SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 |X|
AMENDMENT NO. | |
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BLACKROCK MUNICIPAL INCOME TRUST
(Exact Name of Registrant as Specified In Declaration of Trust)
100 Bellevue Parkway
Wilmington, Delaware 19809
(Address of Principal Executive Offices)
(888) 825-2257
(Registrant's Telephone Number, including Area Code)
Laurence D. Fink, President
BlackRock Municipal Income Trust
345 Park Avenue
New York, New York 10154
(Name and Address of Agent for Service)
Copies to:
Michael K. Hoffman, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
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
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PROPOSED PROPOSED
TITLE OF SECURITIES AMOUNT BEING MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
BEING REGISTERED REGISTERED PRICE PER UNIT OFFERING PRICE(1) REGISTRATION FEE
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Common Shares, $.001 par value............ 100,000 shares $15.00 $1,500,000 $375
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(1) Estimated solely for the purpose of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
BLACKROCK MUNICIPAL INCOME TRUST
CROSS REFERENCE SHEET
PART A - PROSPECTUS
Items in Part A of Form N-2 Location in Prospectus
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Item 1. Outside Front Cover................................. Cover Page
Item 2. Inside Front and Outside Back
Cover Page................................... Cover Page
Item 3. Fee Table and Synopsis.............................. Prospectus Summary; Summary of Trust
Expenses
Item 4. Financial Highlights................................ Not Applicable
Item 5. Plan of Distribution................................ Cover Page; Prospectus Summary; Underwriting
Item 6. Selling Shareholders................................ Not Applicable
Item 7. Use of Proceeds..................................... Use of Proceeds; The Trust's Investments
Item 8. General Description of the
Registrant................................... The Trust; The Trust's Investments; Risks;
Description of Shares; Certain Provisions in the
Declaration of Trust
Item 9. Management.......................................... Management of the Trust; Custodian and Transfer
and Dividend Disbursing Agent
Item 10. Capital Stock, Long-Term Debt,
and Other Securities......................... Description of Shares; Distributions; Dividend
Reinvestment Plan; Certain Provisions in the
Declaration of Trust; Tax Matters
Item 11. Defaults and Arrears on Senior
Securities................................... Not Applicable
Item 12. Legal Proceedings................................... Legal Opinions
Item 13. Table of Contents of the Statement
of Additional Information.................... Table of Contents for the Statement of Additional
Information
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PART B - STATEMENT OF ADDITIONAL INFORMATION
Item 14. Cover Page..................................... Cover Page
Item 15. Table of Contents.............................. Cover Page
Item 16. General Information
and History.................................. Not Applicable
Item 17. Investment Objective
and Policies................................. Investment Objective and Policies; Investment
Policies and Techniques; Portfolio Transactions
Item 18. Management..................................... Management of the Trust; Portfolio Transactions
Item 19. Control Persons and Principal
Holders of Securities........................ Management of the Trust
Item 20. Investment Advisory
and Other Services........................... Management of the Trust; Experts
Item 21. Brokerage Allocation and
Other Practices.............................. Portfolio Transactions
Item 22. Tax Status..................................... Tax Matters; Distributions
Item 23. Financial Statements........................... Report of Independent Auditors
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PART C - OTHER INFORMATION
Items 24-33 have been answered in Part C of this Registration Statement.
[Flag]
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 APRIL 3 , 2001
PROSPECTUS
SHARES
BLACKROCK MUNICIPAL INCOME TRUST
BlackRock Municipal Income Trust (the "Trust") is a newly organized, diversified, closed-end management investment company. The Trust's investment objective is to provide current income exempt from regular Federal income tax.
The Trust will invest primarily in municipal bonds that pay interest that is exempt from regular Federal income tax. The Trust will invest in municipal bonds that, in the opinion of the Trust's investment adviser, are underrated or undervalued. Under normal market conditions, the Trust expects to be fully invested in these tax-exempt municipal bonds. The Trust will invest at least 80% of its total assets in municipal bonds that at the time of investment are investment grade quality. Investment grade quality bonds are bonds rated within the four highest grades (Baa or BBB or better by Moody's Investor Service, Inc., Standard & Poors Ratings Group or Fitch IBCA, Inc.), or bonds that are unrated but judged to be of comparable quality by the Trust's investment adviser. The Trust may invest up to 20% of its total assets in municipal bonds that at the time of investment are rated Ba/BB or B by Moody's, S&P or Fitch or bonds that are unrated but judged to be of comparable quality by the Trust's investment adviser. Bonds of below investment grade quality are regarded as having predominately speculative characteristics with respect to the issuer's capacity to pay interest and repay principal, and are commonly referred to as "junk bonds." The Trust intends to invest primarily in long-term bonds and expects bonds in its portfolio to have a dollar weighted average maturity of 15 years or more under current market conditions. The Trust cannot ensure that it will achieve its investment objective.
Because the Trust is newly organized, its shares have no history of public trading. Shares of closed-end investment companies frequently trade at a discount from their net asset value. This risk may be greater for investors expecting to sell their shares in a relatively short period after completion of the public offering. The Trust's common shares are expected to be listed on the New York Stock Exchange under the symbol " ."
Within approximately one to three months after completion of this offering of common shares, the Trust intends to offer preferred shares representing approximately 38% of the Trust's capital immediately after the issuance of such preferred shares. There can be no assurance, however, that preferred shares representing such percentage of the Trust's capital will actually be issued. The use of preferred shares to leverage the common shares can create special risks.
This prospectus contains information you should know before investing, including information about risks. Please read it before you invest and keep it for future reference.
INVESTING IN THE COMMON SHARES INVOLVES CERTAIN RISKS, WHICH ARE
DESCRIBED IN THE "RISKS" SECTION BEGINNING ON PAGE OF THIS PROSPECTUS.
Per Share Total
Public Offering Price $15.00 $
Sales Load $ $
Proceeds, before expenses, to the Trust $ $
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The underwriters may also purchase up to an additional shares at the public offering price within 45 days from the date of this prospectus to cover over-allotments.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The common shares will be ready for delivery in New York, New York on or about May , 2001.
The date of this prospectus is May , 2001.
TABLE OF CONTENTS
Page
Prospectus Summary....................................................... Summary of Trust Expenses................................................ The Trust................................................................ Use of Proceeds.......................................................... The Trust's Investments.................................................. Preferred Shares and Leverage............................................ Risks.................................................................... Management of the Trust.................................................. Net Asset Value.......................................................... Distributions............................................................ Dividend Reinvestment Plan............................................... Description of Shares.................................................... Certain Provisions in the Agreement and Declaration of Trust............. Closed-End Trust Structure .............................................. Conversion to Open-End Trust............................................. Repurchase of Shares .................................................... Tax Matters ............................................................ Underwriting ............................................................ Custodian and Transfer and Dividend Disbursing Agent..................... Legal Opinions........................................................... Table of Contents for the Statement of Additional Informat...............
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.
PRIVACY PRINCIPLES OF THE TRUST
The Trust is committed to maintaining the privacy of stockholders and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information the Trust collects, how the Trust protects that information and why, in certain cases, the Trust may share information with select other parties.
Generally, the Trust does not receive any non-public personal information relating to its stockholders, although certain non-public personal information of their stockholders may become available to the Trust. The Trust does not disclose any non-public personal information about its stockholders or former stockholders to anyone, except as permitted by law or as is necessary in order to service stockholder accounts (for example, to a transfer agent or third party administrator).
The Trust restricts access to non-public personal information about the stockholders to employees of the Advisor with a legitimate business need for the information. The Trust maintains physical, electronic and procedural safeguards designed to protect the non-public personal information of their stockholders.
PROSPECTUS SUMMARY
This is only a summary. This summary may not contain all of the information that you should consider before investing in our common shares. You should review the more detailed information contained in this prospectus and in the Statement of Additional Information.
THE TRUST.......... BlackRock Municipal Income Trust is a newly organized, closed-end management investment company. Throughout the prospectus, we refer to BlackRock Municipal Income Trust simply as the "Trust" or as "we," "us" or "our." See "The Trust."
THE OFFERING....... The Trust is offering common shares
of beneficial interest at $15.00 per share through a
group of underwriters led by . The common shares of
beneficial interest are called "common shares" in the
rest of this prospectus. You must purchase at least
100 common shares ($1,500). The Trust has given the
underwriters an option to purchase up to additional
common shares to cover orders in excess of common
shares. See "Underwriting."
INVESTMENT
OBJECTIVE.......... The Trust's investment objective is to provide current
income exempt from regular Federal income tax.
INVESTMENT
POLICIES........... The Trust will invest primarily in municipal bonds
that pay interest that is exempt from regular Federal
income tax. The Trust will invest in municipal bonds
that, in the opinion of BlackRock Advisors, Inc.
("BlackRock Advisors" or the "Adviser"), are
underrated or undervalued. Underrated municipal bonds
are those whose ratings do not, in the Adviser's
opinion, reflect their true creditworthiness.
Undervalued municipal bonds are bonds that, in the
Adviser's opinion, are worth more than the value
assigned to them in the marketplace. Under normal
market conditions, the Trust expects to be fully
invested in these tax-exempt municipal bonds. The
Trust will invest at least 80% of its total assets in
municipal bonds that at the time of investment are
investment grade quality. Investment grade quality
bonds are bonds rated within the four highest grades
(Baa or BBB or better by Moody's Investor Service,
Inc. ("Moody's"), Standard & Poors Ratings Group
("S&P") or Fitch IBCA, Inc. ("Fitch")) or bonds that
are unrated but judged to be of comparable quality by
the Adviser. The Trust may invest up to 20% of its
total assets in municipal bonds that at the time of
investment are rated Ba/BB or B by Moody's, S&P or
Fitch or bonds that are unrated but judged to be of
comparable quality by the Adviser. Bonds of below
investment grade quality are regarded as having
predominately speculative characteristics with
respect to the issuer's capacity to pay interest and
repay principal, and are commonly referred to as
"junk bonds." The Trust intends to invest primarily
in long-term bonds and expects bonds in its portfolio
to have a dollar weighted average maturity of 15
years or more under current market conditions. The
Trust cannot ensure that it will achieve its
investment objective. See "The Trust's Investments."
SPECIAL TAX
CONSIDERATIONS..... While exempt-interest dividends are excluded from
gross income for Federal income tax purposes, they
may be subject to the Federal alternative minimum
tax, in certain circumstances. Distributions of any
capital gain or other taxable income will be taxable
to shareholders. The Trust may not be a suitable
investment for investors subject to the Federal
alternative minimum tax or who would become subject
to such tax by investing in the Trust. See "Tax
Matters."
PROPOSED OFFERING
OF PREFERRED SHARES Approximately one to three months after completion of
this offering of the common shares (subject to market
conditions), the Trust intends to offer preferred
shares of beneficial interest ("Preferred Shares")
that will represent approximately 38% of the Trust's
capital after their issuance. The issuance of
Preferred Shares will leverage your shares. Leverage
involves greater risks. The Trust's leveraging
strategy may not be successful. See "Risks--Leverage
Risk." The money the Trust obtains by selling the
Preferred Shares will be invested in long-term
municipal bonds that will generally pay fixed rates
of interest over the life of the bond. The Preferred
Shares will pay adjustable rate dividends based on
shorter-term interest rates. The adjustment period
could be as short as a day or as long as a year or
more. If the rate of return, after the payment of
applicable expenses of the Trust, on the long-term
bonds purchased by the Trust is greater than the
dividends paid by the Trust on the Preferred Shares,
the Trust will generate more income by investing the
proceeds of the Preferred Shares than it will need to
pay dividends on the Preferred Shares. If so, the
excess income will be used to pay higher dividends to
holders of common shares. However, the Trust cannot
assure you that the issuance of Preferred Shares will
result in a higher yield on your common shares. Once
Preferred Shares are issued, the net asset value and
market price of the common shares and the yield to
holders of common shares will be more volatile. See
"Preferred Shares and Leverage" and "Description of
Shares--Preferred Shares."
INVESTMENT ADVISER.. BlackRock Advisors, Inc. will be the Trust's
investment adviser. BlackRock Advisors will receive
an annual fee, payable monthly, in a maximum amount
equal to % of the average weekly value of the Trust's
Managed Assets. "Managed Assets" means the total
assets of the Trust (including any assets
attributable to any Preferred Shares that may be
outstanding) minus the sum of accrued liabilities
(other than debt representing financial leverage).
The liquidation preference of the Preferred Shares is
not a liability. BlackRock Advisors has voluntarily
agreed to waive receipt of a portion of the
investment management fee or other expenses of the
Trust in the amount of % of the average weekly values
of the Trust's Managed Assets for the first five
years of the Trust's operations (through October 31,
2006), and for a declining amount for an additional
five years (through October 31, 2011). See
"Management of the Trust."
DISTRIBUTIONS...... The Trust intends to distribute monthly all or a
portion of its net investment income to holders of
common shares. We expect to declare the initial
monthly dividend on the Trust's common shares
approximately 45 days after completion of this
offering and to pay that initial monthly dividend
approximately 60 to 90 days after completion of this
offering. Unless an election is made to receive
dividends in cash, shareholders will automatically
have all dividends and distributions reinvested in
common shares of the Trust purchased in the open
market through the Trust's Dividend Reinvestment
Plan. See "Dividend Reinvestment Plan."
The Trust will distribute to holders of its common
shares monthly dividends of all or a portion of its
tax- exempt interest income after payment of
dividends on any Preferred Shares of the Trust which
may be outstanding. If the Trust realizes capital
gain or other taxable income, it will be required to
allocate such income between the common shares and
the Preferred Shares in proportion to the total
distributions paid to each class for the year in
which the income is realized. See "Distributions" and
"Preferred Shares and Leverage."
LISTING............ The common shares are expected to be approved for
listing on the New York Stock Exchange, subject to
notice of issuance under the trading or "ticker"
symbol " ." See "Description of Shares--Common
Shares."
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CUSTODIAN AND
TRANSFER AND DIVIDEND
DISBURSING AGENT... State Street Bank and Trust Company will serve as the
Trust's Custodian, Transfer Agent and Dividend
Disbursing Agent. See "Custodian and Transfer and
Dividend Disbursing Agent."
MARKET PRICE
OF SHARES.......... Shares of closed-end investment companies frequently
trade at prices lower than their net asset value.
Shares of closed-end investment companies like the
Trust that invest predominately in investment grade
municipal bonds have during some periods traded at
prices higher than their net asset value and during
other periods traded at prices lower than their net
asset value. The Trust cannot assure you that its
common shares will trade at a price higher than net
asset value. The Trust's net asset value will be
reduced immediately following this offering by the
sales load and the amount of the organization and
offering expenses paid by the Trust. See "Use of
Proceeds." In addition to net asset value, the market
price of the Trust's common shares may be affected by
such factors as dividend levels, which are in turn
affected by expenses; call protection for portfolio
securities; dividend stability; portfolio credit
quality; and liquidity and market supply and demand.
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See "Preferred Shares and Leverage," "Risks," "Description of Shares" and the section of the Statement of Additional Information with the heading "Repurchase of Common Shares." The common shares are designed primarily for long-term investors, and you should not purchase common shares of the Trust if you intend to sell them shortly after purchase.
SPECIAL RISK
CONSIDERATIONS..... No Operating History. The Trust is a newly organized
closed-end investment company with no history of
operations.
Interest Rate Risk. Generally, when market interest
rates fall, bond prices rise, and vice versa.
Interest rate risk is the risk that the municipal
bonds in the Trust's portfolio will decline in value
because of increases in market interest rates. The
prices of longer-term bonds fluctuate more than
prices of shorter-term bonds as interest rates
change. Because the Trust will invest primarily in
long-term bonds, net asset value and market price per
share of the common shares will fluctuate more in
response to changes in market interest rates than if
the Trust invested primarily in shorter-term bonds.
The Trust's use of leverage, as described below, will
tend to increase common share interest rate risk. The
Trust's interest rate risk will be greater if the
Trust invests in residual interest municipal bonds.
Credit Risk. Credit risk is the risk that one or more
municipal bonds in the Trust's portfolio will decline
in price, or fail to pay interest or principal when
due, because the issuer of the bond experiences a
decline in its financial status. The Trust may invest
up to 20% (measured at the time of investment) of its
total assets in municipal bonds that are rated Ba/BB
or B or that are unrated but judged to be of
comparable quality by the Adviser. The prices of
these lower grade bonds are more sensitive to
negative developments, such as a decline in the
issuer's revenues or a general economic downturn,
than are the prices of higher grade securities.
Municipal bonds of below investment grade quality are
predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal
when due, and therefore involve a greater risk of
default.
Economic Sector Risk. The Trust may invest 25% or
more of its total assets in municipal obligations of
issues in the same economic sector, such as hospitals
or life care facilities and transportation related
issues. This may make the Trust more susceptible to
adverse economic, political or regulatory occurrences
affecting a particular economic sector.
Leverage Risk. The use of leverage through the
issuance of Preferred Shares creates an opportunity
for increased common share net income, but also
creates special risks for the holders of common
shares. The Trust's leveraging strategy may not be
successful. We anticipate that Preferred Shares will
pay adjustable rate dividends based on shorter-term
interest rates that would be periodically reset. The
Trust will invest the proceeds of the Preferred
Shares offering in long-term, typically fixed rate,
municipal bonds. So long as the Trust's municipal
bond portfolio provides a higher rate of return, net
of Trust expenses, than the Preferred Share dividend
rate, as reset periodically, the leverage will cause
the holders of common shares to receive a higher
current rate of return than if the Trust were not
leveraged. If, however, long- and/or short-term rates
rise, the Preferred Share dividend rate could exceed
the rate of return on long-term bonds held by the
Trust that were acquired during periods of generally
lower interest rates, reducing return to the holders
of common shares. Leverage creates two major types of
risks for the holders of common shares:
o the likelihood of greater volatility of net
asset value and market price of the common
shares, because changes in the value of the
Trust's bond portfolio, including bonds bought
with the proceeds of the Preferred Shares
offering, are borne entirely by the holders of
common shares; and
o the possibility either that common share
income will fall if the Preferred Share
dividend rate rises, or that common share
income will fluctuate because the Preferred
Share dividend rate varies.
Municipal Bond Market Risk. The amount of public
information available about the municipal bonds 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 would be a stock fund or taxable bond fund. The
secondary market for municipal bonds, particularly
the below investment grade bonds in which the Trust
may invest, 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
bonds at attractive prices.
The ability of municipal issuers to make timely
payments of interest and principal may be diminished
in 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. Issuers of municipal
bonds 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.
Anti-takeover Provisions. The Trust's Agreement and
Declaration of Trust includes provisions that could
limit the ability of other entities or persons to
acquire control of the Trust or convert the Trust to
open-end status. These provisions could deprive the
holders of common shares of opportunities to sell
their common shares at a premium over the then
current market price of the common shares.
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SUMMARY OF TRUST EXPENSES
The following table assumes the issuance of Preferred Shares in an amount equal to 38% of the Trust's capital (after their issuance), and shows Trust expenses as a percentage of net assets attributable to common shares.
Percentage of
Total Net Assets
----------------
Shareholder Transaction Expenses
Sales Load Paid by You (as a percentage
of offering price)...................... %
Dividend Reinvestment Plan Fees.......... None*
Percentage of Net
Assets Attributsble
to Common Shares**
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Annual Expenses
Management Fees......................... %
Fee and Expense Waiver
Years 1-5............................... ( %)***
Net Management Fees....................... %***
Other Expenses............................ %
------
Total Annual Expenses..................... ***
=======
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* You will be charged a $2.50 service charge and pay brokerage charges if you direct the Plan Agent to sell your common shares held in a dividend reinvestment account.
** Amounts shown in the table are expressed as a percentage of assets attributable to common shares. Expressed as a percentage of total net assets, the percentages are as follows: Management Fees %; Fee and Expense Waiver Years 1-5 ( %)***; Net Management Fees %***; Other Expenses %; Total Annual Expenses %***.
*** BlackRock Advisors has voluntarily agreed to waive receipt of a portion of the investment management fee or other expenses of the Trust in the amount of % of average weekly Managed Assets for the first 5 years of the Trust's operations, % in year 6, % in year 7, % in year 8 and % in year 9. Without the waiver, "Total Net Annual Expenses" would be estimated to be % of average daily total net assets and % of average daily net assets attributable to common shares.
The purpose of the table above and the example below is to help you understand all fees and expenses that you, as a holder of common shares, would bear directly or indirectly. The expenses shown in the table under "Other Expenses" and "Total Annual Expenses" are based on estimated amounts for the Trust's first year of operations and assume that the Trust issues common shares. See "Management of the Trust" and "Dividend Reinvestment Plan."
The following example illustrates the expenses (including the sales
load of $ ) that you would pay on a $1,000 investment in common shares,
assuming (1) total net annual expenses of . % of net assets attributable to
common shares in years 1 through 5, increasing to % and %, in year 10 and
(2) a 5% annual return:(1)
1 Year 3 Years 5 Years 10 Years(3)
------ ------- ------- -----------
Expenses Based on a Percentage
of Net Assets Attributable to
Common Shares(2)................. $ $ $ $
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(1) The example should not be considered a representation of future expenses. The example assumes that the estimated Other Expenses set forth in the Annual Expenses table are accurate, that fees and expenses increase as described in note 3 below and that all dividends and distributions are reinvested at net asset value. Actual expenses may be greater or less than those assumed. Moreover, the Trust's actual rate of return may be greater or less than the hypothetical 5% return shown in the example.
(2) Expressed as a percentage of total net assets the amounts would be as follows:
(3) Assumes waiver of fees and expenses of % of average weekly Managed Assets in year 6, % in year 7, % in year 8, % in year 9 and % in year 10. BlackRock Advisors has not agreed to waive any portion of its fees and expenses beyond , 2011.
THE TRUST
The Trust is a recently organized, closed-end, diversified management investment company registered under the Investment Company Act. The Trust was organized as a Delaware business trust on March 30, 2001, pursuant to an Agreement and Declaration of Trust governed by the laws of the State of Delaware. As a newly organized entity, the Trust has no operating history. The Trust's principal office is located at 100 Bellevue Parkway, Wilmington, Delaware, 19809, and its telephone number is (888) 825-2257.
USE OF PROCEEDS
The net proceeds of the offering of common shares will be approximately $ ($ if the underwriters exercise the over-allotment option in full) after payment of the estimated organization and offering costs. The Trust will invest the net proceeds of the offering in accordance with the Trust's investment objective and policies as stated below. We currently anticipate that the Trust will be able to invest substantially all of the net proceeds in municipal bonds that meet the Trust's investment objective and policies within three months after the completion of the offering. Pending such investment, it is anticipated that the proceeds will be invested in short-term, tax-exempt or taxable investment grade securities.
THE TRUST'S INVESTMENTS
INVESTMENT OBJECTIVE AND POLICIES
The Trust's investment objective is to provide current income exempt from regular Federal income tax.
The Trust will invest primarily in municipal bonds that pay interest that is exempt from regular Federal income tax. Under normal market conditions, the Trust expects to be fully invested (at least 95% of its net assets) in such tax-exempt municipal bonds. Under normal market conditions, the Trust will invest at least 80% of its total assets in investment grade quality municipal bonds. Investment grade quality means that such bonds are rated, at the time of investment, within the four highest grades (Baa or BBB or better by Moody's, S&P or Fitch) or are unrated but judged to be of comparable quality by the Adviser. The Trust may invest up to 20% of its total assets in municipal bonds that are rated, at the time of investment, Ba/BB or B by Moody's, S&P or Fitch or that are unrated but judged to be of comparable quality by the Adviser. Bonds of below investment grade quality (Ba/BB or below) are commonly referred to as "junk bonds." Bonds of below investment grade quality are regarded as having predominantly speculative characteristics with respect to the issuer's capacity to pay interest and repay principal. These credit quality policies apply only at the time a security is purchased, and the Trust is not required to dispose of a security if a rating agency downgrades its assessment of the credit characteristics of a particular issue. In determining whether to retain or sell a security that a rating agency has downgraded, the Adviser may consider such factors as the Adviser's assessment of the credit quality of the issuer of the security, the price at which the security could be sold and the rating, if any, assigned to the security by other rating agencies. Appendix A to the Statement of Additional Information contains a general description of Moody's, S&P's and Fitch's ratings of municipal bonds. The Trust may also invest in securities of other open- or closed-end investment companies that invest primarily in municipal bonds of the types in which the Trust may invest directly and in tax-exempt preferred shares that pay dividends exempt from regular Federal income tax. See "--Other Investment Companies," "-Tax-Exempt Preferred Shares" and "--Initial Portfolio Composition."
The Trust will invest in municipal bonds that, in the Adviser's opinion, are underrated or undervalued. Underrated municipal bonds are those whose ratings do not, in the Adviser's opinion, reflect their true creditworthiness. Undervalued municipal bonds are bonds that, in the opinion of the Adviser, are worth more than the value assigned to them in the marketplace. The Adviser may at times believe that bonds associated with a particular municipal market sector (for example, electric utilities), or issued by a particular municipal issuer, are undervalued. The Adviser may purchase those bonds for the Trust's portfolio because they represent a market sector or issuer that the Adviser considers undervalued, even if the value of those particular bonds appears to be consistent with the value of similar bonds. Municipal bonds of particular types (for example, hospital bonds, industrial revenue bonds or bonds issued by a particular municipal issuer) may be undervalued because there is a temporary excess of supply in that market sector, or because of a general decline in the market price of municipal bonds of the market sector for reasons that do not apply to the particular municipal bonds that are considered undervalued. The Trust's investment in underrated or undervalued municipal bonds will be based on the Adviser's belief that their yield is higher than that available on bonds bearing equivalent levels of interest rate risk, credit risk and other forms of risk, and that their prices will ultimately rise, relative to the market, to reflect their true value. Any capital appreciation realized by the Trust will generally result in capital gains distributions subject to Federal capital gains taxes.
The Trust may purchase municipal bonds that are additionally secured by insurance, bank credit agreements or escrow accounts. The credit quality of companies which provide these credit enhancements will affect the value of those securities. Although the insurance feature reduces certain financial risks, the premiums for insurance and the higher market price paid for insured obligations may reduce the Trust's income. Insurance generally will be obtained from insurers with a claims-paying ability rated Aaa by Moody's or AAA by S&P or Fitch. The insurance feature does not guarantee the market value of the insured obligations or the net asset value of the common shares. The Trust may purchase insured bonds and may purchase insurance for bonds in its portfolio.
During temporary defensive periods, including the period during which the net proceeds of this offering are being invested, and in order to keep the Trust's cash fully invested, the Trust may invest up to 100% of its net assets in liquid, short-term investments, including high quality, short-term securities that may be either tax-exempt or taxable. The Trust intends to invest in taxable short-term investments only if suitable tax-exempt short-term investments are not available at reasonable prices and yields. If the Trust invests in taxable short-term investments, a portion of your dividends would be subject to regular Federal income tax.
The Trust cannot change its investment objective without the approval of the holders of a majority of the outstanding common shares and, once the Preferred Shares are issued, the Preferred Shares voting together as a single class, and of the holders of a majority of the outstanding Preferred Shares voting as a separate class. A "majority of the outstanding", means (1) 67% or more of the shares present at a meeting, if the holders of more than 50% of the shares are present or represented by proxy, or (2) more than 50% of the shares, whichever is less. See "Description of Shares--Preferred Shares--Voting Rights" and the Statement of Additional Information under "Description of Shares--Preferred Shares" for additional information with respect to the voting rights of holders of Preferred Shares.
MUNICIPAL BONDS
General. Municipal bonds are either general obligation or revenue bonds and typically are issued to finance public projects, such as roads or public buildings, to pay general operating expenses or to refinance outstanding debt. Municipal bonds may also be issued for private activities, such as housing, medical and educational facility construction or for privately owned industrial development and pollution control projects. General obligation bonds are backed by the full faith and credit, or taxing authority, of the issuer and may be repaid from any revenue source. Revenue bonds may be repaid only from the revenues of a specific facility or source. The Trust also may purchase municipal bonds that represent lease obligations. These carry special risks because the issuer of the bonds may not be obligated to appropriate money annually to make payments under the lease. In order to reduce this risk, the Trust will only purchase municipal bonds representing lease obligations where the Adviser believes the issuer has a strong incentive to continue making appropriations until maturity.
The municipal bonds in which the Trust will invest pay interest that, in the opinion of bond counsel to the issuer, or on the basis of another authority believed by the Adviser to be reliable, is exempt from regular Federal income tax. The Adviser will not conduct its own analysis of the tax status of the interest paid by municipal bonds held by the Trust. The Trust may also invest in municipal bonds issued by United States Territories (such as Puerto Rico or Guam) that are exempt from regular Federal income tax. In addition to the types of municipal bonds described in the prospectus, the Trust may invest in other securities that pay interest that is, or make other distributions that are, exempt from regular Federal income tax and or state and local personal tax, regardless of the technical structure of the issuer of the instrument. The Trust treats all of such tax-exempt securities as municipal bonds.
The yields on municipal bonds are dependent on a variety of factors, including prevailing interest rates and the condition of the general money market and the municipal bond market, the size of a particular offering, the maturity of the obligation and the rating of the issue. The market value of municipal bonds will vary with changes in interest rate levels and as a result of changing evaluations of the ability of bond issuers to meet interest and principal payments.
The Trust will primarily invest in municipal bonds with long-term maturities in order to maintain a weighted average maturity of 15 to 30 years, but the weighted average maturity of obligations held by the Trust may be shortened, depending on market conditions.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES
The Trust may buy and sell municipal bonds on a when-issued basis and may purchase or sell municipal bonds on a "forward commitment" basis. 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 takes place at a later date. This type of transaction may involve an element of risk because no interest accrues on the bonds prior to settlement and, because bonds are subject to market fluctuations, the value of the bonds at the time of delivery may be less or more than cost. A separate account of the Trust will be established with its custodian consisting of cash, or other liquid high grade debt securities having a market value at all times, at least equal to the amount of the commitment.
OTHER INVESTMENT COMPANIES
The Trust may invest up to 10% of its total assets in securities of other open- or closed-end investment companies that invest primarily in municipal bonds of the types in which the Trust may invest directly. The Trust generally expects to invest in other investment companies either during periods when it has large amounts of uninvested cash, such as the period shortly after the Trust receives the proceeds of the offering of its common shares or Preferred Shares, or during periods when there is a shortage of attractive, high-yielding municipal bonds available in the market. As a shareholder in an investment company, the Trust will bear its ratable share of that investment company's expenses, and would remain subject to payment of the Trust's advisory and other fees and expenses with respect to assets so invested. Holders of common shares would therefore be subject to duplicative expenses to the extent the Trust invests in other investment companies. The Adviser will take expenses into account when evaluating the investment merits of an investment in an investment company relative to available municipal bond investments. In addition, the securities of other investment companies may also be leveraged and will therefore be subject to the same leverage risks to which the Trust is subject. As described in this prospectus in the sections entitled "Risks" and "Preferred Shares and Leverage," the net asset value and market value of leveraged shares will be more volatile and the yield to shareholders will tend to fluctuate more than the yield generated by unleveraged shares. Investment companies may have investment policies that differ from those of the Trust. In addition, to the extent the Trust invests in other investment companies, the Trust will be dependent upon the investment and research abilities of persons other than the Adviser. The Trust treats its investments in such open- or closed-end investment companies as investments in municipal bonds.
TAX-EXEMPT PREFERRED SHARES
The Trust may also invest up to 15% of its total assets in preferred interests of other investment funds that pay dividends that are exempt from regular Federal income tax. Such funds in turn invest in municipal bonds and other assets that pay interest or make distributions that are exempt from regular Federal income tax, such as revenue bonds issued by state or local agencies to fund the development of low-income, multi-family housing. Investment in such tax-exempt preferred shares involves many of the same issues as investing in other open- or closed-end investment companies as discussed above. These investments also have additional risks, including liquidity risk, the absence or regulation governing investment practices, capital structure and leverage, affiliated transactions and other matters, and concentration of investments in particular issuers or industries. Revenue bonds issued by state or local agencies to finance the development of low-income, multi-family housing involve special risks in addition to those associated with municipal bonds generally, including that the underlying properties may not generate sufficient income to pay expenses and interest costs. Such bonds are generally non-recourse against the property owner, may be junior to the rights of others with an interest in the properties, may pay interest that changes based in part on the financial performance of the property, may be prepayable without penalty and may be used to finance the construction of housing developments which, until completed and rented, do not generate income to pay interest. Increases in interest rates payable on senior obligations may make it more difficult for issuers to meet payment obligations on subordinated bonds. The Trust will treat investments in tax exempt preferred shares as investments in municipal bonds.
RESIDUAL INTEREST MUNICIPAL BONDS
The Trust may invest in residual interest municipal bonds whose interest rates bear an inverse relationship to the interest rate on another security or the value of an index ("inverse floaters"). An investment in inverse floaters may involve greater risk than an investment in a fixed-rate bond. Because changes in the interest rate on the other security or index inversely affect the residual interest paid on the inverse floater, the value of an inverse floater is generally more volatile than that of a fixed-rate bond. Inverse floaters have interest rate adjustment formulas which generally reduce or, in the extreme, eliminate the interest paid to the Trust when short-term interest rates rise, and increase the interest paid to the Trust when short-term interest rates fall. Inverse floaters have varying degrees of liquidity, and the market for these securities is relatively volatile. These securities tend to underperform the market for fixed-rate bonds in a rising interest rate environment, but tend to outperform the market for fixed-rate bonds when interest rates decline. Shifts in long-term interest rates may, however, alter this tendency. Although volatile, inverse floaters typically offer the potential for yields exceeding the yields available on fixed-rate bonds with comparable credit quality, coupon, call provisions and maturity. These securities usually permit the investor to convert the floating rate to a fixed rate (normally adjusted downward), and this optional conversion feature may provide a partial hedge against rising rates if exercised at an opportune time. Investment in inverse floaters may amplify the effects of the Trust's use of leverage. Should short-term interest rates rise, the combination of the Trust's investment in inverse floaters and the use of leverage likely will adversely affect the Trust's income and distributions to common shareholders. The Trust does not intend initially to invest in inverse floaters, although the Trust may do so at some point in the future. The Trust will not invest more than 10% of its total assets in inverse floaters.
INITIAL PORTFOLIO COMPOSITION
If current market conditions persist, the Trust expects that approximately 80% of its initial portfolio will consist of investment grade quality municipal bonds, rated as such at the time of investment, meaning that such bonds are rated by national rating agencies within the four highest grades or are unrated but judged to be of comparable quality by the Adviser (approximately 60% in Aaa/AAA; 10% in A; and 10% in Baa/BBB). The Adviser generally expects to select obligations that may not be redeemed at the option of the issuer for approximately seven to nine years from the date of purchase by the Trust. Subject to market availability, the Adviser currently expects to invest approximately 20% of the Trust's initial portfolio in municipal bonds that are, at the time of investment, either rated below investment grade or that are unrated but judged to be of comparable quality by the Adviser. See "--Investment Objective and Policies."
PREFERRED SHARES AND LEVERAGE
Approximately one to three months after the completion of the offering of the common shares, subject to market conditions, the Trust intends to offer Preferred Shares representing approximately 38% of the Trust's capital immediately after the issuance of the Preferred Shares. The Preferred Shares will have complete priority upon distribution of assets over the common shares. The issuance of Preferred Shares will leverage the common shares. Leverage involves greater risks. The Trust's leveraging strategy may not be successful. Although the timing and other terms of the offering of Preferred Shares and the terms of the Preferred Shares will be determined by the Trust's board of trustees, the Trust expects to invest the proceeds of the Preferred Shares offering in long-term municipal bonds. The Preferred Shares will pay adjustable rate dividends based on shorter-term interest rates, which would be redetermined periodically by an auction process. The adjustment period for Preferred Share dividends could be as short as one day or as long as a year or more. So long as the Trust's portfolio is invested in securities that provide a higher rate of return than the dividend rate of the Preferred Shares, after taking expenses into consideration, the leverage will cause you to receive a higher current rate of return than if the Trust were not leveraged.
Changes in the value of the Trust's bond portfolio, including bonds bought with the proceeds of the Preferred Shares offering, will be borne entirely by the holders of common shares. If there is a net decrease, or increase, in the value of the Trust's investment portfolio, the leverage will decrease, or increase (as the case may be), the net asset value per common share to a greater extent than if the Trust were not leveraged. During periods in which the Trust is using leverage, the fees paid to BlackRock Advisors for advisory services will be higher than if the Trust did not use leverage because the fees paid will be calculated on the basis of the Trust's total assets, including the proceeds from the issuance of Preferred Shares.
For tax purposes, the Trust is currently required to allocate tax-exempt interest income, net capital gain and other taxable income, if any, between the common shares and Preferred Shares in proportion to total distributions paid to each class for the year in which the net capital gain or other taxable income is realized. If net capital gain or other taxable income is allocated to Preferred Shares, instead of solely tax-exempt income, the Trust will likely have to pay higher total dividends to Preferred Shareholders or make special payments to Preferred Shareholders to compensate them for the increased tax liability. This would reduce the total amount of dividends paid to the holders of common shares, but would increase the portion of the dividend that is tax-exempt. If the increase in dividend payments or the special payments to Preferred Shareholders are not entirely offset by a reduction in the tax liability of, and an increase in the tax-exempt dividends received by, the holders of common shares, the advantage of the Trust's leveraged structure to holders of common shares will be reduced.
Under the Investment Company Act, the Trust is not permitted to issue preferred shares unless immediately after such issuance the value of the Trust's total assets is at least 200% of the liquidation value of the outstanding preferred shares (i.e., the liquidation value may not exceed 50% of the Trust's total assets). In addition, the Trust is not permitted to declare any cash dividend or other distribution on its common shares unless, at the time of such declaration, the value of the Trust's total assets is at least 200% of such liquidation value. If Preferred Shares are issued, the Trust intends, to the extent possible, to purchase or redeem Preferred Shares from time to time to the extent necessary in order to maintain coverage of any Preferred Shares of at least 200%. In addition, as a condition to obtaining ratings on the Preferred Shares, the terms of any Preferred Shares issued are expected to include asset coverage maintenance provisions which will require the redemption of the Preferred Shares in the event of non-compliance by the Trust and may also prohibit dividends and other distributions on the common shares in such circumstances. In order to meet redemption requirements, the Trust may have to liquidate portfolio securities. Such liquidations and redemptions would cause the Trust to incur related transaction costs and could result in capital losses to the Trust. Prohibitions on dividends and other distributions on the common shares could impair the Trust's ability to qualify as a regulated investment company under the Internal Revenue Code of 1986, as amended. If the Trust has Preferred Shares outstanding, two of the Trust's trustees will be elected by the holders of Preferred Shares voting separately as a class. The remaining trustees of the Trust will be elected by holders of common shares and Preferred Shares voting together as a single class. In the event the Trust failed to pay dividends on Preferred Shares for two years, holders of Preferred Shares would be entitled to elect a majority of the trustees of the Trust.
The Trust will be subject to certain restrictions imposed by guidelines of one or more rating agencies that may issue ratings for Preferred Shares issued by the Trust. These guidelines are expected to impose asset coverage or portfolio composition requirements that are more stringent than those imposed on the Trust by the Investment Company Act. It is not anticipated that these covenants or guidelines will impede the Adviser from managing the Trust's portfolio in accordance with the Trust's investment objective and policies.
The Trust may also borrow money as a temporary measure for extraordinary or emergency purposes, including the payment of dividends and the settlement of securities transactions which otherwise might require untimely dispositions of Trust securities.
Assuming that the Preferred Shares will represent approximately 38% of the Trust's capital and pay dividends at an annual average rate of %, the income generated by the Trust's portfolio (net of estimated expenses) must exceed % in order to cover the dividend payments and other expenses specifically related to the Preferred Shares. Of course, these numbers are merely estimates used for illustration. Actual Preferred Share dividend rates will vary frequently and may be significantly higher or lower than the rate estimated above.
The following table is furnished in response to requirements of the Securities and Exchange Commission. It is designed to illustrate the effect of leverage on common share total return, assuming investment portfolio total returns (comprised of income and changes in the value of bonds held in the Trust's portfolio) of -10%, -5%, 0%, 5% and 10%. These assumed investment portfolio returns are hypothetical figures and are not necessarily indicative of the investment portfolio returns experienced or expected to be experienced by the Trust. See "Risks" and "Preferred Shares and Leverage."
Assumed Portfolio Total Return
(Net of Expenses)............ (10)% (5)% 0% 5% 10%
Common Share Total Return... ( )% ( )% ( )% % %
----- ----- ----- ------ ------
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Unless and until Preferred Shares are issued, the common shares will not be leveraged and this section will not apply.
RISKS
The net asset value of the common shares will fluctuate with and be affected by, among other things, interest rate risk, credit risk, reinvestment risk and leverage risk, and an investment in common shares will be subject to market discount risk, inflation risk and municipal bond market risk, each of which is more fully described below.
