<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 6, 1999
SECURITIES ACT FILE NO. 333-81995
INVESTMENT COMPANY ACT FILE NO. 811-09331
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. 2 [X]
POST-EFFECTIVE AMENDMENT NO. [ ]
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 6 [X]
(Check appropriate box or boxes)
------------------------
MUNIHOLDINGS FLORIDA INSURED FUND V
(Exact Name of Registrant as Specified in Charter)
------------------------
800 SCUDDERS MILL ROAD, PLAINSBORO, NEW JERSEY 08536
(Address of Principal Executive Offices)
------------------------
(609) 282-2800
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
------------------------
TERRY K. GLENN
MUNIHOLDINGS FLORIDA INSURED FUND V
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
MAILING ADDRESS: P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011
(Name and Address of Agent for Service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
MICHAEL J. HENNEWINKEL, ESQ. FRANK P. BRUNO, ESQ.
FUND ASSET MANAGEMENT, L.P. BROWN & WOOD LLP
P.O. BOX 9011 ONE WORLD TRADE CENTER
PRINCETON, NEW JERSEY 08543-9011 NEW YORK, NEW YORK 10048-0557
</TABLE>
------------------------
Approximate date of proposed public offering: As soon as practicable after the
effective date of this Registration Statement.
------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. [X]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
This Pre-Effective Amendment is being filed to re-file Exhibit (a)(2).
<PAGE> 3
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(1) Financial Statements
Independent Auditors' Report
Statement of Assets, Liabilities and Capital as of June 15, 1999
Schedule of Investments as of July 23, 1999 (unaudited)
Financial Statements as of July 23, 1999 (unaudited)
(2) Exhibits:
<TABLE>
<CAPTION>
DESCRIPTION
-----------
<S> <C> <C>
(a)(1) -- Declaration of Trust of the Registrant.(a)
(2) -- Form of Certificate of Designation creating the Series A
AMPS.
(b) -- By-Laws of the Registrant.(a)
(c) -- Not applicable.
(d)(1) -- Portions of the Declaration of Trust, By-Laws and the
Certificate of Designation of the Registrant defining the
rights of holders of shares of the Registrant.(b)
(2) -- Form of specimen certificate for the AMPS of the
Registrant.(e)
(e) -- Form of Automatic Dividend Reinvestment Plan.(c)
(f) -- Not applicable.
(g) -- Form of Investment Advisory Agreement between the Registrant
and Fund Asset Management, L.P.(c)
(h)(1) -- Form of Purchase Agreement for the AMPS.(e)
(2) -- Merrill Lynch Standard Dealer Agreement.(c)
(i) -- Not applicable.
(j) -- Form of Custodian Contract between the Registrant and State
Street Bank and Trust Company.(d)
(k)(1) -- Form of Transfer Agency, Dividend Disbursing Agency and
Shareholder Servicing Agency Agreement between the
Registrant and State Street Bank and Trust Company.(d)
(2) -- Form of Auction Agent Agreement between the Registrant and
IBJ Schroder Bank & Trust Company.(e)
(3) -- Form of Broker-Dealer Agreement.(e)
(4) -- Form of Letter of Representations.(e)
(l) -- Opinion and Consent of Brown & Wood LLP, counsel to the
Registrant.(f)
(m) -- Not applicable.
(n) -- Consent of Deloitte & Touche LLP, independent auditors for
the Registrant.(f)
(o) -- Not applicable.
(p) -- Certificate of Fund Asset Management, L.P.(d)
(q) -- Not applicable.
(r) -- Financial Data Schedule.(f)
</TABLE>
- ---------------
(a) Reference is made to the Registrant's registration statement on Form N-2,
File Nos. 333-78141 and 811-09331 (the "Common Shares Registration
Statement") filed with the Securities and Exchange Commission on May 10,
1999.
(b) Reference is made to Section 3.4, Article V, Article VI (sections 1, 2, 4, 5
and 7), Article VIII, Article IX and Article X of the Registrant's
Declaration of Trust, previously filed as Exhibit (a) to the Common Shares
Registration Statement; and to Article II, Article III (sections 1, 2, 3, 5
and 17), Article VI, Article VII, Article XII, Article XIII and Article XIV
of the Registrant's By-Laws, previously filed as Exhibit (b) to the Common
Shares Registration Statement. Reference is also made to the Form of
Certificate of Designation filed hereto as Exhibit (a)(2).
(c) Reference is made to Pre-Effective Amendment No. 1 to Registrant's Common
Shares Registration Statement filed with the Securities and Exchange
Commission on May 18, 1999.
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<PAGE> 4
(d) Reference is made to Pre-Effective Amendment No. 3 to Registrant's Common
Shares Registration Statement filed with the Securities and Exchange
Commission on July 20, 1999.
(e) Reference is made to the Registrant's registration statement on Form N-2,
File Nos. 333-81995 and 811-09331 filed with the Securities and Exchange
Commission on June 30, 1999.
(f) Reference is made to the Registrant's registration statement on Form N-2,
File Nos. 333-81995 and 811-09331 filed with the Securities and Exchange
Commission on July 28, 1999.
ITEM 25. MARKETING ARRANGEMENTS.
See Exhibit (h).
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement:
<TABLE>
<S> <C>
Registration fees........................................... $ 9,730
Printing.................................................... 54,000
Legal fees and expenses..................................... 35,000
Rating Agency fees.......................................... 35,000
Miscellaneous............................................... 1,270
--------
Total............................................. $135,000
========
</TABLE>
--------------------
* To be filed by amendment.
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
The information in the Prospectus under the captions "Investment Advisory
and Management Arrangements" and "Description of Capital Shares-Common Shares"
and in Note 1 to the Statement of Assets, Liabilities and Capital is
incorporated herein by reference.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
NUMBER OF
RECORD HOLDERS
TITLE OF CLASS AT JULY 23, 1999
-------------- ----------------
<S> <C>
Common Shares, $.10 par value............................... 2
Preferred Shares, $.10 par value............................ 0
</TABLE>
ITEM 29. INDEMNIFICATION.
Section 5.3 of the Registrant's Declaration of Trust provides as follows:
"The Trust shall indemnify each of its Trustees, officers, employees,
and agents (including persons who serve at its request as directors,
officers or trustees of another organization in which it has any interest
as a shareholder, creditor or otherwise) against all liabilities and
expenses (including amounts paid in satisfaction of judgments, in
compromise, as fines and penalties, and as counsel fees) reasonably
incurred by him in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, in which he
may be involved or with which he may be threatened, while in office or
thereafter, by reason of his being or having been such a trustee, officer,
employee or agent, except with respect to any matter as to which he shall
have been adjudicated to have acted in bad faith, willful misfeasance,
gross negligence or reckless disregard of his duties; provided, however,
that as to any matter disposed of by a compromise payment by such person,
pursuant to a consent decree or otherwise, no indemnification either for
said payment or for any other expenses shall be provided unless the Trust
shall have received a written opinion from independent legal counsel
approved by the Trustees to the effect that if either the matter of willful
misfeasance, gross negligence or reckless disregard of duty, or the matter
of good faith and reasonable belief as to the best interests of the Trust,
had been adjudicated, it would have been adjudicated in favor of such
person. The rights accruing to any person under these
C-2
<PAGE> 5
provisions shall not exclude any other right to which he may be lawfully
entitled; provided that no person may satisfy any right of indemnity or
reimbursement granted herein or in Section 5.1 or to which he may be
otherwise entitled except out of the property of the Trust, and no
Shareholder shall be personally liable to any person with respect to any
claim for indemnity or reimbursement or otherwise. The Trustees may make
advance payments in connection with indemnification under this Section 5.3,
provided that the indemnified person shall have given a written undertaking
to reimburse the Trust in the event it is subsequently determined that he
is not entitled to such indemnification."
The Registrant's By-Laws provide that insofar as the conditional advancing
of indemnification moneys pursuant to Section 5.3 of the Declaration of Trust
for actions based upon the Investment Company Act of 1940 may be concerned, such
payments will be made only on the following conditions: (i) the advances must be
limited to amounts used, or to be used, for the preparation or presentation of a
defense to the action, including costs connected with the preparation of a
settlement; (ii) advances may be made only upon receipt of a written promise by,
or on behalf of, the recipient to repay that amount of the advance which exceeds
the amount to which it is ultimately determined he is entitled to receive from
the Registrant by reason of indemnification; and (iii) (a) such promise must be
secured by a surety bond, other suitable insurance or an equivalent form of
security which assures that any repayments may be obtained by the Registrant
without delay or litigation, which bond, insurance or other form of security
must be provided by the recipient of the advance, or (b) a majority of a quorum
of the Registrant's disinterested, non-party Trustees, or an independent legal
counsel in a written opinion, shall determine, based upon a review of readily
available facts, that the recipient of the advance ultimately will be found
entitled to indemnification.
In Section 8 of the Distribution Agreement relating to the securities being
offered hereby, the Registrant agrees to indemnify the Distributor and each
person, if any, who controls the Distributor within the meaning of the
Securities Act of 1933 (the "1933 Act"), against certain types of civil
liabilities arising in connection with the Registration Statement or Prospectus.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "1933 Act") may be provided to trustees, officers and
controlling persons of the Fund, pursuant to the foregoing provisions or
otherwise, the Fund has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the 1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Fund of
expenses incurred or paid by a trustee, officer or controlling person of the
Fund in connection with any successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Fund 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 1933 Act and
will be governed by the final adjudication of such issue.
Reference is made to Section Six of the Purchase Agreement, a form of which
will be filed as Exhibit (h)(1) hereto, for provisions relating to the
indemnification of the underwriter.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER.
Fund Asset Management, L.P. (the "Investment Adviser"), acts as investment
adviser for the following open-end registered investment companies: CBA Money
Fund, CMA Government Securities Fund, CMA Money Fund, CMA Multi-State Municipal
Series Trust, CMA Tax-Exempt Fund, CMA Treasury Fund, The Corporate Fund
Accumulation Program, Inc., Financial Institutions Series Trust, Merrill Lynch
Basic Value Fund, Inc., Merrill Lynch California Municipal Series Trust, Merrill
Lynch Corporate Bond Fund, Inc., Merrill Lynch Corporate High Yield Fund, Inc.,
Merrill Lynch Emerging Tigers Fund, Inc., Merrill Lynch Federal Securities
Trust, Merrill Lynch Funds for Institutions Series, Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, Merrill Lynch Multi-State Municipal
Series Trust, Merrill Lynch Municipal Bond Fund, Inc., Merrill Lynch Phoenix
Fund, Inc., Merrill Lynch Special Value Fund, Inc., Merrill Lynch World Income
Fund, Inc., and The Municipal Fund Accumulation Program, Inc., and for the
following closed-end registered investment companies: Apex Municipal Fund, Inc.,
Corporate High Yield Fund, Inc., Corporate High Yield Fund II, Inc., Corporate
High Yield Fund III, Inc., Debt Strategies Fund, Inc., Debt Strategies Fund II,
Inc., Debt Strategies Fund III, Inc., Income Opportunities Fund 1999, Inc.,
Income
C-3
<PAGE> 6
Opportunities Fund 2000, Inc., Merrill Lynch Municipal Strategy Fund, Inc.,
MuniAssets Fund, Inc., MuniEnhanced Fund, Inc., MuniHoldings Fund, Inc.,
MuniHoldings Fund II, Inc., MuniHoldings California Insured Fund, Inc.,
MuniHoldings California Insured Fund II, Inc., MuniHoldings California Insured
Fund III, Inc., MuniHoldings California Insured Fund IV, Inc., MuniHoldings
California Insured Fund V, Inc., Inc., MuniHoldings Florida Insured Fund,
MuniHoldings Florida Insured Fund II, MuniHoldings Florida Insured Fund III,
MuniHoldings Florida Insured Fund IV, MuniHoldings Florida Insured Fund V,
MuniHoldings Insured Fund, Inc., MuniHoldings Insured Fund II, Inc.,
MuniHoldings Insured Fund III, Inc., MuniHoldings Michigan Insured Fund, Inc.,
MuniHoldings New Jersey Insured Fund, Inc., MuniHoldings New Jersey Insured Fund
II, Inc., MuniHoldings New Jersey Insured Fund III, Inc., MuniHoldings New
Jersey Insured Fund IV, Inc., MuniHoldings New York Fund, Inc., MuniHoldings New
York Insured Fund, Inc., MuniHoldings New York Insured Fund II, Inc.,
MuniHoldings New York Insured Fund III, Inc., MuniHoldings New York Insured Fund
IV, Inc., MuniHoldings Pennsylvania Insured Fund, MuniInsured Fund, Inc.,
MuniVest Florida Fund, Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc.,
MuniVest Michigan Insured Fund, Inc., MuniVest New Jersey Fund, Inc., MuniVest
Pennsylvania Insured Fund, MuniYield Arizona Fund, Inc., MuniYield California
Fund, Inc., MuniYield California Insured Fund, Inc., MuniYield California
Insured Fund II, Inc., MuniYield Florida Fund, MuniYield Florida Insured Fund,
MuniYield Fund, Inc., MuniYield Insured Fund, Inc., MuniYield Michigan Fund,
Inc., MuniYield Michigan Insured Fund, Inc., MuniYield New Jersey Fund, Inc.,
MuniYield New Jersey Insured Fund, Inc., MuniYield New York Insured Fund, Inc.,
MuniYield New York Insured Fund II, Inc., MuniYield Pennsylvania Fund, MuniYield
Quality Fund, Inc., MuniYield Quality Fund II, Inc., Senior High Income
Portfolio, Inc., and Worldwide DollarVest Fund, Inc.
Merrill Lynch Asset Management, L.P. ("MLAM"), an affiliate of the
Investment Adviser, acts as the investment adviser for the following open-end
registered investment companies: Merrill Lynch Adjustable Rate Securities Fund,
Inc., Merrill Lynch Americas Income Fund, Inc., Merrill Lynch Asset Builder
Program, Inc., Merrill Lynch Asset Growth Fund, Inc., Merrill Lynch Asset Income
Fund, Inc., Merrill Lynch Capital Fund, Inc., Merrill Lynch Convertible Fund,
Inc., Merrill Lynch Developing Capital Markets Fund, Inc., Merrill Lynch
Disciplined Equity Fund, Inc., Merrill Lynch Dragon Fund, Inc., Merrill Lynch
EuroFund, Merrill Lynch Fundamental Growth Fund, Inc., Merrill Lynch Global Bond
Fund for Investment and Retirement, Merrill Lynch Global Allocation Fund, Inc.,
Merrill Lynch Global Growth Fund, Inc., Merrill Lynch Global Holdings, Merrill
Lynch Global Resources Trust, Merrill Lynch Global SmallCap Fund, Inc., Merrill
Lynch Global Technology Fund, Inc., Merrill Lynch Global Utility Fund, Inc.,
Merrill Lynch Global Value Fund, Inc., Merrill Lynch Growth Fund, Merrill Lynch
Healthcare Fund, Inc., Merrill Lynch Intermediate Government Bond Fund, Merrill
Lynch International Equity Fund, Merrill Lynch Latin America Fund, Inc., Merrill
Lynch Middle East/Africa Fund, Inc., Merrill Lynch Municipal Series Trust,
Merrill Lynch Pacific Fund, Inc., Merrill Lynch Ready Assets Trust, Merrill
Lynch Real Estate Fund, Inc., Merrill Lynch Retirement Series Trust, Merrill
Lynch Series Fund, Inc., Merrill Lynch Short-Term Global Income Fund, Inc.,
Merrill Lynch Strategic Dividend Fund, Merrill Lynch Technology Fund, Inc.,
Merrill Lynch U.S. Treasury Money Fund, Merrill Lynch U.S.A. Government
Reserves, Merrill Lynch Utility Income Fund, Inc., Merrill Lynch Variable Series
Funds, Inc. and Hotchkis and Wiley Funds (advised by Hotchkis and Wiley, a
division of MLAM); and for the following closed-end registered investment
companies: Merrill Lynch High Income Municipal Bond Fund, Inc. and Merrill Lynch
Senior Floating Rate Fund, Inc., Merrill Lynch Senior Floating Rate Fund II,
Inc. MLAM also acts as sub-adviser to Merrill Lynch World Strategy Portfolio and
Merrill Lynch Basic Equity Portfolio, two investment portfolios of EQ Advisors
Trust.
The address of each of these registered investment companies is P.O. Box
9011, Princeton, New Jersey 08543-9011, except that the address of Merrill Lynch
Funds for Institutions Series and Merrill Lynch Intermediate Government Bond
Fund is One Financial Center, 23rd Floor, Boston, Massachusetts 02111-2665. The
address of the Investment Adviser, MLAM, Princeton Services, Inc. ("Princeton
Services") and Princeton Administrators, L.P. is also P.O. Box 9011, Princeton,
New Jersey 08543-9011. The address of Princeton Funds Distributor, Inc. ("PFD")
and of Merrill Lynch Funds Distributor ("MLFD") is P.O. Box 9081, Princeton, New
Jersey 08543-9081. The address of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and Merrill Lynch & Co., Inc. ("ML & Co.") is
World Financial Center, North Tower, 250 Vesey Street, New York, New York
10281-1201.
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<PAGE> 7
Set forth below is a list of each executive officer and partner of the
Investment Adviser indicating each business, profession, vocation or employment
of a substantial nature in which each such person or entity has been engaged for
the past two years for his or her or its own account or in the capacity of
director, officer, employee, partner or trustee. In addition, Mr. Glenn is
President and Mr. Burke is Treasurer of all or substantially all of the
investment companies described in the first two paragraphs of this Item 30 and
also hold the same positions with all or substantially all of the investment
companies advised by MLAM as they do with those advised by the Investment
Adviser. Messrs. Giordano, Doll and Monagle are directors or officers of one or
more of such companies.
<TABLE>
<CAPTION>
POSITION(S) WITH OTHER SUBSTANTIAL BUSINESS,
NAME INVESTMENT ADVISER PROFESSION, VOCATION OR EMPLOYMENT
---- ---------------------------- ----------------------------------
<S> <C> <C>
ML & Co................................ Limited Partner Financial Services Holding
Company; Limited Partner of MLAM
Princeton Services..................... General Partner General Partner of MLAM
Jeffrey M. Peek........................ President President of MLAM, President and
Director of Princeton Services;
Executive Vice President of
ML&Co.; Managing Director and
Co-Head of the Investment Banking
Division of Merrill Lynch in 1997.
Terry K. Glenn......................... Executive Vice President Executive Vice President of MLAM;
Executive Vice President and
Director of Princeton Services;
President and Director of PFD;
Director of FDS; President of
Princeton Administrators, L.P.
Gregory A. Bundy....................... Chief Operating Officer and Chief Operating Officer and
Managing Director Managing Director of FAM; Chief
Operating Officer and Managing
Director of Princeton Services;
Co-CEO of Merrill Lynch Australia
from 1997 to 1999.
Donald C. Burke........................ Senior Vice President, Senior Vice President and
Treasurer and Director of Treasurer of MLAM; Senior Vice
Taxation President and Treasurer of
Princeton Services; Vice President
of PFD; First Vice President of
the Investment Adviser from 1997
to 1999; Vice President of the
Investment Adviser from 1990 to
1997
Michael G. Clark....................... Senior Vice President Senior Vice President of MLAM;
Senior Vice President of Princeton
Services; Treasurer and Director
of PFD; First Vice President of
the Investment Adviser from 1997
to 1999; Vice President of the
Investment Adviser from 1996 to
1997
</TABLE>
C-5
<PAGE> 8
<TABLE>
<CAPTION>
POSITION(S) WITH OTHER SUBSTANTIAL BUSINESS,
NAME INVESTMENT ADVISER PROFESSION, VOCATION OR EMPLOYMENT
---- ---------------------------- ----------------------------------
<S> <C> <C>
Robert C. Doll......................... Senior Vice President Senior Vice President of FAM;
Senior Vice President of Princeton
Services; Chief Investment Officer
of Oppenheimer Funds, Inc. in 1999
and Executive Vice President
thereof from 1991 to 1999.
