As filed with the Securities and Exchange Commission on November 10, 1999
Securities Act File No.333-88355
Investment Company Act File No. 811-6502
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
|X| Pre-Effective Amendment No. 1
|_| Post-Effective Amendment No.
(Check appropriate box or boxes)
-------------------
MuniYield Florida Fund
(Exact Name of Registrant as Specified in Its Charter)
(609) 282-2800
(Registrant's Telephone Number, including Area Code)
-------------------
800 Scudders Mill Road
Plainsboro, New Jersey 08536
(Address of Principal Executive Offices:
Number, Street, City, State, Zip Code)
-------------------
Terry K. Glenn
MuniYield Florida Fund
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:
Frank P. Bruno, Esq. Michael J. Hennewinkel, Esq.
BROWN & WOOD LLP MERRILL LYNCH ASSET MANAGEMENT, L.P.
One World Trade Center 800 Scudders Mill Road
New York, NY 10048-0557 Plainsboro, NJ 08536
-------------------
Approximate Date Of Proposed Public Offering: As soon as practicable after the
Registration Statement becomes effective under the Securities Act of 1933.
-------------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
============================================================================================================================
Proposed Proposed
Maximum Maximum Amount of
Amount Being Offering Price Aggregate Offering Registration
Title of Securities Being Registered Registered (1) Per Unit (1) Price (1) Fee(3)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares ($.10 par value)............. 6,184,861 $13.57 $83,928,564 $23,332
- ----------------------------------------------------------------------------------------------------------------------------
Auction Market Preferred Stock, Series B .. 1,600 $25,000(2) $40,000 $11,120
============================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the filing fee.
(2) Represents the liquidation preference of a share of preferred stock after
the reorganization.
(3) Previously paid by wire transfer to the designated lockbox of the
Securities and Exchange Commission in Pittsburgh, Pennsylvania.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
MUNIYIELD FLORIDA FUND
MUNIVEST FLORIDA FUND
P.O. Box 9011
Princeton, New Jersey 08543-9011
--------------------
NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS
--------------------
TO BE HELD ON DECEMBER 15, 1999
TO THE SHAREHOLDERS OF
MUNIYIELD FLORIDA FUND
MUNIVEST FLORIDA FUND:
NOTICE IS HEREBY GIVEN that the special meetings of shareholders (the
"Meetings") of MuniYield Florida Fund ("MuniYield Florida") and MuniVest Florida
Fund ("MuniVest Florida") will be held at the offices of Merrill Lynch Asset
Management, L.P., 800 Scudders Mill Road, Plainsboro, New Jersey on Wednesday,
December 15, 1999 at 3:00 p.m. Eastern time (for MuniYield Florida) and 2:00
p.m. Eastern time (for MuniVest Florida) for the following purposes:
(1) To approve or disapprove an Agreement and Plan of Reorganization
(the "Agreement and Plan of Reorganization") contemplating (i) the
acquisition of substantially all of the assets and the assumption of
substantially all of the liabilities of MuniVest Florida by MuniYield
Florida, in exchange solely for an equal aggregate value of newly-issued
common shares of beneficial interest of MuniYield Florida ("MuniYield
Florida Common Shares") and shares of a newly-created series of auction
market preferred shares ("AMPS") of MuniYield Florida to be designated
Series B ("MuniYield Florida Series B AMPS"); (ii) the issuance of a new
series of AMPS of MuniYield Florida to be designated Series B; (iii) the
distribution by MuniVest Florida of the MuniYield Florida Common Shares to
the holders of common shares of beneficial interest of MuniVest Florida
and the MuniYield Florida Series B AMPS to the holders of AMPS of MuniVest
Florida; and (iv) the designation of the currently outstanding series of
AMPS of MuniYield Florida as Series A AMPS. A vote in favor of this
proposal also will constitute a vote in favor of the liquidation and
termination of MuniVest Florida and the termination of its registration
under the Investment Company Act of 1940;
(2) To transact such other business as properly may come before the
Meetings or any adjournment thereof.
If the proposed Reorganization is approved by the shareholders at the
Meetings and effected by the Funds, any shareholder (1) who files with the
applicable Fund before the taking of the vote on the approval of such Agreement
and Plan of Reorganization, written objection to the proposed Reorganization
stating that he or she intends to demand payment for his or her shares if the
Reorganization takes place and (2) whose shares are not voted in favor of such
Agreement and Plan of Reorganization has or may have the right to demand in
writing from MuniYield Florida Fund, within twenty days after the date of
mailing to him or her of notice in writing that the Reorganization has become
effective, payment for his or her shares and an appraisal of the value thereof.
MuniYield Florida Fund and any such shareholders shall in such cases have the
rights and duties and shall follow the procedure set forth in sections 88 to 98,
inclusive, of chapter 156B of the General Laws of Massachusetts. See "The
Reorganization -- Agreement and Plan of Reorganization -- Appraisal Rights" in
the Proxy Statement.
The Boards of Trustees of MuniYield Florida and MuniVest Florida have
fixed the close of business on October 20, 1999 as the record date for the
determination of shareholders entitled to notice of, and to vote at, the
Meetings or any adjournment thereof.
A complete list of the shareholders of MuniYield Florida and MuniVest
Florida entitled to vote at the Meetings will be available and open to the
examination of any shareholder of MuniYield Florida or MuniVest
<PAGE>
Florida, respectively, for any purpose germane to the Meetings during ordinary
business hours from and after December 1, 1999, at the offices of MuniYield
Florida, 800 Scudders Mill Road, Plainsboro, New Jersey.
You are cordially invited to attend the Meetings. Shareholders who do not
expect to attend the Meetings in person are requested to complete, date and sign
the enclosed form of proxy applicable to their fund and return it promptly in
the envelope provided for that purpose. The enclosed proxy is being solicited on
behalf of the Board of Trustees of MuniYield Florida or MuniVest Florida, as
applicable.
By Order of the Boards of Trustees
ALICE A. PELLEGRINO
Secretary of MuniYield Florida Fund and
MuniVest Florida Fund
Plainsboro, New Jersey
Dated: November 10, 1999
<PAGE>
PROXY STATEMENT AND PROSPECTUS
MUNIYIELD FLORIDA FUND
MUNIVEST FLORIDA FUND
P.O. Box 9011, Princeton, New Jersey 08543-9011
(609) 282-2800
--------------------
SPECIAL MEETINGS OF SHAREHOLDERS
--------------------
DECEMBER 15, 1999
This Joint Proxy Statement and Prospectus is furnished to you as a
shareholder of one of the funds listed above. A Special Meeting of the
shareholders of each of these funds will be held on December 15, 1999 to
consider the items that are listed below and discussed in greater detail
elsewhere in this Proxy Statement and Prospectus. The Board of Trustees of each
of the funds is requesting its shareholders to submit a proxy to be used at the
Special Meeting to vote the shares held by the shareholder submitting the proxy.
The proposals to be considered at the Special Meetings are:
1. To approve or disapprove an Agreement and Plan of Reorganization
between the funds; and
2. To transact such other business as may properly come before the
Special Meetings or any adjournment thereof.
The Agreement and Plan of Reorganization that you are being asked to
consider involves a transaction that will be referred to in this Proxy Statement
and Prospectus as the Reorganization. The Reorganization involves the
combination of two funds into one. The two funds are:
MuniYield Florida Fund ("MuniYield Florida"), which will be the
surviving fund; and
MuniVest Florida Fund ("MuniVest Florida"), which will be the
acquired fund.
MuniYield Florida and MuniVest Florida are sometimes referred to herein
collectively as the "Funds" and individually as a "Fund."
In the Reorganization, MuniYield Florida will (i) acquire substantially
all of the assets and assume substantially all of the liabilities of MuniVest
Florida solely in exchange for an equal aggregate value of newly-issued common
shares of beneficial interest of MuniYield Florida ("MuniYield Florida Common
Shares"), par value $.10 per share, and shares of a newly-created series of its
auction market preferred shares ("AMPS") of MuniYield Florida with a par value
of $.05 per share and a liquidation preference of $25,000 per share to be
designated Series B ("MuniYield Florida Series B AMPS"); (ii) designate the
currently outstanding series of AMPS of MuniYield Florida as Series A AMPS and
(iii) issue a new series of AMPS to be designated Series B AMPS. MuniVest
Florida will distribute the MuniYield Florida Common Shares and MuniYield
Florida Series B AMPS received in the Reorganization to its shareholders and
will then liquidate and terminate its registration under the Investment Company
Act of 1940, as amended (the "Investment Company Act"). MuniYield Florida will
continue to operate as a registered closed-end investment company with the
investment objective and policies described in this Proxy Statement and
Prospectus.
In the Reorganization, MuniYield Florida will issue its Common Shares and
AMPS to MuniVest Florida based on the value of the assets transferred to
MuniYield Florida by MuniVest Florida. These shares will then be distributed by
MuniVest Florida to its shareholders based on the value of the shares held by
each shareholder just prior to the Reorganization. A holder of common shares of
beneficial interest of MuniVest Florida will receive MuniYield Florida Common
Shares and a holder of AMPS of MuniVest Florida will receive shares of the
newly-created MuniYield Florida Series B AMPS. Approval of the Reorganization
will also constitute approval of the issuance by MuniYield Florida of the
MuniYield Florida Series B AMPS.
This Proxy Statement and Prospectus serves as a prospectus of MuniYield
Florida in connection with the issuance of MuniYield Florida Common Shares and
the MuniYield Florida Series B AMPS in the Reorganization.
-------------------
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this Proxy Statement and
Prospectus. Any representation to the contrary is a criminal offense.
-------------------
The date of this Proxy Statement and Prospectus is November 10, 1999.
<PAGE>
The Proxy Statement and Prospectus sets forth information about MuniYield
Florida and MuniVest Florida that shareholders of the Funds should know before
considering the Reorganization and should be retained for future reference. Each
of the Funds has authorized the solicitation of proxies in connection with the
Reorganization solely on the basis of this Proxy Statement and Prospectus and
the accompanying documents.
The address of the principal executive offices of MuniYield Florida and
MuniVest Florida is 800 Scudders Mill Road, Plainsboro, New Jersey 08536, and
the telephone number is (609) 282-2800.