Newly Organized. The Trust is a newly organized, diversified, closed-end management investment company and has no operating history.
Market Discount Risk. Shares of closed-end management investment companies frequently trade at a discount from their net asset value. Shares of closed-end investment companies like the Trust that invest predominantly in investment grade municipal bonds have during some periods traded at prices higher than their net asset value and during other periods traded at prices lower than their net asset value. The Trust cannot assure you that its common shares will trade at a price higher than net asset value.
Interest Rate Risk. Interest rate risk is the risk that bonds, and the Trust's net assets, will decline in value because of changes in interest rates. Generally, municipal bonds will decrease in value when interest rates rise and increase in value when interest rates decline. This means that the net asset value of the common shares will fluctuate with interest rate changes and the corresponding changes in the value of the Trust's municipal bond holdings. The value of the longer-term bonds in which the Trust generally invests fluctuates more in response to changes in interest rates than does the value of shorter-term bonds. Because the Trust will invest primarily in long-term bonds, the net asset value and market price per share of the common shares will fluctuate more in response to changes in market interest rates than if the Trust invested primarily in shorter-term bonds. The Trust's use of leverage, as described below, will tend to increase common share interest rate risk. The Trust's interest rate risk will be greater if the Trust invests in residual interest municipal bonds.
Credit Risk. Credit risk is the risk that an issuer of a municipal bond will become unable to meet its obligation to make interest and principal payments. In general, lower rated municipal bonds carry a greater degree of risk that the issuer will lose its ability to make interest and principal payments, which could have a negative impact on the Trust's net asset value or dividends. The Trust may invest up to 20% of its total assets in municipal bonds that are rated Ba/BB or B by Moody's, S&P or Fitch or that are unrated but judged to be of comparable quality by the Trust's investment adviser. Bonds rated Ba/BB or B are regarded as having predominately speculative characteristics with respect to the issuer's capacity to pay interest and repay principal, and these bonds are commonly referred to as junk bonds. These securities are subject to a greater risk of default. The prices of these lower grade bonds are more sensitive to negative developments, such as a decline in the issuer's revenues or a general economic downturn, than are the prices of higher grade securities. Lower grade securities tend to be less liquid than investment grade securities. The market values of lower grade securities tend to be more volatile than is the case for investment grade securities.
Municipal Bond Market Risk. Investing in the municipal bond market involves certain risks. The amount of public information available about the municipal bonds 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 would be a stock fund or taxable bond fund. The secondary market for municipal bonds, particularly the below-investment-grade bonds in which the Trust may invest, 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 bonds at attractive prices.
The ability of municipal issuers to make timely payments of interest and principal may be diminished in 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. Issuers of municipal bonds 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 bond portfolio will decline if and when the Trust invests the proceeds from matured, traded, prepaid or called bonds at market interest rates that are below the portfolio's current earnings rate. A decline in income could affect the common shares' market price or their overall returns.
Leverage Risk. Leverage risk is the risk associated with the issuance of the Preferred Shares to leverage the common shares. There is no assurance that the Trust's leveraging strategy will be successful. Once the Preferred Shares are issued, the net asset value and market value of the common shares will be more volatile, and the yield to the holders of common shares will tend to fluctuate with changes in the shorter-term dividend rates on the Preferred Shares. If the dividend rate on the Preferred Shares approaches the net rate of return on the Trust's investment portfolio, the benefit of leverage to the holders of the common shares would be reduced. If the dividend rate on the Preferred Shares exceeds the net rate of return on the Trust's portfolio, the leverage will result in a lower rate of return to the holders of common shares than if the Trust were not leveraged. Because the long-term bonds included in the Trust's portfolio will typically pay fixed rates of interest while the dividend rate on the Preferred Shares will be adjusted periodically, this could occur even when both long-term and short-term municipal rates rise. In addition, the Trust will pay (and the holders of common shares will bear) any costs and expenses relating to the issuance and ongoing maintenance of the Preferred Shares. Accordingly, the Trust cannot assure you that the issuance of Preferred Shares will result in a higher yield or return to the holders of the common shares.
Similarly, any decline in the net asset value of the Trust's investments will be borne entirely by the holders of common shares. Therefore, if the market value of the Trust's portfolio declines, the leverage will result in a greater decrease in net asset value to the holders of common shares than if the Trust were not leveraged. This greater net asset value decrease will also tend to cause a greater decline in the market price for the common shares. The Trust might be in danger of failing to maintain the required 200% asset coverage or of losing its ratings on the Preferred Shares or, in an extreme case, the Trust's current investment income might not be sufficient to meet the dividend requirements on the Preferred Shares. In order to counteract such an event, the Trust might need to liquidate investments in order to fund a redemption of some or all of the Preferred Shares. Liquidation at times of low municipal bond prices may result in capital loss and may reduce returns to the holders of common shares.
While the Trust may from time to time consider reducing leverage in response to actual or anticipated changes in interest rates in an effort to mitigate the increased volatility of current income and net asset value associated with leverage, there can be no assurance that the Trust will actually reduce leverage in the future or that any reduction, if undertaken, will benefit the holders of common shares. Changes in the future direction of interest rates are very difficult to predict accurately. If the Trust were to reduce leverage based on a prediction about future changes to interest rates, and that prediction turns out to be incorrect, the reduction in leverage would likely operate to reduce the income and/or total returns to holders of common shares relative to the circumstance where the Trust had not reduced leverage. The Trust may decide that this risk outweighs the likelihood of achieving the desired reduction to volatility in income and share price if the prediction were to turn out to be correct, and determine not to reduce leverage as described above.
The Trust may invest in the securities of other investment companies. Such securities may also be leveraged and will therefore be subject to the leverage risks described above. This additional leverage may in certain market conditions reduce the net asset value of the Trust's common shares and the returns to the holders of common shares.
Inflation Risk. Inflation risk is the risk that the value of assets or income from investment will be worth less in the future as inflation decreases the value of money. As inflation increases, the real value of the common shares and distributions on those shares can decline. In addition, during any periods of rising inflation, Preferred Share dividend rates would likely increase, which would tend to further reduce returns to the holders of common shares.
Economic Sector and Geographic Risk. The Trust may invest 25% or more of its total assets in municipal obligations of issuers in the same state (or U.S. territory) or in municipal obligations in the same economic sector, including without limitation the following: lease rental obligations of state and local authorities; obligations dependent on annual appropriations by a state's legislature for payment; obligations of state and local housing finance authorities, municipal utilities systems or public housing authorities; obligations of hospitals or life care facilities; or industrial development or pollution control bonds issued for electric utility systems, steel companies, paper companies or other purposes. This may make the Trust more susceptible to adverse economic, political, or regulatory occurrences affecting a particular state or economic sector. For example, health care related issuers are susceptible to Medicare, Medicaid and other third party payor reimbursement policies, and national and state health care legislation. As concentration increases, so does the potential for fluctuation in the net asset value of the Trust's common shares.
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
The board of trustees is responsible for the overall management of the Trust, including supervision of the duties performed by BlackRock Advisors. There are eight trustees of the Trust. Two of the trustees are "interested persons" (as defined in the Investment Company Act). The name and business address of the trustee 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 Advisors, Inc. acts as the Trust's investment manager. BlackRock Advisors is a wholly-owned subsidiary of BlackRock, Inc., which is one of the largest publicly traded investment management firms in the United States with $204 billion of assets under management as of December 31, 2001. BlackRock Advisors manages assets on behalf of more than 3,300 institutions and 200,000 individuals worldwide, including nine of the ten largest companies in the U.S. as determined by Fortune Magazine, through a variety of equity, fixed income, liquidity and alternative investment separate accounts and mutual funds, including the company's flagship fund families, BlackRock Funds and BlackRock Provident Institutional Funds. In addition, the company provides risk management and technology services to a growing number of institutional investors under the BlackRock Solutions name. Clients are served from the company's headquarters in New York City, as well as offices in Wilmington, DE, Edinburgh, Scotland and Tokyo, Japan. BlackRock, Inc. is a member of The PNC Financial Services Group, Inc. ("PNC"), one of the largest diversified financial services organizations in the United States, and is majority-owned by PNC and by BlackRock employees.
Investment Philosophy. BlackRock Advisors' 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.
BlackRock Advisors uses a relative value strategy that evaluates the trade-off between risk and return to seek to achieve the Trust's investment objective of generating high income. This strategy is combined with disciplined risk control techniques and applied in sector, sub-sector and individual security selection decisions. BlackRock Advisors extensive personnel and technology resources are the key drivers of the investment philosophy.
BlackRock Advisors' Municipal Bond Team. BlackRock Advisors uses a team approach to managing municipal portfolios. BlackRock Advisors believes that this approach offers substantial benefits over one that is dependent on the market wisdom or investment expertise of only a few individuals.
BlackRock Advisors' municipal bond team includes four portfolio managers and five credit research analysts. The team is led by Kevin Klingert, a senior portfolio manager and head of municipal bonds at BlackRock Advisors, which he joined in 1991, and a member of BlackRock Advisor's Investment Strategy Group. Mr. Klingert has primary responsibility for managing client portfolios with a special emphasis on municipal bonds. The portfolio management team also includes Craig Kasap, James McGinley and F. Howard Downs, who each serve as Vice President and Portfolio Manager at BlackRock Advisors. Mr. Kasap and Mr. McGinley are also members of BlackRock Advisor's Investment Strategy Group. Prior to joining BlackRock Advisors 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. Prior to joining BlackRock Advisors in 1999, Mr. McGinley was Vice President of Municipal Trading and Manager of the Municipal Strategy Group with Prudential Securities. Prior to joining BlackRock Advisors in 1999, Mr. Downs was a Vice President and 1990 founding member of William E. Simon and Sons, Municipal Securities responsible for institutional sales.
BlackRock Advisors' municipal bond portfolio managers are responsible for 39 municipal bond portfolios, valued at approximately $7.2 billion, plus approximately an additional $2.8 billion in municipal bonds held across portfolios with broader investment mandates. The team is responsible for portfolios with a variety of investment objectives and constraints, including national funds, state-specific funds, and indexed portfolios. Currently, the team manages 13 closed-end municipal funds with over $3.5 billion in assets as of December 31, 2001.
BlackRock Advisors' Investment Process. BlackRock Advisors has in-depth expertise in the fixed income market. BlackRock Advisors applies the same risk-controlled, active sector rotation style to the management process for all of its fixed income portfolios. BlackRock Advisors 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 BlackRock Advisors.
BlackRock Advisors' portfolio management process emphasizes research and analysis of specific sectors and securities, not interest rate speculation. BlackRock Advisors believes that market-timing strategies can be highly volatile and potentially produce inconsistent results. Instead, BlackRock Advisors 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.
In the municipal market, BlackRock Advisors believes one of the most important determinants of value is supply and demand. BlackRock Advisors' ability to monitor investor flows and frequency and seasonality of issuance is helpful in anticipating the supply and demand on sectors. BlackRock Advisors believes that 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.
BlackRock Advisors also believes that over the long-term, intense credit analysis will add incremental value and avoid significant relative performance impairments. The municipal credit team is led by Susan Heide, Ph.D., who has been with BlackRock Advisors since 1993 and is a managing director responsible for municipal credit research. She co-heads the Credit Committee and Credit Research, and is assisted by four municipal research analysts. The group averages over 11 years of experience in municipal credit research.
BlackRock Advisors' approach to credit risk incorporates a combination of sector-based top-down macro-analysis of industry sectors to determine relative weightings with a name-specific (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 name-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. BlackRock Advisors' analytic process focuses on anticipating change in credit trends before market recognition. Credit research is a critical, independent element of BlackRock Advisors' municipal process.
INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an investment management agreement between BlackRock Advisors and the Trust, the Trust has agreed to pay for the investment advisory services and facilities provided by BlackRock Advisors a fee payable monthly in arrears at an annual rate equal to % of the average weekly value of the Trust's Managed Assets (the "management fee"). The Trust will reimburse BlackRock Advisors for all out-of-pocket expenses BlackRock Advisors incurs in connection with performing administrative services for the Trust. In addition, with the approval of the Board of Trustees, a pro rata portion of the salaries, bonuses, health insurance, retirement benefits and similar employment costs for the time spent on Trust operations (other than the provision of services required under the investment management agreement) of all personnel employed by BlackRock Advisors who devote substantial time to Trust operations or the operations of other investment companies advised by the Trust may be reimbursed to BlackRock Advisors. Managed Assets are the total assets of the Trust minus the sum of accrued liabilities (other than indebtedness attributable to leverage). This means that during periods in which the Trust is using leverage, the fee paid to BlackRock Advisors will be higher than if the Trust did not use leverage because the fee is calculated as a percentage of the Trust's Managed Assets, including those purchased with leverage.
In addition to the fee of BlackRock Advisors, the Trust pays all other costs and expenses of its operations, including compensation of its trustees (other than those affiliated with BlackRock Advisors), custodian, transfer and dividend disbursing expenses, legal fees, rating agency fees, expenses of independent auditors, expenses of repurchasing shares, expenses of preparing, printing and distributing shareholder reports, notices, proxy statements and reports to governmental agencies, and taxes, if any.
For the first nine years of the Trust's operation, BlackRock Advisors has undertaken to waive its investment advisory fee payable by the Trust fees and expenses in the amounts, and for the time periods, set forth below:
Percentage Waived
(as a percentage Year
Ending of average
, Managed Assets)
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2001............ %
2002............ %
2003............ %
2004............ %
2005............ %
2006............ %
2007............ %
2008............ %
2009............ %
2010............ %
2011............ %
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* From the commencement of operations.
BlackRock Advisors has not undertaken to waive any portion of the Trust's fees and expenses beyond , 2011 or after termination of the investment management agreement.
NET ASSET VALUE
The net asset value of the 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 will be determined as of the close of the regular trading session on the New York Stock Exchange no less frequently than the last Friday of each week. The Trust calculates net asset value per common share by subtracting the Trust's liabilities (including accrued expenses, dividends payable and any borrowings of the Trust) and the liquidation value of any outstanding shares of preferred stock 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, 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 trustees of the Trust. A substantial portion of the Trust's fixed income investments will be valued utilizing one or more pricing services approved by the Trust's board of trustees. Debt securities having a remaining maturity of 60 days or less when purchased and debt securities originally purchased with maturities in excess of 60 days but which currently have maturities of 60 days or less are valued at cost adjusted for amortization of premiums and accretion of discounts. 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 trustees.
DISTRIBUTIONS
The Trust will distribute to holders of its common shares monthly dividends of all or a portion of its tax-exempt interest income after payment of dividends on any Preferred Shares of the Trust which may be outstanding. It is expected that the initial monthly dividend on shares of the Trust's common shares will be declared approximately 45 days and paid approximately 60 to 90 days after completion of this offering. The Trust expects that all or a portion of any capital gain and other taxable income will be distributed once annually.
Various factors will affect the level of the Trust's income, including the asset mix, the amount of leverage utilized by the Trust and the effects thereof and the Trust's use of hedging. To permit the Trust to maintain a more stable monthly distribution, the Trust may from time-to-time distribute less than the entire amount of tax-exempt interest income earned in a particular period. The undistributed tax-exempt interest income would be available to supplement future distributions. As a result, the distributions paid by the Trust for any particular monthly period may be more or less than the amount of tax-exempt interest income actually earned by the Trust during the period. Undistributed tax-exempt interest income will add to the Trust's net asset value and, correspondingly, distributions from undistributed tax-exempt interest income will deduct from the Trust's net asset value. Shareholders will automatically have all dividends and distributions reinvested in common shares of the Trust issued by the Trust or purchased in the open market in accordance with the Trust's Dividend Reinvestment Plan unless an election is made to receive cash. See "Dividend Reinvestment Plan".
DIVIDEND REINVESTMENT PLAN
Unless you elect to receive cash, all dividend declared for your common shares of the Trust will be automatically reinvested by State Street Bank and Trust Company, agent for shareholders in administering the Trust's Dividend Reinvestment Plan (the "Plan Agent"), in additional shares of the Trust. If you elect not to participate in the Dividend Reinvestment Plan you will receive all dividends in cash paid by check mailed directly to you (or, if the shares are held in street or other nominee name, then to such nominee) by State Street Bank and Trust Company, as dividend disbursing agent. You may elect not to participate in the Dividend Reinvestment Plan and to receive all dividends in cash by sending written instructions to State Street Bank and Trust Company, as dividend disbursing agent, at the address set forth below. Participation in the Dividend Reinvestment Plan is completely voluntary and may be terminated or resumed at any time without penalty by written notice if received by the Plan Agent not less than ten days prior to any dividend record date; otherwise such termination will be effective with respect to any subsequently declared dividend or distribution.
The Plan Agent will open an account for each common shareholder under the Plan in the same name in which such the common shareholder's common shares are registered. Whenever the Trust declares a dividend payable in cash, non-participants in the Plan will receive cash and participants in the Plan will receive the equivalent in common shares. The common shares will be acquired by the Plan Agent for the participants' accounts, depending upon the circumstances described below, either (i) through receipt of additional unissued but authorized common shares from the Trust ("newly issued common shares") or (ii) by purchase of outstanding common shares on the open market ("open-market purchases") on the New York Stock Exchange (the "NYSE"), or elsewhere. If, on the record date for any dividend, the net asset value per common share is equal to or less than the market price per common share, the Plan Agent will invest the dividend amount in newly issued common shares on behalf of the participants. The number of newly issued common shares to be credited to each participant's account will be determined by dividing the dollar amount of the dividend by the net asset value per common share on the date the common shares are issued. If, on the record date for any dividend, the net asset value per common share is greater than the market value, the Plan Agent will invest the dividend amount in common shares acquired on behalf of the participants in open-market purchases. In the event of a market discount on the record date for any dividend, the Plan Agent will have until the last business day before the next date on which the common shares trade on an "ex-dividend" basis or 30 days after the record date for such dividend, whichever is sooner, to invest the dividend amount in common shares acquired in open-market purchases. It is contemplated that the Trust will pay monthly income dividends. Therefore, the period during which open-market purchases can be made will exist only from the record date of each dividend through the date before the next "ex-dividend" date which typically will be approximately ten days. If, before the Plan Agent has completed its open-market purchases, the market price of common share exceeds the net asset value per common share, the average per common share purchase price paid by the Plan Agent may exceed the net asset value of the common shares, resulting in the acquisition of fewer common shares than if the dividend had been paid in newly issued common shares on the dividend record date. Because of the foregoing difficulty with respect to open market purchases, the Plan provides that if the Plan Agent is unable to invest the full dividend amount in open market purchases during the purchase period or if the market discount shifts to a market premium during the purchase period, the Plan Agent may cease making open-market purchases and may invest the uninvested portion of the dividend amount in newly issued common shares at the net asset value per common share at the close of business on the last purchase date.
The Plan Agent maintains all shareholders' accounts in the Dividend Reinvestment Plan and furnishes written confirmation of all transactions in the accounts, including information needed by shareholders for tax records. Common shares in the account of each Dividend Reinvestment Plan participant will be held by the Plan Agent on behalf of the Dividend Reinvestment Plan participant, and each shareholder proxy will include those shares purchased or received pursuant to the Dividend Reinvestment Plan. The Plan Agent will forward all proxy solicitation materials to participants and vote proxies for shares held under the Dividend Reinvestment Plan in accordance with the instructions of the participants.
In the case of shareholders such as banks, brokers or nominees which hold shares for others who are the beneficial owners, the Plan Agent will administer the Dividend Reinvestment Plan on the basis of the number of common shares certified from time to time by the record shareholder's name and held for the account of beneficial owners who are to participate in the Dividend Reinvestment Plan.
There will be no brokerage charges with respect to common shares issued directly by the Trust. However, each participant will pay a pro rata share of brokerage commissions incurred in connection with open-market purchases. The automatic reinvestment of dividends will not relieve participants of any Federal, state or local income tax that may be payable (or required to be withheld) on such dividends. See "Tax Matters."
Experience under the Dividend Reinvestment Plan may indicate that changes are desirable. Accordingly, the Trust reserves the right to amend or terminate the Dividend Reinvestment Plan. There is no direct service charge to participants in the Dividend Reinvestment Plan; however, the Trust reserves the right to amend the Dividend Reinvestment Plan to include a service charge payable by the participants.
All correspondence concerning the Dividend Reinvestment Plan should be directed to the Plan Agent at 225 Franklin Street, Boston, MA 02110.
DESCRIPTION OF SHARES
COMMON SHARES
The Trust is an unincorporated business trust organized under the laws of Delaware pursuant to an Agreement and Declaration of Trust dated as of March 30, 2001. The Trust is authorized to issue an unlimited number of common shares of beneficial interest, par value $.001 per share. Each common share has one vote and, when issued and paid for in accordance with the terms of this offering, will be fully paid and non-assessable. Whenever Preferred Shares are outstanding, the holders of common shares will not be entitled to receive any distributions from the Trust unless all accrued dividends on Preferred Shares have been paid, and unless asset coverage (as defined in the Investment Company Act) with respect to Preferred Shares would be at least 200% after giving effect to the distributions. See "--Preferred Shares" below. All common shares are equal as to dividends, assets and voting privileges and have no conversion, preemptive or other subscription rights. The Trust will send annual and semi-annual reports, including financial statements, to all holders of its shares.
The Trust has no present intention of offering any additional shares other than the Preferred Shares and Common Shares issued under the Trust's Dividend Reinvestment Plan. Any additional offerings of shares will require approval by the Trust's board of trustees. Any additional offering of common shares will be subject to the requirements of the Investment Company Act, which requires that shares may not be issued at a price below the then current net asset value, exclusive of sales load, except in connection with an offering to existing holders of common shares or with the consent of a majority of the Trust's outstanding voting securities.
The Trust intends to apply for listing of the common shares on the New York Stock Exchange under the symbol " ."
The Trust's net asset value per share generally increases when interest rates decline, and decreases when interest rates rise, and these changes are likely to be greater because the Trust intends to have a leveraged capital structure. Net asset value will be reduced immediately following the offering of common shares by the amount of the sales load and organization and offering expenses paid by the Trust. See "Use of Proceeds."
Unlike open-end funds, closed-end funds like the Trust do not continuously offer shares and do not provide daily redemptions. Rather, if a shareholder determines to buy additional common shares or sell shares already held, the shareholder may do so by trading on the New York Stock Exchange through a broker or otherwise. Shares of closed-end investment companies frequently trade on an exchange at prices lower than net asset value. Shares of closed-end investment companies like the Trust that invest predominately in investment grade municipal bonds have during some periods traded at prices higher than net asset value and during other periods have traded at prices lower than net asset value. Because the market value of the common shares may be influenced by such factors as dividend levels, which are in turn affected by expenses; call protection; dividend stability; portfolio credit quality; net asset value; relative demand for and supply of such shares in the market; general market and economic conditions; and other factors beyond the control of the Trust, the Trust cannot assure you that common shares will trade at a price equal to or higher than net asset value in the future. The common shares are designed primarily for long-term investors, and you should not purchase the common shares if you intend to sell them soon after purchase. See "Preferred Shares and Leverage" and the statement of additional information under "Repurchase of Common Shares."
PREFERRED SHARES
The Agreement and Declaration of Trust provides that the Trust's board of trustees may authorize and issue preferred shares with rights as determined by the board of trustees, by action by the board of trustees without the approval of the holders of the common shares. Holders of common shares have no preemptive right to purchase any preferred shares that might be issued.
The Trust's board of trustees has indicated its intention to authorize an offering of preferred shares, representing approximately 38% of the Trust's total assets immediately after the preferred shares are issued, within approximately one to three months after completion of this offering of common shares, subject to market conditions and to the board of trustees' continuing belief that leveraging the Trust's capital structure through the issuance of preferred shares (the "Preferred Shares") is likely to achieve the potential benefits to the holders of common shares described in this prospectus. The Trust may conduct other offerings of Preferred Shares in the future subject to the same percentage restriction, after giving effect to previously issued Preferred Shares. The board of trustees also reserves the right to change the foregoing percentage limitation and may issue Preferred Shares to the extent that the aggregate liquidation preference of all outstanding Preferred Shares does not exceed 50% of the value of the Trust's total assets. We cannot assure you, however, that any Preferred Shares will be issued. Although the terms of any Preferred Shares, including dividend rate, liquidation preference and redemption provisions, will be determined by the board of trustees, subject to applicable law and the Agreement and Declaration of Trust, it is likely that the Preferred Shares will be structured to carry a relatively short-term dividend rate reflecting interest rates on short-term tax-exempt debt securities, by providing for the periodic redetermination of the dividend rate at relatively short intervals through an auction, remarketing or other procedure. The Trust also believes that it is likely that the liquidation preference, voting rights and redemption provisions of the Preferred Shares will be similar to those stated below.
Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Trust, the holders of Preferred Shares will be entitled to receive a preferential liquidating distribution, which is expected to equal the original purchase price per share plus accrued and unpaid dividends, whether or not declared, before any distribution of assets is made to holders of common shares. After payment of the full amount of the liquidating distribution to which they are entitled, the holders of Preferred Shares will not be entitled to any further participation in any distribution of assets by the Trust.
Voting Rights. The Investment Company Act requires that the holders of any Preferred Shares, voting separately as a single class, have the right to elect at least two trustees at all times. In addition, subject to the prior rights, if any, of the holders of any other class of senior securities outstanding, the holders of any Preferred Shares have the right to elect a majority of the trustees of the Trust at any time two years' dividends on any Preferred Shares are unpaid. The Investment Company Act also requires that, in addition to any approval by shareholders that might otherwise be required, the approval of the holders of a majority of any outstanding Preferred Shares, voting separately as a class, would be required to (1) adopt any plan of reorganization that would adversely affect the Preferred Shares, and (2) take any action requiring a vote of security holders under Section 13(a) of the Investment Company Act, including, among other things, changes in the Trust's subclassification as a closed-end investment company or changes in its fundamental investment restrictions. See "Conversion to Open-End Trust." As a result of these voting rights, the Trust's ability to take any such actions may be impeded to the extent that there are any Preferred Shares outstanding. The board of trustees presently intends that, except as otherwise indicated in this prospectus and except as otherwise required by applicable law, holders of Preferred Shares will have equal voting rights with holders of shares of common shares (one vote per share, unless otherwise required by the Investment Company Act), and will vote together with holders of common shares as a single class.
It is presently required that in connection with the election of the Trust's trustees, on and after issuance of any Preferred Shares, the holders of all outstanding Preferred Shares, voting as a separate class, would be entitled to elect two trustees of the Trust, and the remaining trustees would be elected by holders of common shares and Preferred Shares, voting together as a single class.
The affirmative vote of the holders of a majority of the outstanding Preferred Shares, voting as a separate class, will be required to amend, alter or repeal any of the preferences, rights or powers of holders of Preferred Shares so as to affect materially and adversely such preferences, rights, or powers, or increase or decrease the number of Preferred Shares. The class vote of holders of Preferred Shares described above will in each case be in addition to any other vote required to authorize the action in question.
Redemption, Purchase and Sale of Preferred Shares by the Trust. The terms of the Preferred Shares are expected to provide that (1) they are redeemable by the Trust in whole or in part at the original purchase price per share plus accrued dividends per share, (2) the Trust may tender for or purchase Preferred Shares and (3) the Trust may subsequently resell any shares so tendered for or purchased. Any redemption or purchase of Preferred Shares by the Trust will reduce the leverage applicable to the common shares, while any resale of shares by the Trust will increase that leverage.
The discussion above describes the present intention of the board of trustees with respect to an offering of Preferred Shares. If the board of trustees determines to proceed with such an offering, the terms of the Preferred Shares may be the same as, or different from, the terms described above, subject to applicable law and the Trust's Agreement and Declaration of Trust. The board of trustees, without the approval of the holders of common shares, may authorize an offering of Preferred Shares or may determine not to authorize such an offering, and may fix the terms of the Preferred Shares to be offered.
CERTAIN PROVISIONS IN THE AGREEMENT AND DECLARATION OF TRUST
ANTI-TAKEOVER PROVISIONS
The Agreement and Declaration of Trust includes provisions that could have the effect of limiting the ability of other entities or persons to acquire control of the Trust or to change the composition of its board of trustees. This could have the effect of depriving shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control over the Trust, which attempts could have the effect of increasing the expenses of the Trust and disrupting the normal operation of the Trust. The board of trustees is divided into three classes, with the terms of one class expiring at each annual meeting of shareholders. At each annual meeting, one class of trustees is elected to a three-year term. This provision could delay for up to two years the replacement of a majority of the board of trustees. A trustee may be removed from office by the action of two-thirds of the remaining trustees or by a vote of the holders of at least two-thirds of the shares.
In addition, the Trust's Agreement and Declaration of Trust requires the favorable vote of the holders of at least 75% of the outstanding shares of each class of the Trust, voting as a class, then entitled to vote to approve, adopt or authorize certain transactions with five percent-or-greater holders of a class of shares and their associates, unless two-thirds of the board of trustees by resolution has approved a memorandum of understanding with such holders, in which case normal voting requirements would be in effect. For purposes of these provisions, a five percent-or-greater holder of a class of shares (a "Principal Shareholder") refers to any person who, whether directly or indirectly and whether alone or together with its affiliates and associates, beneficially owns 5% or more of the outstanding shares of any class of shares of beneficial interest of the Trust. The transactions subject to these special approval requirements are:
o the merger or consolidation of the Trust or any subsidiary of the Trust with or into any Principal Shareholder;
o the issuance of any securities of the Trust to any Principal Shareholder for cash, except pursuant to the Dividend Reinvestment Plan;
o the sale, lease or exchange of all or any substantial part of the assets of the Trust to any Principal Shareholder, except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purpose of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period; or
o the sale, lease or exchange to the Trust or any subsidiary of the Trust, of any assets of any Principal Shareholder, except assets having an aggregate fair market value of less than $1,000,000, aggregating for purposes of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period.
The board of trustees has determined that provisions with respect to the board of trustees and the 75% voting requirements described above, and the requirements relating to conversion to an open-end trust described below, which voting requirements are greater than the minimum requirements under Delaware law or the Investment Company Act, are in the best interest of shareholders generally. Reference should be made to the Agreement and Declaration of Trust on file with the Securities and Exchange Commission for the full text of these provisions.
CLOSED-END TRUST STRUCTURE
The Trust is a newly-organized, diversified management investment company (commonly referred to as a closed-end fund). Closed-end funds differ from open-end funds (which are generally referred to as mutual funds) in that closed-end funds generally list their shares for trading on a stock exchange and do not redeem their shares at the request of the shareholder. This means that if you wish to sell your shares of a closed-end fund you must trade them on the market like any other stock at the prevailing market price at that time. In a mutual fund, if the shareholder wishes to sell shares of the fund, the mutual fund will redeem or buy back the shares at "net asset value." Also, mutual funds generally offer new shares on a continuous basis to new investors, and closed-end funds generally do not. The continuous inflows and outflows of assets in a mutual fund can make it difficult to manage the fund's investments. By comparison, closed-end funds are generally able to stay more fully invested in securities that are consistent with their investment objectives, and also have greater flexibility to make certain types of investments, and to use certain investment strategies, such as financial leverage and investments in illiquid securities.
Shares of closed-end funds frequently trade at a discount to their net asset value. Because of this possibility and the recognition that any such discount may not be in the interest of shareholders, the Trust's board of trustees might consider from time to time engaging in open market repurchases, tender offers for shares at net asset value or other programs intended to reduce the discount. We cannot guarantee or assure, however, that the Trust's board of trustees will decide to engage in any of these actions. Nor is there any guarantee or assurance that such actions, if undertaken, would result in the shares trading at a price equal or close to net asset value per share. The board of trustees might also consider converting the Trust to an open-end mutual fund, which would also require a vote of the shareholders of the Trust.
CONVERSION TO OPEN-END INVESTMENT COMPANY
The Trust may be converted to an open-end investment company at any time by an amendment to the Agreement and Declaration of Trust. The Agreement and Declaration of Trust provides that such an amendment must be approved by the affirmative vote of a majority of trustees then in office and by the holders of two-thirds of the Trust's outstanding shares, including any Preferred Shares, entitled to vote on the matter, voting as a single class (or a majority of such shares if the amendment previously was approved, adopted or authorized by at least two-thirds of the total number of trustees) and, assuming the Trust has issued Preferred Shares, by the affirmative vote of a majority of Preferred Shares, voting as a separate class. Such a vote also would satisfy a separate requirement in the Investment Company Act that the change be approved by the shareholders. If approved in the foregoing manner, conversion of the Trust could not occur until 90 days after the shareholders' meeting at which such conversion was approved and would also require at least 30 days' prior notice to all shareholders. Conversion of the Trust to an open-end investment company would require the redemption of any outstanding Preferred Shares, which could eliminate or alter the leveraged capital structure of the Trust with respect to the shares. Following any such conversion, it is also possible that certain of the Trust's investment policies and strategies would have to be modified to assure sufficient portfolio liquidity. In the event of conversion, the common shares would cease to be listed on the New York Stock Exchange or other national securities exchanges or market systems. Shareholders of an open-end investment company may require the company to redeem their shares at any time, except in certain circumstances as authorized by or under the Investment Company Act, at their net asset value, less such redemption charge, if any, as might be in effect at the time of a redemption. The Trust expects to pay all such redemption requests in cash, but intends to reserve the right to pay redemption requests in a combination of cash or securities. If such partial payment in securities were made, investors may incur brokerage costs in converting such securities to cash. If the Trust were converted to an open-end fund, it is likely that new shares would be sold at net asset value plus a sales load. The board of trustees believes, however, that the closed-end structure is desirable in light of the Trust's investment objective and policies. Therefore, you should assume that it is not likely that the board of trustees would vote to convert the Trust to an open-end fund.
REPURCHASE OF 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, although it is possible that they may trade at a premium above 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. See "Net Asset Value." 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 have the effect of reducing any market discount from net asset value.
There is no assurance that, if action is undertaken to repurchase or tender for common shares, such action will result in the common shares' trading at a price which approximates their net asset value. Although share repurchases and tenders could have a favorable effect on the market price of the Trust's common shares, you should be aware that the acquisition of common shares by the Trust will decrease the total assets of the Trust and, therefore, may have the effect of increasing the Trust's expense ratio. Any share repurchases or tender offers will be made in accordance with requirements of the Securities Exchange Act of 1934 and the Investment Company Act.
TAX MATTERS
FEDERAL INCOME TAX MATTERS
The discussion below and in the statement of additional information provides general tax information related to an investment in the common shares. Because tax laws are complex and often change, you should consult your tax adviser about the tax consequences of an investment in the Trust.
The Trust primarily invests in municipal bonds whose income is exempt from regular Federal income tax. Consequently, the regular monthly dividends you receive will be exempt from regular Federal income taxes. A portion of these dividends, however, may be subject to the Federal alternative minimum tax.
Although the Trust does not seek to realize taxable income or capital gains, the Trust may realize and distribute taxable income or capital gains from time to time as a result of the Trust's normal investment activities. The Trust will distribute at least annually any taxable income or realized capital gains. Distributions of net short-term gains are taxable as ordinary income. Distributions of net long-term capital gains are taxable to you as long-term capital gains regardless of how long you have owned your common shares. Dividends will not qualify for a dividends received deduction generally available to corporate shareholders.
Each year, you will receive a year-end statement that describes the tax status of dividends paid to you during the preceding year, including the source of investment income by state and the portion of income that is subject to the Federal alternative minimum tax. You will receive this statement from the firm where you purchased your common shares if you hold your investment in street name; the Trust will send you this statement if you hold your shares in registered form.
The tax status of your dividends is not affected by whether you reinvest your dividends or receive them in cash.
In order to avoid corporate taxation of its earnings and to pay tax-exempt dividends, the Trust must meet certain requirements that govern the Trust's sources of income, diversification of assets and distribution of earnings to shareholders. The Trust intends to meet these requirements. If the Trust failed to do so, the Trust would be required to pay corporate taxes on its earnings and all of your distributions would be taxable as ordinary income. In particular, in order for the Trust to pay tax-exempt dividends, at least 50% of the value of the Trust's total assets must consist of tax-exempt obligations. The Trust intends to meet this requirement. If the Trust failed to do so, it would not be able to pay tax-exempt dividends and your distributions attributable to interest received by the Trust from any source would be taxable as ordinary income.
The Trust may be required to withhold 31% of certain of your dividends if you have not provided the Trust with your correct taxpayer identification number (if you are an individual normally your Social Security number), or if you are otherwise subject to back-up withholding. If you receive Social Security benefits, you should be aware that tax-free income is taken into account in calculating the amount of these benefits that may be subject to Federal income tax. If you borrow money to buy Trust shares, you may not deduct the interest on that loan. Under Federal income tax rules, Trust shares may be treated as having been bought with borrowed money even if the purchase of the Trust shares cannot be traced directly to borrowed money.
If you are subject to the Federal alternative minimum tax, a portion of your regular monthly dividends may be taxable.
STATE AND LOCAL TAX MATTERS
The exemption from Federal income tax for exempt-interest dividends does not necessarily result in exemption for such dividends under the income or other tax laws of any state or local taxing authority. In some states, the portion of any exempt-interest dividend that is derived from interest received by a regulated investment company on its holdings of that state's securities and its political subdivisions and instrumentalities is exempt from the state's income tax. Therefore, the Trust will report anually to its shareholders the percentage of interest income earned by the Trust during the preceeding year on tax-exempt obligations indicating, on a state by state basis, the source of such income. Shareholders of the Trust are advised to consult with their own tax advisers about state and local tax matters.
Please refer to the Statement of Additional Information for more detailed information. You are urged to consult your tax adviser.
UNDERWRITING
The underwriters named below (the "Underwriters"), acting through as representatives (the "Representatives), have agreed, subject to the terms and conditions of a Purchase Agreement with the Trust and the Adviser, to purchase common shares from the Trust. The Underwriters are committed to purchase all of such shares if any are purchased.
Number
Name of Shares
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Total..................................
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The Representatives have advised the Trust that the Underwriters propose initially to offer some of the common shares to the public at the public offering price set forth on the cover page of this prospectus and some of the common shares to certain dealers at the public offering price less a concession not in excess of $0. per common share. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $0. per common share on sales to certain other dealers. If all of the common shares are not sold at the initial offering price, the representatives may change the public offering price and other selling terms. Investors must pay for any common shares purchased on or before May , 2001.
The Trust has granted the Underwriters an option, exercisable for 45 days after the date hereof, to purchase up to additional common shares to cover over-allotments, if any, at the initial offering price.
The Underwriters may engage in certain transactions that stabilize the price of the common shares. Such transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of the common shares.
If the Underwriters create a short position in the common shares in connection with the offering, i.e., if they sell more common shares than are set forth on the cover page of this prospectus, the Underwriters may reduce that short position by purchasing common shares in the open market. The Underwriters also may elect to reduce any short position by exercising all or part of the over-allotment option described above.
The Underwriters also may impose a penalty bid on certain selling group members. This means that if the Underwriters purchase common shares in the open market to reduce the Underwriters' short position or to stabilize the price of the common shares, they may reclaim the amount of the selling concession from the selling group members who sold those common shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or to reduce a short position could cause the price of the security to be higher than it might be in the absence of such purchases. The imposition of a penalty bid might also have an effect on the price of a security to the extent that it were to discourage resales of the security.
Neither the Trust nor any Underwriter makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the shares of common stock. In addition, neither the Trust nor any Underwriter makes any representation that any Underwriter will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice.
The Trust and the Adviser have agreed that, for a period of 180 days from the date of this prospectus, they will not, without the prior written consent of the Representatives, on behalf of the Underwriters, dispose of or hedge any common shares or any securities convertible into or exchangeable for common shares. The Representatives in their sole discretion may release any of the securities subject to these agreements at any time without notice.
Prior to this offering, there has been no public market for the common shares. The Trust plans to apply to list its common shares on the NYSE or another national securities exchange. In order to meet the requirements for listing, the Underwriter has undertaken to sell lots of 100 or more shares to a minimum of 2,000 beneficial owners.
The Purchase Agreement provides that it may be terminated in the absolute discretion of the Representatives without liability on the part of any Underwriter to the Trust, or BlackRock Advisors by notice to the Trust or BlackRock Advisors if, prior to delivery of and payment for the common shares, (1) trading in the common shares or securities generally on the New York Stock Exchange, American Stock Exchange, Nasdaq National Market or the Nasdaq Stock Market shall have been suspended or materially limited, (2) additional material governmental restrictions not in force on the date of the underwriting agreement have been imposed upon trading in securities generally or a general moratorium on commercial banking activities in New York shall have been declared by either Federal or state authorities or (3) any outbreak or escalation of hostilities or other international or domestic calamity, crisis or change in political, financial or economic conditions, occurs, the effect of which is such as to make it, in the judgment of the representatives, impracticable or inadvisable to commence or continue the offering of the common shares at the offering price to the public set forth on the cover page of the prospectus or to enforce contracts for the resale of the common shares by the Underwriters.
The Trust and the Adviser have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933.
