and
shall be calculated with respect to the Trust in accordance with the applicable
formula and related guidance provided in the Fitch Criteria and by Fitch
(including with respect to discount factors, if any, or other treatment to be
applied with respect to securities or other assets held by the Trust which are
not specifically referenced in the Fitch Criteria), and the good faith
determinations of the Trust or its agents of Fitch Total OC and related
interpretations of the Fitch Criteria at any time and from time to time shall be
conclusive and binding on all parties.
"Fitch Total OC Test" means an asset coverage test with respect to the
Municipal Preferred that shall be satisfied as of a particular date or time if
the Trust has Fitch Total OC in excess of one-hundred percent (100%) as of such
date or time.
"Gross-up Payment" in respect of any dividend means payment to a Holder of
shares of a series of Municipal Preferred of an amount which, giving effect to
the Taxable Allocations made with respect to such dividend, would cause such
Holder's after-tax returns (after any applicable Federal income tax and/or
California personal income tax consequences, taking into account both the
Taxable Allocations and the Gross-up Payment) to be equal to the after-tax
return such Holder would have received if no such Taxable Allocations had
occurred. Such Gross-up Payment shall be calculated: (i) without consideration
being given to the time value of money; (ii) assuming that no Holder of shares
of Municipal Preferred is subject to the Federal or California alternative
minimum tax with respect to dividends received from the Trust; and (iii)
assuming that each Holder of shares of Municipal Preferred is taxable at the
greater of the maximum combined Federal individual income tax rate and
California personal income tax rate or the maximum Federal corporate income tax
rate, in each case applicable to the character of the income distributed, in
effect at the time such Gross-up Payment is made, and disregarding, in each
case, the phase-out of, or provisions limiting, personal exemptions, itemized
deductions, or the benefit of lower tax brackets, but including any Federal tax
benefit resulting from the payment of California state taxes.
"Holder," with respect to shares of a series of Municipal Preferred or any
other security issued by the Trust, shall mean a Person in whose name such
security is registered in the record books of the Trust.
"Hold Order" and "Hold Orders" shall have the respective meanings
specified in paragraph 1(a) of Part II of this Section 12.1.
"Independent Accountant" shall mean a nationally recognized accountant, or
firm of accountants, that is, with respect to the Trust, an independent public
accountant or firm of independent public accountants under the Securities Act of
1933, as amended from time to time.
"Initial Margin" means the amount of cash or securities deposited with a
broker as a margin payment at the time of purchase or sale of a futures
contract.
"Initial Rate Period," with respect to shares of a series of Municipal
Preferred, shall mean the period from and including the Date of Original Issue
for such series to but excluding the initial Dividend Payment Date for such
series.
"Interest Equivalent" shall mean a yield on a 360-day basis of a discount
basis security which is equal to the yield on an equivalent interest-bearing
security.
"Inverse Floater" shall mean trust certificates or other instruments
evidencing interests in one or more municipal securities, the interest rates on
which are adjusted at short-term intervals on a basis that is inverse to the
simultaneous readjustment of the interest rates on corresponding floating rate
trust certificates or other instruments issued by the same issuer, provided that
the ratio of the aggregate dollar amount of floating rate instruments to inverse
floating rate instruments issued by the same issuer does not exceed three to one
at their time of original issuance unless the floating rate instrument has only
one reset remaining until maturity.
"Issue Type Category" shall mean, with respect to a Municipal Obligation
acquired by the Fund, for purposes of calculating Moody's Eligible Assets as of
any Valuation Date, one of the following categories into which such Municipal
Obligation falls based upon a determination by the Fund: health care issues
(including issues related to teaching and non-teaching hospitals, public or
private); housing issues (including issues related to single- and multi-family
housing projects); educational facilities issues (including issues related to
public and private schools); student loan issues; resource recovery issues;
transportation issues (including issues related to mass transit, airports and
highways); industrial development bond issues (including issues related to
pollution control facilities); utility issues (including issues related to the
provision of gas, water, sewers and electricity); general obligation issues;
lease obligations (including certificates of participation); Escrowed Bonds; and
other issues ("Other Issues") not falling within one of the aforementioned
categories. The general obligation issue category includes any issuer that is
directly or indirectly guaranteed by the State of placeStateCalifornia or its
political subdivisions. Utility issuers are included in the general obligation
issue category if the issuer is directly or indirectly guaranteed by the State
of placeStateCalifornia or its political subdivisions. Municipal Obligations in
the utility issuer category will be classified within one of the three following
sub-categories: (i) electric, gas and combination issues (if the combination
issue includes an electric issue); (ii) water and sewer utilities and
combination issues (if the combination issue does not include an electric
issue); and (iii) irrigation, resource recovery, solid waste and other
utilities. Municipal Obligations in the transportation issue category will be
classified within one of the two following sub-categories: (i) streets and
highways, toll roads, bridges and tunnels, airports and multi-purpose port
authorities (multiple revenue streams generated by toll roads, airports, real
estate, bridges); and (ii) mass transit, parking seaports and others.
"Kenny Index" shall have the meaning specified in the definition of
"Taxable Equivalent of the Short-Term Municipal Bond Rate."
"Late Charge" shall have the meaning specified in paragraph 2(e)(i)(B) of
Part I of this Section 12.1.
"Liens" shall have the meaning specified in the definition of "Moody's
Eligible Asset."
"Liquidation Preference," with respect to a given number of shares of
Municipal Preferred, means $25,000 times that number.
"Market Value" of any asset of the Trust means the market value thereof
determined by the pricing service designated from time to time by the Board of
Trustees. Market Value of any asset shall include any interest accrued thereon.
The pricing service will use current industry standards to value portfolio
securities. The pricing service may employ electronic data processing
techniques or a matrix system, or both, to determine valuations. Securities for
which quotations are not readily available shall be valued at fair value as
determined by the pricing service using methods which include consideration of:
yields or prices of municipal bonds of comparable quality, type of issue,
coupon, maturity and rating; indications as to value from dealers; and general
market conditions. In the event the pricing service is unable to value a
security, the security shall be valued at the lower of two dealer bids obtained
by the Trust from dealers who are nationally recognized members of the National
Association of Securities Dealers, Inc. who are independent of the investment
advisor to the Trust and make a market in the security, at least one of which
shall be in writing. Futures contracts and options are valued at closing prices
for such instruments established by the exchange or board of trade on which they
are traded, or if market quotations are not readily available, are valued at
fair value on a consistent basis using methods determined in good faith by the
Trustees.
"Maximum Potential Gross-up Payment Liability," as of any Valuation Date,
shall mean the aggregate amount of Gross-up Payments that would be due if the
Trust were to make Taxable Allocations, with respect to any taxable year,
estimated based upon dividends paid and the amount of undistributed realized net
capital gains and other taxable income earned by the Trust, as of the end of the
calendar month immediately preceding such Valuation Date, and assuming such
Gross-up Payments are fully taxable.
"Maximum Rate," for shares of a series of Municipal Preferred on any
Auction Date for shares of such series, shall mean:
(i) in the case of any Auction Date which is not the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Trust pursuant to paragraph 4 of Part I of this
Section 12.1, the product of (A) the Reference Rate on such Auction Date
for the next Rate Period of shares of such series and (B) the Rate
Multiple on such Auction Date, unless shares of such series have or had a
Special Rate Period (other than a Special Rate Period of 28 Rate Period
Days or fewer) and an Auction at which Sufficient Clearing Bids existed
has not yet occurred for a Minimum Rate Period of shares of such series
after such Special Rate Period, in which case the higher of:
(A) the dividend rate on shares of such series for the then-
ending Rate Period; and
(B) the product of (1) the higher of (x) the Reference Rate
on such Auction Date for a Rate Period equal in length to the then-
ending Rate Period of shares of such series, if such then-ending
Rate Period was 364 Rate Period Days or fewer, or the Treasury Note
Rate on such Auction Date for a Rate Period equal in length to the
then-ending Rate Period of shares of such series, if such then-
ending Rate Period was more than 364 Rate Period Days, and (y) the
Reference Rate on such Auction Date for a Rate Period equal in
length to such Special Rate Period of shares of such series, if such
Special Rate Period was 364 Rate Period Days or fewer, or the
Treasury Note Rate on such Auction Date for a Rate Period equal in
length to such Special Rate Period, if such Special Rate Period was
more than 364 Rate Period Days and (2) the Rate Multiple on such
Auction Date; or
(ii) in the case of any Auction Date which is the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Trust pursuant to paragraph 4 of Part I of this
Section 12.1, the product of (A) the highest of (1) the Reference Rate on
such Auction Date for a Rate Period equal in length to the then-ending
Rate Period of shares of such series, if such then-ending Rate Period was
364 Rate Period Days or fewer, or the Treasury Note Rate on such Auction
Date for a Rate Period equal in length to the then-ending Rate Period of
shares of such series, if such then-ending Rate Period was more than 364
Rate Period Days, (2) the Reference Rate on such Auction Date for the
Special Rate Period for which the Auction is being held if such Special
Rate Period is 364 Rate Period Days or fewer or the Treasury Note Rate on
such Auction Date for the Special Rate Period for which the Auction is
being held if such Special Rate Period is more than 364 Rate Period Days,
and (3) the Reference Rate on such Auction Date for Minimum Rate Periods
and (B) the Rate Multiple on such Auction Date.
"Minimum Rate Period" shall mean any Rate Period consisting of 7 Rate
Period Days.
"Moody's" shall mean Moody's Investors Service, Inc., and any successor or
successors thereto.
"Moody's Discount Factor" shall mean, for purposes of determining the
Discounted Value of any Moody's Eligible Asset, the percentage determined by
reference to the rating on such asset and the shortest Exposure Period set forth
opposite such rating that is the same length as or is longer than the Moody's
Exposure Period, in accordance with the table set forth below:
Rating Category
Exposure Period Aaa* Aa* A* Baa* Other** (V)stocktickerMIG-1*** SP-1+**** Unrated*****
7 weeks...... 151% 159% 166% 173% 187% 136% 148% 225%
8 weeks or less but greater than seven weeks
154 161 168 176 190 137 149 231
9 weeks or less but greater than eight weeks 156 163 170 177 192 138 150 240
* Moody's rating.
** Municipal Obligations not rated by Moody's but rated BBB by S&P.
*** Municipal Obligations rated stocktickerMIG-1 or VMIG-1, which do not
mature or have a demand feature at par exercisable in 30 days and
which do not have a long-term rating.
**** Municipal Obligations not rated by Moody's but rated SP-1+ by S&P,
which do not mature or have a demand feature at par exercisable in
30 days and which do not have a long-term rating.
***** Municipal Obligations rated less than Baa3 by Moody's or less than
BBB by S&P or not rated by Moody's or S&P.
Notwithstanding the foregoing, (i) the Moody's Discount Factor for short-
term Municipal Obligations will be 115%, so long as such Municipal Obligations
are rated at least stocktickerMIG-1, VMIG-1 or P-1 by Moody's and mature or have
a demand feature at par exercisable in 30 days or less, or 125%, so long as such
Municipal Obligations are rated at least A-1+/AA or SP-1+/AA by S&P and mature
or have a demand feature at par exercisable in 30 days or less, and (ii) no
Moody's Discount Factor will be applied to cash or to Receivables for Municipal
Obligations Sold or futures, options and similar instruments (to the extent such
securities are Moody's Eligible Assets); provided, however, that for purposes of
determining the Moody's Discount Factor applicable to a Municipal Obligation,
any Municipal Obligation (excluding any short-term Municipal Obligation) not
rated by Moody's but rated by S&P shall be deemed to have a Moody's rating which
is one full rating category lower than its S&P rating.
"Moody's Eligible Asset" shall mean cash, Receivables for Municipal
Obligations Sold, futures, options and similar instruments (other than Inverse
Floaters and index warrants) or a Municipal Obligation that (i) pays interest in
cash, (ii) does not have its Moody's rating, if applicable, suspended by
Moody's, (iii) is part of an issue of Municipal Obligations of at least
$10,000,000, and (iv) is not subject to a covered call or a covered put option
written by the Trust. Municipal Obligations issued by any one issuer and not
rated by Moody's or rated lower than Baa3 by Moody's and not rated by S&P or
rated lower than BBB by S&P ("Unrated Moody's Municipal Obligations") may
comprise no more than 4% of total Moody's Eligible Assets; such Unrated Moody's
Municipal Obligations, if any, together with any Municipal Obligations issued by
the same issuer and rated BBB by S&P may comprise no more than 4% of total
Moody's Eligible Assets; such BBB-rated Municipal Obligations and Unrated
Moody's Municipal Obligations, if any, together with any Municipal Obligations
issued by the same issuer and rated Baa by Moody's or A by S&P may comprise no
more than 6% of total Moody's Eligible Assets; such BBB, Baa and A-rated
Municipal Obligations and Unrated Moody's Municipal Obligations, if any,
together with any Municipal Obligations issued by the same issuer and rated A by
Moody's or AA by S&P, may comprise no more than 10% of total Moody's Eligible
Assets; and such BBB, Baa, A and AA-rated Municipal Obligations and Unrated
Moody's Municipal Obligations, if any, together with any Municipal Obligations
issued by the same issuer and rated Aa by Moody's or stocktickerAAA by S&P, may
comprise no more than 20% of total Moody's Eligible Assets. For purposes of the
foregoing sentence, any Municipal Obligation backed by the guaranty, letter of
credit or insurance issued by a third party shall be deemed to be issued by such
third party if the issuance of such third-party credit is the sole determinant
of the rating on such Municipal Obligations. Municipal Obligations not rated by
Moody's and rated BBB or BBB+ by S&P ("Other Securities") falling within a
particular Issue Type Category may comprise no more than 12% of total Moody's
Eligible Assets; such Other Securities, if any, together with any Municipal
Obligations falling within a particular Issue Type Category and rated Baa by
Moody's or A by S&P, may comprise no more than 20% of total Moody's Eligible
Assets; such Other Securities, Baa and A-rated Municipal Obligations, if any,
together with any Municipal Obligations falling within a particular Issue Type
Category and rated A by Moody's or AA by S&P, may comprise no more than 40% of
total Moody's Eligible Assets; and such Other Securities, Baa, A and AA-rated
Municipal Obligations, if any, together with any Municipal Obligations falling
within a particular Issue Type Category and rated Aa by Moody's or
stocktickerAAA by S&P, may comprise no more than 60% of total Moody's Eligible
Assets. Notwithstanding any other provision of this definition, in no event may
(i) student loan Municipal Obligations comprise more than 10% of Moody's
Eligible Assets; (ii) resource recovery Municipal Obligations comprise more than
10% of Moody's Eligible Assets; and (iii) Other Issues comprise more than 10% of
Moody's Eligible Assets. For purposes of applying the foregoing requirements, a
Municipal Obligation shall be deemed to be rated BBB by S&P if rated BBB-, BBB
or BBB+ by S&P, Moody's Eligible Assets shall be calculated without including
cash, and Municipal Obligations rated stocktickerMIG-1, VMIG-1 or P-1 or, if not
rated by Moody's, rated A-1+/Aa or SP-1+/AA by S&P, shall be considered to have
a long-term rating of A. When the Trust sells a Municipal Obligation and agrees
to repurchase such Municipal Obligation at a future day, such Municipal
Obligation shall be valued at its Discounted Value for purposes of determining
Moody's Eligible Assets, and the amount of the repurchase price of such
Municipal Obligation shall be included as a liability for purposes of
calculating the Municipal Preferred Basic Maintenance Amount. When the Trust
purchases a Moody's Eligible Asset and agrees to sell it at a future date, such
Eligible Asset shall be valued at the amount of cash to be received by the Trust
upon such future date, provided that the counterparty to the transaction has a
long-term debt rating of at least A2 and a short-term debt rating of at least P1
from Moody's and the transaction has a term of no more than 30 days; otherwise
such Eligible Asset shall be valued at the Discounted Value of such Eligible
Asset. For purposes of determining the aggregate Discounted Value of Moody's
Eligible Assets, such aggregate amount shall be reduced with respect to any
futures contracts as set forth in paragraph 10(a) of Part I of this Section
12.1.
Notwithstanding the foregoing, an asset will not be considered a Moody's
Eligible Asset to the extent it is (i) subject to any material lien, mortgage,
pledge, security interest or security agreement of any kind (collectively,
"Liens"), except for (a) Liens which are being contested in good faith by
appropriate proceedings and which Moody's has indicated to the Trust will not
affect the status of such asset as a Moody's Eligible Asset, (b) Liens for taxes
that are not then due and payable or that can be paid thereafter without
penalty, (c) Liens to secure payment for services rendered or cash advanced to
the Trust by Massachusetts Financial Services Company, The Chase Manhattan Bank
or the Auction Agent, (d) Liens by virtue of any repurchase agreement or futures
contract and (e) Liens by virtue of the transfer of such asset that is a
Municipal Obligation by the Trust to a special purpose issuer that, in turn,
issues floating rate trust certificates or other instruments and corresponding
Inverse Floaters that collectively evidence interests in such asset, provided
that, for purposes of calculating the total market value of such asset, the
accrued interest of such asset shall be derived from the accrued interest of the
Inverse Floaters representing interests therein; or (ii) deposited irrevocably
for the payment of any liabilities for purposes of determine the Municipal
Preferred Basic Maintenance Amount.
"Moody's Exposure Period" shall mean the period commencing on a given
Valuation Date and ending 49 days thereafter.
"Moody's Liquidity Factor" shall equal the product, expressed as a
percentage, of (i) the quotient, expressed as a percentage, of (A) the aggregate
value of the Municipal Obligations that are transferred by the Trust to special
purpose issuers that, in turn, issue floating rate trust certificates or other
instruments and corresponding Inverse Floaters that collectively evidence
interests in such Municipal Obligations divided by (B) the total asset value of
the Trust; multiplied by (ii) the quotient, measured at their time of original
issuance, expressed as a percentage, of (A) the aggregate dollar amount of
floating rate trust certificates or other instruments issued by the same issuer
that issued, and corresponding to, the Inverse Floaters issued by the special
purpose issuers referred to in clause (i)(A) of this definition divided by (B)
the aggregate value calculated in clause (i)(A) of this definition; multiplied
by (iii) 15%.