The common shares of beneficial interest of each of the Funds ("Common
Shares") are listed on the New York Stock Exchange (the "NYSE") under the
symbols "MYF" (MuniYield Florida) and "MVS" (MuniVest Florida). Subsequent to
the Reorganization, MuniYield Florida Common Shares will continue to be listed
on the NYSE under the symbol "MYF". Reports, proxy materials and other
information concerning either Fund may be inspected at the offices of the NYSE,
20 Broad Street, New York, New York 10005.
2
<PAGE>
TABLE OF CONTENTS
PAGE
----
INTRODUCTION............................................................ 5
ITEM 1: THE REORGANIZATION............................................. 5
SUMMARY............................................................... 5
RISK FACTORS AND SPECIAL CONSIDERATIONS............................... 13
Florida Municipal Bonds............................................. 13
Interest Rate and Credit Risk....................................... 13
Non-diversification................................................. 13
Rating Categories................................................... 13
Private Activity Bonds.............................................. 13
Taxes............................................................... 13
Leverage............................................................ 13
Inverse Floating Obligations........................................ 14
Options and Futures Transactions.................................... 15
Antitakeover Provisions............................................. 15
Ratings Considerations.............................................. 15
COMPARISON OF THE FUNDS............................................... 15
Financial Highlights................................................ 15
MuniYield Florida................................................. 15
MuniVest Florida.................................................. 18
Investment Objective and Policies................................... 20
Description of Florida Municipal Bonds and Municipal Bonds.......... 23
Special Considerations Relating to Florida Municipal Bonds.......... 24
Other Investment Policies........................................... 24
Information Regarding Options and Futures Transactions.............. 25
Investment Restrictions............................................. 28
Rating Agency Guidelines............................................ 29
Portfolio Composition............................................... 30
Portfolio Transactions.............................................. 31
Portfolio Turnover.................................................. 31
Net Asset Value..................................................... 32
Capital Shares...................................................... 32
Certain Provisions of the Declaration of Trust...................... 34
Management of the Funds............................................. 35
Code of Ethics...................................................... 36
Voting Rights....................................................... 36
Shareholder Inquiries............................................... 37
Dividends and Distributions......................................... 37
Automatic Dividend Reinvestment Plan................................ 38
Mutual Fund Investment Option....................................... 40
Liquidation Rights of Holders of AMPS............................... 40
Tax Rules Applicable to the Funds and their Shareholders............ 40
Florida Taxation of the Funds....................................... 45
AGREEMENT AND PLAN OF REORGANIZATION.................................. 45
General............................................................. 45
Procedure........................................................... 46
Terms of the Agreement and Plan of Reorganization................... 46
Potential Benefits to Common Shareholders of the Funds as a
Result of the Reorganization ..................................... 48
Surrender and Exchange of Share Certificates........................ 49
Tax Consequences of the Reorganization.............................. 50
Appraisal Rights.................................................... 51
3
<PAGE>
PAGE
----
Capitalization.................................................... 51
INFORMATION CONCERNING THE SPECIAL MEETINGS......................... 52
Date, Time and Place of Meetings.................................. 52
Solicitation, Revocation and Use of Proxies....................... 52
Record Date and Outstanding Shares................................ 52
Security Ownership of Certain Beneficial Owners and Management.... 53
Voting Rights and Required Vote................................... 53
ADDITIONAL INFORMATION.............................................. 53
Year 2000 Issues.................................................. 54
CUSTODIAN........................................................... 54
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR............. 55
LEGAL PROCEEDINGS................................................... 55
LEGAL OPINIONS...................................................... 55
EXPERTS............................................................. 55
INDEX TO FINANCIAL STATEMENTS......................................... F-1
EXHIBIT I INFORMATION PERTAINING TO EACH FUND..................... I-1
EXHIBIT II AGREEMENT AND PLAN OF REORGANIZATION.................... II-1
EXHIBIT III ECONOMIC AND OTHER CONDITIONS IN FLORIDA................ III-1
EXHIBIT IV SECTIONS 86 THROUGH 98 OF CHAPTER 156B OF THE
MASSACHUSETTS GENERAL LAWS (THE MASSACHUSETTS
BUSINESS CORPORATION LAW)............................... IV-1
EXHIBIT V RATINGS OF MUNICIPAL BONDS.............................. V-1
4
<PAGE>
INTRODUCTION
This Proxy Statement and Prospectus is furnished in connection with the
solicitation of proxies on behalf of the Boards of Trustees of MuniYield Florida
and MuniVest Florida for use at the Meetings to be held at the offices of
Merrill Lynch Asset Management, L.P. ("MLAM"), 800 Scudders Mill Road,
Plainsboro, New Jersey on December 15, 1999, at 3:00 p.m. Eastern time (for
MuniYield) and 2:00 p.m. Eastern time (for MuniVest). The mailing address for
both Funds is P.O. Box 9011, Princeton, New Jersey 08543-9011. The approximate
mailing date of this Proxy Statement and Prospectus is November 12, 1999.
Any person giving a proxy may revoke it at any time prior to its exercise
by executing a superseding proxy, by giving written notice of the revocation to
the Secretary of MuniYield Florida or MuniVest Florida, as applicable, at the
address indicated above or by voting in person at the appropriate Meeting. All
properly executed proxies received prior to the Meetings will be voted at the
Meetings in accordance with the instructions marked thereon or otherwise as
provided therein. Unless instructions to the contrary are marked, proxies will
be voted "FOR" the proposal, Item 1, to approve the Agreement and Plan of
Reorganization between MuniYield Florida and MuniVest Florida (the "Agreement
and Plan of Reorganization").
With respect to Item 1, assuming a quorum is present at the Meetings,
approval of the Agreement and Plan of Reorganization will require the
affirmative vote of shareholders representing (i) a majority of the outstanding
MuniYield Florida Common Shares and MuniYield Florida AMPS, voting together as a
single class, and a majority of the outstanding MuniYield Florida AMPS, voting
separately as a class, and (ii) a majority of the outstanding MuniVest Florida
Common Shares and MuniVest Florida AMPS, voting together as a single class, and
a majority of the outstanding MuniVest Florida AMPS, voting separately as a
class. Because of the requirement that the Agreement and Plan of Reorganization
be approved by shareholders of both Funds, the Reorganization will not take
place if shareholders of either Fund do not approve the Agreement and Plan of
Reorganization.
The Board of Trustees of each Fund has fixed the close of business on
October 20, 1999 as the record date (the "Record Date") for the determination of
shareholders entitled to notice of, and to vote at, the Meetings or any
adjournment thereof. Shareholders on the Record Date will be entitled to one
vote for each share held, with no shares having cumulative voting rights. At the
Record Date, each Fund had outstanding the number of Common Shares and AMPS
indicated in Exhibit I. To the knowledge of the management of each of the Funds,
no person owned beneficially more than 5% of the respective outstanding shares
of either class of either Fund at the Record Date.
The Boards of Trustees of the Funds know of no business other than that
discussed in Item 1 above that will be presented for consideration at the
Meetings. If any other matter is properly presented, it is the intention of the
persons named in the enclosed proxy to vote in accordance with their best
judgment.
ITEM 1: THE REORGANIZATION
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement and Prospectus and is qualified in its entirety by
reference to the more complete information contained in this Proxy Statement and
Prospectus and in the Agreement and Plan of Reorganization attached hereto as
Exhibit II.
In this Proxy Statement and Prospectus, the term "Reorganization" refers
collectively to (i) the acquisition of substantially all of the assets and the
assumption of substantially all of the liabilities of MuniVest Florida by
MuniYield Florida and the subsequent distribution of MuniYield Florida Common
Shares and MuniYield Florida Series B AMPS to the holders of MuniVest Florida
Common Shares and MuniVest Florida AMPS, respectively; (ii) the designation of
the currently outstanding series of MuniYield Florida AMPS as Series A AMPS,
(iii) the issuance by MuniYield Florida of a new series of AMPS to be designated
Series B AMPS and (iv) the subsequent deregistration and termination of MuniVest
Florida.
At meetings of the Boards of Trustees of the Funds, the Reorganization was
approved by the Board of Trustees of MuniYield Florida by a unanimous vote and
by the Board of Trustees of MuniVest Florida by the affirmative vote of all of
the Trustees present at the meeting, representing more than two-thirds of the
total number of Trustees. Subject to obtaining the necessary approvals from the
shareholders of each Fund, the Board of Trustees of MuniVest Florida also deemed
advisable the deregistration of MuniVest Florida under the Investment Company
Act and its termination under the laws of the Commonwealth of Massachusetts. The
Reorganization requires approval of the shareholders of both Funds. The
Reorganization will not take place if the shareholders of either Fund do not
approve the Agreement and the Plan of Reorganization.
Both Funds seek to provide shareholders with current income exempt from
Federal income taxes and the opportunity to own shares whose value is exempt
from the Florida intangible personal property tax ("Florida
5
<PAGE>
Municipal Bonds"). Both of the Funds seek to achieve their investment objectives
by investing primarily in a portfolio of long-term, investment grade municipal
obligations, the interest on which, in the opinion of bond counsel to the
issuer, is exempt from Federal income taxes and which enable shares of the Fund
to be exempt from the Florida intangible personal property tax. Under normal
circumstances, at least 65% of each Fund's total assets will be invested in
Florida Municipal Bonds and at least 80% of each Fund's total assets will be
invested in Florida Municipal Bonds and other long-term municipal obligations
that pay interest exempt from Federal income taxes ("Municipal Bonds"). MuniVest
Florida may invest up to 25% of its assets in municipal obligations rated below
investment grade; MuniYield Florida invests only in municipal obligations that
are rated investment grade, or if unrated are considered by Fund Asset
Management, L.P. ("FAM"), the investment adviser to both Funds to be of
comparable quality.
Both of the Funds are non-diversified, leveraged, closed-end management
investment companies registered under the Investment Company Act. If the
shareholders of the Funds approve the Reorganization, MuniYield Florida Common
Shares and MuniYield Florida Series B AMPS will be issued to MuniVest Florida in
exchange for the assets of MuniVest Florida and thereafter MuniVest Florida will
distribute these shares to its shareholders as provided in the Agreement and
Plan of Reorganization. After the Reorganization, MuniVest Florida will
terminate its registration under the Investment Company Act and its Declaration
of Trust under Massachusetts law.
Based upon their evaluation of all relevant information, the Trustees of
each of the Funds have determined that the Reorganization will potentially
benefit the holders of Common Shares of that Fund. Specifically, after the
Reorganization, the MuniVest Florida shareholders will remain invested in a
closed-end fund with an investment objective and policies substantially similar
to those of MuniVest Florida and that uses substantially the same management
personnel. In addition, it is anticipated that common shareholders of both Funds
will be subject to a reduced overall operating expense ratio based on the
anticipated pro forma combined total operating expenses and the total combined
assets of the surviving fund after the Reorganization. The Boards also
considered the relative tax positions of the Funds' portfolios. It is not
anticipated that the Reorganization will directly benefit the holders of AMPS of
either Fund; however, the Reorganization will not adversely affect the holders
of AMPS of either Fund and the expenses of the Reorganization will not be borne
by the holders of AMPS of either Fund.
If all of the requisite approvals are obtained, it is anticipated that the
Reorganization will occur as soon as practicable after such approval, provided
that the Funds have obtained prior to that time a favorable private letter
ruling from the Internal Revenue Service (the "IRS") concerning the tax
consequences of the Reorganization as set forth in the Agreement and Plan of
Reorganization or an opinion of counsel to the same effect. Under the Agreement
and Plan of Reorganization, however, the Board of Trustees of either Fund may
cause the Reorganization to be postponed or abandoned in certain circumstances
should such Board determine that it is in the best interests of the shareholders
of that Fund to do so. The Agreement and Plan of Reorganization may be
terminated, and the Reorganization abandoned, whether before or after approval
by the Funds' shareholders, at any time prior to the Exchange Date (as defined
below), (i) by mutual consent of the Boards of Trustees of MuniYield Florida and
MuniVest Florida or (ii) by the Board of Trustees of either Fund if any
condition to that Fund's obligations has not been fulfilled or waived by such
Fund's Board of Trustees.
Fee Table for Common Shareholders
of MuniYield Florida and MuniVest Florida and
Pro Forma MuniYield Florida as of June 30, 1999 (Unaudited)(a)
<TABLE>
<CAPTION>
Actual
------------------------
ProForma
MuniYield MuniVest MuniYield
Florida Florida Florida
--------- -------- ----------
<S> <C> <C> <C>
Common Shareholder Transaction Expenses
Maximum Sales Load (as a percentage of offering price)...... None(b) None(b) None(c)
Dividend Reinvestment Plan Fees............................. None None None
Annual Expenses (as a percentage of net assets attributable
to Common Shares at June 30, 1999)(d)
Investment Advisory Fees(e)................................. 0.74% 0.75% 0.75%
Interest Payments on Borrowed Funds......................... None None None
Other Expenses.............................................. 0.37% 0.45% 0.31%
------ ----- -----
Total Annual Expenses............................................. 1.11% 1.20% 1.06%
====== ===== =====
</TABLE>
(footnotes on following page)
6
<PAGE>
- ----------
(a) No information is presented with respect to AMPS because neither Fund's
operating expenses nor expenses of the Reorganization will be borne by the
holders of AMPS of either Fund. Generally, AMPS are sold at a fixed
liquidation preference of $25,000 per share and investment return is set
at an auction.