The Trust anticipates that from time to time the Representatives and certain other Underwriters may act as brokers or dealers in connection with the execution of the Trust's portfolio transactions after they have ceased to be Underwriters and, subject to certain restrictions, may act as brokers while they are Underwriters.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, will act as the Trust's Custodian, Transfer Agent and Dividend Disbursing Agent. The Custodian may employ sub-custodians outside the U.S. approved by the board of trustees in accordance with regulations under the Investment Company Act.
LEGAL OPINIONS
Certain legal matters in connection with the common shares will be passed upon for the Trust by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York and for the underwriters by , New York, New York.
TABLE OF CONTENTS FOR THE
STATEMENT OF ADDITIONAL INFORMATION
Page
Use of Proceeds ............................................B-
Investment Objective and Policies................................B-
Investment Policies and Techniques...............................B-
Other Investment Policies and Techniques.........................B-
Management of the Trust..........................................B-
Portfolio Transactions and Brokerage.............................B-
Description of Shares............................................B-
Repurchase of Common Shares......................................B-
Tax Matters......................................................B-
Performance Related and Comparative Information..................B-
Experts..........................................................B-
Additional Information...........................................B-
Report of Independent Auditors...................................B-
Financial Statements.............................................B-
Ratings of Investments (Appendix A)..............................A-
Taxable Equivalent Yield Table (Appendix B)......................B-
General Characteristics and Risks of Hedging Strategies
(Appendix C).....................................................C-
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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.
Shares
BLACKROCK
MUNICIPAL INCOME TRUST
Common Shares
PROSPECTUS
May , 2001
SUBJECT TO COMPLETION, DATED APRIL 3, 2001
BLACKROCK MUNICIPAL INCOME TRUST
STATEMENT OF ADDITIONAL INFORMATION
BlackRock Municipal Income Trust (the "Trust") is a newly organized, closed-end, diversified management investment company. This Statement of Additional Information relating to common shares does not constitute a prospectus, but should be read in conjunction with the prospectus relating thereto dated May , 2001. This Statement of Additional Information does not include all information that a prospective investor should consider before purchasing common 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 ascribed to them in the prospectus.
TABLE OF CONTENTS
Page
Use of Proceeds ................................................B-
Investment Objective and Policies...............................B-
Investment Policies and Techniques..............................B-
Other Investment Policies and Techniques........................B-
Management of the Trust.........................................B-
Portfolio Transactions and Brokerage............................B-
Description of Shares...........................................B-
Repurchase of Common Shares.....................................B-
Tax Matters.....................................................B-
Performance Related and Comparative Information.................B-
Experts.........................................................B-
Additional Information..........................................B-
Report of Independent Auditors..................................B-
Financial Statements............................................B-
Ratings of Investments (Appendix A).............................A-
Taxable Equivalent Yield Table (Appendix B).....................B-
General Characteristics and Risks of Hedging Strategies
(Appendix C.....................................................C-
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This Statement of Additional Information is dated May , 2001.
USE OF PROCEEDS
Pending investment in municipal bonds that meet the Trust's investment objective and policies the net proceeds of the offering will be invested in high quality, short-term tax-exempt money market securities or in high quality municipal bonds with relatively low volatility (such as pre-refunded and intermediate-term bonds), to the extent such securities are available. If necessary to invest fully the net proceeds of the offering immediately, the Trust may also purchase, as temporary investments, short-term taxable investments of the type described under "Investment Policies and Techniques--Investment in Municipal Bonds--Portfolio Investments," the income on which is subject to regular Federal income tax and securities of other open- or closed-end investment companies that invest primarily in municipal bonds of the type in which the Trust may invest directly.
INVESTMENT OBJECTIVE AND POLICIES
The Trust has not established any limit on the percentage of its portfolio that may be invested in municipal bonds subject to the alternative minimum tax provisions of Federal tax law, and the Trust expects that a substantial portion of the income it produces will be includable in alternative minimum taxable income. Common shares therefore would not ordinarily be a suitable investment for investors who are subject to the Federal alternative minimum tax or who would become subject to such tax by purchasing common shares. The suitability of an investment in common 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 the alternative minimum tax, and from comparable fully taxable investments, in light of each such investor's tax position. Special considerations apply to corporate investors. See "Tax Matters."
INVESTMENT RESTRICTIONS
Except as described below, the Trust, as a fundamental policy, may not, without the approval, if any, of the holders of a majority of the outstanding common shares and Preferred Shares voting together as a single class, and of the holders of a majority of the outstanding Preferred Shares voting as a separate class:
(1) invest 25% or more of the value of its total assets
in any one industry provided that this limitation
does not apply to municipal bonds other than those
municipal bonds backed only by assets and revenues of
non- governmental users;
(2) issue senior securities or borrow money other than as
permitted by the Investment Company Act 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;
(3) 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
entry into of repurchase agreements;
(4) 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
securities the Trust may be deemed to be an
underwriter;
(5) purchase or sell real estate or interests therein
other than municipal bonds secured by real estate or
interests therein; provided that the Trust may hold
and sell any real estate acquired in connection with
its investment in portfolio securities;
(6) purchase or sell commodities or commodity contracts
for any purposes except as, and to the extent,
permitted by applicable law without the Trust
becoming subject to registration with the Commodities
Futures Trading Commission as a commodity pool; or
(7) with respect to 75% of its assets, purchase the
securities of any one issuer (other than cash and
cash items, Government securities and securities of
other investment companies) if upon such purchase (a)
more than 5% of the Trust's total assets would
consist of the securities of such issuer, or (b) the
Trust would own more than 10% of the outstanding
voting securities of such issuer.
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When used with respect to particular shares of the Trust, "majority of the outstanding" means (i) 67% or more of the shares present at a meeting, if the holders of more than 50% of the shares are present or represented by proxy, or (ii) more than 50% of the shares, whichever is less.
For purposes of applying the limitation set forth in subparagraph
(1) above, securities of the U.S. Government, its agencies, or
instrumentalities, and securities backed by the credit of a governmental
entity are not considered to represent industries. However, obligations
backed only by the assets and revenues of non-governmental users may for
this purpose be deemed to be issued by such non-governmental users. Thus,
the 25% limitation would apply to such obligations. It is nonetheless
possible that the Trust may invest more than 25% of its total assets in a
broader economic sector of the market for municipal obligations, such as
revenue obligations of hospitals and other health care facilities or
electrical utility revenue obligations. The Trust reserves the right to
invest more than 25% of its assets in industrial development bonds and
private activity securities.
For the purpose of applying the limitation set forth in subparagraph (1) above, a non-governmental issuer shall be deemed the sole issuer of a security when its assets and revenues are separate from other governmental entities and its securities are backed only by its assets and revenues. Similarly, in the case of a non-governmental issuer, such as an industrial corporation or a privately owned or operated hospital, if the security is backed only by the assets and revenues of the non-governmental issuer, then such non-governmental issuer would be deemed to be the sole issuer. Where a security is also backed by the enforceable obligation of a superior or unrelated governmental or other entity (other than a bond insurer), it shall also be included in the computation of securities owned that are issued by such governmental or other entity. Where a security is guaranteed by a governmental entity or some other facility, such as a bank guarantee or letter of credit, such a guarantee or letter of credit would be considered a separate security and would be treated as an issue of such government, other entity or bank. When a municipal bond is insured by bond insurance, it shall not be considered a security that is issued or guaranteed by the insurer; instead, the issuer of such municipal bond will be determined in accordance with the principles set forth above. The foregoing restrictions do not limit the percentage of the Trust's assets that may be invested in municipal bonds insured by any given insurer.
Under the Investment Company Act of 1940, the Trust may invest only up to 10% of its total assets in the aggregate in shares of other investment companies and only up to 5% of its total assets in any one investment company, provided the investment does not represent more than 3% of the voting stock of the acquired investment company at the time such shares are purchased. As a shareholder in any investment company, the Trust will bear its ratable share of that investment company's expenses, and would remain subject to payment of the Trust's, advisory fees and expenses with respect to assets so invested. Holders of common shares would therefore be subject to duplicative expenses to the extent the Trust invests in other investment companies. In addition, the securities of other investment companies may also be leveraged and will therefore be subject to the same leverage risks described herein and in the prospectus. As described in the prospectus in the section entitled "Risks", the net asset value and market value of leveraged shares will be more volatile and the yield to shareholders will tend to fluctuate more than the yield generated by unleveraged shares.
In addition to the foregoing fundamental investment policies, the Trust is also subject to the following non-fundamental restrictions and policies, which may be changed by the board of trustees. The Trust may not:
(1) 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 may also make short sales "against the box"
without respect to such limitations. In this type of
short sale, at the time of the sale, the Trust owns
or has the immediate and unconditional right to
acquire at no additional cost the identical security.
(2) Purchase securities of open-end or closed-end
investment companies except in compliance with the
Investment Company Act or any exemptive relief
obtained thereunder.
(3) Purchase securities of companies for the purpose of
exercising control.
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The restrictions and other limitations set forth above will apply
only at the time of purchase of securities and will not be considered
violated unless an excess or deficiency occurs or exists immediately after
and as a result of an acquisition of securities. In addition, to comply
with Federal tax requirements for qualification as a "regulated investment
company," the Trust's investments will be limited in a manner such that at
the close of each quarter of each fiscal year, (a) no more than 25% of the
Trust's total assets are invested in the securities of a single issuer and
(b) with regard to at least 50% of the Trust's total assets, no more than
5% of its total assets are invested in the securities of a single issuer.
These tax-related limitations may be changed by the Trustees to the extent
appropriate in light of changes to applicable tax requirements.
The Trust intends to apply for ratings for the Preferred Shares from Moody's and/or S&P. In order to obtain and maintain the required ratings, the Trust will be required to comply with investment quality, diversification and other guidelines established by Moody's or S&P. Such guidelines will likely be more restrictive than the restrictions set forth above. The Trust does not anticipate that such guidelines would have a material adverse effect on the Trust's holders of common shares or its ability to achieve its investment objective. The Trust presently anticipates that any Preferred Shares that it intends to issue would be initially given the highest ratings by Moody's (Aaa) or by S&P (AAA), but no assurance can be given that such ratings will be obtained. No minimum rating is required for the issuance of Preferred Shares by the Trust. Moody's and S&P receive fees in connection with their ratings issuances.
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.
PORTFOLIO INVESTMENTS
The Trust will primarily in a portfolio of investment grade municipal bonds that are exempt from regular Federal income tax.
Issuers of bonds rated Ba/BB or B are regarded as having current capacity to make principal and interest payments but are subject to business, financial or economic conditions which could adversely affect such payment capacity. Municipal bonds rated Baa or BBB are considered "investment grade" securities; municipal bonds rated Baa are considered medium grade obligations which lack outstanding investment characteristics and have speculative characteristics, while municipal bonds rated BBB are regarded as having adequate capacity to pay principal and interest. Municipal bonds rated AAA in which the Trust may invest may have been so rated on the basis of the existence of insurance guaranteeing the timely payment, when due, of all principal and interest. Municipal bonds rated below investment grade quality are obligations of issuers that are considered predominantly speculative with respect to the issuer's capacity to pay interest and repay principal according to the terms of the obligation and, therefore, carry greater investment risk, including the possibility of issuer default and bankruptcy and increased market price volatility. Municipal bonds rated below investment grade tend to be less marketable than higher-quality bonds because the market for them is less broad. The market for unrated municipal bonds is even narrower. During periods of thin trading in these markets, the spread between bid and asked prices is likely to increase significantly and the Trust may have greater difficulty selling its portfolio securities. The Trust will be more dependent on the Adviser's research and analysis when investing in these securities.
A general description of Moody's, S&P's and Fitch's ratings of municipal bonds is set forth in Appendix A hereto. The ratings of Moody's, S&P and Fitch represent their opinions as to the quality of the municipal bonds they rate. It should be emphasized, however, that ratings are general and are not absolute standards of quality. Consequently, municipal bonds 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 Trust will primarily invest in municipal bonds with long-term maturities in order to maintain a weighted average maturity of 15-30 years, but the average weighted maturity may be shortened from time to time depending on market conditions. As a result, the Trust's portfolio at any given time may include both long-term and intermediate-term municipal bonds. Moreover, during temporary defensive periods (e.g., times when, in the Adviser's opinion, temporary imbalances of supply and demand or other temporary dislocations in the tax-exempt bond market adversely affect the price at which long-term or intermediate-term municipal bonds are available), and in order to keep cash on hand fully invested, including the period during which the net proceeds of the offering are being invested, the Trust may invest any percentage of its assets in short-term investments including high quality, short-term securities which may be either tax-exempt or taxable and securities of other open- or closed-end investment companies that invest primarily in municipal bonds of the type in which the Trust may invest directly. The Trust intends to invest in taxable short-term investments only in the event that suitable tax-exempt temporary investments are not available at reasonable prices and yields. Tax-exempt temporary investments include various obligations issued by state and local governmental issuers, such as tax-exempt notes (bond anticipation notes, tax anticipation notes and revenue anticipation notes or other such municipal bonds maturing in three years or less from the date of issuance) and municipal commercial paper. The Trust will invest only in taxable temporary investments which are U.S. Government securities or securities rated within the highest grade by Moody's, S&P or Fitch, and which mature within one year from the date of purchase or carry a variable or floating rate of interest. See Appendix A for a general description of Moody's, S&P's and Fitch's ratings of securities in such categories. Taxable temporary investments of the Trust may include certificates of deposit issued by U.S. banks with assets of at least $1 billion, or commercial paper or corporate notes, bonds or debentures with a remaining maturity of one year or less, or repurchase agreements. See "Other Investment Policies and Techniques--Repurchase Agreements." To the extent the Trust invests in taxable investments, the Trust will not at such times be in a position to achieve its investment objective of tax-exempt income.
The foregoing policies as to ratings of portfolio investments will apply only at the time of the purchase of a security, and the Trust will not be required to dispose of securities in the event Moody's, S&P or Fitch downgrades its assessment of the credit characteristics of a particular issuer.
Also included within the general category of municipal bonds described in the prospectus are participations in lease obligations or installment purchase contract obligations (hereinafter collectively called "Municipal Lease Obligations") of municipal authorities or entities. Although a Municipal Lease Obligation does not constitute a general obligation of the municipality for which the municipality's taxing power is pledged, a Municipal Lease Obligation is ordinarily backed by the municipality's covenant to budget for, appropriate and make the payments due under the Municipal Lease Obligation. However, certain Municipal 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 the case of a "non-appropriation" lease, the Trust's ability to recover under the lease in the event of non-appropriation or default will be limited solely to the repossession of the leased property, without recourse to the general credit of the lessee, and disposition or releasing of the property might prove difficult. In order to reduce this risk, the Trust will only purchase Municipal Lease Obligations where the Adviser believes the issuer has a strong incentive to continue making appropriations until maturity.
Obligations of issuers of municipal bonds are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the Bankruptcy Reform Act of 1978. In addition, the obligations of such issuers may become subject to the laws enacted in the future by Congress, state legislatures or referenda extending the time for payment of principal or interest, or both, 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 bonds may be materially affected.
In addition to the types of municipal bonds described in the prospectus, the Trust may invest in other securities that pay interest that is, or make other distributions that are, exempt from regular Federal income tax and or state and local personal tax, regardless of the technical structure of the issuer of the instrument. The Trust treats all of such tax-exempt securities as municipal bonds.
SHORT-TERM TAXABLE FIXED-INCOME SECURITIES
For temporary defensive purposes or to keep cash on hand fully invested, the Trust may invest up to 100% of its total assets in cash equivalents and short-term taxable fixed-income securities, although the Trust intends to invest in taxable short-term investments only in the event that suitable tax-exempt short-term investments are not available at reasonable prices and yields. Short-term taxable fixed income investments are defined to include, without limitation, the following:
(1) U.S. government securities, including bills, notes
and bonds differing as to maturity and rates of
interest that are either issued or guaranteed by the
U.S. Treasury or by U.S. government agencies or
instrumentalities. U.S. government agency securities
include securities issued by (a) the Federal Housing
Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small
Business Administration, and the Government National
Mortgage Association, whose securities are supported
by the full faith and credit of the United States;
(b) the Federal Home Loan Banks, Federal Intermediate
Credit Banks, and the Tennessee Valley Authority,
whose securities are supported by the right of the
agency to borrow from the U.S. Treasury; (c) the
Federal National Mortgage Association, whose
securities are supported by the discretionary
authority of the U.S. government to purchase certain
obligations of the agency or instrumentality; and (d)
the Student Loan Marketing Association, whose
securities are supported only by its credit. While
the U.S. government provides financial support to
such U.S. government-sponsored agencies or
instrumentalities, no assurance can be given that it
always will do so since it is not so obligated by
law. The U.S. government, its agencies, and
instrumentalities do not guarantee the market value
of their securities. Consequently, the value of such
securities may fluctuate.
(2) Certificates of Deposit issued against funds
deposited in a bank or a savings and loan
association. Such certificates are for a definite
period of time, earn a specified rate of return, and
are normally negotiable. The issuer of a certificate
of deposit agrees to pay the amount deposited plus
interest to the bearer of the certificate on the date
specified thereon. Certificates of deposit purchased
by the Trust may not be fully insured by the FDIC.
(3) Repurchase agreements, which involve purchases of
debt securities. At the time the Trust purchases
securities pursuant to a repurchase agreement, it
simultaneously agrees to resell and redeliver such
securities to the seller, who also simultaneously
agrees to buy back the securities at a fixed price
and time. This assures a predetermined yield for the
Trust during its holding period, since the resale
price is always greater than the purchase price and
reflects an agreed-upon market rate. Such actions
afford an opportunity for the Trust to invest
temporarily available cash. The Trust may enter into
repurchase agreements only with respect to
obligations of the U.S. government, its agencies or
instrumentalities; certificates of deposit; or
bankers' acceptances in which the Trust may invest.
Repurchase agreements may be considered loans to the
seller, collateralized by the underlying securities.
The risk to the Trust is limited to the ability of
the seller to pay the agreed-upon sum on the
repurchase date; in the event of default, the
repurchase agreement provides that the Trust is
entitled to sell the underlying collateral. If the
value of the collateral declines after the agreement
is entered into, and if the seller defaults under a
repurchase agreement when the value of the underlying
collateral is less than the repurchase price, the
Trust could incur a loss of both principal and
interest. The Adviser monitors the value of the
collateral at the time the action is entered into and
at all times during the term of the repurchase
agreement. The Adviser does so in an effort to
determine that the value of the collateral always
equals or exceeds the agreed-upon repurchase price to
be paid to the Trust. If the seller were to be
subject to a Federal bankruptcy proceeding, the
ability of the Trust to liquidate the collateral
could be delayed or impaired because of certain
provisions of the bankruptcy laws.
(4) Commercial paper, which consists of short-term
unsecured promissory notes, including variable rate
master demand notes issued by corporations to finance
their current operations. Master demand notes are
direct lending arrangements between the Trust and a
corporation. There is no secondary market for such
notes. However, they are redeemable by the Trust at
any time. The Adviser will consider the financial
condition of the corporation (e.g., earning power,
cash flow, and other liquidity ratios) and will
continuously monitor the corporation's ability to
meet all of its financial obligations, because the
Trust's liquidity might be impaired if the
corporation were unable to pay principal and interest
on demand. Investments in commercial paper will be
limited to commercial paper rated in the highest
categories by a major rating agency and which mature
within one year of the date of purchase or carry a
variable or floating rate of interest.
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SHORT-TERM TAX-EXEMPT FIXED INCOME SECURITIES
Short-term tax-exempt fixed income securities are securities that are exempt from regular Federal income tax and mature within three years or less from the date of issuance. Short-term tax-exempt fixed income securities are defined to include, without limitation, the following:
Bond Anticipation Notes ("BANs") are usually general obligations of state and local governmental issuers which are sold to obtain interim financing for projects that will eventually be funded through the sale of long-term debt obligations or bonds. The ability of an issuer to meet its obligations on its BANs is primarily dependent on the issuer's access to the long-term municipal bond market and the likelihood that the proceeds of such bond sales will be used to pay the principal and interest on the BANs.
Tax Anticipation Notes ("TANs") are issued by state and local governments to finance the current operations of such governments. Repayment is generally to be derived from specific future tax revenues. TANs are usually general obligations of the issuer. A weakness in an issuer's capacity to raise taxes due to, among other things, a decline in its tax base or a rise in delinquencies, could adversely affect the issuer's ability to meet its obligations on outstanding TANs.
Revenue Anticipation Notes ("RANs") are issued by governments or governmental bodies with the expectation that future revenues from a designated source will be used to repay the notes. In general, they also constitute general obligations of the issuer. A decline in the receipt of projected revenues, such as anticipated revenues from another level of government, could adversely affect an issuer's ability to meet its obligations on outstanding RANs. In addition, the possibility that the revenues would, when received, be used to meet other obligations could affect the ability of the issuer to pay the principal and interest on RANs.
Construction Loan Notes are issued to provide construction financing for specific projects. Frequently, these notes are redeemed with funds obtained from the Federal Housing Administration.
Bank Notes are notes issued by local government bodies and agencies as those described above to commercial banks as evidence of borrowings. The purposes for which the notes are issued are varied but they are frequently issued to meet short-term working capital or capital-project needs. These notes may have risks similar to the risks associated with TANs and RANs.
Tax-Exempt Commercial Paper ("municipal paper") represents very short-term unsecured, negotiable promissory notes, issued by states, municipalities and their agencies. Payment of principal and interest on issues of municipal paper may be made from various sources, to the extent the funds are available therefrom. Maturities on municipal paper generally will be shorter than the maturities of TANs, BANs or RANs. There is a limited secondary market for issues of Municipal Paper.
Certain municipal bonds 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 tax-exempt money market indices.
While the various types of notes described above as a group represent the major portion of the tax-exempt note market, other types of notes are available in the marketplace and the Trust may invest in such other types of notes to the extent permitted under its investment objective, policies and limitations. Such notes may be issued for different purposes and may be secured differently from those mentioned above.
DURATION MANAGEMENT AND OTHER MANAGEMENT TECHNIQUES
The Trust may use a variety of other investment management techniques and instruments. The Trust may purchase and sell futures contracts, enter into various interest rate transactions and may purchase and sell exchange-listed and over-the-counter put and call options on securities, financial indices and futures contracts (collectively, "Additional Investment Management Techniques"). These Additional Investment Management Techniques may be used for duration management and other risk management to attempt to protect against possible changes in the market value of the Trust's portfolio resulting from trends 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, to establish a position in the securities markets as a temporary substitute for purchasing particular securities and to enhance income or gain. There is no particular strategy that requires use of one technique rather than another as the decision to use any particular strategy or instrument is a function of market conditions and the composition of the portfolio. The Additional Investment Management Techniques are described below. The ability of the Trust to use them successfully will depend on the Adviser's ability to predict pertinent market movements as well as sufficient correlation among the instruments, which cannot be assured. Inasmuch as any obligations of the Trust that arise from the use of Additional Investment Management Techniques will be covered by segregated liquid high grade assets or offsetting transactions, the Trust and the Adviser believe such obligations do not constitute senior securities and, accordingly, will not treat them as being subject to its borrowing restrictions. Commodity options and futures contracts regulated by the Commodity Futures Trading Commission (the "CFTC") have specific margin requirements described below and are not treated as senior securities. The use of certain Additional Investment Management Techniques may give rise to taxable income and have certain other consequences. See "Tax Matters".
Interest Rate Transactions. The Trust may enter into 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 will ordinarily use these transactions as a hedge or for duration or risk management although it is permitted to enter into them to enhance income or gain. 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, 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. 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 high grade securities having an aggregate net asset value at all times 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 statistical 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.
Futures Contracts and Options on Futures Contracts. The Trust may also enter into contracts for the purchase or sale for future delivery ("futures contracts") of debt securities, aggregates of debt securities or indices or prices thereof, other financial indices and U.S. government debt securities or options on the above. The Trust will ordinarily engage in such transactions only for bona fide hedging, risk management (including duration management) and other portfolio management purposes. However, the Trust is also permitted to enter into such transactions for non-hedging purposes to enhance income or gain, in accordance with the rules and regulations of the CFTC, which currently provide that no such transaction may be entered into if at such time more than 5% of the Trust's net assets would be posted as initial margin and premiums with respect to such non-hedging transactions.
Calls on Securities Indices and Futures Contracts. The Trust may sell or purchase call options ("calls") on municipal bonds and indices based upon the prices of future contracts and debt securities that are traded on U.S. and foreign securities exchanges and in the over-the-counter markets. A call 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 securities or futures contract subject to the call or other securities acceptable for applicable escrow 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 a security of futures contract which it might otherwise have sold. The purchase of a call gives the Trust the right to buy a security, futures contract or index at a fixed price. Calls on futures on municipal bonds must also be covered by deliverable securities or the futures contract or by liquid high grade debt securities segregated to satisfy the Trust's obligations pursuant to such instruments.
Puts on Securities, Indices and Futures Contracts. The Trust may purchase put options ("puts") that relate to municipal bonds (whether or not it holds such securities in its portfolio), indices or futures contracts. The Trust may also sell puts on municipal bonds, indices or futures contracts on such securities 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 obligations under its hedging and other investment transactions. In selling puts, there is a risk that the Trust may be required to buy the underlying security at a price higher than the current market price.
Municipal Market Data Rate Locks. The Trust may purchase and sell Municipal Market Data Rate Locks ("MMD Rate Locks"). An MMD Rate Lock permits the Trust to lock in a specified municipal interest rate for a portion of its portfolio to preserve a return on a particular investment or a portion of its portfolio as a duration management technique or to protect against any increase in the price of securities to be purchased at a later date. The Trust will ordinarily use these transactions as a hedge or for duration or risk management although it is permitted to enter into them to enhance income or gain. An MMD Rate Lock is a contract between the Trust and an MMD Rate Lock provider pursuant to which the parties agree to make payments to each other on a notional amount, contingent upon whether the Municipal Market Data AAA General Obligation Scale is above or below a specified level on the expiration date of the contract. For example, if the Trust buys an MMD Rate Lock and the Municipal Market Data AAA General Obligation Scale is below the specified level on the expiration date, the counterparty to the contract will make a payment to the Trust equal to the specified level minus the actual level, multiplied by the notional amount of the contract. If the Municipal Market Data AAA General Obligation Scale is above the specified level on the expiration date, the Trust will make a payment to the counterparty equal to the actual level minus the specified level multiplied by the notional amount of the contract. In entering into MMD Rate Locks, there is a risk that municipal yields will move in the direction opposite of the direction anticipated by the Trust. The Trust will not enter into MMD Rate Locks if, as a result, more than 50% of its assets would be required to cover its potential obligations under its hedging and other investment transactions.
Appendix C contains further information about the characteristics, risks and possible benefits of Additional Investment Management Techniques and the Trust's other policies and limitations (which are not fundamental policies) relating to investment in futures contracts and options. The principal risks relating to the use of futures contracts and other Additional Investment Management Techniques are: (a) less than perfect correlation between the prices of the instrument and the market value of the securities in the Trust's portfolio; (b) possible lack of a liquid secondary market for closing out a position in such instruments; (c) losses resulting from interest rate or other market movements not anticipated by the adviser; and (d) the obligation to meet additional variation margin or other payment requirements, all of which could result in the Trust being in a worse position than if such techniques had not been used.
Certain provisions of the Internal Revenue Code of 1986 may restrict or affect the ability of the Trust to engage in Additional Investment Management Techniques. See "Tax Matters".
SHORT SALES
The Trust may make short sales of municipal bonds. A short sale is a transaction in which the Trust sells a security it does not own in anticipation that the market price of that security will decline. The Trust may make short sales to hedge positions, for duration and risk management, in order to maintain portfolio flexibility or to enhance income or gain.
When the Trust makes a short sale, it must borrow the security sold short and deliver it to the broker-dealer through which it made the short sale as collateral for its obligation to deliver the security upon conclusion of the sale. The Trust may have to pay a fee to borrow particular securities and is often obligated to pay over any payments received on such borrowed securities.
The Trust's obligation to replace the borrowed security will be secured by collateral deposited with the broker-dealer, usually cash, U.S. government securities or other high grade liquid securities. The Trust will also be required to segregate similar collateral with its custodian to the extent, if any, necessary so that the aggregate collateral value is at all times at least equal to the current market value of the security sold short. Depending on arrangements made with the broker-dealer from which it borrowed the security regarding payment over of any payments received by the Trust on such security, the Trust may not receive any payments (including interest) on its collateral deposited with such broker-dealer.
If the price of the security sold short increases between the time of the short sale and the time the Trust replaces the borrowed security, the Trust will incur a loss; conversely, if the price declines, the Trust will realize a gain. Any gain will be decreased, and any loss increased, by the transaction costs described above. Although the Trust's gain is limited to the price at which it sold the security short, its potential loss is theoretically unlimited.
The Trust will not make a short sale if, after giving effect to such sale, the market value of all securities sold short exceeds 25% of the value of its total assets or the Trust's aggregate short sales of a particular class of securities exceeds 25% of the outstanding securities of that class. The Trust may also make short sales "against the box" without respect to such limitations. In this type of short sale, at the time of the sale, the Trust owns or has the immediate and unconditional right to acquire at no additional cost the identical security.
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.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES
The Trust may purchase municipal bonds on a "when-issued" basis and may purchase or sell municipal bonds on a "forward commitment" basis. 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 security prior to its acquisition or disposes of its right to deliver or receive against a forward commitment, it can incur a gain or loss. At the time the Trust entered into a transaction on a when-issued or forward commitment basis, it will segregate with its custodian cash or other 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 typically occur monthly for mortgage-related securities, are not treated by the Trust as when-issued or forward commitment transactions and accordingly are not subject to the foregoing restrictions.
BORROWING
Although it has no present intention of doing so, the Trust reserves the rights to borrow funds to the extent permitted as described under the caption "Investment Objective and Policies--Investment Limitations". The proceeds of borrowings may be used for any valid purpose including, without limitation, liquidity, investing and repurchases of shares of the Trust. Borrowing is a form of leverage and, in that respect, entails risks comparable to those associated with the issuance of Preferred Shares.
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. 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 the 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 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.
REPURCHASE AGREEMENTS
As temporary investments, the Trust may invest in repurchase agreements. A repurchase agreement is a contractual agreement whereby the seller of securities (U.S. Government securities or municipal bonds) agrees to repurchase the same security at a specified price on a future date agreed upon by the parties. The agreed-upon repurchase price determines the yield during the Trust's holding period. Repurchase agreements are considered to be loans collateralized by the underlying security that is the subject of the repurchase contract. Income generated from transactions in repurchase agreements will be taxable. See "Tax Matters" for information relating to the allocation of taxable income between common shares and Preferred Shares, if any. The Trust will only enter into repurchase agreements with registered securities dealers or domestic banks that, in the opinion of the Adviser, present minimal credit risk. The risk to the Trust is limited to the ability of the issuer to pay the agreed-upon repurchase price on the delivery date; however, although the value of the underlying collateral at the time the transaction is entered into always equals or exceeds the agreed-upon repurchase price, if the value of the collateral declines there is a risk of loss of both principal and interest. In the event of default, the collateral may be sold but the Trust might incur a loss if the value of the collateral declines, and might incur disposition costs or experience delays in connection with liquidating the collateral. In addition, if bankruptcy proceedings are commenced with respect to the seller of the security, realization upon the collateral by the Trust may be delayed or limited. The Adviser will monitor the value of the collateral at the time the transaction is entered into and at all times subsequent during the term of the repurchase agreement in an effort to determine that such value always equals or exceeds the agreed-upon repurchase price. In the event the value of the collateral declines below the repurchase price, the Adviser will demand additional collateral from the issuer to increase the value of the collateral to at least that of the repurchase price, including interest.
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.
LENDING OF SECURITIES
The Trust may lend its portfolio securities to brokers, dealers and other financial institutions which meet the creditworthiness standards established by the board of trustees of the Trust ("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 the requirements of the Investment Company Act, which currently require that (a) 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, (b) 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), (c) the loan be made subject to termination by the Trust at any time and (d) 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 value of such loans exceeds 33 1/3% 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. 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 trustees.
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 trustees. 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.
MANAGEMENT OF THE TRUST
INVESTMENT MANAGEMENT AGREEMENT
Although BlackRock Advisors 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 BlackRock Advisors are not exclusive and BlackRock Advisors provides similar services to other investment companies and other clients and may engage in other activities.
The Investment Management Agreement also provides that in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations thereunder, BlackRock Advisors is not liable to the Trust or any of the Trust's shareholders for any act or omission by BlackRock Advisors in the supervision or management of its respective investment activities or for any loss sustained by the Trust or the Trust's shareholders and provides for indemnification by the Trust of BlackRock Advisors, its directors, 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 Investment Management Agreement was approved by the Trust's board of trustees, on , 2001, including a majority of the trustees who are not parties to the agreement or interested persons of any such party (as such term is defined in the Investment Company Act). The Investment Management Agreement was approved by the sole common shareholder of the Trust on , 2001. The Investment Management Agreement will continue in effect for a period of two years from its effective date, and if not sooner terminated, will continue in effect for successive periods of 12 months thereafter, provided that each continuance is specifically approved at least annually by both (1) the vote of a majority of the Trust's board of trustees or the vote of a majority of the outstanding voting securities of the Trust (as such term is defined in the Investment Company Act) and (2) by the vote of a majority of the trustees who are not parties to such Agreement or interested persons (as such term is defined in the Investment Company Act) of any such party, cast in person at a meeting called for the purpose of voting on such approval. The Investment Management 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 trustees or a majority of the outstanding voting securities of the Trust or by BlackRock Advisors, on 60 days' written notice by either party to the other. The Investment Management Agreement will terminate automatically in the event of its assignment (as such term is defined in the Investment Company Act and the rules thereunder).
TRUSTEES AND OFFICERS
The officers of the Trust manage its day to day operations. The officers are directly responsible to the Trust's board of trustees which sets broad policies for the Trust and chooses its officers. Initially, Lawrence D. Fink will serve as the sole trustee and as President, Chief Executive Officer and Chief Financial Officer of the Trust. The following is a list of his present positions and principal occupations during the last five years. The Trust anticipates that the board of trustees will be expanded to eight people prior to commencement of the initial public offering. The Trust's initial sole trustee is an interested person (as defined in the Investment Company Act). The business address of the Trust, the initial sole trustee, BlackRock Advisors and its board members and officers is 100 Bellevue Parkway, Wilmington, Delaware, 19809. The trustee listed below is either trustee or director of other closed-end funds in which BlackRock Advisors acts as investment adviser.
PRINCIPAL OCCUPATION DURING THE
NAME AND ADDRESS TITLE PAST-FIVE-YEARS-AND-OTHER-AFFILIATIONS
------------------------------ -------------------- -----------------------------------------------------------
Laurence D. Fink* Trustee, Director, Chairman and Chief Executive Officer of BlackRock, Inc.
Age: 48 President, since its formation in 1998 and of BlackRock, Inc.'s predecessor
Chief entities since 1988. Chairman of the Management Committee and
Executive Co-chair of the Investment Strategy Group of BlackRock, Inc.
Officer and Formerly, Managing Director of the First Boston Corporation,
Chief Member of its Management Committee, Co-head of its Taxable
Financial Fixed Income Division and Head of its Mortgage and Real Estate
Officer Products Group. Currently, Chairman of the Board of each of the
closed-end Trusts in which BlackRock Advisors, Inc. acts as
investment advisor, President, Treasurer and a Trustee of the
BlackRock Funds, Chairman of the Board and Director of Anthracite
Capital, Inc., a Director of BlackRock's offshore funds and
alternative products and Chairman of the Board of Nomura
BlackRock Asset Management Co., Ltd. Currently, Vice Chairman
of the Board of Trustees of Mount Sinai- New York University
Medical Center and Health System and a Member of the Board of
Phoenix House. Formerly, a Director of VIMRx Pharmaceuticals,
Inc. and Innovir Laboratories,, Inc.
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Prior to this offering, all of the outstanding shares of the Trust were owned by BlackRock Advisors.
The fees and expenses of the Independent Trustees of the Trust are paid by the Trust. The Trustees who are members of the BlackRock organization receive no compensation from the Trust. During the year ended December 31, 2001, the Independent Trustees/Directors earned the compensation set forth below in their capacities as trustees/directors of the funds in the BlackRock Family of Funds. It is estimated that the Independent Trustees will receive from the Trust the amounts set forth below for the Trust's fiscal year ending .
ESTIMATED ESTIMATED TOTAL COMPENSATION FROM THE TRUST
NAME OF BOARD MEMBER COMPENSATION-FROM-TRUST AND-FUND-COMPLEX-PAID-TO-BOARD MEMBER (1)
--------------------------------- ----------------------------- --------------------------------------------
$ $
$ $
$ $
$ $
$ $
$ $
---------------
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(1) Represents the total compensation earned by such persons during the calendar year ended December 31, 2001 from the twenty-two closed-end funds advised by the Advisor (the "Fund Complex"). One of these funds, BlackRock Target Term Trust terminated on December 29, 2000.
(2) Of this amount, deferred respectively, pursuant to the Fund Complex's deferred compensation plan (described below).
(3) At a meeting of the Boards of Directors held on August 24, 2000, was appointed "lead director" for each Board of Trustees/Directors in the Fund Complex. For his services as lead trustee/director, will be compensated in the amount of per annum by the Fund Complex to be allocated among the funds in the Fund Complex based on each fund's relative net assets.
(4) Of this amount, deferred respectively, pursuant to the funds' deferred compensation plan (as described below).
Each Independent Trustee/Director receives an annual fee calculated as follows: (i) $6,000 from each fund in the Fund Complex and (ii) $1,500 for each meeting of each board in the Fund Complex attended by such Independent Trustee/Director. The total annual aggregate compensation for each Independent Trustee/Director is capped at $160,000 per annum. In the event that the $160,000 cap is met with respect to an Independent Trustee/Director, the amount of the Independent Trustee/Director's fee borne by each fund in the Fund Complex is reduced by reference to the net assets of the Trust relative to the other funds in the Fund Complex. In addition, the attendance fees of each Independent Trustee/Director of the funds are reduced proportionately, based on each respective fund's net assets, so that the aggregate per meeting fee for all meetings of the boards of trustees/directors of the funds held on a single day does not exceed $20,000 for any Trustee/Director.
CODES OF ETHICS
The Trust, the Adviser and the Trust's principal underwriter have adopted codes of ethics under Rule 17j-1 of the Investment Company Act of 1940. These codes permit personnel subject to the codes to invest in securities, including securities that may be purchased or held by the Trust.
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 under the Investment Management Agreement. 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 trustees 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 approximately 100% 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.
DESCRIPTION OF SHARES
COMMON SHARES
The Trust intends to hold annual meetings of shareholders so long as the common shares are listed on a national securities exchange and such meetings are required as a condition to such listing.
PREFERRED SHARES
Although the terms of the Preferred Shares, including their dividend rate, voting rights, liquidation preference and redemption provisions, will be determined by the board of trustees (subject to applicable law and the Trust's Agreement and Declaration of Trust) when it authorizes a Preferred Shares offering, the Trust currently expects that the preference on distributions, liquidation preference, voting rights and redemption provisions of the Preferred Shares will likely be as stated in the prospectus.
If the board of trustees determines to proceed with an offering of Preferred Shares, the terms of the Preferred Shares may be the same as, or different from, the terms described in the prospectus, subject to applicable law and the Trust's Agreement and Declaration of Trust. The board of trustees, without the approval of the holders of common shares, may authorize an offering of Preferred Shares or may determine not to authorize such an offering, and may fix the terms of the preferred shares to be offered.
REPURCHASE OF COMMON SHARES
The Trust is a closed-end investment company and as such its 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 trustees 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 trustees 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 the Trust's Preferred Shares 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 Securities and Exchange Commission 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 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 trustees would have to comply with the Securities Exchange Act of 1934, as amended, and the Investment Company 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 trustees at the time it
considers such issue, it is the board's present policy, which may be
changed by the board of trustees, 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 Investment Company 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
or New York banks, (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 trustees may in the future modify
these conditions in light of experience.
The repurchase by the Trust of its 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 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.
Before deciding whether to take any action if the common shares trade below net asset value, the Trust's board of trustees 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 trustees may determine that, in the interest of the Trust and its shareholders, no action should be taken.
TAX MATTERS
FEDERAL INCOME TAX MATTERS
The following discussion of Federal income tax matters is based upon the advice of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the Trust.
The Trust intends to qualify under Subchapter M of the Internal Revenue Code of 1986, as amended, for tax treatment as a regulated investment company. In order to qualify as a regulated investment company, the Trust must satisfy certain requirements relating to the source of its income, diversification of its assets, and distributions of its income to its shareholders. First, the Trust must derive at least 90% of its annual gross income (including tax-exempt interest) from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock or securities or foreign currencies, or other income (including but not limited to gains from options and futures) derived with respect to its business of investing in such stock, securities or currencies (the "90% gross income test"). Second, the Trust must diversify its holdings so that, at the close of each quarter of its taxable year, (i) at least 50% of the value of its total assets is comprised of cash, cash items, United States Government securities, securities of other regulated investment companies and other securities limited in respect of any one issuer to an amount not greater in value than 5% of the value 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 value of the total assets is invested in the securities of any one issuer (other than United States Government securities and securities of other regulated investment companies) or two or more issuers controlled by the Trust and engaged in the same, similar or related trades or business.