Linda L. Federici...................... Senior Vice President Senior Vice President of MLAM;
Senior Vice President of Princeton
Services
Vincent R. Giordano.................... Senior Vice President Senior Vice President of MLAM;
Senior Vice President of Princeton
Services
Michael J. Hennewinkel................. General Counsel Senior Vice President, General
and Secretary Counsel of MLAM; Senior Vice
President the MLAM International
Group
Philip L. Kirstein..................... Senior Vice President Senior Vice President of MLAM;
Senior Vice President, General
Counsel, Director and Secretary of
Princeton Services
Ronald M. Kloss........................ Senior Vice President Senior Vice President of MLAM;
Senior Vice President of Princeton
Services
Debra W. Landsman-Yaros................ Senior Vice President Senior Vice President of MLAM;
Senior Vice President of Princeton
Services; Vice President of PFD
Stephen M. M. Miller................... Senior Vice President Executive Vice President of
Princeton Administrators, L.P.;
Senior Vice President of Princeton
Services
Joseph T. Monagle, Jr.................. Senior Vice President Senior Vice President of MLAM;
Senior Vice President of Princeton
Services
Brian A. Murdock....................... Senior Vice President Senior Vice President of MLAM;
Senior Vice President of Princeton
Services; Director of PFD
Gregory D. Upah........................ Senior Vice President Senior Vice President of MLAM;
Senior Vice President of Princeton
Services
</TABLE>
ITEM 31. LOCATION OF ACCOUNT AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and the Rules
promulgated thereunder are maintained at the offices of the Registrant (800
Scudders Mill Road, Plainsboro, New Jersey 08536), its investment adviser (800
Scudders Mill Road, Plainsboro, New Jersey 08536), and its custodian and
transfer agent.
ITEM 32. MANAGEMENT SERVICES.
Not applicable.
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<PAGE> 9
ITEM 33. UNDERTAKINGS.
Registrant undertakes:
(1) For the purpose of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as a
part of a registration statement in reliance upon Rule 430A under the
Securities Act of 1933 and contained in the form of prospectus filed by the
Registrant pursuant to 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.
(2) 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 such securities at that
time shall be deemed to be the initial bona fide offering thereof.
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<PAGE> 10
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 Township of Plainsboro, and State of New Jersey, on the 6th
day of August, 1999.
MUNIHOLDINGS FLORIDA INSURED FUND V
(Registrant)
By: /s/ TERRY K. GLENN
--------------------------------------
(Terry K. Glenn, President)
Each person whose signature appears below hereby authorizes Terry K. Glenn,
Donald C. Burke or William E. Zitelli, Jr., or any of them, as attorney-in-fact,
to sign on his or her behalf, individually and in each capacity stated below,
any amendment to this Registration Statement (including post-effective
amendments) and to file the same, with all exhibits thereto, with the Securities
and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following person in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ TERRY K. GLENN President (Principal Executive August 6, 1999
- --------------------------------------------------- Officer) and Trustee
(Terry K. Glenn)
/s/ DONALD C. BURKE Treasurer (Principal Financial August 6, 1999
- --------------------------------------------------- and Accounting Officer)
(Donald C. Burke)
/s/ RONALD W. FORBES Trustee August 6, 1999
- ---------------------------------------------------
(Ronald W. Forbes)
/s/ CYNTHIA A. MONTGOMERY Trustee August 6, 1999
- ---------------------------------------------------
(Cynthia A. Montgomery)
/s/ CHARLES C. REILLY Trustee August 6, 1999
- ---------------------------------------------------
(Charles C. Reilly)
/s/ KEVIN A. RYAN Trustee August 6, 1999
- ---------------------------------------------------
(Kevin A. Ryan)
/s/ RICHARD R. WEST Trustee August 6, 1999
- ---------------------------------------------------
(Richard R. West)
/s/ ARTHUR ZEIKEL Trustee August 6, 1999
- ---------------------------------------------------
(Arthur Zeikel)
</TABLE>
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<PAGE> 11
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <S>
(a)(2) -- Form of Certificate of Designation creating the Series A
AMPS
</TABLE>
<PAGE> 1
MUNIHOLDINGS FLORIDA INSURED FUND V
CERTIFICATE OF DESIGNATION DATED AUGUST 11, 1999
ESTABLISHING POWERS, QUALIFICATIONS, RIGHTS
AND PREFERENCES OF ONE SERIES OF AUCTION MARKET
PREFERRED SHARES ("AMPS(R)")
WHEREAS the Board of Trustees of MuniHoldings Florida Insured Fund V (the
"Trust") is expressly empowered pursuant to Section 6.1 of the Trust's
Declaration of Trust to authorize the issuance of preferred shares of the Trust
in one or more series, with such preferences, powers, restrictions, limitations
or qualifications as determined by the Board of Trustees and as set forth in the
resolution or resolutions providing for the issuance of such preferred shares.
AND WHEREAS the Board of Trustees has determined that it is in the best
interests of the Trust to issue one series of such preferred shares.
NOW THEREFORE, the Board of Trustees does hereby authorize the issuance of
one series of preferred shares, par value $0.10 per share, liquidation
preference $25,000 per share plus an amount equal to accumulated but unpaid
dividends thereon (whether or not earned or declared), to be designated Auction
Market Preferred Shares, Series A.
The preferences, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption, of the preferred shares
are as follows:
DESIGNATION
A series of 1,400 preferred shares, par value $.10 per share, liquidation
preference $25,000 per share plus an amount equal to accumulated but unpaid
dividends (whether or not earned or declared) thereon, is hereby designated
"Auction Market Preferred Shares, Series A." Each Auction Market Preferred
Share, Series A (sometimes referred to herein as "AMPS") shall be issued on a
date to be determined by the Board of Trustees of the Trust or pursuant to their
delegated authority; have an Initial Dividend Rate and an Initial Dividend
Payment Date as shall be determined in advance of the issuance thereof by the
Board of Trustees of the Trust or pursuant to their delegated authority; and
have such other preferences, voting powers, limitations as to dividends,
qualifications and terms and conditions of redemption as are set forth in this
Certificate of Designation. The Auction Market Preferred Shares, Series A shall
constitute a
- ---------------------------
(R) Registered trademark of Merrill Lynch & Co., Inc.
<PAGE> 2
separate series of preferred shares of the Trust, and each Auction
Market Preferred Share, Series A shall be identical.
1. Definitions. (a) Unless the context or use indicates another or
different meaning or intent, in this Certificate of Designation the following
terms have the following meanings, whether used in the singular or plural:
"'AA" Composite Commercial Paper Rate," on any date of determination,
means (i) the Interest Equivalent of the rate on commercial paper placed on
behalf of issuers whose corporate bonds are rated "AA" by S&P or "Aa" by Moody's
or the equivalent of such rating by another nationally recognized rating agency,
as such rate is made available on a discount basis or otherwise by the Federal
Reserve Bank of New York for the Business Day immediately preceding such date,
or (ii) in the event that the Federal Reserve Bank of New York does not make
available such a rate, then the arithmetic average of the Interest Equivalent of
the rate on commercial paper placed on behalf of such issuers, as quoted on a
discount basis or otherwise by Merrill Lynch, Pierce, Fenner & Smith
Incorporated or its successors that are Commercial Paper Dealers, to the Auction
Agent for the close of business on the Business Day immediately preceding such
date. If one of the Commercial Paper Dealers does not quote a rate required to
determine the "AA" Composite Commercial Paper Rate, the "AA" Composite
Commercial Paper Rate will be determined on the basis of the quotation or
quotations furnished by any Substitute Commercial Paper Dealer or Substitute
Commercial Paper Dealers selected by the Trust to provide such rate or rates not
being supplied by the Commercial Paper Dealer. If the number of Dividend Period
days shall be (i) 7 or more but fewer than 49 days, such rate shall be the
Interest Equivalent of the 30-day rate on such commercial paper; (ii) 49 or more
but fewer than 70 days, such rate shall be the Interest Equivalent of the 60-day
rate on such commercial paper; (iii) 70 or more days but fewer than 85 days,
such rate shall be the arithmetic average of the Interest Equivalent on the
60-day and 90-day rates on such commercial paper; (iv) 85 or more days but fewer
than 99 days, such rate shall be the Interest Equivalent of the 90-day rate on
such commercial paper; (v) 99 or more days but fewer than 120 days, such rate
shall be the arithmetic average of the Interest Equivalent of the 90-day and
120-day rates on such commercial paper; (vi) 120 or more days but fewer than 141
days, such rate shall be the Interest Equivalent of the 120-day rate on such
commercial paper; (vii) 141 or more days but fewer than 162 days, such rate
shall be the arithmetic average of the Interest Equivalent of the 120-day and
2
<PAGE> 3
180-day rates on such commercial paper; and (viii) 162 or more days but fewer
than 183 days, such rate shall be the Interest Equivalent of the 180-day rate on
such commercial paper.
"Accountant's Confirmation" has the meaning set forth in paragraph 7(c)
of this Certificate of Designation.
"Additional Dividend" has the meaning set forth in paragraph 2(e) of
this Certificate of Designation.
"Adviser" means the Trust's investment adviser which initially shall be
Fund Asset Management, L.P.
"Affiliate" means any Person, other than Merrill Lynch, Pierce, Fenner &
Smith Incorporated or its successors, known to the Auction Agent to be
controlled by, in control of, or under common control with, the Trust.
"Agent Member" means a member of the Securities Depository that will act
on behalf of a Beneficial Owner of one or more AMPS or a Potential Beneficial
Owner.
"AMPS" means the Auction Market Preferred Shares, Series A.
"AMPS Basic Maintenance Amount," as of any Valuation Date, means the
dollar amount equal to (i) the sum of (A) the product of the number of AMPS and
Other AMPS Outstanding on such Valuation Date multiplied by the sum of (a)
$25,000 and (b) any applicable redemption premium attributable to the
designation of a Premium Call Period; (B) the aggregate amount of cash dividends
(whether or not earned or declared) that will have accumulated for each share of
AMPS and Other AMPS Outstanding, in each case, to (but not including) the end of
the current Dividend Period that follows such Valuation Date in the event the
then current Dividend Period will end within 49 calendar days of such Valuation
Date or through the 49th day after such Valuation Date in the event the then
current Dividend Period will not end within 49 calendar days of such Valuation
Date; (C) in the event the then current Dividend Period will end within 49
calendar days of such Valuation Date, the aggregate amount of cash dividends
that would accumulate at the Maximum Applicable Rate applicable to a Dividend
Period of 28 or fewer days on any AMPS and Other AMPS Outstanding from the end
of such Dividend Period through the 49th day after such Valuation Date,
multiplied by the larger of the Moody's Volatility Factor and the S&P Volatility
Factor, determined from time to time by Moody's and S&P, respectively
3
<PAGE> 4
(except that if such Valuation Date occurs during a Non-Payment Period, the cash
dividend for purposes of calculation would accumulate at the then current
Non-Payment Period Rate); (D) the amount of anticipated expenses of the Trust
for the 90 days subsequent to such Valuation Date (including any premiums
payable with respect to a Policy); (E) the amount of the Trust's Maximum
Potential Additional Dividend Liability as of such Valuation Date; and (F) any
current liabilities as of such Valuation Date to the extent not reflected in any
of (i)(A) through (i)(E) (including, without limitation, and immediately upon
determination, any amounts due and payable by the Trust pursuant to repurchase
agreements and any amounts payable for Florida Municipal Bonds or Municipal
Bonds purchased as of such Valuation Date) less (ii) either (A) the Discounted
Value of any of the Trust's assets, or (B) the face value of any of the Trust's
assets if such assets mature prior to or on the date of redemption of AMPS or
payment of a liability and are either securities issued or guaranteed by the
United States Government or Deposit Securities, in both cases irrevocably
deposited by the Trust for the payment of the amount needed to redeem AMPS
subject to redemption or to satisfy any of (i)(B) through (i)(F). For Moody's
and S&P, the Trust shall include as a liability an amount calculated
semi-annually equal to 150% of the estimated cost of obtaining other insurance
guaranteeing the timely payment of interest on a Moody's Eligible Asset or S&P
Eligible Asset and principal thereof to maturity with respect to Moody's
Eligible Assets and S&P Eligible Assets that (i) are covered by a Policy which
provides the Trust with the option to obtain such other insurance and (ii) are
discounted by a Moody's Discount Factor or an S&P Discount Factor determined, as
the case may be, by reference to the insurance claims-paying ability rating of
the issuer of such Policy.
"AMPS Basic Maintenance Cure Date," with respect to the failure by the
Trust to satisfy the AMPS Basic Maintenance Amount (as required by paragraph
7(a) of this Certificate of Designation) as of a given Valuation Date, means the
sixth Business Day following such Valuation Date.
"AMPS Basic Maintenance Report" means a report signed by any of the
President, Treasurer, any Senior Vice President or any Vice President of the
Trust which sets forth, as of the related Valuation Date, the assets of the
Trust, the Market Value and the Discounted Value thereof (seriatim and in
aggregate), and the AMPS Basic Maintenance Amount.
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<PAGE> 5
"Anticipation Notes" shall mean the following Florida Municipal Bonds:
revenue anticipation notes, tax anticipation notes, tax and revenue
anticipation notes, grant anticipation notes and bond anticipation notes.
"Applicable Percentage" has the meaning set forth in paragraph
10(a)(vii) of this Certificate of Designation.
"Applicable Rate" means the rate per annum at which cash dividends are
payable on the AMPS or Other AMPS, as the case may be, for any Dividend Period.
"Auction" means a periodic operation of the Auction Procedures.
"Auction Agent" means IBJ Whitehall Bank & Trust Company unless and
until another commercial bank, trust company or other financial institution
appointed by a resolution of the Board of Trustees of the Trust or a duly
authorized committee thereof enters into an agreement with the Trust to follow
the Auction Procedures for the purpose of determining the Applicable Rate and to
act as transfer agent, registrar, dividend disbursing agent and redemption agent
for the AMPS and Other AMPS.
"Auction Procedures" means the procedures for conducting Auctions set
forth in paragraph 10 of this Certificate of Designation.
"Beneficial Owner" means a customer of a Broker-Dealer who is listed on
the records of that Broker-Dealer (or, if applicable, the Auction Agent) as a
holder of AMPS or a Broker-Dealer that holds AMPS for its own account.
"Broker-Dealer" means any broker-dealer, or other entity permitted by law
to perform the functions required of a Broker-Dealer in paragraph 10 of this
Certificate of Designation, that has been selected by the Trust and has entered
into a Broker-Dealer Agreement with the Auction Agent that remains effective.
"Broker-Dealer Agreement" means an agreement between the Auction Agent and
a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the
procedures specified in paragraph 10 of this Certificate of Designation.
"Business Day" means a day on which the New York Stock Exchange, Inc.
is open for trading and which is not a Saturday, Sunday or other day on which
banks in The City of New York are authorized or obligated by law to close.
5
<PAGE> 6
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Paper Dealers" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated and such other commercial paper dealer or dealers as the Trust may
from time to time appoint, or, in lieu of any thereof, their respective
affiliates or successors.
"Common Shares" means the common shares of beneficial interest, par value
$.10 per share, of the Trust.
"Date of Original Issue" means, with respect to any share of AMPS or Other
AMPS, the date on which the Trust originally issues such share.
"Declaration" means the Declaration of Trust, as amended and supplemented
(including this Certificate of Designation), of the Trust on file with the
office of the Secretary of State of the Commonwealth of Massachusetts.
"Deposit Securities" means cash and Florida Municipal Bonds and Municipal
Bonds rated at least A2 (having a remaining maturity of 12 months or less), P-1,
VMIG-1 or MIG-1 by Moody's or A (having a remaining maturity of 12 months or
less), A-1+ or SP-1+ by S&P.
"Discounted Value" means (i) with respect to an S&P Eligible Asset, the
quotient of the Market Value thereof divided by the applicable S&P Discount
Factor and (ii) with respect to a Moody's Eligible Asset, the lower of par and
the quotient of the Market Value thereof divided by the applicable Moody's
Discount Factor.
"Dividend Payment Date," with respect to AMPS, has the meaning set forth
in paragraph 2(b)(i) of this Certificate of Designation and, with respect to
Other AMPS, has the equivalent meaning.
"Dividend Period" means the Initial Dividend Period, any 7-Day Dividend
Period and any Special Dividend Period.
"Existing Holder" means a Broker-Dealer or any such other Person as may be
permitted by the Trust that is listed as the holder of record of AMPS in the
Share Books.
"Fitch" means Fitch IBCA, Inc. or its successors.
"Florida Municipal Bonds" means Municipal Bonds issued by or on behalf of
the State of Florida, its political subdivisions, agencies and instrumentalities
and by other qualifying issuers
6
<PAGE> 7
that pay interest which, in the opinion of bond counsel to the issuer, is exempt
from Federal income taxes and Florida intangible personal property taxes, and
includes Inverse Floaters.
"Forward Commitment" has the meaning set forth in paragraph 8(c) of
this Certificate of Designation.
"Holder" means a Person identified as a holder of record of AMPS in the
Share Register.
"Independent Accountant" means a nationally recognized accountant, or firm
of accountants, that is, with respect to the Trust, an independent public
accountant or firm of independent public accountants under the Securities Act of
1933, as amended.
"Initial Dividend Payment Date" means the Initial Dividend Payment Date as
determined by the Board of Trustees of the Trust with respect to the AMPS or
Other AMPS, as the case may be.
"Initial Dividend Period," with respect to the AMPS, has the meaning set
forth in paragraph 2(c)(i) of this Certificate of Designation and, with respect
to Other AMPS, has the equivalent meaning.
"Initial Dividend Rate," with respect to the AMPS, means the rate per
annum applicable to the Initial Dividend Period for the AMPS and, with respect
to Other AMPS, has the equivalent meaning.
"Initial Margin" means the amount of cash or securities deposited with a
broker as a margin payment at the time of purchase or sale of a futures
contract.
"Interest Equivalent" means a yield on a 360-day basis of a discount basis
security which is equal to the yield on an equivalent interest-bearing security.
"Inverse Floaters" means trust certificates or other instruments
evidencing interests in one or more Florida Municipal Bonds that qualify as S&P
Eligible Assets (and are not part of a private placement of Florida Municipal
Bonds and satisfy the issuer and original issue size or ratings requirements of
clause (vi) of the definition of S&P Eligible Assets) the interest rates on
which are adjusted at short term intervals on a basis that is inverse to the
simultaneous readjustment of the interest rates on corresponding floating rate
trust certificates or other instruments issued by the same issuer, provided that
the ratio of the aggregate dollar amount of floating rate instruments to inverse
floating rate instruments issued by the same issuer does not
7
<PAGE> 8
exceed one to one at their time of original issuance unless the floating rate
instruments have only one reset remaining until maturity.
"Long Term Dividend Period" means a Special Dividend Period consisting of
a specified period of one whole year or more but not greater than five years.
"Mandatory Redemption Price" means $25,000 per share of AMPS plus an
amount equal to accumulated but unpaid dividends (whether or not earned or
declared) to the date fixed for redemption and excluding Additional Dividends.
"Marginal Tax Rate" means the maximum marginal regular Federal individual
income tax rate applicable to ordinary income or the maximum marginal regular
Federal corporate income tax rate, whichever is greater.
"Market Value" of any asset of the Trust shall be the market value thereof
determined by the Pricing Service. Market Value of any asset shall include any
interest accrued thereon. The Pricing Service shall value portfolio securities
at the quoted bid prices or the mean between the quoted bid and asked price or
the yield equivalent when quotations are not readily available. Securities for
which quotations are not readily available shall be valued at fair value as
determined by the Pricing Service using methods which include consideration of:
yields or prices of municipal bonds of comparable quality, type of issue,
coupon, maturity and rating; indications as to value from dealers; and general
market conditions. The Pricing Service may employ electronic data processing
techniques and/or a matrix system to determine valuations. In the event the
Pricing Service is unable to value a security, the security shall be valued at
the lower of two dealer bids obtained by the Trust from dealers who are members
of the National Association of Securities Dealers, Inc. and who make a market in
the security, at least one of which shall be in writing. Futures contracts and
options are valued at closing prices for such instruments established by the
exchange or board of trade on which they are traded, or if market quotations are
not readily available, are valued at fair value on a consistent basis using
methods determined in good faith by the Board of Trustees.