(b) Common Shares purchased in the secondary market may be subject to
brokerage commissions or other charges.
(c) No sales load will be charged on the issuance of shares in the
Reorganization. Common Shares are not available for purchase from the
Funds but may be purchased through a broker-dealer subject to individually
negotiated commission rates.
(d) The annual operating expenses for pro forma MuniYield Florida are
projections for a 12-month period.
(e) Based on net assets of each Fund and pro forma MuniYield Florida,
excluding assets attributable to AMPS. If assets attributable to AMPS are
included, the Investment Advisory Fee for each Fund and pro forma
MuniYield Florida would be 0.50% and the Total Annual Expenses would be
0.75%, 0.80%, and 0.71%.
Example:
Cumulative Expenses Paid on Common Shares
for the Periods Indicated:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
----- ------ ------ -------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment, assuming (1) the operating expense ratio
for each Fund (as a percentage of net assets
attributable to Common Shares) set forth in the table
above and (2) a 5% annual return throughout the period:
MuniYield Florida........................................ $11 $35 $61 $135
MuniVest Florida......................................... $12 $38 $66 $145
Pro Forma MuniYield Florida*............................. $11 $34 $58 $129
</TABLE>
- ----------
* Assumes that the Reorganization had taken place on June 30, 1999.
The foregoing Fee Table is intended to assist investors in understanding
the costs and expenses that a common shareholder of each of the Funds will bear
directly or indirectly as compared to the costs and expenses that would be borne
by such investors taking into account the Reorganization. The Example set forth
above assumes that the Common Shares were purchased in the initial offerings and
the reinvestment of all dividends and distributions and uses a 5% annual rate of
return as mandated by Securities and Exchange Commission (the "SEC")
regulations. The Example should not be considered a representation of past or
future expenses or annual rates of return. Actual expenses or annual rates of
return may be more or less than those assumed for purposes of the Example. See
"Comparison of the Funds" and "The Reorganization - Potential Benefits to Common
Shareholders of the Funds as a Result of the Reorganization."
Business of MuniYield Florida ....... MuniYield Florida was organized as a
business trust under the laws of the
Commonwealth of Massachusetts on
January 21, 1992 and commenced
operations on February 28, 1992.
MuniYield Florida is a
non-diversified, leveraged, closed-end
management investment company whose
investment objective is to provide
shareholders with current income
exempt from Federal income tax. The
Fund also seeks to provide
shareholders with the opportunity to
own shares the value of which is
exempt from the Florida intangible
personal property tax. MuniYield
Florida seeks to achieve its
investment objective by investing
primarily in a portfolio of Florida
Municipal Bonds. The Fund intends to
invest primarily in long-term Florida
Municipal Bonds and Municipal Bonds
with a maturity of more than ten
years. The weighted average maturity
of the Fund's portfolio was 21.12
years as of September 30, 1999. The
average maturity of the Fund's
portfolio securities, and therefore
the Fund's portfolio as a whole, will
vary based upon FAM's assessment of
economic and market conditions. See
"Comparison of the Funds - Investment
Objectives and Policies."
7
<PAGE>
MuniYield Florida has outstanding both
Common Shares and AMPS. As of
September 30, 1999, MuniYield Florida
had net assets of $163,631,640.
Business of MuniVest Florida....... MuniVest Florida was organized as a
business trust under the laws of the
Commonwealth of Massachusetts on March
5, 1993 and commenced operations on
April 30, 1993. MuniVest Florida is a
non-diversified, leveraged, closed-end
management investment company whose
investment objective is to provide
shareholders with current income
exempt from Federal income tax. The
Fund also seeks to provide
shareholders with the opportunity to
own shares the value of which is
exempt from the Florida intangible
personal property tax. MuniVest
Florida seeks to achieve its
investment objective by investing
primarily in a portfolio of Florida
Municipal Bonds. MuniVest Florida may
invest up to 25% of its assets in
municipal bonds rated below investment
grade. The Fund intends to invest
primarily in long-term Florida Municipal
Bonds and Municipal Bonds with a
maturity of more than ten years. The
weighted average maturity of the Fund's
portfolio was 20.18 years as of
September 30, 1999. The average maturity
of the Fund's portfolio securities, and
therefore the Fund's portfolio as a
whole, will vary based upon FAM's
assessment of economic and market
conditions. See "Comparison of the
Funds--Investment Objective and
Policies."
MuniVest Florida has outstanding both
Common Shares and AMPS. As of
September 30, 1999, MuniVest Florida
had net assets of $115,895,770.
Comparison of the Funds............ Investment Objectives and Policies.
The Funds have substantially similar
investment objectives and policies. Both
Funds seek to provide shareholders
(including holders of AMPS) with current
income exempt from Federal income tax
and to provide shareholders with the
opportunity to own shares, the value of
which is, exempt from the Florida
intangible personal property tax and
seek to achieve this objective by
investing primarily in a portfolio of
Florida Municipal Bonds. The Funds
intend to invest substantially all (at
least 80%) of their respective assets in
Florida Municipal Bonds except when in
FAM's judgment Florida Municipal Bonds
of sufficient quality and quantity are
unavailable at suitable prices. Each
Fund will, under normal circumstances,
maintain at least 65% of its assets in
Florida Municipal Bonds and at least 80%
of its assets in Florida Municipal Bonds
and Municipal Bonds. In addition,
MuniVest Florida may invest up to 25% of
its assets in below investment grade
municipal obligations. MuniYield Florida
does not have this ability. See
"Comparison of the Funds - Investment
Objective and Policies."
Capital Shares. Each Fund has outstanding
both Common Shares and AMPS. The Common
Shares of both Funds are traded on the
NYSE. As of September 30, 1999, (i) the
net asset value per share of MuniYield
Florida Common Shares was $13.59 and the
market price per
8
<PAGE>
share was $12.00; (ii) the net asset
value per share of MuniVest Florida
Common Shares was $12.67 and the market
price per share was $11.50. The AMPS of
both Funds have a liquidation preference
of $25,000 per share and are sold
principally at auctions. See "Comparison
of the Funds - Capital Shares."
Auctions generally have been held and
will be held every seven days for each
series of AMPS of each of the Funds
unless the applicable Fund elects,
subject to certain limitations, to
have a special dividend period. In
connection with the Reorganization, it
is anticipated that a holder of AMPS
of MuniVest Florida will receive
MuniYield Florida Series B AMPS with a
dividend payment date and an auction
date that fall on the same day of the
week as the AMPS of MuniVest Florida
that he or she holds. See "Comparison
of the Funds--Capital Shares" and
"Agreement and Plan of
Reorganization--Terms of the Agreement
and Plan of Reorganization." The
following table provides information
about the dividend rates for the
currently outstanding AMPS of each of
the Funds as of a recent auction.
<TABLE>
<CAPTION>
Auction Date Fund Dividend Rate
------------ ------ -------------
<S> <C> <C>
October 20, 1999 MuniYield Florida 3.50%
October 21, 1999 MuniVest Florida 3.40%
</TABLE>
Advisory Fees. FAM is the investment
adviser for both Funds. The
principal business address of FAM is
800 Scudders Mill Road, Plainsboro,
New Jersey 08536. FAM was organized
as an investment adviser in 1977 and
offers investment advisory services
to more than 50 registered
investment companies. The Asset
Management Group of Merrill Lynch &
Co., Inc. ("ML & Co.") (which
includes FAM) acts as investment
adviser for over 100 registered
investment companies and also offers
portfolio management and portfolio
analysis services to individuals and
institutional accounts.
FAM is responsible for the management
of each Fund's investment portfolio
and for providing administrative
services to each Fund. William R. Bock
serves as portfolio manager for
MuniYield Florida and MuniVest Florida
and is expected to serve as portfolio
manager of the combined fund.
Pursuant to separate investment
advisory agreements between each Fund
and FAM, each Fund pays FAM a monthly
fee at the annual rate of 0.50% of
such Fund's average weekly net assets,
including assets acquired from the
sale of AMPS. Subsequent to the
Reorganization, FAM will continue to
receive compensation at the rate of
0.50% of the average weekly net
assets, including assets acquired from
the sale of AMPS, of the combined
fund. See "Comparison of the Funds -
Management of the Funds."
9
<PAGE>
Other Significant Fees. The Bank of
New York is the custodian for each
Fund and serves as transfer agent,
dividend disbursing agent and
registrar for the Common Shares of
each Fund. The Bank of New York is
also the auction agent, transfer
agent dividend disbursing agent and
registrar for each Fund's AMPS. The
Bank of New York receives a fee for
these services. The principal
business addresses are as follows:
The Bank of New York, 90 Washington
Street, New York, New York 10286
(for its custodial services) and 101
Barclay Street, New York, New York
10286 (for its auction agency and
transfer agency services). See
"Comparison of the Funds -
Management of the Funds."
Overall Expense Ratio. As of June 30,
1999, the overall annualized operating
expense ratio for MuniYield Florida
was 1.11%, based on net assets of
approximately $113.5 million excluding
AMPS, and 0.75%, based on net assets
of approximately $168.5 million
including AMPS; the overall annualized
operating expense ratio for MuniVest
Florida was 1.20%, based on net assets
of approximately $79.3 million
excluding AMPS, and 0.80%, based on
net assets of approximately $119.3
million including AMPS. If the
Reorganization had taken place on June
30, 1999, the overall operating
expense ratio for Pro Forma MuniYield
Florida would have been 1.06%, based
on net assets of approximately $192.8
million excluding AMPS, and 0.71%,
based on net assets of approximately
$287.8 million including AMPS.
Purchases and Sales of Common Shares
and AMPS. Purchase and sale procedures
for the Common Shares of each of the
Funds are identical, and investors
typically purchase and sell Common
Shares of the Funds through a
registered broker-dealer on the NYSE,
thereby incurring a brokerage
commission set by the broker-dealer.
Alternatively, investors may purchase
or sell Common Shares of the Funds
through privately negotiated
transactions with existing
shareholders.
Purchase and sale procedures for the
AMPS of each of the Funds also are
identical. Such AMPS generally are
purchased and sold at separate
auctions conducted on a regular basis
by The Bank of New York, as the
auction agent for each Fund's AMPS
(the "Auction Agent"). Unless
otherwise permitted by the Funds,
existing and potential holders of AMPS
only may participate in auctions
through their broker-dealers.
Broker-dealers submit the orders of
their respective customers who are
existing and potential holders of AMPS
to the Auction Agent. On or prior to
each auction date for the AMPS (the
business day next preceding the first
day of each dividend period), each
10
<PAGE>
holder may submit orders to buy, sell
or hold AMPS to its broker-dealer.
Outside of these auctions, shares of
AMPS may be purchased or sold through
broker-dealers for the AMPS in a
secondary trading market maintained by
the broker-dealers. However, there can
be no assurance that a secondary
market will develop or if it does
develop, that it will provide holders
with a liquid trading market for the
AMPS of either Fund.
Ratings of AMPS. The AMPS of each Fund
have been assigned a rating of AAA
from Standard & Poor's ("S&P") and
"aaa" from Moody's Investors Service,
Inc. ("Moody's"). See "Comparison of
the Funds - Rating Agency Guidelines."
Ratings of Municipal Obligations.
MuniYield Florida will invest only in
municipal obligations that at the time
of purchase are considered investment
grade. MuniVest Florida will invest
primarily in investment grade
municipal obligations but may invest
up to 25% of its assets in
below investment grade municipal
obligations.
Portfolio Transactions. The portfolio
transactions in which the Funds may
engage are similar, as are the
procedures for such transactions. See
"Comparison of the Funds - Portfolio
Transactions."