"Moody's Municipal Preferred Asset Coverage" means, as of a particular
date or time, sufficient asset coverage with respect to the Municipal Preferred
such that the Trust has Moody's Eligible Assets having an aggregate Discounted
Value equal to or greater than the Municipal Preferred Basic Maintenance Amount
as of such date or time.
"Moody's Municipal Preferred Asset Coverage Report" means, with respect to
Moody's Municipal Preferred Asset Coverage, a report signed by the President,
Treasurer, Secretary, an Assistant Treasurer, a Deputy Treasurer or an Assistant
Secretary of the Trust which sets forth, as of the related Valuation Date, the
assets of the Trust, the Market Value and the Discounted Value thereof (seriatim
and in aggregate), and the Municipal Preferred Basic Maintenance Amount.
"Moody's Volatility Factor" shall mean, as of any Valuation Date, (i) in
the case of any Minimum Rate Period, any Special Rate period of 28 Rate Period
Days or fewer, or any Special Rate Period of 57 Rate Period Days or more, a
multiplicative factor equal to 275%, except as otherwise provided in the last
sentence of this definition; (ii) in the case of any Special Rate Period of more
than 28 but fewer than 36 Rate Period Days, a multiplicative factor equal to
203%; (iii) in the case of any Special Rate Period of more than 35 but fewer
than 43 Rate Period Days, a multiplicative factor equal to 217%; (iv) in the
case of any Special Rate Period of more than 42 but fewer than 50 Rate Period
Days, a multiplicative factor equal to 226%; and (v) in the case of any Special
Rate Period of more than 49 but fewer than 57 Rate Period Days, a multiplicative
factor equal to 235%. If, as a result of the enactment of changes to the Code,
the greater of the maximum marginal Federal individual income tax rate
applicable to ordinary income and the maximum marginal Federal corporate income
tax rate applicable to ordinary income will increase, such increase being
rounded up to the next five percentage points (the "Federal Tax Rate Increase"),
until the effective date of such increase, the Moody's Volatility Factor in the
case of any Rate Period described in (i) above in this definition instead shall
be determined by reference to the following table:
Federal Volatility
Tax Rate Increase Factor
5% 295%
10% 317%
15% 341%
20% 369%
25% 400%
30% 436%
35% 477%
40% 525%
"Municipal Obligations" shall mean "Municipal Obligations" as defined in
the Trust's registration statement on Form N-2 as filed with the Securities and
Exchange Commission on August 6, 2008 (the "Registration Statement").
"Municipal Preferred" shall mean Municipal Auction Rate Cumulative
Preferred Shares, without par value, liquidation preference $25,000 per share,
of the Trust.
"Municipal Preferred Basic Maintenance Amount," as of any Valuation Date,
shall mean the dollar amount equal to the sum of (i) (A) the product of the
number of shares of Municipal Preferred outstanding on such date multiplied by
$25,000 (plus the product of the number of shares of any other series of
Preferred Shares outstanding on such date multiplied by the liquidation
preference of such shares), plus any redemption premium applicable to shares of
Municipal Preferred (or other Preferred Shares) then subject to redemption; (B)
the aggregate amount of dividends that will have accumulated at the respective
Applicable Rates (whether or not earned or declared) to (but not including) the
first respective Dividend Payment Dates for shares of Municipal Preferred
outstanding that follow such Valuation Date (plus the aggregate amount of
dividends, whether or not earned or declared, that will have accumulated in
respect of other outstanding Preferred Shares to, but not including, the first
respective dividend payment dates for such other shares that follow such
Valuation Date); (C) the aggregate amount of dividends that would accumulate on
shares of each series of Municipal Preferred outstanding from such first
respective Dividend Payment Date therefor through the 49th day after such
Valuation Date, at the Maximum Rate (calculated as if such Valuation Date were
the Auction Date for the Rate Period commencing on such Dividend Payment Date)
for a Minimum Rate Period of shares of such series to commence on such Dividend
Payment Date, assuming, solely for purposes of the foregoing, that if on such
Valuation Date the Trust shall have delivered a Notice of Special Rate Period to
the Auction Agent pursuant to paragraph 4(d)(i) of Part I of this Section 12.1
with respect to shares of such series, such Maximum Rate shall be the higher of
(a) the Maximum Rate for the Special Rate Period of shares of such series to
commence on such Dividend Payment Date and (b) the Maximum Rate for a Minimum
Rate Period of shares of such series to commence on such Dividend Payment Date,
multiplied by the Volatility Factor applicable to a Minimum Rate Period, or, in
the event the Trust shall have delivered a Notice of Special Rate Period to the
Auction Agent pursuant to paragraph 4(d)(i) of Part I of this Section 12.1 with
respect to shares of such series designating a Special Rate Period consisting of
49 Rate Period Days or more, the Volatility Factor applicable to a Special Rate
Period of that length (plus the aggregate amount of dividends that would
accumulate at the maximum dividend rate or rates on any other Preferred Shares
outstanding from such respective dividend payment dates through the 49th day
after such Valuation Date, as established by or pursuant to the respective
statements establishing and fixing the rights and preferences of such other
Preferred Shares) (except that (1) if such Valuation Date occurs at a time when
a Failure to Deposit (or, in the case of Preferred Shares other than Municipal
Preferred, a failure similar to a Failure to Deposit) has occurred that has not
been cured, the dividend for purposes of calculation would accumulate at the
current dividend rate then applicable to the shares in respect of which such
failure has occurred and (2) for those days during the period described in this
subparagraph (C) in respect of which the Applicable Rate in effect immediately
prior to such Dividend Payment Date will remain in effect (or, in the case of
the Preferred Shares other than Municipal Preferred, in respect of which the
dividend rate or rates in effect immediately prior to such respective dividend
payment dates will remain in effect), the dividend for purposes of calculation
would accumulate at such Applicable Rate (or other rate or rates, as the case
may be) in respect of those days); (D) the amount of anticipated expenses of the
Trust for the 90 days subsequent to such Valuation Date; (E) the amount of the
Trust's Maximum Potential Gross-up Payment Liability in respect of shares of
Municipal Preferred (and similar amounts payable in respect of other Preferred
Shares pursuant to provisions similar to those contained in paragraph 3 of Part
I of this Section 12.1) as of such Valuation Date; (F) only for purposes of
Section 7(a)(ii) of Part I of this Article 12, the total market value of the
floating rate trust certificates or other instruments corresponding to the
Inverse Floaters held by the Trust as of such Valuation Date and issued by the
same issuer that issued such Inverse Floaters, provided that the total market
value of each such floating rate trust certificate or other instrument is
calculated as the sum of (i) its principal amount and (ii) the difference of (a)
the accrued interest of the municipal security or securities underlying such
floating rate trust certificate or other instrument and the corresponding
Inverse Floater less (b) the accrued interest of the corresponding Inverse
Floater; and (G) any current liabilities as of such Valuation Date to the extent
not reflected in any of (i)(A) through (i)(F) (including, without limitation,
any payables for Municipal Obligations purchased as of such Valuation Date and
any liabilities incurred for the purpose of clearing securities transactions)
less (ii) the value (i.e., for purposes of current Moody's guidelines, the face
value of cash, short-term Municipal Obligations rated MIG-1, VMIG-1 or P-1, and
short-term securities that are the direct obligation of the U.S. government,
provided in each case that such securities mature on or prior to the date upon
which any of (i)(A) through (i)(G) become payable, otherwise the Moody's
Discounted Value) of any of the Trust's assets irrevocably deposited by the
Trust for the payment of any of (i)(A) through (i)(G).
"Municipal Preferred Cure Date" shall have the meaning specified in
paragraph 11(b) of Part I of this Section 12.1.
"1940 Act" shall mean the Investment Company Act of 1940, as amended, or
any successor statute.
"1940 Act Cure Date," with respect to the failure by the Trust to maintain
the 1940 Act Municipal Preferred Asset Coverage (as required by paragraph 7 of
Part I of this Section 12.1) as of the last Business Day of each month, shall
mean the last Business Day of the following month.
"1940 Act Municipal Preferred Asset Coverage" shall mean asset coverage,
as defined in Section 18(h) of the 1940 Act, of at least 200% with respect to
all outstanding senior securities of the Trust which are shares of beneficial
interest, including all outstanding shares of Municipal Preferred and VMTP
Shares (or such other asset coverage as may in the future be specified in or
under the 1940 Act as the minimum asset coverage for senior securities which are
shares or stock of a closed-end investment company as a condition of declaring
dividends on its common shares or stock).
"Notice of Redemption" shall mean any notice with respect to the
redemption of shares of Municipal Preferred pursuant to paragraph 11(c) of
Part I of this Section 12.1.
"Notice of Special Rate Period" shall mean any notice with respect to a
Special Rate Period of shares of Municipal Preferred pursuant to
paragraph 4(d)(i) of Part I of this Section 12.1.
"Order" and "Orders" shall have the respective meanings specified in
paragraph 1(a) of Part II of this Section 12.1.
"Other Issues" shall have the meaning specified in the definition of
"Issue Type Category."
"Other Securities" shall have the meaning specified in the definition of
"Moody's Eligible Asset."
"Outstanding" shall mean, as of any Auction Date with respect to shares of
any series of Municipal Preferred, the number of shares of such series
theretofore issued by the Trust except, without duplication, (i) any shares of
such series theretofore canceled or delivered to the Auction Agent for
cancellation or redeemed by the Trust, (ii) any shares of such series as to
which the Trust or any Affiliate thereof shall be an Existing Holder and (iii)
any shares of such series represented by any certificate in lieu of which a new
certificate has been executed and delivered by the Trust.
"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.
"Policy" means an insurance policy purchased by the Trust which guarantees
the payment of principal and interest on specified Municipal Obligations during
the period in which such Municipal Obligations are owned by the Trust.
"Potential Beneficial Owner," with respect to shares of a series of
Municipal Preferred, shall mean a customer of a Broker-Dealer that is not a
Beneficial Owner of shares of such series but that wishes to purchase shares of
such series, or that is a Beneficial Owner of shares of such series that wishes
to purchase additional shares of such series.
"Potential Holder," with respect to shares of a series of Municipal
Preferred, shall mean a Broker-Dealer (or any such other person as may be
permitted by the Trust) that is not an Existing Holder of shares of such series
or that is an Existing Holder of shares of such series that wishes to become the
Existing Holder of additional shares of such series.
"Preferred Shares" shall mean the preferred shares, without par value, of
the Trust, and includes the shares of Municipal Preferred, the VMTP Shares and
any other shares of beneficial interest hereafter authorized and issued by the
Trust of a class having priority over any other class as to distribution of
assets or payments of dividends.
"Rate Multiple," for shares of a series of Municipal Preferred on any
Auction Date for shares of such series, shall mean the percentage, determined as
set forth below, based on the prevailing rating of shares of such series in
effect at the close of business on the Business Day next preceding such Auction
Date:
Prevailing Rating Percentage
"aa3"/AA- or higher.............................. 110%
"a3"/A-.......................................... 125%
"baa3"/BBB-...................................... 150%
"ba3"/BB-........................................ 200%
Below "ba3"/BB-.................................. 250%
provided, however, that in the event the Trust has notified the Auction Agent of
its intent to allocate income taxable for Federal income tax or California
personal income tax purposes to shares of such series prior to the Auction
establishing the Applicable Rate for shares of such series, the applicable
percentage in the foregoing table shall be divided by the quantity 1 minus the
greater of the maximum combined Federal individual income tax rate and
California personal income tax rate or the maximum federal corporate income tax
rate, in each case applicable to the character of the income to be allocated
(taking into account the Federal income tax deductibility of state taxes paid or
incurred).
For purposes of this definition, the "prevailing rating" of shares of a
series of Municipal Preferred shall be (i) "aa3"/AA- or higher if such shares
have a rating of "aa3" or better by Moody's and AA- or better by Fitch or the
equivalent of such ratings by such agencies or a substitute rating agency or
substitute rating agencies selected as provided below, (ii) if not "aa3"/AA- or
higher, then "a3"/A- if such shares have a rating of "a3" or better by Moody's
and A- or better by Fitch or the equivalent of such ratings by such agencies or
a substitute rating agency or substitute rating agencies selected as provided
below, (iii) if not "aa3"/AA- or higher or "a3"/A-, then "baa3"/BBB- if such
shares have a rating of "baa3" or better by Moody's and BBB- or better by Fitch
or the equivalent of such ratings by such agencies or a substitute rating agency
or substitute rating agencies selected as provided below, (iv) if not "aa3"/AA-
or higher, "a3"/A- or "baa3"/BBB-, then "ba3"/BB- if such shares have a rating
of "ba3" or better by Moody's and BB- or better by Fitch or the equivalent of
such ratings by such agencies or a substitute rating agency or substitute rating
agencies selected as provided below, and (v) if not "aa3"/AA- or higher, "a3"/A-
, "baa3"/BBB-, or "ba3"/BB-, then below "ba3"/BB-; provided, however, that if
such shares are rated by only one rating agency, the prevailing rating will be
determined without reference to the rating of any other rating agency. The
Trust shall take all reasonable action necessary to enable either Fitch or
Moody's to provide a rating for shares of Municipal Preferred. If neither Fitch
nor Moody's shall make such a rating available, Salomon Smith Barney, Inc. or
its successor shall select at least one nationally recognized statistical rating
organization (as that term is used in the rules and regulations of the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended from time to time) to act as a substitute rating agency in respect of
shares of such series of Municipal Preferred, and the Trust shall take all
reasonable action to enable such rating agency to provide a rating for such
shares."Rate Period," with respect to shares of a series of Municipal Preferred,
shall mean the Initial Rate Period of shares of such series and any Subsequent
Rate Period, including any Special Rate Period, of shares of such series.
"Rate Period Days," for any Rate Period or Dividend Period, means the
number of days that would constitute such Rate Period or Dividend Period but for
the application of paragraph 2(d) of Part I of this Section 12.1 or
paragraph 4(b) of Part I of this Section 12.1.
"Rating Agency" shall mean, as of any date and in respect of a series of
Municipal Preferred, (i) each of Moody's and Fitch and (ii) any other nationally
recognized statistical rating organization designated as a Rating Agency on such
date, in each case above, only if it maintains a current credit rating for the
shares of Municipal Preferred of such series on such date and the Board of
Trustees has not terminated its designation as a Rating Agency.
"Rating Agency Municipal Preferred Asset Coverage" means, (i) with respect
to the asset coverage specifications of Fitch, Fitch Municipal Preferred Asset
Coverage and (ii) with respect to the asset coverage specifications of Moody's,
Moody's Municipal Preferred Asset Coverage.
"Rating Agency Municipal Preferred Asset Coverage Cure Date," with respect
to the failure by the Trust to satisfy Fitch Municipal Preferred Asset Coverage
or Moody's Municipal Preferred Asset Coverage (as required by paragraph 7(a) of
Part I of this Statement) as of a given Valuation Date, shall mean the second
Business Day following such Valuation Date.
"Rating Agency Municipal Preferred Asset Coverage Report" means a Moody's
Municipal Preferred Asset Coverage Report, a Fitch Municipal Preferred Asset
Coverage Report or a similar report to be provided to another Rating Agency, as
applicable.
"Receivables for Municipal Obligations Sold" shall mean for purposes of
calculating Moody's Eligible Assets as of any Valuation Date, no more than the
aggregate of the following: (i) the book value of receivables for Municipal
Obligations sold as of or prior to such Valuation Date if such receivables are
due within five business days of such Valuation Date, and if the trades which
generated such receivables are (x) settled through clearing house firms with
respect to which the Trust has received prior written authorization from Moody's
or (y) with counterparties having a Moody's long-term debt rating of at least
Baa3; and (ii) the Moody's Discounted Value of Municipal Obligations sold as of
or prior to such Valuation Date which generated receivables, if such receivables
are due within five business days of such Valuation Date but do not comply with
either of the conditions specified in (i) above.
"Redemption Price" shall mean the applicable redemption price specified in
paragraph 11(a) or (b) of Part I of this Section 12.1.
"Reference Rate" shall mean (i) the higher of the Taxable Equivalent of
the Short-Term Municipal Bond Rate and the "AA" Composite Commercial Paper Rate
in the case of Minimum Rate Periods and Special Rate Periods of 28 Rate Period
Days or fewer; (ii) the "AA" Composite Commercial Paper Rate in the case of
Special Rate Periods of more than 28 Rate Period Days but fewer than 183 Rate
Period Days; and (iii) the Treasury Bill Rate in the case of Special Rate
Periods of more than 182 Rate Period Days but fewer than 365 Rate Period Days.
"Registration Statement" shall have the meaning specified in the
definition of "Municipal Obligations."
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-
Hill Companies, Inc., and its successors.
"Securities Depository" shall mean The Depository Trust Company and its
successors and assigns or any other securities depository selected by the Trust
which agrees to follow the procedures required to be followed by such securities
depository in connection with shares of Municipal Preferred.
"Sell Order" and "Sell Orders" shall have the respective meanings
specified in paragraph 1(a) of Part II of this Section 12.1.
"Special Rate Period," with respect to shares of a series of Municipal
Preferred, shall have the meaning specified in paragraph 4(a) of Part I of this
Section 12.1.
"Special Redemption Provisions" shall have the meaning specified in
paragraph 11(a)(i) of Part I of this Section 12.1.
"Submission Deadline" shall mean 1:30 P.M., placeCityNew York City time,
on any Auction Date or such other time on any Auction Date by which Broker-
Dealers are required to submit Orders to the Auction Agent as specified by the
Auction Agent from time to time.
