FORM N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. | |
Post-Effective Amendment No. | |
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 | |
AMENDMENT NO. 5 |X|
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THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
(Exact Name of Registrant as Specified In Charter)
800 Scudders Mill Road
Plainsboro, New Jersey 08536
(Address of Principal Executive Offices)
(800) 688-0928
(Registrant's Telephone Number, including Area Code)
Ralph L. Schlosstein, President
The BlackRock Investment Quality Municipal Trust Inc.
345 Park Avenue
New York, New York 10154
(Name and Address of Agent for Service)
Copies to:
Richard T. Prins, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Thomas A. DeCapo, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street
Boston, Massachusetts 02108-3194
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
PROPOSED PROPOSED
TITLE OF SECURITIES AMOUNT BEING MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
BEING REGISTERED REGISTERED PRICE PER UNIT OFFERING PRICE REGISTRATION FEE
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Auction Rate Municipal Preferred Stock, Series T7 662 shares $25,000 $16,550,000 $4,071
(Liquidation preference $25,000 per share)...........
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THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
CROSS REFERENCE SHEET
Part A-Prospectus
ITEMS IN PART A OF FORM N-2
SPECIFIED IN PROSPECTUS LOCATION IN PROSPECTUS
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Item 1. Outside Front Cover...................................................Cover page
Item 2. Inside Front and Outside Back Cover Page..............................Inapplicable
Item 3. Fee Table and Synopsis................................................Inapplicable
Item 4. Financial Highlights..................................................Financial Highlights
Item 5. Plan of Distribution..................................................Cover Page; Prospectus Summary; the Auction;
Underwriting
Item 6. Selling Shareholders..................................................Inapplicable
Item 7. Use of Proceeds.......................................................Use of Proceeds; Investment Objective and Policies
Item 8. General Description of the Registrant.................................Cover Page; Prospectus Summary The Trust;
Investment Objective and Policies
Item 9. Management............................................................Prospectus Summary; Management of the Trust
Item 10. Capital Stock, Long-Term Debt, and Other Securities...................Capitalization; Investment Objective and Policies;
Description of New Preferred Shares; the Auction;
Tax Matters
Item 11. Defaults and Arrears on Senior Securities............................ Inapplicable
Item 12. Legal Proceedings.....................................................Inapplicable
Item 13. Table of Contents of the Statement of Additional Table of Contents of the Statement of Additional
Information...........................................................Information
Part B-Statement of Additional Information
ITEMS IN PART B OF FORM N-2 LOCATION IN STATEMENT OF
ADDITIONAL INFORMATION
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Item 14. Cover Page...........................................................Cover Page
Item 15. Table of Contents....................................................Back Cover Page
Item 16. General Information and History......................................Inapplicable
Item 17. Investment Objective and Policies....................................Investment Objective and Policies;
Investment Policies and Techniques
Item 18. Management...........................................................Management of the Trust
Item 19. Control Persons and Principal Holders of Securities..................Management of the Trust
Item 20. Investment Advisory and Other Services...............................Management of the Trust
Item 21. Brokerage Allocation and Other Practices.............................Portfolio Transactions
Item 22. Tax Status...........................................................Tax Matters
Item 23. Financial Statements.................................................Financial Statements (incorporated by reference)
Part C-Other Information
Items 24-33 have been answered in Part C of this Registration Statement
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The information in this Prospectus is not complete and may be changed. We may not sell these securities until the Registration Statement filed with the Securities and Exchange Commission is effective. This Prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JANUARY 27, 2000
PROSPECTUS
$16,550,000
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
AUCTION RATE MUNICIPAL PREFERRED STOCK ("NEW PREFERRED SHARES")
662 SHARES, SERIES T7
LIQUIDATION PREFERENCE $25,000 PER SHARE
The BlackRock Investment Quality Municipal Trust Inc. (the "Trust") is a closed-end, diversified management investment company. The Trust's investment objective is to provide high current income exempt from regular Federal income tax consistent with the preservation of capital.
The Trust seeks to achieve its investment objective by investing substantially all of its assets in a diversified portfolio of investment grade municipal obligations and to actively manage its assets in relation to market conditions and interest rate changes. Under normal circumstances, the Trust invests at least 80% of its assets in securities which are rated at the time of investment at least Baa, MIG or P-1 by Moody's Investors Service, Inc. ("Moody's"), BBB, SP-2 or A-1 by Standard & Poor's Rating Service ("S&P"), or BBB or F-1 by Fitch Investors Service, Inc. ("Fitch") or another nationally recognized statistical rating organization. The Trust may invest up to 20% of its assets in unrated securities that are deemed by the Trust's investment adviser to be equivalent credit quality. No assurance can be given that the Trust will achieve its investment objective. Although the Trust does not ordinarily invest in municipal obligations the interest on which is subject to the Federal alternative minimum tax and expects that no more than 20% of its assets will be invested in municipal obligations subject to such tax at any time, all or a portion of the Trust's dividends may be subject to Federal alternative minimum tax. BlackRock Financial Management, Inc. (the "Adviser") acts as the investment adviser to the Trust. The address of the Trust is 800 Scudders Mill Road, Plainsboro, New Jersey 08536 and its telephone number is (800) 688-0928.
This prospectus contains important information about the Trust. You should read the prospectus before deciding whether to invest and retain it for future reference. A statement of additional information, dated , 2000, containing additional information about the Trust, has been filed with the Securities and Exchange Commission ("SEC") and is incorporated by reference in its entirety into this prospectus. You can review the table of contents of the statement of additional information on page of this prospectus. You may request a free copy of the statement of additional information by calling (800) 227-7236. You may also obtain the statement of additional information and other information regarding the Trust on the SEC web site (http://www.sec.gov).
INVESTING IN THE NEW PREFERRED SHARES INVOLVES CERTAIN RISKS. SEE
"RISKS" BEGINNING ON PAGE ___. THE MINIMUM PURCHASE AMOUNT OF THE NEW
PREFERRED SHARES IS $25,000.
(continued on following page)
Neither the SEC nor any state securities commission has approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Per Share Total
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Public Offering Price $25,000 $16,550,000
Sales Load $ $
Proceeds to Trust (before expenses)1 $ $
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1 Offering expenses payable by the Trust are estimated to be $[300,000].
The underwriters are offering the New Preferred Shares subject to various conditions. The underwriters expect to deliver the New Preferred Shares to purchasers, in book-entry form, through the facilities of The Depository Trust Company on or about ___, 2000.
The Trust is offering 662 newly issued shares of Auction Rate Municipal Preferred Stock, Series T7. We refer to these shares as the "New Preferred Shares" throughout this prospectus and the related statement of additional information. Except for the initial dividend rate and initial dividend period, the terms of the New Preferred Shares are the same as the terms of the Trust's currently outstanding Series T7 Preferred Shares (together with the Trust's outstanding Series T28 Preferred Shares, the "Preferred Shares").
The dividend rate for the initial dividend period (the period from the date of issue through ____, 2000) will be ___%, and will be paid on _________, 2000. After the initial dividend period, the dividend rate on the New Preferred Shares for each subsequent dividend period generally will be determined pursuant to weekly auctions. The letter/numeral indication "T7" means that the auction for the New Preferred Shares normally will be held every Tuesday and that the dividend period normally will be 7 days. Prospective purchasers should carefully review the auction procedures described in this prospectus, including the appendices, and should note:
o a buy order (called a "bid") or sell order is a commitment to buy or sell New Preferred Shares based on the results of an auction;
o auctions will be conducted by telephone; and
o purchases and sales will be settled on the next business day after the auction.
The New Preferred Shares will not be listed on an exchange. You may only buy or sell New Preferred Shares through an order placed at an auction with or through a broker-dealer that has entered into an agreement with the auction agent and the Trust, or in a secondary market maintained by certain broker-dealers. These broker-dealers are not required to maintain this market, and it may not provide you with liquidity.
Dividends on New Preferred Shares, to the extent payable from tax-exempt income earned on the Trust's investments, will be exempt from regular Federal income tax in the hands of owners of such shares. All or a portion of the Trust's dividends may be subject to the Federal alternative minimum tax. The Trust is required to allocate net capital gains and other taxable income, if any, proportionately between common shares and Preferred Shares, including the New Preferred Shares, based on the percentage of total dividends distributed to each class for that year. The Trust may at its election give notice of the amount of any income subject to regular Federal income tax to be included in a dividend on a New Preferred Share in advance of the related auction. If the Trust does not give such advance notice, it generally will be required to pay additional amounts to holders of New Preferred Shares in order to adjust for their receipt of income subject to regular Federal income tax.
The New Preferred Shares are redeemable, in whole or in part, at the option of the Trust on any date dividends are paid on the New Preferred Shares (except during certain non-call periods), and will be subject to mandatory redemption, in certain circumstances, at a redemption price of $25,000 per share plus accumulated but unpaid dividends to the redemption date (whether or not declared), plus a premium in certain circumstances.
The New Preferred Shares do not represent a deposit or obligation of, and are not guaranteed or endorsed by, any bank or other insured depository institution. The New Preferred Shares are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. THE TRUST HAS NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. THE TRUST IS NOT MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS.
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY.....................................................4
FINANCIAL HIGHLIGHTS...................................................8
THE TRUST..............................................................9
USE OF PROCEEDS.......................................................10
CAPITALIZATION........................................................10
INVESTMENT OBJECTIVE AND POLICIES.....................................11
MUNICIPAL OBLIGATIONS.................................................11
OTHER INVESTMENT PRACTICES............................................13
RISKS.................................................................14
MANAGEMENT OF THE TRUST...............................................16
DESCRIPTION OF PREFERRED SHARES.......................................19
DESCRIPTION OF NEW PREFERRED SHARES...................................20
THE AUCTION...........................................................27
TAXES.................................................................30
DETERMINATION OF NET ASSET VALUE......................................31
REPURCHASE OF COMMON SHARES...........................................32
DESCRIPTION OF CAPITAL STOCK..........................................32
CUSTODIAN.............................................................34
UNDERWRITING..........................................................34
TRANSFER AGENT, DIVIDEND
DISBURSING AGENT AND REGISTRAR........................................35
LEGAL OPINIONS........................................................35
EXPERTS...............................................................35
REPORTS TO STOCKHOLDERS...............................................35
AVAILABLE INFORMATION.................................................35
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TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION.........37 APPENDIX A...........................................................A-1 |
PROSPECTUS SUMMARY
The following information is a summary of, and is qualified in its entirety by reference to, more detailed information included in this prospectus and the Trust's statement of additional information.
THE TRUST.......................................... The BlackRock Investment Quality Municipal Trust Inc. (the
"Trust") is a diversified, closed-end management investment
company. As of December 31, 1999, the Trust had 16,707,093
shares of common stock outstanding and 5,200 preferred shares
outstanding in two series: 2,600 preferred shares designated
Series T7 and 2,600 preferred shares designated Series T28. The
Trust's common shares are traded on the New York Stock
Exchange under the symbol "BKN."
THE OFFERING....................................... The Trust is offering 662 New Preferred Shares. The purchase
price for each New Preferred Share is $25,000 plus accumulated
dividends, if any, from the date the share is first issued. Except
for the initial dividend rate and the length of the initial dividend
period for the New Preferred Shares, the rights and preferences
of the New Preferred Shares are the same as the Trust's
outstanding Series T7 preferred shares.
The New Preferred Shares are being offered by a group of
underwriters listed under "Underwriting."
INVESTMENT OBJECTIVE AND POLICIES.................. The Trust's investment objective is to provide high current
income exempt from regular Federal income tax consistent with
the preservation of capital. No assurance can be given that the
Trust will achieve its investment objective. Although the Trust
does not ordinarily invest in municipal obligations subject to the
Federal alternative minimum tax ("AMT") and expects that no
more than 20% of its assets will be invested in municipal
obligations subject to such tax at any time, all or a portion of the
Trust's dividends may be subject to AMT.
In seeking to provide high current income exempt from
regular Federal income tax, the Trusts intends to invest
substantially all of its assets in a diversified portfolio
of investment grade municipal obligations and to actively
manage its assets in relation to market conditions and
interest rate changes. Under normal circumstances, the Trust
will invest at least 80% of its assets in securities which
are rated at the time of investment at least Baa, MIG or P-1
by Moody's, BBB, SP-2 or A-1 by S&P, or BBB or F-1 by Fitch
or another nationally recognized statistical rating
organization. The Trust may invest up to 20% of its assets
in unrated securities that are deemed by the Trust's
investment adviser to be of equivalent credit quality. The
Trust emphasizes investments in municipal obligations with
long-term maturities and ordinarily maintains an average
portfolio maturity of 20-30 years, but the average maturity
may be shortened from time to time depending on market
conditions.
INVESTMENT ADVISER................................. BlackRock Financial Management, Inc. (the "Adviser") acts as
the Trust's investment adviser. The Adviser is responsible for
the investment strategy of the Trust. The Adviser and its
affiliates comprise a global asset management firm with assets of
approximately $148 billion under management as of September 30,
1999.
RISK FACTORS....................................... Before investing in New Preferred Shares, you should consider
carefully the following risks of such an investment:
o if an auction fails you may not be able to sell some or all
of your shares;
o because of the nature of the market for New Preferred
Shares, you may receive less than the price you paid
for your shares if you sell them outside of the
auction, especially when market interest rates are
rising;
o a rating agency could downgrade the rating assigned to
the New Preferred Shares, which could affect liquidity;
o the Trust may be forced to redeem your shares to meet
regulatory or rating agency requirements or may
voluntarily redeem your shares in certain
circumstances;
o in extraordinary circumstances the Trust may not earn
sufficient income from its investments to pay dividends;
o if interest rates rise, the value of the Trust's
investment portfolio will decline, reducing the asset
coverage for the New Preferred Shares; and
o if an issuer of a municipal bond in which the Trust
invests experiences financial difficulty or defaults,
there may be a negative impact on the income and net
asset value of the Trust's portfolio.
SECONDARY MARKET TRADING........................... The New Preferred Shares will not be listed on a stock exchange.
Instead, you may buy or sell New Preferred Shares at a periodic
auction by submitting orders to a broker-dealer (a "Broker-
Dealer") that has entered into a separate agreement with the
auction agent and the Trust or to a broker-dealer that has entered
into an agreement with a Broker-Dealer. In addition to the
auctions, Broker-Dealers and other broker-dealers may maintain
a separate secondary trading market in New Preferred Shares, but
may discontinue this activity at any time. You may transfer
shares outside of auctions only to or through a Broker-Dealer, a
broker-dealer that has entered into a separate agreement with a
Broker-Dealer, or other persons as the Trust may agree. There
can be no assurance that a secondary trading market for the New
Preferred Shares will develop, or if it does develop, that it will
provide holders with liquidity of investment.
DIVIDENDS AND DIVIDEND PERIODS..................... After their initial dividend period, the New Preferred Shares
normally will have a dividend period consisting of seven days.
The board of directors of the Trust may, from time to time,
declare a special dividend period upon giving notice to the
holders of the New Preferred Shares.
Dividends on the New Preferred Shares offered hereby are
cumulative from the date they are first issued and are
payable when, as and if declared by the board of directors
of the Trust, out of funds legally available therefor. The
Trust will pay the initial dividend for the New Preferred
Shares on [____________] and thereafter generally on each
succeeding Wednesday, subject to certain exceptions.
After the initial dividend period, the dividend rate for the
New Preferred Shares will be determined by auction. The
dividend rate for the initial dividend period is ___% and
the first auction will be held on ___.
TAXES.............................................. Because in normal circumstances the Trust will invest
substantially all of its assets in municipal obligations that pay
interest that is exempt from regular Federal income tax, the
income you receive will ordinarily be exempt from Federal income
tax. Your income may be subject to state and local taxes. Taxable
income or gain earned by the Trust will be allocated
proportionately to holders of the Trust's preferred shares and
common shares, based on the percentage of total dividends paid
to each class for that year. Accordingly, certain specified New
Preferred Share dividends may be subject to income tax on
income or gains attributed to the Trust. The Trust may at its
election give notice before any applicable auction of the amount
of any taxable income and gain to be distributed for the period
relating to that auction. If the Trust does not provide such
notice, the Trust generally will make holders of New Preferred
Shares whole for taxes owing on dividends paid to shareholders
that include taxable income or gain.
ALTERNATIVE MINIMUM TAX............................ Although the Trust does not ordinarily invest in municipal
obligations subject to AMT, all or a portion of the Trust's
dividends may be subject to AMT. New Preferred Shares may
not be a suitable investment if you are subject to this tax or
would become subject to such tax by investing in New Preferred
Shares.
LIQUIDATION PREFERENCE............................. The liquidation preference of each New Preferred Share will be
$25,000, plus an amount equal to accumulated but unpaid
dividends (whether or not earned or declared) plus the premium,
if any, resulting from the designation of a premium call period.
RATINGS............................................ It is a condition to the issuance of the New Preferred Shares that
they be issued with a rating of "aaa" from Moody's and "AAA"
from S&P and that the Trust receive written assurance from each
of Moody's and S&P that the issuance of the New Preferred
Shares will not cause a downgrading of the Trust's currently
outstanding Preferred Shares.
REDEMPTION......................................... Holders of New Preferred Shares will not have the right to cause
the Trust to redeem their shares. The Trust may, however, be
required by applicable law or by rating agency guidelines to
redeem New Preferred Shares if, for example, the Trust does not
meet an asset coverage ratio required by law or correct a failure
to meet a rating agency guideline in a timely manner. The Trust
may also voluntarily redeem New Preferred Shares.
VOTING RIGHTS...................................... The Investment Company Act of 1940 requires that the holders
of New Preferred Shares and of currently outstanding Preferred
Shares, voting together as a single class separate from the
holders of common shares, have the right to elect at least two
directors of the Trust at all times and to elect a majority of the
directors at any time when two years' dividends on the Preferred
Shares are unpaid. The holders of New Preferred Shares and any
other outstanding preferred shares will vote as a separate class
on certain other matters as required under the Trust's
charter, the Investment Company Act of 1940 and Maryland
law.
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FINANCIAL HIGHLIGHTS
The table below sets forth certain specified information for a share of common stock of the Trust outstanding throughout each period presented. The financial highlights for each period presented (other than for the six months ended April 30, 1999) have been audited by Deloitte & Touche LLP, the Trust's independent auditors, whose report covering each of the five years in the period ended October 31, 1998, is included in the Trust's most recent Annual Report and is incorporated by reference in the statement of additional information. The financial highlights should be read in conjunction with the financial statements and notes thereto included in the Trust's most recent Annual Report and the Semi-Annual Report for the six months ended April 30, 1999, which are available without charge from the Trust.
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
SIX MONTHS FEBRUARY
ENDED 26, 1993**
APRIL 30, THROUGH
PER COMMON SHARE OPERATING 1999 OCTOBER
PERFORMANCE: (UNAUDITED) 1998 1997 1996 1995 1994 31, 1993
-------- -------- -------- --------- --------- --------- ----------
Net asset value, beginning of the period......$ 15.78 $ 15.32 $ 14.52 $ 14.18 $ 12.05 $ 14.76 $ 14.10
-------- -------- -------- --------- --------- --------- ----------
Net investment income...................... 0.55 1.08 1.08 1.09 1.10 1.06 0.66
Net realized and unrealized gain (loss)
on investments........................... (0.18) 0.70 0.80 0.34 2.16 (2.64) 0.74
-------- -------- -------- --------- --------- --------- ----------
Net increase (decrease) from investment
operations ............................... 0.37 1.78 1.88 1.43 3.26 (1.58) 1.40
-------- -------- -------- --------- --------- --------- ----------
Dividends and distributions:
Dividends from net investment income to:
Common shareholders...................... (.43) (.81) (.78) (.79) (.82) (.90) (.45)
Preferred shareholders................... (.11) (.24) (.27) (.28) (.31) (.21) (.11)
Distributions from net realized gain on investments
to:
Common shareholders...................... (.15) (.20) (.02) (.01) -- -- --
Preferred shareholders................... (.04) (.07) (.01) (.01) -- -- --
Total dividends and distributions............. (0.73) (1.32) (1.08) (1.09) (1.13) (1.11) (0.56)
Capital charge with respect to issuance of common
and preferred shares.......................... -- -- -- -- -- $ (.02) $ (.18)
Net asset value, end of period*...............$ 15.42 $ 15.78 $ 15.32 $ 14.52 $ 14.18 $ 12.05 $ 14.76##
Market value, end of period*..................$ 15.19 $ 15.44 $ 13.38 $ 12.44 $ 12.00 $ 10.38 $ 14.125
TOTAL INVESTMENT RETURN +..................... 2.09% 23.81% 14.39% 10.41% 24.01% (20.98)% 3.36%
RATIOS TO AVERAGE NET ASSETS OF
COMMON SHAREHOLDERS:(A)
%++
Expenses++.................................... 1.01%+ 1.04% 1.07% 1.12% 1.16% 1.14% 1.04%+++
Net investment income before preferred stock %++
dividends++................................ 7.13%++ 6.95% 7.42% 7.57% 8.36% 7.80% 6.88%+++
%++
Preferred stock dividends..................... 1.39%++ 1.53% 1.88% 1.97% 2.34% 1.55% 1.16%+++
Net investment income available to common %++
shareholders............................... 5.74%++ 5.42% 5.54% 5.60% 6.02% 6.25% 5.72%+++
SUPPLEMENTAL DATA:
Average net assets of common shareholders
(in thousands).............................$259,970 $259,280 $243,947 $ 238,540 $ 219,740 $ 226,935 $ 236,810
Portfolio turnover............................ 20% 46% 160% 164% 182% 210% 110%
Net assets of common shareholders, end of peri 263,590 255,926 242,547 236,990 201,343 246,631
(in thousands)............................$257,690 $ $ $ $ $ $
Preferred stock outstanding (in thousands)....$130,000 $130,000 $130,000 $ 130,000 $ 130,000 $ 130,000 $ 130,000
Asset coverage per share of preferred stock,
end of period#.............................$ 74,566 $ 75,690 $ 74,241 $ 71,644 $ 70,575 $ 127,440 $ 144,858
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* Net asset value and market value are published in Barron's each
Saturday and The Wall Street Journal each Monday.
** Commencement of investment operations.
# A 2-for-1 stock split occurred on July 24, 1995.
## Net asset value immediately after the closing of the first public
offering was $14.05.
+ Total investment return is calculated assuming a purchase of common
stock at the current market price on the first day and a sale at the
current market price on the last day of the period reported. Dividends
and distributions, if any, are assumed for purposes of this
calculation to be reinvested at prices obtained under the Trust's
dividend reinvestment plan. Total investment return does not reflect
brokerage commissions. Total investment returns for periods of less
than one year are not annualized.
++ Ratios are calculated on the basis of income and expenses applicable
to both the common and preferred shares, relative to the average net
assets of common shareholders.
+++ Annualized.
(a) Certain changes have been made to the ratios to average net assets of
common shareholders for the period ended October 31, 1993 to conform
to current year presentation.
THE TRUST
The BlackRock Investment Quality Municipal Trust Inc. (the "Trust") is a diversified, closed-end management investment company. The Trust was incorporated under the laws of the State of Maryland on November 19, 1992, and has registered under the Investment Company Act of 1940 (the "1940 Act"). The Trust's principal office is located at 800 Scudders Mill Road, Plainsboro, New Jersey 08536 and its telephone number is (800) 688-0928.
The Trust commenced investment operations on February 26, 1993, upon the closing of the initial public offering of 15,500,000 of its common shares. The net proceeds of such offering were approximately $218.6 million. In March, 1993, the Trust sold, pursuant to an over-allotment option granted to the underwriters in the initial public offering, an additional 1.2 million of its common shares for net proceeds of approximately $14.1 million.
On March 26, 1993, the Trust issued shares of preferred stock in the following amounts and with the following designations: Preferred Shares Series T7 - 1,300 shares and Preferred Shares Series T28 - 1,300 shares. Each series of preferred shares was issued with a liquidation preference per share of $50,000, plus accumulated and unpaid dividends. On May 16, 1995, shareholders approved a proposal to split each preferred share into two shares and simultaneously reduce each share's liquidation preference from $50,000 to $25,000, plus in each case accumulated and unpaid dividends, which split occurred on July 24, 1995.
As of December 31, 1999, $16,707,093 common shares of the Trust were
outstanding and 5,200 preferred shares were outstanding in two series:
2,600 Preferred Shares Series T7 and 2,600 Preferred Shares Series T28. The
Trust's common shares are traded on the New York Stock Exchange under the
symbol "BKN."
The following table provides information about the Preferred Shares since their issuance:
Amount Outstanding
Exclusive of Treasury Asset Coverage Involuntary Liquidating
As of Securities Per Share* Preference Per Share
----- ---------- ---------- --------------------
12/31/1993 2,600 $144,858 $50,000
12/31/1994 2,600 $127,440 $50,000
12/31/1995** 5,200 $70,575 $25,000
12/31/1996 5,200 $71,644 $25,000
12/31/1997 5,200 $74,241 $25,000
12/31/1998 5,200 $75,690 $25,000
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* Calculated by dividing net assets by the number of Preferred Shares outstanding. ** A 2-for-1 stock split with respect to the Preferred Shares occurred on July 24, 1995.
The following table provides information about the Trust's outstanding shares as of December 31, 1999:
Amount Held by
the Trust or for
Title of Class Amount Authorized its Account Amount Outstanding
-------------- ----------------- ----------- ------------------
Common Shares 200,000,000 0 16,707,093
Series T7 Preferred Shares 2,600 0 2,600
Series T28 Preferred Shares 2,600 0 2,600
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USE OF PROCEEDS
The net proceeds of the offerings will be $[ ], after payment of offering expenses (estimated to be $300,000) and the underwriting discount.
The net proceeds of the offering will be invested in accordance with the Trust's investment objective and policies as stated below. It is presently anticipated that the Trust will be able to invest substantially all of the net proceeds in municipal securities that meet its objective and policies at or shortly (within [six to eight] weeks) after the completion of the offering. To the extent that all of the proceeds cannot be so invested, pending such investment, they will be invested in short-term, high quality tax-exempt securities. If necessary in order to fully invest the net proceeds of the offerings immediately, the Trust may also purchase, as temporary investments, short-term, taxable investments, the income on which is subject to regular Federal income tax.
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Trust as of _____________, 2000, and as adjusted to give effect to the issuance of the New Preferred Shares pursuant to the offering.
ACTUAL AS ADJUSTED
------------- ---------------
Shareholders' equity:
Preferred Stock, par value $.01 per share (5,200 shares issued; 5,862
preferred shares issued and outstanding, as adjusted, at $25,000 per share
liquidatrr preference)..................................................... $ 130,000,000 $ 146,550,000
Common Shares, par value $.01 per share (16,707,093 shares issued and
outstanding)............................................................. 167,071 167,071
Paid in capital in excess at par .......................................... 232,077,869 231,612,369
Undistributed net investment income........................................
Accumulated net realized loss..............................................
Unrealized appreciation of investments.....................................
------------- ---------------
Net assets................................................................. $ $
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INVESTMENT OBJECTIVE AND POLICIES
The Trust's investment objective is to provide high current income exempt from regular Federal income tax consistent with the preservation of capital. No assurance can be given that the Trust will achieve its investment objective.
The Trust seeks to achieve its investment objective by investing substantially all of its assets in a diversified portfolio of investment grade municipal obligations and actively managing its assets in relation to market conditions and interest rate changes. Under normal circumstances, the Trust will invest at least 80% of its assets in securities rated investment grade by Moody's (at least Baa, MIG or P-1), S&P (at least BBB, SP-2 or A-1), Fitch (at least BBB or F-1) or another nationally recognized statistical rating agency. The Trust may invest up to 20% of its assets in unrated securities that are deemed by the Adviser to be of equivalent credit quality. The Trust does not ordinarily invest more than 25% of its total assets (taken at market value) in municipal obligations whose issuers are located in the same state. The Trust emphasizes investments in municipal obligations with long-term maturities and expects to maintain an average portfolio maturity of 20-30 years, but the average maturity may be shortened from time to time depending on market conditions. Although the Trust does not currently intend to invest in municipal obligations the interest on which would be subject to AMT and expects that no more than 20% of its assets will be invested in municipal obligations subject to such tax at any time, all or a portion of the Trust's dividends paid in respect of the New Preferred Shares may be subject to AMT.
In addition, the Trust may utilize certain options, futures, interest rate swaps and related transactions for hedging purposes. To the extent the Trust utilizes such hedging strategies or invests in taxable securities, the Trust's ability to achieve its investment objective of providing high current income exempt from regular Federal income tax may be limited. Accordingly, under normal circumstances, the Trust expects that its use of such practices will not be significant.
For purposes of enhancing liquidity and/or preserving capital, on a temporary defensive basis, the Trust may invest without limit in securities issued by the U.S. Government or its agencies or instrumentalities, repurchase agreements collateralized by such securities, or certificates of deposit, time deposits or bankers' acceptances. The Trust may also invest in municipal obligations with maturities of less than one year, other debt obligations of corporate issuers, such as interest-paying corporate bonds, commercial paper and certificates of deposit, bankers' acceptances and interest- bearing savings accounts of banks having assets greater than $1 billion and which are members of the Federal Deposit Insurance Corporation. During temporary defensive periods, the current dividend rate on any outstanding preferred stock will be more likely to approximate or exceed the net rate of return on the Trust's investment portfolio, with the result that the leverage resulting from the preferred stock may become less beneficial or adverse to the holders of common shares.
MUNICIPAL OBLIGATIONS
Municipal obligations include debt obligations issued by states, cities and local authorities, and possessions and certain territories of the United States to obtain funds for various public purposes. These purposes include the construction of public facilities such as airports, bridges, highways, housing, hospitals, mass transportation, schools, streets and water and sewer works. Other public purposes for which municipal obligations may be issued include the refinancing of outstanding obligations and the obtaining of funds for general operating expenses and for loans to other public institutions and facilities. Subject to the credit standard policies described under "Investment Objective and Policies," there are two categories of municipal obligations in which the Trust may invest in normal circumstances: (i) "public purpose" obligations that generate interest that is tax-exempt under regular Federal income tax rules and is not treated as a preference item for AMT; and (ii) qualified "private activity" obligations (typically industrial revenue bonds) that generate income that is tax-exempt under regular Federal income tax rules but must, if issued after August 7, 1986, be included in computing AMT. The Trust will not invest in municipal obligations that generate interest that by its terms is subject to Federal income tax other than AMT.
The types of municipal obligations in which the Trust may invest include general obligation bonds, revenue bonds, municipal lease obligations, installment purchase contract obligations, capped variable and floating rate obligations, zero coupon securities, custodial receipts or certificates, auction and residual component municipal securities, tax-exempt notes and municipal commercial paper.
The yields on municipal obligations are dependent on a variety of factors, including interest and income tax rates, the condition of the general money market and the municipal obligations market, the size of the particular issue, the maturity of the obligation and the rating of the issue. The ratings of Moody's, S&P and Fitch represent their opinions as to the quality of those municipal obligations that they rate.
It should be emphasized that ratings are general and are not absolute standards of quality. Consequently, municipal obligations with the same maturity, coupon and rating may have different yields while obligations of the same maturity and coupon with different ratings may have the same yield. The market value of outstanding municipal obligations will vary with changes in prevailing interest rate levels and as a result of changing evaluations of the ability of their issuers to meet interest and principal payments.
The terms of municipal obligations often give their issuers the right periodically to "call" or prepay their municipal obligations. Issuers will exercise call rights when interest rates decline and they can refinance their municipal obligations at lower interest rates. At the time the Trust was formed, most of the municipal obligations available in the market were subject to call provisions. When municipal obligations are called by their issuers, the Adviser reinvests the proceeds from the called securities in other municipal obligations and is subject to reinvestment risk.
Obligations of issuers of municipal obligations may be subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the United States Bankruptcy Code and other applicable laws. In addition, the obligations of such issuers may become subject to the laws enacted in the future by Congress or state legislatures or referenda extending the time for payment of principal and/or interest, or imposing other constraints upon enforcement of such obligations or upon municipalities to levy taxes. There is also the possibility that, as a result of legislation or other conditions, the power or ability of any issuer to pay, when due, the principal of and interest on its municipal obligations may be materially affected.
INVESTMENT GRADE MUNICIPAL OBLIGATIONS
The Trust invests substantially all of its assets in municipal obligations rated investment grade at the time of purchase. The lowest investment grade rating for municipal obligations is "BBB" by S&P, "Baa" by Moody's or "BBB" by Fitch. "BBB" municipal obligations (including those rated as low as BBB-) are considered by S&P as having "adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to meet its financial commitment on the obligation." "Baa" municipal obligations (including those rated as low as Baa3) are considered by Moody's "as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such municipal obligations lack outstanding investment characteristics and in fact have speculative characteristics as well." "BBB" municipal obligations (including those rated as low as BBB-) are considered by Fitch to be "of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse consequences on these municipal obligations, and therefore impair timely payment." The Trust's ability to preserve principal is a function of, among other things, the ability of the issuers of municipal obligations in which the Trust invests to make timely payments of interest and principal and the ability of the Adviser to select and monitor such securities and to seek to minimize the potential adverse impact of rating downgrades.
OTHER INVESTMENT PRACTICES
Certain of the other investment practices in which the Trust may engage that are described herein or in the statement of additional information may give rise to income that is subject to regular Federal income tax. Accordingly, in normal circumstances, the Trust does not intend to engage in such practices to a significant extent. Moreover, the Trust intends that, so long as New Preferred Shares are outstanding, its portfolio will reflect guidelines established by Moody's and S&P in connection with the Trust's receipt of a rating for such shares on the date they are first issued of at least "aaa" from Moody's and "AAA" from S&P. Such guidelines may preclude or limit the Trust from engaging in many of the investment practices described under this caption or in the statement of additional information. In particular, for so long as New Preferred Shares are rated by Moody's, unless the Moody's ratings guidelines change from those presently applicable as described under "Description of New Preferred Shares -- Rating Agency Guidelines and Asset Coverage," the Trust will not buy or sell futures contracts or options thereon or write put or call options (except covered call options) on portfolio securities unless it receives written confirmation from Moody's that engaging in such transactions would not impair the ratings then assigned to the New Preferred Shares by Moody's except that the Trust may sell exchange traded futures contracts based on the Municipal Index or Treasury Bonds and purchase exchange traded put options on such futures contracts and write exchange traded call options on such futures contracts (collectively "Moody's Hedging Transactions") subject to the limitations described below. For so long as New Preferred Shares are rated by S&P, unless S&P's ratings guidelines change from those presently applicable as described under "Description of New Preferred Shares -- Rating Agency Guidelines and Asset Coverage," the Trust will not buy or sell futures contracts or options thereon or write put options (except covered put options) or call options (except covered call options) on portfolio securities unless it receives written confirmation from S&P that engaging in such transactions will not impair the ratings then assigned to the New Preferred Shares by S&P except that the Trust may buy and sell futures contracts based on the Municipal Index or Treasury Bonds and purchase put and call options on such contracts (collectively "S&P Hedging Transactions") subject to the limitations described below.
HEDGING
Although in normal circumstances the Trust does not intend to invest more than 5% of its assets in instruments other than municipal obligations, the Trust may also enter into certain hedging transactions. In particular, the Trust may purchase and sell futures contracts, exchange-listed and over-the-counter put and call options on securities, financial indices and futures contracts and may enter into various interest rate transactions (collectively, "Hedging Transactions"). Hedging Transactions may be used to attempt to protect against possible changes in the market value of the Trust's portfolio resulting from fluctuations in the debt securities markets and changes in interest rates, to protect the Trust's unrealized gains in the value of its portfolio securities, to facilitate the sale of such securities, for investment purposes or to establish a position in the securities markets as a temporary substitute for purchasing particular securities. Any or all of these techniques may be used at any time. There is no particular strategy that requires use of one technique rather than another. Use of any Hedging Transaction is a function of market conditions. The Hedging Transactions that the Trust may use are described in the statement of additional information. The ability of the Trust to hedge successfully will depend on the Adviser's ability to predict pertinent market movements, which cannot be assured.
OTHER INVESTMENT TECHNIQUES
The Trust may engage in other types of transactions, including investment in restricted and illiquid securities, repurchase and reverse repurchase agreements, when-issued and forward commitment transactions, borrowing, securities lending and other transactions. For a description of such types of transactions, see "Investment Policies and Techniques - Other Investment Policies and Techniques" in the statement of additional information.
RISKS
Risk is inherent in all investing. Investing in any investment company security involves risk, including the risk that you may receive little or no return on your investment or that you may lose part or all of your investment. Therefore, before investing you should consider carefully the following risks that you assume when you invest in New Preferred Shares.
INTEREST RATE RISK
The Trust issues preferred shares (including the New Preferred Shares), which pay dividends based on short-term interest rates. The Trust then uses the proceeds from the sale of preferred shares to buy municipal obligations, which pay interest based on long-term rates. Both long-term and short-term interest rates may fluctuate. If short-term interest rates rise, the preferred shares dividend rates may rise so that the amount of dividends paid to holders of preferred shares exceeds the income from the portfolio securities purchased with the proceeds from the sale of preferred shares. Because income from the Trust's entire investment portfolio (not just the portion of the portfolio purchased with the proceeds of the preferred shares offering) is available to pay preferred share dividends, however, preferred share dividend rates would need to greatly exceed the yield on the Trust's portfolio before the Trust's ability to pay preferred share dividends would be impaired. Generally, municipal obligations will decrease in value when interest rates rise and increase in value when interest rates decline. If long-term rates rise, the value of the Trust's investment portfolio will decline, reducing the amount of assets serving as asset coverage for the preferred shares.
AUCTION RISK
The dividend rate for the New Preferred Shares normally is set through an auction process. In the auction, holders of New Preferred Shares may indicate the dividend rate at which they would be willing to hold or sell their New Preferred Shares or purchase additional New Preferred Shares. The auction also provides liquidity for the sale of New Preferred Shares. An auction fails if there are more New Preferred Shares offered for sale than there are buyers. You may not be able to sell your New Preferred Shares at an auction if the auction fails. Also, if you place hold orders (orders to retain New Preferred Shares) at an auction only at a specified dividend rate, and that rate exceeds the rate set at the auction, you will not retain your New Preferred Shares. Finally, if you buy shares or elect to retain shares without specifying a dividend rate below which you would not wish to buy or continue to hold those shares, you could receive a lower rate of return on your shares than the market rate. See "The Auction".
SECONDARY MARKET RISK
If you try to sell your New Preferred Shares between auctions, you may not be able to sell any or all of your shares, or you may not be able to sell them for $25,000 per share or $25,000 per share plus accumulated dividends. If the Trust has designated a Special Dividend Period (a rate period of more than seven days), changes in interest rates could affect the price you would receive if you sold your shares in the secondary market. Broker-dealers that maintain a secondary trading market for New Preferred Shares are not required to maintain this market, and the Trust is not required to redeem shares either if an auction or an attempted secondary market sale fails because of a lack of buyers. New Preferred Shares are not listed on a stock exchange or the NASDAQ stock market. If you sell your New Preferred Shares to a broker-dealer between auctions, you may receive less than the price you paid for them, especially if market interest rates have risen since the last auction.
RATINGS AND ASSET COVERAGE RISK
While it is a condition to the issuance of the New Preferred Shares that Moody's assign a rating of aaa and S&P a rating of AAA to the New Preferred Shares, such ratings do not eliminate or necessarily mitigate the risks of investing in New Preferred Shares. Moody's or S&P could downgrade New Preferred Shares, which may make your shares less liquid at an auction or in the secondary market. If Moody's or S&P downgrades the New Preferred Shares, the Trust may alter its portfolio or redeem New Preferred Shares in an effort to improve the rating, although there is no assurance that it will be able to do so to the extent necessary to restore the prior rating. The Trust may voluntarily redeem New Preferred Shares. See "Description of New Preferred Shares-Rating Agency Guidelines and Asset Coverage" for a description of the asset maintenance tests the Trust must meet.
CREDIT RISK
Credit risk refers to an issuer's ability to make timely payments of interest and principal. The Trust may invest in securities rated as low as Baa, MIG or P-1 by Moody's, BBB, SP-2 or A-1 by S&P or BBB or F-1 by Fitch or another nationally recognized statistical rating organization. The Trust may invest up to 20% of its assets in unrated securities that are deemed by the Adviser to be of equivalent credit quality. Adverse changes in economic conditions or changing circumstances are more likely to lead to a weakened capacity of the issuers of such municipal obligations to make timely payments of interest and principal than would be the case with respect to issuers of higher rated municipal obligations.
MUNICIPAL OBLIGATIONS MARKET RISK
Investing in the market for municipal obligations involves certain risks. The amount of public information available about the municipal obligations in the Trust's portfolio is generally less than that for corporate equities or bonds, and the investment performance of the Trust may therefore be more dependent on the analytical abilities of the Adviser than a stock fund or taxable bond fund. The secondary market for municipal obligations also tends to be less well-developed or liquid than many other securities markets, which may adversely affect the Trust's ability to sell its portfolio securities at attractive prices.
The ability of municipal issuers to make timely payments of interest and principal may be diminished during general economic downturns and as governmental cost burdens are reallocated among Federal, state and local governments. In addition, laws enacted in the future by Congress or state legislatures or referenda could extend the time for payment of principal and/or interest, or impose other constraints on enforcement of such obligations, or on the ability of municipalities to levy taxes. Insurance on municipal obligations held by the Trust may reduce, but will not necessarily eliminate, such risks. Issuers of municipal securities might seek protection under the bankruptcy laws. In the event of bankruptcy of such an issuer, the Trust could experience delays in collecting principal and interest and the Trust may not, in all circumstances, be able to collect all principal and interest to which it is entitled. To enforce its rights in the event of a default in the payment of interest or repayment of principal, or both, the Trust may take possession of and manage the assets securing the issuer's obligations on such securities, which may increase the Trust's operating expenses. Any income derived from the Trust's ownership or operation of such assets may not be tax-exempt.
REINVESTMENT RISK
Reinvestment risk is the risk that income from the Trust's portfolio will decline if and when the Trust invests the proceeds from matured, traded, prepaid or called bonds at lower interest rates. This risk will increase as the Trust approaches its termination date, because the Trust will reinvest such proceeds in municipal obligations with maturities on or about its termination date, and shorter term municipal obligations generally pay lower rates of interest than longer term municipal obligations. A decline in income could affect the Trust's ability to pay dividends on the New Preferred Shares.
INFLATION RISK
Inflation is the reduction in the purchasing power of money resulting from the increase in the price of goods and services. Inflation risk is the risk that the inflation adjusted (or "real") value of an investment in New Preferred Shares or the income from that investment will be worth less in the future. As inflation occurs, the real value of the New Preferred Shares and distributions declines. In an inflationary period, however, it is expected that, through the auction process, dividend rates on the New Preferred Shares would increase, tending to offset this risk.
MANAGEMENT OF THE TRUST
DIRECTORS AND OFFICERS
The board of directors is responsible for the overall management of the Trust, including supervision of the duties performed by the Adviser. There are eight directors of the Trust. Two of the directors are "interested persons" (as defined in the 1940 Act). The names and business addresses of the directors and officers of the Trust and their principal occupations and other affiliations during the past five years are set forth under "Management of the Trust" in the statement of additional information.
INVESTMENT ADVISER
BlackRock Financial Management, Inc. acts as the Trust's investment adviser (the "Adviser"). BlackRock Advisors, Inc. together with its investment advisory subsidiaries, including the Adviser, is a global asset management firm with assets of approximately $148 billion under management as of September 30, 1999. The Adviser has its principal office at 345 Park Avenue, New York, New York 10154. BlackRock Advisors and its subsidiaries constitute the asset management arm of PNC Bank, N.A., and together have over 671 employees. The Adviser and its affiliates provide fixed income, liquidity, equity, alternative investment, and risk management products for clients worldwide. As of September 30, 1999, the Adviser managed approximately $83 billion in various fixed income sectors, including $8 billion in municipal securities. The Adviser and its affiliates manage 13 closed-end, six open-end and six money market municipal funds. In addition, the Adviser manages portfolios of municipal securities for large insurance companies and high net worth individuals.
INVESTMENT PHILOSOPHY
The Adviser's investment decision-making process for the municipal bond sector is subject to the same discipline, oversight and investment philosophy that the firm applies to other sectors of the fixed income market.
The Adviser uses a relative value strategy that evaluates the trade-off between risk and return to seek to achieve the Trust's investment objective. This strategy is combined with disciplined risk control techniques and applied in sector, sub-sector and individual security selection decisions. The Adviser's extensive personnel and technology resources are the key drivers of the investment philosophy.
The Adviser's Municipal Bond Team. The Adviser uses a team approach to managing municipal portfolios. The Adviser believes that this approach offers substantial benefits over one that is dependent on the market wisdom or investment expertise of only a few individuals.
The Adviser's municipal bond team includes three portfolio managers and six credit research analysts. The team is led by Kevin M. Klingert, a managing director and portfolio manager at the Adviser. Mr. Klingert is a senior portfolio manager and head of municipal bonds at the Adviser, a position he has held since joining the Adviser in 1991. Mr. Klingert has over 15 years of experience in the municipal market. Prior to joining the Adviser, Mr. Klingert was an Assistant Vice President in the Unit Investment Trust Department at Merrill Lynch, Pierce, Fenner & Smith, which he joined in 1985. Mr. Klingert has primary responsibility for managing client portfolios with a special emphasis on municipal securities. The portfolio management team also includes Craig Kasap. Mr. Kasap has been a portfolio manager at the Adviser for over two years and is a member of the Adviser's Investment Strategy Group. Prior to joining the Adviser in 1997, Mr. Kasap spent three years as a municipal bond trader with Keystone Investments in Boston where he was involved in formulating the firm's municipal bond investment strategies. James McGinley is also a member of the Adviser's municipal bond portfolio management team and Investment Strategy Group. Prior to joining the Adviser in 1999 as a Vice President, Mr. McGinley worked at Prudential Securities as an Associate Vice President in Municipal Research.
The Adviser's municipal bond portfolio managers are responsible for 25 municipal bond portfolios, valued as of September 30, 1999 at approximately $5.5 billion, plus approximately an additional $2.5 billion in municipal bonds held across portfolios with broader investment mandates. The team is responsible for portfolios with a variety of investment objective and constraints, including national funds and state-specific funds. As of September 30, 1999, the team managed 13 closed-end municipal funds with over $3 billion in assets.
The Adviser's Investment Process. The Adviser has in-depth expertise in the fixed income market. The Adviser applies the same risk-controlled, active sector rotation style (discussed below) to the management process for all of its fixed income portfolios. The Adviser believes that it is unique in its integration of taxable and municipal bond specialists. Both taxable and municipal bond portfolio managers share the same trading floor and interact frequently for determining the firm's overall investment strategy. This interaction allows each portfolio manager to access the combined experience and expertise of the entire portfolio management group at the Adviser.
The Adviser's portfolio management process emphasizes research and analysis of specific sectors and securities, not interest rate speculation. The Adviser believes that market-timing strategies can be highly volatile and potentially produce inconsistent results. Instead, the Adviser thinks that value over the long-term is best achieved through a risk-controlled approach, focusing on sector allocation, security selection and yield curve management (discussed below).
In the municipal market, the Adviser believes one of the most important determinants of value is supply and demand. The Adviser's ability to monitor investor flows and frequency and seasonality of issuance is helpful in anticipating the impact of supply and demand on sectors. The Adviser believes that the breadth and expertise of its municipal bond team allows it to anticipate issuance flows, forecast which sectors are likely to have the most supply and plan its investment strategy accordingly.
The Adviser also believes that over the long-term, intense credit analysis will add value and avoid significant relative performance impairments. The municipal credit team is led by Susan C. Heide, Ph.D who, since December 15, 1998, has been managing director responsible for municipal credit research at the Adviser. Ms. Heide supervises a team of five municipal research analysts who have an average of 10 years of experience in municipal credit research. Between 1993 and December 15, 1998, Ms. Heide served as a director at the Adviser, specializing in the credit analysis of municipal securities.
The Adviser's approach to credit risk incorporates a combination of sector-based top-down macro-analysis of industry sectors to determine relative weightings with an issuer-specific, bottom-up detailed credit analysis of issuers and structures. The sector-based approach focuses on rotating into sectors that are undervalued and exiting sectors when fundamentals or technicals become unattractive. The issuer-specific approach focuses on identifying special opportunities where the market undervalues a credit, and devoting concentrated resources to research the credit and monitor the position. The Adviser's analytic process focuses on anticipating changes in credit trends before market recognition. Credit research is a critical element of the Adviser's municipal process. The Adviser's yield curve management process involves, among other things, an evaluation of the risk/return trade off for bonds having different durations, and selecting bonds believed to present an attractive yield relative to the degree of interest rate risk involved.
THE INVESTMENT ADVISORY AGREEMENT
Pursuant to an Investment Advisory Agreement (the "Advisory Agreement"), the Adviser manages the investment of the Trust's assets and provides such investment research, advice and supervision, in conformity with the Trust's investment objective and policies, as necessary for the operations of the Trust.
The Advisory Agreement provides, among other things, that the Adviser will bear all expenses of its employees and overhead incurred in connection with its duties under the Advisory Agreement, and will pay all directors' fees and salaries of the Trust's directors and officers who are affiliated persons (as such term is defined in the 1940 Act) of the Adviser, except that the board of directors may approve reimbursement for the time spent on Trust operations of personnel who spend substantial time on the operations (other than the provision of investment advice) of the Trust or other investment companies advised by the Adviser. The Advisory Agreement provides that the Trust shall pay to the Adviser for its services a monthly fee at the annual rate of 0.35% of the Trust's average weekly net asset value. The liquidation value of any outstanding preferred shares (including the New Preferred Shares) of the Trust is not taken into account in determining the Trust's average weekly net asset value.
Although the Adviser intends to devote such time and effort to the business of the Trust as is reasonably necessary to perform its duties to the Trust, the services of the Adviser are not exclusive and the Adviser provides similar services to other investment companies and other clients and may engage in other activities.
The Advisory Agreement also provides that, in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations thereunder, the Adviser is not liable to the Trust or any of the Trust's stockholders for any act or omission by the Adviser in the supervision or management of its respective investment activities or for any loss sustained by the Trust or the Trust's stockholders and provides for indemnification by the Trust of the Adviser, its partners, officers, employees, agents and control persons for liabilities incurred by them in connection with their services to the Trust, subject to certain limitations and conditions.
The Advisory Agreement will continue in effect, provided that each continuance is specifically approved at least annually by both (i) the vote of a majority of the Trust's board of directors or the vote of a majority of the outstanding voting securities of the Trust (as such term is defined in the 1940 Act) and (ii) by the vote of a majority of the directors who are not parties to such Agreement or interested persons (as such term is defined in the 1940 Act) of any such party, cast in person at a meeting called for the purpose of voting on such approval. The Advisory Agreement may be terminated as a whole at any time by the Trust, without the payment of any penalty, upon the vote of a majority of the Trust's board of directors or a majority of the outstanding voting securities of the Trust or by the Adviser, on 60 days' written notice by either party to the other. Except as otherwise provided by order of the SEC or any rule or provision of the 1940 Act, the Agreement will terminate automatically in the event of its assignment (as such term is defined in the 1940 Act and the rules thereunder).
THE ADMINISTRATION AGREEMENT
Princeton Administrators, L.P. (the "Administrator"), 800 Scudders Mill Road, Plainsboro, New Jersey 08536, acts as administrator for the Trust. [The Administrator is an affiliate of _________________________, one of the underwriters of this offering.] Under the Administration Agreement with the Trust (the "Administration Agreement"), the Administrator administers the Trust's corporate affairs subject to the supervision of the Trust's board of directors and in connection therewith furnishes the Trust with office facilities together with such ordinary clerical and bookkeeping services (e.g., preparation of annual and other reports to stockholders and the SEC and filing of Federal, state and local income tax returns) as are not being furnished by the custodian. In connection with its administration of the corporate affairs of the Trust, the Administrator will bear the following expenses:
o the salaries and expenses of all personnel of the Administrator; and
o all expenses incurred by the Administrator in connection with administering the ordinary course of the Trust's business, other than those assumed by the Trust, as described below.
The Administration Agreement provides that the Trust shall pay to the Administrator a monthly fee for its services and the facilities furnished by the Administrator at the annual rate of 0.10% of the Trust's average weekly net asset value. The liquidation value of any outstanding preferred shares (including the New Preferred Shares) of the Trust is not taken into account in determining the Trust's average weekly net asset value.
The Administration Agreement is terminable on 60 days' prior written notice by either party to the other.
EXPENSES OF THE TRUST
Except as indicated above, the Trust will pay all of its expenses, including fees of the directors not affiliated with the Adviser and board meeting expenses: fees of the Adviser and the Administrator; interest charges; taxes; organization expenses; charges and expenses of the Trust's legal counsel and independent accountants, and of the transfer agent, registrar and dividend disbursing agent of the Trust; expenses of repurchasing shares; expenses of issuing any preferred shares (including the New Preferred Shares) or indebtedness; expenses of printing and mailing share certificates, stockholder reports, notices, proxy statements and reports to governmental offices; brokerage and other expenses connected with the execution, recording and settlement of portfolio security transactions; expenses connected with negotiating, effecting purchase or sale, or registering privately issued portfolio securities; custodial fees and expenses for all services to the Trust, including safekeeping of funds and securities and maintaining required books and accounts; expenses of calculating and publishing the net asset value of the Trust's shares; expenses of membership in investment company associations; expenses of fidelity bonding and other insurance expenses including insurance premiums; expenses of stockholders meetings; SEC and state registration fees; New York Stock Exchange listing fees; and fees payable to the National Association of Securities Dealers, Inc. in connection with this offering and fees of any rating agencies retained to rate any preferred shares (including the New Preferred Shares) issued by the Trust.
DESCRIPTION OF PREFERRED SHARES
Certain of the capitalized terms used herein are defined in the Articles Supplementary and Articles of Amendment of the Trust attached as Appendices B-1, B-2 and B-3 to the statement of additional information.
The Preferred Shares of each series are shares of preferred stock of the Trust that entitle their holders to receive dividends when, as and if declared by the board of directors, out of funds legally available therefor, at a rate per annum that may vary for the successive Dividend Periods for each such series. In general, the Applicable Rate for a particular Dividend Period for a particular series of Preferred Shares will be determined by an Auction conducted on the day before the start of such Dividend Period. Existing Holders and Potential Holders of Preferred Shares may participate in Auctions therefor, although Existing Holders desiring to continue to hold all of their Preferred Shares regardless of the Applicable Rate resulting from Auctions need not participate. For an explanation of Auctions and the method of determining the Applicable Rate, see "The Auction".
A Dividend Payment Date and an Auction Date for the Trust's outstanding Series T28 Preferred Shares may coincide with a Dividend Payment Date and an Auction Date for the Series T7 Preferred Shares (including the New Preferred Shares); however, the Series T28 Preferred Shares will have a Dividend Period of 28 days in length and the Series T7 Preferred Shares (including the New Preferred Shares) will have a Dividend Period of seven days in length (except in the case of the Initial Dividend Period or a Special Dividend Period in respect of either series).
The Preferred Shares have a liquidation preference of $25,000 per share plus an amount equal to accumulated but unpaid dividends (whether or not carried or declared) plus the premium, if any, resulting from the designation of a Premium Call Period and are fully paid and non-assessable. The Preferred Shares are not convertible into common shares or other capital stock of the Trust and the holders thereof have no preemptive rights. The Preferred Shares will not be subject to any sinking fund but will be subject to redemption at the option of the Trust on any Dividend Payment Date with respect thereto (provided that no Preferred Shares shall be subject to optional redemption during a Non-Call Period) and, in certain circumstances, are subject to mandatory redemption by the Trust. Except with regard to their respective Initial Dividend Periods and Initial Dividend Rates and except for the timing of their respective Auction Dates and Dividend Payment Dates, the rights and preferences of each series of Preferred Shares are the same.
In connection with the auction procedures described below, Deutsche Bank Group is the Auction Agent, the transfer agent, registrar, dividend disbursing agent and redemption agent for the Preferred Shares.
DESCRIPTION OF NEW PREFERRED SHARES
The following is a brief description of the terms of the New Preferred Shares. For the complete terms of the New Preferred Shares, including definitions of terms used but not defined, please refer to the detailed description of the New Preferred Shares in the Articles Supplementary and Articles of Amendment attached as Appendices B-1, B-2 and B-3 to the statement of additional information. We refer to the Articles Supplementary and Articles of Amendment in this prospectus collectively as the "Articles Supplementary."
GENERAL
The Trust is authorized to issue 200 million shares of capital stock, $.01 par value. The board of directors of the Trust is authorized to classify and reclassify any unissued shares of capital stock from time to time by setting or changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of such shares of stock. In connection with the offerings of New Preferred Shares described herein, the board of directors has reclassified 662 shares of unissued capital stock as New Preferred Shares.
The New Preferred Shares will rank on parity with the currently outstanding Preferred Shares of the Trust as to the payment of dividends and the distribution of assets upon liquidation. Each New Preferred Share carries one vote on matters that New Preferred Shares can be voted. New Preferred Shares, when issued, will be fully paid and non- assessable and have no preemptive, conversion or cumulative voting rights.
DIVIDENDS AND DIVIDEND PERIODS
General. The following is a general description of dividends and Dividend Periods. The Initial Dividend Period for the New Preferred Shares will be ___ days and the dividend rate for this period will be __%. Subsequent Dividend Periods generally will be seven days and the dividend rates for those periods will be determined by auction. The Trust, subject to certain conditions, may change the length of subsequent Dividend Periods by designating them as Special Dividend Periods. See "--Designation of Special Dividend Periods" below.
Dividend Payment Dates. Dividends on New Preferred Shares will be payable, when, as and if declared by the board of directors, out of legally available funds in accordance with the Trust's charter and applicable law, on _____________, 2000, and thereafter generally on each Wednesday. However, if dividends are payable on a Wednesday that is not a Business Day, then dividends will generally be payable on the next day, if such day is a Business Day, or as otherwise specified in the Trust's charter. With respect to a Special Dividend Period of 35 days or fewer, dividends on New Preferred Shares are ordinarily paid on the next Business Day next succeeding the last day thereof. With respect to a Special Dividend Period of more than 35 days, dividends on New Preferred Shares are ordinarily paid on the first business day of each calendar month during such Special Dividend Period and on the Business Day next succeeding the last day thereof.
Dividends will be paid through the Securities Depository on each Dividend Payment Date. The Securities Depository, in accordance with its current procedures, is expected to distribute dividends received from the Auction Agent in same-day funds on each Dividend Payment Date to Agent Members. These Agent Members are in turn expected to distribute such dividends to the persons for whom they are acting as agents. However, each of the current Broker-Dealers has indicated to the Trust that dividend payments will be available in same-day funds on each Dividend Payment Date to customers that use such Broker-Dealer or that Broker-Dealer's designee as Agent Member.
Calculation of Dividend Payment. The Trust computes the dividend
per New Preferred Share by multiplying the Applicable Rate in effect by a
fraction. The numerator of this fraction will normally be seven (i.e. the
number of days in the Dividend Period) and the denominator will normally be
365. If the Trust has designated a Special Dividend Period of 365 days or
more, then the numerator will be the number of days in the Dividend Period,
and the denominator will be 360. In either case, this rate is then
multiplied by $25,000 to arrive at dividends per share.
Dividends on New Preferred Shares will accumulate from the date of their original issue. For each Dividend Payment Period after the Initial Dividend Period, the dividend rate will be the dividend rate determined at the Auction, except as provided below. The dividend rate that results from an Auction for New Preferred Shares will not be greater than the Maximum Applicable Rate. In the case of a Special Dividend Period for which Bid Requirements are specified, the dividend rate will not be less than the Minimum Applicable Rate specified in the Notice of Special Dividend Period. During Dividend Periods for which no Bid Requirements are specified, there will be no Minimum Applicable Rate.
The Maximum Applicable Rate for any regular Dividend Payment Period will be the Applicable Percentage of the higher of the 30-day "AA" Composite Commercial Paper Rate and the Taxable Equivalent of the Short-Term Municipal Bond Rate. In the case of a Special Dividend Period, the Maximum Applicable Rate for any Dividend Payment Period included in such Special Dividend Period will be the Applicable Percentage (determined on the date of the Notice of Special Dividend Period in the case of any such Notice that specifies a Maximum Applicable Rate applicable to such Special Dividend Payment Period) of the Special Dividend Period Reference Rate for such Dividend Payment Period. The Applicable Percentage will be determined based on (i) the lower of the credit rating or ratings assigned on such date to such shares by Moody's and S&P (or if Moody's or S&P or both shall not make such rating available, the equivalent of either or both of such ratings by a Substitute Rating Agency or two Substitute Rating Agencies or, in the event that only one such rating shall be available, such rating) and (ii) whether the Trust has provided notification to the Auction Agent prior to the Auction establishing the Applicable Rate for any dividend period that net capital gains or other taxable income will be included in such dividend on New Preferred Shares as follows:
Credit Ratings Applicable Applicable
-------------- Percentage: Percentage:
Moody's S&P No Notification Notification
------- --- --------------- ------------
"aa3" or higher AA- or higher 110% 150%
"a3" to "al" A- to A+ 125% 160%
"baa3" to "baal" BBB- to BBB+ 150% 250%
"ba3" to "bal" BB- to BB+ 200% 275%
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Below "ba3" Below BB- 250% 300%
Prior to each Dividend Payment Date, the Trust is required to deposit with the Auction Agent sufficient funds for the payment of declared dividends. The failure to make such deposit will not result in the cancellation of any Auction. The Trust does not intend to establish any reserves for the payment of dividends.
Additional Dividends. If, in the case of a Dividend Period of 28 days or fewer, the Trust retroactively allocates any net capital gain or other taxable income to a dividend paid on New Preferred Shares and did not give advance notice thereof to the Auction Agent as described below under "The Auction-Auction Procedures" (the amount of the retroactive allocation referred to herein as a "Retroactive Taxable Allocation") solely by reason of the fact that the retroactive allocation is made as a result of the redemption of all or a portion of the outstanding New Preferred Shares or the liquidation of the Trust, the Trust will, within 90 days (and generally within 60 days) after the end of the Trust's fiscal year for which a Retroactive Taxable Allocation is made, provide notice thereof to the Auction Agent and to each holder of New Preferred Shares (initially expected to be Cede & Co. as nominee of the Securities Depository) during such fiscal year at the holder's address listed on the stock books of the Trust. The Trust will, within 30 days after such notice is given to the Auction Agent, pay to the Auction Agent (who will then distribute to such holders of New Preferred Shares), out of funds legally available therefor, an amount equal to the aggregate Additional Dividend (as defined below) with respect to all Retroactive Taxable Allocations made to such holders during the fiscal year in question. See "Taxes".
If, in the case of a Dividend Period of 35 days or more, the Trust makes a Retroactive Taxable Allocation to a dividend paid on New Preferred Shares, the Trust will, within 90 days (and generally within 60 days) after the end of the Trust's fiscal year for which a Retroactive Taxable Allocation is made, provide notice thereof to the Auction Agent and to each holder of New Preferred Shares (initially expected to be Cede & Co., as nominee of the Securities Depository) during such fiscal year at the holder's address list on the stock books of the Trust. The Trust will, within 30 days after such notice is given to the Auction Agent, pay to the Auction Agent (who will then distribute to such holders of New Preferred Shares), out of funds legally available therefor, an amount equal to the aggregate Additional Dividend (as defined below) with respect to all Retroactive Taxable Allocations made to such holders during the fiscal year in question. See "Taxes".
In no other instance will the Trust be required to make payments to holders of New Preferred Shares to offset the tax effect of any reallocation of net capital gain or other taxable income.
An "Additional Dividend" means an amount paid to a holder of New Preferred Shares that, when taken together with the aggregate amount of Retroactive Taxable Allocations allocated to such holder with respect to the fiscal year in question, would cause the holder's dividends from the aggregate of both the Retroactive Taxable Allocations and the Additional Dividend to be equal to the amount of the dividends that would have been received and retained by the holder if the Retroactive Taxable Allocations had not been made. Additional Dividends shall be calculated:
o without consideration being given to the time value of money;
o assuming that no holder of New Preferred Shares is subject to AMT with respect to dividends received from the Trust; and
o assuming that each Retroactive Taxable Allocation would be taxable in the hands of each holder of New Preferred Shares at the maximum marginal regular Federal income tax rate applicable to individuals or corporations, whichever is greater, in effect at the end of the fiscal year in question.
Although the Trust generally intends to designate any Additional Dividend as an exempt-interest dividend to the extent permitted by applicable law, it is possible that all or a portion of any Additional Dividend will be taxable to the recipient thereof. See "Taxes." The Trust will not pay a further Additional Dividend with respect to any taxable portion of an Additional Dividend.
Restrictions on Dividends and Other Distributions. Except as otherwise described herein, when the Trust has any preferred shares outstanding, including the New Preferred Shares, the Trust may not declare, pay or set apart for payment, any dividend or other distribution (other than a dividend or distribution paid in, or in options, warrants or rights to subscribe for or purchase, its common shares) in respect of common shares. In addition, the Trust may not call for redemption, redeem, purchase or otherwise acquire for consideration any common shares (except by conversion into or exchange for shares of the Trust ranking junior to the New Preferred Shares as to the payment of dividends and the distribution of assets upon liquidation). However, the Trust is not confined by the above restrictions if:
o immediately after such transaction, the Discounted Value of the Trust's portfolio would be equal to or greater than the Preferred Shares Basic Maintenance Amount and the 1940 Act Preferred Shares Asset Coverage (see "--Rating Agency Guidelines and Asset Coverage" below),
o full cumulative dividends on the New Preferred Shares due on or prior to the date of the transaction have been declared and paid or shall have been declared and sufficient funds for the payment thereof deposited with the Auction Agent;
o any Additional Dividend required to be paid on or before the date of such declaration or payment has been paid; and
o the Trust has redeemed the full number of New Preferred Shares required to be redeemed by any provision for mandatory redemption contained in the Articles Supplementary.
Except as set forth in the next sentence, the Trust will not declare, pay or set apart for payment any dividend on any shares of the Trust ranking, as to the payment of dividends, on a parity with New Preferred Shares for any period unless the Trust has declared and paid or contemporaneously declares and pays full cumulative dividends on the New Preferred Shares through its most recent Dividend Payment Date. However, when the Trust has not paid dividends in full on the New Preferred Shares through the most recent Dividend Payment Date or upon any shares of the Trust ranking, as to the payment of dividends, on a parity with New Preferred Shares through their most recent respective Dividend Payment Dates, the Trust will declare all dividends upon New Preferred Shares and any shares of the Trust ranking, as to the payment of dividends, on a parity with New Preferred Shares, pro rata so that the amount of dividends declared per share on New Preferred Shares and such other class or series of shares will in all cases bear to each other the same ratio that accumulated dividends per share on the New Preferred Shares and such other class or series of shares bear to each other.
Designation of Special Dividend Periods. The Trust may, at its sole option and whenever permitted by law, declare a Special Dividend Period. To declare a Special Dividend Period, the Trust will give notice (a "Request for Special Dividend Period") to the Auction Agent and to each Broker-Dealer and request that the next succeeding Dividend Period for such series of New Preferred Shares be a number of days (other than seven) evenly divisible by seven and specified in such notice. For any Auction occurring after the initial Auction, the Trust may not give a Request for Special Dividend Period unless Sufficient Clearing Bids were made in the last occurring Auction and unless full cumulative dividends, any amounts due with respect to mandatory redemptions, and any Additional Dividends payable prior to such date have been paid in full. The Trust must have also received confirmation from Moody's and S&P or any Substitute Rating Agency that the proposed Special Dividend Period will not adversely affect such agency's then-current rating on the New Preferred Shares. A Request for Special Dividend Period will also specify any proposed Bid Requirements. Upon receiving a Request for Special Dividend Period, the Broker-Dealer(s) will jointly determine whether, given the factors set forth in the Articles Supplementary, it is advisable that the Trust issue a Notice of Special Dividend Period for the New Preferred Shares as contemplated by the Request for Special Dividend Period and, if advisable, the Specific Redemption Provisions and will give the Trust and the Auction Agent notice of its determination. If no Broker-Dealer objects to the Notice of Special Dividend Period, the Trust may issue such notice specifying the duration of the Special Dividend Period, the Bid Requirements, if any, and the Specific Redemption Provisions, if any.
REDEMPTION
Mandatory Redemption. If the Trust does not timely cure a failure to maintain (a) a Discounted Value of its portfolio equal to the Preferred Shares Basic Maintenance Amount or (b) the 1940 Act Preferred Shares Asset Coverage, in accordance with the requirements of the rating agencies that rate the New Preferred Shares, the Trust must redeem all or a portion of the New Preferred Shares. This mandatory redemption will take place on a date that the board of directors specifies out of legally available funds in accordance with the Trust's charter and applicable law, at the redemption price of $25,000 per share plus accumulated but unpaid dividends (whether or not earned or declared) to the date fixed for redemption. The mandatory redemption will be limited to the number of New Preferred Shares necessary to restore the required Discounted Value or the 1940 Act Preferred Shares Asset Coverage, as the case may be.
Optional Redemption. To the extent permitted under the 1940 Act and Maryland law, upon giving a Notice of Redemption, as provided below, the Trust, at its option, may redeem the New Preferred Shares, in whole or in part, out of funds legally available therefor, on any Dividend Payment Date at the optional redemption price per share of $25,000 per share plus an amount equal to accumulated but unpaid dividends (whether or not earned or declared) to the date fixed for redemption plus the premium, if any, resulting from the designation of a Premium Call Period; provided that no New Preferred Shares shall be subject to optional redemption during a Non-Call Period. In addition, holders of New Preferred Shares may be entitled to receive Additional Dividends in the event of redemption of such New Preferred Shares to the extent provided herein. The Trust has the authority to redeem the New Preferred Shares for any reason and may redeem all or part of then-outstanding New Preferred Shares if it anticipates that the Trust's leveraged capital structure will result in a lower rate of return to holders of common shares of the Trust for any significant period of time than that obtainable if such common shares were not leveraged.
LIQUIDATION
Upon a voluntary or involuntary liquidation of the Trust, the holders of outstanding New Preferred Shares will receive, from the assets of the Trust available for distribution to its shareholders, the liquidation preference plus all accumulated but unpaid dividends (whether or not earned or declared) plus the premium, if any, resulting from the designation of a Premium Call Period and any applicable Additional Dividends before any payment is made to the common shares. The holders of outstanding New Preferred Shares will be entitled to receive these amounts subject to the rights of holders of any series or class of shares, including other series of Preferred Shares, ranking on a parity with the New Preferred Shares with respect to the distribution of assets upon liquidation of the Trust. After the payment to the holders of New Preferred Shares of the full preferential amounts provided for as described, the holders of New Preferred Shares will have no right or claim to any of the remaining assets of the Trust.
Neither the sale of all or substantially all the property or business of the Trust, nor the merger or consolidation of the Trust into or with any other corporation, nor the merger or consolidation of any other corporation into or with the Trust, is a voluntary or involuntary liquidation for the purposes of the foregoing paragraph.
RATING AGENCY GUIDELINES AND ASSET COVERAGE
The Trust is required under guidelines of Moody's and S&P to maintain assets having in the aggregate a Discounted Value at least equal to the Preferred Shares Basic Maintenance Amount. Moody's and S&P have each established separate guidelines for calculating Discounted Value. To the extent any particular portfolio holding does not satisfy a rating agency's guidelines, all or a portion of the holding's value will not be included in the rating agency's calculation of Discounted Value. The Moody's and S&P guidelines do not impose any limitations on the percentage of the Trust's assets that may be invested in holdings not eligible for inclusion in the calculation of the Discounted Value of the Trust's portfolio. The amount of such assets included in the portfolio at any time may vary depending upon the rating, diversification and other characteristics of the eligible assets included in the portfolio. The Preferred Shares Basic Maintenance Amount includes the sum of (a) the aggregate liquidation preference of New Preferred Shares then outstanding and (b) certain accrued and projected payment obligations of the Trust.
The Trust is also required under rating agency guidelines to maintain, with respect to New Preferred Shares, as of the last Business Day of each month in which any such shares are outstanding, asset coverage of at least 200% with respect to senior securities which are equity shares, including the New Preferred 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 equity shares of a closed-end investment company as a condition of declaring dividends on its common shares) ("1940 Act Preferred Shares Asset Coverage"). Based on the composition of the portfolio of the Trust and market conditions as of __________ ___, 2000, the 1940 Act Preferred Shares Asset Coverage with respect to all of the Trust's preferred shares, assuming the issuance on that date of all New Preferred Shares offered hereby and giving effect to the deduction of related sales load and related offering costs estimated at $465,500, would have been computed as follows:
Value of Trust assets less liabilities
not constituting senior securities = $ = %
---------------------------------- -------
Senior securities representing indebtedness $
plus
liquidation value of the preferred shares
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In the event the Trust does not timely cure a failure to maintain
(a) a Discounted Value of its portfolio equal to the Preferred Shares Basic
Maintenance Amount or (b) the 1940 Act Preferred Shares Asset Coverage, in
each case in accordance with the requirements of the rating agency or
agencies then rating the New Preferred Shares, the Trust will be required
to redeem New Preferred Shares as described under "--Redemption--Mandatory
Redemption" above.
Pursuant to S&P guidelines, for so long as the New Preferred Shares are rated by S&P, the Trust will also be required under the Articles Supplementary to have, as of each Valuation Date, Deposit Securities with maturity or tender payment dates not later than the Dividend Payment Date (collectively, "Dividend Coverage Assets") for each share of New Preferred Shares outstanding that follows such Valuation Date and having in the aggregate a value not less than the Dividend Coverage Amount (the "Minimum Liquidity Level"). The "Dividend Coverage Amount", as of any Valuation Date, means (A) the aggregate amount of cash dividends that will accumulate on outstanding New Preferred Shares to (but not including) the next Dividend Payment Date that follows such Valuation Date less (B) the combined fair market value of Deposit Securities irrevocably deposited for the payment of cash dividends on New Preferred Shares. "Deposit Securities" means cash, the book value of municipal obligations sold for which payment is due within five Business Days and before the next Valuation Date and municipal obligations rated at least A-1 + or SP- I + by S&P, VMIG-1 or MIG-1 by Moody's. The definitions of "Deposit Securities", "Dividend Coverage Assets" and "Dividend Coverage Amount" may be changed from time to time by the Trust without shareholder approval, but only in the event the Trust receives confirmation from S&P that any such change would not impair the ratings then assigned by S&P to New Preferred Shares.
The Trust may, but is not required to, adopt any modifications to the guidelines that may be established by Moody's or S&P. Failure to adopt any such modifications, however, may result in a change in the ratings described above or a withdrawal of ratings altogether. In addition, any rating agency providing a rating for the New Preferred Shares may, at any time, change or withdraw any such rating. The Board may, without shareholder approval, amend, alter or repeal any or all of the definitions and related provisions which have been adopted by the Trust pursuant to the rating agency guidelines in the event the Trust receives written confirmation from Moody's or S&P, as the case may be, that any such amendment, alteration or repeal would not impair the rating then assigned to the New Preferred Shares.
As recently described by Moody's and S&P, a preferred stock rating is an assessment of the capacity and willingness of an issuer to pay preferred stock obligations. The rating on the New Preferred Shares is not a recommendation to purchase, hold or sell those shares, inasmuch as the rating does not comment as to market price or suitability for a particular investor. The rating agency guidelines described above also do not address the likelihood that an owner of New Preferred Shares will be able to sell such shares in an Auction or otherwise. The ratings are based on current information furnished to Moody's and S&P by the Trust and the Adviser and information obtained from other sources. The ratings may be changed, suspended or withdrawn as a result of changes in, or the unavailability of, such information. The common shares have not been rated by a nationally recognized statistical rating organization.
A rating agency's guidelines will apply to New Preferred Shares only so long as the rating agency is rating the shares. The Trust will pay certain fees to Moody's and S&P for rating the New Preferred Shares.
VOTING RIGHTS
Except as otherwise provided in this prospectus and in the statement of additional information or as otherwise required by law, holders of New Preferred Shares will have equal voting rights with holders of common shares and any other preferred shares of the Trust (one vote per share) and will vote together with holders of common shares and any other preferred shares as a single class.
In connection with the election of the Trust's directors, holders of outstanding preferred shares of the Trust, including New Preferred Shares, voting as a separate class, are entitled to elect two of the Trust's directors, and the remaining directors are elected by holders of common shares and preferred shares, including New Preferred Shares, voting together as a single class. In addition, if at any time dividends (whether or not earned or declared) on outstanding preferred shares of the Trust, including New Preferred Shares, are due and unpaid in an amount equal to two full years of dividends, and sufficient cash or specified securities have not been deposited with the Auction Agent for the payment of such dividends, then, the sole remedy of holders of outstanding preferred shares of the Trust, including New Preferred Shares, is that the number of directors constituting the board of directors will be automatically increased by the smallest number that, when added to the two directors elected exclusively by the holders of preferred shares of the Trust, including New Preferred Shares, as described above, would constitute a majority of the board of directors. The holders of preferred shares of the Trust, including New Preferred Shares, will be entitled to elect that smallest number of additional directors at a special meeting of shareholders held as soon as possible and at all subsequent meetings at which directors are to be elected. The terms of office of the persons who are directors at the time of that election will continue. If the Trust thereafter shall pay, or declare and set apart for payment, in full, all dividends payable on all outstanding preferred shares of the Trust, including New Preferred Shares, the special voting rights stated above will cease, and the terms of office of the additional directors elected by the holders of the preferred shares will automatically terminate.
As long as any preferred shares of the Trust are outstanding, the Trust will not, without the affirmative vote or consent of the holders of at least a majority of the Preferred Shares (including New Preferred Shares) outstanding at the time (voting as a separate class):
(a) authorize, create or issue, or increase the authorized or issued amount of, any class or series of stock ranking prior to or on a parity with the Preferred Shares (including the New Preferred Shares) with respect to payment of dividends or the distribution of assets on liquidation, or increase the authorized amount of the Preferred Shares (including the New Preferred Shares) or any other preferred stock, unless the Trust obtains written confirmation from Moody's (if Moody's is then rating preferred shares), S&P (if S&P is then rating preferred shares) or any Substitute Rating Agency (if any such Substitute Rating Agency is then rating preferred shares) that the issuance of such class or series would not impair the rating then assigned by such rating agency to the Preferred Shares) and the Trust continues to comply with Section 13 of the 1940 Act, the 1940 Act Preferred Shares Asset Coverage requirements and the Preferred Shares Basic Maintenance Amount requirements, in which case the vote or consent of the holders of the Preferred Shares (including the New Preferred Shares) is not required;
(b) amend, alter or repeal the provisions of the Trust's charter whether by merger, consolidation or otherwise, so as to adversely affect any of the contract rights expressly set forth in the Trust's charter of holders of Preferred Shares (including the New Preferred Shares) or any other preferred stock;
(c) authorize the Trust's conversion from a closed-end to an open-end investment company; or
(d) amend the provisions of the Trust's charter which provide for the classification of the board of directors of the Trust into three classes, each with a term of office of three years with only one class of directors standing for election in any year (presently Article VI of the Trust's charter).
To the extent permitted under the 1940 Act, the Trust shall not approve any of the actions set forth in (a) or (b) above which adversely affects the rights expressly set forth in the Trust's charter of a holder of shares of a series of preferred shares differently than those of a holder of shares of any other series of preferred shares without the affirmative vote of the holders of at least a majority of the shares of each series adversely affected and outstanding at such time, in person or by proxy, at a meeting (each such adversely affected series voting separately as a class) or by the unanimous written consent of the holders of all outstanding preferred shares. Unless a higher percentage is provided for under the Trust's charter, the affirmative vote of the holders of a majority of the outstanding preferred shares, including New Preferred Shares, voting together as a single class, will be required to approve any plan of reorganization (including bankruptcy proceedings) adversely affecting such shares or any action requiring a vote of security holders under Section 13(a) of the 1940 Act. Notwithstanding the preceding sentence, to the extent permitted by Maryland General Corporation Law, no vote of holders of common stock, either separately or together with holders of preferred shares as a single class, is necessary to take the actions contemplated by (a) and (b) above and the holders of common shares will not be entitled to vote in respect of such matters, unless, in the case of the actions contemplated by (b) above, the action would adversely affect the contract rights expressly set forth in the charter of the holders of common shares.
The foregoing voting provisions will not apply with respect to New Preferred Shares if, at or prior to the time when a vote is required, such shares have been (i) redeemed or (ii) called for redemption and sufficient funds have been deposited in trust to effect such redemption.
THE AUCTION
GENERAL
The Trust's charter provides that, except as otherwise described herein, the Applicable Rate for the New Preferred Shares for each Dividend Period after the Initial Dividend Period shall be equal to the rate per annum that the Auction Agent advises has resulted on the Business Day preceding the first day of such subsequent Dividend Period (an "Auction Date") from implementation of the auction procedures (the "Auction Procedures") set forth in the Trust's charter and summarized below, in which persons determine to hold or offer to sell or, based on dividend rates bid by them, offer to purchase or sell New Preferred Shares. Each periodic implementation of the Auction Procedures is referred to herein as an "Auction." See the Articles Supplementary for a more complete description of the Auction process.
Auction Agency Agreement. The Trust will enter into an Auction Agency Agreement (the "Auction Agency Agreement") with the Auction Agent (currently, Deutsche Bank Group) which provides, among other things, that the Auction Agent will follow the Auction Procedures to determine the Applicable Rate for New Preferred Shares so long as the Applicable Rate for New Preferred Shares is to be based on the results of an Auction.
The Auction Agent may terminate the Auction Agency Agreement upon notice to the Trust no earlier than [60] days after such notice. If the Auction Agent should resign, the Trust will use its best efforts to enter into an agreement with a successor Auction Agent containing substantially the same terms and conditions as the Auction Agency Agreement. The Trust may remove the Auction Agent provided that prior to such removal the Trust has entered into such an agreement with a successor Auction Agent.
Broker-Dealer Agreements. Each Auction requires the participation of one or more Broker-Dealers. The Auction Agent will enter into agreements (collectively, the "Broker-Dealer Agreements") with several Broker-Dealers selected by the Trust, which provide for the participation of those Broker-Dealers in Auctions for New Preferred Shares.
The Auction Agent after each Auction for New Preferred Shares will pay to each Broker-Dealer, from funds provided by the Trust, a service charge at the annual rate of 1/4 of 1% in the case of any Auction immediately preceding a Dividend Period of less than one year, or a percentage agreed to by the Trust and the Broker-Dealers in the case of any Auction immediately preceding a Dividend Period of one year or longer, of the purchase price of New Preferred Shares placed by such Broker-Dealer at such Auction. For the purposes of the preceding sentence, New Preferred Shares will be placed by a Broker-Dealer if such shares were (a) the subject of Hold Orders deemed to have been submitted to the Auction Agent by the Broker-Dealer and were acquired by such Broker-Dealer for its own account or were acquired by such Broker-Dealer for its customers who are Beneficial Owners or (b) the subject of an Order submitted by such Broker- Dealer that is (i) a Submitted Bid of an Existing Holder that resulted in such Existing Holder continuing to hold such shares as a result of the Auction or (ii) a Submitted Bid of a Potential Holder that resulted in such Potential Holder purchasing such shares as a result of the Auction or (iii) a valid Hold Order.
The Trust may request the Auction Agent to terminate one or more Broker-Dealer Agreements at any time, provided that at least one Broker-Dealer Agreement is in effect after such termination.
AUCTION PROCEDURES
Prior to the Submission Deadline on each Auction Date for the New Preferred Shares, each 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 New Preferred Shares (a "Beneficial Owner") may submit orders ("Orders") with respect to New Preferred Shares to that Broker-Dealer as follows:
1. Hold Order--indicating its desire to hold New Preferred Shares without regard to the Applicable Rate for the next Dividend Period thereof.
2. Bid--indicating its desire to sell New Preferred Shares at $25,000 per share if the Applicable Rate for shares of such series for the next Dividend Period thereof is less than the rate or spread specified in such Bid.
3. Sell Order--indicating its desire to sell New Preferred Shares at $25,000 per share without regard to the Applicable Rate for shares of such series for the next Dividend Period thereof.