Dividends and Distributions. The
methods of dividend payment and
distributions are similar for all of
the Funds, both with respect to the
Common Shares and the AMPS of each
Fund. See "Comparison of the Funds -
Dividends and Distributions."
Net Asset Value. The net asset value
per Common Share of each Fund is
determined after the close of business
on the NYSE (generally, 4:00 p.m.,
Eastern time) on the last business
day in each week. For purposes of
determining the net asset value of
the Common Shares of each Fund, the
value of the securities held by the
Fund plus any cash or other assets
(including interest accrued but not
yet received) minus all liabilities
(including accrued expenses) and the
aggregate liquidation value of the
outstanding AMPS of the Fund is
divided by the total number of
Common Shares of the Fund
outstanding at such time. Expenses,
including fees payable to FAM, are
accrued daily. See "Comparison of
the Funds - Net Asset Value."
Voting Rights. The corresponding
voting rights of the holders of each
Fund's Common Shares are substantially
similar. Likewise, the corresponding
voting rights of the holders of each
Fund's AMPS are substantially similar.
See "Comparison of the Funds - Capital
Shares."
11
<PAGE>
Shareholder Services. An automatic
dividend reinvestment plan is
available to holders of each Fund's
Common Shares. The plans are similar
for the two
Funds. See "Comparison of the Funds
- Automatic Dividend Reinvestment
Plan." Other shareholder services,
including the provision of annual
and semi-annual reports, are the
same for the two Funds.
Outstanding Securities of MuniYield Florida and MuniVest Florida as of
September 30, 1999
<TABLE>
<CAPTION>
Amount
Outstanding
Amount Held By Exclusive of
Amount Fund for its Own Amount Shown in
Title of Class Authorized Account Previous Column
------------ ---------- ---------------- ----------------
<S> <C> <C> <C>
MuniYield Florida
Common Shares....................... Unlimited -0- 7,993,842
AMPS .............................. 1,000,000 -0- 2,200
MuniVest Florida
Common Shares....................... Unlimited -0- 5,988,782
AMPS .............................. 1,000,000 -0- 1,600
</TABLE>
Tax Considerations................... The Funds have jointly requested a
private letter ruling from the IRS
with respect to the Reorganization to
the effect that, among other things,
neither Fund will recognize gain or
loss on the transaction and the
shareholders of MuniVest Florida will
not recognize gain or loss on the
exchange of their shares for MuniYield
Florida Common Shares (except to the
extent that a holder of MuniVest
Common Shares receives cash
representing an interest in less than
a full share of MuniYield Florida
Common Shares in the Reorganization)
or MuniYield Florida Series B AMPS.
The consummation of the Reorganization
is subject to the receipt of such
ruling or of an opinion of counsel to
the same effect. The Reorganization
will not affect the status of
MuniYield Florida as a regulated
investment company (a "RIC") under the
Internal Revenue Code of 1986, as
amended (the "Code"). MuniVest Florida
will liquidate pursuant to the
Reorganization. See "Agreement and
Plan of Reorganization -- Tax
Consequences of the Reorganization."
12
<PAGE>
RISK FACTORS AND SPECIAL CONSIDERATIONS
Since both MuniYield Florida and MuniVest Florida invest primarily in a
portfolio of Florida Municipal Bonds, any risks inherent in such investments
apply equally to both Funds and will also apply to the combined fund after the
Reorganization. It is expected that the Reorganization itself will not adversely
affect the rights of holders of Common Shares or AMPS of either Fund or create
additional risks.
Florida Municipal Bonds
Each of the Funds ordinarily invests at least 65% of its portfolio in
Florida Municipal Bonds and at least 80% of its portfolio in Florida Municipal
Bonds and other Municipal Bonds. As a result, each Fund is more exposed to risks
affecting issuers of Florida Municipal Bonds than is a municipal bond fund that
invests more widely. See "Comparison of the Funds -- Special Considerations
Relating to Florida Municipal Bonds" and Exhibit III "Economic and Other
Conditions in Florida."
Interest Rate and Credit Risk
Each Fund invests in municipal bonds, which are subject to interest rate
and credit risk. Interest rate risk is the risk that prices of municipal bonds
generally increase when interest rates decline and decrease when interest rates
increase. Prices of longer-term securities generally change more in response to
interest rate changes than prices of shorter-term securities. Credit risk is the
risk that the issuer will be unable to pay the interest or principal when due.
The degree of credit risk depends on both the financial condition of the issuer
and the terms of the obligation.
Non-diversification
Each Fund is registered as a "non-diversified" investment company. This
means that the Fund may invest a greater percentage of its assets in a single
issuer than a diversified investment company. Since a Fund may invest a
relatively high percentage of its assets in a limited number of issuers, the
Fund may be more exposed to the effects of any single economic, political or
regulatory occurrence than a more widely-diversified fund. Even as a
non-diversified fund, each Fund must still meet the diversification requirements
of applicable Federal income tax law.
Rating Categories
The Funds intend to invest primarily in municipal bonds that are rated
investment grade by S&P, Moody's or Fitch IBCA, Inc. ("Fitch") or are considered
by FAM to be of comparable quality. Obligations rated in the lowest investment
grade category may have certain speculative characteristics. MuniVest Florida
may invest up to 25% of its total assets in municipal bonds that are rated below
investment grade at the time of purchase or in unrated municipal bonds that FAM
believes are of comparable quality. MuniYield Floirda will not invest in
municipal bonds that are rated below investment grade at the time of purchase.
Although below investment grade bonds generally pay higher rates of interest
than investment grade bonds, they are high risk investments that may cause
income and principal losses for MuniVest Florida.
Private Activity Bonds
Each Fund may invest all or a portion of its assets in certain tax-exempt
securities classified as "private activity bonds." These bonds may subject
certain investors in a Fund to a Federal alternative minimum tax.
Taxes
It is possible that a Fund may not be able to fully dispose of a sufficient
portion of its assets subject to Florida intangible personal property tax by the
last business day of the calendar year. This could subject shares of a Fund to
Florida intangible personal property tax. See "Comparison of the Funds -- Tax
Rules Applicable to the Funds and their Shareholders."
Leverage
Use of leverage, through the issuance of AMPS, involves certain risks to
holders of Common Shares of each of the Funds. For example, each Fund's issuance
of AMPS may result in higher volatility of the net asset value of its Common
Shares and potentially more volatility in the market value of its Common Shares.
In addition, changes in the short-term and medium-term dividend rates on, and
the amount of taxable income allocable to, the AMPS will
13
<PAGE>
affect the yield to holders of Common Shares. Under certain circumstances, when
a Fund is required to allocatetaxable income to holders of AMPS, the Fund may be
required to make an additional distribution to such holders in an amount
approximately equal to the tax liability resulting from that allocation (an
"Additional Distribution"). Leverage will allow holders of each Fund's Common
Shares to realize a higher current rate of return than if the Fund were not
leveraged as long as the Fund, while accounting for its costs andoperating
expenses, is able to realize a higher net return on its investment portfolio
than the then-current dividend rate (and any Additional Distribution) paid on
the AMPS. Similarly, since a pro rata portion of each Fund's net realized
capital gains is generally payable to holders of the Fund's Common Shares, the
use of leverage will increase the amount of such gains distributed to holders of
the Fund's Common Shares. However, short-term, medium-term and long-term
interest rates change from time to time as do their relationships to each other
(i.e., the slope of the yield curve) depending upon such factors as supply and
demand forces, monetary and tax policies and investor expectations. Changes in
any or all of such factors could cause the relationship between short-term,
medium-term and long-term rates to change (i.e., to flatten or to invert the
slope of the yield curve) so that short-term and medium-term rates may
substantially increase relative to the long-term obligations in which each Fund
may be invested. To the extent that the current dividend rate (and any
Additional Distribution) on the AMPS approaches the net return on a Fund's
investment portfolio, the benefit of leverage to holders of Common Shares will
be decreased. If the current dividend rate (and any Additional Distribution) on
the AMPS were to exceed the net return on a Fund's portfolio, holders of Common
Shares would receive a lower rate of return than if the Fund were not leveraged.
Similarly, since both the costs of issuing AMPS and any decline in the value of
a Fund's investments (including investments purchased with the proceeds from any
AMPS offering) will be borne entirely by holders of the Fund's Common Shares,
the effect of leverage in a declining market would result in a greater decrease
in net asset value to holders of Common Shares than if the Fund were not
leveraged. If a Fund is liquidated, holders of that Fund's AMPS will be entitled
to receive liquidating distributions before any distribution is made to holders
of Common Shares of that Fund.
In an extreme case, a decline in net asset value could affect each Fund's
ability to pay dividends on its Common Shares. Failure to make such dividend
payments could adversely affect the Fund's qualification as a RIC under the
Federal tax laws. See "Comparison of the Funds -- Tax Rules Applicable to the
Funds and their Shareholders." However, each Fund intends to take all measures
necessary to make Common Shares dividend payments. If a Fund's current
investment income is ever insufficient to meet dividend payments on either the
Common Shares or the AMPS, the Fund may have to liquidate certain of its
investments. In addition, each Fund has the authority to redeem its AMPS for any
reason and may redeem all or part of its AMPS under the following circumstances:
o if the Fund anticipates that its leveraged capital structure will result
in a lower rate of return for any significant amount of time to holders of the
Common Shares than the Fund can obtain if the Common Shares were not leveraged,
o if the asset coverage for the AMPS declines below 200%, either as a
result of a decline in the value of the Fund's portfolio investments or as a
result of the repurchase of Common Shares in tender offers or otherwise, or
o in order to maintain the asset coverage established by Moody's and S&P
in rating the AMPS.
Redemption of the AMPS or insufficient investment income to make dividend
payments, may reduce the net asset value of the Common Shares and require the
Fund to liquidate a portion of its investments at a time when it may be
disadvantageous to do so.
Portfolio Management. The portfolio management strategies of the Funds are
the same. In the event of an increase in short-term or medium-term rates or
other change in market conditions to the point where a Fund's leverage could
adversely affect holders of Common Shares as noted above, or in anticipation of
such changes, each Fund may attempt to shorten the average maturity of its
investment portfolio, which would tend to offset the negative impact of leverage
on holders of its Common Shares. Each Fund also may attempt to reduce the degree
to which it is leveraged by redeeming AMPS pursuant to the provisions of the
Fund's Certificate of Designation establishing the rights and preferences of the
AMPS or otherwise purchasing shares of AMPS. Purchases and sales or redemptions
of AMPS, whether on the open market or in negotiated transactions, are subject
to limitations under the Investment Company Act. If market conditions
subsequently change, each Fund may sell previously unissued shares of AMPS or
shares of AMPS that the Fund previously issued but later repurchased or
redeemed.
Inverse Floating Obligations
A Fund's investments in "inverse floating obligations" or "residual
interest bonds" provide investment leverage because their market value increases
or decreases in response to market changes at a greater rate than
14
<PAGE>
fixed rate, long term tax exempt securities. The market values of such
securities are more volatile than the market values of fixed rate, tax exempt
securities.
Options and Futures Transactions
Each Fund may engage in certain options and futures transactions to reduce
its exposure to interest rate movements. If a Fund incorrectly forecasts market
values, interest rates or other factors, that Fund's performance could suffer.
Each Fund also may suffer a loss if the other party to the transaction fails to
meet its obligations. The Funds are not required to use hedging and may choose
not to do so.
Antitakeover Provisions
The Declaration of Trust of each of the Funds includes provisions that
could limit the ability of other entities or persons to acquire control of that
Fund or to change the composition of its Board of Trustees. Such provisions
could limit the ability of shareholders to sell their shares at a premium over
prevailing market prices by discouraging a third party from seeking to obtain
control of the Fund.