As a regulated investment company, the Trust will not be subject to Federal income tax in any taxable year for which it distributes at least 90% of the sum of (i) its "investment company taxable income" (which includes dividends, taxable interest, taxable original issue discount and market discount income, income from securities lending, net short-term capital gain in excess of long-term capital loss, and any other taxable income other than "net capital gain" (as defined below) and is reduced by deductible expenses) and (ii) its net tax-exempt interest (the excess of its gross tax-exempt interest income over certain disallowed deductions). The Trust may retain for investment its net capital gain (which consists of the excess of its net long-term capital gain over its net short-term capital loss). However, if the Trust retains any net capital gain or any investment company taxable income, it will be subject to tax at regular corporate rates on the amount retained. If the Trust retains any net capital gain, it may designate the retained amount as undistributed capital gains in a notice to its holders of common shares who, if subject to Federal income tax on long-term capital gains, (i) will be required to include in income for Federal income tax purposes, as long-term capital gain, their share of such undistributed amount and (ii) will be entitled to credit their proportionate shares of the tax paid by the Trust against their Federal income tax liabilities, if any, and to claim refunds to the extent the credit exceeds such liabilities. For Federal income tax purposes, the tax basis of shares owned by a holder of common shares of the Trust will be increased by an amount equal under current law to the difference between the amount of undistributed capital gains included in the holders of common shares' gross income and the tax deemed paid by the holders of common shares under clause (ii) of the preceding sentence. The Trust intends to distribute at least annually to its shareholders all or substantially all of its net tax-exempt interest and any investment company taxable income and net capital gain.
Treasury regulations permit a regulated investment company, in
determining its investment company taxable income and net capital gain,
i.e., the excess of net long-term capital gain over net short-term capital
loss for any taxable year, to elect (unless it has made a taxable year
election for excise tax purposes as discussed below) to treat all or part
of any net capital loss, any net long-term capital loss or any net foreign
currency loss incurred after October 31 as if it had been incurred in the
succeeding year.
Distributions by the Trust of investment company taxable income if any, will be taxable to shareholders as ordinary income whether received in cash or additional shares. Net long-term capital gains realized by the Trust and distributed to shareholders in cash or additional shares will be taxable to shareholders as long-term capital gains regardless of the length of time investors have owned shares of the Trust. Distributions by the Trust that do not constitute ordinary income dividends or capital gain dividends will be treated as a return of capital to the extent of (and in reduction of) the shareholders' tax basis in his or her shares. Any excess will be treated as gain from the sale of his or her shares, as discussed below.
If the Trust engages in hedging transactions involving financial futures and options, these transactions will be subject to special tax rules, the effect of which may be to accelerate income to the Trust, defer the Trust's losses, cause adjustments in the holding periods of the Trust's securities, convert long-term capital gains into short-term capital gains and convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to holders of common shares.
Prior to purchasing shares in the Trust, an investor should carefully consider the impact of dividends which are expected to be or have been declared, but not paid. Any dividend declared shortly after a purchase of such shares prior to the record date will have the effect of reducing the per share net asset value by the per share amount of the dividend.
Although dividends generally will be treated as distributed when paid, dividends declared in October, November or December, payable to holders of common shares 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 holder of common shares) on December 31.
Federal tax law imposes an alternative minimum tax with respect to both corporations and individuals based on certain items of tax preference. To the extent the Trust receives income treated as tax preference items for purposes of the alternative minimum tax, a portion of the dividends paid by it, although otherwise exempt from Federal income tax, will be taxable to holders of common shares to the extent that their tax liability is determined under the alternative minimum tax. The Trust will annually supply holders of common shares with reports indicating the amount and nature of all income distributed to them as well as the percentage of Trust income attributable to tax preference items subject to the alternative minimum tax.
The Trust intends to invest in sufficient tax-exempt municipal bonds to permit payment of "tax-exempt dividends" (as defined in the Internal Revenue Code of 1986, as amended). Except as provided below, exempt-interest dividends paid to holders of common shares are not includable in the holder's gross income for Federal income tax purposes.
Interest on certain "private-activity bonds" is an item of tax preference subject to the alternative minimum tax on individuals and corporations. The Trust may invest a portion of its assets in municipal bonds subject to this provision so that a portion of its exempt-interest dividends is an item of tax preference to the extent such dividends represent interest received from these private- activity bonds. Accordingly, investment in the Trust could cause a holder of common shares to be subject to, or result in an increased liability under, the alternative minimum tax.
Exempt-interest dividends are included in determining what portion, if any, of a person's social security and railroad retirement benefits will be includable in gross income subject to Federal income tax.
Although exempt-interest dividends generally may be treated by holders of common shares as items of interest excluded from their gross income, each holder is advised to consult his tax adviser with respect to whether exempt-interest dividends retain their exclusion if the shareholder would be treated as a "substantial user," or a "related person" of a substantial user, of the facilities financed with respect to any of the tax-exempt obligations held by the Trust. "Substantial user" is defined under the Treasury Regulations to include a non-exempt person who regularly uses in his trade or business a part of the facilities financed with the tax- exempt obligations and whose gross revenues derived from such facilities exceed 5% of the useable area of the facilities or from whom the facilities or a part thereof were specifically constructed, reconstructed or acquired. "Related persons" include certain natural persons, affiliated corporations, a partnership and its partners and an S corporation and its shareholders.
For 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 municipal bonds, and therefore all exempt-interest dividends received from the Trust, are included in calculating adjusted current earnings.
The redemption or exchange of common shares normally will result in capital gain or loss to the holders of common shares. Generally, a shareholder's gain or loss will be long-term gain or loss if the shares have been held for more than one year. Present law taxes both long- and short-term capital gains of corporations at the rates applicable to ordinary income. For non-corporate taxpayers, however, net capital gains will be taxed at a maximum rate of 20%, while short-term capital gains and other ordinary income will be taxed at a maximum rate of 39.6%. Because of the limitations on itemized deductions and the deduction for personal exemptions applicable to higher income taxpayers, the effective tax rate may be higher in certain circumstances.
All or a portion of a sales charge paid in purchasing common shares cannot be taken into account for purposes of determining gain or loss on the redemption or exchange of such shares within 90 days after their purchase to the extent common shares or shares of another fund are subsequently acquired without payment of a sales charge pursuant to the reinvestment or exchange privilege. Any disregarded portion of such charge will result in an increase in the shareholder's tax basis in the shares subsequently acquired. In addition, no loss will be allowed on the redemption or exchange of common shares if the shareholder purchases other shares of the Trust (whether through reinvestment of distributions or otherwise) or the shareholder acquires or enters into a contract or option to acquire securities that are substantially identical to shares of the Trust within a period of 61 days beginning 30 days before and ending 30 days after such redemption or exchange. If disallowed, the loss will be reflected in an adjustment to the basis of the shares acquired. Further, any losses realized on the sale or exchange of common shares held for six months or less will be disallowed to the extent of any exempt-interest dividends received with respect to such common shares and, if not disallowed, such losses will be treated as long-term capital losses to the extent of any capital gain dividends received with respect to such common shares.
In order to avoid a 4% Federal excise tax, the Trust must distribute or be deemed to have distributed by December 31 of each calendar year at least 98% of its taxable ordinary income for such year, at least 98% of the excess of its realized capital gains over its realized capital losses (generally computed on the basis of the one-year period ending on October 31 of such year) and 100% of any taxable ordinary income and any excess of realized capital gains over realized capital losses for the prior year that was not distributed during such year and on which the Trust paid no Federal income tax. For purposes of the excise tax, a regulated investment company may reduce its capital gain net income (but not below its net capital gain) by the amount of any net ordinary loss for the calendar year. The Trust intends to make timely distributions in compliance with these requirements and consequently it is anticipated that it generally will not be required to pay the excise tax.
If in any year the Trust should fail to qualify under Subchapter M for tax treatment as a regulated investment company, the Trust would incur a regular corporate Federal income tax upon its income for that year, and distributions to its shareholders would be taxable to shareholders as ordinary dividend income for Federal income tax purposes to the extent of the Trust's earnings and profits.
The Trust is required in certain circumstances to withhold 31% of taxable dividends and certain other payments paid to non-corporate shareholders who have not furnished 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.
The foregoing is a general and abbreviated summary of the provisions of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations presently in effect as they directly govern the taxation of the Trust and its shareholders. For complete provisions, reference should be made to the pertinent Code sections and Treasury Regulations. The Code and the Treasury Regulations are subject to change by legislative or administrative action, and any such change may be retroactive with respect to Trust transactions. Holders of common shares are advised to consult their own tax advisers for more detailed information concerning the Federal taxation of the Trust and the income tax consequences to its holders of common shares.
See Appendix B for additional information on Federal taxation.
PERFORMANCE RELATED AND COMPARATIVE INFORMATION
Municipal bonds can provide tax-free income. Because the Trust expects that a substantial portion of its investments will pay interest that is taxable under the Federal alternative minimum tax, the Trust may not be a suitable investment for shareholders that are subject to the Federal alternative minimum tax.
The Trust may quote certain performance-related information and may compare certain aspects of its portfolio and structure to other substantially similar closed-end funds as categorized by Lipper, Inc. ("Lipper"), Morningstar Inc. or other independent services. Comparison of the Trust to an alternative investment should be made with consideration of differences in features and expected performance. The Trust may obtain data from sources or reporting services, such as Bloomberg Financial ("Bloomberg") and Lipper, that the Trust believes to be generally accurate.
Past performance is not indicative of future results. At the time common shareholders sell their shares, they may be worth more or less than their original investment.
EXPERTS
The Statement of Net Assets of the Trust as of May , 2001 appearing in this statement of additional information has been audited by , independent auditors, as set forth in their report thereon appearing elsewhere herein, and is included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. , located at , provides accounting and auditing services to the Trust.
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 (the "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 Commission's principal office in Washington, D.C., and copies of all or any part thereof may be obtained from the Commission upon the payment of certain fees prescribed by the Commission.
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees of BlackRock Municipal Income Trust
We have audited the accompanying statement of net assets of BlackRock Municipal Income Trust (the "Trust") as of , 2001. This statement of net assets is the responsibility of the Trust's management. Our responsibility is to express an opinion on this statement of net assets based on our audit.
We conducted our audit in accordance with generally accepted accounting standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of net assets is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of net assets. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statement of net assets presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statement of net assets referred to above presents fairly, in all material respects, the financial position of the Trust at , 2001, in conformity with generally accepted accounting principles.
THE BLACKROCK MUNICIPAL INCOME TRUST
STATEMENT OF NET ASSETS
, 2001
ASSETS:
Cash.................................................... $100,000
--------
NET ASSETS...................................................... $100,000
========
NET ASSETS REPRESENTS:
Cumulative Preferred Shares, $.001 par value; unlimited
number of shares authorized, no shares outstanding.....
Common Shares, $.001 par value; unlimited number of
shares authorized, shares outstanding.............
Paid-in surplus................................... ...... --------
$100,000
Net asset value per Common Share outstanding ($100,000 divided
by __________ Common Shares outstanding)...................... $
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NOTES
APPENDIX A
RATINGS OF INVESTMENTS
Standard & Poor's Corporation--A brief description of the applicable Standard & Poor's Corporation ("S&P") rating symbols and their meanings (as published by S&P) follows:
Long Term Debt
An S&P corporate or municipal debt rating is a current assessment of the creditworthiness of an obligor with respect to a specific obligation. This assessment may take into consideration obligors such as guarantors, insurers, or lessees.
The debt rating is not a recommendation to purchase, sell, or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor.
The ratings are based on current information furnished by the issuer or obtained by S&P from other sources it considers reliable. S&P does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of, such information, or based on other circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default--capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights.
Investment Grade
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in
small degree.
A Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in
higher rated categories.
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Speculative Grade Rating
Debt rated "BB", "B", "CCC", "CC" and "C" is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. "BB" indicates the least degree of speculation and "C" the highest. While such debt will likely have some quality and protective characteristics these are outweighed by major uncertainties or major exposures to adverse conditions.
BB Debt rated "BB" has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to inadequate capacity to meet timely interest and principal payments. The "BB" rating category is also used for debt subordinated to senior debt that is assigned an actual or implied "BBB--" rating.
B Debt rated "B" has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The "B" rating category is also used for debt subordinated to senior debt that is assigned an actual or implied "BB" or "BB--" rating.
CCC Debt rated "CCC" has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and
economic conditions to meet timely payment of interest and
repayment of principal. In the event of adverse business,
financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
The "CCC" rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied "B" or "B--"
rating.
CC The rating "CC" typically is applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" debt rating.
C The rating "C" typically is applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC--" debt rating.
The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed, but debt service payments are continued.
CI The rating "CI" is reserved for income bonds on which no interest is
being paid.
D Debt rated "D" is in payment default. The "D" rating category is
used when interest payments or principal payments are not made on
the date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period. The "D" rating also will be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
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Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.
Provisional Ratings: The letter "p" indicates that the rating is provisional. A provisional rating assumes the successful completion of the project financed by the debt being rated and indicates that payment of debt service requirements is largely or entirely dependent upon the successful and timely completion of the project. This rating, however, while addressing credit quality subsequent to completion of the project, makes no comment on the likelihood of, or the risk of default upon failure of, such completion. The investor should exercise judgment with respect to such likelihood and risk.
L The letter "L" indicates that the rating pertains to the principal amount of those bonds to the extent that the underlying deposit collateral is Federally insured by the Federal Savings & Loan Insurance Corp. or the Federal Deposit Insurance Corp.* and interest is adequately collateralized. In the case of certificates of deposit the letter "L" indicates that the deposit, combined with other deposits being held in the same right and capacity will be honored for principal and accrued pre-default interest up to the Federal insurance limits within 30 days after closing of the insured institution or, in the event that the deposit is assumed by a successor insured institution, upon maturity.
* Continuance of the rating is contingent upon S&P's receipt of an executed copy f the escrow agreement or closing documentation confirming investments and cash flow.
NR Indicates no rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular type of obligation as a matter of policy.
Municipal Notes
An S&P note rating reflects the liquidity concerns and market access risks unique to notes. Notes due in 3 years or less will likely receive a note rating. Notes maturing beyond 3 years will most likely receive a long-term debt rating. The following criteria will be used in making that assessment:
-- Amortization schedule (the larger the final maturity relative to other maturities, the more likely it will be treated as a note).
-- Source of payment (the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics
will be given a plus (+) designation.
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SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
A note rating is not a recommendation to purchase, sell, or hold a security inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished to S&P by the issuer or obtained by S&P from other sources it considers reliable. S&P does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in or unavailability of such information or based on other circumstances.
Commercial Paper
An S&P commercial paper rating is a current assessment of the likelihood of timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories, ranging from "A-1" for the highest quality obligations to "D" for the lowest. These categories are as follows:
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus
sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high
as for issues designated "A-1."
A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
B Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated "D" is in payment default. The "D" rating category is
used when interest payments or principal payments are not made on
the date due, even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period.
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A commercial rating is not a recommendation to purchase, sell, or hold a security inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished to S&P by the issuer or obtained by S&P from other sources it considers reliable. S&P does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in or unavailability of such information or based on other circumstances.
Moody's Investors Service, Inc.--A brief description of the applicable Moody's Investors Service, Inc. ("Moody's") rating symbols and their meanings (as published by Moody's) follows:
Municipal Bonds
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate
and thereby not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in
this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long
period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect
to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
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Con(..) Bonds for which the security depends upon the completion of some act or the fulfillment of some condition are rated conditionally. These are bonds secured by (a) earnings of projects under construction, (b) earnings of projects unseasoned in operation experience, (c) rentals which begin when facilities are completed, or (d) payments to which some other limiting condition attaches. Parenthetical rating denotes probable credit stature upon completion of construction or elimination of basis of condition.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating category from Aa to B in the public finance sectors. The modifier 1 indicates that the issuer is in the higher end of its letter rating category; the modifier 2 indicates a mid-range ranking; the modifier 3 indicates that the issuer is in the lower end of the letter ranking category.
Short-Term Loans
MIG 1/VMIG 1 This designation denotes best quality. There is
present strong protection by established cash flows,
superior liquidity support or demonstrated broadbased access
to the market for refinancing.
MIG 2/VMIG 2 This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG 3/VMIG 3 This designation denotes favorable quality. All
security elements are accounted for but there is lacking the
undeniable strength of the preceding grades. Liquidity and
cash flow protection may be narrow and market access for
refinancing is likely to be less well-established.
MIG 4/VMIG 4 This designation denotes adequate quality.
Protection commonly regarded as required of an investment
security is present and although not distinctly or
predominantly speculative, there is specific risk.
S.G. This designation denotes speculative quality. Debt instruments
in this category lack margins of protection.
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Commercial Paper
Issuers rated Prime-1 (or related supporting institutions) have a superior capacity for repayment of short-term promissory obligations. Prime-1 repayment capacity will normally be evidenced by the following characteristics:
-- Leading market positions in well-established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structures with moderate reliance on debt and ample asset protection.
-- Broad margins in earnings coverage of fixed financial charges and high internal cash generation.
-- Well-established access to a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong capacity for repayment of short-term promissory obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or related supporting institutions) have an acceptable capacity for repayment of short-term promissory obligations. The effect of industry characteristics and market composition may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and the requirement for relatively high financial leverage. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
Fitch IBCA, Inc.--A brief description of the applicable Fitch IBCA, Inc. ("Fitch") ratings symbols and meanings (as published by Fitch) follows:
Long-Term Credit Ratings
Investment Grade
AAA Highest credit quality. 'AAA' ratings denote the lowest expectation
of credit risk. They are assigned only in case of exceptionally
strong capacity for timely payment of financial commitments. This
capacity is highly unlikely to be adversely affected by foreseeable
events.
AA Very high credit quality. 'AA' ratings denote a very low
expectation of credit risk. They indicate very strong capacity for
timely payment of financial commitments. This capacity is not
significantly vulnerable to foreseeable events.
A High credit quality. 'A' ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is
considered strong. This capacity may, nevertheless, be more
vulnerable to changes in circumstances or in economic conditions
than is the case for higher ratings.
BBB Good credit quality. 'BBB' ratings indicate that there is currently
a low expectation of credit risk. The capacity for timely payment
of financial commitments is considered adequate, but adverse
changes in circumstances and in economic conditions are more likely
to impair this capacity. This is the lowest investment-grade
category.
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Speculative Grade
BB Speculative. 'BB' ratings indicate that there is a
possibility of credit risk developing, particularly
as the result of adverse economic change over time;
however, business or financial alternatives may be
available to allow financial commitments to be met.
Securities rated in this category are not investment
grade.
B Highly speculative. 'B' ratings indicate that
significant credit risk is present, but a limited
margin of safety remains. Financial commitments are
currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable
business and economic environment.
CCC, CC, C High default risk. Default is a real
possibility. Capacity for meeting financial
commitments is solely reliant upon sustained,
favorable business or economic developments. A 'CC'
rating indicates that default of some kind appears
probable. 'C' ratings signal imminent default.
DDD, DD, and D Default. The ratings of obligations in this
category are based on their prospects for achieving
partial or full recovery in a reorganization or
liquidation of the obligor. While expected recovery
values are highly speculative and cannot be estimated
with any precision, the following serve as general
guidelines. 'DDD' obligations have the highest
potential for recovery, around 90%-100% of
outstanding amounts and accrued interest. 'DD'
indicates potential recoveries in the range of
50%-90%, and 'D' the lowest recovery potential, i.e.,
below 50%.
Entities rated in this category have defaulted on
some or all of their obligations. Entities rated
'DDD' have the highest prospect for resumption of
performance or continued operation with or without a
formal reorganization process. Entities rated 'DD'
and 'D' are generally undergoing a formal
reorganization or liquidation process; those rated
'DD' are likely to satisfy a higher portion of their
outstanding obligations, while entities rated 'D'
have a poor prospect for repaying all obligations.
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Short-Term Credit Ratings
A short-term rating has a time horizon of less than 12 months for most obligations, or up to three years for U.S. public finance securities, and thus places greater emphasis on the liquidity necessary to meet financial commitments in a timely manner.
F1 Highest credit quality. Indicates the strongest capacity for timely payment of financial commitments; may have an added "+" to denote any exceptionally strong credit feature.
F2 Good credit quality. A satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of the higher ratings.
F3 Fair credit quality. The capacity for timely payment of financial commitments is adequate; however, near-term adverse changes could result in a reduction to non-investment grade.
B Speculative. Minimal capacity for timely payment of financial commitments, plus vulnerability to near-term adverse changes in financial and economic conditions.
C High default risk. Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon a sustained, favorable business and economic environment.
D Default. Denotes actual or imminent payment default.
Notes:
"+" or "-" may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the 'AAA' long-term rating category, to categories below 'CCC', or to short-term ratings other than 'F1'.
'NR' indicates that Fitch IBCA does not rate the issuer or issue in question.
'Withdrawn': A rating is withdrawn when Fitch IBCA deems the amount of information available to be inadequate for rating purposes, or when an obligation matures, is called, or refinanced.
Rating alert: Ratings are placed on Rating alert to notify investors that there is a reasonable probability of a rating change and the likely direction of such change. These are designated as "Positive", indicating a potential upgrade, "Negative", for a potential downgrade, or "Evolving", if ratings may be raised, lowered or maintained. Rating alert is typically resolved over a relatively short period.
APPENDIX B
TAXABLE EQUIVALENT YIELD TABLE
The taxable equivalent yield is the current yield you would need to earn on a taxable investment in order to equal a stated tax-free yield on a municipal investment. To assist you to more easily compare municipal investments like the Trust with taxable alternative investments, the table below presents the taxable equivalent yields for a range of hypothetical tax-free yields and tax rates:
2000 FEDERAL TAXABLE VS. TAX-FREE YIELDS
FEDERAL
TAX TAXABLE EQUIVALENT ESTIMATE CURRENT RETURN
BRACKET 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
-------------------------------------------------------------------------
28.0% 5.56% 6.25% 6.94% 7.64% 8.33% 9.03%
31.0% 5.80% 6.52% 7.25% 7.97% 8.70% 9.42%
36.0% 6.25% 7.03% 7.81% 8.59% 9.38% 10.16%
39.6% 6.62% 7.45% 8.28% 9.11% 9.93% 10.76%
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APPENDIX C
GENERAL CHARACTERISTICS AND RISKS
OF HEDGING TRANSACTIONS
In order to manage the risk of its securities portfolio, including management, or to enhance income or gain as described in the prospectus, the Trust will engage in Additional Investment Management Techniques. The Trust will engage in such activities 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 applicable regulations of the CFTC. Certain Additional Investment Management Techniques may give rise to taxable income.
PUT AND CALL OPTIONS ON SECURITIES AND INDICES
The Trust may purchase and sell put and call options on securities and indices. A put option gives the purchaser of the option the right to sell and the writer the obligation to buy the underlying security at the exercise price during the option period. The Trust may also purchase and sell options on bond indices ("index options"). 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 bond 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 could protect the Trust's holdings in a security or a number of securities 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 or index at the exercise price during the option period or for a specified period prior to a fixed date. The purchase of a call option on a security could 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. Listed options are issued by the Options Clearing Corporation ("OCC") which guarantees the performance of the obligations of the parties to such options.
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 on option exchanges. 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 United States government securities dealers recognized by the Federal Reserve Bank of 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 RELATED OPTIONS
Characteristics. The Trust may sell financial futures contracts or purchase put and call options on such futures as a hedge against anticipated interest rate changes or other market movements. 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 securities or commodities 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 generally in the future by regulatory action. An outstanding futures contract is valued daily and the payment in case 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 the position may not be able to be closed if no offsetting transaction can be arranged.
Limitations on Use of Futures and Options on Futures. The Trust's use of futures and options on futures will in all cases be consistent with applicable regulatory requirements and in particular the rules and regulations of the CFTC. Under such regulations the Trust currently may enter into such transactions without limit for bona fide hedging purposes, including risk management and duration management and other portfolio strategies. The Trust may also engage in transactions in futures contracts or related options for non- hedging purposes to enhance income or gain provided that the Trust will not enter into a futures contract or related option (except for closing transactions) for purposes other than bona fide hedging, or risk management including duration management 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 liquidation value, i.e., net 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 equivalents will be maintained and marked to market on a daily basis in an amount equal to the market value of the contract. The Trust reserves the right to comply with such different standard as may be established from time to time by CFTC rules and regulations with respect to the purchase or sale of futures contracts or options thereon.
Segregation and Cover Requirements. Futures contracts, interest rate swaps, caps, floors and collars, short sales, reverse repurchase agreements and dollar rolls, and listed or OTC options on securities, indices and futures contracts sold by the Trust are generally subject to segregation and coverage requirements of either the CFTC or the SEC, with the result that, if the Trust does not hold the security or futures contract underlying the instrument, the Trust will be required to segregate on an ongoing basis with its custodian, cash, U.S. government securities, or other liquid high grade debt obligations in an amount at least equal to the Trust's obligations with respect to such instruments. Such amounts fluctuate as the obligations increase or decrease. The segregation requirement can result in the Trust maintaining securities positions it would otherwise liquidate, segregating assets at a time when it might be disadvantageous to do so or otherwise restrict portfolio management.
Additional Investment Management Techniques present certain risks. With respect to hedging and risk management, 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 position. The same is true for such instruments entered into for income or gain. In addition, certain 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 without incurring losses substantially greater than the initial deposit. Although the contemplated use of these instruments predominantly for hedging should tend to minimize the risk of loss due to a decline in the value of the 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 successfully utilize Additional Investment Management Techniques will depend on the Adviser's ability to predict pertinent market movements and sufficient correlations, which cannot be assured. Finally, the daily 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. Losses due to the use of Additional Investment Management Techniques will reduce net asset value.
PART C
OTHER INFORMATION
Part B - None.
* Filed herewith. ** To be filed by amendment.
Registration fees.............................................. $ *
New York Stock Exchange listing fee............................ *
Printing (other than certificates)............................. *
Engraving and printing certificates............................ *
Fees and expenses of qualification under
state securities laws (excluding fees
of counsel).................................................. *
Accounting fees and expenses................................... *
Legal fees and expenses........................................ *
NASD fee....................................................... *
Miscellaneous.................................................. *
Total................................................... $ *
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* To be furnished by amendment.
Prior to March 30, 2001 the Registrant had no existence.
Item 28. Number of Holders of Shares
Number of
Title of class Record Holders
-------------- --------------
Shares of Beneficial Interest 0
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Article V of the Registrant's Agreement and Declaration of Trust provides as follows:
Section 5.1. No Shareholder of the Trust shall be subject in such capacity to any personal liability whatsoever to any Person in connection with Trust property or the acts, obligations or affairs of the Trust. Shareholders shall have the same limitation of personal liability as is extended to stockholders of a private corporation for profit incorporated under the general corporation law of the State of Delaware. No Trustee or officer of the Trust shall be subject in such capacity to any personal liability whatsoever to any Person, other than the Trust or its Shareholders, in connection with Trust Property or the affairs of the Trust, save only liability to the Trust or its Shareholders arising from bad faith, willful misfeasance, gross negligence (negligence in the case of those Trustees or officers who are directors, officers or employees of the Trust's investment advisor ("Affiliated Indemnitees")) or reckless disregard for his duty to such person; and, subject to the foregoing exception, all such persons shall look solely to the Trust property for satisfaction of claims of any nature arising in connection with the affairs of the Trust. If any shareholder, trustee or officer, as such, of the Trust, is made a party to any suit or proceeding to enforce any such liability, subject to the foregoing exception, he shall not, on account thereof, be held to any personal liability.
Section 5.2. a. The Trust hereby agrees to indemnify the Trustees
and officers of the Trust (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 reasonable counsel
fees 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 5.2 by reason of his having acted in any such
capacity, except with respect to any matter as to which he shall not have
acted in good faith in the reasonable belief that his action was in the
best interest of the Trust or, in the case of any criminal proceeding, as
to which he shall have had reasonable cause to believe that the conduct was
unlawful, provided, however, that no indemnitee shall be indemnified
hereunder against any liability to any person or any expense of such
indemnitee arising by reason of (i) willful misfeasance, (ii) bad faith,
(iii) gross negligence (negligence in the case of Affiliated Indemnitees),
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"). Notwithstanding the
foregoing, 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 Trustees.
b. Notwithstanding the foregoing, no indemnification shall be made hereunder unless there has been a determination (i) by a final decision on the merits by a court or other body of competent jurisdiction before whom the issue of entitlement to indemnification hereunder was brought that such indemnitee is entitled to indemnification hereunder or, (ii) in the absence of such a decision, by (1) a majority vote of a quorum of those trustees who are neither "interested persons" of the (as defined in Section 2(a)(19) of the Investment Company Act) nor parties to the proceeding ("Disinterested Non-Party Trustees"), that the indemnitee is entitled to indemnification hereunder, or (2) if such quorum is not obtainable or even if obtainable, if such majority so directs, independent legal counsel in a written opinion conclude that the indemnitee should be entitled to indemnification hereunder. All determinations to make advance payments in connection with the expense of defending any proceeding shall be authorized and made in accordance with the immediately succeeding paragraph (c) below.
c. 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 by the indemnitee of the indemnitee's good faith belief that the standards of conduct necessary for indemnification have been met and a written undertaking to reimburse the Trust unless it is subsequently determined that he is entitled to such indemnification and if a majority of the Trustees determine that the applicable standards of conduct necessary for indemnification appear to have been met. In addition, at least one of the following conditions must be met: (i) the indemnitee shall provide adequate security for his undertaking, (ii) the Trust shall be insured against losses arising by reason of any lawful advances, or (iii) a majority of a quorum of the Disinterested Non-Party Trustees, or if a majority vote of such quorum so direct, independent legal counsel in a written opinion, shall conclude, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is substantial reason to believe that the indemnitee ultimately will be found entitled to indemnification.
d. The rights accruing to any indemnitee under these provisions shall not exclude any other right to which he may be lawfully entitled.
e. Subject to any limitations provided by the Investment Company Act and this Declaration, the Trust shall have the power and authority to indemnify other Persons providing services to the Trust to the full extent provided by law as if the Trust were a corporation organized under the Delaware General Corporation Law provided that such indemnification has been approved by a majority of the Trustees.
Insofar as indemnification for liabilities arising under the Act, may be permitted to Trustees, officers and controlling persons of the Trust, pursuant to the foregoing provisions or otherwise, the Trust has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities 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 Trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such Trustee, 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 Securities Act and will be governed by the final adjudication of such issue. Reference is made to Article of the underwriting agreement attached as Exhibit , which is incorporated herein by reference.
Not Applicable
The Registrant's accounts, books and other documents are currently located at the offices of the Registrant, c/o BlackRock Advisors, Inc., 100 Bellevue Parkway, Wilmington, Delaware 19809 and at the offices of State Street Bank and Trust Company, the Registrant's Custodian, Transfer Agent and Dividend Disbursing Agent.
Not Applicable
(1) The Registrant hereby undertakes to suspend the offering of its units until it amends its prospectus if (a) subsequent to the effective date of its registration statement, the net asset 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) The Registrant hereby undertakes that (i) for the purpose of
determining any liability under the 1933 Act, the information omitted from
the form of prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant under Rule 497(h) under the 1933 Act shall be deemed to be part
of this registration statement as of the time it was declared effective;
(ii) for the purpose of determining any liability under the 1933 Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of the securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) Not applicable
(4) Not applicable
(5) (a) For the purposes of determining any liability under the
Securities Act of 1933, the information omitted form the form of prospectus
filed as part of a registration statement in reliance upon Rule 430A and
contained in the form of prospectus filed by the Registrant under Rule 497
(h) under the Securities Act of 1933 shall be deemed to be part of the
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) The Registrant undertakes to send by first class mail or other means designed to ensure equally prompt delivery within two business days of receipt of a written or oral request, any Statement of Additional Information.
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 3rd day of April, 2001.
/s/ Laurence D. Fink ------------------------ Laurence D. Fink President |
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities set forth below on the 3rd day of April, 2001.
Name Title
---- -----
/s/ Laurence D. Fink
------------------------
Laurence D. Fink Initial Sole Trustee,
Principal Executive Officer
and Principal Financial and
Accounting Officer
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INDEX TO EXHIBITS
(a) Agreement and Declaration of Trust.
(b) By-Laws.
(e) Form of Dividend Reinvestment Plan.
(g) Form of Investment Management Agreement.
(j) Form of Custodian Agreement.
(k)(1) Form of Expense Reimbursement Agreement
(p) Form of Initial Subscription Agreement.
(r)(1) Code of Ethics of Trust
(r)(2) Code of Ethics of Adviser
Exhibit (a)
BLACKROCK
MUNICIPAL INCOME TRUST
AGREEMENT AND DECLARATION OF TRUST
DATED AS OF
MARCH 30, 2001
TABLE OF CONTENTS
ARTICLE I
The Trust
1.1 Name...............................................2
1.2 Definitions........................................2
ARTICLE II
Trustees
2.1 Number and Qualification...........................4
2.2 Term and Election..................................4
2.3 Resignation and Removal............................5
2.4 Vacancies..........................................6
2.5 Meetings...........................................6
2.6 Officers...........................................7
ARTICLE III
Powers and Duties of Trustees
3.1 General............................................8
3.2 Investments........................................8
3.3 Legal Title........................................9
3.4 Issuance and Repurchase of Shares..................9
3.5 Borrow Money or Utilize Leverage...................9
3.6 Delegation; Committees............................10
3.7 Collection and Payment............................10
3.8 Expenses..........................................11
3.9 By-Laws...........................................11
3.10 Miscellaneous Powers.............................11
3.11 Further Powers...................................12
3.12 Trustee Action by Written Consent................13
ARTICLE IV
Advisory, Management and Distribution Arrangements
4.1 Advisory and Management Arrangements..............13
4.2 Distribution Arrangements.........................13
4.3 Parties to Contract...............................14
ARTICLE V
Limitations of Liability
and Indemnification
5.1 No Personal Liability of Shareholders,
Trustees, etc.....................................15
5.2 Mandatory Indemnification.........................15
5.3 No Bond Required of Trustees......................17
5.4 No Duty of Investigation; Notice in Trust
Instruments, etc..................................18
5.5 Reliance on Experts, etc..........................18
5.6 Indemnification of Shareholders...................19
ARTICLE VI
Shares of Beneficial Interest
6.1 Beneficial Interest...............................19
6.2 Other Securities..................................19
6.3 Rights of Shareholders............................20
6.4 Trust Only........................................20
6.5 Issuance of Shares................................21
6.6 Register of Shares................................21
6.7 Transfer Agent and Registrar......................22
6.8 Transfer of Shares................................22
6.9 Notices...........................................22
ARTICLE VII
Custodians
7.1 Appointment and Duties............................23
7.2 Central Certificate System........................24
ARTICLE VIII
Redemption
8.1 Redemptions.......................................24
8.2 Disclosure of Holding.............................24
ARTICLE IX
Determination of Net Asset Value
Net Income and Distributions
9.1 Net Asset Value...................................25
9.2 Distributions to Shareholders.....................25
9.3 Power to Modify Foregoing Procedures..............26
ARTICLE X
Shareholders
10.1 Meetings of Shareholders.........................27
10.2 Voting...........................................27
10.3 Notice of Meeting and Record Date................28
10.4 Quorum and Required Vote.........................28
10.5 Proxies, etc.....................................29
10.6 Reports..........................................29
10.7 Inspection of Records............................30
10.8 Shareholder Action by Written Consent............30
ARTICLE XI
Duration: Termination of Trust;
Amendment; Mergers, Etc.
11.1 Duration.........................................30
11.2 Termination......................................31
11.3 Amendment Procedure..............................32
11.4 Merger, Consolidation and Sale of sets...........33
11.5 Incorporation....................................33
11.6 Conversion.......................................34
11.7 Certain Transactions.............................35
ARTICLE XII
Miscellaneous
12.1 Filing...........................................37
12.2 Resident Agent...................................38
12.3 Governing Law....................................38
12.4 Counterparts.....................................39
12.5 Reliance by Third Parties........................39
12.6 Provisions in Conflict with Law or Regulation....39
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BLACKROCK MUNICIPAL INCOME TRUST
AGREEMENT AND DECLARATION OF TRUST
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST made as of the 30th day of March, 2001, by the Trustee hereunder, and by the holders of shares of beneficial interest issued hereunder as hereinafter provided.
WHEREAS, this Trust has been formed to carry on business as set forth more particularly hereinafter;
WHEREAS, this Trust is authorized to issue an unlimited number of its shares of beneficial interest all in accordance with the provisions hereinafter set forth;
WHEREAS, the Trustees have agreed to manage all property coming into their hands as Trustees of a Delaware business trust in accordance with the provisions hereinafter set forth; and
WHEREAS, the parties hereto intend that the Trust created by this Declaration and the Certificate of Trust filed with the Secretary of State of the State of Delaware on March 30, 2001 shall constitute a business trust under the Delaware Business Trust Act and that this Declaration shall constitute the governing instrument of such business trust.
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash, securities, and other assets which they may from time to time acquire in any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the following terms and conditions for the benefit of the holders from time to time of shares of beneficial interest in this Trust as hereinafter set forth.
ARTICLE I
The Trust
1.1 Name. This Trust shall be known as the "BlackRock Municipal Income Trust" and the Trustees shall conduct the business of the Trust under that name or any other name or names as they may from time to time determine.
1.2 Definitions. As used in this Declaration, the following terms shall have the following meanings:
The terms "Affiliated Person", "Assignment", "Commission", "Interested Person" and "Principal Underwriter" shall have the meanings given them in the 1940 Act.
"By-Laws" shall mean the By-Laws of the Trust as amended from time to time by the Trustees.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
"Commission" shall mean the Securities and Exchange Commission.
"Declaration" shall mean this Agreement and Declaration of Trust, as amended or amended and restated from time to time.
"Delaware Business Trust Statute" shall mean the provisions of the Delaware Business Trust Act, 12 Del. C.ss.3801, et. seq., as such Act may be amended from time to time.
"Fundamental Policies" shall mean the investment policies and restrictions as set forth from time to time in any Prospectus or contained in any current Registration Statement of the Trust filed with the Commission or as otherwise adopted by the Trustees and the Shareholders in accordance with the requirements of the 1940 Act and designated as fundamental policies therein as they may be amended in accordance with the requirements of the 1940 Act.
"Majority Shareholder Vote" shall mean a vote of a majority of the outstanding voting securities (as such term is defined in the 1940 Act) of the Trust.
"Person" shall mean and include individuals, corporations, partnerships, trusts, limited liability companies, associations, joint ventures and other entities, whether or not legal entities, and governments and agencies and political subdivisions thereof.
"Prospectus" shall mean the currently effective Prospectus of the Trust, if any, under the Securities Act of 1933, as amended.
"Shareholders" shall mean as of any particular time the holders of record of outstanding Shares of the Trust, at such time.
"Shares" shall mean the transferable units of beneficial interest into which the beneficial interest in the Trust shall be divided from time to time and includes fractions of Shares as well as whole Shares. In addition, Shares also means any preferred shares or preferred units of beneficial interest which may be issued from time to time, as described herein. All references to Shares shall be deemed to be Shares of any or all series or classes as the context may require.
"Trust" shall mean the trust established by this Declaration, as amended from time to time, inclusive of each such amendment.
"Trustees" shall mean the signatory to this Declaration, so long as he or she shall continue in office in accordance with the terms hereof, and all other persons who at the time in question have been duly elected or appointed and have qualified as trustees in accordance with the provisions hereof and are then in office.
"Trust Property" shall mean as of any particular time any and all property, real or personal, tangible or intangible, which at such time is owned or held by or for the account of the Trust or the Trustees in such capacity.
The "1940 Act" refers to the Investment Company Act of 1940 and the rules and regulations promulgated thereunder and exemptions granted therefrom, as amended from time to time.
ARTICLE II
Trustees
2.1 Number and Qualification. Prior to a public offering of Shares there may be a sole Trustee. Thereafter, the number of Trustees shall be no less than three or more than fifteen, provided, however, that the number of Trustees may be increased or decreased by a written instrument signed by a majority of the Trustees then in office. No reduction in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his term. An individual nominated as a Trustee shall be at least 21 years of age and not older than 80 years of age at the time of nomination and not under legal disability. Trustees need not own Shares and may succeed themselves in office.