A Beneficial Owner may submit different types of Orders to its Broker-Dealer with respect to New Preferred Shares then held by such Beneficial Owner. A Beneficial Owner that submits a Bid to its Broker-Dealer having a rate higher than the Maximum Applicable Rate on the Auction Date therefor will be treated as having submitted a Sell Order to its Broker-Dealer. A Beneficial Owner that fails to submit an Order to its Broker-Dealer will be deemed to have submitted a Hold Order to its Broker-Dealer; provided however, that if a Beneficial Owner fails to submit an Order to its Broker-Dealer for an Auction relating to a Dividend Period of more than 91 days, such Beneficial Owner will be deemed to have submitted a Sell Order to its Broker-Dealer. A Sell Order shall constitute an irrevocable offer to sell the New Preferred Shares subject thereto. A Beneficial Owner that offers to become the Beneficial Owner of additional New Preferred Shares is, for purposes of such offer, a Potential Beneficial Owner as discussed below.
A customer of a Broker-Dealer that is not a Beneficial Owner of New Preferred Shares but that wishes to purchase New Preferred Shares, or that is a Beneficial Owner that wishes to purchase additional New Preferred Shares (in each case, a "Potential Beneficial Owner"), may submit Bids to its Broker-Dealer in which it offers to purchase New Preferred Shares at $25,000 per share if the Applicable Rate for the next Dividend Period thereof is not less than the rate specified in such Bid. A Bid placed by a Potential Beneficial Owner specifying a rate higher than the Maximum Applicable Rate on the Auction Date therefor will not be accepted.
Any Bid by an Existing Holder that specifies a Spread with respect to an Auction in which a Spread is not included in any Bid Requirements or in which there are no Bid Requirements and an Order that does not specify a Spread with respect to an Auction in which a Spread is included in any Bid Requirements shall be treated as a Sell Order.
The Broker-Dealers in turn will submit the Orders of their respective customers who are Beneficial Owners and Potential Beneficial Owners to the Auction Agent, designating themselves (unless otherwise permitted by the Trust) as Existing Holders in respect of shares subject to Orders submitted or deemed submitted to them by Beneficial Owners and as Potential Holders in respect of shares subject to Orders submitted to them by Potential Beneficial Owners. However, neither the Trust nor the Auction Agent will be responsible for a Broker-Dealer's failure to comply with the foregoing. Any Order placed with the Auction Agent by a Broker-Dealer as or on behalf of an Existing Holder or a Potential Holder will be treated in the same manner as an Order placed with a Broker-Dealer by a Beneficial Owner or Potential Beneficial Owner. Similarly, any failure by a Broker-Dealer to submit to the Auction Agent an Order in respect of any New Preferred Shares held by it or customers who are Beneficial Owners will be treated in the same manner as a Beneficial Owner's failure to submit to its Broker-Dealer an Order in respect of New Preferred Shares held by it. A Broker- Dealer may also submit Orders to the Auction Agent for its own account as an Existing Holder or Potential Holder, provided it is not an affiliate of the Trust.
If Sufficient Clearing Bids for New Preferred Shares exist (that is, the number of shares subject to Bids submitted or deemed submitted to the Auction Agent by Broker-Dealers as or on behalf of Potential Holders with rates or spreads equal to or lower than the Maximum Applicable Rate is at least equal to the number of New Preferred Shares subject to Sell Orders submitted or deemed submitted to the Auction Agent by Broker-Dealers as or on behalf of Existing Holders), the Applicable Rate for New Preferred Shares for the next succeeding Dividend Period thereof will be the lowest rate specified in the Submitted Bids which, taking into account such rate and all lower rates bid by Broker-Dealers as or on behalf of Existing Holders and Potential Holders, would result in Existing Holders and Potential Holders owning the New Preferred Shares available for purchase in the Auction. If Sufficient Clearing Bids for New Preferred Shares do not exist, the Applicable Rate for the next succeeding Dividend Period thereof will be the Maximum Applicable Rate on the Auction Date therefor. In such event, Beneficial Owners of New Preferred Shares that have submitted or are deemed to have submitted Sell Orders may not be able to sell in such Auction all shares subject to such Sell Orders. If all of the Outstanding New Preferred Shares are the subject of Submitted Hold Orders, then the Dividend Period next succeeding the Auction shall automatically be the same length as the immediately preceding Dividend Period and the Applicable Rate for the next succeeding Dividend Period will be the higher of the 30-day "AA" Composite Commercial Paper Rate and the Taxable Equivalent of the Short-Term Municipal Bond Rate multiplied by 1 minus the maximum marginal regular Federal individual income tax rate then applicable to ordinary income or the maximum marginal regular Federal corporate tax rate then applicable, whichever is greater (or 90% of such rate if the Trust has provided notification to the Auction Agent prior to the Auction establishing the Applicable Rate that net capital gains or other taxable income will be included in such dividend on New Preferred Shares) on the date of the Auction.
The Auction Procedures include a pro rata allocation of shares for purchase and sale, which may result in an Existing Holder continuing to hold or selling, or a Potential Holder purchasing, a number of New Preferred Shares that is different than the number of shares specified in its Order. To the extent the allocation procedures have that result, Broker-Dealers that have designated themselves as Existing Holders or Potential Holders in respect of customer Orders will be required to make appropriate pro rata allocations among their respective customers.
Settlement of purchases and sales will be made on the next Business Day (also a Dividend Payment Date) after the Auction Date through the Securities Depository. Purchasers will make payment through their Agent Members in same-day funds to the Securities Depository against delivery to their respective Agent Members. The Securities Depository will make payment to the sellers' Agent Members in accordance with the Securities Depository's normal procedures, which now provide for payment against delivery by their Agent Members in same-day funds.
The Auctions for New Preferred Shares will normally be held every Tuesday, and each subsequent Dividend Period will normally begin on the following Wednesday.
Whenever the Trust intends to include any net capital gains or other income taxable for Federal income tax purposes in any dividend on New Preferred Shares, the Trust may, at its election, 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 customers who are Beneficial Owners and Potential Beneficial Owners believed by it to be interested in submitting an Order in the Auction to be held on such Auction Date. In the event of such notice, the Trust will not be required to pay an Additional Dividend with respect to such dividend.
SECONDARY MARKET TRADING AND TRANSFER OF NEW PREFERRED SHARES
The Broker-Dealers are expected to maintain a secondary trading market in New Preferred Shares outside of Auctions, but are not obligated to do so, and may discontinue such activity at any time. There can be no assurance that any secondary trading market in New Preferred Shares will provide owners with liquidity of investment. The New Preferred Shares are not registered on any stock exchange or on the Nasdaq Stock Market. Investors who purchase shares in an Auction for a Special Dividend Period in which the Bid Requirements, if any, do not require a Bid to specify a Spread, should note that because the dividend rate on such shares will be fixed for the length of such Dividend Period, the value of the shares may fluctuate in response to changes in interest rates, and may be more or less than their original cost if sold on the open market in advance of the next Auction therefor, depending upon market conditions. Investors who purchase shares in an Auction for a Special Dividend Period in which the Bid Requirements require a Bid to specify a Spread should be aware that the value of their shares may also fluctuate and may be more or less than their original cost if sold on the open market in advance of the next Auction, particularly if market spreads narrow or widen in a manner unfavorable to such purchaser's position.
A Beneficial Owner or an Existing Holder may sell, transfer or otherwise dispose of New Preferred Shares only in whole shares and only:
o pursuant to a Bid or Sell Order placed with the Auction Agent in accordance with the Auction Procedures;
o to a Broker-Dealer; or
o to such other persons as may be permitted by the Trust;
provided, however, that
-------- -------
o a sale, transfer or other disposition of New Preferred Shares
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 the foregoing 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
o 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.
For the meaning of defined terms used but not defined, see the
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Articles Supplementary and Articles of Amendment attached as Appendices B-1, B-2 and B-3 to the statement of additional information.
TAXES
FEDERAL INCOME TAX MATTERS
The Trust has qualified and elected, and intends to continue to qualify, as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and intends to distribute at least 90% of its net investment income (including taxable income, tax-exempt interest and net short-term capital gain, but not net capital gain, which is the excess of net long-term capital gain over net short-term capital loss) and substantially all of its net capital gain to its shareholders. The Trust will not be subject to Federal income tax on any net investment income and net capital gain that it distributes to its shareholders, but will be subject to Federal income tax at the regular corporate income tax rate on any net investment income (other than net tax-exempt interest income) that it retains.
The Trust expects that substantially all of the Trust's dividends to the common shareholders and Preferred Shareholders will qualify as "exempt-interest dividends." A shareholder treats an exempt-interest dividend as interest on state and local bonds which is exempt from regular Federal income tax. Some or all of an exempt-interest dividend, however, may be subject to Federal alternative minimum tax imposed on the shareholder. Different Federal alternative minimum tax rules apply to individuals and to corporations. In addition to exempt-interest dividends, the Trust also may distribute to its shareholders amounts that are treated as long-term capital gain or ordinary income. The Trust will allocate distributions to shareholders that are treated as tax-exempt interest and as long-term capital gain and ordinary income, if any, proportionately among the common shares and Preferred Shares, including the New Preferred Shares. The Trust intends to notify Preferred Shares, including New Preferred Shares in advance if it will allocate income to them that is not exempt from regular Federal income tax. In certain circumstances the Trust will make payments to such shareholders to offset the tax effects of the taxable distribution. See "Description of New Preferred Shares--Dividends and Dividend Periods-Additional Dividends."
The sale or other disposition of common shares or Preferred Shares of the Trust will normally result in capital gain or loss to shareholders. Present law taxes both long-term and short-term capital gains of corporations at the rates applicable to ordinary income. For non-corporate taxpayers, under current law short-term capital gains and ordinary income will be taxed at a maximum rate of 39.6%, while long-term capital gains will generally be taxed at a maximum rate of 20%. Because of certain limitations on itemized deductions and the deduction for personal exemptions applicable to higher income taxpayers, the effective rate of tax may be higher in certain circumstances. Losses realized by a shareholder on the sale or exchange of shares of the Trust held for six months or less are disallowed to the extent of any exempt- interest dividends received with respect to such shares, and, if not disallowed, such losses are treated as long-term capital losses to the extent of any distribution of net capital gain received with respect to such shares. A shareholder's holding period is suspended for any periods during which the shareholder's risk of loss is diminished as a result of holding one or more other positions in substantially similar or related property, or through certain options or short sales. Any loss realized on a sale or exchange of shares of the Trust will be disallowed to the extent those shares of the Trust are replaced by other shares within a period of 61 days beginning 30 days before and ending 30 days after the date of disposition of the original shares. In that event, the basis of the replacement shares of the Trust will be adjusted to reflect the disallowed loss.
The statement of additional information contains a more detailed summary of the Federal tax rules that apply to the Trust and its shareholders. Legislative, judicial or administrative action may change the tax rules that apply to the Trust or its shareholders, and any such change may be retroactive. You should consult with your tax adviser about Federal income tax matters.
STATE AND LOCAL TAX MATTERS
While exempt-interest dividends are exempt from regular Federal income tax, they may not be exempt from state or local income or other taxes. Some states exempt from state income tax that portion of any exempt-interest dividend that is derived from interest that a regulated investment company receives on its holdings of securities of that state and its political subdivisions and instrumentalities. Therefore, the Trust will report annually to its shareholders the percentage of interest income the Trust earned during the preceding year on tax-exempt obligations and the Trust will indicate, on a state-by-state basis, the source of this income. You should consult with your tax adviser about state and local tax matters.
DETERMINATION OF NET ASSET VALUE
The net asset value of common shares of the Trust will be computed based upon the value of the Trust's portfolio securities and other assets. Net asset value per common share of the Trust will be determined as of the close of the regular trading session on the New York Stock Exchange no less frequently than Friday of each week and the last business day of each month, provided, however, that if any such day is a holiday or determination of net asset value on such day is impracticable, the net asset value shall be calculated on such earlier or later day as determined by the Adviser. The Trust calculates net asset value per common share of the Trust by subtracting the Trust's liabilities (including accrued expenses, dividends payable and any borrowings of the Trust) and the liquidation value of any outstanding preferred shares (including New Preferred Shares) of the Trust from the Trust's total assets (the value of the securities the Trust holds plus cash or other assets, including interest accrued but not yet received) and dividing the result by the total number of common shares of the Trust outstanding.
The Trust values its fixed income securities by using market quotations provided by pricing services, prices provided by market makers or estimates of market values obtained from yield data relating to instruments or securities with similar characteristics in accordance with procedures established by the board of directors of the Trust. Short-term securities having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market value. Any securities or other assets for which current market quotations are not readily available are valued at their fair value as determined in good faith under procedures established by and under the general supervision and responsibility of the Trust's board of directors.
REPURCHASE OF COMMON SHARES
Shares of closed-end investment companies often trade at a discount to their net asset values, and the Trust's common shares may also trade at a discount to their net asset value. The market price of the Trust's common shares will be determined by such factors as relative demand for and supply of such common shares in the market, the Trust's net asset value, general market and economic conditions and other factors beyond the control of the Trust. Although the Trust's common shareholders will not have the right to redeem their common shares, the Trust may take action to repurchase common shares in the open market or make tender offers for its common shares at their net asset value. This may, but will not necessarily, have the effect of reducing any market discount from net asset value. See "Repurchase of Common Shares" in the statement of additional information.
DESCRIPTION OF CAPITAL STOCK
The Trust is authorized to issue 200 million shares of capital stock, $.01 par value. The board of directors of the Trust is authorized to classify and reclassify any unissued shares of capital stock from time to time by setting or changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of such shares of stock. In connection with the offerings of New Preferred Shares described herein, the board of directors has reclassified 662 shares of unissued capital stock as New Preferred Shares.
COMMON SHARES
The Trust has no present intention of offering any additional shares of capital stock other than New Preferred Shares as described herein. Any additional offerings of shares of capital stock, if made, will require approval by the Trust's board of directors. Any additional offering of common shares will be subject to the requirements of the 1940 Act that common shares may not be issued at a price below the then current net asset value (exclusive of underwriting discounts and commissions) except in connection with an offering to existing stockholders or with the consent of a majority of the Trust's common shareholders.
On December 31, 1999, there were 16,707,093 common shares of the Trust issued and outstanding.
So long as any New Preferred Shares or any other preferred shares of the Trust are outstanding, holders of common shares of the Trust will not be entitled to receive any net income of or other distributions from the Trust unless all accumulated dividends on outstanding preferred shares (including the New Preferred Shares) have been paid, and unless asset coverage (as defined in the 1940 Act) with respect to such preferred shares would be at least 200% after giving effect to such distributions. See "Description of New Preferred Shares-Dividends and Dividend Periods" for other restrictions on dividends to holders of common shares which will be applicable for so long as any preferred shares of the Trust are outstanding.
The common shares have traded on the New York Stock Exchange (the "Exchange") since February 19, 1992 under the symbol "BKN."
At , 2000, the net asset value per common share
----------------------
was $ and the closing price per common share on the Exchange was
----------
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PREFERRED STOCK
Under the Trust's charter, the Trust is authorized to issue 200 million shares of capital stock, $.01 par value. The board of directors of the Trust is authorized to classify and reclassify any unissued shares of capital stock from time to time by setting or changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of such shares of stock. In connection with the offerings of New Preferred Shares described herein, the board of directors has reclassified 662 shares of unissued capital stock as New Preferred Shares. Under the 1940 Act, the Trust is permitted to have outstanding more than one series of preferred shares so long as no single series has a priority over another series as to the distribution of assets of the Trust or the payment of dividends. Holders of common shares and outstanding preferred shares of the Trust have no preemptive right to purchase any preferred shares (including the New Preferred Shares) that might be issued. It is anticipated that the net asset value per share of the New Preferred Stock will equal its original purchase price per share plus accrued dividends per share. See "Description of New Preferred Shares" for a description of the rights, preferences, privileges and other terms of the New Preferred Shares.
ANTITAKEOVER PROVISIONS OF THE CHARTER AND BY-LAWS
The Trust presently has provisions in its charter and By-Laws (commonly referred to as "antitakeover" provisions) which may have the effect of limiting the ability of other entities or persons to acquire control of the Trust, to cause it to engage in certain transactions or to modify its structure.
First, a director elected by the holders of capital stock (i.e., the common shares, the New Preferred Shares and any other preferred shares) or by the holders of Preferred Shares, including the New Preferred Shares, and any other preferred shares may be removed from office only for cause by vote of the holders of at least 75% of the shares of capital stock or preferred shares, as the case may be, of the Trust entitled to be voted on the matter. Second, the affirmative vote of a majority of the directors and of the holders of at least 75% of the Trust's outstanding shares of capital stock entitled to be voted on the matter, voting as a single class, and the affirmative vote of a majority of outstanding preferred shares, voting as a separate class, will be required to authorize the Trust's conversion from a closed-end to an open-end investment company, which conversion would result in delisting of the common shares from the New York Stock Exchange. Conversion to an open-end investment company would require redemption of all outstanding preferred shares of the Trust. Third, the board of directors is classified into three classes, each with a term of three years with only one class of directors standing for election in any year. Such classification may prevent replacement of a majority of the directors for up to a two year period. The affirmative vote of at least 75% of the Trust's outstanding shares of capital stock entitled to be voted on the matter, voting as a single class, and the affirmative vote of a majority of outstanding preferred shares, voting as a separate class will be required to amend the charter or By-Laws to change any of the foregoing provisions.
In addition, under the Trust's charter, the Trust has elected to be subject to provisions of the Maryland General Corporation Law that generally provide that, unless an exemption is available, certain mergers, consolidations, shares exchanges, asset sales, stock issuances, liquidations or dissolutions, recapitalizations, and other transaction ("Business Combinations") with a beneficial owner of 10% or more of the voting power of a Maryland corporation (an "Interested Stockholder") or any affiliate of an Interested Stockholder are prohibited for a period of five years following the most recent date on which the Interested Stockholder became an Interested Stockholder. Thereafter, such a Business Combination must be recommended by the board of directors and approved by the affirmative vote of at least (i) 80% of the votes entitled to be cast by outstanding shares of voting stock of the corporation and (ii) 662/3% of the votes entitled to be cast by holders of voting stock other than voting stock held by the Interested Stockholder who is (or whose affiliate is) a party to the Business Combination or an affiliate or associate of the Interested Stockholder (with dissenting stockholders having certain appraisal rights), unless certain value and other standards are satisfied or some other statutory exemption is available. The vote specified in the preceding sentence will be required to amend the charter to change the provisions subjecting the Trust to the provisions of the Maryland General Corporation Law discussed above.
The percentage of votes required under these provisions, which are greater than the minimum requirements under Maryland law absent the elections described above or in the 1940 Act, will make more difficult a change in the Trust's business or management and may have the effect of depriving holders of common shares of an opportunity to sell shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of the Trust in a tender offer or similar transaction. The Trust's board of directors, however, has considered these antitakeover provisions and believes they are in the best interests of shareholders.
CUSTODIAN
The Trust's securities and cash are held under a Custodial Agreement with State Street Bank and Trust Company (the "Custodian"), 225 Franklin Street, Boston, Massachusetts.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement dated the date hereof, each underwriter named below has severally agreed to purchase, and the Trust has agreed to sell to such underwriter, the number of New Preferred Shares set forth opposite the name of such underwriter.
Number of
Series T7
Name Preferred Shares
------------------- --------------------------
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The underwriting agreement provides that the obligations of the underwriters to purchase the shares included in this offering are subject to the approval of certain legal matters by counsel and to certain other conditions. The underwriters are obligated to purchase all the New Preferred Shares if they purchase any of the shares. In the underwriting agreement, the Trust and the Adviser have agreed to indemnify the underwriters against certain liabilities, including liabilities arising under the Securities Act of 1933, or to contribute payments the underwriters may be required to make for any of those liabilities.
The underwriters, for whom ___________ [and ] are acting as representatives, propose to initially offer some of the New Preferred Shares directly to the public at the public offering price set forth on the cover page of this prospectus and some of the New Preferred Shares to certain dealers at the public offering price less a concession not in excess of $ per share. The sales load the Trust will pay of per share is equal to % of the initial offering price. The underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share on sales to certain other dealers. After the initial public offering, the underwriters may change the public offering price and the concession. Investors must pay for any New Preferred Shares purchased in the initial public offering on or before , 2000.
The Trust anticipates that the underwriters may from time to time act as brokers or dealers in executing the Trust's portfolio transactions after they have ceased to be underwriters. The underwriters are active underwriters of, and dealers in, securities and act as market makers in a number of such securities, and therefore can be expected to engage in portfolio transactions with the Trust.
The Trust anticipates that the underwriters or their respective affiliates may, from time to time, act in Auctions as Broker-Dealers and receive fees as set forth under "The Auction." [Each of such firms may also provide information to be used in ascertaining the applicable reference rates.] Each of the underwriters engages in transactions with, and perform services for, the Trust in the ordinary course of business.
TRANSFER AGENT, DIVIDEND
DISBURSING AGENT AND REGISTRAR
The transfer agent, dividend disbursing agent and registrar for the New Preferred Shares will be Deutsche Bank Group, 4 Albany Street, New York, New York. The transfer agent, dividend disbursing agent and registrar for the common shares of the Trust is State Street Bank and Trust Company.
LEGAL OPINIONS
Certain legal matters in connection with the New Preferred Shares offered hereby will be passed upon for the Trust by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York and for the Underwriters by Simpson Thacher & Bartlett, New York, New York. Such counsel will rely, as to matters of Maryland law, on the opinion of Miles & Stockbridge, Baltimore, Maryland.
EXPERTS
The data in the "Financial Highlights" section of this prospectus are based upon financial statements that have been audited by Deloitte & Touche LLP, Two World Center, New York, New York, independent auditors, as indicated in their reports with respect thereto, and are incorporated by reference in reliance on their reports given on their authority as experts in auditing and accounting.
REPORTS TO STOCKHOLDERS
The Trust sends unaudited semiannual reports and audited annual reports, including a list of investments held, to stockholders.
AVAILABLE INFORMATION
The Trust is subject to the informational requirements of the Securities Exchange Act of 1934 and the 1940 Act and in accordance therewith is required to file reports, proxy statements and other information with the SEC. Any such reports, proxy statements and other information can be inspected and copied at the public reference facilities of the SEC, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and the SEC's New York Regional Office, Seven World Trade Center, New York, New York 10048 and its Chicago Regional Office, Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661. Reports, proxy statements and other information concerning the Trust can also be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
Additional information regarding the Trust and the New Preferred Shares is contained in the Registration Statement on Form N-2, including amendments, exhibits and schedules thereto, relating to such shares filed by the Trust with the SEC. This prospectus does not contain all of the information set forth in the Registration Statement, including any amendments, exhibits and schedules thereto. For further information with respect to the Trust and the shares offered hereby, reference is made to the Registration Statement. Statements contained in this prospectus as to the contents of any contract or other document referred to are not necessarily complete and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference.
A copy of the Registration Statement may be inspected without charge at the SEC's principal office in Washington, D.C., and copies of all or any part thereof may be obtained from the SEC upon the payment of certain fees prescribed by the SEC. The SEC maintains a web site (http://www.sec.gov) that contains the Registration Statement, other documents incorporated by reference, and other information the Trust has filed electronically with the SEC, including proxy statements and reports filed under the Securities Exchange Act of 1934.
TABLE OF CONTENTS FOR THE
STATEMENT OF ADDITIONAL INFORMATION
Page
STATEMENT OF ADDITIONAL INFORMATION.........................................S-1
INVESTMENT OBJECTIVE AND POLICIES...........................................S-2
INVESTMENT POLICIES AND TECHNIQUES..........................................S-5
MANAGEMENT OF THE TRUST.....................................................S-8
PORTFOLIO TRANSACTIONS AND BROKERAGE.......................................S-13
ADDITIONAL INFORMATION CONCERNING THE AUCTIONS FOR NEW PREFERRED SHARES....S-14
REPURCHASE OF COMMON SHARES................................................S-16
TAX MATTERS................................................................S-17
FINANCIAL STATEMENTS.......................................................S-21
APPENDIX A - GENERAL CHARACTERISTICS AND RISKS OF HEDGING TRANSACTIONS......A-1
APPENDIX B-1 - ARTICLES OF AMENDMENT......................................B-1-1
APPENDIX B-2 - ARTICLES OF AMENDMENT......................................B-2-1
APPENDIX B-3 - ARTICLES SUPPLEMENTARY.....................................B-3-1
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APPENDIX A
TAX EQUIVALENT YIELD TABLE
The table below gives the approximate yield a security must earn at various income brackets to produce after-tax yields equivalent to those of tax-exempt bonds yielding from 4% to 6% under the regular Federal income tax law and tax rates applicable to individuals for 2000.
(TAXABLE INCOME*) TAX EXEMPT YIELD OF:
-------------------------------------------- MARGINAL -------------------------------------------------
INCOME 4% 4.5% 5% 5.5% 6%
SINGLE RETURN JOINT RETURN TAX BRACKET IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
--------------------- -------------------- ------------- -------------------------------------------------
Up to $26,250 Up to $43,850 15.00% 4.71% 5.29% 5.88% 6.47% 7.06%
$26,251 - $63,550 $43,851 - $105,950 28.00 5.56 6.25 6.94 7.64 8.33
$63,551 - $132,600 $105,951 - $161,450 31.00 5.80 6.52 7.25 7.97 8.70
$132,601 - $288,350 $161,451 - $288,350 36.00 6.25 7.03 7.81 8.59 9.38
Over $288,350 Over $288,350 39.60 6.62 7.45 8.28 9.11 9.93
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The above indicated Federal income tax brackets do not take into account the effect of a reduction in the deductibility of itemized deductions for individual taxpayers with adjusted gross income in excess of $128,950. The tax brackets also do not show the effects of phaseout of personal exemptions for single filers with adjusted gross income in excess of $128,950 and joint filers with adjusted gross income in excess of $193,400. The effective tax brackets and equivalent taxable yields of those taxpayers will be higher than those indicated above.
Yields shown are for illustration purposes only and are not meant to represent the Trust's actual yield. No assurance can be given that the Trust will achieve any specific tax-exempt yield. While it is expected that the Trust will invest principally in obligations the interest from which is exempt from the regular Federal income tax, other income received by the Trust may be taxable. The table does not take into account state or local taxes, if any, payable on Trust distributions. It should also be noted that the interest earned on certain "private activity bonds", while exempt from the regular Federal income tax, is treated as a tax preference item which could subject the recipient to the AMT. The illustrations assume that the AMT is not applicable and do not take into account any tax credits that may be available.
The information set forth above is as of the date of this prospectus. Subsequent tax law changes could result in prospective or retroactive changes in the tax brackets, tax rates, and tax-equivalent yields set forth above. Investors should consult their tax adviser for additional information.
$16,550,000
THE BLACKROCK INVESTMENT QUALITY
MUNICIPAL TRUST INC.
AUCTION RATE MUNICIPAL PREFERRED STOCK
662 SHARES, SERIES T7
PROSPECTUS
The information in this statement of additional information is not complete and may be changed. We may not sell these securities until the Registration Statement filed with the Securities and Exchange Commission is effective. This statement of additional information is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JANUARY 27, 2000
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
STATEMENT OF ADDITIONAL INFORMATION
The BlackRock Investment Quality Municipal Trust Inc. (the "Trust") is a closed-end, diversified management investment company. This statement of additional information relating to New Preferred Shares does not constitute a prospectus, but should be read in conjunction with the prospectus relating hereto dated ________ __, 2000. This statement of additional information does not include all information that a prospective investor should consider before purchasing New Preferred Shares, and investors should obtain and read the prospectus prior to purchasing such shares. A copy of the prospectus may be obtained without charge by calling (888) 825-2257. You may also obtain a copy of the prospectus on the Securities and Exchange Commission's web site (http://www.sec.gov). Capitalized terms used but not defined in this statement of additional information have the meanings given to them in the prospectus or the Articles Supplementary and Articles of Amendment attached to this Statement of Additional Information as Appendices B-1, B-2 and B-3.
TABLE OF CONTENTS
Page
STATEMENT OF ADDITIONAL INFORMATION.......................................S-1
INVESTMENT OBJECTIVE AND POLICIES.........................................S-2
INVESTMENT POLICIES AND TECHNIQUES........................................S-5
MANAGEMENT OF THE TRUST...................................................S-8
PORTFOLIO TRANSACTIONS AND BROKERAGE.....................................S-13
ADDITIONAL INFORMATION CONCERNING THE AUCTIONS FOR NEW PREFERRED SHARES..S-14
REPURCHASE OF COMMON SHARES..............................................S-16
TAX MATTERS..............................................................S-17
FINANCIAL STATEMENTS.....................................................S-21
APPENDIX A - GENERAL CHARACTERISTICS AND RISKS OF HEDGING TRANSACTIONS...A-1
APPENDIX B-1 - ARTICLES OF AMENDMENT ...................B-1-1
APPENDIX B-2 - ARTICLE OF AMENDMENT.....................................B-2-1
APPENDIX B-3 - ARTICLES SUPPLEMENTARY...................................B-3-1
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This statement of additional information is dated _______ __ , 2000.
INVESTMENT OBJECTIVE AND POLICIES
Although the Trust does not ordinarily invest in municipal obligations subject to the Federal alternative minimum tax ("AMT") and expects that no more than 20% of its assets will be invested in municipal obligations subject to such tax at any time, all or a portion of the Trust's dividends may be subject to AMT. New Preferred Shares therefore may not be a suitable investment for investors who are subject to AMT or who would become subject to such tax by purchasing New Preferred Shares. The suitability of an investment in New Preferred Shares will depend upon a comparison of the after-tax yield likely to be provided from the Trust with that from comparable tax-exempt investments not subject to AMT, and from comparable fully taxable investments, in light of each such investor's tax position. Special considerations apply to corporate investors. See "Tax Matters."
The types of municipal obligations in which the Trust may invest include general obligation bonds, revenue bonds, municipal lease obligations, installment purchase contract obligations, variable and floating rate obligations, zero coupon securities, tax-exempt notes and municipal commercial paper.
The two principal classifications of municipal obligations are "general obligation" bonds and "revenue" bonds. General obligation bonds are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue bonds are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific revenue source. Industrial development, private activity and pollution control bonds are in most cases revenue bonds and do not generally constitute the pledge of the credit or taxing power of the issuer of such bonds. There are, of course, depending on numerous factors, variations in the quality of municipal obligations both within a particular classification and between classifications.
Also included within the general category of municipal obligations are certain lease obligations or installment purchase contract obligations and participations therein (hereinafter collectively called "lease obligations") of municipal authorities or entities. Although lease obligations do not constitute general obligations of the municipality for which the municipality's taxing power is pledged, a lease obligation is ordinarily backed by the municipality's covenant to budget for, appropriate and make the payments due under the lease obligation. Interest on lease obligations is tax- exempt to the same extent as if the municipality had issued debt obligations to finance the underlying project or purchase. However, certain lease obligations contain "non-appropriation" clauses which provide that the municipality has no obligation to make lease or installment purchase payments in future years unless money is appropriated for such purpose on a yearly basis. In addition to the "non-appropriation" risk, these securities represent a relatively new type of financing that has not yet developed the depth of marketability associated with more conventional bonds and some lease obligations may be illiquid. Although "non-appropriation" lease obligations are generally secured by the leased property, disposition of the property in the event of foreclosure might prove difficult. In addition, the tax treatment of such obligations in the event of non-appropriation is unclear. The Trust does not intend to invest more than 10% of its total assets in lease obligations that contain "non-appropriation" clauses.
The Trust invests a portion of its assets in municipal obligations that pay interest at a coupon rate equal to a base rate plus additional interest for a certain period of time if short-term interest rates rise above a predetermined level or "cap." Although the specific terms of these municipal obligations may differ, the amount of any additional interest payment typically is calculated pursuant to a formula based upon an applicable short-term interest rate index multiplied by a designated factor. This use of a designated factor in the calculation of additional interest effectively multiplies the underlying principal amount of these municipal obligations and the Trust will attempt under normal market conditions to purchase a sufficient amount of these securities so that the "notional principal" on which any additional interest is calculated is equal to at least 100% of the liquidation preference of the Trust's outstanding Preferred Shares. The Adviser believes that during periods of sharp increases in short-term interest rates, the total coupon rate payable on these municipal obligations frequently would exceed prevailing short-term interest rates. The additional interest component of the coupon rate of these municipal obligations generally expires before the maturity of the underlying instrument. These municipal obligations may also contain provisions that provide for conversion at the option of the issuer to constant interest rates in addition to standard call features. Under normal market conditions, the Trust invests approximately 15-25% of its total assets in these municipal obligations. There can be no assurance that these securities will continue to be available at current levels or otherwise, and they may be subject to greater volatility than other municipal obligations.
Certain municipal obligations may carry variable or floating rates of interest whereby the rate of interest is not fixed but varies with changes in specified market rates or indices, such as a bank prime rate or a tax-exempt money market index. Accordingly, the yield on such obligations can be expected to fluctuate with changes in prevailing interest rates.
Other municipal obligations include zero coupon securities, which are debt obligations that do not entitle the holder to any periodic payments prior to maturity and are issued and traded at a discount from their face amounts. The discount varies depending on the time remaining until maturity, prevailing interest rates, liquidity of the security and perceived credit quality of the issuer. Zero coupon municipal obligations may be created by investment banks under proprietary programs in which they strip the interest component from the principal component and sell both separately. The market prices of zero coupon securities are generally more volatile than the market prices of securities that pay interest periodically and are likely to respond to changes in interest rates to a greater degree than do securities having similar maturities and credit quality that do pay periodic interest.
The Trust may acquire custodial receipts or certificates underwritten by securities dealers or banks that evidence ownership of future interest payments principal payments or both on certain municipal obligations. The underwriter of these certificates or receipts typically purchases municipal obligations and deposits the obligations in an irrevocable trust or custodial account with a custodian bank which then issues receipts or certificates that evidence ownership of the periodic unmatured coupon payments and the final principal payment on the obligations. Custodial receipts evidencing specific coupon or principal payments have the same general attributes as zero coupon municipal obligations described above. Although under the terms of a custodial receipt, the Trust typically would be authorized to assert its rights directly against the issuer of the underlying obligations, the Trust could be required to assert through the custodian bank those rights as may exist against the underlying issuer. Thus, in the event the underlying issuer fails to pay principal and/or interest when due, the Trust may be subject to delays, expenses and risks that are greater than those that would have been involved if the Trust had purchased a direct obligation of the issuer. In addition, in the event that the trust or custodial account in which the underlying security has been deposited is determined to be an association taxable as a corporation, instead of a non-taxable entity, the yield on the underlying security would be reduced in recognition of any taxes paid.
The Trust may also invest in municipal obligations the interest rate on which has been divided by the issuer into two different and variable components, which together result in a fixed interest rate. Typically, the first of the components (the "Auction Component") pays an interest rate that is reset periodically through an auction process, whereas the second of the components (the "Residual Component") pays a residual interest rate based on the difference between the total interest paid by the issuer on the municipal obligation and the auction rate paid on the Auction Component. The Trust may purchase both Auction and Residual Components.
Because the interest rate paid to holders of Residual Components is generally determined by subtracting the interest rate paid to the holders of Auction Components from a fixed amount, the interest rate paid to Residual Component holders will decrease as the Auction Component's rate increases and increase as the Auction Component's rate decreases. Moreover, the extent of the increases and decreases in market value of Residual Components may be larger than comparable changes in the market value of an equal principal amount of a fixed rate municipal obligation having similar credit quality, redemption provisions and maturity.
The term municipal obligations also includes obligations, such as tax-exempt notes, municipal commercial paper and municipal lease obligations, having relatively short-term maturities.
INVESTMENT RESTRICTIONS
The Trust's investment objective and the following investment restrictions are fundamental and cannot be changed without the approval of the holders of a majority of the Trust's outstanding voting securities (defined in the 1940 Act as the lesser of (a) more than 50% of the outstanding shares (including common shares, New Preferred Shares and any other outstanding preferred shares) or (b) 67% or more of the shares (including common shares and New Preferred Shares and any other outstanding preferred shares) represented at a meeting at which more than 50% of the outstanding shares (including common shares and New Preferred Shares and any other outstanding preferred shares) are represented) and the approval of the holders of a majority of New Preferred Shares and any other outstanding preferred shares voting separately as a class. All other investment policies or practices are considered by the Trust not to be fundamental and accordingly may be changed without stockholder approval. If a percentage restriction on investment or use of assets set forth below is adhered to at a time a transaction is effected, later changes in percentage resulting from changing market values will not be considered a deviation from policy. The Trust may not:
(1) with respect to 75% of its total assets, invest more than 5% of the value of its total assets (taken at market value at time of purchase) in the outstanding securities of any other issuer or own more than 10% of the outstanding voting securities of any one issuer, in each case other than securities issued or guaranteed by the U.S. government or any agency or instrumentality thereof or other investment companies;
(2) invest 25% of more of the value of its total assets in any one industry provided that such limitation shall not be applicable to municipal obligations other than those municipal obligations backed only by assets and revenues of non-governmental users;
(3) issue senior securities other than (a) preferred shares not in excess of the excess of 50% of its total assets over any senior securities described in clause (b) below that are outstanding, (b) senior securities other than preferred shares (including borrowing money, including on margin if margin securities are owned and through entering into reverse repurchase agreements) not in excess of 331/3% of its total assets, and (c) borrowings up to 5% of its total assets for temporary purposes without regard to the amount of senior securities outstanding under clauses (a) and (b) above; provided, however, that the Trust's obligations under interest rate swaps, when issued and forward commitment transactions and similar transactions are not treated as senior securities if covering assets are appropriately segregated; or pledge its assets other than to secure such issuances or in connection with Hedging Transactions, short sales, when-issued and forward commitment transactions and similar investment strategies. For purposes of clauses (a), (b) and (c) above, "total assets" shall be calculated after giving effect to the net proceeds of any such issuance and net of any liabilities and indebtedness that do not constitute senior securities except for such liabilities and indebtedness as are excluded from treatment as senior securities by the proviso to this item (3);
(4) make loans of money or property to any person, except through loans of portfolio securities, the purchase of fixed income securities consistent with the Trust's investment objective and policies or the acquisition of securities subject to repurchase agreements;
(5) underwrite the securities of other issuers, except to the extent that in connection with the disposition of portfolio securities or the sale of its own shares the Trust may be deemed to be an underwriter;
(6) invest for the purpose of exercising control over any issuer, except that the Trust may control a portfolio subsidiary;
(7) purchase or sell real estate or interests therein other than municipal obligations secured by real estate or interests therein;
(8) purchase or sell commodities or commodity contracts except for purposes, and only to the extent, permitted by applicable law without the Trust becoming subject to registration with the Commodity Futures Trading Commission as a commodity pool; or
(9) make any short sale of securities except in conformity with applicable laws, rules and regulations and unless, giving effect to such sale, the market value of all securities sold short does not exceed 25% of the value of the Trust's total assets and the Trust's aggregate short sales of a particular class of securities does not exceed 25% of the then outstanding securities of that class.
The Trust has no intention to file a voluntary application for relief under Federal bankruptcy law of any similar application under state law for as long as the Trust is solvent and does not foresee becoming insolvent.
INVESTMENT POLICIES AND TECHNIQUES
The following information supplements the discussion of the Trust's investment objective, policies and techniques that are described in the prospectus.
HEDGING TRANSACTIONS
The following descriptions of types of hedging transactions in which the Trust may engage supplements the information in the prospectus under the caption "Other Investment Practices -- Hedging." For additional information, see Appendix A "General Characteristics and Risks of Hedging Transactions."
Interest Rate Transactions. Among the Hedging Transactions into which the Trust may enter are interest rate swaps and the purchase or sale of interest rate caps and floors. The Trust expects to enter into these transactions primarily to preserve a return or spread on a particular investment or portion of its portfolio as a duration management technique or to protect against any increase in the price of securities the Trust anticipates purchasing at a later date. The Trust intends to use these transactions as a hedge and not as a speculative investment. The Trust will not sell interest rate caps or floors that it does not own. Interest rate swaps involve the exchange by the Trust with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling such interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling such interest rate floor.
The Trust may enter into interest rate swaps, caps and floors on either an asset-based or liability-based basis, depending on whether it is hedging its assets or liabilities, and will usually enter into interest rate-swaps on a net basis, i.e., the two payment streams are netted out, with the Trust receiving or paying, as the case may be, only the net amount of the two payments on the payment dates. Inasmuch as these Hedging Transactions are entered into for good faith hedging purposes, the Adviser and the Trust believe such obligations do not constitute senior securities and, accordingly, will not treat them as being subject to its borrowing restrictions. The Trust will accrue the net amount of the excess, if any, of the Trust's obligations over its entitlements with respect to each interest rate swap on a daily basis and will segregate with a custodian an amount of cash or liquid securities having an aggregate net asset value at least equal to the accrued excess. The Trust will not enter into any interest rate swap, cap or floor transaction unless the unsecured senior debt or the claims-paying ability of the other party thereto is rated in the highest rating category of at least one nationally recognized rating organization at the time of entering into such transaction. If there is a default by the other party to such a transaction, the Trust will have contractual remedies pursuant to the agreements related to the transaction. The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting both as principals and as agents utilizing standardized swap documentation. Caps and floors are more recent innovations for which standardized documentation has not yet been developed and, accordingly, they are less liquid than swaps.
Futures Contracts and Options on Futures Contracts. In connection with its hedging and other risk management strategies, the Trust may also enter into contracts for the purchase or sale for future delivery ("futures contracts") of debt securities, aggregates of debt securities, financial indices, and U.S. Government debt securities or options on the foregoing to hedge the value of its portfolio securities that might result from a change in interest rates or market movements. The Trust will engage in such transactions only for bona fide hedging, risk management and other appropriate portfolio management purposes, in each case, in accordance with the rules and regulations of the Commodity Futures Trading Commission.
Calls on Securities Indices and Futures Contracts. In order to enhance income or reduce fluctuations in net asset value, the Trust may sell or purchase call options ("calls") on municipal obligations and indices based upon the prices of debt securities that are traded on US. securities exchanges and in the over-the-counter markets. A call option gives the purchaser of the option the right to buy, and obligates the seller to sell, the underlying security, futures contract or index at the exercise price at any time or at a specified time during the option period. All such calls sold by the Trust must be "covered" as long as the call is outstanding (i.e., the Trust must own the instrument subject to the call or other securities or assets acceptable for applicable segregation and coverage requirements). A call sold by the Trust exposes the Trust during the term of the option to possible loss of opportunity to realize appreciation in the market price of the underlying security, index or futures contract and may require the Trust to hold an instrument which it might otherwise have sold. The purchase of a call gives the Trust the right to buy the underlying instrument or index at a fixed price. Calls on futures contracts on municipal obligations written by the Trust must also be covered by assets or instruments acceptable under applicable segregation and coverage requirements.
Puts on Securities Indices and Futures Contracts. As with calls, the Trust may purchase put options ("puts") on municipal obligations (whether or not it holds such securities in its portfolio). For the same purposes the Trust may also sell puts on municipal obligations financial indices and puts on futures contracts on municipal obligations if the Trust's contingent obligations on such puts are secured by segregated assets consisting of cash or liquid high grade debt securities having a value not less than the exercise price. The Trust will not sell puts if, as a result, more than 50% of the Trust's assets would be required to cover its potential obligation under its hedging and other investment transactions. In selling puts, there is a risk that the Trust may be required to buy the underlying instrument or index at higher than the current market price.
The principal risks relating to the use of Hedging Transactions
are: (i) less than perfect correlation between the prices of the hedging
instrument and the market value of the securities in the Trust's portfolio;
(ii) possible lack of a liquid secondary market for closing out a position
in such instruments; (iii) losses resulting from interest rate or other
market movements not anticipated by the Adviser; and (iv) the obligation to
meet additional variation margin or other payment requirements. See
Appendix A "General Characteristics and Risks of Hedging Transactions."
Certain provisions of the Internal Revenue Code of 1986, as amended (the "Code"), may restrict or affect the ability of the Trust to engage in Hedging Transactions. See "Tax Matters" and the prospectus.
OTHER INVESTMENT POLICIES AND TECHNIQUES
Restricted and Illiquid Securities. Certain of the Trust's investments may be illiquid. Illiquid securities are subject to legal or contractual restrictions on disposition or lack an established secondary trading market. The sale of restricted and illiquid securities often requires more time and results in higher brokerage charges or dealer discounts and other selling expenses than does the sale of securities eligible for trading on national securities exchanges or in the over- the-counter markets. Restricted securities may sell at a price lower than similar securities that are not subject to restrictions on resale.
Repurchase Agreements. The Trust may invest temporarily, without limitation, in repurchase agreements, which are agreements pursuant to which securities are acquired by the Trust from a third party with the understanding that they will be repurchased by the seller at a fixed price on an agreed date. These agreements may be made with respect to any of the portfolio securities in which the Trust is authorized to invest. Repurchase agreements may be characterized as loans secured by the underlying securities. The Trust may enter into repurchase agreements with (i) member banks of the Federal Reserve System having total assets in excess of $500 million and (ii) securities dealers, provided that such banks or dealers meet the creditworthiness standards established by the Trust's board of directors ("Qualified Institutions"). The Adviser will monitor the continued creditworthiness of Qualified Institutions, subject to the supervision of the Trust's board of directors. The resale price reflects the purchase price plus an agreed upon market rate of interest which is unrelated to the coupon rate or date of maturity of the purchased security. The collateral is marked to market daily. Such agreements permit the Trust to keep all its assets earning interest while retaining "overnight" flexibility in pursuit of investments of a longer-term nature.
The use of repurchase agreements involves certain risks. For example, if the seller of securities under a repurchase agreement defaults on its obligation to repurchase the underlying securities, as a result of its bankruptcy or otherwise, the Trust will seek to dispose of such securities, which action could involve costs or delays. If the seller becomes insolvent and subject to liquidation or reorganization under applicable bankruptcy or other laws, the Trust's ability to dispose of the underlying securities may be restricted. Finally, it is possible that the Trust may not be able to substantiate its interest in the underlying securities. To minimize this risk, the securities underlying the repurchase agreement will be held by the custodian at all times in an amount at least equal to the repurchase price, including accrued interest. If the seller fails to repurchase the securities, the Trust may suffer a loss to the extent proceeds from the sale of the underlying securities are less than the repurchase price.
Reverse Repurchase Agreements. The Trust may enter into reverse repurchase agreements with respect to its portfolio investments subject to the investment restrictions set forth herein and in the prospectus. Reverse repurchase agreements involve the sale of securities held by the Trust with an agreement by the Trust to repurchase the securities at an agreed upon price, date and interest payment. At the time the Trust enters into a reverse repurchase agreement, it may establish and maintain a segregated account with its custodian containing liquid instruments having a value not less than the repurchase price (including accrued interest). If the Trust establishes and maintains such a segregated account, a reverse repurchase agreement will not be considered a borrowing by the Trust; however, under circumstances in which the Trust does not establish and maintain such a segregated account, such reverse repurchase agreement will be considered a borrowing for the purpose of the Trust's limitation on borrowings. The use by the Trust of reverse repurchase agreements involves many of the same risks of leverage since the proceeds derived from such reverse repurchase agreements may be invested in additional securities. Reverse repurchase agreements involve the risk that the market value of the securities acquired in connection with the reverse repurchase agreement may decline below the price of the securities the Trust has sold but is obligated to repurchase. Also, reverse repurchase agreements involve the risk that the market value of the securities retained in lieu of sale by the Trust in connection with the reverse repurchase agreement may decline in price.
If the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its trustee or receiver may receive an extension of time to determine whether to enforce the Trust's obligation to repurchase the securities, and the Trust's use of the proceeds of the reverse repurchase agreement may effectively be restricted pending such decision. Also, the Trust would bear the risk of loss to the extent that the proceeds of the reverse repurchase agreement are less than the value of the securities subject to such agreement.
When-Issued and Forward Commitment Securities. The Trust may purchase municipal obligations on a "when- issued" basis and may purchase or sell municipal obligations on a "forward commitment" basis in order to hedge against anticipated changes in interest rates and prices. When such transactions are negotiated, the price, which is generally expressed in yield terms, is fixed at the time the commitment is made, but delivery and payment for the securities take place at a later date. When-issued securities and forward commitments may be sold prior to the settlement date, but the Trust will enter into when-issued and forward commitments only with the intention of actually receiving or delivering the securities, as the case may be. If the Trust disposes of the right to acquire a when-issued municipal obligation prior to its acquisition or disposes of its right to deliver or receive against a forward commitment, it might incur a gain or loss. At the time the Trust enters into a transaction on a when-issued or forward commitment basis, it will segregate with the custodian cash or liquid high grade debt securities with a value not less than the value of the when-issued or forward commitment securities. The value of these assets will be monitored daily to ensure that their marked to market value will at all times equal or exceed the corresponding obligations of the Trust. There is always a risk that the securities may not be delivered and that the Trust may incur a loss. Settlements in the ordinary course, which may take substantially more than five business days, are not treated by the Trust as when-issued or forward commitment transactions and accordingly are not subject to the foregoing restrictions.
Borrowings. Although it has no present intention of doing so, the Trust receives the right to borrow funds to the extent permitted as described under the caption "Investment Objective and Policies -- Investment Restrictions." The proceeds of borrowings may be used for any valid purpose including, without limitation, liquidity, investing and repurchases of capital stock of the Trust. Borrowing is a form of leverage and, in that respect, entails risks, including volatility in net asset value, market value and income available for distribution.
Lending of Securities. The Trust may lend its portfolio securities to Qualified Institutions. By lending its portfolio securities, the Trust attempts to increase its income through the receipt of interest on the loan. Any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Trust. The Trust may lend its portfolio securities so long as the terms and the structure of such loans are not inconsistent with requirements of the 1940 Act, which currently require that (i) the borrower pledge and maintain with the Trust collateral consisting of cash, a letter of credit issued by a domestic U.S. bank, or securities issued or guaranteed by the U.S. Government having a value at all times not less than 100% of the value of the securities loaned, (ii) the borrower add to such collateral whenever the price of the securities loaned rises (i.e., the value of the loan is "marked to the market" on a daily basis), (iii) the loan be made subject to termination by the Trust at any time and (iv) the Trust receive reasonable interest on the loan (which may include the Trust's investing any cash collateral in interest bearing short-term investments), any distributions on the loaned securities and any increase in their market value. The Trust will not lend portfolio securities if, as a result, the aggregate of such loans exceeds 331/3% of the value of the Trust's total assets (including such loans). Loan arrangements made by the Trust will comply with all other applicable regulatory requirements, including the rules of the New York Stock Exchange, which rules presently require the borrower, after notice, to redeliver the securities within the normal settlement time of five business days. All relevant facts and circumstances, including the creditworthiness of the Qualified Institution, will be monitored by the Adviser, and will be considered in making decisions with respect to lending of securities, subject to review by the Trust's board of directors.
The Trust may pay reasonable negotiated fees in connection with loaned securities, so long as such fees are set forth in a written contract and approved by the Trust's board of directors. In addition, voting rights may pass with the loaned securities, but if a material event were to occur affecting such a loan, the loan must be called and the securities voted.
Zero Coupon Bonds. The Trust may invest in zero coupon bonds. A zero coupon bond is a bond that does not pay interest for its entire life. The market prices of zero coupon bonds are affected to a greater extent by changes in prevailing levels of interest rates and thereby tend to be more volatile in price than securities that pay interest periodically. In addition, because the Trust accrues income with respect to these securities prior to the receipt of such interest, it may have to dispose of portfolio securities under disadvantageous circumstances in order to obtain cash needed to pay income dividends in amounts necessary to avoid unfavorable tax consequences.
MANAGEMENT OF THE TRUST
The officers of the Trust manage its day to day operations. The officers are directly responsible to the Trust's board of directors which sets broad policies for the Trust and chooses its officers. The following is a list of the directors and officers of the Trust and a brief statement of their present positions and principal occupations during the past five years. Directors who are interested persons of the Trust (as defined in the 1940 Act) are denoted by an asterisk (*). The business address of the Trust, the Adviser and their board members and officers is 345 Park Avenue, New York, New York 10154, unless specified otherwise below. The directors listed below are either trustees or directors of other closed- end funds in which BlackRock Financial Management, Inc. or an affiliate acts as investment adviser.
Principal Occupation
During the Past Five
Name and Address Title Years and Other Affiliations
---------------- ----- ----------------------------
Andrew F. Brimmer Director President of Brimmer & Company, Inc., a Washington,
4400 MacArthur Blvd., N.W. D.C. based economic and financial consulting firm.
Suite 302 Director of CarrAmerica Realty Corporation and Borg-
Washington, DC 20007 Warner Automotive. Formerly member of the Board of
Age: 72 Governors the Federal Reserve System. Formerly
Director of AirBorne Express, BankAmerica Corporation (Bank
of America), BellSouth Corporation, College Retirement
Equities Fund (Trustee), Commodity Exchange, Inc. (Public
Governor), Connecticut Mutual Life Insurance Company, E.I.
duPont de Nemours & Company, Equitable Life Assurance
Society of the United States, Gannett Company (publishing),
MNC Financial Corporation (American Security Bank), NMC
Capital Management, Navistar International Corporation
(truck manufacturing), and UAL Corporation (United
Richard E. Cavanagh Director President and Chief Executive Officer of The
845 Third Avenue Conference Board, Inc., a leading global business
New York, NY 10022 membership organization, from 1995-present. Former
Age: 52 Executive Dean of the John F. Kennedy School of
Government at Harvard University from 1988-1995.
Acting Director, Harvard Center for Government
(1991-1993). Formerly Partner (principal) of McKinsey
& Company, Inc. (1980-1988). Former Executive
Director of Federal Cash Management, White House
Office of Management and Budget (1977-1979). Co-
author, THE WINNING PERFORMANCE (best selling
management book published in 13 national editions).
Trustee, Wesleyan University, Drucker Foundation,
Educational Testing Services (ETS) and Airplanes
Group, Aircraft Finance Trust (AFT). Director, Arch
Chemicals (chemicals), Fremont Group (investments)
and The Guardian Life Insurance Company of America
(insurance).
Kent Dixon Director Consultant/Investor. Former President and Chief
9495 Blind Pass Road Executive Officer of Empire Federal Savings Bank of
Unit #602 America and Banc PLUS Savings Association, former
St. Petersburg, FL 33706 Chairman of the Board, President and Chief Executive
Age: 61 Officer of Northeast Savings. Former Director of ISFA
(the owner of INVEST, a national securities brokerage
service designed for banks and thrift institutions).
Frank J. Fabozzi Director Consultant. Editor of THE JOURNAL OF
858 Tower View Circle PORTFOLIO MANAGEMENT and Adjunct Professor
New Hope, PA 18938 of Finance at the School of Management at Yale
Age: 50 University. Director, Guardian Mutual Trusts Group.
Author and editor of several books on fixed income portfolio
management. Visiting Professor of Finance and Accounting at
the Sloan School of Management, Massachusetts Institute of
Technology from 1986 to August 1992.
Laurence D. Fink* Director Chairman and Chief Executive Officer of BlackRock
Age: 47 Financial Management, Inc. and BlackRock, Inc.
Formerly a Managing Director of The First Boston
Corporation, member of its Management Committee, co-head of
its Taxable Fixed Income Division and head of its Mortgage
and Real Estate Products Group (December 1980-March 1988).
Currently, Chairman of the board and Director of each of
BlackRock Financial Management, Inc.'s Trusts and Anthracite
Capital, Inc. Trustee of New York University Medical Center,
Dwight Englewood School, National Outdoor Leadership School
and Phoenix House. A Director of VIMRx Pharmaceuticals, Inc.
and Innovir Laboratories, Inc.
James Clayburn LaForce, Jr. Director Dean Emeritus of The John E. Anderson Graduate
P.O. Box 1595 School of Management, University of California since
Pauma Valley, CA 92061 July 1, 1993. Director, Jacobs Engineering Group, Inc.,
Age: 69 Rockwell International Corporation, Payden & Rygel
Investment Trusts (investment companies), Timken
Company (roller bearing and steel) and Motor Cargo
Industries (transportation). Acting Dean of The School
of Business, Hong Kong University of Science and
Technology 1990-1993. From 1978 to September 1993, Dean
of The John E. Anderson Graduate School of Management,
University of California.
Walter F. Mondale Director Partner, Dorsey & Whitney, a law firm (December
220 South Sixth Street 1996-present, September 1987-August 1993). Formerly
Minneapolis, MN 55402 U.S. Ambassador to Japan (1993-1996). Formerly Vice
Age: 71 President of the United States, U.S. Senator and
Attorney General of the State of Minnesota. 1984
Democratic Nominee for President of the United
States.
Ralph L. Schlosstein* Director and President President of BlackRock Financial Management, Inc.
Age: 48 and BlackRock, Inc. Formerly a Managing Director of
Lehman Brothers, Inc. and co-head of its Mortgage
and Savings Institutional Group. Currently President
of each of the closed-end funds in which BlackRock
Financial Management, Inc. acts as investment
adviser. Trustee of Denison University and New
Visions for Public Education in New York City. A
Director of the Pulte Corporation and a member of the
Visiting Board of Overseers of the John F. Kennedy
School of Government at Harvard University.
Keith T. Anderson Vice President Managing Director of BlackRock Financial
Age: 40 Management, Inc. since January 1991. Director of
BlackRock Financial Management, Inc. from April
1988 to January 1991. From February 1987 to April
1988, Vice President at The First Boston Corporation
in the Fixed Income Research Department. Previously
Vice President and Senior Portfolio Manager at
Criterion Investment Management Company (now
Nicholas-Applegate).
Henry Gabbay Treasurer Managing Director of BlackRock Financial
Age: 52 Management, Inc. since January 1990. Director of
BlackRock Financial Management, Inc. from February
1989 to January 1990. From September 1984 to
February 1989, Vice President at The First Boston
Corporation.
Robert S. Kapito Vice President Managing Director and Vice Chairman of BlackRock
Age: 42 Financial Management, Inc. since March 1988.
Formerly Vice President the First Boston Corporation in
the Mortgage Products Group (from December 1985 to
March 1988).
James Kong Assistant Treasurer Managing Director of BlackRock Financial
Age: 39 Management, Inc. since January 1996. Director of
BlackRock Financial Management, Inc. from January
1993 to January 1996. Vice President and Associate of
BlackRock Financial Management, Inc. from January
1991 and April 1989 to January 1993 and January 1991,
respectively. From April 1987 to April 1989,
Assistant Vice President at The First Boston
Corporation in the CMO/ABO Administration
Department. Previously affiliated with Deloitte
Haskins & Sells (now Deloitte & Touche LLP).
Karen H. Sabath Secretary Managing Director of BlackRock Financial
Age: 34 Management, Inc. since January 1993. Vice President
and Associate of BlackRock Financial Management,
Inc. from January 1989 and August 1988 to January
1993 and January 1989, respectively. From June 1986
to July 1988, Associate at The First Boston
Corporation in the Mortgage Finance Department.
From August 1988 to December 1992, Associate Vice
President of BlackRock Advisers.
Michael C. Huebsch Vice President Managing Director of the BlackRock Financial
Age: 41 Management, Inc. since January 1991. Director of
BlackRock Financial Management, Inc. from January
1989 to January 1991. From July 1985 to January 1989,
Vice President at The First Boston Corporation in the
Fixed Income Research Department.
Kevin Klingert Vice President Managing Director of BlackRock Financial
Age: 37 Management, Inc. since January 1996. Director of
BlackRock Financial Management, Inc. from January
1994 to January 1996. Vice President of BlackRock
Financial Management, Inc. from October 1991 to
January 1994. From March 1985 to October 1991,
Assistant Vice President at Merrill Lynch, Pierce,
Fenner & Smith in the Unit Investment Trust
Department.
Richard Shea, Esq. Vice President Effective January 2000 Managing Director of
Age: 40 BlackRock Financial Management, Inc. Director of
BlackRock Financial Management, Inc. from January
1996 to January 2000. Vice President of BlackRock
Financial Management, Inc. from February 1993 to
January 1996. From December 1988 to February 1993,
Associate Vice President and Tax Counsel at
Prudential Securities Incorporated. From August 1984
to December 1988, Senior Tax Specialist at Laventhol
& Horwath.
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As of _________, 2000, no person is known to the Trust to own of record or beneficially 5% or more of the outstanding common shares or preferred shares, except Cede & Co., Bowling Green Station, P.O. Box 20, New York, NY 10274-0020, which owned of record _____ of the outstanding common shares.
Laurence D. Fink and Ralph L. Schlosstein serve as members of the executive committee of the board of directors. The executive committee, which meets between regular meetings of the board of directors, is authorized to exercise all of the powers of the board of directors except as otherwise set forth in the charter.
The Trust has an Audit Committee consisting of those directors who are not interested persons of BlackRock Advisors, Inc. or the Adviser.
No officer or employee of the Trust receives any compensation from the Trust for serving as an officer or director of the Trust. The Trust pays each director who is not an "interested person" of the Trust (as defined in the 1940 Act) $[6,000] per year plus $[1,500] per board meeting attended in person or by telephone for travel and out-of-pocket expenses.
The aggregate estimated compensation received by each current director of the Trust for the fiscal year ending December 31, 1999 and the aggregate estimated compensation to be received by each current director/trustee of the BlackRock family of funds for the fiscal year ending December 31, 1999 as a whole are estimated as follows:
1999 Estimated
Aggregate Estimated Total Compensation from
Compensation From the Trust and Fund
Name of Board Member Trust Complex Paid to Board Member*
-------------------- ----- -----------------------------
Andrew R. Brimmer $ $160,000
Richard E. Cavanagh $ $160,000
Kent Dixon $ $160,000
Frank J. Fabozzi $ $160,000
Laurence D. Fink N/A N/A
James Grosfeld** $ $
James Clayburn LaForce, Jr. $ $160,000
Ralph L. Schlosstein N/A N/A
Walter F. Mondale $ $160,000
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* The BlackRock family of funds consists of 22 closed-end funds. Total compensation from the Trust and Trust complex paid to each board member is capped at $160,000; Director fees paid by the Trust may be reduced based on the Trust's relative net asset value in the event that the cap is applicable. ** Resigned on November 17, 1999.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is responsible for decisions to buy and sell securities for the Trust, the selection of brokers and dealers to effect the transactions and the negotiation of prices and any brokerage commissions. The securities in which the Trust invests are traded principally in the over-the-counter market. In the over-the-counter market, securities are generally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission, although price of the security usually includes a mark-up to the dealer. Securities purchased in underwritten offerings generally include, in the price, a fixed amount of compensation for the manager(s), underwriter(s) and dealer(s). The Trust may also purchase certain money market instruments directly from an issuer, in which case no commissions or discounts are paid. Purchases and sales of debt securities on a stock exchange are effected through brokers who charge a commission for their services.
The Adviser is responsible for effecting securities transactions of the Trust and will do so in a manner deemed fair and reasonable to shareholders of the Trust and not according to any formula. The Adviser's primary considerations in selecting the manner of executing securities transactions for the Trust will be prompt execution of orders, the size and breadth of the market for the security, the reliability, integrity and financial condition and execution capability of the firm, the size of the difficulty in executing the order, and the best net price. There are many instances when, in the judgment of the Adviser, more than one firm can offer comparable execution services. In selecting among such firms, consideration is given to those firms which supply research and other services in addition to execution services. Consideration may also be given to the sale of shares of the Trust. However, it is not the policy of the Adviser, absent special circumstances, to pay higher commissions to a firm because it has supplied such research or other services.
The Adviser is able to fulfill its obligations to furnish a continuous investment program to the Trust without receiving such information from brokers; however, it considers access to such information to be an important element of financial management. Although such information is considered useful, its value is not determinable, as it must be reviewed and assimilated by the Adviser, and does not reduce the Adviser's normal research activities in rendering investment advice. It is possible that the Adviser's expenses could be materially increased if it attempted to purchase this type of information or generate it through its own staff.
One or more of the other investment companies or accounts which the Adviser manages may own from time to time some of the same investments as the Trust. Investment decisions for the Trust are made independently from those of such other investment companies or accounts; however, from time to time, the same investment decision may be made for more than one company or account. When two or more companies or accounts seek to purchase or sell the same securities, the securities actually purchased or sold will be allocated among the companies and accounts on a good faith equitable basis by the Adviser in its discretion in accordance with the accounts' various investment objective. In some cases, this system may adversely affect the price or size of the position obtainable for the Trust. In other cases, however, the ability of the Trust to participate in volume transactions may produce better execution for the Trust. It is the opinion of the Trust's board of directors that this advantage, when combined with the other benefits available due to the Adviser's organization, outweighs any disadvantages that may be said to exist from exposure to simultaneous transactions.
Although the investment management agreement contains no restrictions on portfolio turnover, it is not the Trust's policy to engage in transactions with the objective of seeking profits from short-term trading. It is expected that the annual portfolio turnover rate of the Trust will be less than 200% excluding securities having a maturity of one year or less. Because it is difficult to predict accurately portfolio turnover rates, actual turnover may be higher or lower. Higher portfolio turnover results in increased Trust expenses, including brokerage commissions, dealer mark-ups and other transaction costs on the sale of securities and on the reinvestment in other securities.
ADDITIONAL INFORMATION CONCERNING
THE AUCTIONS FOR NEW PREFERRED SHARES
GENERAL
Auction Agency Agreement. The Trust will enter into an Auction Agency Agreement (the "Auction Agency Agreement") with the Auction Agent (currently, Deutsche Bank Group) which provides, among other things, that the Auction Agent will follow the Auction Procedures for purposes of determining the Applicable Rate for the New Preferred Shares so long as the Applicable Rate for such shares is to be based on the results of an Auction.
Broker-Dealer Agreements. Each Auction requires the participation of one or more Broker-Dealers. The Auction Agent will enter into agreements (collectively, the "Broker-Dealer Agreements") with several Broker-Dealers selected by the Trust, which provide for the participation of those Broker- Dealers in Auctions for New Preferred Shares. See "Broker-Dealers" below.
Securities Depository. The Depository Trust Company ("DTC") will act as the Securities Depository for the Agent Members with respect to the New Preferred Shares. One certificate for all of the New Preferred Shares will be registered in the name of Cede & Co., as nominee of the Securities Depository. Such certificate will bear a legend to the effect that such certificate is issued subject to the provisions restricting transfers of shares of New Preferred Shares contained in the Articles Supplementary. The Trust will also issue stop-transfer instructions to the transfer agent for New Preferred Shares. Prior to the commencement of the right of holders of preferred shares of the Trust to elect a majority of the Trust's directors, as described under "Description of New Preferred Shares-Voting Rights" in the prospectus, Cede & Co. will be the holder of record of all shares of the New Preferred Shares and owners of such shares will not be entitled to receive certificates representing their ownership interest in such shares.
DTC, a New York-chartered limited purpose trust company, performs services for its participants (including the Agent Members), some of whom (and/or their representatives) own DTC. DTC maintains lists of its participants and will maintain the positions (ownership interests) held by each such participant (the "Agent Member") in New Preferred Shares, whether for its own account or as a nominee for another person. Additional information concerning DTC and the DTC depository system is included as an Exhibit to the Registration Statement of which this statement of additional information forms a part.
CONCERNING THE AUCTION AGENT
The Auction Agent will act as agent for the Trust in connection with Auctions. In the absence of bad faith or negligence on its part, the Auction Agent will not be liable for any action taken, suffered, or omitted or for any error of judgment made by it in the performance of its duties under the Auction Agency Agreement and will not be liable for any error of judgment made in good faith unless the Auction Agent will have been negligent in ascertaining the pertinent facts.
The Auction Agent may rely upon, as evidence of the identities of the Existing Holders of New Preferred Shares, the Auction Agent's registry of Existing Holders, the results of Auctions and notices from any Broker-Dealer (or other Person, if permitted by the Trust) with respect to transfers described under "The Auction" in the prospectus and notices from the Trust. The Auction Agent is not required to accept any such notice for an Auction unless it is received by the Auction Agent by 3:00 p.m., New York City time, on the Business Day preceding such Auction.
The Auction Agent may terminate the Auction Agency Agreement upon notice to the Trust on a date no earlier than 60 days after such notice. If the Auction Agent should resign, the Trust will use its best efforts to enter into an agreement with a successor Auction Agent containing substantially the same terms and conditions as the Auction Agency Agreement. The Trust may remove the Auction Agent provided that prior to such removal the Trust shall have entered into such an agreement with a successor Auction Agent.
BROKER-DEALERS
The Auction Agent after each Auction for New Preferred Shares will
pay to each Broker-Dealer, from funds provided by the Trust, a service
charge at the annual rate of 0.25% in the case of any Auction immediately
preceding a Dividend Period of less than one year, or a percentage agreed
to by the Trust and the Broker-Dealers in the case of any Auction
immediately preceding a Dividend Period of one year or longer, of the
purchase price of shares of New Preferred Shares placed by such
Broker-Dealer at such Auction. For the purposes of the preceding sentence,
New Preferred Shares will be placed by a Broker-Dealer if such shares were
(a) the subject of Hold Orders deemed to have been submitted to the Auction
Agent by the Broker-Dealer and were acquired by such Broker- Dealer for its
own account or were acquired by such Broker-Dealer for its customers who
are Beneficial Owners or (b) the subject of an Order submitted by such
Broker-Dealer that is (i) a Submitted Bid of an Existing Holder that
resulted in such Existing Holder continuing to hold such shares as a result
of the Auction or (ii) a Submitted Bid of a Potential Holder that resulted
in such Potential Holder purchasing such shares as a result of the Auction
or (iii) a valid Hold Order. The Trust may request the Auction Agent to
terminate one or more Broker-Dealer Agreements at any time, provided that
at least one Broker-Dealer Agreement is in effect after such termination.
The Broker-Dealer Agreements provide that a Broker-Dealer (other than an affiliate of the Trust) may submit Orders in Auctions for its own account, unless the Trust notifies all Broker-Dealers that they may no longer do so, in which case Broker-Dealers may continue to submit Hold Orders and Sell Orders for their own accounts. Any Broker- Dealer that is an affiliate of the Trust may submit Orders in Auctions, but only if such Orders are not for its own account. If a Broker-Dealer submits an Order for its own account in any Auction, it might have an advantage over other Bidders because it would have knowledge of all Orders submitted by it in that Auction; such Broker-Dealer, however, would not have knowledge of Orders submitted by other Broker-Dealers in that Auction.
REPURCHASE OF COMMON SHARES
The Trust is a closed-end investment company and as such its common shareholders will not have the right to cause the Trust to redeem their shares. Instead, the Trust's common shares will trade in the open market at a price that will be a function of several factors, including dividend levels (which are in turn affected by expenses), net asset value, call protection, price, dividend stability, relative demand for and supply of such shares in the market, general market and economic conditions and other factors. Because shares of a closed-end investment company may frequently trade at prices lower than net asset value, the Trust's board of directors may consider action that might be taken to reduce or eliminate any material discount from net asset value in respect of common shares, which may include the repurchase of such shares in the open market or in private transactions, the making of a tender offer for such shares at net asset value, or the conversion of the Trust to an open-end investment company. The board of directors may not decide to take any of these actions. In addition, there can be no assurance that share repurchases or tender offers, if undertaken, will reduce market discount.
Notwithstanding the foregoing, at any time when preferred shares of the Trust are outstanding, the Trust may not purchase, redeem or otherwise acquire any of its common shares unless (1) all accrued preferred shares dividends have been paid and (2) at the time of such purchase, redemption or acquisition, the net asset value of the Trust's portfolio (determined after deducting the acquisition price of the common shares) is at least 200% of the liquidation value of the outstanding preferred shares (expected to equal the original purchase price per share plus any accrued and unpaid dividends thereon). The staff of the SEC currently requires that any tender offer made by a closed-end investment company for its shares must be at a price equal to the net asset value of such shares on the close of business on the last day of the tender offer. Any service fees incurred in connection with any tender offer made by the Trust will be borne by the Trust and will not reduce the stated consideration to be paid to tendering shareholders.
Subject to its investment limitations, the Trust may borrow to finance the repurchase of common shares or to make a tender offer. Interest on any borrowings to finance share repurchase transactions or the accumulation of cash by the Trust in anticipation of share repurchases or tenders will reduce the Trust's net income. Any share repurchase, tender offer or borrowing that might be approved by the Trust's board of directors would have to comply with the Securities Exchange Act of 1934 and the 1940 Act and the rules and regulations under each of those acts.
Although the decision to take action in response to a discount
from net asset value will be made by the board of directors at the time it
considers such issue, it is the board's present policy, which may be
changed by the board of directors, not to authorize repurchases of common
shares or a tender offer for such shares if (1) such transactions, if
consummated, would (a) result in the delisting of the common shares from
the New York Stock Exchange, or (b) impair the Trust's status as a
regulated investment company under the Internal Revenue Code of 1986 (which
would make the Trust a taxable entity, causing the Trust's income to be
taxed at the corporate level in addition to the taxation of shareholders
who receive dividends from the Trust) or as a registered closed-end
investment company under the 1940 Act; (2) the Trust would not be able to
liquidate portfolio securities in an orderly manner and consistent with the
Trust's investment objective and policies in order to repurchase shares; or
(3) there is, in the board's judgment, any (a) material legal action or
proceeding instituted or threatened challenging such transactions or
otherwise materially adversely affecting the Trust, (b) general suspension
of or limitation on prices for trading securities on the New York Stock
Exchange, (c) declaration of a banking moratorium by Federal or state
authorities or any suspension of payment by United States banks in which
the Trust invests, (d) material limitation affecting the Trust or the
issuers of its portfolio securities by Federal or state authorities on the
extension of credit by lending institutions or on the exchange of foreign
currency, (e) commencement of war, armed hostilities or other international
or national calamity directly or indirectly involving the United States, or
(f) other event or condition which would have a material adverse effect
(including any adverse tax effect) on the Trust or its shareholders if
shares were repurchased. The board of directors may in the future modify
these conditions in light of experience.
The repurchase by the Trust of its common shares at prices below net asset value will result in an increase in the net asset value of those shares that remain outstanding. However, there can be no assurance that share repurchases or tenders at or below net asset value will result in the Trust's common shares trading at a price equal to their net asset value. Nevertheless, the fact that the Trust's shares may be the subject of repurchase or tender offers at net asset value from time to time, or that the Trust may be converted to an open-end company, may reduce any spread between market price and net asset value that might otherwise exist.
In addition, a purchase by the Trust of its common shares will decrease the Trust's total assets which would likely have the effect of increasing the Trust's expense ratio. Any purchase by the Trust of its common shares at a time when preferred shares are outstanding will increase the leverage applicable to the outstanding common shares then remaining and decrease the asset coverage of the preferred shares.
Before deciding whether to take any action if the common shares trade below net asset value, the Trust's board of directors would likely consider all relevant factors, including the extent and duration of the discount, the liquidity of the Trust's portfolio, the impact of any action that might be taken on the Trust or its shareholders and market considerations. Based on these considerations, even if the Trust's shares should trade at a discount, the board of directors may determine that, in the interest of the Trust and its shareholders, no action should be taken.
TAX MATTERS
The Trust has qualified and elected, and intends to continue to qualify under the Code, as a regulated investment company and to satisfy conditions which enable dividends on common shares or Preferred Shares which are attributable to interest on tax-exempt municipal securities to be exempt from Federal income tax in the hands of owners of such shares, subject to the possible application of the Federal alternative minimum tax.
To qualify for tax treatment as a regulated investment company, the Trust must, among other things: (a) distribute to its shareholders at least an amount equal to the sum of (i) 90% of its net investment income (which is its investment company taxable income as that term is defined in the Code but determined without regard to the deduction for dividends paid) and (ii) 90% of its net tax-exempt income and (b) diversify its holdings so that, at the end of each fiscal quarter of the Trust (i) at least 50% of the market value of the Trust's assets is represented by cash, cash items, U.S. government securities and securities of other regulated investment companies, and other securities, with these other securities limited, with respect to any one issuer, to an amount not greater in value than 5% of the Trust's total assets, and to not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the market value of the Trust's assets is invested in the securities of any one issuer (other than U.S. government securities or securities of other regulated investment companies). In meeting these requirements, the Trust may be restricted in the utilization of certain of the investment techniques described above and in the prospectus. If in any year the Trust should fail to qualify for tax treatment as a regulated investment company, the Trust would incur a regular Federal corporate income tax upon its taxable income for that year, and distributions to its shareholders would be taxable to such holders as ordinary income to the extent of the Trust's earnings and profits. A regulated investment company that fails to distribute, by the close of each calendar year, at least an amount equal to the sum of 98% of its ordinary taxable income for such year and 98% of its capital gain net income for the one year period ending October 31 in such year, plus any shortfalls from the prior year's required distribution, is liable for a 4% excise tax on the portion of the undistributed amount of such income that is less than the required amount for such distributions. To avoid the imposition of this excise tax, the Trust generally makes the required distributions of its ordinary taxable income, if any, and its capital gain net income, to the extent possible, by the close of each calendar year.
Certain of the Trust's investment practices are subject to special provisions of the Code that, among other things, may defer the use of certain deductions or losses of the Trust, affect the holding period of securities held by the Trust and alter the character of the gains or losses realized by the Trust. These provisions may also require the Trust to recognize income or gain without receiving cash with which to make distributions in the amounts necessary to satisfy the requirements for maintaining regulated investment company status and for avoiding income and excise taxes. The Trust will monitor its transactions and may make certain tax elections in order to mitigate the effect of these rules and prevent disqualification of the Trust as a regulated investment company.
The Trust intends to qualify to pay "exempt-interest" dividends, as defined in the Code on its common shares and Preferred Shares. In order for any distributions to owners of the Trust's Preferred Shares to be eligible to be treated as exempt-interest dividends, such Preferred Shares must be treated as stock for Federal income tax purposes. Under the Code, at the close of each quarter of its taxable year, if at least 50% of the value of its total assets consists of municipal bonds, the Trust will be qualified to pay exempt-interest dividends to its shareholders. Exempt-interest dividends are dividends or any part thereof (other than a capital gain dividend) paid by the Trust which are attributable to interest on municipal bonds and are so designated by the Trust within 60 days of the Trust's fiscal year-end. Exempt-interest dividends will be exempt from Federal income tax, subject to the possible application of the Federal alternative minimum tax. Insurance proceeds received by the Trust under any insurance policies in respect of scheduled interest payments on defaulted municipal bonds, as described herein, will generally be excludable from gross income under Section 103(a) of the Code. In the case of non-appropriation by a political subdivision, however, there can be no assurance that payments made by the issuer representing interest on such "non-appropriation" municipal lease obligations will be excludable from gross income for Federal income tax purposes. See "Investment Objective and Policies" above. Gains of the Trust that are attributable to market discount on certain municipal obligations acquired after April 30, 1993 are treated as ordinary income. The interest on private activity bonds in most instances is not Federally tax-exempt to a person who is a "substantial user" of a facility financed by such bonds or a "related person" of such "substantial user." As a result, the Trust may not be an appropriate investment for shareholders who are considered either a "substantial user" or a "related person" within the meaning of the Code. In general, a "substantial user" of a facility includes a "non- exempt person who regularly uses a part of such facility in his trade or business." "Related persons" are in general defined to include persons among whom there exists a relationship, either by family or business, which would result in a disallowance of losses in transactions among them under various provisions of the Code (or if they are members of the same controlled group of corporations under the Code), including a partnership and each of its partners (and certain members of their families), an S corporation and each of its shareholders (and certain members of their families) and various combinations of these and other relationships. The foregoing is not a complete description of all of the provisions of the Code covering the definitions of "substantial user" and "related person." The Code provides that every holder of Preferred Shares required to file a tax return must include for information purposes on such return the amount of tax-exempt interest received during the taxable year, including any exempt-interest dividends received from the Trust.
Federal tax law imposes an alternative minimum tax with respect to both corporations and individuals. Interest on certain municipal obligations, such as bonds issued to make loans for housing purposes or to private entities (but not to certain tax-exempt organizations such as universities and non-profit hospitals) is included as an item of tax preference in determining the amount of a taxpayer's alternative minimum taxable income. To the extent that the Trust receives income from municipal obligations subject to the Federal alternative minimum tax, a portion of the dividends paid by it, although otherwise exempt from Federal income tax, will be taxable to its shareholders to the extent that their tax liability is determined under the alternative minimum tax. The Trust will annually supply a report indicating the percentage of the Trust's income attributable to municipal obligations subject to the Federal alternative minimum tax. In addition, for certain corporations, alternative minimum taxable income is increased by 75% of the difference between an alternative measure of income ("adjusted current earnings") and the amount otherwise determined to be the alternative minimum taxable income. Interest on all municipal obligations, and therefore all distributions by the Trust that would otherwise be tax-exempt, is included in calculating a corporation's adjusted current earnings. Certain small corporations are not subject to the alternative minimum tax.
Tax-exempt income, including exempt-interest dividends paid by the Trust, is taken into account in calculating the amount of social security and railroad retirement benefits that may be subject to Federal income tax.
Distributions to shareholders by the Trust of net income received, if any, from taxable temporary investments and net short-term capital gains, if any, realized by the Trust will be taxable to its shareholders as ordinary income. Distributions by the Trust of net capital gain (which is the excess of net long-term capital gain over net short-term capital loss), if any, are taxable as long-term capital gain, regardless of the length of time the shareholder has owned common shares or Preferred Shares. The amount of taxable income allocable to the Trust's Preferred Shares will depend upon the amount of such income realized by the Trust, but is not generally expected to be significant. Except for dividends paid on Preferred Shares which include an allocable portion of any net capital gain or other taxable income, the Trust anticipates that all dividends paid on shares of its Preferred Shares will constitute exempt-interest dividends for Federal income tax purposes. Distributions, if any, in excess of the Trust's earnings and profits will first reduce the adjusted tax basis of a shareholder's shares and, after that basis has been reduced to zero, will constitute capital gains to the shareholder (assuming the shares are held as a capital asset). As long as the Trust qualifies as a regulated investment company under the Code, no part of its distributions to shareholders will qualify for the dividends-received deduction for corporations.
The Internal Revenue Service (the "IRS") requires that a regulated investment company that has two or more classes of shares designate to each such class proportionate amounts of each type of its income for each tax year based upon the percentage of total dividends distributed to each class for such year. The Trust intends each year to allocate, to the fullest extent practicable, net tax-exempt interest, net capital gain and other taxable income, if any, between its common shares and preferred shares, including the Preferred Shares, in proportion to the total dividends paid to each class with respect to such year. To the extent permitted under applicable law, the Trust reserves the right to make special allocations of income within a class, consistent with the objective of the Trust. The Trust may, at its election, notify the Auction Agent of the amount of any net capital gain or other income taxable for Federal income tax purposes to be included in any dividend on shares of its Preferred Shares prior to the Auction establishing the Applicable Rate for such dividend. If the Trust allocates any net capital gain or other taxable income for Federal income tax purposes to its Preferred Shares without having given advance notice thereof as described above, the Trust generally will be required to make payments to owners of its Preferred Shares to which such allocation was made in order to offset the Federal income tax effect of the taxable income so allocated as described under "Description of Preferred Shares-Dividends and Dividend Periods-Additional Dividends" in the prospectus.
Although dividends generally will be treated as distributed when paid, dividends declared in October, November or December, payable to shareholders of record on a specified date in one of those months and paid during the following January will be treated as having been distributed by the Trust (and received by the shareholders) on December 31 of the year declared.
If at any time when the Trust's Preferred Shares are outstanding the Trust fails to meet the Preferred Shares Basic Maintenance Amount or the 1940 Act Preferred Shares Asset Coverage, the Trust will be required to suspend distributions to holders of its common shares until such maintenance amount or asset coverage, as the case may be, is restored. See "Description of New Preferred Shares-Dividends and Dividend Periods" in the prospectus. This may prevent the Trust from distributing at least an amount equal to the sum of 90% of its investment company taxable income and 90% of its net tax-exempt interest income, and may therefore jeopardize the Trust's qualification for taxation as a regulated investment company or cause the Trust to incur a tax liability or a non-deductible 4% excise tax on the undistributed taxable income (including gain), or both. Upon failure to meet the Preferred Shares Basic Maintenance Amount or the 1940 Act Preferred Shares Asset Coverage, the Trust will be required to redeem its shares of Preferred Shares in order to maintain or restore such maintenance amount or asset coverage and avoid the adverse consequences to the Trust and its shareholders of failing to qualify as a regulated investment company. There can be no assurance, however, that any such redemption would achieve such objective.