"Submitted Bid" and "Submitted Bids" shall have the respective meanings
specified in paragraph 3(a) of Part II of this Section 12.1.
"Submitted Hold Order" and "Submitted Hold Orders" shall have the
respective meanings specified in paragraph 3(a) of Part II of this Section 12.1.
"Submitted Order" and "Submitted Orders" shall have the respective
meanings specified in paragraph 3(a) of Part II of this Section 12.1.
"Submitted Sell Order" and "Submitted Sell Orders" shall have the
respective meanings specified in paragraph 3(a) of Part II of this Section 12.1.
"Subsequent Rate Period," with respect to shares of a series of Municipal
Preferred, shall mean the period from and including the first day following the
Initial Rate Period of shares of such series to but excluding the next Dividend
Payment Date for shares of such series and any period thereafter from and
including one Dividend Payment Date for shares of such series to but excluding
the next succeeding Dividend Payment Date for shares of such series; provided,
however, that if any Subsequent Rate Period is also a Special Rate Period, such
term shall mean the period commencing on the first day of such Special Rate
Period and ending on the last day of the last Dividend Period thereof.
"Substitute Commercial Paper Dealer" shall mean Merrill Lynch, Pierce,
Fenner & Smith, Inc., Citigroup Global Markets, Inc., Credit Suisse New York, or
Morgan Stanley & Co. or their respective affiliates or successors, if such
entity is a commercial paper dealer; provided, however, that none of such
entities shall be a Commercial Paper Dealer.
"Substitute U.S. Government Securities Dealer" shall mean Goldman, Sachs &
Co., Citigroup Global Markets, Inc., Nomura Securities International, and
Barclays Capital, Inc. or their respective affiliates or successors, if such
entity is a U.S. Government securities dealer; provided, however, that none of
such entities shall be a U.S. Government Securities Dealer.
"Sufficient Clearing Bids" shall have the meaning specified in
paragraph 3(a) of Part II of this Section 12.1.
"Taxable Allocation" shall have the meaning specified in paragraph 3 of
Part I of this Section 12.1.
"Taxable Equivalent of the Short-Term Municipal Bond Rate," on any date
for any Minimum Rate Period or Special Rate Period of 28 Rate Period Days or
fewer, shall mean 90% of the quotient of (A) the per annum rate expressed on an
interest equivalent basis equal to the S&P Kenny 30 day High Grade Index or any
successor index (the "Kenny Index") (provided, however, that any such successor
index must be approved by Moody's (if Moody's is then rating the shares of
Municipal Preferred) and Fitch (if Fitch is then rating the shares of Municipal
Preferred)), made available for the Business Day immediately preceding such date
but in any event not later than 8:30 A.M., New York City time, on such date by
S&P J.J. Kenny Evaluation Services or any successor thereto, based upon 30-day
yield evaluations at par of short-term bonds the interest on which is excludable
for regular Federal income tax purposes under the Code, of "high grade"
component issuers selected by S&P J.J. Kenny Evaluation Services or any such
successor from time to time in its discretion, which component issuers shall
include, without limitation, issuers of general obligation bonds, but shall
exclude any bonds the interest on which constitutes an item of tax preference
under Section 57(a)(5) of the Code, or successor provisions, for purposes of the
"alternative minimum tax," divided by (B) 1.00 minus the greater of the maximum
marginal regular Federal individual income tax rate applicable to ordinary
income or the maximum marginal regular Federal corporate income tax rate
applicable to ordinary income (in each case expressed as a decimal); provided,
however, that if the Kenny Index is not made so available by 8:30 A.M., New York
City time, on such date by S&P J.J. Kenny Evaluation Services or any successor,
the Taxable Equivalent of the Short-Term Municipal Bond Rate shall mean the
quotient of (A) the per annum rate expressed on an interest equivalent basis
equal to the most recent Kenny Index so made available for any preceding
Business Day, divided by (B) 1.00 minus the greater of the maximum marginal
regular Federal individual income tax rate applicable to ordinary income or the
maximum marginal regular Federal corporate income tax rate applicable to
ordinary income (in each case expressed as a decimal).
"Taxable Income" shall have the meaning specified in paragraph 3(c) of
Part II of this Section 12.1.
"Treasury Bill" shall mean a direct obligation of the U.S. Government
having a maturity at the time of issuance of 364 days or less.
"Treasury Bill Rate," on any date for any Rate Period, shall mean (i) the
bond equivalent yield, calculated in accordance with prevailing industry
convention, of the rate on the most recently auctioned Treasury Bill with a
remaining maturity closest to the length of such Rate Period, as quoted in The
Wall Street Journal on such date for the Business Day next preceding such date;
or (ii) in the event that any such rate is not published in The Wall Street
Journal, then the bond equivalent yield, calculated in accordance with
prevailing industry convention, as calculated by reference to the arithmetic
average of the bid price quotations of the most recently auctioned Treasury Bill
with a remaining maturity closest to the length of such Rate Period, as
determined by bid price quotations as of the close of business on the Business
Day immediately preceding such date obtained from the U.S. Government Securities
Dealers to the Auction Agent.
"Treasury Note" shall mean a direct obligation of the U.S. Government
having a maturity at the time of issuance of five years or less but more than
364 days.
"Treasury Note Rate," on any date for any Rate Period, shall mean (i) the
yield on the most recently auctioned Treasury Note with a remaining maturity
closest to the length of such Rate Period, as quoted in The Wall Street Journal
on such date for the Business Day next preceding such date; or (ii) in the event
that any such rate is not published in The Wall Street Journal, then the yield
as calculated by reference to the arithmetic average of the bid price quotations
of the most recently auctioned Treasury Note with a remaining maturity closest
to the length of such Rate Period, as determined by bid price quotations as of
the close of business on the Business Day immediately preceding such date
obtained from the U.S. Government Securities Dealers to the Auction Agent. If
any U.S. Government Securities Dealer does not quote a rate required to
determine the Treasury Bill Rate or the Treasury Note Rate, the Treasury Bill
Rate or the Treasury Note Rate shall be determined on the basis of the quotation
or quotations furnished by the remaining U.S. Government Securities Dealer or
U.S. Government Securities Dealers and any Substitute U.S. Government Securities
Dealers selected by the Trust to provide such rate or rates not being supplied
by any U.S. Government Securities Dealer or U.S. Government Securities Dealers,
as the case may be, or, if the Trust does not select any such Substitute U.S.
Government Securities Dealer or Substitute U.S. Government Securities Dealers,
by the remaining U.S. Government Securities Dealer or U.S. Government Securities
Dealers.
"U.S. Government Securities Dealer" shall mean J.P. Morgan Securities LLC,
Merrill Lynch, Pierce, Fenner & Smith, Inc., RBS Securities, Inc., and HSBC Bank
USA or their respective affiliates or successors, if such entity is a U.S.
government securities dealer.
"Valuation Date" shall mean, for purposes of determining whether the Trust
is maintaining Rating Agency Municipal Preferred Asset Coverage, each Business
Day.
"Variation Margin" means, in connection with an outstanding futures
contract owned or sold by the Trust, the amount of cash or securities paid to or
received from a broker (subsequent to the Initial Margin payment) from time to
time as the price of such futures contract fluctuates.
"Volatility Factor" shall mean, as of any Valuation Date, the Moody's
Volatility Factor.
"Voting Period" shall have the meaning specified in paragraph 5(b) of Part
I of this Section 12.1.
"VMTP Shares" shall mean Variable Rate Municipal Term Preferred Shares,
without par value, liquidation preference $25,000 per share plus an amount equal
to accumulated but unpaid dividends thereon (whether or not earned or declared),
of the Trust. The preferences, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption of each series
of VMTP Shares are set forth in the VMTP Shares Statement.
"VMTP Shares Statement" shall mean the Statement Establishing and Fixing
the Rights and Preferences of Variable Rate Municipal Term Preferred Shares,
together with the appendices and exhibits thereto, attached as Exhibit 2 to this
Statement.
"Winning Bid Rate" shall have the meaning specified in paragraph 3(a) of
Part II of this Section 12.1.
2. Dividends.
(a) Ranking. The shares of a series of Municipal Preferred shall rank
on a parity with each other, with shares of any other series of Municipal
Preferred and with shares of any other series of Preferred Shares (including any
VMTP Shares) as to the payment of dividends and as to distribution of assets
upon dissolution, liquidation or winding up of the affairs of the Trust.
(b) Cumulative Cash Dividends. The Holders of shares of Municipal
Preferred of any series shall be entitled to receive, when, as and if declared
by the Board of Trustees, out of funds legally available therefor in accordance
with the Declaration, these By-Laws and applicable law, cumulative cash
dividends at the Applicable Rate for shares of such series, determined as set
forth in subparagraph (e) of this paragraph 2, and no more (except to the extent
set forth in paragraph 3 of Part I of this Section 12.1), payable on the
Dividend Payment Dates with respect to shares of such series determined pursuant
to subparagraph (d) of this paragraph 2. Holders of shares of Municipal
Preferred shall not be entitled to any dividend, whether payable in cash,
property or shares, in excess of full cumulative dividends, as herein provided,
on shares of Municipal Preferred. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or payments on
shares of Municipal Preferred which may be in arrears, and, except to the extent
set forth in subparagraph (e)(i) of this paragraph 2, no additional sum of money
shall be payable in respect of any such arrearage.
(c) Dividends Cumulative From Date of Original Issue. Dividends on
shares of Municipal Preferred of any series shall accumulate at the Applicable
Rate for shares of such series from the Date of Original Issue thereof.
(d) Dividend Payment Dates and Adjustments Thereof. The Dividend
Payment Dates with respect to shares of a series of Municipal Preferred shall be
Monday, dateYear1999Day27Month12lstransDecember 27, 1999 and each Friday
thereafter with respect to shares of Series TH Municipal Preferred; provided,
however, that
(i) (A) if the Friday on which dividends would otherwise be payable
on shares of Series TH Municipal Preferred is not a Business Day, then
such dividends shall be payable on shares of such series on the first
Business Day that falls before such Friday; and
(ii) notwithstanding the foregoing provisions of this
paragraph 2(d), the Trust in its discretion may establish the Dividend
Payment Dates in respect of any Special Rate Period of shares of a series
of Municipal Preferred consisting of more than 28 Rate Period Days;
provided, however, that such dates shall be set forth in the Notice of
Special Rate Period relating to such Special Rate Period, as delivered to
the Auction Agent, which Notice of Special Rate Period shall be filed with
the Secretary of the Trust; and further provided that (1) any such
Dividend Payment Date shall be a Business Day and (2) the last Dividend
Payment Date in respect of such Special Rate Period shall be the Business
Day immediately following the last day thereof, as such last day is
determined in accordance with subparagraph (b) of paragraph 4 of Part I of
this Section 12.1.
(e) Dividend Rates and Calculation of Dividends.
(i) Dividend Rates. The dividend rate on shares of Municipal
Preferred of any series during the period from and after the Date of
Original Issue of shares of such series to and including the last day of
the Initial Rate Period of shares of such series shall be equal to the
rate per annum set forth with respect to shares of such series under
"Designation" in Part I of this Section 12.1. For each Subsequent Rate
Period of shares of such series thereafter, the dividend rate on shares of
such series shall be equal to the rate per annum that results from an
Auction for shares of such series on the Auction Date next preceding such
Subsequent Rate Period; provided, however, that if:
(A) an Auction for any such Subsequent Rate Period is not
held for any reason other than as described below, the dividend rate
on shares of such series for such Subsequent Rate Period will be the
Maximum Rate for shares of such series on the Auction Date therefor;
(B) any Failure to Deposit shall have occurred with respect
to shares of such series during any Rate Period thereof (other than
any Special Rate Period consisting of more than 364 Rate Period Days
or any Rate Period succeeding any Special Rate Period consisting of
more than 364 Rate Period Days during which a Failure to Deposit
occurred that has not been cured), but, prior to 12:00 Noon, New
York City time, on the third Business Day next succeeding the date
on which such Failure to Deposit occurred, such Failure to Deposit
shall have been cured in accordance with subparagraph (f) of this
paragraph 2 and the Trust shall have paid to the Auction Agent a
late charge ("Late Charge") equal to the sum of (1) if such Failure
to Deposit consisted of the failure timely to pay to the Auction
Agent the full amount of dividends with respect to any Dividend
Period of the shares of such series, an amount computed by
multiplying (x) 200% of the Reference Rate for the Rate Period
during which such Failure to Deposit occurs on the Dividend Payment
Date for such Dividend Period by (y) a fraction, the numerator of
which shall be the number of days for which such Failure to Deposit
has not been cured in accordance with subparagraph (f) of this
paragraph 2 (including the day such Failure to Deposit occurs and
excluding the day such Failure to Deposit is cured) and the
denominator of which shall be 360, and applying the rate obtained
against the aggregate Liquidation Preference of the outstanding
shares of such series and (2) if such Failure to Deposit consisted
of the failure timely to pay to the Auction Agent the Redemption
Price of the shares, if any, of such series for which Notice of
Redemption has been mailed by the Trust pursuant to paragraph 11(c)
of Part I of this Section 12.1, an amount computed by multiplying
(x) 200% of the Reference Rate for the Rate Period during which such
Failure to Deposit occurs on the redemption date by (y) a fraction,
the numerator of which shall be the number of days for which such
Failure to Deposit is not cured in accordance with subparagraph (f)
of this paragraph 2 (including the day such Failure to Deposit
occurs and excluding the day such Failure to Deposit is cured) and
the denominator of which shall be 360, and applying the rate
obtained against the aggregate Liquidation Preference of the
outstanding shares of such series to be redeemed, no Auction will be
held in respect of shares of such series for the Subsequent Rate
Period thereof and the dividend rate for shares of such series for
such Subsequent Rate Period will be the Maximum Rate for shares of
such series on the Auction Date for such Subsequent Rate Period;
(C) any Failure to Deposit shall have occurred with respect
to shares of such series during any Rate Period thereof (other than
any Special Rate Period consisting of more than 364 Rate Period Days
or any Rate Period succeeding any Special Rate Period consisting of
more than 364 Rate Period Days during which a Failure to Deposit
occurred that has not been cured), and, prior to 12:00 Noon, New
York City time, on the third Business Day next succeeding the date
on which such Failure to Deposit occurred, such Failure to Deposit
shall not have been cured in accordance with subparagraph (f) of
this paragraph 2 or the Trust shall not have paid the applicable
Late Charge to the Auction Agent, no Auction will be held in respect
of shares of such series for the first Subsequent Rate Period
thereof thereafter (or for any Rate Period thereof thereafter to and
including the Rate Period during which (1) such Failure to Deposit
is cured in accordance with subparagraph (f) of this paragraph 2 and
(2) the Trust pays the applicable Late Charge to the Auction Agent
(the condition set forth in this clause (2) to apply only in the
event Moody's is rating such shares at the time the Trust cures such
Failure to Deposit), in each case no later than 12:00 Noon, New York
City time, on the fourth Business Day prior to the end of such Rate
Period), and the dividend rate for shares of such series for each
such Subsequent Rate Period shall be a rate per annum equal to the
Maximum Rate for shares of such series on the Auction Date for such
Subsequent Rate Period (but with the prevailing rating for shares of
such series, for purposes of determining such Maximum Rate, being
deemed to be "Below 'ba3'/BB-"); or
(D) any Failure to Deposit shall have occurred with respect
to shares of such series during a Special Rate Period thereof
consisting of more than 364 Rate Period Days, or during any Rate
Period thereof succeeding any Special Rate Period consisting of more
than 364 Rate Period Days during which a Failure to Deposit occurred
that has not been cured, and, prior to 12:00 Noon, New York City
time, on the fourth Business Day preceding the Auction Date for the
Rate Period subsequent to such Rate Period, such Failure to Deposit
shall not have been cured in accordance with subparagraph (f) of
this paragraph 2 or, in the event Moody's is then rating such
shares, the Trust shall not have paid the applicable Late Charge to
the Auction Agent (such Late Charge, for purposes of this
subparagraph (D), to be calculated by using, as the Reference Rate,
the Reference Rate applicable to a Rate Period (x) consisting of
more than 182 Rate Period Days but fewer than 365 Rate Period Days
and (y) commencing on the date on which the Rate Period during which
Failure to Deposit occurs commenced), no Auction will be held in
respect of shares of such series for such Subsequent Rate Period (or
for any Rate Period thereof thereafter to and including the Rate
Period during which (1) such Failure to Deposit is cured in
accordance with subparagraph (f) of this paragraph 2 and (2) the
Trust pays the applicable Late Charge to the Auction Agent (the
condition set forth in this clause (2) to apply only in the event
Moody's is rating such shares at the time the Trust cures such
Failure to Deposit), in each case no later than 12:00 Noon, New York
City time, on the fourth Business Day prior to the end of such Rate
Period), and the dividend rate for shares of such series for each
such Subsequent Rate Period shall be a rate per annum equal to the
Maximum Rate for shares of such series on the Auction Date for such
Subsequent Rate Period (but with the prevailing rating for shares of
such series, for purposes of determining such Maximum Rate, being
deemed to be "Below 'ba3'/BB-") (the rate per annum of which
dividends are payable on shares of a series of Municipal Preferred
for any Rate Period thereof being herein referred to as the
"Applicable Rate" for shares of such series).
(ii) Calculation of Dividends. The amount of dividends per share
payable on shares of a series of Municipal Preferred on any date on which
dividends shall be payable on shares of such series shall be computed by
multiplying the Applicable Rate for shares of such series in effect for
such Dividend Period or Dividend Periods or part thereof for which
dividends have not been paid by a fraction, the numerator of which shall
be the number of days in such Dividend Period or Dividend Periods or part
thereof and the denominator of which shall be 365 if such Dividend Period
consists of 7 Rate Period Days and 360 for all other Dividend Periods, and
applying the rate obtained against $25,000.