2.2 Term and Election. The Board of Trustees 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 trustees constituting the entire Board of Trustees. Within the limits above specified, the number of the Trustees in each class shall be determined by resolution of the Board of Trustees. The term of office of all of the Trustees shall expire on the date of the first annual or special meeting of Shareholders following the effective date of the Registration Statement relating to the Shares under the Securities Act of 1933, as amended. The term of office of the first class shall expire on the date of the second annual meeting of Shareholders or special meeting in lieu thereof. The term of office of the second class shall expire on the date of the third annual meeting of Shareholders or special meeting in lieu thereof. The term of office of the third class shall expire on the date of the fourth annual meeting of Shareholders or special meeting in lieu thereof. Upon expiration of the term of office of each class as set forth above, the number of Trustees in such class, as determined by the Board of Trustees, shall be elected for a term expiring on the date of the third annual meeting of Shareholders or special meeting in lieu thereof following such expiration to succeed the Trustees whose terms of office expire. The Trustees shall be elected at an annual meeting of the Shareholders or special meeting in lieu thereof called for that purpose, except as provided in Section 2.3 of this Article and each Trustee elected shall hold office until his or her successor shall have been elected and shall have qualified.
2.3 Resignation and Removal. Any of the Trustees may resign their trust (without need for prior or subsequent accounting) by an instrument in writing signed by such Trustee and delivered or mailed to the Chairman, if any, the President or the Secretary and such resignation shall be effective upon such delivery, or at a later date according to the terms of the instrument. Any of the Trustees may be removed (provided the aggregate number of Trustees after such removal shall not be less than the minimum number required by Section 2.1 hereof) by the action of two-thirds of the remaining Trustees or the holders of two thirds of the Shares. Upon the resignation or removal of a Trustee, each such resigning or removed Trustee shall execute and deliver such documents as the remaining Trustees shall require for the purpose of conveying to the Trust or the remaining Trustees any Trust Property held in the name of such resigning or removed Trustee. Upon the incapacity or death of any Trustee, such Trustee's legal representative shall execute and deliver on such Trustee's behalf such documents as the remaining Trustees shall require as provided in the preceding sentence.
2.4 Vacancies. The term of office of a Trustee shall terminate and a vacancy shall occur in the event of the death, resignation, bankruptcy, adjudicated incompetence or other incapacity to perform the duties of the office, or removal, of a Trustee. Whenever a vacancy in the Board of Trustees shall occur, the remaining Trustees may fill such vacancy by appointing an individual having the qualifications described in this Article by a written instrument signed by a majority of the Trustees then in office or by election by the Shareholders, or may leave such vacancy unfilled or may reduce the number of Trustees (provided the aggregate number of Trustees after such reduction shall not be less than the minimum number required by Section 2.1 hereof). Any vacancy created by an increase in Trustees may be filled by the appointment of an individual having the qualifications described in this Article made by a written instrument signed by a majority of the Trustees then in office or by election by the Shareholders. No vacancy shall operate to annul this Declaration or to revoke any existing agency created pursuant to the terms of this Declaration. Whenever a vacancy in the number of Trustees shall occur, until such vacancy is filled as provided herein, the Trustees in office, regardless of their number, shall have all the powers granted to the Trustees and shall discharge all the duties imposed upon the Trustees by this Declaration.
2.5 Meetings. Meetings of the Trustees shall be held from time to time upon the call of the Chairman, if any, the President, the Secretary or any two Trustees. Regular meetings of the Trustees may be held without call or notice at a time and place fixed by the By-Laws or by resolution of the Trustees. Notice of any other meeting shall be mailed not less than 48 hours before the meeting or otherwise actually delivered orally or in writing not less than 24 hours before the meeting, but may be waived in writing by any Trustee either before or after such meeting. The attendance of a Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Trustee attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting has not been properly called or convened. The Trustees may act with or without a meeting. A quorum for all meetings of the Trustees shall be a majority of the Trustees. Unless provided otherwise in this Declaration, any action of the Trustees may be taken at a meeting by vote of a majority of the Trustees present (a quorum being present) or without a meeting by written consent of a majority of the Trustees.
Any committee of the Trustees, including an executive committee, if any, may act with or without a meeting. A quorum for all meetings of any such committee shall be a majority of the members thereof. Unless provided otherwise in this Declaration, any action of any such committee may be taken at a meeting by vote of a majority of the members present (a quorum being present) or without a meeting by written consent of a majority of the members.
With respect to actions of the Trustees and any committee of the Trustees, Trustees who are Interested Persons in any action to be taken may be counted for quorum purposes under this Section and shall be entitled to vote to the extent not prohibited by the 1940 Act.
All or any one or more Trustees may participate in a meeting of the Trustees or any committee thereof by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other; participation in a meeting pursuant to any such communications system shall constitute presence in person at such meeting.
2.6 Officers. The Trustees shall elect a President, a Secretary and a Treasurer and may elect a Chairman who shall serve at the pleasure of the Trustees or until their successors are elected. The Trustees may elect or appoint or may authorize the Chairman, if any, or President to appoint such other officers or agents with such powers as the Trustees may deem to be advisable. A Chairman shall, and the President, Secretary and Treasurer may, but need not, be a Trustee.
ARTICLE III
Powers and Duties of Trustees
3.1 General. The Trustees shall owe to the Trust and its Shareholders the same fiduciary duties as owed by directors of corporations to such corporations and their stockholders under the general corporation law of the State of Delaware. The Trustees shall have exclusive and absolute control over the Trust Property and over the business of the Trust to the same extent as if the Trustees were the sole owners of the Trust Property and business in their own right, but with such powers of delegation as may be permitted by this Declaration. The Trustees may perform such acts as in their sole discretion are proper for conducting the business of the Trust. The enumeration of any specific power herein shall not be construed as limiting the aforesaid power. Such powers of the Trustees may be exercised without order of or resort to any court.
3.2 Investments. The Trustees shall have power, subject to the Fundamental Policies in effect from time to time with respect to the Trust to:
(a) manage, conduct, operate and carry on the business of an investment company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise acquire, hold, pledge, sell, assign, transfer, exchange, distribute or otherwise deal in or dispose of any and all sorts of property, tangible or intangible, including but not limited to securities of any type whatsoever, whether equity or non-equity, of any issuer, evidences of indebtedness of any person and any other rights, interests, instruments or property of any sort and to exercise any and all rights, powers and privileges of ownership or interest in respect of any and all such investments of every kind and description, including, without limitation, the right to consent and otherwise act with respect thereto, with power to designate one or more Persons to exercise any of said rights, powers and privileges in respect of any of said investments. The Trustees shall not be limited by any law limiting the investments which may be made by fiduciaries.
3.3 Legal Title. Legal title to all the Trust Property shall be vested in the Trustees as joint tenants except that the Trustees shall have power to cause legal title to any Trust Property to be held by or in the name of one or more of the Trustees, or in the name of the Trust, or in the name of any other Person as nominee, custodian or pledgee, on such terms as the Trustees may determine, provided that the interest of the Trust therein is appropriately protected.
The right, title and interest of the Trustees in the Trust Property shall vest automatically in each person who may hereafter become a Trustee upon his due election and qualification. Upon the ceasing of any person to be a Trustee for any reason, such person shall automatically cease to have any right, title or interest in any of the Trust Property, and the right, title and interest of such Trustee in the Trust Property shall vest automatically in the remaining Trustees. Such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered.
3.4 Issuance and Repurchase of Shares. The Trustees shall have the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal in, Shares, including Shares in fractional denominations, and, subject to the more detailed provisions set forth in Articles VIII and IX, to apply to any such repurchase, redemption, retirement, cancellation or acquisition of Shares any funds or property whether capital or surplus or otherwise, to the full extent now or hereafter permitted by the laws of the State of Delaware governing business corporations.
3.5 Borrow Money or Utilize Leverage. Subject to the Fundamental Policies in effect from time to time with respect to the Trust, the Trustees shall have the power to borrow money or otherwise obtain credit or utilize leverage to the maximum extent permitted by law or regulation as such may be needed from time to time and to secure the same by mortgaging, pledging or otherwise subjecting as security the assets of the Trust, including the lending of portfolio securities, and to endorse, guarantee, or undertake the performance of any obligation, contract or engagement of any other person, firm, association or corporation.
3.6 Delegation; Committees. The Trustees shall have the power, consistent with their continuing exclusive authority over the management of the Trust and the Trust Property, to delegate from time to time to such of their number or to officers, employees or agents of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Trustees or otherwise as the Trustees may deem expedient, to at least the same extent as such delegation is permitted to directors of a Delaware business corporation and is permitted by the 1940 Act, as well as any further delegations the Trustees may determine to be desirable, expedient or necessary in order to effect the purpose hereof. The Trustees may designate an executive committee which shall have all authority of the entire Board of Trustees except such committee cannot declare dividends and cannot authorize removal of a trustee or any merger, consolidation or sale of substantially all of the assets of the Trust.
3.7 Collection and Payment. The Trustees shall have power to collect all property due to the Trust; to pay all claims, including taxes, against the Trust Property or the Trust, the Trustees or any officer, employee or agent of the Trust; to prosecute, defend, compromise or abandon any claims relating to the Trust Property or the Trust, or the Trustees or any officer, employee or agent of the Trust; to foreclose any security interest securing any obligations, by virtue of which any property is owed to the Trust; and to enter into releases, agreements and other instruments. Except to the extent required for a Delaware business corporation, the Shareholders shall have no power to vote as to whether or not a court action, legal proceeding or claim should or should not be brought or maintained derivatively or as a class action on behalf of the Trust or the Shareholders.
3.8 Expenses. The Trustees shall have power to incur and pay out of the assets or income of the Trust any expenses which in the opinion of the Trustees are necessary or incidental to carry out any of the purposes of this Declaration, and the business of the Trust, and to pay reasonable compensation from the funds of the Trust to themselves as Trustees. The Trustees shall fix the compensation of all officers, employees and Trustees. The Trustees may pay themselves such compensation for special services, including legal, underwriting, syndicating and brokerage services, as they in good faith may deem reasonable and reimbursement for expenses reasonably incurred by themselves on behalf of the Trust. The Trustees shall have the power, as frequently as they may determine, to cause each Shareholder to pay directly, in advance or arrears, for charges of distribution, of the custodian or transfer, Shareholder servicing or similar agent, a pro rata amount as defined from time to time by the Trustees, by setting off such charges due from such Shareholder from declared but unpaid dividends or distributions owed such Shareholder and/or by reducing the number of shares in the account of such Shareholder by that number of full and/or fractional Shares which represents the outstanding amount of such charges due from such Shareholder.
3.9 By-Laws. The Trustees may adopt and from time to time amend or repeal the By-Laws for the conduct of the business of the Trust.
3.10 Miscellaneous Powers. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees may deem
desirable for the transaction of the business of the Trust; (b) enter into
joint ventures, partnerships and any other combinations or associations;
(c) purchase, and pay for out of Trust Property, insurance policies
insuring the Shareholders, Trustees, officers, employees, agents,
investment advisors, distributors, selected dealers or independent
contractors of the Trust against all claims arising by reason of holding
any such position or by reason of any action taken or omitted by any such
Person in such capacity, whether or not constituting negligence, or whether
or not the Trust would have the power to indemnify such Person against such
liability; (d) establish pension, profit-sharing, share purchase, and
other retirement, incentive and benefit plans for any Trustees, officers,
employees and agents of the Trust; (e) make donations, irrespective of
benefit to the Trust, for charitable, religious, educational, scientific,
civic or similar purposes; (f) to the extent permitted by law, indemnify
any Person with whom the Trust has dealings, including without limitation
any advisor, administrator, manager, transfer agent, custodian, distributor
or selected dealer, or any other person as the Trustees may see fit to such
extent as the Trustees shall determine; (g) guarantee indebtedness or
contractual obligations of others; (h) determine and change the fiscal year
of the Trust and the method in which its accounts shall be kept; (i)
notwithstanding the Fundamental Policies of the Trust, convert the Trust to
a master-feeder structure; provided, however, the Trust obtains the
approval of shareholders holding at least a majority of the Trust's Shares
present at a meeting of Shareholders at which a quorum is present and (j)
adopt a seal for the Trust but the absence of such seal shall not impair
the validity of any instrument executed on behalf of the Trust.
3.11 Further Powers. The Trustees shall have the power to conduct the business of the Trust and carry on its operations in any and all of its branches and maintain offices both within and without the State of Delaware, in any and all states of the United States of America, in the District of Columbia, and in any and all commonwealths, territories, dependencies, colonies, possessions, agencies or instrumentalities of the United States of America and of foreign governments, and to do all such other things and execute all such instruments as they deem necessary, proper or desirable in order to promote the interests of the Trust although such things are not herein specifically mentioned. Any determination as to what is in the interests of the Trust made by the Trustees in good faith shall be conclusive. In construing the provisions of this Declaration, the presumption shall be in favor of a grant of power to the Trustees. The Trustees will not be required to obtain any court order to deal with the Trust Property.
3.12 Trustee Action by Written Consent. Any action which may be taken by Trustees by vote may be taken without a meeting if the number of Trustees required for approval of such action at a meeting of Trustees consent to the action in writing and the written consents are filed with the records of the meetings of Shareholders. Such consent shall be treated for all purposes as a vote taken at a meeting of Trustees.
ARTICLE IV
Advisory, Management and Distribution Arrangements
4.1 Advisory and Management Arrangements. Subject to the requirements of applicable law as in effect from time to time, the Trustees may in their discretion from time to time enter into advisory, administration or management contracts whereby the other party to any such contract shall undertake to furnish the Trustees such advisory, administrative and management services, with respect to the Trust as the Trustees shall from time to time consider desirable and all upon such terms and conditions as the Trustees may in their discretion determine. Notwithstanding any provisions of this Declaration, the Trustees may authorize any advisor, administrator or manager (subject to such general or specific instructions as the Trustees may from time to time adopt) to effect investment transactions with respect to the assets on behalf of the Trustees to the full extent of the power of the Trustees to effect such transactions or may authorize any officer, employee or Trustee to effect such transactions pursuant to recommendations of any such advisor, administrator or manager (and all without further action by the Trustees). Any such investment transaction shall be deemed to have been authorized by all of the Trustees.
4.2 Distribution Arrangements. Subject to compliance with the 1940 Act, the Trustees may retain underwriters and/or placement agents to sell Trust Shares. The Trustees may in their discretion from time to time enter into one or more contracts, providing for the sale of the Shares of the Trust, whereby the Trust may either agree to sell such Shares to the other party to the contract or appoint such other party its sales agent for such Shares. In either case, the contract shall be on such terms and conditions as the Trustees may in their discretion determine not inconsistent with the provisions of this Article IV or the By-Laws; and such contract may also provide for the repurchase or sale of Shares of the Trust by such other party as principal or as agent of the Trust and may provide that such other party may enter into selected dealer agreements with registered securities dealers and brokers and servicing and similar agreements with persons who are not registered securities dealers to further the purposes of the distribution or repurchase of the Shares of the Trust.
4.3 Parties to Contract. Any contract of the character described in Sections 4.1 and 4.2 of this Article IV or in Article VII hereof may be entered into with any Person, although one or more of the Trustees, officers or employees of the Trust may be an officer, director, trustee, shareholder, or member of such other party to the contract, and no such contract shall be invalidated or rendered voidable by reason of the existence of any such relationship, nor shall any Person holding such relationship be liable merely by reason of such relationship for any loss or expense to the Trust under or by reason of said contract or accountable for any profit realized directly or indirectly therefrom, provided that the contract when entered into was reasonable and fair and not inconsistent with the provisions of this Article IV or the By-Laws. The same Person may be the other party to contracts entered into pursuant to Sections 4.1 and 4.2 above or Article VII, and any individual may be financially interested or otherwise affiliated with Persons who are parties to any or all of the contracts mentioned in this Section 4.3.
ARTICLE V
Limitations of Liability
and Indemnification
5.1 No Personal Liability of Shareholders, Trustees, etc. No Shareholder of the Trust shall be subject in such capacity to any personal liability whatsoever to any Person in connection with Trust Property or the acts, obligations or affairs of the Trust. Shareholders shall have the same limitation of personal liability as is extended to stockholders of a private corporation for profit incorporated under the general corporation law of the State of Delaware. No Trustee or officer of the Trust shall be subject in such capacity to any personal liability whatsoever to any Person, other than the Trust or its Shareholders, in connection with Trust Property or the affairs of the Trust, save only liability to the Trust or its Shareholders arising from bad faith, willful misfeasance, gross negligence (negligence in the case of those Trustees or officers who are directors, officers or employees of the Trust's investment advisor ("Affiliated Indemnitees")) or reckless disregard for his duty to such Person; and, subject to the foregoing exception, all such Persons shall look solely to the Trust Property for satisfaction of claims of any nature arising in connection with the affairs of the Trust. If any Shareholder, Trustee or officer, as such, of the Trust, is made a party to any suit or proceeding to enforce any such liability, subject to the foregoing exception, he shall not, on account thereof, be held to any personal liability.
5.2 Mandatory Indemnification. (a) The Trust hereby agrees to indemnify the Trustees and officers of the Trust (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 reasonable counsel fees 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 5.2 by reason of his having acted in any such capacity, except with respect to any matter as to which he shall not have acted in good faith in the reasonable belief that his action was in the best interest of the Trust or, in the case of any criminal proceeding, as to which he shall have had reasonable cause to believe that the conduct was unlawful, provided, however, that no indemnitee shall be indemnified hereunder against any liability to any person or any expense of such indemnitee arising by reason of (i) willful misfeasance, (ii) bad faith, (iii) gross negligence (negligence in the case of Affiliated Indemnitees), 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"). Notwithstanding the foregoing, 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 Trustees.
(b) Notwithstanding the foregoing, no indemnification shall be made hereunder unless there has been a determination (i) by a final decision on the merits by a court or other body of competent jurisdiction before whom the issue of entitlement to indemnification hereunder was brought that such indemnitee is entitled to indemnification hereunder or, (ii) in the absence of such a decision, by (1) a majority vote of a quorum of those Trustees who are neither "interested persons" of the Trust (as defined in Section 2(a)(19) of the 1940 Act) nor parties to the proceeding ("Disinterested Non-Party Trustees"), that the indemnitee is entitled to indemnification hereunder, or (2) if such quorum is not obtainable or even if obtainable, if such majority so directs, independent legal counsel in a written opinion conclude that the indemnitee should be entitled to indemnification hereunder. All determinations to make advance payments in connection with the expense of defending any proceeding shall be authorized and made in accordance with the immediately succeeding paragraph (c) below.
(c) 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 by the indemnitee of the indemnitee's good faith belief that the standards of conduct necessary for indemnification have been met and a written undertaking to reimburse the Trust unless it is subsequently determined that he is entitled to such indemnification and if a majority of the Trustees determine that the applicable standards of conduct necessary for indemnification appear to have been met. In addition, at least one of the following conditions must be met: (i) the indemnitee shall provide adequate security for his undertaking, (ii) the Trust shall be insured against losses arising by reason of any lawful advances, or (iii) a majority of a quorum of the Disinterested Non-Party Trustees, or if a majority vote of such quorum so direct, independent legal counsel in a written opinion, shall conclude, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is substantial reason to believe that the indemnitee ultimately will be found entitled to indemnification.
(d) The rights accruing to any indemnitee under these provisions shall not exclude any other right to which he may be lawfully entitled.
(e) Subject to any limitations provided by the 1940 Act and this Declaration, the Trust shall have the power and authority to indemnify other Persons providing services to the Trust to the full extent provided by law as if the Trust were a corporation organized under the Delaware General Corporation Law provided that such indemnification has been approved by a majority of the Trustees.
5.3 No Bond Required of Trustees. No Trustee shall, as such, be obligated to give any bond or other security for the performance of any of his duties hereunder.
5.4 No Duty of Investigation; Notice in Trust Instruments, etc. No purchaser, lender, transfer agent or other person dealing with the Trustees or with any officer, employee or agent of the Trust shall be bound to make any inquiry concerning the validity of any transaction purporting to be made by the Trustees or by said officer, employee or agent or be liable for the application of money or property paid, loaned, or delivered to or on the order of the Trustees or of said officer, employee or agent. Every obligation, contract, undertaking, instrument, certificate, Share, other security of the Trust, and every other act or thing whatsoever executed in connection with the Trust shall be conclusively taken to have been executed or done by the executors thereof only in their capacity as Trustees under this Declaration or in their capacity as officers, employees or agents of the Trust. Every written obligation, contract, undertaking, instrument, certificate, Share, other security of the Trust made or issued by the Trustees or by any officers, employees or agents of the Trust in their capacity as such, shall contain an appropriate recital to the effect that the Shareholders, Trustees, officers, employees or agents of the Trust shall not personally be bound by or liable thereunder, nor shall resort be had to their private property for the satisfaction of any obligation or claim thereunder, and appropriate references shall be made therein to this Declaration, and may contain any further recital which they may deem appropriate, but the omission of such recital shall not operate to impose personal liability on any of the Trustees, Shareholders, officers, employees or agents of the Trust. The Trustees may maintain insurance for the protection of the Trust Property, its Shareholders, Trustees, officers, employees and agents in such amount as the Trustees shall deem adequate to cover possible tort liability, and such other insurance as the Trustees in their sole judgment shall deem advisable or is required by the 1940 Act.
5.5 Reliance on Experts, etc. Each Trustee and officer or employee of the Trust shall, in the performance of its duties, be fully and completely justified and protected with regard to any act or any failure to act resulting from reliance in good faith upon the books of account or other records of the Trust, upon an opinion of counsel, or upon reports made to the Trust by any of the Trust's officers or employees or by any advisor, administrator, manager, distributor, selected dealer, accountant, appraiser or other expert or consultant selected with reasonable care by the Trustees, officers or employees of the Trust, regardless of whether such counsel or expert may also be a Trustee.
5.6 Indemnification of Shareholders. If any Shareholder or former Shareholder shall be held personally liable solely by reason of its being or having been a Shareholder and not because of its acts or omissions or for some other reason, the Shareholder or former Shareholder (or its heirs, executors, administrators or other legal representatives or in the case of any entity, its general successor) shall be entitled out of the assets belonging to the Trust to be held harmless from and indemnified to the maximum extent permitted by law against all loss and expense arising from such liability. The Trust shall, upon request by such Shareholder, assume the defense of any claim made against such Shareholder for any act or obligation of the Trust and satisfy any judgment thereon from the assets of the Trust.
ARTICLE VI
Shares of Beneficial Interest
6.1 Beneficial Interest. The interest of the beneficiaries hereunder shall be divided into an unlimited number of transferable shares of beneficial interest, par value $.001 per share. All Shares issued in accordance with the terms hereof, including, without limitation, Shares issued in connection with a dividend in Shares or a split of Shares, shall be fully paid and, except as provided in the last sentence of Section 3.8, nonassessable when the consideration determined by the Trustees (if any) therefor shall have been received by the Trust.
6.2 Other Securities. The Trustees may authorize and issue such other securities as they determine to be necessary, desirable or appropriate including preferred interests, debt securities or other senior securities subject to the Fundamental Policies and the requirements of the 1940 Act. To the extent that the Trustees authorize and issue preferred shares they are hereby authorized and empowered to amend or supplement this Declaration as is necessary or appropriate to comply with the requirements of the 1940 Act relating to such securities or as required to issue such securities by rating agencies or other persons, all without the approval of Shareholders. Any such supplement or amendment shall be filed as is necessary. The Trustees are also authorized to take such actions and retain such persons as they see fit to offer and sell such securities.
6.3 Rights of Shareholders. The Shares shall be personal property giving only the rights in this Declaration specifically set forth. The ownership of the Trust Property of every description and the right to conduct any business herein before described are vested exclusively in the Trustees, and the Shareholders shall have no interest therein other than the beneficial interest conferred by their Shares, and they shall have no right to call for any partition or division of any property, profits, rights or interests of the Trust nor can they be called upon to share or assume any losses of the Trust or, subject to the right of the Trustees to charge certain expenses directly to Shareholders, as provided in the last sentence of Section 3.8, suffer an assessment of any kind by virtue of their ownership of Shares. The Shares shall not entitle the holder to preference, preemptive, appraisal, conversion or exchange rights (except as specified in this Section 6.3, in Section 11.4 or as specified by the Trustees when creating the Shares, as in preferred shares).
6.4 Trust Only. It is the intention of the Trustees to create only the relationship of Trustee and beneficiary between the Trustees and each Shareholder from time to time. It is not the intention of the Trustees to create a general partnership, limited partnership, joint stock association, corporation, bailment or any form of legal relationship other than a trust. Nothing in this Declaration shall be construed to make the Shareholders, either by themselves or with the Trustees, partners or members of a joint stock association.
6.5 Issuance of Shares. The Trustees, in their discretion, may from time to time without vote of the Shareholders issue Shares including preferred shares that may have been established pursuant to Section 6.2, in addition to the then issued and outstanding Shares and Shares held in the treasury, to such party or parties and for such amount and type of consideration, including cash or property, at such time or times, and on such terms as the Trustees may determine, and may in such manner acquire other assets (including the acquisition of assets subject to, and in connection with the assumption of, liabilities) and businesses. The Trustees may from time to time divide or combine the Shares into a greater or lesser number without thereby changing the proportionate beneficial interest in such Shares. Issuances and redemptions of Shares may be made in whole Shares and/or l/l,000ths of a Share or multiples thereof as the Trustees may determine in such fractions thereof.
6.6 Register of Shares. A register shall be kept at the offices of the Trust or any transfer agent duly appointed by the Trustees under the direction of the Trustees which shall contain the names and addresses of the Shareholders and the number of Shares held by them respectively and a record of all transfers thereof. Separate registers shall be established and maintained for each class. Each such register shall be conclusive as to who are the holders of the Shares of the applicable class and who shall be entitled to receive dividends or distributions or otherwise to exercise or enjoy the rights of Shareholders. No Shareholder shall be entitled to receive payment of any dividend or distribution, nor to have notice given to him as herein provided, until he has given his address to a transfer agent or such other officer or agent of the Trustees as shall keep the register for entry thereon. It is not contemplated that certificates will be issued for the Shares; however, the Trustees, in their discretion, may authorize the issuance of share certificates and promulgate appropriate fees therefore and rules and regulations as to their use.
6.7 Transfer Agent and Registrar. The Trustees shall have power to employ a transfer agent or transfer agents, and a registrar or registrars, with respect to the Shares. The transfer agent or transfer agents may keep the applicable register and record therein, the original issues and transfers, if any, of the said Shares. Any such transfer agents and/or registrars shall perform the duties usually performed by transfer agents and registrars of certificates of stock in a corporation, as modified by the Trustees.
6.8 Transfer of Shares. Shares shall be transferable on the records of the Trust only by the record holder thereof or by its agent thereto duly authorized in writing, upon delivery to the Trustees or a transfer agent of the Trust of a duly executed instrument of transfer, together with such evidence of the genuineness of each such execution and authorization and of other matters as may reasonably be required. Upon such delivery the transfer shall be recorded on the applicable register of the Trust. Until such record is made, the Shareholder of record shall be deemed to be the holder of such Shares for all purposes hereof and neither the Trustees nor any transfer agent or registrar nor any officer, employee or agent of the Trust shall be affected by any notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death, bankruptcy, or incompetence of any Shareholder, or otherwise by operation of law, shall be recorded on the applicable register of Shares as the holder of such Shares upon production of the proper evidence thereof to the Trustees or a transfer agent of the Trust, but until such record is made, the Shareholder of record shall be deemed to be the holder of such for all purposes hereof, and neither the Trustees nor any transfer agent or registrar nor any officer or agent of the Trust shall be affected by any notice of such death, bankruptcy or incompetence, or other operation of law.
6.9 Notices. Any and all notices to which any Shareholder hereunder may be entitled and any and all communications shall be deemed duly served or given if mailed, postage prepaid, addressed to any Shareholder of record at his last known address as recorded on the applicable register of the Trust.
ARTICLE VII
Custodians
7.1 Appointment and Duties. The Trustees shall at all times employ a custodian or custodians, meeting the qualifications for custodians for portfolio securities of investment companies contained in the 1940 Act, as custodian with respect to the assets of the Trust. Any custodian shall have authority as agent of the Trust with respect to which it is acting as determined by the custodian agreement or agreements, but subject to such restrictions, limitations and other requirements, if any, as may be contained in the By-Laws of the Trust and the 1940 Act:
(1) to hold the securities owned by the Trust and deliver the same upon written order;
(2) to receive any receipt for any moneys due to the Trust and deposit the same in its own banking department (if a bank) or elsewhere as the Trustees may direct;
(3) to disburse such funds upon orders or vouchers;
(4) if authorized by the Trustees, to keep the books and accounts of the Trust and furnish clerical and accounting services; and
(5) if authorized to do so by the Trustees, to compute the net income or net asset value of the Trust;
all upon such basis of compensation as may be agreed upon between the Trustees and the custodian. If so directed by a Majority Shareholder Vote, the custodian shall deliver and pay over all property of the Trust held by it as specified in such vote.
The Trustees may also authorize each custodian to employ one or more sub-custodians from time to time to perform such of the acts and services of the custodian and upon such terms and conditions, as may be agreed upon between the custodian and such sub-custodian and approved by the Trustees, provided that in every case such sub- custodian shall meet the qualifications for custodians contained in the 1940 Act.
7.2 Central Certificate System. Subject to such rules, regulations and orders as the Commission may adopt, the Trustees may direct the custodian to deposit all or any part of the securities owned by the Trust in a system for the central handling of securities established by a national securities exchange or a national securities association registered with the Commission under the Securities Exchange Act of 1934, or such other Person as may be permitted by the Commission, or otherwise in accordance with the 1940 Act, pursuant to which system all securities of any particular class of any issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of such securities, provided that all such deposits shall be subject to withdrawal only upon the order of the Trust.
ARTICLE VIII
Redemption
8.1 Redemptions. The Shares of the Trust are not redeemable by the holders.
8.2 Disclosure of Holding. The holders of Shares or other securities of the Trust shall upon demand disclose to the Trustees in writing such information with respect to direct and indirect ownership of Shares or other securities of the Trust as the Trustees deem necessary to comply with the provisions of the Code, or to comply with the requirements of any other taxing or regulatory authority.
ARTICLE IX
Determination of Net Asset Value
Net Income and Distributions
9.1 Net Asset Value. The net asset value of each outstanding Share of the Trust shall be determined at such time or times on such days as the Trustees may determine, in accordance with the 1940 Act. The method of determination of net asset value shall be determined by the Trustees and shall be as set forth in the Prospectus or as may otherwise be determined by the Trustees. The power and duty to make the net asset value calculations may be delegated by the Trustees and shall be as generally set forth in the Prospectus or as may otherwise be determined by the Trustees.
9.2 Distributions to Shareholders.
(a) The Trustees shall from time to time distribute ratably among the Shareholders such proportion of the net profits, surplus (including paid-in surplus), capital, or assets held by the Trustees as they may deem proper. Such distribution may be made in cash or property (including without limitation any type of obligations of the Trust or any assets thereof) or any combination thereof, and the Trustees may distribute ratably among the Shareholders additional Shares in such manner, at such times, and on such terms as the Trustees may deem proper.
(b) In the event the Trust has outstanding more than one class of Shares, the Trustees shall from time to time distribute ratably among each class of Shareholders of the Trust such proportion of the net profits, surplus (including paid-in surplus), capital or assets attributable to such class held by the Trustees as they may deem proper or as may otherwise be determined in the instrument creating such class of Shares, and the Trustees may distribute ratably among the Shareholders of each class of the Trust additional Shares of such class in such manner, at such times, and on such terms as the Trustees may deem proper. Such distributions to one class need not be ratable with respect to distributions to Shares of any other class of the Trust.
(c) Distributions pursuant to this Section 9.2 may be among the Shareholders of record at the time of declaring a distribution or among the Shareholders of record at such later date as the Trustees shall determine and specify at the time of declaration.
(d) The Trustees may always retain from the net profits such amount as they may deem necessary to pay the debts or expenses of the Trust or to meet obligations of the Trust, or as they otherwise may deem desirable to use in the conduct of its affairs or to retain for future requirements or extensions of the business.
(e) Inasmuch as the computation of net income and gains for Federal income tax purposes may vary from the computation thereof on the books, the above provisions shall be interpreted to give the Trustees the power in their discretion to distribute for any fiscal year as ordinary dividends and as capital gains distributions, respectively, additional amounts sufficient to enable the Trust to avoid or reduce liability for taxes.
9.3 Power to Modify Foregoing Procedures. Notwithstanding any of the foregoing provisions of this Article IX, the Trustees may prescribe, in their absolute discretion except as may be required by the 1940 Act, such other bases and times for determining the per share asset value of the Trust's Shares or net income, or the declaration and payment of dividends and distributions as they may deem necessary or desirable for any reason, including to enable the Trust to comply with any provision of the 1940 Act, or any securities association registered under the Securities Exchange Act of 1934, or any order of exemption issued by the Commission, all as in effect now or hereafter amended or modified.
ARTICLE X
Shareholders
10.1 Meetings of Shareholders. The Trust shall hold annual meetings of the Shareholders. A special meeting of Shareholders may be called at any time by a majority of the Trustees and shall be called by any Trustee for any proper purpose upon written request of Shareholders of the Trust holding in the aggregate not less than 51% of the outstanding Shares of the Trust or class having voting rights, such request specifying the purpose or purposes for which such meeting is to be called. Any shareholder meeting, including a Special Meeting, shall be held within or without the State of Delaware on such day and at such time as the Trustees shall designate.
10.2 Voting. Shareholders shall have no power to vote on any matter except matters on which a vote of Shareholders is required by applicable law, this Declaration or resolution of the Trustees. Any matter required to be submitted to Shareholders and affecting one or more classes shall require separate approval by the required vote of Shareholders of each affected class; provided, however, that to the extent required by the 1940 Act, there shall be no separate class votes on the election or removal of Trustees, the selection of auditors for the Trust, approval of any agreement or contract entered into by the Trust, approval of conversion of the Trust to a master-feeder structure or any action to liquidate or dissolve the Trust. Shareholders of a particular class shall not be entitled to vote on any matter that affects only one or more other classes. There shall be no cumulative voting in the election or removal of Trustees. The Trustees shall cause each matter required or permitted to be voted upon at a meeting or by written consent of Shareholders to be submitted to a vote of all classes of outstanding Shares entitled to vote thereon, unless the 1940 Act or other applicable law or regulations require that the actions of the Shareholders be taken by a separate vote of one or more classes, or the Trustees determine that any matter to be submitted to a vote of Shareholders affects only the rights or interests of one or more (but not all) classes of outstanding Shares, in which case only the Shareholders of the class or classes so affected shall be entitled to vote thereon.
10.3 Notice of Meeting and Record Date. Notice of all meetings of Shareholders, stating the time, place and purposes of the meeting, shall be given by the Trustees by mail to each Shareholder of record entitled to vote thereat at its registered address, mailed at least 10 days before the meeting or otherwise in compliance with applicable law. Only the business stated in the notice of the meeting shall be considered at such meeting. Any adjourned meeting may be held as adjourned one or more times without further notice not later than 130 days after the record date. For the purposes of determining the Shareholders who are entitled to notice of and to vote at any meeting the Trustees may, without closing the transfer books, fix a date not more than 100 days prior to the date of such meeting of Shareholders as a record date for the determination of the Persons to be treated as Shareholders of record for such purposes.
10.4 Quorum and Required Vote.
(a) The holders of a majority of outstanding Shares of the Trust present in person or by proxy shall constitute a quorum at any meeting of the Shareholders for purposes of conducting business on which a vote of Shareholders of the Trust is being taken. The holders of a majority of outstanding Shares of a class present in person or by proxy shall constitute a quorum at any meeting of the Shareholders of such class for purposes of conducting business on which a vote of Shareholders of such class is being taken.
(b) Subject to any provision of applicable law requiring greater or lesser votes, this Declaration or resolution of the Trustees specifying a greater or lesser vote requirement for the transaction of any item of business at any meeting of Shareholders, (i) the affirmative vote of a majority of the Shares present in person or represented by proxy and entitled to vote on the subject matter shall be the act of the Shareholders with respect to such matter, and (ii) where a separate vote of any class is required on any matter, the affirmative vote of a majority of the Shares of such class present in person or represented by proxy at the meeting shall be the act of the Shareholders of such class with respect to such matter.
10.5 Proxies, etc. At any meeting of Shareholders, any holder of Shares entitled to vote thereat may vote by properly executed proxy, provided that no proxy shall be voted at any meeting unless it shall have been placed on file with the Secretary, or with such other officer or agent of the Trust as the Secretary may direct, for verification prior to the time at which such vote shall be taken. Pursuant to a resolution of a majority of the Trustees, proxies may be solicited in the name of one or more Trustees or one or more of the officers or employees of the Trust. Only Shareholders of record shall be entitled to vote. Each full Share shall be entitled to one vote and fractional Shares shall be entitled to a vote of such fraction. When any Share is held jointly by several persons, any one of them may vote at any meeting in person or by proxy in respect of such Share, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Share. A proxy purporting to be executed by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger. If the holder of any such Share is a minor or a person of unsound mind, and subject to guardianship or to the legal control of any other person as regards the charge or management of such Share, he may vote by his guardian or such other person appointed or having such control, and such vote may be given in person or by proxy.
10.6 Reports. The Trustees shall cause to be prepared at least annually and more frequently to the extent and in the form required by law, regulation or any exchange on which Trust Shares are listed a report of operations containing a balance sheet and statement of income and undistributed income of the Trust prepared in conformity with generally accepted accounting principles and an opinion of an independent public accountant on such financial statements. Copies of such reports shall be mailed to all Shareholders of record within the time required by the 1940 Act, and in any event within a reasonable period preceding the meeting of Shareholders. The Trustees shall, in addition, furnish to the Shareholders at least semi-annually to the extent required by law, interim reports containing an unaudited balance sheet of the Trust as of the end of such period and an unaudited statement of income and surplus for the period from the beginning of the current fiscal year to the end of such period.
10.7 Inspection of Records. The records of the Trust shall be open to inspection by Shareholders to the same extent as is permitted shareholders of a Delaware business corporation.
10.8 Shareholder Action by Written Consent. Any action which may be taken by Shareholders by vote may be taken without a meeting if the holders entitled to vote thereon of the proportion of Shares required for approval of such action at a meeting of Shareholders pursuant to Section 10.4 consent to the action in writing and the written consents are filed with the records of the meetings of Shareholders. Such consent shall be treated for all purposes as a vote taken at a meeting of Shareholders.
ARTICLE XI
Duration: Termination of Trust;
Amendment; Mergers, Etc.
11.1 Duration. Subject to possible termination in accordance with the provisions of Section 11.2 hereof, the Trust created hereby shall have perpetual existence.
11.2 Termination.
(a) The Trust may be dissolved, after two thirds of the Trustees have approved a resolution therefor, upon approval by a majority of all the Shareholders voting as one class. Upon the dissolution of the Trust:
(i) The Trust shall carry on no business except for the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust and all of the powers of the Trustees under this Declaration shall continue until the affairs of the Trust shall have been wound up, including the power to fulfill or discharge the contracts of the Trust, collect its assets, sell, convey, assign, exchange, merger where the Trust is not the survivor, transfer or otherwise dispose of all or any part of the remaining Trust Property to one or more Persons at public or private sale for consideration which may consist in whole or in part in cash, securities or other property of any kind, discharge or pay its liabilities, and do all other acts appropriate to liquidate its business; provided that any sale, conveyance, assignment, exchange, merger in which the Trust is not the survivor, transfer or other disposition of all or substantially all the Trust Property of the Trust shall require approval of the principal terms of the transaction and the nature and amount of the consideration by Shareholders with the same vote as required to open-end the Trust.
(iii) After paying or adequately providing for the payment of all liabilities, and upon receipt of such releases, indemnities and refunding agreements, as they deem necessary for their protection, the Trustees may distribute the remaining Trust Property, in cash or in kind or partly each, among the Shareholders according to their respective rights.
(b) After the winding up and termination of the Trust and distribution to the Shareholders as herein provided, a majority of the Trustees shall execute and lodge among the records of the Trust an instrument in writing setting forth the fact of such termination and shall execute and file a certificate of cancellation with the Secretary of State of the State of Delaware. Upon termination of the Trust, the Trustees shall thereupon be discharged from all further liabilities and duties hereunder, and the rights and interests of all Shareholders shall thereupon cease.
11.3 Amendment Procedure.
(a) Except as provided in subsection (b) of this Section 11.3, this Declaration may be amended, after a majority of the Trustees have approved a resolution therefor, by the affirmative vote of the holders of not less than a majority of the affected Shares. The Trustees also may amend this Declaration without any vote of Shareholders to divide the Shares of the Trust into one or more classes or additional classes, to change the name of the Trust or any class, to make any change that does not adversely affect the relative rights or preferences of any Shareholder, as they may deem necessary, to conform this Declaration to the requirements of the 1940 Act or any other applicable federal laws or regulations including pursuant to Section 6.2 or the requirements of the regulated investment company provisions of the Code, but the Trustees shall not be liable for failing to do so.