The Trust may, at its option, redeem its Preferred Shares in whole or in part, and is required to redeem Preferred Shares to the extent required to maintain the Preferred Shares Basic Maintenance Amount and the 1940 Act Preferred Shares Asset Coverage. Gain or loss, if any, resulting from a redemption of Preferred Shares will be taxed as gain or loss from the sale or exchange of Preferred Shares under Section 302 of the Code rather than as a dividend, but only if the redemption distribution (a) is deemed not to be essentially equivalent to a dividend, (b) is in complete redemption of an owner's interest in the Trust, (c) is substantially disproportionate with respect to the owner, or (d) with respect to a non- corporate owner, is in partial liquidation of the owner's interest in the Trust. For purposes of (a), (b) and (c) above, a shareholder's ownership of common shares will be taken into account.
The sale or other disposition of common shares or Preferred Shares of the Trust will normally result in capital gain or loss to shareholders. Present law taxes both long-term and short-term capital gains of corporations at the rates applicable to ordinary income. For non-corporate taxpayers, however, under current law short-term capital gains and ordinary income will be taxed at a maximum rate of 39.6% while long-term capital gains generally will be taxed at a maximum rate of 20%. However, because of the limitations on itemized deductions and the deduction for personal exemptions applicable to higher income taxpayers, the effective rate of tax may be higher in certain circumstances. Losses realized by a shareholder on the sale or exchange of shares of the Trust held for six months or less are disallowed to the extent of any distribution of exempt- interest dividends received with respect to such shares, and, if not disallowed, such losses are treated as long-term capital losses to the extent of any distribution of net capital gain received with respect to such shares. A shareholder's holding period is suspended for any periods during which the shareholder's risk of loss is diminished as a result of holding one or more other positions in substantially similar or related property, or through certain options or short sales. Any loss realized on a sale or exchange of shares of the Trust will be disallowed to the extent those shares of the Trust are replaced by other shares within a period of 61 days beginning 30 days before and ending 30 days after the date of disposition of the original shares. In that event, the basis of the replacement shares of the Trust will be adjusted to reflect the disallowed loss.
The Code provides that interest on indebtedness incurred or continued to purchase or carry the Trust's shares to which exempt-interest dividends are allocated is not deductible. Under rules used by the IRS for determining when borrowed funds are considered used for the purpose of purchasing or carrying particular assets, the purchase or ownership of shares may be considered to have been made with borrowed funds even though such funds are not directly used for the purchase or ownership of such shares.
Nonresident alien individuals and certain foreign corporations and other entities ("foreign investors") generally are subject to U.S. withholding tax at the rate of 30% (or possibly a lower rate provided by an applicable tax treaty) on distributions of net investment income (which includes net short-term capital gain). To the extent received by foreign investors, exempt-interest dividends, distributions of net capital gain and gain from the sale or other disposition of Preferred Shares generally are exempt from United States Federal income taxation. Different tax consequences may result if the owner is engaged in a trade or business in the United States or, in the case of an individual, is present in the United States for 183 or more days during a taxable year.
The Trust is required in certain circumstances to backup withhold 31% of taxable dividends and certain other payments paid to non-corporate holders of the Trust's shares who do not furnish to the Trust their correct taxpayer identification number (in the case of individuals, their social security number) and certain certifications, or who are otherwise subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld from payments made to a shareholder may be refunded or credited against such shareholder's United States Federal income tax liability, if any, provided that the required information is furnished to the IRS.
The foregoing is a general, summary of the provisions of the Code and regulations thereunder presently in effect as they directly govern the taxation of the Trust and its shareholders. These provisions are subject to change by legislative or administrative action, and any such change may be retroactive. Moreover, the foregoing does not address many of the factors that may be determinative of whether an investor will be liable for the alternative minimum tax. Shareholders are advised to consult their own tax advisers for more detailed information concerning the Federal income tax consequences of purchasing, holding and disposing of Trust shares.
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS
Deloitte & Touche LLP, located at Two World Financial Center, New York, New York, provides auditing services to the Trust. The financial statements and independent auditors report incorporated by reference into this statement of additional information have been so incorporated and the financial highlights included in the prospectus have been so included, in reliance upon the report of Deloitte & Touche LLP given on their authority as experts in auditing and accounting.
INCORPORATION BY REFERENCE
The Trust's Portfolio of Investments, dated October 31, 1998 (audited); Statement of Assets and Liabilities, dated October 31, 1998 (audited); Statement of Operations for the year ended October 31, 1998 (audited); Statement of Changes in Net Investment Assets for the two years ended October 31, 1998 (audited) and the independent auditors report included in the Trust's Annual Report for the fiscal year ended October 31, 1998 and the Trust's Portfolio of Investments, dated April 30, 1999 (unaudited); Statement of Assets and Liabilities, dated April 30, 1999 (unaudited); Statement of Operations for the period ended April 30, 1999 (unaudited); and Statement of Changes in Net Investment Assets for the period ended April 30, 1999 (unaudited) included in the Trust's Semi-Annual Report for the six-month period ended April 30, 1999 (the "Reports"), which accompany this statement of additional information, are incorporated herein by reference. The Trust will furnish, without charge, a copy of the Reports upon written request to the Trust at 800 Scudders Mill Road, Plainsboro, New Jersey 08536 or by telephone request at (800) 688-0928.
ADDITIONAL INFORMATION
A Registration Statement on Form N-2, including amendments thereto, relating to the shares offered hereby, has been filed by the Trust with the Securities and Exchange Commission, Washington, D.C. The prospectus and this statement of additional information do not contain all of the information set forth in the Registration Statement, including any exhibits and schedules thereto. For further information with respect to the Trust and the shares offered hereby, reference is made to the Registration Statement. Statements contained in the prospectus and this statement of additional information as to the contents of any contract or other document referred to are not necessarily complete and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference.
A copy of the Registration Statement may be inspected without charge at the SEC's principal office in Washington, D.C., and copies of all or any part thereof may be obtained from the SEC upon the payment of certain fees prescribed by the SEC. The SEC maintains a web site (http://www.sec.gov) that contains the Registration Statement, other documents incorporated by reference, and other information the Trust has filed electronically with the SEC, including proxy statements and reports filed under the Securities Exchange Act of 1934.
APPENDIX A
GENERAL CHARACTERISTICS AND
RISKS OF HEDGING TRANSACTIONS
In order to hedge against changes in the value of its portfolio securities, the Trust may from time to time engage in certain hedging strategies. The Trust will engage in such activities from time to time in the Adviser's discretion, and may not necessarily be engaging in such activities when movements in interest rates that could affect the value of the assets of the Trust occur. The Trust's ability to pursue certain of these strategies may be limited by the Commodity Exchange Act, applicable regulations of the Commodity Futures Trading Commission ("CFTC") and the federal income tax requirements applicable to regulated investment companies.
PUT AND CALL OPTIONS ON SECURITIES AND INDICES
The Trust may purchase and sell put and call options on securities and financial indices. A put option gives the purchaser of the option the right to sell and the seller the obligation to buy the underlying security at the exercise price during the option period. Index options are similar to options on securities except that, rather than taking or making delivery of securities underlying the option at a specified price upon exercise, an index option gives the holder the right to receive cash upon exercise of the option if the level of the index upon which the option is based is greater, in the case of a call, or less, in the case of a put, than the exercise price of the option. The purchase of a put option on a debt security would be designed to protect the Trust's holdings in a security against a substantial decline in the market value. A call option gives the purchaser of the option the right to buy and the seller the obligation to sell the underlying security at the exercise price during the option period. The purchase of a call option on a security would be intended to protect the Trust against an increase in the price of a security that it intended to purchase in the future. In the case of either put or call options that it has purchased, if the option expires without being sold or exercised, the Trust will experience a loss in the amount of the option premium plus any related commissions. When the Trust sells put and call options, it receives a premium as the seller of the option. The premium that the Trust receives for selling the option will serve as a partial hedge, in the amount of the option premium, against changes in the value of the securities in its portfolio. During the term of the option, however, a covered call seller has, in return for the premium on the option, given up the opportunity for capital appreciation above the exercise price of the option if the value of the underlying security increases, but has retained the risk of loss should the price of the underlying security decline. Conversely, a secured put seller retains the risk of loss should the market value of the underlying security decline below the exercise price of the option, less the premium received on the sale of the option. The Trust is authorized to purchase and sell exchange listed options and over-the-counter options ("OTC Options") which are privately negotiated with the counterparty to such contract. Listed options are issued by the Options Clearing Corporation ("OCC"), which guarantees the performance of the obligations of the parties to such options. All put and call options written by the Trust will be covered.
The Trust's ability to close out its position as a purchaser or seller of an exchange-listed put or call option is dependent upon the existence of a liquid secondary market. Among the possible reasons for the absence of a liquid secondary market on an exchange are: (i) insufficient trading interest in certain options; (ii) restrictions on transactions imposed by an exchange; (iii) trading halts, suspensions or other restrictions imposed with respect to particular classes or series of options or underlying securities; (iv) interruption of the normal operations on an exchange; (v) inadequacy of the facilities of an exchange or OCC to handle current trading volume; or (vi) a decision by one or more exchanges to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that exchange (or in that class or series of options) would cease to exist, although outstanding options on that exchange that had been listed by the OCC as a result of trades on that exchange would generally continue to be exercisable in accordance with their terms. OTC options are purchased from or sold to dealers, financial institutions or other counterparties which have entered into direct agreements with the Trust. With OTC Options, such variables as expiration date, exercise price and premium will be agreed upon between the Trust and the counterparty, without the intermediation of a third party such as the OCC. If the counterparty fails to make or take delivery of the securities underlying an option it has written, or otherwise settle the transaction in accordance with the terms of that option as written, the Trust would lose the premium paid for the option as well as any anticipated benefit of the transaction. As the Trust must rely on the credit quality of the counterparty rather than the guarantee of the OCC, it will only enter into OTC Options with counterparties with the highest long-term credit ratings, and with primary U.S. Government securities dealers recognized by the Federal Reserve Bank in New York.
The hours of trading for options on debt securities may not conform to the hours during which the underlying securities are traded. To the extent that the option markets close before the markets for the underlying securities, significant price and rate movements can take place in the underlying markets that cannot be reflected in the option markets.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Characteristics. The Trust may purchase and sell futures contracts and purchase put and call options on such futures contracts traded on recognized domestic exchanges as a hedge against anticipated interest rate changes or other market movements and future risk management. The sale of a futures contract creates an obligation by the Trust, as seller, to deliver the specific type of financial instrument called for in the contract at a specified future time for a specified price. Options on futures contracts are similar to options on securities except that an option on a futures contract gives the purchaser the right in return for the premium paid to assume a position in a futures contract (a long position if the option is a call and a short position if the option is a put).
Margin Requirements. At the time a futures contract is purchased or sold, the Trust must allocate cash or securities as a deposit payment ("initial margin"). It is expected that the initial margin that the Trust will pay may range from approximately 1% to approximately 5% of the value of the instruments underlying the contract. In certain circumstances, however, such as periods of high volatility, the Trust may be required by an exchange to increase the level of its initial margin payment Additionally, initial margin requirements may be increased in the future pursuant to regulatory action. An outstanding futures contract is valued daily and the payment in cash of "variation margin" may be required, a process known as "marking to the market." Transactions in listed options and futures are usually settled by entering into an offsetting transaction, and are subject to the risk that this position may not be able to be closed if no offsetting transaction can be arranged.
Limitations on Use of Futures Contracts and Options on Futures Contracts. The Trust's use of futures contracts and options on futures contracts will in all cases be consistent with applicable regulatory requirements and in particular, the rules and regulations of the CFTC and will be entered into only for bona fide hedging purposes or other appropriate risk management and duration management or other appropriate portfolio strategies. In addition, the Trust may not sell futures contracts if the value of such futures contracts exceeds the total market value of the Trust's portfolio securities.
The Trust will not engage in transactions in futures contracts or options thereon for speculative purposes but only as a hedge against changes resulting from market conditions in the values of securities in its portfolio. In addition, the Trust will not enter into a futures contract or option thereon if, immediately thereafter, the sum of the amount of its initial deposits and premiums on open contracts and options would exceed 5% of the Trust's total assets (taken at current value); provided, however, that in the case of an option that is in-the-money at the time of the purchase, the in-the- money amount may be excluded in calculating the 5% limitation. Also, when required, a segregated account of cash or cash equivalents will be maintained and marked to market in an amount equal to the market value of the contract. The Adviser reserves the right to comply with such different standards as may be established from time to time by CFTC rules and regulations with respect to the purchase and sale of futures contracts and options thereon.
Hedging Transactions present certain risks. In particular, the variable degree of correlation between price movements of hedging instruments and price movements in the position being hedged creates the possibility that losses on the hedge may be greater than gains in the value of the Trust's positions. In addition, certain hedging instruments and markets may not be liquid in all circumstances. As a result, in volatile markets, the Trust may not be able to close out a transaction in certain of these instruments without incurring losses substantially greater than the initial deposit. Although the contemplated use of these instruments should tend to minimize the risk of loss due to a decline in the value of the hedged position, at the same time they tend to limit any potential gain which might result from an increase in the value of such position. The ability of the Trust to hedge successfully will depend on the Adviser's ability to predict pertinent market movements, which cannot be assured. Finally, the daily variation margin deposit requirements in futures contracts that the Trust has sold create an ongoing greater potential financial risk than do options transactions, where the exposure is limited to the cost of the initial premium and transaction costs paid by the Trust. Losses due to Hedging Transactions will reduce net asset value.
The Trust's use of Hedging Transactions may be limited or affected by certain provisions of the Code and rating agency guidelines.
APPENDIX B-1
ARTICLES OF AMENDMENT
OF
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
The undersigned, on behalf of THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC., a Maryland corporation having its principal Maryland office in the City of Baltimore ("the Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland ("SDAT") that:
FIRST: The charter of the Corporation is hereby amended by deleting the provisions of the Articles Supplementary of the Corporation (which were approved and received for record by SDAT on March 30, 1993) in their entirety, and inserting in lieu thereof the following provisions:
"FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by article fifth of its Charter, the Board of Directors has reclassified 2,600 authorized and unissued shares of common stock of the Corporation as preferred stock of the Corporation and has given general authorization for the issuance of two series of 1,300 shares each, as the case may be, of preferred stock, par value $.01 per share, liquidation preference $50,000 per share plus an amount equal to accumulated but unpaid dividends (whether or not earned or declared) thereon plus the premium, if any resulting from the designation of a Premium Call Period, designated respectively Auction Rate Municipal Preferred Stock, Series T7 and Auction Rate Municipal Preferred Stock, Series T28.
SECOND: The Executive Committee of the Board of Directors of the Corporation, acting in accordance with Sections 2-208 and 2-411 of the Maryland General Corporation Law, has fixed the preferences, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption, of the shares of each such series of preferred stock as follows:
DESIGNATION
SERIES T7: A series of 1,300 shares of preferred stock, par value $.01 per share, liquidation preference $50,000 per share plus an amount equal to accumulated but unpaid dividends (whether or not earned or declared) thereon plus the premium, if any, resulting from the designation of a Premium Call Period, is hereby designated "Auction Rate Municipal Preferred Stock, Series T7". Each share of Auction Rate Municipal Preferred Stock, Series T7 shall be issued on April 1, 1993; have an Initial Dividend Rate of 2.30% per annum and the Initial Dividend Payment Date shall be April 14, 1993; and have such other preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Corporation's Charter Applicable to Preferred stock of the Corporation, as are set forth in these Articles Supplementary. The Auction Rate Municipal Preferred Stock, Series T7 shall constitute a separate series of preferred stock of the Corporation, and each share of Auction Rate Municipal Preferred Stock, Series T7 shall be identical.
SERIES T28: A series of 1,300 shares of preferred stock, par value $.01 per share, liquidation preference $50,000 per share plus an amount equal to accumulated but unpaid dividends (whether or not earned or declared) thereon plus the premium, if any, resulting from the designation of a Premium Call Period, is hereby designated "Auction Rate Municipal Preferred Stock, Series T28". Each share of Auction Rate Municipal Preferred Stock, Series T28 shall be issued on April 1, 1993; have an Initial Dividend Rate of 2.35% per annum and the Initial Dividend Payment Date shall be May 5, 1993; and have such other preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Corporation's Charter applicable to preferred stock of the Corporation, as are set forth in these Articles Supplementary. The Auction Rate Municipal Preferred Stock, Series T28 shall constitute a separate series of preferred stock of the Corporation, and each share of Auction Rate Municipal Preferred Stock, Series T28 shall be identical.
1. Definitions. (a) Unless the context or use indicates another or different meaning or intent, in these Articles Supplementary the following terms have the following meanings, whether used in the singular or plural:
"'AA' Composite Commercial Paper Rate" for any period less than 183 days as of any date means (i) the Interest Equivalent of the rate on commercial paper for such period 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 nationally recognized statistical rating organization, as the rate for such period is made available on a discount basis or otherwise by the Federal Reserve Bank of New York for the Business Day immediately preceding such date, or (ii) in the event that the Federal Reserve Bank of New York does not make available at such a rate, then the arithmetic average of the Interest Equivalent of the rate on commercial paper for such period placed on behalf of such issuers, as quoted to the Auction Agent on a discount basis or otherwise by the Commercial Paper Dealers for the close of business on the Business Day immediately preceding such date. If a Commercial Paper Dealer does not quote a rate required to determine the "AA" Composite Commercial Paper Rate for such period, the "AA" Composite Commercial Paper rate for such period will be determined on the basis of the quotation or quotations furnished by any Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers selected by the Corporation to provide such rate or rates not being supplied by the Commercial Paper Dealer.
"Accountant's Confirmation" has the meaning set forth in paragraph 7(c) of these Articles Supplementary.
"Additional Dividend" has the meaning set forth in paragraph 2(e) of these Articles Supplementary.
"Adviser" means the Corporation's investment adviser, BlackRock Financial Management L.P., Blackstone Financial Management, L.P., and any successor thereto.
"Affiliate" shall mean any person, known to the Auction Agent to be controlled by, in control of, or under common control with, the Corporation.
"Agent Member" means a member of the Securities Depository that will act on behalf of an existing Holder of one or more Preferred Shares or a Potential Holder.
"Anticipation Notes" means the following Municipal Obligations:
tax anticipation notes, revenue anticipation notes and tax and revenue
anticipation notes.
"Applicable Percentage" has the meaning set forth in paragraph 11(a)(vi) of these Articles Supplementary.
"Applicable Rate" means (i) for purposes of the Auction Procedures, the rate per annum or, in connection with any Auction in which Bid Requirements are imposed by the Corporation, the method by which one or more such rates may be determined, at which cash dividends are payable (if declared) on the preferred Shares or Other Preferred Shares, as the case may be, for any Dividend Period and any Dividend Payment Period included therein and (ii) for purposes of determining the amount of cash dividends payable (if declared) at any Dividend Payment Date, the rate per annum (including in the case of any Applicable rate expressed as a Spread the rate per annum determined by periodic application of such Spread to the applicable rate expressed as a Spread the rate per annum determined by periodic application of such Spread to the applicable Reference Index or Reference Security at the frequency and weighting, if any, specified in the related Bid Requirements, subject to any Maximum Applicable Rate applicable to such Dividend Payment Period) at which cash dividends are payable (if declared) on the Preferred Shares, and includes, to the extent provided by paragraph 2(c)(i) of these Articles Supplementary, any late charge provided for by such paragraph.
"Auction" means a periodic operation of the Auction Procedures.
"Auction Agent" means Banker's Trust Company unless and until another commercial bank, trust company or other financial institution appointed by a resolution of the Board of Directors of the Corporation or a duly authorized committee thereof enters into an agreement with the Corporation to follow the Auction Procedures for the purpose of determining the Applicable Rate and to act as transfer agent, registrar, dividend disbursing agent and redemption agent for the Preferred Shares and Other Preferred Shares.
"Auction Procedures" means the procedures for conducting Auctions set forth in paragraph 11 of these Articles Supplementary.
"Bid Requirements" means (i) any requirement for a Special Dividend Period longer than 91 days that Bids by Potential Holders shall be expressed as a Spread below, at or above the rate of a specified Reference Index or Reference Security, (ii) the Reference Index or Reference Security, the most recently announced rate thereof and the frequency with which the rate of Reference Index or the Reference Security, as the case may be, shall be recalculated for purposes of determining rates expressed as Spreads thereon in accordance with these Articles Supplementary, which frequency shall be the same as the frequency with which the person maintaining the Reference Index being utilized recalculates such Reference Index, or the same as the frequency with which the interest rate on the Reference Security being utilized changes or such other frequency as the Corporation shall specify (which specification may include a formula specified by the Corporation indicating the weighting to be given to each recalculation of the Reference Security during a specific period), (iii) the frequency of Dividend Payment Dates during such Special Dividend Period (which shall not be more often than the frequency specified pursuant to clause (ii) above), (iv) one or more Minimum Applicable Rate or Rates (the Indicated Minimum Applicable Rate or Rates in the case of Bid Requirements set forth in a request for Special Dividend Period) and/or (v) one or more Special Dividend Period Reference Rate or Rates and the Maximum Applicable Rate or Rates (the Indicated Maximum Applicable Rate or Rates in the case of Bid Requirements set forth in a Request for Special Dividend Period) derivable from such Special Dividend Period Reference Rate or Rates, in each case as set forth in the Notice of Special Dividend Period for such Special Dividend Period.
"Broker-Dealer" shall mean any broker-dealer, or other entity permitted by law to perform the functions required of a Broker-Dealer in paragraph 11 of these Articles Supplementary, that has been selected by the Corporation and has entered into a Broker-Dealer Agreement with the Auction Agent that remains effective.
"Broker-Dealer Agreement" shall mean an agreement between the Auction Agent and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the procedures specified in paragraph 11 of these Articles Supplementary.
"Business Day" means a day on which the New York Stock Exchange, Inc. is open for trading and which is not a Saturday, Sunday or other day on which banks in the City of New York are authorized or obligated by laws to close.
"Charter" means the Charter, as amended and supplemented (including these Articles Supplementary), of the Corporation on file in the State Department of Assessments and Taxation of Maryland.
"Closing Transaction" means the termination of a futures contract or option position by taking a position opposite thereto.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Paper Dealers" means Merrill Lynch, Pierce, Fenner & Smith Incorporated and such other commercial paper dealer or dealers as the Corporation may from time to time appoint, or, in lieu of any thereof, their respective affiliates or successors.
"Common Stock" means the common stock, par value $.01 per share, of the Corporation.
"Corporation" means The BlackRock Investment Quality Municipal Trust Inc., a Maryland corporation.
"Date of Original Issue" means April 1, 1993, with respect to the Preferred Shares and the date on which the corporation originally issues any Other Preferred Shares with respect to such Other Preferred Shares.
"Deposit Securities" means cash, the book value of Municipal Obligations sold for which payment is due within five Business Days with counterparties rated at least Baa by Moody's and before the next Dividend Payment Date or Valuation Date, as the case may be, and Municipal Obligations rated at least A-1+ or SP-1+ by S&P, VMIG-1 or MIG-1 by Moody's.
"Discounted Value" means (i) with respect to a Moody's Eligible Asset, the lower of par and the quotient of the Market Value thereof divided by the applicable Moody's Discount Factor and (ii) with respect to an S&P Eligible Asset, the quotient of the Market Value thereof divided by the applicable S&P Discount Factor.
"Dividend Coverage Amount," as of any Valuation Date, means (i) the aggregate amount of cash dividends that will accumulate on all Outstanding Preferred Shares and Other Preferred Shares, in each case to (but not including) the next Dividend Payment Date therefor that follows such Valuation Date (calculated, in the case of cash dividends determined by application of a Spread to a Reference Index or Reference Security, by assuming that the Applicable Rate in effect for the immediately preceding Dividend Payment Period will remain in effect until the next Dividend Payment Period) plus the aggregate amount of any liabilities of the Corporation that are required to be paid on or prior to the next Dividend Payment Date less (ii) the combined Market Value of Deposit Securities irrevocably deposited with the Auction Agent for the payment of cash dividends on all Preferred Shares and Other Preferred Shares.
"Dividend Coverage Assets," as of any Valuation Date, means, in the case of Preferred Shares and Other Preferred Shares, Deposit Securities with maturity or tender payment dates not later in each case than the Dividend Payment Date therefor that follows such Valuation Date.
"Dividend Payment Date," with respect to Preferred Shares, has the meaning set forth in paragraph 2(b)(i) of these Articles Supplementary and, with respect to Other Preferred Shares, has the equivalent meaning.
"Dividend Payment Period" means the Initial Dividend Period and any Subsequent Dividend Payment Period.
"Dividend Period" means the Initial Dividend Period, any 28-day Dividend Period (in the case of Series T28 Preferred Shares) or 7-day Dividend Period (in the case of Series T7 Preferred Shares) and any Special Dividend Period.
"Existing Holder" means a Person who is listed as the holder of record of Preferred Shares in the Stock Books.
"Holder" means a Person identified as a holder of record of Preferred Shares in Stock Register.
"Independent Accountant" means a nationally recognized accountant, or firm of accountants, that is, with respect to the Corporation, an independent public accountant or firm of independent public accountants under the Securities Act of 1933, as amended.
"Indicated Maximum Applicable Rate" means the Maximum Applicable Rate that would apply if the Auction with respect to which it is specified were conducted on the date of the Request for Special Dividend Period in which such Indicated Maximum Applicable Rate is specified.
"Indicated Minimum Applicable Rate" means the Minimum Applicable Rate that would apply if the Auction with respect to which it is specified were conducted on the date of the Request for Special Dividend Period in which such Indicated Minimum Applicable Rate is specified.
"Initial Dividend Payment Date" means, with respect to each series of Preferred Shares and Other Preferred Shares, the Initial Dividend Payment Date specified herein.
"Initial Dividend Period," with respect to Preferred Shares, has the meaning set forth in paragraph 2(c)(i) of these Articles Supplementary and, with respect to Other Preferred Shares, has the equivalent meaning.
"Initial Dividend Rate," with respect to each series of Preferred shares, means the rate per annum applicable to the Initial Dividend Period for such series of Preferred Shares and, with respect to Other Preferred Shares, has the equivalent meaning.
"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.
"Interest Equivalent" means a yield on a 360-day basis of a discount basis security which is equal to the yield on an equivalent interest bearing security.
"Mandatory Redemption Price" means $50,000 per share of Preferred Shares plus an amount equal to accumulated but unpaid dividends (whether or not earned or declared) to the date fixed for redemption plus the premium, if any, resulting from the designation of a Premium Call Period.
"Market Value" of any asset of the Corporation shall be the market value thereof determined by the Pricing Service. Market Value of any asset shall include any interest accrued thereon. The Pricing Service shall value portfolio securities at the lower of the quoted bid price or the mean between the quoted bid and ask price or the yield equivalent when quotations are not readily available. 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 obligations of comparable quality, type of issue, coupon, maturity and rating; indications as to value from dealers; and general market conditions. The Pricing Service may employ electronic data processing techniques and/or a matrix system to determine valuations. If the Pricing Service fails to provide the Market Value of any Municipal Obligation, such Municipal Obligation shall be valued at the lower of two bid quotations (one of which shall be in writing) obtained by the Corporation from two dealers who are members of the National Association of Securities Dealers, Inc. and are making a market in such Municipal Obligations. 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 as determined by the Pricing Service or if the Pricing Service is not able to value such instruments they shall be valued at fair value on a consistent basis using methods determined in good faith by the Board of Directors.
"Maximum Applicable Rate," for any Dividend Payment Period with respect to Preferred Shares, has the meaning set forth in paragraph 11(a)(vi) of these Articles Supplementary and, with respect to Other Preferred Shares, has the equivalent meaning.
"Maximum Marginal Tax Rate: means the maximum marginal regular Federal individual income tax rate applicable to ordinary income or the maximum marginal regular Federal corporate income tax rate, whichever is greater.
"Maximum Potential Additional Dividend Liability," as of any Valuation Date, means the aggregate amount of Additional Dividends that would be due if the Corporation were to make Retroactive Taxable Allocations, with respect to any fiscal year, estimated based upon dividends paid and the amount of undistributed realized net capital gains and other taxable income earned by the Corporation, as of the end of the calendar month immediately preceding such Valuation Date and assuming such Additional Dividends are fully taxable.
"Minimum Applicable Rate," for any Dividend Payment Period with respect to Preferred Shares, has the meaning set forth in paragraph 11(a)(vii) of these Articles Supplementary and, with respect to Other Preferred Shares, has the equivalent meaning.
"Minimum Liquidity Level" means, as of any Valuation Date, an aggregate Market Value of the Corporation's Dividend Coverage Assets not less than the Dividend Coverage Amount.
"Moody's" means Moody's Investors Service or its successors.
"Moody's Discount Factor" means, for purposes of determining the Discounted Value of any Moody's Eligible Asset which is a Municipal Obligation, the percentage determined by reference to (i) (A) the rating by Moody's or S&P on such asset or (B) in the event the Municipal Obligation is insured under an insurance policy which guarantees the timely payment of interest on such Municipal Obligation and principal thereof to maturity, the Moody's insurance claims- paying ability rating of the issuer of the insurance policy (provided that for purposes of clause (B) if the insurance claims-paying ability of an issuer of an insurance policy is not rated by Moody's but is rated by S&P, such issuer shall be deemed to have a Moody's insurance claims-paying ability rating which is one full category lower than the S&P insurance claims-paying ability rating) and (ii) the shortest Moody's Collateral 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
-------------------------------------------------------------
Moody's Collateral Period Aaa+ Aa+ A+ Paa* Other**
------------------------- ---- --- -- ---- -------
7 weeks or less................................... 151% 159% 168% 202% 229%
8 weeks or less but greater than seven weeks...... 154 164 173 205 235
9 weeks or less but greater than eight weeks...... 158 169 179 209 242
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; provided, however, in the event a Moody's Discount Factor applicable to a Municipal Obligation is determined by reference to an insurance claims-paying ability rating in accordance with clause (i)(B), such Moody's Discount Factor shall be increased by an amount equal to 50% of the difference between (a) the percentage set forth in the foregoing table under the applicable rating category and (b) the percentage set forth in the foregoing table under the rating category which is one category lower than the applicable rating category. If a Municipal Obligation is covered by a Portfolio Insurance policy which provides the Trust with an option to obtain Permanent Insurance with respect to such Municipal Obligations and such Portfolio Insurance policy has been approved in writing by Moody's, the Moody's Discount Factor rating category shall be determined by averaging the insurance claims paying ability rating of the Portfolio Insurance provider and the next lowest rating category.
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 MIG-1, VMIG-1 or P-1 by Moody's or 125% if such Obligations are not rated by Moody's but are rated A-1+ or SP-1+ or 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 Municipal Receivables (except to the extent provided in the definition thereof).
"Moody's Eligible Asset" means cash, a Municipal Receivable or a Municipal Obligation that (i) pays interest in cash, (ii) is publicly rated Baa or higher by Moody's or, if not rated by Moody's but rated by S&P, is rated at least BBB by S&P (provided that, for purposes of determining the Moody's Discount Factor applicable to any such S&P-rated Municipal Obligation, such Municipal Obligation (excluding any short-term Municipal Obligation) will be deemed to have a Moody's rating which is one full rating category lower than its S&P rating), (iii) does not have its Moody's rating suspended by Moody's and (iv) is part of an issue of Municipal Obligations of at least $10,000,000. Municipal Obligations issued by any one issuer, not rated by Moody's and rated BBB by S&P may comprise no more than 4% of total Municipal Obligations which are Moody's Eligible Assets; such BBB rated 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 Municipal Obligations which are Moody's Eligible Assets; such BBB, A and Baa rated 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 Municipal Obligations which are Moody's Eligible Assets; and such BBB, Baa, A and AA rated Municipal Obligations, if any, together with any Municipal Obligations issued by the same issuer and rated Aa by Moody's or AAA by S&P, may comprise no more than 20% of total Municipal Obligations which are Moody's Eligible Assets. Municipal Obligations issued by issuers located within a single state or territory, not rated by Moody's and rated BBB by S&P, may comprise no more than 12% of total Municipal Obligations which are Moody's Eligible Assets; such BBB rated Municipal Obligations, if any, together with any Municipal Obligations issued by issuers located within the same state or territory and rated Baa by Moody's or A by S&P, may comprise no more than 20% of total Municipal Obligations which are Moody's Eligible Assets; such BBB, Baa and A rated Municipal Obligations, if any, together with any Municipal Obligations issued by issuers located within the same state or territory and rated A by Moody's or AA by S&P, may comprise no more than 40% of total Municipal Obligations which are Moody's Eligible Assets; and such BBB, Baa, A and AA rated Municipal Obligations issued by issuers located within the same state or territory and rated Aa by Moody's or AAA by S&P, may comprise no more than 60% of total Municipal Obligations which are Moody's Eligible Assets. Additionally, Municipal Obligations whose ratings are determined by the claims paying ability ratings of the providers of Portfolio Insurance may comprise no more than 10% of the total Municipal Obligations which are Moody's Eligible Assets. When the Corporation sells a Municipal Obligation and agrees to repurchase it at a future date, the Corporation must count as a liability for the purposes of the Preferred Shares Basic Maintenance Amount the amount of the repurchase price of such Municipal Obligation and such Municipal Obligation is considered a Moody's Eligible Asset to the extent it satisfies Moody's current guidelines. When the Corporation buys a Municipal Obligation and agrees to sell it to another party at a future date and the long-term debt of such other party is rated at least A2 and the transaction has a term of 30 days or less, the cash to be received by the Corporation will be counted as a Moody's Eligible Asset; otherwise such Municipal Obligation will be counted as a Moody's Eligible Asset to the extent it satisfies Moody's current guidelines.
Notwithstanding the foregoing, an asset will not be considered a Moody's Eligible Asset if it is held in a margin account or if it is subject to any material lien, mortgage, pledge, security interest or security agreement of any kind, except for (i) Liens to secure payment for services rendered or cash advanced to the Corporation by the Adviser, the custodian of the Corporation's assets, the Auction Agent or any Broker-Dealers and (ii) any Lien by virtue of a repurchase agreement. In addition, an asset irrevocably deposited for the payment of any of the items set forth in clauses (i) A through F of the Preferred Shares Basic Maintenance Amount will not be considered Moody's Eligible Assets.
For purposes of the definition of Moody's Eligible Asset, references to the S&P rating BBB shall be deemed to include the S&P ratings BBB-, BBB and BBB+.
"Moody's Exposure Period" means a period that is the same length or longer than the number of days used in calculating the cash dividend component of the Preferred Shares Basic Maintenance Amount and shall initially be the period commencing on a given Valuation Date and ending 48 days thereafter.
"Moody's Hedging Transaction" means the selling of an exchange traded futures contract based on the Municipal Index or Treasury Bonds or the purchase of an exchange traded put option on such a futures contract or the writing of an exchange traded call option on such a futures contract.
"Moody's Volatility Factor" means 100% during any Dividend Period of greater than 49 days until 49 days prior to the last day of such Dividend Period; otherwise, "Moody's Volatility Factor" means 272% except during that time period where legislation increasing the federal income tax rate has been enacted into law and such increase has not yet taken effect, in which cash for such time period Moody's Volatility Factor shall be determined by reference to the increase in the Maximum Marginal Tax Rate as follows: for increases of up to 5%, 292%; for increases greater than 5% and up to 10%, 313%; for increases greater than 10% and up to 15%, 338%; for increases greater than 15% and up to 20%, 364%; for increases greater than 20% and up to 25%, 396%; for increases greater than 25% and up to 30%, 432%; for increases greater than 30% and up to 35%, 472%; for increases greater than 35% and up to 40%, 520%.
"Municipal Index" means The Bond Buyer Municipal Bond Index.
"Municipal Obligations" means "Municipal Obligations" as defined in the Corporation's Registration Statement on Form N-2 (File Nos. 33-59456 and 811-7354) on file with the Securities and Exchange Commission, as such Registration Statement may be amended from time to time.
"Municipal Receivables" means no more than the aggregate of the following: (i) the book value of receivables for Municipal Obligations sold as of or prior to a relevant Valuation Date if such receivables are due within five Business Days of such Valuation Date, and if the trades which generated such receivables are (A) settled through clearing house firms with respect to which the Corporation has received prior written authorization from Moody's or (B) 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 conditions (A) or (B) of the preceding clause (i).
"1940 Act" means the Investment Company Act of 1940, as amended from time to time.
"1940 Act Preferred Shares Asset Coverage" means 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 Corporation which are stock, including all outstanding Preferred Shares and Other Preferred 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 stock of a closed-end investment company as a condition of paying dividends on its common stock).
"1940 Act Cure Date," with respect to the failure by the Corporation to maintain the 1940 Act Preferred Shares Asset Coverage (as required by paragraph 6 of these Articles Supplementary) as of the last Business Day of each month, means the last Business Day of the following month.
"Non-Call Period" has the meaning set forth under "Specific Redemption Provisions" below.
"Non-Payment Period," with respect to each series of Preferred Shares, means any period commencing on and including the day on which the Corporation shall fail to (i) declare, prior to the close of business on the second Business Day preceding any Dividend Payment Date, for payment on or (to the extent permitted by paragraph 2(c)(i) of these Articles Supplementary) within three Business Days after such Dividend Payment Date to the Holders as of 12:00 noon, New York City time, on the Business Day preceding such Dividend Payment Date, the full amount of any dividend on Preferred Shares payable on such Dividend Payment Date or (ii) deposit, irrevocably in trust, in same-day funds, with the Auction Agent by 12:00 noon, New York City time, (A) on such Dividend Payment Date the full amount of any cash dividend on such shares payable (if declared) on such Dividend Payment Date or (B) on any redemption date for any Preferred Shares called for redemption, the Mandatory Redemption Price per share of such Preferred Shares or, in the case of an optional redemption, the Optional Redemption Price per share, and ending on and including the Business Day on which, by 12:00 noon, New York City time, all unpaid cash dividends and unpaid redemption prices shall have been so deposited or shall have otherwise been made available to Holders in same-day funds; provided that, a Non-Payment Period shall not end unless the Corporation shall have given at least five days' but no more than 30 days' written notice of such deposit or availability to the Auction Agent, all Existing Holders (at their addresses appearing in the Stock Books) and the Securities Depository. Notwithstanding the foregoing, the failure by the Corporation to deposit the funds provided for by clauses (ii)(A) and (ii)(B) above within three Business Days after a Dividend Payment Date or any Redemption Date, as the case may be, in each case to the extent contemplated by paragraph 2(c)(i) of these Articles Supplementary, shall not constitute a "Non-Payment Period".
"Non-Payment Period Rate" means, initially, 250% of the 30-day "AA" Composite Commercial Paper Rate (or 300% of such rate if the Corporation has provided notification to the Auction Agent prior to the Auction establishing the Applicable Rate for any dividend pursuant to paragraph 2(f) hereof that net capital gains or other taxable income will be included in such dividend on Preferred Shares). Such percentages will be used to calculate the Applicable Rate for any Non-Payment Period which occurs during a Special Dividend Period on either series of Preferred Shares and will be applied to the applicable Special Dividend Period Reference Rate then in effect with respect to such series. However, the Board of Directors of the Corporation shall have the authority to adjust, modify, alter or change from time to time the initial Non-Payment Period Rate if the Board of Directors of the Corporation determines and Moody's and S&P (and any Substitute Rating Agency in lieu of Moody's or S&P in the event either of such parties shall not rate the Preferred Shares) advise the Corporation in writing that such adjustment, modification, alteration or change will not adversely affect their then-current ratings on the Preferred Shares.
"Normal Dividend Payment Date" has the meaning set forth in paragraph 2(b)(i) of these Articles Supplementary.
"Notice of Redemption" means any notice with respect to the redemption of Preferred Shares pursuant to paragraph 4 of these Articles Supplementary.
"Notice of Revocation" has the meaning set forth in paragraph 2(c)(iii) of these Articles Supplementary.
"Notice of Special Dividend Period" has the meaning set forth in paragraph 2(c)(iii) of these Articles Supplementary.
"Optional Redemption Price" shall mean $50,000 per share plus an amount equal to accumulated but unpaid dividends (whether or not earned or declared) to the date fixed for redemption plus the premium, if any, resulting from the designation of a Premium Call Period.
"Original Issue Insurance" means insurance guaranteeing the timely payment of principal of, and interest on, a Municipal Obligation purchased by the issuer of a Municipal Obligation or by a third party at the time of issuance of such Municipal Obligation.
"Other Preferred Shares" means the Auction Rate Municipal Preferred Stock of the Corporation, other than the Preferred Shares.
"Outstanding" means, as of any date (i) with respect to Preferred Shares, Preferred Shares theretofore issued by the Corporation except, without duplication, (A) any Preferred Shares, theretofore cancelled or delivered to the Auction Agent for cancellation, or redeemed by the Corporation, or as to which a Notice of Redemption shall have been given and moneys shall have been deposited in trust by the Corporation pursuant to paragraph 4(c) and (B) any Preferred Shares as to which the Corporation or any Affiliate thereof shall be an Existing Holder and (ii) with respect to shares of Other Preferred Stock, has the equivalent meaning.
"Parity Stock" means the Preferred Shares and each other outstanding series of Preferred Stock the holders of which, together with the holders of the Preferred Shares, shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion top the full respective preferential amounts to which they are entitled, without preference or priority one over the other.
"Permanent Insurance" means insurance guaranteeing the timely payment of principal of, and interest on, a Municipal Obligation purchased by the Corporation upon payment of a single, predetermined insurance premium pursuant to an irrevocable commitment of the issuer of Portfolio Insurance covering such Municipal Obligation.
"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.
"Portfolio Insurance" means insurance guaranteeing the timely payment of principal of, and interest on, a covered Municipal Obligation only while such Municipal Obligation is owned by the Corporation.
"Potential Holder" shall mean any Person, including any Existing Holder, who may be interested in acquiring Preferred Shares (or, in the case of an Existing Holder, additional Preferred Shares).
"Preferred Shares" means, as the case may be, Auction Rate Municipal Preferred Stock, Series T7 or Auction Rate Municipal Preferred Stock, Series T28.
"Preferred Shares Basic Maintenance Amount," as of any Valuation Date, means the dollar amount equal to (i) the sum of (A) the product of the number of Preferred Shares and Other Preferred Shares outstanding on such Valuation Date multiplied by $50,000 plus the premium, if any, resulting from the designation of a Premium Call Period; (B) the aggregate amount of cash dividends that will have accumulated (whether or not earned or declared) for each share of Preferred Shares and Other Preferred Shares outstanding, in each case, to (but not including) the next Dividend Payment Date therefor that follows such Valuation Date (calculated, in the case of cash dividends determined by application of a Spread to a Reference Index or Reference Security, by assuming that the Applicable Rate in effect for the immediately preceding Dividend Payment Period will remain in effect until the next Dividend Payment Period); (C) the aggregate amount of cash dividends that would accumulate at the then current Maximum Applicable Rate (assuming notification has been given to the Auction Agent that net capital gains or other taxable income will be included in the relevant dividend as contemplated pursuant to paragraphs 2(f) and 11(a)(vi) of these Articles Supplementary) on any Preferred Shares and Other Preferred Shares outstanding from such Dividend Payment Date through the 48th day after such Valuation Date, multiplied by the larger of the Moody's Volatility Factor and the S&P Volatility Factor determined from time to time by Moody's and S&P, respectively (except that if such Valuation Date occurs during a Non-Payment Period, the cash dividend for purposes of calculation would accumulate at the then current Non-Payment Period Rate); (D) the amount of anticipated expenses of the Corporation for the 90 days subsequent to such Valuation Date; (E) the amount of the Corporation's Maximum Potential Additional Dividend Liability as of such Valuation Date; and (F) any current liabilities as of such Valuation Date to the extent not reflected in any of (i)(A) through (i)(E) (including, without limitation, and immediately upon determination, payables for Municipal Obligations purchased as of such Valuation Date) less (ii) the lesser of (A) either the Discounted Value of the Corporation's assets irrevocably deposited by the Corporation for the payment of any of (i)(A) through (i)(F) of the face value of such irrevocably deposited assets that mature prior to the payment date of the liabilities for which they are being deposited and are either fully guaranteed by the U.S. government or have a rating of either P-1, VMIG-1 or MIG-1 by Moody's and A-1+ or SP-1+ by S&P and (B) the Market Value of any of the Corporation's assets irrevocably deposited by the Corporation for the payment of any of (i)(A) through (i)(F).
For purposes of determining as of any Valuation Date whether the Corporation has Moody's Eligible Assets and S&P Eligible Assets each with an aggregate Discounted Value at least equal to the Preferred Shares Basic Maintenance Amount, the Corporation shall include as a liability in the calculation of the Preferred Shares Basic Maintenance Amount an amount calculated semi-annually equal to 150% of the estimated cost of obtaining Permanent Insurance with respect to Moody's Eligible Assets or S&P Eligible Assets, as applicable, that are (i) covered by Portfolio Insurance policies which provide the Corporation with the option to obtain such Permanent Insurance and (ii) are discounted by Moody's Discount Factor or S&P Discount Factor, as applicable, determined by reference to the insurance claims-paying ability rating of the issuer of such Portfolio Insurance policy.
"Preferred Shares Basic Maintenance Cure Date," with respect to the failure by the Corporation to satisfy the Preferred Shares Basic Maintenance Amount (as required by paragraph 7(a) of these Articles Supplementary) as of a given Valuation Date, means the fifth Business Day following such Valuation Date.
"Preferred Shares Basic Maintenance Report" means a report signed by the president, Treasurer, or Vice President of the Corporation which sets forth, as of the related Valuation Date, the assets of the Corporation, the Market Value and the Discounted Value thereof (seriatim and in aggregate), and the Preferred Shares Basic Maintenance Amount.
"Preferred Stock" means the preferred stock of the Corporation, and includes Preferred Shares and Other Preferred Shares.
"Premium Call Period" has the meaning set forth under "Specific Redemption Provisions" below.
"Pricing Service" shall mean J.J. Kenny Co., Inc. or any pricing service designated by the Board of Directors of the Corporation provided the Corporation obtains written assurance from S&P that such designation will not impair the rating then assigned by S&P to the Preferred Shares.
"Quarterly Valuation Date" means the last Business Day of each fiscal quarter of the Corporation in each fiscal year of the Corporation, commencing June 30, 1993.
"Reference Index" shall mean an index of interest rates on Treasury Securities, Municipal Obligations or high quality commercial paper or dividend rates on preferred stock of issuers registered as closed-end management investment companies under the 1940 Act that invest primarily in Municipal Obligations or any other index or instrument selected and approved by the Corporation's Board of Directors, after consultation with the Broker-Dealers and made available to the Auction Agent, as being an appropriate index or instrument, in each case expressed as a rate and devised and calculated not less often than monthly by one or more parties that are not affiliated with the Corporation and made available to the Corporation, the Auction Agent, the Broker-Dealers and existing and potential beneficial owners of the Preferred Shares.
"Reference Rate" means the higher of the 30-day "AA" Composite Commercial Paper Rate and the Taxable Equivalent of the Short-Term Municipal Bond Rate, or, in the case of a Special Dividend Period with a single Applicable Rate throughout such Special Dividend Period, the Special Dividend Period Reference Rate or, in the case of a Special Dividend Period with a varying Applicable Rate, the Reference Rate specified in the definition of S&P Volatility Factor that most closely approximates the length of the interval between periodic applications of the Spread to the relevant Reference Index or Reference Security.
"Reference Security" shall mean, in the case of a debt obligation, a particular debt obligation which is publicly traded, which is non callable prior to the termination of the Special Dividend Period with respect to which such Reference Security is relevant and the outstanding aggregate principal amount of which at the time of the Notice of Special Dividend Period exceeds $100 million or, in the case of a preferred stock, a preferred stock issue which is publicly traded, which is non-redeemable prior to the termination of the Special Dividend Period with respect to which such Reference Security is relevant and the outstanding liquidation value of which at the time of the Notice of Special Dividend Period exceeds $50 million.
"Request for Special Dividend Period" has the meaning set forth in paragraph 2(c)(iii) of these Articles Supplementary.
"Response" has the meaning set forth in paragraph 2(c)(iii) of these Articles Supplementary.
"Retroactive Taxable Allocation" has the meaning set forth in paragraph 2(e) of these Articles Supplementary.
"Right," with respect to Preferred Shares, has the meaning set forth in paragraph 2(e) of these Articles Supplementary and, with respect to Other Preferred Shares, has the equivalent meaning.
"Rightholder" has the meaning set forth in paragraph 2(e) of these Articles Supplementary.
"S&P" means Standard & Poor's Corporation or its successors.
"S&P Discount Factor" means, for purposes of determining the Discounted Value of any S&P Eligible Asset, the percentage determined by reference to (a)(i) in the event a Municipal Obligation is covered by a Portfolio Insurance policy which does not provide the Corporation with the option to obtain Permanent Insurance with respect to such Municipal Obligation, or is not covered by bond insurance, the S&P or Moody's rating on such Municipal Obligation, (ii) in the event a Municipal Obligation is covered by an Original Issue Insurance policy or a Secondary Insurance policy, the S&P Insurance claims-paying ability rating of the issuer of the policy or (iii) in the event a Municipal Obligation is covered by a Portfolio Insurance policy which provides the Corporation with the option to obtain Permanent Insurance with respect to such Municipal Obligation and such Portfolio Insurance policy has been reviewed and approved in writing by S&P, at the Corporation's option, the S&P or Moody's rating on such Municipal Obligation or the S&P insurance claims-paying ability rating of the issuer of the Portfolio Insurance policy and (b) the shortest S&P Collateral Period set forth opposite such rating that is the same length as or is longer than the S&P Exposure Period, in accordance with the table set forth below:
Rating Category
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Collateral Period AAA* AA* A* BBB*
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40 Business Days............ 190% 195% 210% 250%
22 Business Days............ 170 175 190 230
10 Business Days............ 155 160 175 215
7 Business Days............. 150 155 170 210
3 Business Days............. 130 135 150 190
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* S&P rating.
Notwithstanding the foregoing, (i) the S&P Discount Factor for short-term Municipal Obligations will be 115%, so long as such Municipal Obligations are rated A-1+ or SP-1+ by S&P or 125% if such Municipal Obligations are not rate by S&P but are rated VMIG 1, P-1 or MIG-1 by Moody's and mature or have a demand feature exercisable in 30 days or less; provided, however, that such Moody's rated short-term Municipal Obligations must be backed by a letter of credit, liquidity facility or guarantee from a bank or other financial institution, such bank or institution having a short-term rating of at least A-1 from S&P; and further provided that such short term Municipal Obligations rated by Moody's but not rated by S&P may comprise no more than 50% of short-term Municipal Obligations that qualify as S&P Eligible Assets and (ii) no S&P Discount Factor will be applied to cash or to the book value of Municipal Obligations sold for which payment is due within five Business Days. Anticipation Notes rated SP-1+, or, if not rated by S&P, rated MIG-1 or VMIG-1 by Moody's, which do not mature or have no demand feature at par exercisable in 30 days and which do not have a long-term rating, will be considered to be short-term Municipal Obligations for purposes of determining the Discounted Value of S&P Eligible Assets.
"S&P Eligible Asset" means cash or the book value of Municipal Obligations sold for which payment is due within five business Days of a Valuation Date or a Municipal Obligation that (i) is issued by any of the 50 states, the territories and their subdivisions, counties, cities, towns, villages, and school districts, agencies, such as authorities and special districts created by the states, and certain federally sponsored agencies such as local housing authorities (payments made on these bonds are exempt from regular federal income taxes and are generally exempt from state and local taxes in the state of issuance); (ii) is interest bearing and pays interest at least semiannually; (iii) is payable with respect to principal and interest in United States Dollars; (iv) is publicly rated BBB or higher by S&P or, if not rated by S&P but rated by Moody's, is rated at least A by Moody's (provided that such Moody's-rated Municipal Obligations will be included in S&P Eligible Assets only to the extent the Market Value of such Municipal Obligations does not exceed 50% of the aggregate Market Value of the S&P Eligible Assets; and further provided that, for purposes of determining the S&P Discount Factor applicable to any such Moody's-rated Municipal Obligation, such Municipal Obligation will be deemed to have an S&P rating which is one full rating category lower than its Moody's rating); (v) is not subject to a covered call or covered put option written by the Corporation; (vi) is not part of a private placement of Municipal Obligations; and (vii) is part of an issue of Municipal Obligations with an original issue size of at least $20 million or, if of an issue with an original issue size below $20 million (but in no event below $10 million), is issued by an issuer with a total of at least $50 million of securities outstanding. Notwithstanding the foregoing:
(1) Municipal Obligations of any one issuer or guarantor (excluding bond insurers) will be considered S&P Eligible Assets only to the extent the Market Value of such Municipal Obligations does not exceed 10% of the aggregate Market Value of the S&P Eligible Assets, provided that 2% is added to the applicable S&P Discount Factor for every 1% by which the Market Value of such Municipal Obligations exceeds 5% of the aggregate Market Value of the S&P Eligible Assets; and
(2) Municipal Obligations guaranteed or insured by any one bond insurer will be considered S&P Eligible Assets only to the extent the fair market value of such municipal securities does not exceed 25% of the aggregate fair market value of the S&P Eligible Assets.
(3) Municipal Obligations issued by issuers in any one state or territory will be considered S&P Eligible Assets only to the extent the Market Value of such Municipal Obligations does not exceed 20% of the aggregate Market Value of the S&P Eligible Assets.
"S&P Exposure Period" means the maximum period of time following a Valuation Date, including the Valuation Date and the Preferred Shares Basic Maintenance Cure Date, (currently 10 Business Days) that the Corporation has under these Articles Supplementary to cure any failure to maintain, as of such Valuation Date, the Discounted Value for its portfolio at least equal to the Preferred Shares Basic Maintenance Amount (as described in paragraph 7(a) of these Articles Supplementary).
"S&P Hedging Transaction" means the purchasing or selling of a futures contract based on the Municipal Index or Treasury Bonds or the purchasing of an option on such a futures contract.
"S&P Volatility Factor" means, with respect to each series of Preferred Shares, 277% during the Initial Dividend Period. Thereafter, "S&P Volatility Factor" means, depending on the applicable Reference Rate, the following:
Reference Rate Taxable Equivalent of the Short-Term Municipal Bond Rate......277% 30-day "AA" Composite Commercial Paper Rate...................228% 60-day "AA" Composite Commercial Paper Rate...................228% 90-day "AA" Composite Commercial Paper Rate...................222% 180-day "AA" Composite Commercial Paper Rate.................217% 1-year U.S. Treasury Bill Rate................................198% 2-year U.S. Treasury Note Rate................................185% 3-year U.S. Treasury Note Rate................................178% 4-year U.S. Treasury Note Rate................................171% 5-year U.S. Treasury Note Rate................................169% |
Notwithstanding the foregoing, the S&P Volatility Factor may mean such other potential dividend rate increase factor as S&P advises the Corporation in writing is applicable.
"Secondary Insurance" means insurance guaranteeing the timely payment of principal of, and interest on, a Municipal Obligation purchased by the Corporation or a third party subsequent to the original issuance of such Municipal Obligation.
"Securities Depository" means The Depository Trust Company or any successor company or other entity selected by the Corporation as securities depository for the Preferred Shares that agrees to follow the procedures required to be followed by such securities depository in connection with the Preferred Shares.
"Series T7 Preferred Shares" means the Auction Rate Municipal Preferred Stock, Series T7, liquidation preference $50,000 per share plus an amount equal to accumulated but unpaid dividends thereon (whether or not earned or declared), plus the premium, if any, resulting from the designation of a Premium Call Period, of the Corporation.
"Series T28 Preferred Shares" means the Auction Rate Municipal Preferred Stock, Series T28, liquidation preference $50,000 per share plus an amount equal to accumulated but unpaid dividends thereon (whether or not earned or declared) plus the premium, if any, resulting from the designation of a Premium Call Period, of the Corporation.
"Service" means the United States Internal Revenue Service.
"7-day Dividend Period" means any Dividend Period of 7 days for a series of Preferred Shares.
"Special Dividend Period" means a Dividend Period consisting of a specified number of days (other than 28 in the case of the Series T28 Preferred Shares or 7 in the case of the Series T7 Preferred Shares), evenly divisible by seven (in each case subject to adjustment as provided in paragraph 2(c)(iii).
"Special Dividend Period Reference Rate" means the rate or rates per annum specified by the Corporation (which may be expressed as the lower of a specified rate or rates or a Spread under, at or over the Reference Index or Reference Security being specified for such Special Dividend Period) in the Notice of Special Dividend Period relating to a particular Special Dividend Period and specifying a Reference Index or Reference Security or, if the Corporation shall fail to so specify any such rate or rates, then (i), in the case of a Special Dividend Period of 182 days or less, the "AA" Composite Commercial Paper Rate which most closely matches the length of the Special Dividend Period, provided that in no case shall the Special Dividend Reference Rate be a "AA" Composite Commercial Paper Rate which is shorter in time than the 30-day "AA" Composite Commercial Paper Rate, or, in the case of Special Dividend Period of longer than 182 days, the Treasury Rate which most closely matches the length of the Special Dividend Period.
"Specific Redemption Provisions" means, with respect to a Special Dividend Period either, or any combination of, (i) a period (a "Non-Call Period") determined by the Board of Directors of the Corporation, after consultation with the Auction Agent and the Broker Dealers, during which the Preferred Shares subject to such Dividend Period shall not be subject to redemption at the option of the corporation and (ii) a period (a "Premium Call Period"), consisting of a number of whole years and determined by the Board of Directors of the Corporation, after consultation with the Auction Agent and the Broker-Dealers, during each year of which the Preferred Shares subject to such Dividend Period shall be redeemable at a price per share equal to $50,000 plus accumulated but unpaid dividends plus a premium expressed as a percentage of $50,000 as determined by the Board of Directors of the Corporation after consultation with the Auction Agent and the Broker-Dealers; provided, however, that the Corporation shall not adopt Specific Redemption Provisions unless Moody's and S&P or any Substitute Rating Agency Advises the Corporation in writing that such adoption will not adversely affect their then-current ratings on the Preferred Shares.
"Spread" means the negative or positive difference or the absence of any difference, expressed in whole and fractional basis points, below, at or above a Reference Index or Reference Security specified by the Corporation in a Notice of Special Dividend Period.
"Stock Books" means the books maintained by the Auction Agent setting forth at all times a current list, as determined by the Auction Agent, of Existing Holders of the Preferred Shares.
"Stock Register" means the register of Holders maintained on behalf of the Corporation by the Auction Agent in its capacity as transfer agent and registrar for the Preferred Shares.
"Subsequent Dividend Payment Period," with respect to Preferred Shares, has the meaning set forth in paragraph 2(c)(i) of these Articles Supplementary and, with respect to Other Preferred Shares, has the equivalent meaning.
"Substitute Commercial Paper Dealers" means such Substitute Commercial Paper Dealer or Dealers as the Corporation may from time to time appoint or, in lieu of any thereof, their respective affiliates or successors.
"Substitute Rating Agency" and "Substitute Rating Agencies" shall mean a nationally recognized securities rating organization and two nationally recognized securities rating organizations, respectively, selected by Merrill Lynch, Pierce, Fenner & Smith Incorporated, or its respective affiliates and successors, after consultation with the Corporation, to act as a substitute rating agency or substitute rating agencies, as the case may be, to determine the respective credit ratings of the Preferred Shares.
"Taxable Equivalent of the Short-Term Municipal Bond Rate" means
(i) 90% of (A) the per annum rate expressed on an interest equivalent basis
equal to the index, 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 Kenny Information Systems or any successor
thereto, based upon 30-day yield evaluations at par of bonds the interest
on which is excludable for Federal income tax purposes under the Code of
not less than "high grade" component issuers selected by Kenny Information
Systems 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 is
subject to the Federal alternative minimum tax or similar tax under the
Code, unless all bonds the interest on which is so excludable for Federal
income tax purposes are subject to such tax and (B) divided by 1 minus the
Maximum Marginal Regular Federal individual income tax rate applicable to
the character of the income being distributed or the maximum marginal
regular Federal corporate income tax rate applicable to the character of
the income being distributed (in each case expressed as a decimal),
whichever is greater; or (ii) in lieu of the rate determined pursuant to
clause (i) above, a percentage, determined by the Corporation, of (A) the
per annum rate expressed on an interest equivalent basis equal to any
substitute index prepared by any person (other than an Affiliate of the
Corporation), selected from time to time by the Corporation, based on bonds
the interest on which is excludable from gross income for Federal income
tax purposes under the Code and (B) divided by 1 minus the Maximum Marginal
Regular Federal individual income tax rate applicable to the character of
the income being distributed or the Maximum Marginal Regular Federal
corporate income tax rate applicable to the character of the income being
distributed (in each case expressed as a decimal), whichever is greater, as
made available on a discount basis or otherwise by the preparer of such
index 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; provided that
the Corporation shall not select any such substitute index or determine any
such percentage unless the Corporation has received confirmation from
Moody's and S&P (or any Substitute Rating Agency) that the use of such
index or percentage would not affect the ratings assigned to the Preferred
Shares by Moody's and S&P (or any Substitute Rating Agency); provided,
however, that if the index then used by the Corporation for purposes of
determining the Taxable Equivalent of the Short-Term Municipal Bond Rate is
not made so available by 8:30 A.M., the case of the index described in
clause (i) above or by the preparer of such index in the case of any
substitute index described in clause (ii) above, the Taxable Equivalent of
the Short-Term Municipal Bond Rate shall mean the per annum rate expressed
on an interest equivalent basis equal to the most recent such index so made
available for any preceding Business Day, without being multiplied by the
90% factor in the case of the index described in such clause (i) or the
percentage determined by the Corporation referred to in such clause (ii) in
the case of the index described in clause (ii).
"30-day "AA" Composite Commercial Paper Rate," on any date, means
(i) the Interest Equivalent of the 30-day rate on commercial paper placed
on behalf of issuers whose corporate bonds are rated "AA" by S&P, or the
equivalent of such rating by S&P or another nationally recognized
statistical rating organization, as such 30-day rate is made available on a
discount basis or otherwise by the Federal Reserve Bank of New York for the
Business Day immediately preceding such date, or (ii) in the event that the
Federal Reserve Bank of New York does not make available such a rate, then
the arithmetical average of the Interest Equivalent of the 30-day rate on
commercial paper placed on behalf of such issuers, as quoted to the Auction
Agent on a discount basis or otherwise by the Commercial Paper dealer for
the close of business on the Business Day immediately preceding such date.
If the Commercial Paper Dealer does not quote a rate required to determine
30-day "AA" Composite Commercial Paper Rate, the 30-day "AA" Composite
Commercial Paper Rate will be determined on the basis of the quotation or
quotations furnished by any Substitute Commercial Paper Dealer or
Substitute Commercial Paper Dealers selected by the Corporation to provide
such rate or rates not being supplied by the Commercial Paper Dealer.
"Treasury Bonds" means United States Treasury Bonds with remaining maturities of ten years or more.
"Treasury Rate," on any date for any Special Dividend Period exceeding 182 days, means:
(i) the yield on the most recently auctioned non-callable direct obligations of the U.S. Government (excluding "flower" bonds) with a remaining maturity closest to the duration of such Special Dividend 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 by The Wall Street Journal, then the arithmetic average of the yields on the most recently auctioned non-callable direct obligations of the U.S. Government (excluding "flower" bonds) with a remaining maturity closest to the duration of such Special Dividend Period as quoted on a discount basis or otherwise by the U.S. Government Securities Dealers to the Auction Agent for the close of business on the Business Day immediately preceding such date.
If any U.S. Government Securities Dealer does not quote a rate required to determine the Treasury Rate, the Treasury 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 Dealers selected by the Corporation 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.
"Treasury Securities" means United States Treasury bills, notes or bonds.
"28-day Dividend Period" means any Dividend Period of 28 days for a series of Preferred Shares.
"U.S. Government Securities Dealer" means Merrill Lynch, Pierce, Fenner & Smith Incorporated or its respective affiliates or successors, if such entity is a U.S. Government securities dealer. As used herein, "Substitute U.S. Government Securities Dealer" shall mean, with respect to each series of Preferred Shares, Kidder, Peabody & Co. Incorporated and Lehman Special Securities, Inc., and solely with respect to the Series T7 Preferred Shares, A.G. Edwards & Sons, Inc., and Legg Mason Wood Walker Incorporated, and solely with respect to the Series T28 Preferred Shares, PaineWebber Incorporated and Prudential Securities Incorporated, or the respective affiliates or successors of the foregoing, if such entity is a U.S. Government securities dealer, provided that none of such entities shall be a U.S. Government Securities Dealer.
"Valuation Date" means, for purposes of determining whether the Corporation is maintaining the Preferred Shares Basic Maintenance Amount and the Minimum Liquidity Level, each Friday which is a Business Day, or the Business Day preceding any Friday which is not a Business Day, and the Date of Original Issue.
"Variation Margin" means, in connection with an outstanding futures contract owned or sold by the Corporation, the amount of cash or securities paid to and received from a broker (subsequent to the Initial Margin payment) from time to time as the price of such futures contract fluctuates.
(b) The foregoing definitions of Accountant's Confirmation, Deposit Securities, Discounted Value, Dividend Coverage Amount, Dividend Coverage Assets, Independent Accountant, Market Value, Maximum Potential Additional Dividend Liability, Minimum Liquidity Level, Moody's Discount Factor, Moody's Eligible Asset, Moody's Exposure Period, Moody's Hedging Transaction, Moody's Volatility Factor, Preferred Shares Basic Maintenance Amount, Preferred Shares Basic Maintenance Cure Date, Preferred Shares Basic Maintenance Report, Reference Rate, S&P Discount Factor, S&P Eligible Asset, S&P Exposure Period, S&P Hedging Transaction, S&P Volatility Factor and Valuation Date have been determined by the Board of Directors of the Corporation in order to obtain an "aaa" rating from Moody's and an AAA rating from S&P on the Preferred Shares on their Date of Original Issue; and such definitions shall be adjusted from time to time and without further action by the Board of Directors to reflect changes made thereto independently by Moody's, S&P or any Substitute Rating Agency if each of Moody's, S&P and any Substitute Rating Agency has advised the Corporation in writing (i) separately or collectively of such adjustments and (ii) collectively that such adjustments will not adversely affect their then-current ratings on the Preferred Shares. The adjustments contemplated by the preceding sentence shall be made effective upon the time the Corporation receives the written notice from Moody's S&P and any Substitute Rating Agency contemplated by clause (ii) of the preceding sentence.
2. Dividends. (a) The Holders shall be entitled to receive, when,
as and if declared by the Board of Directors of the Corporation, out of
funds legally available therefor, cumulative dividends each consisting of
(i) cash at the Applicable Rate and (ii) an uncertificated Right to receive
cash as set forth in paragraph 2(e) below, and no more, payable on the
respective dates set forth below. Dividends on the Preferred Shares so
declared and payable shall be paid (i) in preference to and in priority
over any dividends declared and payable on the Common Stock, and (ii) to
the extent permitted by law and to the extent available, out of net
tax-exempt income earned on the Corporation's investments. To the extent
permitted by law, dividends on Preferred Shares will be designated as
exempt interest dividends. For the purposes of this section, the term "net
tax-exempt income" shall exclude capital gains and other taxable income of
the Corporation.
(b) (i) Cash dividends on Preferred Shares shall
accumulate from the Date of Original Issue. With respect to the Series T7
Preferred Shares and Series T28 Preferred Shares, dividends will be payable
commencing on the Initial Dividend Payment Date with respect to each series
of Preferred Shares. Following the Initial Dividend Payment Date for the
Series T7 Preferred Shares and Series T28 Preferred Shares, dividends on
the Preferred Shares will be payable, at the option of the Corporation,
(ii) with respect to any Dividend Period of 35 or fewer days on the day
next succeeding the last day thereof, (iii) with respect to any Dividend
Period of more than 35 and fewer that 92 days, on the day next succeeding
each period of 30 days to occur during such Dividend Period (or in the case
of any Dividend Period of more than 91 days as specified in the relevant
Notice of Special Dividend Period), and on the day next succeeding the last
day thereof, (iv) with respect to any Dividend Period of 365 days or more,
monthly on the first day of each calendar month during such Dividend Period
(or in the case of any Dividend Period of more than 91 days, as specified
in the relevant Notice of Special Dividend Period), and on the day next
succeeding the last day thereof (each such date referred to in clauses (i),
(ii), (iii) and (iv) being hereinafter referred to as a "Normal Dividend
Payment Date"), except that (i) if such Normal Dividend Payment Date is not
a Business Day, then the Dividend Payment Date shall be the next succeeding
date if both such dates following the Normal Dividend Payment Date are
Business Days, or (ii) if the date following such Normal Dividend Payment
Date is not a Business Day, then the Dividend Payment Date will be the date
next preceding such Normal Dividend Payment Date if both such date and such
Normal Dividend Payment Date are Business Days or (iii) if such Normal
Dividend Payment Date and either the preceding date or the succeeding date
are not Business Days, then the Dividend Payment Date shall be the first
Business Day next preceding such Normal Dividend Payment Date that is next
succeeded by a Business Day. If, however, the Securities Depository shall
make available to its participants and members in funds immediately
available in New York City on Dividend Payment Dates, the amount due as
dividends on such Dividend Payment Dates (and the Securities Depository
shall have so advised the Corporation), and if the day that otherwise would
be the Dividend Payment Date is not a Business Day, then the Dividend
Payment Date shall be the next succeeding Business Day. Although any
particular Dividend Payment Date may not occur on a Normal Dividend Payment
Date because of the exceptions discussed above, the next succeeding
Dividend Payment Date shall be, subject to such provisos, the next Normal
Dividend Payment Date. If for any reason a Dividend Payment Date cannot be
fixed as described above, then the Board of Directors shall fix the
Dividend Payment Date. Each dividend payment date determined as provided
above is hereinafter referred to as a "Dividend Payment Date."
(ii) Each dividend shall be paid to the Holders as they appear in the Stock Register as of 12:00 Noon, New York City time, on the Business Day preceding the Dividend Payment Date. 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 as they appear on the Stock Register on a date, not exceeding 15 days prior to the payment date therefor, as may be fixed by the Board of Directors of the Corporation.
(c) (i) during the period from and including the Date of Original Issue to but with respect to the Series T7 Preferred Shares and Series T28 Preferred Shares, excluding the Initial Dividend Payment Date (the "Initial Dividend Period"), the Applicable Rate shall be the Initial Dividend Rate. Commencing on the Initial Dividend Payment Date, with respect to the Series T7 Preferred Shares and Series T28 Preferred Shares, the Applicable Rate for each subsequent Dividend Period or portion thereof (hereinafter referred to as a "Subsequent Dividend Payment Period"), which Subsequent Dividend Payment Period shall commence on a Dividend Payment Date and shall end on the calendar day prior to the next Dividend Payment Date, shall be equal to the lesser of (x) the Maximum Applicable Rate for such Dividend Period or for such Subsequent Dividend Payment Period included herein or (y) the greater of (i) the Minimum Applicable Rate for such Dividend Period or for such Subsequent Dividend Payment Period included therein or (ii) the rate per annum that results for such Dividend Period or Subsequent Dividend Payment Period included therein from implementation of the Auction Procedures including any periodic application of a Spread to a specified Reference Index or Reference Security.
Notwithstanding the foregoing sentence, the Applicable Rate for each Dividend Period commencing during a Non-Payment Period shall be equal to the Non-Payment Period Rate and each Dividend Payment Period for Preferred Shares of any series, commencing after the first day of, and during, a Non-Payment Period shall be a 28-day Dividend Payment period (in the case of the Series T28 Preferred Shares) or a 7-day Dividend Payment Period (in the case of the Series T7 Preferred Shares). Except in the case of the willful failure of the Corporation to pay a dividend on a Dividend Payment Date or to redeem any Preferred Shares on the date set for such redemption, any amount of any dividend due on any Dividend Payment Date, the Corporation has declared such dividend payable on such Dividend Payment Date to the Holders of such Preferred Shares as of 12:00 noon, New York City time, on the Business Day preceding such Dividend Payment Date) or redemption price with respect to any Preferred Shares not paid to such Holders when due may be paid to such Holders in the same form of funds by 12:00 noon, New York City time, on any of the first three Business Days after such Dividend Payment Date or due date, as the case may be, provided that, such amount is accompanied by a late charge calculated for such period of non-payment at the Non-Payment Period Rate applied to the amount of such non-payment based on the actual number of days comprising such period divided by 365. In the case of a willful failure of the corporation to pay a dividend on a Dividend Payment Date or to redeem any Preferred Shares on the date set for such redemption, the preceding sentence shall not apply and the Applicable Dividend Rate for the Dividend Period commencing during the Non-Payment Period resulting from such failure shall be the Non-Payment Period Rate. For the purposes of the foregoing, payment to a person in same-day funds on any Business Day at any time shall be considered equivalent to payment to such person in New York Clearing House (next-day) funds at the same time on the preceding Business Day, and any payment made after 12:00 noon, New York City time, on any Business Day shall be considered to have been made instead in the same form of funds and to the same person before 12:00 noon, New York City time, on the next Business Day.
(ii) The amount of cash dividends per share of Preferred Shares payable (if declared) for any Dividend Payment Period or part thereof shall be computed by multiplying the Applicable Rate for such Dividend Payment Period by a fraction, the numerator of which shall be the number of days in such Dividend Payment Period or part thereof such share was outstanding and the denominator of which shall be 365 (or 360 for a Dividend Period of 365 days or more), multiplying the amount so obtained by $50,000 and rounding the amount so obtained to the nearest cent.
(iii) With respect to each Dividend Period that
the Corporation desires to be a Special Dividend Period, the
Corporation may, at its sole option and to the extent permitted by
law, by telephonic and written notice (a "Request for Special
Dividend Period") to the Auction Agent and to each Broker-Dealer,
request that the next succeeding Dividend Period for such series
of Preferred Shares be a number of days (other than 28 in the case
of Series T28 Preferred Shares or 7 in the case of Series T7
Preferred Shares), evenly divisible by seven and specified in such
notice, provided that for any Auction occurring after the initial
Auction, the Corporation may not give a Request for Special
Dividend Period (and any such request shall be null and void)
unless Sufficient Clearing Bids were made in the last occurring
Auction and unless full cumulative dividends, any amounts due with
respect to mandatory redemptions, and any Additional Dividends
payable prior to such date have been paid in full. Such Request
for Special Dividend Period, in the case of a Dividend Period of
182 days or less, shall be given on or prior to the 4th day but
not more than 7 days prior to an Auction Date for the Preferred
Shares and, in the case of a Dividend Period of more than 182
days, shall be given on or prior to the 14th day but not more than
28 days prior to an Auction Date for the Preferred Shares. Such
Request for Special Dividend Period shall also specify any
proposed Bid Requirements. Upon receiving such Request for Special
Dividend Period, the Broker-Dealer(s) shall jointly determine
whether, given the factors set forth below, it is advisable that
the Corporation issue a Notice of Special Dividend Period for the
Preferred Shares as contemplated by such Request for Special
Dividend Period and, if advisable, the Specific Redemption
Provisions and shall give the Corporation and the Auction Agent
written notice (a "Response") of such determination by no later
than the third day prior to such Auction Date. In making such
determination the Broker-Dealer(s) will consider (1) existing
short-term and long-term market rates and indices of such
short-term and long-term rates, (2) existing market supply and
demand for short-term and long-term securities, (3) existing yield
curves for short-term and long-term securities comparable to the
Preferred Shares, (4) industry and financial conditions which may
affect the Preferred Shares, (5) the investment objective of the
Corporation and (6) the Dividend Periods and dividend rates at
which current and potential beneficial holders of the Preferred
Shares would remain or become beneficial holders. If none of the
Broker-Dealer(s) give the Corporation and the Auction Agent a
Response by such third day or if the Response of all of the
Broker-Dealers providing a Response states that given the factors
set forth above it is not advisable that the Corporation give a
notice of Special Dividend Period for the Preferred Shares, the
Corporation may not give a Notice of Special Dividend Period in
respect of such Request for Special Dividend Period. In the event
the Response of at least one Broker- Dealer does not indicate that
it is not advisable that the Corporation give a notice of Special
Dividend Period for the Preferred Shares, the Corporation may by
no later than the second day prior to such Auction Date give a
notice (a "Notice of Special Dividend Period") to the Auction
Agent, the Securities Depository and each Broker-Dealer which
notice will specify the duration of the Special Dividend Period,
the Bid Requirements (if any) applicable to the Auction relating
to such Special Dividend Period and Specific Redemption Provisions
(if any). The Corporation shall not give a Notice of Special
Dividend Period or convert to a Special Dividend Period and, if
the Corporation has given a notice of Special Dividend, the
Corporation is required to give telephonic and written notice of
revocation (a "Notice of Revocation") to the Auction Agent, each
Broker- Dealer, and the Securities Depository on or prior to the
Business Day prior to the relevant Auction Date if it has not
obtained the advice in writing of Moody's and S&P or any
Substitute Rating Agency that the proposed Special Dividend Period
will not adversely affect their then-current rating on the
Preferred Shares or if (w) either the 1940 Act Preferred Shares
Asset Coverage is not satisfied or the Corporation shall fail to
maintain S&P Eligible Assets and Moody's Eligible Assets each with
an aggregate Discounted Value at least equal to the Preferred
Shares Basic Maintenance Amount, in each case on each of the two
Valuation Dates immediately preceding the Business Day prior to
the relevant Auction Date (and in each case, with respect to
Moody's Eligible Assets, using a Moody's Exposure Period
equivalent to 14 days longer than normal) on an actual basis and
on a pro forma basis giving effect to the proposed Special
Dividend Period (using as a pro forma dividend rate with respect
to such Special Dividend Period the dividend rate which the Broker
Dealers shall advise the Corporation is an approximately equal
rate for securities similar to the Preferred Shares with an equal
frequency of recalculation of the Reference Index or Reference
Security as is utilized by the Corporation with respect to the
first Dividend Payment Period within such Special Dividend Period
and using as a pro forma Maximum Applicable Rate the highest rate
specified in the Notice of Special Dividend Period for the
Dividend Payment Periods covering not less than the first 49 days
of such proposed Special Dividend Period or, if no such rate is
specified in the Notice of Special Dividend Period, the Maximum
Applicable Rate resulting by operation of the definition of
Special Dividend Period Reference Rate for the Special Dividend
Period specified in such Notice of Special Dividend Period), (x)
sufficient funds for the payment of dividends payable on the
immediately succeeding Dividend Payment Date have not been
irrevocably deposited with the Auction Agent by the close of
business on third Business Day preceding the related Auction
Date, (y) the Broker-Dealer(s) jointly advise the Corporation
that after consideration of the factors listed above they have
concluded that it is advisable to give a Notice of Revocation or
(z) the Corporation has determined to terminate the Special
Dividend Period for any reason. If the Corporation is prohibited
from giving a Notice of Special Dividend Period as a result of
any of the factors enumerated in clause (w), (x), (y) or (z) of
the prior sentence or if the Corporation gives a Notice of
Revocation with respect to a Notice of Special Dividend Period,
the next succeeding Dividend Period will be a 28-day Period (in
the case of Series T28 Preferred Shares) or a 7-day Dividend
Period the case of Series T7 Preferred Shares) provided that if
the then-current Dividend Period in the case of the Series T28
Preferred Shares is a Special Dividend Period of less than 28
days, the next succeeding Dividend Period for such series will be
the same length as the current Dividend Period. In addition, in
the event Sufficient Clearing Bids are not made in the applicable
Auction or such Auction is not held for any reason, such next
succeeding Dividend Period will be a 28 day Dividend Period (in
the case of Series T28 Preferred Shares) or a 7-day Dividend
Period (in the case of Series T7 Preferred Shares) and the
Corporation may not again give a Notice of Special Dividend
Period of the Preferred Shares (and any such attempted notice
shall be null and void) until Sufficient Clearing bids have been
made in an Auction with respect to a 28-day Dividend Period (in
the case of Series T28 Preferred Shares) or a 7-day Dividend
Period (in the case of Series T7 Preferred Shares).
(d) (i) Holders shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the Preferred Shares. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment on the Preferred Shares that may be in arrears.
(ii) For so long as any share of the Preferred Shares is outstanding, the Corporation shall not declare, pay or set apart for payment any dividend or other distribution (other than a dividend or distribution paid in shares of, or options, warrants or rights to subscribe for or purchase, Common Stock or other stock, if any, ranking junior to the Preferred Shares as to dividends or upon liquidation) in respect of the Common Stock or any other stock of the Corporation ranking junior to or on a parity with the Preferred Shares as to dividends or upon liquidation, or call for redemption, redeem, purchase or otherwise acquire for consideration any shares of the Common Stock or any other such junior stock (except by conversion into or exchange for stock of the Corporation ranking junior to the Preferred Shares as to dividends and upon liquidation) or any other such Parity Stock (except by conversion into or exchange for stock of the Corporation ranking junior to or on a parity with the Preferred Shares as to dividends and upon liquidation), unless (A) immediately after such transaction, the Corporation shall have Moody's Eligible Assets and S&P Eligible Assets each with an aggregate Discounted Value equal to or greater than the Preferred Shares Basic Maintenance Amount and the Corporation shall maintain the 1940 Act Preferred Shares Asset Coverage, (B) full cumulative dividends on Preferred Shares and shares of Other Preferred Shares due on or prior to the date of the transaction have been declared and paid or shall have been declared and sufficient funds for the payment thereof deposited with the Auction Agent, (C) any Additional Dividend required to be paid under paragraph 2(e) below on or before the date of such declaration or payment has been paid and (D) the Corporation has redeemed the full number of Preferred Shares required to be redeemed by any provision for mandatory redemption contained herein.
(e) Each dividend shall consist of (i) cash at the Applicable Rate and (ii) an uncertificated right (a "Right") to receive an Additional Dividend (as defined below). Each Right shall thereafter be independent of the share or Preferred Shares on which the dividend was paid. The Corporation shall cause to be maintained a record of each Right received by the respective Holders. The Corporation shall not be required to recognize any transfer of a Right.
If, in the case of a Dividend Period of 28 days or fewer, the Corporation retroactively allocates any net capital gains or other taxable income to Preferred Shares without having given advance notice thereof to the Auction Agent as described in paragraph 2(f) hereof (the amount of such allocation referred to herein as a "Retroactive Taxable Allocation") solely by reason of the fact that such allocation is made as a result of the redemption of all or a portion of the outstanding Preferred Shares or the liquidation of the Corporation, the Corporation will, within 90 days (and generally within 60 days) after the end of the Corporation's fiscal year for which a Retroactive Taxable Allocation is made, provide notice thereof to the Auction Agent and to each holder of a Right applicable to such Preferred Shares (initially Cede & Co. as nominee of The Depository Trust Company) during such fiscal year at such holder's address as the same appears or last appeared on the Stock Books of the Corporation. The Corporation will, within 30 days after such notice is given to the Auction Agent, pay to the Auction Agent (who will then distribute to such holders of Rights), out of funds legally available therefor, an amount equal to the aggregate Additional Dividend with respect to all Retroactive Taxable Allocations made to such holders during the fiscal year in question.
If the Corporation, in the case of a Dividend Period of 35 days or more, makes a Retroactive Taxable Allocation to a dividend paid on Preferred Shares, the Corporation will, within 90 days (and generally within 60 days) after the end of the Corporation's fiscal year for which a Retroactive Taxable Allocation is made, provide notice thereof to the Auction Agent and to each holder of a Right applicable to such Preferred Shares (initially Cede & Co. as nominee of The Depository Trust Company) during such fiscal year at such holder's address as the same appears or last appeared on the Stock Books of the Corporation. The Corporation will, within 30 days after such notice is given to the Auction Agent, pay to the Auction Agent (who will then distribute to such holders of Rights), out of funds legally available therefor, an amount equal to the aggregate Additional Dividend with respect to all Retroactive Taxable Allocations made to such holders during the fiscal year in question.