Ratings Considerations
The Funds have received ratings of their AMPS of AAA from S&P and "aaa"
from Moody's. In order to maintain these ratings, the Funds are required to
maintain portfolio holdings meeting specified guidelines of such rating
agencies. These guidelines may impose asset coverage requirements that are more
stringent than those imposed by the Investment Company Act.
As described by Moody's and S&P, a preferred stock rating is an assessment
of the capacity and willingness of an issuer to pay preferred stock obligations.
The ratings of the AMPS are not recommendations to purchase, hold or sell shares
of AMPS, inasmuch as the ratings do not comment as to market price or
suitability for a particular investor, nor do the rating agency guidelines
address the likelihood that a holder of shares of AMPS will be able to sell such
shares in an auction. The ratings are based on current information furnished to
Moody's and S&P by the Funds and FAM and information obtained from other
sources. The ratings may be changed, suspended or withdrawn as a result of
changes in, or the unavailability of, such information. The Common Shares of the
Funds have not been rated by a nationally recognized statistical rating
organization.
The Board of Trustees of each of the Funds, without shareholder approval,
may amend, alter or repeal certain definitions or restrictions which have been
adopted by the Fund pursuant to the rating agency guidelines, in the event the
Fund receives confirmation from the rating agencies that any such amendment,
alteration or repeal would not impair the ratings then assigned to shares of
AMPS.
COMPARISON OF THE FUNDS
Financial Highlights
MuniYield Florida
The financial information in the table below, except for the six month
period ended April 30, 1999 which is unaudited and has been provided by FAM, has
been audited in conjunction with the annual audits of the financial statements
of the Fund by Deloitte & Touche LLP, independent auditors. The following per
share data and ratios have been derived from information provided in the
financial statements of the Fund.
<TABLE>
<CAPTION>
For the Six
Months Ended For the year Ended October 31,
April 30, -----------------------------------
1999 1998 1997 1996 1995
------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
Net asset value, beginning of period.................... $15.70 $15.59 $15.23 $ 15.07 $13.82
----- ----- ------ ------ -----
Investment income - net................................. .50 1.10 1.13 1.13 1.14
Realized and unrealized gain (loss) on investments -
net.................................................. (.30) .34 .41 .17 1.25
----- ----- ------ ------ -----
Total from investment operations........................ .20 1.44 1.54 1.30 2.39
----- ----- ------ ------ -----
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
MuniYield Florida (continued)
For the Six
Months Ended For the year Ended October 31,
April 30, ----------------------------------
1999 1998 1997 1996 1995
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Less dividends and distributions to Common Shareholders:
Investment income - net .......................... (.44) (.86) (.89) (.90) (.88)
Realized gain on investments - net ............... (.43) (.22) (.04) -- --
--------- -------- -------- -------- --------
Total dividends and distributions to Common
Shareholders ........................................ (.87) (1.08) (.93) (.90) (.88)
--------- -------- -------- -------- --------
Effect of Preferred Share activity:
Dividends and distributions to Preferred
Shareholders:
Investment income - net .......................... (.05) (.19) (.24) (.24) (.26)
Realized gain on investments - net ............... (.09) (.06) (.01) -- --
--------- -------- -------- -------- --------
Total effect of Preferred Share activity ............... (.14) (.25) (.25) (.24) (.26)
--------- -------- -------- -------- --------
Net asset value, end of period ......................... $ 14.89 $ 15.70 $ 15.59 $ 15.23 $ 15.07
========= ======== ======== ======== ========
Market price per share, end of period .................. $ 14.875 $ 16.00 $ 15.50 $ 14.50 $ 13.375
========= ======== ======== ======== ========
Total Investment Return:**
Based on market price per share ........................ (1.69)%# 10.66% 13.76% 15.29% 25.63%
========= ======== ======== ======== ========
Based on net asset value per share ..................... .29%# 7.96% 8.93% 7.47% 16.50%
========= ======== ======== ======== ========
Ratios to Average Net Assets***
Expenses ............................................... .75%* .72% .75% .74% .77%
========= ======== ======== ======== ========
Investment income - net ................................ 4.54%* 4.90% 5.04% 5.11% 5.32%
========= ======== ======== ======== ========
Supplemental Data:
Net assets, net of Preferred Shares, end of period (in
thousands) .......................................... $ 119,014 $124,455 $122,731 $119,704 $118,402
========= ======== ======== ======== ========
Preferred Shares outstanding, end of period (in
thousands) .......................................... $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000
========= ======== ======== ======== ========
Portfolio turnover ..................................... 55.52% 92.25% 107.09% 119.29% 97.93%
========= ======== ======== ======== ========
Dividends Per Share on Preferred Shares
Outstanding:
Investment income - net ................................ $ 176 $ 696 $ 826 $ 869 $ 927
========= ======== ======== ======== ========
Leverage:
Asset coverage per $1,000 .............................. $ 3,164 $ 3,263 $ 3,231 $ 3,176 $ 3,153
========= ======== ======== ======== ========
</TABLE>
- ----------
* Annualized.
** Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result
in substantially different returns. Total investment returns exclude
the effects of sales charges.
*** Do not reflect the effect of dividends to Preferred Shareholders.
# Aggregate total investment return.
16
<PAGE>
MuniYield Florida (continued)
<TABLE>
<CAPTION>
For the
Period
Feb. 28
For the 1992+ to
Year Ended October 31, Oct. 31,
--------------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
Net asset value, beginning of period ........................ $ 16.74 $ 14.13 $ 14.18
------------ ------------ ------------
Investment income--net ................................... 1.15 1.17 .77
Realized and unrealized gain (loss) on investments--net .. (2.46) 2.66 .05
------------ ------------ ------------
Total from investment operations ............................ (1.31) 3.83 .82
------------ ------------ ------------
Less dividends and distributions to Common Shareholders:
Investment income--net ................................... (.95) (.97) (.55)
Realized gain on investments--net ........................ (.43) (.04) --
------------ ------------ ------------
Total dividends and distributions to Common Shareholders .... (1.38) (1.01) (.55)
------------ ------------ ------------
Capital Charge resulting from issuance of Common Shares: .... -- -- (.03)
------------ ------------ ------------
Effect of Preferred Share activity: ++
Dividends and distributions to Preferred Shareholders:
Investment income--net ................................... (.15) (.20) (.14)
Realized gain on investments--net ........................ (.08) (.01) --
Capital Charge resulting from issuance of Preferred Shares .. -- -- (.15)
------------ ------------ ------------
Total effect of Preferred Share activity .................... (.23) (.21) (.29)
------------ ------------ ------------
Net asset value, end of period .............................. $ 13.82 $ 16.74 $ 14.13
============ ============ ============
Market price per share, end of period ....................... $ 11.375 $ 16.625 $ 14.75
============ ============ ============
Total Investment Return:**
Based on market price per share ............................. (24.94%) 20.13% 2.05%#
============ ============ ============
Based on net asset value per share .......................... (9.43%) 26.27% 3.12%#
============ ============ ============
Ratios to Average Net Assets:***
Expenses, net of reimbursement .............................. .76% .78% .58%*
============ ============ ============
Expenses .................................................... .76% .78% .76%*
============ ============ ============
Investment income--net ...................................... 5.15% 5.16% 5.59%*
============ ============ ============
Supplemental Data:
Net assets, net of Preferred Shares, end of period
(in thousands) ........................................... $ 108,591 $ 130,275 $ 108,541
============ ============ ============
Preferred Shares outstanding, end of period
(in thousands) ........................................... $ 55,000 $ 55,000 $ 55,000
============ ============ ============
Portfolio turnover .......................................... 18.31% 32.84% 16.18%
============ ============ ============
Leverage:
Asset coverage per $1,000 ................................... $ 2,974 $ 3,369 $ 2,973
============ ============ ============
Dividends Per Share On Preferred
Shares Outstanding +++:
Investment income--net ...................................... $ 549 $ 719 $ 467
============ ============ ============
</TABLE>
- ----------
* Annualized.
** Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales
charges.
*** Do not reflect the effect of dividends to Preferred Shareholders.
+ Commencement of Operations.
++ The Fund's Preferred Shares were issued on April 10, 1992.
+++ Dividends per share have been adjusted to reflect a two-for-one stock
split that occurred on December 1, 1994.
# Aggregate total investment return.
17
<PAGE>
MuniVest Florida
The financial information in the table below, except for the six month
period ended April 30, 1999 which is unaudited and has been provided by FAM, has
been audited in conjunction with the annual audits of the financial statements
of the Fund by Deloitte & Touche LLP, independent auditors. The following per
share data and ratios have been derived from information provided in the
financial statements of the Fund.
<TABLE>
<CAPTION>
For the Six
Months Ended For the year Ended October 31,
April 30, ---------------------------------------------
1999 1998 1997 1996 1995
--------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
Net asset value, beginning of period .................... $ 14.20 $ 13,87 $ 13.39 $ 13.16 $ 11.82
--------- -------- ------- ------- -------
Investment income - net ................................. .47 .99 1.01 .99 1.01
Realized and unrealized gain (loss) on investments - net (.31) .32 .48 .23 1.34
--------- -------- ------- ------- -------
Total from investment operations ........................ .16 1.31 1.49 1.22 2.35
--------- -------- ------- ------- -------
Less dividends to Common Shareholders from investment
income - net: ........................................ (.37) (.76) (.78) (.76) (.76)
--------- -------- ------- ------- -------
Effect of Preferred Shares activity:
Dividends to Preferred Shareholders from
investment income - net ................................. (.10) (.22) (.23) (.23) (.25)
--------- -------- ------- ------- -------
Net asset value, end of period .......................... $ 13.89 14.20 $ 13.87 $ 13.39 $ 13.16
========= ======== ======= ======= =======
Market price per share, end of period ................... $ 13.5625 $ 14.125 $ 13.00 $ 12.75 $ 11.50
========= ======== ======= ======= =======
Total Investment Return:**
Based on market price per share ......................... (1.38)%# 14.78% 8.21% 17.87% 22.93%
========= ======== ======= ======= =======
Based on net asset value per share ...................... .47%# 8.16% 9.93% 8.17% 19.02%
========= ======== ======= ======= =======
Ratios to Average Net Assets :***
Expenses ................................................ .79%* .77% .78% .82% .85%
========= ======== ======= ======= =======
Investment income - net ................................. 4.51%* 4.80% 4.96% 4.96% 5.38%
========= ======== ======= ======= =======
Supplemental Data:
Net assets, net of Preferred Shares, end of
period (in thousands) ................................ $ 83,167 $ 84,949 $82,918 $80,058 $78,695
========= ======== ======= ======= =======
Preferred Shares outstanding, end of period
(in thousands) ....................................... $ 40,000 $ 40,000 $40,000 $40,000 $40,000
========= ======== ======= ======= =======
Portfolio turnover ...................................... 46.54% 92.75% 89.21% 116.82% 92.54%
========= ======== ======= ======= =======
Dividends Per Share on Preferred Shares
Outstanding:
Investment income - net ................................. $ 367 $ 829 $ 844 $ 861 $ 940
========= ======== ======= ======= =======
Leverage:
Asset coverage per $1,000 ............................... $ 3,079 $ 3,124 $ 3,073 $ 3,001 $ 2,967
========= ======== ======= ======= =======
</TABLE>
- ----------
* Annualized.
** Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales
charges.