(b) No amendment may be made to this Section 11.3 or which would change any rights with respect to any Shares of the Trust by reducing the amount payable thereon upon liquidation of the Trust or by diminishing or eliminating any voting rights pertaining thereto, except with the vote of the holders of two-thirds of the Shares of the Trust. Nothing contained in this Declaration shall permit the amendment of this Declaration to impair the exemption from personal liability of the Shareholders, Trustees, officers, employees and agents of the Trust or to permit assessments upon Shareholders.
(c) An amendment duly adopted by the requisite vote of the Board of Trustees and, if required, the Shareholders as aforesaid, shall become effective at the time of such adoption or at such other time as may be designated by the Board of Trustees or Shareholders, as the case may be. A certification in recordable form signed by a majority of the Trustees setting forth an amendment and reciting that it was duly adopted by the Trustees and, if required, the Shareholders as aforesaid, or a copy of the Declaration, as amended, in recordable form, and executed by a majority of the Trustees, shall be conclusive evidence of such amendment when lodged among the records of the Trust or at such other time designated by the Board.
Notwithstanding any other provision hereof, until such time as a Registration Statement under the Securities Act of 1933, as amended, covering the first public offering of Shares of the Trust shall have become effective, this Declaration may be terminated or amended in any respect by the affirmative vote of a majority of the Trustees or by an instrument signed by a majority of the Trustees.
11.4 Merger, Consolidation and Sale of Assets. The Trust may merge or consolidate with any other corporation, association, trust or other organization or may sell, lease or exchange all or substantially all of the Trust Property or the property, including its good will, upon such terms and conditions and for such consideration when and as authorized by two-thirds of the Trustees and approved by a majority vote of the affected Shareholders and any such merger, consolidation, sale, lease or exchange shall be determined for all purposes to have been accomplished under and pursuant to the statutes of the State of Delaware.
11.5 Incorporation. Upon approval by Shareholders, the Trustees may cause to be organized or assist in organizing a corporation or corporations under the laws of any jurisdiction or any other trust, partnership, association or other organization to take over all of the Trust Property or to carry on any business in which the Trust shall directly or indirectly have any interest, and to sell, convey and transfer the Trust Property to any such corporation, trust, limited liability company, association or organization in exchange for the shares or securities thereof, or otherwise, and to lend money to, subscribe for the shares or securities of, and enter into any contracts with any such corporation, trust, limited liability company, partnership, association or organization, or any corporation, partnership, trust, limited liability company, association or organization in which the Trust holds or is about to acquire shares or any other interests. The Trustees may also cause a merger or consolidation between the Trust or any successor thereto and any such corporation, trust, limited liability company, partnership, association or other organization if and to the extent permitted by law, as provided under the law then in effect. Nothing contained herein shall be construed as requiring approval of Shareholders for the Trustees to organize or assist in organizing one or more corporations, trusts, limited liability companies, partnerships, associations or other organizations and selling, conveying or transferring a portion of the Trust Property to such organizations or entities.
11.6 Conversion. (a) The Trust may be converted at any time from a "closed-end company" to an "open-end company" as those terms are defined by the 1940 Act, upon the approval of such a proposal, together with the necessary amendments to this Declaration to permit such a conversion, by a majority of the Trustees then in office and by the holders of not less than two-thirds (66-2/3%) of the Trust's outstanding Shares entitled to vote, except that if such proposal is recommended by two- thirds of the total number of Trustees then in office, such proposal may be adopted by a Majority Shareholder Vote. From time to time, the Trustees may consider recommending to the Shareholders a proposal to convert the Trust from a "closed-end company" to an "open-end company." Upon the recommendation and subsequent adoption of such a proposal and the necessary amendments to this Declaration to permit such a conversion of the Trust's outstanding Shares entitled to vote, the Trust shall, upon complying with any requirements of the 1940 Act and state law, become an "open-end" investment company. Such affirmative vote or consent shall be in addition to the vote or consent of the holders of the Shares otherwise required by law, or any agreement between the Trust and any national securities exchange.
(b) The Trust may be converted at any time to a master-feeder structure, upon the approval of such a proposal, together with the necessary amendments to this Declaration to permit such a conversion, by a majority of the Trustees then in office and by the holders of not less than a majority of the Trust's outstanding Shares entitled to vote. From time to time, the Trustees may consider recommending to the Shareholders a proposal to convert the Trust to a master- feeder structure. Upon the recommendation and subsequent adoption of such a proposal and the necessary amendments to this Declaration to permit such a conversion of the Trust's outstanding Shares entitled to vote, the Trust shall, upon complying with any requirements of the 1940 Act and state law, convert to a master-feeder structure.
11.7 Certain Transactions. (a) Notwithstanding any other provision of this Declaration and subject to the exceptions provided in paragraph (d) of this Section, the types of transactions described in paragraph (c) of this Section shall require the affirmative vote or consent of the holders of seventy- five percent (75%) of the Shares of each class outstanding and entitled to vote, voting as a class, when a Principal Shareholder (as defined in paragraph (b) of this Section) is a party to the transaction. Such affirmative vote or consent shall be in addition to the vote or consent of the holders of Shares otherwise required by law or by the terms of any class or series of preferred stock, whether now or hereafter authorized, or any agreement between the Trust and any national securities exchange.
(b) The term "Principal Shareholder" shall mean any corporation, Person or other entity which is the beneficial owner, directly or indirectly, of five percent (5%) or more of the outstanding Shares and shall include any affiliate or associate, as such terms are defined in clause (ii) below, of a Principal Shareholder. For the purposes of this Section, in addition to the Shares which a corporation, Person or other entity beneficially owns directly, (a) any corporation, Person or other entity shall be deemed to be the beneficial owner of any Shares (i) which it has the right to acquire pursuant to any agreement or upon exercise of conversion rights or warrants, or otherwise (but excluding share options granted by the Trust) or (ii) which are beneficially owned, directly or indirectly (including Shares deemed owned through application of clause (i) above), by any other corporation, Person or entity with which its "affiliate" or "associate" (as defined below) has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of Shares, or which is its "affiliate" or "associate" as those terms are defined in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, and (b) the outstanding Shares shall include Shares deemed owned through application of clauses (i) and (ii) above but shall not include any other Shares which may be issuable pursuant to any agreement, or upon exercise of conversion rights or warrants, or otherwise.
(c) This Section shall apply to the following transactions:
(i) The merger or consolidation of the Trust or any subsidiary of the Trust with or into any Principal Shareholder.
(ii) The issuance of any securities of the Trust to any Principal Shareholder for cash(other than pursuant to any automatic dividend reinvestment plan).
(iii) The sale, lease or exchange of all or any substantial part of the assets of the Trust to any Principal Shareholder (except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purpose of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period.)
(iv) The sale, lease or exchange to the Trust or any subsidiary thereof, in exchange for securities of the Trust of any assets of any Principal Shareholder (except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purposes of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period).
(d) The provisions of this Section shall not be applicable to
(i) any of the transactions described in paragraph (c) of this Section if
two-thirds of the Board of Trustees of the Trust shall by resolution have
approved a memorandum of understanding with such Principal Shareholder with
respect to and substantially consistent with such transaction, or (ii) any
such transaction with any corporation of which a majority of the
outstanding shares of all classes of a stock normally entitled to vote in
elections of directors is owned of record or beneficially by the Trust and
its subsidiaries.
(e) The Board of Trustees shall have the power and duty to determine
for the purposes of this Section on the basis of information known to the
Trust whether (i) a corporation, person or entity beneficially owns five
percent (5%) or more of the outstanding Shares, (ii) a corporation, person
or entity is an "affiliate" or "associate" (as defined above) of another,
(iii) the assets being acquired or leased to or by the Trust or any
subsidiary thereof constitute a substantial part of the assets of the Trust
and have an aggregate fair market value of less than $1,000,000, and (iv)
the memorandum of understanding referred to in paragraph (d) hereof is
substantially consistent with the transaction covered thereby. Any such
determination shall be conclusive and binding for all purposes of this
Section.
ARTICLE XII
Miscellaneous
12.1 Filing. (a) This Declaration and any amendment hereto shall be filed in such places as may be required or as the Trustees deem appropriate. Each amendment shall be accompanied by a certificate signed and acknowledged by a Trustee stating that such action was duly taken in a manner provided herein, and shall, upon insertion in the Trust's minute book, be conclusive evidence of all amendments contained therein. A restated Declaration, containing the original Declaration and all amendments theretofore made, may be executed from time to time by a majority of the Trustees and shall, upon insertion in the Trust's minute book, be conclusive evidence of all amendments contained therein and may thereafter be referred to in lieu of the original Declaration and the various amendments thereto.
(b) The Trustees hereby authorize and direct a Certificate of Trust, in the form attached hereto as Exhibit A, to be executed and filed with the Office of the Secretary of State of the State of Delaware in accordance with the Delaware Business Trust Act.
12.2 Resident Agent. The Trust shall maintain a resident agent in the State of Delaware, which agent shall initially be The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801 The Trustees may designate a successor resident agent, provided, however, that such appointment shall not become effective until written notice thereof is delivered to the office of the Secretary of the State.
12.3 Governing Law. This Declaration is executed by the Trustees and delivered in the State of Delaware and with reference to the laws thereof, and the rights of all parties and the validity and construction of every provision hereof shall be subject to and construed according to laws of said State and reference shall be specifically made to the business corporation law of the State of Delaware as to the construction of matters not specifically covered herein or as to which an ambiguity exists, although such law shall not be viewed as limiting the powers otherwise granted to the Trustees hereunder and any ambiguity shall be viewed in favor of such powers.
12.4 Counterparts. This Declaration may be simultaneously executed in several counterparts, each of which shall be deemed to be an original, and such counterparts, together, shall constitute one and the same instrument, which shall be sufficiently evidenced by any such original counterpart.
12.5 Reliance by Third Parties. Any certificate executed by an individual who, according to the records of the Trust, or of any recording office in which this Declaration may be recorded, appears to be a Trustee hereunder, certifying to: (a) the number or identity of Trustees or Shareholders, (b) the name of the Trust, (c) the due authorization of the execution of any instrument or writing, (d) the form of any vote passed at a meeting of Trustees or Shareholders, (e) the fact that the number of Trustees or Shareholders present at any meeting or executing any written instrument satisfies the requirements of this Declaration, (f) the form of any By Laws adopted by or the identity of any officers elected by the Trustees, or (g) the existence of any fact or facts which in any manner relate to the affairs of the Trust, shall be conclusive evidence as to the matters so certified in favor of any person dealing with the Trustees and their successors.
12.6 Provisions in Conflict with Law or Regulation.
(a) The provisions of this Declaration are severable, and if the Trustees shall determine, with the advice of counsel, that any of such provisions is in conflict with the 1940 Act, the regulated investment company provisions of the Internal Revenue Code or with other applicable laws and regulations, the conflicting provision shall be deemed never to have constituted a part of this Declaration; provided, however, that such determination shall not affect any of the remaining provisions of this Declaration or render invalid or improper any action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach only to such provision in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction or any other provision of this Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned has caused these presents to be executed as of the day and year first above written.
/s/ Laurence D. Fink __________________________________ Laurence D. Fink Sole Trustee |
Exhibit A
CERTIFICATE OF TRUST
OF
BLACKROCK MUNICIPAL INCOME TRUST
This Certificate of Trust of BlackRock Municipal Income Trust (the "Trust"), dated March 30, 2001, is being duly executed and filed by Laurence D. Fink, as sole trustee (the "Sole Trustee"), to form a business trust under the Delaware Business Trust Act (12 Del. C. Section 3801, et seq.).
1. Name. The name of the business trust formed hereby is BlackRock Municipal Income Trust.
2. Registered Office; Registered Agent. The business address of the registered office of the Trust in the State of Delaware is The Corporation Trust Company, 1209 Orange Street in the City of Wilmington, 19801. The name of the Trust's registered agent at such address is The Corporation Trust Company.
3. Address of Sole Trustee. The business address of the Sole Trustee is 345 Park Avenue, New York, New York, 10154.
4. Effective Date. This Certificate of Trust shall be effective upon the date and time of filing.
5. Investment Company. The Trust will become an investment company registered under the Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of Trust as of the date first above-written.
By: /s/ Laurence D. Fink
__________________________
Laurence D. Fink
Sole Trustee
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Exhibit (b)
BY-LAWS
OF
BLACKROCK MUNICIPAL INCOME TRUST
TABLE OF CONTENTS
Page
ARTICLE I - Shareholder Meetings....................................1
1.1 Chairman.................................................1
1.2 Proxies; Voting..........................................1
1.3 Fixing Record Dates......................................1
1.4 Inspectors of Election...................................1
1.5 Records at Shareholder Meetings..........................2
ARTICLE II - Trustees...............................................3
2.1 Annual and Regular Meetings..............................3
2.2 Chairman; Records........................................3
ARTICLE III - Officers..............................................3
3.1 Officers of the Trust....................................3
3.2 Election and Tenure......................................3
3.3 Removal of Officers......................................4
3.4 Bonds and Surety.........................................4
3.5 Chairman, President, and Vice Presidents.................4
3.6 Secretary................................................5
3.7 Treasurer................................................5
3.8 Other Officers and Duties................................6
ARTICLE IV - Miscellaneous..........................................6
4.1 Depositories.............................................6
4.2 Signatures...............................................7
4.3 Seal.....................................................7
ARTICLE V - Stock Transfers.........................................7
5.1 Transfer Agents, Registrars and the Like.................7
5.2 Transfer of Shares.......................................7
5.3 Registered Shareholders..................................8
ARTICLE VI - Amendment of By-Laws...................................8
6.1 Amendment and Repeal of By-Laws..........................8
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BLACKROCK MUNICIPAL INCOME TRUST
BY-LAWS
These By-Laws are made and adopted pursuant to Section 3.9 of the Agreement and Declaration of Trust establishing BlackRock Municipal Income Trust dated as of March 30, 2001, as from time to time amended (hereinafter called the "Declaration"). All words and terms capitalized in these By-Laws shall have the meaning or meanings set forth for such words or terms in the Declaration.
ARTICLE II
Shareholder Meetings
2.2 Chairman. The Chairman, if any, shall act as chairman at all meetings of the Shareholders; in the Chairman's absence, the Trustee or Trustees present at each meeting may elect a temporary chairman for the meeting, who may be one of themselves.
2.4 Proxies; Voting. Shareholders may vote either in person or by duly executed proxy and each full share represented at the meeting shall have one vote, all as provided in Article 10 of the Declaration.
2.6 Fixing Record Dates. For the purpose of determining the Shareholders who are entitled to notice of or to vote or act at any meeting, including any adjournment thereof, or who are entitled to participate in any dividends, or for any other proper purpose, the Trustees may from time to time, without closing the transfer books, fix a record date in the manner provided in Section 10.3 of the Declaration. If the Trustees do not prior to any meeting of Shareholders so fix a record date or close the transfer books, then the date of mailing notice of the meeting or the date upon which the dividend resolution is adopted, as the case may be, shall be the record date.
2.8 Inspectors of Election. In advance of any meeting of Shareholders, the Trustees may appoint Inspectors of Election to act at the meeting or any adjournment thereof. If Inspectors of Election are not so appointed, the Chairman, if any, of any meeting of Shareholders may, and on the request of any Shareholder or Shareholder proxy shall, appoint Inspectors of Election of the meeting. The number of Inspectors of Election shall be either one or three. If appointed at the meeting on the request of one or more Shareholders or proxies, a majority of Shares present shall determine whether one or three Inspectors of Election are to be appointed, but failure to allow such determination by the Shareholders shall not affect the validity of the appointment of Inspectors of Election. In case any person appointed as Inspector of Election fails to appear or fails or refuses to act, the vacancy may be filled by appointment made by the Trustees in advance of the convening of the meeting or at the meeting by the person acting as chairman. The Inspectors of Election shall determine the number of Shares outstanding, the Shares represented at the meeting, the existence of a quorum, the authenticity, validity and effect of proxies, shall receive votes, ballots or consents, shall hear and determine all challenges and questions in any way arising in connection with the right to vote, shall count and tabulate all votes or consents, determine the results, and do such other acts as may be proper to conduct the election or vote with fairness to all Shareholders. If there are three Inspectors of Election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. On request of the Chairman, if any, of the meeting, or of any Shareholder or Shareholder proxy, the Inspectors of Election shall make a report in writing of any challenge or question or matter determined by them and shall execute a certificate of any facts found by them.
2.10 Records at Shareholder Meetings. At each meeting of the Shareholders, there shall be made available for inspection at a convenient time and place during normal business hours, if requested by Shareholders, the minutes of the last previous Annual or Special Meeting of Shareholders of the Trust and a list of the Shareholders of the Trust, as of the record date of the meeting or the date of closing of transfer books, as the case may be. Such list of Shareholders shall contain the name and the address of each Shareholder in alphabetical order and the number of Shares owned by such Shareholder. Shareholders shall have such other rights and procedures of inspection of the books and records of the Trust as are granted to shareholders of a Delaware business corporation.
ARTICLE IV
Trustees
4.2 Annual and Regular Meetings. Meetings of the Trustees shall be held from time to time upon the call of the Chairman, if any, the President, the Secretary or any two Trustees. Regular meetings of the Trustees may be held without call or notice and shall generally be held quarterly. Neither the business to be transacted at, nor the purpose of, any meeting of the Board of Trustees need be stated in the notice or waiver of notice of such meeting, and no notice need be given of action proposed to be taken by unanimous written consent.
4.4 Chairman; Records. The Chairman, if any, shall act as chairman at all meetings of the Trustees; in absence of a chairman, the Trustees present shall elect one of their number to act as temporary chairman. The results of all actions taken at a meeting of the Trustees, or by unanimous written consent of the Trustees, shall be recorded by the person appointed by the Board of Trustees as the meeting secretary.
ARTICLE VI
Officers
6.2 Officers of the Trust. The officers of the Trust shall consist of a Chairman, if any, a President, a Secretary, a Treasurer and such other officers or assistant officers as may be elected or authorized by the Trustees. Any two or more of the offices may be held by the same Person, except that the same person may not be both President and Secretary. The Chairman, if any, shall be a Trustee, but no other officer of the Trust need be a Trustee.
6.4 Election and Tenure. At the initial organization meeting, the Trustees shall elect the Chairman, if any, President, Secretary, Treasurer and such other officers as the Trustees shall deem necessary or appropriate in order to carry out the business of the Trust. Such officers shall serve at the pleasure of the Trustees or until their successors have been duly elected and qualified. The Trustees may fill any vacancy in office or add any additional officers at any time.
6.6 Removal of Officers. Any officer may be removed at any time, with or without cause, by action of a majority of the Trustees. This provision shall not prevent the making of a contract of employment for a definite term with any officer and shall have no effect upon any cause of action which any officer may have as a result of removal in breach of a contract of employment. Any officer may resign at any time by notice in writing signed by such officer and delivered or mailed to the Chairman, if any, President, or Secretary, and such resignation shall take effect immediately upon receipt by the Chairman, if any, President, or Secretary, or at a later date according to the terms of such notice in writing.
6.8 Bonds and Surety. Any officer may be required by the Trustees to be bonded for the faithful performance of such officer's duties in such amount and with such sureties as the Trustees may determine.
6.10 Chairman, President, and Vice Presidents. The Chairman, if any, shall, if present, preside at all meetings of the Shareholders and of the Trustees and shall exercise and perform such other powers and duties as may be from time to time assigned to such person by the Trustees. Subject to such supervisory powers, if any, as may be given by the Trustees to the Chairman, if any, the President shall be the chief executive officer of the Trust and, subject to the control of the Trustees, shall have general supervision, direction and control of the business of the Trust and of its employees and shall exercise such general powers of management as are usually vested in the office of President of a corporation. Subject to direction of the Trustees, the Chairman, if any, and the President shall each have power in the name and on behalf of the Trust to execute any and all loans, documents, contracts, agreements, deeds, mortgages, registration statements, applications, requests, filings and other instruments in writing, and to employ and discharge employees and agents of the Trust. Unless otherwise directed by the Trustees, the Chairman, if any, and the President shall each have full authority and power, on behalf of all of the Trustees, to attend and to act and to vote, on behalf of the Trust at any meetings of business organizations in which the Trust holds an interest, or to confer such powers upon any other persons, by executing any proxies duly authorizing such persons. The Chairman, if any, and the President shall have such further authorities and duties as the Trustees shall from time to time determine. In the absence or disability of the President, the Vice-Presidents in order of their rank as fixed by the Trustees or, if more than one and not ranked, the Vice-President designated by the Trustees, shall perform all of the duties of the President, and when so acting shall have all the powers of and be subject to all of the restrictions upon the President. Subject to the direction of the Trustees, and of the President, each Vice-President shall have the power in the name and on behalf of the Trust to execute any and all instruments in writing, and, in addition, shall have such other duties and powers as shall be designated from time to time by the Trustees or by the President.
6.12 Secretary. The Secretary shall maintain the minutes of all meetings of, and record all votes of, Shareholders, Trustees and the Executive Committee, if any. The Secretary shall be custodian of the seal of the Trust, if any, and the Secretary (and any other person so authorized by the Trustees) shall affix the seal, or if permitted, facsimile thereof, to any instrument executed by the Trust which would be sealed by a Delaware business corporation executing the same or a similar instrument and shall attest the seal and the signature or signatures of the officer or officers executing such instrument on behalf of the Trust. The Secretary shall also perform any other duties commonly incident to such office in a Delaware business corporation, and shall have such other authorities and duties as the Trustees shall from time to time determine.
6.14 Treasurer. Except as otherwise directed by the Trustees, the Treasurer shall have the general supervision of the monies, funds, securities, notes receivable and other valuable papers and documents of the Trust, and shall have and exercise under the supervision of the Trustees and of the President all powers and duties normally incident to the office. The Treasurer may endorse for deposit or collection all notes, checks and other instruments payable to the Trust or to its order. The Treasurer shall deposit all funds of the Trust in such depositories as the Trustees shall designate. The Treasurer shall be responsible for such disbursement of the funds of the Trust as may be ordered by the Trustees or the President. The Treasurer shall keep accurate account of the books of the Trust's transactions which shall be the property of the Trust, and which together with all other property of the Trust in the Treasurer's possession, shall be subject at all times to the inspection and control of the Trustees. Unless the Trustees shall otherwise determine, the Treasurer shall be the principal accounting officer of the Trust and shall also be the principal financial officer of the Trust. The Treasurer shall have such other duties and authorities as the Trustees shall from time to time determine. Notwithstanding anything to the contrary herein contained, the Trustees may authorize any adviser, administrator, manager or transfer agent to maintain bank accounts and deposit and disburse funds of any series of the Trust on behalf of such series.
6.16 Other Officers and Duties. The Trustees may elect such other officers and assistant officers as they shall from time to time determine to be necessary or desirable in order to conduct the business of the Trust. Assistant officers shall act generally in the absence of the officer whom they assist and shall assist that officer in the duties of the office. Each officer, employee and agent of the Trust shall have such other duties and authority as may be conferred upon such person by the Trustees or delegated to such person by the President.
ARTICLE VIII
Miscellaneous
8.2 Depositories. In accordance with Section 7.1 of the Declaration, the funds of the Trust shall be deposited in such custodians as the Trustees shall designate and shall be drawn out on checks, drafts or other orders signed by such officer, officers, agent or agents (including the adviser, administrator or manager), as the Trustees may from time to time authorize.
8.4 Signatures. All contracts and other instruments shall be executed on behalf of the Trust by its properly authorized officers, agent or agents, as provided in the Declaration or By-laws or as the Trustees may from time to time by resolution provide.
8.6 Seal. The Trust is not required to have any seal, and the adoption or use of a seal shall be purely ornamental and be of no legal effect. The seal, if any, of the Trust may be affixed to any instrument, and the seal and its attestation may be lithographed, engraved or otherwise printed on any document with the same force and effect as if it had been imprinted and affixed manually in the same manner and with the same force and effect as if done by a Delaware business corporation. The presence or absence of a seal shall have no effect on the validity, enforceability or binding nature of any document or instrument that is otherwise duly authorized, executed and delivered.
ARTICLE X
Stock Transfers
10.2 Transfer Agents, Registrars and the Like. As provided in
Section 6.7 of the Declaration, the Trustees shall have authority to employ
and compensate such transfer agents and registrars with respect to the
Shares of the Trust as the Trustees shall deem necessary or desirable. In
addition, the Trustees shall have power to employ and compensate such
dividend disbursing agents, warrant agents and agents for the reinvestment
of dividends as they shall deem necessary or desirable. Any of such agents
shall have such power and authority as is delegated to any of them by the
Trustees.
10.4 Transfer of Shares. The Shares of the Trust shall be
transferable on the books of the Trust only upon delivery to the Trustees
or a transfer agent of the Trust of proper documentation as provided in
Section 6.8 of the Declaration. The Trust, or its transfer agents, shall be
authorized to refuse any transfer unless and until presentation of such
evidence as may be reasonably required to show that the requested transfer
is proper.
10.6 Registered Shareholders. The Trust may deem and treat the holder of record of any Shares as the absolute owner thereof for all purposes and shall not be required to take any notice of any right or claim of right of any other person.
ARTICLE XII
Amendment of By-Laws
12.2 Amendment and Repeal of By-Laws. In accordance with
Section 3.9 of the Declaration, the Trustees shall have the power to amend
or repeal the By-Laws or adopt new By-Laws at any time; provided, however,
that By-Laws adopted by the Shareholders may, if such By-Laws so state, be
altered, amended or repealed only by the Shareholders by an affirmative
vote of a majority of the outstanding voting securities of the Trust, and
not by the Trustees. Action by the Trustees with respect to the By-Laws
shall be taken by an affirmative vote of a majority of the Trustees. The
Trustees shall in no event adopt By-Laws which are in conflict with the
Declaration, and any apparent inconsistency shall be construed in favor of
the related provisions in the Declaration.
Exhibit (e)
BLACKROCK MUNICIPAL INCOME TRUST
AUTOMATIC DIVIDEND REINVESTMENT PLAN
TERMS AND CONDITIONS
Pursuant to the Automatic Dividend Reinvestment Plan (the "Plan") of BlackRock Municipal Income Trust (the "Trust"), unless a holder (each, a "Shareholder") of the Trust's common shares of beneficial interest (the "Common Shares") otherwise elects, all dividends and capital gain distributions on such Shareholder's Common Shares will be automatically reinvested by State Street Bank & Trust Co. ("State Street Bank"), as agent for Shareholders in administering the Plan (the "Plan Agent"), in additional Common Shares of the Trust. Shareholders who elect not to participate in the Plan will receive all dividends and other distributions in cash paid by check mailed directly to the Shareholder of record (or, if the Common Shares are held in street or other nominee name, then to such nominee) by State Street Bank as the Dividend Disbursing Agent. Such participants may elect not to participate in the Plan and to receive all dividends and capital gain distributions in cash by sending written instructions to State Street Bank, as the Dividend Disbursing Agent, at the address set forth below. Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by written notice if received by the Plan Agent not less than ten days prior to any dividend record date; otherwise such termination or resumption will be effective with respect to any subsequently declared dividend or other distribution.
The Plan Agent will open an account for each Shareholder under the Plan in the same name in which such Shareholder's Common Shares are registered. Whenever the Trust declares an income dividend or a capital gain distribution (collectively referred to as "dividends") payable in cash, non-participants in the Plan will receive cash and participants in the Plan will receive the equivalent in Common Shares. The Common Shares will be acquired by the Plan Agent for the participants' accounts, depending upon the circumstances described below, either (i) through receipt of additional unissued but authorized Common Shares from the Trust ("newly issued Common Shares") or (ii) by purchase of outstanding Common Shares on the open market ("open-market purchases") on the New York Stock Exchange (the "NYSE"), the primary national securities exchange on which the common shares are traded (the "Exchange"), or elsewhere. If, on the record date for any dividend, the net asset value per Common Share is equal to or less than the market price per Common Share (such condition being referred to herein as "market premium"), the Plan Agent will invest the dividend amount in newly issued Common Shares on behalf of the participants. The number of newly issued Common Shares to be credited to each participant's account will be determined by dividing the dollar amount of the dividend by the net asset value per Common Share on the date the Common Shares are issued. If, on the record date for any dividend, the net asset value per Common Share is greater than the market value (such condition being referred to herein as "market discount"), the Plan Agent will invest the dividend amount in Common Shares acquired on behalf of the participants in open-market purchases.
In the event of a market discount on the record date for any dividend, the Plan Agent will have until the last business day before the next date on which the Common Shares trade on an "ex-dividend" basis or 30 days after the record date for such dividend, whichever is sooner (the "last purchase date"), to invest the dividend amount in Common Shares acquired in open-market purchases. It is contemplated that the Trust will pay monthly income dividends. Therefore, the period during which open-market purchases can be made will exist only from the record date of each dividend through the date before the next "ex-dividend" date which typically will be approximately ten days. If, before the Plan Agent has completed its open- market purchases, the market price of a Common Share exceeds the net asset value per Common Share, the average per Common Share purchase price paid by the Plan Agent may exceed the net asset value of the Common Shares, resulting in the acquisition of fewer Common Shares than if the dividend had been paid in newly issued Common Shares on the dividend record date. Because of the foregoing difficulty with respect to open market purchases, the Plan provides that if the Plan Agent is unable to invest the full dividend amount in open market purchases during the purchase period or if the market discount shifts to a market premium during the purchase period, the Plan Agent may cease making open-market purchases and may invest the uninvested portion of the dividend amount in newly issued Common Shares at the net asset value per Common Share at the close of business on the last purchase date.
The Plan Agent maintains all Shareholders' accounts in the Plan and furnishes written confirmation of all transactions in the accounts, including information needed by Shareholders for tax records. Common Shares in the account of each Plan participant will be held by the Plan Agent on behalf of the Plan participant.
In the case of Shareholders such as banks, brokers or nominees that hold Common Shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of Common Shares certified from time to time by the record Shareholder and held for the account of beneficial owners who participate in the Plan.
There will be no brokerage charges with respect to Common Shares issued directly by the Trust as a result of dividends or capital gains distributions payable either in Common Shares or in cash. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open- market purchases in connection with the reinvestment of dividends.
VOTING
Each Shareholder proxy will include those Common Shares purchased or received pursuant to the Plan. The Plan Agent will forward all proxy solicitation materials to participants and vote proxies for Common Shares held pursuant to the Plan in accordance with the instructions of the participants.
TAXATION
The automatic reinvestment of dividends will not relieve participants of any federal, state or local income tax that may be payable (or required to be withheld) on such dividends.
AMENDMENT OF THE PLAN
The Plan may be amended or terminated by the Trust or the Plan Agent. There is no direct service charge to participants in the Plan; however, the Trust reserves the right to amend the Plan to include a service charge payable by the participants. Notice will be sent to Plan participants of any amendments as soon as practicable after such action by the Trust.
INQUIRIES REGARDING THE PLAN
All correspondence concerning the Plan should be directed to the Plan Agent at 225 Franklin Street, Boston, MA 02110, 1-800-699-1236.
APPLICABLE LAW
These terms and conditions shall be governed by the laws of the State of New York without regard to its conflicts of laws provisions.
EXECUTION
To record the adoption of the Plan as of [_________], 2001, the Trust has caused this Plan to be executed in the name and on behalf of the Trust by a duly authorized officer.
BLACKROCK MUNICIPAL
INCOME TRUST,
a Delaware business trust
Title:
Exhibit (g)
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, dated _____________, between BlackRock Municipal Income Trust (the "Trust"), a Delaware business trust, and BlackRock Advisors, Inc. (the "Advisor"), a Delaware corporation.
WHEREAS, Advisor has agreed to furnish investment advisory services to BlackRock Municipal Income Trust (the "Trust"), a closed-end management investment company registered under the Investment Company Act of 1940, as amended (the "Act");
WHEREAS, this Agreement has been approved in accordance with the provisions of the Act, and the Advisor is willing to furnish such services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual premises and covenants 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 Advisor 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 for the day-to-day operations of the Trust and the purchase of securities for and the sale of securities held in the investment portfolio of the Trust.
2. Duties and Obligations of the Advisor with Respect to Investment of Assets of the Trust. Subject to the succeeding provisions of this section and subject to the direction and control of the Trust's Board of Trustees, the Advisor 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; (iii) arrange, subject to the provisions of paragraph 4 hereof, for the purchase and sale of securities and other assets held in the investment portfolio of the Trust; and (iv) provide investment research to the Trust.
3. Duties and Obligations of Advisor with Respect to the Administration of the Trust. The Advisor also agrees to furnish office facilities and equipment and clerical, bookkeeping and administrative services (other than such services, if any, provided by the Trust's Custodian, Transfer Agent and Dividend Disbursing Agent and other service providers) for the Trust. To the extent requested by the Trust, the Advisor agrees to provide the following administrative 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 Trustees;
(b) Oversee the maintenance the Trust's Custodian and Transfer Agent and Dividend Disbursing Agent of certain books and records of the Trust as required under Rule 31a-1(b)(4) of the Act and maintain (or oversee maintenance by such other persons as approved by the Board of Trustees) such other books and records required by law or for the proper operation of the Trust;
(c) Oversee the preparation and filing of the Trust's federal, state and local income tax returns and any other required tax returns;
(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 ("SEC") on Form N-SAR and such other reports, forms and 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 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 of Trustees concerning the performance of the independent accountants as the Board of Trustees may reasonably request or deems appropriate;
(j) Make such reports and recommendations to the Board of Trustees concerning the performance and fees of the Trust's Custodian and Transfer and Dividend disbursing agent as the Board of Trustees may reasonably request or deems appropriate;
(k) Oversee and review calculations of fees paid to the Trust's service providers;
(l) Oversee the Trust's portfolio and perform necessary calculations as required under Section 18 of the Act;
(m) Consult 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 and monitor financial and shareholder accounting services;
(n) Review implementation of any share purchase programs authorized by the Board of Trustees;
(o) Determine the amounts available for distribution as dividends and distributions to be paid by the Trust to its shareholders; prepare and arrange for the printing of dividend notices to shareholders; and provide the Trust's dividend disbursing agent and custodian with such information as is required for such parties to effect the payment of dividends and distributions and to implement the Trust's dividend reinvestment plan;
(p) Prepare such information and reports as may be required by any banks from which the Trust borrows funds;
(q) Provide such assistance to 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;
(r) Assist in the preparation and filing of Forms 3, 4, and 5 pursuant to Section 16 of the Securities Exchange Act of 1934, as amended, and Section 30(f) of the Act for the officers and trustees of the Trust, such filings to be based on information provided by those persons;
(s) Respond to or refer to the Trust's officers or transfer agent, shareholder (including any potential shareholder) inquiries relating to the Trust.
(t) Supervise any other aspects of the Trust's administration as may be agreed to by the Trust and the Advisor.
All services are to be furnished through the medium of any directors, officers or employees of the Advisor or its affiliates as the Advisor deems appropriate in order to fulfill its obligations hereunder.
The Trust will reimburse the Advisor or its affiliates for all out-of-pocket expenses incurred by them in connection with the performance of the administrative services described in this paragraph 3.
4. Covenants. In the performance of its duties under this Agreement, the Advisor shall at all times conform to, and act in accordance with, any requirements imposed by:
(a) (i) the provisions of the Act and the Investment Advisers Act of 1940, as amended, and all applicable Rules and Regulations of the Securities and Exchange Commission (the "SEC"); (ii) any other applicable provision of law; (iii) the provisions of the Agreement and Declaration of Trust and By-Laws of the Trust, as such documents are amended from time to time; (iv) the investment objectives 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 Trustees of the Trust;
(b) will place orders either directly with the issuer or with any broker or dealer. Subject to the other provisions of this paragraph, in placing orders with brokers and dealers, the Advisor will attempt to obtain the best price and the most favorable execution of its orders. In placing orders, the Advisor will consider the experience and skill of the firm's securities traders as well as the firm's financial responsibility and administrative efficiency. Consistent with this obligation, the Advisor may select brokers on the basis of the research, statistical and pricing services they provide to the Trust and other clients of the Advisor. Information and research received from such brokers will be in addition to, and not in lieu of, the services required to be performed by the Advisor hereunder. A commission paid to such brokers may be higher than that which another qualified broker would have charged for effecting the same transaction, provided that the Advisor determines in good faith that such commission is reasonable in terms either of the transaction or the overall responsibility of the Advisor to the Trust and its other clients and that the total commissions paid by the Trust will be reasonable in relation to the benefits to the Trust over the long-term. In addition, the Advisor is authorized to take into account the sale of shares of the Trust in allocating purchase and sale orders for portfolio securities to brokers or dealers (including brokers and dealers that are affiliated with the Advisor), provided that the Advisor believes that the quality of the transaction and the commission are comparable to what they would be with other qualified firms. In no instance, however, will the Trust's securities be purchased from or sold to the Advisor, or any affiliated person thereof, except to the extent permitted by the SEC or by applicable law;
(c) will maintain a policy and practice of conducting its investment advisory services hereunder independently of the commercial banking operations of its affiliates. When the Advisor makes investment recommendations for the Trust, its investment advisory personnel will not inquire or take into consideration whether the issuer of securities proposed for purchase or sale for the Trust's account are customers of the commercial department of its affiliates; and
(d) will treat confidentially and as proprietary information of the Trust all records and other information relative to the Trust, and the Trust's prior, current or potential shareholders, and will not use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Trust, which approval shall not be unreasonably withheld and may not be withheld where the Advisor may be exposed to civil or criminal contempt proceedings for failure to comply, when requested to divulge such information by duly constituted authorities, or when so requested by the Trust.
5. Services Not Exclusive. Nothing in this Agreement shall prevent the Advisor or any 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 Advisor or any of its 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 Advisor will undertake no activities which, in its judgment, will adversely affect the performance of its obligations under this Agreement.
6. Books and Records. In compliance with the requirements of Rule 31a-3 under the Act, the Advisor hereby agrees that all records which it maintains for the Trust are the property of the Trust and further agrees to surrender promptly to the Trust any such records upon the Trust's request. The Advisor further agrees to preserve for the periods prescribed by Rule 31a-2 under the Act the records required to be maintained by Rule 31a-1 under the Act.
7. Agency Cross Transactions. From time to time, the Advisor or brokers or dealers affiliated with it may find themselves in a position to buy for certain of their brokerage clients (each an "Account") securities which the Advisor's investment advisory clients wish to sell, and to sell for certain of their brokerage clients securities which advisory clients wish to buy. Where one of the parties is an advisory client, the Advisor or the affiliated broker or dealer cannot participate in this type of transaction (known as a cross transaction) on behalf of an advisory client and retain commissions from one or both parties to the transaction without the advisory client's consent. This is because in a situation where the Advisor is making the investment decision (as opposed to a brokerage client who makes his own investment decisions), and the Advisor or an affiliate is receiving commissions from both sides of the transaction, there is a potential conflicting division of loyalties and responsibilities on the Advisor's part regarding the advisory client. The Securities and Exchange Commission has adopted a rule under the Investment Advisers Act of 1940, as amended, which permits the Advisor or its affiliates to participate on behalf of an Account in agency cross transactions if the advisory client has given written consent in advance. By execution of this Agreement, the Trust authorizes the Advisor or its affiliates to participate in agency cross transactions involving an Account. The Trust may revoke its consent at any time by written notice to the Advisor.
8. Expenses. During the term of this Agreement, the Advisor will bear all costs and expenses of its employees and any overhead incurred in connection with its duties hereunder and shall bear the costs of any salaries or trustees fees of any officers or trustees of the Trust who are affiliated persons (as defined in the Act) of the Advisor; provided that the Board of Trustees of the Trust may approve reimbursement to the Advisor 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 and administrative services required to be provided hereunder) of all personnel employed by the Advisor who devote substantial time to Trust operations or the operations of other investment companies advised by the Advisor.
9. Compensation of the Advisor. (a) The Trust agrees to pay to the Advisor and the Advisor agrees to accept as full compensation for all services rendered by the Advisor as such, a monthly fee (the "Investment Advisory Fee") in arrears at an annual rate equal to [ % of the average weekly value of the Trust's net assets]. 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 Trustees of the Trust for calculating the value of the Trust's assets or delegating such calculations to third parties.
10. Indemnity. (a) The Trust hereby agrees to indemnify
the Advisor, and each of the Advisor's directors, officers, employees,
agents, associates and controlling persons and the directors, partners,
members, officers, employees and agents thereof (including any individual
who serves at the Advisor's request as director, officer, partner, member,
trustee or the like of another entity) (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 state 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
such Indemnitee may be or may have been involved as a party or otherwise or
with which such Indemnitee may be or may have been threatened, while acting
in any capacity set forth herein or thereafter by reason of such Indemnitee
having acted in any such capacity, except with respect to any matter as to
which such Indemnitee shall have been adjudicated not to have acted in good
faith in the reasonable belief that such Indemnitee's action was in the
best interest of the Trust and furthermore, in the case of any criminal
proceeding, so long as such Indemnitee 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 misfeasance, (ii) bad faith, (iii) gross negligence or (iv)
reckless disregard of the duties involved in the conduct of such
Indemnitee's 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 such Indemnitee's 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 Trustees 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 such Indemnitee is entitled to such indemnification and if the trustees 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 such Indemnitee-undertaking, (B) the Trust shall be insured against losses arising by reason of any lawful advance, or (C) a majority of a quorum consisting of trustees 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 Trustees") 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 or 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 Trustees 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 such Indemnitee may be lawfully entitled.