(f) Curing a Failure to Deposit. A Failure to Deposit with respect to
shares of a series of Municipal Preferred shall have been cured (if such Failure
to Deposit is not solely due to the willful failure of the Trust to make the
required payments to the Auction Agent) with respect to any Rate Period of
shares of such series if, within the respective time periods described in
subparagraph (e)(i) of this paragraph 2, the Trust shall have paid to the
Auction Agent (A) all accumulated and unpaid dividends on shares of such series
and (B) without duplication, the Redemption Price for shares, if any, of such
series for which Notice of Redemption has been mailed by the Trust pursuant to
paragraph 11(c) of Part I of this Section 12.1; provided, however, that the
foregoing clause (B) shall not apply to the Trust's failure to pay the
Redemption Price in respect of shares of Municipal Preferred when the related
Redemption Notice provides that redemption of such shares is subject to one or
more conditions precedent and any such condition precedent shall not have been
satisfied at the time or times and in the manner specified in such Notice of
Redemption.
(g) Dividend Payments by Trust to Auction Agent. The Trust shall pay to
the Auction Agent, not later than 12:00 Noon, New York City time, on the
Business Day next preceding each Dividend Payment Date for shares of a series of
Municipal Preferred, an aggregate amount of funds available on the next Business
Day in The City of New York, New York, equal to the dividends to be paid to all
Holders of shares of such series on such Dividend Payment Date.
(h) Auction Agent as Trustee of Dividend Payments by Trust. All moneys
paid to the Auction Agent for the payment of dividends (or for the payment of
any Late Charge) on shares of Municipal Preferred shall be held in trust for the
payment of such dividends (and any such Late Charge) by the Auction Agent for
the benefit of the Holders of shares of Municipal Preferred specified in
subparagraph (i) of this paragraph 2. Any moneys paid to the Auction Agent in
accordance with the foregoing but not applied by the Auction Agent to the
payment of dividends (and any such Late Charge) on shares of Municipal Preferred
will, to the extent permitted by law, be repaid to the Trust at the end of 90
days from the date on which such moneys were so to have been applied.
(i) Dividends Paid to Holders of Shares of Municipal Preferred. Each
dividend on shares of Municipal Preferred shall be paid on the Dividend Payment
Date therefor to the Holders thereof as their names appear on the record books
of the Trust on the Business Day next preceding such Dividend Payment Date.
(j) Dividends Credited Against Earliest Accumulated But Unpaid
Dividends. Any dividend payment made on shares of Municipal Preferred shall
first be credited against the earliest accumulated but unpaid dividends due with
respect to such shares. Dividends in arrears for any past Dividend Period may
be declared and paid at any time, without reference to any regular Dividend
Payment Date, to the Holders of shares of Municipal Preferred as their names
appear on the record books of the Trust on such date, not exceeding 15 days
preceding the payment date thereof, as may be fixed by the Board of Trustees.
(k) Dividends Designated as Exempt-Interest Dividends. Dividends on
shares of Municipal Preferred shall be designated as exempt-interest dividends
up to the amount of tax-exempt income of the Trust, to the extent permitted by,
and for purposes of, Section 852 of the Code (or any successor statutory
provision).
3. Gross-up Payments.
Holders of shares of Municipal Preferred shall be entitled to receive,
when, as and if declared by the Board of Trustees, out of funds legally
available therefor in accordance with the Declaration, these By-Laws and
applicable law, dividends in an amount equal to the aggregate Gross-up Payments
as follows:
(a) Minimum Rate Periods and Special Rate Periods of 28 Rate Period Days
or Fewer. If, in the case of any Minimum Rate Period or any Special Rate Period
of 28 Rate Period Days or fewer, the Trust allocates any net capital gain or
other income taxable for Federal income tax and/or California personal income
tax purposes to a dividend paid on shares of Municipal Preferred without having
given advance notice thereof to the Auction Agent as provided in paragraph 5 of
Part II of this Section 12.1 (such allocation being referred to herein as a
"Taxable Allocation") solely by reason of the fact that such allocation is made
retroactively as a result of the redemption of all or a portion of the
outstanding shares of Municipal Preferred or the liquidation of the Trust, the
Trust shall, prior to the end of the calendar year in which such dividend was
paid, provide notice thereof to the Auction Agent and direct the Trust's
dividend disbursing agent to send such notice with a Gross-up Payment to each
Holder of such shares that was entitled to such dividend payment during such
calendar year at such Holder's address as the same appears or last appeared on
the record books of the Trust.
(b) Special Rate Periods of More Than 28 Rate Period Days. If, in the
case of any Special Rate Period of more than 28 Rate Period Days, the Trust
makes a Taxable Allocation to a dividend paid on shares of Municipal Preferred,
the Trust shall, prior to the end of the calendar year in which such dividend
was paid, provide notice thereof to the Auction Agent and direct the Trust's
dividend disbursing agent to send such notice with a Gross-up Payment to each
Holder of shares that was entitled to such dividend payment during such calendar
year at such Holder's address as the same appears or last appeared on the record
books of the Trust.
(c) No Gross-up Payments In the Event of a Reallocation. The Trust
shall not be required to make Gross-up Payments with respect to any net capital
gain or other taxable income determined by the Internal Revenue Service or the
placeStateCalifornia state taxing authority to be allocable in a manner
different from that allocated by the Trust.
4. Designation of Special Rate Periods.
(a) Length of and Preconditions for Special Rate Period. The Trust, at
its option, may designate any succeeding Subsequent Rate Period of shares of a
series of Municipal Preferred as a Special Rate Period consisting of a specified
number of Rate Period Days evenly divisible by seven and not more than 1,820,
subject to adjustment as provided in subparagraph (b) of this paragraph 4. A
designation of a Special Rate Period shall be effective only if (A) notice
thereof shall have been given in accordance with subparagraphs (c) and (d)(i) of
this paragraph 4, (B) an Auction for shares of such series shall have been held
on the Auction Date immediately preceding the first day of such proposed Special
Rate Period and Sufficient Clearing Bids for shares of such series shall have
existed in such Auction, and (C) if any Notice of Redemption shall have been
mailed by the Trust pursuant to paragraph 11(c) of Part I of this Section 12.1
with respect to any shares of such series, the Redemption Price with respect to
such shares shall have been deposited with the Auction Agent. In the event the
Trust wishes to designate any succeeding Subsequent Rate Period for shares of a
series of Municipal Preferred as a Special Rate Period consisting of more than
28 Rate Period Days, the Trust shall notify Fitch (if Fitch is then rating such
series) and Moody's (if Moody's is then rating such series) in advance of the
commencement of such Subsequent Rate Period that the Trust wishes to designate
such Subsequent Rate Period as a Special Rate Period and shall provide Fitch (if
Fitch is then rating such series) and Moody's (if Moody's is then rating such
series) with such documents as either may request.
(b) Adjustment of Length of Special Rate Period. In the event the Trust
wishes to designate a Subsequent Rate Period as a Special Rate Period, but the
day following what would otherwise be the last day of such Special Rate Period
is not a Friday that is a Business Day, then the Trust shall designate such
Subsequent Rate Period as a Special Rate Period consisting of the period
commencing at the end of the immediately preceding Rate Period and ending on the
first Thursday that is followed by a Friday that is a Business Day preceding
what would otherwise be such last day, in the case of Series TH Municipal
Preferred.
(c) Notice of Proposed Special Rate Period. If the Trust proposes to
designate any succeeding Subsequent Rate Period of shares of a series of
Municipal Preferred as a Special Rate Period pursuant to subparagraph (a) of
this paragraph 4, not less than 20 (or such lesser number of days as may be
agreed to from time to time by the Auction Agent) nor more than 30 days prior to
the date the Trust proposes to designate as the first day of such Special Rate
Period (which shall be such day that would otherwise be the first day of a
Minimum Rate Period), notice shall be (i) published or caused to be published by
the Trust in a newspaper of general circulation to the financial community in
The City of New York, New York, which carries financial news, and (ii) mailed by
the Trust by first-class mail, postage prepaid, to the Holders of shares of such
series. Each such notice shall state (A) that the Trust may exercise its option
to designate a succeeding Subsequent Rate Period of shares of such series as a
Special Rate Period, specifying the first day thereof and (B) that the Trust
will, by 11:00 A.M., New York City time, on the second Business Day next
preceding such date (or by such later time or date, or both, as may be agreed to
by the Auction Agent) notify the Auction Agent of either (x) its determination,
subject to certain conditions, to exercise such option, in which case the Trust
shall specify the Special Rate Period designated, or (y) its determination not
to exercise such option.
(d) Notice of Special Rate Period. No later than 11:00 A.M., New York
City time, on the second Business Day next preceding the first day of any
proposed Special Rate Period of shares of a series of Municipal Preferred as to
which notice has been given as set forth in subparagraph (c) of this paragraph 4
(or such later time or date, or both, as may be agreed to by the Auction Agent),
the Trust shall deliver to the Auction Agent either:
(i) a notice ("Notice of Special Rate Period") stating (A) that the
Trust has determined to designate the next succeeding Rate Period of
shares of such series as a Special Rate Period, specifying the same and
the first day thereof, (B) the Auction Date immediately prior to the first
day of such Special Rate Period, (C) that such Special Rate Period shall
not commence if (1) an Auction for shares of such series shall not be held
on such Auction Date for any reason or (2) an Auction for shares of such
series shall be held on such Auction Date but Sufficient Clearing Bids for
shares of such series shall not exist in such Auction, (D) the scheduled
Dividend Payment Dates for shares of such series during such Special Rate
Period and (E) the Special Redemption Provisions, if any, applicable to
shares of such series in respect of such Special Rate Period; such notice
to be accompanied by a Moody's Municipal Preferred Asset Coverage Report
showing that, as of the third Business Day next preceding such proposed
Special Rate Period, the Trust maintains Moody's Municipal Preferred Asset
Coverage (if Moody's is then rating such series) as of such Business Day
(assuming for purposes of the foregoing calculation that (a) the Maximum
Rate is the Maximum Rate on such Business Day as if such Business Day were
the Auction Date for the proposed Special Rate Period, and (b) the Moody's
Discount Factors applicable to Moody's Eligible Assets are determined by
reference to the first Exposure Period longer than the Exposure Period
then applicable to the Trust, as described in the definition of Moody's
Discount Factor herein); or
(ii) a notice stating that the Trust has determined not to exercise
its option to designate a Special Rate Period of shares of such series and
that the next succeeding Rate Period of shares of such series shall be a
Minimum Rate Period.
(e) Failure to Deliver Notice of Special Rate Period. If the Trust
fails to deliver either of the notices described in subparagraphs (d)(i) or
(d)(ii) of this paragraph 4 (and, in the case of the notice described in
subparagraph (d)(i) of this paragraph 4, a Moody's Municipal Preferred Asset
Coverage Report to the effect set forth in such subparagraph (if Moody's is then
rating the series in question)) with respect to any designation of any proposed
Special Rate Period to the Auction Agent by 11:00 A.M., New York City time, on
the second Business Day next preceding the first day of such proposed Special
Rate Period (or by such later time or date, or both, as may be agreed to by the
Auction Agent), the Trust shall be deemed to have delivered a notice to the
Auction Agent with respect to such Special Rate Period to the effect set forth
in subparagraph (d)(ii) of this paragraph 4. In the event the Trust delivers to
the Auction Agent a notice described in subparagraph (d)(i) of this paragraph 4,
it shall file a copy of such notice with the Secretary of the Trust, and the
contents of such notice shall be binding on the Trust. In the event the Trust
delivers to the Auction Agent a notice described in subparagraph (d)(ii) of this
paragraph 4, the Trust will provide Moody's (if Moody's is then rating the
series in question) and Fitch (if Fitch is then rating the series in question) a
copy of such notice.
5. Voting Rights.
(a) One Vote Per Share of Municipal Preferred. Except as otherwise
provided in the Declaration, this paragraph 5 or as otherwise required by law,
(i) each Holder of shares of Municipal Preferred shall be entitled to one vote
for each share of Municipal Preferred held by such Holder on each matter
submitted to a vote of all shareholders of the Trust, and (ii) the Holders of
outstanding Preferred Shares, including each share of Municipal Preferred and
each share of VMTP Shares, and of Common Shares shall vote together as a single
class; provided, however, that, at any meeting of the shareholders of the Trust
held for the election of trustees, the Holders of outstanding Preferred Shares,
including Municipal Preferred and VMTP Shares, represented in person or by proxy
at said meeting, shall be entitled, as a class, to the exclusion of the Holders
of all other securities and classes of shares of beneficial interest of the
Trust, to elect two trustees of the Trust, each Preferred Share, including each
share of Municipal Preferred and each VMPT Share, entitling the Holder thereof
to one vote. Subject to subparagraph (b) of this paragraph 5, the Holders of
outstanding Common Shares and Preferred Shares, including Municipal Preferred
and VMTP Shares, voting together as a single class, shall elect the balance of
the trustees. (b) Voting For Additional Trustees.
(i) Voting Period. During any period in which any one or more of
the conditions described in subparagraphs (A) or (B) of this subparagraph
(b)(i) shall exist (such period being referred to herein as a "Voting
Period"), the number of trustees constituting the Board of Trustees shall
be automatically increased by the smallest number that, when added to the
two trustees elected exclusively by the Holders of Preferred Shares,
including shares of Municipal Preferred and VMTP Shares, would constitute
a majority of the Board of Trustees as so increased by such smallest
number; and the Holders of Preferred Shares, including Municipal Preferred
and VMTP Shares, shall be entitled, voting as a class on a one-vote-per-
share basis (to the exclusion of the Holders of all other securities and
classes of shares of beneficial interest of the Trust), to elect such
smallest number of additional trustees, together with the two trustees
that such Holders are in any event entitled to elect. A Voting Period
shall commence:
(A) if at the close of business on any dividend payment date
accumulated dividends (whether or not earned or declared) on any
outstanding Preferred Share, including Municipal Preferred or VMTP
Shares, equal to at least two full years' dividends shall be due and
unpaid and sufficient cash or specified securities shall not have
been deposited with the Auction Agent for the payment of such
accumulated dividends; or
(B) if at any time Holders of Preferred Shares are entitled
under the 1940 Act to elect a majority of the trustees of the Trust.
Upon the termination of a Voting Period, the voting rights described in this
subparagraph (b)(i) shall cease, subject always, however, to the revesting of
such voting rights in the Holders of Preferred Shares upon the further
occurrence of any of the events described in this subparagraph (b)(i).
(ii) Notice of Special Meeting. As soon as practicable after the
accrual of any right of the Holders of Preferred Shares to elect
additional trustees as described in subparagraph (b)(i) of this
paragraph 5, the Trust shall notify the Auction Agent and the Auction
Agent shall call a special meeting of such Holders, by mailing a notice of
such special meeting to such Holders, such meeting to be held not less
than 10 nor more than 20 days after the date of mailing of such notice. If
the Trust fails to send such notice to the Auction Agent or if the Auction
Agent does not call such a special meeting, it may be called by any such
Holder on like notice. The record date for determining the Holders of
Preferred Shares entitled to notice of and to vote at such special meeting
shall be the close of business on the fifth Business Day preceding the day
on which such notice is mailed. At any such special meeting and at each
meeting of Holders of Preferred Shares held during a Voting Period at
which trustees are to be elected, such Holders, voting together as a class
(to the exclusion of the Holders of all other securities and classes of
shares of beneficial interest of the Trust), shall be entitled to elect
the number of trustees prescribed in subparagraph (b)(i) of this
paragraph 5 on a one-vote-per-share basis.
(iii) Terms of Office of Existing Trustees. The terms of office of
all persons who are trustees of the Trust at the time of a special meeting
of Holders of Preferred Shares to elect trustees shall continue,
notwithstanding the election at such meeting by the Holders of Preferred
Shares of the number of trustees that they are entitled to elect, and the
persons so elected by the Holders of Preferred Shares, together with the
two incumbent trustees elected by the Holders of Preferred Shares and the
remaining incumbent trustees elected by the Holders of the Common Shares
and Preferred Shares, shall constitute the duly elected trustees of the
Trust.
(iv) Terms of Office of Certain Trustees to Terminate Upon
Termination of Voting Period. Simultaneously with the termination of a
Voting Period, the term of office of the additional trustees elected by
the Holders of Preferred Shares pursuant to subparagraph (b)(i) of this
paragraph 5 shall terminate, the remaining trustees shall constitute the
trustees of the Trust and the voting rights of the Holders of Preferred
Shares to elect additional trustees pursuant to subparagraph (b)(i) of
this paragraph 5 shall cease, subject to the provisions of the last
sentence of subparagraph (b)(i) of this paragraph 5.
(c) Holders of Municipal Preferred To Vote on Certain Other Matters.