"Maximum Applicable Rate," with respect to AMPS, has the meaning set forth
in paragraph 10(a)(vii) of this Certificate of Designation and, with respect to
Other AMPS, has the equivalent meaning.
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<PAGE> 9
"Maximum Potential Additional Dividend Liability," as of any Valuation
Date, means the aggregate amount of Additional Dividends that would be due if
the Trust were to make Retroactive Taxable Allocations, with respect to any
fiscal year, estimated based upon dividends paid and the amount of undistributed
realized net capital gains and other taxable income earned by the Trust, as of
the end of the calendar month immediately preceding such Valuation Date and
assuming such Additional Dividends are fully taxable.
"Moody's" means Moody's Investors Service, Inc. or its successors.
"Moody's Discount Factor" means, for purposes of determining the
Discounted Value of any Florida Municipal Bond or Municipal Bond which
constitutes a Moody's Eligible Asset, the percentage determined by reference to
(a)(i) the rating by Moody's or S&P on such Bond or (ii) in the event the
Moody's Eligible Asset is insured under a Policy and the terms of the Policy
permit the Trust, at its option, to obtain other insurance guaranteeing the
timely payment of interest on such Moody's Eligible Asset and principal thereof
to maturity, the Moody's insurance claims-paying ability rating of the issuer of
the Policy or (iii) in the event the Moody's Eligible Asset is insured under an
insurance policy which guarantees the timely payment of interest on such Moody's
Eligible Asset and principal thereof to maturity, the Moody's insurance
claims-paying ability rating of the issuer of the insurance policy (provided
that for purposes of clauses (ii) and (iii) if the insurance claims-paying
ability of an issuer of a Policy or insurance policy is not rated by Moody's but
is rated by S&P, such issuer shall be deemed to have a Moody's insurance
claims-paying ability rating which is two full categories lower than the S&P
insurance claims-paying ability rating) and (b) the Moody's Exposure Period, in
accordance with the table set forth below:
<TABLE>
<CAPTION>
Rating Category
---------------------------------------------------------------------
Moody's Exposure Period Aaa(1) Aa(1) A(1) Baa(1) Other(2) VMIG-1(3) SP-1+(3)
----------------------- ------ ----- ---- ------ -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
7 weeks or less.............. 151% 159% 168% 202% 229% 136% 148%
8 weeks or less but
greater than seven weeks..... 154 164 173 205 235 137 149
9 weeks or less but
greater than eight weeks..... 158 169 179 209 242 138 150
</TABLE>
- ----------
(1) Moody's rating.
(2) Florida Municipal Bonds and Municipal Bonds not rated by Moody's but rated
BBB or BBB+ by S&P.
(3) Florida Municipal Bonds and Municipal Bonds rated MIG-1, VMIG-1 or P-1 or,
if not rated by Moody's, rated SP-1+ or A-1+ by S&P which do not mature or
have a demand feature at par exercisable within the Moody's Exposure
Period and which do not have a long-term rating. For the purposes of the
definition of Moody's Eligible Assets, these securities will have an
assumed rating of "A" by Moody's.
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<PAGE> 10
; provided, however, in the event a Moody's Discount Factor applicable to a
Moody's Eligible Asset is determined by reference to an insurance claims-paying
ability rating in accordance with clause (a)(ii) or (a)(iii), such Moody's
Discount Factor shall be increased by an amount equal to 50% of the difference
between (a) the percentage set forth in the foregoing table under the applicable
rating category and (b) the percentage set forth in the foregoing table under
the rating category which is one category lower than the applicable rating
category.
Notwithstanding the foregoing, (i) a 102% Moody's Discount Factor will be
applied to short-term Florida Municipal Bonds and short-term Municipal Bonds, so
long as such Florida Municipal Bonds and Municipal Bonds are rated at least
MIG-1, VMIG-1 or P-1 by Moody's and mature or have a demand feature at par
exercisable within the Moody's Exposure Period, and the Moody's Discount Factor
for such Bonds will be 125% if such Bonds are not rated by Moody's but are rated
A-1+ or SP-1+ or AA by S&P and mature or have a demand feature at par
exercisable within the Moody's Exposure Period, and (ii) no Moody's Discount
Factor will be applied to cash or to Receivables for Florida Municipal Bonds or
Municipal Bonds Sold. "Receivables for Florida Municipal Bonds or Municipal
Bonds Sold," for purposes of calculating Moody's Eligible Assets as of any
Valuation Date, means no more than the aggregate of the following: (i) the book
value of receivables for Florida Municipal Bonds or Municipal Bonds sold as of
or prior to such Valuation Date if such receivables are due within five Business
Days of such Valuation Date, and if the trades which generated such receivables
are (x) settled through clearing house firms with respect to which the Trust has
received prior written authorization from Moody's or (y) with counterparties
having a Moody's long-term debt rating of at least Baa3; and (ii) the Moody's
Discounted Value of Florida Municipal Bonds or Municipal Bonds sold as of or
prior to such Valuation Date which generated receivables, if such receivables
are due within five Business Days of such Valuation Date but do not comply with
either of conditions (x) or (y) of the preceding clause (i).
"Moody's Eligible Asset" means cash, Receivables for Florida Municipal
Bonds or Municipal Bonds Sold, a Florida Municipal Bond or a Municipal Bond that
(i) pays interest in cash, (ii) is publicly rated Baa or higher by Moody's or,
if not rated by Moody's but rated by S&P, is rated at least BBB by S&P (provided
that, for purposes of determining the Moody's Discount Factor applicable to any
such S&P-rated Florida Municipal Bond or S&P-rated
10
<PAGE> 11
Municipal Bond, such Florida Municipal Bond or Municipal Bond (excluding any
short-term Florida Municipal Bond or Municipal Bond) will be deemed to have a
Moody's rating which is one full rating category lower than its S&P rating),
(iii) does not have its Moody's rating suspended by Moody's; and (iv) is part of
an issue of Florida Municipal Bonds or Municipal Bonds of at least $10,000,000.
In addition, Florida Municipal Bonds and Municipal Bonds in the Trust's
portfolio must be within the following diversification requirements in order to
be included within Moody's Eligible Assets:
<TABLE>
<CAPTION>
Minimum Maximum Maximum Maximum Maximum
Issue Size Underlying Issue Type County State or Territory
Rating ($ Millions) Obligor (%) (1) Concentration (%) (1) (3) Concentration (%) (1) (4) Concentration (1) (5)
- ------ ------------ --------------- ------------------------- ------------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Aaa............ 10 100 100 100 100
Aa............. 10 20 60 60 60
A.............. 10 10 40 40 40
Baa............ 10 6 20 20 20
Other(2)....... 10 4 12 12 12
</TABLE>
- -------------------------
(1) The referenced percentages represent maximum cumulative totals for the
related rating category and each lower rating category.
(2) Florida Municipal Bonds and Municipal Bonds not rated by Moody's but rated
BBB or BBB+ by S&P.
(3) Does not apply to general obligation bonds.
(4) Applicable to general obligation bonds only.
(5) Does not apply to Florida Municipal Bonds. Territorial bonds (other than
those issued by Puerto Rico and counted collectively) are each limited to
10% of Moody's Eligible Assets. For diversification purposes, Puerto Rico
will be treated as a state.
For purposes of the maximum underlying obligor requirement described above, any
Florida Municipal Bond or Municipal Bond backed by the guaranty, letter of
credit or insurance issued by a third party will be deemed to be issued by such
third party if the issuance of such third party credit is the sole determinant
of the rating on such Bond. For purposes of the issue type concentration
requirement described above, Florida Municipal Bonds and Municipal Bonds will be
classified within one of the following categories: health care issues (teaching
and non-teaching hospitals, public and private), housing issues (single- and
multi-family), educational facilities issues (public and private schools),
student loan issues, resource recovery issues, transportation issues (mass
transit, airport and highway bonds), industrial revenue/pollution control bond
issues, utility issues (including water, sewer and electricity), general
obligation issues, lease obligations/certificates of participation, escrowed
bonds and other issues ("Other Issues") not falling within one of the
aforementioned categories (includes special obligations to crossover, excise and
sales tax revenue, recreation revenue, special assessment and telephone revenue
bonds). In no event shall (a) more than 10% of Moody's Eligible Assets consist
of student loan issues, (b) more than 10% of Moody's Eligible Assets consist of
resource recovery issues or (c) more than 10% of Moody's Eligible Assets consist
of Other Issues.
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<PAGE> 12
When the Trust sells a Florida Municipal Bond or Municipal Bond and agrees
to repurchase it at a future date, the Discounted Value of such Bond will
constitute a Moody's Eligible Asset and the amount the Trust is required to pay
upon repurchase of such Bond will count as a liability for purposes of
calculating the AMPS Basic Maintenance Amount. For so long as the AMPS are rated
by Moody's, the Trust will not enter into any such reverse repurchase agreements
unless it has received written confirmation from Moody's that such transactions
would not impair the ratings then assigned the AMPS by Moody's. When the Trust
purchases a Florida Municipal Bond or Municipal Bond and agrees to sell it at a
future date to another party, cash receivable by the Trust thereby will
constitute a Moody's Eligible Asset if the long-term debt of such other party is
rated at least A2 by Moody's and such agreement has a term of 30 days or less;
otherwise the Discounted Value of such Bond will constitute a Moody's Eligible
Asset.
Notwithstanding the foregoing, an asset will not be considered a Moody's
Eligible Asset if it is (i) held in a margin account, (ii) subject to any
material lien, mortgage, pledge, security interest or security agreement of any
kind, (iii) held for the purchase of a security pursuant to a Forward Commitment
or (iv) irrevocably deposited by the Trust for the payment of dividends or
redemption.
"Moody's Exposure Period" means a period that is the same length or longer
than the number of days used in calculating the cash dividend component of the
AMPS Basic Maintenance Amount and shall initially be the period commencing on
and including a given Valuation Date and ending 48 days thereafter.
"Moody's Hedging Transactions" has the meaning set forth in paragraph 8(b)
of this Certificate of Designation.
"Moody's Volatility Factor" means 272% as long as there has been no
increase enacted to the Marginal Tax Rate. If such an increase is enacted but
not yet implemented, the Moody's Volatility Factor shall be as follows:
% Change in
Marginal Tax Moody's Volatility
Rate Factor
------------ ------------------
<5% 292%
-
12
<PAGE> 13
>5% but <10% 313%
-
>10% but <15% 338%
-
>15% but <20% 364%
-
>20% but <25% 396%
-
>25% but <30% 432%
-
>30% but <35% 472%
-
>35% but <40% 520%
-
Notwithstanding the foregoing, the Moody's Volatility Factor may mean such other
potential dividend rate increase factor as Moody's advises the Trust in writing
is applicable.
"Municipal Bonds" means "Municipal Bonds" as defined in the Trust's
Registration Statement on Form N-2 (File No. 333-81995) relating to the AMPS on
file with the Securities and Exchange Commission, as such Registration Statement
may be amended from time to time, as well as short-term municipal obligations
and Inverse Floaters.
"Municipal Index" has the meaning set forth in paragraph 8(a) of this
Certificate of Designation.
"1940 Act" means the Investment Company Act of 1940, as amended from time
to time.
"1940 Act AMPS Asset Coverage" means asset coverage, as defined in section
18(h) of the 1940 Act, of at least 200% with respect to all outstanding senior
securities of the Trust which are shares of beneficial interest, including all
outstanding AMPS and Other AMPS (or such other asset coverage as may in the
future be specified in or under the 1940 Act as the minimum asset coverage for
senior securities which are stock of a closed-end investment company as a
condition of paying dividends on its common stock).
"1940 Act Cure Date," with respect to the failure by the Trust to maintain
the 1940 Act AMPS Asset Coverage (as required by paragraph 6 of this Certificate
of Designation) as of the last Business Day of each month, means the last
Business Day of the following month.
"Non-Call Period" has the meaning set forth under the definition of
"Specific Redemption Provisions."
"Non-Payment Period" means, with respect to the AMPS, any period
commencing on and including the day on which the Trust shall fail to (i)
declare, prior to the close of business on the second Business Day preceding any
Dividend Payment Date, for payment on or (to the extent permitted by paragraph
2(c)(i) of this Certificate of Designation) within three Business Days
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<PAGE> 14
after such Dividend Payment Date to the Holders as of 12:00 noon, New York City
time, on the Business Day preceding such Dividend Payment Date, the full amount
of any dividend on AMPS payable on such Dividend Payment Date or (ii) deposit,
irrevocably in trust, in same-day funds, with the Auction Agent by 12:00 noon,
New York City time, (A) on such Dividend Payment Date the full amount of any
cash dividend on such shares payable (if declared) on such Dividend Payment Date
or (B) on any redemption date for any AMPS called for redemption, the Mandatory
Redemption Price per share of such AMPS or, in the case of an optional
redemption, the Optional Redemption Price per share, and ending on and including
the Business Day on which, by 12:00 noon, New York City time, all unpaid cash
dividends and unpaid redemption prices shall have been so deposited or shall
have otherwise been made available to Holders in same-day funds; provided that,
a Non-Payment Period shall not end unless the Trust shall have given at least
five days' but no more than 30 days' written notice of such deposit or
availability to the Auction Agent, all Existing Holders (at their addresses
appearing in the Share Books) and the Securities Depository. Notwithstanding the
foregoing, the failure by the Trust to deposit funds as provided for by clauses
(ii)(A) or (ii)(B) above within three Business Days after any Dividend Payment
Date or redemption date, as the case may be, in each case to the extent
contemplated by paragraph 2(c)(i) of this Certificate of Designation, shall not
constitute a "Non-Payment Period."
"Non-Payment Period Rate" means, initially, 200% of the applicable
Reference Rate (or 275% of such rate if the Trust has provided notification to
the Auction Agent prior to the Auction establishing the Applicable Rate for any
dividend pursuant to paragraph 2(f) hereof that net capital gains or other
taxable income will be included in such dividend on AMPS), provided that the
Board of Trustees of the Trust shall have the authority to adjust, modify, alter
or change from time to time the initial Non-Payment Period Rate if the Board of
Trustees of the Trust determines and Moody's and S&P (and any Substitute Rating
Agency in lieu of Moody's or S&P in the event either of such parties shall not
rate the AMPS) advise the Trust in writing that such adjustment, modification,
alteration or change will not adversely affect their then-current ratings on the
AMPS.
"Normal Dividend Payment Date" has the meaning set forth in paragraph
2(b)(i) of this Certificate of Designation.
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<PAGE> 15
"Notice of Redemption" means any notice with respect to the redemption of
AMPS pursuant to paragraph 4 of this Certificate of Designation.
"Notice of Revocation" has the meaning set forth in paragraph 2(c)(iii)
of this Certificate of Designation.
"Notice of Special Dividend Period" has the meaning set forth in paragraph
2(c)(iii) of this Certificate of Designation.
"Optional Redemption Price" means $25,000 per share plus an amount equal
to accumulated but unpaid dividends (whether or not earned or declared) to the
date fixed for redemption and excluding Additional Dividends plus any applicable
redemption premium attributable to the designation of a Premium Call Period.
"Other AMPS" means the auction rate preferred shares of the Trust, other
than the AMPS.
"Outstanding" means, as of any date (i) with respect to AMPS, AMPS
theretofore issued by the Trust except, without duplication, (A) any AMPS
theretofore cancelled or delivered to the Auction Agent for cancellation, or
redeemed by the Trust, or as to which a Notice of Redemption shall have been
given and Deposit Securities shall have been deposited in trust or segregated by
the Trust pursuant to paragraph 4(c) and (B) any AMPS as to which the Trust or
any Affiliate thereof shall be a Beneficial Owner, provided that AMPS held by an
Affiliate shall be deemed outstanding for purposes of calculating the AMPS Basic
Maintenance Amount and (ii) with respect to other Preferred Shares, has the
equivalent meaning.
"Parity Shares" means the AMPS and each other outstanding series of
Preferred Shares the holders of which, together with the holders of the AMPS,
shall be entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in proportion to the
full respective preferential amounts to which they are entitled, without
preference or priority one over the other.
"Person" means and includes an individual, a partnership, a corporation, a
trust, an unincorporated association, a joint venture or other entity or a
government or any agency or political subdivision thereof.
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<PAGE> 16
"Policy" means an insurance policy purchased by the Trust which guarantees
the payment of principal and interest on specified Florida Municipal Bonds or
Municipal Bonds during the period in which such Florida Municipal Bonds or
Municipal Bonds are owned by the Trust; provided, however, that, as long as the
AMPS are rated by Moody's and S&P, the Trust will not obtain any Policy unless
Moody's and S&P advise the Trust in writing that the purchase of such Policy
will not adversely affect their then-current rating on the AMPS.
"Potential Beneficial Owner" means a customer of a Broker-Dealer or a
Broker-Dealer that is not a Beneficial Owner of AMPS but that wishes to purchase
such shares, or that is a Beneficial Owner that wishes to purchase additional
AMPS.
"Potential Holder" means any Broker-Dealer or any such other Person as may
be permitted by the Trust, including any Existing Holder, who may be interested
in acquiring AMPS (or, in the case of an Existing Holder, additional AMPS).
"Preferred Shares" means the preferred shares of beneficial interest, par
value $.10 per share, of the Trust, and includes AMPS and Other AMPS.
"Premium Call Period" has the meaning set forth under the definition of
"Specific Redemption Provisions."
"Pricing Service" means J.J. Kenny or any pricing service designated by
the Board of Trustees of the Trust provided the Trust obtains written assurance
from S&P and Moody's that such designation will not impair the rating then
assigned by S&P and Moody's to the AMPS.
"Quarterly Valuation Date" means the twenty-fifth day of the last month of
each fiscal quarter of the Trust (or, if such day is not a Business Day, the
next succeeding Business Day) in each fiscal year of the Trust, commencing
November 25, 1999.
"Receivables for Florida Municipal Bonds Sold" has the meaning set forth
under the definition of S&P Discount Factor.
"Receivables for Florida Municipal Bonds or Municipal Bonds Sold" has the
meaning set forth under the definition of Moody's Discount Factor.
"Reference Rate" means: (i) with respect to a Dividend Period or a Short
Term Dividend Period having 28 or fewer days, the higher of the applicable "AA"
Composite Commercial Paper Rate and the Taxable Equivalent of the Short-Term
Municipal Bond Rate, (ii) with respect to any
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<PAGE> 17
Short Term Dividend Period having more than 28 but fewer than 183 days, the
applicable "AA" Composite Commercial Paper Rate, (iii) with respect to any Short
Term Dividend Period having 183 or more but fewer than 364 days, the applicable
U.S. Treasury Bill Rate and (iv) with respect to any Long Term Dividend Period,
the applicable U.S. Treasury Note Rate.
"Request for Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii) of this Certificate of Designation.
"Response" has the meaning set forth in paragraph 2(c)(iii) of this
Certificate of Designation.
"Retroactive Taxable Allocation" has the meaning set forth in paragraph
2(e) of this Certificate of Designation.
"Right," with respect to the AMPS, has the meaning set forth in paragraph
2(e) of this Certificate of Designation and, with respect to Other AMPS, has the
equivalent meaning.
"S&P" means Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. or its successors.