*** Do not reflect the effect of dividends to Preferred Shareholders.
# Aggregate total investment return.
18
<PAGE>
MuniVest Florida (continued)
<TABLE>
<CAPTION>
For the
Period
April 30
For the 1993 + to
Year Ended Oct. 31, Oct. 31,
1994 1993
------------------- ----------
<S> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
Net asset value, beginning of period ............................... $ 14.99 $ 14.18
---------- ----------
Investment income--net ............................................. 1.00 .49
Realized and unrealized gain (loss) on investments--net ........... (3.05) .90
---------- ----------
Total from investment operations ................................... (2.05) 1.39
---------- ----------
Less dividends and distributions to Common Shareholders:
Investment income--net .......................................... (.84) (.35)
Realized gain on investments--net ............................... (.11) --
---------- ----------
Total dividends and distributions to Common Shareholders ........... (.95) (.35)
---------- ----------
Capital charge resulting from issuance of Common Shares ............ -- (.04)
---------- ----------
Effect of Preferred Share activity:++
Dividends and distributions to Preferred Shareholders:
Investment income -- net ..................................... (.15) (.07)
Realized gain on investments -- net .......................... (.02) --
Capital charge resulting from issuance of Preferred Shares ...... -- (.12)
---------- ----------
Total effect of Preferred Share activity ........................... (.17) (.19)
---------- ----------
Net asset value, end of period ..................................... $ 11.82 $ 14.99
Market price per share, end of period .............................. $ 10.00 $ 15.00
Total Investment Return:**
Based on market price per share .................................... (28.20%) 2.37%#
========== ==========
Based on net asset value per share ................................. (15.07%) 8.22%#
========== ==========
Ratios to Average Net Assets:***
Expenses, net of reimbursement ..................................... .75% .48%*
========== ==========
Expenses ........................................................... .78% .83%*
========== ==========
Investment income--net ............................................. 4.94% 4.85%*
========== ==========
Supplemental Data:
Net assets, net of Preferred Shares, end of period (in thousands) .. $ 70,674 $ 89,438
========== ==========
Preferred Shares outstanding, end of period (in thousands) ......... $ 40,000 $ 40,000
========== ==========
Portfolio turnover ................................................. 100.98% 23.23%
========== ==========
Leverage:
Asset coverage per $1,000 .......................................... $ 2,767 $ 3,236
========== ==========
Dividends Per Share on Preferred
Shares Outstanding:+++
Investment income--net ............................................. $ 569 $ 245
========== ==========
</TABLE>
- ----------
* Annualized.
** Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales
charges.
*** Do not reflect the effect of dividends to Preferred Shareholders.
+ Commencement of Operations.
++ The Fund's Preferred Shares were issued on June 1, 1993.
+++ Dividends per share have been adjusted to reflect a two-for-one stock
split that occurred on December 1, 1994.
# Aggregate total investment return.
19
<PAGE>
Per Share Data for Common Shares*
Traded on the New York Stock Exchange (unaudited)
MuniYield Florida
<TABLE>
<CAPTION>
Premium
(Discount)
Market Price**($) Net Asset Value ($) to Net Value (%)
------------------------ ------------------------ -----------------------
Quarter Ended* High Low High Low High Low
------------- ----- ---- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
January 1, 1997............. 14.875 14.625 15.19 14.98 (2.46) (5.92)
April 30, 1997.............. 14.625 14.125 14.93 14.72 0.46 (4.87)
July 31, 1997............... 15.875 15.25 15.73 15.28 1.33 (4.22)
October 31, 1997............ 15.75 15.0625 15.66 15.37 1.00 (3.94)
January 1, 1998............. 16.125 15.6875 15.90 15.58 2.63 (2.14)
April 30, 1998.............. 15.5625 14.8125 15.61 15.17 3.37 (2.48)
July 31, 1998............... 15.75 15.25 15.55 15.44 (0.32) (2.03)
October 31, 1998............ 16.125 15.625 16.12 15.65 3.04 (3.85)
January 1, 1999............. 16.4375 15.75 15.31 15.06 9.59 1.71
April 30, 1999.............. 15.625 14.875 15.05 14.89 8.30 (0.10)
July 31, 1999............... 13.75 13.5625 14.34 14.14 0.57 (5.37)
October 31, 1999............ 13.8125 11.375 14.12 13.09 (1.43) (11.70)
</TABLE>
MuniVest Florida
<TABLE>
<CAPTION>
Premium
(Discount)
Market Price**($) Net Asset Value ($) to Net Value (%)
------------------------ ------------------------ -----------------------
Quarter Ended* High Low High Low High Low
------------- ----- ---- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
January 1, 1997............. 13.375 12.75 13.39 13.18 (4.28) (7.10)
April 30, 1997.............. 12.50 12.00 13.12 12.92 0.19 (7.34)
July 31, 1997............... 13.9375 13.125 13.90 13.50 (1.80) (7.37)
October 31, 1997............ 13.6875 12.75 13.91 13.67 (1.32) (6.27)
January 1, 1998............. 14.3125 13.75 14.36 14.05 (0.87) (4.43)
April 30, 1998.............. 14.0625 13.1875 14.08 13.67 2.12 (4.58)
July 31, 1998............... 14.25 13.5625 14.04 13.95 0.07 (3.88)
October 31, 1998............ 14.125 13.9375 14.60 14.13 (0.53) (4.35)
January 1, 1999............. 14.0625 13.5625 14.25 14.02 1.82 (1.20)
April 30, 1999.............. 13.625 13.3125 14.03 13.89 0.16 (3.92)
July 31, 1999............... 12.4375 12.00 13.38 13.20 (3.60) (8.95)
October 31, 1999............ 12.0625 10.375 13.18 12.21 (7.02) (10.64)
</TABLE>
* Calculations are based upon common shares of beneficial interest
outstanding at the end of each quarter.
** As reported in the consolidated transaction operating system.
As indicated in the tables above, for the periods shown, the Common Shares
of the Funds generally have traded at prices close to net asset value, with
small premiums or discounts to net asset value of generally less than 12% being
reflected in the market value of the shares from time to time. Although there is
no reason to believe that this pattern should be affected by the Reorganization,
it is not possible to predict whether shares of the surviving fund will trade at
a premium or discount to net asset value following the Reorganization, or what
the extent of any such premium or discount might be.
Investment Objective and Policies
The structure, organization and investment policies of the Funds are
substantially similar, with the differences between the two Funds set forth
below. Each Fund seeks as a fundamental investment objective current income
exempt from Federal income tax and to provide shareholders with the opportunity
to own shares, the value of which is exempt from the Florida intangible personal
property tax. The investment objective of each Fund is a fundamental policy that
may not be changed without a vote of a majority of the Fund's outstanding voting
securities.
20
<PAGE>
The Funds seek to achieve their objective by investing primarily in a
portfolio of long-term, municipal obligations issued by or on behalf of the
State of Florida, its political subdivisions, agencies and instrumentalities
that pay interest which, in the opinion of bond counsel to the issuer, is exempt
from Federal income taxes and which enable shares of the Fund to be exempt from
Florida intangible personal property taxes. Each Fund will seek to achieve its
investment objective by seeking to invest substantially all (a minimum of 80%)
of its assets in Florida Municipal Bonds, except at times when, in the judgment
of FAM, Florida Municipal Bonds of sufficient quality and quantity are
unavailable for investment by the Fund. At all times, except during temporary
defensive periods, each Fund maintains at least 65% of its assets in Florida
Municipal Bonds. The investment objective of each Fund is a fundamental policy
that may not be changed without the affirmative vote of a majority of the Fund's
outstanding voting securities, as defined below under "Investment Restrictions."
At times the Funds may seek to hedge their portfolios through the use of futures
transactions and options to reduce volatility in the net asset value of their
Common Shares.
The Funds ordinarily do not intend to realize significant investment
income from securities other than Florida Municipal Bonds. To the extent that
suitable Florida Municipal Bonds are not available for investment by the Funds,
as determined by FAM, the Funds may purchase Municipal Bonds. Each Fund may
invest all or a portion of its assets in certain tax-exempt securities
classified as "private activity bonds" (in general, bonds that benefit
non-governmental entities) that may subject certain investors in the Fund to
Federal alternative minimum tax.
Each Fund also may invest in securities not issued by or on behalf of a
state or territory or by an agency or instrumentality thereof, if the Fund
nevertheless believes such securities pay interest or distributions that are
exempt from Federal income taxation ("Non-Municipal Tax-Exempt Securities").
Non-Municipal Tax-Exempt Securities may include securities issued by other
investment companies that invest in Florida Municipal Bonds and Municipal Bonds,
to the extent such investments are permitted by the Investment Company Act.
Other Non-Municipal Tax-Exempt Securities could include trust certificates or
other instruments evidencing interests in one or more long-term Florida
Municipal Bonds or Municipal Bonds. Certain Non-Municipal Tax-Exempt Securities
may be characterized as derivative instruments. For purposes of a Fund's
investment objective and policies, Non-Municipal Tax-Exempt Securities that pay
interest that is exempt from Federal income taxes and that enable shares of the
Fund to be exempt from Florida intangible personal property tax will be
considered "Florida Municipal Bonds" and Non-Municipal Tax-Exempt Securities
that pay interest that is exempt from Federal income taxes will be considered
"Municipal Bonds."
The Florida Municipal Bonds and Municipal Bonds in which each Fund invests
will be rated at the date of purchase in the four highest rating categories of
S&P, Moody's or Fitch or, if unrated, will be considered to be of comparable
quality by FAM. As discussed below, MuniVest Florida may invest up to 25% in
Florida Municipal Bonds and Municipal Bonds rated below investment grade. In the
case of long-term debt, the investment grade rating categories are AAA through
BBB for S&P and Fitch and Aaa through Baa for Moody's. In the case of short-term
notes, the investment grade rating categories are SP-1 through SP-2 for S&P,
MIG-1 through MIG-3 for Moody's and F-1+ through F-3 for Fitch. In the case of
tax-exempt commercial paper, the investment grade rating categories are A-1+
through A-3 for S&P, Prime-1 through Prime-3 for Moody's and F-1+ through F-3
for Fitch. Obligations ranked in the lowest investment grade rating category
(BBB, SP-2 and A-3 for S & P; Baa, MIG-3 and Prime-3 for Moody's; and BBB and
F-3 for Fitch), while considered "investment grade," may have certain
speculative characteristics. There may be sub-categories or graduations
indicating relative standing within the ratings categories set forth above. In
assessing the quality of Florida Municipal Bonds and Municipal Bonds with
respect to the foregoing requirements, FAM takes into account the nature of any
letters of credit or similar credit enhancement to which particular Florida
Municipal Bonds and Municipal Bonds are entitled and the creditworthiness of the
insurance company or financial institution that provided such insurance or
credit enhancements. See Exhibit V -- "Ratings of Municipal Bonds." There is no
assurance that a particular rating will continue for any given period of time or
that such rating will not be revised downward or withdrawn entirely if, in the
judgment of the agency originally establishing the rating, circumstances so
warrant. The value of Florida Municipal Bonds and Municipal Bonds generally may
be affected by uncertainties in the municipal markets as a result of legislation
or litigation changing the taxation of Florida Municipal Bonds and Municipal
Bonds or the rights of Florida Municipal Bond and Municipal Bond holders in the
event of a bankruptcy. Municipal bankruptcies are rare, and certain provisions
of the U.S. Bankruptcy Code governing such bankruptcies are unclear. Further,
the application of state law to Florida Municipal Bond and Municipal Bond
issuers could produce varying results among the states or among Municipal Bond
issuers within a state. These
21
<PAGE>
uncertainties could have a significant impact on the prices of the Florida
Municipal Bonds and Municipal Bonds in which the Funds invest.