(i) Increases in Capitalization. So long as any shares of
Municipal Preferred are outstanding, the Trust shall not, without the
affirmative vote or consent of the Holders of at least a majority of the
shares of Municipal Preferred outstanding at the time, in person or by
proxy, either in writing or at a meeting, voting as a separate class: (a)
authorize, create or issue any class or series of shares ranking prior to
or on a parity with shares of Municipal Preferred with respect to the
payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Trust, or authorize,
create or issue additional shares of any series of Municipal Preferred
(except that, notwithstanding the foregoing, but subject to the provisions
of paragraph 10(c) of Part I of this Section 12.1, the Board of Trustees,
without the vote or consent of the Holders of Municipal Preferred, may
from time to time authorize and create, and the Trust may from time to
time issue, additional shares of any series of Municipal Preferred or
classes or series of Preferred Shares ranking on a parity with shares of
Municipal Preferred with respect to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up of the
affairs of the Trust; provided, however, that if Moody's or Fitch is not
then rating the shares of Municipal Preferred, the aggregate liquidation
preference of all Preferred Shares of the Trust outstanding after any such
issuance, exclusive of accumulated and unpaid dividends, may not exceed
$24,450,000) or (b) amend, alter or repeal the provisions of the
Declaration or the By-Laws, including this Section 12.1, whether by
merger, consolidation or otherwise, so as to materially affect any
preference, right or power of such shares of Municipal Preferred to the
Holders thereof; provided, however, that (i) none of the actions permitted
by the exception to (a) above will be deemed to affect such preferences,
rights or powers, (ii) a division of a share of Municipal Preferred will
be deemed to affect such preferences, rights or powers only if the terms
of such division adversely affect the Holders of shares of Municipal
Preferred and (iii) the authorization, creation and issuance of classes or
series of shares ranking junior to shares of Municipal Preferred with
respect to the payment of dividends and the distribution of assets upon
dissolution, liquidation or winding up of the affairs of the Trust, will
be deemed to affect such preferences, rights or powers only if Moody's or
Fitch is then rating shares of Municipal Preferred and such issuance
would, at the time thereof, cause the Trust not to satisfy the 1940 Act
Municipal Preferred Asset Coverage, Moody's Municipal Preferred Asset
Coverage, or Fitch Municipal Preferred Asset Coverage. So long as any
shares of Municipal Preferred are outstanding, the Trust shall not,
without the affirmative vote or consent of the Holders of at least 66 2/3%
of the shares of Municipal Preferred outstanding at the time, in person or
by proxy, either in writing or at a meeting, voting as a separate class,
file a voluntary application for relief under Federal bankruptcy law or
any similar application under state law for so long as the Trust is
solvent and does not foresee becoming insolvent. See also Section 2.8 of
Exhibit 2 for related requirements with respect to VMTP Shares.
(ii) 1940 Act Matters. Unless a higher percentage is provided for
in the Declaration or these By-Laws, (A) the affirmative vote of the
Holders of at least a majority of the Preferred Shares, including
Municipal Preferred and VMTP Shares, outstanding at the time, voting as a
separate class, shall be required to approve any conversion of the Trust
from a closed-end to an open-end investment company and (B) the
affirmative vote of the Holders of a "majority of the outstanding
Preferred Shares," including Municipal Preferred and VMTP Shares, voting
as a separate class, shall be required to approve any plan of
reorganization (as such term is used in the 1940 Act) adversely affecting
such shares. The affirmative vote of the Holders of a "majority of the
outstanding Preferred Shares," including Municipal Preferred and VMTP
Shares, voting as a separate class, shall be required to approve any
action not described in the first sentence of this paragraph 5(c)(ii)
requiring a vote of security holders of the Trust under Section 13(a) of
the 1940 Act. For purposes of the foregoing, "majority of the outstanding
Preferred Shares" means (i) 67% or more of such shares present at a
meeting, if the Holders of more than 50% of such shares are present or
represented by proxy, or (ii) more than 50% of such shares, whichever is
less. In the event a vote of Holders of Municipal Preferred is required
pursuant to the provisions of Section 13(a) of the 1940 Act, the Trust
shall, not later than ten Business Days prior to the date on which such
vote is to be taken, notify Moody's (if Moody's is then rating the shares
of Municipal Preferred) and Fitch (if Fitch is then rating the shares of
Municipal Preferred) that such vote is to be taken and the nature of the
action with respect to which such vote is to be taken. The Trust shall,
not later than ten Business Days after the date on which such vote is
taken, notify Moody's (if Moody's is then rating the shares of Municipal
Preferred) and Fitch (if Fitch is then rating the shares of Municipal
Preferred) of the results of such vote.
(iii) Separate Vote by Series. To the extent permitted by the 1940
Act, with respect to actions set forth in paragraph 5(c)(i) and paragraph
5(c)(ii) above (including amendment, alteration or repeal of the
provisions of the Declaration of Trust or the By-Laws, whether by merger,
consolidation or otherwise) that would adversely affect the rights of one
or more series of Municipal Preferred (the "Affected Series") in a manner
different from any other series of Municipal Preferred, the Trust will not
approve any such action without the affirmative vote or consent of the
Holders of at least a majority of the shares of each such Affected Series
outstanding at the time, in person or proxy, either in writing or at a
meeting (each such Affected Series voting as a separate class).
(d) Board May Take Certain Actions Without Shareholder Approval. The
Board of Trustees, without the vote or consent of the shareholders of the Trust,
may from time to time amend, alter or repeal any or all of the definitions of
the terms listed below, or any provision of this Section 12.1 viewed by Moody's
or Fitch as a predicate for any such definition, and any such amendment,
alteration or repeal will not be deemed to affect the preferences, rights or
powers of shares of Municipal Preferred or the Holders thereof; provided,
however, that the Board of Trustees receives written confirmation from (i)
Moody's (such confirmation being required to be obtained only in the event
Moody's is rating the shares of Municipal Preferred) and (ii) Fitch (such
confirmation being required to be obtained only in the event Fitch is rating the
shares of Municipal Preferred) that any such amendment, alteration or repeal
would not impair the ratings then assigned by Moody's or Fitch, as the case may
be, to shares of Municipal Preferred: Deposit Securities, Discounted Value,
Escrowed Bonds, Market Value, Maximum Potential Gross-up Payment Liability,
Moody's Discount Factor, Moody's Eligible Asset, Moody's Exposure Period,
Moody's Volatility Factor, Moody's Municipal Preferred Asset Coverage, Moody's
Municipal Preferred Asset Coverage Report, Municipal Preferred Basic
Maintenance Amount, 1940 Act Cure Date, 1940 Act Municipal Preferred Asset
Coverage, Other Issues, Rating Agency Municipal Preferred Asset Coverage, Rating
Agency Municipal Preferred Asset Coverage Report, Rating Agency Municipal
Preferred Asset Coverage Cure Date, Receivables for Municipal Obligations Sold,
Valuation Date and Volatility Factor.
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In addition, the Trust may change its policies to comply with changes in
Rating Agency requirements upon receiving written notification of such changes.
Such changes will be subject to the ratification by the Board of Trustees.
(e) Voting Rights Set Forth Herein Are Sole Voting Rights. Unless
otherwise required by law, these By-Laws or by the Declaration, the Holders of
shares of Municipal Preferred shall not have any relative rights or preferences
or other special rights other than those specifically set forth herein.
(f) No Preemptive Rights or Cumulative Voting. The Holders of shares of
Municipal Preferred shall have no preemptive rights or rights to cumulative
voting.
(g) Voting for Trustees Sole Remedy for Trust's Failure to Pay
Dividends. In the event that the Trust fails to pay any dividends on the shares
of Municipal Preferred, the exclusive remedy of the Holders of shares of
Municipal Preferred shall be the right to vote for Trustees pursuant to the
provisions of this paragraph 5.
(h) Holders of Shares of Municipal Preferred Entitled to Vote. For
purposes of determining any rights of the Holders of shares of Municipal
Preferred to vote on any matter, whether such right is created by this
Section 12.1, by the other provisions of these By-Laws or the Declaration, by
statute or otherwise, no Holder of shares of Municipal Preferred shall be
entitled to vote any share of Municipal Preferred and no share of Municipal
Preferred 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, the requisite Notice
of Redemption with respect to such shares shall have been mailed as provided in
paragraph 11(c) of Part I of this Section 12.1 and the Redemption Price for the
redemption of such shares shall have been deposited in trust with the Auction
Agent for that purpose. No shares of Municipal Preferred held by the Trust or
any affiliate of the Trust (except for shares held by a Broker-Dealer that is an
affiliate of the Trust for the account of its customers) shall have any voting
rights or be deemed to be outstanding for voting or other purposes.
(i) Notwithstanding any provision of these By-Laws to the contrary,
neither the Holders of Municipal Preferred, nor the Holders of any one or more
series thereof, shall be entitled to vote as a separate class with respect to
any matter, if such separate class vote is prohibited by the 1940 Act.
6. 1940 Act Municipal Preferred Asset Coverage.
The Trust shall maintain, as of the last Business Day of each month in
which any share of Municipal Preferred is outstanding, the 1940 Act Municipal
Preferred Asset Coverage.
7. Rating Agency Municipal Preferred Asset Coverage.
(a) So long as shares of Municipal Preferred are outstanding, the Trust
shall maintain, on each Valuation Date, and shall verify to its satisfaction
that it is maintaining on such Valuation Date, both (i) Fitch Municipal
Preferred Asset Coverage (if Fitch is then rating the shares of Municipal
Preferred) and (ii) Moody's Municipal Preferred Asset Coverage (if Moody's is
then rating the shares of Municipal Preferred).
(b) On or before 5:00 P.M., New York City time, on the third Business
Day after a Valuation Date on which the Trust fails to satisfy the Rating Agency
Municipal Preferred Asset Coverage specified by a particular Rating Agency, and
on the third Business Day after the Rating Agency Municipal Preferred Asset
Coverage Cure Date with respect to such Valuation Date, the Trust shall complete
and deliver to such Rating Agency (if such Rating Agency is then rating the
shares of Municipal Preferred) and the Auction Agent the Rating Agency Municipal
Preferred Asset Coverage Report called for by such Rating Agency, as of the date
of such failure or such Rating Agency Municipal Preferred Asset Coverage Cure
Date, as the case may be, which will be deemed to have been delivered to the
Auction Agent if the Auction Agent receives a copy of telecopy, telex or other
electronic transcription thereof and on the same day the Trust mails to the
Auction Agent for delivery on the next Business Day the full Rating Agency
Municipal Preferred Asset Coverage Report.
The Trust shall also deliver (i) a Rating Agency Municipal Preferred Asset
Coverage Report for each Rating Agency then rating the shares of Municipal
Preferred to the Auction Agent (if either Moody's or Fitch is then rating the
shares of Municipal Preferred) as of (A) the fifteenth day of each month (or, if
such day is not a Business Day, the next succeeding Business Day) and (B) the
last Business Day of each month, and (ii) (A) a Fitch Municipal Preferred Asset
Coverage Report to Fitch (if Fitch is then rating the shares of Municipal
Preferred) if and when requested for any Valuation Date by Fitch or as otherwise
required under the Fitch Criteria and (B) a Moody's Municipal Preferred Asset
Coverage Report to Moody's (if Moody's is then rating the shares of Municipal
Preferred), if and when requested for any Valuation Date by Moody's, on or
before the third Business Day after such request. A failure by the Trust to
deliver a Rating Agency Municipal Preferred Asset Coverage Report to a Rating
Agency pursuant to the preceding sentence shall be deemed to be delivery of a
Rating Agency Municipal Preferred Asset Coverage Report to such Rating Agency
indicating the Trust has failed to maintain Rating Agency Municipal Preferred
Asset Coverage as specified by such Rating Agency, as of the relevant Valuation
Date.
(c) As frequently as requested by Moody's (if Moody's is then rating the
shares of Municipal Preferred), the Trust shall cause the Independent Accountant
to confirm in writing to Moody's and the Auction Agent (i) the mathematical
accuracy of the calculations reflected in a Moody's Municipal Preferred Asset
Coverage Report and (ii) that, in such Report, the Trust determined in
accordance with this paragraph whether the Trust had, at the time of such
request, Moody's Eligible Assets (if Moody's is then rating the shares of
Municipal Preferred) of an aggregate Discounted Value at least equal to the
Municipal Preferred Basic Maintenance Amount (such confirmation being herein
called the "Accountant's Confirmation").
(d) With respect to Moody's ratings of the Municipal Preferred, within
ten Business Days after the date of delivery of a Moody's Municipal Preferred
Asset Coverage Report in accordance with subparagraph (b) of this paragraph 7
relating to any Valuation Date on which the Trust failed to satisfy Moody's
Municipal Preferred Asset Coverage, and relating to the Rating Agency Municipal
Preferred Asset Coverage Cure Date with respect to such failure to satisfy
Moody's Municipal Preferred Asset Coverage, the Trust shall cause the
Independent Accountant to provide to Moody's (if Moody's is then rating the
shares of Municipal Preferred) and the Auction Agent an Accountant's
Confirmation as to such Moody's Municipal Preferred Asset Coverage Report.
(e) If any Accountant's Confirmation delivered pursuant to subparagraph
(c) or (d) of this paragraph 7 shows that an error was made in the Moody's
Municipal Preferred Asset Coverage 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 Moody's Eligible
Assets (if Moody's is then rating the shares of Municipal Preferred), as the
case may be, of the Trust was determined by the Independent Accountant, the
calculation or determination made by such Independent Accountant shall be final
and conclusive and shall be binding on the Trust, and the Trust shall
accordingly amend and deliver the Moody's Municipal Preferred Asset Coverage
Report to Moody's (if Moody's is then rating the shares of Municipal Preferred)
and the Auction Agent promptly following receipt by the Trust of such
Accountant's Confirmation.
(f) On or before 5:00 p.m., New York City time, on the first Business
Day after the Date of Original Issue of any shares of Municipal Preferred, the
Trust shall complete and deliver to Moody's (if Moody's is then rating the
shares of Municipal Preferred) a Moody's Municipal Preferred Asset Coverage
Report as of the close of business on such Date of Original Issue.
(g) On or before 5:00 p.m., New York City time, on the third Business
Day after the Trust shall have redeemed Common Shares, the Trust will complete
and deliver (i) a Fitch Municipal Preferred Asset Coverage Report to Fitch and
(ii) a Moody's Municipal Preferred Asset Coverage Report to Moody's as of the
date of such event. In addition, on or before 5:00P.M., New York City time, on
the third Business Day after the ratio of the Discounted Value of Moody's
Eligible Assets to the Municipal Preferred Basic Maintenance Amount is less than
or equal to 105%, the Trust shall complete and deliver to Moody's a Moody's
Municipal Preferred Asset Coverage Report as of the date of such event.
8. [Reserved].
9. Restrictions on Dividends and Other Distributions.
(a) Dividends on Preferred Shares Other Than Municipal Preferred.
Except as set forth in the next sentence, no dividends shall be declared or paid
or set apart for payment on the shares of any class or series of shares of
beneficial interest of the Trust ranking, as to the payment of dividends, on a
parity with shares of Municipal Preferred (including, without limitation, VMTP
Shares) for any period unless full cumulative dividends have been or
contemporaneously are declared and paid on the shares of each series of
Municipal Preferred through its most recent Dividend Payment Date. When
dividends are not paid in full upon the shares of each series of Municipal
Preferred through its most recent Dividend Payment Date or upon the shares of
any other class or series of shares of beneficial interest of the Trust ranking
on a parity as to the payment of dividends with shares of Municipal Preferred
(including, without limitation, VMTP Shares) through their most recent
respective dividend payment dates, all dividends declared upon shares of
Municipal Preferred and any other such class or series of shares of beneficial
interest ranking on a parity as to the payment of dividends with shares of
Municipal Preferred shall be declared pro rata so that the amount of dividends
declared per share on shares of Municipal Preferred and such other class or
series of shares of beneficial interest shall in all cases bear to each other
the same ratio that accumulated dividends per share on the shares of Municipal
Preferred and such other class or series of shares of beneficial interest bear
to each other (for purposes of this sentence, the amount of dividends declared
per share of Municipal Preferred shall be based on the Applicable Rate for such
shares for the Dividend Periods during which dividends were not paid in full).
(b) Dividends and Other Distributions With Respect to Common Shares
Under the 1940 Act. The Board of Trustees shall not declare any dividend
(except a dividend payable in Common Shares), or declare any other distribution,
upon the Common Shares, or purchase Common Shares, unless in every such case the
Preferred Shares have, at the time of any such declaration or purchase, an asset
coverage (as defined in and determined pursuant to the 1940 Act) of at least
200% (or such other asset coverage as may in the future be specified in or under
the 1940 Act as the minimum asset coverage for senior securities which are
shares or stock of a closed-end investment company as a condition of declaring
dividends on its common shares or stock) after deducting the amount of such
dividend, distribution or purchase price, as the case may be.
(c) Other Restrictions on Dividends and Other Distributions. For so
long as any share of Municipal Preferred is outstanding, and except as set forth
in subparagraph (a) of this paragraph 9 and paragraph 12(c) of Part I of this
Section 12.1, (A) the Trust shall not declare, pay or set apart for payment any
dividend or other distribution (other than a dividend or distribution paid in
shares of, or in options, warrants or rights to subscribe for or purchase,
Common Shares or other shares, if any, ranking junior to the shares of Municipal
Preferred as to the payment of dividends and the distribution of assets upon
dissolution, liquidation or winding up) in respect of the Common Shares or any
other shares of the Trust ranking junior to or on a parity with the shares of
Municipal Preferred as to the payment of dividends or the distribution of assets
upon dissolution, liquidation or winding up, or call for redemption, redeem,
purchase or otherwise acquire for consideration any Common Shares or any other
such junior shares (except by conversion into or exchange for shares of the
Trust ranking junior to the shares of Municipal Preferred as to the payment of
dividends and the distribution of assets upon dissolution, liquidation or
winding up), or any such parity shares (except by conversion into or exchange
for shares of the Trust ranking junior to or on a parity with Municipal
Preferred as to the payment of dividends and the distribution of assets upon
dissolution, liquidation or winding up), unless (i) full cumulative dividends on
shares of each series of Municipal Preferred through its most recently ended
Dividend Period shall have been paid or shall have been declared and sufficient
funds for the payment thereof deposited with the Auction Agent and (ii) the
Trust has redeemed the full number of shares of Municipal Preferred required to
be redeemed by any provision for mandatory redemption pertaining thereto, and
(B) the Trust shall not declare, pay or set apart for payment any dividend or
other distribution (other than a dividend or distribution paid in shares of, or
in options, warrants or rights to subscribe for or purchase, Common Shares or
other shares, if any, ranking junior to shares of Municipal Preferred as to the
payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up) in respect of Common Shares or any other shares of
the Trust ranking junior to shares of Municipal Preferred as to the payment of
dividends or the distribution of assets upon dissolution, liquidation or winding
up, or call for redemption, redeem, purchase or otherwise acquire for
consideration any Common Shares or any other such junior shares (except by
conversion into or exchange for shares of the Trust ranking junior to shares of
Municipal Preferred as to the payment of dividends and the distribution of
assets upon dissolution, liquidation or winding up), unless immediately after
such transaction the Trust satisfies Moody's Municipal Preferred Asset Coverage
and Fitch Municipal Preferred Asset Coverage.