"S&P Discount Factor" means, for purposes of determining the Discounted
Value of any Florida Municipal Bond which constitutes an S&P Eligible Asset, the
percentage determined by reference to (a)(i) the rating by S&P, Moody's or Fitch
on such Bond or (ii) in the event the Florida Municipal Bond is insured under a
Policy and the terms of the Policy permit the Trust, at its option, to obtain
other permanent insurance guaranteeing the timely payment of interest on such
Florida Municipal Bond and principal thereof to maturity, the S&P insurance
claims-paying ability rating of the issuer of the Policy or (iii) in the event
the Florida Municipal Bond is insured under an insurance policy which guarantees
the timely payment of interest on such Florida Municipal Bond and principal
thereof to maturity, the S&P insurance claims-paying ability rating of the
issuer of the insurance policy and (b) the S&P Exposure Period, in accordance
with the tables set forth below:
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<PAGE> 18
<TABLE>
<CAPTION>
For Florida Municipal Bonds:
- ----------------------------
Rating Category
---------------------------------------
S&P Exposure Period AAA* AA* A* BBB*
- ------------------- ---------------------------------------
<S> <C> <C> <C> <C>
45 Business Days................. 205% 210% 225% 265%
25 Business Days................. 185 190 205 245
10 Business Days................. 170 175 190 230
7 Business Days................. 165 170 185 225
3 Business Days................. 145 150 165 205
</TABLE>
- -------------------
* S&P rating.
Notwithstanding the foregoing, (i) the S&P Discount Factor for short-term
Florida Municipal Bonds will be 115%, so long as such Florida Municipal Bonds
are rated A-1+ or SP-1+ by S&P and mature or have a demand feature exercisable
in 30 days or less, or 120% so long as such Florida Municipal Bonds are rated
A-1 or SP-1 by S&P and mature or have a demand feature exercisable in 30 days or
less, or 125% if such Florida Municipal Bonds are not rated by S&P but are rated
VMIG-1, P-1 or MIG-1 by Moody's or F-1 + by Fitch; provided, however, such
short-term Florida Municipal Bonds rated by Moody's or Fitch but not rated by
S&P having a demand feature exercisable in 30 days or less must be backed by a
letter of credit, liquidity facility or guarantee from a bank or other financial
institution having a short-term rating of at least A-1+ from S&P; and further
provided that such short-term Florida Municipal Bonds rated by Moody's or Fitch
but not rated by S&P may comprise no more than 50% of short-term Florida
Municipal Bonds that qualify as S&P Eligible Assets, (ii) the S&P Discount
Factor for Receivables for Florida Municipal Bonds Sold that are due in more
than five Business Days from such Valuation Date will be the S&P Discount Factor
applicable to the Florida Municipal Bonds sold, and (iii) no S&P Discount Factor
will be applied to cash or to Receivables for Florida Municipal Bonds Sold if
such receivables are due within five Business Days of such Valuation Date.
"Receivables for Florida Municipal Bonds Sold," for purposes of calculating S&P
Eligible Assets as of any Valuation Date, means the book value of receivables
for Florida Municipal Bonds sold as of or prior to such Valuation Date. The
Trust may adopt S&P Discount Factors for Municipal Bonds other than Florida
Municipal Bonds provided that S&P advises the Trust in writing that such action
will not adversely affect its then current rating on the AMPS. For purposes of
the foregoing, Anticipation Notes rated SP-1 or, if not rated by S&P, rated
VMIG-1 by Moody's or F-1 + by Fitch, which do not mature or have a demand
feature exercisable in 30
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<PAGE> 19
days and which do not have a long-term rating, shall be considered to be
short-term Florida Municipal Bonds.
"S&P Eligible Asset" means cash, Receivables for Florida Municipal Bonds
Sold or a Florida Municipal Bond that (i) is interest bearing and pays interest
at least semi-annually; (ii) is payable with respect to principal and interest
in United States Dollars; (iii) is publicly rated BBB or higher by S&P or,
except in the case of Anticipation Notes that are grant anticipation notes or
bond anticipation notes which must be rated by S&P to be included in S&P
Eligible Assets, if not rated by S&P but rated by Moody's or Fitch, is rated at
least A by Moody's or Fitch (provided that such Moody's-rated or Fitch-rated
Florida Municipal Bonds will be included in S&P Eligible Assets only to the
extent the Market Value of such Florida Municipal Bonds does not exceed 50% of
the aggregate Market Value of the S&P Eligible Assets; and further provided
that, for purposes of determining the S&P Discount Factor applicable to any such
Moody's-rated or Fitch-rated Florida Municipal Bond, such Florida Municipal Bond
will be deemed to have an S&P rating which is one full rating category lower
than its Moody's rating or Fitch rating); (iv) is not subject to a covered call
or covered put option written by the Trust; (v) except for Inverse Floaters, is
not part of a private placement of Florida Municipal Bonds; and (vi) except for
Inverse Floaters, is part of an issue of Florida Municipal Bonds with an
original issue size of at least $10 million or, if of an issue with an original
issue size below $10 million (but in no event below $5 million), is either (a)
issued by an issuer with a total of at least $25 million of securities
outstanding or (b) rated at least A by S&P with all such Florida Municipal Bonds
not constituting more than 20% of the aggregate Market Value of S&P Eligible
Assets. Notwithstanding the foregoing:
(1) Florida Municipal Bonds of any one issuer or guarantor
(excluding bond insurers) will be considered S&P Eligible Assets only to
the extent the Market Value of such Florida Municipal Bonds does not
exceed 10% of the aggregate Market Value of the S&P Eligible Assets,
provided that 2% is added to the applicable S&P Discount Factor for every
1% by which the Market Value of such Florida Municipal Bonds exceeds 5% of
the aggregate Market Value of the S&P Eligible Assets;
(2) Florida Municipal Bonds of any one issue type category (as
described below) will be considered S&P Eligible Assets only to the extent
the Market Value of such
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<PAGE> 20
Bonds does not exceed 25% of the aggregate Market Value of S&P Eligible Assets,
except that Florida Municipal Bonds falling within the utility issue type
category will be broken down into three sub-categories (as described below) and
such Florida Municipal Bonds will be considered S&P Eligible Assets to the
extent the Market Value of such Bonds in each such sub-category does not exceed
25% of the aggregate Market Value of S&P Eligible Assets and the Market Value of
such Bonds in all three sub-categories combined does not exceed 60% of the
aggregate Market Value of S&P Eligible Assets, except that Florida Municipal
Bonds falling within the transportation issue type category will be broken down
into two sub-categories (as described below) and such Florida Municipal Bonds
will be considered S&P Eligible Assets to the extent the Market Value of such
Bonds in both sub-categories combined (as described below) does not exceed 40%
of the aggregate Market Value of S&P Eligible Assets and except that Florida
Municipal Bonds falling within the general obligation issue type category will
be considered S&P Eligible Assets to the extent the Market Value of such Bonds
does not exceed 50% of the aggregate Market Value of S&P Eligible Assets. For
purposes of the issue type category requirement described above, Florida
Municipal Bonds will be classified within one of the following categories:
health care issues, housing issues, educational facilities issues, student loan
issues, transportation issues, industrial development bond issues, utility
issues, general obligation issues, lease obligations, escrowed bonds and other
issues not falling within one of the aforementioned categories. The general
obligation issue type category includes any issuer that is directly or
indirectly guaranteed by the State of Florida or its political subdivisions.
Utility issuers are included in the general obligation issue type category if
the issuer is directly or indirectly guaranteed by the State of Florida or its
political subdivisions. For purposes of the issue type category requirement
described above, Florida Municipal Bonds in the utility issue type category will
be classified within one of the three following sub-categories: (i) electric,
gas and combination issues (if the combination issue includes an electric
issue), (ii) water and sewer utilities and combination issues (if the
combination issue does not include an electric issue), and (iii) irrigation,
resource recovery, solid waste and other utilities, provided that Florida
Municipal Bonds included in this sub-category (iii) must be rated by S&P in
order to be included in S&P Eligible Assets. For purposes of the
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<PAGE> 21
issue type category requirement described above, Florida Municipal Bonds
in the transportation issue type category will be classified within one of
the two following sub-categories: (i) streets and highways, toll roads,
bridges and tunnels, airports and multi-purpose port authorities (multiple
revenue streams generated by toll roads, airports, real estate, bridges),
(ii) mass transit, parking, seaports and others. Exposure to
transportation sub-category (i) in the preceding sentence is limited to
25% of the aggregate Market Value of S&P Eligible Assets, provided,
however, exposure to transportation sub-category (ii) in the preceding
sentence can exceed the 25% limit to the extent that exposure to
transportation sub-category (ii) is reduced, for a total exposure up to
and not exceeding 40% of the aggregate Market Value of S&P Eligible Assets
for the transportation issue type category; and
(3) Florida Municipal Bonds which are escrow bonds or defeased bonds
may compose up to 100% of the aggregate Market Value of S&P Eligible
Assets if such Bonds initially are assigned a rating by S&P in accordance
with S&P's legal defeasance criteria or rerated by S&P as economic
defeased escrow bonds and assigned an AAA rating. Florida Municipal Bonds
may be rated as escrow bonds by another nationally recognized rating
agency or rerated as an escrow bond and assigned the equivalent of an S&P
AAA rating, provided that such equivalent rated Bonds are limited to 50%
of the aggregate Market Value of S&P Eligible Assets and are deemed to
have an AA S&P rating for purposes of determining the S&P Discount Factor
applicable to such Florida Municipal Bonds. The limitations on Florida
Municipal Bonds of any one issuer in clause (1) above are not applicable
to escrow bonds, however, economically defeased bonds that are either
initially rated or rerated by S&P or another nationally recognized rating
agency and assigned the same rating level as the issuer of the Bonds will
remain in its original issue type category set forth in clause (2) above.
Florida Municipal Bonds that are legally defeased and secured by
securities issued or guaranteed by the United States Government are not
required to meet the minimum issuance size requirement set forth above.
The Trust may include Municipal Bonds other than Florida Municipal Bonds
as S&P Eligible Assets pursuant to guidelines and restrictions to be established
by S&P provided that
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<PAGE> 22
S&P advises the Trust in writing that such action will not adversely affect its
then current rating on the AMPS.
"S&P Exposure Period" means the maximum period of time following a
Valuation Date, including the Valuation Date and the AMPS Basic Maintenance Cure
Date, that the Trust has under this Certificate of Designation to cure any
failure to maintain, as of such Valuation Date, the Discounted Value for its
portfolio at least equal to the AMPS Basic Maintenance Amount (as described in
paragraph 7(a) of this Certificate of Designation).
"S&P Hedging Transactions" has the meaning set forth in paragraph 8(a) of
this Certificate of Designation.
"S&P Volatility Factor" means 277% or such other potential dividend rate
increase factor as S&P advises the Trust in writing is applicable.
"Securities Depository" means The Depository Trust Company or any
successor company or other entities elected by the Trust as securities
depository for the AMPS that agrees to follow the procedures required to be
followed by such securities depository in connection with the AMPS.
"Service" means the United States Internal Revenue Service.
"7-Day Dividend Period" means a Dividend Period consisting of seven
days.
"Share Books" means the books maintained by the Auction Agent setting
forth at all times a current list, as determined by the Auction Agent, of
Existing Holders of the AMPS.
"Share Register" means the register of Holders maintained on behalf of the
Trust by the Auction Agent in its capacity as transfer agent and registrar for
the AMPS.
"Short Term Dividend Period" means a Special Dividend Period consisting of
a specified number of days (other than seven), evenly divisible by seven and not
fewer than seven nor more than 364.
"Special Dividend Period" means a Dividend Period consisting of (i) a
specified number of days (other than seven), evenly divisible by seven and not
fewer than seven nor more than 364 or (ii) a specified period of one whole year
or more but not greater than five years (in each case subject to adjustment as
provided in paragraph 2(b)(i)).
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<PAGE> 23
"Specific Redemption Provisions" means, with respect to a Special Dividend
Period either, or any combination of, (i) a period (a "Non-Call Period")
determined by the Board of Trustees of the Trust, after consultation with the
Auction Agent and the Broker-Dealers, during which the AMPS subject to such
Dividend Period shall not be subject to redemption at the option of the Trust
and (ii) a period (a "Premium Call Period"), consisting of a number of whole
years and determined by the Board of Trustees of the Trust, after consultation
with the Auction Agent and the Broker-Dealers, during each year of which the
AMPS subject to such Dividend Period shall be redeemable at the Trust's option
at a price per share equal to $25,000 plus accumulated but unpaid dividends plus
a premium expressed as a percentage of $25,000, as determined by the Board of
Trustees of the Trust after consultation with the Auction Agent and the
Broker-Dealers.
"Subsequent Dividend Period," with respect to AMPS, has the meaning set
forth in paragraph 2(c)(i) of this Certificate of Designation and, with respect
to Other AMPS, has the equivalent meaning.
"Substitute Commercial Paper Dealers" means such Substitute Commercial
Paper Dealer or Dealers as the Trust may from time to time appoint or, in lieu
of any thereof, their respective affiliates or successors.
"Substitute Rating Agency" and "Substitute Rating Agencies" mean a
nationally recognized statistical rating organization or two nationally
recognized statistical rating organizations, respectively, selected by Merrill
Lynch, Pierce, Fenner & Smith Incorporated or its affiliates and successors,
after consultation with the Trust, to act as the substitute rating agency or
substitute rating agencies, as the case may be, to determine the credit ratings
of the AMPS.
"Taxable Equivalent of the Short-Term Municipal Bond Rate" on any date
means 90% of the quotient of (A) the per annum rate expressed on an interest
equivalent basis equal to the Kenny S&P 30-day High Grade Index (the "Kenny
Index") or any successor index, made available for the Business Day immediately
preceding such date but in any event not later than 8:30 A.M., New York City
time, on such date by Kenny Information Systems Inc. or any successor thereto,
based upon 30-day yield evaluations at par of bonds the interest on which is
excludable for regular Federal income tax purposes under the Code of "high
grade" component issuers selected by Kenny Information Systems Inc. or any such
successor from time to time in
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<PAGE> 24
its discretion, which component issuers shall include, without limitation,
issuers of general obligation bonds but shall exclude any bonds the interest on
which constitutes an item of tax preference under Section 57(a)(5) of the Code,
or successor provisions, for purposes of the "alternative minimum tax," divided
by (B) 1.00 minus the Marginal Tax Rate (expressed as a decimal); provided,
however, that if the Kenny Index is not made so available by 8:30 A.M., New York
City time, on such date by Kenny Information Systems Inc. or any successor, the
Taxable Equivalent of the Short-Term Municipal Bond Rate shall mean the quotient
of (A) the per annum rate expressed on an interest equivalent basis equal to the
most recent Kenny Index so made available for any preceding Business Day,
divided by (B) 1.00 minus the Marginal Tax Rate (expressed as a decimal). The
Trust may not utilize a successor index to the Kenny Index unless Moody's and
S&P provide the Trust with written confirmation that the use of such successor
index will not adversely affect the then-current respective Moody's and S&P
ratings of the AMPS.
"Treasury Bonds" has the meaning set forth in paragraph 8(a) of this
Certificate of Designation.
"Trust" means MuniHoldings Florida Insured Fund V, a Massachusetts
business trust.
"U.S. Treasury Bill Rate" on any date means (i) the Interest Equivalent of
the rate on the actively traded Treasury Bill with a maturity most nearly
comparable to the length of the related Dividend Period, as such rate is made
available on a discount basis or otherwise by the Federal Reserve Bank of New
York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report
for such Business Day, or (ii) if such yield as so calculated is not available,
the Alternate Treasury Bill Rate on such date. "Alternate Treasury Bill Rate" on
any date means the Interest Equivalent of the yield as calculated by reference
to the arithmetic average of the bid price quotations of the actively traded
Treasury Bill with a maturity most nearly comparable to the length of the
related Dividend Period, as determined by bid price quotations as of any time on
the Business Day immediately preceding such date, obtained from at least three
recognized primary U.S. Government securities dealers selected by the Auction
Agent.
"U.S. Treasury Note Rate" on any date means (i) the yield as calculated by
reference to the bid price quotation of the actively traded, current coupon
Treasury Note with a maturity most nearly comparable to the length of the
related Dividend Period, as such bid price quotation is
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<PAGE> 25
published on the Business Day immediately preceding such date by the Federal
Reserve Bank of New York in its Composite 3:30 P.M. Quotations for U.S.
Government Securities report for such Business Day, or (ii) if such yield as so
calculated is not available, the Alternate Treasury Note Rate on such date.
"Alternate Treasury Note Rate" on any date means the yield as calculated by
reference to the arithmetic average of the bid price quotations of the actively
traded, current coupon Treasury Note with a maturity most nearly comparable to
the length of the related Dividend Period, as determined by the bid price
quotations as of any time on the Business Day immediately preceding such date,
obtained from at least three recognized primary U.S. Government securities
dealers selected by the Auction Agent.
"Valuation Date" means, for purposes of determining whether the Trust is
maintaining the AMPS Basic Maintenance Amount, each Business Day commencing with
the Date of Original Issue.
"Variation Margin" means, in connection with an outstanding futures
contract owned or sold by the Trust, the amount of cash or securities paid to or
received from a broker (subsequent to the Initial Margin payment) from time to
time as the price of such futures contract fluctuates.
(b) The foregoing definitions of Accountant's Confirmation, AMPS Basic
Maintenance Amount, AMPS Basic Maintenance Cure Date, AMPS Basic Maintenance
Report, Deposit Securities, Discounted Value, Independent Accountant, Initial
Margin, Inverse Floaters, Market Value, Maximum Potential Additional Dividend
Liability, Moody's Discount Factor, Moody's Eligible Asset, Moody's Exposure
Period, Moody's Hedging Transactions, Moody's Volatility Factor, S&P Discount
Factor, S&P Eligible Asset, S&P Exposure Period, S&P Hedging Transactions, S&P
Volatility Factor, Valuation Date and Variation Margin have been determined by
the Board of Trustees of the Trust in order to obtain a "aaa" rating from
Moody's and a AAA rating from S&P on the AMPS on their Date of Original Issue;
and the Board of Trustees of the Trust shall have the authority, without
shareholder approval, to amend, alter or repeal from time to time the foregoing
definitions and the restrictions and guidelines set forth thereunder if Moody's
and S&P or any Substitute Rating Agency advises the Trust in writing that such
amendment, alteration or repeal will not adversely affect their then current
ratings on the AMPS.
2. Dividends. (a) The Holders shall be entitled to receive, when, as and
if declared by the Board of Trustees of the Trust, out of funds legally
available therefor, cumulative dividends
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<PAGE> 26
each consisting of (i) cash at the Applicable Rate, (ii) a Right to receive cash
as set forth in paragraph 2(e) below, and (iii) any additional amounts as set
forth in paragraph 2(f) below, and no more, payable on the respective dates set
forth below. Dividends on the AMPS so declared and payable shall be paid (i) in
preference to and in priority over any dividends declared and payable on the
Common Shares, and (ii) to the extent permitted under the Code and to the extent
available, out of net tax-exempt income earned on the Trust's investments. To
the extent permitted under the Code, dividends on AMPS will be designated as
exempt-interest dividends. For the purposes of this section, the term "net
tax-exempt income" shall exclude capital gains of the Trust.
(b) (i) Cash dividends on AMPS shall accumulate from the Date of Original
Issue and shall be payable, when, as and if declared by the Board of Trustees,
out of funds legally available therefor, commencing on the Initial Dividend
Payment Date with respect to the AMPS. Following the Initial Dividend Payment
Date for the AMPS, dividends on the AMPS will be payable, at the option of the
Trust, either (i) with respect to any 7-Day Dividend Period and any Short Term
Dividend Period of 35 or fewer days, on the day next succeeding the last day
thereof or (ii) with respect to any Short Term Dividend Period of more than 35
days and with respect to any Long Term Dividend Period, monthly on the first
Business Day of each calendar month during such Short Term Dividend Period or
Long Term Dividend Period and on the day next succeeding the last day thereof
(each such date referred to in clause (i) or (ii) being herein referred to as a
"Normal Dividend Payment Date"), except that if such Normal Dividend Payment
Date is not a Business Day, then the Dividend Payment Date shall be the first
Business Day next succeeding such Normal Dividend Payment Date. Although any
particular Dividend Payment Date may not occur on the originally scheduled date
because of the exceptions discussed above, the next succeeding Dividend Payment
Date, subject to such exceptions, will occur on the next following originally
scheduled date. If for any reason a Dividend Payment Date cannot be fixed as
described above, then the Board of Trustees shall fix the Dividend Payment Date.