11. Limitation on Liability. (a) The Advisor will not be liable for any error of judgment or mistake of law or for any loss suffered by Advisor or by the Trust in connection with the performance of this Agreement, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard by it of its duties under this Agreement.
(b) Notwithstanding anything to the contrary contained in this Agreement, the parties hereto acknowledge and agree that, as provided in Section 5.1 of Article V of the Declaration of Trust, this Agreement is executed by the Trustees and/or officers of the Trust, not individually but as such Trustees and/or officers of the Trust, and the obligations hereunder are not binding upon any of the Trustees or Shareholders individually but bind only the estate of the Trust.
12. Duration and Termination. This Agreement shall become effective as of the date hereof and, unless sooner terminated with respect to the Trust as provided herein, shall continue in effect for a period of two years. Thereafter, if not terminated, this Agreement shall continue in effect with respect to the Trust for successive periods of 12 months, provided such continuance is specifically approved at least annually by both (a) the vote of a majority of the Trust's Board of Trustees or the vote of a majority of the outstanding voting securities of the Trust at the time outstanding and entitled to vote, and (b) by the vote of a majority of the Trustees who are not parties to this Agreement or interested persons of any party to this Agreement, cast in person at a meeting called for the purpose of voting on such approval. Notwithstanding the foregoing, this Agreement may be terminated by the Trust at any time, without the payment of any penalty, upon giving the Advisor 60 days' notice (which notice may be waived by the Advisor), provided that such termination by the Trust shall be directed or approved by the vote of a majority of the Trustees of the Trust in office at the time or by the vote of the holders of a majority of the voting securities of the Trust at the time outstanding and entitled to vote, or by the Advisor on 60 days' written notice (which notice may be waived by the Trust). This Agreement will also immediately terminate in the event of its assignment. (As used in this Agreement, the terms "majority of the outstanding voting securities," "interested person" and "assignment" shall have the same meanings of such terms in the Act.)
13. 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.
14. Amendment of this Agreement. No provision of this Agreement
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought. Any amendment of this
Agreement shall be subject to the Act.
15. Governing Law. This Agreement shall be governed by and 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.
16. Use of the name BlackRock. The Advisor has consented to the use by the Trust of the name or identifying word "BlackRock" in the name of the Trust. Such consent is conditioned upon the employment of the Advisor as the investment adviser to the Trust. The name or identifying word "BlackRock" may be used from time to time in other connections and for other purposes by the Advisor and any of its affiliates. The Advisor may require the Trust to cease using "BlackRock" in the name of the Trust if the Trust ceases to employ, for any reason, the Advisor, any successor thereto or any affiliate thereof as investment advisor of the Trust.
17. Miscellaneous. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding on, and shall inure to the benefit of the parties hereto and their respective successors.
18. Counterparts. This Agreement may be executed in counterparts by the parties hereto, each of which shall constitute an original counterpart, and all of which, together, shall constitute one Agreement.
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.
BLACKROCK MUNICIPAL INCOME TRUST
By:_________________________________
Name:
Title:
BLACKROCK ADVISORS, INC.
By:_________________________________
Name:
Title:
BlackRock Advisors, Inc.
345 Park Avenue
New York, New York 10154
_______________, 2001
BlackRock Municipal Income Trust
100 Bellevue Parkway
Wilmington, Delaware 19809
Gentlemen:
We are writing to confirm our understanding that BlackRock Municipal Income Trust (the "Trust") has a nonexclusive, revocable license to use the word "BlackRock" in its name and that if BlackRock Advisors, Inc. (the "Advisor") ceases to be the investment adviser to the Trust, the Trust will cease using such name as promptly as practicable, making all reasonable efforts to remove "BlackRock" from its name including calling a special meeting of stockholders.
Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Trust, has informed us that the provision described above is contained in the Trust's investment management agreement, and that continued use of the name "BlackRock" if the Advisor ceases to be the investment adviser would probably violate those provisions of the Investment Company Act of 1940, as amended, that require that the Trust's name not be misleading.
Execution of this letter agreement on behalf of the Trust will signify that the Trust understands that it has a nonexclusive, revocable license to the use of the name "BlackRock."
BLACKROCK ADVISORS, INC.
By:_________________________________________
Name:
Title:
BLACKROCK MUNICIPAL
INCOME TRUST
By:_________________________________________
Name:
Title:
Exhibit (j)
CUSTODIAN CONTRACT
Between
STATE STREET BANK AND TRUST COMPANY
And
BLACKROCK MUNICIPAL INCOME TRUST
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....................................2
2.1 Holding Securities......................................2
2.2 Delivery of Securities..................................2
2.3 Registration of Securities..............................7
2.4 Bank Accounts...........................................8
2.5 Availability of Federal Funds...........................8
2.6 Collection of Income....................................9
2.7 Payment of Fund Monies.................................10
2.8 Liability for Payment in Advance of Receipt of Securities
Purchased..............................................12
2.9 Appointment of Agents..................................13
2.10 Deposit of Fund Assets in Securities Systems...........13
2.10A Fund Assets Held in the Custodian's Direct Paper System16
2.11 Segregated Account.....................................17
2.12 Ownership Certificates for Tax Purposes................19
2.13 Proxies................................................19
2.14 Communications Relating to Fund Portfolio Securities...19
2.15 Proper Instructions....................................20
2.16 Actions Permitted without Express Authority............21
2.17 Evidence of Authority..................................22
3. Duties of Custodian with Respect to the Books of Account
and Calculation of Net Asset Value and Net Income............22
4. Records......................................................23
5. Opinion of Fund's Independent Accountant.....................24
6. Reports to Fund by Independent Public Accountants............24
7. Compensation of Custodian....................................25
8. Responsibility of Custodian..................................25
9. Effective Period, Termination and Amendment..................26
10. Successor Custodian..........................................28
11. Interpretive and Additional Provisions ......................29
12. Massachusetts Law to Apply...................................30
13. Prior Contracts .............................................30
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CUSTODIAN CONTRACT
This Contract between BlackRock Municipal Income Trust, a Delaware business trust organized and existing under the laws of Delaware, having its principal place of business at 100 Bellevue Parkway, Wilmington, Delaware 19809, 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 Agreement and Declaration of Trust. 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, $0.001 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 applicable vote by the Board
of Trustees of the Fund, and provided that the Custodian shall have no more
or less responsibility or liability to the Fund on account of any actions
or omissions of any sub-custodian so employed than any such sub-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) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered
into by the Fund;
3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Section 2.10
hereof;
4) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
5) To the issuer thereof or its agent when such securities
are called, redeemed, retired or otherwise become
payable; provided that, in any such case, the cash or
other consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into
the name of the Fund or into the name of any nominee or
nominees of the Custodian or into the name or nominee
name of any agent appointed pursuant to Section 2.9 or
into the name or nominee name of any sub-custodian
appointed pursuant to Article 1; or for exchange for a
different number of bonds, certificates or
other evidence representing the same aggregate face
amount or number of units; provided that, in any such
case, the new securities are to be delivered to the
Custodian;
7) 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 exercise of such warrants,
rights or similar 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, the Custodian and a
broker-dealer registered under the Securities Exchange
Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc.
("NASD"), relating to compliance with the rules of The
Options Clearing Corporation and of any registered
national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund;
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 Trustees
or of the Executive Committee signed by an officer of the
Fund and certified by the Secretary or an Assistant
Secretary, specifying the securities to be delivered,
setting forth the purpose for which such delivery is to
be made, declaring such 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. The Custodian shall open and maintain a 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 Trustees 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 amount of checks received in payment for Shares of 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 deemed appropriate by the parties, the Custodian shall pay out monies 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 member of NASD, (i) against
delivery of the securities either in certificate form or
through an entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the Fund
of securities owned by the Custodian 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 in whole or part capitalized or
treated as 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 Trustees 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 securities to the same extent as if the
securities had been 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 Securities System which shall not include any assets
of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
2) The records of the Custodian with respect to 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 the Fund shall identify the
Fund, be maintained for the Fund by the Custodian and be
provided to the Fund at its request. Upon request, the
Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund in the form
of a written advice or notice and shall furnish to the
Fund copies of daily transaction sheets reflecting each
day's transactions in the Securities System for the
account of the Fund.
4) The Custodian shall provide the Fund with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and
procedures for safeguarding 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 any such agent to enforce
effectively such rights as it may have against the
Securities System; at the election of the Fund, it shall
be entitled to be subrogated to the rights of the
Custodian with 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 in the Direct Paper
System shall identify by book-entry those 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.
2.11 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts
for and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities, including securities maintained
in an account by the Custodian pursuant to Section 2.10 hereof, (i)
in accordance with the provisions of any agreement among the Fund,
the Custodian and a broker-dealer registered under the Exchange Act
and a member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to compliance
with the rules of The Options Clearing Corporation and of any
registered national securities exchange (or the Commodity Futures
Trading Commission or any registered contract market), or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund, (ii) for
purposes of segregating cash or government securities in connection
with options purchased, sold or written by the Fund or commodity
futures contracts or options thereon purchased or sold by the Fund,
(iii) for the purposes of compliance by the Fund with the procedures
required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of
the Board of Trustees 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
rights in connection therewith and notices of exercise of call and
put options written by the Fund and the maturity of futures contracts
purchased or sold by the Fund) received by the Custodian from issuers
of the 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 initialed by one or more person
or persons as the Board of Trustees 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 of the Secretary or an Assistant
Secretary as to the authorization by the Board of Trustees of the
Fund accompanied by a detailed description of procedures approved by
the Board of Trustees, Proper Instructions may include communications
effected directly between electro- mechanical or electronic devices
provided that the Board of Trustees 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
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the securities
and property of the Fund except as otherwise directed by
the Board of Trustees 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
Trustees 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 Trustees pursuant to
the Agreement and Declaration of Trust 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
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to the entity or entities appointed by the Board of Trustees of the Fund to keep the books of account of the Fund and/or compute the net asset value per share of the outstanding shares of the Fund or, if directed in writing to do so by the Fund, shall itself keep such books of account and/or compute such net asset value per share. If so directed, the Custodian shall also calculate 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 3la-1 and 3la-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 of the Fund and employees and agents of the Securities and Exchange Commission. The Custodian shall, at the Fund's request, supply the Fund with a tabulation of securities owned by the Fund and held by the Custodian and shall, when requested to do so by the Fund and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such tabulations.
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 assurance 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 of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Contract and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties, 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 liable for the payment of money or incurring liability of some other form, the Fund, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it.
If the Fund requires the Custodian to advance cash or securities for any purpose or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Contract, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the Fund shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of the Fund assets to the extent necessary to obtain reimbursement.
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; provide, 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 Trustees 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 Trustees has reviewed the use by the Fund of such Securities System, as required in each case by Rule 17f-4 under the Investment Company Act of 1940, as amended and that the Custodian 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 Trustees 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 Trustees 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 Agreement and Declaration of Trust, and further provided, that the Fund may at any time by action of its Board of Trustees (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 Trustees of the Fund, the Custodian shall, upon termination, deliver to such successor custodian at the office of the Custodian, duly endorsed and in the form for transfer, all securities then held by it hereunder and shall transfer to an account of the successor custodian all of the Fund's securities held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of a certified copy of a vote of the Board of Trustees 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 Trustees 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 termination hereof owing to failure of the Fund to procure the certified copy of the vote referred to or of the Board of Trustees 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 Agreement and Declaration of Trust of the Fund. No interpretive or additional provisions .made as provided in the preceding sentence shall be deemed to be an amendment of this Contract.
12. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts.
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.
Exhibit (k)(1)
EXPENSE REIMBURSEMENT AGREEMENT
AGREEMENT made this ___ day of _________, 2001, by and between BLACKROCK MUNICIPAL INCOME TRUST, a Delaware business trust (the "Trust"), and BLACKROCK ADVISORS, INC., a Delaware corporation (the "Advisor").
W I T N E S S E T H
WHEREAS, the Trust and the Advisor have separately entered into an Investment Management Agreement of even date herewith (the "Management Agreement");
In consideration of the mutual covenants hereinafter contained, and in connection with the establishment and commencement of operations of the Fund, it is hereby agreed by and between the parties hereto as follows:
1. For the period from the commencement of the Trust's
operations through [December 31, 2001] and for the 12 month periods ending
[December 31] in each indicated year during the term of the Management
Agreement (including any continuation done in accordance with Section 15(c)
of the Investment Company Act of 1940), the Advisor agrees to reimburse
expenses (including the management fee and other expenses) in the amounts
determined by applying the following annual rates to the average daily net
assets of the Trust:
Period Ending Period Ending
[December 31] Reimbursement [December 31] Reimbursement
2001* [ ]% 2007 [ ]%
2002 [ ]% 2008 [ ]%
2003 [ ]% 2009 [ ]%
2004 [ ]% 2010 [ ]%
2005 [ ]% 2011 [ ]%
2006 [ ]%
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*From the commencement of operations.
2. To effect the expense reimbursement provided for in this Agreement, the Trust may offset the appropriate amount of the reimbursement contemplated hereunder against the management fee payable under the Management Agreement.
3. This Agreement, and the Advisor's obligation to so reimburse expenses hereunder, shall terminate on the earlier of (a) [December 31, 2011] or (b) termination of the Management Agreement.
4. Except as provided in paragraph 3, above, this Agreement may be terminated only by the vote of (a) the Board of Trustees of the Trust, including the vote of the members of the Board who are not "interested persons" within the meaning of the Investment Company Act of 1940, and (b) a majority of the outstanding voting securities of the Trust.
5. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule, or otherwise, the remainder shall not be thereby affected.
6. The Trust's Declaration of Trust is on file with the Secretary of the State of Delaware. This Agreement is executed on behalf of the Trust by the Trust's officers as officers and not individually and the obligations imposed upon the Trust by this Agreement are not binding upon any of the Trust's Trustees, officers or shareholders individually but are binding only upon the assets and property of the Trust.
IN WITNESS WHEREOF, the Trust and the Advisor have caused this Agreement to be executed on the day and year above written.
BLACKROCK
MUNICIPAL INCOME TRUST
by: _________________________________
Name:
Title:
Attest: __________________________
Name:
Title:
BLACKROCK ADVISORS, INC.
by: _________________________________
Name:
Title:
Attest: __________________________
Name:
Title:
Exhibit (p)
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT is entered into as of the day of May, 2001, between BlackRock Municipal Income Trust, a trust organized and existing under the laws of Delaware (the "Trust"), and BlackRock Advisors, Inc. or one of its affiliates (the "Purchaser").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF THE SHARES
1.1 SALE AND ISSUANCE OF SHARES. Subject to the terms and conditions of this Agreement, the Trustees agree to sell to the Purchaser, and the Purchaser agrees to purchase from the Trustees [ ] common shares of beneficial interest, par value [$ ], representing undivided beneficial interests in the Trust (the "Shares") at a price per Share of $[ ] for an aggregate purchase price of $[ ].
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER. The Purchaser hereby represents and warrants to, and covenants for the benefit of, the Trust that:
2.1 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made by the Trustees with the Purchaser in reliance upon the Purchaser's representation to the Trustees, which by the Purchaser's execution of this Agreement the Purchaser hereby confirms, that the Shares are being acquired for investment for the Purchaser's own account, and not as a nominee or agent and not with a view to the resale or distribution by the Purchaser of any of the Shares, and that the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the Shares, in either case in violation of any securities registration requirement under applicable law, but subject nevertheless, to any requirement of law that the disposition of its property shall at all times by within its control. By executing this Agreement, the Purchaser further represents that the Purchaser does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to such person or to any third person, with respect to any of the Shares.
2.2 INVESTMENT EXPERIENCE. The Purchaser acknowledges that it can bear the economic risk of the investment for an indefinite period of time and has such knowledge and experience in financial and business matters (and particularly in the business in which the Trust operates) as to be capable of evaluating the merits and risks of the investment in the Shares. The Purchaser is an "accredited investor" as defined in Rule 501(a) of Regulation D under the Securities Act of 1933 (the "Act").
2.3 RESTRICTED SECURITIES. The Purchaser understands that the Shares are characterized as "restricted securities" under the United States securities laws inasmuch as they are being acquired from the Trustees in a transaction not involving a public offering and that under such laws and applicable regulations such Shares may be resold without registration under the Act only in certain circumstances. In this connection, the Purchaser represents that it understands the resale limitations imposed by the Act and is generally familiar with the existing resale limitations imposed by Rule 144.
2.4 FURTHER LIMITATIONS ON DISPOSITION. The Purchaser further agrees not to make any disposition directly or indirectly of all or any portion of the Shares unless and until:
(a) There is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or
(b) The Purchaser shall have furnished the Trustees with an opinion of counsel, reasonably satisfactory to the Trustees, that such disposition will not require registration of such Shares under the Act.
(c) Notwithstanding the provisions of subsections (a) and (b) above, no such registration statement or opinion of counsel shall be necessary for a transfer by the Purchaser to any affiliate of the Purchaser, if the transferee agrees in writing to be subject to the terms hereof to the same extent as if it were the original Purchaser hereunder.
2.5 LEGENDS. It is understood that the certificate evidencing the Shares may bear either or both of the following legends:
(a) "These securities have not been registered under the Securities Act of 1933. They may not be sold, offered for sale, pledged or hypothecated in the absence of a registration statement in effect with respect to the Shares under such Act or an opinion of counsel reasonably satisfactory to the Trustees of BlackRock Municipal Income Trust that such registration is not required."
(b) Any legend required by the laws of any other applicable jurisdiction.
The Purchaser and the Trustees agree that the legend contained in the paragraph (a) above shall be removed at a holder's request when they are no longer necessary to ensure compliance with federal securities laws.
2.6 COUNTERPARTS. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
BLACKROCK MUNICIPAL INCOME TRUST
By: ---------------------------------------
Name:
Title:
BlackRock Advisors, Inc.
By:---------------------------------------
Name:
Title:
Address:
Exhibit (r)(1)
THE BLACKROCK CLOSED END TRUSTS
CODE OF ETHICS
I. Introduction.
The purpose of this Code of Ethics is to prevent Access Persons (as
defined below) of The BlackRock Closed End Trusts (the "Trusts") from
engaging in any act, practice or course of business prohibited by paragraph
(b) of Rule 17j-l (the "Rule") under the Investment Company Act of 1940, as
amended (the "Act"). This Code of Ethics is required by paragraph (c) of
the Rule. A copy of the Rule is attached to this Code of Ethics as Appendix
1.
Access Persons of the Trusts, in conducting their personal securities transactions, owe a fiduciary duty to the shareholders of the Trusts. The fundamental standard to be followed in personal securities transactions is that Access Persons may not take inappropriate advantage of their positions. All personal securities transactions by Access Persons must be conducted in such a manner as to avoid any actual or potential conflict of interest between the Access Person's interest and the interests of the Trusts, or any abuse of an Access Person's position of trust and responsibility. Potential conflicts arising from personal investment activities could include buying or selling securities based on knowledge of the Trust's trading position or plans (sometimes referred to as front-running), and acceptance of personal favors that could influence trading judgments on behalf of the Trusts. While this Code of Ethics is designed to address identified conflicts and potential conflicts, it cannot possibly be written broadly enough to cover all potential situations and, in this regard, Access Persons are expected to adhere not only to the letter, but also the spirit, of the policies contained herein.
II. Definitions.
In order to understand how this Code of Ethics applies to particular persons and transactions, familiarity with the key terms and concepts used in this Code of Ethics is necessary. Those key terms and concepts are:
1. "Access Person" means any trustee, officer or "advisory person" of the Trusts. A list of the Trust's Access Persons is attached as Appendix 2 to this Code of Ethics and will be updated from time to time.
2. "Advisory person" means (a) any employee of the Trusts or of any company in a control relationship to the Trusts, who, in connection with his regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of a "Covered Security" by the Trusts, or whose functions relate to the making of any recommendations with respect to such purchases or sales; and (b) any natural person in a control relationship to the Trusts who obtains information concerning recommendations made to the Trusts with regard to the purchase or sale of "Covered Securities".
3. "Beneficial ownership" has the meaning set forth in Rule 16a-1(a)(2) of the Securities Exchange Act of 1934, as amended, a copy of which is included as Appendix 3. The determination of direct or indirect beneficial ownership shall apply to all securities which an Access Person has or acquires.
4. "BlackRock" means BlackRock Advisors, Inc. the investment adviser of the Trusts.
5. "BlackRock Code" means the Employee Investment Transaction Policy adopted by BlackRock and approved by the Board.
6. "Control" has the meaning set forth in Section 2(a)(9) of the Act.
7. "Covered Security" has the meaning set forth in Section 2(a)(36) of the Act, except that it shall not include: direct obligations of the Government of the United States; bankers' acceptances, bank certificates of deposit, commercial paper, and high-quality short-term debt instruments, including repurchase agreements; and shares issued by registered open-end investment companies. A high-quality short- term debt instrument is one with a maturity at issuance of less than 366 days and that is rated in one of the two highest rating categories by a nationally recognized statistical rating organization.
8. "Independent trustee" means a trustee of the Trusts who is not an "interested person" of the Trusts within the meaning of Section 2(a)(19) of the Act.
9. "Investment Personnel" of the Trusts means (a) any employee of the Trusts (or of any company in a control relationship to the Trusts) who, in connection with his or her regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of securities by the Trusts and (b) any natural person who controls the Trusts and who obtains information concerning recommendations made to the Trusts regarding the purchase or sale of securities by the Trusts.
10. "IPO" means an offering of securities registered under the Securities Act of 1933, the issuer or which, immediately before the registration, was not subject to the reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act.
11. "Limited Offering" means an offering exempt from registration under the Securities Act of 1933 pursuant to Section 4(2), 4(6) or Rule 504, 505 or 506 under the Securities Act of 1933.
12. "Purchase or sale of a Covered Security" includes, among other things, the writing of an option to purchase or sell a Covered Security.
III. Restrictions Applicable to Directors, Officers and Employees of BlackRock.
1. All Directors, officers and employees of BlackRock's investment advisory companies shall be subject to the restrictions, limitations and reporting responsibilities set forth in the BlackRock Code, respectively, as if fully set forth herein.
2. Persons subject to this Section III shall not be subject to the restrictions, limitations and reporting responsibilities set forth in Sections IV. and V. below.
IV. Prohibitions; Exemptions.
1. Prohibited Purchases and Sales.
A. No Access Person may purchase or sell, directly or indirectly, any Covered Security in which that Access Person has, or by reason of the transaction would acquire, any direct or indirect beneficial ownership and which to the actual knowledge of that Access Person at the time of such purchase or sale:
(1) is being considered for purchase or sale by the Trusts; or
(2) is being purchased or sold by the Trusts.
2. Exemptions From Certain Prohibitions.
A. The prohibited purchase and sale transactions described in paragraph IV.1 above do not apply to the following personal securities transactions:
(1) purchases or sales effected in any account over which the Access Person has no direct or indirect influence or control;
(2) purchases or sales which are non-volitional on the part of either the Access Person or the Trusts;
(3) purchases which are part of an automatic dividend reinvestment plan (other than pursuant to a cash purchase plan option);
(4) purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent the rights were acquired from that issuer, and sales of the rights so acquired;
(5) any purchase or sale, or series of related transactions, involving 500 shares or less in the aggregate, if the issuer has a market capitalization (outstanding shares multiplied by the current price per share) greater than $1 billion;
(6) any purchase or sale which the Compliance Officer of BlackRock (as defined in the BlackRock Code) approves on the grounds that its potential harm to the Trusts is remote.
3. Prohibited Recommendations.
An Access Person may not recommend the purchase or sale of any Covered Security to or for the Trusts without having disclosed his or her interest, if any, in such security or the issuer thereof, including without limitation:
A. any direct or indirect beneficial ownership of any Covered Security of such issuer, including any Covered Security received in a private securities transaction;
B. any contemplated purchase or sale by such person of a Covered Security;
C. any position with such issuer or its affiliates; or
D. any present or proposed business relationship between such issuer or its affiliates and such person or any party in which such person has a significant interest.
4. Pre-approval of Investments in Initial Public Offerings or Limited Offerings.
A. No Investment Personnel shall purchase any security (including, but not limited to, any Covered Security) issued in an initial public offering ("IPO") or a Limited Offering unless an officer of the Trusts approves the transaction in advance. The Secretary shall maintain a written record of any decisions to permit these transactions, along with the reasons supporting the decision.
V. Reporting.
1. Initial Holdings Reports.
No later than ten (10) days after a person becomes an Access Person, he or she must report to the Trusts the following information:
(i) the title, number of shares and principal amount of each Covered Security in which the Access Person had any direct or indirect beneficial ownership when the person became an Access Person;
(ii) the name of any broker, dealer or bank with whom the Access Person maintained an account in which any securities were held for the direct or indirect benefit of the Access Person as of the date the person became an Access Person; and
(iii) the date that the report is submitted by the Access Person.
2. Quarterly Reporting.
A. Every Access Person shall either report to the Trusts the information described in paragraphs B and C below with respect to transactions in any Covered Security in which the Access Person has, or by reason of the transaction acquires, any direct or indirect beneficial ownership in the security or, in the alternative, make the representation in paragraph D below.
B. Every report shall be made not later than 10 days after the end of the calendar quarter in which the transaction to which the report relates was effected and shall contain the following information:
(1) the date of the transaction, the title, the interest rate and maturity date (if applicable), the number of shares and the principal amount of each Covered Security involved;
(2) the nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);
(3) the price at which the transaction was effected;
(4) the name of the broker, dealer or bank with or through whom the transaction was effected;
(5) the date that the report is submitted by the Access Person; and
(6) a description of any factors potentially relevant to an analysis of whether the Access Person may have a conflict of interest with respect to the transaction, including the existence of any substantial economic relationship between the transaction and securities held or to be acquired by the Trusts.
C. With respect to any account established by the Access Person in which any securities were held during the quarter for the direct or indirect benefit of the Access Person, no later than 10 days after the end of a calendar quarter, an Access Person shall provide a report to the Trusts containing the following information:
(1) the name of the broker, dealer or bank with whom the Access Person established the account;
(2) the date the account was established; and
(3) the date that the report is submitted by the Access Person.
D. If no transactions were conducted by an Access Person during a calendar quarter that are subject to the reporting requirements described above, such Access Person shall, not later than 10 days after the end of that calendar quarter, provide a written representation to that effect to the Trusts.
3. Annual Reporting.
A. Every Access Person shall report to the Trusts the information described in paragraph B below with respect to transactions in any Covered Security in which the Access Person has, or by reason of the transaction acquires, any direct or indirect beneficial ownership in the security.
B. Annually, within 30 days of the end of each calendar year, the following information (which information must be current as of a date no more than 30 days before the report is submitted):
(1) The title, number of shares and principal amount of each Covered Security in which the Access Person had any direct or indirect beneficial ownership;
(2) The name of any broker, dealer or bank with whom the Access Person maintains an account in which any securities are held for the direct or indirect benefit of the Access Person; and
(3) The date that the report is submitted by the Access Person.
4. Exceptions to Reporting Requirements.
A. An Access Person is not required to make a report otherwise required under paragraphs 1, 2 or 3 above with respect to any transaction effected for any account over which the Access Person does not have any direct or indirect influence or control; provided, (however, that if the Access Person is relying upon the provisions of this paragraph 4(A) to avoid making such a report, the Access Person shall, not later than 10 days after the end of each calendar quarter, identify any such account in writing and certify in writing that he or she had no direct or indirect influence over any such account.
B. An independent trustee of the Trusts who would be required to make a report pursuant to paragraphs 1, 2 or 3 above solely by reason of being a trustee of the Trusts is not required to make an initial holdings report under paragraph 1 above and an annual report under paragraph 3 above, and is only required to make a quarterly report under paragraph 2 above if the independent trustee, at the time of the transaction, knew or, in the ordinary course of fulfilling the independent trustee's official duties as a trustee of the Trusts, should have known that (a) the Trusts has engaged in a transaction in the same security within the last 15 days or is engaging or going to engage in a transaction in the same security within the next 15 days, or (b) the Trusts or BlackRock has within the last 15 days considered a transaction in the same security or is considering a transaction in the same security or within the next 15 days is going to consider a transaction in the same security.
5. Annual Certification.
A. All Access Persons are required to certify that they have read and understand this Code of Ethics and recognize that they are subject to the provisions hereof and will comply with the policy and procedures stated herein. Further, all Access Persons are required to certify annually that they have complied with the requirements of this Code of Ethics and that they have reported all personal securities transactions required to be disclosed or reported pursuant to the requirements of such policies. A copy of the certification form to be used in complying with this paragraph A is attached to this Code of Ethics as Appendix 4.
B. The Trusts and BlackRock shall prepare an annual report to the Board of Trustees of the Trusts to be presented at the first regular meeting of the Board after March 31 of each year and which shall:
(1) Summarize existing procedures concerning personal investing, including pre-clearance policies and the monitoring of personal investment activity after pre-clearance has been granted, and any changes in the procedures during the past year;
(2) describe any issues arising under the Code of Ethics or procedures since the last report to the Board including, but not limited to, information about any material violations of the Code of Ethics or procedures and the sanctions imposed during the past year;
(3) identify any recommended changes in existing restrictions or procedures based upon experience under this Code of Ethics, evolving industry practice or developments in applicable laws and regulations;
(4) contain such other information, observations and recommendations as deemed relevant by the Trusts or BlackRock; and
(5) certify that the Trusts, BlackRock have adopted Codes of Ethics with procedures reasonably necessary to prevent Access Persons from violating the provisions of Rule 17j-1(b) or this Code.
6. Notification of Reporting Obligation and Review of Reports.
Each Access Person shall receive a copy of this Code of Ethics and be notified of his or her reporting obligations. All reports shall be promptly submitted upon completion to the Trust's Secretary who shall review such reports.
7. Miscellaneous.
A. Any report under this Code of Ethics may contain a statement that the report shall not be construed as an admission by the person making the report that the person has any direct or indirect beneficial ownership in the securities to which the report relates.
VI. Confidentiality.
No Access Person shall reveal to any other person (except in the normal course of his or her duties on behalf of the Trusts) any information regarding securities transactions by the Trusts or consideration by the Trusts or BlackRock of any such securities transaction.
All information obtained from any Access Person hereunder shall be kept in strict confidence, except that reports of securities transactions hereunder will be made available to the Securities and Exchange Commission or any other regulatory or self-regulatory organization to the extent required by law or regulation.
VII. Sanctions.
Upon discovering a violation of this Code of Ethics, the Board of Trustees of the Trusts may impose any sanctions it deems appropriate, including a letter of censure, the suspension or termination of any trustee, officer or employee of the Trusts, or the recommendation to the employer of the violator of the suspension or termination of the employment of the violator.
Dated: May 18, 2000
Appendix 1
Rule 17j-l under the Investment Company Act of 1940
Appendix 2
The following are "Access Persons" for purposes of the foregoing Code of Ethics:
NAME TITLE
DIRECTORS
Laurence D. Fink Chairman/Director
Andrew F. Brimmer Director
Richard E. Cavanagh Director
Kent Dixon Director
Frank J. Fabozzi Director
James Clayburn La Force, Jr. Director
Walter F. Mondale Director
Ralph L. Schlosstein Director
OFFICERS
Ralph L. Schlosstein President
Scott Amero Vice President (Taxables Only) Keith T. Anderson Vice President Michael C. Heubsch Vice President Robert S. Kapito Vice President Kevin Klingert Vice President (Municipals Only) Dennis Schaney Vice President (BHY Only) Richard M. Shea Vice President/Tax Henry Gabbay Treasurer James KongAssistant Treasurer Anne Ackerley Secretary
Appendix 3
Rule 16a-l(a)(2) under the Securities Exchange Act
Appendix 4
CERTIFICATION FORM
This is to certify that I have read and understand the Code of Ethics of the BlackRock Closed End Trusts dated May_, 2000, and that I recognize that I am subject to the provisions thereof and will comply with the policy and procedures stated therein.
This is to further certify that I have complied with the requirements of such Code of Ethics and that I have reported all personal securities transactions required to be disclosed or reported pursuant to the requirements of such Code of Ethics.
Please sign your name here:
Please print your name here:
Please sign two copies of this Certification Form, return one copy to Mr. Bart Battista, Chief Compliance Officer, BlackRock Advisors, Inc., 345 Park Avenue, New York, NY 10154, and retain the other copy, together with a copy of the Code of Ethics, for your records.
Exhibit (r)(2)
EMPLOYEE INVESTMENT TRANSACTION POLICY
FOR
BLACKROCK INVESTMENT ADVISER COMPANIES
EFFECTIVE MARCH 1, 2000
EMPLOYEE INVESTMENT TRANSACTION POLICY
TABLE OF CONTENTS
Page
TABLE OF CONTENTS..........................................................-i-
I. PREAMBLE...............................................................1
A. General Principles...............................................1
B. The General Scope Of The Policy's Application To Personal
Investment Transactions..........................................3
C. The Organization Of This Policy..................................4
D. Questions........................................................4
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II. PERSONAL INVESTMENT TRANSACTIONS.......................................5
A. In General.......................................................5
B. Reporting Obligations............................................5
1. Use Of Broker-Dealers And Futures Commission Merchants.....5
2. Initial Report.............................................5
3. New Accounts...............................................7
4. Timely Reporting Of Investment Transactions................7
5. Related Accounts...........................................7
6. Exemptions From Reporting..................................7
C. Prohibited Or Restricted Investment Transactions.................8
1. Initial Public Offerings...................................8
2. Private Placements.........................................9
D. Investment Transactions Requiring Prior Notification.............9
1. Prior Notification Procedure...............................9
2. Exemptions From Prior Notification........................10
(a) Transactions Exempt From Prior Notification.........10
(b) Securities Exempt From Prior Notification...........11
(c) Futures Contracts Exempt From Prior Notification....11
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E. Ban On Short-Term Trading Profits...............................12
F. Blackout Periods................................................12
1. Specific Blackout Periods.................................12
2. Exemptions From Blackout Restrictions.....................13
III. INSIDE INFORMATION AND SERVICE AS A DIRECTOR..........................14
A. Inside Information..............................................14
B. Service As A Director...........................................14
IV. EXEMPTIONS............................................................15
V. COMPLIANCE............................................................15
A. Certifications..................................................15
1. Upon Receipt Of This Policy...............................15
2. Annual Certificate Of Compliance..........................16
B. Supervisory Procedures..........................................16
1. The Compliance Committee..................................16
2. The Compliance Officer....................................17
3. Post-Trade Monitoring And Investigations..................17
4. Remedial Actions..........................................18
5. Reports Of Violations Requiring Significant Remedial Action...........................................18
6. Annual Reports............................................19
VI. EFFECTIVE DATE........................................................19
APPENDICES
I. Definitions Of Capitalized Terms
II. Acknowledgment Of Receipt Of The Policy
III. Annual Certification Of Compliance With The Policy
IV. Initial Report of Accounts
V. Request For Duplicate Broker Reports
VI. Investment Transaction Prior Notification Form
VII. Fully Discretionary Account Form
EMPLOYEE INVESTMENT TRANSACTION POLICY
FOR BLACKROCK, INVESTMENT ADVISER COMPANIES
I. PREAMBLE
A. GENERAL PRINCIPLES
This Employee Investment Transaction Policy (the "Policy") is based on the principle that you, as an officer, director or other Advisory Employee of an Advisor affiliated with BlackRock, Inc. ("BlackRock"), owe a fiduciary duty of undivided loyalty to the registered investment companies, institutional investment clients, personal trusts and estates, guardianships, employee benefit trusts, and other Advisory Clients which that Advisor serves.(1) Accordingly, you must avoid transactions, activities, and relationships that might interfere or appear to interfere with making decisions in the best interests of those Advisory Clients.
At all times, you must observe the following GENERAL PRINCIPLES:
The term "ADVISOR" means any entity affiliated with BlackRock, whether now in existence or formed after the date hereof, that is registered as (i) an investment advisor under the Investment Advisers Act of 1940, as amended, or (ii) a broker-dealer under the Securities Exchange Act of 1934, as amended, other than any such investment advisor or broker-dealer that has adopted its own employee investment transaction policy.
The term "ADVISORY CLIENT" means a registered investment company, an institutional investment client, a personal trust or estate, a guardianship, an employee benefit trust, or another client with which the Advisor by which you are employed or with which you are associated has an invest ment management, advisory or sub-advisory contract or relationship.
The term "ADVISORY EMPLOYEE" means an officer, director, or employee of an Advisor, or any other person identified as a "control person" on the Form ADV or the Form BD filed by the Advisor with the U.S. Securities and Exchange Commission, (1) who, in connection with his or her regular functions or duties, generates, participates in, or obtains information regarding that Advisor's purchase or sale of a Security by or on behalf of an Advisory Client; (2) whose regular functions or duties relate to the making of any recommendations with respect to such purchases or sales; (3) who obtains information or exercises influence concerning investment recommendations made to an Advisory Client of that Advisor; or (4) who has line oversight or management responsibilities over employees described in (1), (2) or (3), above.
1. YOU MUST PLACE THE INTERESTS OF ADVISORY CLIENTS FIRST. As a fiduciary you must scrupulously avoid serving your own personal interests ahead of the interests of Advisory Clients. You must adhere to this general fiduciary principle as well as comply with the Policy's specific provisions. Technical compliance with the Policy will not automatically insulate from scrutiny any Investment Transaction(2) that indicates an abuse of your fiduciary duties or that creates an appearance of such abuse.
Your fiduciary obligation applies not only to your personal Investment Transactions but also to actions taken on behalf of Advisory Clients. In particular, you may not cause an Advisory Client to take action, or not to take action, for your personal benefit rather than for the benefit of the Advisory Client. For example, you would violate this Policy if you caused an Advisory Client to purchase a Security you owned for the purpose of increasing the value of that Security. If you are a Portfolio Employee,(3) you would also violate this Policy if you made a personal investment in a Security that might be an appropriate investment for an Advisory Client without first considering the Security as an investment for the Advisory Client.
(2) For purposes of this Policy, the term "INVESTMENT TRANSACTION" means any transaction in a Security or Futures Contract in which you have, or by reason of the transaction will acquire, a Beneficial Ownership interest.
As a GENERAL MATTER, the term "SECURITY" means any stock, note, bond, debenture or other evidence of indebtedness (including any loan participation or assignment), limited partnership interest or investment contract OTHER THAN AN EXEMPT SECURITY (as defined above). The term "Security" includes an OPTION on a Security, an index of Securities, a currency or a basket of currencies, including such an option traded on the Chicago Board of Options Exchange or on the New York, American, Pacific or Philadelphia Stock Exchanges as well as such an option traded in the over-the-counter market. The term "Security" does NOT include a physical commodity or a Futures Contract.
The term "FUTURES CONTRACT" includes (a) a futures contract and an option on a futures contract traded on a U.S. or foreign board of trade, such as the Chicago Board of Trade, the Chicago Mercantile Exchange, the New York Mercantile Exchange, or the London International Financial Futures Exchange (a "Publicly-Traded Futures Contract"), as well as (b) a forward contract, a "swap", a "cap", a "collar", a "floor" and an over-the-counter option (other than an option on a foreign currency, an option on a basket of currencies, an option on a Security or an option on an index of Securities) (a "Privately-Traded Futures Contract").
As a GENERAL MATTER, you are considered to have a "BENEFICIAL OWNERSHIP" interest in a Security or Futures Contract if you have the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in that Security or Futures Contract. YOU ARE PRESUMED TO HAVE A BENEFICIAL OWNERSHIP INTEREST IN ANY SECURITY OR FUTURES CONTRACT HELD, INDIVIDUALLY OR JOINTLY, BY YOU AND/OR BY A MEMBER OF YOUR IMMEDIATE FAMILY (AS DEFINED BELOW). In addition, unless specifically excepted by the Compliance Officer based on a showing that your interest or control is sufficiently attenuated to avoid the possibility of a conflict, you will be considered to have a Beneficial Ownership interest in a Security held by: (1) a JOINT ACCOUNT to which you are a party, (2) a PARTNERSHIP in which you are a general partner, (3) a LIMITED LIABILITY COMPANY in which you are a manager-member, (4) a TRUST in which you or a member of your Immediate Family has an interest or(5) an INVESTMENT CLUB in which you are a member.
See Appendix I for more complete definitions of the terms "Beneficial Ownership," "Futures Contract," and "Security."