10. Rating Agency Restrictions.
For so long as any shares of Municipal Preferred are outstanding and Fitch
is rating such shares, the Trust will not, unless it has received confirmation
from Fitch that any such action would not impair the ratings then assigned by
Fitch to such shares, issue additional shares of any series of Municipal
Preferred or any class or series of shares ranking prior to or on a parity with
shares of Municipal Preferred with respect to the payment of dividends or the
distribution of assets upon dissolution, liquidation or winding up of the Trust,
or reissue any shares of Municipal Preferred previously purchased or redeemed by
the Trust.
In addition, for so long as any shares of Municipal Preferred are
outstanding and Moody's is rating such shares, the Trust will not, unless it has
received written confirmation from Moody's that any such action would not impair
the ratings then assigned by Moody's to such shares, engage in any one or more
of the following transactions:
(a) purchase or sell futures contracts, write, purchase or sell options
on futures contracts or write put options (except covered put options) or call
options (except covered call options) on portfolio securities except that the
Trust may purchase or sell futures contracts based on the Bond Buyer Municipal
Bond Index (the "Municipal Index") or United States Treasury Bonds or Notes
("Treasury Bonds") and write, purchase or sell put and call options on such
contracts (collectively, "Hedging Transactions"), subject to the following
limitations:
(i) the Trust will not engage in any Hedging Transaction based on
the Municipal Index (other than transactions which terminate a futures
contract or option held by the Trust by the Trust's taking an opposite
position thereto ("Closing Transactions")), which would cause the Trust at
the time of such transaction to own or have sold the least of (A) more
than 1,000 outstanding futures contracts based on the Municipal Index, (B)
outstanding futures contracts based on the Municipal Index exceeding in
number 25% of the quotient of the Market Value of the Trust's total assets
divided by $1,000 or (C) outstanding futures contracts based on the
Municipal Index exceeding in number 10% of the average number of daily
open interest futures contracts based on the Municipal Index in the 30
days preceding the time of effecting such transaction as reported by The
Wall Street Journal.
(ii) the Trust will not engage in any Hedging Transaction based on
Treasury Bonds (other than Closing Transactions) which would cause the
Trust at the time of such transaction to own or have sold the lesser of
(A) outstanding futures contracts based on Treasury Bonds exceeding in
number 50% of the quotient of the Market Value of the Trust's total assets
divided by $100,000 ($200,000 in the case of a two-year United States
Treasury Note) or (B) outstanding futures contracts based on Treasury
Bonds exceeding in number 10% of the average number of daily traded
futures contracts based on Treasury Bonds in the 30 days preceding the
time of effecting such transaction as reported by The Wall Street Journal;
(iii) the Trust will engage in Closing Transactions to close out
any outstanding futures contract which the Trust owns or has sold or any
outstanding option thereon owned by the Trust in the event (A) the Trust
fails to maintain Moody's Municipal Preferred Asset Coverage on two
consecutive Valuation Dates and (B) the Trust is required to pay Variation
Margin on the second such Valuation Date;
(iv) the Trust will engage in a Closing Transaction to close out
any outstanding futures contract or option thereon in the month prior to
the delivery month under the terms of such futures contract or option
thereon unless the Trust holds the securities deliverable under such
terms; and
(v) when the Trust writes a futures contract or option thereon, it
will maintain any liquid assets for Moody's purposes in a segregated
account with the Trust's custodian, so that the amount so segregated plus
the amount of Initial Margin and Variation Margin held in the account of
or on behalf of the Trust's broker with respect to such futures contract
or option equals the Market Value of the futures contract or option, or,
in the event the Trust writes a futures contract or option thereon which
requires delivery of an underlying security, it shall hold such underlying
security in its portfolio.
For purposes of determining whether the Trust has Moody's Municipal
Preferred Asset Coverage, the Discounted Value of cash or securities held for
the payment of Initial Margin or Variation Margin shall be zero and the
aggregate Discounted Value of Moody's Eligible Assets shall be reduced by an
amount equal to (I) 30% of the aggregate settlement value, as marked to market,
of any outstanding futures contracts based on the Municipal Index which are
owned by the Trust plus (II) 25% of the aggregate settlement value, as marked to
market, of any outstanding futures contracts based on Treasury Bonds which
contracts are owned by the Trust.
(b) borrow money, except that the Trust may, without obtaining the
written confirmation described above, borrow money for the purpose of clearing
securities transactions if (i) Moody's Municipal Preferred Asset Coverage would
continue to be satisfied after giving effect to such borrowing (which shall
mean, for purposes of calculating the Municipal Preferred Basic Maintenance
Amount, adding the amount of the liability for such borrowing to the calculation
of the Municipal Preferred Basic Maintenance Amount under subparagraph (F) under
the definition of that term in Part I of this Section 12.1) and (ii) such
borrowing (A) is privately arranged with a bank or other person and is evidenced
by a promissory note or other evidence of indebtedness that is not intended to
be publicly distributed or (B) is for "temporary purposes," is evidenced by a
promissory note or other evidence of indebtedness and is an amount not exceeding
the lesser of $10 million or 5% of the value of the total assets of the Trust at
the time of the borrowing; for purposes of the foregoing, "temporary purpose"
means that the borrowing is to be repaid within sixty days and is not to be
extended or renewed;
(c) issue additional shares of any series of Municipal Preferred or any
class or series of shares ranking prior to or on a parity with shares of
Municipal Preferred with respect to the payment of dividends or the distribution
of assets upon dissolution, liquidation or winding up of the Trust, or reissue
any shares of Municipal Preferred previously purchased or redeemed by the Trust;
(d) engage in any short sales of securities;
(e) lend securities;
(f) merge or consolidate into or with any corporation;
(g) change the pricing service (currently both Interactive Data System
and Standard & Poor's J.J. Kenny Evaluation Services are used by the Trust)
referred to in the definition of Market Value to a pricing service other than
Interactive Data System or Standard & Poor's J.J. Kenny Evaluation Services; or
(h) enter into reverse repurchase agreements.
11. Redemption.
(a) Optional Redemption.
(i) Subject to the provisions of subparagraph (v) of this
subparagraph (a), shares of Municipal Preferred of any series may be
redeemed, at the option of the Trust, as a whole or from time to time in
part, on the second Business Day preceding any Dividend Payment Date for
shares of such series, out of funds legally available therefor, at a
redemption price per share equal to the sum of $25,000 plus an amount
equal to accumulated but unpaid dividends thereon (whether or not earned
or declared) to (but not including) the date fixed for redemption;
provided, however, that (1) unless otherwise provided herein, shares of a
series of Municipal Preferred are redeemable by the Trust during the
Initial Rate Period thereof only on the second Business Day next preceding
the last Dividend Payment Date for such Initial Rate Period; and (2)
subject to subparagraph (ii) of this subparagraph (a), the Notice of
Special Rate Period relating to a Special Rate Period of shares of a
series of Municipal Preferred, as delivered to the Auction Agent and filed
with the Secretary of the Trust, may provide that shares of such series
shall not be redeemable during the whole or any part of such Special Rate
Period (except as provided in subparagraph (iv) of this subparagraph (a))
or shall be redeemable during the whole or any part of such Special Rate
Period only upon payment of such redemption premium or premiums as shall
be specified therein ("Special Redemption Provisions").
(ii) A Notice of Special Rate Period relating to shares of a series
of Municipal Preferred for a Special Rate Period thereof may contain
Special Redemption Provisions only if the Trust's Board of Trustees, after
consultation with the Broker-Dealer or Broker-Dealers for such Special
Rate Period of shares of such series, determines that such Special
Redemption Provisions are in the best interest of the Trust.
(iii) If fewer than all of the outstanding shares of a series of
Municipal Preferred are to be redeemed pursuant to subparagraph (i) of
this subparagraph (a), the number of shares of such series to be redeemed
shall be determined by the Board of Trustees, and such shares shall be
redeemed pro rata from the Holders of shares of such series in proportion
to the number of shares of such series held by such Holders.
(iv) Subject to the provisions of subparagraph (v) of this
subparagraph (a), shares of any series of Municipal Preferred may be
redeemed, at the option of the Trust, as a whole but not in part, out of
funds legally available therefor, on the first day following any Dividend
Period thereof included in a Rate Period consisting of more than 364 Rate
Period Days if, on the date of determination of the Applicable Rate for
shares of such series for such Rate Period, such Applicable Rate equaled
or exceeded on such date of determination the Treasury Note Rate for such
Rate Period, at a redemption price per share equal to the sum of $25,000
plus an amount equal to accumulated but unpaid dividends thereon (whether
or not earned or declared) to (but not including) to the date fixed for
redemption.
(v) The Trust may not on any date mail a Notice of Redemption
pursuant to subparagraph (c) of this paragraph 11 in respect of a
redemption contemplated to be effected pursuant to this subparagraph (a)
unless on such date (a) the Trust 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 (including any
applicable premium) due to Holders of shares of Municipal Preferred by
reason of the redemption of such shares on such redemption date and (b)
the Trust satisfies Moody's Municipal Preferred Asset Coverage (if Moody's
is then rating the shares of Municipal Preferred) and Fitch Municipal
Preferred Asset Coverage (if Fitch is then rating the shares of Municipal
Preferred), and would maintain both Moody's Municipal Preferred Asset
Coverage (if Moody's is then rating the shares of Municipal Preferred) and
Fitch Municipal Preferred Asset Coverage (if Fitch is then rating the
shares of Municipal Preferred) immediately subsequent to such redemption
if such redemption were to occur on such date. For purposes of
determining in clause (b) of the preceding sentence whether the Trust has
maintained Moody's Municipal Preferred Asset Coverage, the Moody's
Discount Factors applicable to Moody's Eligible Assets shall be determined
by reference to the first Exposure Period longer than the Exposure Period
then applicable to the Trust, as described in the definition of Moody's
Discount Factor herein.
(b) Mandatory Redemption. The Trust shall redeem, at a redemption price
equal to $25,000 per share plus accumulated but unpaid dividends thereon
(whether or not earned or declared) to (but not including) the date fixed by the
Board of Trustees for redemption, certain of the shares of Municipal Preferred
and other Preferred Shares, if the Trust fails to maintain either Moody's
Municipal Preferred Asset Coverage or Fitch Municipal Preferred Asset Coverage,
or fails to maintain the 1940 Act Municipal Preferred Asset Coverage, in
accordance with the requirements of the Rating Agency or Rating Agencies then
rating the shares of Municipal Preferred, and such failure is not cured on or
before the Rating Agency Municipal Preferred Asset Coverage Cure Date or the
1940 Act Cure Date, as the case may be (as applicable, the "Municipal Preferred
Cure Date"). The number of shares of Municipal Preferred and other Preferred
Shares to be redeemed shall be equal to the lesser of (i) the minimum number of
shares of Municipal Preferred, together with all other Preferred Shares,
including VMTP Shares, subject to redemption or retirement, the redemption of
which, if deemed to have occurred immediately prior to the opening of business
on the Municipal Preferred Cure Date, would have resulted in the Trust
maintaining both Moody's Municipal Preferred Asset Coverage and Fitch Municipal
Preferred Asset Coverage or maintaining the 1940 Act Municipal Preferred Asset
Coverage, as the case may be, on such Municipal Preferred Cure Date (provided,
however, that if there is no such minimum number of shares of Municipal
Preferred and other Preferred Shares, including VMTP Shares, the redemption or
retirement of which would have had such result, all shares of Municipal
Preferred and Preferred Shares, including VMTP Shares, then outstanding shall be
redeemed), and (ii) the maximum number of shares of Municipal Preferred,
together with all other Preferred Shares, including VMTP Shares, subject to
redemption or retirement, that can be redeemed out of funds expected to be
legally available therefor in accordance with the Declaration, the By-laws, this
Statement and applicable law. In determining the shares of Municipal Preferred
required to be redeemed in accordance with the foregoing, the Trust shall
allocate the number required to be redeemed to satisfy both Fitch Municipal
Preferred Asset Coverage and Moody's Municipal Preferred Asset Coverage or the
1940 Act Municipal Preferred Asset Coverage, as the case may be, pro rata among
shares of Municipal Preferred and other Preferred Shares, including VMTP Shares,
(and, then pro rata among each series of Municipal Preferred) subject to
redemption or retirement. The Trust shall effect such redemption on the date
fixed by the Trust therefor, which date shall not be earlier than 20 days nor
later than 40 days after such Municipal Preferred Cure Date, except that if the
Trust does not have funds legally available for the redemption of all of the
required number of shares of Municipal Preferred and other Preferred Shares,
including VMTP Shares, which are subject to redemption or retirement or the
Trust otherwise is unable to effect such redemption on or prior to 40 days after
such Municipal Preferred Cure Date, the Trust shall redeem those shares of
Municipal Preferred and other Preferred Shares, including VMTP Shares, which it
was unable to redeem on the earliest practicable date on which it is able to
effect such redemption. If fewer than all of the outstanding shares of a series
of Municipal Preferred are to be redeemed pursuant to this subparagraph (b), the
number of shares of such series to be redeemed shall be redeemed pro rata from
the Holders of shares of such series in proportion to the number of shares of
such series held by such Holders. See also Sections 2.4(a), 2.4(c) and 2.5(b)
of Exhibit 2 for additional mandatory redemption provisions relating to the
Municipal Preferred.
(c) Notice of Redemption. If the Trust shall determine or be required
to redeem shares of a series of Municipal Preferred pursuant to subparagraph (a)
or (b) of this paragraph 11, it shall mail a Notice of Redemption with respect
to such redemption by first class mail, postage prepaid, to each Holder of the
shares of such series to be redeemed, at such Holder's address as the same
appears on the record books of the Trust on the record date established by the
Board of Trustees. Such Notice of Redemption shall be so mailed not less than
20 nor more than 45 days prior to the date fixed for redemption. Each such
Notice of Redemption shall state: (i) the redemption date; (ii) the number of
shares of Municipal Preferred to be redeemed and the series thereof; (iii) the
CUSIP number for shares of such series; (iv) the Redemption Price; (v) the place
or places where the certificate(s) for such shares (properly endorsed or
assigned for transfer, if the Board of Trustees shall so require and the Notice
of Redemption shall so state) are to be surrendered for payment of the
Redemption Price; (vi) that dividends on the shares to be redeemed will cease to
accumulate on such redemption date; and (vii) the provisions of this
paragraph 11 under which such redemption is made. If fewer than all shares of a
series of Municipal Preferred held by any Holder of shares of Municipal
Preferred are to be redeemed, the Notice of Redemption mailed to such Holder
shall also specify the number of shares of such series to be redeemed from such
Holder. The Trust may provide in any Notice of Redemption relating to an
optional redemption contemplated to be effected pursuant to subparagraph (a) of
this paragraph 11 that such redemption is subject to one or more conditions
precedent and that the Trust shall not be required to make such redemption
unless each such condition shall have been satisfied at the time or times and in
the manner specified in such Notice of Redemption.
(d) No Redemption of Shares of Municipal Preferred Under Certain
Circumstances. Notwithstanding the provisions of subparagraphs (a) or (b) of
this paragraph 11, if any dividends on shares of a series of Municipal Preferred
(whether or not earned or declared) are in arrears, no shares of such series
shall be redeemed unless all outstanding shares of such series are
simultaneously redeemed, and the Trust shall not purchase or otherwise acquire
any shares of such series; provided, however, that the foregoing shall not
prevent the purchase or acquisition of all outstanding shares of such series of
Municipal Preferred pursuant to the successful completion of an otherwise lawful
purchase or exchange offer made on the same terms to, and accepted by, Holders
of all outstanding shares of such series. See also Section 2.5(d)(iv) of
Exhibit 2 for additional provisions relating to prohibitions on redemption.
(e) Absence of Funds Available for Redemption. To the extent that any
redemption for which Notice of Redemption has been mailed is not made by reason
of the absence of legally available funds therefor in accordance with the
Declaration, these By-Laws and applicable law, such redemption shall be made as
soon as practicable to the extent such funds become available. Failure to
redeem shares of Municipal Preferred shall be deemed to occur if at any time
after the date specified for redemption in a Notice of Redemption the Trust
shall have failed, for any reason whatsoever, to deposit in trust with the
Auction Agent the Redemption Price with respect to any shares of which such
Notice of Redemption has been mailed; provided, however, that the foregoing
shall not apply in the case of the Trust's failure to deposit in trust with the
Auction Agent the Redemption Price with respect to any shares where (1) the
Notice of Redemption relating to such redemption provided that such redemption
was subject to one or more conditions precedent and (2) any such condition
precedent shall not have been satisfied at the time or times and in the manner
specified in such Notice of Redemption. Notwithstanding the fact that the Trust
may not have redeemed shares of Municipal Preferred for which a Notice of
Redemption has been mailed, dividends may be declared and paid on shares of
Municipal Preferred and shall include those shares of Municipal Preferred for
which a Notice of Redemption has been mailed.
(f) Auction Agent as Trustee of Redemption Payments by Trust. All
moneys paid to the Auction Agent for payment of the Redemption Price of shares
of Municipal Preferred called for redemption shall be held in trust by the
Auction Agent for the benefit of Holders of shares of Municipal Preferred so to
be redeemed.