The Board of Trustees by resolution prior to authorization of a dividend by the
Board of Trustees may change a Dividend Payment Date if such change does not
adversely affect the contract rights of the Holders of AMPS set forth in the
Declaration. The Initial Dividend Period, 7-Day Dividend Periods and Special
Dividend Periods are hereinafter
26
<PAGE> 27
sometimes referred to as Dividend Periods. Each dividend payment date determined
as provided above is hereinafter referred to as a "Dividend Payment Date."
(ii) Each dividend shall be paid to the Holders as they appear in the
Share Register as of 12:00 noon, New York City time, on the Business Day
preceding the Dividend Payment Date. Dividends in arrears for any past Dividend
Period may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to the Holders as they appear on the Share Register on a
date, not exceeding 15 days prior to the payment date therefor, as may be fixed
by the Board of Trustees of the Trust.
(c) (i) During the period from and including the Date of Original Issue to
but excluding the Initial Dividend Payment Date (the "Initial Dividend Period"),
the Applicable Rate shall be the Initial Dividend Rate. Commencing on the
Initial Dividend Payment Date, the Applicable Rate for each subsequent dividend
period (hereinafter referred to as a "Subsequent Dividend Period"), which
Subsequent Dividend Period shall commence on and include a Dividend Payment Date
and shall end on and include the calendar day prior to the next Dividend Payment
Date (or last Dividend Payment Date in a Dividend Period if there is more than
one Dividend Payment Date), shall be equal to the rate per annum that results
from implementation of the Auction Procedures.
The Applicable Rate for each Dividend Period commencing during a
Non-Payment Period shall be equal to the Non-Payment Period Rate; and each
Dividend Period, commencing after the first day of, and during, a Non-Payment
Period shall be a 7-Day Dividend Period. Except in the case of the willful
failure of the Trust to pay a dividend on a Dividend Payment Date or to redeem
any AMPS on the date set for such redemption, any amount of any dividend due on
any Dividend Payment Date (if, prior to the close of business on the second
Business Day preceding such Dividend Payment Date, the Trust has declared such
dividend payable on such Dividend Payment Date to the Holders of such AMPS as of
12:00 noon, New York City time, on the Business Day preceding such Dividend
Payment Date) or redemption price with respect to any AMPS not paid to such
Holders when due may be paid to such Holders in the same form of funds by 12:00
noon, New York City time, on any of the first three Business Days after such
Dividend Payment Date or due date, as the case may be, provided that, such
amount is accompanied by a late charge calculated for such period of non-payment
at the Non-Payment
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<PAGE> 28
Period Rate applied to the amount of such non-payment based on the actual number
of days comprising such period divided by 365. In the case of a willful failure
of the Trust to pay a dividend on a Dividend Payment Date or to redeem any AMPS
on the date set for such redemption, the preceding sentence shall not apply and
the Applicable Rate for the Dividend Period commencing during the Non-Payment
Period resulting from such failure shall be the Non-Payment Period Rate. For the
purposes of the foregoing, payment to a person in same-day funds on any Business
Day at any time shall be considered equivalent to payment to such person in New
York Clearing House (next-day) funds at the same time on the preceding Business
Day, and any payment made after 12:00 noon, New York City time, on any Business
Day shall be considered to have been made instead in the same form of funds and
to the same person before 12:00 noon, New York City time, on the next Business
Day.
(ii) The amount of cash dividends per share of AMPS payable (if declared)
on the Initial Dividend Payment Date, each 7-Day Dividend Period and each
Dividend Payment Date of each Short Term Dividend Period shall be computed by
multiplying the Applicable Rate for such Dividend Period by a fraction, the
numerator of which will be the number of days in such Dividend Period or part
thereof that such share was outstanding and the denominator of which will be
365, multiplying the amount so obtained by $25,000, and rounding the amount so
obtained to the nearest cent. During any Long Term Dividend Period, the amount
of cash dividends per share of AMPS payable (if declared) on any Dividend
Payment Date shall be computed by multiplying the Applicable Rate for such
Dividend Period by a fraction, the numerator of which will be such number of
days in such part of such Dividend Period that such share was outstanding and
for which dividends are payable on such Dividend Payment Date and the
denominator of which will be 360, multiplying the amount so obtained by $25,000,
and rounding the amount so obtained to the nearest cent.
(iii) With respect to each Dividend Period that is a Special Dividend
Period, the Trust may, at its sole option and to the extent permitted by law, by
telephonic and written notice (a "Request for Special Dividend Period") to the
Auction Agent and to each Broker-Dealer, request that the next succeeding
Dividend Period for the AMPS be a number of days (other than seven), evenly
divisible by seven, and not fewer than seven nor more than 364 in the case of a
Short Term Dividend Period or one whole year or more but not greater than five
years in the case of a Long Term Dividend Period, specified in such notice,
provided that the Trust may not give a
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<PAGE> 29
Request for Special Dividend Period of greater than 28 days (and any such
request shall be null and void) unless, for any Auction occurring after the
initial Auction, Sufficient Clearing Bids were made in the last occurring
Auction and unless full cumulative dividends, any amounts due with respect to
redemptions, and any Additional Dividends payable prior to such date have been
paid in full. Such Request for Special Dividend Period, in the case of a Short
Term Dividend Period, shall be given on or prior to the second Business Day but
not more than seven Business Days prior to an Auction Date for the AMPS and, in
the case of a Long Term Dividend Period, shall be given on or prior to the
second Business Day but not more than 28 days prior to an Auction Date for the
AMPS. Upon receiving such Request for Special Dividend Period, the
Broker-Dealer(s) shall jointly determine whether, given the factors set forth
below, it is advisable that the Trust issue a Notice of Special Dividend Period
for the AMPS as contemplated by such Request for Special Dividend Period and the
Optional Redemption Price of the AMPS during such Special Dividend Period and
the Specific Redemption Provisions and shall give the Trust and the Auction
Agent written notice (a "Response") of such determination by no later than the
second Business Day prior to such Auction Date. In making such determination the
Broker-Dealer(s) will consider (1) existing short-term and long-term market
rates and indices of such short-term and long-term rates, (2) existing market
supply and demand for short-term and long-term securities, (3) existing yield
curves for short-term and long-term securities comparable to the AMPS, (4)
industry and financial conditions which may affect the AMPS, (5) the investment
objective of the Trust, and (6) the Dividend Periods and dividend rates at which
current and potential beneficial holders of the AMPS would remain or become
beneficial holders. If the Broker-Dealer(s) shall not give the Trust and the
Auction Agent a Response by such second Business Day or if the Response states
that given the factors set forth above it is not advisable that the Trust give a
Notice of Special Dividend Period for the AMPS, the Trust may not give a Notice
of Special Dividend Period in respect of such Request for Special Dividend
Period. In the event the Response indicates that it is advisable that the Trust
give a Notice of Special Dividend Period for the AMPS, the Trust may by no later
than the second Business Day prior to such Auction Date give a notice (a "Notice
of Special Dividend Period") to the Auction Agent, the Securities Depository and
each Broker-Dealer which notice will specify (i) the duration of the Special
Dividend Period, (ii) the Optional Redemption Price as specified in the related
Response and (iii) the Specific Redemption Provisions, if any, as specified in
the related
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<PAGE> 30
Response. The Trust also shall provide a copy of such Notice of Special Dividend
Period to Moody's and S&P. The Trust shall not give a Notice of Special Dividend
Period and, if the Trust has given a Notice of Special Dividend Period, the
Trust is required to give telephonic and written notice of its revocation (a
"Notice of Revocation") to the Auction Agent, each Broker-Dealer, and the
Securities Depository on or prior to the Business Day prior to the relevant
Auction Date if (x) either the 1940 Act AMPS Asset Coverage is not satisfied or
the Trust shall fail to maintain S&P Eligible Assets and Moody's Eligible Assets
each with an aggregate Discounted Value at least equal to the AMPS Basic
Maintenance Amount, in each case on each of the two Valuation Dates immediately
preceding the Business Day prior to the relevant Auction Date on an actual basis
and on a pro forma basis giving effect to the proposed Special Dividend Period
(using as a pro forma dividend rate with respect to such Special Dividend Period
the dividend rate which the Broker-Dealers shall advise the Trust is an
approximately equal rate for securities similar to the AMPS with an equal
dividend period), provided that, in calculating the aggregate Discounted Value
of Moody's Eligible Assets for this purpose, the Moody's Exposure Period shall
be deemed to be one week longer, (y) sufficient funds for the payment of
dividends payable on the immediately succeeding Dividend Payment Date have not
been irrevocably deposited with the Auction Agent by the close of business on
the third Business Day preceding the related Auction Date or (z) the
Broker-Dealer(s) jointly advise the Trust that after consideration of the
factors listed above they have concluded that it is advisable to give a Notice
of Revocation. The Trust also shall provide a copy of such Notice of Revocation
to Moody's and S&P. If the Trust is prohibited from giving a Notice of Special
Dividend Period as a result of any of the factors enumerated in clause (x), (y)
or (z) above or if the Trust gives a Notice of Revocation with respect to a
Notice of Special Dividend Period for the AMPS, the next succeeding Dividend
Period will be a 7-Day Dividend Period. In addition, in the event Sufficient
Clearing Bids are not made in the applicable Auction or such Auction is not held
for any reason, such next succeeding Dividend Period will be a 7-Day Dividend
Period and the Trust may not again give a Notice of Special Dividend Period for
the AMPS (and any such attempted notice shall be null and void) until Sufficient
Clearing Bids have been made in an Auction with respect to a 7-Day Dividend
Period.
(d) (i) Holders shall not be entitled to any dividends, whether payable in
cash, property or shares, in excess of full cumulative dividends and applicable
late charges, as herein provided,
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<PAGE> 31
on the AMPS (except for Additional Dividends as provided in paragraph 2(e)
hereof and additional payments as provided in paragraph 2(f) hereof). Except for
the late charge payable pursuant to paragraph 2(c)(i) hereof, no interest, or
sum of money in lieu of interest, shall be payable in respect of any dividend
payment on the AMPS that may be in arrears.
(ii) For so long as any share of AMPS is Outstanding, the Trust shall not
declare, pay or set apart for payment any dividend or other distribution (other
than a dividend or distribution paid in shares of, or options, warrants or
rights to subscribe for or purchase, Common Shares or other shares of beneficial
interest, if any, ranking junior to the AMPS as to dividends or upon
liquidation) in respect of the Common Shares or any other shares of the Trust
ranking junior to or on a parity with the AMPS as to dividends or upon
liquidation, or call for redemption, redeem, purchase or otherwise acquire for
consideration any shares of the Common Shares or any other such junior shares of
beneficial interest (except by conversion into or exchange for shares of the
Trust ranking junior to the AMPS as to dividends and upon liquidation) or any
other such Parity Shares (except by conversion into or exchange for shares of
the Trust ranking junior to or on a parity with the AMPS as to dividends and
upon liquidation), unless (A) immediately after such transaction, the Trust
shall have S&P Eligible Assets and Moody's Eligible Assets each with an
aggregate Discounted Value equal to or greater than the AMPS Basic Maintenance
Amount and the Trust shall maintain the 1940 Act AMPS Asset Coverage, (B) full
cumulative dividends on AMPS and shares of Other AMPS due on or prior to the
date of the transaction have been declared and paid or shall have been declared
and sufficient funds for the payment thereof deposited with the Auction Agent,
(C) any Additional Dividend required to be paid under paragraph 2(e) below on or
before the date of such declaration or payment has been paid and (D) the Trust
has redeemed the full number of AMPS required to be redeemed by any provision
for mandatory redemption contained herein.
(e) Each dividend shall consist of (i) cash at the Applicable Rate, (ii)
an uncertificated right (a "Right") to receive an Additional Dividend (as
defined below), and (iii) any additional amounts as set forth in paragraph 2(f)
below. Each Right shall thereafter be independent of the AMPS on which the
dividend was paid. The Trust shall cause to be maintained a record of each Right
received by the respective Holders. A Right may not be transferred other than by
operation of law. If the Trust retroactively allocates any net capital gains or
other income subject to regular Federal income taxes to AMPS without having
given advance notice thereof to the
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<PAGE> 32
Auction Agent as described in paragraph 2(f) hereof solely by reason of
the fact that such allocation is made as a result of the redemption of all or a
portion of the outstanding AMPS or the liquidation of the Trust (the amount of
such allocation referred to herein as a "Retroactive Taxable Allocation"), the
Trust will, within 90 days (and generally within 60 days) after the end of the
Trust's fiscal year for which a Retroactive Taxable Allocation is made, provide
notice thereof to the Auction Agent and to each holder of a Right applicable to
such AMPS (initially Cede & Co. as nominee of The Depository Trust Company)
during such fiscal year at such holder's address as the same appears or last
appeared on the Share Books of the Trust. The Trust will, within 30 days after
such notice is given to the Auction Agent, pay to the Auction Agent (who will
then distribute to such holders of Rights), out of funds legally available
therefor, an amount equal to the aggregate Additional Dividend with respect to
all Retroactive Taxable Allocations made to such holders during the fiscal year
in question.
An "Additional Dividend" means payment to a present or former holder of
AMPS of an amount which, when taken together with the aggregate amount of
Retroactive Taxable Allocations made to such holder with respect to the fiscal
year in question, would cause such holder's dividends in dollars (after Federal
and Florida income tax consequences) from the aggregate of both the Retroactive
Taxable Allocations and the Additional Dividend to be equal to the dollar amount
of the dividends which would have been received by such holder if the amount of
the aggregate Retroactive Taxable Allocations would have been excludable from
the gross income of such holder. Such Additional Dividend shall be calculated
(i) without consideration being given to the time value of money; (ii) assuming
that no holder of AMPS is subject to the Federal alternative minimum tax with
respect to dividends received from the Trust; and (iii) assuming that each
Retroactive Taxable Allocation would be taxable in the hands of each holder of
AMPS at the greater of: (x) the maximum marginal regular Federal individual
income tax rate applicable to ordinary income or capital gains depending on the
taxable character of the distribution (including any surtax); or (y) the maximum
combined marginal regular Federal and Florida corporate income tax rate
applicable to ordinary income or capital gains depending on the taxable
character of the distribution (taking into account in both (x) and (y) the
Federal income tax deductibility of state taxes paid or incurred but not any
phase out of, or provision limiting, personal exemptions, itemized deductions,
or the benefit of lower tax brackets and
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<PAGE> 33
assuming the taxability of Federally tax-exempt dividends for corporations for
Florida income tax purposes).
(f) Except as provided below, whenever the Trust intends to include any
net capital gains or other income subject to regular Federal income taxes in any
dividend on AMPS, the Trust will notify the Auction Agent of the amount to be so
xincluded at least five Business Days prior to the Auction Date on which the
Applicable Rate for such dividend is to be established. The Trust may also
include such income in a dividend on shares of AMPS without giving advance
notice thereof if it increases the dividend by an additional amount calculated
as if such income was a Retroactive Taxable Allocation and the additional amount
was an Additional Dividend, provided that the Trust will notify the Auction
Agent of the additional amounts to be included in such dividend at least five
Business Days prior to the applicable Dividend Payment Date.
(g) No fractional AMPS shall be issued.
3. Liquidation Rights. Upon any liquidation, dissolution or winding up of
the Trust, whether voluntary or involuntary, the Holders shall be entitled to
receive, out of the assets of the Trust available for distribution to
shareholders, before any distribution or payment is made upon any Common Shares
or any other shares of beneficial interest ranking junior in right of payment
upon liquidation to the AMPS, the sum of $25,000 per share plus accumulated but
unpaid dividends (whether or not earned or declared) thereon to the date of
distribution, and after such payment the Holders will be entitled to no other
payments other than Additional Dividends as provided in paragraph 2(e) hereof.
If upon any liquidation, dissolution or winding up of the Trust, the amounts
payable with respect to the AMPS and any other Outstanding class or series of
Preferred Shares of the Trust ranking on a parity with the AMPS as to payment
upon liquidation are not paid in full, the Holders and the holders of such other
class or series will share ratably in any such distribution of assets in
proportion to the respective preferential amounts to which they are entitled.
After payment of the full amount of the liquidating distribution to which they
are entitled, the Holders will not be entitled to any further participation in
any distribution of assets by the Trust except for any Additional Dividends. A
consolidation, merger or statutory share exchange of the Trust with or into any
other corporation or entity or a sale, whether for cash, shares of stock,
securities or properties, of all or substantially all or any part of the assets
of
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<PAGE> 34
the Trust shall not be deemed or construed to be a liquidation, dissolution
or winding up of the Trust.
4. Redemption. (a) Shares of AMPS shall be redeemable by the Trust as
provided below:
(i) To the extent permitted under the 1940 Act and Massachusetts
law, upon giving a Notice of Redemption, the Trust at its option may
redeem AMPS, in whole or in part, out of funds legally available therefor,
at the Optional Redemption Price per share, on any Dividend Payment Date;
provided that no share of AMPS may be redeemed at the option of the Trust
during (A) the Initial Dividend Period with respect to such share or (B) a
Non-Call Period to which such share is subject. In addition, holders of
AMPS which are redeemed shall be entitled to receive Additional Dividends
to the extent provided herein. The Trust may not give a Notice of
Redemption relating to an optional redemption as described in this
paragraph 4(a)(i) unless, at the time of giving such Notice of Redemption,
the Trust has available Deposit Securities with maturity or tender dates
not later than the day preceding the applicable redemption date and having
a value not less than the amount due to Holders by reason of the
redemption of their AMPS on such redemption date.
(ii) The Trust shall redeem, out of funds legally available
therefor, at the Mandatory Redemption Price per share, AMPS to the extent
permitted under the 1940 Act, on a date fixed by the Board of Trustees, if
the Trust fails to maintain S&P Eligible Assets and Moody's Eligible
Assets each with an aggregate Discounted Value equal to or greater than
the AMPS Basic Maintenance Amount as provided in paragraph 7(a) or to
satisfy the 1940 Act AMPS Asset Coverage as provided in paragraph 6 and
such failure is not cured on or before the AMPS Basic Maintenance Cure
Date or the 1940 Act Cure Date (herein collectively referred to as a "Cure
Date"), as the case may be. In addition, holders of AMPS so redeemed shall
be entitled to receive Additional Dividends to the extent provided herein.
The number of AMPS to be redeemed shall be equal to the lesser of (i) the
minimum number of AMPS the redemption of which, if deemed to have occurred
immediately prior to the opening of business on the Cure Date, together
with all shares of other Preferred Shares subject to redemption or
retirement, would result in the
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<PAGE> 35
Trust having S&P Eligible Assets and Moody's Eligible Assets each with an
aggregate Discounted Value equal to or greater than the AMPS Basic
Maintenance Amount or satisfaction of the 1940 Act AMPS Asset Coverage, as
the case may be, on such Cure Date (provided that, if there is no such
minimum number of AMPS and of other Preferred Shares the redemption of
which would have such result, all AMPS and other Preferred Shares then
Outstanding shall be redeemed), and (ii) the maximum number of AMPS,
together with all other Preferred Shares subject to redemption or
retirement, that can be redeemed out of funds expected to be legally
available therefor on such redemption date. In determining the number of
AMPS required to be redeemed in accordance with the foregoing, the Trust
shall allocate the number required to be redeemed which would result in
the Trust having S&P Eligible Assets and Moody's Eligible Assets each with
an aggregate Discounted Value equal to or greater than the AMPS Basic
Maintenance Amount or satisfaction of the 1940 Act AMPS Asset Coverage, as
the case may be, pro rata among AMPS of all series, Other AMPS and other
Preferred Shares subject to redemption pursuant to provisions similar to
those contained in this paragraph 4(a)(ii); provided that, AMPS which may
not be redeemed at the option of the Trust due to the designation of a
Non-Call Period applicable to such shares (A) will be subject to mandatory
redemption only to the extent that other shares are not available to
satisfy the number of shares required to be redeemed and (B) will be
selected for redemption in an ascending order of outstanding number of
days in the Non-Call Period (with shares with the lowest number of days to
be redeemed first) and by lot in the event of shares having an equal
number of days in such Non-Call Period. The Trust shall effect such
redemption on a Business Day which is not later than 35 days after such
Cure Date, except that if the Trust does not have funds legally available
for the redemption of all of the required number of AMPS and other
Preferred Shares which are subject to mandatory redemption or the Trust
otherwise is unable to effect such redemption on or prior to 35 days after
such Cure Date, the Trust shall redeem those AMPS which it is unable to
redeem on the earliest practicable date on which it is able to effect such
redemption out of funds legally available therefor.