An "Additional Dividend" means payment to a holder of Preferred
Shares of an amount which, when taken together with the aggregate amount of
Retroactive Taxable Allocations allocated to such holder with respect to
the fiscal year in question, would cause such holder's dividends from the
aggregate of both the Retroactive Taxable Allocations and the Additional
Dividend to be equal to the dollar amount of the dividends which would have
been received and retained by such holder if the Retroactive Taxable
Allocations had not been made. Such Additional Dividend shall be calculated
(i) without consideration being given to the time value of money; (ii)
assuming that no holder of Preferred Shares is subject to the Federal
alternative minimum tax with respect to dividends received from the
Corporation; and (iii) assuming that each Retroactive Taxable Allocation
would be taxable in the hands of each holder of Preferred Shares at the
maximum marginal combined regular Federal income tax rate applicable to
individuals or corporations, whichever is greater, in effect during the
fiscal year in question.
(f) Whenever the Corporation intends to include any net capital gains or other taxable income in any dividend on Preferred Shares the Applicable Rate for which will be established at the next succeeding Auction, the Corporation will, in the case of a Dividend Period of 28 days or fewer, and may, in the case of a Dividend Period of 35 days or more, notify the Auction Agent of the amount to be so included at least five Business Days prior to the Auction Date on which the Applicable Rate for such dividend is to be established. If, in the case of a Dividend Period of 28 days or fewer, the Corporation retroactively allocates any net capital gains or other taxable income to a dividend paid on Preferred Shares without having given advance notice thereof to the Auction Agent as described in paragraph 2(f) hereof solely by reason of the fact that such allocation is made as a result of the redemption of all or a portion of the outstanding Preferred Shares or the liquidation of the Corporation, the Corporation will make certain payments to holders of Preferred Shares to offset the tax effect thereof. If, in the case of a Dividend Period of 35 days or more, the Corporation allocates any net capital gains or other taxable income to a dividend paid on Preferred Shares without having given advance notice thereof to the Auction Agent as described in Paragraph 2(f) hereof, the Corporation will make certain payments to holders of Preferred Shares to offset the tax effect thereof.
(g) No fractional share of Preferred Shares shall be issued.
3. Liquidation Rights. Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the Holders shall be entitled to receive, out of the assets of the Corporation available for distribution to shareholders, before any distribution or payment is made upon any Common Stock or any other capital stock ranking junior in right of payment upon liquidation to the Preferred Shares, the sum of $50,000 per share plus accumulated but unpaid dividends (whether or not earned or declared) thereon plus the premium, if any, resulting from the designation of a Premium Call Period to the date of distribution, and after such payment the holders of Preferred Shares will be entitled to no other payments other than Additional Dividends as provided in paragraph 2(e) hereof. If upon any liquidation, dissolution or winding up of the Corporation, the amounts payable with respect to the Preferred Shares and any other outstanding class or series of Preferred Stock of the Corporation ranking on a parity with the Preferred Shares as to payment upon liquidation are not paid in full, the Holders and the holders of such other class or series will share ratably in any such distribution of assets in proportion to the respective preferential amounts to which they are entitled. After payment of the full amount of the liquidating distribution to which they are entitled, the Holders will not be entitled to any further participation in any distribution of assets by the Corporation except for any Additional Dividends. A consolidation or merger of the Corporation with or into any other corporation or corporations or a sale, whether for cash, shares of stock, securities or properties, of all or substantially all or any part of the assets of the Corporation shall not be deemed or construed to be a liquidation, dissolution or winding up of the Corporation.
4. Redemption. (a) Preferred Shares shall be redeemable by the Corporation as provided below:
(i) To the extent permitted under the 1940 Act and Maryland law, upon giving a Notice of Redemption, the Corporation at its option may redeem Preferred Shares, in whole or in part, out of funds legally available therefor, at the Optional Redemption Price per share, on any Dividend Payment Date; provided, however, that no Preferred Shares shall be subject to optional redemption during a Non-Call Period. In addition, holders of Preferred Shares which are redeemed shall be entitled to receive Additional Dividends to the extent provided herein. The Corporation may not give a Notice of Redemption relating to an optional redemption as described in this paragraph 4(a)(i) or effect an optional redemption unless, at the time of giving such Notice of Redemption or effecting such optional redemption, the Corporation has available Deposit Securities with maturity or tender dates not later than the day preceding the applicable redemption date and having a value not less than the amount due to Holders by reason of the redemption of their Preferred Shares on such redemption date and, if as a result of such optional redemption, the Corporation would fail to maintain S&P Eligible Assets and Moody's Eligible Assets each with an aggregate Discounted Value equal to the Preferred Shares Basic Maintenance Amount.
(ii) The Corporation shall redeem, out of funds
legally available therefor, at the Mandatory Redemption Price per
share, Preferred Shares to the extent permitted under the 1940 Act
and Maryland law, on a date fixed by the Board of Directors, if
the Corporation fails to maintain Moody's Eligible Assets and S&P
Eligible Assets each with an aggregate Discounted Value equal to
or greater than the Preferred Shares Basic Maintenance Amount as
provided in paragraph 7(a) or to satisfy the 1940 Act Preferred
Shares Asset Coverage as provided in paragraph 6 and such failure
is not cured on or before the Preferred Shares Basic Maintenance
Cure Date or the 1940 Act Cure Date (herein respectively referred
to as the "Cure Date"), as the case may be. In addition, holders
of Preferred Shares so redeemed shall be entitled to receive
Additional Dividends to the extent provided herein. The number of
Preferred Shares to be redeemed shall be equal to the lesser of
(i) the minimum number of Preferred Shares the redemption of
which, if deemed to have occurred immediately prior to the opening
of business on the Cure Date, would together with all shares of
Other Preferred Stock subject to redemption or retirement, result
in the Corporation having S&P Eligible Assets and Moody's Eligible
Assets each with an aggregate Discounted Value equal to or greater
than the Preferred Shares Basic Maintenance Amount or satisfaction
of the 1940 Act Preferred Shares Asset Coverage, as the case may
be, on such Cure Date (provided that, if there is no such minimum
number of Preferred Shares and shares of Other Preferred Stock the
redemption of which would have such result, all Preferred Shares
and shares of Other Preferred Stock then outstanding shall be
redeemed), and (ii) the maximum number of Preferred Shares,
together with all shares of other Preferred Stock subject to
redemption or retirement, that can be redeemed out of funds
expected to be legally available therefor on such redemption date.
In determining the number of Preferred Shares required to be
redeemed in accordance with the foregoing, the Corporation shall
allocate the number required to be redeemed which would result in
the Corporation having Moody's Eligible Assets and S&P Eligible
Assets each with an aggregate Discounted Value equal to or greater
than the Preferred Shares Basic Maintenance Amount or satisfaction
of the 1940 Act Preferred Shares Asset Coverage, as the case may
be, pro rata among Preferred Shares, Other Preferred Shares and
other Preferred Stock subject to redemption pursuant to provisions
similar to those contained in this paragraph 4(a)(ii) provided
that, Preferred Shares which may not be redeemed at the option of
the Corporation (a) will be subject to mandatory redemption only
to the extent that other shares are not available to satisfy the
number of shares required to be redeemed and (b) will be selected
for redemption in an ascending order of outstanding number of days
in the Non-Call Period during which such shares are not subject to
optional redemption (with shares with the lowest number of days to
be redeemed first) and by lot in the event of shares having an
equal number of days in such period. The Corporation shall effect
such redemption on a Business Day which is not later than 30 days
after such Cure Date, except that if the Corporation does not
have funds legally available for the redemption of all of the
required number of Preferred Shares and shares of other Preferred
Stock which are subject to mandatory redemption or the
Corporation otherwise is unable to effect such redemption on or
prior to 30 days after such Cure Date, the Corporation shall
redeem those Preferred Shares which it is unable to redeem on the
earliest practicable date on which it is able to effect such
redemption out of funds legally available therefor.
(b) Notwithstanding any other provision of this paragraph 4, no Preferred Shares may be redeemed pursuant to paragraph 4(a)(i) of these Articles Supplementary unless all dividends in arrears on all remaining outstanding shares of Parity Stock shall have been or are being contemporaneously paid or declared and set apart for payment. In the event that less than all the outstanding Preferred Shares are to be redeemed and there is more than one Holder, the shares to be redeemed shall be selected by lot or such other method as the Corporation shall deem fair and equitable.
(c) Whenever Preferred Shares are to be redeemed, the Corporation, not less than 20 or more than 60 days prior to the date fixed for redemption, shall mail a notice ("Notice of Redemption") by first-class mail, postage prepaid, to each Holder of Preferred Shares to be redeemed and to the Auction Agent. The Corporation shall cause the Notice of Redemption also to be published in the eastern and national editions of The Wall Street Journal. The Notice of Redemption to set forth (i) the redemption date, (ii) the amount of the redemption price, (iii) the aggregate number of Preferred Shares to be redeemed, (iv) the place or places where Preferred Shares are to be surrendered for payment of the redemption price, (v) a statement that dividends on the shares to be redeemed shall cease to accumulate on such redemption date (except that holders may be entitled to Additional Dividends) and (vi) the provision of these Articles Supplementary pursuant to which such shares are being redeemed. No defect in the Notice of Redemption or in the mailing or publication thereof shall affect the validity of the redemption proceedings, except as required by applicable law.
If the Notice of Redemption shall have been given as aforesaid and, concurrently or thereafter, the Corporation shall have deposited in trust with the Auction Agent a cash amount equal to the redemption payment for the Preferred Shares to which such Notice of Redemption has been given with irrevocable instructions and authority to pay the redemption price to the Holders of such shares, then upon the date of such deposit or, if no such deposit is made, then upon such date fixed for redemption (unless the Corporation shall default in making the redemption payment), all rights of the Holders of such shares as shareholders of the Corporation by reason of the ownership of such shares will cease and terminate (except their right to receive the redemption price in respect thereof and any additional dividends, but without interest), and such shares shall no longer be deemed outstanding. The Corporation shall be entitled to receive, from time to time, from the Auction Agent the interest, if any, on such moneys deposited with it and the Holders of any shares so redeemed shall have no claim to any of such interest. In case the Holder of any shares so called for redemption shall not claim the redemption payment for his shares within one year after the date of redemption, the Auction Agent shall, upon demand, pay over to the Corporation such amount remaining on deposit and the Auction Agent shall thereupon be relieved of all responsibility to the Holder of such shares called for redemption and such Holder thereafter shall look only to the Corporation for the redemption payment.
5. Voting Rights. (a) General. Except as otherwise provided in the Charter, each Holder of Preferred Shares shall be entitled to one vote for each share held on each matter submitted to a vote of stockholders of the Corporation to which the stockholders are entitled to vote, and the holders of outstanding shares of Preferred Stock, including Preferred Shares, and of shares of Common Stock shall vote together as a single class with respect to all matters on which all stockholders are entitled to vote. Notwithstanding the preceding sentence, at the first annual meeting of stockholders, the holders of outstanding shares of Preferred Stock, including Preferred Shares, represented in person or by proxy shall be entitled as a class, and to the exclusion of the holders of all other securities and classes of capital stock of the Corporation, to elect one Class I director and one Class II director and shall thereafter be so entitled to elect any successors from time to time to the Class I and Class II directors so elected at any meeting of shareholders in which successors are elected. At each meeting of shareholders at which entire classes of Class I and Class II directors are to be elected, or at any meeting at which a successor to a director elected by the holders of Preferred Stock in accordance with this Section is to be elected (including directors elected pursuant to this sentence), the holders of outstanding shares of Preferred Stock, including Preferred Shares, represented in person or by proxy shall be entitled as a class and to the exclusion of the holders of all other securities and classes of capital stock of the Corporation to elect one Class I and one Class II director or to elect such successor. In the event that the Charter is amended to eliminate the classification of the Corporation's Board of Directors, the holders of outstanding shares of Preferred Stock, including Preferred Shares, represented in person or by proxy shall be entitled as a class, and to the exclusion of the holders of all other securities and classes of capital stock of the Corporation, to elect two directors. Subject to paragraph 5(b) hereof, the holders of outstanding shares of capital stock of the Corporation, voting as a single class, shall elect the balance of the directors.
(b) Right to Elect Majority of Board of Directors. During any period in which any one or more of the conditions described below shall exist (such period being referred to herein as a "Voting Period"), the number of directors constituting the Board of Directors shall be automatically increased by the smallest number that, when added to the two directors elected exclusively by the holders of shares of Preferred Stock, would constitute a majority of the Board of Directors as so increased by such smallest number; and the holders of shares of Preferred Stock 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 capital stock of the Corporation), to elect such smallest number of additional directors, together with the two directors that such holders are in any event entitled to elect. A Voting Period shall commence:
(i) if at any time accumulated dividends (whether or not earned or declared, and whether or not funds are then legally available in an amount sufficient therefor) on the outstanding Preferred 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
(ii) if at any time holders of any Preferred Stock are entitled to elect a majority of the directors of the Corporation under the 1940 Act.
Upon the termination of a Voting Period, the voting rights described in this paragraph 5(b) shall cease, subject always, however, to the revesting of such voting rights in the Holders upon the further occurrence of any of the events described in this paragraph 5(b).
(c) Right to Vote with Respect to Certain Other Matters. So long as any Preferred Shares are outstanding, the Corporation shall not, without the affirmative vote of the holders of a majority of the Outstanding shares of Preferred Stock outstanding at the time, in person or by proxy, at a meeting (voting separately as one class) or by the unanimous written consent of the holders of all Outstanding shares of Preferred Stock: (i) authorize, create or issue, or increase the authorized or issued amount of, any class or series of stock ranking prior to or on a parity with any series of Preferred Stock with respect to payment of dividends or the distribution of assets on liquidation, or increase the authorized amount of Preferred Shares or any other Preferred Stock (except that, notwithstanding the foregoing, but subject to the provisions of Section 13 of the 1940 Act, the Board of Directors, without the vote or consent of the Holders of Preferred Shares, may from time to time authorize, create and issue, and may increase the authorized or issued amount of, classes or series of Preferred Stock, including Preferred Shares, ranking on a parity with the Preferred Shares with respect to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Corporation, subject to continuing compliance by the Corporation with 1940 Act Preferred Shares Asset Coverage and Preferred Shares Basic Maintenance Amount requirements, provided that the Fund obtains written confirmation from Moody's (if Moody's is then rating Preferred Shares), S&P (if S&P is then rating Preferred Shares) or any Substitute Rating Agency (if any such Substitute Rating Agency is then rating Preferred Shares) that the issuance of such class or series would not impair the rating then assigned by such rating agency to the Preferred Shares), (ii) amend, alter or repeal the provisions of the Charter whether by merger, consolidation or otherwise, so as to adversely affect any of the contract rights expressly set forth in the Charter of holders of Preferred Shares or any Other Preferred Stock, (iii) authorize the Corporation's conversion from a closed-end to an open-end investment company as defined in Section 5(a) of the 1940 Act, or (iv) amend the provisions of the Charter which provide for the classification of the Board of Directors of the Corporation into three classes, each with a term of office of three years with only one class of directors standing for election in any year (presently Article VI of the Charter). To the extent permitted under the 1940 Act, the Corporation shall not approve any of the actions set forth in clause (i) or (ii) which adversely affects the contract rights expressly set forth in the Charter of a Holder of shares of a series of Preferred Shares differently than those of a Holder of shares of any other series of Preferred Shares without the affirmative vote of the holders of at least a majority of the Preferred Shares of each series adversely affected and Outstanding at such time, in person or by proxy, at a meeting (each such adversely affected series voting separately as a class) or by the unanimous written consent of the holders of all Outstanding shares of Preferred Stock. The Corporation shall notify Moody's and S&P 10 Business Days prior to any such vote described in clauses (i) and (ii). Unless a higher percentage is provided for under the Charter, the affirmative vote of the holders of a majority of the Outstanding shares of Preferred Stock, including Preferred Shares, voting together as a single class, will be required to approve any plan of reorganization (including bankruptcy proceedings) adversely affecting such shares or any action requiring a vote of security holders under Section 13(a) of the 1940 Act. The class vote of holders of shares of Preferred Stock, including Preferred Shares, described above will in each case be in addition to a separate vote of the requisite percentage of shares of Common Stock and shares of Preferred Stock, including Preferred Shares, voting together as a single class necessary to authorize the action in question. Notwithstanding the preceding sentence, to the extent permitted by Maryland General Corporation Law, no vote of holders of Common Stock, either separately or together with holders of Preferred Shares as a single class, shall be necessary to take the actions contemplated by clauses (i) and (ii) of the first sentence of this Section 5(c) and the holders of Common Stock shall not be entitled to vote in respect of such matters, unless, in the case of the actions contemplated by clause (ii) of the first sentence of this section 5(c), the action would adversely affect the contract rights expressly set forth in the Charter of the holders of Common Stock.
(i) As soon as practicable after the accrual of any right of the Holders of shares of Preferred Stock to elect additional directors as described in paragraph 5(b) above, the Corporation shall notify the Secretary of the Corporation and instruct the Secretary to 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 Secretary of the Corporation does not call such a special meeting, it may be called by Holders of at least 25% of the votes entitled to be cast at such meeting on like notice. The record date for determining the Holders entitled to notice of and to vote at such special meeting shall be the close of business on the fifth Business Day preceding the day on which such notice is mailed. At any such special meeting and at each meeting held during a Voting Period, such Holders, voting together as a class (to the exclusion of the holders of all other securities and classes of capital stock of the Corporation), shall be entitled to elect the number of directors prescribed in paragraph 5(b) above on a one-vote-per-share basis. At any such meeting or adjournment thereof in the absence of a quorum, a majority of such holders present in person or by proxy shall have the power to adjourn the meeting without notice, other than by an announcement at the meeting, to a date not more than 120 days after the original record date.
(ii) For purposes of determining any rights of the Holders to vote on any matter or the number of shares required to constitute a quorum, whether such right is created by these Articles Supplementary, by the other provisions of the Charter, by statute or otherwise, a share of Preferred Shares which is not outstanding shall not be counted.
(iii) The terms of office of all persons who are directors of the Corporation at the time of a special meeting of Holders and holders of other Preferred Stock to elect directors shall continue, notwithstanding the election at such meeting by the Holders and such other holders of the number of directors that they are entitled to elect, and the persons so elected by the Holders and such other holders, together with the two incumbent directors elected by the Holders and such other holders of Preferred Stock and the remaining incumbent directors elected by the holders of the Common Stock and Preferred Stock, shall constitute the duly elected directors of the Corporation.
(iv) The terms of office of the additional directors elected by the Holders and holders of other Preferred Stock pursuant to paragraph 5(b) above shall terminate on the earliest date permitted by the Maryland General Corporation Law following the termination of a Voting Period, the remaining directors shall constitute the directors of the Corporation and the voting rights of the Holders and such other holders to elect additional directors pursuant to paragraph 5(b) above shall cease, subject to the provisions of the last sentence of paragraph 5(b)(ii).
(e) Exclusive Remedy. Unless otherwise required by law, the Holders of Preferred Shares shall not have any relative rights or preferences or other special rights other than those specifically set forth herein. The Holders of Preferred Shares shall have no preemptive rights or rights to cumulative voting. In the event that the Corporation fails to pay any dividends on the Preferred Shares, the exclusive remedy of the Holders shall be the right to vote for directors pursuant to the provisions of this paragraph 5.
(f) Notification to Moody's and S&P. In the event a vote
of Holders of Preferred Shares is required pursuant to the provisions of
Section 13(a) of the 1940 Act, the Corporation shall, not later than ten
business days prior to the date on which such vote is to be taken, notify
Moody's and S&P that such vote is to be taken and the nature of the action
with respect to which such vote is to be taken. Upon completion of any such
vote, the Corporation shall notify Moody's and S&P as to the result of such
vote.
6. 1940 Act Preferred Shares Asset Coverage. The Corporation shall maintain, as of the last Business Day of each month in which any share of Preferred Shares is outstanding, the 1940 Act Preferred Shares Asset Coverage.
7. Preferred Shares Basic Maintenance Amount. (a) The Corporation shall maintain, on each Valuation Date, and shall verify to its satisfaction that it is maintaining on such Valuation Date, (i) Moody's Eligible Assets having an aggregate Discounted Value equal to or greater than the Preferred Shares Basic Maintenance Amount and (ii) S&P Eligible Assets having an aggregate Discounted Value equal to or greater than the Preferred Shares Basic Maintenance Amount. Upon any failure to maintain the required Discounted Value, the Corporation will use its best efforts to alter the composition of its portfolio to reattain the Preferred Shares Basic Maintenance Amount on or prior to the Preferred Shares Basic Maintenance Cure Date.
(b) On or before 5:00 p.m., New York City time, on the third Business Day after a Valuation Date on which the Corporation fails to satisfy the Preferred Shares Basic Maintenance Amount, the Corporation shall complete and deliver to the Auction Agent, Moody's and S&P a complete Preferred Shares Basic Maintenance Report as of the date of such failure, which shall be deemed to have been delivered to the Auction Agent if the Auction Agent receives a copy or telecopy, telex or other electronic transcription thereof and on the same day the Corporation mails to the Auction Agent for delivery on the next Business Day the complete Preferred Shares Basic Maintenance Report. The Corporation shall also give a notice of cure of its failure to satisfy the Preferred Shares Basic Maintenance Amount along with the complete Preferred Shares Basic Maintenance Report to the Auction Agent, Moody's and S&P within three Business Days of its determination that it has satisfied such requirement following any period during which it has failed to satisfy such requirement. The Corporation will also deliver a Preferred Shares Basic Maintenance Report to the Auction Agent as of (i) the fifteenth day of each month (or, if such day is not a Business Day, the next succeeding Business Day) and (ii) the last Business Day of each month, in each case on or before the third Business Day after such day. The Corporation will also deliver a Preferred Shares Basic Maintenance Report to Moody's or S&P, as the case may be, for each Valuation Date that the Discounted Value of Moody's Eligible Assets or S&P Eligible Assets is less than or equal to 125% of the Preferred Shares Basic Maintenance Amount, provided, however, that if the Valuation Date is every day that is a Business Day, the Corporation will deliver a Preferred Shares Basic Maintenance Report to Moody's or S&P, as the case may be, for each Valuation Date that the Discounted Value of Moody's Eligible Assets or S&P Eligible Assets is less than or equal to 105% of the Preferred Shares Basic Maintenance Amount. The Corporation will deliver a Preferred Shares Basic Maintenance Report to Moody's upon request and when the Corporation redeems any shares of Common Stock. The Corporation will deliver a Preferred Shares Basic Maintenance Report to S&P upon request. A failure by the Corporation to deliver a Preferred Shares Basic Maintenance Report under this paragraph 7(b) shall be deemed to be delivery of a Preferred Shares Basic Maintenance Report indicating the Discounted Value for S&P Eligible Assets and Moody's Eligible Assets of the Corporation is less than the Preferred Shares Basic Maintenance Amount, as of the relevant Valuation Date.
(c) Within ten Business Days after the date of delivery of the Preferred Shares Basic Maintenance Report and a Certificate of Minimum Liquidity in accordance with paragraph 7(b) above relating to a Quarterly Valuation Date, the Corporation shall cause the Independent Accountant to confirm in writing to the Auction Agent. Moody's and S&P (i) the mathematical accuracy of the calculations reflected in such Report (and in any other Preferred Shares Basic Maintenance Report, randomly selected by the Independent Accountant, that was delivered by the Corporation during the quarter ending on such Quarterly Valuation Date) and (with respect to S&P only while S&P is rating the Preferred Shares) such Certificate, (ii) that, in such Report (and in such randomly selected Report), the Corporation correctly determined the assets of the Corporation which constitute S&P Eligible Assets or Moody's Eligible Assets, as the case may be, at such Quarterly Valuation Date in accordance with these Articles Supplementary, (iii) that, in such Report (and in such randomly selected Report), the Corporation determined whether the Corporation had, at such Quarterly Valuation Date (and at the Valuation Date addressed in such randomly-selected Report) in accordance with these Articles Supplementary, S&P Eligible Assets of an aggregate Discounted Value at least equal to the Preferred Shares Basic Maintenance Amount and Moody's Eligible Assets of an aggregate Discounted Value at least equal to the Preferred Shares Basic Maintenance Amount, (iv) that (with respect o S&P only) in such Certificate, the Corporation determined the Minimum Liquidity Level and the Corporation's Deposit Securities in accordance with these Articles Supplementary, including maturity or tender date, (v) with respect to the S&P rating on Municipal Obligations, the issuer name, issue size and coupon rate listed in such Report and (with respect to S&P only) such Certificate, that the Independent Accountant has requested that S&P verify such information and the Independent Accountant shall provide - listing in its letter of any differences, (vi) with respect to the Moody's ratings on Municipal Obligations the issuer name, issue size and coupon rate listed in such Report and (with respect to S&P only) such Certificate, that such information has been verified by Moody's (in the event such information is not verified by Moody's the Independent Accountant will inquire of Moody's what such information is, and provide a listing in its letter of any differences) and (vii) with respect to the bid or mean price (or such alternative permissible factor used in calculating the Market Value) provided by the custodian of the Corporation's assets to the Corporation for purposes of valuing securities in the Corporation's portfolio, the Independent Accountant has traced the price used in such Report and (with respect to S&P only) such Certificate to the bid or mean price listed in such Report and (with respect to S&P only) such Certificate as provided to the Corporation and verified that such information agrees (in the event such information does not agree, the Independent Accountant will provide a listing in its letter of such differences) (such confirmation is herein called the "Accountant's Confirmation").
(d) Within ten Business Days after the date of delivery to the Auction Agent, S&P and Moody's of a Preferred Shares Basic Maintenance Report in accordance with paragraph 7(b) above relating to any Valuation Date on which the Corporation failed to maintain S&P Eligible Assets with an aggregate Discounted Value and Moody's Eligible Assets with an aggregate Discounted Value equal to or greater than the Preferred Shares Basic Maintenance Amount, and relating to the Preferred Shares Basic Maintenance Cure Date with respect to such failure, the Independent Accountant will provide to the Auction Agent, S&P and Moody's an Accountant's Confirmation as to such Preferred Shares Basic Maintenance 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 Preferred Shares Basic Maintenance 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 S&P Eligible Assets or Moody's Eligible Assets, as the case may be, of the Corporation was determined by the Independent Accountant, the calculation or determination made by such Independent Accountant shall be final and conclusive and shall be binding on the Corporation and the Corporation shall accordingly amend and deliver the Preferred Shares Basic Maintenance Report to the Auction Agent, S&P and Moody's promptly following receipt by the Corporation 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 the Preferred Shares, the Corporation will complete and deliver to S&P and Moody's a Preferred Shares Basic Maintenance Report as of the close of business on such Date of Original Issue. Within five business days of such Date of Original Issue, the Corporation shall cause the Independent Accountant to confirm in writing to S&P and Moody's (i) the mathematical accuracy of the calculations reflected in such Report and (ii) that the aggregate Discounted Value of S&P Eligible Assets and the aggregate Discounted Value of Moody's Eligible Assets reflected thereon equals or exceeds the Preferred Shares Basic Maintenance Amount reflected thereon.
(g) For so long as Preferred Shares are rated by Moody's, in managing the Corporation's portfolio, the Corporation shall require that the Adviser will not alter the composition of the Corporation's portfolio if, in the reasonable belief of the Adviser, the effect of any such alteration would be to cause the Corporation to have Moody's Eligible Assets with an aggregate Discounted Value, as of the immediately preceding Valuation Date, less than Preferred Shares Basic Maintenance Amount as of such Valuation Date; provided, however, that in the event that, as of the immediately preceding Valuation Date, the aggregate Discounted Value of Moody's Eligible Assets exceeded the Preferred Shares Basic Maintenance Amount by twenty-five percent or less (or, in the event the Valuation Date is every day that is a Business Day, five percent or less), the Adviser will not alter the composition of the Corporation's portfolio in a manner reasonably expected to reduce the aggregate Discounted Value of Moody's Eligible Assets unless the Corporation shall have confirmed that, after giving effect to such alteration, the aggregate Discounted Value of Moody's Eligible Assets would exceed the Preferred Shares Basic Maintenance Amount.
8. Minimum Liquidity Level. (i) For so long as any Preferred Shares are rated by S&P, the Corporation shall be required to have, as of each Valuation Date, Dividend Coverage Assets having in aggregate a value not less than the Dividend Coverage Amount
(ii) As of each Valuation Date as long as any Preferred Shares are rated by S&P, the Corporation shall determine (A) the Market Value of the Dividend Coverage Assets owned by the Corporation as of that Valuation Date, (B) the Dividend Coverage Amount on that Valuation Date, and (C) whether the Minimum Liquidity Level is met as of that Valuation Date. The calculations of the Dividend Coverage Assets, the Dividend Coverage Amount and whether the Minimum Liquidity Level is met shall be set forth in a certificate (a "Certificate of Minimum Liquidity") dated as of the Valuation Date. The Preferred Shares Basic Maintenance Report and the Certificate of Minimum Liquidity may be combined in one certificate. The Corporation shall cause the Certificate of Minimum Liquidity to be delivered to S&P not later than the close of business on the third Business Day after the Valuation Date applicable to such Certificate pursuant to paragraph 7(b). The Minimum Liquidity Level shall be deemed to be met as of any date of determination if the Corporation has timely delivered a Certificate of Minimum Liquidity relating to such date which states that the same has been met and which is not manifestly inaccurate. In the event that a Certificate of Minimum Liquidity is not delivered to S&P when required, the Minimum Liquidity Level shall be deemed not to have been met as of the applicable date.
(iii) If the Minimum Liquidity Level is not met as of any Valuation Date, then the Corporation shall purchase or otherwise acquire Dividend Coverage Assets to the extent necessary so that the Minimum Liquidity Level is met as of the fifth Business Day, provide to S&P a Certificate of Minimum Liquidity setting forth the calculations of the Dividend Coverage Assets and the Dividend Coverage Amount and showing that the Minimum Liquidity Level is met as such fifth Business Day together with a report of the custodian of the Corporation's assets confirming the amount of the Corporation's Dividend Coverage Assets as of such fifth Business Day.
9. Certain Other Restrictions. (a) So long as there are Preferred Shares Outstanding, the Corporation will enter into futures and options transactions only for bona fide hedging purposes and not for leveraging or speculative purposes. So long as Moody's and S&P are rating the Preferred Shares, the Corporation will only engage in futures or options transactions in accordance with the then-current guidelines of such ratings agencies, only if it is valuing its assets daily and only after it has received written confirmation from Moody's and S&P, as appropriate, that such transactions would not impair the ratings then assigned by S&P and Moody's to Preferred Shares. The S&P guidelines in effect as of the Date of Original Issue are set forth in their entirety in the following paragraph. The Corporation may engage in futures and options transactions in accordance therewith and such transactions shall have the consequences included in such guidelines set forth therein (as such guidelines are amended, modified and supplemented from time to time by S&P), provided, however, that it may not engage in any such transactions unless it has satisfied the relevant provisions of this paragraph relating to complying with Moody's guidelines and obtaining written confirmation from Moody's and S&P.
For so long as Preferred Shares are rated by S&P, the
Corporation will not, unless it has received written confirmation
from S&P that any such action would not impair the rating then
assigned by S&P to Preferred Shares, purchase or sell futures
contracts or options thereon or write uncovered put or uncovered
call options in portfolio securities except (provided that the
Corporation has received such written confirmation in advance from
S&P) that (i) the Corporation may engage in S&P Hedging
Transactions based on the Municipal Index, provided that (A) the
Corporation shall not engage in any S&P Hedging Transaction based
on the Municipal Index (other than Closing Transactions) which
would cause the Corporation at the time of such transaction to own
or have sold (1) more than 1,000 outstanding futures contracts
based on the Municipal Index, (2) outstanding futures contracts
based on Municipal Index exceeding in number 25% of the quotient
of the fair market value of the Corporation's total assets divided
by 100,000 or (3) outstanding futures contracts based on the
Municipal Index exceeding in number 10% of the average number of
daily traded futures contracts based on the Municipal Index in the
month prior to the time of effecting such transaction as reported
by The Wall Street Journal and (ii) the Corporation may engage in
S&P Hedging Transactions based on Treasury Bonds, provided that
(A) the Corporation shall not engage in any S&P Hedging
Transactions based on Treasury Bonds (other than Closing
Transactions) which would cause the Corporation at the time of
such transaction to own or have sold the lesser of (1)
outstanding futures contracts based on Treasury Bonds exceeding
in number 25% of the quotient of the fair market value of the
Corporation's total assets divided by 100,000 or (2) 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 month prior to the time of effecting such
transaction as reported by The Wall Street Journal. For so long
as Preferred Shares are rated by S&P, the Corporation will engage
in Closing Transactions to close out any outstanding futures
contract which the Corporation owns or has sold or any
outstanding option thereon owned by the Corporation in the event
(i) the Corporation does not have S&P Eligible Assets with an
aggregate Discounted Value equal to or greater than the Preferred
Shares Maintenance Amount on two consecutive Valuation Dates and
(ii) the Corporation is required to pay Variation Margin on the
second such Valuation Date. For so long as Preferred Shares are
rated by S&P, the Corporation 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
Corporation holds securities deliverable under such terms. For
purposes of calculating the Discounted Value of S&P Eligible
Assets to determine compliance with the Preferred Shares Basic
Maintenance Amount, such Discounted Value shall be reduced to 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 Corporation. For so long as Preferred
Shares are rated by S&P, when the Corporation writes a futures
contract or option thereon, it will maintain an amount of cash,
cash equivalents or short-term, fixed-income securities in a
segregated account with the Corporation's custodian, so that the
amount so segregated plus the amount of Initial Margin and
Variation Margin held in the account of the Corporation's broker
equals the fair market value of the futures contract, except that
in the event the Corporation writes a futures contract or option
thereon which requires delivery of an underlying security, the
Corporation shall hold such underlying security.
(b) For so long as Preferred Shares are rated by Moody's or S&P, the Corporation will not, unless it has received written confirmation from Moody's and/or S&P, as the case may be, that such action would not impair the ratings then assigned to Preferred Shares by Moody's and/or S&P, as the case may be, (i) borrow money, (ii) engage in short sales of securities, (iii) lend any securities, (iv) issue any class or series of stock ranking prior to or on a parity with the Preferred Shares with respect to the payment of dividends or the distribution of assets upon dissolution, liquidation or winding up of the Corporation, (v) reissue any Preferred Shares previously purchased or redeemed by the Corporation, (vi) merge or consolidate into or with any other corporation, (vii) change the Pricing Service or (viii) engage in reverse repurchase agreements.
10. Notice. All notices or communications, unless otherwise specified in these Articles Supplementary, shall be sufficiently given if in writing and delivered in person or mailed by first-class mail, postage prepaid. Notice shall be deemed given on the earlier of the date received or the date seven days after which such notice is mailed.
11. Auction Procedures. (a) Certain definitions. As used in this paragraph 11, the following terms shall have the following meanings, unless the context otherwise requires:
(i) "Auction Date" shall mean the first Business Day preceding the first day of a Dividend Period.
(ii) "Available Preferred Shares" shall have the meaning specified in paragraph 11(d) (i) below.
(iii) "Bid" shall have the meaning specified in paragraph
11(b) (i) below.
(iv) "Bidder" shall have the meaning specified in paragraph
11 (b) (i) below.
(v) "Hold Order" shall have the meaning specified in paragraph 11 (b) (i) below.
(vi) "Maximum Applicable Rate," for any Dividend Payment
Period for the Preferred Shares will be the Applicable Percentage
of the higher of the 30-day "AA" Composite Commercial Paper Rate
and the Taxable Equivalent of the Short-Term Municipal Bond Rate
except in the case of a Special Dividend Period in which case the
Maximum Applicable Rate for any Dividend Payment Period included
in such Special Dividend Period will be the Applicable Percentage
(determined on the date of the Notice of Special Dividend Period
in the case of any such Notice that specifies a Maximum
Applicable Rate applicable to such Special Dividend Payment
Period) of the Special Dividend Period Reference Rate for such
Dividend Payment Period. The Applicable Percentage will be
determined based on (i) the lower of the credit rating or ratings
assigned on such date to such shares by Moody's and S&P (or if
Moody's or S&P or both shall not make such ratings available, the
equivalent of either or both of such ratings by a Substitute
Rating Agency or two Substitute Rating Agencies or, in the event
that only one such rating shall be available, such rating) and
(ii) whether the Corporation has provided notification to the
Auction Agent prior to the Auction establishing the Applicable
Rate for any dividend pursuant to paragraph 2(f) hereof that net
capital gains or other taxable income will be included in such
dividend on Preferred Shares as follows:
Credit Ratings Applicable Applicable
--------------------------------------------- Percentage : Percentage:
Moody's S&P No Notification Notification
----------------- ------------------------ --------------------- ------------------
"aa3" or higher AA or higher 110% 150%
"a3" to "a1" A- to A+ 125% 160%
"baa3" to "baa1" BBB- to BBB+ 150% 250%
"ba3" to "ba1" BB- to BB+ 200% 275%
Below "ba3" Below BB- 250% 300%
|
The Corporation will take all reasonable action necessary to enable Moody's and S&P to provide a rating for the series of Preferred Shares. If either Moody's or S&P shall not make such a rating available, or neither Moody's nor S&P shall make such a rating available, Merrill Lynch, Pierce, Fenner & Smith Incorporated or its affiliates and successors, after consultation with the Corporation, will select a nationally recognized statistical rating organization (a "Substitute Rating Agency") or two nationally recognized statistical rating organizations ("Substitute Rating Agencies") to act as Substitute Rating Agency or Substitute Rating Agencies, as the case may be; provided that if such a rating is not made available with respect to either series of Preferred Shares, Merrill Lynch, Pierce, Fenner & Smith or its affiliates and successors, after consultation with the Corporation, shall select a Substitute Rating Agency or Agencies.
(vii) "Minimum Applicable Rate," for any Dividend Payment Period included in a Special Dividend Period for which Bid Requirements are imposed will be such rate as may be specified by the Corporation in the Notice of Special Dividend Period relating to the Special Dividend Period within which such Dividend Payment Period occurs.
(viii) "Order" shall have the meaning specified in paragraph
11(b) (i) below.
(ix) "Preferred Shares" shall mean the Preferred Shares being auctioned pursuant to this paragraph 11.
(x) "Sell Order" shall have the meaning specified in paragraph 11 (b) (i) below.
(xi) "Submission Deadline" shall mean 1:00 P.M., New York City time, on any Auction Date or such other time on any Auction Date as may be specified by the Auction Agent from time to time as the time by which each Broker-Dealer must submit to the Auction Agent in writing all Orders obtained by it for the Auction to be conducted on such Auction Date.
(xii) "Submitted Bid" shall have the meaning specified in paragraph 11 (d) (i) below.
(xiii) "Submitted Hold Order" shall have the meaning specified in paragraph 11 (d) (i) below.
(xiv) "Submitted Order" shall have the meaning specified in paragraph 11 (d) (i) below.
(xv) "Submitted Sell Order" shall have the meaning specified in paragraph 11 (d) (i) below.
(xvi) "Sufficient Clearing Bids" shall have the meaning specified in paragraph 11 (d) (i) below.
(xvii) "Winning Bid Rate" shall have the meaning specified in paragraph 11 (d) (i) below.
(b) Orders by Existing Holders and Potential Holders.
(i) On or prior to the Submission Deadline on each Auction Date:
(A) each Existing Holder may submit to a Broker-Dealer information as to:
(1) the number of Outstanding shares, if any, of
Preferred Shares held by such Existing Holder which such Existing Holder desires to continue to hold without regard to the Applicable Rate for the next succeeding Dividend Period;
(2) the number of Outstanding shares, if any, of Preferred Shares held by such Existing Holder which such Existing Holder desires to continue to hold, provided that the Applicable Rate for the next succeeding Dividend Period shall not be less than the rate per annum or, in the case of an Auction with Bid Requirements including a Spread, the Spread specified by such Existing Holder; and/or
(3) the number of Outstanding shares, if any, of Preferred Shares held by such Existing Holder which such Existing Holder offers to sell without regard to the Applicable Rate for the next succeeding Dividend Period; and
(B) each Broker-Dealer, using a list of Potential Holders that shall be maintained in good faith for the purpose of conducting a competitive Auction, shall contact Potential Holders, including Persons that are not Existing Holders, on such list to determine the number of Outstanding shares, if any, of Preferred Shares which each such Potential Holder offers to purchase, provided that the Applicable Rate for the next succeeding Dividend Period shall not be less than the rate per annum or Spread specified by such Potential Holder.
For the purposes hereof, the communication to a Broker-Dealer of information referred to in clause (A) or (B) of this paragraph 11(b)(i) is hereinafter referred to an "Order" and each Existing Holder and each Potential Holder placing an Order is hereinafter referred to as a "Bidder"; an Order containing the information referred to in clause (A)(1) of this paragraph 11(b)(i) is hereinafter referred to as a "Hold Order"; an Order containing the information referred to in clause (A)(2) or (B) of this paragraph 11(b)(i) is hereinafter referred to as a "Bid"; and an Order containing the information referred to in clause (A)(3) of this paragraph 11(b)(i) is hereinafter referred to as a "Sell Order".
(i) (A) A Bid by an Existing Holder shall constitute an irrevocable offer to sell:
(1) the number of Outstanding Preferred Shares specified in such Bid if the Applicable Rate determined on such Auction Date shall be less than the rate per annum or Spread specified in such Bid; or
(2) such number of a lesser number of Outstanding Preferred Shares to be determined as set forth in paragraph 11(e)(i)(D) if the Applicable Rate determined on such Auction Date shall be equal to the rate per annum or Spread specified therein; or
(3) a lesser number of Outstanding Preferred Shares to be determined as set forth in paragraph 11(e)(ii)(C) if such specified rate per annum shall be higher than the Maximum Applicable Rate and Sufficient Clearing Bids do not exist.
(B) A Sell Order by an Existing Holder shall constitute an irrevocable offer to sell:
(1) the number of Outstanding Preferred Shares specified in such Sell Order; or
(2) such number or a lesser number of Outstanding Preferred Shares to be determined as set forth in paragraph 11(e)(ii)(C) if Sufficient Clearing Bids do not exist.
(C) A Bid by a Potential Holder shall constitute an irrevocable offer to purchase:
(1) the number of Outstanding Preferred Shares specified in such Bid if the Applicable Rate determined on such Auction Date shall be higher than the rate per annum or Spread specified in such Bid; or
(2) such number or a lesser number of Outstanding Preferred Shares to be determined as set forth in paragraph 11(e)(i)(E) if the Applicable Rate determined on such Auction Date shall be equal to the rate per annum or Spread specified therein.
(c) Submission of Orders by Broker-Dealers to Auction Agent.
(i) Each Broker-Dealer shall submit in writing or through the Auction Agent's Auction Processing System to the Auction Agent prior to the Submission Deadline on each Auction Date all Orders obtained by such Broker-Dealer and specifying with respect to each Order:
(A) the name of the Bidder placing such Order;
(B) the aggregate number of Outstanding Preferred
Shares that are subject of such Order;
(C) to the extent that such Bidder is an Existing Holder;
(1) the number of Outstanding shares, if any,
of Preferred Shares subject to any Hold Order placed by such Existing Holder;
(2) the number of Outstanding shares, if any, of Preferred Shares subject to any Bid placed by such Existing Holder and the rate per annum or Spread specified in such Bid; and
(3) the number of Outstanding shares, if any, of Preferred Shares subject to any Sell Order placed by such Existing Holder; and
(D) (i) to the extent such Bidder is a Potential Holder, the rate per annum or Spread specified in such Potential Holder's Bid.
(ii) If any rate per annum or Spread 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% and shall round such Spread to the next highest one-thousandth (.001) of a basis point.
(iii) If an Order or Orders covering all of the Outstanding Preferred Shares held by an Existing Holder is not submitted to the Auction Agent prior to the Submission Deadline, the Auction Agent shall deem a Hold Order to have been submitted on behalf of such Existing Holder covering the number of Outstanding Preferred Shares held by such Existing Holder and not subject to Orders submitted to the Auction Agent; provided, however, that with respect to an Auction to establish a Special Dividend Period longer than 91 days, the Auction Agent shall deem a Sell Order to have been submitted on behalf of such Existing Holder covering such number of Outstanding Preferred Shares.
(iv) If one or more Orders on behalf of an Existing Holder covering in the aggregate more than the number of Outstanding Preferred Shares held by such Existing Holder are submitted to the Auction Agent, such Orders shall be considered valid as follows and in the following order of priority:
(A) any Hold Order submitted on behalf of such Existing Holder shall be considered valid up to and including the number of Outstanding Preferred Shares held by such Existing Holder; provided that if more than one Hold Order is submitted on behalf of such Existing Holder and the number of Preferred Shares subject to such Hold Orders exceeds the number of Outstanding Preferred Shares held by such Existing Holder, the number of Preferred Shares subject to each of such Hold Orders shall be reduced pro rata so that such Hold Orders, in the aggregate, will cover exactly the number of Outstanding Preferred Shares held by such Existing Holder;
(B) any Bids submitted on behalf of such Existing Holder shall be considered valid, in the ascending order of their respective rates per annum or Spread, if more than one Bid is submitted on behalf of such Existing Holder, up to and including the excess of the number of Outstanding Preferred Shares held by such Existing Holder over the number of Preferred Shares subject to any Hold Order referred to in paragraph 11(c)(iv)(A) above (and if more than one Bid submitted on behalf of such Existing Holder specifies the same rate per annum or Spread and together they cover more than the remaining number of shares that can be the subject of valid Bids after application of paragraph 11(c)(iv)(A) above and of the foregoing portion of this paragraph 11(c)(iv)(B) to any Bid or Bids specifying a lower rate or rates per annum or Spread, the number of shares subject to each of such Bids shall be reduced pro rata so that such Bids, in the aggregate, cover exactly such remaining number of shares); and the number of shares, if any, subject to Bids not valid under this paragraph 11(c)(iv)(B) shall be treated as the subject of a Bid by a Potential Holder; and
(C) any Sell Order shall be considered valid up to and including the excess of the number of Outstanding Preferred Shares held by such Existing Holder over the number of Preferred Shares subject to Hold Orders referred to in paragraph 11(c)(iv)(A) and Bids referred to in paragraph 11(c)(iv)(B); provided that if more than one Sell Order is submitted on behalf of any Existing Holder and the number of Preferred Shares subject to such Sell Orders is greater than such excess, the number of Preferred Shares subject to each of such Sell Orders shall be reduced pro rata so that such Sell Orders, in the aggregate, cover exactly the number of Preferred Shares equal to such excess.
(v) If more than one Bid is submitted on behalf of any Potential Holder, each Bid submitted shall be a separate Bid with the rate per annum or Spread and number of Preferred Shares specified.
(vi) Any Bid by an Existing Holder that specifies a Spread, with respect to an Auction in which a Spread is not included in any Bid Requirements or in which there are no bid Requirements and any Order that does not specify a Spread with respect to an Auction in which a Spread is included in any bid Requirements shall be treated as a Sell Order.
(d) Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate.
(i) Not earlier than the Submission Deadline on each Auction Date, the Auction Agent shall assemble all Orders submitted or deemed submitted to it by the Broker-Dealers (each such Order as submitted or deemed submitted by a Broker-Dealer being hereinafter referred to individually as a "Submitted Hold Order" a "Submitted Bid" a "Submitted Sell Order", as the case may be, or as a "Submitted Order") and shall determine:
(A) the excess of the total number of Outstanding Preferred Shares over the number of Outstanding Preferred Shares that are the subject of Submitted Hold Orders (such excess being hereinafter referred to as the "Available Preferred Shares");
(B) from the Submitted Orders whether the number of Outstanding Preferred Shares that are the subject of Submitted bids by Potential Holders specifying one or more rates per annum or Spreads that result in one or more rates per annum on such date equal to or lower than the Maximum Applicable Rate in effect for the first Dividend Payment Period after the auction Date exceeds or is equal to the sum of:
(1) the number of outstanding Preferred Shares that are the subject of Submitted Bids by Existing Holders specifying one or more rates per annum or Spreads that result in one or more rates per annum on such date higher than such Maximum Applicable Rate, and
(2) the number of Outstanding Preferred Shares that are subject to Submitted Sell Orders (if such excess or such equality exists (other than because the number of Outstanding Preferred Shares in clauses (1) and (2) above are each zero because all of the Outstanding Preferred Shares are the subject of Submitted Hold Orders), such Submitted Bids by Potential Holders being hereinafter referred to collectively as "Sufficient Clearing Bids"); and
(C) if Sufficient Clearing Bids exist, the lowest rate per annum or, in the case of an, Auction with Bid Requirements including a Spread, the lowest Spread specified in the Submitted Bids (the "Winning Bid Rate") that if:
(1) each Submitted Bid from
Existing Holders specifying the Winning Bid Rate and all other Submitted Bids from Existing Holders specifying lower rates per annum or Spreads were rejected, thus entitling such Existing Holders to continue to hold the Preferred Shares that are the subject of such Submitted Bids, and
(2) each Submitted Bid from Potential Holders specifying the Winning Bid Rate and all other Submitted Bids from Potential Holders specifying lower rates per annum or Spreads were accepted, thus entitling the Potential Holders to purchase the Preferred Shares that are the subject of such Submitted Bids, would result in the number of shares subject to all Submitted Bids specifying the Winning Bid Rate or a lower rate per annum or Spread being at least equal to the Available Preferred Shares.
(D) For purposes of these Article Supplementary, a positive Spread shall be considered lower than another positive Spread to the extent it is a lower number, a Spread of Zero shall be considered lower than a positive Spread, a negative Spread shall be considered lower than a Spread of zero and a negative Spread shall be considered lower than another negative Spread to the extent it is a higher number.
(ii) Promptly after the Auction Agent has made the determinations pursuant to paragraph 11(d)(i), the Auction Agent shall advise the Corporation of the Maximum Applicable Rate (or, in the event the Corporation has specified a Maximum Applicable Rate or Rates, or a Minimum Applicable Rate or Rates the Auction Agent shall confirm to the Corporation the calculation of such Maximum Applicable Rate or Rules or such Minimum Applicable Rate or Rates) and based on such determinations, the Applicable Rate for the next succeeding Dividend Period as follows:
(A) if Sufficient Clearing Bids exist, that the Applicable Rate for the next succeeding Dividend Period shall be equal to the Winning Bid Rate, subject to the effect of any applicable Minimum Applicable Rate and any applicable Maximum Applicable Rate;
(B) if Sufficient Clearing Bids do not exist (other than because all of the Outstanding Preferred Shares are the subject of Submitted Hold Orders and other than in the event the Auction is being conducted with respect to a Special Dividend Period), that the Applicable Rate for the next succeeding Dividend Period shall be equal to the Maximum Applicable Rate;
(C) if all of the Outstanding Preferred Shares are the subject of Submitted Hold Orders that the Dividend Period next succeeding the Auction shall automatically be the same length as the immediately preceding Dividend Period and the Applicable Rate for the next succeeding Dividend Period will be the higher of the 30-day "AA" Composite Commercial Paper Rate and the Taxable Equivalent of the Short- Term Municipal Bond Rate multiplied by 1 minus the maximum marginal regular Federal individual income tax rate then applicable to ordinary income or the maximum marginal regular Federal corporate tax rate then applicable, whichever is greater (or 90% of such rate if the Corporation has provided notification to the Auction Agent prior to the Auction establishing the Applicable Rate for any dividend pursuant to paragraph 2(f) hereof that net capital gains or other taxable income will be included in such dividend on Preferred Shares) on the date of the Auction; or
(D) If the Auction is being conducted with respect to a Special Dividend Period and Sufficient Clearing Bids do not exist, that the Dividend Period next succeeding the Auction shall automatically be 28 days (in the case of Series T28 Preferred Shares) or 7 days (in the case of Series T7 Preferred Shares) and the Applicable Rate for the next succeeding Dividend Period will be as set forth in paragraph 11(d)(ii)(C) above.
(e) Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and Allocation of Shares. Based on the determinations made pursuant to paragraph 11(d)(i), the Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the Auction Agent shall take such other action as set forth below:
(i) If Sufficient Clearing Bids have been made,
subject to the provisions of paragraph 11(e) (iii) and paragraph
11(e) (iv), Submitted Bids and Submitted Sell Orders shall be
accepted or rejected in the following order of priority and all
other Submitted Bids shall be rejected:
(A) the Submitted Sell Orders of Existing Holders shall be accepted and the Submitted Bid of each of the Existing Holders specifying any rate per annum or Spread that is higher than the Winning Bid Rate shall be accepted, thus requiring each such Existing Holder to sell the Outstanding Preferred Shares that are the subject of such Submitted Sell Order or Submitted Bid;
(B) the Submitted Bid of each of the Existing Holders specifying any rate per annum or Spread that is lower than the Winning Bid Rate shall be rejected, thus entitling each such Existing Holder to continue to hold the Outstanding Preferred Shares that are the subject of such Submitted Bid;
(C) the Submitted Bid of each of the Potential Holders specifying any rate per annum that is lower than the Winning Bid Rate or Spread shall be accepted;
(D) the Submitted Bid of each of the
Existing Holders specifying a rate per annum or Spread that is
equal to the Winning Bid Rate shall be rejected, thus entitling
each such Existing Holder to continue to hold the Outstanding
Preferred Shares that are the subject of such Submitted Bid,
unless the number of Outstanding Preferred Shares subject to all
such Submitted Bids shall be greater than the number of
Outstanding Preferred Shares ("Remaining Shares") equal to the
excess of the Available Preferred Shares over the number of
Outstanding Preferred Shares subject to Submitted Bids described
in paragraph 11(e) (i) (B) and paragraph 11(e) (i)(C), in which
event the Submitted Bids of each such Existing Holder shall be
accepted, and each such Existing Holder shall be required to sell
Outstanding Preferred Shares, but only in an amount equal to the
difference between (1) the number of Outstanding Preferred Shares
then held by such Existing Holder subject to such Submitted Bid
and (2) the number of Preferred Shares obtained by multiplying
(x) the number of Remaining Shares by (y) a fraction the
numerator of which shall be the number of Outstanding Preferred
Shares held by such Existing Holder subject to such Submitted bid
and the denominator of which shall be the sum of the numbers of
outstanding Preferred Shares subject to such Submitted Bids made
by all such Existing Holders that specified a rate per annum
equal or Spread to the Winning Bid Rate; and
(E) the Submitted Bid of each of the Potential Holders specifying a rate per annum or Spread that is equal to the Winning Bid Rate shall be accepted but only in an amount equal to the number of Outstanding Preferred Shares obtained by multiplying (x) the difference between the Available Preferred Shares and the number of Outstanding Preferred Shares subject to Submitted Bids described n paragraph 11(e)(i)(B), paragraph 11(e)(i)(C) and paragraph 11(e)(i)(D) by (y) a fraction the numerator of which shall be the number of Outstanding Preferred Shares subject to such Submitted Bid and the denominator of which shall be the sum of the numbers of Outstanding Preferred Shares subject to such Submitted Bids made by all such Potential Holders that specified a rate per annum or Spread equal to the winning Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other than because all of the Outstanding Preferred Shares are subject to Submitted Hold Orders), subject to the provisions of paragraph 11(e) (iii), Submitted Orders shall be accepted or rejected as follows in the following order of priority and all other Submitted Bids shall be rejected:
(A) The Submitted Bid of each Existing Holder specifying any rate per annum or Spread that is equal to or lower than the Maximum Applicable Rate (a Bid specifying a Spread being converted to a rate per annum for this purpose by applying the spread to the most recently available Reference Index or Reference Security) shall be rejected, thus entitling such Existing Holder to continue to hold the Outstanding Preferred Shares that are the subject of such Submitted Bid;
(B) the Submitted Bid of each Potential Holder specifying any rate per annum or Spread that is equal to or lower than the Maximum Applicable Rate (a Bid specifying a Spread being converted to a rate per annum for this purpose by applying the Spread to the most recently available Reference Index or Reference Security) shall be accepted, thus requiring such Potential Holder to purchase the Outstanding Preferred Shares that are the subject of such Submitted Bid; and
(C) the Submitted Bids of each Existing Holder specifying any rate per annum or spread that is higher than the Maximum Applicable Rate (a Bid specifying a Spread being converted to a rate per annum for this purpose by applying the Spread to the most recently available Reference Index or Reference Security) shall be accepted, and the Submitted Sell Orders of each Existing Holder shall be accepted in both cases only in an amount equal to the difference between (1) the number of Outstanding Preferred Shares then held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and (2) the number of Preferred Shares obtained by multiplying (x) the difference between the Available Preferred Shares and the aggregate number of outstanding Preferred Shares subject to Submitted Bids described in paragraph 11(e)(ii)(A) and paragraph 11(e)(ii)(B) by (y) a fraction the numerator of which shall be the number of Outstanding Preferred Shares subject to such Submitted Bid or Submitted Sell Order and the denominator of which shall be the number of Outstanding Preferred Shares subject to all such Submitted Bids and Submitted Sell Orders.
(iii) If, as a result of the procedures described in paragraph 11(e)(i) or paragraph 11(e)(ii), any Existing Holder would be entitled or required to sell, or any Potential Holder would be entitled or required to purchase, a fraction of a share of Preferred Shares on any Auction Date, the Auction Agent shall, in such manner as in its sole discretion it shall determine, round up or down the number of Preferred Shares to be purchased or sold by any Existing Holder or Potential Holder on such Auction Date so that each Outstanding share of Preferred Shares purchased or sold by each Existing Holder or Potential Holder on such Auction Date shall be a whole share of Preferred shares.
(iv) If, as a result of the procedures described in paragraph 11(e)(i), any Potential Holder would be entitled or required to purchase less than a whole share of Preferred Shares on any Auction Date, the Auction Agent shall, in such manner as in its sole discretion it shall determine, allocate Preferred Shares for purchase among Potential Holders so that only whole Preferred Shares are purchased on such Auction Date by any Potential Holder, even if such allocation results in one or more of such Potential Holders not purchasing any Preferred Shares on such Auction Date.
(v) Based on the results of each Auction, the Auction Agent shall determine, with respect to each Broker-Dealer that submitted Bids or Sell Orders on behalf of Existing Holders or Potential Holders, the aggregate number of Outstanding Preferred Shares to be purchased and the aggregate number of Outstanding Preferred Shares to be sold by such Potential Holders and Existing Holders and to, the extent that such aggregate number of Outstanding shares to be purchased and such aggregate number of Outstanding shares to be sold differ, the Auction Agent shall determine to which other Broker-Dealer or Broker-Dealers acting for one or more purchasers such Broker-Dealer shall deliver, or from which other Broker-Dealer or Broker- Dealers acting for one or more sellers such Broker-Dealer shall receive, as the case may be, Outstanding Preferred Shares.
(f) Miscellaneous. An Existing Holder (A) may sell, transfer or otherwise dispose of Preferred Shares only pursuant to a Bid or Sell Order in accordance with the procedures described in this paragraph 11 or to or through a broker-dealer, provided that in the case of all transfers other than pursuant to Auctions such Existing Holder, its Broker-Dealer or its Agent Member advises the Auction Agent of such transfer and (B) except as otherwise required by law, shall have the ownership of the Preferred Shares held by it maintained in book entry form by the Securities Depository in the account of its Agent Member, which in turn will maintain records of such Existing Holder's beneficial ownership. Neither the Corporation nor any Affiliate shall submit an Order in any Auction. Any Existing Holder that is an Affiliate shall not sell, transfer or otherwise dispose of Preferred Shares to any Person other than the Corporation. All of the outstanding Preferred Shares of each series shall be represented by a single certificate registered in the name of the nominee of the Securities Depository unless otherwise required by law or unless there is no Securities Depository. If there is no Securities Depository, at the Corporation's option and upon its receipt of such documents as it deems appropriate, any Preferred Shares may be registered in the Stock Register in the name of the Existing Holder thereof and such Existing Holder thereupon will be entitled to receive certificates therefor and required to deliver certificates therefor upon transfer or exchange thereof.
12. Securities Depository; Stock Certificates. (a) If there is a Securities Depository, one certificate for all of the Preferred Shares of each series shall be issued to the Securities Depository and registered in the name of the Securities Depository or its nominee. Additional certificates may be issued as necessary to represent Preferred Shares. All such certificates shall bear a legend to the effect that such certificates are issued subject to the provisions restricting the transfer of Preferred Shares contained in these Articles Supplementary. Unless the Corporation shall have elected, during a Non-Payment Period, to waive this requirement, the Corporation will also issue stop-transfer instructions to the Auction Agent for the Preferred Shares. Except as provided in paragraph (b) below, the Securities Depository or its nominee will be the Holder, and no existing Holder shall receive certificates representing its ownership interest in such shares.
(b) If the Applicable Rate applicable to all Preferred Shares of a series shall be the Non- Payment Period Rate or there is no Securities Depository, the Corporation may at its option issue one or more new certificates with respect to such shares (without the legend referred to in paragraph 12(a)) registered in the names of the Existing Holders or their nominees and rescind the stop-transfer instructions referred to in paragraph 12(a) with respect to such shares.
13. Interpretations. The Board of Directors may interpret the provisions of these Articles Supplementary to resolve any inconsistency or ambiguity, remedy any formal defect or make any other change or modification that does not adversely affect the rights of Existing Holders of Preferred Shares."
SECOND: The amendment to the charter of the Corporation set forth in these Articles of Amendment was advised by the Board of Directors of the Corporation and approved by the stockholders of the Corporation at a special meeting of the stockholders of the Corporation held on July 13, 1994.
THIRD: The amendment to the charter of the Corporation set forth in these Articles of Amendment does not increase the authorized capital stock of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed by its President and its corporate seal to be affixed hereto and attested to by its Secretary as of the 13th day of July, 1994.
THE BLACKROCK INVESTMENT QUALITY
(SEAL) MUNICIPAL TRUST INC.
By/s/ Ralph L. Schlosstein
-----------------------------------------
Ralph L. Schlosstein
President
|
ATTEST:
/s/ Barbara G. Novick -------------------------- Barbara G. Novick Secretary |
The undersigned, the President of the BlackRock Investment Quality Municipal Trust Inc., hereby acknowledges the foregoing to be the corporate act of such Corporation and that, to the best of his knowledge, information and belief, the matters and facts set forth therein are true in all material respects, and that this statement has been made under the penalties for perjury.
/s/ Ralph L. Schlosstein -------------------------- Ralph L. Schlosstein President |
APPENDIX B-2
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
ARTICLES OF AMENDMENT
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC., a Maryland
corporation (the "Corporation"), hereby certifies as follows:
FIRST: For the purposes of these Articles of Amendment, the following terms, when used herein in capitalized form, shall have the meanings indicated: (a) "Articles Supplementary" shall mean the Articles Supplementary of the Corporation which (i) created the classes of capital stock of the Corporation designated as the "Auction Rate Municipal Preferred Stock, Series T7" and the "Auction Rate Municipal Preferred Stock, Series T28" and (ii) were amended pursuant to Articles of Amendment that were filed with, and approved for record by, the Maryland State Department of Assessments and Taxation on July 15, 1994; and (b) "Effective Date" shall mean 5:00 p.m. (Eastern Daylight Time) on the date that these Articles of Amendment are filed with, and accepted for record by, the Maryland State Department of Assessments and Taxation in accordance with the Maryland General Corporation Law.
SECOND: The amendment to the Charter of the Corporation hereinafter set forth in these Articles of Amendment shall become effective at the Effective Date.
THIRD: Effective as of the Effective Date, the Charter of the Corporation shall be, and is hereby, amended for the purposes of changing and reclassifying certain of the shares of the authorized capital stock of the Corporation into additional authorized shares of the "Auction Rate Municipal Preferred Stock, Series T7" and the "Auction Rate Municipal Preferred Stock, Series T28" and decreasing the liquidation preferences thereof as follows:
(a) By striking out the "DESIGNATION" set forth in the first paragraph of Article SECOND of the Articles Supplementary and inserting in lieu thereof the following:
"SERIES T7: A series of 2,600 shares of preferred stock, par value $.01 per share, liquidation preference of $25,000 per share plus an amount equal to accumulated but unpaid dividends (whether or not earned or declared) thereon plus the premium, if any, resulting from the designation of a Premium Call Period, is hereby designated "Auction Rate Municipal Preferred Stock, Series T7." Each share of Auction Rate Municipal Preferred Stock, Series T7 shall have such preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Corporation's Charter applicable to preferred stock of the Corporation, as are set forth in these Articles Supplementary. The Auction Rate Municipal Preferred Stock, Series T7 shall constitute a separate series of preferred stock of the Corporation, and each share of the Auction Rate Municipal Preferred Stock, Series T7 shall be identical."
"SERIES T28: A series of 2,600 shares of preferred stock, par value $.01 per share, liquidation preference of $25,000 per share plus an amount equal to accumulated but unpaid dividends (whether or not earned or declared) thereon plus the premium, if any, resulting from the designation of a Premium Call Period, is hereby designated "Auction Rate Municipal Preferred Stock, Series T28. Each share of Auction Rate Municipal Preferred Stock, Series T28 shall have such preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Corporation's Charter applicable to preferred stock of the Corporation, as are set forth in these Articles Supplementary. The Auction Rate Municipal Preferred Stock, Series T28 shall constitute a separate series of preferred stock of the Corporation, and each share of the Auction Rate Municipal Preferred Stock, Series T28 shall be identical."
(b) By striking out the first sentence of Paragraph 3 (Liquidation Rights) of Article SECOND of the Articles Supplementary and inserting in lieu thereof the following:
"3. Liquidation Rights. Upon any, liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the Holders shall be entitled to receive, out of the assets of the Corporation available for distribution to shareholders, before any distribution or payment is made upon any Common Stock or any other capital stock ranking junior in right of payment upon liquidation to the Preferred Shares, the sum of $25,000 plus accumulated but unpaid dividends (whether or not earned or declared) thereon plus the premium, if any, resulting from the designation of a Premium Call Period to the date of distribution, and after such payment the holders of Preferred Shares will be entitled to no other payments other than Additional Dividends as provided in paragraph 2(e) hereof."
FOURTH: Effective as of the Effective Date, each share of the issued and outstanding "Auction Rate Municipal Preferred Stock, Series T7" shall be converted into two (2) shares of the "Auction Rate Municipal Preferred Stock, Series T7," each of which shall have all of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption as are afforded to each and every other share of the "Auction Rate Municipal Preferred Stock, Series T7" pursuant to the Charter of the Corporation (as amended by these Articles of Amendment) and the Maryland General Corporation Law.
FIFTH: Effective as of the Effective Date, each share of the issued and outstanding "Auction Rate Municipal Preferred Stock, Series T28" shall be converted into two (2) shares of the "Auction Rate Municipal Preferred Stock, Series T28," each of which shall have all of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption as are afforded to each and every other share of the "Auction Rate Municipal Preferred Stock, Series T28" pursuant to the Charter of the Corporation (as amended by these Articles of Amendment) and the Maryland General Corporation Law.
SIXTH: The amendment to the Charter of the Corporation set forth in these Articles of Amendment was advised by the Board of Directors of the Corporation in accordance with the Charter and Bylaws of the Corporation and the Maryland General Corporation Law.
SEVENTH: The amendment to the Charter of the Corporation set forth in these Articles of Amendment was approved by the stockholders of the Corporation at a meeting of the stockholders of the Corporation held on May 16, 1995 in accordance with the Charter and Bylaws of the Corporation and the Maryland General Corporation Law.
EIGHTH: The amendment to the Charter of the Corporation set forth in these Articles of Amendment changes and reclassifies certain of the authorized shares of the capital stock of the Corporation into additional authorized shares of the "Auction Rate Municipal Preferred Stock, Series T7" and the "Auction Rate Municipal Preferred Stock, Series T28," respectively, but does not increase the aggregate number of authorized shares of the capital stock of the Corporation. Prior to the Effective Date, there were 1,300 authorized shares of the "Auction Rate Municipal Preferred Stock, Series T7." As of the Effective Date, there will be 2,600 shares of the "Auction Rate Municipal Preferred Stock, Series T7." Prior to the Effective Date, there were 1,300 authorized shares of the "Auction Rate Municipal Preferred Stock, Series T28." As of the Effective Date, there will be 2,600 shares of the "Auction Rate Municipal Preferred Stock, Series T28."
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed in its name and on its behalf by its President and its corporate seal to be affixed and attested to by its Secretary as of the 13th day of June, 1995.
ATTEST: THE BLACKROCK INVESTMENT QUALITY
MUNICIPAL TRUST INC.
/s/ Karen H. Sabath By /s/Ralph L. Schlosstein (SEAL) --------------------------- -------------------------- Karen H. Sabath Ralph L. Schlosstein Secretary President |
The undersigned, being the duly elected and acting President of The BlackRock Investment Quality Municipal Trust Inc. hereby acknowledges that the foregoing Articles of Amendment, of which this certificate is a part, is the act and deed of The BlackRock Investment Quality Municipal Trust Inc., and certifies, under the penalties for perjury, to the best of his knowledge, information and belief, that all matters and facts set forth therein are true in all material respects.
/s/Ralph L. Schlosstein ------------------------------- Ralph L. Schlosstein President |
APPENDIX B-3
FORM OF
ARTICLES SUPPLEMENTARY
OF THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC., a Maryland corporation having its principal Maryland office in the City of Baltimore (the "Corporation"), certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to the authority expressly vested in the Board of Directors of the Corporation by article fifth of its Charter, the Board of Directors has reclassified 662 authorized and unissued shares of common stock of the Corporation as preferred stock of the Corporation by increasing the number of shares of stock designated as Auction Rate Municipal Preferred Stock, Series T7 from 5,200 to 5,862.
SECOND: All of the authorized shares of the Auction Rate Municipal Preferred Stock, Series T7 shall be subject in all respects to the preferences, voting powers, restrictions, qualifications, and terms and conditions of redemption applicable to shares of Auction Rate Municipal Preferred Stock, Series T7 as provided in the Corporation's Charter; provided, however, that the Initial Dividend Period for such 662 shares shall be days and the Initial Dividend Rate for such shares shall be %.
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be signed and acknowledged in its name and on its behalf on this ___ day of ________________, 2000, by its President, who acknowledges that these Articles Supplementary are the act of the Corporation and, to the best of his knowledge, information and belief and under penalties of perjury, all matters and facts contained in these Articles Supplementary are true in all material respects.
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL
TRUST INC.
By:__________________________________________
Ralph L. Schlosstein
President
Attest:
PART C - OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(1) FINANCIAL STATEMENTS:
Included in Part A of the Registration Statement
Financial Highlights for the period ended October 31, 1993 each of the five years ended October 31, 1998 and the period ended April 30, 1999
PART I
Incorporated by reference to Registrant's most recent Annual and Semi-Annual Reports to Shareholders dated October 31, 1998 and April 30, 1999, respectively:
Independent Auditors Report for year ended October 31, 1998
Portfolio of Investments, October 31, 1998 (audited)
Portfolio of Investments, April 30, 1999 (unaudited)
Statement of Assets and Liabilities, October 31, 1998 (audited)
Statement of Assets and Liabilities, April 30, 1999 (unaudited)
Statement of Operations for the year ended October 31, 1998 (audited)
Statement of Operations for the six-month period ended April 30, 1999
(unaudited)
Statement of Changes in Net Investment Assets for the two years ended October 31, 1998 (audited)
Statement of Changes in Net Investment Assets for the six-month period ended April 30, 1999 (unaudited)
(2) EXHIBITS
The exhibits to this Registration Statement are listed in the Exhibit Index located elsewhere herein.
ITEM 25: MARKETING ARRANGEMENTS
See Sections ___ and ___ of the Purchase Agreement filed as an Exhibit herein.
ITEM 26: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Securities and Exchange Commission fees $
Printing and engraving expenses
Legal fees
Accounting expenses
Rating Agency fees
Blue Sky filing fees and expenses
Miscellaneous expenses
ITEM 27: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The Trust is not under common control with any person except to the extent that the existence of identical boards of directors or trustees as the case may be, at other investment companies advised by the Adviser would render the Trust under common control with such other investment companies. The Trust does not control any person.
ITEM 28: NUMBER OF HOLDERS OF SECURITIES
At December 31, 1999:
Common Stock, $.01 par value
Preferred Shares, $.01 par value
ITEM 29: INDEMNIFICATION
Under Registrant's Articles of Incorporation and By-Laws, the directors and officers of Registrant will be indemnified to the fullest extent allowed and in the manner provided by Maryland law and applicable provisions of the Investment Company Act of 1940, including advancing of expenses incurred in connection therewith. Indemnification shall not be provided however to any officer or director against any liability to the Registrant or its securityholders to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.
Article 2, Section 405.2 of the Maryland General Corporation Law provides that the Articles of Incorporation of a Maryland corporation may limit the extent to which directors or officers may be personally liable to the Corporation or its stockholders for money damages in certain instances. The Registrant's Articles of Incorporation provide that, to the fullest extent permitted by Maryland law, as it may be amended or interpreted from time to time, no director or officer of the Registrant shall be personally liable to the Registrant or its stockholders. The Registrant's Articles of Incorporation also provide that no amendment of the Registrant's Articles of Incorporation or repeal of any of its provisions shall limit or eliminate any of the benefits provided to directors and officers in respect of any act or omission that occurred prior to such amendment or repeal.
The underwriting agreements filed as Exhibit h hereto contain provisions requiring indemnification of the Registrant's underwriters by the Registrant.
ITEM 30: BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See "Management of the Trust" in the Prospectus and for information regarding the business of the investment adviser. For information as to the business, profession, vocation or employment of a substantial nature of each of the officers and directors of BlackRock Financial Management Inc., reference is made to the Adviser's current Form ADV filed under the Investment Advisers Act of 1940, incorporated herein by reference.
ITEM 31: LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of the Registrant are maintained in part at the office of the Adviser at 345 Park Avenue, New York, NY 10154, in part at the offices of State Street, 1776 Heritage Drive, North Quincy, Massachusetts 02171, in part at the offices of State Street Bank & Trust Company, 150 Royal Street, Canton, Massachusetts 02021 and in part at the offices of the Administrator, 800 Scudders Mill Road, Plainsboro, New Jersey 08536.
ITEM 32: MANAGEMENT SERVICES
Except as described in Part I of this Registration Statement under the caption "Management of the Trust," the Registrant is not a party to any management service related contract.
ITEM 33: UNDERTAKINGS
(1) Registrant undertakes to suspend the offering of its shares until it amends its prospectus if (a) subsequent to the effective date of its Registration Statement, the net assets value declines more than 10 percent from its net asset value as of the effective date of the Registration Statement, or (b) the net asset value increases to an amount greater than its net proceeds as stated in the prospectus.
(2) Not applicable
(3) Not applicable
(4) Not applicable
(5) Registrant undertakes that:
(a) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as a part of a registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant under Rule 497(h) under the Securities Act of 1933 shall be deemed to be a part of this Registration Statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof.
(6) Registrant undertakes to send by first class mail or other means designed to ensure equally prompt delivery, within two business days of receipt of a written or oral request, any Statement of Additional Information.
(7) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding (is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, and State of New York, on the ___ day of January, 2000.
THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the date indicated.
Signatures Title Date
---------- ----- ----
*
-------------------------- President (Principal Executive Officer) January 3, 2000
Ralph L. Schlosstein and Director
*
-------------------------- Treasurer (Principal Financial and January 3, 2000
Henry Gabbay Accounting Officer)
*
-------------------------- Director January 3, 2000
Laurence D. Fink
*
-------------------------- Director January 3, 2000
Andrew F. Brimmer
*
-------------------------- Director January 3, 2000
Richard E. Cavanagh
*
-------------------------- Director January 3, 2000
Kent Dixon
*
-------------------------- Director January 3, 2000
Frank J. Fabozzi
*
-------------------------- Director January 3, 2000
James Clayburn LaForce, Jr.
*
-------------------------- Director January 3, 2000
Walter F. Mondale
|
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER PAGE
------ ----
a. (1) Articles of Incorporation*
(2) Articles of Amendment dated July 13 1994 (for outstanding
preferred shares)*
(3) Articles of Amendment dated June 13, 1995 (for outstanding
preferred shares)*
(4) Form of Articles Supplementary (for New Preferred Shares)*
b. By-Laws*
c. None
d. (1) Specimen Stock Certificate Representing Shares of
Common Stock*
(2) Form of Specimen Stock Certificate Representing Series T7 Preferred Shares*
(3) Form of Specimen Stock Certificate Representing Series T28 Preferred Shares*
e. Dividend Reinvestment Plan*
f. Not Applicable
g. (1) Advisory Agreement*
(2) Administration Agreement*
h. (1) Form of Purchase Agreement for initial public offeringt+
(2) Form of Master Agreement Among Underwriters for initial public offering+
(3) Form of Master Selected Dealer Agreement for initial public offering+
i. Not Applicable
j. (1) Custodian Agreement*
(2) Transfer Agent Agreement*
k. (1) Auction Agent Agreement*
(2) Broker-Dealer Agreement*
(3) Depository Agreement*
l. Opinion and consent of counsel+
m. Not Applicable
n. Consent of Independent Accountants+
o. Not Applicable
p. Not Applicable
q. Not Applicable
r. Code of Ethics+
s. Powers of Attorney*
|
ARTICLES OF INCORPORATION
OF
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
* * * * * *
ARTICLE I
THE UNDERSIGNED, Joseph W. Weikel, whose post office address is 10 Light Street, Baltimore, Maryland 21202, being at least eighteen (18) years of age, hereby forms a corporation under and by virtue of the Maryland General Corporation Law.
ARTICLE II
NAME
The name of the Corporation is The BlackRock Investment Quality Municipal Trust Inc. (the "Corporation").
ARTICLE III
PURPOSES AND POWERS
The purposes for which the Corporation is formed are to act as an investment company under the federal Investment Company Act of 1940, as amended (the "1940 Act"), and to exercise and enjoy all of the general powers, rights and privileges granted to, or conferred upon, corporations by the Maryland General Corporation Law now or hereafter in force.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the Corporation in the State of Maryland is c/o The Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202. The name of the resident agent of the Corporation in the State of Maryland is The Corporation Trust Incorporated, a corporation of the State of Maryland, and the post office address of the resident agent is 32 South Street, Baltimore, Maryland 21202.
ARTICLE V
CAPITAL STOCK
(1) The total number of shares of capital stock of all classes which the Corporation shall have authority to issue in Two Hundred Million (200,000, 000) shares, all of which shall have a par value of one cent ($.01) per share and of the aggregate par value of Two Million Dollars ($2,000,000).
(2) (a) The Board of Directors of the Corporation is authorized to classify or to reclassify, from time to time, any unissued shares of stock of the Corporation, whether now or thereafter authorized, by setting, changing or eliminating the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms and conditions of or rights to require redemption of the stock.
(b) Without limiting the generality of the foregoing, the dividends and distributions or other payments with respect to the stock of the Corporation, and with respect to each class that hereafter may be created, shall be in such amount as may be declared from time to time by the Board of Directors, and such dividends and distributions may vary from class to class to such extent and for such purposes as the Board of Directors may deem appropriate, including, but not limited to, the purpose of complying with requirements of regulatory or legislative authorities.
(c) Until such time as the Board of Directors shall provide otherwise pursuant to the authority granted in this section (2) all the authorized shares of the Corporation are designated as Common Stock. Shares of the Common Stock and the holders thereof, and shares of any class and the holders thereof, shall be subject to the following provisions, provided, however, that if no shares of any class other than Common Stock are outstanding, the shares of the Common Stock and the holders thereof shall nevertheless be subject to the following provisions except to the extent that such provisions are by their terms applicable only when shares of two or more classes are outstanding.
(3) The net asset value of each share of the Corporation's capital stock issued, sold or purchased at net asset value shall be the current net asset value per share as determined in accordance with procedures adopted from time to time by the Board of Directors which comply with the 1940 Act.
(4) Shares of each class of stock shall be entitled to such dividends or distributions, in stock or in cash or both, as may be declared from time to time by the Board of Directors, acting in its sole discretion, with respect to such class.
(5) In the event of the liquidation or dissolution of the Corporation, the holders of the Common Stock of the Corporation's stock shall be entitled to receive all the assets of the Corporation not attributable to other classes of stock through any preference. The assets so distributable to the stockholders shall be distributed among such stockholders in proportion to the number of shares of that class held by them and recorded on the books of the Corporation.
(6) Unless otherwise expressly provided in these Article of Incorporation, including any Articles Supplementary creating any class of capital stock, on each matter submitted to a vote of stockholders, each holder of a share of capital stock of the Corporation shall be entitled to one vote for each share standing in such holder's name on the books of the Corporation, irrespective of the class thereof, and all shares of all classes of capital stock shall vote together as a single class; provided, however, that as to any matter with respect to which a separate vote of any class is required by the 1940 Act or any rules, regulations or orders issued thereunder, or the Maryland General Corporation law, such requirement as to a separate vote by that class shall apply in lieu of a vote of all classes voting together as a single class as described above.
(7) The Corporation shall be entitled to purchase shares of its capital stock, to the extent that the Corporation may lawfully effect such purchase under the laws of the State of Maryland, upon such terms and conditions and for such consideration as the Board of Directors shall deem advisable.
(8) All shares purchased by the Corporation shall constitute authorized but unissued shares and the number of the authorized shares of stock of the Corporation shall not be reduced by the number of any shares purchased by it. Unless and until their classification is changed in accordance with section (2) of this Article V, all shares of capital stock so purchased shall continue to belong to the same class to which they belonged at the time of their purchase.
(9) The Corporation may issue shares of stock in fractional denominations to the same extent as its whole shares, and shares in fractional denominations shall be shares of capital stock having proportionately to the respective fractions represented thereby all the rights of whole shares, including without limitation, the right to vote, the right to receive dividends and distributions, and the right to participate upon liquidation of the Corporation, but excluding the right to receive a stock certificate representing fractional shares.
(10) All persons who shall acquire capital stock or other securities of the Corporation shall acquire the same subject to the provisions of these Articles of Incorporation and the By-Laws of the Corporation, as each may be amended from time to time.
ARTICLE VI
PROVISIONS FOR DEFINING, LIMITING AND
REGULATING CERTAIN POWERS OF THE CORPORATION
AND OF THE DIRECTORS AND STOCKHOLDERS
(1) The number of directors of the Corporation shall initially be two (2), which number may be increased by or pursuant to the By-Laws of the Corporation but shall never be less than two (2), unless the Corporation has three (3) or more stockholders during which time the number of directors shall never be less than three (3). In addition, and notwithstanding the preceding sentence, the number of the Corporation's directors shall be increased by or pursuant to the Corporation's By-Laws to a number greater than or equal to three prior to or at the Corporation's first annual meeting of stockholders (the "initial annual meeting"). The names of the persons who shall act as directors until the initial annual meeting and until their successors are duly elected and qualify are:
Ralph L. Schlosstein
Laurence D. Fink
Beginning with the initial annual meeting, the directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. At the initial annual meeting of stockholders, Class I directors shall be elected for a one-year term, Class II directors for a two-year term and Class III directors for a three-year term. At each annual meeting of stockholders beginning with the annual meeting of stockholders next succeeding the initial annual meeting, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term. A director elected at an annual meeting shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. If the number of directors is changed, any increase or decrease shall be apportioned among the classes, as of the annual meeting of stockholders next succeeding any such change, so as to maintain a number of directors in each class as nearly equal as possible. In no case shall a decrease in the number of directors shorten the term of any incumbent director. Any vacancy on the Board of Directors that results from an increase in the number of directors may be filled by a majority of the entire Board of Directors, provided that a quorum is present, and any other vacancy occurring in the Board of Directors may be filled by a majority of the directors then in office whether or not sufficient to constitute a quorum, or by a sole remaining director; provided, however, that if the stockholders of any class of the Corporation's capital stock are entitled separately to elect one or more directors, a majority of the remaining directors elected by that class or the sole remaining director elected by that class may fill any vacancy among the number of directors elected by that class. A director elected by the Board of Directors to fill any vacancy in the Board of Directors shall serve until the next annual meeting of stockholders and until his successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. At any annual meeting of stockholders, any director elected to fill any vacancy in the Board of Directors that has arisen since the preceding annual meeting of stockholders (whether or not any such vacancy has been filled by election of a new director by the Board of Directors) shall hold office for a term which coincides with the remaining term of the class to which such directorship was previously assigned, if such vacancy arose other than by an increase in the number of directors, and until his successor shall be elected and shall qualify. In the event such vacancy arose due to an increase in the number of directors, any director so elected to fill such vacancy at an annual meeting shall hold office for a term which coincides with that of the class to which such directorship has been apportioned as heretofore provided, and until his successor shall be elected and shall qualify. A director may be removed for cause only, and not without cause, and only by action taken by the holders of at least seventy-five percent (75%) of the shares of capital stock then entitled to vote in an election of such director.