MuniVest Florida may invest up to 25% of its assets in Florida Municipal
Bonds and Municipal Bonds that are rated below investment grade or, if unrated,
are considered to be of comparable quality by FAM. These high yield bonds are
commonly referred to as "junk bonds" and are regarded as predominantly
speculative as to the issuer's ability to make payments of principal and
interest. Consequently, although such bonds can be expected to provide higher
yields and be less subject to interest rate fluctuations, they may be subject to
greater market price fluctuations and risk of loss of principal than lower
yielding, higher rated fixed-income securities. Such securities are particularly
vulnerable to adverse changes in the issuer's industry and in general economic
conditions. Issuers of high yield bonds may be highly leveraged and may not have
available to them more traditional methods of financing. The risk of loss due to
default by the issuer is significantly greater for holders of these bonds
because such securities may be unsecured and may be subordinated to other
creditors of the issuer. In addition, while the high yield bonds in which the
Fund may invest normally will not include securities that, at the time of
investment, are in default or the issuers of which are in bankruptcy, there can
be no assurance that such events will not occur after MuniVest Florida purchases
a particular security, in which case MuniVest Florida may experience losses and
incur costs. Currently, there are no lower-rated bonds in MuniVest Florida's
portfolio.
High yield bonds frequently have call or redemption features that permit
an issuer to repurchase such bonds from the Fund, which may decrease the net
investment income to MuniVest Florida and dividends to shareholders in the event
that MuniVest Florida is required to replace a called security with a lower
yielding security. MuniVest Florida may have difficulty disposing of certain
high yield bonds because there may be a thin trading market for such securities.
Reduced secondary market liquidity may have an adverse impact on market price
and MuniVest Florida's ability to dispose of particular issues when necessary to
meet its liquidity needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. In addition, market
quotations are generally available on many high yield bond issues only from a
limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales. See Exhibit V -- "Ratings of Municipal
Bonds."
Each of the Funds may invest in variable rate demand obligations ("VRDOs")
and VRDOs in the form of participation interests ("Participating VRDOs") in
variable rate tax-exempt obligations held by a financial institution, typically
a commercial bank. The VRDOs in which each Fund may invest are tax-exempt
obligations, in the opinion of counsel to the issuer, that contain a floating or
variable interest rate adjustment formula and a right of demand on the part of
the holder thereof to receive payment of the unpaid principal balance plus
accrued interest on a short notice period not to exceed seven days.
Participating VRDOs provide each Fund with a specified undivided interest (up to
100%) in the underlying obligation and the right to demand payment of the unpaid
principal balance plus accrued interest on the Participating VRDOs from the
financial institution on a specified number of days' notice, not to exceed seven
days. There is, however, the possibility that because of default or insolvency,
the demand feature of VRDOs or Participating VRDOs may not be honored. Each Fund
has been advised by its counsel that the Fund should be entitled to treat the
income received on Participating VRDOs as interest from tax-exempt obligations
for Federal income tax purposes.
The average maturity of each Fund's portfolio securities varies based upon
FAM's assessment of economic and market conditions. The net asset value of
common shares of a closed-end investment company, such as each Fund, which
invests primarily in fixed-income securities, changes as the general levels of
interest rates fluctuate. When interest rates decline, the value of a fixed
income portfolio can be expected to rise. Conversely, when interest rates rise,
the value of a fixed income portfolio can be expected to decline. Prices of
longer-term securities generally fluctuate more in response to interest rate
changes than do short-term or medium-term securities. These changes in net asset
value are likely to be greater in the case of a fund having a leveraged capital
structure, such as that used by the Funds. See "Risk Factors and Special
Considerations -- Leverage."
Each Fund intends to invest primarily in long-term Florida Municipal Bonds
and Municipal Bonds. However, each Fund may also invest in short-term tax-exempt
securities, short-term U.S. Government securities, cash. Such short-term
securities or cash will not exceed 20% of each Fund's total assets except during
interim periods pending investment of the net proceeds from public offerings of
the Fund's securities or in anticipation of the repurchase or redemption of the
Fund's securities and temporary periods when, in the opinion of FAM, prevailing
market or economic conditions warrant.
Each Fund is classified as non-diversified within the meaning of the
Investment Company Act, which means that the Fund is not limited by such Act in
the proportion of its total assets that it may invest in securities of a
22
<PAGE>
single issuer. However, each Fund's investments are limited so as to qualify the
Fund for the special tax treatment afforded RICs under the Federal tax laws. To
qualify, among other requirements, each Fund limits its investments so that, at
the close of each quarter of the taxable year, (i) not more than 25% of the
market value of the Fund's total assets will be invested in the securities
(other than U.S. Government securities) of a single issuer, and (ii) with
respect to 50% of the market value of its total assets, not more than 5% of the
market value of its total assets will be invested in the securities (other than
U.S. Government securities) of a single issuer. A fund that elects to be
classified as "diversified" under the Investment Company Act must satisfy the
foregoing 5% requirement with respect to 75% of its total assets. To the extent
that any Fund assumes large positions in the securities of a small number of
issuers, the Fund's yield may fluctuate to a greater extent than that of a
diversified company as a result of changes in the financial condition or in the
market's assessment of the issuers.
Description of Florida Municipal Bonds and Municipal Bonds
Florida Municipal Bonds and Municipal Bonds include debt obligations
issued to obtain funds for various public purposes, including construction of a
wide range of public facilities, refunding of outstanding obligations and
obtaining funds for general operating expenses and loans to other public
institutions and facilities. In addition, certain types of private activity
bonds ("PABs") are issued by or on behalf of public authorities to finance
various privately operated facilities, including airports, public ports, mass
commuting facilities, multifamily housing projects, as well as facilities for
water supply, gas, electricity, sewage or solid waste disposal. For purposes of
this prospectus, such obligations are Municipal Bonds if the interest paid
thereon is exempt from Federal income tax and are Florida Municipal Bonds if the
interest thereon is exempt from Federal income tax and the obligation is exempt
from Florida intangible personal property tax, even though such bonds may be
industrial development bonds or PABs as discussed below. Also, for purposes of
this proxy statement and prospectus, Non-Municipal Tax-Exempt Securities as
discussed above will be considered Florida Municipal Bonds or Municipal Bonds.
The two principal classifications of Florida Municipal Bonds and Municipal
Bonds are "general obligation" bonds and "revenue" bonds, which latter category
includes PABs and, for bonds issued on or before August 15, 1986, industrial
development bonds or "IDBs". General obligation bonds are typically secured by
the issuer's pledge of faith, credit and taxing power for the repayment of
principal and the payment of interest. Revenue or special obligation bonds are
typically payable only from the revenues derived from a particular facility or
class of facilities or, in some cases, from the proceeds of a special excise tax
or other specific revenue source such as from the user of the facility being
financed. PABs are in most cases revenue bonds and do not generally constitute
the pledge of the credit or taxing power of the issuer of such bonds. The
repayment of principal and the payment of interest on revenue bonds depends
solely on the ability of the user of the facility financed by the bonds to meet
its financial obligations and the pledge, if any, of real and personal property
so financed as security for such payment. Florida Municipal Bonds and Municipal
Bonds may also include "moral obligation" bonds, which are normally issued by
special purpose public authorities. If an issuer of moral obligation bonds is
unable to meet its obligations, the repayment of such bonds becomes a moral
commitment but not a legal obligation of the state or municipality in question.
Each Fund may purchase Florida Municipal Bonds and Municipal Bonds
classified as PABs. Interest received on certain PABs is treated as an item of
"tax preference" for purposes of the Federal alternative minimum tax and may
impact the overall tax liability of investors in the Fund. There is no
limitation on the percentage of the Fund's assets that may be invested in
Florida Municipal Bonds and Municipal Bonds, the interest on which is treated as
an item of "tax preference" for purposes of the Federal alternative minimum tax.
See "Comparison of Funds -- Tax Rules Applicable to the Funds and their
Shareholders."
Also included within the general category of Florida Municipal Bonds
and/or Municipal Bonds are certificates of participation ("COPs") executed and
delivered for the benefit of government authorities or entities to finance the
acquisition or construction of equipment, land and/or facilities. COPs represent
participations in a lease, an installment purchase contract or a conditional
sales contract (hereinafter collectively referred to as "lease obligations")
relating to such equipment, land or facilities. Although lease obligations
typically do not constitute general obligations of the issuer for which the
issuer's unlimited taxing power is pledged, a lease obligation frequently is
backed by the issuer's covenant to budget for, appropriate and make the payments
due under the lease obligation. However, certain lease obligations contain
"non-appropriation" clauses, which provide that the issuer has no obligation to
make lease or installment purchase payments in future years unless
23
<PAGE>
money is appropriated for such purpose on a yearly basis. Although
"non-appropriation" lease obligations are secured by the lease property,
disposition of the property in the event of foreclosure might prove difficult.
Federal tax legislation has limited and may continue to limit the types
and volume of such bonds the interest on which is excludable from income for
Federal income tax purposes. Such legislation may affect the availability of
Florida Municipal Bonds and Municipal Bonds for investment by the Fund.
Special Considerations Relating to Florida Municipal Bonds
The Funds ordinarily will invest at least 65% of their total assets in
Florida Municipal Bonds, and therefore they are more susceptible to factors
adversely affecting issuers of Florida Municipal Bonds than is a municipal bond
fund that is not concentrated in issuers of Florida Municipal Bonds to this
degree. Many different social, environmental and economic factors may affect the
financial condition of Florida and its political subdivisions. From time to time
Florida and its political subdivisions have encountered financial difficulties.
Florida is highly dependent upon sales and use taxes, which account for the
majority of its General Fund revenues. The Florida Constitution does not permit
a state or local personal income tax. The structure of personal income in
Florida is also different from the rest of the nation in that the State has a
proportionally greater retirement age population that is dependent upon transfer
payments (social security, pension benefits, etc.). Such transfer payments can
be affected by Federal legislation. Florida's economic growth is also highly
dependent upon other factors such as changes in population growth, tourism,
interest rates and hurricane activity. The Florida Constitution may limit the
State's ability to raise revenues and may have an adverse effect on the finances
of Florida and its political subdivisions. FAM does not believe that the current
economic conditions in Florida will have a significant adverse effect on the
Funds' ability to invest in investment grade Florida Municipal Bonds. As of
August 20, 1999, the State had a bond ratings of Aa2 from Moody's, AA+ from S&P
and AA from Fitch IBCA, Inc. on all of its general obligation bonds. For a
discussion of economic and other conditions in the State of Florida, see Exhibit
III -- "Economic and Other Conditions in Florida" and Exhibit V - "Ratings of
Municipal Bonds."
Other Investment Policies
The Funds have adopted certain other policies as set forth below:
Borrowings. Each Fund is authorized to borrow amounts of up to 5% of the
value of its total assets at the time of such borrowings; provided, however,
that each Fund is authorized to borrow moneys in excess of 5% of the value of
its total assets at the time of such borrowings to finance the repurchase of its
own common shares pursuant to tender offers or otherwise to redeem or repurchase
preferred shares or for temporary, extraordinary or emergency purposes.
Borrowings by each Fund (commonly known, as with the issuance of preferred
shares, as "leveraging") create an opportunity for greater total return since
the Fund will not be required to sell portfolio securities to repurchase or
redeem shares but, at the same time, increase exposure to capital risk. In
addition, borrowed funds are subject to interest costs that may offset or exceed
the return earned on the borrowed funds.
When-Issued Securities and Delayed Delivery Transactions. Each Fund may
purchase or sell Florida Municipal Bonds and Municipal Bonds on a delayed
delivery basis or on a when-issued basis at fixed purchase or sale terms. These
transactions arise when securities are purchased or sold by a Fund with payment
and delivery taking place in the future. The purchase will be recorded on the
date that the Fund enters into the commitment, and the value of the obligation
thereafter will be reflected in the calculation of the Fund's net asset value.
The value of the obligation on the delivery day may be more or less than its
purchase price. A separate account of the Fund will be established with its
custodian consisting of cash, cash equivalents or liquid securities having a
market value at all times at least equal to the amount of the commitment.