(b) Notwithstanding any other provision of this paragraph 4, no AMPS may
be redeemed pursuant to paragraph 4(a)(i) of this Certificate of Designation (i)
unless all dividends in arrears
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on all remaining outstanding Parity Shares shall have been or are being
contemporaneously paid or declared and set apart for payment and (ii) if
redemption thereof would result in the Trust's failure to maintain Moody's
Eligible Assets or S&P Eligible Assets with an aggregate Discounted Value equal
to or greater than the AMPS Basic Maintenance Amount. In the event that less
than all the outstanding shares of a series of AMPS are to be redeemed and there
is more than one Holder, the shares of AMPS to be redeemed shall be selected by
lot or such other method as the Trust shall deem fair and equitable.
(c) Whenever AMPS are to be redeemed, the Trust, not less than 17 nor more
than 60 days prior to the date fixed for redemption, shall mail a notice
("Notice of Redemption") by first-class mail, postage prepaid, to each Holder of
AMPS to be redeemed and to the Auction Agent. The Trust shall cause the Notice
of Redemption to also be published in the eastern and national editions of The
Wall Street Journal. The Notice of Redemption shall set forth (i) the redemption
date, (ii) the amount of the redemption price, (iii) the aggregate number of
AMPS to be redeemed, (iv) the place or places where AMPS are to be surrendered
for payment of the redemption price, (v) a statement that dividends on the
shares to be redeemed shall cease to accumulate on such redemption date (except
that holders may be entitled to Additional Dividends) and (vi) the provision of
this Certificate of Designation pursuant to which such shares are being
redeemed. No defect in the Notice of Redemption or in the mailing or publication
thereof shall affect the validity of the redemption proceedings, except as
required by applicable law.
If the Notice of Redemption shall have been given as aforesaid and,
concurrently or thereafter, the Trust shall have deposited in trust with the
Auction Agent, or segregated in an account at the Trust's custodian bank for the
benefit of the Auction Agent, Deposit Securities (with a right of substitution)
having an aggregate Discounted Value (utilizing in the case of S&P an S&P
Exposure Period of 22 Business Days) equal to the redemption payment for the
AMPS as to which such Notice of Redemption has been given with irrevocable
instructions and authority to pay the redemption price to the Holders of such
shares, then upon the date of such deposit or, if no such deposit is made, then
upon such date fixed for redemption (unless the Trust shall default in making
the redemption payment), all rights of the Holders of such shares as
shareholders of the Trust by reason of the ownership of such shares will cease
and terminate (except their right to receive the redemption price in respect
thereof and any Additional
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<PAGE> 37
Dividends, but without interest), and such shares shall no longer be deemed
outstanding. The Trust shall be entitled to receive, from time to time, from the
Auction Agent the interest, if any, on such Deposit Securities deposited with it
and the Holders of any shares so redeemed shall have no claim to any of such
interest. In case the Holder of any shares so called for redemption shall not
claim the redemption payment for his shares within one year after the date of
redemption, the Auction Agent shall, upon demand, pay over to the Trust such
amount remaining on deposit and the Auction Agent shall thereupon be relieved of
all responsibility to the Holder of such shares called for redemption and such
Holder thereafter shall look only to the Trust for the redemption payment.
5. Voting Rights. (a) General. Except as otherwise provided in the
Declaration or By-Laws, each Holder of AMPS shall be entitled to one vote for
each share held on each matter submitted to a vote of shareholders of the Trust,
and the holders of outstanding Preferred Shares, including AMPS, and of Common
Shares vote together as a single class; provided that, at any meeting of the
shareholders of the Trust held for the election of trustees, the holders of
outstanding Preferred Shares, including AMPS, shall be entitled, as a class, to
the exclusion of the holders of all other securities and classes of shares of
beneficial interest of the Trust, to elect two trustees of the Trust. Subject to
paragraph 5(b) hereof, the holders of outstanding shares of beneficial interest
of the Trust, including the holders of outstanding Preferred Shares, including
AMPS, voting as a single class, shall elect the balance of the trustees.
(b) Right to Elect Majority of Board of Trustees. During any period in
which any one or more of the conditions described below shall exist (such period
being referred to herein as a "Voting Period"), the number of trustees
constituting the Board of Trustees shall be automatically increased by the
smallest number that, when added to the two trustees elected exclusively by the
holders of Preferred Shares, would constitute a majority of the Board of
Trustees as so increased by such smallest number; and the holders of Preferred
Shares shall be entitled, voting separately as one class (to the exclusion of
the holders of all other securities and classes of shares of beneficial interest
of the Trust), to elect such smallest number of additional trustees, together
with the two trustees that such holders are in any event entitled to elect. A
Voting Period shall commence:
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(i) if at any time accumulated dividends (whether or not earned or
declared, and whether or not funds are then legally available in an amount
sufficient therefor) on the outstanding AMPS equal to at least two full
years' dividends shall be due and unpaid and sufficient cash or specified
securities shall not have been deposited with the Auction Agent for the
payment of such accumulated dividends; or
(ii) if at any time holders of any other Preferred Shares are
entitled to elect a majority of the trustees of the Trust under the 1940
Act.
Upon the termination of a Voting Period, the voting rights described in
this paragraph 5(b) shall cease, subject always, however, to the reverting of
such voting rights in the Holders upon the further occurrence of any of the
events described in this paragraph 5(b).
(c) Right to Vote with Respect to Certain Other Matters. So long as any
AMPS are outstanding, the Trust shall not, without the affirmative vote of the
holders of a majority of the Preferred Shares Outstanding at the time, voting
separately as one class: (i) authorize, create or issue any class or series of
shares ranking prior to the AMPS or any other series of Preferred Shares with
respect to payment of dividends or the distribution of assets on liquidation, or
(ii) amend, alter or repeal the provisions of the Declaration, whether by
merger, consolidation or otherwise, so as to adversely affect any of the
contract rights expressly set forth in the Declaration of holders of AMPS or any
other Preferred Shares. To the extent permitted under the 1940 Act, in the event
shares of more than one series of AMPS are outstanding, the Trust shall not
approve any of the actions set forth in clause (i) or (ii) which adversely
affects the contract rights expressly set forth in the Declaration of a Holder
of shares of a series of AMPS differently than those of a Holder of shares of
any other series of AMPS without the affirmative vote of the holders of at least
a majority of the AMPS of each series adversely affected and outstanding at such
time (each such adversely affected series voting separately as a class). The
Trust shall notify Moody's and S&P ten Business Days prior to any such vote
described in clause (i) or (ii). Unless a higher percentage is provided for
under the Declaration, the affirmative vote of the holders of a majority of the
outstanding Preferred Shares, including AMPS, voting together as a single class,
will be required to approve any plan of reorganization (including bankruptcy
proceedings) adversely affecting such shares or any action requiring a vote of
security holders under Section 13(a) of the 1940 Act. The class vote of holders
of Preferred
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Shares, including AMPS, described above will in each case be in addition to a
separate vote of the requisite percentage of shares of beneficial interest and
Preferred Shares, including AMPS, voting together as a single class necessary to
authorize the action in question.
(d) Voting Procedures.
(i) As soon as practicable after the accrual of any right of the holders
of Preferred Shares to elect additional trustees as described in paragraph 5(b)
above, the Trust shall call a special meeting of such holders and instruct the
Auction Agent to mail a notice of such special meeting to such holders, such
meeting to be held not less than 10 nor more than 20 days after the date of
mailing of such notice. If the Trust fails to send such notice to the Auction
Agent or if the Trust does not call such a special meeting, it may be called by
any such holder on like notice. The record date for determining the holders
entitled to notice of and to vote at such special meeting shall be the close of
business on the fifth Business Day preceding the day on which such notice is
mailed. At any such special meeting and at each meeting held during a Voting
Period, such Holders, voting together as a class (to the exclusion of the
holders of all other securities and classes of shares of beneficial interest of
the Trust), shall be entitled to elect the number of trustees prescribed in
paragraph 5(b) above. At any such meeting or adjournment thereof in the absence
of a quorum, a majority of such holders present in person or by proxy shall have
the power to adjourn the meeting without notice, other than by an announcement
at the meeting, to a date not more than 120 days after the original record date.
(ii) For purposes of determining any rights of the Holders to vote on any
matter or the number of shares required to constitute a quorum, whether such
right is created by this Certificate of Designation, by the other provisions of
the Declaration, by statute or otherwise, a share of AMPS which is not
Outstanding shall not be counted.
(iii) The terms of office of all persons who are trustees of the Trust at
the time of a special meeting of Holders and holders of other Preferred Shares
to elect trustees shall continue, notwithstanding the election at such meeting
by the Holders and such other holders of the number of trustees that they are
entitled to elect, and the persons so elected by the Holders and such other
holders, together with the two incumbent trustees elected by the Holders and
such other holders of Preferred Shares and the remaining incumbent trustees
elected by the holders of the Common Shares and Preferred Shares, shall
constitute the duly elected trustees of the Trust.
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(iv) Simultaneously with the expiration of a Voting Period, the terms of
office of the additional trustees elected by the Holders and holders of other
Preferred Shares pursuant to paragraph 5(b) above shall terminate, the remaining
trustees shall constitute the trustees of the Trust and the voting rights of the
Holders and such other holders to elect additional trustees pursuant to
paragraph 5(b) above shall cease, subject to the provisions of the last sentence
of paragraph 5(b).
(e) Exclusive Remedy. Unless otherwise required by law, the Holders of
AMPS shall not have any rights or preferences other than those specifically set
forth herein. The Holders of AMPS shall have no preemptive rights or rights to
cumulative voting. In the event that the Trust fails to pay any dividends on the
AMPS, the exclusive remedy of the Holders shall be the right to vote for
trustees pursuant to the provisions of this paragraph 5.
(f) Notification to S&P and Moody's. In the event a vote of Holders of
AMPS is required pursuant to the provisions of Section 13(a) of the 1940 Act,
the Trust shall, not later than ten Business Days prior to the date on which
such vote is to be taken, notify S&P and Moody's that such vote is to be taken
and the nature of the action with respect to which such vote is to be taken and,
not later than ten Business Days after the date on which such vote is taken,
notify S&P and Moody's of the result of such vote.
6. 1940 Act AMPS Asset Coverage. The Trust shall maintain, as of the last
Business Day of each month in which any share of AMPS is outstanding, the 1940
Act AMPS Asset Coverage.
7. AMPS Basic Maintenance Amount. (a) The Trust shall maintain, on each
Valuation Date, and shall verify to its satisfaction that it is maintaining on
such Valuation Date, (i) S&P Eligible Assets having an aggregate Discounted
Value equal to or greater than the AMPS Basic Maintenance Amount and (ii)
Moody's Eligible Assets having an aggregate Discounted Value equal to or greater
than the AMPS Basic Maintenance Amount. Upon any failure to maintain the
required Discounted Value, the Trust will use its best efforts to alter the
composition of its portfolio to reattain a Discounted Value at least equal to
the AMPS Basic Maintenance Amount on or prior to the AMPS Basic Maintenance Cure
Date.
(b) On or before 5:00 p.m., New York City time, on the third Business Day
after a Valuation Date on which the Trust fails to satisfy the AMPS Basic
Maintenance Amount, the
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<PAGE> 41
Trust shall complete and deliver to the Auction Agent, and Moody's and S&P, as
the case may be, a complete AMPS Basic Maintenance Report as of the date of such
failure, which will be deemed to have been delivered to the Auction Agent if the
Auction Agent receives a copy or telecopy, telex or other electronic
transcription thereof and on the same day the Trust mails to the Auction Agent
for delivery on the next Business Day the complete AMPS Basic Maintenance
Report. The Trust will deliver an AMPS Basic Maintenance Report to the Auction
Agent and Moody's and S&P, as the case may be, on or before 5:00 p.m., New York
City time, on the third Business Day after a Valuation Date on which the Trust
cures its failure to maintain Moody's Eligible Assets or S&P Eligible Assets, as
the case may be, with an aggregate Discounted Value equal to or greater than the
AMPS Basic Maintenance Amount or on which the Trust fails to maintain Moody's
Eligible Assets or S&P Eligible Assets, as the case may be, with an aggregate
Discounted Value which exceeds the AMPS Basic Maintenance Amount by 5% or more.
The Trust will also deliver an AMPS Basic Maintenance Report to the Auction
Agent, Moody's and S&P as of each Quarterly Valuation Date on or before the
third Business Day after such date. Additionally, on or before 5:00 p.m., New
York City time, on the third Business Day after the first day of a Special
Dividend Period, the Trust will deliver an AMPS Basic Maintenance Report to S&P
and the Auction Agent. The Trust shall also provide Moody's and S&P with an AMPS
Basic Maintenance Report when specifically requested by either Moody's or S&P. A
failure by the Trust to deliver an AMPS Basic Maintenance Report under this
paragraph 7(b) shall be deemed to be delivery of an AMPS Basic Maintenance
Report indicating the Discounted Value for S&P Eligible Assets and Moody's
Eligible Assets of the Trust is less than the AMPS Basic Maintenance Amount, as
of the relevant Valuation Date.
(c) Within ten Business Days after the date of delivery of an AMPS Basic
Maintenance Report in accordance with paragraph 7(b) above relating to a
Quarterly Valuation Date, the Independent Accountant will confirm in writing to
the Auction Agent, S&P and Moody's (i) the mathematical accuracy of the
calculations reflected in such Report (and in any other AMPS Basic Maintenance
Report, randomly selected by the Independent Accountant, that was delivered by
the Trust during the quarter ending on such Quarterly Valuation Date), (ii)
that, in such Report (and in such randomly selected Report), the Trust correctly
determined the assets of the Trust which constitute S&P Eligible Assets or
Moody's Eligible Assets, as the case may be, at such Quarterly Valuation Date in
accordance with this Certificate of Designation, (iii) that, in
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<PAGE> 42
such Report (and in such randomly selected Report), the Trust determined whether
the Trust had, at such Quarterly Valuation Date (and at the Valuation Date
addressed in such randomly selected Report) in accordance with this Certificate
of Designation, S&P Eligible Assets of an aggregate Discounted Value at least
equal to the AMPS Basic Maintenance Amount and Moody's Eligible Assets of an
aggregate Discounted Value at least equal to the AMPS Basic Maintenance Amount,
(iv) with respect to the S&P ratings on Florida Municipal Bonds or Municipal
Bonds, the issuer name, issue size and coupon rate listed in such Report, that
the Independent Accountant has requested that S&P verify such information and
the Independent Accountant shall provide a listing in its letter of any
differences, (v) with respect to the Moody's ratings on Florida Municipal Bonds
or Municipal Bonds, the issuer name, issue size and coupon rate listed in such
Report, that such information has been verified by Moody's (in the event such
information is not verified by Moody's, the Independent Accountant will inquire
of Moody's what such information is, and provide a listing in its letter of any
differences), (vi) with respect to the bid or mean price (or such alternative
permissible factor used in calculating the Market Value) provided by the
custodian of the Trust's assets to the Trust for purposes of valuing securities
in the Trust's portfolio, the Independent Accountant has traced the price used
in such Report to the bid or mean price listed in such Report as provided to the
Trust and verified that such information agrees (in the event such information
does not agree, the Independent Accountant will provide a listing in its letter
of such differences) and (vii) with respect to such confirmation to Moody's,
that the Trust has satisfied the requirements of paragraph 8(b) of this
Certificate of Designation (such confirmation is herein called the "Accountant's
Confirmation").
(d) Within ten Business Days after the date of delivery to the Auction
Agent, S&P and Moody's of an AMPS Basic Maintenance Report in accordance with
paragraph 7(b) above relating to any Valuation Date on which the Trust failed to
maintain S&P Eligible Assets with an aggregate Discounted Value and Moody's
Eligible Assets with an aggregate Discounted Value equal to or greater than the
AMPS Basic Maintenance Amount, and relating to the AMPS Basic Maintenance Cure
Date with respect to such failure, the Independent Accountant will provide to
the Auction Agent, S&P and Moody's an Accountant's Confirmation as to such AMPS
Basic Maintenance Report.
(e) If any Accountant's Confirmation delivered pursuant to subparagraph
(c) or (d) of this paragraph 7 shows that an error was made in the AMPS Basic
Maintenance Report for a
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<PAGE> 43
particular Valuation Date for which such Accountant's Confirmation as required
to be delivered, or shows that a lower aggregate Discounted Value for the
aggregate of all S&P Eligible Assets or Moody's Eligible Assets, as the case may
be, of the Trust was determined by the Independent Accountant, the calculation
or determination made by such Independent Accountant shall be final and
conclusive and shall be binding on the Trust, and the Trust shall accordingly
amend and deliver the AMPS Basic Maintenance Report to the Auction Agent, S&P
and Moody's promptly following receipt by the Trust of such Accountant's
Confirmation.
(f) On or before 5:00 p.m., New York City time, on the first Business Day
after the Date of Original Issue of the AMPS, the Trust will complete and
deliver to S&P and Moody's an AMPS Basic Maintenance Report as of the close of
business on such Date of Original Issue. Within five Business Days of such Date
of Original Issue, the Independent Accountant will confirm in writing to S&P and
Moody's (i) the mathematical accuracy of the calculations reflected in such
Report and (ii) that the aggregate Discounted Value of S&P Eligible Assets and
the aggregate Discounted Value of Moody's Eligible Assets reflected thereon
equals or exceeds the AMPS Basic Maintenance Amount reflected thereon. Also, on
or before 5:00 p.m., New York City time, on the first Business Day after Common
Shares are repurchased by the Trust, the Trust will complete and deliver to S&P
and Moody's an AMPS Basic Maintenance Report as of the close of business on such
date that Common Shares are repurchased.
(g) For so long as AMPS are rated by Moody's, in managing the Trust's
portfolio, the Adviser will not alter the composition of the Trust's portfolio
if, in the reasonable belief of the Adviser, the effect of any such alteration
would be to cause the Trust to have Moody's Eligible Assets with an aggregate
Discounted Value, as of the immediately preceding Valuation Date, less than the
AMPS Basic Maintenance Amount as of such Valuation Date; provided, however, that
in the event that, as of the immediately preceding Valuation Date, the aggregate
Discounted Value of Moody's Eligible Assets exceeded the AMPS Basic Maintenance
Amount by five percent or less, the Adviser will not alter the composition of
the Trust's portfolio in a manner reasonably expected to reduce the aggregate
Discounted Value of Moody's Eligible Assets unless the Trust shall have
confirmed that, after giving effect to such alteration, the aggregate Discounted
Value of Moody's Eligible Assets would exceed the AMPS Basic Maintenance
Amount.