(3) The term "PORTFOLIO EMPLOYEE" means a Portfolio Manager or an Advisory Employee who provides information or advice to a Portfolio Manager, who helps execute a Portfolio Manager's decisions, or who directly supervises a Portfolio Manager. The term "PORTFOLIO MANAGER" means any employee of an Advisor who has the authority, whether sole or shared or only from time to time, to make investment decisions or to direct trades affecting an Advisory Client
2. YOU MUST CONDUCT ALL OF YOUR PERSONAL INVESTMENT TRANSACTIONS IN FULL COMPLIANCE WITH THIS POLICY, THE BLACKROCK, INC. INSIDER TRADING POLICY, THE PNC CODE OF ETHICS, AND THE OTHER POLICIES OF PNC BANK CORP. ("PNC") AND BLACKROCK (including the policies that prohibit insider trading or that restrict trading in PNC Securities). BlackRock encourages you and your family to develop personal investment programs. However, those investment programs must remain within boundaries reasonably necessary to insure that appropriate safeguards exist to protect the interests of our Advisory Clients and to avoid even the APPEARANCE of unfairness or impropriety. Doubtful situations should be resolved in favor of our Advisory Clients and against your personal Investment Transactions.
3. YOU MUST NOT TAKE INAPPROPRIATE ADVANTAGE OF YOUR POSITION. The receipt of investment opportunities, perquisites, gifts or gratuities from persons seeking to do business, directly or indirectly, with BlackRock, an affiliate, or an Advisory Client could call into question the independence of your business judgment. Doubtful situations should be resolved against your personal interests.
B. THE GENERAL SCOPE OF THE POLICY'S APPLICATION TO PERSONAL INVESTMENT TRANSACTIONS
Rule 17j-l under the Investment Company Act of 1940, as amended, requires REPORTING of all personal Investment Transactions in Securities (other than certain "Exempt Securities") by Advisory Employees, whether or not they are Securities that might be purchased or sold by or on behalf of an Advisory Client. This Policy implements that reporting requirement.
However, since a primary purpose of the Policy is to avoid conflicts of interest arising from personal Investment Transactions in Securities and other instruments that are held or might be acquired on behalf of Advisory Clients, this Policy only places RESTRICTIONS on personal Investment Transactions in such investments. This Policy also requires reporting and restricts personal Investment Transactions in certain Futures Contracts which, although they are not Securities, are instruments that Advisors buy and sell for Advisory Clients.
Although this Policy applies to all officers, directors and other Advisory Employees of BlackRock, the Policy recognizes that Portfolio Managers, and the other Portfolio Employees who provide them with advice and who execute their decisions, occupy more sensitive positions than other Advisory Employees, and that it is appropriate to subject their personal Investment Transactions to greater restrictions.
C. THE ORGANIZATION OF THIS POLICY
The remainder of this Policy is divided into four main topics.
Section II concerns PERSONAL INVESTMENT TRANSACTIONS. Section III describes
restrictions that apply to Advisory Employees who receive INSIDE
INFORMATION or seek to serve on a BOARD OF DIRECTORS OR SIMILAR GOVERNING
BODY. Section IV outlines the procedure for seeking case-by-case EXEMPTIONS
from the Policy's requirements. Section V summarizes the methods for
ensuring COMPLIANCE under this Policy. In addition, the following
APPENDICES are also a part of this Policy:
I. Definitions Of Capitalized Terms
II. Acknowledgment Of Receipt Of The Policy
III. Annual Certification Of Compliance With The Policy
IV. Initial Report Of Accounts
V. Request For Duplicate Broker Reports
VI. Investment Transaction Prior Notification Form
VII. Fully Discretionary Account Form
D. QUESTIONS
Questions regarding this Policy should be addressed to the Compliance Officer. If you have any question regarding the interpretation of this Policy or its application to a potential Investment Transaction, you should consult the Compliance Officer BEFORE you execute that transaction.
II. PERSONAL INVESTMENT TRANSACTIONS
A. IN GENERAL
(4) The term "IMMEDIATE FAMILY" means any of the following persons who RESIDE IN YOUR HOUSEHOLD OR WHO DEPEND ON YOU FOR BASIC LIVING SUPPORT: your spouse, any child, stepchild, grandchild, parent, stepparent, grandparent, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother- in-law, or sister-in-law, including any adoptive relationships.
B. REPORTING OBLIGATIONS
1. USE OF BROKER-DEALERS AND FUTURES COMMISSION MERCHANTS
YOU MUST USE A REGISTERED BROKER-DEALER OR FUTURES COMMISSION MERCHANT to engage in any purchase or sale of a publicly traded Security or Futures Contract. This requirement also applies to any purchase or sale of a Security or Futures Contract in which you have, or by reason of the Investment Transaction will acquire, a Beneficial Ownership interest. Thus, as a general matter, any Securities or Futures Contract transactions by members of your Immediate Family will need to be made through a registered broker-dealer or futures commission merchant.
2. INITIAL REPORT
(5) The term "PERSONAL ACCOUNT" means the following accounts that hold or are likely to hold a Security or Futures Contract in which you have a Beneficial Ownership interest;
o any account in your individual name;
o any joint or tenant-in-common account in which you have an interest or are a participant;
o any account for which you act as trustee, executor, or custodian; and
o any account over which you have investment discretion or have the power (whether or not exercised) to direct the acquisition or disposition of Securities or Futures Contracts (other than an Advisory Client's account that you manage or over which you have investment discretion), including the accounts of any individual or entity that is managed or controlled directly or indirectly by or through you, such as the account of an investment club to which you belong. There is a presumption that you can control accounts held by members of your Immediate Family sharing the same household. This presumption may be rebutted only by convincing evidence.
The term"RELATED ACCOUNT" means any account, other than a Personal Account, that holds a Security or Futures Contract in which you have a direct or indirect Beneficial Ownership interest (other than an account over which you have no investment discretion and cannot otherwise exercise control) and any account (other than an Advisory Client's account) of any individual or entity to whom you give advice or make recommendations with regard to the acquisition or disposition of Securities or Futures Contracts (whether or not such advice is acted upon).
On that same form you should supply the name of any registered broker-dealer and/or futures commission merchant and the number for any Personal Account and Related Account that holds or is likely to hold a Security or Futures Contract in which you have a Beneficial Ownership interest for which you CANNOT supply the most recent account statement. You must also certify, where indicated on the form, that the contents of the form and the documents attached thereto disclose all such Personal Accounts and Related Accounts.
In addition, you must also supply, where indicated on the form, the following information for each Security or Futures Contract in which you have a Beneficial Ownership interest, to the extent that this information is not available from the statements attached to the form:
1. A description of the Security or Futures Contract, including its name or title;
2. The quantity (e.g., in terms of numbers of shares, units or contracts) and value (in dollars) of the Security or Futures Contract; and
3. The custodian of the Security or Futures Contract.
3. NEW ACCOUNTS
Upon the opening of a new Personal Account or a Related Account that holds or is likely to hold a Security or a Futures Contract in which you have a Beneficial Ownership interest, you must give written notice to the Compliance Officer of the name of the registered broker-dealer or futures commission merchant for that account, the identifying number for that Personal Account or Related Account and the date that the account was established.
4. TIMELY REPORTING OF INVESTMENT TRANSACTIONS
You must cause each broker-dealer or futures commission merchant that maintains a Personal Account or a Related Account that holds a Security or a Futures Contract in which you have a Beneficial Ownership interest to provide to the Compliance Officer, on a timely basis, duplicate copies of confirmations of all transactions in that account and of periodic statements for that account ("Duplicate Broker Reports"). A form for that purpose is attached hereto as Appendix V.
In addition, you must report to the Compliance Officer, on a timely basis, any transaction in a Security or Futures Contract in which you have or acquired a Beneficial Ownership interest that was made without the use of a registered broker-dealer or futures commission merchant.
5. RELATED ACCOUNTS
The reporting obligations described above also apply to any Related Account (as defined in Appendix I) and to any Investment Transaction in a Related Account.
It is important that you recognize that the definitions of 'Personal Account," "Related Account" and "Beneficial Ownership" in Appendix I probably will require you to provide, or to arrange for the broker-dealer or futures commission merchant to furnish, copies of reports for any account used by or for a member of your Immediate Family or a trust in which you or a member of your Immediate Family has an interest, as well as for any other accounts in which you may have the opportunity, directly or indirectly, to profit or share in the profit derived from any Investment Transaction in that account, including the account of any investment club to which you belong.
6. EXEMPTIONS FROM REPORTING
You need not report Investment Transactions in any account, including a Fully Discretionary Account,(6) over which neither you nor an Immediate Family Member has or had any direct or indirect influence or control. For example, Investment Transactions in the account of your spouse in an employee benefit plan would not have to be reported if neither you nor your spouse has any influence or control over those Investment Transactions.
(6) The term "FULLY DISCRETIONARY ACCOUNT" means a Personal Account or Related Account managed or held by a broker-dealer, futures commission merchant, investment advisor or trustee as to which neither you nor an Immediate Family Member: (a) exercises any investment discretion; (b) suggests or receives notice of transactions prior to their execution; and (c) you do not otherwise have any direct or indirect influence or control. In addition, to qualify as a Fully Discretionary Account, the individual broker, registered representative or merchant responsible for that account must not be responsible for nor receive advance notice of any purchase or sale of a Security or Futures Contract on behalf of an Advisory Client. To qualify an account as a Fully Discretionary Account, the Compliance Officer must receive and approve a written notice, in the form attached hereto as Appendix VIII, that the account meets the foregoing qualifications as a Fully Discretionary Account.
(7) The term "EXEMPT SECURITY" means any Security (as defined in Appendix
I) not included within the definition of Security in SEC Rule
17j-l(e)(5) under the Investment Company Act of 1940, as amended,
including:
1. A direct obligation of the Government of the United States;
2. Shares of registered open-end investment companies (i.e., mutual funds); and
3. High quality short-term debt instruments, including, but not limited to, bankers' acceptances, bank certificates of deposit, commercial paper and repurchase agreements.
See Appendix I for a more complete definition of "Exempt Security".
C. PROHIBITED OR RESTRICTED INVESTMENT TRANSACTIONS
1. INITIAL PUBLIC OFFERINGS
As an Advisory Employee, you may not acquire Beneficial Ownership of
any Security in an initial public offering, except that, with the approval
of the Compliance Committee and the General Counsel of BlackRock, you may
acquire Beneficial Ownership of a Security in an initial public offering
directed or sponsored by BlackRock. For purposes of this Policy, an initial
public offering shall not include the purchase of a Security in an initial
public offering by (i) a savings bank to its depositors, (ii) a mutual
insurance company to its policyholders, (iii) an issuer of debt securities
(other than debt securities convertible into common or preferred stock) or
(iv) with respect to an Advisory Employee employed by BlackRock
International, Ltd. a building society to its depositors.
2. PRIVATE PLACEMENTS
If you are a Portfolio Employee, you may not acquire Beneficial Ownership of any Security in a private placement, or subsequently sell that interest, unless you have received the prior written approval of the Compliance Officer and of any supervisor designated by the Compliance Officer. Approval will not be given unless a determination is made that the investment opportunity should not be reserved for one or more Advisory Clients, and that the opportunity to invest has not been offered to you by virtue of your position with an Advisor.
If you have acquired Beneficial Ownership of Securities in a private placement, you must disclose that investment to your supervisor when you play a part in any consideration of any investment by an Advisory Client in the issuer of the Securities, and any decision to make such an investment must be independently reviewed by a Portfolio Manager who does not have a Beneficial Ownership interest in any Securities of the issuer.
D. INVESTMENT TRANSACTIONS REQUIRING PRIOR NOTIFICATION
You must give prior notification to the Compliance Officer of ANY Investment Transaction in Securities or Futures Contracts in a Personal Account or Related Account, or in which you otherwise have or will acquire a Beneficial Ownership interest, UNLESS that Investment Transaction, Security or Futures Contract falls into one of the following categories that are identified as "exempt from prior notification." The purpose of prior notification is to permit the Compliance Officer and the Compliance Committee to take reasonable steps to investigate whether that Investment Transaction is in accordance with this Policy. Satisfaction of the prior notification requirement does not, however, constitute approval or authorization of any Investment Transaction for which you have given prior notification. As a result, the primary responsibility for compliance with this Policy rests with you.
1. PRIOR NOTIFICATION PROCEDURE
Prior notification must be given by completing and submitting to the Compliance Officer a copy of the prior notification form attached hereto as Appendix VII. No Investment Transaction requiring prior notification may be executed prior to notice by the Compliance Officer that the prior notification process has been completed. The time and date of that notice will be reflected on the prior notification form. Unless otherwise specified, an Investment Transaction requiring prior notification must be placed and executed by the end of trading in New York City or, in the case of Advisory Employees employed by BlackRock International, Ltd., by the end of trading in the United Kingdom on the day of notice from the Compliance Officer that the prior notification process has been completed. If a proposed Investment Transaction is not executed (with the exception of a limit order) within the time specified, you must repeat the prior notification process before executing the transaction. A notice from a Compliance Officer that the prior notification process has been completed is no longer effective if you discover, prior to executing your Investment Transaction, that the information on your prior notification form is no longer accurate, or if the Compliance Officer revokes his or her notice for any other reason.
The Compliance Officer may undertake such investigation as he or she considers necessary to investigate whether an Investment Transaction for which prior notification has been sought complies with the terms of this Policy and is consistent with the general principles described at the beginning of this Policy.
As part of that investigation, the Compliance Officer or a designee of the Compliance Officer will determine whether there is a pending buy or sell order in the same equity Security or Futures Contract, or a Related Security, on behalf of an Advisory Client.(8) If such an order exists, the Compliance Officer will not provide notice that the prior notification process has been completed UNTIL the Advisory Client's order is executed or withdrawn.
(8) The term "RELATED SECURITY" means, as to any Security, any instrument related in value to that Security, including, but not limited to, any option or warrant to purchase or sell that Security, and any Security convertible into or exchangeable for that Security.
2. EXEMPTIONS FROM PRIOR NOTIFICATION
Prior notification will not be required for the following Investment Transactions, Securities and Futures Contracts. They are exempt only from the Policy's prior notification requirement, and, unless otherwise indicated, remain subject to the Policy's other requirements, including its reporting requirements.
(a) TRANSACTIONS EXEMPT FROM PRIOR NOTIFICATION
Prior notification is not required for any of the following Investment Transactions:
1. Any Investment Transaction in a Fully Discretionary Account that has been approved as such by the Compliance Officer.
2. Purchases of Securities under dividend reinvestment plans.
3. Purchases of Securities by an exercise of rights issued to the holders of a class of Securities pro rata, to the extent those rights are issued with respect to Securities of which you have Beneficial Ownership.
4. Acquisitions or dispositions of Securities as the result of a stock dividend, stock split, reverse stock split, merger, consolidation, spin-off or other similar corporate distribution or reorganization applicable to all holders of a class of Securities of which you have Beneficial Ownership.
5. Purchases of common stock of PNC Bank Corp. under the Employee Stock Purchase Plan.
6. With respect to Advisory Employees who are employed by BlackRock International, Inc., automatic investments by direct debit into a personal equity plan (PEP), or similar type of plan in Exempt Securities if the pre- notification process was completed for the first such investment.
7. Investment Transactions made by a person who serves on the Board of Directors of an Advisor and is not involved with the Advisory operations of such Advisor nor engages in the type of activities described under (1) (2) or (3) under the term Advisory Employee as defined in Appendix I.
(b) SECURITIES EXEMPT FROM PRIOR NOTIFICATION
Prior notification is not required for an Investment Transaction in an Exempt Security, as defined in Appendix I, e.g., U.S. Government securities, shares in registered open- end investment companies (i.e., mutual funds) and "high quality short-term debt instruments" (as defined in Appendix I).
(c) FUTURES CONTRACTS EXEMPT FROM PRIOR NOTIFICATION
Prior notification is not required for an Investment Transaction in the following Futures Contracts:
1. Currency futures.
2. U.S. Treasury futures.
3. Eurodollar futures.
4. Physical commodity futures (e.g., contracts for future delivery of grain, livestock, fiber or metals).
5. Futures contracts to acquire Fixed Income Securities issued by a U.S. Government agency, a foreign government, or an international or supranational agency.
6. Futures contracts on the Standard and Poor's 500 (S&P 500) or the Dow Jones Industrial Average or NASDAQ 100 stock indexes.
7. For Advisory Employees who are employed by BlackRock International, Ltd., futures contracts on the Financial Times Stock Exchange 100 (FTSE) Index.
E. BAN ON SHORT-TERM TRADING PROFITS
You may not profit from the purchase and sale, or the sale and purchase, within 60 calendar days, of the same Securities and/or Related Security. Any such short-term trade must be reversed or unwound, or if that is not practical, the profits must be disgorged and distributed in a manner determined by the Compliance Committee.
This short-term trading ban does NOT apply to Investment Transactions
in Exempt Securities (as defined in Appendix I) or in Futures Contracts.
This ban also does NOT apply to a purchase or sale in connection with a
Transaction Exempt From Prior Notification (as described above in Section
II.D.2.(a)), a transaction in a Fully Discretionary Account or a
transaction exempt from the "blackout" periods pursuant to Section II.F.2
below.
You are considered to profit from a short-term trade if Securities of which you have Beneficial Ownership (including Securities held by Immediate Family members) are sold for more than their purchase price, even though the Securities purchased and the Securities sold are held of record or beneficially by different persons or entities.
F. BLACKOUT PERIODS
Your ability to engage in certain Investment Transactions may be prohibited or restricted during the "blackout" periods described below:
1. SPECIFIC BLACKOUT PERIODS
a. You may not purchase or sell a Security, a Related Security, or Futures Contract at a time when you intend or know of another's intention to purchase or sell that same Security, a Related Security, or Futures Contract, on behalf of an Advisory Client of ANY Advisor (the "Specific Knowledge Blackout Period").
b. In addition, if you are a PORTFOLIO EMPLOYEE, you may not purchase or sell a Security, a Related Security or a Futures Contract which you are actively considering or which you have actively considered and rejected for purchase or sale for an Advisory Client within the previous 15 CALENDAR DAYS (the "15- Day Blackout Period") unless the Compliance Officer, after consultation with your supervisor, has approved your Investment Transaction.(9)
c. Finally, if you are a PORTFOLIO MANAGER, you may not purchase or sell a Security, a Related Security, or Futures Contract within 7 CALENDAR DAYS before or after a transaction in that Security, a Related Security, or Futures Contract, by an Advisory Client for which you are responsible (the "7-Day Blackout Period").
For Portfolio Employees or Portfolio Managers, the Compliance Officer will not give such notice until any applicable 15-Day Blackout Period or 7-Day Blackout Period has expired or any required approvals or exemptions have been obtained. An Investment Transaction that violates one of these Blackout restrictions must be reversed or unwound, or if that is not practical, the profits must be disgorged and distributed in a manner determined by the Compliance Committee.
(9) SEC Rule 17j-l places restrictions on the purchase or sale of any "security held or to be acquired" by a registered investment company. Rule 17j-l(e)(6) defines a "security held or to be acquired" by a registered investment company as including any security which, within the most recent 15 days, "is being or has been considered by such company or its investment adviser for purchase by such company."
2. EXEMPTIONS FROM BLACKOUT RESTRICTIONS
The foregoing blackout period restrictions do NOT apply to Investment Transactions in:
a. Exempt Securities, as defined in Appendix I.
b. Securities of a company listed on the Standard & Poor's 100 (S & P 100) Index.
c. A Futures Contract Exempt From Prior Notification under this Policy (as described above).
d. A Fully Discretionary Account.
e. With respect to Advisory Employees who are employed by BlackRock International, Ltd., securities of a company listed on the Financial Times Stock Exchange 100 (FTSE 100).
III. INSIDE INFORMATION AND SERVICE AS A DIRECTOR
A. INSIDE INFORMATION
As an employee of a subsidiary of PNC and BlackRock, Inc., you must
comply with the PNC Insider Trading Policy and the BlackRock, Inc. Insider
Trading Policy. A copy of the PNC Insider Trading Policy is included in
Section E of the PNC Code of Ethics. A copy of the BlackRock, Inc. Insider
Trading Policy was furnished to all employees at the time of its adoption
and is furnished to all new employees at the commencement of their
employment. In addition, as an Advisory Employee, you must notify the
General Counsel of BlackRock if you receive or expect to receive material
non-public information about an entity that issues securities. The General
Counsel will determine the restrictions, if any, that will apply to your
communications and activities while in possession of that information. In
general, those restrictions will include:
1. An undertaking not to trade, either on your own behalf or on behalf of an Advisory Client, in the securities of the entity about which you have material non-public information.
2. An undertaking not to disclose material non-public information to other Advisory Employees.
3. An undertaking not to participate in discussions with or decisions by other Advisory Employees relating to the entity about which you have material non-public information.
The General Counsel, in cooperation with the Compliance Officer, will
maintain a "restricted list" of entities about which Advisory Employees may
have material non-public information. This "restricted list" will be
available to the Compliance Officer when he or she conducts investigations
or reviews related to the Prior Notification Procedure described previously
in Section II(D)(1) or the Post-Trade Monitoring process described below in
Section V(B)(3).
B. SERVICE AS A DIRECTOR
You may not serve on the board of directors or other governing board of any entity unless you have received the prior written approval of the General Counsel of PNC, to the extent such approval is required under the terms of the PNC Code of Ethics, and the General Counsel of BlackRock. If permitted to serve on a governing board, an Advisory Employee will be isolated from those Advisory Employees who make investment decisions regarding the securities of that entity, through a "Chinese wall" or other procedures determined by the General Counsel of BlackRock. In general, the "Chinese wall" or other procedures will include:
1. An undertaking not to trade or to cause a trade on behalf of an Advisory Client in the securities of the entity on whose board you serve.
2. An undertaking not to disclose material non-public information about that entity to other Advisory Employees.
3. An undertaking not to participate in discussions with or decisions by other Advisory Employees relating to the entity on whose board you serve.
Any entity on whose board an Advisory Employee serves will be included on the "restricted list" referenced in subsection A, above.
IV. EXEMPTIONS
The Compliance Committee, in its discretion, may grant case-by-case exceptions to any of the foregoing requirements, restrictions or prohibitions, except that the Compliance Committee may not exempt any Investment Transaction in a Security (other than an Exempt Security) or a Futures Contract from the Policy's reporting requirements. Exemptions from the Policy's prior notification requirements and from the Policy's restrictions on acquisitions in initial public offerings, short-term trading and trading during blackout periods will require a determination by the Compliance Committee that the exempted transaction does not involve a realistic possibility of violating the general principles described at the beginning of this Policy. An application for a case-by-case exemption, in accordance with this paragraph, should be made in WRITING to the Compliance Officer, who will promptly forward that written request to the members of the Compliance Committee.
V. COMPLIANCE
A. CERTIFICATIONS
1. UPON RECEIPT OF THIS POLICY
Upon commencement of your employment or the effective date of this Policy, whichever occurs later, you will be required to acknowledge receipt of your copy of this Policy by completing and returning to the Compliance Officer a copy of the form attached hereto as Appendix II. By that acknowledgment, you will also agree:
1. To read the Policy, to make a reasonable effort to understand its provisions, and to ask the Compliance Officer questions about those provisions you find confusing or difficult to understand.
2. To comply with the Policy, including its general principles, its reporting requirements, its prohibitions, its prior notification requirements, its short- term trading and blackout restrictions.
3. To advise the members of your Immediate Family about the existence of the Policy, its applicability to their personal Investment Transactions, and your responsibility to assure that their personal Investment Transactions comply with the Policy.
4. To cooperate fully with any investigation or inquiry by or on behalf of the Compliance Officer or the Compliance Committee to determine your compliance with the provisions of the Policy.
In addition, your acknowledgment will recognize that any failure to comply with the Policy and to honor the commitments made by your acknowledgment may result in disciplinary action, including dismissal
2. ANNUAL CERTIFICATE OF COMPLIANCE
You are required to certify on an annual basis, on a copy of the form attached hereto as Appendix III, that you have complied with each provision of your initial acknowledgment (see above). In particular, your annual certification will require that you certify that you have read and that you understand the Policy, that you recognize that you are subject to its provisions, that you complied with the requirements of the Policy during the year just ended, and that you have disclosed, reported, or caused to be reported all Investment Transactions required to be disclosed or reported pursuant to the requirements of the Policy and that you have disclosed, reported or caused to be reported all Personal Accounts and Related Accounts that hold or are likely to hold a Security or Futures Contract in which you have a Beneficial Ownership interest. In addition, you will be required to confirm the accuracy of the record of information on file with the Advisor with respect to such Personal Accounts and Related Accounts.
B. SUPERVISORY PROCEDURES
1. THE COMPLIANCE COMMITTEE
The policy will be implemented, monitored and reviewed by the Compliance Committee. The initial members of the Compliance Committee will be appointed by the management committee of BlackRock. The Compliance Committee, by a simple majority of its members, may appoint new members of the Committee, may replace existing members of the Committee, and may fill vacancies on the Committee. Among other responsibilities, the Compliance Committee will consider requests for case-by-case exemptions (described above) and will conduct investigations (described below) of any actual or suspected violations of the Policy. The Compliance Committee will determine what remedial actions, if any, should be taken by an Advisor in response to a violation of the Policy. The Compliance Committee will also provide reports (described below) regarding significant violations of the Policy and the procedures to implement the Policy. The Compliance Committee may recommend changes to those procedures or to the Policy to the management of the Advisors. Finally, the Compliance Committee will designate one person to act as Compliance Officer for all Advisors.
2. THE COMPLIANCE OFFICER
The Compliance Officer designated by the Compliance Committee will be responsible for the day-to-day administration of the Policy for all Advisors, subject to the direction and control of the Compliance Committee. Based on information supplied by the management of each Advisor, the Compliance Officer will forward a copy of the policy to each Advisory Employee subject to the policy and will notify each such person of his or her designation as an Advisory Employee, Portfolio Employee or Portfolio manager. The Compliance Officer will also be responsible for administration of the reporting and prior notification functions described in the Policy, and will maintain the reports required by those functions. In addition, the Compliance Officer will attempt to answer any questions from an Advisory Employee regarding the interpretation or administration of the Policy. When necessary or desirable, the Compliance Officer will consult with the Compliance Committee about such questions. The Compliance officer may designate one or more Assistant Compliance Officers to whom the Compliance Officer may delegate any of the duties described in this paragraph or in the succeeding paragraph, and who shall be empowered to act on the Compliance Officer's behalf when the Compliance Officer is absent or unavailable.
3. POST-TRADE MONITORING AND INVESTIGATIONS
The Compliance Officer will review the Duplicate Broker Reports and other information supplied for each Advisory Employee so that the Compliance Officer can detect and prevent potential violations of the Policy. This information may also be disclosed to the Advisor's auditors, attorneys and regulators. If, based on his or her review of information supplied for an Advisory Employee, or based on other information, the Compliance Officer suspects that the Policy may have been violated, the Compliance Officer will perform such investigations and make such inquiries as he or she considers necessary. You should expect that, as a matter of course, the Compliance Officer will make inquiries regarding any personal Investment Transaction in a Security or Futures Contract that occurs on the same day as a transaction in the same Security or Futures Contract on behalf of an Advisory Client. If the Compliance Officer reaches a preliminary conclusion that an Advisory Employee may have violated this Policy, the Compliance Officer will report that preliminary conclusion in a timely manner to the Compliance Committee and will furnish to the Committee all information that relates to the Compliance Officer's preliminary conclusion. The Compliance Officer may also report his or her preliminary conclusions and the information relating to that preliminary conclusion to the Advisor's auditors, attorneys and regulators.
Promptly after receiving the Compliance Officer's report of a possible violation of the Policy, the Compliance Committee, with the aid and assistance of the Compliance Officer, will conduct an appropriate investigation to determine whether the policy has been violated and will determine what remedial action should be taken by the Advisor in response to any such violation(s). For purposes of these determinations, a majority of the Compliance Committee will constitute a quorum and action taken by a simple majority of that quorum constitute action by the Committee.
4. REMEDIAL ACTIONS
The remedial actions that may be recommended by the Compliance Committee may include, but are not limited to, disgorgement of profits, imposition of a fine, censure, demotion, suspension or dismissal. As part of any sanction e.g., for violation of the Policy's restrictions on short-term trading or trading during blackout periods, you may be required to reverse or unwind a transaction and to forfeit any profit or to absorb any loss from the transaction. If an Investment Transaction may not be reversed or unwound, you may be required to disgorge any profits associated with the transaction, which profits will be distributed in a manner prescribed by the Compliance Committee in the exercise of its discretion. Profits derived from Investment Transactions in violation of this policy may not be offset by any losses from Investment Transactions in violation of this Policy. Finally, evidence suggesting violations of criminal laws will be reported to the appropriate authorities, as required by applicable law.
In determining what, if any, remedial action is appropriate in response to a violation of the Policy, the Compliance Committee will consider, among other factors, the gravity of your violation, the frequency of your violations, whether any violation caused harm or the potential of harm to any Advisory Client, whether you knew or should have known that your Investment Transaction violated the Policy, whether you engaged in an Investment Transaction with a view to making a profit on the anticipated market action of a transaction by an Advisory Client, your efforts to cooperate with the Compliance Officer's investigation, and your efforts to correct any conduct that led to a violation. In rare instances, the Compliance Committee may find that, for equitable reasons, no remedial action should be taken.
5. REPORTS OF VIOLATIONS REQUIRING SIGNIFICANT REMEDIAL ACTION
In a timely manner, and not less frequently than annually, the Compliance Committee will report to the management committee of BlackRock, and to the directors or trustees of each investment company that is an Advisory Client, any known Policy violation requiring significant remedial action (as defined below) and the disposition of that violation. For this purpose, a significant remedial action means any action that has a significant financial effect on the violator. Evidence suggesting violations of criminal laws will be reported to the appropriate authorities, as required by applicable law.
6. ANNUAL REPORTS
The Compliance Committee will furnish an annual report to the management committee of BlackRock, and to the directors or trustees of each investment company that is an Advisory Client, that, at a minimum, will:
1. Summarize existing procedures and restrictions concerning personal investing by Advisory Employees and any changes in those procedures and restrictions that were made during the previous year;
2. Summarize any violations of the Policy that resulted in significant remedial action during the previous year; and
3. Describe any changes in existing procedures or restrictions that the Compliance Committee recommends based upon its experience under the Policy, evolving industry practices, or developments in applicable laws or regulations.
VI. EFFECTIVE DATE
The provisions of this Policy will take effect on October 1, 1998. Amendments to this Policy will take effect at the time such amendments are promulgated and distributed to the Advisory Employees governed by this Policy.
APPENDIX I
DEFINITIONS OF CAPITALIZED TERMS
The following definitions apply to the capitalized terms used in the Policy:
ADVISOR
The term "Advisor" means any entity affiliated with BlackRock, whether now in existence or formed after the date hereof, that is registered as (i) an investment advisor under the Investment Advisers Act of 1940, as amended, or (ii) a broker-dealer under the Securities Exchange Act of 1934, as amended, other than any such investment advisor or broker-dealer that has adopted its own employee investment transaction policy.
ADVISORY CLIENT
The term "Advisory Client" means a registered investment company, an institutional investment client, a personal trust or estate, a guardianship, an employee benefit trust, or another client with which the Advisor by which you are employed or with which you are associated has an investment management, advisory or sub-advisory contract or relationship.
ADVISORY EMPLOYEE
The term "Advisory Employee" means an officer, director, or employee
of an Advisor, or any other person identified as a "control person" on the
Form ADV or the Form BD filed by the Advisor with the U.S. Securities and
Exchange Commission, (1) who, in connection with his or her regular
functions or duties, generates, participates in, or obtains information
regarding that Advisor's purchase or sale of a Security by or on behalf of
an Advisory Client; (2) whose regular functions or duties relate to the
making of any recommendations with respect to such purchases or sales; or
(3) who obtains information or exercises influence concerning investment
recommendations made to an Advisory Client of that Advisor or who has line
oversight or management responsibilities over employees who obtain such
information or who exercise such influence.
BENEFICIAL OWNERSHIP
As a GENERAL MATTER, you are considered to have a "Beneficial Ownership" interest in a Security or Futures Contract if you have the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in that Security. YOU ARE PRESUMED TO HAVE A BENEFICIAL OWNERSHIP INTEREST IN ANY SECURITY OR FUTURES CONTRACT HELD, INDIVIDUALLY OR JOINTLY, BY YOU AND/OR BY A MEMBER OF YOUR IMMEDIATE FAMILY (AS DEFINED BELOW). In addition, unless specifically excepted by the Compliance Officer based on a showing that your interest or control is sufficiently attenuated to avoid the possibility of a conflict, you will be considered to have a Beneficial Ownership interest in a Security or Futures Contract held by: (1) a JOINT ACCOUNT to which you are a party, (2) a PARTNERSHIP in which you are a general partner, (3) a LIMITED LIABILITY COMPANY in which you are a manager-member, or (4) a TRUST in which you or a member of your Immediate Family has a vested interest. Although you may have a Beneficial Ownership interest in a Security or Futures Contract held in a Fully Discretionary Account (as defined below), the application of this Policy to such a Security or Futures Contract may be modified by the special exemptions provided for Fully Discretionary Accounts.
As a TECHNICAL MATTER, the term "Beneficial Ownership" for purposes of this Policy will be interpreted in the same manner as it would be under SEC Rule 16a-1(a)(2) in determining whether a person has beneficial ownership of a security for purposes of Section 16 of the Securities Exchange Act of 1934 and the rules and regulations thereunder.
BLACKROCK
The term "BlackRock" means BlackRock, Inc.
COMPLIANCE COMMITTEE
The term "Compliance Committee" means the committee of persons who have responsibility for implementing, monitoring and reviewing the Policy, in accordance with Section V(B)(1) of the Policy.
COMPLIANCE OFFICER
The term "Compliance Officer" means the person designated by the Compliance Committee as responsible for the day-to-day administration of the Policy in accordance with Section V(B)(2) of the Policy.
DUPLICATE BROKER REPORTS
The term "Duplicate Broker Reports" means duplicate copies of confirmations of transactions in your Personal or Related Accounts and of periodic statements for those accounts.
EXEMPT SECURITY
The term "Exempt Security" means any Security (as defined below) not included within the definition of Security in SEC Rule l7j-1(e)(5) under the Investment Company Act of 1940, as amended, including:
1. A direct obligation of the Government of the United States;
2. Shares of registered open-end investment companies; and
3. High quality short-term debt instruments, including, but not limited to, bankers' acceptances, bank certificates of deposit, commercial paper and repurchase agreements. For these purposes, a "high quality short-term debt instrument" means any instrument having a maturity at issuance of less than 366 days and which is rated in one of the highest two rating categories by a Nationally Recognized Statistical Rating Organization, or which is unrated but is of comparable quality.
4. For Advisory Employees employed by BlackRock International, Ltd., shares of authorized unit trusts, open-ended investment companies (OEIC's) and direct obligations of the Government of the United Kingdom.
FIXED INCOME SECURITIES
For purposes of this Policy, the term "Fixed Income Securities" means fixed income Securities issued by agencies or instrumentalities of, or unconditionally guaranteed by, the Government of the United States, corporate debt Securities, mortgage-backed and other asset- backed Securities, fixed income Securities issued by state or local governments or the political subdivisions thereof, structured notes and loan participations, foreign government debt Securities, and debt Securities of international agencies or supranational agencies. For purposes of this Policy, the term "Fixed Income Securities" will not be interpreted to include U.S. Government Securities or any other Exempt Security (as defined above).
FULLY DISCRETIONARY ACCOUNT
The term "Fully Discretionary Account" means a Personal Account or Related Account (as defined below) managed or held by a broker-dealer, futures commission merchant, investment advisor or trustee as to which neither you nor an Immediate Family Member (as defined below): (a) exercises any investment discretion; (b) suggests or receives notice of transactions prior to their execution; and (c) otherwise has any direct or indirect influence or control. In addition, to qualify as a Fully Discretionary Account, the individual broker, registered representative or merchant responsible for that account must not be responsible for nor receive advance notice of any purchase or sale of a Security or Futures Contract on behalf of an Advisory Client. To qualify an account as a Fully Discretionary Account, the Compliance Officer must receive and approve a written notice, in the form attached hereto as Appendix VIII, that the account meets the foregoing qualifications as a Fully Discretionary Account.
FUTURES CONTRACT
The term "Futures Contract" includes (a) a futures contract and an option on a futures contract traded on a U.S. or foreign board of trade, such as the Chicago Board of Trade, the Chicago Mercantile Exchange, the New York Mercantile Exchange, or the London International Financial Futures Exchange (a "Publicly-Traded Futures Contract"), as well as (b) a forward contract, a "swap", a "cap", a "collar", a "floor" and an over-the-counter option (other than an option on a foreign currency, an option on a basket of currencies, an option on a Security or an option on an index of Securities, which fall within the definition of "Security") (a "Privately- Traded Futures Contract"). You should consult with the Compliance Officer if you have any doubt about whether a particular Investment Transaction you contemplate involves a Futures Contract. For purposes of this definition, a Publicly-Traded Futures Contract is defined by its expiration month, i.e., a Publicly-Traded Futures Contract on a U.S. Treasury Bond that expires in June is treated as a separate Publicly-Traded Futures Contract, when compared to a Publicly- Traded Futures Contract on a U.S. Treasury Bond that expires in July.
IMMEDIATE FAMILY
The term "Immediate Family" means any of the following persons who
RESIDE IN YOUR HOUSEHOLD OR WHO DEPEND ON YOU FOR BASIC LIVING SUPPORT:
your spouse, any child, stepchild, grandchild, parent, stepparent,
grandparent, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including any adoptive
relationships.
INVESTMENT TRANSACTION
For purposes of this Policy, the term "Investment Transaction" means any transaction in a Security or Futures Contract in which you have, or by reason of the transaction will acquire, a Beneficial Ownership interest. The exercise of an option to acquire a Security or Futures Contract is an Investment Transaction in that Security or Futures Contract
PERSONAL ACCOUNT
The term "Personal Account" means the following accounts that hold or are likely to hold a Security or Futures Contract in which you have a Beneficial Ownership interest:
o any account in your individual name;
o any joint or tenant-in-common account in which you have an interest or are a participant;.
o any account for which you act as trustee, executor, or custodian; and
o any account over which you have investment discretion or have the power (whether or not exercised) to direct the acquisition or disposition of Securities or Futures Contracts (other than an Advisory Client's account that you manage or over which you have investment discretion), including the accounts of any individual or entity that is managed or controlled directly or indirectly by or through you. There is a presumption that you can control accounts held by members of your Immediate Family sharing the same household. This presumption may be rebutted only by convincing evidence.
POLICY
The term 'Policy" means this Employee Investment Transaction Policy.
PORTFOLIO EMPLOYEE
The term "Portfolio Employee" means a Portfolio Manager or an Advisory Employee who provides information or advice to a Portfolio Manager, who helps execute a Portfolio Manager's decisions, or who directly supervises a Portfolio Manager.
PORTFOLIO MANAGER
The term "Portfolio Manager" means any employee of an Advisor who has the authority, whether sole or shared or only from time to time, to make investment decisions or to direct trades affecting an Advisory Client.
RELATED ACCOUNT
The term "Related Account" means any account, other than a Personal Account, that holds a Security or Futures Contract in which you have a direct or indirect Beneficial Ownership interest (other than an account over which you have no investment discretion and cannot otherwise exercise control) and any account (other than an Advisory Client's account) of any individual or entity to whom you give advice or make recommendations with regard to the acquisition or disposition of Securities or Futures Contracts (whether or not such advice is acted upon).
RELATED SECURITY
The term "Related Security" means, as to any Security, any instrument related in value to that Security, including, but not limited to, any option or warrant to purchase or sell that Security, and any Security convertible into or exchangeable for that Security. For example, the purchase and exercise of an option to acquire a Security is subject to the same restrictions that would apply to the purchase of the Security itself.
SECURITY
As a GENERAL MATTER, the term "Security" means any stock, note, bond, debenture or other evidence of indebtedness (including any loan participation or assignment), limited partnership interest, or investment contract, OTHER THAN AN EXEMPT SECURITY (as defined above). The term "Security" includes an OPTION on a Security, an index of Securities, a currency or a basket of currencies, including such an option traded on the Chicago Board of Options Exchange or on the New York, American, Pacific or Philadelphia Stock Exchanges as well as such an option traded in the over-the-counter market. The term "Security" does NOT include a physical commodity or a Futures Contract. The term "Security" may include an interest in a limited liability company (LLC) or in a private investment fund.
As a TECHNICAL MATTER, the term "Security" has the meaning set forth in Section 2(a)(36) of the Investment Company Act of 1940, which defines a Security to mean:
Any note, stock, treasury stock, bond debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting- trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security (including a certificate of deposit) or on any group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a "security", or any certificate of interest or instrument commonly known as a "security", or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, warrant or right to subscribe to or purchase any of the foregoing,
EXCEPT THAT the term "Security" does not include any Security that is an Exempt Security (as defined above), a Futures Contract (as defined above), or a physical commodity (such as foreign exchange or a precious metal).