(g) Shares for Which Notice of Redemption Has Been Given Are No Longer
Outstanding. Provided a Notice of Redemption has been mailed pursuant to
subparagraph (c) of this paragraph 11, upon the deposit with the Auction Agent
(on the Business Day next preceding the date fixed for redemption thereby, in
funds available on the next Business Day in The City of New York, New York) of
funds sufficient to redeem the shares of Municipal Preferred that are the
subject of such notice, dividends on such shares shall cease to accumulate and
such shares shall no longer be deemed to be outstanding for any purpose (except
as provided below), and all rights of the Holders of the shares of Municipal
Preferred so called for redemption shall cease and terminate, except the right
of such Holders to receive the Redemption Price, but without any interest or
other additional amount, except as provided in paragraphs 2(e)(i) and 3 of Part
I of this Section 12.1; provided, however, that unless otherwise provided in the
Fitch Criteria, such shares shall be deemed to be outstanding for purposes of
calculating Fitch Municipal Preferred Asset Coverage (but not for the other
purposes specified above, including with respect to the rights of Holders of
shares of Municipal Preferred). Upon surrender in accordance with the Notice of
Redemption of the certificates for any shares of Municipal Preferred so redeemed
(properly endorsed or assigned for transfer, if the Board of Trustees shall so
require and the Notice of Redemption shall so state), the Redemption Price shall
be paid by the Auction Agent to the Holders of shares of Municipal Preferred
subject to redemption. In the case that fewer than all of the shares of
Municipal Preferred represented by any such certificate are redeemed, a new
certificate shall be issued, representing the unredeemed shares, without cost to
the Holder thereof. The Trust shall be entitled to receive from the Auction
Agent, promptly after the date fixed for redemption, any cash deposited with the
Auction Agent in excess of (i) the aggregate Redemption Price of the shares of
Municipal Preferred called for redemption on such date and (ii) all other
amounts to which Holders of shares of Municipal Preferred called for redemption
may be entitled. Any funds so deposited that are unclaimed at the end of 90
days from such redemption date shall, to the extent permitted by law, be repaid
to the Trust, after which time the Holders of shares of Municipal Preferred so
called for redemption may look only to the Trust for payment of the Redemption
Price and all other amounts to which they may be entitled. The Trust shall be
entitled to receive, from time to time after the date fixed for redemption, any
interest on the funds so deposited.
(h) Compliance With Applicable Law. In effecting any redemption
pursuant to this paragraph 11, the Trust shall use its best efforts to comply
with all applicable conditions precedent to effecting such redemption under the
1940 Act and any applicable StateMassachusetts law, but shall effect no
redemption except in accordance with the 1940 Act and any applicable
StateplaceMassachusetts law.
(i) Only Whole Shares of Municipal Preferred May Be Redeemed. In the
case of any redemption pursuant to this paragraph 11, only whole shares of
Municipal Preferred shall be redeemed, and in the event that any provision of
the Declaration or these By-Laws would require redemption of a fractional share,
the Auction Agent shall be authorized to round up so that only whole shares are
redeemed.
12. Liquidation Rights.
(a) Ranking. The shares of a series of Municipal Preferred shall rank on
a parity with each other, with shares of any other series of Municipal Preferred
and with shares of any other class or series of Preferred Shares (including VMTP
Shares) as to the distribution of assets upon dissolution, liquidation or
winding up of the affairs of the Trust. In this regard, the provisions of this
Section 12 shall be applied consistently with Section 2.3 of Exhibit 2 relating
to VMTP Shares such that the Holders of shares of Municipal Preferred and
Holders of VMTP Shares are treated on a parity with one another with respect to
any such distribution.
(b) Distributions to Municipal Preferred Upon Liquidation. Upon the
dissolution, liquidation or winding up of the affairs of the Trust, whether
voluntary or involuntary, the Holders of shares of Municipal Preferred then
outstanding shall be entitled to receive and to be paid out of the assets of the
Trust available for distribution to its shareholders, before any payment or
distribution shall be made on the Common Shares or on any other class of shares
of the Trust ranking junior to the Municipal Preferred upon dissolution,
liquidation or winding up, an amount equal to the Liquidation Preference with
respect to such shares plus an amount equal to all dividends thereon (whether or
not earned or declared) accumulated but unpaid to (but not including) the date
of final distributions in same-day funds, together with any payments required to
be made pursuant to paragraph 3 of Part I of this Section 12.1 in connection
with the liquidation of the Trust. After the payment to the Holders of the
shares of Municipal Preferred of the full preferential amounts provided for in
this subparagraph (b), the Holders of Municipal Preferred as such shall have no
right or claim to any of the remaining assets of the Trust.
(c) Pro Rata Distributions. In the event the assets of the Trust
available for distribution to the Holders of shares of Municipal Preferred upon
any dissolution, liquidation or winding up of the affairs of the Trust, whether
voluntary or involuntary, shall be insufficient to pay in full all amounts to
which such Holders are entitled pursuant to subparagraph (b) of this
paragraph 12, no such distribution shall be made on account of any shares of any
other class or series of Preferred Shares ranking on a parity with the shares of
Municipal Preferred (including, without limitation, VMTP Shares) with respect to
the distribution of assets upon such dissolution, liquidation or winding up
unless proportionate distributive amounts shall be paid on account of the shares
of Municipal Preferred, ratably, in proportion to the full distributable amounts
for which Holders of all such parity shares are respectively entitled upon such
dissolution, liquidation or winding up.
(d) Rights of Junior Shares. Subject to the rights of the Holders of
shares of any series or class or classes of shares ranking on a parity with the
shares of Municipal Preferred with respect to the distribution of assets upon
dissolution, liquidation or winding up of the affairs of the Trust (including,
without limitation, VMTP Shares), after payment shall have been made in full to
the Holders of the shares of Municipal Preferred as provided in subparagraph (b)
of this paragraph 12, but not prior thereto, any other series or class or
classes of shares ranking junior to the shares of Municipal Preferred with
respect to the distribution of assets upon dissolution, liquidation or winding
up of the affairs of the Trust shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed, and the Holders of the shares of Municipal
Preferred shall not be entitled to share therein.
(e) Certain Events Not Constituting Liquidation. Neither the sale of
all or substantially all of the property or business of the Trust, nor the
merger or consolidation of the Trust into or with any Massachusetts business
trust or corporation nor the merger or consolidation of any Massachusetts
business trust or corporation into or with the Trust shall be a dissolution,
liquidation or winding up, whether voluntary or involuntary, for the purposes of
this paragraph 12.
13. Miscellaneous.
(a) Amendment of this Section 12.1 to Add Additional Series of Municipal
Preferred. Subject to the provisions of subparagraph (c) of paragraph 10 of
Part I of this Section 12.1 and the applicable provisions regarding VMTP Shares
in Exhibit 2, the Board of Trustees may, by resolution duly adopted, without
shareholder approval (except as otherwise provided by this Section 12.1 or
required by applicable law), amend Section 12.1 to (1) reflect any amendment
hereto which the Board of Trustees is entitled to adopt pursuant to the terms of
this Section 12.1 without shareholder approval or (2) add additional series of
Municipal Preferred or additional shares of a series of Municipal Preferred (and
terms relating thereto) to the series and shares of Municipal Preferred
theretofore described thereon. Each such additional series and all such
additional shares shall be governed by the terms of this Section 12.1.
(b) [Reserved]
(c) No Fractional Shares. No fractional shares of Municipal Preferred
shall be issued.
(d) Status of Shares of Municipal Preferred Redeemed, Exchanged or
Otherwise Acquired by the Trust. Shares of Municipal Preferred which are
redeemed, exchanged or otherwise acquired by the Trust shall return to the
status of authorized and unissued Preferred Shares without designation as to
series.
(e) Board May Resolve Ambiguities. To the extent permitted by
applicable law, the Board of Trustees may interpret or adjust the provisions of
this Section 12.1 to resolve any inconsistency or ambiguity or to remedy any
formal defect, and may amend this Section 12.1 with respect to any series of
Municipal Preferred prior to the issuance of shares of such series.
(f) Headings Not Determinative. The headings contained in this
Section 12.1 are for convenience of reference only and shall not affect the
meaning or interpretation of this Section 12.1.
(g) Notices. All notices or communications, unless otherwise specified
in these By-Laws or this Section 12.1, shall be sufficiently given if in writing
and delivered in person or mailed by first-class mail, postage prepaid.
PART II
1. Orders.
(a) Prior to the Submission Deadline on each Auction Date for shares of
a series of Municipal Preferred:
(i) each Beneficial Owner of shares of such series may submit to
its Broker-Dealer by telephone or otherwise information as to:
(A) the number of Outstanding shares, if any, of such series
held by such Beneficial Owner which such Beneficial Owner desires to
continue to hold without regard to the Applicable Rate for shares of
such series for the next succeeding Rate Period of such shares;
(B) the number of Outstanding shares, if any, of such series
held by such Beneficial Owner which such Beneficial Owner offers to
sell if the Applicable Rate for shares of such series for the next
succeeding Rate Period of shares of such series shall be less than
the rate per annum specified by such Beneficial Owner; and/or
(C) the number of Outstanding shares, if any, of such series
held by such Beneficial Owner which such Beneficial Owner offers to
sell without regard to the Applicable Rate for shares of such series
for the next succeeding Rate Period of shares of such series; and
(ii) one or more Broker-Dealers, using lists of Potential
Beneficial Owners, shall in good faith for the purpose of conducting a
competitive Auction in a commercially reasonable manner, contact Potential
Beneficial Owners (by telephone or otherwise), including Persons that are
not Beneficial Owners, on such lists to determine the number of shares, if
any, of such series which each such Potential Beneficial Owner offers to
purchase if the Applicable Rate for shares of such series for the next
succeeding Rate Period of shares of such series shall not be less than the
rate per annum specified by such Potential Beneficial Owner.
For purposes hereof, the communication by a Beneficial Owner or Potential
Beneficial Owner to a Broker-Dealer, or by a Broker-Dealer to the Auction Agent,
of information referred to in clause (i)(A), (i)(B), (i)(C) or (ii) of this
subparagraph (a) is hereinafter referred to as an "Order" and collectively as
"Orders" and each Beneficial Owner and each Potential Beneficial Owner placing
an Order with a Broker-Dealer, and such Broker-Dealer placing an Order with the
Auction Agent, is hereinafter referred to as a "Bidder" and collectively as
"Bidders"; an Order containing the information referred to in clause (i)(A) of
this subparagraph (a) is hereinafter referred to as a "Hold Order" and
collectively as "Hold Orders"; an Order containing the information referred to
in clause (i)(B) or (ii) of this subparagraph (a) is hereinafter referred to as
a "Bid" and collectively as "Bids"; and an Order containing the information
referred to in clause (i)(C) of this subparagraph (a) is hereinafter referred to
as a "Sell Order" and collectively as "Sell Orders."
(b)(i) A Bid by a Beneficial Owner or an Existing Holder of shares of a
series of Municipal Preferred subject to an Auction on any Auction Date shall
constitute an irrevocable offer to sell:
(A) the number of Outstanding shares of such series specified in
such Bid if the Applicable Rate for shares of such series determined on
such Auction Date shall be less than the rate specified therein;
(B)such number or a lesser number of Outstanding shares of such
series to be determined as set forth in paragraph 4(a)(iv) of Part II
of this Section 12.1 if the Applicable Rate for shares of such series
determined on such Auction Date shall be equal to the rate specified
therein; or
(C) the number of Outstanding shares of such series specified in
such Bid if the rate specified therein shall be higher than the Maximum
Rate for shares of such series, or such number or a lesser number of
Outstanding shares of such series to be determined as set forth in
paragraph 4(b)(iii) of Part II of this Section 12.1 if the rate
specified therein shall be higher than the Maximum Rate for shares of
such series and Sufficient Clearing Bids for shares of such series do
not exist.
(ii) A Sell Order by a Beneficial Owner or an Existing Holder of shares
of a series of Municipal Preferred subject to an Auction on any Auction Date
shall constitute an irrevocable offer to sell:
(A) the number of Outstanding shares of such series specified
in such Sell Order; or
(B) such number or a lesser number of Outstanding shares of
such series as set forth in paragraph 4(b)(iii) of Part II of this
Section 12.1 if Sufficient Clearing Bids for shares of such series
do not exist;
provided, however, that a Broker-Dealer that is an Existing Holder with
respect to shares of a series of Municipal Preferred shall not be liable
to any Person for failing to sell such shares pursuant to a Sell Order
described in the proviso to paragraph 2(c) of Part II of this Section 12.1
if (1) such shares were transferred by the Beneficial Owner thereof
without compliance by such Beneficial Owner or its transferee Broker-
Dealer (or other transferee person, if permitted by the Trust) with the
provisions of paragraph 7 of Part II of this Section 12.1 or (2) such
Broker-Dealer has informed the Auction Agent pursuant to the terms of its
Broker-Dealer Agreement that, according to such Broker-Dealer's records,
such Broker-Dealer believes it is not the Existing Holder of such shares.
(iii) A Bid by a Potential Beneficial Holder or a Potential Holder
of shares of a series of Municipal Preferred subject to an Auction on any
Auction Date shall constitute an irrevocable offer to purchase:
(A) the number of Outstanding shares of such series specified
in such Bid if the Applicable Rate for shares of such series
determined on such Auction Date shall be higher than the rate
specified therein; or
(B) such number or a lesser number of Outstanding shares of
such series as set forth in paragraph 4(a)(v) of Part II of this
Section 12.1 if the Applicable Rate for shares of such series
determined on such Auction Date shall be equal to the rate specified
therein.
(c) No Order for any number of shares of Municipal Preferred other than
whole shares shall be valid.
2. Submission of Orders by Broker-Dealers to Auction Agent.
(a) Each Broker-Dealer shall submit in writing to the Auction Agent
prior to the Submission Deadline on each Auction Date all Orders for shares of
Municipal Preferred of a series subject to an Auction on such Auction Date
obtained by such Broker-Dealer, designating itself (unless otherwise permitted
by the Trust) as an Existing Holder in respect of shares subject to Orders
submitted or deemed submitted to it by Beneficial Owners and as a Potential
Holder in respect of shares subject to Orders submitted to it by Potential
Beneficial Owners, and shall specify with respect to each Order for such shares:
(i) the name of the Bidder placing such Order (which shall be the
Broker-Dealer unless otherwise permitted by the Trust);
(ii) the aggregate number of shares of such series that are the subject
of such Order;
(iii) to the extent that such Bidder is an Existing Holder of shares of
such series:
(A) the number of shares, if any, of such series subject to
any Hold Order of such Existing Holder;
(B) the number of shares, if any, of such series subject to
any Bid of such Existing Holder and the rate specified in such Bid;
and
(C) the number of shares, if any, of such series subject to
any Sell Order of such Existing Holder; and
(iv) to the extent such Bidder is a Potential Holder of shares of such
series, the rate and number of shares of such series specified in such Potential
Holder's Bid.
(b) If any rate 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%.
(c) If an Order or Orders covering all of the Outstanding shares of
Municipal Preferred of a series held by any 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 by or on behalf of such Existing Holder
covering the number of Outstanding shares of such series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent; provided,
however, that if an Order or Orders covering all of the Outstanding shares of
such series held by any Existing Holder is not submitted to the Auction Agent
prior to the Submission Deadline for an Auction relating to a Special Rate
Period consisting of more than 28 Rate Period Days, the Auction Agent shall deem
a Sell Order to have been submitted by or on behalf of such Existing Holder
covering the number of Outstanding shares of such series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent.
(d) If one or more Orders of an Existing Holder is submitted to the
Auction Agent covering in the aggregate more than the number of Outstanding
shares of Municipal Preferred of a series subject to an Auction held by such
Existing Holder, such Orders shall be considered valid in the following order of
priority:
(i) all Hold Orders for shares of such series shall be considered
valid, but only up to and including in the aggregate the number of
Outstanding shares of such series held by such Existing Holder, and if the
number of shares of such series subject to such Hold Order exceeds the
number of Outstanding shares of such series held by such Existing Holder,
the number of shares subject to each such Hold Order shall be reduced pro
rata to cover the number of Outstanding shares of such series held by such
Existing Holder;
(ii) (A) any Bid for shares of such series shall be considered valid
up to and including the excess of the number of Outstanding shares of such
series held by such Existing Holder over the number of shares of such
series subject to any Hold Orders referred to in clause (i) above;
(B) subject to subclause (A), if more than one Bid of an
Existing Holder for shares of such series is submitted to the
Auction Agent with the same rate and the number of Outstanding
shares of such series subject to such Bids is greater than such
excess, such Bids shall be considered valid up to and including the
amount of such excess, and the number of shares of such series
subject to each Bid with the same rate shall be reduced pro rata to
cover the number of shares of such series equal to such excess;
(C) subject to subclauses (A) and (B), if more than one Bid
of an Existing Holder for shares of such series is submitted to the
Auction Agent with different rates, such Bids shall be considered
valid in the ascending order of their respective rates up to and
including the amount of such excess; and
(D) in any such event, the number, if any, of such Outstanding
shares of such series subject to any portion of Bids considered not
valid in whole or in part under this clause (ii) shall be treated as
the subject of a Bid for shares of such series by or on behalf of a
Potential Holder at the rate therein specified; and
(iii) all Sell Orders for shares of such series shall be considered valid
up to and including the excess of the number of Outstanding shares of such
series held by such Existing Holder over the sum of shares of such series
subject to valid Hold Orders referred to in clause (i) above and valid Bids
referred to in clause (ii) above.
(e) If more than one Bid for one or more shares of a series of Municipal
Preferred is submitted to the Auction Agent by or on behalf of any Potential
Holder, each such Bid submitted shall be a separate Bid with the rate and number
of shares therein specified.
(f) 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.
3. Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate.