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<PAGE> 44
8. Certain Other Restrictions and Requirements. (a) For so long as any
AMPS are rated by S&P, the Trust will not purchase or sell futures contracts,
write, purchase or sell options on futures contracts or write put options
(except covered put options) or call options (except covered call options) on
portfolio securities unless it receives written confirmation from S&P that
engaging in such transactions will not impair the ratings then assigned to the
AMPS by S&P, except that the Trust may purchase or sell futures contracts based
on the Bond Buyer Municipal Bond Index (the "Municipal Index") or United States
Treasury Bonds or Notes ("Treasury Bonds") and write, purchase or sell put and
call options on such contracts (collectively, "S&P Hedging Transactions"),
subject to the following limitations:
(i) the Trust will not engage in any S&P Hedging Transaction based
on the Municipal Index (other than transactions which terminate a futures
contract or option held by the Trust by the Trust's taking an opposite
position thereto ("Closing Transactions")), which would cause the Trust at
the time of such transaction to own or have sold the least of (A) more
than 1,000 outstanding futures contracts based on the Municipal Index, (B)
outstanding futures contracts based on the Municipal Index exceeding in
number 25% of the quotient of the Market Value of the Trust's total assets
divided by $1,000 or (C) outstanding futures contracts based on the
Municipal Index exceeding in number 10% of the average number of daily
traded futures contracts based on the Municipal Index in the 30 days
preceding the time of effecting such transaction as reported by The Wall
Street Journal;
(ii) the Trust will not engage in any S&P Hedging Transaction based
on Treasury Bonds (other than Closing Transactions) which would cause the
Trust at the time of such transaction to own or have sold the lesser of
(A) outstanding futures contracts based on Treasury Bonds exceeding in
number 50% of the quotient of the Market Value of the Trust's total assets
divided by $100,000 ($200,000 in the case of the two-year United States
Treasury Note) or (B) outstanding futures contracts based on Treasury
Bonds exceeding in number 10% of the average number of daily traded
futures contracts based on Treasury Bonds in the 30 days preceding the
time of effecting such transaction as reported by The Wall Street Journal;
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<PAGE> 45
(iii) the Trust will engage in Closing Transactions to close out any
outstanding futures contract which the Trust owns or has sold or any
outstanding option thereon owned by the Trust in the event (A) the Trust
does not have S&P Eligible Assets with an aggregate Discounted Value equal
to or greater than the AMPS Basic Maintenance Amount on two consecutive
Valuation Dates and (B) the Trust is required to pay Variation Margin on
the second such Valuation Date;
(iv) the Trust will engage in a Closing Transaction to close out any
outstanding futures contract or option thereon in the month prior to the
delivery month under the terms of such futures contract or option thereon
unless the Trust holds the securities deliverable under such terms; and
(v) when the Trust writes a futures contract or option thereon, it
will either maintain an amount of cash, cash equivalents or high grade
(rated A or better by S&P), fixed-income securities in a segregated
account with the Trust's custodian, so that the amount so segregated plus
the amount of Initial Margin and Variation Margin held in the account of
or on behalf of the Trust's broker with respect to such futures contract
or option equals the Market Value of the futures contract or option, or,
in the event the Trust writes a futures contract or option thereon which
requires delivery of an underlying security, it shall hold such underlying
security in its portfolio.
For purposes of determining whether the Trust has S&P Eligible Assets with
a Discounted Value that equals or exceeds the AMPS Basic Maintenance Amount, the
Discounted Value of cash or securities held for the payment of Initial Margin or
Variation Margin shall be zero and the aggregate Discounted Value of S&P
Eligible Assets shall be reduced by an amount equal to (i) 30% of the aggregate
settlement value, as marked to market, of any outstanding futures contracts
based on the Municipal Index which are owned by the Trust plus (ii) 25% of the
aggregate settlement value, as marked to market, of any outstanding futures
contracts based on Treasury Bonds which contracts are owned by the Trust.
(b) For so long as any AMPS are rated by Moody's, the Trust will not buy
or sell futures contracts, write, purchase or sell call options on futures
contracts or purchase put options on futures contracts or write call options
(except covered call options) on portfolio securities unless it receives written
confirmation from Moody's that engaging in such transactions would not
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<PAGE> 46
impair the ratings then assigned to the AMPS by Moody's, except that the Trust
may purchase or sell exchange-traded futures contracts based on the Municipal
Index or Treasury Bonds and purchase, write or sell exchange-traded put options
on such futures contracts and purchase, write or sell exchange-traded call
options on such futures contracts (collectively, "Moody's Hedging
Transactions"), subject to the following limitations:
(i) the Trust will not engage in any Moody's Hedging Transaction
based on the Municipal Index (other than Closing Transactions) which would
cause the Trust at the time of such transaction to own or have sold (A)
outstanding futures contracts based on the Municipal Index exceeding in
number 10% of the average number of daily traded futures contracts based
on the Municipal Index in the 30 days preceding the time of effecting such
transaction as reported by The Wall Street Journal or (B) outstanding
futures contracts based on the Municipal Index having a Market Value
exceeding 50% of the Market Value of all Municipal Bonds constituting
Moody's Eligible Assets owned by the Trust (other than Moody's Eligible
Assets already subject to a Moody's Hedging Transaction);
(ii) the Trust will not engage in any Moody's Hedging Transaction
based on Treasury Bonds (other than Closing Transactions) which would
cause the Trust at the time of such transaction to own or have sold (A)
outstanding futures contracts based on Treasury Bonds having an aggregate
Market Value exceeding 20% of the aggregate Market Value of Moody's
Eligible Assets owned by the Trust and rated Aa by Moody's (or, if not
rated by Moody's but rated by S&P, rated AAA by S&P) or (B) outstanding
futures contracts based on Treasury Bonds having an aggregate Market Value
exceeding 40% of the aggregate Market Value of all Municipal Bonds
constituting Moody's Eligible Assets owned by the Trust (other than
Moody's Eligible Assets already subject to a Moody's Hedging Transaction)
and rated Baa or A by Moody's (or, if not rated by Moody's but rated by
S&P, rated A or AA by S&P) (for purposes of the foregoing clauses (i) and
(ii), the Trust shall be deemed to own the number of futures contracts
that underlie any outstanding options written by the Trust);
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<PAGE> 47
(iii) the Trust will engage in Closing Transactions to close out any
outstanding futures contract based on the Municipal Index if the amount of
open interest in the Municipal Index as reported by The Wall Street
Journal is less than 5,000;
(iv) the Trust will engage in a Closing Transaction to close out any
outstanding futures contract by no later than the fifth Business Day of
the month in which such contract expires and will engage in a Closing
Transaction to close out any outstanding option on a futures contract by
no later than the first Business Day of the month in which such option
expires;
(v) the Trust will engage in Moody's Hedging Transactions only with
respect to futures contracts or options thereon having the next settlement
date or the settlement date immediately thereafter;
(vi) the Trust will not engage in options and futures transactions
for leveraging or speculative purposes and will not write any call options
or sell any futures contracts for the purpose of hedging the anticipated
purchase of an asset prior to completion of such purchase; and
(vii) the Trust will not enter into an option or futures transaction
unless, after giving effect thereto, the Trust would continue to have
Moody's Eligible Assets with an aggregate Discounted Value equal to or
greater than the AMPS Basic Maintenance Amount.
For purposes of determining whether the Trust has Moody's Eligible Assets
with an aggregate Discounted Value that equals or exceeds the AMPS Basic
Maintenance Amount, the Discounted Value of Moody's Eligible Assets which the
Trust is obligated to deliver or receive pursuant to an outstanding futures
contract or option shall be as follows: (i) assets subject to call options
written by the Trust which are either exchange-traded and "readily reversible"
or which expire within 49 days after the date as of which such valuation is made
shall be valued at the lesser of (a) Discounted Value and (b) the exercise price
of the call option written by the Trust; (ii) assets subject to call options
written by the Trust not meeting the requirements of clause (i) of this sentence
shall have no value; (iii) assets subject to put options written by the Trust
shall be valued at the lesser of (A) the exercise price and (B) the Discounted
Value of the subject security; (iv) futures contracts shall be valued at the
lesser of (A) settlement price and (B) the
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<PAGE> 48
Discounted Value of the subject security, provided that, if a contract matures
within 49 days after the date as of which such valuation is made, where the
Trust is the seller the contract may be valued at the settlement price and where
the Trust is the buyer the contract may be valued at the Discounted Value of the
subject securities; and (v) where delivery may be made to the Trust with any
security of a class of securities, the Trust shall assume that it will take
delivery of the security with the lowest Discounted Value.
For purposes of determining whether the Trust has Moody's Eligible Assets
with an aggregate Discounted Value that equals or exceeds the AMPS Basic
Maintenance Amount, the following amounts shall be subtracted from the aggregate
Discounted Value of the Moody's Eligible Assets held by the Trust: (i) 10% of
the exercise price of a written call option; (ii) the exercise price of any
written put option; (iii) where the Trust is the seller under a futures
contract, 10% of the settlement price of the futures contract; (iv) where the
Trust is the purchaser under a futures contract, the settlement price of assets
purchased under such futures contract; (v) the settlement price of the
underlying futures contract if the Trust writes put options on a futures
contract; and (vi) 105% of the Market Value of the underlying futures contracts
if the Trust writes call options on a futures contract and does not own the
underlying contract.
(c) For so long as any AMPS are rated by Moody's, the Trust will not enter
into any contract to purchase securities for a fixed price at a future date
beyond customary settlement time (other than such contracts that constitute
Moody's Hedging Transactions that are permitted under paragraph 8(b) of this
Certificate of Designation), except that the Trust may enter into such contracts
to purchase newly-issued securities on the date such securities are issued
("Forward Commitments"), subject to the following limitations:
(i) the Trust will maintain in a segregated account with its
custodian cash, cash equivalents or short-term, fixed-income securities
rated P-1, MIG-1 or VMIG-1 by Moody's and maturing prior to the date of
the Forward Commitment with a Market Value that equals or exceeds the
amount of the Trust's obligations under any Forward Commitments to which
it is from time to time a party or long-term fixed income securities with
a Discounted Value that equals or exceeds the amount of the Trust's
obligations under any Forward Commitment to which it is from time to time
a party; and
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(ii) the Trust will not enter into a Forward Commitment unless,
after giving effect thereto, the Trust would continue to have Moody's
Eligible Assets with an aggregate Discounted Value equal to or greater
than the AMPS Basic Maintenance Amount.
For purposes of determining whether the Trust has Moody's Eligible Assets
with an aggregate Discounted Value that equals or exceeds the AMPS Basic
Maintenance Amount, the Discounted Value of all Forward Commitments to which the
Trust is a party and of all securities deliverable to the Trust pursuant to such
Forward Commitments shall be zero.
(d) For so long as AMPS are rated by S&P or Moody's, the Trust will not,
unless it has received written confirmation from S&P and/or Moody's, as the case
may be, that such action would not impair the ratings then assigned to AMPS by
S&P and/or Moody's, as the case may be, (i) borrow money except for the purpose
of clearing transactions in portfolio securities (which borrowings shall under
any circumstances be limited to the lesser of $10 million and an amount equal to
5% of the Market Value of the Trust's assets at the time of such borrowings and
which borrowings shall be repaid within 60 days and not be extended or renewed
and shall not cause the aggregate Discounted Value of Moody's Eligible Assets
and S&P Eligible Assets to be less than the AMPS Basic Maintenance Amount), (ii)
engage in short sales of securities, (iii) lend any securities, (iv) issue any
class or series of shares ranking prior to or on a parity with the AMPS with
respect to the payment of dividends or the distribution of assets upon
dissolution, liquidation or winding up of the Trust, (v) reissue any AMPS
previously purchased or redeemed by the Trust, (vi) merge or consolidate into or
with any other corporation or entity, (vii) change the Pricing Service or (viii)
engage in reverse repurchase agreements.
(e) For so long as AMPS are rated by Moody's, the Trust agrees to provide
Moody's with the following, unless the Trust has received written confirmation
from Moody's that the provision of such information is no longer required and
that the current rating then assigned to the AMPS by Moody's would not be
impaired: a notification letter at least 30 days prior to any material change in
the Declaration; a copy of the AMPS Basic Maintenance Report prepared by the
Trust in accordance with this Certificate of Designation; and a notice upon the
occurrence of any of the following events: (i) any failure by the Trust to
declare or pay any dividends on the AMPS or successfully remarket the AMPS; (ii)
any mandatory or optional redemption of the
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AMPS effected by the Trust; (iii) any assumption of control of the Board
of Trustees of the Trust by the holders of the AMPS; (iv) a general
unavailability of dealer quotes on the assets of the Trust; (v) any material
auditor discrepancies on valuations; (vi) the dividend rate on the AMPS equals
or exceeds 95% of the Aaa Composite Commercial Paper Rate; (vii) the occurrence
of any Special Dividend Period; (viii) any change in the Maximum Applicable Rate
or the Reference Rate; (ix) the acquisition by any person of beneficial
ownership of more than 5% of the Trust's voting shares of beneficial interest
(inclusive of Common Shares and Preferred Shares); (x) the occurrence of any
change in Internal Revenue Service rules with respect to the payment of
Additional Dividends; (xi) any change in the Pricing Service employed by the
Trust; (xii) any change in the Investment Adviser; (xiii) any increase of
greater than 40% to the maximum marginal Federal income tax rate applicable to
individuals or corporations; and (xiv) the maximum marginal Federal income tax
rate applicable to individuals or corporations is increased to a rate in excess
of 50%.
9. Notice. All notices or communications, unless otherwise specified in
the By-Laws of the Trust or this Certificate of Designation, shall be
sufficiently given if in writing and delivered in person or mailed by
first-class mail, postage prepaid. Notice shall be deemed given on the earlier
of the date received or the date seven days after which such notice is mailed.
10. Auction Procedures.
(a) Certain definitions. As used in this paragraph 10, the following terms
shall have the following meanings, unless the context otherwise requires:
(i) "AMPS" means the AMPS being auctioned pursuant to this paragraph
10.
(ii) "Auction Date" means the first Business Day preceding the first
day of a Dividend Period.
(iii) "Available AMPS" has the meaning specified in paragraph
10(d)(i) below.
(iv) "Bid" has the meaning specified in paragraph 10(b)(i) below.
(v) "Bidder" has the meaning specified in paragraph 10(b)(i) below.
(vi) "Hold Order" has the meaning specified in paragraph 10(b)(i)
below.
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(vii) "Maximum Applicable Rate" for any Dividend Period will be the
Applicable Percentage of the Reference Rate. The Applicable Percentage
will be determined based on (i) the lower of the credit rating or ratings
assigned on such date to such shares by Moody's and S&P (or if Moody's or
S&P or both shall not make such rating available, the equivalent of either
or both of such ratings by a Substitute Rating Agency or two Substitute
Rating Agencies or, in the event that only one such rating shall be
available, such rating) and (ii) whether the Trust has provided
notification to the Auction Agent prior to the Auction establishing the
Applicable Rate for any dividend pursuant to paragraph 2(f) hereof that
net capital gains or other taxable income will be included in such
dividend on AMPS as follows:
<TABLE>
<CAPTION>
Applicable Applicable
Percentage of Percentage of
Credit Ratings Reference Reference
- ------------------------------------------- Rate - Rate -
Moody's S&P No Notification Notification
- ------------------- ---------------------- --------------- ------------
<S> <C> <C> <C>
"aa3" or higher AA- or higher 110% 150%
"a3" to "a1" A- to A+ 125% 160%
"baa3" to "baa1" BBB- to BBB+ 150% 250%
Below "baa3" Below BBB- 200% 275%
</TABLE>
The Trust shall take all reasonable action necessary to enable S&P and
Moody's to provide a rating for the AMPS. If either S&P or Moody's shall not
make such a rating available, or neither S&P nor Moody's shall make such a
rating available, Merrill Lynch, Pierce, Fenner & Smith Incorporated or its
affiliates and successors, after consultation with the Trust, shall select a
nationally recognized statistical rating organization or two nationally
recognized statistical rating organizations to act as a Substitute Rating Agency
or Substitute Rating Agencies, as the case may be.
(viii) "Order" has the meaning specified in paragraph 10(b)(i)
below.
(ix) "Sell Order" has the meaning specified in paragraph 10(b)(i)
below.
(x) "Submission Deadline" means 1:00 P.M., New York City time, on
any Auction Date or such other time on any Auction Date as may be
specified by the Auction Agent from time to time as the time by which each
Broker-Dealer must submit to the
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Auction Agent in writing all Orders obtained by it for the Auction to be
conducted on such Auction Date.
(xi) "Submitted Bid" has the meaning specified in paragraph 10(d)(i)
below.
(xii) "Submitted Hold Order" has the meaning specified in paragraph
10(d)(i) below.
(xiii) "Submitted Order" has the meaning specified in paragraph
10(d)(i) below.
(xiv) "Submitted Sell Order" has the meaning specified in paragraph
10(d)(i) below.
(xv) "Sufficient Clearing Bids" has the meaning specified in
paragraph 10(d)(i) below.
(xvi) "Winning Bid Rate" has the meaning specified in paragraph
10(d)(i) below.
(b) Orders by Beneficial Owners, Potential Beneficial Owners, Existing
Holders and Potential Holders.
(i) Unless otherwise permitted by the Trust, Beneficial Owners and
Potential Beneficial Owners may only participate in Auctions through their
Broker-Dealers. Broker-Dealers will submit the Orders of their respective
customers who are Beneficial Owners and Potential Beneficial Owners to the
Auction Agent, designating themselves as Existing Holders in respect of
shares subject to Orders submitted or deemed submitted to them by
Beneficial Owners and as Potential Holders in respect of shares subject to
Orders submitted to them by Potential Beneficial Owners. A Broker-Dealer
may also hold AMPS in its own account as a Beneficial Owner. A
Broker-Dealer may thus submit Orders to the Auction Agent as a Beneficial
Owner or a Potential Beneficial Owner and therefore participate in an
Auction as an Existing Holder or Potential Holder on behalf of both itself
and its customers. On or prior to the Submission Deadline on each Auction
Date:
(A) each Beneficial Owner may submit to its Broker-Dealer
information as to:
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(1) the number of Outstanding shares, if any, of AMPS held by
such Beneficial Owner which such Beneficial Owner desires to
continue to hold without regard to the Applicable Rate for the next
succeeding Dividend Period;
(2) the number of Outstanding shares, if any, of AMPS held by
such Beneficial Owner which such Beneficial Owner desires to
continue to hold, provided that the Applicable Rate for the next
succeeding Dividend Period shall not be less than the rate per annum
specified by such Beneficial Owner; and/or
(3) the number of Outstanding shares, if any, of AMPS held by
such Beneficial Owner which such Beneficial Owner offers to sell
without regard to the Applicable Rate for the next succeeding
Dividend Period; and
(B) each Broker-Dealer, using a list of Potential Beneficial Owners
that shall be maintained in good faith for the purpose of conducting a
competitive Auction, shall contact Potential Beneficial Owners, including
Persons that are not Beneficial Owners, on such list to determine the
number of Outstanding shares, if any, of AMPS which each such Potential
Beneficial Owner offers to purchase, provided that the Applicable Rate for
the next succeeding Dividend Period shall not be less than the rate per
annum specified by such Potential Beneficial Owner.
For the purposes hereof, the communication by a Beneficial Owner or
Potential Beneficial Owner to a Broker-Dealer, or the communication by a
Broker-Dealer acting for its own account to the Auction Agent, of information
referred to in clause (A) or (B) of this paragraph 10(b)(i) is hereinafter
referred to as an "Order" and each Beneficial Owner and each Potential
Beneficial Owner placing an Order, including a Broker-Dealer acting in such
capacity for its own account, is hereinafter referred to as a "Bidder"; an Order
containing the information referred to in clause (A)(1) of this paragraph
10(b)(i) is hereinafter referred to as a "Hold Order"; an Order containing the
information referred to in clause (A)(2) or (B) of this paragraph 10(b)(i) is
hereinafter referred to as a "Bid"; and an Order containing the information
referred to in clause (A)(3) of this paragraph 10(b)(i) is hereinafter referred
to as a "Sell Order." Inasmuch as a Broker-Dealer participates in an Auction as
an Existing Holder or a Potential Holder only to represent the interests of a
Beneficial Owner or Potential Beneficial Owner, whether it be its customers or
itself, all discussion herein relating to the consequences of an Auction for
Existing
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Holders and Potential Holders also applies to the underlying beneficial
ownership interests represented.