(2) The Board of Directors of the Corporation is hereby empowered to authorize the issuance from time to time of shares of capital stock, whether now or hereafter authorized, for such consideration as the Board of Directors may deem advisable, subject to such limitations as may be set forth in these Articles of Incorporation or in the By-Laws of the Corporation or in the Maryland General Corporation Law or the 1940 Act.
(3) Each person who at any time is or was a director or officer of the Corporation shall be indemnified by the Corporation to the fullest extent permitted by the Maryland General Corporation Law as it may be amended or interpreted from time to time, including the advancing of expenses, subject to any limitations imposed by the 1940 Act and the Rules and Regulations promulgated thereunder. Furthermore, to the fullest extent permitted by Maryland law, as it may be amended or interpreted from time to time, subject to the limitations imposed by the 1940 Act and the Rules and Regulations promulgated thereunder, no director or officer of the Corporation shall be personally liable to the Corporation or its stockholders. No amendment of the Charter of the Corporation or repeal of any of its provisions shall limit or eliminate any of the benefits provided to any person who at any time is or was a director or officer of the Corporation under this Section in respect of any act or omission that occurred prior to such amendment or repeal.
(4) The Board of Directors of the Corporation shall have the exclusive authority to make, alter or repeal from time to time any of the By-Laws of the Corporation except any particular By-Law which is specified as not subject to alteration or repeal by the Board of Directors, subject to the requirements of the 1940 Act and the Rules and Regulations promulgated thereunder.
ARTICLE VII
DENIAL OF PREEMPTIVE RIGHTS
No stockholder of the Corporation shall by reason of his holding shares of capital stock have any preemptive or preferential right to purchase or subscribe to any shares of capital stock of the Corporation, now or hereafter authorized, or any notes, debentures, bonds or other securities convertible into shares of capital stock, now or hereafter to be authorized, whether or not the issuance of any such shares of capital stock, or notes, debentures, bonds or other securities would adversely affect the dividend or voting rights of such stockholder; and the Board of Directors may issue shares of any Class or capital stock of the Corporation, or any notes, debentures, bonds, or other securities convertible into shares of any class of capital stock of the Corporation, either, whole or in part, to the existing stockholders.
ARTICLE VIII
CERTAIN VOTES OF STOCKHOLDERS
(1) Except as otherwise provided in these Articles of Incorporation and notwithstanding any provision of the Maryland General Corporation Law (other than Sections 3-601 through 3-603 of the Maryland General Corporation Law or any successors thereto) requiring approval by the stockholders (or any class of stockholders) of any action by the affirmative vote of a greater proportion than a majority of the votes entitled to be cast on the matter, any such action may be taken or authorized upon the concurrence of a majority of the number of votes entitled to be cast thereon (or a majority of the number of votes entitled to be cast thereon as a separate class).
(2) Notwithstanding the terms of Section 3-603(e)(1)(iv) of the
Maryland General Corporation Law (or any successor thereto) and
the provisions of Section (1) of this Article VIII, the
Corporation hereby expressly elects to be subject to the
requirements of Section 3-602 of the Maryland General Corporation
Law. The amendment, alteration, modification, or repeal of this
Section (2) of Article VIII of these Articles of Incorporation
shall require the vote specified in Section 3-602 of the Maryland
General Corporation law.
ARTICLE IX
DETERMINATION BINDING
Any determination made in good faith, so far as accounting matters are involved, in accordance with accepted accounting practice pursuant by or pursuant to the authority of the direction of the Board of Directors, as to the amount of assets, obligations or liabilities of the Corporation, as to the amount of net income of the Corporation from dividends and interest for any period or amounts at any time legally available for the payment of dividends, as to the amount of any reserves or charges set up and the propriety thereof, as to the time of or purpose for creating reserves or as to the use, alteration or cancellation of any reserves or charges (whether or not any obligation or liability for which such reserves or charges shall have been created, shall have been paid or discharges or shall be then or thereafter be required to be paid or discharged ), as to the price of any security owned by the Corporation or as to any other matters relating to the issuance, sale, redemption or other acquisition or disposition of securities or shares of capital stock of the Corporation, and any reasonable determination made in good faith by the Board of Directors shall be final and conclusive, and shall be binding upon the Corporation and all holders of its capital stock, past, present and future, and shares of the capital stock of the Corporation are issued and sold on the condition and understanding, evidenced by the purchase of shares of capital stock or acceptance of share certificates, that any and all such determinations shall be binding as aforesaid. No provision of these Articles of Incorporation shall be effective to (a) require a waiver of compliance with any provision of the Securities Act of 1933, as amended, or the 1940 Act, or of any valid rule, regulation or order of the Securities and Exchange Commission thereunder or (b) protect or purport to protect any director or officer of the Corporation against any liability to the Corporation or its security holders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office.
ARTICLE X
PRIVATE PROPERTY OF STOCKHOLDERS
The private property of stockholders shall not be subject to the payment of corporate debts to any extent whatsoever.
ARTICLE XI
PERPETUAL EXISTENCE
The Corporation shall have perpetual existence.
ARTICLE XII
CONVERSION TO OPEN-END COMPANY
Notwithstanding any other provisions of these Articles of Incorporation or the By-Laws of the Corporation, a favorable vote of a majority of the total number of directors fixed in accordance with the By- Laws of the Corporation and the favorable vote of the holders of at least seventy-five percent (75%) of the shares of capital stock of the Corporation entitled to be voted on the matter shall be required to approve, adopt or authorize an amendment to these Articles of Incorporation that makes the Common Stock or any other class of capital stock a "redeemable security" as that term is defined in the 1940 Act.
The Corporation shall notify the holders of all capital securities of the approval, in accordance with the preceding paragraph of this Article XII, of any amendment to these Articles of Incorporation that makes the Common Stock a "redeemable security" (as that term is defined in the 1940 Act) no later than (30) days prior to the date of filing of such amendment with the Department of Assessments and Taxation (or any successor agency) of the State of Maryland; such amendment may not be so filed, however, until the later of (a) ninety (90) days following the date of approval of such amendment by the holders of capital securities in accordance with the preceding paragraph of this Article XII and (b) the next January 1 or July 1, whichever is sooner, following the date of such approval by holders of capital securities.
ARTICLE XIII
AMENDMENT
The Corporation reserves the right to amend, alter, change, or repeal
any provision contained in these Articles of Incorporation, in the manner
now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
Notwithstanding any other provisions of these Articles of Incorporation or
the By-laws of the Corporation (and by law, these Articles of Incorporation
or the By-Laws of the Corporation), the amendment or repeal of Section (1),
Section (3), or Section (4) of Article VI, Section (1) of Article VIII,
Article X, Article XI, Article XII or this Article XIII of these Articles
of Incorporation shall require the affirmative vote of the holders of at
least seventy-five percent (75%) of the shares then entitled to be voted on
the matter.
IN WITNESS WHEREOF, the undersigned incorporator of the BlackRock Investment Quality Municipal Trust Inc. hereby executes the foregoing Articles of Incorporation and acknowledges the same to be his act and further acknowledges that, to the best of his knowledge, the matters and facts set forth therein are true in all material respects under the penalties of perjury.
Dated the 19th day of November, 1992.
/s/ Joseph W. Weikel ------------------------- Joseph W. Weikel |
EXHIBIT a.(2)
ARTICLES OF AMENDMENT
OF
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
The undersigned, on behalf of THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC., a Maryland corporation having its principal Maryland office in the City of Baltimore ("the Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland ("SDAT") that:
FIRST: The charter of the Corporation is hereby amended by deleting the provisions of the Articles Supplementary of the Corporation (which were approved and received for record by SDAT on March 30, 1993) in their entirety, and inserting in lieu thereof the following provisions:
"FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by article fifth of its Charter, the Board of Directors has reclassified 2,600 authorized and unissued shares of common stock of the Corporation as preferred stock of the Corporation and has given general authorization for the issuance of two series of 1,300 shares each, as the case may be, of preferred stock, par value $.01 per share, liquidation preference $50,000 per share plus an amount equal to accumulated but unpaid dividends (whether or not earned or declared) thereon plus the premium, if any resulting from the designation of a Premium Call Period, designated respectively Auction Rate Municipal Preferred Stock, Series T7 and Auction Rate Municipal Preferred Stock, Series T28.
SECOND: The Executive Committee of the Board of Directors of the Corporation, acting in accordance with Sections 2-208 and 2-411 of the Maryland General Corporation Law, has fixed the preferences, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption, of the shares of each such series of preferred stock as follows:
DESIGNATION
SERIES T7: A series of 1,300 shares of preferred stock, par value $.01 per share, liquidation preference $50,000 per share plus an amount equal to accumulated but unpaid dividends (whether or not earned or declared) thereon plus the premium, if any, resulting from the designation of a Premium Call Period, is hereby designated "Auction Rate Municipal Preferred Stock, Series T7". Each share of Auction Rate Municipal Preferred Stock, Series T7 shall be issued on April 1, 1993; have an Initial Dividend Rate of 2.30% per annum and the Initial Dividend Payment Date shall be April 14, 1993; and have such other preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Corporation's Charter Applicable to Preferred stock of the Corporation, as are set forth in these Articles Supplementary. The Auction Rate Municipal Preferred Stock, Series T7 shall constitute a separate series of preferred stock of the Corporation, and each share of Auction Rate Municipal Preferred Stock, Series T7 shall be identical.
SERIES T28: A series of 1,300 shares of preferred stock, par value $.01 per share, liquidation preference $50,000 per share plus an amount equal to accumulated but unpaid dividends (whether or not earned or declared) thereon plus the premium, if any, resulting from the designation of a Premium Call Period, is hereby designated "Auction Rate Municipal Preferred Stock, Series T28". Each share of Auction Rate Municipal Preferred Stock, Series T28 shall be issued on April 1, 1993; have an Initial Dividend Rate of 2.35% per annum and the Initial Dividend Payment Date shall be May 5, 1993; and have such other preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Corporation's Charter applicable to preferred stock of the Corporation, as are set forth in these Articles Supplementary. The Auction Rate Municipal Preferred Stock, Series T28 shall constitute a separate series of preferred stock of the Corporation, and each share of Auction Rate Municipal Preferred Stock, Series T28 shall be identical.
1. Definitions. (a) Unless the context or use indicates another or different meaning or intent, in these Articles Supplementary the following terms have the following meanings, whether used in the singular or plural.
"'AA' Composite Commercial Paper Rate" for any period less than 183 days as of any date means (i) the Interest Equivalent of the rate on commercial paper for such period 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 nationally recognized statistical rating organization, as the rate for such period is made available on a discount basis or otherwise by the Federal Reserve Bank of New York for the Business Day immediately preceding such date, or (ii) in the event that the Federal Reserve Bank of New York does not make available at such a rate, then the arithmetic average of the Interest Equivalent of the rate on commercial paper for such period placed on behalf of such issuers, as quoted to the Auction Agent on a discount basis or otherwise by the Commercial Paper Dealers for the close of business on the Business Day immediately preceding such date. If a Commercial Paper Dealer does not quote a rate required to determine the "AA" Composite Commercial Paper Rate for such period, the "AA" Composite Commercial Paper rate for such period will be determined on the basis of the quotation or quotations furnished by any Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers selected by the Corporation to provide such rate or rates not being supplied by the Commercial Paper Dealer.
"Accountant's Confirmation" has the meaning set forth in paragraph 7(c) of these Articles Supplementary.
"Additional Dividend" has the meaning set forth in paragraph 2(e) of these Articles Supplementary.
"Adviser" means the Corporation's investment adviser, BlackRock Financial Management L.P., Blackstone Financial Management, L.P., and any successor thereto.
"Affiliate" shall mean any person, known to the Auction Agent to be controlled by, in control of, or under common control with, the Corporation.
"Agent Member" means a member of the Securities Depository that will act on behalf of an existing Holder of one or more Preferred Shares or a Potential Holder.
"Anticipation Notes" means the following Municipal Obligations:
tax anticipation notes, revenue anticipation notes and tax and revenue
anticipation notes.
"Applicable Percentage" has the meaning set forth in paragraph 11(a)(vi) of these Articles Supplementary.
"Applicable Rate" means (i) for purposes of the Auction Procedures, the rate per annum or, in connection with any Auction in which Bid Requirements are imposed by the Corporation, the method by which one or more such rates may be determined, at which cash dividends are payable (if declared) on the preferred Shares or Other Preferred Shares, as the case may be, for any Dividend Period and any Dividend Payment Period included therein and (ii) for purposes of determining the amount of cash dividends payable (if declared) at any Dividend Payment Date, the rate per annum (including in the case of any Applicable rate expressed as a Spread the rate per annum determined by periodic application of such Spread to the applicable rate expressed as a Spread the rate per annum determined by periodic application of such Spread to the applicable Reference Index or Reference Security at the frequency and weighting, if any, specified in the related Bid Requirements, subject to any Maximum Applicable Rate applicable to such Dividend Payment Period) at which cash dividends are payable (if declared) on the Preferred Shares, and includes, to the extent provided by paragraph 2(c)(i) of these Articles Supplementary, any late charge provided for by such paragraph.
"Auction" means a periodic operation of the Auction Procedures.
"Auction Agent" means Banker's Trust Company unless and until another commercial bank, trust company or other financial institution appointed by a resolution of the Board of Directors of the Corporation or a duly authorized committee thereof enters into an agreement with the Corporation to follow the Auction Procedures for the purpose of determining the Applicable Rate and to act as transfer agent, registrar, dividend disbursing agent and redemption agent for the Preferred Shares and Other Preferred Shares.
"Auction Procedures" means the procedures for conducting Auctions set forth in paragraph 11 of these Articles Supplementary.
"Bid Requirements" means (i) any requirement for a Special Dividend Period longer than 91 days that Bids by Potential Holders shall be expressed as a Spread below, at or above the rate of a specified Reference Index or Reference Security, (ii) the Reference Index or Reference Security, the most recently announced rate thereof and the frequency with which the rate of Reference Index or the Reference Security, as the case may be, shall be recalculated for purposes of determining rates expressed as Spreads thereon in accordance with these Articles Supplementary, which frequency shall be the same as the frequency with which the person maintaining the Reference Index being utilized recalculates such Reference Index, or the same as the frequency with which the interest rate on the Reference Security being utilized changes or such other frequency as the Corporation shall specify (which specification may include a formula specified by the Corporation indicating the weighting to be given to each recalculation of the Reference Security during a specific period), (iii) the frequency of Dividend Payment Dates during such Special Dividend Period (which shall not be more often than the frequency specified pursuant to clause (ii) above), (iv) one or more Minimum Applicable Rate or Rates (the Indicated Minimum Applicable Rate or Rates in the case of Bid Requirements set forth in a request for Special Dividend Period) and/or (v) one or more Special Dividend Period Reference Rate or Rates and the Maximum Applicable Rate or Rates (the Indicated Maximum Applicable Rate or Rates in the case of Bid Requirements set forth in a Request for Special Dividend Period) derivable from such Special Dividend Period Reference Rate or Rates, in each case as set forth in the Notice of Special Dividend Period for such Special Dividend Period.
"Broker-Dealer" shall mean any broker-dealer, or other entity permitted by law to perform the functions required of a Broker-Dealer in paragraph 11 of these Articles Supplementary, that has been selected by the Corporation and has entered into a Broker-Dealer Agreement with the Auction Agent that remains effective.
"Broker-Dealer Agreement" shall mean an agreement between the Auction Agent and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the procedures specified in paragraph 11 of these Articles Supplementary.
"Business Day" means a day on which the New York Stock Exchange, Inc. is open for trading and which is not a Saturday, Sunday or other day on which banks in the City of New York are authorized or obligated by laws to close.
"Charter" means the Charter, as amended and supplemented (including these Articles Supplementary), of the Corporation on file in the State Department of Assessments and Taxation of Maryland.
"Closing Transaction" means the termination of a futures contract or option position by taking a position opposite thereto.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Paper Dealers" means Merrill Lynch, Pierce, Fenner & Smith Incorporated and such other commercial paper dealer or dealers as the Corporation may from time to time appoint, or, in lieu of any thereof, their respective affiliates or successors.
"Common Stock" means the common stock, par value $.01 per share, of the Corporation.
"Corporation" means The BlackRock Investment Quality Municipal Trust Inc., a Maryland corporation.
"Date of Original Issue" means April 1, 1993, with respect to the Preferred Shares and the date on which the corporation originally issues any Other Preferred Shares with respect to such Other Preferred Shares.
"Deposit Securities" means cash, the book value of Municipal Obligations sold for which payment is due within five Business Days with counterparties rated at least Baa by Moody's and before the next Dividend Payment Date or Valuation Date, as the case may be, and Municipal Obligations rated at least A-1+ or SP-1+ by S&P, VMIG-1 or MIG-1 by Moody's.
"Discounted Value" means (i) with respect to a Moody's Eligible Asset, the lower of par and the quotient of the Market Value thereof divided by the applicable Moody's Discount Factor and (ii) with respect to an S&P Eligible Asset, the quotient of the Market Value thereof divided by the applicable S&P Discount Factor.
"Dividend Coverage Amount," as of any Valuation Date, means (i) the aggregate amount of cash dividends that will accumulate on all Outstanding Preferred Shares and Other Preferred Shares, in each case to (but not including) the next Dividend Payment Date therefor that follows such Valuation Date (calculated, in the case of cash dividends determined by application of a Spread to a Reference Index or Reference Security, by assuming that the Applicable Rate in effect for the immediately preceding Dividend Payment Period will remain in effect until the next Dividend Payment Period) plus the aggregate amount of any liabilities of the Corporation that are required to be paid on or prior to the next Dividend Payment Date less (ii) the combined Market Value of Deposit Securities irrevocably deposited with the Auction Agent for the payment of cash dividends on all Preferred Shares and Other Preferred Shares.
"Dividend Coverage Assets," as of any Valuation Date, means, in the case of Preferred Shares and Other Preferred Shares, Deposit Securities with maturity or tender payment dates not later in each case than the Dividend Payment Date therefor that follows such Valuation Date.
"Dividend Payment Date," with respect to Preferred Shares, has the meaning set forth in paragraph 2(b)(i) of these Articles Supplementary and, with respect to Other Preferred Shares, has the equivalent meaning.
"Dividend Payment Period" means the Initial Dividend Period and any Subsequent Dividend Payment Period.
"Dividend Period" means the Initial Dividend Period, any 28-day Dividend Period (in the case of Series T28 Preferred Shares) or 7-day Dividend Period (in the case of Series T7 Preferred Shares) and any Special Dividend Period.
"Existing Holder" means a Person who is listed as the holder of record of Preferred Shares in the Stock Books.
"Holder" means a Person identified as a holder of record of Preferred Shares in Stock Register.
"Independent Accountant" means a nationally recognized accountant, or firm of accountants, that is, with respect to the Corporation, an independent public accountant or firm of independent public accountants under the Securities Act of 1933, as amended.
"Indicated Maximum Applicable Rate" means the Maximum Applicable Rate that would apply if the Auction with respect to which it is specified were conducted on the date of the Request for Special Dividend Period in which such Indicated Maximum Applicable Rate is specified.
"Indicated Minimum Applicable Rate" means the Minimum Applicable Rate that would apply if the Auction with respect to which it is specified were conducted on the date of the Request for Special Dividend Period in which such Indicated Minimum Applicable Rate is specified.
"Initial Dividend Payment Date" means, with respect to each series of Preferred Shares and Other Preferred Shares, the Initial Dividend Payment Date specified herein.
"Initial Dividend Period," with respect to Preferred Shares, has the meaning set forth in paragraph 2(c)(i) of these Articles Supplementary and, with respect to Other Preferred Shares, has the equivalent meaning.
"Initial Dividend Rate," with respect to each series of Preferred shares, means the rate per annum applicable to the Initial Dividend Period for such series of Preferred Shares and, with respect to Other Preferred Shares, has the equivalent meaning.
"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.
"Interest Equivalent" means a yield on a 360-day basis of a discount basis security which is equal to the yield on an equivalent interest bearing security.
"Mandatory Redemption Price" means $50,000 per share of Preferred Shares plus an amount equal to accumulated but unpaid dividends (whether or not earned or declared) to the date fixed for redemption plus the premium, if any, resulting from the designation of a Premium Call Period.
"Market Value" of any asset of the Corporation shall be the market value thereof determined by the Pricing Service. Market Value of any asset shall include any interest accrued thereon. The Pricing Service shall value portfolio securities at the lower of the quoted bid price or the mean between the quoted bid and ask price or the yield equivalent when quotations are not readily available. 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 obligations of comparable quality, type of issue, coupon, maturity and rating; indications as to value from dealers; and general market conditions. The Pricing Service may employ electronic data processing techniques and/or a matrix system to determine valuations. If the Pricing Service fails to provide the Market Value of any Municipal Obligation, such Municipal Obligation shall be valued at the lower of two bid quotations (one of which shall be in writing) obtained by the Corporation from two dealers who are members of the National Association of Securities Dealers, Inc. and are making a market in such Municipal Obligations. 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 as determined by the Pricing Service or if the Pricing Service is not able to value such instruments they shall be valued at fair value on a consistent basis using methods determined in good faith by the Board of Directors.
"Maximum Applicable Rate," for any Dividend Payment Period with respect to Preferred Shares, has the meaning set forth in paragraph 11(a)(vi) of these Articles Supplementary and, with respect to Other Preferred Shares, has the equivalent meaning.
"Maximum Marginal Tax Rate: means the maximum marginal regular Federal individual income tax rate applicable to ordinary income or the maximum marginal regular Federal corporate income tax rate, whichever is greater.
"Maximum Potential Additional Dividend Liability," as of any Valuation Date, means the aggregate amount of Additional Dividends that would be due if the Corporation were to make Retroactive Taxable Allocations, with respect to any fiscal year, estimated based upon dividends paid and the amount of undistributed realized net capital gains and other taxable income earned by the Corporation, as of the end of the calendar month immediately preceding such Valuation Date and assuming such Additional Dividends are fully taxable.
"Minimum Applicable Rate," for any Dividend Payment Period with respect to Preferred Shares, has the meaning set forth in paragraph 11(a)(vii) of these Articles Supplementary and, with respect to Other Preferred Shares, has the equivalent meaning.
"Minimum Liquidity Level" means, as of any Valuation Date, an aggregate Market Value of the Corporation's Dividend Coverage Assets not less than the Dividend Coverage Amount.
"Moody's" means Moody's Investors Service or its successors.
"Moody's Discount Factor" means, for purposes of determining the Discounted Value of any Moody's Eligible Asset which is a Municipal Obligation, the percentage determined by reference to (i) (A) the rating by Moody's or S&P on such asset or (B) in the event the Municipal Obligation is insured under an insurance policy which guarantees the timely payment of interest on such Municipal Obligation and principal thereof to maturity, the Moody's insurance claims-paying ability rating of the issuer of the insurance policy (provided that for purposes of clause (B) if the insurance claims-paying ability of an issuer of an insurance policy is not rated by Moody's but is rated by S&P, such issuer shall be deemed to have a Moody's insurance claims-paying ability rating which is one full category lower than the S&P insurance claims-paying ability rating) and (ii) the shortest Moody's Collateral 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
---------------------------------------------------------
Moody's Collateral Period Aaa+ Aa+ A+ Paa* Other**
------------------------- ---- --- -- ---- -------
7 weeks or less . . . . . . . . 151% 159% 168% 202% 229%
8 weeks or less but greater
than seven weeks 154 164 173 205 235
9 weeks or less but greater
than eight weeks 158 169 179 209 242
_______________
+ Moody's rating.
** Municipal obligations not rated by Moody's but rated BBB-, BBB or
BBB+ by S&P.
|
; provided, however, in the event a Moody's Discount Factor applicable to a Municipal Obligation is determined by reference to an insurance claims- paying ability rating in accordance with clause (i)(B), such Moody's Discount Factor shall be increased by an amount equal to 50% of the difference between (a) the percentage set forth in the foregoing table under the applicable rating category and (b) the percentage set forth in the foregoing table under the rating category which is one category lower than the applicable rating category. If a Municipal Obligation is covered by a Portfolio Insurance policy which provides the Trust with an option to obtain Permanent Insurance with respect to such Municipal Obligations and such Portfolio Insurance policy has been approved in writing by Moody's, the Moody's Discount Factor rating category shall be determined by averaging the insurance claims paying ability rating of the Portfolio Insurance provider and the next lowest rating category.
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 MIG-1, VMIG-1 or P-1 by Moody's or 125% if such Obligations are not rated by Moody's but are rated A-1+ or SP-1+ or 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 Municipal Receivables (except to the extent provided in the definition thereof).
"Moody's Eligible Asset" means cash, a Municipal Receivable or a Municipal Obligation that (i) pays interest in cash, (ii) is publicly rated Baa or higher by Moody's or, if not rated by Moody's but rated by S&P, is rated at least BBB by S&P (provided that, for purposes of determining the Moody's Discount Factor applicable to any such S&P-rated Municipal Obligation, such Municipal Obligation (excluding any short-term Municipal Obligation) will be deemed to have a Moody's rating which is one full rating category lower than its S&P rating), (iii) does not have its Moody's rating suspended by Moody's and (iv) is part of an issue of Municipal Obligations of at least $10,000,000. Municipal Obligations issued by any one issuer, not rated by Moody's and rated BBB by S&P may comprise no more than 4% of total Municipal Obligations which are Moody's Eligible Assets; such BBB rated 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 Municipal Obligations which are Moody's Eligible Assets; such BBB, A and Baa rated 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 Municipal Obligations which are Moody's Eligible Assets; and such BBB, Baa, A and AA rated Municipal Obligations, if any, together with any Municipal Obligations issued by the same issuer and rated Aa by Moody's or AAA by S&P, may comprise no more than 20% of total Municipal Obligations which are Moody's Eligible Assets. Municipal Obligations issued by issuers located within a single state or territory, not rated by Moody's and rated BBB by S&P, may comprise no more than 12% of total Municipal Obligations which are Moody's Eligible Assets; such BBB rated Municipal Obligations, if any, together with any Municipal Obligations issued by issuers located within the same state or territory and rated Baa by Moody's or A by S&P, may comprise no more than 20% of total Municipal Obligations which are Moody's Eligible Assets; such BBB, Baa and A rated Municipal Obligations, if any, together with any Municipal Obligations issued by issuers located within the same state or territory and rated A by Moody's or AA by S&P, may comprise no more than 40% of total Municipal Obligations which are Moody's Eligible Assets; and such BBB, Baa, A and AA rated Municipal Obligations issued by issuers located within the same state or territory and rated Aa by Moody's or AAA by S&P, may comprise no more than 60% of total Municipal Obligations which are Moody's Eligible Assets. Additionally, Municipal Obligations whose ratings are determined by the claims paying ability ratings of the providers of Portfolio Insurance may comprise no more than 10% of the total Municipal Obligations which are Moody's Eligible Assets. When the Corporation sells a Municipal Obligation and agrees to repurchase it at a future date, the Corporation must count as a liability for the purposes of the Preferred Shares Basic Maintenance Amount the amount of the repurchase price of such Municipal Obligation and such Municipal Obligation is considered a Moody's Eligible Asset to the extent it satisfies Moody's current guidelines. When the Corporation buys a Municipal Obligation and agrees to sell it to another party at a future date and the long-term debt of such other party is rated at least A2 and the transaction has a term of 30 days or less, the cash to be received by the Corporation will be counted as a Moody's Eligible Asset; otherwise such Municipal Obligation will be counted as a Moody's Eligible Asset to the extent it satisfies Moody's current guidelines.
Notwithstanding the foregoing, an asset will not be considered a Moody's Eligible Asset if it is held in a margin account or if it is subject to any material lien, mortgage, pledge, security interest or security agreement of any kind, except for (i) Liens to secure payment for services rendered or cash advanced to the Corporation by the Adviser, the custodian of the Corporation's assets, the Auction Agent or any Broker- Dealers and (ii) any Lien by virtue of a repurchase agreement. In addition, an asset irrevocably deposited for the payment of any of the items set forth in clauses (i) A through F of the Preferred Shares Basic Maintenance Amount will not be considered Moody's Eligible Assets.
For purposes of the definition of Moody's Eligible Asset, references to the S&P rating BBB shall be deemed to include the S&P ratings BBB-, BBB and BBB+.
"Moody's Exposure Period" means a period that is the same length or longer than the number of days used in calculating the cash dividend component of the Preferred Shares Basic Maintenance Amount and shall initially be the period commencing on a given Valuation Date and ending 48 days thereafter.
"Moody's Hedging Transaction" means the selling of an exchange traded futures contract based on the Municipal Index or Treasury Bonds or the purchase of an exchange traded put option on such a futures contract or the writing of an exchange traded call option on such a futures contract.
"Moody's Volatility Factor" means 100% during any Dividend Period of greater than 49 days until 49 days prior to the last day of such Dividend Period; otherwise, "Moody's Volatility Factor" means 272% except during that time period where legislation increasing the federal income tax rate has been enacted into law and such increase has not yet taken effect, in which cash for such time period Moody's Volatility Factor shall be determined by reference to the increase in the Maximum Marginal Tax Rate as follows: for increases of up to 5%, 292%; for increases greater than 5% and up to 10%, 313%; for increases greater than 10% and up to 15%, 338%; for increases greater than 15% and up to 20%, 364%; for increases greater than 20% and up to 25%, 396%; for increases greater than 25% and up to 30%, 432%; for increases greater than 30% and up to 35%, 472%; for increases greater than 35% and up to 40%, 520%.
"Municipal Index" means The Bond Buyer Municipal Bond Index.
"Municipal Obligations" means "Municipal Obligations" as defined in the Corporation's Registration Statement on Form N-2 (File Nos. 33-59456 and 811-7354) on file with the Securities and Exchange Commission, as such Registration Statement may be amended from time to time.
"Municipal Receivables" means no more than the aggregate of the following: (i) the book value of receivables for Municipal Obligations sold as of or prior to a relevant Valuation Date if such receivables are due within five Business Days of such Valuation Date, and if the trades which generated such receivables are (A) settled through clearing house firms with respect to which the Corporation has received prior written authorization from Moody's or (B) 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 conditions (A) or (B) of the preceding clause (i).
"1940 Act" means the Investment Company Act of 1940, as amended from time to time.
"1940 Act Preferred Shares Asset Coverage" means 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 Corporation which are stock, including all outstanding Preferred Shares and Other Preferred 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 stock of a closed-end investment company as a condition of paying dividends on its common stock).
"1940 Act Cure Date," with respect to the failure by the Corporation to maintain the 1940 Act Preferred Shares Asset Coverage (as required by paragraph 6 of these Articles Supplementary) as of the last Business Day of each month, means the last Business Day of the following month.
"Non-Call Period" has the meaning set forth under "Specific Redemption Provisions" below.
"Non-Payment Period," with respect to each series of Preferred Shares, means any period commencing on and including the day on which the Corporation shall fail to (i) declare, prior to the close of business on the second Business Day preceding any Dividend Payment Date, for payment on or (to the extent permitted by paragraph 2(c)(i) of these Articles Supplementary) within three Business Days after such Dividend Payment Date to the Holders as of 12:00 noon, New York City time, on the Business Day preceding such Dividend Payment Date, the full amount of any dividend on Preferred Shares payable on such Dividend Payment Date or (ii) deposit, irrevocably in trust, in same-day funds, with the Auction Agent by 12:00 noon, New York City time, (A) on such Dividend Payment Date the full amount of any cash dividend on such shares payable (if declared) on such Dividend Payment Date or (B) on any redemption date for any Preferred Shares called for redemption, the Mandatory Redemption Price per share of such Preferred Shares or, in the case of an optional redemption, the Optional Redemption Price per share, and ending on and including the Business Day on which, by 12:00 noon, New York City time, all unpaid cash dividends and unpaid redemption prices shall have been so deposited or shall have otherwise been made available to Holders in same-day funds; provided that, a Non-Payment Period shall not end unless the Corporation shall have given at least five days' but no more than 30 days' written notice of such deposit or availability to the Auction Agent, all Existing Holders (at their addresses appearing in the Stock Books) and the Securities Depository. Notwithstanding the foregoing, the failure by the Corporation to deposit the funds provided for by clauses (ii)(A) and (ii)(B) above within three Business Days after a Dividend Payment Date or any Redemption Date, as the case may be, in each case to the extent contemplated by paragraph 2(c)(i) of these Articles Supplementary, shall not constitute a "Non-Payment Period".
"Non-Payment Period Rate" means, initially, 250% of the 30-day "AA" Composite Commercial Paper Rate (or 300% of such rate if the Corporation has provided notification to the Auction Agent prior to the Auction establishing the Applicable Rate for any dividend pursuant to paragraph 2(f) hereof that net capital gains or other taxable income will be included in such dividend on Preferred Shares). Such percentages will be used to calculate the Applicable Rate for any Non-Payment Period which occurs during a Special Dividend Period on either series of Preferred Shares and will be applied to the applicable Special Dividend Period Reference Rate then in effect with respect to such series. However, the Board of Directors of the Corporation shall have the authority to adjust, modify, alter or change from time to time the initial Non-Payment Period Rate if the Board of Directors of the Corporation determines and Moody's and S&P (and any Substitute Rating Agency in lieu of Moody's or S&P in the event either of such parties shall not rate the Preferred Shares) advise the Corporation in writing that such adjustment, modification, alteration or change will not adversely affect their then-current ratings on the Preferred Shares.
"Normal Dividend Payment Date" has the meaning set forth in paragraph 2(b)(i) of these Articles Supplementary.
"Notice of Redemption" means any notice with respect to the redemption of Preferred Shares pursuant to paragraph 4 of these Articles Supplementary.
"Notice of Revocation" has the meaning set forth in paragraph 2(c)(iii) of these Articles Supplementary.
"Notice of Special Dividend Period" has the meaning set forth in paragraph 2(c)(iii) of these Articles Supplementary.
"Optional Redemption Price" shall mean $50,000 per share plus an amount equal to accumulated but unpaid dividends (whether or not earned or declared) to the date fixed for redemption plus the premium, if any, resulting from the designation of a Premium Call Period.
"Original Issue Insurance" means insurance guaranteeing the timely payment of principal of, and interest on, a Municipal Obligation purchased by the issuer of a Municipal Obligation or by a third party at the time of issuance of such Municipal Obligation.
"Other Preferred Shares" means the Auction Rate Municipal Preferred Stock of the Corporation, other than the Preferred Shares.
"Outstanding" means, as of any date (i) with respect to Preferred Shares, Preferred Shares theretofore issued by the Corporation except, without duplication, (A) any Preferred Shares, theretofore cancelled or delivered to the Auction Agent for cancellation, or redeemed by the Corporation, or as to which a Notice of Redemption shall have been given and moneys shall have been deposited in trust by the Corporation pursuant to paragraph 4(c) and (B) any Preferred Shares as to which the Corporation or any Affiliate thereof shall be an Existing Holder and (ii) with respect to shares of Other Preferred Stock, has the equivalent meaning.
"Parity Stock" means the Preferred Shares and each other outstanding series of Preferred Stock the holders of which, together with the holders of the Preferred Shares, shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion top the full respective preferential amounts to which they are entitled, without preference or priority one over the other.
"Permanent Insurance" means insurance guaranteeing the timely payment of principal of, and interest on, a Municipal Obligation purchased by the Corporation upon payment of a single, predetermined insurance premium pursuant to an irrevocable commitment of the issuer of Portfolio Insurance covering such Municipal Obligation.
"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.
"Portfolio Insurance" means insurance guaranteeing the timely payment of principal of, and interest on, a covered Municipal Obligation only while such Municipal Obligation is owned by the Corporation.
"Potential Holder" shall mean any Person, including any Existing Holder, who may be interested in acquiring Preferred Shares (or, in the case of an Existing Holder, additional Preferred Shares).
"Preferred Shares" means, as the case may be, Auction Rate Municipal Preferred Stock, Series T7 or Auction Rate Municipal Preferred Stock, Series T28.
"Preferred Shares Basic Maintenance Amount," as of any Valuation Date, means the dollar amount equal to (i) the sum of (A) the product of the number of Preferred Shares and Other Preferred Shares outstanding on such Valuation Date multiplied by $50,000 plus the premium, if any, resulting from the designation of a Premium Call Period; (B) the aggregate amount of cash dividends that will have accumulated (whether or not earned or declared) for each share of Preferred Shares and Other Preferred Shares outstanding, in each case, to (but not including) the next Dividend Payment Date therefor that follows such Valuation Date (calculated, in the case of cash dividends determined by application of a Spread to a Reference Index or Reference Security, by assuming that the Applicable Rate in effect for the immediately preceding Dividend Payment Period will remain in effect until the next Dividend Payment Period); (C) the aggregate amount of cash dividends that would accumulate at the then current Maximum Applicable Rate (assuming notification has been given to the Auction Agent that net capital gains or other taxable income will be included in the relevant dividend as contemplated pursuant to paragraphs 2(f) and 11(a)(vi) of these Articles Supplementary) on any Preferred Shares and Other Preferred Shares outstanding from such Dividend Payment Date through the 48th day after such Valuation Date, multiplied by the larger of the Moody's Volatility Factor and the S&P Volatility Factor determined from time to time by Moody's and S&P, respectively (except that if such Valuation Date occurs during a Non- Payment Period, the cash dividend for purposes of calculation would accumulate at the then current Non-Payment Period Rate); (D) the amount of anticipated expenses of the Corporation for the 90 days subsequent to such Valuation Date; (E) the amount of the Corporation's Maximum Potential Additional Dividend Liability as of such Valuation Date; and (F) any current liabilities as of such Valuation Date to the extent not reflected in any of (i)(A) through (i)(E) (including, without limitation, and immediately upon determination, payables for Municipal Obligations purchased as of such Valuation Date) less (ii) the lesser of (A) either the Discounted Value of the Corporation's assets irrevocably deposited by the Corporation for the payment of any of (i)(A) through (i)(F) of the face value of such irrevocably deposited assets that mature prior to the payment date of the liabilities for which they are being deposited and are either fully guaranteed by the U.S. government or have a rating of either P-1, VMIG-1 or MIG-1 by Moody's and A-1+ or SP-1+ by S&P and (B) the Market Value of any of the Corporation's assets irrevocably deposited by the Corporation for the payment of any of (i)(A) through (i)(F).
For purposes of determining as of any Valuation Date whether the Corporation has Moody's Eligible Assets and S&P Eligible Assets each with an aggregate Discounted Value at least equal to the Preferred Shares Basic Maintenance Amount, the Corporation shall include as a liability in the calculation of the Preferred Shares Basic Maintenance Amount an amount calculated semi-annually equal to 150% of the estimated cost of obtaining Permanent Insurance with respect to Moody's Eligible Assets or S&P Eligible Assets, as applicable, that are (i) covered by Portfolio Insurance policies which provide the Corporation with the option to obtain such Permanent Insurance and (ii) are discounted by Moody's Discount Factor or S&P Discount Factor, as applicable, determined by reference to the insurance claims-paying ability rating of the issuer of such Portfolio Insurance policy.
"Preferred Shares Basic Maintenance Cure Date," with respect to the failure by the Corporation to satisfy the Preferred Shares Basic Maintenance Amount (as required by paragraph 7(a) of these Articles Supplementary) as of a given Valuation Date, means the fifth Business Day following such Valuation Date.
"Preferred Shares Basic Maintenance Report" means a report signed by the president, Treasurer, or Vice President of the Corporation which sets forth, as of the related Valuation Date, the assets of the Corporation, the Market Value and the Discounted Value thereof (seriatim and in aggregate), and the Preferred Shares Basic Maintenance Amount.
"Preferred Stock" means the preferred stock of the Corporation, and includes Preferred Shares and Other Preferred Shares.
"Premium Call Period" has the meaning set forth under "Specific Redemption Provisions" below.
"Pricing Service" shall mean J.J. Kenny Co., Inc. or any pricing service designated by the Board of Directors of the Corporation provided the Corporation obtains written assurance from S&P that such designation will not impair the rating then assigned by S&P to the Preferred Shares.
"Quarterly Valuation Date" means the last Business Day of each fiscal quarter of the Corporation in each fiscal year of the Corporation, commencing June 30, 1993.
"Reference Index" shall mean an index of interest rates on Treasury Securities, Municipal Obligations or high quality commercial paper or dividend rates on preferred stock of issuers registered as closed-end management investment companies under the 1940 Act that invest primarily in Municipal Obligations or any other index or instrument selected and approved by the Corporation's Board of Directors, after consultation with the Broker-Dealers and made available to the Auction Agent, as being an appropriate index or instrument, in each case expressed as a rate and devised and calculated not less often than monthly by one or more parties that are not affiliated with the Corporation and made available to the Corporation, the Auction Agent, the Broker-Dealers and existing and potential beneficial owners of the Preferred Shares.
"Reference Rate" means the higher of the 30-day "AA" Composite Commercial Paper Rate and the Taxable Equivalent of the Short-Term Municipal Bond Rate, or, in the case of a Special Dividend Period with a single Applicable Rate throughout such Special Dividend Period, the Special Dividend Period Reference Rate or, in the case of a Special Dividend Period with a varying Applicable Rate, the Reference Rate specified in the definition of S&P Volatility Factor that most closely approximates the length of the interval between periodic applications of the Spread to the relevant Reference Index or Reference Security.
"Reference Security" shall mean, in the case of a debt obligation, a particular debt obligation which is publicly traded, which is non callable prior to the termination of the Special Dividend Period with respect to which such Reference Security is relevant and the outstanding aggregate principal amount of which at the time of the Notice of Special Dividend Period exceeds $100 million or, in the case of a preferred stock, a preferred stock issue which is publicly traded, which is non-redeemable prior to the termination of the Special Dividend Period with respect to which such Reference Security is relevant and the outstanding liquidation value of which at the time of the Notice of Special Dividend Period exceeds $50 million.
"Request for Special Dividend Period" has the meaning set forth in paragraph 2(c)(iii) of these Articles Supplementary.
"Response" has the meaning set forth in paragraph 2(c)(iii) of these Articles Supplementary.
"Retroactive Taxable Allocation" has the meaning set forth in paragraph 2(e) of these Articles Supplementary.
"Right," with respect to Preferred Shares, has the meaning set forth in paragraph 2(e) of these Articles Supplementary and, with respect to Other Preferred Shares, has the equivalent meaning.
"Rightholder" has the meaning set forth in paragraph 2(e) of these Articles Supplementary.
"S&P" means Standard & Poor's Corporation or its successors.
"S&P Discount Factor" means, for purposes of determining the Discounted Value of any S&P Eligible Asset, the percentage determined by reference to (a)(i) in the event a Municipal Obligation is covered by a Portfolio Insurance policy which does not provide the Corporation with the option to obtain Permanent Insurance with respect to such Municipal Obligation, or is not covered by bond insurance, the S&P or Moody's rating on such Municipal Obligation, (ii) in the event a Municipal Obligation is covered by an Original Issue Insurance policy or a Secondary Insurance policy, the S&P Insurance claims-paying ability rating of the issuer of the policy or (iii) in the event a Municipal Obligation is covered by a Portfolio Insurance policy which provides the Corporation with the option to obtain Permanent Insurance with respect to such Municipal Obligation and such Portfolio Insurance policy has been reviewed and approved in writing by S&P, at the Corporation's option, the S&P or Moody's rating on such Municipal Obligation or the S&P insurance claims-paying ability rating of the issuer of the Portfolio Insurance policy and (b) the shortest S&P Collateral Period set forth opposite such rating that is the same length as or is longer than the S&P Exposure Period, in accordance with the table set forth below:
Rating Category
----------------------------------
Collateral Period AAA* AA* A* BBB*
-----------------
40 Business Days . . . . . . . . . . . 190% 195% 210% 250%
22 Business Days . . . . . . . . . . . 170 175 190 230
10 Business Days . . . . . . . . . . . 155 160 175 215
7 Business Days . . . . . . . . . . . . 150 155 170 210
3 Business Days . . . . . . . . . . . . 130 135 150 190
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*S&P rating.
Notwithstanding the foregoing, (i) the S&P Discount Factor for short-term Municipal Obligations will be 115%, so long as such Municipal Obligations are rated A-1+ or SP-1+ by S&P or 125% if such Municipal Obligations are not rate by S&P but are rated VMIG 1, P-1 or MIG-1 by Moody's and mature or have a demand feature exercisable in 30 days or less; provided, however, that such Moody's rated short-term Municipal Obligations must be backed by a letter of credit, liquidity facility or guarantee from a bank or other financial institution, such bank or institution having a short-term rating of at least A-1 from S&P; and further provided that such short term Municipal Obligations rated by Moody's but not rated by S&P may comprise no more than 50% of short-term Municipal Obligations that qualify as S&P Eligible Assets and (ii) no S&P Discount Factor will be applied to cash or to the book value of Municipal Obligations sold for which payment is due within five Business Days. Anticipation Notes rated SP-1+, or, if not rated by S&P, rated MIG-1 or VMIG-1 by Moody's, which do not mature or have no demand feature at par exercisable in 30 days and which do not have a long-term rating, will be considered to be short-term Municipal Obligations for purposes of determining the Discounted Value of S&P Eligible Assets.
"S&P Eligible Asset" means cash or the book value of Municipal Obligations sold for which payment is due within five business Days of a Valuation Date or a Municipal Obligation that (i) is issued by any of the 50 states, the territories and their subdivisions, counties, cities, towns, villages, and school districts, agencies, such as authorities and special districts created by the states, and certain federally sponsored agencies such as local housing authorities (payments made on these bonds are exempt from regular federal income taxes and are generally exempt from state and local taxes in the state of issuance); (ii) is interest bearing and pays interest at least semiannually; (iii) is payable with respect to principal and interest in United States Dollars; (iv) is publicly rated BBB or higher by S&P or, if not rated by S&P but rated by Moody's, is rated at least A by Moody's (provided that such Moody's-rated Municipal Obligations will be included in S&P Eligible Assets only to the extent the Market Value of such Municipal Obligations does not exceed 50% of the aggregate Market Value of the S&P Eligible Assets; and further provided that, for purposes of determining the S&P Discount Factor applicable to any such Moody's-rated Municipal Obligation, such Municipal Obligation will be deemed to have an S&P rating which is one full rating category lower than its Moody's rating); (v) is not subject to a covered call or covered put option written by the Corporation; (vi) is not part of a private placement of Municipal Obligations; and (vii) is part of an issue of Municipal Obligations with an original issue size of at least $20 million or, if of an issue with an original issue size below $20 million (but in no event below $10 million), is issued by an issuer with a total of at least $50 million of securities outstanding. Notwithstanding the foregoing:
(1) Municipal Obligations of any one issuer or guarantor (excluding bond insurers) will be considered S&P Eligible Assets only to the extent the Market Value of such Municipal Obligations does not exceed 10% of the aggregate Market Value of the S&P Eligible Assets, provided that 2% is added to the applicable S&P Discount Factor for every 1% by which the Market Value of such Municipal Obligations exceeds 5% of the aggregate Market Value of the S&P Eligible Assets; and
(2) Municipal Obligations guaranteed or insured by any one bond insurer will be considered S&P Eligible Assets only to the extent the fair market value of such municipal securities does not exceed 25% of the aggregate fair market value of the S&P Eligible Assets.
(3) Municipal Obligations issued by issuers in any one state or territory will be considered S&P Eligible Assets only to the extent the Market Value of such Municipal Obligations does not exceed 20% of the aggregate Market Value of the S&P Eligible Assets.
"S&P Exposure Period" means the maximum period of time following a Valuation Date, including the Valuation Date and the Preferred Shares Basic Maintenance Cure Date, (currently 10 Business Days) that the Corporation has under these Articles Supplementary to cure any failure to maintain, as of such Valuation Date, the Discounted Value for its portfolio at least equal to the Preferred Shares Basic Maintenance Amount (as described in paragraph 7(a) of these Articles Supplementary).
"S&P Hedging Transaction" means the purchasing or selling of a futures contract based on the Municipal Index or Treasury Bonds or the purchasing of an option on such a futures contract.
"S&P Volatility Factor" means, with respect to each series of Preferred Shares, 277% during the Initial Dividend Period. Thereafter, "S&P Volatility Factor" means, depending on the applicable Reference Rate, the following:
Reference Rate -------------- Taxable Equivalent of the Short-Term Municipal Bond Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277% 30-day "AA" Composite Commercial Paper Rate . . . . . . . . . . . . . . . . . . . . . . . 228% 60-day "AA" Composite Commercial Paper Rate . . . . . . . . . . . . . . . . . . . . . . . 228% 90-day "AA" Composite Commercial Paper Rate . . . . . . . . . . . . . . . . . . . . . . . 222% 180-day "AA" Composite Commercial Paper Rate . . . . . . . . . . . . . . . . . . . . . . . 217% 1-year U.S. Treasury Bill Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198% 2-year U.S. Treasury Note Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185% 3-year U.S. Treasury Note Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178% 4-year U.S. Treasury Note Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171% 5-year U.S. Treasury Note Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169% Notwithstanding the foregoing, the S&P Volatility Factor may mean such other potential dividend rate increase factor as S&P advises the Corporation in writing is applicable. |
"Secondary Insurance" means insurance guaranteeing the timely payment of principal of, and interest on, a Municipal Obligation purchased by the Corporation or a third party subsequent to the original issuance of such Municipal Obligation.
"Securities Depository" means The Depository Trust Company or any successor company or other entity selected by the Corporation as securities depository for the Preferred Shares that agrees to follow the procedures required to be followed by such securities depository in connection with the Preferred Shares.
"Series T7 Preferred Shares" means the Auction Rate Municipal Preferred Stock, Series T7, liquidation preference $50,000 per share plus an amount equal to accumulated but unpaid dividends thereon (whether or not earned or declared), plus the premium, if any, resulting from the designation of a Premium Call Period, of the Corporation.
"Series T28 Preferred Shares" means the Auction Rate Municipal Preferred Stock, Series T28, liquidation preference $50,000 per share plus an amount equal to accumulated but unpaid dividends thereon (whether or not earned or declared) plus the premium, if any, resulting from the designation of a Premium Call Period, of the Corporation.
"Service" means the United States Internal Revenue Service.
"7-day Dividend Period" means any Dividend Period of 7 days for a series of Preferred Shares.
` "Special Dividend Period" means a Dividend Period consisting of a specified number of days (other than 28 in the case of the Series T28 Preferred Shares or 7 in the case of the Series T7 Preferred Shares), evenly divisible by seven (in each case subject to adjustment as provided in paragraph 2(c)(iii).
"Special Dividend Period Reference Rate" means the rate or rates per annum specified by the Corporation (which may be expressed as the lower of a specified rate or rates or a Spread under, at or over the Reference Index or Reference Security being specified for such Special Dividend Period) in the Notice of Special Dividend Period relating to a particular Special Dividend Period and specifying a Reference Index or Reference Security or, if the Corporation shall fail to so specify any such rate or rates, then (i), in the case of a Special Dividend Period of 182 days or less, the "AA" Composite Commercial Paper Rate which most closely matches the length of the Special Dividend Period, provided that in no case shall the Special Dividend Reference Rate be a "AA" Composite Commercial Paper Rate which is shorter in time than the 30-day "AA" Composite Commercial Paper Rate, or, in the case of Special Dividend Period of longer than 182 days, the Treasury Rate which most closely matches the length of the Special Dividend Period.
"Specific Redemption Provisions" means, with respect to a Special Dividend Period either, or any combination of, (i) a period (a "Non-Call Period") determined by the Board of Directors of the Corporation, after consultation with the Auction Agent and the Broker Dealers, during which the Preferred Shares subject to such Dividend Period shall not be subject to redemption at the option of the corporation and (ii) a period (a "Premium Call Period"), consisting of a number of whole years and determined by the Board of Directors of the Corporation, after consultation with the Auction Agent and the Broker-Dealers, during each year of which the Preferred Shares subject to such Dividend Period shall be redeemable at a price per share equal to $50,000 plus accumulated but unpaid dividends plus a premium expressed as a percentage of $50,000 as determined by the Board of Directors of the Corporation after consultation with the Auction Agent and the Broker-Dealers; provided, however, that the Corporation shall not adopt Specific Redemption Provisions unless Moody's and S&P or any Substitute Rating Agency Advises the Corporation in writing that such adoption will not adversely affect their then-current ratings on the Preferred Shares.
"Spread" means the negative or positive difference or the absence of any difference, expressed in whole and fractional basis points, below, at or above a Reference Index or Reference Security specified by the Corporation in a Notice of Special Dividend Period.
"Stock Books" means the books maintained by the Auction Agent setting forth at all times a current list, as determined by the Auction Agent, of Existing Holders of the Preferred Shares.
"Stock Register" means the register of Holders maintained on behalf of the Corporation by the Auction Agent in its capacity as transfer agent and registrar for the Preferred Shares.
"Subsequent Dividend Payment Period," with respect to Preferred Shares, has the meaning set forth in paragraph 2(c)(i) of these Articles Supplementary and, with respect to Other Preferred Shares, has the equivalent meaning.
"Substitute Commercial Paper Dealers" means such Substitute Commercial Paper Dealer or Dealers as the Corporation may from time to time appoint or, in lieu of any thereof, their respective affiliates or successors.
"Substitute Rating Agency" and "Substitute Rating Agencies" shall mean a nationally recognized securities rating organization and two nationally recognized securities rating organizations, respectively, selected by Merrill Lynch, Pierce, Fenner & Smith Incorporated, or its respective affiliates and successors, after consultation with the Corporation, to act as a substitute rating agency or substitute rating agencies, as the case may be, to determine the respective credit ratings of the Preferred Shares.
"Taxable Equivalent of the Short-Term Municipal Bond Rate" means
(i) 90% of (A) the per annum rate expressed on an interest equivalent basis
equal to the index, 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 Kenny Information Systems or any successor
thereto, based upon 30-day yield evaluations at par of bonds the interest
on which is excludable for Federal income tax purposes under the Code of
not less than "high grade" component issuers selected by Kenny Information
Systems 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 is
subject to the Federal alternative minimum tax or similar tax under the
Code, unless all bonds the interest on which is so excludable for Federal
income tax purposes are subject to such tax and (B) divided by 1 minus the
Maximum Marginal Regular Federal individual income tax rate applicable to
the character of the income being distributed or the maximum marginal
regular Federal corporate income tax rate applicable to the character of
the income being distributed (in each case expressed as a decimal),
whichever is greater; or (ii) in lieu of the rate determined pursuant to
clause (i) above, a percentage, determined by the Corporation, of (A) the
per annum rate expressed on an interest equivalent basis equal to any
substitute index prepared by any person (other than an Affiliate of the
Corporation), selected from time to time by the Corporation, based on bonds
the interest on which is excludable from gross income for Federal income
tax purposes under the Code and (B) divided by 1 minus the Maximum Marginal
Regular Federal individual income tax rate applicable to the character of
the income being distributed or the Maximum Marginal Regular Federal
corporate income tax rate applicable to the character of the income being
distributed (in each case expressed as a decimal), whichever is greater, as
made available on a discount basis or otherwise by the preparer of such
index 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; provided that
the Corporation shall not select any such substitute index or determine any
such percentage unless the Corporation has received confirmation from
Moody's and S&P (or any Substitute Rating Agency) that the use of such
index or percentage would not affect the ratings assigned to the Preferred
Shares by Moody's and S&P (or any Substitute Rating Agency); provided,
however, that if the index then used by the Corporation for purposes of
determining the Taxable Equivalent of the Short-Term Municipal Bond Rate is
not made so available by 8:30 A.M., the case of the index described in
clause (i) above or by the preparer of such index in the case of any
substitute index described in clause (ii) above, the Taxable Equivalent of
the short-Term Municipal Bond Rate shall mean the per annum rate expressed
on an interest equivalent basis equal to the most recent such index so made
available for any preceding Business Day, without being multiplied by the
90% factor in the case of the index described in such clause (i) or the
percentage determined by the Corporation referred to in such clause (ii) in
the case of the index described in clause (ii).
"30-day "AA" Composite Commercial Paper Rate," on any date, means
(i) the Interest Equivalent of the 30-day rate on commercial paper placed
on behalf of issuers whose corporate Bonds are rated "AA" by S&P, or the
equivalent of such rating by S&P or another nationally recognized
statistical rating organization, as such 30-day rate is made available on a
discount basis or otherwise by the Federal Reserve Bank of New York for the
Business Day immediately preceding such date, or (ii) in the event that the
Federal Reserve Bank of New York does not make available such a rate, then
the arithmetical average of the Interest Equivalent of the 30-day rate on
commercial paper placed on behalf of such issuers, as quoted to the Auction
Agent on a discount basis or otherwise by the Commercial Paper dealer for
the close of business on the Business Day immediately preceding such date.
If the Commercial Paper Dealer does not quote a rate required to determine
30-day "AA" Composite Commercial Paper Rate, the 30-day "AA" Composite
Commercial Paper Rate will be determined on the basis of the quotation or
quotations furnished by any Substitute Commercial Paper Dealer or
Substitute Commercial Paper Dealers selected by the Corporation to provide
such rate or rates not being supplied by the Commercial Paper Dealer.
"Treasury Bonds" means United States Treasury Bonds with remaining maturities of ten years or more.
"Treasury Rate," on any date for any Special Dividend Period exceeding 182 days, means:.
(i) the yield on the most recently auctioned non-callable direct obligations of the U.S. Government (excluding "flower" bonds) with a remaining maturity closest to the duration of such Special Dividend 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 by The Wall Street Journal, then the arithmetic average of the yields on the most recently auctioned non-callable direct obligations for the U.S. Government (excluding "flower" bonds) with a remaining maturity closest to the duration of such Special Dividend Period as quoted on a discount basis or otherwise by the U.S. Government Securities Dealers to the Auction Agent for the close of business on the Business Day immediately preceding such date.
If any U.S. Government Securities Dealer does not quote a rate required to determine the Treasury Rate, the Treasury 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 Dealers selected by the Corporation 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.
"Treasury Securities" means United States Treasury bills, notes or bonds.
"28-day Dividend Period" means any Dividend Period of 28 days for a series of Preferred Shares.
"U.S. Government Securities Dealer" means Merrill Lynch, Pierce, Fenner & Smith Incorporated or its respective affiliates or successors, if such entity is a U.S. Government securities dealer. As used herein, "Substitute U.S. Government Securities Dealer" shall mean, with respect to each series of Preferred Shares, Kidder, Peabody & Co. Incorporated and Lehman Special Securities, Inc., and solely with respect to the Series T7 Preferred Shares, A.G. Edwards & Sons, Inc., and Legg Mason Wood Walker Incorporated, and solely with respect to the Series T28 Preferred Shares, PaineWebber Incorporated and Prudential Securities Incorporated, or the respective affiliates or successors of the foregoing, if such entity is a U.S. Government securities dealer, provided that none of such entities shall be a U.S. Government Securities Dealer.
"Valuation Date" means, for purposes of determining whether the Corporation is maintaining the Preferred Shares Basic Maintenance Amount and the Minimum Liquidity Level, each Friday which is a Business Day, or the Business Day preceding any Friday which is not a Business Day, and the Date of Original Issue.
"Variation Margin" means, in connection with an outstanding futures contract owned or sold by the Corporation, the amount of cash or securities paid to and received from a broker (subsequent to the Initial Margin payment) from time to time as the price of such futures contract fluctuates.
(b) The foregoing definitions of Accountant's Confirmation, Deposit Securities, Discounted Value, Dividend Coverage Amount, Dividend Coverage Assets, Independent Accountant, Market Value, Maximum Potential Additional Dividend Liability, Minimum Liquidity Level, Moody's Discount Factor, Moody's Eligible Asset, Moody's Exposure Period, Moody's Hedging Transaction, Moody's Volatility Factor, Preferred Shares Basic Maintenance Amount, Preferred Shares Basic Maintenance Cure Date, Preferred Shares Basic Maintenance Report, Reference Rate, S&P Discount Factor, S&P Eligible Asset, S&P Exposure Period, S&P Hedging Transaction, S&P Volatility Factor and Valuation Date have been determined by the Board of Directors of the Corporation in order to obtain an "aaa" rating from Moody's and an AAA rating from S&P on the Preferred Shares on their Date of Original Issue; and such definitions shall be adjusted from time to time and without further action by the Board of Directors to reflect changes made thereto independently by Moody's, S&P or any Substitute Rating Agency if each of Moody's, S&P and any Substitute Rating Agency has advised the Corporation in writing (i) separately or collectively of such adjustments and (ii) collectively that such adjustments will not adversely affect their then- current ratings on the Preferred Shares. The adjustments contemplated by the preceding sentence shall be made effective upon the time the Corporation receives the written notice from Moody's S&P and any Substitute Rating Agency contemplated by clause (ii) of the preceding sentence.
2. Dividends. (a) The Holders shall be entitled to receive, when, as and if declared by the Board of Directors of the Corporation, out of funds legally available therefor, cumulative dividends each consisting of (i) cash at the Applicable Rate and (ii) an uncertificated Right to receive cash as set forth in paragraph 2(e) below, and no more, payable on the respective dates set forth below. Dividends on the Preferred Shares so declared and payable shall be paid (i) in preference to and in priority over any dividends declared and payable on the Common Stock, and (ii) to the extent permitted by law and to the extent available, out of net tax- exempt income earned on the Corporation's investments. To the extent permitted by law, dividends on Preferred Shares will be designated as exempt interest dividends. For the purposes of this section, the term "net tax-exempt income" shall exclude capital gains and other taxable income of the Corporation.
(b) (i) Cash dividends on Preferred Shares shall
accumulate from the Date of Original Issue. With respect to the
Series T7 Preferred Shares and Series T28 Preferred Shares,
dividends will be payable commencing on the Initial Dividend
Payment Date with respect to each series of Preferred Shares.
Following the Initial Dividend Payment Date for the Series T7
Preferred Shares and Series T28 Preferred Shares, dividends on
the Preferred Shares will be payable, at the option of the
Corporation, (ii) with respect to any Dividend Period of 35 or
fewer days on the day next succeeding the last day thereof,
(iii) with respect to any Dividend Period of more than 35 and
fewer that 92 days, on the day next succeeding each period of 30
days to occur during such Dividend Period (or in the case of any
Dividend Period of more than 91 days as specified in the
relevant Notice of Special Dividend Period), and on the day next
succeeding the last day thereof, (iv) with respect to any
Dividend Period of 365 days or more, monthly on the first day of
each calendar month during such Dividend Period (or in the case
of any Dividend Period of more than 91 days, as specified in the
relevant Notice of Special Dividend Period), and on the day next
succeeding the last day thereof (each such date referred to in
clauses (i), (ii), (iii) and (iv) being hereinafter referred to
as a "Normal Dividend Payment Date"), except that (i) if such
Normal Dividend Payment Date is not a Business Day, then the
Dividend Payment Date shall be the next succeeding date if both
such dates following the Normal Dividend Payment Date are
Business Days, or (ii) if the date following such Normal
Dividend Payment Date is not a Business Day, then the Dividend
Payment Date will be the date next preceding such Normal
Dividend Payment Date if both such date and such Normal Dividend
Payment Date are Business Days or (iii) if such Normal Dividend
Payment Date and either the preceding date or the succeeding
date are not Business Days, then the Dividend Payment Date shall
be the first Business Day next preceding such Normal Dividend
Payment Date that is next succeeded by a Business Day. If,
however, the Securities Depository shall make available to its
participants and members in funds immediately available in New
York City on Dividend Payment Dates, the amount due as dividends
on such Dividend Payment Dates (and the Securities Depository
shall have so advised the Corporation), and if the day that
otherwise would be the Dividend Payment Date is not a Business
Day, then the Dividend Payment Date shall be the next succeeding
Business Day. Although any particular Dividend Payment Date may
not occur on a Normal Dividend Payment Date because of the
exceptions discussed above, the next succeeding Dividend Payment
Date shall be, subject to such provisos, the next Normal
Dividend Payment Date. If for any reason a Dividend Payment Date
cannot be fixed as described above, then the Board of Directors
shall fix the Dividend Payment Date. Each dividend payment date
determined as provided above is hereinafter referred to as a
"Dividend Payment Date."
(ii) Each dividend shall be paid to the Holders as they appear in the Stock Register as of 12:00 Noon, New York City time, on the Business Day preceding the Dividend Payment Date. 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 as they appear on the Stock Register on a date, not exceeding 15 days prior to the payment date therefor, as may be fixed by the Board of Directors of the Corporation.
(c) (i) during the period from and including the Date of Original Issue to but with respect to the Series T7 Preferred Shares and Series T28 Preferred Shares, excluding the Initial Dividend Payment Date (the "Initial Dividend Period"), the Applicable Rate shall be the Initial Dividend Rate. Commencing on the Initial Dividend Payment Date, with respect to the Series T7 Preferred Shares and Series T28 Preferred Shares, the Applicable Rate for each subsequent Dividend Period or portion thereof (hereinafter referred to as a "Subsequent Dividend Payment Period"), which Subsequent Dividend Payment Period shall commence on a Dividend Payment Date and shall end on the calendar day prior to the next Dividend Payment Date, shall be equal to the lesser of (x) the Maximum Applicable Rate for such Dividend Period or for such Subsequent Dividend Payment Period included herein or (y) the greater of (i) the Minimum Applicable Rate for such Dividend Period or for such Subsequent Dividend Payment Period included therein or (ii) the rate per annum that results for such Dividend Period or Subsequent Dividend Payment Period included therein from implementation of the Auction Procedures including any periodic application of a Spread to a specified Reference Index or Reference Security.
Notwithstanding the foregoing sentence, the Applicable Rate for each Dividend Period commencing during a Non-Payment Period shall be equal to the Non-Payment Period Rate and each Dividend Payment Period for Preferred Shares of any series, commencing after the first day of, and during, a Non-Payment Period shall be a 28-day Dividend Payment period (in the case of the Series T28 Preferred Shares) or a 7-day Dividend Payment Period (in the case of the Series T7 Preferred Shares). Except in the case of the willful failure of the Corporation to pay a dividend on a Dividend Payment Date or to redeem any Preferred Shares on the date set for such redemption, any amount of any dividend due on any Dividend Payment Date, the Corporation has declared such dividend payable on such Dividend Payment Date to the Holders of such Preferred Shares as of 12:00 noon, New York City time, on the Business Day preceding such Dividend Payment Date) or redemption price with respect to any Preferred Shares not paid to such Holders when due may be paid to such Holders in the same form of funds by 12:00 noon, New York City time, on any of the first three Business Days after such Dividend Payment Date or due date, as the case may be, provided that, such amount is accompanied by a late charge calculated for such period of non-payment at the Non-Payment Period Rate applied to the amount of such non-payment based on the actual number of days comprising such period divided by 365. In the case of a willful failure of the corporation to pay a dividend on a Dividend Payment Date or to redeem any Preferred Shares on the date set for such redemption, the preceding sentence shall not apply and the Applicable Dividend Rate for the Dividend Period commencing during the Non-Payment Period resulting from such failure shall be the Non-Payment Period Rate. For the purposes of the foregoing, payment to a person in same-day funds on any Business Day at any time shall be considered equivalent to payment to such person in New York Clearing House (next-day) funds at the same time on the preceding Business Day, and any payment made after 12:00 noon, New York City time, on any Business Day shall be considered to have been made instead in the same form of funds and to the same person before 12:00 noon, New York City time, on the next Business Day.
(ii) The amount of cash dividends per share of Preferred Shares payable (if declared) for any Dividend Payment Period or part thereof shall be computed by multiplying the Applicable Rate for such Dividend Payment Period by a fraction, the numerator of which shall be the number of days in such Dividend Payment Period or part thereof such share was outstanding and the denominator of which shall be 365 (or 360 for a Dividend Period of 365 days or more), multiplying the amount so obtained by $50,000 and rounding the amount so obtained to the nearest cent.
(iii) With respect to each Dividend Period that the Corporation desires to be a Special Dividend Period, the Corporation may, at its sole option and to the extent permitted by law, by telephonic and written notice (a "Request for Special Dividend Period") to the Auction Agent and to each Broker-Dealer, request that the next succeeding Dividend Period for such series of Preferred Shares be a number of days (other than 28 in the case of Series T28 Preferred Shares or 7 in the case of Series T7 Preferred Shares), evenly divisible by seven and specified in such notice, provided that for any Auction occurring after the initial Auction, the Corporation may not give a Request for Special Dividend Period (and any such request shall be null and void) unless Sufficient Clearing Bids were made in the last occurring Auction and unless full cumulative dividends, any amounts due with respect to mandatory redemptions, and any Additional Dividends payable prior to such date have been paid in full. Such Request for Special Dividend Period, in the case of a Dividend Period of 182 days or less, shall be given on or prior to the 4th day but not more than 7 days prior to an Auction Date for the Preferred Shares and, in the case of a Dividend Period of more than 182 days, shall be given on or prior to the 14th day but not more than 28 days prior to an Auction Date for the Preferred Shares. Such Request for Special Dividend Period shall also specify any proposed Bid Requirements. Upon receiving such Request for Special Dividend Period, the Broker-Dealer(s) shall jointly determine whether, given the factors set forth below, it is advisable that the Corporation issue a Notice of Special Dividend Period for the Preferred Shares as contemplated by such Request for Special Dividend Period and, if advisable, the Specific Redemption Provisions and shall give the Corporation and the Auction Agent written notice (a "Response") of such determination by no later than the third day prior to such Auction Date. In making such determination the Broker-Dealer(s) will consider (1) existing short-term and long-term market rates and indices of such short-term and long-term rates, (2) existing market supply and demand for short-term and long-term securities, (3) existing yield curves for short-term and long-term securities comparable to the Preferred Shares, (4) industry and financial conditions which may affect the Preferred Shares, (5) the investment objective of the Corporation and (6) the Dividend Periods and dividend rates at which current and potential beneficial holders of the Preferred Shares would remain or become beneficial holders. If none of the Broker-Dealer(s) give the Corporation and the Auction Agent a Response by such third day or if the Response of all of the Broker- Dealers providing a Response states that given the factors set forth above it is not advisable that the Corporation give a notice of Special Dividend Period for the Preferred Shares, the Corporation may not give a Notice of Special Dividend Period in respect of such Request for Special Dividend Period. In the event the Response of at least one Broker-Dealer does not indicate that it is not advisable that the Corporation give a notice of Special Dividend Period for the Preferred Shares, the Corporation may by no later than the second day prior to such Auction Date give a notice (a "Notice of Special Dividend Period") to the Auction Agent, the Securities Depository and each Broker-Dealer which notice will specify the duration of the Special Dividend Period, the Bid Requirements (if any) applicable to the Auction relating to such Special Dividend Period and Specific Redemption Provisions (if any). The Corporation shall not give a Notice of Special Dividend Period or convert to a Special Dividend Period and, if the Corporation has given a notice of Special Dividend, the Corporation is required to give telephonic and written notice of revocation (a "Notice of Revocation") to the Auction Agent, each Broker-Dealer, and the Securities Depository on or prior to the Business Day prior to the relevant Auction Date if it has not obtained the advice in writing of Moody's and S&P or any Substitute Rating Agency that the proposed Special Dividend Period will not adversely affect their then-current rating on the Preferred Shares or if (w) either the 1940 Act Preferred Shares Asset Coverage is not satisfied or the Corporation shall fail to maintain S&P Eligible Assets and Moody's Eligible Assets each with an aggregate Discounted Value at least equal to the Preferred Shares Basic Maintenance Amount, in each case on each of the two Valuation Dates immediately preceding the Business Day prior to the relevant Auction Date (and in each case, with respect to Moody's Eligible Assets, using a Moody's Exposure Period equivalent to 14 days longer than normal) on an actual basis and on a pro forma basis giving effect to the proposed Special Dividend Period (using as a pro forma dividend rate with respect to such Special Dividend Period the dividend rate which the Broker Dealers shall advise the Corporation is an approximately equal rate for securities similar to the Preferred Shares with an equal frequency of recalculation of the Reference Index or Reference Security as is utilized by the Corporation with respect to the first Dividend Payment Period within such Special Dividend Period and using as a pro forma Maximum Applicable Rate the highest rate specified in the Notice of Special Dividend Period for the Dividend Payment Periods covering not less than the first 49 days of such proposed Special Dividend Period or, if no such rate is specified in the Notice of Special Dividend Period, the Maximum Applicable Rate resulting by operation of the definition of Special Dividend Period Reference Rate for the Special Dividend Period specified in such Notice of Special Dividend Period), (x) sufficient funds for the payment of dividends payable on the immediately succeeding Dividend Payment Date have not been irrevocably deposited with the Auction Agent by the close of business on third Business Day preceding the related Auction Date, (y) the Broker- Dealer(s) jointly advise the Corporation that after consideration of the factors listed above they have concluded that it is advisable to give a Notice of Revocation or (z) the Corporation has determined to terminate the Special Dividend Period for any reason. If the Corporation is prohibited from giving a Notice of Special Dividend Period as a result of any of the factors enumerated in clause (w), (x), (y) or (z) of the prior sentence or if the Corporation gives a Notice of Revocation with respect to a Notice of Special Dividend Period, the next succeeding Dividend Period will be a 28-day Period (in the case of Series T28 Preferred Shares) or a 7-day Dividend Period the case of Series T7 Preferred Shares) provided that if the then-current Dividend Period in the case of the Series T28 Preferred Shares is a Special Dividend Period of less than 28 days, the next succeeding Dividend Period for such series will be the same length as the current Dividend Period. In addition, in the event Sufficient Clearing Bids are not made in the applicable Auction or such Auction is not held for any reason, such next succeeding Dividend Period will be a 28 day Dividend Period (in the case of Series T28 Preferred Shares) or a 7-day Dividend Period (in the case of Series T7 Preferred Shares) and the Corporation may not again give a Notice of Special Dividend Period of the Preferred Shares (and any such attempted notice shall be null and void) until Sufficient Clearing bids have been made in an Auction with respect to a 28-day Dividend Period (in the case of Series T28 Preferred Shares) or a 7-day Dividend Period (in the case of Series T7 Preferred Shares).
(d) (i) Holders shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the Preferred Shares. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment on the Preferred Shares that may be in arrears.
(ii) For so long as any share of the Preferred Shares is outstanding, the Corporation shall not declare, pay or set apart for payment any dividend or other distribution (other than a dividend or distribution paid in shares of, or options, warrants or rights to subscribe for or purchase, Common Stock or other stock, if any, ranking junior to the Preferred Shares as to dividends or upon liquidation) in respect of the Common Stock or any other stock of the Corporation ranking junior to or on a parity with the Preferred Shares as to dividends or upon liquidation, or call for redemption, redeem, purchase or otherwise acquire for consideration any shares of the Common Stock or any other such junior stock (except by conversion into or exchange for stock of the Corporation ranking junior to the Preferred Shares as to dividends and upon liquidation) or any other such Parity Stock (except by conversion into or exchange for stock of the Corporation ranking junior to or on a parity with the Preferred Shares as to dividends and upon liquidation), unless (A) immediately after such transaction, the Corporation shall have Moody's Eligible Assets and S&P Eligible Assets each with an aggregate Discounted Value equal to or greater than the Preferred Shares Basic Maintenance Amount and the Corporation shall maintain the 1940 Act Preferred Shares Asset Coverage, (B) full cumulative dividends on Preferred Shares and shares of Other Preferred Shares due on or prior to the date of the transaction have been declared and paid or shall have been declared and sufficient funds for the payment thereof deposited with the Auction Agent, (C) any Additional Dividend required to be paid under paragraph 2(e) below on or before the date of such declaration or payment has been paid and (D) the Corporation has redeemed the full number of Preferred Shares required to be redeemed by any provision for mandatory redemption contained herein.
(e) Each dividend shall consist of (i) cash at the at the Applicable Rate and (ii) an uncertificated right (a "Right") to receive an Additional Dividend (as defined below). Each Right shall thereafter be independent of the share or Preferred Shares on which the dividend was paid. The Corporation shall cause to be maintained a record of each Right received by the respective Holders. The Corporation shall not be required to recognize any transfer of a Right.
If, in the case of a Dividend Period of 28 days or fewer, the Corporation retroactively allocates any net capital gains or other taxable income to Preferred Shares without having given advance notice thereof to the Auction Agent as described in paragraph 2(f) hereof (the amount of such allocation referred to herein as a "Retroactive Taxable Allocation") solely by reason of the fact that such allocation is made as a result of the redemption of all or a portion of the outstanding Preferred Shares or the liquidation of the Corporation, the Corporation will, within 90 days (and generally within 60 days) after the end of the Corporation's fiscal year for which a Retroactive Taxable Allocation is made, provide notice thereof to the Auction Agent and to each holder of a Right applicable to such Preferred Shares (initially Cede & Co. as nominee of The Depository Trust Company) during such fiscal year at such holder's address as the same appears or last appeared on the Stock Books of the Corporation. The Corporation will, within 30 days after such notice is given to the Auction Agent, pay to the Auction Agent (who will then distribute to such holders of Rights), out of funds legally available therefor, an amount equal to the aggregate Additional Dividend with respect to all Retroactive Taxable Allocations made to such holders during the fiscal year in question.
If the Corporation, in the case of a Dividend Period of 35 days or more, makes a Retroactive Taxable Allocation to a dividend paid on Preferred Shares, the Corporation will, within 90 days (and generally within 60 days) after the end of the Corporation's fiscal year for which a Retroactive Taxable Allocation is made, provide notice thereof to the Auction Agent and to each holder of a Right applicable to such Preferred Shares (initially Cede & Co. as nominee of The Depository Trust Company) during such fiscal year at such holder's address as the same appears or last appeared on the Stock Books of the Corporation. The Corporation will, within 30 days after such notice is given to the Auction Agent, pay to the Auction Agent (who will then distribute to such holders of Rights), out of funds legally available therefor, an amount equal to the aggregate Additional Dividend with respect to all Retroactive Taxable Allocations made to such holders during the fiscal year in question.
An "Additional Dividend" means payment to a holder of Preferred Shares of an amount which, when taken together with the aggregate amount of Retroactive Taxable Allocations allocated to such holder with respect to the fiscal year in question, would cause such holder's dividends from the aggregate of both the Retroactive Taxable Allocations and the Additional Dividend to be equal to the dollar amount of the dividends which would have been received and retained by such holder if the Retroactive Taxable Allocations had not been made. Such Additional Dividend shall be calculated (i) without consideration being given to the time value of money; (ii) assuming that no holder of Preferred Shares is subject to the Federal alternative minimum tax with respect to dividends received from the Corporation; and (iii) assuming that each Retroactive Taxable Allocation would be taxable in the hands of each holder of Preferred Shares at the maximum marginal combined regular Federal income tax rate applicable to individuals or corporations, whichever is greater, in effect during the fiscal year in question.
(f) Whenever the Corporation intends to include any net capital gains or other taxable income in any dividend on Preferred Shares the Applicable Rate for which will be established at the next succeeding Auction, the Corporation will, in the case of a Dividend Period of 28 days or fewer, and may, in the case of a Dividend Period of 35 days or more, notify the Auction Agent of the amount to be so included at least five Business Days prior to the Auction Date on which the Applicable Rate for such dividend is to be established. If, in the case of a Dividend Period of 28 days or fewer, the Corporation retroactively allocates any net capital gains or other taxable income to a dividend paid on Preferred Shares without having given advance notice thereof to the Auction Agent as described in paragraph 2(f) hereof solely by reason of the fact that such allocation is made as a result of the redemption of all or a portion of the outstanding Preferred Shares or the liquidation of the Corporation, the Corporation will make certain payments to holders of Preferred Shares to offset the tax effect thereof. If, in the case of a Dividend Period of 35 days or more, the Corporation allocates any net capital gains or other taxable income to a dividend paid on Preferred Shares without having given advance notice thereof to the Auction Agent as described in Paragraph 2(f) hereof, the Corporation will make certain payments to holders of Preferred Shares to offset the tax effect thereof.
(g) No fractional share of Preferred Shares shall be issued.
3. Liquidation Rights. Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the Holders shall be entitled to receive, out of the assets of the Corporation available for distribution to shareholders, before any distribution or payment is made upon any Common Stock or any other capital stock ranking junior in right of payment upon liquidation to the Preferred Shares, the sum of $50,000 per share plus accumulated but unpaid dividends (whether or not earned or declared) thereon plus the premium, if any, resulting from the designation of a Premium Call Period to the date of distribution, and after such payment the holders of Preferred Shares will be entitled to no other payments other than Additional Dividends as provided in paragraph 2(e) hereof. If upon any liquidation, dissolution or winding up of the Corporation, the amounts payable with respect to the Preferred Shares and any other outstanding class or series of Preferred Stock of the Corporation ranking on a parity with the Preferred Shares as to payment upon liquidation are not paid in full, the Holders and the holders of such other class or series will share ratably in any such distribution of assets in proportion to the respective preferential amounts to which they are entitled. After payment of the full amount of the liquidating distribution to which they are entitled, the Holders will not be entitled to any further participation in any distribution of assets by the Corporation except for any Additional Dividends. A consolidation or merger of the Corporation with or into any other corporation or corporations or a sale, whether for cash, shares of stock, securities or properties, of all or substantially all or any part of the assets of the Corporation shall not be deemed or construed to be a liquidation, dissolution or winding up of the Corporation.
4. Redemption. (a) Preferred Shares shall be redeemable by the Corporation as provided below:
(i) To the extent permitted under the 1940 Act and Maryland law, upon giving a Notice of Redemption, the Corporation at its option may redeem Preferred Shares, in whole or in part, out of funds legally available therefor, at the Optional Redemption Price per share, on any Dividend Payment Date; provided, however, that no Preferred Shares shall be subject to optional redemption during a Non-Call Period. In addition, holders of Preferred Shares which are redeemed shall be entitled to receive Additional Dividends to the extent provided herein. The Corporation may not give a Notice of Redemption relating to an optional redemption as described in this paragraph 4(a)(i) or effect an optional redemption unless, at the time of giving such Notice of Redemption or effecting such optional redemption, the Corporation has available Deposit Securities with maturity or tender dates not later than the day preceding the applicable redemption date and having a value not less than the amount due to Holders by reason of the redemption of their Preferred Shares on such redemption date and, if as a result of such optional redemption, the Corporation would fail to maintain S&P Eligible Assets and Moody's Eligible Assets each with an aggregate Discounted Value equal to the Preferred Shares Basic Maintenance Amount.