(a) Not earlier than the Submission Deadline on each Auction Date for
shares of a series of Municipal Preferred, the Auction Agent shall assemble all
valid Orders submitted or deemed submitted to it by the Broker-Dealers in
respect of shares of such series (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 collectively as ?Submitted Hold
Orders,? ?Submitted Bids? or ?Submitted Sell Orders,? as the case may be, or as
?Submitted Orders?) and shall determine for such series:
(i) the excess of the number of Outstanding shares of such series over
the number of Outstanding shares of such series subject to Submitted Hold Orders
(such excess being hereinafter referred to as the ?Available Municipal
Preferred? of such series);
(ii) from the Submitted Orders for shares of such series whether:
(A) the number of Outstanding shares of such series subject to
Submitted Bids of Potential Holders specifying one or more rates equal to
or lower than the Maximum Rate for shares of such series;
exceeds or is equal to the sum of:
(B) the number of Outstanding shares of such series subject to
Submitted Bids of Existing Holders specifying one or more rates higher
than the Maximum Rate for shares of such series; and
(C) the number of Outstanding shares of such series subject to
Submitted Sell Orders
(in the event such excess or such equality exists (other than because
the number of shares of such series in subclauses (B) and (C) above is
zero because all of the Outstanding shares of such series are subject to
Submitted Hold Orders), such Submitted Bids in subclause (A) above being
hereinafter referred to collectively as ?Sufficient Clearing Bids? for
shares of such series); and
(iii) if Sufficient Clearing Bids for shares of such series exist, the
lowest rate specified in such Submitted Bids (the ?Winning Bid Rate? for shares
of such series) which if:
(A)(I) each such Submitted Bid of Existing Holders specifying such
lowest rate and (II) all other such Submitted Bids of Existing Holders
specifying lower rates were rejected, thus entitling such Existing
Holders to continue to hold the shares of such series that are subject
to such Submitted Bids; and
(B)(I) each such Submitted Bid of Potential Holders specifying such
lowest rate and (II) all other such Submitted Bids of Potential Holders
specifying lower rates were accepted;
would result in such Existing Holders described in subclause (A) above
continuing to hold an aggregate number of Outstanding shares of such
series which, when added to the number of Outstanding shares of such
series to be purchased by such Potential Holders described in subclause
(B) above, would equal not less than the Available Municipal Preferred of
such series.
(b) Promptly after the Auction Agent has made the determinations
pursuant to subparagraph (a) of this paragraph 3, the Auction Agent shall advise
the Trust of the Maximum Rate for shares of the series of Municipal Preferred
for which an Auction is being held on the Auction Date and, based on such
determination, the Applicable Rate for shares of such series for the next
succeeding Rate Period thereof as follows:
(i) if Sufficient Clearing Bids for shares of such series exist,
that the Applicable Rate for all shares of such series for the next
succeeding Rate Period thereof shall be equal to the Winning Bid Rate for
shares of such series so determined;
(ii) if Sufficient Clearing Bids for shares of such series do not
exist (other than because all of the Outstanding shares of such series
are subject to Submitted Hold Orders), that the Applicable Rate for all
shares of such series for the next succeeding Rate Period thereof shall
be equal to the Maximum Rate for shares of such series; or
(iii) if all of the Outstanding shares of such series are subject to
Submitted Hold Orders, that the Applicable Rate for all shares of such
series for the next succeeding Rate Period thereof shall be as set forth
in subparagraph (c) of this paragraph 3.
(c) For purposes of subparagraph (b)(iii) of this paragraph 3, the
Applicable Rate for shares of such series for the next succeeding Rate Period of
shares of such series shall be equal to the lesser of the Kenny Index (if such
Rate Period consists of fewer than 183 Rate Period Days) or the product of (A)
(I) the "AA" Composite Commercial Paper Rate on such Auction Date for such Rate
Period, if such Rate Period consists of fewer than 183 Rate Period Days; (II)
the Treasury Bill Rate on such Auction Date for such Rate Period, if such Rate
Period consists of more than 182 but fewer than 365 Rate Period Days; or (III)
the Treasury Note Rate on such Auction Date for such Rate Period, if such Rate
Period is more than 364 Rate Period Days (the rate described in the foregoing
clause (A)(I), (II) or (III), as applicable, being referred to herein as the
"Benchmark Rate") and (B) 1 minus the greater of the maximum marginal regular
Federal individual income tax rate applicable to ordinary income or the maximum
marginal regular Federal corporate income tax rate applicable to ordinary
income; provided, however, that if the Trust has notified the Auction Agent of
its intent to allocate to shares of such series in such Rate Period any net
capital gains or other income taxable for Federal income tax purposes ("Taxable
Income"), the Applicable Rate for shares of such series for such Rate Period
will be (i) if the Taxable Yield Rate (as defined below) is greater than the
Benchmark Rate, then the Benchmark Rate, or (ii) if the Taxable Yield Rate is
less than or equal to the Benchmark Rate, then the rate equal to the sum of (x)
the lesser of the Kenny Index (if such Rate Period consists of fewer than 183
Rate Period Days) or the product of the Benchmark Rate multiplied by the factor
set forth in the preceding clause (B) and (y) the product of the maximum
marginal regular Federal individual income tax rate applicable to ordinary
income or the maximum marginal regular Federal corporate income tax applicable
to ordinary income, whichever is greater, multiplied by the Taxable Yield Rate.
For purposes of the foregoing, "Taxable Yield Rate" means the rate determined by
(a) dividing the amount of Taxable Income available for distribution per such
share of Municipal Preferred by the number of days in the Dividend Period in
respect of which such Taxable Income is contemplated to be distributed, (b)
multiplying the amount determined in (a) above by 365 (in the case of a Dividend
Period of 7 Rate Period Days) or 360 (in the case of any other Dividend Period),
and (c) dividing the amount determined in (b) above by $25,000.
4. Acceptance and Rejection of Submitted Bids and Submitted Sell Orders
and Allocation of Shares. Existing Holders shall continue to hold the shares of
Municipal Preferred that are subject to Submitted Hold Orders, and, based on the
determinations made pursuant to subparagraph (a) of paragraph 3 of Part II of
this Section 12.1, the Submitted Bids and Submitted Sell Orders shall be
accepted or rejected by the Auction Agent and the Auction Agent shall take such
other action as set forth below:
(a) If Sufficient Clearing Bids for shares of a series of Municipal
Preferred have been made, all Submitted Sell Orders with respect to shares of
such series shall be accepted and, subject to the provisions of subparagraphs
(d) and (e) of this paragraph 4, Submitted Bids with respect to shares of such
series shall be accepted or rejected as follows in the following order of
priority and all other Submitted Bids with respect to shares of such series
shall be rejected:
(i) Existing Holders' Submitted Bids for shares of such series
specifying any rate that is higher than the Winning Bid Rate for shares of
such series shall be accepted, thus requiring each such Existing Holder to
sell the shares of Municipal Preferred subject to such Submitted Bids;
(ii) Existing Holders' Submitted Bids for shares of such series
specifying any rate that is lower than the Winning Bid Rate for shares of
such series shall be rejected, thus entitling each such Existing Holder to
continue to hold the shares of Municipal Preferred subject to such
Submitted Bids;
(iii) Potential Holders' Submitted Bids for shares of such series
specifying any rate that is lower than the Winning Bid Rate for shares of
such series shall be accepted;
(iv) each Existing Holders' Submitted Bid for shares of such series
specifying a rate that is equal to the Winning Bid Rate for shares of such
series shall be rejected, thus entitling such Existing Holder to continue
to hold the share of Municipal Preferred subject to such Submitted Bid,
unless the number of Outstanding shares of Municipal Preferred subject to
all such Submitted Bids shall be greater than the number of shares of
Municipal Preferred ("remaining shares") in the excess of the Available
Municipal Preferred of such series over the number of shares of Municipal
Preferred subject to Submitted Bids described in clauses (ii) and (iii) of
this subparagraph (a), in which event such Submitted Bid of such Existing
Holder shall be rejected in part, and such Existing Holder shall be
entitled to continue to hold shares of Municipal Preferred subject to such
Submitted Bid, but only in an amount equal to the number of shares of
Municipal Preferred of such series obtained by multiplying the number of
remaining shares by a fraction, the numerator of which shall be the number
of Outstanding shares of Municipal Preferred held by such Existing Holder
subject to such Submitted Bid and the denominator of which shall be the
aggregate number of Outstanding shares of Municipal Preferred subject to
such Submitted Bids made by all such Existing Holders that specified a
rate equal to the Winning Bid Rate for shares of such series; and
(v) each Potential Holder's Submitted Bid for shares of such series
specifying a rate that is equal to the Winning Bid Rate of shares of such
series shall be accepted but only in an amount equal to the number of
shares of such series obtained by multiplying the number of shares in the
excess of the Available Municipal Preferred of such series over the number
of shares of Municipal Preferred subject to Submitted Bids described in
clauses (ii) through (iv) of this subparagraph (a) by a fraction, the
numerator of which shall be the number of Outstanding shares of Municipal
Preferred subject to such Submitted Bids and the denominator of which
shall be the aggregate number of Outstanding shares of Municipal Preferred
subject to such Submitted Bids made by all such Potential Holders that
specified a rate equal to the Winning Bid Rate for shares of such series.
(b) If Sufficient Clearing Bids for shares of a series of Municipal
Preferred have not been made (other than because all of the Outstanding shares
of such series are subject to Submitted Hold Orders), subject to the provisions
of subparagraph (d) of this paragraph 4, Submitted Orders for shares of such
series shall be accepted or rejected as follows in the following order of
priority and all other Submitted Bids for shares of such series shall be
rejected:
(i) Existing Holders' Submitted Bids for shares of such series
specifying any rate that is equal to or lower than the Maximum Rate for
shares of such series shall be rejected, thus entitling such Existing
Holders to continue to hold the shares of Municipal Preferred subject to
such Submitted Bids;
(ii) Potential Holders' Submitted Bids for shares of such series
specifying any rate that is equal to or lower than the Maximum Rate for
shares of such series shall be accepted; and
(iii) Each Existing Holder's Submitted Bid for shares of such series
specifying any rate that is higher than the Maximum Rate for shares of
such series and the Submitted Sell Orders for shares of such series of
each Existing Holder shall be accepted, thus entitling each Existing
Holder that submitted or on whose behalf was submitted any such Submitted
Bid or Submitted Sell Order to sell the shares of such series subject to
such Submitted Bid or Submitted Sell Order, but in both cases only in an
amount equal to the number of shares of such series obtained by
multiplying the number of shares of such series subject to Submitted Bids
described in clause (ii) of this subparagraph (b) by a fraction, the
numerator of which shall be the number of Outstanding shares of such
series held by such Existing Holder subject to such Submitted Bid or
Submitted Sell Order and the denominator of which shall be the aggregate
number of Outstanding shares of such series subject to all such Submitted
Bids and Submitted Sell Orders.
(c) If all of the Outstanding shares of a series of Municipal Preferred
are subject to Submitted Hold Orders, all Submitted Bids for shares of such
series shall be rejected.
(d) If, as a result of the procedures described in clause (iv) or (v) of
subparagraph (a) or clause (iii) of subparagraph (b) of this paragraph 4, 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 a series of
Municipal Preferred on any Auction Date, the Auction Agent shall, in such manner
as it shall determine in its sole discretion, round up or down the number of
shares of Municipal Preferred of such series to be purchased or sold by any
Existing Holder or Potential Holder on such Auction Date as a result of such
procedures so that the number of shares so purchased or sold by each Existing
Holder or Potential Holder on such Auction Date shall be whole shares of
Municipal Preferred.
(e) If, as a result of the procedures described in clause (v) of
paragraph (a) of this paragraph 4, any Potential Holder would be entitled or
required to purchase less than a whole share of series of Municipal Preferred on
any Auction Date, the Auction Agent shall, in such manner as it shall determine
in its sole discretion, allocate shares of Municipal Preferred of such series
for purchase among Potential Holders so that only whole shares of Municipal
Preferred of such series are purchased on such Auction Date as a result of such
procedures by any Potential Holder, even if such allocation results in one or
more Potential Holders not purchasing shares of Municipal Preferred of such
series on such Auction Date.
(f) Based on the results of each Auction for shares of a series of
Municipal Preferred, the Auction Agent shall determine the aggregate number of
shares of such series to be purchased and the aggregate number of shares of such
series to be sold by Potential Holders and Existing Holders and, with respect to
each Potential Holder and Existing Holder, to the extent that such aggregate
number of shares to be purchased and such aggregate number of shares to be sold
differ, determine to which other Potential Holder(s) or Existing Holder(s) they
shall deliver, or from which other Potential Holder(s) or Existing Holder(s)
they shall receive, as the case may be, shares of Municipal Preferred of such
series. Notwithstanding any provision of the Auction Procedures or the
Settlement Procedures to the contrary, in the event an Existing Holder or
Beneficial Owner of shares of a series of Municipal Preferred with respect to
whom a Broker-Dealer submitted a Bid to the Auction Agent for such shares that
was accepted in whole or in part, or submitted or is deemed to have submitted a
Sell Order for such shares that was accepted in whole or in part, fails to
instruct its Agent Member to deliver such shares against payment therefor,
partial deliveries of shares of Municipal Preferred that have been made in
respect of Potential Holders' or Potential Beneficial Owners' Submitted Bids for
shares of such series that have been accepted in whole or in part shall
constitute good delivery to such Potential Holders and Potential Beneficial
Owners.
(g) Neither the Trust nor the Auction Agent nor any affiliate of either
shall have any responsibility or liability with respect to the failure of an
Existing Holder, a Potential Holder, a Benefit Owner, a Potential Beneficial
Owner or its respective Agent Member to deliver shares of Municipal Preferred of
any series or to pay for shares of Municipal Preferred of any series sold or
purchased pursuant to the Auction Procedures or otherwise.
5. Notification of Allocations. Whenever the Trust intends to include
any net capital gain or other income taxable for Federal income tax purposes in
any dividend on shares of Municipal Preferred, the Trust shall, in the case of a
Minimum Rate Period or a Special Rate Period of 28 Rate Period Days or fewer,
and may, in the case of any other Special Rate Period, notify the Auction Agent
of the amount to be so included not later than the Dividend Payment Date next
preceding the Auction Date on which the Applicable Rate for such dividend is to
be established. Whenever the Auction Agent receives such notice from the Trust,
it will be required in turn to notify each Broker-Dealer, who, on or prior to
such Auction Date, in accordance with its Broker-Dealer Agreement, will be
required to notify its Beneficial Owners and Potential Beneficial Owners of
shares of Municipal Preferred believed by it to be interested in submitting an
Order in the Auction to be held on such Auction Date.
6. Auction Agent. For so long as any shares of Municipal Preferred are
outstanding, the Auction Agent, duly appointed by the Trust to so act, shall be
in each case a commercial bank, trust company or other financial institution
independent of the Trust and its affiliates (which however, may engage or have
engaged in business transactions with the Trust or its affiliates) and at no
time shall the Trust or any of its affiliates act as the Auction Agent in
connection with the Auction Procedures. If the Auction Agent resigns or for any
reason its appointment is terminated during any period that any shares of
Municipal Preferred are outstanding, the Board of Trustees shall use its best
efforts promptly thereafter to appoint another qualified commercial bank, trust
company or financial institution to act as the Auction Agent. The Auction
Agent's registry of Existing Holders of shares of a series of Municipal
Preferred shall be conclusive and binding on the Broker-Dealers. A Broker-
Dealer may inquire of the Auction Agent between 3:00 P.M. on the Business Day
preceding an Auction for shares of a series of Municipal Preferred and 9:30 A.M.
on the Auction Date for such Auction to ascertain the number of shares of a
series in respect of which the Auction Agent has determined such Broker-Dealer
to be an Existing Holder. If such Broker-Dealer believes it is the Existing
Holder of fewer shares of such series than specified by the Auction Agent in
response to such Broker-Dealer's inquiry, such Broker-Dealer may so inform the
Auction Agent of that belief. Such Broker-Dealer shall not, in its capacity as
Existing Holder of shares of such series, submit Orders in such Auction in
respect of shares of such series covering in the aggregate more than the number
of shares of such series specified by the Auction Agent in response to such
Broker-Dealer's inquiry.
7. Transfer of Shares of Municipal Preferred. Unless otherwise
permitted by the Trust, a Beneficial Owner or an Existing Holder may sell,
transfer or otherwise dispose of shares of Municipal Preferred only in whole
shares and only pursuant to a Bid or Sell Order placed with the Auction Agent in
accordance with the procedures described in Part II of this Section 12.1 or to a
Broker-Dealer; provided, however, that (a) a sale, transfer or other disposition
of shares of Municipal Preferred from a customer of a Broker-Dealer who is
listed on the records of that Broker-Dealer as the holder of such shares to that
Broker-Dealer or another customer of that Broker-Dealer shall not be deemed to
be a sale, transfer or other disposition for purposes of this paragraph 7 if
such Broker-Dealer remains the Existing Holder of the shares so sold,
transferred or disposed of immediately after such sale, transfer or disposition
and (b) in the case of all transfers other than pursuant to Auctions, the
Broker-Dealer (or other Person, if permitted by the Trust) to whom such transfer
is made shall advise the Auction Agent of such transfer.
8. Global Certificate. Prior to the commencement of a Voting Period,
(i) all of the shares of a series of Municipal Preferred outstanding from time
to time shall be represented by one global certificate registered in the name of
the Securities Depository or its nominee and (ii) no registration of transfer of
shares of a series of Municipal Preferred shall be made on the books of the
Trust to any Person other than the Securities Depository or its nominee.
ARTICLE 13
Amendments
These By-Laws may be amended or replaced, in whole or in part, by a
majority of the Trustees then in office at any meeting of the Trustees, or by
one or more writings signed by such a majority. Any action required to be taken
by a majority of the Trustees under this Article may also be taken by a
committee of the Trustees duly appointed for the purpose.