(ii) (A) A Bid by an Existing Holder shall constitute an
irrevocable offer to sell:
(1) the number of Outstanding AMPS specified in such Bid
if the Applicable Rate determined on such Auction Date shall
be less than the rate per annum specified in such Bid; or
(2) such number or a lesser number of Outstanding AMPS
to be determined as set forth in paragraph 10(e)(i)(D) if the
Applicable Rate determined on such Auction Date shall be equal
to the rate per annum specified therein; or
(3) a lesser number of Outstanding AMPS to be determined
as set forth in paragraph 10(e)(ii)(C) if such specified rate
per annum shall be higher than the Maximum Applicable Rate and
Sufficient Clearing Bids do not exist.
(B) A Sell Order by an Existing Holder shall constitute an
irrevocable offer to sell:
(1) the number of Outstanding AMPS specified in
such Sell Order; or
(2) such number or a lesser number of Outstanding AMPS
to be determined as set forth in paragraph 10(e)(ii)(C) if
Sufficient Clearing Bids do not exist.
(C) A Bid by a Potential Holder shall constitute an
irrevocable offer to purchase:
(1) the number of Outstanding AMPS specified in such Bid
if the Applicable Rate determined on such Auction Date shall
be higher than the rate per annum specified in such Bid; or
(2) such number or a lesser number of Outstanding AMPS
to be determined as set forth in paragraph 10(e)(i)(E) if the
Applicable Rate
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determined on such Auction Date shall be equal to the rate per annum
specified therein.
(c) Submission of Orders by Broker-Dealers to Auction Agent.
(i) Each Broker-Dealer shall submit in writing or through the Auction
Agent's Auction Processing System to the Auction Agent prior to the Submission
Deadline on each Auction Date all Orders obtained by such Broker-Dealer,
designating itself (unless otherwise permitted by the Trust) as an Existing
Holder in respect of shares subject to Orders submitted or deemed submitted to
it by Beneficial Owners and as a Potential Holder in respect of shares subject
to Orders submitted to it by Potential Beneficial Owners, and specifying with
respect to each Order:
(A) the name of the Bidder placing such Order (which shall be the
Broker-Dealer unless otherwise permitted by the Trust);
(B) the aggregate number of Outstanding AMPS that are the subject of such
Order;
(C) to the extent that such Bidder is an Existing Holder:
(1) the number of Outstanding shares, if any, of AMPS subject to any
Hold Order placed by such Existing Holder;
(2) the number of Outstanding shares, if any, of AMPS subject to any
Bid placed by such Existing Holder and the rate per annum specified in
such Bid; and
(3) the number of Outstanding shares, if any, of AMPS subject to any
Sell Order placed by such Existing Holder; and
(D) to the extent such Bidder is a Potential Holder, the rate per annum
specified in such Potential Holder's Bid.
(ii) If any rate per annum specified in any Bid contains more than three
figures to the right of the decimal point, the Auction Agent shall round such
rate up to the next highest one-thousandth (.001) of 1%.
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(iii) If an Order or Orders covering all of the Outstanding AMPS held by
an Existing Holder are not submitted to the Auction Agent prior to the
Submission Deadline, the Auction Agent shall deem a Hold Order (in the case of
an Auction relating to a Dividend Period which is not a Special Dividend Period
of 28 days or more) and a Sell Order (in the case of an Auction relating to a
Special Dividend Period of 28 days or more) to have been submitted on behalf of
such Existing Holder covering the number of Outstanding AMPS held by such
Existing Holder and not subject to Orders submitted to the Auction Agent.
(iv) If one or more Orders on behalf of an Existing Holder covering in the
aggregate more than the number of Outstanding AMPS held by such Existing Holder
are submitted to the Auction Agent, such Order shall be considered valid as
follows and in the following order of priority:
(A) any Hold Order submitted on behalf of such Existing Holder shall be
considered valid up to and including the number of Outstanding AMPS held by such
Existing Holder; provided that if more than one Hold Order is submitted on
behalf of such Existing Holder and the number of AMPS subject to such Hold
Orders exceeds the number of Outstanding AMPS held by such Existing Holder, the
number of AMPS subject to each of such Hold Orders shall be reduced pro rata so
that such Hold Orders, in the aggregate, will cover exactly the number of
Outstanding AMPS held by such Existing Holder;
(B) any Bids submitted on behalf of such Existing Holder shall be
considered valid, in the ascending order of their respective rates per annum if
more than one Bid is submitted on behalf of such Existing Holder, up to and
including the excess of the number of Outstanding AMPS held by such Existing
Holder over the number of AMPS subject to any Hold Order referred to in
paragraph 10(c)(iv)(A) above (and if more than one Bid submitted on behalf of
such Existing Holder specifies the same rate per annum and together they cover
more than the remaining number of shares that can be the subject of valid Bids
after application of paragraph 10(c)(iv)(A) above and of the foregoing portion
of this paragraph 10(c)(iv)(B) to any Bid or Bids specifying a lower rate or
rates per annum, the number of shares subject to each of such Bids shall be
reduced pro rata so
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that such Bids, in the aggregate, cover exactly such remaining number of
shares); and the number of shares, if any, subject to Bids not valid under this
paragraph 10(c)(iv)(B) shall be treated as the subject of a Bid by a Potential
Holder; and
(C) any Sell Order shall be considered valid up to and including the
excess of the number of Outstanding AMPS held by such Existing Holder over the
number of AMPS subject to Hold Orders referred to in paragraph 10(c)(iv)(A) and
Bids referred to in paragraph 10(c)(iv)(B); provided that if more than one Sell
Order is submitted on behalf of any Existing Holder and the number of AMPS
subject to such Sell Orders is greater than such excess, the number of AMPS
subject to each of such Sell Orders shall be reduced pro rata so that such Sell
Orders, in the aggregate, cover exactly the number of AMPS equal to such excess.
(v) If more than one Bid is submitted on behalf of any Potential Holder,
each Bid submitted shall be a separate Bid with the rate per annum and number of
AMPS therein specified.
(vi) Any Order submitted by a Beneficial Owner as a Potential Beneficial
Owner to its Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior to
the Submission Deadline on any Auction Date shall be irrevocable.
(d) Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable
Rate.
(i) Not earlier than the Submission Deadline on each Auction Date, the
Auction Agent shall assemble all Orders submitted or deemed submitted to it by
the Broker-Dealers (each such Order as submitted or deemed submitted by a
Broker-Dealer being hereinafter referred to individually as a "Submitted Hold
Order," a "Submitted Bid" or a "Submitted Sell Order," as the case may be, or as
a "Submitted Order") and shall determine:
(A) the excess of the total number of Outstanding AMPS over the number of
Outstanding AMPS that are the subject of Submitted Hold Orders (such excess
being hereinafter referred to as the "Available AMPS");
(B) from the Submitted Orders whether the number of Outstanding AMPS that
are the subject of Submitted Bids by Potential Holders specifying one or more
rates per
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annum equal to or lower than the Maximum Applicable Rate exceeds or is
equal to the sum of:
(1) the number of Outstanding AMPS that are the subject of Submitted
Bids by Existing Holders specifying one or more rates per annum higher
than the Maximum Applicable Rate, and
(2) the number of Outstanding AMPS that are subject to Submitted
Sell Orders (if such excess or such equality exists (other than because
the number of Outstanding AMPS in clause (1) above and this clause (2) are
each zero because all of the Outstanding AMPS are the subject of Submitted
Hold Orders), such Submitted Bids by Potential Holders being hereinafter
referred to collectively as "Sufficient Clearing Bids"); and
(C) if Sufficient Clearing Bids exist, the lowest rate per annum specified
in the Submitted Bids (the "Winning Bid Rate") that if:
(1) each Submitted Bid from Existing Holders specifying the Winning
Bid Rate and all other Submitted Bids from Existing Holders specifying
lower rates per annum were rejected, thus entitling such Existing Holders
to continue to hold the AMPS that are the subject of such Submitted Bids,
and
(2) each Submitted Bid from Potential Holders specifying the Winning
Bid Rate and all other Submitted Bids from Potential Holders specifying
lower rates per annum were accepted, thus entitling the Potential Holders
to purchase the AMPS that are the subject of such Submitted Bids, would
result in the number of shares subject to all Submitted Bids specifying
the Winning Bid Rate or a lower rate per annum being at least equal to the
Available AMPS.
(ii) Promptly after the Auction Agent has made the determinations pursuant
to paragraph 10(d)(i), the Auction Agent shall advise the Trust of the Maximum
Applicable Rate and, based on such determinations, the Applicable Rate for the
next succeeding Dividend Period as follows:
(A) if Sufficient Clearing Bids exist, that the Applicable Rate for the
next succeeding Dividend Period shall be equal to the Winning Bid Rate;
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(B) if Sufficient Clearing Bids do not exist (other than because all
of the Outstanding AMPS are the subject of Submitted Hold Orders), that
the Applicable Rate for the next succeeding Dividend Period shall be equal
to the Maximum Applicable Rate; or
(C) if all of the Outstanding AMPS are the subject of Submitted Hold
Orders, that the Dividend Period next succeeding the Auction shall
automatically be the same length as the immediately preceding Dividend
Period and the Applicable Rate for the next succeeding Dividend Period
shall be equal to 40% of the Reference Rate (or 60% of such rate if the
Trust has provided notification to the Auction Agent prior to the Auction
establishing the Applicable Rate for any dividend pursuant to paragraph
2(f) hereof that net capital gains or other taxable income will be
included in such dividend on AMPS) on the date of the Auction.
(e) Acceptance and Rejection of Submitted Bids and Submitted Sell Orders
and Allocation of Shares. Based on the determinations made pursuant to paragraph
10(d)(i), the Submitted Bids and Submitted Sell Orders shall be accepted or
rejected and the Auction Agent shall take such other action as set forth below:
(i) If Sufficient Clearing Bids have been made, subject to the
provisions of paragraph 10(e)(iii) and paragraph 10(e)(iv), Submitted Bids
and Submitted Sell Orders shall be accepted or rejected in the following
order of priority and all other Submitted Bids shall be rejected:
(A) the Submitted Sell Orders of Existing Holders shall be accepted
and the Submitted Bid of each of the Existing Holders specifying any rate
per annum that is higher than the Winning Bid Rate shall be accepted, thus
requiring each such Existing Holder to sell the Outstanding AMPS that are
the subject of such Submitted Sell Order or Submitted Bid;
(B) the Submitted Bid of each of the Existing Holders specifying any
rate per annum that is lower than the Winning Bid Rate shall be rejected,
thus entitling each such Existing Holder to continue to hold the
Outstanding AMPS that are the subject of such Submitted Bid;
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(C) the Submitted Bid of each of the Potential Holders specifying any rate
per annum that is lower than the Winning Bid Rate shall be accepted;
(D) the Submitted Bid of each of the Existing Holders specifying a rate
per annum that is equal to the Winning Bid Rate shall be rejected, thus
entitling each such Existing Holder to continue to hold the Outstanding AMPS
that are the subject of such Submitted Bid, unless the number of Outstanding
AMPS subject to all such Submitted Bids shall be greater than the number of
Outstanding AMPS ("Remaining Shares") equal to the excess of the Available AMPS
over the number of Outstanding AMPS subject to Submitted Bids described in
paragraph 10(e)(i)(B) and paragraph 10(e)(i)(C), in which event the Submitted
Bids of each such Existing Holder shall be accepted, and each such Existing
Holder shall be required to sell Outstanding AMPS, but only in an amount equal
to the difference between (1) the number of Outstanding AMPS then held by such
Existing Holder subject to such Submitted Bid and (2) the number of AMPS
obtained by multiplying (x) the number of Remaining Shares by (y) a fraction the
numerator of which shall be the number of Outstanding AMPS held by such Existing
Holder subject to such Submitted Bid and the denominator of which shall be the
sum of the number of Outstanding AMPS subject to such Submitted Bids made by all
such Existing Holders that specified a rate per annum equal to the Winning Bid
Rate; and
(E) the Submitted Bid of each of the Potential Holders specifying a rate
per annum that is equal to the Winning Bid Rate shall be accepted but only in an
amount equal to the number of Outstanding AMPS obtained by multiplying (x) the
difference between the Available AMPS and the number of Outstanding AMPS subject
to Submitted Bids described in paragraph 10(e)(i)(B), paragraph 10(e)(i)(C) and
paragraph 10(e)(i)(D) by (y) a fraction the numerator of which shall be the
number of Outstanding AMPS subject to such Submitted Bid and the denominator of
which shall be the sum of the number of Outstanding AMPS subject to such
Submitted Bids made by all such Potential Holders that specified rates per annum
equal to the Winning Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other than because
all of the Outstanding AMPS are subject to Submitted Hold Orders), subject to
the provisions
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of paragraph 10(e)(iii), Submitted Orders shall be accepted or rejected as
follows in the following order of priority and all other Submitted Bids shall be
rejected:
(A) the Submitted Bid of each Existing Holder specifying any rate per
annum that is equal to or lower than the Maximum Applicable Rate shall be
rejected, thus entitling such Existing Holder to continue to hold the
Outstanding AMPS that are the subject of such Submitted Bid;
(B) the Submitted Bid of each Potential Holder specifying any rate per
annum that is equal to or lower than the Maximum Applicable Rate shall be
accepted, thus requiring such Potential Holder to purchase the Outstanding AMPS
that are the subject of such Submitted Bid; and
(C) the Submitted Bids of each Existing Holder specifying any rate per
annum that is higher than the Maximum Applicable Rate shall be accepted and the
Submitted Sell Orders of each Existing Holder shall be accepted, in both cases
only in an amount equal to the difference between (1) the number of Outstanding
AMPS then held by such Existing Holder subject to such Submitted Bid or
Submitted Sell Order and (2) the number of AMPS obtained by multiplying (x) the
difference between the Available AMPS and the aggregate number of Outstanding
AMPS subject to Submitted Bids described in paragraph 10(e)(ii)(A) and paragraph
10(e)(ii)(B) by (y) a fraction the numerator of which shall be the number of
Outstanding AMPS held by such Existing Holder subject to such Submitted Bid or
Submitted Sell Order and the denominator of which shall be the number of
Outstanding AMPS subject to all such Submitted Bids and Submitted Sell Orders.
(iii) If, as a result of the procedures described in paragraph 10(e)(i) or
paragraph 10(e)(ii), any Existing Holder would be entitled or required to sell,
or any Potential Holder would be entitled or required to purchase, a fraction of
a share of AMPS on any Auction Date, the Auction Agent shall, in such manner as
in its sole discretion it shall determine, round up or down the number of AMPS
to be purchased or sold by any Existing Holder or Potential Holder on such
Auction Date so that each Outstanding share of AMPS purchased or sold by each
Existing Holder or Potential Holder on such Auction Date shall be a whole share
of AMPS.
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(iv) If, as a result of the procedures described in paragraph
10(e)(i), any Potential Holder would be entitled or required to purchase
less than a whole share of AMPS on any Auction Date, the Auction Agent
shall, in such manner as in its sole discretion it shall determine,
allocate AMPS for purchase among Potential Holders so that only whole AMPS
are purchased on such Auction Date by any Potential Holder, even if such
allocation results in one or more of such Potential Holders not purchasing
any AMPS on such Auction Date.
(v) Based on the results of each Auction, the Auction Agent shall
determine, with respect to each Broker-Dealer that submitted Bids or Sell
Orders on behalf of Existing Holders or Potential Holders, the aggregate
number of Outstanding AMPS to be purchased and the aggregate number of the
Outstanding AMPS to be sold by such Potential Holders and Existing Holders
and, to the extent that such aggregate number of Outstanding shares to be
purchased and such aggregate number of Outstanding shares to be sold
differ, the Auction Agent shall determine to which other Broker-Dealer or
Broker-Dealers acting for one or more purchasers such Broker-Dealer shall
deliver, or from which other Broker-Dealer or Broker-Dealers acting for
one or more sellers such Broker-Dealer shall receive, as the case may be,
Outstanding AMPS.
(f) Miscellaneous. The Trust may interpret the provisions of this
paragraph 10 to resolve any inconsistency or ambiguity, remedy any formal defect
or make any other change or modification that does not substantially adversely
affect the rights of Beneficial Owners of AMPS. A Beneficial Owner or an
Existing Holder (A) may sell, transfer or otherwise dispose of AMPS only
pursuant to a Bid or Sell Order in accordance with the procedures described in
this paragraph 10 or to or through a Broker-Dealer, provided that in the case of
all transfers other than pursuant to Auctions such Beneficial Owner or Existing
Holder, its Broker-Dealer, if applicable, or its Agent Member advises the
Auction Agent of such transfer and (B) except as otherwise required by law,
shall have the ownership of the AMPS held by it maintained in book entry form by
the Securities Depository in the account of its Agent Member, which in turn will
maintain records of such Beneficial Owner's beneficial ownership. Neither the
Trust nor any Affiliate shall submit an Order in any Auction. Any Beneficial
Owner that is an Affiliate shall not sell, transfer or otherwise dispose of AMPS
to any Person other than the Trust. All of the Outstanding AMPS shall be
represented by a single certificate registered in the name of the
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nominee of the Securities Depository unless otherwise required by law or unless
there is no Securities Depository. If there is no Securities Depository, at the
Trust's option and upon its receipt of such documents as it deems appropriate,
any AMPS may be registered in the Share Register in the name of the Beneficial
Owner thereof and such Beneficial Owner thereupon will be entitled to receive
certificates therefor and required to deliver certificates therefor upon
transfer or exchange thereof.
11. Securities Depository; Share Certificates. (a) If there is a
Securities Depository, one certificate for all of the AMPS of each series shall
be issued to the Securities Depository and registered in the name of the
Securities Depository or its nominee. Additional certificates may be issued as
necessary to represent AMPS. All such certificates shall bear a legend to the
effect that such certificates are issued subject to the provisions restricting
the transfer of AMPS contained in this Certificate of Designation. Unless the
Trust shall have elected, during a Non-Payment Period, to waive this
requirement, the Trust will also issue stop-transfer instructions to the Auction
Agent for the AMPS. Except as provided in paragraph (b) below, the Securities
Depository or its nominee will be the Holder, and no Beneficial Owner shall
receive certificates representing its ownership interest in such shares.
(b) If the Applicable Rate applicable to all AMPS of a series shall be the
Non-Payment Period Rate or there is no Securities Depository, the Trust may at
its option issue one or more new certificates with respect to such shares
(without the legend referred to in paragraph 11(a)) registered in the names of
the Beneficial Owners or their nominees and rescind the stop-transfer
instructions referred to in paragraph 11(a) with respect to such shares.
12. Personal Liability. The Declaration of Trust establishing MuniHoldings
Florida Insured Fund V, dated May 10, 1999, a copy of which, together with all
amendments thereto, is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name "MuniHoldings Florida
Insured Fund V" refers to the trustees under the Declaration collectively as
trustees, but not as individuals or personally; and no trustee, shareholder,
officer, employee or agent of the Trust shall be held to any personal liability,
nor shall resort be had to their private property for the satisfaction of any
obligation or claim or otherwise in connection with the affairs of the Trust,
but the "Trust Property" only shall be liable.
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MUNIHOLDINGS FLORIDA INSURED FUND V
CERTIFICATE
The undersigned hereby certifies that he is the Secretary of MuniHoldings
Florida Insured Fund V, an unincorporated business trust organized and existing
under the laws of The Commonwealth of Massachusetts (the "Trust"), that annexed
hereto is the Certificate of Designation dated August 11, 1999, establishing the
powers, qualifications, rights and preferences of the Auction Market Preferred
Shares, Series A of the Trust, which Certificate has been adopted by the Board
of Trustees of the Trust in a manner provided in the Trust's Declaration of
Trust.
Dated this day of August, 1999.
--------------------------------------
William E. Zitelli, Jr.
Secretary