(ii) The Corporation shall redeem, out of funds legally available therefor, at the Mandatory Redemption Price per share, Preferred Shares to the extent permitted under the 1940 Act and Maryland law, on a date fixed by the Board of Directors, if the Corporation fails to maintain Moody's Eligible Assets and S&P Eligible Assets each with an aggregate Discounted Value equal to or greater than the Preferred Shares Basic Maintenance Amount as provided in paragraph 7(a) or to satisfy the 1940 Act Preferred Shares Asset Coverage as provided in paragraph 6 and such failure is not cured on or before the Preferred Shares Basic Maintenance Cure Date or the 1940 Act Cure Date (herein respectively referred to as the "Cure Date"), as the case may be. In addition, holders of Preferred Shares so redeemed shall be entitled to receive Additional Dividends to the extent provided herein. The number of Preferred Shares to be redeemed shall be equal to the lesser of (i) the minimum number of Preferred Shares the redemption of which, if deemed to have occurred immediately prior to the opening of business on the Cure Date, would together with all shares of Other Preferred Stock subject to redemption or retirement, result in the Corporation having S&P Eligible Assets and Moody's Eligible Assets each with an aggregate Discounted Value equal to or greater than the Preferred Shares Basic Maintenance Amount or satisfaction of the 1940 Act Preferred Shares Asset Coverage, as the case may be, on such Cure Date (provided that, if there is no such minimum number of Preferred Shares and shares of Other Preferred Stock the redemption of which would have such result, all Preferred Shares and shares of Other Preferred Stock then outstanding shall be redeemed), and (ii) the maximum number of Preferred Shares, together with all shares of other Preferred Stock subject to redemption or retirement, that can be redeemed out of funds expected to be legally available therefor on such redemption date. In determining the number of Preferred Shares required to be redeemed in accordance with the foregoing, the Corporation shall allocate the number required to be redeemed which would result in the Corporation having Moody's Eligible Assets and S&P Eligible Assets each with an aggregate Discounted Value equal to or greater than the Preferred Shares Basic Maintenance Amount or satisfaction of the 1940 Act Preferred Shares Asset Coverage, as the case may be, pro rata among Preferred Shares, Other Preferred Shares and other Preferred Stock subject to redemption pursuant to provisions similar to those contained in this paragraph 4(a)(ii) provided that, Preferred Shares which may not be redeemed at the option of the Corporation (a) will be subject to mandatory redemption only to the extent that other shares are not available to satisfy the number of shares required to be redeemed and (b) will be selected for redemption in an ascending order of outstanding number of days in the Non-Call Period during which such shares are not subject to optional redemption (with shares with the lowest number of days to be redeemed first) and by lot in the event of shares having an equal number of days in such period. The Corporation shall effect such redemption on a Business Day which is not later than 30 days after such Cure Date, except that if the Corporation does not have funds legally available for the redemption of all of the required number of Preferred Shares and shares of other Preferred Stock which are subject to mandatory redemption or the Corporation otherwise is unable to effect such redemption on or prior to 30 days after such Cure Date, the Corporation shall redeem those Preferred Shares which it is unable to redeem on the earliest practicable date on which it is able to effect such redemption out of funds legally available therefor.
(b) Notwithstanding any other provision of this paragraph 4, no Preferred Shares may be redeemed pursuant to paragraph 4(a)(i) of these Articles Supplementary unless all dividends in arrears on all remaining outstanding shares of Parity Stock shall have been or are being contemporaneously paid or declared and set apart for payment. In the event that less than all the outstanding Preferred Shares are to be redeemed and there is more than one Holder, the shares to be redeemed shall be selected by lot or such other method as the Corporation shall deem fair and equitable.
(c) Whenever Preferred Shares are to be redeemed, the Corporation, not less than 20 or more than 60 days prior to the date fixed for redemption, shall mail a notice ("Notice of Redemption") by first-class mail, postage prepaid, to each Holder of Preferred Shares to be redeemed and to the Auction Agent. The Corporation shall cause the Notice of Redemption also to be published in the eastern and national editions of The Wall Street Journal. The Notice of Redemption to set forth (i) the redemption date, (ii) the amount of the redemption price, (iii) the aggregate number of Preferred Shares to be redeemed, (iv) the place or places where Preferred Shares are to be surrendered for payment of the redemption price, (v) a statement that dividends on the shares to be redeemed shall cease to accumulate on such redemption date (except that holders may be entitled to Additional Dividends) and (vi) the provision of these Articles Supplementary pursuant to which such shares are being redeemed. No defect in the Notice of Redemption or in the mailing or publication thereof shall affect the validity of the redemption proceedings, except as required by applicable law.
If the Notice of Redemption shall have been given as aforesaid and, concurrently or thereafter, the Corporation shall have deposited in trust with the Auction Agent a cash amount equal to the redemption payment for the Preferred Shares to which such Notice of Redemption has been given with irrevocable instructions and authority to pay the redemption price to the Holders of such shares, then upon the date of such deposit or, if no such deposit is made, then upon such date fixed for redemption (unless the Corporation shall default in making the redemption payment), all rights of the Holders of such shares as shareholders of the Corporation by reason of the ownership of such shares will cease and terminate (except their right to receive the redemption price in respect thereof and any additional dividends, but without interest), and such shares shall no longer be deemed outstanding. The Corporation shall be entitled to receive, from time to time, from the Auction Agent the interest, if any, on such moneys deposited with it and the Holders of any shares so redeemed shall have no claim to any of such interest. In case the Holder of any shares so called for redemption shall not claim the redemption payment for his shares within one year after the date of redemption, the Auction Agent shall, upon demand, pay over to the Corporation such amount remaining on deposit and the Auction Agent shall thereupon be relieved of all responsibility to the Holder of such shares called for redemption and such Holder thereafter shall look only to the Corporation for the redemption payment.
5. Voting Rights. (a) General. Except as otherwise provided in the Charter, each Holder of Preferred Shares shall be entitled to one vote for each share held on each matter submitted to a vote of stockholders of the Corporation to which the stockholders are entitled to vote, and the holders of outstanding shares of Preferred Stock, including Preferred Shares, and of shares of Common Stock shall vote together as a single class with respect to all matters on which all stockholders are entitled to vote. Notwithstanding the preceding sentence, at the first annual meeting of stockholders, the holders of outstanding shares of Preferred Stock, including Preferred Shares, represented in person or by proxy shall be entitled as a class, and to the exclusion of the holders of all other securities and classes of capital stock of the Corporation, to elect one Class I director and one Class II director and shall thereafter be so entitled to elect any successors from time to time to the Class I and Class II directors so elected at any meeting of shareholders in which successors are elected. At each meeting of shareholders at which entire classes of Class I and Class II directors are to be elected, or at any meeting at which a successor to a director elected by the holders of Preferred Stock in accordance with this Section is to be elected (including directors elected pursuant to this sentence), the holders of outstanding shares of Preferred Stock, including Preferred Shares, represented in person or by proxy shall be entitled as a class and to the exclusion of the holders of all other securities and classes of capital stock of the Corporation to elect one Class I and one Class II director or to elect such successor. In the event that the Charter is amended to eliminate the classification of the Corporation's Board of Directors, the holders of outstanding shares of Preferred Stock, including Preferred Shares, represented in person or by proxy shall be entitled as a class, and to the exclusion of the holders of all other securities and classes of capital stock of the Corporation, to elect two directors. Subject to paragraph 5(b) hereof, the holders of outstanding shares of capital stock of the Corporation, voting as a single class, shall elect the balance of the directors.
(b) Right to Elect Majority of Board of Directors. During any period in which any one or more of the conditions described below shall exist (such period being referred to herein as a "Voting Period"), the number of directors constituting the Board of Directors shall be automatically increased by the smallest number that, when added to the two directors elected exclusively by the holders of shares of Preferred Stock, would constitute a majority of the Board of Directors as so increased by such smallest number; and the holders of shares of Preferred Stock 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 capital stock of the Corporation), to elect such smallest number of additional directors, together with the two directors that such holders are in any event entitled to elect. A Voting Period shall commence:
(i) if at any time accumulated dividends (whether or not earned or declared, and whether or not funds are then legally available in an amount sufficient therefor) on the outstanding Preferred 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
(ii) if at any time holders of any Preferred Stock are entitled to elect a majority of the directors of the Corporation under the 1940 Act.
Upon the termination of a Voting Period, the voting rights described in this paragraph 5(b) shall cease, subject always, however, to the revesting of such voting rights in the Holders upon the further occurrence of any of the events described in this paragraph 5(b).
(c) Right to Vote with Respect to Certain Other Matters.
So long as any Preferred Shares are outstanding, the Corporation shall not,
without the affirmative vote of the holders of a majority of the
Outstanding shares of Preferred Stock outstanding at the time, in person or
by proxy, at a meeting (voting separately as one class) or by the unanimous
written consent of the holders of all Outstanding shares of Preferred
Stock: (i) authorize, create or issue, or increase the authorized or
issued amount of, any class or series of stock ranking prior to or on a
parity with any series of Preferred Stock with respect to payment of
dividends or the distribution of assets on liquidation, or increase the
authorized amount of Preferred Shares or any other Preferred Stock (except
that, notwithstanding the foregoing, but subject to the provisions of
Section 13 of the 1940 Act, the Board of Directors, without the vote or
consent of the Holders of Preferred Shares, may from time to time
authorize, create and issue, and may increase the authorized or issued
amount of, classes or series of Preferred Stock, including Preferred
Shares, ranking on a parity with the Preferred Shares with respect to the
payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Corporation, subject to
continuing compliance by the Corporation with 1940 Act Preferred Shares
Asset Coverage and Preferred Shares Basic Maintenance Amount requirements,
provided that the Fund obtains written confirmation from Moody's (if
Moody's is then rating Preferred Shares), S&P (if S&P is then rating
Preferred Shares) or any Substitute Rating Agency (if any such Substitute
Rating Agency is then rating Preferred Shares) that the issuance of such
class or series would not impair the rating then assigned by such rating
agency to the Preferred Shares), (ii) amend, alter or repeal the provisions
of the Charter whether by merger, consolidation or otherwise, so as to
adversely affect any of the contract rights expressly set forth in the
Charter of holders of Preferred Shares or any Other Preferred Stock, (iii)
authorize the Corporation's conversion from a closed-end to an open-end
investment company as defined in Section 5(a) of the 1940 Act, or (iv)
amend the provisions of the Charter which provide for the classification of
the Board of Directors of the Corporation into three classes, each with a
term of office of three years with only one class of directors standing for
election in any year (presently Article VI of the Charter). To the extent
permitted under the 1940 Act, the Corporation shall not approve any of the
actions set forth in clause (i) or (ii) which adversely affects the
contract rights expressly set forth in the Charter of a Holder of shares of
a series of Preferred Shares differently than those of a Holder of shares
of any other series of Preferred Shares without the affirmative vote of the
holders of at least a majority of the Preferred Shares of each series
adversely affected and Outstanding at such time, in person or by proxy, at
a meeting (each such adversely affected series voting separately as a
class) or by the unanimous written consent of the holders of all
Outstanding shares of Preferred Stock. The Corporation shall notify
Moody's and S&P 10 Business Days prior to any such vote described in
clauses (i) and (ii). Unless a higher percentage is provided for under the
Charter, the affirmative vote of the holders of a majority of the
Outstanding shares of Preferred Stock, including Preferred Shares, voting
together as a single class, will be required to approve any plan of
reorganization (including bankruptcy proceedings) adversely affecting such
shares or any action requiring a vote of security holders under Section
13(a) of the 1940 Act. The class vote of holders of shares of Preferred
Stock, including Preferred Shares, described above will in each case be in
addition to a separate vote of the requisite percentage of shares of Common
Stock and shares of Preferred Stock, including Preferred Shares, voting
together as a single class necessary to authorize the action in question.
Notwithstanding the preceding sentence, to the extent permitted by Maryland
General Corporation Law, no vote of holders of Common Stock, either
separately or together with holders of Preferred Shares as a single class,
shall be necessary to take the actions contemplated by clauses (i) and (ii)
of the first sentence of this Section 5(c) and the holders of Common Stock
shall not be entitled to vote in respect of such matters, unless, in the
case of the actions contemplated by clause (ii) of the first sentence of
this section 5(c), the action would adversely affect the contract rights
expressly set forth in the Charter of the holders of Common Stock.
(d) Voting Procedures.
(i) As soon as practicable after the accrual of any right of the Holders of shares of Preferred Stock to elect additional directors as described in paragraph 5(b) above, the Corporation shall notify the Secretary of the Corporation and instruct the Secretary to 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 Secretary of the Corporation does not call such a special meeting, it may be called by Holders of at least 25% of the votes entitled to be cast at such meeting on like notice. The record date for determining the Holders entitled to notice of and to vote at such special meeting shall be the close of business on the fifth Business Day preceding the day on which such notice is mailed. At any such special meeting and at each meeting held during a Voting Period, such Holders, voting together as a class (to the exclusion of the holders of all other securities and classes of capital stock of the Corporation), shall be entitled to elect the number of directors prescribed in paragraph 5(b) above on a one-vote-per-share basis. At any such meeting or adjournment thereof in the absence of a quorum, a majority of such holders present in person or by proxy shall have the power to adjourn the meeting without notice, other than by an announcement at the meeting, to a date not more than 120 days after the original record date.
(ii) For purposes of determining any rights of the Holders to vote on any matter or the number of shares required to constitute a quorum, whether such right is created by these Articles Supplementary, by the other provisions of the Charter, by statute or otherwise, a share of Preferred Shares which is not outstanding shall not be counted.
(iii) The terms of office of all persons who are directors of the Corporation at the time of a special meeting of Holders and holders of other Preferred Stock to elect directors shall continue, notwithstanding the election at such meeting by the Holders and such other holders of the number of directors that they are entitled to elect, and the persons so elected by the Holders and such other holders, together with the two incumbent directors elected by the Holders and such other holders of Preferred Stock and the remaining incumbent directors elected by the holders of the Common Stock and Preferred Stock, shall constitute the duly elected directors of the Corporation.
(iv) The terms of office of the additional directors elected by the Holders and holders of other Preferred Stock pursuant to paragraph 5(b) above shall terminate on the earliest date permitted by the Maryland General Corporation Law following the termination of a Voting Period, the remaining directors shall constitute the directors of the Corporation and the voting rights of the Holders and such other holders to elect additional directors pursuant to paragraph 5(b) above shall cease, subject to the provisions of the last sentence of paragraph 5(b)(ii).
(e) Exclusive Remedy. Unless otherwise required by law, the Holders of Preferred Shares shall not have any relative rights or preferences or other special rights other than those specifically set forth herein. The Holders of Preferred Shares shall have no preemptive rights or rights to cumulative voting. In the event that the Corporation fails to pay any dividends on the Preferred Shares, the exclusive remedy of the Holders shall be the right to vote for directors pursuant to the provisions of this paragraph 5.
(f) Notification to Moody's and S&P. In the event a vote
of Holders of Preferred Shares is required pursuant to the provisions of
Section 13(a) of the 1940 Act, the Corporation shall, not later than ten
business days prior to the date on which such vote is to be taken, notify
Moody's and S&P that such vote is to be taken and the nature of the action
with respect to which such vote is to be taken. Upon completion of any
such vote, the Corporation shall notify Moody's and S&P as to the result of
such vote.
6. 1940 Act Preferred Shares Asset Coverage. The Corporation shall maintain, as of the last Business Day of each month in which any share of Preferred Shares is outstanding, the 1940 Act Preferred Shares Asset Coverage.
7. Preferred Shares Basic Maintenance Amount. (a) The Corporation shall maintain, on each Valuation Date, and shall verify to its satisfaction that it is maintaining on such Valuation Date, (i) Moody's Eligible Assets having an aggregate Discounted Value equal to or greater than the Preferred Shares Basic Maintenance Amount and (ii) S&P Eligible Assets having an aggregate Discounted Value equal to or greater than the Preferred Shares Basic Maintenance Amount. Upon any failure to maintain the required Discounted Value, the Corporation will use its best efforts to alter the composition of its portfolio to reattain the Preferred Shares Basic Maintenance Amount on or prior to the Preferred Shares Basic Maintenance Cure Date.
(b) On or before 5:00 p.m., New York City time, on the third Business Day after a Valuation Date on which the Corporation fails to satisfy the Preferred Shares Basic Maintenance Amount, the Corporation shall complete and deliver to the Auction Agent, Moody's and S&P a complete Preferred Shares Basic Maintenance Report as of the date of such failure, which shall be deemed to have been delivered to the Auction Agent if the Auction Agent receives a copy or telecopy, telex or other electronic transcription thereof and on the same day the Corporation mails to the Auction Agent for delivery on the next Business Day the complete Preferred Shares Basic Maintenance Report. The Corporation shall also give a notice of cure of its failure to satisfy the Preferred Shares Basic Maintenance Amount along with the complete Preferred Shares Basic Maintenance Report to the Auction Agent, Moody's and S&P within three Business Days of its determination that it has satisfied such requirement following any period during which it has failed to satisfy such requirement. The Corporation will also deliver a Preferred Shares Basic Maintenance Report to the Auction Agent as of (i) the fifteenth day of each month (or, if such day is not a Business Day, the next succeeding Business Day) and (ii) the last Business Day of each month, in each case on or before the third Business Day after such day. The Corporation will also deliver a Preferred Shares Basic Maintenance Report to Moody's or S&P, as the case may be, for each Valuation Date that the Discounted Value of Moody's Eligible Assets or S&P Eligible Assets is less than or equal to 125% of the Preferred Shares Basic Maintenance Amount, provided, however, that if the Valuation Date is every day that is a Business Day, the Corporation will deliver a Preferred Shares Basic Maintenance Report to Moody's or S&P, as the case may be, for each Valuation Date that the Discounted Value of Moody's Eligible Assets or S&P Eligible Assets is less than or equal to 105% of the Preferred Shares Basic Maintenance Amount. The Corporation will deliver a Preferred Shares Basic Maintenance Report to Moody's upon request and when the Corporation redeems any shares of Common Stock. The Corporation will deliver a Preferred Shares Basic Maintenance Report to S&P upon request. A failure by the Corporation to deliver a Preferred Shares Basic Maintenance Report under this paragraph 7(b) shall be deemed to be delivery of a Preferred Shares Basic Maintenance Report indicating the Discounted Value for S&P Eligible Assets and Moody's Eligible Assets of the Corporation is less than the Preferred Shares Basic Maintenance Amount, as of the relevant Valuation Date.
(c) Within ten Business Days after the date of delivery of
the Preferred Shares Basic Maintenance Report and a Certificate of Minimum
Liquidity in accordance with paragraph 7(b) above relating to a Quarterly
Valuation Date, the Corporation shall cause the Independent Accountant to
confirm in writing the Auction Agent. Moody's and S&P (i) the mathematical
accuracy of the calculations reflected in such Report (and in any other
Preferred Shares Basic Maintenance Report, randomly selected by the
Independent Accountant, that was delivered by the Corporation during the
quarter ending on such Quarterly Valuation Date) and (with respect to S&P
only while S&P is rating the Preferred Shares) such Certificate, (ii) that,
in such Report (and in such randomly selected Report), the Corporation
correctly determined the assets of the Corporation which constitute S&P
Eligible Assets or Moody's Eligible Assets, as the case may be, at such
Quarterly Valuation Date in accordance with these Articles Supplementary,
(iii) that, in such Report (and in such randomly selected Report), the
Corporation determined whether the Corporation had, at such Quarterly
Valuation Date (and at the Valuation Date addressed in such randomly-
selected Report) in accordance with these Articles Supplementary, S&P
Eligible Assets of an aggregate Discounted Value at least equal to the
Preferred Shares Basic Maintenance Amount and Moody's Eligible Assets of an
aggregate Discounted Value at least equal to the Preferred Shares Basic
Maintenance Amount, (iv) that (with respect o S&P only) in such
Certificate, the Corporation determined the Minimum Liquidity Level and the
Corporation's Deposit Securities in accordance with these Articles
Supplementary, including maturity or tender date, (v) with respect to the
S&P rating on Municipal Obligations, the issuer name, issue size and coupon
rate listed in such Report and (with respect to S&P only) such Certificate,
that the Independent Accountant has requested that S&P verify such
information and the Independent Accountant shall provide - listing in its
letter of any differences, (vi) with respect to the Moody's ratings on
Municipal Obligations the issuer name, issue size and coupon rate listed in
such Report and (with respect to S&P only) such Certificate, that such
information has been verified by Moody's (in the event such information is
not verified by Moody's the Independent Accountant will inquire of Moody's
what such information is, and provide a listing in its letter of any
differences) and (vii) with respect to the bid or mean price (or such
alternative permissible factor used in calculating the Market Value)
provided by the custodian of the Corporation's assets to the Corporation
for purposes of valuing securities in the Corporation's portfolio, the
Independent Accountant has traced the price used in such Report and (with
respect to S&P only) such Certificate to the bid or mean price listed in
such Report and (with respect to S&P only) such Certificate as provided to
the Corporation and verified that such information agrees (in the event
such information does not agree, the Independent Accountant will provide a
listing in its letter of such differences) (such confirmation is herein
called the "Accountant's Confirmation").
(d) Within ten Business Days after the date of delivery to the Auction Agent, S&P and Moody's of a Preferred Shares Basic Maintenance Report in accordance with paragraph 7(b) above relating to any Valuation Date on which the Corporation failed to maintain S&P Eligible Assets with an aggregate Discounted Value and Moody's Eligible Assets with an aggregate Discounted Value equal to or greater than the Preferred Shares Basic Maintenance Amount, and relating to the Preferred Shares Basic Maintenance Cure Date with respect to such failure, the Independent Accountant will provide to the Auction Agent, S&P and Moody's an Accountant's Confirmation as to such Preferred Shares Basic Maintenance 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 Preferred Shares Basic Maintenance 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 S&P Eligible Assets or Moody's Eligible Assets, as the case may be, of the Corporation was determined by the Independent Accountant, the calculation or determination made by such Independent Accountant shall be final and conclusive and shall be binding on the Corporation and the Corporation shall accordingly amend and deliver the Preferred Shares Basic Maintenance Report to the Auction Agent, S&P and Moody's promptly following receipt by the Corporation 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 the Preferred Shares, the Corporation will complete and deliver to S&P and Moody's a Preferred Shares Basic Maintenance Report as of the close of business on such Date of Original Issue. Within five business days of such Date of Original Issue, the Corporation shall cause the Independent Accountant to confirm in writing to S&P and Moody's (i) the mathematical accuracy of the calculations reflected in such Report and (ii) that the aggregate Discounted Value of S&P Eligible Assets and the aggregate Discounted Value of Moody's Eligible Assets reflected thereon equals or exceeds the Preferred Shares Basic Maintenance Amount reflected thereon.
(g) For so long as Preferred Shares are rated by Moody's, in managing the Corporation's portfolio, the Corporation shall require that the Adviser will not alter the composition of the Corporation's portfolio if, in the reasonable belief of the Adviser, the effect of any such alteration would be to cause the Corporation to have Moody's Eligible Assets with an aggregate Discounted Value, as of the immediately preceding Valuation Date, less than Preferred Shares Basic Maintenance Amount as of such Valuation Date; provided, however, that in the event that, as of the immediately preceding Valuation Date, the aggregate Discounted Value of Moody's Eligible Assets exceeded the Preferred Shares Basic Maintenance Amount by twenty-five percent or less (or, in the event the Valuation Date is every day that is a Business Day, five percent or less), the Adviser will not alter the composition of the Corporation's portfolio in a manner reasonably expected to reduce the aggregate Discounted Value of Moody's Eligible Assets unless the Corporation shall have confirmed that, after giving effect to such alteration, the aggregate Discounted Value of Moody's Eligible Assets would exceed the Preferred Shares Basic Maintenance Amount.
8. Minimum Liquidity Level. (i) For so long as any Preferred Shares are rated by S&P, the Corporation shall be required to have, as of each Valuation Date, Dividend Coverage Assets having in aggregate a value not less than the Dividend Coverage Amount
(ii) As of each Valuation Date as long as any Preferred
Shares are rated by S&P, the Corporation shall determine (A) the
Market Value of the Dividend Coverage Assets owned by the Corporation
as of that Valuation Date, (B) the Dividend Coverage Amount on that
Valuation Date, and (C) whether the Minimum Liquidity Level is met as
of that Valuation Date. The calculations of the Dividend Coverage
Assets, the Dividend Coverage Amount and whether the Minimum Liquidity
Level is met shall be set forth in a certificate (a "Certificate of
Minimum Liquidity") dated as of the Valuation Date. The Preferred
Shares Basic Maintenance Report and the Certificate of Minimum
Liquidity may be combined in one certificate. The Corporation shall
cause the Certificate of Minimum Liquidity to be delivered to S&P not
later than the close of business on the third Business Day after the
Valuation Date applicable to such Certificate pursuant to paragraph
7(b). The Minimum Liquidity Level shall be deemed to be met as of any
date of determination if the Corporation has timely delivered a
Certificate of Minimum Liquidity relating to such date which states
that the same has been met and which is not manifestly inaccurate. In
the event that a Certificate of Minimum Liquidity is not delivered to
S&P when required, the Minimum Liquidity Level shall be deemed not to
have been met as of the applicable date.
(iii) If the Minimum Liquidity Level is not met as of any Valuation Date, then the Corporation shall purchase or otherwise acquire Dividend Coverage Assets to the extent necessary so that the Minimum Liquidity Level is met as of the fifth Business Day, provide to S&P a Certificate of Minimum Liquidity setting forth the calculations of the Dividend Coverage Assets and the Dividend Coverage Amount and showing that the Minimum Liquidity Level is met as such fifth Business Day together with a report of the custodian of the Corporation's assets confirming the amount of the Corporation's Dividend Coverage Assets as of such fifth Business Day.
9. Certain Other Restrictions. (a) So long as there are Preferred Shares Outstanding, the Corporation will enter into futures and options transactions only for bona fide hedging purposes and not for leveraging or speculative purposes. So long as Moody's and S&P are rating the Preferred Shares, the Corporation will only engage in futures or options transactions in accordance with the then-current guidelines of such ratings agencies, only if it is valuing its assets daily and only after it has received written confirmation from Moody's and S&P, as appropriate, that such transactions would not impair the ratings then assigned by S&P and Moody's to Preferred Shares. The S&P guidelines in effect as of the Date of Original Issue are set forth in their entirety in the following paragraph. The Corporation may engage in futures and options transactions in accordance therewith and such transactions shall have the consequences included in such guidelines set forth therein (as such guidelines are amended, modified and supplemented from time to time by S&P), provided, however, that it may not engage in any such transactions unless it has satisfied the relevant provisions of this paragraph relating to complying with Moody's guidelines and obtaining written confirmation from Moody's and S&P.
For so long as Preferred Shares are rated by S&P, the Corporation will not, unless it has received written confirmation from S&P that any such action would not impair the rating then assigned by S&P to Preferred Shares, purchase or sell futures contracts or options thereon or write uncovered put or uncovered call options in portfolio securities except (provided that the Corporation has received such written confirmation in advance from S&P) that (i) the Corporation may engage in S&P Hedging Transactions based on the Municipal Index, provided that (A) the Corporation shall not engage in any S&P Hedging Transaction based on the Municipal Index (other than Closing Transactions) which would cause the Corporation at the time of such transaction to own or have sold (1) more than 1,000 outstanding futures contracts based on the Municipal Index, (2) outstanding futures contracts based on Municipal Index exceeding in number 25% of the quotient of the fair market value of the Corporation's total assets divided by 100,000 or (3) outstanding futures contracts based on the Municipal Index exceeding in number 10% of the average number of daily traded futures contracts based on the Municipal Index in the month prior to the time of effecting such transaction as reported by The Wall Street Journal and (ii) the Corporation may engage in S&P Hedging Transactions based on Treasury Bonds, provided that (A) the Corporation shall not engage in any S&P Hedging Transactions based on Treasury Bonds (other than Closing Transactions) which would cause the Corporation at the time of such transaction to own or have sold the lesser of (1) outstanding futures contracts based on Treasury Bonds exceeding in number 25% of the quotient of the fair market value of the Corporation's total assets divided by 100,000 or (2) 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 month prior to the time of effecting such transaction as reported by The Wall Street Journal. For so long as Preferred Shares are rated by S&P, the Corporation will engage in Closing Transactions to close out any outstanding futures contract which the Corporation owns or has sold or any outstanding option thereon owned by the Corporation in the event (i) the Corporation does not have S&P Eligible Assets with an aggregate Discounted Value equal to or greater than the Preferred Shares Maintenance Amount on two consecutive Valuation Dates and (ii) the Corporation is required to pay Variation Margin on the second such Valuation Date. For so long as Preferred Shares are rated by S&P, the Corporation 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 Corporation holds securities deliverable under such terms. For purposes of calculating the Discounted Value of S&P Eligible Assets to determine compliance with the Preferred Shares Basic Maintenance Amount, such Discounted Value shall be reduced to 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 Corporation. For so long as Preferred Shares are rated by S&P, when the Corporation writes a futures contract or option thereon, it will maintain an amount of cash, cash equivalents or short-term, fixed-income securities in a segregated account with the Corporation's custodian, so that the amount so segregated plus the amount of Initial Margin and Variation Margin held in the account of the Corporation's broker equals the fair market value of the futures contract, except that in the event the Corporation writes a futures contract or option thereon which requires delivery of an underlying security, the Corporation shall hold such underlying security.
(b) For so long as Preferred Shares are rated by Moody's or S&P, the Corporation will not, unless it has received written confirmation from Moody's and/or S&P, as the case may be, that such action would not impair the ratings then assigned to Preferred Shares by Moody's and/or S&P, as the case may be, (i) borrow money, (ii) engage in short sales of securities, (iii) lend any securities, (iv) issue any class or series of stock ranking prior to or on a parity with the Preferred Shares with respect to the payment of dividends or the distribution of assets upon dissolution, liquidation or winding up of the Corporation, (v) reissue any Preferred Shares previously purchased or redeemed by the Corporation, (vi) merge or consolidate into or with any other corporation, (vii) change the Pricing Service or (viii) engage in reverse repurchase agreements.
10. Notice. All notices or communications, unless otherwise specified in these Articles Supplementary, shall be sufficiently given if in writing and delivered in person or mailed by first-class mail, postage prepaid. Notice shall be deemed given on the earlier of the date received or the date seven days after which such notice is mailed.
11. Auction Procedures. (a) Certain definitions. As used in this paragraph 11, the following terms shall have the following meanings, unless the context otherwise requires:
(i) "Auction Date" shall mean the first Business Day preceding the first day of a Dividend Period.
(ii) "Available Preferred Shares" shall have the meaning specified in paragraph 11(d) (i) below.
(iii) "Bid" shall have the meaning specified in paragraph 11(b) (i) below.
(iv) "Bidder" shall have the meaning specified in paragraph
11 (b) (i) below.
(v) "Hold Order" shall have the meaning specified in paragraph 11 (b) (i) below.
(vi) "Maximum Applicable Rate," for any Dividend Payment Period for the Preferred Shares will be the Applicable Percentage of the higher of the 30-day "AA" Composite Commercial Paper Rate and the Taxable Equivalent of the Short-Term Municipal Bond Rate except in the case of a Special Dividend Period in which case the Maximum Applicable Rate for any Dividend Payment Period included in such Special Dividend Period will be the Applicable Percentage (determined on the date of the Notice of Special Dividend Period in the case of any such Notice that specifies a Maximum Applicable Rate applicable to such Special Dividend Payment Period) of the Special Dividend Period Reference Rate for such Dividend Payment Period. The Applicable Percentage will be determined based on (i) the lower of the credit rating or ratings assigned on such date to such shares by Moody's and S&P (or if Moody's or S&P or both shall not make such ratings available, the equivalent of either or both of such ratings by a Substitute Rating Agency or two Substitute Rating Agencies or, in the event that only one such rating shall be available, such rating) and (ii) whether the Corporation has provided notification to the Auction Agent prior to the Auction establishing the Applicable Rate for any dividend pursuant to paragraph 2(f) hereof that net capital gains or other taxable income will be included in such dividend on Preferred Shares as follows:
Credit Ratings Applicable Applicable ------------------------------------- Percentage: Percentage: Moody's S&P No Notification Notification ------- --- --------------- ------------ "aa3" or higher AA or higher 110% 150% "a3" to "a1" A- to A+ 125% 160% |
"baa3" to "baa1" BBB- to BBB+ 150% 250% "ba3" to "ba1" BB- to BB+ 200% 275% Below "ba3" Below BB- 250% 300%
The Corporation will take all reasonable action necessary to enable Moody's and S&P to provide a rating for the series of Preferred Shares. If either Moody's or S&P shall not make such a rating available, or neither Moody's nor S&P shall make such a rating available, Merrill Lynch, Pierce, Fenner & Smith Incorporated or its affiliates and successors, after consultation with the Corporation, will select a nationally recognized statistical rating organization (a "Substitute Rating Agency") or two nationally recognized statistical rating organizations ("Substitute Rating Agencies") to act as Substitute Rating Agency or Substitute Rating Agencies, as the case may be; provided that if such a rating is not made available with respect to either series of Preferred Shares, Merrill Lynch, Pierce, Fenner & Smith or its affiliates and successors, after consultation with the Corporation, shall select a Substitute Rating Agency or Agencies.
(vii) "Minimum Applicable Rate," for any Dividend Payment Period included in a Special Dividend Period for which Bid Requirements are imposed will be such rate as may be specified by the Corporation in the Notice of Special Dividend Period relating to the Special Dividend Period within which such Dividend Payment Period occurs.
(viii) "Order" shall have the meaning specified in paragraph 11(b) (i) below.
(ix) "Preferred Shares" shall mean the Preferred Shares being auctioned pursuant to this paragraph 11.
(x) "Sell Order" shall have the meaning specified in paragraph 11 (b) (i) below.
(xi) "Submission Deadline" shall mean 1:00 P.M., New York City time, on any Auction Date or such other time on any Auction Date as may be specified by the Auction Agent from time to time as the time by which each Broker-Dealer must submit to the Auction Agent in writing all Orders obtained by it for the Auction to be conducted on such Auction Date.
(xii) "Submitted Bid" shall have the meaning specified in paragraph 11 (d) (i) below.
(xiii) "Submitted Hold Order" shall have the meaning specified in paragraph 11 (d) (i) below.
(xiv) "Submitted Order" shall have the meaning specified in paragraph 11 (d) (i) below.
(xv) "Submitted Sell Order" shall have the meaning specified in paragraph 11 (d) (i) below.
(xvi) "Sufficient Clearing Bids" shall have the meaning specified in paragraph 11 (d) (i) below.
(xvii) "Winning Bid Rate" shall have the meaning specified in paragraph 11 (d) (i) below.
(b) Orders by Existing Holders and Potential Holders.
(i) On or prior to the Submission Deadline on each Auction Date:
(A) each Existing Holder may submit to a Broker-Dealer information as to:
(1) the number of Outstanding shares, if any, of Preferred Shares held by such Existing Holder which such Existing Holder desires to continue to hold without regard to the Applicable Rate for the next succeeding Dividend Period;
(2) the number of Outstanding shares, if any, of Preferred Shares held by such Existing Holder which such Existing Holder desires to continue to hold, provided that the Applicable Rate for the next succeeding Dividend Period shall not be less than the rate per annum or, in the case of an Auction with Bid Requirements including a Spread, the Spread specified by such Existing Holder; and/or
(3) the number of Outstanding shares, if any, of Preferred Shares held by such Existing Holder which such Existing Holder offers to sell without regard to the Applicable Rate for the next succeeding Dividend Period; and
(B) each Broker-Dealer, using a list of Potential Holders that shall be maintained in good faith for the purpose of conducting a competitive Auction, shall contact Potential Holders, including Persons that are not Existing Holders, on such list to determine the number of Outstanding shares, if any, of Preferred Shares which each such Potential Holder offers to purchase, provided that the Applicable Rate for the next succeeding Dividend Period shall not be less than the rate per annum or Spread specified by such Potential Holder.
For the purposes hereof, the communication to a Broker- Dealer of information referred to in clause (A) or (B) of this paragraph 11(b)(i) is hereinafter referred to an "Order" and each Existing Holder and each Potential Holder placing an Order is hereinafter referred to as a "Bidder"; an Order containing the information referred to in clause (A)(1) of this paragraph 11(b)(i) is hereinafter referred to as a "Hold Order"; an Order containing the information referred to in clause (A)(2) or (B) of this paragraph 11(b)(i) is hereinafter referred to as a "Bid"; and an Order containing the information referred to in clause (A)(3) of this paragraph 11(b)(i) is hereinafter referred to as a "Sell Order".
(i) (A) A Bid by an Existing Holder shall constitute an irrevocable offer to sell:
(1) the number of Outstanding Preferred Shares specified in such Bid if the Applicable Rate determined on such Auction Date shall be less than the rate per annum or Spread specified in such Bid; or
(2) such number of a lesser number of Outstanding Preferred Shares to be determined as set forth in paragraph 11(e)(i)(D) if the Applicable Rate determined on such Auction Date shall be equal to the rate per annum or Spread specified therein; or
(3) a lesser number of Outstanding Preferred Shares to be determined as set forth in paragraph 11(e)(ii)(C) if such specified rate per annum shall be higher than the Maximum Applicable Rate and Sufficient Clearing Bids do not exist.
(B) A Sell Order by an Existing Holder shall constitute an irrevocable offer to sell:
(1) the number of Outstanding Preferred Shares specified in such Sell Order; or
(2) such number or a lesser number of Outstanding Preferred Shares to be determined as set forth in paragraph 11(e)(ii)(C) if Sufficient Clearing Bids do not exist.
(C) A Bid by a Potential Holder shall constitute an irrevocable offer to purchase:
(1) the number of Outstanding Preferred Shares specified in such Bid if the Applicable Rate determined on such Auction Date shall be higher than the rate per annum or Spread specified in such Bid; or
(2) such number or a lesser number of Outstanding Preferred Shares to be determined as set forth in paragraph 11(e)(i)(E) if the Applicable Rate determined on such Auction Date shall be equal to the rate per annum or Spread specified therein.
(c) Submission of Orders by Broker-Dealers to Auction Agent.
(i) Each Broker-Dealer shall submit in writing or through the Auction Agent's Auction Processing System to the Auction Agent prior to the Submission Deadline on each Auction Date all Orders obtained by such Broker-Dealer and specifying with respect to each Order:
(A) the name of the Bidder placing such Order;
(B) the aggregate number of Outstanding Preferred Shares that are subject of such Order;
(C) to the extent that such Bidder is an Existing Holder;
(1) the number of Outstanding shares, if any, of Preferred Shares subject to any Hold Order placed by such Existing Holder;
(2) the number of Outstanding shares, if any, of Preferred Shares subject to any Bid placed by such Existing Holder and the rate per annum or Spread specified in such Bid; and
(3) the number of Outstanding shares, if any, of Preferred Shares subject to any Sell Order placed by such Existing Holder; and
(D) (i) to the extent such Bidder is a Potential Holder, the rate per annum or Spread specified in such Potential Holder's Bid.
(ii) If any rate per annum or Spread 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% and shall round such Spread to the next highest one-thousandth (.001) of a basis point.
(iii) If an Order or Orders covering all of the Outstanding Preferred Shares held by an Existing Holder is not submitted to the Auction Agent prior to the Submission Deadline, the Auction Agent shall deem a Hold Order to have been submitted on behalf of such Existing Holder covering the number of Outstanding Preferred Shares held by such Existing Holder and not subject to Orders submitted to the Auction Agent; provided, however, that with respect to an Auction to establish a Special Dividend Period longer than 91 days, the Auction Agent shall deem a Sell Order to have been submitted on behalf of such Existing Holder covering such number of Outstanding Preferred Shares.
(iv) If one or more Orders on behalf of an Existing Holder covering in the aggregate more than the number of Outstanding Preferred Shares held by such Existing Holder are submitted to the Auction Agent, such Orders shall be considered valid as follows and in the following order of priority:
(A) any Hold Order submitted on behalf of such Existing Holder shall be considered valid up to and including the number of Outstanding Preferred Shares held by such Existing Holder; provided that if more than one Hold Order is submitted on behalf of such Existing Holder and the number of Preferred Shares subject to such Hold Order exceeds the number of Outstanding Preferred Shares held by such Existing Holder, the number of Preferred Shares subject to each of such Hold Orders shall be reduced pro rata so that such Hold Orders, in the aggregate, will cover exactly the number of Outstanding Preferred Shares held by such Existing Holder;
(B) any Bids submitted on behalf of such Existing Holder shall be considered valid, in the ascending order of their respective rates per annum or Spread, if more than one Bid is submitted on behalf of such Existing Holder, up to and including the excess of the number of Outstanding Preferred Shares held by such Existing Holder over the number of Preferred Shares subject to any Hold Order referred to in paragraph 11(c)(iv)(A) above (and if more than one Bid submitted on behalf of such Existing Holder specifies the same rate per annum or Spread and together they cover more than the remaining number of shares that can be the subject of valid Bids after application of paragraph 11(c)(iv)(A) above and of the foregoing portion of this paragraph 11(c)(iv)(B) to any Bid or Bids specifying a lower rate or rates per annum or Spread, the number of shares subject to each of such Bids shall be reduced pro rata so that such Bids, in the aggregate, cover exactly such remaining number of shares); and the number of shares, if any, subject to Bids not valid under this paragraph 11(c)(iv)(B) shall be treated as the subject of a Bid by a Potential Holder; and
(C) any Sell Order shall be considered valid up to and including the excess of the number of Outstanding Preferred Shares held by such Existing Holder over the number of Preferred Shares subject to Hold Orders referred to in paragraph 11(c)(iv)(A) and Bids referred to in paragraph 11(c)(iv)(B); provided that if more than one Sell Order is submitted on behalf of any Existing Holder and the number of Preferred Shares subject to such Sell Orders is greater than such excess, the number of Preferred Shares subject to each of such Sell Orders shall be reduced pro rata so that such Sell Orders, in the aggregate, cover exactly the number of Preferred Shares equal to such excess.
(v) If more than one Bid is submitted on behalf of any Potential Holder, each Bid submitted shall be a separate Bid with the rate per annum or Spread and number of Preferred Shares specified.
(vi) Any Bid by an Existing Holder that specifies a Spread, with respect to an Auction in which a Spread is not included in any Bid Requirements or in which there are no bid Requirements and any Order that does not specify a Spread with respect to an Auction in which a Spread is included in any bid Requirements shall be treated as a Sell Order.
(d) Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate.
(i) Not earlier than the Submission Deadline on each Auction Date, the Auction Agent shall assemble all Orders submitted or deemed submitted to it by the Broker-Dealers (each such Order as submitted or deemed submitted by a Broker-Dealer being hereinafter referred to individually as a "Submitted Hold Order" a "Submitted Bid" a "Submitted Sell Order", as the case may be, or as a "Submitted Order") and shall determine:
(A) the excess of the total number of Outstanding Preferred Shares over the number of Outstanding Preferred Shares that are the subject of Submitted Hold Orders (such excess being hereinafter referred to as the "Available Preferred Shares");
(B) from the Submitted Orders whether the number of Outstanding Preferred Shares that are the subject of Submitted bids by Potential Holders specifying one or more rates per annum or Spreads that result in one or more rates per annum on such date equal to or lower than the Maximum Applicable Rate in effect for the first Dividend Payment Period after the auction Date exceeds or is equal to the sum of:
(1) the number of outstanding Preferred Shares that are the subject of Submitted Bids by Existing Holders specifying one or more rates per annum or Spreads that result in one or more rates per annum on such date higher than such Maximum Applicable Rate, and
(2) the number of Outstanding Preferred Shares that are subject to Submitted Sell Orders (if such excess or such equality exists (other than because the number of Outstanding Preferred Shares in clauses (1) and (2) above are each zero because all of the Outstanding Preferred Shares are the subject of Submitted Hold Orders), such Submitted Bids by Potential Holders being hereinafter referred to collectively as "Sufficient Clearing Bids"); and
(C) if Sufficient Clearing Bids exist, the lowest rate per annum or, in the case of an, Auction with Bid Requirements including a Spread, the lowest Spread specified in the Submitted Bids (the "Winning Bid Rate") that if:
(1) each Submitted Bid from Existing Holders specifying the Winning Bid Rate and all other Submitted Bids from Existing Holders specifying lower rates per annum or Spreads were rejected, thus entitling such Existing Holders to continue to hold the Preferred Shares that are the subject of such Submitted Bids, and
(2) each Submitted Bid from Potential Holders specifying the Winning Bid Rate and all other Submitted Bids from Potential Holders specifying lower rates per annum or Spreads were accepted, thus entitling the Potential Holders to purchase the Preferred Shares that are the subject of such Submitted Bids, would result in the number of shares subject to all Submitted Bids specifying the Winning Bid Rate or a lower rate per annum or Spread being at least equal to the Available Preferred Shares.
(D) For purposes of these Article Supplementary, a positive Spread shall be considered lower than another positive Spread to the extent it is a lower number, a Spread of Zero shall be considered lower than a positive Spread, a negative Spread shall be considered lower than a Spread of zero and a negative Spread shall be considered lower than another negative Spread to the extent it is a higher number.
(ii) Promptly after the Auction Agent has made the determinations pursuant to paragraph 11(d)(i), the Auction Agent shall advise the Corporation of the Maximum Applicable Rate (or, in the event the Corporation has specified a Maximum Applicable Rate or Rates, or a Minimum Applicable Rate or Rates the Auction Agent shall confirm to the Corporation the calculation of such Maximum Applicable Rate or Rules or such Minimum Applicable Rate or Rates) and based on such determinations, the Applicable Rate for the next succeeding Dividend Period as follows:
(A) if Sufficient Clearing Bids exist, that the Applicable Rate for the next succeeding Dividend Period shall be equal to the Winning Bid Rate, subject to the effect of any applicable Minimum Applicable Rate and any applicable Maximum Applicable Rate;
(B) if Sufficient Clearing Bids do not exist (other than because all of the Outstanding Preferred Shares are the subject of Submitted Hold Orders and other than in the event the Auction is being conducted with respect to a Special Dividend Period), that the Applicable Rate for the next succeeding Dividend Period shall be equal to the Maximum Applicable Rate;
(C) if all of the Outstanding Preferred Shares are the subject of Submitted Hold Orders that the Dividend Period next succeeding the Auction shall automatically be the same length as the immediately preceding Dividend Period and the Applicable Rate for the next succeeding Dividend Period will be the higher of the 30-day "AA" Composite Commercial Paper Rate and the Taxable Equivalent of the Short-Term Municipal Bond Rate multiplied by 1 minus the maximum marginal regular Federal individual income tax rate then applicable to ordinary income or the maximum marginal regular Federal corporate tax rate then applicable, whichever is greater (or 90% of such rate if the Corporation has provided notification to the Auction Agent prior to the Auction establishing the Applicable Rate for any dividend pursuant to paragraph 2(f) hereof that net capital gains or other taxable income will be included in such dividend on Preferred Shares) on the date of the Auction; or
(D) if the Auction is being conducted with respect to a Special Dividend Period and Sufficient Clearing Bids do not exist, that the Dividend Period next succeeding the Auction shall automatically be 28 days (in the case of Series T28 Preferred Shares) or 7 days (in the case of Series T7 Preferred Shares) and the Applicable Rate for the next succeeding Dividend Period will be as set forth in paragraph 11(d)(ii)(C) above.
(e) Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and Allocation of Shares. Based on the determinations made pursuant to paragraph 11(d)(i), the Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the Auction Agent shall take such other action as set forth below:
(i) If Sufficient Clearing Bids have been made, subject to the provisions of paragraph 11(e) (iii) and paragraph 11(e) (iv), Submitted Bids and Submitted Sell Orders shall be accepted or rejected in the following order of priority and all other Submitted Bids shall be rejected:
(A) the Submitted Sell Orders of Existing Holders shall be accepted and the Submitted Bid of each of the Existing Holders specifying any rate per annum or Spread that is higher than the Winning Bid Rate shall be accepted, thus requiring each such Existing Holder to sell the Outstanding Preferred Shares that are the subject of such Submitted Sell Order or Submitted Bid;
(B) the Submitted Bid of each of the Existing Holders specifying any rate per annum or Spread that is lower than the Winning Bid Rate shall be rejected, thus entitling each such Existing Holder to continue to hold the Outstanding Preferred Shares that are the subject of such Submitted Bid;
(C) the Submitted Bid of each of the Potential Holders specifying any rate per annum that is lower than the Winning Bid Rate or Spread shall be accepted;
(D) the Submitted Bid of each of the Existing Holders specifying a rate per annum or Spread that is equal to the Winning Bid Rate shall be rejected, thus entitling each such Existing Holder to continue to hold the Outstanding Preferred Shares that are the subject of such Submitted Bid, unless the number of Outstanding Preferred Shares subject to all such Submitted Bids shall be greater than the number of Outstanding Preferred Shares ("Remaining Shares") equal to the excess of the Available Preferred Shares over the number of Outstanding Preferred Shares subject to Submitted Bids described in paragraph 11(e) (i) (B) and paragraph 11(e) (i)(C), in which event the Submitted Bids of each such Existing Holder shall be accepted, and each such Existing Holder shall be required to sell Outstanding Preferred Shares, but only in an amount equal to the difference between (1) the number of Outstanding Preferred Shares then held by such Existing Holder subject to such Submitted Bid and (2) the number of Preferred Shares obtained by multiplying (x) the number of Remaining Shares by (y) a fraction the numerator of which shall be the number of outstanding Preferred Shares held by such Existing Holder subject to such Submitted bid and the denominator of which shall be the sum of the numbers of Outstanding Preferred Shares subject to such Submitted Bids made by all such Existing Holders that specified a rate per annum equal or Spread to the Winning Bid Rate; and
(E) the Submitted Bid of each of the Potential Holders specifying a rate per annum or Spread that is equal to the Winning Bid Rate shall be accepted but only in an amount equal to the number of Outstanding Preferred Shares obtained by multiplying (x) the difference between the Available Preferred Shares and the number of Outstanding Preferred Shares subject to Submitted Bids described n paragraph 11(e)(i)(B), paragraph 11(e)(i)(C) and paragraph 11(e)(i)(D) by (y) a fraction the numerator of which shall be the number of Outstanding Preferred Shares subject to such Submitted Bid and the denominator of which shall be the sum of the numbers of Outstanding Preferred Shares subject to such Submitted Bids made by all such Potential Holders that specified a rate per annum or Spread equal to the winning Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other
than because all of the Outstanding Preferred Shares are subject to
Submitted Hold Orders), subject to the provisions of paragraph 11(e)
(iii), Submitted Orders shall be accepted or rejected as follows in
the following order of priority and all other Submitted Bids shall be
rejected:
(A) The Submitted Bid of each Existing Holder specifying any rate per annum or Spread that is equal to or lower than the Maximum Applicable Rate (a Bid specifying a Spread being converted to a rate per annum for this purpose by applying the spread to the most recently available Reference Index or Reference Security) shall be rejected, thus entitling such Existing Holder to continue to hold the outstanding Preferred Shares that are the subject of such Submitted Bid;
(B) the Submitted Bid of each Potential Holder specifying any rate per annum or Spread that is equal to or lower than the Maximum Applicable Rate (a Bid specifying a Spread being converted to a rate per annum for this purpose by applying the Spread to the most recently available Reference Index or Reference Security) shall be accepted, thus requiring such Potential Holder to purchase the Outstanding Preferred Shares that are the subject of such Submitted Bid; and
(C) the Submitted Bids of each Existing Holder
specifying any rate per annum or spread that is higher than the
Maximum Applicable Rate (a Bid specifying a Spread being converted to
a rate per annum for this purpose by applying the Spread to the most
recently available Reference Index or Reference Security) shall be
accepted, and the Submitted Sell Orders of each Existing Holder shall
be accepted in both cases only in an amount equal to the difference
between (1) the number of Outstanding Preferred Shares then held by
such Existing Holder subject to such Submitted Bid or Submitted Sell
Order and (2) the number of Preferred Shares obtained by multiplying
(x) the difference between the Available Preferred Shares and the
aggregate number of Outstanding Preferred Shares subject to Submitted
Bids described in paragraph 11(e)(ii)(A) and paragraph 11(e)(ii)(B) by
(y) a fraction the numerator of which shall be the number of
Outstanding Preferred Shares subject to such Submitted Bid or
Submitted Sell Order and the denominator of which shall be the number
of Outstanding Preferred Shares subject to all such Submitted Bids and
Submitted Sell Orders.
(iii) If, as a result of the procedures described in paragraph 11(e)(i) or paragraph 11(e)(ii), any Existing Holder would be entitled or required to sell, or any Potential Holder would be entitled or required to purchase, a fraction of a share of Preferred Shares on any Auction Date, the Auction Agent shall, in such manner as in its sole discretion it shall determine, round up or down the number of Preferred Shares to be purchased or sold by any Existing Holder or Potential Holder on such Auction Date so that each Outstanding share of Preferred Shares purchased or sold by each Existing Holder or Potential Holder on such Auction Date shall be a whole share of Preferred shares.
(iv) If, as a result of the procedures described in paragraph 11(e)(i), any Potential Holder would be entitled or required to purchase less than a whole share of Preferred Shares on any Auction Date, the Auction Agent shall, in such manner as in its sole discretion it shall determine, allocate Preferred Shares for purchase among Potential Holders so that only whole Preferred Shares are purchased on such Auction Date by any Potential Holder, even if such allocation results in one or more of such Potential Holders not purchasing any Preferred Shares on such Auction Date.
(v) Based on the results of each Auction, the Auction Agent shall determine, with respect to each Broker-Dealer that submitted Bids or Sell Orders on behalf of Existing Holders or Potential Holders, the aggregate number of Outstanding Preferred Shares to be purchased and the aggregate number of Outstanding Preferred Shares to be sold by such Potential Holders and Existing Holders and to, the extent that such aggregate number of Outstanding shares to be purchased and such aggregate number of Outstanding shares to be sold differ, the Auction Agent shall determine to which other Broker-Dealer or Broker-Dealers acting for one or more purchasers such Broker-Dealer shall deliver, or from which other Broker-Dealer or Broker-Dealers acting for one or more sellers such Broker-Dealer shall receive, as the case may be, Outstanding Preferred Shares.
(f) Miscellaneous. An Existing Holder (A) may sell, transfer or otherwise dispose of Preferred Shares only pursuant to a Bid or Sell Order in accordance with the procedures described in this paragraph 11 or to or through a broker-dealer, provided that in the case of all transfers other than pursuant to Auctions such Existing Holder, its Broker- Dealer or its Agent Member advises the Auction Agent of such transfer and (B) except as otherwise required by law, shall have the ownership of the Preferred Shares held by it maintained in book entry form by the Securities Depository in the account of its Agent Member, which in turn will maintain records of such Existing Holder's beneficial ownership. Neither the Corporation nor any Affiliate shall submit an Order in any Auction. Any Existing Holder that is an Affiliate shall not sell, transfer or otherwise dispose of Preferred Shares to any Person other than the Corporation. All of the outstanding Preferred Shares of each series shall be represented by a single certificate registered in the name of the nominee of the Securities Depository unless otherwise required by law or unless there is no Securities Depository. If there is no Securities Depository, at the Corporation's option and upon its receipt of such documents as it deems appropriate, any Preferred Shares may be registered in the Stock Register in the name of the Existing Holder thereof and such Existing Holder thereupon will be entitled to receive certificates therefor and required to deliver certificates therefor upon transfer or exchange thereof.
12. Securities Depository; Stock Certificates. (a) If there is a Securities Depository, one certificate for all of the Preferred Shares of each series shall be issued to the Securities Depository and registered in the name of the Securities Depository or its nominee. Additional certificates may be issued as necessary to represent Preferred Shares. All such certificates shall bear a legend to the effect that such certificates are issued subject to the provisions restricting the transfer of Preferred Shares contained in these Articles Supplementary. Unless the Corporation shall have elected, during a Non-Payment Period, to waive this requirement, the Corporation will also issue stop-transfer instructions to the Auction Agent for the Preferred Shares. Except as provided in paragraph (b) below, the Securities Depository or its nominee will be the Holder, and no existing Holder shall receive certificates representing its ownership interest in such shares.
(b) If the Applicable Rate applicable to all Preferred Shares of a series shall be the Non-Payment Period Rate or there is no Securities Depository, the Corporation may at its option issue one or more new certificates with respect to such shares (without the legend referred to in paragraph 12(a)) registered in the names of the Existing Holders or their nominees and rescind the stop-transfer instructions referred to in paragraph 12(a) with respect to such shares.
13. Interpretations. The Board of Directors may interpret the provisions of these Articles Supplementary to resolve any inconsistency or ambiguity, remedy any formal defect or make any other change or modification that does not adversely affect the rights of Existing Holder of Preferred Shares."
SECOND: The amendment to the charter of the Corporation set forth in these Articles of Amendment was advised by the Board of Directors of the Corporation and approved by the stockholders of the Corporation at a special meeting of the stockholders of the Corporation held on July 13, 1994.
THIRD: The amendment to the charter of the Corporation set forth in these Articles of Amendment does not increase the authorized capital stock of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed by its President and its corporate seal to be affixed hereto and attested to by its Secretary as of the 13th day of July, 1994.
THE BLACKROCK INVESTMENT QUALITY
(SEAL) MUNICIPAL TRUST INC.
By /s/ Ralph L. Schlosstein
---------------------------------
Ralph L. Schlosstein
President
|
ATTEST:
/s/ Barbara G. Novick ------------------------- Barbara G. Novick Secretary |
The undersigned, the President of the BlackRock Investment Quality Municipal Trust Inc., hereby acknowledges the foregoing to be the corporate act of such Corporation and that, to the best of his knowledge, information and belief, the matters and facts set forth therein are true in all material respects, and that this statement has been made under the penalties for perjury.
/s/ Ralph L. Schlosstein ----------------------------- Ralph L. Schlosstein President |
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
ARTICLES OF AMENDMENT
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC., a Maryland
corporation (the "Corporation"), hereby certifies as follows:
FIRST: For the purposes of these Articles of Amendment, the following terms, when used herein in capitalized form, shall have the meanings indicated: (a) "Articles Supplementary" shall mean the Articles Supplementary of the Corporation which (i) created the classes of capital stock of the Corporation designated as the "Auction Rate Municipal Preferred Stock, Series T7" and the "Auction Rate Municipal Preferred Stock, Series T28" and (ii) were amended pursuant to Articles of Amendment that were filed with, and approved for record by, the Maryland State Department of Assessments and Taxation on July 15, 1994; and (b) "Effective Date" shall mean 5:00 p.m. (Eastern Daylight Time) on the date that these Articles of Amendment are filed with, and accepted for record by, the Maryland State Department of Assessments and Taxation in accordance with the Maryland General Corporation Law.
SECOND: The amendment to the Charter of the Corporation hereinafter set forth in these Articles of Amendment shall become effective at the Effective Date.
THIRD: Effective as of the Effective Date, the Charter of the Corporation shall be, and is hereby, amended for the purposes of changing and reclassifying certain of the shares of the authorized capital stock of the Corporation into additional authorized shares of the "Auction Rate Municipal Preferred Stock, Series T7" and the "Auction Rate Municipal Preferred Stock, Series T28" and decreasing the liquidation preferences thereof as follows:
(a) By striking out the "DESIGNATION" set forth in the first paragraph of Article SECOND of the Articles Supplementary and inserting in lieu thereof the following:
"SERIES T7: A series of 2,600 shares of preferred stock, par value $.01 per share, liquidation preference of $25,000 per share plus an amount equal to accumulated but unpaid dividends (whether or not earned or declared) thereon plus the premium, if any, resulting from the designation of a Premium Call Period, is hereby designated "Auction Rate Municipal Preferred Stock, Series T7." Each share of Auction Rate Municipal Preferred Stock, Series T7 shall have such preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Corporation's Charter applicable to preferred stock of the Corporation, as are set forth in these Articles Supplementary. The Auction Rate Municipal Preferred Stock, Series T7 shall constitute a separate series of preferred stock of the Corporation, and each share of the Auction Rate Municipal Preferred Stock, Series T7 shall be identical."
"SERIES T28: A series of 2,600 shares of preferred stock, par value $.01 per share, liquidation preference of $25,000 per share plus an amount equal to accumulated but unpaid dividends (whether or not earned or declared) thereon plus the premium, if any, resulting from the designation of a Premium Call Period, is hereby designated "Auction Rate Municipal Preferred Stock, Series T28. Each share of Auction Rate Municipal Preferred Stock, Series T28 shall have such preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Corporation's Charter applicable to preferred stock of the Corporation, as are set forth in these Articles Supplementary. The Auction Rate Municipal Preferred Stock, Series T28 shall constitute a separate series of preferred stock of the Corporation, and each share of the Auction Rate Municipal Preferred Stock, Series T28 shall be identical."
(b) By striking out the first sentence of Paragraph 3 (Liquidation Rights) of Article SECOND of the Articles Supplementary and inserting in lieu thereof the following:
"3. Liquidation Rights. Upon any, liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the Holders shall be entitled to receive, out of the assets of the Corporation available for distribution to shareholders, before any distribution or payment is made upon any Common Stock or any other capital stock ranking junior in right of payment upon liquidation to the Preferred Shares, the sum of $25,000 plus accumulated but unpaid dividends (whether or not earned or declared) thereon plus the premium, if any, resulting from the designation of a Premium Call Period to the date of distribution, and after such payment the holders of Preferred Shares will be entitled to no other payments other than Additional Dividends as provided in paragraph 2(e) hereof."
FOURTH: Effective as of the Effective Date, each share of the issued and outstanding "Auction Rate Municipal Preferred Stock, Series T7" shall be converted into two (2) shares of the "Auction Rate Municipal Preferred Stock, Series T7," each of which shall have all of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption as are afforded to each and every other share of the "Auction Rate Municipal Preferred Stock, Series T7" pursuant to the Charter of the Corporation (as amended by these Articles of Amendment) and the Maryland General Corporation Law.
FIFTH: Effective as of the Effective Date, each share of the issued and outstanding "Auction Rate Municipal Preferred Stock, Series T28" shall be converted into two (2) shares of the "Auction Rate Municipal Preferred Stock, Series T28," each of which shall have all of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption as are afforded to each and every other share of the "Auction Rate Municipal Preferred Stock, Series T28" pursuant to the Charter of the Corporation (as amended by these Articles of Amendment) and the Maryland General Corporation Law.
SIXTH: The amendment to the Charter of the Corporation set forth in these Articles of Amendment was advised by the Board of Directors of the Corporation in accordance with the Charter and Bylaws of the Corporation and the Maryland General Corporation Law.
SEVENTH: The amendment to the Charter of the Corporation set forth in these Articles of Amendment was approved by the stockholders of the Corporation at a meeting of the stockholders of the Corporation held on May 16, 1995 in accordance with the Charter and Bylaws of the Corporation and the Maryland General Corporation Law.
EIGHTH: The amendment to the Charter of the Corporation set forth in these Articles of Amendment changes and reclassifies certain of the authorized shares of the capital stock of the Corporation into additional authorized shares of the "Auction Rate Municipal Preferred Stock, Series T7" and the "Auction Rate Municipal Preferred Stock, Series T28," respectively, but does not increase the aggregate number of authorized shares of the capital stock of the Corporation. Prior to the Effective Date, there were 1,300 authorized shares of the "Auction Rate Municipal Preferred Stock, Series T7." As of the Effective Date, there will be 2,600 shares of the "Auction Rate Municipal Preferred Stock, Series T7." Prior to the Effective Date, there were 1,300 authorized shares of the "Auction Rate Municipal Preferred Stock, Series T28." As of the Effective Date, there will be 2,600 shares of the "Auction Rate Municipal Preferred Stock, Series T28."
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed in its name and on its behalf by its President and its corporate seal to be affixed and attested to by its Secretary as of the 13th day of June, 1995.
ATTEST: THE BLACKROCK INVESTMENT QUALITY
MUNICIPAL TRUST INC.
/s/ Karen H. Sabath By /s/Ralph L. Schlosstein (SEAL) --------------------------- -------------------------- Karen H. Sabath Ralph L. Schlosstein Secretary President |
The undersigned, being the duly elected and acting President of The BlackRock Investment Quality Municipal Trust Inc. hereby acknowledges that the foregoing Articles of Amendment, of which this certificate is a part, is the act and deed of The BlackRock Investment Quality Municipal Trust Inc., and certifies, under the penalties for perjury, to the best of his knowledge, information and belief, that all matters and facts set forth therein are true in all material respects.
/s/Ralph L. Schlosstein Ralph L. Schlosstein President |
EXHIBIT a.(4)
FORM OF
ARTICLES SUPPLEMENTARY
OF THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC., a Maryland corporation having its principal Maryland office in the City of Baltimore (the "Corporation"), certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to the authority expressly vested in the Board of Directors of the Corporation by article fifth of its Charter, the Board of Directors has reclassified 662 authorized and unissued shares of common stock of the Corporation as preferred stock of the Corporation by increasing the number of shares of stock designated as Auction Rate Municipal Preferred Stock, Series T7 from 5,200 to 5,862.
SECOND: All of the authorized shares of the Auction Rate Municipal Preferred Stock, Series T7 shall be subject in all respects to the preferences, voting powers, restrictions, qualifications, and terms and conditions of redemption applicable to shares of Auction Rate Municipal Preferred Stock, Series T7 as provided in the Corporation's Charter; provided, however, that the Initial Dividend Period for such 662 shares shall be days and the Initial Dividend Rate for such shares shall be %.
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be signed and acknowledged in its name and on its behalf on this ___ day of ________________, 2000, by its President, who acknowledges that these Articles Supplementary are the act of the Corporation and, to the best of his knowledge, information and belief and under penalties of perjury, all matters and facts contained in these Articles Supplementary are true in all material respects.
THE BLACKROCK INVESTMENT
QUALITY MUNICIPAL TRUST INC.
By:_____________________________
Ralph L. Schlosstein
President
Attest:
BY-LAWS
OF
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the Corporation shall be in the City of Baltimore, State of Maryland.
Section 2. Principal Executive Office. The principal executive offices of the Corporation shall be at One Seaport Plaza, New York, New York 10292.
Section 3. Other Offices. The Corporation may have such other offices in such places as the Board of Directors may from time to time determine.
ARTICLE II
Meetings of Stockholders
Section 1. Annual Meeting. An annual meeting of the stockholders of the Corporation for the election of directors and for the transaction of such other business as may properly be brought before the meeting shall be held in May of each year.
Section 2. Special Meetings. Special meetings of the stockholders, unless otherwise provided by law or by the Articles of Incorporation, may be called for any purpose or purposes by a majority of the Board of Directors, the President, or on the written request of the holders of at least 25% of the outstanding capital stock of the Corporation entitled to vote at such meeting.
Section 3. Place of Meetings. Annual and special meetings of the stockholders shall be held at such place within the United States as the Board of Directors may from time to time determine.
Section 4. Notice of Meetings; Waiver of Notice. Notice of the place, date and time of the holding of each annual and special meeting of the stockholders and the purpose or purposes of each special meeting shall be given personally or by mail, not less than ten nor more than ninety days before the date of such meeting, to each stockholder entitled to vote at such meeting and to each other stockholder entitled to notice of the meeting. Notice by mail shall be deemed to be duly given when deposited in the United States mail addressed to the stockholder at his address as it appears on the records of the Corporation, with postage thereon prepaid.
Notice of any meeting of stockholders shall be deemed waived by any stockholder who shall attend such meeting in person or by proxy, or who shall, either before or after the meeting, submit a signed waiver of notice which is filed with the records of the meeting. When a meeting is adjourned to another time and place, unless the Board of Directors, after the adjournment, shall fix a new record date for an adjourned meeting, or the adjournment is for more than one hundred and twenty-days after the original record date, notice of such adjourned meeting need not be given if the time and place to which the meeting shall be adjourned were announced at the meeting at which the adjournment is taken.
Section 5. Quorum. At all meetings of the stockholders, the holders of a majority of the shares of stock of the Corporation entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum for the transaction of any business, except as otherwise provided by statute or by the Articles of Incorporation. In the absence of a quorum no business may be transacted, except that the holders of a majority of the shares of stock present in person or by proxy and entitled to vote may adjourn the meeting from time to time, without notice other than announcement thereat except as otherwise required by these By-Laws, until the holders of the requisite amount of shares of stock shall be so present. At any such adjourned meeting at which a quorum may be present any business may be transacted which might have been transacted at the meeting as originally called. The absence from any meeting, in person or by proxy, of holders of the number of shares of stock of the Corporation in excess of a majority thereof which may be required by the laws of the State of Maryland, the Investment Company Act of 1940, as amended, or other applicable statute, the Articles of Incorporation, or these By-Laws, for action upon any given matters shall not prevent action at such meeting upon any other matter or matter which may properly come before the meeting, if there shall be present thereat, in person or by proxy, holders of the number of shares of stock of the Corporation required for action in respect of such other matter or matters.
Section 6. Organization. At each meeting of the stockholders, the Chairman of the Board (if one has been designated by the Board), or in the Chairman of the Board's absence or inability to act, the President, or in the absence or inability of the Chairman of the Board and the President, a Vice President, shall act as chairman of the meeting. The Secretary, or in the Secretary's absence or inability to act, any person appointed by the chairman of the meeting, shall act as secretary of the meeting and keep the minutes thereof.
Section 7. Order of Business. The order of business at all meetings of the stockholders shall be as determined by the chairman of the meeting.
Section 8. Voting. Except as otherwise provided by statute
or the Articles of Incorporation, each holder of record of shares of stock
of the Corporation having voting power shall be entitled at each meeting of
the stockholders to one vote for every share of such stock stranding in
such stockholder's name on the record of stockholders of the Corporation as
of the record date determined pursuant to Section 9 of this Article or if
such record date shall not have been so fixed, then at the later of (i) the
close of business on the day on which notice of the meeting is mailed or
(ii) the thirtieth day before the meeting.
Each stockholder entitled to vote at any meeting of stockholders may authorize another person or persons to act for him by a proxy signed by such stockholder or his attorney-in-fact. No proxy shall be valid after the expiration of eleven months from the date thereof, unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the stockholder executing it, except in those cases where such proxy states that it is irrevocable and where an irrevocable proxy is permitted by law. Except as otherwise provided by statute, the Articles of Incorporation or these By-Laws, any corporate action to be taken by vote of the stockholders shall be authorized by a majority of the total votes cast at a meeting of stockholders by the holders of shares present in person or represented by proxy and entitled to vote on such action.
If a vote shall be taken on any question other than the election of directors, which shall be written by ballot, then unless required by statute or these By-Laws, or determined by the chairman of the meeting to be advisable, any such vote need not be by ballot. On a vote by ballot, each ballot shall be signed by the stockholder voting, or by his proxy, if there be such proxy, and shall state the number of shares voted.
Section 9. Fixing of Record Date. The Board of Directors may set a record date for the purpose of determining stockholders entitled to vote at any meeting of the stockholders. The record date, which may not be prior to the close of business on the day the record date is fixed, shall be not more than ninety nor less than ten days before the date of the meeting of the stockholders. All persons who were holders of record of shares at such time, and not others, shall be entitled to vote at such meeting and any adjournment thereof.
Section 10. Inspectors. The Board may, in advance of any meeting of stockholders, appoint one or more inspectors to act at such meeting or any adjournment thereof. If the inspector shall not be so appointed or if any of them shall fail to appear to act, the chairman of the meeting may, and on the request of any stockholder entitled to vote thereat shall, appoint inspectors. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath to execute faithfully the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares outstanding and the voting powers of each, the number of shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the chairman of the meeting or any stockholder entitled to vote thereat, the inspectors shall make a report in writing of any challenge, request or matter determined by them and shall execute a certificate of any fact found by them. No director or candidate for the office of director shall act as inspector of an election of directors. Inspectors need not be stockholders.
Section 11. Consent of Stockholders in Lieu of Meeting. Except as otherwise provided by statute or the Articles of Incorporation, any action required to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if the following are filed with the records of stockholders meetings: (i) a unanimous written consent which sets forth the action and is signed by each stockholder entitled to vote on the matter and (ii) a written waiver of any right to dissent signed by each stockholder entitled to notice of the meeting but not entitled to vote thereat.
ARTICLE III
Board of Directors
Section 1. General Powers. Except as otherwise provided in the Articles of Incorporation, the business and affairs of the Corporation shall be managed under the direction of the Board of Directors. All powers of the Corporation may be exercised by or under authority of the Board of Directors except as conferred on or reserved to the stockholders by law or by the Articles of Incorporation or these By-Laws.
Section 2. Number of Directors. The number of directors shall be fixed from time to time by resolution of the Board of Directors adopted by a majority of the Directors then in office; provided, however, that the number of directors shall in no event be less than two nor more than nine. Any vacancy created by an increase in Directors may be filled in accordance with Section 6 of this Article III. No reduction in the number of directors shall have the effect of removing any director from office prior to the expiration of his term. Directors need not be stockholders.
Section 3. Election and Term of Directors. Each class of Directors as to which vacancies exist shall be elected by written ballot at the annual meeting of stockholders, or a special meeting held for that purpose unless otherwise provided by statute or the Articles of Incorporation. The term of office of each director shall be from time of his election and qualification until the expiration of the term of his class or until the annual election of directors next succeeding his election and until his successor shall have been elected and shall have qualified, or until his death, or until he shall have resigned, or have been removed as hereinafter provided in these By-Laws, or as otherwise provided by statute or the Articles of Incorporation.
Section 4. Resignation. A director of the Corporation may resign at any time by giving written notice of his resignation to the Board or the Chairman of the Board or the President or the Secretary. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
Section 5. Removal of Directors. Any director of the Corporation may be removed for cause (but not without cause ) by the stockholders by a vote of seventy-five percent (75%) of the votes entitled to be cast of the election of directors.
Section 6. Vacancies. Subject to the provisions of the Investment Company Act of 1940, as amended, any vacancies in the Board, whether arising from death, resignation, removal, an increase in the number of directors or any other cause, shall be filled by a vote of the Board of Directors in accordance with the Articles of Incorporation.
Section 7. Place of Meetings. Meetings of the Board may be held at such place as the Board may from time to time determine or as shall be specified in the notice of such meeting
Section 8. Regular Meeting. Regular meetings of the Board may be held without notice at such time and place as may be determined by the Board of Directors.
Section 9. Special Meetings. Special meetings of the Board may be called by two or more directors of the Corporation or by the Chairman of the Board or the President.
Section 10. Annual Meeting. The annual meeting of each newly elected Board of Directors (including a Board of Directors to which only one class of Directors has been newly elected) shall be held as soon as practicable after the meeting of stockholders at which directors were elected. No notice of such annual meeting shall be necessary if held immediately after the adjournment, and at the site, of the meeting of stockholders. If not so held, notice shall be given as hereinafter provided for special meetings of the Board of Directors.
Section 11. Notice of Special Meetings. Notice of each special meeting of the Board shall be given by the Secretary as hereinafter provided, in which notice shall be stated the time and place of the meeting. Notice of each such meeting shall be delivered to each director, either personally or by telephone or any standard form of telecommunication, at least twenty-four hours before the time at which such meeting is to be held, or mailed by first-class mail, postage prepaid, addressed to him at his residence or usual place of business, at least three days before the day on which such meeting is to be held.
Section 12. Waiver of Notice of Meetings. Notice of any special meeting need not be given to any director who shall, either before or after the meeting, sign a written wavier of notice which is filed with the records of the meeting or who shall attend such meeting. Except as otherwise specifically required by these By-Laws, a notice or waiver of notice of any meeting need not state the purpose of such meeting.
Section 13. Quorum and Voting. One-third, but not less than two, of the members of the entire Board shall be present in person at any meeting of the Board in order to constitute a quorum for the transaction of business at such meeting, and except as otherwise expressly required by statute, the Articles of Incorporation, these By-Laws, the Investment Company Act of 1940, as amended, or other applicable statute, the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board; provided, however, that the approval of any contract with an investment adviser or principal underwriter, as such terms are defined in the Investment Company Act of 1949, as amended, which the Corporation enters into or any renewal or amendment thereof, the approval of the fidelity bond required by the Investment Company Act of 1940, as amended, and the selection of the Corporation's independent public accountants shall each require the affirmative vote of a majority of the directors who are not interested persons, as defined in the Investment Company Act of 1940, as amended, of the Corporation. In the absence of a quorum at the meeting of the Board, a majority of the directors present thereat may adjourn such meeting to another time and place until a quorum shall be present thereat. Notice of the time and place of any such adjourned meeting shall be given to the directors who were not present at the time of the adjournment and, unless such time and place were announced at the meeting at which the adjournment was taken, to the other directors. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called.
Section 14. Organization. The Board may, by resolution adopted by a majority of the entire Board, designated a Chairman of the Board, who shall preside at each meeting of the Board. In the absence or inability of the Chairman of the board to preside at a meeting, the President or, in his absence or inability to act, another director chosen by a majority of the directors present, shall act as chairman of the meeting and preside thereat. The Secretary (or, in his absence or inability to act, any person appointed by the Chairman) shall act as secretary of the meeting and keep the minutes thereof.
Section 15. Written Consent of Directors in Lieu of a Meeting. Subject to the provisions of the Investment Company Act of 1040, as amended, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writings or writing are filed with the minutes of the proceedings of the Board or committee.
Section 16. Compensation. Directors may receive compensation for services to the Corporation in their capacities as directors or otherwise in such manner and in such amounts as may be fixed from time to time by the Board.
Section 17. Investment Policies. It shall be the duty of the Board of Directors to ensure that the purchase, sale, retention and disposal of portfolio securities and the other investment practices of the Corporation are at all times consistent with the investment policies and restrictions with respect to securities investments and otherwise of the Corporation, as recited in the Prospectus included in the registration statement of the Corporation covering the initial public offering of shares of its capital stock, as filed with the Securities and Exchange Commission (or as such investment policies and restrictions may be modified by the Board of Directors or, if required, by majority vote of the stockholders of the Corporation in accordance with the Investment Company Act of 1940, as amended) and as required by the Investment Company Act of 1940, as amended. The Board however may delegate the duty of management of the assets and the administration of its day to day operations to one or more individuals or corporate management companies and/or investment advisers pursuant to a written contract or contracts which have obtained the requisite approvals, including the requisite approvals of renewals thereof, of the Board of Directors and/or the stockholders of the Corporation in accordance with the provisions of the Investment Company Act of 1940, as amended.
Section 18. Asset Value. The Board of Directors shall determine the times and method of calculation of the net asset value per share of the Fund subject to conditions with the requirements of the 1940 Act.
ARTICLE IV
Committees
Section 1. Committees of the Board. The Board of Directors may from time to time, by resolution adopted by a majority of the whole Board, designate one or more committees of the Board, each such committee to consist of two or more directors and to have such powers and duties as the board of Directors may, by resolution, prescribe.
Section 2. General. One-third, but not less than two, of the members of any committee shall be present in person at any meeting of such committee in order to constitute a quorum for the transaction of business at such meeting, and the act of a majority present shall be the act of such committee. The Board may designate a chairman of any committee and such chairman or any two members of any committee may fix the time and place of its meetings unless the Board shall otherwise provide. In the absence or disqualification of any member of any committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. The Board shall have the power at any time to change the membership of any committee, to fill all vacancies, to designate alternate members to replace any absent or disqualified member, or to dissolve any such committee. Nothing herein shall be deemed to prevent the Board from appointing one or more committees consisting in whole or in part of persons who are not directors of the Corporation; provided, however, that no such committee shall have or may exercise any authority or power of the Board in the management of the business or affairs of the Corporation.
ARTICLE V
Officers, Agents, and Employees
Section 1. Number of Qualifications. The officers of the Corporation shall be a President, who shall be a director of the Corporation, a Secretary and a Treasurer, each of whom shall be elected by the Board of Directors. The Board of Directors may elect or appoint one or more Vice Presidents and may also appoint such other officers, agents and employees as it may deem necessary or proper. Any two or more offices may be held by the same person, except the offices of the President and Vice President, but no officer shall execute, acknowledge or verify any instrument as an officer in more than one capacity. Such officers shall be elected by the Board of Directors each year at its first meeting held after the annual meeting of stockholders, each to hold office until the meeting of the stockholders and until his successor shall have been duly elected and shall have qualified, or until his death, or until he shall have resigned, or have been removed, as hereinafter provided in these By-Laws. The Board may from time to time elect, or delegate to the President the power to appoint, such officers (including one or more Assistant Vice Presidents, one or more Assistant Treasurers and one or more Assistant Secretaries) and such agents, as may be necessary or desirable for the business of the Corporation. Such officers and agents shall have such duties and shall hold their offices for such terms as may be prescribed by the Board or by the appointing authority.
Section 2. Resignations. Any officer of the Corporation may resign at any time by giving written notice of resignation to the Board, the Chairman of the Board, President or the Secretary. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt; and, unless otherwise specified therein, the acceptance of such resignation shall be necessary to make it effective.
Section 3. Removal of Officer, Agent or Employee. Any officer, agent or employee of the Corporation may be removed by the Board of Directors with or without cause at any time, and the Board may delegate such power of removal as to agents and employees not elected or appointed by the Board of Directors. Such removal shall be without prejudice to such person's contract rights, if any, but the appointment of any person as an officer, agent or employee of the Corporation shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office, either arising from death, resignation, removal or any other cause, may be filled for the unexpired portion of the term of the office which shall be vacant, in the manner prescribed in these By-Laws for the regular election or appointment to such office.
Section 5. Compensation. The compensation of the officers of the Corporation shall be fixed by the Board of Directors, but this power may be delegated to any officer in respect of other officers under his control.
Section 6. Bonds or Other Security. If required by the Board, any officer, agent or employee of the Corporation shall give a bond or other security for the faithful performance of his duties, in such amount and with such surety or sureties as the Board may require.
Section 7. President. The President shall be the chief executive officer of the Corporation. In the absence of the Chairman of the Board (or if there be none), he shall preside at al meetings of the stockholders and of the Board of Directors. He shall have, subject to the control of the Board of Directors, general charge of the business and affairs of the Corporation. He may employ and discharge employees and agents of the Corporation, except such as shall be appointed by the Board, and he may delegate these powers.
Section 8. Vice President. Each Vice President shall have such powers and perform such duties as the board of Directors or the President may from time to time prescribe.
Section 9. Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible for, all the funds and securities of the Corporation, except those which the Corporation has placed in the custody of a bank or trust company or member of a national securities exchange (as that term is defined in the Securities Exchange Act of 1934, as amended) pursuant to a written agreement designating such bank or trust company or member of a national securities exchange as a custodian or sub-custodian of the property of the Corporation;
(b) keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation;
(c) cause all moneys and other valuables to be deposited to the credit of the Corporation;
(d) receive, and give receipts for, moneys due and payable, to the Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the investment of its funds as ordered or authorized by the Board, taking proper vouchers therefor; and
(f) in general, perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board or the President.
Section 10. Secretary. the Secretary shall:
(a) keep or cause to be kept in one or more books provided for the purpose, the minutes of all meetings of the Board and the stockholders;
(b) see that all notices are duly given in accordance with the provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and affix and attest the seal to all stock certificates of the Corporation (unless the seal of the Corporation on such certificates shall be a facsimile, as hereinafter provided) and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; and
(e) in general, perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board or the President.
Section 11. Delegation of Duties. In case of the absence of any officer of the Corporation, or for any other reason that the Board may deem sufficient, the Board may confer for the time being the powers or duties, or any of them, of such officer upon any other officer or upon any director.
ARTICLE VI
Indemnification
Each officer and director of the Corporation shall be indemnified by the Corporation to the full extent permitted under the General Laws of the State of Maryland, including the advancing of expenses, except that such indemnity shall not protect any such person against any liability to the Corporation or any stockholder thereof to which such person would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. Absent a court determination that an officer or director seeking indemnification was not liable on the merits or guilty of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office, the decision by the Corporation to indemnify such person must be based upon the reasonable determination of independent counsel or nonparty independent directors, after review of the facts, that such officer or director is not guilty of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office.
The Corporation may purchase insurance on behalf of the officer or director protecting such person to the full extent permitted under the General Laws of the State of Maryland, from liability arising from his activities as officer or director of the Corporation. The Corporation, however, may not purchase insurance on behalf of any officer or director of the Corporation that protects or purports to protect such person from liability to the Corporation or to its stockholders to which such officer or director would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of this office.
The Corporation may indemnify or purchase insurance to the extent provided in this Article VI on behalf of an employee or agent who is not an officer or director of the Corporation.
ARTICLE VII
Capital Stock
Section 1. Stock Certificates. Each holder of stock of the Corporation shall be entitled upon request to have a certificate or certificates, in such form as shall be approved by the Board, representing the number of shares of the Corporation owned by him, provided, however, that certificates for fractional shares will not be delivered in any case. The certificates representing shares of stock shall be signed by or in the name of the Corporation by the President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer and sealed with the seal of the Corporation. Any or all of the signatures or the seal on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate shall be issued, it may be issued by the Corporation with the same effect as if such officer, transfer agent or registrar were still in office at the date of issue.
Section 2. Books of Accounts and Record of Stockholders. There shall be kept at the principal executive office of the Corporation correct and complete books and records of account of all the business and transactions of the Corporation. There shall be made available upon request of any stockholder, in accordance with Maryland law, a record containing the number of shares of stock issued during a specified period not to exceed twelve months and the consideration received by the Corporation for each such share.
Section 3. Transfers of Shares. Transfers of shares of stock of the Corporation shall be made on the stock records of the Corporation only by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or with a transfer agent or transfer clerk, and on surrender of the certificate or certificates, if issued, for such shares properly endorsed or accompanied by a duly executed stock transfer power and the payment of all taxes thereon. Except as otherwise provided by law, the Corporation shall be entitled to recognize the exclusive rights of a person in whose name any share or shares stand on the record of stockholders as the owner of such share or shares for all purposes, including, without limitation, the rights to receive dividends or other distributions, and to vote as such owner, and the Corporation shall not be bound to recognize any equitable or legal claim to or interest in any such share or shares on the part of any other person.
Section 4. Regulations. The Board may make such additional rules and regulations, not inconsistent with these By-Laws, as it may deem expedient concerning the issue, transfer and registration of certificates for shares of stock of the Corporation. It may appoint, or authorize any officer or officers to appoint, one or more transfer agents or one or more transfer clerks and one or more registrars and may require all certificates for shares of stock to bear the signature or signatures of any of them.
Section 5. Lost, Destroyed or Mutilated Certificates. The holder of any certificates representing shares of stock of the Corporation shall immediately notify the Corporation of any loss, destruction or mutilation of such certificate, and the Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it which the owner thereof shall allege to have been lost or destroyed or which shall have been mutilated, and the Board may, in its discretion, require such owner or his legal representatives to give to the Corporation a bond in such sum, limited or unlimited, and in such form and with such surety or sureties, as the Board in its absolute discretion shall determine, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss or destruction of any such certificate, or issuance of a new certificate. Anything herein to the contrary notwithstanding, the Board, in its absolute discretion, may refuse to issue any such new certificate, except pursuant to legal proceedings under the laws of the State of Maryland.
Section 6. Fixing of a Record Date for Dividends and Distributions. The Board may fix, in advance, a date not more than ninety days preceding the date fixed for the payment of any dividend or the making of any distribution. Once the Board of Directors fixes a record date as the record date for the determination of the stockholders entitled to receive any such dividend or distribution, in such case only the stockholders of record at the time so fixed shall be entitled to receive such dividend or distribution.
Section 7. Information to Stockholders and Others. Any stockholder of the corporation or his agent may inspect and copy during usual business hours the Corporation's By-Laws, minutes of the proceedings of its stockholders, annual statements of its affairs, and voting trust agreements on file at its principal office.
ARTICLE VIII
Seal
The seal of the Corporation shall be circular in form and shall bear, in addition to any other emblem or device approved by the Board of Directors, the name of the Corporation, the year of its incorporation and the words "Corporate Seal" and "Maryland". Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.
ARTICLE IX
Fiscal Year
Unless otherwise determined by the Board, the fiscal year of the Corporation shall end on the 31st day of December.
ARTICLE X
Depositories and Custodians
Section 1. Depositories. The funds of the Corporation shall be deposited with such banks or other depositories as the Board of Directors of the corporation may from time to time determine.
Section 2. Custodians. All securities and other investments shall be deposited in the safe keeping of such banks or other companies as the Board of Directors of the Corporation may from time to time determine. Every arrangement entered into with any bank or other company for the safe keeping of the securities and investments of the Corporation shall contain provisions complying with the Investment Company Act of 1940, as amended, and the general rules and regulations thereunder.
ARTICLE XI
Execution of Instruments
Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts, acceptances, bills of exchange and other orders or obligations for the payment of money shall be signed by such officer or officers or person or persons as the Board of Directors by resolution shall from time to time designate.
Section 2. Sale or Transfer of Securities. Stock certificates, bonds or other securities at any time owned by the Corporation may be held on behalf of the Corporation or sold, transferred or otherwise disposed of subject to any limits imposed by these By-Laws and pursuant to authorization by the Board and, when so authorized to be held on behalf of the Corporation or sold, transferred or otherwise disposed of, may be transferred from the name of the Corporation by the signature of the President or a Vice President or the Treasurer or pursuant to any procedure approved by the Board of Directors, subject to applicable law.
ARTICLE XII
Independent Public Accountants
The firm of independent public accountants which shall sign or certify the financial statements of the Corporation which are filed with the Securities and Exchange Commission shall be selected annually by the Board of Directors and ratified by the stockholders in accordance with the provisions of the Investment Company Act of 1940, as amended.
ARTICLE XIII
Annual Statement
The books of account of the Corporation shall be examined by an independent firm of public accountants at the close of each annual period of the Corporation and at such other times as may be directed by the Board. A report to the stockholders based upon each such examination shall be mailed to each stockholder of the Corporation of record on such date with respect to each report as may be determined by the Board, at his address as the same appears on the books of the Corporation. Such annual statement shall also be available at the annual meeting of stockholders and be placed on file at the Corporation's principal office in the State of Maryland. Each such report shall show the assets and liabilities of the Corporation as of the close of the annual or quarterly period covered by the report and the Securities in which the funds of the Corporation were then invested. Such report shall also show the Corporation's income and expenses for the period from the end of the Corporation's preceding fiscal year to the close of the annual or quarterly period covered by the report and any other information required by the Investment Company Act of 1940, as amended, and shall set forth such other matters as the Board or such firm of independent public accountants shall determine.
ARTICLE XIV
Amendments
The Board of Directors, by affirmative vote of a majority thereof, shall have the exclusive right to amend, alter or repeal these By- Laws at any regular or special meeting of the Board of Directors, except any particular By-Law which is specified as not subject to alteration or repeal by the Board of Directors, subject to the requirements of the Investment Company Act of 1940, as amended.
COMMON STOCK
PAR VALUE $.01
THE BLACKROCK INVESTMENT QUALITY
MUNICIPAL TRUST INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF MARYLAND
THIS CERTIFICATE IS TRANSFERABLE CUSIP 094247D 10 5
IN BOSTON, MA OR IN NEW YORK, NY
THIS CERTIFIES THAT IS THE OWNER OF
FULL PAID AND NON-ASSESSABLE
SHARES OF THE COMMON STOCK The Black Rock Investment Quality Munical Trust Inc. transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be subject to all of the provisions of the Articles of Incorporation and By-Laws of the Corporation, each as from time to time amended, to all of which the holder by acceptance hereof assents. This Certificate is not valid until countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized offices.
Dated:
/s/_______________________________
Secretary
By /s/ ____________________________
President
|
The Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, limitations, or restrictions of such prefences and/or rights. The Corporation will also furnsih without charge to each stockholder who so requests a description of the authority of the Corporation's board of directors to set the relative rights and preferences of unissued series of the Corporation's capital stock. Such requests may be made to the Corporation or the transfer agent.
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM -- as tenants in common
UNIF GIFT MIN ACT--_____Custodian______
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with rights under Uniform Gifts of survivorship and not as to Minors Act ______ tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For value received ____________ hereby sell, assign and transfer unto. Please insert social security or other identifying number of assignee ___.
/ / __________________________________
___________ shares of the capital stock represented by the within certificate, and do hereby irrevocably constitute and appoint _______________ Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.
Dated: __________
NOTICE: The Signature to this assignment must correspond with the name as written upon the face of the Certificate in every particular, without alteration or enlargement or any change whatever.
Auction Rate Municipal SHARES
Preferred Stock, Series T7
THE BLACKROCK INVESTMENT QUALITY
MUNICIPAL TRUST INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF MARYLAND
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFICATE IS TRANSFERABLE CUSIP
IN NEW YORK, NY
THIS CERTIFIES THAT CEDE & CO. IS THE OWNER OF One Thousand Three Hundered
(1,300) FULLY PAID AND NON-ASSESSABLE SHARES OF AUCTION RATE MUNICIPAL
PREFERRED STOCK, SERIES T7, PAR VALUE $.01 PER SHARE, LIQUIDATION
PREFERENCE $50,000 PER SHARE PLUS AN AMOUNT EQUAL TO ACCUMULATED BUT UNPAID
DIVIDENDS (WHETHER OR NOT EARNED OR DECLARED) THEREON PLUS THE PREMIUM, IF
ANY, RESULTING FROM THE DESIGNATION OF A PREMIUM CALL PERIOD OF
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
transferable on the books of said Corporation in person or by duly authorized attorney upon surrender of this certificate properly endorsed.
This certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar.
In Witness Whereof, THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC. has caused its corporate seal to be hereto affixed and this certificate to be executed in its name and behalf by its duly authorized officers.
Dated: April 1, 1993
Countersigned and Registered:
BANKERS TRUST COMPANY
(New York) Transfer Agent President
By _________________________________
Authorized Signature
THE TRANSFER OF THE SHARES OF AUCTION RATE MUNICIPAL PREFERRED STOCK REPRESENTED HEREBY IS SUBJECT TO THE RESTRICTIONS CONTAINED IN THE CORPORATION'S CHARTER, AND THE PURCHASER'S LETTERS REFERRED TO THEREIN. THE CORPORATION WILL FURNISH INFORMATION ABOUT SUCH RESTRICTION TO ANY STOCKHOLDER, WITHOUT CHARGE, UPON REQUEST TO THE SECRETARY OF THE CORPORATION.
A full statement of the designations and any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption of the shares of each class of stock which the Corporation is authorized to issue and the differences in the relative rights and preferences between the shares of each series to the extent that they have been set, and the authority of the Board of Directors to set the relative rights and preferences of subsequent series, will be furnished by the Corporation to any stockholder, without charge, upon request to the Secretary of the Corporation at its principal office.
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM -- as tenants in common
UNIF GIFT MIN ACT--_____Custodian______
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with rights under Uniform Gifts of survivorship and not as to Minors Act ______ tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For value received ____________ hereby sell, assign and transfer unto. Please insert social security or other identifying number of assignee ___.
/ / _________________________________________
___________ shares of the capital stock represented by the within certificate, and do hereby irrevocably constitute and appoint _______________ Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.
Dated: ______________
NOTICE: The Signature to this assignment must correspond with the name as written upon the face of the Certificate in every particular, without alteration or enlargement or any change whatever.
SPECIMEN
Auction Rate Municipal SHARES
Preferred Stock, Series T28
THE BLACKROCK INVESTMENT QUALITY
MUNICIPAL TRUST INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF MARYLAND
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT CEDE & CO. IS THE OWNER OF One Thousand Three Hundered
(1,300) FULLY PAID AND NON-ASSESSABLE SHARES OF AUCTION RATE MUNICIPAL
PREFERRED STOCK, SERIES T28, PAR VALUE $.01 PER SHARE, LIQUIDATION
PREFERENCE $50,000 PER SHARE PLUS AN AMOUNT EQUAL TO ACCUMULATED BUT UNPAID
DIVIDENDS (WHETHER OR NOT EARNED OR DECLARED) THEREON PLUS THE PREMIUM, IF
ANY, RESULTING FROM THE DESIGNATION OF A PREMIUM CALL PERIOD OF
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
transferable on the books of said Corporation in person or by duly authorized attorney upon surrender of this certificate properly endorsed.
This certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar.
In Witness Whereof, THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC. has caused its corporate seal to be hereto affixed and this certificate to be executed in its name and behalf by its duly authorized officers.
Dated: April 1, 1993
Countersigned and Registered:
BANKERS TRUST COMPANY
(New York) Transfer Agent President
By
Authorized Signature
THE TRANSFER OF THE SHARES OF AUCTION RATE MUNICIPAL PREFERRED STOCK REPRESENTED HEREBY IS SUBJECT TO THE RESTRICTIONS CONTAINED IN THE CORPORATION'S CHARTER, AND THE PURCHASER'S LETTERS REFERRED TO THEREIN. THE CORPORATION WILL FURNISH INFORMATION ABOUT SUCH RESTRICTION TO ANY STOCKHOLDER, WITHOUT CHARGE, UPON REQUEST TO THE SECRETARY OF THE CORPORATION.
A full statement of the designations and any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption of the shares of each class of stock which the Corporation is authorized to issue and the differences in the relative rights and preferences between the shares of each series to the extent that they have been set, and the authority of the Board of Directors to set the relative rights and preferences of subsequent series, will be furnished by the Corporation to any stockholder, without charge, upon request to the Secretary of the Corporation at its principal office.
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM -- as tenants in common
UNIF GIFT MIN ACT--_____Custodian______
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with rights under Uniform Gifts of survivorship and not as to Minors Act ______ tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For value received ____________ hereby sell, assign and transfer unto. Please insert social security or other identifying number of assignee .
/ / ___________________________________
___________ shares of the capital stock represented by the within certificate, and do hereby irrevocably constitute and appoint _______________ Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.
Dated: _____________
NOTICE: The Signature to this assignment must correspond with the name as written upon the face of the Certificate in every particular, without alteration or enlargement or any change whatever.
TERMS AND CONDITIONS OF
DIVIDEND REINVESTMENT PLAN
1. You, State Street Bank and Trust Company, will act as Agent for me, and will open an account for me under the Dividend Reinvestment Plan (the "Plan") in the same name as my present shares are registered, and put the Plan into effect for me as of the first record date for a dividend or capital gains distribution after you receive the Authorization duly executed by me.
2. Whenever The BlackRock Investment Quality Municipal Trust Inc. (the "Trust") declares a distribution from capital gains or an income dividend payable in cash you shall use such cash to purchase additional shares of Trust common stock for me in the open market or otherwise. Such purchases will be made on or shortly after the payable date for such dividend or distribution, and in no event more than 45 days after such date except where temporary curtailment or suspension of purchase is necessary to comply with applicable provisions of federal securities law.
3. For all purposes of the Plan:
(a) The market price of the Trust's common stock on a particular date shall be the mean between the highest and lowest sales prices on the New York Stock Exchange on that date, or, if there is no sale on such Exchange on that date, then the mean between the closing bid and asked quotations for such stock on such Exchange on such date.
(b) The net asset value per share of the Trust's common stock on a particular date shall be as determined by or on behalf of the Trust; and
(c) All dividends, distributions and other payment shall be made net of any applicable withholding tax.
4. The open-market purchases provided for above may be made on any securities exchange where the Trust's common stock is traded, in the over-the-counter market or in negotiated transactions and may be on such terms as to price, delivery and otherwise as you shall determine. My funds held by you uninvested will not bear interest, and it is understood that, in any event, you shall have no liability in connection with any inability to purchase shares within 45 days after the initial date of such purchase as herein provided, or with the timing of any purchases effected. You shall have no responsibility as to the value of the common stock of the Trust acquired for my account. For the purposes of cash investments you may commingle my funds with those of other shareholders of the Trust for whom you similarly act as Agent, and the average price (including brokerage commissions) of all shares purchased by you as Agent shall be the price per share allocable to me in connection therewith.
5. You may hold my shares acquired pursuant to my authorization, together with the shares of other shareholders of the Trust acquired pursuant to similar authorizations, in noncertificated form in your name or that of your nominee. You will forward to me any proxy solicitation material and will vote any shares so held for me only in accordance with the proxy returned by me to the Trust. Upon my written request, you will deliver to me, without charge, a certificate or certificates for the full shares.
6. You will confirm to me each acquisition made for my account as soon as practical but not later than 60 days after the date thereof. Although I may from time to time have an undivided fractional interest (computed to three decimal places) in a share of the Trust, no certificates for a fractional share will be issued. However, dividends and distributions on fractional shares will be credited to my account. In the event of termination of my account under the Plan, you will adjust for any such undivided fractional interest in cash at the market value of the Trust's shares at the time of termination less the pro rata expense of any sale required to make such adjustment.
7. Any stock dividends or split shares distributed by the Trust on shares held by you for me will be credited to my account. In the event that the Trust makes available to its shareholders rights to purchase additional shares or other securities, the shares held for me under the Plan will be added to other shares held by me in calculating the number of rights to be issued to me.
8. Your service fee for handling capital gains distributions or income dividends will be paid by the Trust. I will be charged a pro rata share of brokerage commissions on all open- market purchases.
9. I may terminate my account under the Plan by notifying you by telephone or in writing. Such termination will be effective immediately if my notice is received by you not less than ten days prior to any dividend or distribution record date; otherwise such termination will be effective on the first trading day after the payment date for such dividend or distribution with respect to any subsequent dividend or distribution. The Plan may be terminated by you or the Trust upon notice in writing mailed to me at least 90 days prior to any record date for the payment of any dividend or distribution by the Trust. Upon any termination you will cause a certificate or certificates for the full shares held for me under the Plan and cash adjustment for any fraction to be delivered to me without charge. If I elect by notice to you in writing in advance of such termination to have you sell part or all of my shares and remit the proceeds to me, you are authorized to deduct a $2.50 fee plus brokerage commission for this transaction from the proceeds.
10. These terms and conditions may be amended or supplemented by you or the Trust at any time or times but, except when necessary or appropriate to comply with applicable law or the rules or policies of the Securities and Exchange Commission or any other regulatory authority, only by mailing to me appropriate written notice at least 90 days prior to the record date for the first dividend or distribution to which such amendment or supplement applies if by the Trust or if by you 90 days prior to the effective date of such amendment or supplement. The amendment or supplement shall be deemed to be accepted by me unless, prior to the effective date thereof, you receive written notice of the termination of my account under the Plan. Any such amendment may include an appointment by you in your place and stead of a successor Agent under these terms and conditions, with full power and authority to perform all or any of the acts to be performed by the Agent under these terms and conditions. Upon any such appointment of an Agent for the purpose of receiving dividends and distributions, the Trust will be authorized to pay to such successor Agent, for my account, all dividends and distributions payable on common stock of the Trust held in my name or under the Plan for retention or application by such successor Agent as provided in these terms and conditions.
11. You shall at all times act in good faith and agree to use your best efforts within reasonable limits to ensure the accuracy of all services performed under this Agreement and to comply with applicable law, but assume no responsibility, and shall not be liable for loss or damage due to errors unless such error is caused by your negligence, bad faith, or willful misconduct or that of your employees.
12. These terms and conditions shall be governed by the laws of the Commonwealth of Massachusetts.
THE BLACKROCK INVESTMENT This form is for shareholders who hold
QUALITY MUNICIPAL TRUST INC. stock in their own names. If your shares
are held through a brokerage firm, bank,
or other nominee, you should instruct your
DIVIDEND REINVESTMENT PLAN nominee to participate on your behalf. If you
wish to participate in the Plan, but your
brokerage firm, bank or other nominee is
unable to participate on your behalf, you
should request it to re- register your
shares in your own name, which will enable
your participation in the Plan.
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AUTHORIZATION FOR REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
(Please read carefully before signing)
I hereby authorize the BlackRock Investment Quality Municipal Trust Inc. (the "Trust") to pay to State Street Bank and Trust Company for my account all income dividends and capital gains distributions payable to me on shares of Common Stock of the Trust now or hereafter registered in my name, and hereby elect to receive in shares of Common Stock all such dividends and distributions payable in cash, except as set forth below.
I hereby appoint State Street Bank and Trust Company as my Agent, subject to the Terms and Conditions of the Dividend Reinvestment Plan (the "Plan") set forth in the accompanying brochure, and authorize State Street Bank and Trust Company, as such Agent, in accordance with such Terms and Conditions to apply all such income dividends and capital gains distributions payable solely in cash, after deducting the charges as provided in such Terms and Conditions, to the purchase of shares of Common Stock of the Trust.
(continued on other side)
FORM OF
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, dated February ___, 1993, between The BlackRock Investment Quality Municipal Trust Inc. (the "Trust"), a Maryland corporation, and BlackRock Financial Management L.P. (the "Adviser"), a Delaware limited partnership.
In consideration of the mutual promises and agreements herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, it is agreed by and between the parties hereto as follows:
1. In General
The Adviser agrees, all as more fully set forth herein, to act as investment adviser to the Trust with respect to the investment of the Trust's assets and to supervise and arrange the purchase of securities for and the sale of securities held in the investment portfolio of the Trust.
2. Duties and obligations of the Adviser with respect to investments of assets of the Trust
(a) Subject to the succeeding provisions of this section and subject to the direction and control of the Trust's Board of Directors, the Adviser shall (i) act as investment adviser for and supervise and manage the investment and reinvestment of the Trust's assets and in connection therewith have complete discretion in purchasing and selling securities and other assets for the Trust and in voting, exercising consents and exercising all other rights appertaining to such securities and other assets on behalf of the Trust; (ii) supervise continuously the investment program of the Trust and the composition of its investment portfolio; and (iii) arrange, subject to the provisions of paragraph 3 hereof, for the purchase and sale of securities and other assets held in the investment portfolio of the Trust.
(b) In the performance of its duties under this Agreement, the Adviser shall at all times conform to, and act in accordance with, any requirements imposed by (i) the provisions of the Investment Company Act of 1940 (the "Act"), and of any rules or regulations in force thereunder; (ii) any other applicable provision of law; (iii) the provisions of the Articles of Incorporation and By-Laws of the Trust, as such documents are amended from time to time; (iv) the investment objective and policies of the Trust as set forth in its Registration Statement on Form N-2; and (v) any policies and determinations of the Board of Directors of the Trust.
(c) The Adviser will bear all costs and expenses of its partners and employees and any overhead incurred in connection with its duties hereunder and shall bear the costs of any salaries or directors fees of any officers or directors of the Trust who are affiliated persons (as defined in the Act) of the Adviser except that the Board of Directors of the Trust may approve reimbursement to the Adviser of the pro rata portion of the salaries, bonuses, health insurance, retirement benefits and all similar employment costs for the time spent on Trust operations (other than the provision of investment advice) of all personnel employed by the Adviser who devote substantial time to Trust operations or the operations of other investment companies advised by the Adviser.
(d) The Adviser shall give the Trust the benefit of its best judgment and effort in rendering services hereunder, but the Adviser shall not be liable for any act or omission or for any loss sustained by the Trust in connection with the matters to which this Agreement relates, except a loss resulting from willful malfeasance, bad faith or gross negligence in the performance of its duties, or by reason of its reckless disregard of its obligations and duties under this Agreement.
(e) Nothing in this Agreement shall prevent the Adviser or any partner, officer, employee or other affiliate thereof from acting as investment adviser for any other person, firm or corporation, or from engaging in any other lawful activity, and shall not in any way limit or restrict the Adviser or any of its partners, officers, employees or agents from buying, selling or trading any securities for its or their own accounts or for the accounts of others for whom it or they may be acting, provided, however that the Adviser will undertake no activities which, in its judgment, will adversely affect the performance of its obligations under this Agreement.
3. Portfolio Transactions and Brokerage
The Adviser is authorized, for the purchase and sale of the Trust's portfolio securities, to employ such securities dealers as may, in the judgment of the Adviser, implement the policy of the Trust to obtain the best net results taking into account such factors as price, including dealer spread, the size, type and difficulty of the transaction involved, the firm's general execution and operational facilities and the firm's risk in positioning the securities involved. Consistent with this policy, the Adviser is authorized to direct the execution of the Trust's portfolio transactions to dealers and brokers furnishing statistical information or research deemed by the Adviser to be useful or valuable to the performance of its investment advisory functions for the Trust.
4. Compensation of the Adviser
(a) The Trust agrees to pay to the Adviser and the Adviser agrees to accept as full compensation for all services rendered by the Adviser as such, a fee computed and payable monthly in an amount equal to .35% of the Trust's average weekly net asset value on an annualized basis. For any period less than a month during which this Agreement is in effect, the fee shall be prorated according to the proportion which such period bears to a full month of 28, 29, 30 or 31 days, as the case may be.
(b) For purposes of this Agreement, the net assets of the Trust shall be calculated pursuant to the procedures adopted by resolutions of the Directors of the Trust for calculating the net asset value of the Trust's shares or delegating such calculations to third parties; provided, however, that the liquidation value of any outstanding preferred stock of the Trust shall not be taken into account in calculating the Trust's average weekly net asset value for purposes of Section 4(a) of this Agreement.
5. Indemnity
(a) The Trust hereby agrees to indemnify the Adviser and each of the Adviser's partners, officers, employees, agents, associates and controlling persons and the partners, officers, employees and agents thereof (including any individual who serves at the Adviser's request as director, officer, partner, trustee or the like of another corporation) (each such person being an "indemnitee") against any liabilities and expenses, including amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees (all as provided in accordance with applicable corporate law) reasonably incurred by such indemnitee in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or administrative or investigative body in which he may be or may have been involved as a party or otherwise or with which he may be or may have been threatened, while acting in any capacity set forth above in this Section 5 or thereafter by reason of his having acted in any such capacity, except with respect to any matter as to which he shall have been adjudicated not to have acted in good faith in the reasonable belief that his action was in the best interest of the Trust and furthermore, in the case of any criminal proceeding, so long as he had no reasonable cause to believe that the conduct was unlawful, provided, however, that (1) no indemnitee shall be indemnified hereunder against any liability to the Trust or its shareholders or any expense of such indemnitee arising by reason of (i) willful malfeasance, (ii) bad faith, (iii) gross negligence or (iv) reckless disregard of the duties involved in the conduct of his position (the conduct referred to in such clauses (i) through (iv) being sometimes referred to herein as "disabling conduct"), (2) as to any matter disposed of by settlement or a compromise payment by such indemnitee, pursuant to a consent decree or otherwise, no indemnification either for said payment or for any other expenses shall be provided unless there has been a determination that such settlement or compromise is in the best interests of the Trust and that such indemnitee appears to have acted in good faith in the reasonable belief that his action was in the best interest of the Trust and did not involve disabling conduct by such indemnitee and (3) with respect to any action, suit or other proceeding voluntarily prosecuted by any indemnitee as plaintiff, indemnification shall be mandatory only if the prosecution of such action , suit or other proceeding by such indemnitee was authorized by a majority of the full Board of the Trust.
(b) The Trust shall make advance payments in connection with the expenses of defending any action with respect to which indemnification might be sought hereunder if the Trust receives a written affirmation of the indemnitee's good faith belief that the standard of conduct necessary for indemnification has been met and a written undertaking to reimburse the Trust unless it is subsequently determined that he is entitled to such indemnification and if the directors of the Trust determine that the facts then known to them would not preclude indemnification. In addition, at least one of the following conditions must be met: (A) the indemnitee shall provide a security for his undertaking, (B) the Trust shall be insured against losses arising by reason of any lawful advances, or (C) a majority of a quorum consisting of directors of the Trust who are neither "interested persons" of the Trust (as defined in Section 2(a) (19) of the Act) nor parties to the proceeding ("Disinterested Non-Party Directors") or an independent legal counsel in a written opinion, shall determine, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the indemnitee ultimately will be found entitled to indemnification.
(c) All determinations with respect to indemnification hereunder shall be made (1) by a final decision on the merits by a court or other body before whom the proceeding was brought that such indemnitee is not liable by reason of disabling conduct or, (2) in the absence of such a decision, by (i) a majority vote of a quorum of the Disinterested Non-party Directors of the Trust, or (ii) if such a quorum is not obtainable or even, if obtainable, if a majority vote of such quorum so directs, independent legal counsel in a written opinion. All determinations that advance payments in connection with the expense of defending any proceeding shall be authorized shall be made in accordance with the immediately preceding clause (2) above.
The rights accruing to any indemnitee under these provisions shall not exclude any other right to which he may be lawfully entitled.
6. Duration and Termination
This Agreement shall become effective on the date it is approved by the stockholder of the Trust and shall continue in effect for a period of two years and thereafter from year to year, but only so long as such continuation is specifically approved at least annually in accordance with the requirements of the Act.
This Agreement may be terminated by the Adviser at any time without penalty upon giving the Trust sixty days written notice (which notice may be waived by the Trust) and may be terminated by the Trust at any time without penalty upon giving the Adviser sixty days notice (which notice may be waived by the Adviser), provided that such termination by the Trust shall be directed or approved by the vote of a majority of the Directors of the Trust in office at the time or by the vote of the holders of a "majority" (as defined in the Act) of the voting securities of the Trust at the time outstanding and entitled to vote. This Agreement shall terminate automatically in the event of its assignment (as "assignment" is defined in the Act). The Adviser is a partnership and will notify the Trust promptly after any change in the membership of such partnership.
7. Notices
Any notice under this Agreement shall be in writing to the other party at such address as the other party may designate from time to time for the receipt of such notice and shall be deemed to be received on the earlier of the date actually received or on the fourth day after the postmark if such notice is mailed first class postage prepaid.
8. Governing Law
This Agreement shall be construed in accordance with the laws of the State of New York for contracts to be performed entirely therein without reference to choice of law principles thereof and in accordance with the applicable provisions of the Act.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument to be executed by their duly authorized officers, all as of the day and the year first above written.
THE BLACKROCK INVESTMENT QUALITY
MUNICIPAL TRUST INC.
[SEAL] By _________________________________
Ralph L. Schlosstein,
President
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BLACKROCK FINANCIAL MANAGEMENT L.P.
By ________________________________
Laurence D. Fink,
General Partner
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
ADMINISTRATION AGREEMENT
ADMINISTRATION AGREEMENT, made as of the 16th day of February, 1993 between THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC., a Maryland corporation (the "Trust"), and MIDDLESEX ADMINISTRATORS L.P., a Delaware limited partnership (the "Administrator").
W I T N E S S E T H:
WHEREAS, the Trust is a diversified closed-end management investment company registered under the Investment Company Act of 1940, as amended (the "Investment Company Act"); and
WHEREAS, the Trust has retained an investment adviser for the purpose of investing its assets in securities and desires to retain the Administrator for certain administrative services, and the Administrator is willing to furnish such administrative services on the terms and conditions hereinafter set forth,
NOW, THEREFORE, the parties hereto agree as follows:
1. The Trust hereby appoints the Administrator to provide the services set forth below, subject to the overall supervision of the Board of Directors of the Trust for the period and on the terms set forth in this Agreement. The Administrator hereby accepts such appointment and agrees during such period to render the services herein described and to assume the obligations herein set forth, for the compensation herein provided.
2. Subject to the supervision of the Board of Directors and officers of the Trust, the Administrator shall provide facilities for meetings of the Board of Directors and shareholders of the Trust and office facilities and personnel to assist the officers of the Trust in the performance of the following services:
(a) Oversee the determination and publication of the Trust's net asset value in accordance with the Trust's policy as adopted from time to time by the Board of Directors;
(b) Oversee the maintenance by State Street Bank and Trust Company of certain books and records of the Trust as required under Rule 31a-1(b) (4) of the Investment Company Act;
(c) Prepare or arrange for preparation for review, approval and execution by officers of the Trust the Trust's federal, state and local income tax returns, and any other required tax returns, as may be mutually agreed upon;
(d) Review the appropriateness of and arrange for payment of the Trust's expenses;
(e) Prepare for review and approval by officers of the Trust financial information for the Trust's semi-annual and annual reports, proxy statements and other communications with shareholders required or otherwise to be sent to Trust shareholders, and arrange for the printing and dissemination of such reports and communications to shareholders;
(f) Prepare for review by an officer of the Trust the Trust's periodic financial reports required to be filed with the Securities and Exchange Commission (the "SEC") on Form N-SAR and Form N-2 and such other reports, forms or filings, as may be mutually agreed upon;
(g) Prepare reports relating to the business and affairs of the Trust as may be mutually agreed upon and not otherwise appropriately prepared by the Trust's investment adviser, custodian, counsel or auditors;
(h) Prepare such information and reports as may be required by any stock exchange or exchanges on which the Trust's shares are listed;
(i) Make such reports and recommendations to the Board concerning the performance of the independent accountants as the Board may reasonably request or deems appropriate;
(j) Make such reports and recommendations to the Board concerning the performance and fees of the Trust's custodian, transfer and dividend disbursing agent as the Board may reasonably request or deems appropriate;
(k) Oversee and review calculations of fees paid to the Administrator, the investment adviser and the custodian;
(l) Consult as necessary with the Trust's officers, independent accountants, legal counsel, custodian, accounting agent and transfer and dividend disbursing agent in establishing the accounting policies of the Trust;
(m) Review implementation of any stock purchase or dividend reinvestment programs authorized by the Board of Directors;
(n) Assist the investment adviser in facilitating bank or other borrowings by the Trust;
(o) Prepare such information and reports as may be required by any banks from which the Trust borrows funds;
(p) Provide such assistance to the investment adviser, the custodian and the Trust's counsel and auditors as generally may be required to properly carry on the business and operations of the Trust;
(q) Respond to, or refer to the Trust's officers or transfer agent, shareholder inquiries relating to the Trust;
(r) Provide to Standard & Poor's Corporation ("S&P"), upon its request, corporate or financial information reasonably available to the Administrator to assist S&P in the rating of the Trust's common shares; and
(s) Assist in the preparation and filing of Forms 3, 4 and 5 pursuant to Section 16 of the Securities Exchange Act of 1934 and Section 30(f) of the Investment Company Act for the officers and directors of the Trust, except as otherwise requested by the Trust's investment adviser, such filings to be based on information provided by those persons and the Trust's investment adviser.
All services are to be furnished through the medium of any directors, officers or employees of the Administrator as the Administrator deems appropriate in order to fulfill its obligations hereunder.
Each party shall bear all its own expenses incurred in connection with this Agreement. Printing and dissemination expenses, such as those for reports to shareholders and proxy statements, shall be expenses of the Trust.
3. The Trust will pay the Administrator a fee on the first business
day of each calendar month for the previous month equal to the greater of
(i) $150,000 per annum ($12,500 per month), or (ii) based on the Trust's
average weekly net asset value computed at the per annum rate of .15% from
the effective date of this Agreement until termination of the Trust
pursuant to its Articles of Incorporation.
4. The Administrator assumes no responsibility under this Agreement other than to render the services called for hereunder, and specifically assumes no responsibilities for investment advice or the investment or reinvestment of the Trust's assets.
5. (a) The Administrator shall not be liable to the Trust for any action taken or omitted to be taken by the Administrator in connection with the performance of any of its duties or obligations under this Agreement, and the Trust shall indemnify the Administrator and hold it harmless from and against all damages, liabilities, costs and expenses (including reasonable attorneys' fees and amounts reasonably paid in settlement) incurred by the Administrator in or by any reason of any pending, threatened or contemplated action, suit, investigation or other proceeding (including an action or suit by or in the right of the Trust or its security holders) arising out of or otherwise based upon any action actually or allegedly taken or omitted to be taken by the Administrator in connection with the performance of any of its duties or obligations under this Agreement; provided, however, that nothing contained herein shall protect or be deemed to protect the Administrator against or entitle or be deemed to entitle the Administrator to indemnification in respect of any liability to the Trust or its security holders to which the Administrator would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of its reckless disregard of its duties and obligations under this Agreement.
(b) Such expenses shall be paid by the Trust in advance of the final disposition of such matter upon invoice by the Administrator and receipt by the Trust of an undertaking from the Administrator to repay such amounts if it shall ultimately be established that the Administrator is not entitled to payment of such expenses hereunder.
(c) As used in this Paragraph 5, the term "Administrator" shall include any affiliates of the Administrator performing services for the Trust contemplated hereby, and directors, officers, agents and employees of the Administrator and such affiliates.
(d) The Administrator may, with respect to questions of law, apply for and obtain the advice and opinion of legal counsel to the Trust, at the expense of the Trust, and with respect to the application of generally accepted accounting principles, apply for and obtain the advice and opinion of the Trust's accounting experts, at the expense of the Trust. The Administrator shall be fully protected with respect to any action taken or omitted by it in good faith in conformity with such advice or opinion.
6. This Agreement shall become effective as of the date on which the Trust's Registration Statement on Form N-2 shall be declared effective by the SEC and shall thereafter continue in effect unless terminated as herein provided. This Agreement may be terminated by either party hereto (without penalty) at any time upon not less than 60 days' prior written notice to the other party hereto.
7. The services of the Administrator to the Trust hereunder are not exclusive and nothing in this Agreement shall limit or restrict the right of the Administrator to engage in any other business or to render services of any kind to any other corporation, firm, individual or association. The Administrator shall be deemed to be an independent contractor, unless otherwise expressly provided or authorized by this Agreement.
8. During the term of this Agreement, the Trust agrees to furnish the Administrator at the principal office of the Administrator prior to use thereof drafts and final copies of all prospectuses, proxy statements, reports to shareholders, sales literature, or other material prepared for distribution to shareholders of the Trust or the public that refer in any way to the Administrator. If the Administrator reasonably objects to such references within five business days (or such other time as may be mutually agreed) after receipt thereof, the Trust will modify such references in a manner reasonably satisfactory to the Administrator. In the event of termination of this Agreement, the Trust will continue to furnish to the Administrator copies of any of the above-mentioned materials that refer in any way to the Administrator. The Trust shall timely furnish or otherwise make available to the Administrator such other information relating to the business affairs of the Trust, its directors, officers, and service providers, as the Administrator at any time, or from time to time, reasonably requests in order to discharge its obligations hereunder.
9. This Agreement may be amended by mutual written consent.
10. Any notice of other communication required to be given in writing pursuant to this Agreement shall be deemed duly given if delivered or mailed by registered mail, postage prepaid, (1) to the Administrator at P.O. Box 9011, Princeton, New Jersey 08543, Attention: Stephen M. M. Miller, (2) to the Trust at 345 Park Avenue, New York, New York 10154, Attention: President.
11. This Agreement sets forth the agreement and understanding of the parties hereto solely with respect to the matters covered hereby and the relationship between the Trust and Middlesex Administrators L.P. as Administrator. Nothing in this Agreement shall govern, restrict or limit in any respect any other business dealings between the parties hereto unless otherwise expressly provided herein.
12. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without reference to choice of law principles thereof and in accordance with the Investment Company Act. In the case of any conflict, the Investment Company Act shall control.
13. This Agreement may be executed by the parties hereto in counterparts, and if executed in more than one counterpart, the separate instruments shall constitute one agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
THE BLACKROCK INVESTMENT QUALITY
MUNICIPAL TRUST INC.
By _______________________________
Title: ___________________________
MIDDLESEX ADMINISTRATORS L.P.
By MIDDLESEX ADMINISTRATORS, INC.,
General Partner
By _______________________________
Title: ___________________________
CUSTODIAN CONTRACT
BETWEEN
THE BLACKROCK INVESTMENT QUALITY
MUNICIPAL TRUST INC.
AND
STATE STREET BANK AND TRUST COMPANY
This Contract between The BlackRock Investment Quality Municipal Trust Inc., a corporation organized and existing under the laws of Maryland, having its principal place of business at 345 Park Avenue, New York, New York 10154, hereinafter called the "Fund", and State Street Bank and Trust Company, a Massachusetts trust company, having its principal place of business at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH: That in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held By It
The Fund hereby employs the Custodian as the custodian of its assets pursuant to the provisions of the Articles of Incorporation. The Fund agrees to deliver to the Custodian all securities and cash owned by it, and all payments of income, payments of principal or capital distributions received by it with respect to all securities owned by the Fund from time to time, and the cash consideration received by it for such new or treasury shares of capital stock, $.01 par value, ("Shares") of the Fund as may be issued or sold from time to time. The Custodian shall not be responsible for any property of the Fund held or received by the Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of
Section 2.15), the Custodian shall from time to time employ one or more
sub-custodians, but only in accordance with an _________ that the
Custodian shall have no more or less responsibility or liability to the
Fund on account of any actions or omissions of any sub-custodian so
employed than any such sub-custodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the Fund Held By the Custodian
2.1 Holding Securities. The Custodian shall hold and physically segregate for the account of the Fund all non-cash property, including all securities owned by the Fund, other than (a) securities which are maintained pursuant to Section 2.10 in a clearing agency which acts as a securities depository or in a book-entry system authorized by the U.S. Department of the Treasury, collectively referred to herein as "Securities System" and (b) commercial paper of an issuer for which State Street Bank and Trust Company acts as issuing and paying agent ("Direct Paper") which is deposited and/or maintained in the Direct Paper System of the Custodian pursuant to Section 2.10A.
2.2 Delivery of Securities. The Custodian shall release and deliver securities owned by the Fund held by the Custodian or in a Securities System account of the Custodian or in the Custodian's Direct Paper book entry system account ("Direct Paper System Account") only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:
1) _______________ or the Fund and receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a Securities System, in accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other similar offers for portfolio securities of the Fund;
5) To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of the Fund or into the name of any nominee or nominees of the Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.9 or into the name or nominee name of any sub-custodian appointed pursuant to Article 1; or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount such case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Fund, to the broker or its clearing agent, against a receipt, for examination in accordance with "street delivery" custom; provided that in any such case, the Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Custodian's own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender thereof in the securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by the Fund, but only against receipt of adequate collateral as agreed upon from time to time by the Custodian and the Fund, which may be in the form of cash or obligations issued by the United States government, its agencies or instrumentalities, except that in connection with any loans for which collateral is to be credited to the Custodian's account in the book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or responsible for the delivery of securities owned by the Fund prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the Fund requiring a pledge of assets by the Fund, but only against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement among the Fund, under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The National Association of Securities Dealers, Inc. ("NASD"), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund;
13) For delivery in accordance with the provisions of any agreement among the Fund, the Custodian, and a Futures Commission Merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission and/or any Contract Market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Fund; and
14) For any other proper corporate purpose, but only upon receipt of, in addition to Proper Instructions, a certified copy of a resolution of the Board of Directors or of the Executive Committee signed by an officer of the Fund and certified by the Secretary or securities to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom delivery of such securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian (other than bearer securities) shall be registered in the name of the Fund or in the name of any nominee of the Fund or of any nominee of the Custodian which nominee shall be assigned exclusively to the Fund, unless the Fund has authorized in writing the appointment of a nominee to be used in common with other registered investment companies having the same investment adviser as the Fund, or in the name or nominee name of any agent appointed pursuant to Section 2.9 or in the name or nominee name of any sub-custodian appointed pursuant to Article 1. All securities accepted by the Custodian on behalf of the Fund under the terms of this Contract shall be in "street name" or other good delivery form. If, however, the Fund directs the Custodian to maintain securities in "street name", the Custodian shall utilize its best efforts only to timely collect income due the Fund on such securities and to notify the Fund on a best efforts basis only of relevant corporate actions including, without limitation, pendency of calls, maturities, tender or exchange offers.
2.4 Bank Accounts. _____________separate bank account or accounts in the name of the Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Contract, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Fund, other than cash maintained by the Fund in a bank account established and used in accordance with Rule 17f-3 under the Investment Company Act of 1940. Funds held by the Custodian for the Fund may be deposited by it to its credit as Custodian in the Banking Department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable; provided, however, that every- such bank or trust company shall be qualified to act as a custodian under the Investment Company Act of 1940 and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall be approved by vote of a majority of the Board of Directors of the Fund. Such funds shall be deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund and the Custodian, the Custodian shall, upon the receipt of Proper Instructions, make federal funds available to the Fund as of specified times agreed upon from time to time by the Fund and the Custodian in the Fund which are deposited into the Fund's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the Custodian shall collect on a timely basis all income and other payments with respect to registered securities held hereunder to which the Fund shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to bearer securities if, on the date of payment by the issuer, such securities are held by the Custodian or its agent thereof and shall credit such income, as collected, to the Fund's custodian account. Without limiting the generality of the foregoing, the Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. Income due the Fund on securities loaned pursuant to the provisions of Section 2.2 (10) shall be the responsibility of the Fund. The Custodian will have no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Fund is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions, which may be continuing instructions when ______________ of the Fund in the following cases only:
1) Upon the purchase of securities, options, futures contracts
or options on futures contracts for the account of the Fund
but only (a) against the delivery of such securities or
evidence of title to such options, futures contracts or
options on futures contracts to the Custodian (or any bank,
banking firm or trust company doing business in the United
States or abroad which is qualified under the Investment
Company Act of 1940, as amended, to act as a custodian and
has been designated by the Custodian as its agent for this
purpose) registered in the name of the Fund or in the name
of a nominee of the Custodian referred to in Section 2.3
hereof or in proper form for transfer; (b) in the case of a
purchase effected through a Securities System, in accordance
with the conditions set forth in Section 2.10 hereof; (c) in
the case of a purchase involving the Direct Paper System, in
accordance with the conditions set forth in Section 2.10A;
(d) in the case of repurchase agreements entered into
between the Fund and the Custodian, or another bank, or a
broker-dealer which is a _______________ either in
certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt
evidencing purchase by the Fund of securities owned by the
Custodian along with written evidence of the agreement by
the Custodian to repurchase such securities from the Fund or
(e) for transfer to a time deposit account of the Fund in
any bank, whether domestic or foreign; such transfer may be
effected prior to receipt of a confirmation from a broker
and/or the applicable bank pursuant to Proper Instructions
from the Fund as defined in Section 2.15;
2) In connection with conversion, exchange or surrender of securities owned by the Fund as set forth in Section 2.2 hereof;
3) For the payment of any expense or liability incurred by the Fund, including but not limited to the following payments for the account of the Fund: interest, taxes, management, accounting, transfer agent and legal fees, and operating expenses of the Fund whether or not such expenses are to be deferred expenses;
4) For the payment of any dividends declared pursuant to the governing documents of the Fund;
5) For payment of the amount of dividends received in respect of securities sold short;
6) For any other proper purpose, but only upon receipt of, in addition to Proper Instructions, a certified copy of a resolution of the Board of Directors or of the Executive Committee of the Fund signed by an officer of the Fund and certified by its Secretary or an Assistant Secretary, specifying the amount of such payment, setting forth the purpose for which such payment is to be made, declaring such purpose to be a proper purpose, and naming the person or persons to whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased. Except as specifically stated otherwise in this Contract, in any and every case where payment for purchase of securities for the account of the Fund is made by the Custodian in advance of receipt of the securities purchased in the absence of specific written instructions from the Fund to so pay in advance, the Custodian shall be absolutely liable to the Fund for such _____ received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its discretion appoint (and may at any time remove) any other bank or trust company which is itself qualified under the Investment Company Act of 1940, as amended, to act as a custodian, as its agent to carry out such of the provisions of this Article 2 as the Custodian may from time to time direct; provided, however, that the appointment of any agent shall not relieve the Custodian of its responsibilities or liabilities hereunder.
2.10 Deposit of Fund Assets in Securities Systems. The Custodian may deposit and/or maintain securities owned by the Fund in a clearing agency registered with the Securities and Exchange Commission under Section 17A of the Securities Exchange Act of 1934, which acts as a securities depository, or in the book-entry system authorized by the U.S. Department of the Treasury and certain federal agencies, collectively referred to herein as "Securities System'" in accordance with applicable Federal Reserve Board and Securities and Exchange Commission rules and regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Fund in a Securities System provided that such securities are represented in an account ("Account") of the Custodian in the assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the Fund which are maintained in a Securities System shall identify by book-entry those securities belonging to the Fund;
3) The Custodian shall pay for securities purchased for the
account of the Fund upon (i) receipt of advice from the
Securities System that such securities have been transferred
to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and
transfer for the account of the Fund. The Custodian shall
transfer securities sold for the account of the Fund upon
(i) receipt of advice from the Securities System that
payment for such securities has been transferred to the
Account, and (ii) the making of an entry on the records of
the Custodian to reflect such transfer and payment for the
account of the Fund. Copies of all advices from the
Securities System of transfers of securities for the account
of ____________ maintained for the Fund by the Custodian and
be provided to the Fund at its request. Upon request, the
Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund in the form of a
written advice or notice and shall furnish to the Fund
copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the
Fund.
4) The Custodian shall provide the Fund with any report obtained by the Custodian on the Securities System's accounting system, internal accounting control and procedures for safeguarding securities deposited in the Securities System;
5) The Custodian shall have received the initial or annual certificate, as the case may be, required by Article 9 hereof;
6) Anything to the contrary in this Contract notwithstanding,
the Custodian shall be liable to the Fund for any loss or
damage to the Fund resulting from use of the Securities
System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any
of its or their employees or from failure of the Custodian
or ____________ as it may have against the Securities
System; at the election of the Fund, it shall be entitled to
be subrogated to the rights of the Custodian with respect to
any claim against the Securities System or any other person
which the Custodian may have as a consequence of any such
loss or damage if and to the extent that the Fund has not
been made whole for any such loss or damage.
2.10A Fund Assets Held in the Custodian's Direct Paper System. The
Custodian may deposit and/or maintain securities owned by the
Fund in the Direct Paper System of the Custodian subject to the
following provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper
Instructions;
2) The Custodian may keep securities of the Fund in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper
System which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or
otherwise for customers;
3) The records of the Custodian with respect to securities of
the Fund which are maintained ___________ securities
belonging to the Fund;
4) The Custodian shall pay for securities purchased for the
account of the Fund upon the making of an entry on the
records of the Custodian to reflect such payment and
transfer of securities to the account of the Fund. The
Custodian shall transfer securities sold for the account of
the Fund upon the making of an entry on the records of the
Custodian to reflect such transfer and receipt of payment
for the account of the Fund;
5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of
a written advice or notice, of Direct Paper on the next
business day following such transfer and shall furnish to
the Fund copies of daily transaction sheets reflecting each
day's transaction in the Securities System for the account
of the Fund;
6) The Custodian shall provide the Fund with any report on its
system of internal accounting control as the Fund may
reasonably request from time to time.
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2.11 Segregated Account. __________________________________ instructions establish and maintain a segregated account or accounts for and on behalf of the Fund, into which account or accounts may be transferred cash and/or securities, including securities maintained in an account by the Custodian pursuant to Section 2.10 hereof, (i) in accordance with the provisions of any agreement among the Fund, the Custodian and a broker-dealer registered under the Exchange Act and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the Commodity Futures Trading Commission or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund, (ii) for purposes of segregating cash or government securities in connection with options purchased, sold or written by the Fund or commodity futures contracts or options thereon purchased or sold by the Fund, (iii) for the purposes of compliance by the Fund with the procedures required by Investment Company Act Release No. 10666, or any subsequent release or releases of the Securities and Exchange Commission relating to the maintenance of segregated accounts by registered investment companies and (iv) for other proper corporate purposes, but only, in the case of clause (iv), ___________________________ copy of a resolution of the Board of Directors or of the Executive Committee signed by an officer of the Fund and certified by the Secretary or an Assistant Secretary, setting forth the purpose or purposes of such segregated account and declaring such purposes to be proper corporate purposes.
2.12 Ownership Certificates for Tax Purposes. The Custodian shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other payments with respect to securities of the Fund held by it and in connection with transfers of securities.
2.13 Proxies. The Custodian shall, with respect to the securities held hereunder, cause to be promptly executed by the registered holder of such securities, if the securities are registered otherwise than in the name of the Fund or a nominee of the Fund, all proxies, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Fund such proxies, all proxy soliciting materials and all notices relating to such securities.
2.14 Communications Relating to Fund Portfolio Securities. Subject to the provisions of Section 2.3, the Custodian shall transmit promptly to the Fund all written information (including, without limitation, pendency of calls and maturities of securities and expirations of call and put options written by the Fund and the maturity of futures contracts purchased or sold by the Fund) received by the Custodian from issuers of the securities being held for the Fund. With respect to tender or exchange offers, the Custodian shall transmit promptly to the Fund all written information received by the Custodian from issuers of the securities whose tender or exchange is sought and from the party (or his agents) making the tender or exchange offer. If the Fund desires to take action with respect to any tender offer, exchange offer or any other similar transaction, the Fund shall notify the Custodian at least three business days prior to the date on which the Custodian is to take such action.
2.15 Proper Instructions. Proper Instructions as used throughout this
Article 2 means a writing signed or initialled by one or more person or
persons as the Board of Directors shall have from time to time authorized.
Each such writing shall set forth the specific transaction or type of
transaction involved, including a specific statement of the purpose for
which such action is requested. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been given
by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate authorization by the
Board of Directors of the Fund accompanied by a detailed description of
procedures approved by the Board of Directors, Proper Instructions may
include communications effected directly between electro-mechanical or
electronic devices provided that the Board of Directors and the Custodian
are satisfied that such procedures afford adequate safeguards for the
Fund's assets. For purposes of this Section, Proper Instructions shall
include instructions received by the Custodian pursuant to any three-party
agreement which requires a segregated asset account in accordance with
Section 2.11.
2.16 Actions Permitted without Express Authority. The Custodian may in its discretion, without express authority from the Fund:
1) make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Contract, provided that all such payments shall be accounted for to the Fund;
2) surrender securities in temporary form for securities in definitive form;
3) endorse for collection, in the name of the Fund, checks, drafts and other negotiable instruments; and ______ in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Fund except as otherwise directed by the Board of Directors of the Fund.
2.17 Evidence of Authority. The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper believed by it to be genuine and to have been properly executed by or on behalf of the Fund. The Custodian may receive and accept a certified copy of a vote of the Board of Directors of the Fund as conclusive evidence (a) of the authority of any person to act in accordance with such vote or (b) of any determination or of any action by the Board of Directors pursuant to the Articles of Incorporation as described in such vote, and such vote may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary.
3. Duties of Custodian with Respect to the Books of Account and Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the Board of Directors of the Fund to keep the books of account of the Fund and/or compute the net asset value per share of the outstanding _______________ and/or compute such net asset value per share. If so directed, the Custodian shall also calculate weekly the net income of the Fund as described in the Fund's currently effective prospectus and shall advise the fund and the Transfer Agent weekly of the total amounts of such net income and, if instructed in writing by an officer of the Fund to do so, shall advise the Transfer Agent periodically of the division of such net income among its various components. The calculations of the net asset value per share and the weekly income of the Fund shall be made at the time or times described from time to time in the Fund's currently effective prospectus.
4. Records
The Custodian shall create and maintain all records relating to its activities and obligations under this Contract in such manner as will meet the obligations of the Fund under the Investment Company Act of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents the Fund and employees and agents of the Securities and Exchange Commission. The Custodian shall, at the Fund's request, supply the Fund with a tabulation of securities owned by the Fund and held by the Custodian and shall, when requested to do so by Fund and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such tabulations.
5. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund may from time to time request, to obtain from year to year favorable opinions from the Fund's independent accountants with respect to its activities hereunder in connection with the preparation of the Fund's Form N-2 and Form N-SAR or other annual reports to the Securities and Exchange Commission and with respect to any other requirements of such Commission.
6. Reports to Fund by Independent Public Accountants.
The Custodian shall provide the Fund, at such times as the Fund may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities, futures contracts and options on futures contracts, including securities deposited and/or maintained in a Securities System, relating to the services provided by the Custodian under this Contract; such reports shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund to provide reasonable insurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its services and expenses as Custodian, as agreed upon from time to time between the Fund and the Custodian.
8. Responsibility of Custodian
So long as and to the extent that it is in the exercise ____________________ or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Contract and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a three-party futures or options agreement. The Custodian shall be held to the exercise of reasonable care in carrying out the provisions of this Contract, but shall be kept indemnified by and shall be without liability to the Fund for any action taken or omitted by it in good faith without negligence. It shall be entitled to rely on and may act upon-advice of counsel (who may be counsel for the Fund) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice.
If the Fund requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund being reliable for the payment of money or incurring liability of some form, the Fund, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or agents, to advance cash or securities for any purpose (including but not limited to securities settlements, _______________________ its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Contract, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the Fund shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of the Fund assets to the extent necessary to obtain reimbursement.
9. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than thirty (30) days after the date of such delivery or mailing; provided, however that the Custodian shall not act under Section 2.10 hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board of Directors of the Fund has approved the initial use of a particular Securities System and the receipt of an annual certificate of the Secretary or an Assistant Secretary that the Board of Directors has reviewed the use by the Fund of such Securities System, as required in each case by Rule 17f-4 under _________________ shall not act under Section 2.10A hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board of Directors has approved the initial use of the Direct Paper System and the receipt of an annual certificate of the Secretary or an Assistant Secretary that the Board of Directors has reviewed the use by the Fund of the Direct Paper System; provided further, however, that the Fund shall not amend or terminate this Contract in contravention of any applicable federal or state regulations, or any provision of the Articles of Incorporation, and further provided, that the Fund may at any time by action of its Board of Directors (i) substitute another bank or trust company for the Custodian by giving notice as described above to the Custodian, or (ii) immediately terminate this Contract in the event of the appointment of a conservator or receiver for the Custodian by the Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian for its costs, expenses and disbursements.
10. Successor Custodian
If a successor custodian shall be appointed by the Board of Directors of the Fund, the Custodian shall, upon termination, deliver to such successor custodian at the office of the _________ then held by it hereunder and shall transfer to an account of the successor custodian all of the Fund's securities held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of a certified copy of a vote of the Board of Directors of the Fund, deliver at the office of the Custodian and transfer such securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or certified copy of a vote of the Board of Directors shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a "bank" as defined in the Investment Company Act of 1940, doing business in Boston, Massachusetts, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Custodian and all instruments held by the Custodian relative thereto and all other property held by it under this Contract and to transfer to an account of such successor custodian all of the Fund's securities held in any Securities System. Thereafter, such bank or trust company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the possession of the Custodian after the date of _____________________ referred to or of the Board of Directors to appoint a successor custodian, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such securities, funds and other properties and the provisions of this Contract relating to the duties and obligations of the Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and the Fund may from time to time agree on such provisions interpretive of or in addition to the provisions of this Contract as may in their joint opinion be consistent with the general tenor of this Contract. Any such interpretive or additional provisions shall be in a writing signed by both parties and shall be annexed hereto, provided that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of the Articles of Incorporation of the Fund. No interpretive or additional provisions made as provided in the preceding sentence will be deemed to be an amendment of this Contract.
12. Massachusetts Law to Apply
This Contract shall be construed and the provisions hereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts.
13. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all prior contracts between the Fund and the Custodian relating to the custody of the Fund's assets.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative and its seal to be hereunder affixed as of the day of 1992.
ATTEST THE BLACKROCK INVESTMENT QUALITY
MUNICIPAL TRUST INC.
______________________ By _______________________________ ATTEST STATE STREET BANK AND TRUST COMPANY _______________________ By_______________________________ Assistant Secretary Senior Vice-President |
_____________________________ _________ Schedule
BLACKROCK FINANCIAL MANAGEMENT
BlackRock Income Trust
BlackRock High Income Fund BlackRock Strategic Term Trust
BlackRock Advantage Term Trust BlackRock 1998 Term Trust
BlackRock Target Term Trust BlackRock Municipal Target Term Trust
BlackRock FNMA Fund BlackRock Freddie MAC Fund
BlackRock Insured Municipal BlackRock North American Gov't
Term Trust Income Trust
BlackRock Investment Quality Term The BFM Institutional Trust Inc.
Trust The BlackRock 2001 Term Trust
The BlackRock Insured Municipal The BlackRock New York Insured
2008 Term Trust Inc. Municipal 2008 Term Trust Inc.
The BlackRock California Insured The BlackRock Florida Insured Municipal
Municipal 2008 Term Trust Inc. 2008 Term Trust Inc.
BFM Libor Mortgage Fund The BlackRock Investment Quality Municipal
Trust Inc.
The BlackRock 1999 Term Trust Inc.
|
I. ADMINISTRATION
A. Custody Service - Maintain custody of fund assets. Settle portfolio purchases and sales. Report buy and sell fails. Determine and collect portfolio income. Make cash disbursements and report cash transactions. Maintain investment ledgers, provide selected portfolio transactions, position and income reports.
The administration fees shown below are annual charges, billed and payable monthly.
ANNUAL FEES
FUND NET ASSETS ANNUAL FEES
--------------- -----------
First $500 Million 3 BP
Next $500 Million 1.75 BP
Next $1 Billion 1.3 BP
Excess 1.25 BP
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These fees will take the total domestic assets of all the above BFM portfolios into account.
B. Global Custody Service
Services provided include: Security and Cash Movements through Subcustodian network, Foreign Communication, Foreign Exchange (local currency settlements).
Canada 10BP
II. FUND ACCOUNTING SERVICE
Maintain general ledger and capital stock accounts. Prepare daily trial balance. Calculate net asset value weekly (daily for the BFM Institutional Trust). Provide selected general ledger reports. Securities yield or market value quotations will be provided to State Street by the fund.
First $250M $15,000 per fund Excess $250M - $750M $15,000 per fund Excess $750M .25 BP |
III. PORTFOLIO TRADES - FOR EACH LINE ITEM PROCESSED
State Street Bank Repos $ 7.00
New York Physical Settlements $ 25.00
Maturity Collections $ 8.00
Fed Book Entry Settlements $ 12.00
Canadian Transactions $ 30.00
All Other Trades $ 16.00
IV. OPTIONS
Option charge for each option written
or closing contract, per issue, per
broker $ 25.00
Option expiration charge, per issue,
per broker $ 15.00
Option exercised charge, per issue,
per broker $ 15.00
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V. LENDING OF SECURITIES
Deliver loaned securities versus cash
collateral $ 20.00
Deliver loaned securities versus
securities collateral $ 30.00
Receive/deliver additional cash
collateral $ 6.00
Substitutions of securities collateral $ 30.00
Deliver cash collateral versus receipt
of loaned securities $ 15.00
Deliver securities collateral versus
receipt of loaned securities $ 25.00
Loan administration - mark-to-market
per day, per loan $ 3.00
VI. ___________________________
Transactions -- no security movement $ 10.00
VII. HOLDINGS CHARGE
For each issue maintained -- monthly
charge $ 5.00
VIII. PRINCIPAL REDUCTION PAYMENTS
Paydown on Government Securities, per
paydown $ 8.00
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IX. SPECIAL SERVICES
Fees for activities such as fund consolidations or reorganization, extraordinary security shipments, the preparation of special reports, daily fund pricing and quotes from sources other than BFM will be subject to negotiation.
X. OUT-OF-POCKET-EXPENSES
A billing for the recovery of applicable out-of-pocket expenses will be made as of the end of each month. Out-of-pocket expenses include, but are not limited to the following:
Telephone Wire Charges ($5.25 per wire in and $5.00 out) Postage and Insurance Courier Service Duplicating Legal Fees Supplies Related to Fund Records Rush Transfer -- $8.00 Each Transfer Fees Sub-custodian Charges Price Waterhouse Audit Letter Federal Reserve Fee for Return Check Items over $2,500 -- $4.25 GNMA Transfer -- $15.00 Each |
XI. This fee schedule will be effective September 1, 1991.
BLACKROCK FINANCIAL MANAGEMENT STATE STREET BANK & TRUST CO. BY: __________________________ BY: ___________________________ TITLE:________________________ TITLE: ________________________ DATE:_________________________ DATE: _________________________ |
TABLE OF CONTENTS
PAGE
1. Employment of Custodian and Property to be Held By It . . . . . . . 1
2. Duties of the Custodian with Respect to Property of the Fund
Held By the Custodian . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Holding Securities . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Delivery of Securities . . . . . . . . . . . . . . . . . . . . 2
2.3 Registration of Securities . . . . . . . . . . . . . . . . . . 4
2.4 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Availability of Federal Funds . . . . . . . . . . . . . . . . . 5
2.6 Collection of Income . . . . . . . . . . . . . . . . . . . . . 5
2.7 Payment of Fund Monies . . . . . . . . . . . . . . . . . . . . 6
2.8 Liability for Payment in Advance of Receipt of Securities
Purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.9 Appointment of Agents . . . . . . . . . . . . . . . . . . . . . 7
2.10 Deposit of Fund Assets in Securities Systems . . . . . . . . . 8
2.10A Fund Assets Held in the Custodian's Direct Paper System . . . . 9
2.11 Segregated Account . . . . . . . . . . . . . . . . . . . . . 10
2.12 Ownership Certificates for Tax Purposes . . . . . . . . . . . 11
2.13 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.14 Communications Relating to Fund Portfolio Securities . . . . 11
2.15 Proper Instructions . . . . . . . . . . . . . . . . . . . . . 11
2.16 Actions Permitted without Express Authority . . . . . . . . . 12
2.17 Evidence of Authority . . . . . . . . . . . . . . . . . . . . 12
3. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income . . . . . . . . . . . 13
4. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5. Opinion of Fund's Independent Accountant . . . . . . . . . . . . . 13
6. Reports to Fund by Independent Public Accountants . . . . . . . . . 14
7. Compensation of Custodian . . . . . . . . . . . . . . . . . . . . . 14
8. Responsibility of Custodian . . . . . . . . . . . . . . . . . . . . 14
9. Effective Period, Termination and Amendment . . . . . . . . . . . . 15
10. Successor Custodian . . . . . . . . . . . . . . . . . . . . . . . 16
11. Interpretive and Additional Provisions . . . . . . . . . . . . . 17
12. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . . . 17
13. Prior Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 18
|
REGISTRAR,
TRANSFER AGENCY AND SERVICE AGREEMENT
between
THE BLACKROCK INVESTMENT QUALITY
MUNICIPAL TRUST INC.
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
Page
Article 1 Terms of Appointment; Duties of the Bank..............1
Article 2 Fees and Expenses.....................................3
Article 3 Representations and Warranties of the Bank............4
Article 4 Representations and Warranties of the Fund............5
Article 5 Data Access and Proprietary Information...............5
Article 6 Indemnification.......................................8
Article 7 Standard of Care.....................................10
Article 8 Covenants of the Fund and the Bank...................10
Article 9 Termination of Agreement.............................11
Article 10 Assignment...........................................12
Article 11 Amendment............................................12
Article 12 Massachusetts Law to Apply...........................12
Article 13 Force Majeure........................................13
Article 14 Consequential Damages................................13
Article 15 Merger of Agreement..................................13
|
REGISTRAR, TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the day of , 1992, by and between THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC., a Maryland corporation, having its principal office and place of business at 345 Park Avenue, New York, New York 10154, (the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company having its principal office and place of business at 225 Franklin Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund desires to appoint the Bank as its registrar, transfer agent, dividend disbursing agent, custodian of certain retirement plans and agent in connection with certain other activities and the Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows:
1.01 Subject to the terms and conditions set forth in this Agreement, the Fund hereby employs and appoints the Bank to act as, and the Bank agrees to act as registrar, transfer agent to the Fund's authorized and issued shares of its common stock (the "Shares"), dividend disbursing agent, custodian of certain retirement plans and agent in connection with any dividend reinvestment plan as set out in the prospectus of the Fund, corresponding to the date of this Agreement.
1.02 The Bank agrees that it will perform the following services:
(a) In accordance with the procedures established from time to time by agreement between the Fund and the Bank, the Bank shall:
(i) Issue and record the appropriate number of Shares as authorized and hold such Shares in the appropriate Shareholder account;
(ii) Effect transfers of Shares by the registered owners thereof upon receipt of appropriate documentation;
(iii) Execute transactions directly with broker-dealers authorized by the Fund who shall thereby be redeemed to be acting on behalf of the Fund;
(iv) Prepare and transmit payments for dividends and distributions declared by the Fund;
(v) Act as agent for Shareholders pursuant to the dividend reinvestment and cash purchase plan as amended from time to time in accordance with the terms of the agreement to be entered into between the Shareholders and the Bank in substantially the form attached as Exhibit A hereto;
(vi) Issue replacement certificates for those certificates alleged to have been lost, stolen or destroyed upon receipt by the Bank of indemnification satisfactory to the Bank and protecting the Bank and the Fund, and the Bank as its option, may issue replacement certificates in place of mutilated stock certificates upon presentation thereof and without such indemnity.
(b) In addition to and neither in lieu nor in contravention of the services set forth in the above paragraph (a), the Bank shall: (i) perform all of the customary services of a registrar, transfer agent, dividend disbursing agent, custodian of certain retirement plans and agent of the dividend reinvestment and cash purchase plan as described in Article 1 consistent with those requirements in effect as of the date of this Agreement. The detailed definition, frequency, limitations and associated costs (if any) set out in the attached fee schedule, include but not limited to: maintaining all Shareholder accounts, preparing Shareholder meeting lists, mailing proxies, and mailing Shareholder reports to current Shareholders, withholding taxes on U.S. resident and non-resident alien accounts where applicable, preparing and filing U.S. Treasury Department Forms 1099 and other appropriate forms required with respect to dividends and distributions by federal authorities for all registered Shareholders.
(c) The Bank shall provide additional services on behalf of the Fund (i.e., escheatment services) which may be agreed upon in writing between the Fund and the Bank.
2.01 For the performance by the Bank pursuant to this Agreement, the Fund agrees to pay the Bank an annual maintenance fee as set out in the initial fee schedule attached hereto. Such fees and out-of-pocket expenses and advances identified under Section 2.02 below may be changed from time to time subject to mutual written agreement between the Fund and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the Fund agrees to reimburse the Bank for out-of-pocket expenses, including but not limited to confirmation production, postage, forms, telephone, microfilm, microfiche, tabulating proxies, records storage, or advances incurred by the Bank for the items set out in the fee schedule attached hereto. In addition, any other expenses incurred by the Bank at the request or with the consent of the Fund, will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses within five days following the receipt of the respective billing notice. Postage and the cost of materials for mailing of dividends, proxies, Fund reports and other mailings to all Shareholder accounts shall be advanced to the Bank by the Fund at least seven (7) days prior to the mailing date of such materials. Article 3 Representations and Warranties of the Bank
The Bank represents and warrants to the Fund that:
3.01 It is a trust company duly organized and existing and in good standing under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the ommonwealth of Massachusetts.
3.03 It is empowered under applicable laws and by its Charter and By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement.
The Fund represents and warrants to the Bank that:
4.01 It is a corporation duly organized and existing and in good standing under the laws of Maryland.
4.02 It is empowered under applicable laws and by its Articles of Incorporation and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Articles of Incorporation and By- Laws have been taken to authorize it to enter into and perform this Agreement.
4.04 It is a closed-end, diversified investment company registered under the Investment Company Act of 1940, as amended.
4.05 To the extent required by federal securities laws a registration statement under the Securities Act of 1933, as amended is currently effective and appropriate state securities law filings have been made with respect to all Shares of the Fund being offered for sale; information to the contrary will result in immediate notification to the Bank.
4.06 It shall make all required filings under federal and state securities laws.
5.01 The Fund acknowledges that the data bases, computer programs, screen formats, report formats, interactive design techniques, and documentation manuals furnished to the Fund by the Bank as part of the Fund's ability to access certain Fund-related data ("Customer Data") maintained by the Bank on data bases under the control and ownership of the Bank ("Data Access Services") constitute copyrighted, trade secret, or other proprietary information (collectively, "Proprietary Information") of substantial value to the Bank. The Fund agrees to treat all Proprietary Information as proprietary to the Bank and further agrees that it shall not divulge any Proprietary Information to any person or organization except as may be provided hereunder. Without limiting the foregoing, the Fund agrees for itself and its employees and agents:
(a) to access Customer Data solely from locations as may be designated in writing by the Bank and solely in accordance with the Bank's applicable user documentation;
(b) to refrain from copying or duplicating in any way the Proprietary Information;
(c) to refrain from obtaining unauthorized access to any portion of the Proprietary Information, and if such access is inadvertently obtained, to inform in a timely manner of such fact and dispose of such information in accordance with the Bank's instructions;
(d) to refrain from causing or allowing third-party data acquired hereunder from being retransmitted to any other computer facility or other location, except with the prior written consent of the Bank;
(e) that the Fund shall have access only to those authorized transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to protect at the Bank's expense the rights of the Bank in Proprietary Information at common law, under federal copyright law and under other federal or state law.
Each party shall take reasonable efforts to advise its employees of their obligations pursuant to this Article 5. The obligations of this Article shall survive any earlier termination of this Agreement.
5.02 If the Fund notifies the Bank that any of the Data Access Services do not operate in material compliance with the most recently issued user documentation for such services, the Bank shall endeavor in a timely manner to correct such failure. Organizations from which the Bank may obtain certain data included in the Data Access Services are solely responsible for the contents of such data and the Fund agrees to make no claim against the Bank arising out of the contents of such third- party data, including, but not limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED IN AN AS IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5.03 If the transactions available to the Fund include
the ability to originate electronic instructions to the Bank in order to
(i) effect the transfer or movement of cash or Shares or (ii) transmit
Shareholder information or other information (such transactions
constituting a "COEFI"), then in such event the Bank shall be entitled to
rely on the validity and authenticity of such instruction without
undertaking any further inquiry as long as such instruction is undertaken
in conformity with security procedures established by the Bank from time to
time.
6.01 The Bank shall not be responsible for, and the Fund shall indemnify and hold the Bank harmless from and against, any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors required to be taken pursuant to this Agreement, provided that such actions are taken in good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful misconduct which arise out of the breach of any representation or warranty of the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or subcontractors of information, records, documents or services which (i) are received by the Bank or its agents or subcontractors, and (ii) have been prepared, maintained or performed by the Fund or any other person or firm on behalf of the Fund including but not limited to any previous transfer agent or registrar.
(d) The reliance on, or the carrying out by the Bank or its agents or subcontractors of any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement under the federal securities laws or regulations or the securities laws or regulations of any state that such Shares be registered in such state or in violation of any stop order or other determination or ruling by any federal agency or any state with respect to the offer or sale of such Shares in such state.
6.02 At any time the Bank may apply to any officer of the Fund for instructions, and may consult with legal counsel with respect to any matter arising in connection with the services to be performed by the Bank under this Agreement, and the Bank and its agents or subcontractors shall not be liable and shall be indemnified by the Fund for any action taken or omitted by it in reliance upon such instructions or upon the opinion of such counsel. The Bank, its agents and subcontractors shall be protected and indemnified in acting upon any paper or document furnished by or on behalf of the Fund, reasonably believed to be genuine and to have been signed by the proper person or persons, or upon any instruction, information, data, records or documents provided the Bank or its agents or subcontractors by telephone, in person, machine readable input, telex, CRT data entry or other similar means authorized by the Fund, and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Fund. The Bank, its agents and subcontractors shall also be protected and indemnified in recognizing stock certificates which are reasonably believed to bear the proper manual or facsimile signatures of the officers of the Fund, and the proper countersignature of any former transfer agent or former registrar, or of a co-transfer agent or co- registrar.
6.03 In order that the indemnification provisions contained in this Article 6 shall apply, upon the assertion of a claim for which the Fund may be required to indemnify the Bank, the Bank shall promptly notify the Fund of such assertion, and shall keep the Fund advised with respect to all developments concerning such claim. The Fund shall have the option to participate with the Bank in the defense of such claim or to defend against said claim in its own name or in the name of the Bank. The Bank shall in no case confess any claim or make any compromise in any case in which the Fund may be required to indemnify the Bank except with the Fund's prior written consent. Article 7 Standard of Care
7.01 The Bank shall at all times act in good faith and agrees to use its best efforts within reasonable limits to insure the accuracy of all services performed under this Agreement, but assumes no responsibility and shall not be liable for loss or damage due to errors unless said errors are caused by its negligence, bad faith, or willful misconduct of that of its employees. Article 8 Covenants of the Fund and the Bank
8.01 The Fund shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Board of Directors of the Fund authorizing the appointment of the Bank and the execution and delivery of this Agreement.
(b)A copy of the Articles of Incorporation and By-Laws of the Fund and all amendments thereto.
8.02 The Bank hereby agrees to establish and maintain facilities and procedures reasonably acceptable to the Fund for safekeeping of stock certificates, check forms and facsimile signature imprinting devices, if any; and for the preparation or use, and for keeping account of, such certificates, forms and devices.
8.03 The Bank shall keep records relating to the services to be performed hereunder, in the form and manner as it may deem advisable. To the extent required by Section 31 of the Investment Company Act of 1940, as amended, and the Rules thereunder, the Bank agrees that all such records prepared or maintained by the Bank relating to the services to be performed by the Bank hereunder are the property of the Fund and will be preserved, maintained and made available in accordance with such Section and Rules, and will be surrendered promptly to the Fund on and in accordance with its request.
8.04 The Bank and the Fund agrees that all books, records, information and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be required by law.
8.05 In cases of any requests or demands for the inspection of the Shareholder records of the Fund, the Bank will endeavor to notify the Fund and to secure instructions from an authorized officer of the Fund as to such inspection. The Bank reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by its counsel that it may be held liable for the failure to exhibit the Shareholder records to such person.
9.01 This Agreement may be terminated by either party upon one hundred twenty (120) days written notice to the other.
9.02 Should the Fund exercise its right to terminate, all out-of-pocket expenses associated with the movement of records and material will be borne by the Fund. Additionally, the Bank reserves the right to charge for any other reasonable expenses associated with such termination and/or a charge equivalent to the average of three (3) month's fees.
10.01 Except as provided in Section 10.03 below, neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the written consent of the other party.
10.02 This Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted successors and assigns.
10.03 The Bank may, without further consent on the part of the Fund, subcontract for the performance hereof with (i) Boston Financial Data Services, Inc., a Massachusetts corporation ("BFDS") which is duly registered as a transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of 1934, as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly registered as a transfer agent pursuant to Section 17A(c)(1) or (iii) a BFDS affiliate; provided, however, that the Bank shall be as fully responsible to the Fund for the acts and omissions of any subcontractor as it is for its own acts and omissions.
11.01 This Agreement may be amended or modified by a written agreement executed by both parties and authorized or approved by a resolution of the Board of Directors of the Fund.
12.01 This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of the Commonwealth of Massachusetts.
13.01 In the event either party is unable to perform its obligations under the terms of this Agreement because of acts of God, strikes, equipment or transmission failure or damage reasonably beyond its control, or other causes reasonably beyond its control, such party shall not be liable for damages to the other for damages resulting form such failure to perform or otherwise from such causes.
14.01 Neither party to this Agreement shall be liable to the other party for consequential damages under any provision of this Agreement or for any consequential damages arising out of any act or failure to act hereunder.
15.01 This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject hereof whether oral or written.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers, as of the day and year first above written.
THE BLACKROCK INVESTMENT QUALITY
MUNICIPAL TRUST INC.
BY:__________________________________
ATTEST:
STATE STREET BANK AND TRUST COMPANY
BY:__________________________________
Senior Vice President
ATTEST:
FEE SCHEDULE
For
The BlackRock Advantage Term Trust Inc.
The BlackRock Income Trust Inc.
The BlackRock Insured Municipal Term Trust Inc.
The BlackRock Municipal Target Term Trust Inc.
The BlackRock North American Government Income Trust
The BlackRock Target Term Trust Inc.
The BlackRock 1998 Term Trust Inc.
The BlackRock Investment Quality Term Trust Inc.
The BlackRock 2001 Term Trust Inc.
The BlackRock Insured Municipal 2008 Term Trust Inc.
The BlackRock New York Insured Municipal 2008 Term Trust Inc.
The BlackRock California Insured Municipal 2008 Term Trust Inc.
The BlackRock Florida Insured Municipal 2008 Term Trust Inc.
The BlackRock Investment Quality Municipal Trust Inc.
The BlackRock 1999 Term Trust Inc.
First 15,000 shareholders $8.75 (Per account/Per annum) Next 15,000 - 30,000 shareholders at $8.25 (Per account/Per annum) Next 30,000 or more shareholders at $7.50 (Per account/Per annum) |
Includes the issuance and registration of the first 5,000 credit certificates per fund. Excess credits to be billed at $1.25 each.
For each dividend reinvestment per participant $.75 For each optional cash infusion $.75
ACCOUNT MAINTENANCE SERVICES
o Establishing new accounts
o Preparation and mailing of W-9 solicitation to new accounts without T.I.N.'s.
o Address changes
o Processing T.I.N. changes
o Processing routine and non-routine transfers of ownership
o Issuance of credit certificates (see limits)
o Posting debit and credit transactions
o Providing a daily transfer journal of ownership changes
o Responding to written shareholder communications
o Responding to shareholder telephone inquiries
o Placing stop transfers
o Releasing stop transfers
o Replacing lost certificates
o Registration of credit certificates (see limits)
DIVIDEND REIMBURSEMENT SERVICES
o Generate and mail monthly dividend checks with one enclosure
(12 per annum)
o Replace lost dividend checks
o Processing of backup withholding and remittance
o Preparation and filing of Federal Tax forms 1099 and 1042
o Preparation and filing of State Tax information as directed
o Preparation of escheatment information (shares and dividends)
DIVIDEND REINVESTMENT SERVICES PROVIDED
o Addressing and mailing of enrollment confirmation notice
o Processing optional cash investments and acknowledging same
o The monthly reinvestment of dividend proceeds for participants (12 per annum)
o Participant withdrawal or sell requests
o Preparation, mailing and filing of Federal Tax Form 1099B for sales
ANNUAL MEETING SERVICE
o Preparation for the mailing of proxies, proxy statement, annual report and business reply envelope
o Providing one set of labels of banks, brokers and nominees for broker search
o Providing a record date list
o Tabulation of returned proxies
o Daily reporting of tabulation results
o Interface support during solicitation effort
o Providing one inspector of election at annual meeting
o Providing an annual meeting voted list
ADDRESSING AND MAILING SERVICES
o Addressing and mailing of three (3) quarterly reports
o Addressing and mailing new shareholder welcome materials on a weekly basis
TERM OF FEE CONTRACT
o Two years from date of execution
o Minimum of $1,000 per month per Fund
o Escalation Clause - The per account annual fee in effect during
1994 shall be equal to the fee for 1993 increased by the lesser of
(i) 6% or, (ii) the percentage increase in the U.S. Department of
Labor national index of "Cost of Services Less Rent" for the year
1993. The fee for 1994- 1996, after taking into effect this
increase, will not change.
MISCELLANEOUS
o All out-of-pocket expenses such as postage, stationery, etc. will be billed as incurred.
ADDITIONAL SERVICES
o Services over and above this Fee Schedule will be invoiced in accordance with our current Schedule of Services.
Dated:
The BlackRock Funds State Street Bank and Trust Company
By: ________________________________ By:________________________________
Name: ______________________________ Name: Charles V. Rossi
______________________________
Title:______________________________ Title: Vice President
____________________________
|
AUCTION AGENT AGREEMENT
between
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
and
BANKERS TRUST COMPANY
Dated as of April 1, 1993
Relating to
Auction Rate Municipal Preferred Stock
(the "Preferred Shares")
Series T7 and Series T28
of
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
THIS AUCTION AGENT AGREEMENT dated as of April 1, 1993, between THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC., a Maryland corporation (the "Company"), and BANKERS TRUST COMPANY, a New York banking corporation.
The Company proposes to duly authorize and issue 1,300 shares of Auction Rate Municipal Preferred Stock, Series T7, with a par value of $.01 per share and a liquidation preference of $50,000 per share plus an amount equal to accumulated but unpaid dividends (whether or not earned or declared) plus the premium, if any, resulting from the designation of a Premium Call Period ("Series T7 Preferred Shares") and 1,300 shares of Auction Rate Municipal Preferred Stock, Series T28, with a par value of $.01 per share and a liquidation preference of $50,000 per share plus an amount equal to accumulated but unpaid dividends (whether or not earned or declared) plus the premium, if any, resulting from the designation of a Premium Call Period ("Series T28 Preferred Shares"), each pursuant to the Company's Articles Supplementary (as defined below). The Series T7 Preferred Shares and the Series T28 Preferred Shares are sometimes herein together referred to as the "Preferred Shares". A separate Auction (as defined below) will be conducted for each series of Preferred Shares. The Company desires that Bankers Trust Company perform certain duties as agent in connection with each Auction of Preferred Shares (the "Auction Agent") and as the transfer agent, registrar, dividend disbursing agent and redemption agent with respect to the Preferred Shares (the "Paying Agent") upon the terms and conditions of this Agreement, and hereby appoints Bankers Trust Company as said Auction Agent and Paying Agent in accordance with those terms and conditions (hereinafter generally referred to as the "Auction Agent" except in Sections 3 and 4 below).
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Company and the Auction Agent agree as follows:
1. Definitions and Rules of Construction.
1.1 Terms Defined by Reference to Articles Supplementary.
Capitalized terms not defined herein shall have the respective meanings specified in the Articles Supplementary.
1.2 Terms Defined Herein.
As used herein and in the Settlement Procedures (as defined below), the following terms shall have the following meanings, unless the context otherwise requires:
(a) "Affiliate" shall mean any Person made known to the Auction Agent to be controlled by, in control of or under common control with, the Company, or its successors.
(b) "Agent Member" of any Person shall mean such Person's agent member of the Securities Depository that will act on behalf of a Bidder.
(c) "Articles Supplementary" shall mean the Articles Supplementary of the Company, establishing the powers, preferences and rights of the Series T7 Preferred Shares and the Series T28 Preferred Shares filed on March __, 1993 in the Office of the State Department of Assessments and Taxation of the State of Maryland.
(d) "Auction" shall have the meaning specified in Section 2.1 hereof.
(e) "Auction Procedures" shall mean the Auction Procedures that are set forth in Paragraph 11 of the Articles Supplementary.
(f) "Authorized Officer" shall mean each Senior Vice President, Vice President, Assistant Vice President, Trust Officer and Assistant Secretary and Assistant Treasurer of the Auction Agent assigned to its Corporate Trust and Agency Group and every other officer or employee of the Auction Agent designated as an "Authorized Officer" for purposes hereof in a communication to the Company.
(g) "Broker-Dealer Agreement" shall mean each agreement between the Auction Agent and a Broker-Dealer substantially in the form attached hereto as Annex A.
(h) "Company Officer" shall mean the Chairman, the President, each Vice President (whether or not designated by a number or word or words added before or after the title "Vice President"), the Secretary, the Treasurer, each Assistant Secretary and each Assistant Treasurer of the Company and every other officer or employee of the Company designated as a "Company Officer" for purposes hereof in a notice from the Company to the Auction Agent.
(i) "Holder" shall be a holder of record of one or more shares of Series T7 Preferred Shares or Series T28 Preferred Shares, as the case may be, listed as such in the stock register maintained by the Paying Agent pursuant to Section 4.6.
(j) "Settlement Procedures" shall mean the Settlement Procedures attached to the Broker-Dealer Agreement as Exhibit A.
1.3 Rules of Construction.
Unless the context or use indicates another or different meaning or intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural number and vice versa.
(b) The captions and headings herein are solely for convenience of reference and shall not constitute a part of this Agreement nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York City time.
2. The Auction.
2.1 Purpose; Incorporation by Reference of Auction Procedures and Settlement Procedures.
(a) The Articles Supplementary provide that the Applicable Rate on Series T7 Preferred Shares or Series T28 Preferred Shares, as the case may be, for each Dividend Period therefor after the Initial Dividend Period shall be the rate per annum that a commercial bank, trust company, or other financial institution appointed by the Company advises results from implementation of the Auction Procedures. The Board of Directors of the Company has adopted a resolution appointing Bankers Trust Company as Auction Agent for purposes of the Auction Procedures. The Auction Agent hereby accepts such appointment and agrees that, on each Auction Date, it shall follow the procedures set forth in this Section 2 and the Auction Procedures for the purpose of determining the Applicable Rate for the Series T7 Preferred Shares or the Series T28 Preferred Shares, as the case may be, for the next Dividend Period therefor. Each periodic operation of such procedures is hereinafter referred to as an "Auction".
(b) All of the provisions contained in the Auction Procedures and the Settlement Procedures are incorporated herein by reference in their entirety and shall be deemed to be a part hereof to the same extent as if such provisions were fully set forth herein.
2.2 Preparation for Each Auction; Maintenance of Registry of Beneficial Owners.
(a) At the time of closing of the initial issuance and sale
of the Preferred Shares (the "Closing"), the Company shall provide the
Auction Agent with a list of initial Broker-Dealers previously approved by
the Auction Agent and shall cause to be delivered to the Auction Agent for
execution by the Auction Agent a Broker-Dealer Agreement signed by each
such Broker-Dealer. Subsequent to the Closing and pursuant to
Section 2.5(b) and subject to Section 2.5(c) hereof, the Auction Agent may,
from time to time, designate additional Broker Dealers. The Auction Agent
shall keep the list of Broker Dealers current and accurate, and shall
indicate thereon, or on a separate list, the identity of each Existing
Holder, if any, whose most recent Order was submitted by a Broker-Dealer on
such list and resulted in such Existing Holder continuing to hold or
purchasing Preferred Shares. Not later than seven days prior to any
Auction Date for which any change in such list of Broker-Dealers is to be
effective, the Auction Agent shall notify the Company in writing of such
change and, if any such change is the addition of a Broker-Dealer to such
list, the Auction Agent shall have entered into a Broker-Dealer Agreement
with such additional Broker-Dealer prior to the participation of any such
Broker-Dealer in any Auction.
(b) (i) In the event that the Auction Date for any Auction shall be changed after the Auction Agent shall have given the notice referred to in clause (vii) of Paragraph (a) of the Settlement Procedures, the Auction Agent, by such means as the Auction Agent deems practicable, shall give notice of such change to the Broker-Dealers not later than the earlier of 9:15 A.M. on the new Auction Date or 9:15 A.M. on the old Auction Date.
(ii) If, after the date of this Agreement, there is any change in the prevailing rating of Preferred Shares by either of the rating agencies (or substitute or successor rating agencies) referred to in the definition of the Maximum Applicable Rate, thereby resulting in any change in the corresponding percentage for the Preferred Shares, as set forth in said definition (the "Percentage"), the Company shall notify the Auction Agent in writing of such change in the Percentage prior to 9:00 A.M. on the Auction Date for Preferred Shares next succeeding such change. The Percentage for the Preferred Shares on the date of this Agreement is 110%. The Auction Agent shall be entitled to rely on the last Percentage of which it has received notice from the Company (or, in the absence of such notice, the Percentage set forth in the preceding sentence) in determining the Maximum Applicable Rate as set forth in Section 2.2(e)(i) hereof.
(c) With respect to each Dividend Period that is a Special
Dividend Period, on or prior to the fourth day but not more than seven days
prior to an Auction Date for each series of the Preferred Shares, the
Company may, at its sole option and to the extent permitted by law, by
telephonic and written notice (a "Request for Special Dividend Period") to
the Auction Agent and to each Broker-Dealer, request that the next
succeeding Dividend Period for such series of Preferred Shares will be a
number of days (other than 28 in the case of the Series T28 Preferred
Shares or 7 in the case of the Series T7 Preferred Shares) evenly divisible
by 7 and specified in such notice, provided that for any Auction occurring
after the initial Auction, the Company may not give a Request for Special
Dividend Period (and any such request shall be null and void) unless
sufficient Clearing Bids were made in the last occurring Auction and unless
full cumulative dividends, any amounts due with respect to mandatory
redemptions and any Additional Dividends payable prior to such date have
been paid in full. Such Request for Special Dividend Period, in the case
of a Dividend Period of 182 days or less, shall be made on or prior to the
4th day but not more than 7 days prior to an Auction Date for such series
of Preferred Shares and, in the case of a Dividend Period of more than 182
days, shall be given on or prior to the 14th day but not more than 28 days
prior to an Auction Date for such series of Preferred Shares. Upon
receiving such Request for Special Dividend Period, the Broker-Dealer(s)
shall jointly determine whether given the factors set forth in paragraph
2(c)(iii) of the Articles Supplementary it is advisable that the Company
issue a Notice of Special Dividend Period for the particular series of
Preferred Shares as contemplated by such Request for Special Dividend
Period and shall give the Company and the Auction Agent written notice (a
"Response") of such determination by no later than the third day prior to
such Auction Date. If the Broker-Dealer(s) shall not give the Company and
the Auction Agent a Response by such third day or if the Response states
that given the factors referred to above it is not advisable that the
Company give a Notice of Special Dividend Period (as defined below) for the
particular series of Preferred Shares, the Company may not give a Notice of
Special Dividend Period in respect of such Request for Special Dividend
Period. In the event the Response indicates that it is advisable that the
Company give a Notice of Special Dividend Period for the particular series
of Preferred Shares, the Company will by no later than the second day prior
to such Auction Date give a notice (a "Notice of Special Dividend Period")
to the Auction Agent, the Securities Depository and each Broker-Dealer,
which notice will specify the duration of the Special Dividend Period, the
Maximum Applicable Rate therefor and Specific Redemption Provisions, if
any. The Company shall not give a Notice of Special Dividend Period or
convert to a Special Dividend Period, or, if such Notice of Special
Dividend Period shall have already been given, shall give telephonic and
written notice of revocation (a "Notice of Revocation") to the Auction
Agent, each Broker-Dealer, and the Securities Depository on or prior to the
Business Day prior to the relevant Auction Date if (i) it has not obtained
the advice in writing of Moody's and S&P or any Substitute Rating Agency
that the proposed Special Dividend Period will not adversely affect their
then-current rating on the Preferred Shares, (ii) either the 1940 Act
Preferred Shares Coverage is not satisfied or the Company shall fail to
maintain S&P Eligible Assets and Moody's Eligible Assets each with an
aggregate Discounted Value at least equal to the Preferred Shares Basic
Maintenance Amount in each case on each of the two Valuation Dates
immediately preceding the Business Day prior to the relevant Auction Date
on an actual basis and on a pro forma basis giving effect to the proposed
Special Dividend Period (using as a pro forma dividend rate with respect to
such Special Dividend Period the dividend rate which the Broker-Dealers
shall advise the Company is an approximately equal rate for securities
similar to the Preferred Shares with an equal dividend period),
(iii) sufficient funds for the payment of dividends payable on the
immediately succeeding Dividend Payment Date have not been irrevocably
deposited with the Auction Agent by the close of business on the third
Business Day preceding the related Auction Date or (iv) the
Broker-Dealer(s) jointly advise the Company that after consideration of the
factors referred to above they have concluded that it is advisable to give
a Notice of Revocation. If the Company is prohibited from giving a Notice
of Special Dividend Period as a result of the factors enumerated in clause
(i), (ii), (iii) or (iv) of the preceding sentence or if the Company gives
a Notice of Revocation with respect to a Notice of Special Dividend Period,
the next succeeding Dividend Period will be a 28-day Dividend Period in the
case of the Series T28 Preferred Shares and a 7-day Dividend Period in the
case of the Series T7 Preferred Shares, provided that if the then-current
Dividend Period in the case of the Series T28 Preferred Shares is a Special
Dividend Period of less than 28 days, the next succeeding Dividend Period
will be the same length as the current Dividend Period. In addition, in
the event sufficient Clearing Bids are not made in any Auction or an
Auction is not held for any reason, the next succeeding Dividend Period
will be a 28-day Dividend Period (in the case of Series T28 Preferred
Shares) or a 7-day Dividend Period (in the case of Series T7 Preferred
Shares) and the Company may not again give a Notice of Special Dividend
Period (and any such attempted notice shall be null and void) until
sufficient Clearing Bids have been made in an Auction with respect to a
28-day Dividend Period (in the case of Series T28 Preferred Shares) or a
7-day Dividend Period (in the case of Series T7 Preferred Shares).
(d) (i) Whenever the Company intends to include any net capital gains or other taxable income in any dividend on Preferred Shares, the Company will in the case of a Dividend Period of 28 days or fewer, and may, in the case of a Dividend Period of 35 days or more, notify the Auction Agent of the amount to be so included at least five Business Days prior to the Auction Date on which the Applicable Rate for such dividend is to be established. Whenever the Auction Agent receives such notice from the Company, it will in turn notify each Broker Dealer, who, on or prior to such Auction Date, in accordance with its Broker-Dealer Agreement, will notify its Existing Holders and Potential Holders believed to be interested in submitting an Order in the Auction to be held on such Auction Date.
(ii) If the Company makes a Retroactive Taxable Allocation, the Company will, within 90 days (and generally within 60 days) after the end of its fiscal year for which a Retroactive Taxable Allocation is made provide notice thereof to the Auction Agent and to each holder of Preferred Shares (initially the Securities Depository) during such fiscal year at such holder's address as the same appears or last appeared on the stock books of the Company. The Company will, within 30 days after such notice is given to the Auction Agent, pay to the Auction Agent (who will then distribute to such holders of Preferred Shares), a cash amount equal to the aggregate Additional Dividend with respect to all Retroactive Taxable Allocations made to such holders during the fiscal year in question.
(e) (i) On each Auction Date, the Auction Agent shall
determine the Maximum Applicable Rate from the higher of the 30-day "AA"
Composite Commercial Paper Rate and the Taxable Equivalent of the
Short-Term Municipal Bond Rate (except in the case of a Special Dividend
Period in which case the Maximum Applicable Rate shall be determined from
the higher of the Special Dividend Period Reference Rate and the Taxable
Equivalent of the Short-Term Municipal Bond Rate). If any such rate on
which the Maximum Applicable Rate is to be based is not quoted on an
interest basis but is quoted on a discount basis, the Auction Agent shall
convert the quoted rate to an Interest Equivalent, as set forth in
Paragraph 1 of the Articles Supplementary; or, if the rate obtained by the
Auction Agent is not quoted on an interest or discount basis, the Auction
Agent shall convert the quoted rate to an interest rate after consultation
with the Company as to the method of such conversion. Not later than 9:30
A.M. on each Auction Date for each series of Preferred Shares, the Auction
Agent shall notify the Company and the Broker-Dealers of the applicable
rate so determined and the Maximum Applicable Rate.
(ii) If the rate on which the Maximum Applicable Rate is to be based is the 30-day "AA" Composite Commercial Paper Rate and such rate is to be based on rates supplied by Commercial Paper Dealers and one or more of the Commercial Paper Dealers shall not provide a quotation for the determination of the 30-day "AA" Composite Commercial Paper Rate, the Auction Agent shall immediately notify the Company so that the Company can determine whether to select a Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers to provide the quotation or quotations not being supplied by any Commercial Paper Dealer or Commercial Paper Dealers. The Company shall promptly advise the Auction Agent of any such selection. If the Company does not select any such Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers, then the rates shall be supplied by the remaining Commercial Paper Dealer or Commercial Paper Dealers.
(f) (i) The Auction Agent shall maintain by series a current registry of the Beneficial Owners of the shares of both series of Preferred Shares for purposes of each Auction. The Company shall use its best efforts to provide or cause to be provided to the Auction Agent within ten days following the date of Closing a list of the initial Beneficial Owners of Series T7 Preferred Shares and Series T28 Preferred Shares and the respective Broker-Dealer of each such Beneficial Owner through which such Beneficial Owner purchased such shares. The Auction Agent may rely upon, as evidence of the identities of the Beneficial Owners, such list, the results of each Auction and notices from any Beneficial Owner, the Agent Member of any Beneficial Owner or the Broker-Dealer of any Beneficial Owner with respect to such Beneficial Owner's transfer of any Preferred Shares to another Person.
(ii) In the event of any partial redemption of any Series T7 Preferred Shares or Series T28 Preferred Shares, as the case may be, upon notice by the Company to the Auction Agent of such partial redemption, the Auction Agent shall promptly request the Securities Depository to notify the Auction Agent of the identities of the Agent Members (and the respective numbers of Preferred Shares) from the accounts of which Preferred Shares have been called for redemption and the person or department at such Agent member to contact regarding such redemption and, at least two Business Days prior to the next Auction with respect to Preferred Shares of the series being partially redeemed, the Auction Agent shall request each Agent Member so identified to disclose to the Auction Agent (upon selection by such Agent Member of the Beneficial owners whose Preferred Shares are to be redeemed) the number of Preferred Shares of such series of Preferred Shares of each such Beneficial Owner, if any, to be redeemed by the Company; provided that the Auction Agent has been furnished with the name and telephone number of a person or department at such Agent member from which it is to request such information. In the absence of receiving any such information with respect to a Beneficial Owner, from such Beneficial Owner's Agent Member or otherwise, the Auction Agent may continue to treat such Beneficial Owner as having beneficial ownership of the number of Series T7 Preferred Shares or Series T28 Preferred Shares shown in the Auction Agent's registry of Beneficial Owners.
(iii) The Auction Agent shall register a transfer of the beneficial ownership of Series T7 Preferred Shares or Series T28 Preferred Shares from a Beneficial Owner to another Beneficial Owner, or other Person if permitted by the Company, and only if (A) such transfer is pursuant to an Auction or (B) if such transfer is made other than pursuant to an Auction, the Auction Agent has been notified in writing in a notice substantially in the form of Exhibit C to the Broker-Dealer Agreement, by such Existing Holder or the Agent Member of such Existing Holder of such transfer. The Auction Agent is not required to accept any notice of transfer delivered for an Auction unless it is received by the Auction Agent by 3:00 P.M. on the Business Day next preceding the applicable Auction Date. The Auction Agent shall rescind a transfer made on the registry of the beneficial owners of any Preferred Shares if the Auction Agent has been notified in writing in a notice substantially in the form of Exhibit D to the Broker-Dealer Agreement by the Agent Member or the Broker-Dealer of any Person that (i) purchased any Preferred Shares and the seller failed to deliver such shares or (ii) sold any Preferred Shares and the purchaser failed to make payment to such Person upon delivery to the purchaser of such shares.
(g) The Auction Agent may request that the Broker-Dealers, as set forth in Section 3.2(c) of the Broker-Dealer Agreements, provide the Auction Agent with a list of their respective customers that such Broker-Dealers believe are Beneficial Owners of shares of either series of Preferred Shares. The Auction Agent shall keep confidential any such information and shall not disclose any such information so provided to any Person other than the relevant Broker-Dealer and the Company provided that the Auction Agent reserves the right to disclose any such information if it is advised by its counsel that its failure to do so would be unlawful.
2.3 Auction Schedule.
The Auction Agent shall conduct Auctions for both series of Preferred Shares in accordance with the schedule set forth below. Such schedule may be changed by the Auction Agent with the consent of the Company, which consent shall not be unreasonably withheld. The Auction Agent shall give notice of any such change to each Broker-Dealer. Such notice shall be received prior to the first Auction Date on which any such change shall be effective.
Time Event
---- -----
By 9:30 A.M. Auction Agent advises the Company and the
Broker-Dealers of the Maximum Applicable Rate
as determined from the higher of the 30-day
"AA" Composite Commercial Paper Rate and the
Taxable Equivalent of the Short-Term
Municipal Bond Rate (except in the case of a
Special Dividend Period in which case the
Maximum Applicable Rate shall be the higher
of the Special Dividend Period Reference Rate
and the Taxable Equivalent of the Short-Term
Municipal Bond Rate) as set forth in
Section 2.2(e)(i) hereof.
9:30 A.M. - 1:00 P.M. Auction Agent assembles information
communicated to it by Broker-Dealers as
provided in Paragraph 11(c)(i) of the
Articles Supplementary. Submission deadline
is 1:00 P.M.
Not earlier than 1:00 P.M. Auction Agent makes determination pursuant to
Paragraph 11(d)(i) of the Articles
Supplementary.
By approximately 3:00 P.M. Auction Agent advises Company of results of
Auction as provided in Paragraph 11(d)(ii) of
the Articles Supplementary.
Submitted Bids and Submitted Sell Orders are
accepted and rejected in whole or in part and
shares of Preferred Shares allocated as
provided in Paragraph 11(e) of the Articles
Supplementary.
Auction Agent gives notice of Auction results
as set forth in Section 2.4 hereof.
|
2.4 Notice of Auction Results.
On each Auction Date, the Auction Agent shall notify Broker-Dealers of the results of the Auction held on such date by telephone or through the Auction Agent's Auction Processing System as set forth in Paragraph (a) of the Settlement Procedures.
2.5 Broker-Dealers.
(a) Not later than 12:00 noon on each Auction Date for both
series of Preferred Shares, the Company shall pay to the Auction Agent in
New York Clearing House or similar next-day funds an amount in cash equal
to, (i) in the case of any Auction Date immediately preceding any Dividend
Period of 28 days or less, the product of (A) a fraction the numerator of
which is the number of days in such Dividend Period (calculated by counting
the first day of such Dividend Period but excluding the last day thereof)
and the denominator of which is 365, times (B) 1/4 of 1%, times
(C) $50,000, times (D) the sum of the aggregate number of outstanding
shares of such series of Preferred Shares for which the Auction is
conducted and (ii) in the case of any Auction Date immediately preceding
any Dividend Period of more than 28 days, the amount determined by mutual
consent of the Company and the Broker-Dealer or Broker-Dealers pursuant to
Section 3.5 of the Broker-Dealer Agreements. The Auction Agent shall apply
such monies as set forth in Section 3.5 of the Broker-Dealer Agreements and
shall thereafter remit to the Company any remaining funds paid to the
Auction Agent pursuant to this Section 2.5(a).
(b) Subject to Section 2.5(c) hereof, the Auction Agent is
hereby authorized by the Company to designate at any time or from time to
time any Person to act as a Broker-Dealer without the prior written
approval of the Company. The Auction Agent may designate an Affiliate of
the Company or of itself to act as a Broker-Dealer subject to
Section 2.5(c) hereof.
(c) The Auction Agent shall terminate any Broker-Dealer Agreement as set forth therein if so directed by the Company.
(d) Notwithstanding Section 2.5(b) hereof, no person may act as a Broker-Dealer unless such person shall have entered into a Broker-Dealer Agreement with the Auction Agent.
(e) The Auction Agent shall maintain a list of Broker-Dealers.
2.6 Ownership of Series T7 Preferred Shares and Series T28 Preferred Shares and Submission of Bids by Company and Affiliates.
Neither the Company nor any Affiliate of the Company may submit any Sell Order or Bid, directly or indirectly, in any Auction, except that an Affiliate of the Company that is a Broker-Dealer may submit a Sell Order or Bid on behalf of a Beneficial Owner or Potential Beneficial owner. The Company shall notify the Auction Agent if the Company or, to the best of the Company's knowledge, any Affiliate of the Company becomes an Existing Holder of any Preferred Shares. Any Preferred Shares redeemed, purchased or otherwise acquired (i) by the Company shall not be reissued or (ii) by its Affiliates shall not be transferred (other than to the Company). The Auction Agent shall have no duty or liability with respect to enforcement of this Section 2.6.
2.7 Access to and Maintenance of Auction Records.
The Auction Agent shall afford to the Company, its agents, independent public accountants and counsel, access at reasonable times during normal business hours to review and make extracts or copies (at the Company's sole cost and expense) of all books, records, documents and other information concerning the conduct and results of Auctions, provided that any such agent, accountant, or counsel shall furnish the Auction Agent with a letter from the Company requesting that the Auction Agent afford such person access. The Auction Agent shall maintain records relating to any Auction for a period of two years after such Auction (unless requested by the Company to maintain such records for such longer period not in excess of four years, then for such longer period), and such records shall, in reasonable detail, accurately, and fairly reflect the actions taken by the Auction Agent hereunder. The Company agrees to keep any information regarding the customers of any Broker-Dealer received from the Auction Agent in connection with this Agreement or any Auction confidential and shall not disclose such information or permit the disclosure of such information without the prior written consent of the applicable Broker-Dealer to anyone except such agent, accountant or counsel engaged to audit or review the results of Auctions as permitted by this Section 2.7. Any such agent, accountant or counsel, before having access to such information, shall agree to keep such information confidential and not to disclose such information or permit disclosure of such information without the prior written consent of the applicable Broker-Dealer.
3. The Auction Agent as Paying Agent.
3.1 Paying Agent.
The Board of Directors of the Company has adopted a resolution appointing Bankers Trust Company as transfer agent, registrar, dividend disbursing agent and redemption agent for the Company in connection with any Preferred Shares (the "Paying Agent"). The Paying Agent hereby accepts such appointment and agrees to act in accordance with its standard procedures and the provisions of the Articles Supplementary which are specified herein as Paying Agent with respect to the Preferred Shares and as set forth in this Section 3.
3.2 The Company's Notices to Paying Agent.
Whenever any Preferred Shares are to be redeemed, the Company shall promptly deliver to the Paying Agent the Notice of Redemption, which will be mailed by the Company to each Holder, at least five days prior to the date such Notice of Redemption is required to be mailed by the Articles Supplementary. The Paying Agent shall have no responsibility to confirm or verify the accuracy of any such notice.
3.3 Company to Provide Funds for Dividends and Redemptions and Additional Dividends.
(a) Not later than noon, on the Business Day immediately preceding each Dividend Payment Date, the Company shall deposit with the Paying Agent an aggregate amount of New York Clearing House or similar next-day funds equal to the declared dividends to be paid to Holders on such Dividend Payment Date and shall give the Paying Agent irrevocable instructions to apply such funds to the payment of such dividends on such Dividend Payment Date.
(b) If the Company shall give the Notice of Redemption then, by noon of the Business Day immediately preceding the date fixed for redemption, the Company shall deposit in trust with the Paying Agent an aggregate amount of New York Clearing House or similar next day funds sufficient to redeem such Preferred Shares called for redemption and shall give the Paying Agent irrevocable instructions and authority to pay the redemption price to the Holders of Preferred Shares called for redemption upon surrender of the certificate or certificates therefor.
(c) If the Company provides notice to the Auction Agent of a Retroactive Taxable Allocation, the Company shall, within 30 days after such notice is given and by noon of the Business Day immediately preceding the date fixed for payment of an Additional Dividend, deposit in trust with the Paying Agent an aggregate amount of New York Clearing House or similar next-day funds equal to such Additional Dividend and shall give the Paying Agent irrevocable instructions and authority to pay the Additional Dividends to Holders (or former Holders) of Preferred Shares entitled thereto.
3.4 Disbursing Dividends, Redemption Price and Additional Dividends.
After receipt of the New York Clearing House or similar next-day funds and instructions from the Company described in Sections 3.3(a), (b) and (c) above, the Paying Agent shall pay to the Holders (or former Holders) entitled thereto (i) on each corresponding Dividend Payment Date, dividends on the Series T7 Preferred Shares or Series T28 Preferred Shares, as the case may be, (ii) on any date fixed for redemption, the redemption price of any Preferred Shares called for redemption and (iii) on the date fixed for payment of an Additional Dividend, such Additional Dividend. The amount of dividends for any Dividend Period to be paid by the Paying Agent to Holders will be determined by the Company as set forth in Paragraph 2 of the Articles Supplementary. The redemption price to be paid by the Paying Agent to the Holders of any Preferred Shares called for redemption will be determined as set forth in Paragraph 4 of the Articles Supplementary. The amount of Additional Dividends to be paid by the Paying Agent in the event of a Retroactive Taxable Allocation to Holders will be determined by the Company pursuant to paragraph 2(e) of the Articles Supplementary. The Company shall notify the Paying Agent in writing of a decision to redeem any Preferred Shares on or prior to the date specified in Section 3.2 above, and such notice by the Company to the Paying Agent shall contain the information required to be stated in the Notice of Redemption required to be mailed by the Company to such Holders. The Paying Agent shall have no duty to determine the redemption price and may rely on the amount thereof set forth in the Notice of Redemption.
4. The Paying Agent as Transfer Agent and Registrar.
4.1 Original Issue of Stock Certificates.
On the Date of Original Issue, one certificate for all Series T7 Preferred Shares and one certificate for all Series T28 Preferred Shares shall be issued by the Company and registered in the name of Cede & Co., as nominee of the Securities Depository, and countersigned by the Paying Agent.
4.2 Registration of Transfer or Exchange of Preferred Shares.
Except as provided in this Section 4.2, the shares of each
series of Preferred Shares shall be registered solely in the name of the
Securities Depository or its nominee. If the Securities Depository shall
give notice of its intention to resign as such, and if the Company shall
not have selected a substitute Securities Depository acceptable to the
Paying Agent prior to such resignation, then upon such resignation, the
shares of each series of Preferred Shares may, at the Company's request, be
registered for transfer or exchange, and new certificates thereupon shall
be issued in the name of the designated transferee or transferees, upon
surrender of the old certificates in form deemed by the Paying Agent
properly endorsed for transfer with (a) all necessary endorsers' signatures
guaranteed in such manner and form as the Paying Agent may require by a
guarantor reasonably believed by the Paying Agent to be responsible,
(b) such assurances as the Paying Agent shall deem necessary or appropriate
to evidence the genuineness and effectiveness of each necessary endorsement
and (c) satisfactory evidence of compliance with all applicable laws
relating to the collection of taxes or funds necessary for the payment of
such taxes. If the certificates for Preferred Shares are not held by the
Securities Depository or its nominee, payments upon transfer of shares in
an Auction shall be made in same-day funds to the Auction Agent against
delivery of certificates therefor.
4.3 Removal of Legend.
Any request for removal of a legend indicating a restriction on transfer from certificates evidencing Series T7 Preferred Shares or Series T28 Preferred Shares shall be accompanied by an opinion of counsel stating that such legend may be removed and such shares transferred free of the restriction described in such legend, said opinion to be delivered under cover of a letter from a Company Officer authorizing the Paying Agent to remove the legend on the basis of said opinion.
4.4 Lost Stock Certificates.
The Paying Agent shall issue and register replacement
certificates for certificates represented to have been lost, stolen or
destroyed, upon the fulfillment of such requirements as shall be deemed
appropriate by the Company and the Paying Agent, subject at all times to
provisions of law, the By-Laws of the Company governing such matters and
resolutions adopted by the Company with respect to lost securities. The
Paying Agent may issue new certificates in exchange for and upon the
cancellation of mutilated certificates. Any request by the Company to the
Paying Agent to issue a replacement or new certificate pursuant to this
Section 4.4 shall be deemed to be a representation and warranty by the
Company to the Paying Agent that such issuance will comply with such
provisions of applicable law and the By-Laws and resolutions of the
Company.
4.5 Disposition of Cancelled Certificates; Record Retention.
The Paying Agent shall retain stock certificates which have been cancelled in transfer or in exchange and accompanying documentation in accordance with applicable rules and regulations of the Securities and Exchange Commission for two calendar years from the date of such cancellation. The Paying Agent shall afford to the Company, its agents and counsel access at reasonable times during normal business hours to review and make extracts or copies (at the Company's sole cost and expense) of such certificates and accompanying documentation. Upon the expiration of this two-year period, the Paying Agent shall deliver to the Company the cancelled certificates and accompanying documentation. The Company shall, at its expense, retain such records for a minimum additional period of four calendar years from the date of delivery of the records to the Company and shall make such records available during this period at any time, or from time to time, for reasonable periodic, special, or other examinations by representatives of the Securities and Exchange Commission. The Company shall also undertake to furnish to the Securities and Exchange Commission, upon demand, at either the principal office or at any regional office, complete, correct and current hard copies of any and all such records. Thereafter such records shall not be destroyed by the Company without the approval of the Paying Agent, which shall not be unreasonably withheld, but will be safely stored for possible future reference.
4.6 Stock Register.
The Paying Agent shall maintain the stock register, which shall
contain a list of the Holders, the number of Preferred Shares held by each
Holder and the address of each Holder. The Paying Agent shall record in
the stock register any change of address of a Holder upon notice by such
Holder. In case of any request or demand for the inspection of the stock
register or any other books of the Company in the possession of the Paying
Agent, the Paying Agent will notify the Company and secure instructions as
to permitting or refusing such inspection. The Paying Agent reserves the
right, however, to exhibit the stock register or other records to any
person in case it is advised by its counsel that its failure to do so would
(i) be unlawful or (ii) expose it to liability, unless the Company shall
have offered indemnification satisfactory to the Paying Agent.
4.7 Return of Funds.
Any funds deposited with the Paying Agent by the Company for any reason under this Agreement, including for the payment of dividends or the redemption of shares of any series of Preferred Shares, that remain with the Paying Agent after 12 months shall be repaid to the Company upon the written request of the Company.
5. Representations and Warranties.
(a) The Company represents and warrants to the Auction Agent that:
(i) the Company is a duly incorporated and validly existing corporation in good standing under the laws of the State of Maryland and has full power to execute and deliver this Agreement and to authorize, create and issue the Series T7 Preferred Shares and the Series T28 Preferred Shares;
(ii) the Company is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended, as a closed-end, diversified management investment company;
(iii) this Agreement has been duly and validly authorized, executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject as to such enforceability to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equitable principles;
(iv) the forms of the certificates evidencing the Series T7 Preferred Shares and the Series T28 Preferred Shares comply with all applicable laws of the State of Maryland;
(v) the Series T7 Preferred Shares and the Series T28 Preferred Shares have been duly and validly authorized by the Company and, upon completion of the initial sale of the shares of each series of Preferred Shares and receipt of payment therefor, will be validly issued, fully paid and nonassessable;
(vi) the offering of the shares of Series T7 Preferred Shares and the shares of Series T28 Preferred Shares has been registered under the Securities Act of 1933, as amended, and no action by or before any governmental body or authority of the United States or of any state thereof is required in connection with the execution and delivery of this Agreement or the issuance of the shares of any such series of Preferred Shares except as required by applicable state securities or insurance laws, all of which have been taken;
(vii) the execution and delivery of this Agreement and the issuance and delivery of the Series T7 Preferred Shares and the Series T28 Preferred Shares do not and will not conflict with, violate, or result in a breach of, the terms, conditions or provisions of, or constitute a default under, the Charter or the By-Laws of the Company, any law or regulation applicable to the Company, any order or decree of any court or public authority having jurisdiction over the Company, or any mortgage, indenture, contract, agreement or undertaking to which the Company is a party or by which it is bound; and
(viii) no taxes are payable upon or in respect of the execution of this Agreement or the issuance of the shares of any series of Preferred Shares.
(b) The Auction Agent represents and warrants to the Company that the Auction Agent is duly organized and is validly existing as a banking corporation in good standing under the laws of the State of New York and has the corporate power to enter into and perform its obligations under this Agreement.
6. The Auction Agent.
6.1 Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Company hereunder and owes no fiduciary duties to any Person except as provided by this Agreement.
(b) The Auction Agent undertakes to perform such duties and only such duties as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction Agent shall not be liable for any action taken, suffered or omitted or for any error of judgment made by it in the performance of its duties under this Agreement. The Auction Agent shall not be liable for any error of judgment made in good faith unless the Auction Agent shall have been negligent in ascertaining (or failing to ascertain) the pertinent facts.
6.2 Rights of the Auction Agent.
(a) The Auction Agent may rely and shall be protected in acting or refraining from acting upon any communication authorized hereby and upon any written instruction, notice, request, direction, consent, report, certificate, share certificate or other instrument, paper or document reasonably believed by it to be genuine. The Auction Agent shall not be liable for acting upon any telephone communication authorized hereby which the Auction Agent believes in good faith to have been given by the Company or by a Broker-Dealer. The Auction Agent may record telephone communications with the Company or with the Broker-Dealers or both.
(b) The Auction Agent may consult with counsel of its choice, and the written advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its own funds or otherwise incur or become exposed to financial liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights hereunder either directly or by or through agents or attorneys.
6.3 Auction Agent's Disclaimer.
The Auction Agent makes no representation as to the validity or adequacy of this Agreement, the Broker-Dealer Agreements or the Preferred Shares.
6.4 Compensation, Expenses and Indemnification.
(a) The Company shall pay the Auction Agent from time to time reasonable compensation for all services rendered by it under this Agreement and the Broker-Dealer Agreements.
(b) The Company shall reimburse the Auction Agent upon its request for all reasonable expenses, disbursements and advances incurred or made by the Auction Agent in accordance with any provision of this Agreement and the Broker-Dealer Agreements (including the reasonable compensation, expenses and disbursements of its agents and counsel), except any expense, disbursement and advances attributable to its negligence or bad faith.
(c) The Company shall indemnify the Auction Agent for, and hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with its agency under this Agreement and the Broker-Dealer Agreements, including the costs and expenses of defending itself against any claim or liability in connection with its exercise or performance of any of its duties hereunder and thereunder, except such as may result from its negligence or bad faith.
7. Miscellaneous.
7.1 Term of Agreement.
(a) The term of this Agreement is unlimited unless it shall be terminated as provided in this Section 7.l. The Company may terminate this Agreement at any time by so notifying the Auction Agent, provided that if any Preferred Shares remain outstanding the Company has entered into an agreement in substantially the form of this Agreement with a successor auction agent. The Auction Agent may terminate this Agreement upon prior notice to the Company on the date specified in such notice, which shall be no earlier than 60 days after the delivery of such notice. If the Auction Agent resigns while any shares of Preferred Shares remain outstanding, the Company shall use its best efforts to enter into an agreement with a successor auction agent containing substantially the same terms and conditions as this Agreement.
(b) Except as otherwise provided in this Section 7.1(b),
the respective rights and duties of the Company and the Auction Agent under
this Agreement shall cease upon termination of this Agreement. The
Company's representations, warranties, covenants and obligations to the
Auction Agent under Sections 5 and 6.4 hereof shall survive the termination
hereof. Upon termination of this Agreement, the Auction Agent shall
(i) resign as Auction Agent under the Broker-Dealer Agreements, (ii) at the
Company's request, promptly deliver to the Company copies of all books and
records maintained by it in connection with its duties hereunder, and
(iii) at the request of the Company, promptly transfer to the Company or
any successor auction agent any funds deposited by the Company with the
Auction Agent (whether in its capacity as Auction Agent or Paying Agent)
pursuant to this Agreement which have not previously been distributed by
the Auction Agent in accordance with this Agreement.
7.2 Communications.
Except for (i) communications authorized to be made by
telephone pursuant to this Agreement or the Auction Procedures and
(ii) communications in connection with Auctions (other than those expressly
required to be in writing), all notices, requests and other communications
to any party hereunder shall be in writing (including telecopy or similar
writing) and shall be given to such party addressed to it at its address,
or telecopy number set forth below:
If to the Company,
addressed: The BlackRock Investment Quality
Municipal Trust Inc.
345 Park Avenue, 31st Floor
New York, NY 10154
Attention: Treasurer
Telephone No.: (212) 935-2626
Telecopier No.: (212) 935-1370
If to the Auction Agent,
addressed: Bankers Trust Company
4 Albany Street
New York, NY 10006
Attention: Auction Rate Securities
Telephone No.: (212) 250-6850
Telecopier No.: (212) 250-6215
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or such other address or telecopy number as such party may hereafter specify for such purpose by notice to the other party. Each such notice, request or communication shall be effective when delivered at the address specified herein. Communications shall be given on behalf of the Company by a Company Officer and on behalf of the Auction Agent by an Authorized Officer.
7.3 Entire Agreement.
This Agreement contains the entire agreement between the parties relating to the subject matter hereof, and there are no other representations, endorsements, promises, agreements or understandings, oral, written or inferred between the parties relating to the subject matter hereof except for agreements relating to the compensation of the Auction Agent.
7.4 Benefits.
Nothing herein, express or implied, shall give to any Person, other than the Company, the Auction Agent and their respective successors and assigns, any benefit of any legal or equitable right, remedy or claim hereunder.
7.5 Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be modified, amended, rescinded, cancelled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged. The Company shall notify the Auction Agent of any change in the Articles Supplementary prior to the effective date of any such change.
(b) Failure of either party hereto to exercise any right or remedy hereunder in the event of a breach hereof by the other party shall not constitute a waiver of any such right or remedy with respect to any subsequent breach.
7.6 Successor and Assigns.
This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the respective successors and permitted assigns of each of the Company and the Auction Agent. This Agreement may not be assigned by either party hereto absent the prior written consent of the other party, which consent shall not be unreasonably withheld.
7.7 Severability.
If any clause, provision or section hereof shall be ruled invalid or unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such clause, provision or section shall not affect any of the remaining clauses, provisions or sections hereof.
7.8 Execution in Counterparts.
This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
7.9 Governing Law.
This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in said state.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
THE BLACKROCK INVESTMENT
QUALITY MUNICIPAL TRUST INC.
By: __________________________
Ralph L. Schlosstein,
President
BANKERS TRUST COMPANY
By: __________________________
Annex A
BROKER-DEALER AGREEMENT
between
BANKERS TRUST COMPANY
and
Dated as of April 1, 1993
Relating to
AUCTION RATE MUNICIPAL PREFERRED STOCK
(the "Preferred Shares")
Series T7 and Series T28
of
THE BLACKROCK INVESTMENT QUALITY MUNICIPAL TRUST INC.
BROKER-DEALER AGREEMENT dated as of April 1, 1993, between Bankers Trust Company, a New York banking corporation (the "Auction Agent") (not in its individual capacity but solely as agent of The BlackRock Investment Quality Municipal Trust Inc., a Maryland corporation (the "Company"), pursuant to authority granted to it in the Auction Agent Agreement dated as of April 1, 1993, between the Company and the Auction Agent (the "Auction Agent Agreement")) and ______________ (together with its successors and assigns hereinafter referred to as "BD").
The Company has duly authorized and issued 1,300 shares of Auction Rate Municipal Preferred Stock, Series T7, with a par value of $.01 per share and a liquidation preference of $50,000 per share plus an amount equal to accumulated but unpaid dividends (whether or not earned or declared) plus the premium, if any, resulting from the designation of a Premium Call Period ("Series T7 Preferred Shares"), and 1,300 shares of Auction Rate Municipal Preferred Stock, Series T28, with a par value of $.01 per share and a liquidation preference of $50,000 per share plus an amount equal to accumulated but unpaid dividends (whether or not earned or declared) plus the premium, if any, resulting from the designation of a Premium Call Period ("Series T28 Preferred Shares"), each pursuant to the Company's Articles Supplementary (as defined below). The Series T7 Preferred Shares and the Series T28 Preferred Shares are sometimes herein together referred to as the "Preferred Shares".
The Company's Articles Supplementary provide that the dividend
rate on the Series T7 Preferred Shares and the Series T28 Preferred Shares
for each Dividend Period therefor after the Initial Dividend Period shall
be the Applicable Rate therefor, which in each case, in general, shall be
the rate per annum that a commercial bank, trust company or other financial
institution appointed by the Company advises results from implementation of
the Auction Procedures (as defined below). The Board of Directors of the
Company has adopted a resolution appointing Bankers Trust Company as
Auction Agent for purposes of the Auction Procedures, and pursuant to
Section 2.5(d) of the Auction Agent Agreement, the Company has authorized
and directed the Auction Agent to execute and deliver this Agreement.
The Auction Procedures require the participation of one or more Broker-Dealers.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the Auction Agent and BD agree as follows:
1. Definitions and Rules of Construction.
1.1 Terms Defined by Reference to the Articles Supplementary. Capitalized terms not defined herein shall have the respective meanings specified in the Articles Supplementary of the Company.
1.2 Terms Defined Herein. As used herein and in the Settlement Procedures (as defined below), the following terms shall have the following meanings, unless the context otherwise requires:
(a) "Articles Supplementary" shall mean the Articles Supplementary of the Company, establishing the powers, preferences and rights of the Series T7 Preferred Shares and the Series T28 Preferred Shares filed on March __, 1993 in the office of the State Department of Assessments and Taxation of the State of Maryland.
(b) "Auction" shall have the meaning specified in
Section 3.1 hereof.
(c) "Auction Procedures" shall mean the Auction Procedures that are set forth in Paragraph 11 of the Articles Supplementary.
(d) "Authorized Officer" shall mean each Senior Vice President, Vice President, Assistant Vice President, Trust Officer, Assistant Secretary and Assistant Treasurer of the Auction Agent assigned to its Corporate Trust and Agency Group and every other officer or employee of the Auction Agent designated as an "Authorized Officer" for purposes of this Agreement in a communication to BD.
(e) "BD Officer" shall mean each officer or employee of BD designated as a "BD Officer" for purposes of this Agreement in a communication to the Auction Agent.
(f) "Broker-Dealer Agreement" shall mean this Agreement and any substantially similar agreement between the Auction Agent and a Broker-Dealer.
(g) "Settlement Procedures" shall mean the Settlement Procedures attached hereto as Exhibit A.
1.3 Rules of Construction. Unless the context or use indicates another or different meaning or intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural number and vice versa.
(b) The captions and headings herein are solely for convenience of reference and shall not constitute a part of this Agreement nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York City time.
2. Notification of Dividend Period and Advance Notice of Allocation of Taxable Income.
(a) The provisions contained in paragraph 2 of the Articles Supplementary concerning the notification of a Special Dividend Period will be followed by the Auction Agent and BD and the provisions contained therein are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were fully set forth herein.
(b) Whenever the Company intends to include any net capital gains or other taxable income in any dividend on Preferred Shares, the Company will notify the Auction Agent of the amount to be so included at least five Business Days prior to the Auction Date on which the Applicable Rate for such dividend is to be established. Whenever the Auction Agent receives such notice from the Company, it will in turn notify BD, who, on or prior to such Auction Date, will notify its Beneficial Owners and Potential Beneficial Owners believed to be interested in submitting an Order in the Auction to be held on such Auction Date.
3. The Auction.
3.1 Purpose; Incorporation by Reference of Auction Procedures and Settlement Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures will be followed by the Auction Agent for the purpose of determining the Applicable Rate for the Series T7 Preferred Shares or the Series T28 Preferred Shares, as the case may be, for the next Dividend Period therefor. Each periodic operation of such procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures and the Settlement Procedures are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were fully set forth herein.
(c) BD agrees to act as, and assumes the obligations of and limitations and restrictions placed upon, a Broker-Dealer under this Agreement. BD understands that other Persons meeting the requirements specified in the definition of "Broker-Dealer" contained in Paragraph 1 of the Articles Supplementary may execute a Broker-Dealer Agreement.
(d) BD and other Broker-Dealers may participate in Auctions for their own accounts. However, the Company may by notice to BD and all other Broker-Dealers prohibit all Broker-Dealers from submitting Bids in Auctions for their own accounts, provided that Broker-Dealers may continue to submit Hold Orders and Sell Orders.
3.2 Preparation for Each Auction.
(a) Not later than 9:30 A.M. on each Auction Date for both series of Preferred Shares, the Auction Agent shall advise BD by telephone of the Maximum Applicable Rate in effect on such Auction Date as determined from the higher of the 30-day "AA" Composite Commercial Paper Rate and the Taxable Equivalent of the Short-Term Municipal Bond Rate (except in the case of a Special Dividend Period in which case the Maximum Applicable Rate shall be determined from the higher of the Special Dividend Period Reference Rate and the Taxable Equivalent of the Short-Term Municipal Bond Rate.)
(b) In the event that the Auction Date for any Auction shall be changed after the Auction Agent has given the notice referred to in clause (vii) of paragraph (a) of the Settlement Procedures, the Auction Agent, by such means as the Auction Agent deems practicable, shall give notice of such change to BD not later than the earlier of 9:15 A.M. on the new Auction Date or 9:15 A.M. on the old Auction Date. Thereafter, BD shall promptly notify customers of BD that BD believes are Beneficial Owners of Series T7 Preferred Shares or Series T28 Preferred Shares, as the case may be, of such change in the Auction Date.
(c) The Auction Agent from time to time may request BD to provide it with a list of the respective customers BD believes are Beneficial Owners of shares of Series T7 Preferred Shares or Series T28 Preferred Shares. BD shall comply with any such request, and the Auction Agent shall keep confidential any such information, including information received as to the identity of Bidders in any Auction, and shall not disclose any such information so provided to any Person other than the Company; and such information shall not be used by the Auction Agent or its officers, employees, agents or representatives for any purpose other than such purposes as are described herein. The Auction Agent shall transmit any list of customers BD believes are Beneficial Owners of Series T7 Preferred Shares or Series T28 Preferred Shares and information related thereto only to its officers, employees, agents or representatives in the Corporate Trust and Agency Group who need to know such information for the purposes of acting in accordance with this Agreement and shall prevent the transmission of such information to others and shall cause its officers, employees, agents and representatives to abide by the foregoing confidentiality restrictions; provided, however, that the Auction Agent shall have no responsibility or liability for the actions of any of its officers, employees, agents or representatives after they have left the employ of the Auction Agent.
3.3 Auction Schedule; Method of Submission of Orders.
(a) The Company and the Auction Agent shall conduct Auctions for both series of Preferred Shares in accordance with the schedule set forth below. Such schedule may be changed at any time by the Auction Agent with the consent of the Company, which consent shall not be unreasonably withheld. The Auction Agent shall give notice of any such change to BD. Such notice shall be received prior to the first Auction Date on which any such change shall be effective.
Time Event
---- -----
By 9:30 A.M. Auction Agent advises the Company and
Broker-Dealers of the Maximum Applicable Rate
as determined from the higher of the 30-day
"AA" Composite Commercial Paper Rate and the
Taxable Equivalent of the Short-Term
Municipal Bond Rate (except in the case of a
Special Dividend Period in which case the
Maximum Applicable Rate shall be the higher
of the Special Dividend Period Reference Rate
and the Taxable Equivalent of the Short-Term
Municipal Bond Rate) as set forth in Section
3.2(a) hereof.
9:30 A.M. - 1:00 P.M. Auction Agent assembles information
communicated to it by Broker-Dealers as
provided in Paragraph 11(c)(i) of the
Articles Supplementary. Submission deadline
is 1:00 P.M.
Not earlier than 1:00 P.M. Auction Agent makes determinations pursuant
to Paragraph 11(d)(i) of the Articles
Supplementary.
By approximately 3:00 P.M. Auction Agent advises Company of results of
Auction as provided in Paragraph 11(d)(ii) of
the Articles Supplementary.
Submitted Bids and Submitted Sell Orders are
accepted and rejected in whole or in part and
shares of Preferred Shares are allocated as
provided in Paragraph 11(e) of the Articles
Supplementary.
Auction Agent gives notice of Auction results
as set forth in Section 3.4(a) hereof.
|
(b) BD agrees to maintain a list of Potential Beneficial Owners and to contact the Potential Beneficial Owners on such list on or prior to each Auction Date for the purposes set forth in Paragraph 11 of the Articles Supplementary.
(c) BD shall submit Orders to the Auction Agent in writing in substantially the form attached hereto as Exhibit B. BD shall submit separate Orders to the Auction Agent for each Potential Beneficial Owner or Beneficial Owner on whose behalf BD is submitting an Order and shall not net or aggregate the Orders of Potential Beneficial Owners or Beneficial Owners on whose behalf BD is submitting Orders.
(d) BD shall deliver to the Auction Agent (i) a written notice, substantially in the form attached hereto as Exhibit C, of transfers of Series T7 Preferred Shares or Series T28 Preferred Shares made through BD by a Beneficial Owner to another Person other than pursuant to an Auction, and (ii) a written notice, substantially in the form attached hereto as Exhibit D, of the failure of any Series T7 Preferred Shares or Series T28 Preferred Shares to be transferred to or by any Person that purchased or sold Series T7 Preferred Shares or Series T28 Preferred Shares or through BD pursuant to an Auction. The Auction Agent is not required to accept any notice delivered pursuant to the terms of the foregoing sentence with respect to an Auction unless it is received by the Auction Agent by 3:00 P.M. on the Business Day next preceding the applicable Auction Date.
3.4 Notice of Auction Results.
(a) On each Auction Date, the Auction Agent shall notify BD by telephone as set forth in paragraph (a) of the Settlement Procedures. On the Business Day next succeeding such Auction Date, the Auction Agent shall notify BD in writing of the disposition of all Orders submitted by BD in the Auction held on such Auction Date.
(b) BD shall notify each Beneficial Owner, Potential Beneficial Owner, Existing Holder or Potential Holder on whose behalf BD has submitted an Order as set forth in paragraph (b) of the Settlement Procedures and take such other action as is required of BD pursuant to the Settlement Procedures.
If any Existing Holder selling Preferred Shares in an
Auction fails to deliver such shares, the BD of any Person that was to have
purchased Series T7 Preferred Shares or Series T28 Preferred Shares in such
Auction may deliver to such Person a number of whole shares of such Series
T7 Preferred Shares or Series T28 Preferred Shares, as the case may be,
that is less than the number of shares that otherwise was to be purchased
by such Person. In such event, the number of such Series T7 Preferred
Shares or Series T28 Preferred Shares to be so delivered shall be
determined by such BD. Delivery of such lesser number of shares shall
constitute good delivery. Upon the occurrence of any such failure to
deliver shares, such BD shall deliver to the Auction Agent the notice
required by Section 3.3(e)(ii) hereof. Notwithstanding the foregoing terms
of this Section 3.4(b), any delivery or non-delivery of Series T7 Preferred
Shares or Series T28 Preferred Shares which represents any departure from
the results of an Auction, as determined by the Auction Agent, shall be of
no effect unless and until the Auction Agent shall have been notified of
such delivery or non-delivery in accordance with the terms of
Section 3.3(e)(ii) hereof. The Auction Agent shall have no duty or
liability with respect to enforcement of this Section 3.4(b).
3.5 Service Charge to Be Paid to BD. On the Business Day next
succeeding each Auction Date for each series of Preferred Shares, the
Auction Agent shall pay to BD from moneys received from the Company an
amount equal to, (a) in the case of any Auction Date immediately preceding
any Dividend Period of 28 days or less, the product of (i) a fraction the
numerator of which is the number of days in such Dividend Period
(calculated by counting the first day of such Dividend Period but excluding
the last day thereof) and the denominator of which is 365, times
(ii) 1/4 of 1%, times (iii) $50,000, times (iv) the sum of (A) the
aggregate number of shares of such series of Preferred Shares placed by BD
in the applicable Auction that were (x) the subject of a Submitted Bid of a
Beneficial Owner submitted by BD and continued to be held as a result of
such submission and (y) the subject of a Submitted Bid of a Potential
Beneficial Owner submitted by BD and were purchased as a result of such
submission plus (B) the aggregate number of shares of such series of
Preferred Shares subject to valid Hold Orders (determined in accordance
with Paragraph 11 of the Articles Supplementary) submitted to the Auction
Agent by BD plus (C) the number of shares of such series of Preferred
Shares deemed to be subject to Hold Orders by Existing Holders pursuant to
Paragraph 11 of the Articles Supplementary that were acquired by such
Existing Holders through BD and (b) in the case of any Auction Date
immediately preceding any Dividend Period of 35 days or more, that amount
as mutually agreed on by the Company and BD, based on a selling concession
that would be applicable to an underwriting of fixed or variable rate
preferred shares with a similar final maturity or variable rate dividend
period, respectively, at the commencement of the Dividend Period with
respect to such Auction. For the purposes of calculating any such fee,
Preferred Shares will be placed by a Broker-Dealer if such shares were
(i) the subject of Hold Orders deemed to have been made by Existing Holders
that were acquired by such Existing Holders through such Broker-Dealer or
(ii) the subject of the following Orders submitted by such Broker-Dealer:
(A) a Submitted Bid of an Existing Holder that resulted in such Existing
Holder continuing to hold such shares as a result of the Auction, (B) a
Submitted Bid of a Potential Holder that resulted in such Potential Holder
purchasing such shares as a result of the Auction or (C) a Submitted Hold
Order.
For purposes of subclause (iv) (C) of the foregoing sentence, if any Existing Holder who acquired Series T7 Preferred Shares or Series T28 Preferred Shares through BD transfers those shares to another Person other than pursuant to an Auction, then the Broker-Dealer for the shares so transferred shall continue to be BD, provided, however, that if the transfer was effected by, or if the transferee is, a Broker-Dealer other than BD, then such Broker-Dealer shall be the Broker-Dealer for such shares.
3.6 Settlement.
(a) If any Beneficial Owner with respect to whom BD has submitted a Bid or Sell Order for Series T7 Preferred Shares or Series T28 Preferred Shares that was accepted in whole or in part fails to instruct its Agent Member to deliver the Preferred Shares subject to such Bid or Sell Order against payment therefor, BD shall instruct such Agent Member to deliver such Preferred Shares against payment therefor and BD may deliver to the Potential Holder or Potential Beneficial Owner with respect to whom BD submitted a Bid for Preferred Shares of such series that was accepted in whole or in part a number of Preferred Shares of such series that is less than the number of Preferred Shares of such series specified in such Bid to be purchased by such Potential Holder or Potential Beneficial Owner. Notwithstanding the foregoing terms of this Section, any delivery or non-delivery of Preferred Shares of either series which represents any departure from the results of an Auction for such series, as determined by the Auction Agent, shall be of no effect unless and until the Auction Agent shall have been notified of such delivery or non-delivery in accordance with the terms of Section 3.3(d) hereof. The Auction Agent shall have no duty or liability with respect to enforcement of this Section 3.6.
(b) Neither the Auction Agent nor the Company shall have any responsibility or liability with respect to the failure of an Existing Holder, a Potential Holder, a Beneficial Owner, a Potential Beneficial Owner or its respective Agent Member to deliver either series of Preferred Shares or to pay for Series T7 Preferred Shares or Series T28 Preferred Shares sold or purchased pursuant to the Auction Procedures or otherwise.
4. The Auction Agent.
4.1 Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Company hereunder and owes no fiduciary duties to any other Person by reason of this Agreement.
(b) The Auction Agent undertakes to perform such duties and only such duties as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction Agent shall not be liable for any action taken, suffered, or omitted or for any error of judgment made by it in the performance of its duties under this Agreement. The Auction Agent shall not be liable for any error of judgment made in good faith unless the Auction Agent shall have been negligent in ascertaining (or failing to ascertain) the pertinent facts.
4.2 Rights of the Auction Agent.
(a) The Auction Agent may rely and shall be protected in acting or refraining from acting upon any communication authorized by this Agreement and upon any written instruction, notice, request, direction, consent, report, certificate, share certificate or other instrument, paper or document believed by it to be genuine. The Auction Agent shall not be liable for acting upon any telephone communication authorized by this Agreement which the Auction Agent believes in good faith to have been given by the Company or by BD. The Auction Agent may record telephone communications with BD.
(b) The Auction Agent may consult with counsel of its own choice, and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its own funds or otherwise incur or become exposed to financial liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights hereunder either directly or by or through agents or attorneys.
4.3 Auction Agent's Disclaimer. The Auction Agent makes no representation as to the validity or adequacy of this Agreement or the Series T7 Preferred Shares or the Series T28 Preferred Shares.
5. Miscellaneous.
5.1 Termination. Any party may terminate this Agreement at any time upon five days' prior notice to the other party.
5.2 Agent Member. At the date hereof, BD is a participant of the Securities Depository.
5.3 Communications. Except for (i) communications authorized to be made by telephone pursuant to this Agreement or the Auction Procedures and (ii) communications in connection with the Auctions (other than those expressly required to be in writing), all notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given to such party, addressed to it, at its address or telecopy number set forth below:
If to BD addressed: ____________________________________
____________________________________
____________________________________
Attention:
Telephone No.:
Telecopier No.:
If to the Auction Agent,
addressed: Bankers Trust Company
4 Albany Street
New York, New York 10006
Attention: Auction Rate Securities
Telephone No.: (212) 250-6850
Telecopier No.: (212) 250-6215
|
or such other address or telecopy number as such party may hereafter specify for such purpose by notice to the other party. Each such notice, request or communication shall be effective when delivered at the address specified herein. Communications shall be given on behalf of BD by a BD Officer and on behalf of the Auction Agent by an Authorized Officer. BD may record telephone communications with the Auction Agent.
5.4 Entire Agreement. This Agreement contains the entire agreement between the parties relating to the subject matter hereof, and there are no other representations, endorsements, promises, agreements or understandings, oral, written or inferred, between the parties relating to the subject matter hereof.
5.5 Benefits. Nothing in this Agreement, express or implied, shall give to any person, other than the Company, the Auction Agent and BD and their respective successors and assigns, any benefit of any legal or equitable right, remedy or claim under this Agreement.
5.6 Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be modified, amended, rescinded, cancelled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged.
(b) Failure of either party to this Agreement to exercise any right or remedy hereunder in the event of a breach of this Agreement by the other party shall not constitute a waiver of any such right or remedy with respect to any subsequent breach.
5.7 Successors and Assigns. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the respective successors and permitted assigns of each of BD and the Auction Agent. This Agreement may not be assigned by either party hereto absent the prior written consent of the other party; provided, however, that this Agreement may be assigned by the Auction Agent to a successor Auction Agent selected by the Company without the consent of BD.
5.8 Severability. If any clause, provision or section of this Agreement shall be ruled invalid or unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such clause, provision or section shall not affect any remaining clause, provision or section hereof.
5.9 Execution in Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in said State.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
BANKERS TRUST COMPANY
By: ___________________________
Title:
By: ___________________________ Title:
EXHIBIT A
SETTLEMENT PROCEDURES
The following summary of Settlement Procedures sets forth the procedures expected to be followed in connection with the settlement of each Auction and will be incorporated by reference in the Auction Agent Agreement and each Broker-Dealer Agreement. Nothing contained in this Appendix C constitutes a representation by the Trust that in each Auction each party referred to herein will actually perform the procedures described to be performed by such party. Capitalized terms used herein shall have the respective meanings specified in the glossary of this Prospectus or Appendix B to the Prospectus, as the case may be.
(a) On each Auction Date, the Auction Agent shall notify by telephone the Broker-Dealers that participated in the Auction held on such Auction Date and submitted an Order on behalf of any Beneficial Owner or Potential Beneficial Owner of:
(i) the Applicable Rate fixed for the next succeeding Dividend Period;
(ii) whether Sufficient Clearing Bids existed for the determination of the Applicable Rate;
(iii) if such Broker-Dealer (a "Seller's Broker-Dealer") submitted a Bid or Sell Order on behalf of a Beneficial Owner, the number of shares, if any, of Preferred Shares to be sold by such Beneficial Owner;
(iv) if such Broker-Dealer (a "Buyer's Broker-Dealer") submitted a Bid on behalf of a Potential Beneficial Owner, the number of shares, if any, of Preferred Shares to be purchased by such Potential Beneficial Owner;
(v) if the aggregate number of Preferred Shares to be sold by all Beneficial Owners on whose behalf such Broker-Dealer submitted a Bid or a Sell Order exceeds the aggregate number of Preferred Shares to be purchased by all Potential Beneficial Owners on whose behalf such Broker-Dealer submitted a Bid, the name or names of one or more Buyer's Broker-Dealers (and the name of the Agent Member, if any, of each such Buyer's Broker-Dealer) acting for one or more purchasers of such excess number of Preferred Shares and the number of such shares to be purchased from one or more Beneficial Owners on whose behalf such Broker- Dealer acted by one or more Potential Beneficial Owners on whose behalf each of such Buyer's Broker-Dealers acted;
(vi) if the aggregate number of Preferred Shares to be purchased by all Potential Beneficial Owners on whose behalf such Broker-Dealer submitted a Bid exceeds the aggregate number of Preferred Shares to be sold by all Beneficial Owners on whose behalf such Broker-Dealer submitted a Bid or a Sell Order, the name or names of one or more Seller's Broker-Dealers (and the name of the Agent Member, if any, of each such Seller's Broker-Dealer) acting for one or more sellers of such excess number of Preferred Shares and the number of such shares to be sold to one or more Potential Beneficial Owners on whose behalf such Broker-Dealer acted by one or more Beneficial Owners on whose behalf each of such Seller's Broker-Dealers acted; and
(vii) the Auction Date of the next succeeding Auction with respect to the Preferred Shares.
(b) On each Auction Date, each Broker-Dealer that submitted an Order on behalf of any Beneficial Owner or Potential Beneficial Owner shall:
(i) in the case of a Broker-Dealer that is a Buyer's Broker-Dealer, instruct each Potential Beneficial Owner on whose behalf such Broker-Dealer submitted a Bid that was accepted, in whole or in part, to instruct such Potential Beneficial Owner's Agent Member to pay to such Broker-Dealer (or its Agent Member) through the Securities Depository the amount necessary to purchase the number of Preferred Shares to be purchased pursuant to such Bid against receipt of such shares and advise such Potential Beneficial Owner of the Applicable Rate for the next succeeding Dividend Period;
(ii) in the case of a Broker-Dealer that is a Seller's Broker-Dealer, instruct each Beneficial Owner on whose behalf such Broker-Dealer submitted a Sell Order that was accepted, in whole or in part, or a Bid that was accepted, in whole or in part, to instruct such Beneficial Owner's Agent Member to deliver to such Broker-Dealer (or its Agent Member) through the Securities Depository the number of Preferred Shares to be sold pursuant to such Order against payment therefor and advise any such Beneficial Owner that will continue to hold Preferred Shares of the Applicable Rate for the next succeeding Dividend Period;
(iii) advise each Beneficial Owner on whose behalf such Broker-Dealer submitted a Hold Order of the Applicable Rate for the next succeeding Dividend Period;
(iv) advise each Beneficial Owner on whose behalf such Broker-Dealer submitted an Order of the Auction Date for the next succeeding Auction; and
(v) advise each Potential Beneficial Owner on whose behalf such Broker-Dealer submitted a Bid that was accepted, in whole or in part, of the Auction Date for the next succeeding Auction.
(c) On the basis of the information provided to it pursuant to
(a) above, each Broker-Dealer that submitted a Bid or a Sell Order on
behalf of a Potential Beneficial Owner or a Beneficial Owner shall, in
such manner and at such time or times as in its sole discretion it may
determine, allocated any funds received by it pursuant to (b)(i) above
and any Preferred Shares received by it pursuant to (b)(ii) above
among the Potential Beneficial Owner, if any, on whose behalf such
Broker-Dealer submitted Bids, the Beneficial Owner, if any, on whose
behalf such Broker-Dealer submitted Bids that were accepted or Sell
Orders, and any Broker-Dealer or Broker-Dealers identified to it by
the Auction Agent pursuant to (a)(v) or (a)(vi) above.
(d) On each Auction Date:
(i) each Potential Beneficial Owner and Beneficial Owner shall instruct its Agent Member as provided in (b)(i) or (ii) above, as the case may be;
(ii) each Seller's Broker-Dealer which is not an Agent Member of the Securities Depository shall instruct its Agent Member to (A) pay through the Securities Depository to the Agent Member of the Beneficial Owner delivering shares to such Broker-Dealer pursuant to (b)(ii) above the amount necessary to purchase such shares against receipt of such shares, and (B) deliver such shares through the Securities Depository to a Buyer's Broker-Dealer (or its Agent Member) identified to such Seller's Broker-Dealer pursuant to (a)(v) above against payment therefor; and
(iii) each Buyer's Broker-Dealer which is not an Agent
Member of the Securities Depository shall instruct its Agent
Member to (A) pay through the Securities Depository to a Seller's
Broker-Dealer (or its Agent Member) identified pursuant to
(a)(vi) above the amount necessary to purchase the shares to be
purchased pursuant to (b)(i) above against receipt of such
shares, and (B) deliver such shares through the Securities
Depository to the Agent Member of the purchaser thereof against
payment therefor.
(e) On the day after the Auction Date:
(i) each Bidder's Agent Member referred to in (d)(i) above shall instruct the Securities Depository to execute the transactions described under (b)(i) or (ii) above, and the Securities Depository shall execute such transactions;
(ii) each Seller's Broker-Dealer or its Agent Member shall instruct the Securities Depository to execute the transactions described in (d)(ii) above, and the Securities Depository shall execute such transactions; and
(iii) each Buyer's Broker-Dealer or its Agent Member shall instruct the Securities Depository to execute the transactions described in (d)(iii) above, and the Securities Depository shall execute such transactions.
(f) If a Beneficial Owner selling Preferred Shares in an Auction fails to deliver such shares (by authorized book-entry), a Broker-Dealer may deliver to the Potential Beneficial Owner on behalf of which it submitted a Bid that was accepted a number of whole Preferred Shares that is less than the number of shares that otherwise was to be purchased by such Potential Beneficial Owner. In such event, the number of Preferred Shares to be so delivered shall be determined solely by such Broker-Dealer. Delivery of such lesser number of shares shall constitute good delivery. Notwithstanding the foregoing terms of this paragraph (f), any delivery or non-delivery of shares which shall represent any departure from the results of an Auction, as determined by the Auction Agent, shall be of no effect unless and until the Auction Agent shall have been notified of such delivery or non-delivery in accordance with the provisions of the Auction Agent Agreement and the Broker-Dealer Agreements.
EXHIBIT B
BANKERS TRUST COMPANY
AUCTION BID FORM
Submit To: Bankers Trust Co. Issue: The BlackRock Investment
4 Albany Street Quality Municipal Trust Inc.
New York, New York 10006 Series: ____________________________
Auction Date: ______________________
Attention: Auction Rate Telephone (212) 250-6215
Securities Facsimile (212) 250-6850
|
The undersigned Broker-Dealer submits the following Order on behalf of the Bidder listed below:
Name of Bidder: ________________________
EXISTING HOLDER
Shares now held _______________ HOLD ____________________
BID at rate of ____________________
SELL ____________________
POTENTIAL HOLDER
# of shares bid ___________________
BID at rate of ___________________
Notes:
(1) If submitting more than one Bid for one Bidder, use additional Auction Bid Forms.
(2) If one or more Bids covering in the aggregate more than the number of outstanding shares held by any Existing Holder are submitted, such Bids shall be considered valid in the order priority set forth in the Auction Procedures on the above issue.
(3) A Hold or Sell may be placed only by an Existing Holder covering a number of shares not greater than the number of shares currently held.
(4) Potential Holders may make only Bids, each of which must specify a rate. If more than one Bid is submitted on behalf of any Potential Holder, each Bid submitted shall be a separate Bid with the rate specified.
(5) Bids may contain no more than three figures to the right of the decimal point (.001 of 1%). Fractions will not be accepted.
NAME OF BROKER-DEALER __________________________
Authorized Signature __________________________
EXHIBIT C
(To be used only for transfers made other than pursuant to an Auction).
TRANSFER FORM
Re: The BlackRock Investment Quality Municipal Trust Inc. Series [T7] [T28] Preferred Shares
(the "Preferred Shares")
We are (check one):
|_| the Beneficial Owner named below;
|_| the Agent Member for such Beneficial Owner.
We hereby notify you that such Beneficial Owner has transferred ____ shares of [Series T7] (Series T28] Preferred Shares to ___________________.
By: __________________________
Printed Name:
Title:
EXHIBIT D
(To be used only for failures to deliver Preferred Shares sold pursuant to an Auction)
NOTICE OF A FAILURE TO DELIVER
Complete either I or II
I. We are a Broker-Dealer for _________________________ (the "Purchaser"), which purchased _______ Series [T7] [T28] Preferred Shares of The BlackRock Investment Quality Municipal Trust Inc. in the Auction held on ____________________ from the seller of such shares.
II. We are a Broker-Dealer for _________________________ (the "Seller"), which sold _______ Series [T7] [T28] Preferred Shares of The BlackRock Investment Quality Municipal Trust Inc. in the Auction held on ____________________ to the Purchaser of such shares.
We hereby notify you that (check one) --
________ the Seller failed to deliver such shares to the
Purchaser
________ the Purchaser failed to make payment to the Seller upon
delivery of such shares
Name: ___________________________
(Name of Broker-Dealer)
By: _____________________________
Printed Name:
|
Title:
BOOK-ENTRY ONLY AUCTION-RATE/MONEY MARKET
PREFERRED/AND REMARKETED PREFERRED SECURITIES
LETTER OF REPRESENTATIONS
[To be Completed by Issuer and Trust Company]
The BlackRock Investment Quality Municipal Trust
[Name of Issuer]
Bankers Trust Company
[Name of Trust Company]
[Date]
Attention: General Counsel's Office
The Depository Trust Company
55 Water Street, 49th Floor
New York, NY 10041-0099
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain matters relating to the above referenced issue (the "Securities"). Trust Company will act as transfer agent, registrar, dividend disbursing agent, and redemption agent with respect to the Securities. The Securities will be issued pursuant to a prospectus, private placement memorandum, or other such document authorizing the issuance of the Securities dated MARCH 26, 1993 (the "Document"). SEE RIDER A is distributing the Securities through The Depository Trust Company ("DTC").
To induce DTC to accept the Securities as eligible for deposit at DTC and to act in accordance with its Rules with respect to the Securities, Issuer and Trust Company make the following representations to DTC:
1. Prior to closing on the Securities on , 199 there shall be deposited with DTC one Security certificate registered in the name of DTC's nominee, Cede & Co. and represents the total number of Securities issued. Said certificate shall remain in DTC's custody provided in the Document. If, however, the aggregate principal amount of the Securities exceeds $150 million, one certificate will be issued with respect to each $150 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount $150 million. Securities certificate shall bear the following legend:
Unless this certificate is presented by an authorized representative of The Depositor Trust Company, a New York corporation, "DTC," to Issuer or its agent for registration of transfer exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC and any payment as made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
2. In the event of any solicitation of consents from or voting by holders of the Securities, Issuer shall establish a record date for such purposes (with no provision for revocation of consents or votes by subsequent holders) and shall, to the extent possible, send notice of such record date to DTC not less than 15 Calendar days in advance of such record date. Notice to DTC pursuant to this Paragraph by telecopy shall be sent to DTC's Reorganization Department at (212) 709-6896 or (212) 709-6897, and receipt of such notices shall be confirmed by telephoning (212) 709-6870. Notices to DTC pursuant to this Paragraph by mail or by any other means shall be sent to DTC Reorganization Department as indicated in Paragraph 4.
3. In the event of a full or partial redemption of the outstanding
Securities, Issuer or Trust Company shall send a notice to DTC specifying
(a) the number of Securities to be redeemed and (b) the date such notice is
to be mailed to Security holders or published (the "Publication Date").
Such notice shall be sent to DTC by a secure means (e.g. legible telecopy,
registered certified mail, overnight delivery) in a timely manner designed
to assure that such notice is in DTC's possession no later than the close
of business on the business day before or, if possible, two business days
before the Publication Date. Issuer or Trust Company shall forward such
notice either in a separate secure transmission for each CUSIP number or in
a secure transmission for multiple CUSIP numbers (if applicable which
includes a manifest or list of each CUSIP number submitted in that
transmission. (The party sending such notice shall have a method to verify
subsequently the use of such means and the timeliness of such notice.) The
Publication Date shall be not less than 30 days nor more than 60 days prior
to the redemption date. Notices to DTC pursuant to this Paragraph by
telecopy shall be sent to DTC's Call Notification Department at (516) 227-
4039 or (516) 227-4190. If the party sending the notice does not receive a
telecopy receipt from DTC confirming that the notice has been received,
such party shall telephone (516) 227-4070. Notices to DTC pursuant to this
Paragraph by mail or by any other means shall be sent to:
Manager: Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719
4. In the event of an invitation to tender the Securities, notice by Issuer or Trust Company Security holders specifying the terms of the tender and the Publication Date of such notice is to be sent to DTC by a secure means in the manner set forth in the preceding Paragraph. Notices to DTC pursuant to this Paragraph and notices of other corporate actions (including mandatory tenders, exchanges, and capital changes) by telecopy shall be sent to DTC's Reorganization Department at (212) 709-1093 or (212) 709-1094, and receipt of such notices shall be confirmed telephoning (212) 709-6884. Notices to DTC pursuant to the above by mail or by any other means shall be sent to:
Manager: Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, NY 10004-2695
5. All notices and payment advices sent to DTC shall contain the CUSIP number of the Securities.
6. The Document indicates that the dividend rate for the Securities may vary from time to time. Absent other existing arrangements with DTC, Issuer or Trust Company shall give DTC notice of each such change in the dividend rate, on the same day that the new rate is determined by telephoning the Supervisor of DTC's Dividend Announcement Section at (212) 709-1270 by telecopy sent to (212) 709-1723. Such verbal or telecopy notice shall be followed by prompt written confirmation sent by a secure means in the manner set forth in Paragraph 3 to:
Manager: Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, NY 10004-2695
7. The Document indicates that each purchaser of Securities must sign a purchaser's letter which contains provisions restricting transfer of the Securities purchased. Issuer and Trust Company acknowledge that as long as Cede & Co is the sole record owner of the Securities, Cede & Co. shall be entitled to all voting rights applicable to the Securities and to receive the full amount of dividends, liquidation proceeds, and redemption proceeds payable with respect to the Security even if the credits of Securities to the DTC accounts of any DTC Participant ("Participant") result from transfers or failures to transfer in violation of the provisions of the purchaser's letter. Issuer and Trust Company acknowledge that DTC shall treat any Participant having Securities credited to its DTC accounts as entitled to the full benefits of ownership of such Securities. Without limiting ____ generality of the preceding sentence. Issuer and Trust Company acknowledge that DTC shall treat any Participant having Securities credited to its DTC accounts as entitled to receive dividend distributions, and voting rights, if any, in respect of Securities and, subject to Paragraphs 11 and 12 to receive certificates evidencing Securities if such certificates are to be issued in accordance with Issuer's certificate of incorporation. The treatment by DTC of the effects of the crediting by it of Securities to the accounts of Participants described in the preceding two sentences shall not affect the rights of Issuer, participants in auctions relating to the Securities, purchasers, sellers or holders of Securities against any Participant. DTC shall not have any responsibility to ascertain whether any transfer of Securities is made in accordance with the provisions of the purchaser's letter.
8. Transactions in the Securities shall be eligible for same-day funds settlement in DTC Same- Day Funds Settlement ("SDFS") system:
A. Dividend payments shall be received by Cede & Co., as nominee of DTC, or its registered assigns in same-day funds on each payment date (or the equivalent in accordance with existing arrangements between Issuer or Trust Company and DTC). Such payments are to be made payable to the order of Cede & Co. Absent any other existing arrangements such payments shall be addressed as follows:
Manager: Cash Receipts Dividend Department The Depository Trust Company 7 Hanover Square, 24th Floor New York, NY 10004-2695
B. Redemption payments shall be made in same-day funds by Trust Company in the manner set forth in the SDFS Paying Agent Operating Procedures, a copy of which previously has been furnished to Trust Company.
9. DTC may direct Issuer or Trust Company to use any other number or address as the number or address to which notices, payments of dividends, or redemption proceeds may be sent.
10. In the event of a redemption necessitating a reduction in the number of Securities outstanding, DTC, in its discretion: (a) may request Issuer or Trust Company to issue and authenticate a new Security certificate; or (b) may make an appropriate notation on the Security certificate indicating the date and amount of such reduction in the number of Security outstanding, except in the case of final redemption, in which case the certificate will be presented to Issuer or Trust Company prior to payment, if required.
11. In the event that Issuer determines that beneficial owners of Securities shall be able to obtain certificated Securities, Issuer or Trust Company shall notify DTC of the availability of certificates. In such event, Issuer or Trust Company shall issue, transfer, and exchange certificate in appropriate amounts, as required by DTC and others.
12. DTC may discontinue providing its services as securities depository with respect to the Securities at any time by giving reasonable notice to Issuer or Trust Company (at which time DTC will confirm with Issuer or Trust Company the aggregate principal amount of Securities outstanding). Under such circumstances, at DTC's request Issuer and Trust Company shall cooperate fully with DTC by taking appropriate action to make available one or more separate certificates evidencing Securities to any DTC Participant having Securities credited to its DTC accounts.
13. Issuer hereby authorizes DTC to provide to Trust Company security position listings of Participants with respect to the Securities from time to time at the request of Trust Company. Issuer also authorizes DTC, in the event of a partial redemption of Securities, to provide Trust Company, upon request, with the names of those Participants whose positions in Securities have been selected for redemption by DTC. DTC will use its best efforts to notify Trust Company of those Participants whose positions in Securities have been selected for redemption by DTC. Issuer authorizes and instructs Trust Company to provide DTC with such signatures, examples of signatures, and authorizations to act as may be deemed necessary or appropriate by DTC to permit DTC to discharge its obligations to its Participants and appropriate regulatory authorities. Such requests for security position listing shall be sent to DTC's Reorganization Department in a manner set forth in Paragraph 4.
This authorization, unless revoked by Issuer, shall continue with respect to the Securities while any Securities are on deposit at DTC, until and unless Trust Company shall no longer be acting. In such event, Issuer shall provide DTC with similar evidence, satisfactory to DTC, of the authorization of any successor thereto so to act..
14. Issuer: (a) understands that DTC has no obligation to, and will
not, communicate to Participants or to any person having an interest in
the Securities any information contained in Security Certificate(s); and
(b) acknowledges that neither DTC's Participants nor any person having an
interest in the Securities shall be deemed to have notice of the provisions
of the Security certificate(s) by virtue of submission of submission of
such certificates to DTC.
15. Nothing herein shall be deemed to require Trust Company to advance funds on behalf of Issuer.
Notes:
A. If there is a Trust Company (as defined in this Letter of Representations), Trust Company as well as Issuer must sign this Letter. If there is no Trust Company, in signing this Letter Issuer itself undertakes to perform all of the obligations set forth herein.
B. Schedule A contains statements that DTC believes accurately describe DTC, the method of effecting book-entry transfers of securities distributed through DTC and certain related matters.
Very truly yours,
By:_______________________________
[Authorized Officer's Signature]
By:____________________________
[Authorized Officer's Signature]
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By: ______________________________
cc: Underwriter
Underwriter's Counsel
SCHEDULE A
SAMPLE OFFERING DOCUMENT LANGUAGE
DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
(Prepared by DTC bracketed material may be applicable only to certain issues.)
1. The Depository Trust Company ("DTC") New York, NY, will act as securities depository for the securities ("Securities"). The Securities will be issued as fully-registered in the name of Cede & Co. (DTC's partnership nominee). One fully-registered Security certificate will be issued for [each issue of] the Securities [each] the aggregate principal amount of such issue, and will deposited with DTC. [If, however, the aggregate principal amount of [any] issue exceeds $150 million, one certificate will be issued with respect to each $150 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount os such issue.
2. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "cleaning agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that it's participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions such as transfers and pledges, in deposited securities through electronic computerized book- entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants") applicable to DTC and its Participants are on file with the Securities and Exchange Commission.
3. Purchasers of Securities under the DTC system must be made by or through Direct Participants, which receive a credit for the Securities of DTC's records. The ownership interest of each actual purchaser of each ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership in the Securities are to be accomplished by entries made on the books of the Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities in the event that use of the book-entry system for the Securities is discontinued.
4. To facilitate subsequent transfers, all Securities deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Securities with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
[6. Redemption notices shall be sent to Cede & Co. If less than all of the Securities within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.]
7. Neither DTC nor Cede & Co. will consent or vote with respect to Securities. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).
8. Principal and interest payments on the Securities will be made to DTC. DTC's practice is to credit Direct Participants' accounts on payable date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on payable date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices as is the case with securities held for the accounts of customers in bearer form or registered in "street name" and will be the responsibility of such Participant and not of DTC the Agent of the Issuer subject to any statutory or regulatory requirements as may be in effect from time to time Payment of principal and interest to DTC and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants.
[9. A Beneficial Owner shall give notice to elect to have its
Securities purchased or tendered through its Participant, to the
[Tender/Remarketing] Agent, and shall effect delivery of such Securities by
causing the Direct Participant to transfer the Participant's interest in
the Securities, on DTC's records, to the [Tender/Remarketing] Agent. The
requirement for physical delivery of Securities in connection with a demand
for purchase or a mandatory purchase will be deemed satisfied when the
ownership rights in the Securities are transferred by Direct Participants
on DTC's records.]
10. DTC may discontinue providing its services as securities depository with respect to the Securities at any time by giving reasonable notice to the Issuer or the Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Security certificates are required to be printed and delivered.
11. The Issuer may decide to discontinue use of the system of book- entry transfers through DTC (or a securities depository). In that event, Security certificates will be printed and delivered.
12. The information in this section concerning DTC and DTC's book- entry system has been obtained from sources that the Issuer believes to be reliable, but the Issuer takes no responsibility for the accuracy thereof.
POWER OF ATTORNEY
That each of the undersigned officers and directors of The BlackRock Investment Quality Municipal Trust Inc., a corporation formed under the laws of the State of Maryland (the "Trust"), do constitute and appoint Ralph L. Schlosstein, Laurence D. Fink and Karen H. Sabath, and each of them, his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute in the name and on behalf of each of the undersigned as such officer or director, a Registration Statement on Form N-2, including any pre-effective amendments and/or any post-effective amendments hereto and any subsequent Registration Statement of the Trust pursuant to Rule 462(b) of the Securities Act of 1933, as amended (the "1933 Act") and any other filings in connection therewith, and to file the same under the 1933 Act or the Investment Company Act of 1940, as amended, or otherwise, with respect to the registration and offering by the Trust of its preferred stock, liquidation preference $25,000 per share, granting to such attorneys and agents and each of them, full power of substitution and revocation in the premises; and ratifying and confirming all that such attorneys and agents or any of them, may do or cause to be done by virtue of these presents.
This Power of Attorney may be executed in multiple counterparts, each of which shall be deemed an original, but which taken together shall constitute one instrument.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of Attorney this 3rd day of January, 2000.
/s/ Dr. Andrew F. Brimmer ------------------------------- Dr. Andrew F. Brimmer Director /s/ Richard E. Cavanagh ------------------------------- Richard E. Cavanagh Director /s/ Kent Dixon ------------------------------- Kent Dixon Director /s/ Frank J. Fabozzi -------------------------------- Frank J. Fabozzi Director /s/James Clayburn LaForce, Jr. -------------------------------- James Clayburn LaForce, Jr. Director /s/ Walter F. Mondale --------------------------------- Walter F. Mondale Director /s/ Ralph L. Schlosstein --------------------------------- Ralph L. Schlosstein Director and President /s/ Laurence D. Fink --------------------------------- Laurence D. Fink Director /s/ Henry Gabbay -------------------------------- Henry Gabbay Treasurer |