Indexed and Inverse Floating Obligations. Each Fund may invest in Florida
Municipal Bonds and Municipal Bonds yielding a return based on a particular
index of value or interest rates. For example, each Fund may invest in Florida
Municipal Bonds and Municipal Bonds that pay interest based on an index of
Municipal Bond interest rates. The principal amount payable upon maturity of
certain Florida Municipal Bonds and Municipal Bonds also may be based on the
value of an index. To the extent a Fund invests in these types of Municipal
Bonds, the Fund's return on such Florida Municipal Bonds and Municipal Bonds
will be subject to risk with respect to the value of the particular index. Also,
a Fund may invest in so-called "inverse floating obligations" or "residual
interest bonds" on which the interest rates typically vary inversely with a
short-term floating rate (which may be reset periodically by a dutch auction, a
remarketing agent, or by reference to a short-term tax-exempt interest rate
index). Each Fund may purchase synthetically-created inverse floating
obligations
24
<PAGE>
evidenced by custodial or trust receipts. Generally, income on inverse floating
obligations will decrease when short-term rates increase, and will increase when
short-term rates decrease. Such securities have the effect of providing a degree
of investment leverage, since they may increase or decrease in value in response
to changes, as an illustration, in market interest rates at a rate that is a
multiple (typically two) of the rate at which fixed-rate, long-term, tax-exempt
securities increase or decrease in response to such changes. As a result, the
market values of such securities generally will be more volatile than the market
values of fixed-rate tax-exempt securities. To seek to limit the volatility of
these securities, a Fund may purchase inverse floating obligations with
shorter-term maturities or limitations on the extent to which the interest rate
may vary. FAM believes that indexed and inverse floating obligations represent a
flexible portfolio management instrument for the Funds that allows FAM to vary
the degree of investment leverage relatively efficiently under different market
conditions.
Call Rights. Each of the Funds may purchase a Florida Municipal Bond or
Municipal Bond issuer's rights to call all or a portion of such Florida
Municipal Bond or Municipal Bond for mandatory tender for purchase (a "Call
Right"). A holder of a Call Right may exercise such right to require a mandatory
tender for the purchase of related Florida Municipal Bonds or Municipal Bonds,
subject to certain conditions. A Call Right that is not exercised prior to the
maturity of the related Florida Municipal Bond or Municipal Bond will expire
without value. The economic effect of holding both the Call Right and the
related Florida Municipal Bond or Municipal Bond is identical to holding a
Florida Municipal Bond or Municipal Bond as a non-callable security.
Repurchase Agreements. The Funds may invest in securities pursuant to
repurchase agreements. Repurchase agreements may be entered into only with a
member bank of the Federal Reserve System or a primary dealer in U.S. government
securities or an affiliate thereof. Under such agreements, the seller agrees,
upon entering into the contract, to repurchase the security at a mutually
agreed-upon time and price, thereby determining the yield during the term of the
agreement. The Funds may not invest in repurchase agreements maturing in more
than seven days if such investments, together with all other illiquid
investments, would exceed 15% of the Fund's net assets. In the event of default
by the seller under a repurchase agreement, the Funds may suffer time delays and
incur costs or possible losses in connection with the disposition of the
underlying securities.
In general, for Federal income tax purposes, repurchase agreements are
treated as collateralized loans secured by the securities "sold." Therefore,
amounts earned under such agreements will not be considered tax-exempt interest.
Information Regarding Options and Futures Transactions
Each Fund may hedge all or a portion of its portfolio investments against
fluctuations in interest rates through the use of options and certain financial
futures contracts and options thereon. While each Fund's use of hedging
strategies is intended to reduce the volatility of the net asset value of its
Common Shares, the net asset value of its Common Shares will fluctuate. There
can be no assurance that a Fund's hedging transactions will be effective. In
addition, because of the leveraged nature of the Common Shares, hedging
transactions will result in a larger impact on the net asset value of the Common
Shares than would be the case if the Common Shares were not leveraged.
Furthermore, a Fund may only engage in hedging activities from time to time and
may not necessarily be engaging in hedging activities when movements in interest
rates occur. No Fund has an obligation to enter into hedging transactions and
each may choose not to do so.
Certain Federal income tax requirements may limit a Fund's ability to
engage in hedging transactions. Gains from transactions in options and futures
contracts distributed to shareholders will be taxable as ordinary income or, in
certain circumstances, as long-term capital gains to shareholders. See
"Comparison of the Funds -- Tax Rules Applicable to the Funds and their
Shareholders -- Tax Treatment of Options and Futures Transactions." In addition,
in order to obtain ratings of the AMPS from one or more NRSROs, a Fund may be
required to limit its use of hedging techniques in accordance with the specified
guidelines of such rating organizations. See "Rating Agency Guidelines" below.
The following is a description of the options and futures transactions in
which each Fund may engage, limitations on the Fund's use of such transactions
and risks associated with these transactions. The investment policies with
respect to the hedging transactions of a Fund are not fundamental policies and
may be modified by the Board of Trustees of the Fund without the approval of the
Fund's shareholders.
Writing Covered Call Options. Each Fund is authorized to write (i.e.,
sell) covered call options with respect to Florida Municipal Bonds and Municipal
Bonds it owns, thereby giving the holder of the option the right to buy the
underlying security covered by the option from the Fund at the stated exercise
price until the option expires. Each Fund writes only covered call options,
which means that so long as the Fund is obligated as the writer of a
25
<PAGE>
call option, it will own the underlying securities subject to the option. The
Fund may not write covered call options on underlying securities in an amount
exceeding 15% of the market value of its total assets.
Each Fund receives a premium from writing a call option, which increases
the Fund's return on the underlying security in the event the option expires
unexercised or is closed out at a profit. By writing a call, a Fund limits its
opportunity to profit from an increase in the market value of the underlying
security above the exercise price of the option for as long as the Fund's
obligation as a writer continues. Covered call options serve as a partial hedge
against a decline in the price of the underlying security. Each Fund may engage
in closing transactions in order to terminate outstanding options that it has
written.
Purchase of Options. Each Fund may purchase put options in connection with
its hedging activities. By buying a put, the Fund has a right to sell the
underlying security at the exercise price, thus limiting its risk of loss
through a decline in the market value of the security until the put expires. The
amount of any appreciation in the value of the underlying security will be
partially offset by the amount of the premium paid for the put option and any
related transaction costs. Prior to its expiration, a put option may be sold in
a closing sale transaction; profit or loss from the sale will depend on whether
the amount received is more or less than the premium paid for the put option
plus the related transaction costs. A closing sale transaction cancels out the
Fund's position as the purchaser of an option by means of an offsetting sale of
an identical option prior to the expiration of the option it has purchased. In
certain circumstances, the Fund may purchase call options on securities held in
its portfolio on which it has written call options, or on securities which it
intends to purchase. A Fund will not purchase options on securities if, as a
result of such purchase, the aggregate cost of all outstanding options on
securities held by the Fund would exceed 5% of the market value of the Fund's
total assets.
Financial Futures Contracts and Options. Each Fund is authorized to
purchase and sell certain financial futures contracts and options thereon solely
for the purposes of hedging its investments in Florida Municipal Bonds and
Municipal Bonds against declines in value and hedging against increases in the
cost of securities it intends to purchase. A financial futures contract
obligates the seller of a contract to deliver and the purchaser of a contract to
take delivery of the type of financial instrument covered by the contract or, in
the case of index-based financial futures contracts, to make and accept a cash
settlement, at a specific future time for a specified price. A sale of financial
futures contracts may provide a hedge against a decline in the value of
portfolio securities because such depreciation may be offset, in whole or in
part, by an increase in the value of the position in the financial futures
contracts or options. A purchase of financial futures contracts may provide a
hedge against an increase in the cost of securities intended to be purchased,
because such appreciation may be offset, in whole or in part, by an increase in
the value of the position in the financial futures contracts.
The purchase or sale of a financial futures contract differs from the
purchase or sale of a security in that no price or premium is paid or received.
Instead, an amount of cash or securities acceptable to the broker equal to
approximately 5% of the contract amount must be deposited with the broker. This
amount is known as initial margin. Subsequent payments to and from the broker,
called variation margin, are made on a daily basis as the price of the financial
futures contract fluctuates making the long and short positions in the financial
futures contract more or less valuable.
Each Fund may purchase and sell financial futures contracts based on The
Bond Buyer Municipal Bond Index, a price-weighted measure of the market value of
40 large tax-exempt issues, and purchase and sell put and call options on such
financial futures contracts for the purpose of hedging Florida Municipal Bonds
and Municipal Bonds that the Fund holds or anticipates purchasing against
adverse changes in interest rates. Each Fund also may purchase and sell
financial futures contracts on U.S. Government securities and purchase and sell
put and call options on such financial futures contracts for such hedging
purposes. With respect to U.S. Government securities, currently there are
financial futures contracts based on long-term U.S. Treasury bonds, U.S.
Treasury notes, GNMA Certificates and three-month U.S. Treasury bills.
Subject to policies adopted by its Board of Trustees, each Fund also may
engage in transactions in other financial futures contracts, such as financial
futures contracts on other municipal bond indices that may become available, if
FAM should determine that there is normally sufficient correlation between the
prices of such financial futures contracts and the Florida Municipal Bonds and
Municipal Bonds in which the Fund invests to make such hedging appropriate.
Over-The-Counter Options. Each Fund may engage in options and futures
transactions on exchanges and in the over-the-counter markets ("OTC options").
In general, exchange-traded contracts are third-party contracts (i.e.,
performance of the parties' obligations is guaranteed by an exchange or clearing
corporation) with
26
<PAGE>
standardized strike prices and expiration dates. OTC option transactions are
two-party contracts with price and terms negotiated by the buyer and seller.
Restrictions on OTC Options. Each Fund will engage in transactions in OTC
options only with banks or dealers that have capital of at least $50 million or
whose obligations are guaranteed by an entity having capital of at least $50
million. Certain OTC options and assets used to cover OTC options written by the
Funds are considered to be liquid. The illiquidity of such options or assets may
prevent a successful sale of such options or assets, result in a delay of sale,
or reduce the amount of proceeds that otherwise might be realized.
Risk Factors in Financial Futures Contracts and Options Thereon. Use of
futures transactions involves the risk of imperfect correlation in movements in
the price of financial futures contracts and movements in the price of the
security that is the subject of the hedge. If the price of the financial futures
contract moves more or less than the price of the security that is the subject
of the hedge, a Fund will experience a gain or loss that will not be completely
offset by movements in the price of such security. There is a risk of imperfect
correlation where the securities underlying financial futures contracts have
different maturities, ratings, geographic compositions or other characteristics
different from those of the security being hedged. In addition, the correlation
may be affected by additions to or deletions from the index that serves as a
basis for a financial futures contract. Finally, in the case of financial
futures contracts on U.S. Government securities and options on such financial
futures contracts, the anticipated correlation of price movements between the
U.S. Government securities underlying the futures or options and Florida
Municipal Bonds and Municipal Bonds may be adversely affected by economic,
political, legislative or other developments which have a disparate impact on
the respective markets for such securities.
Under regulations of the Commodity Futures Trading Commission, the futures
trading activities described herein will not result in a Fund being deemed a
"commodity pool," as defined under such regulations, provided that the Fund
adheres to certain restrictions. In particular, the Fund may purchase and sell
financial futures contracts and options thereon (i) for bona fide hedging
purposes, without regard to the percentage of the Fund's assets committed to
margin and option premiums, and (ii) for non-hedging purposes, if, immediately
thereafter the sum of the amount of initial margin deposits on the Fund's
existing futures positions and option premiums entered into for non-hedging
purposes do not exceed 5% of the market value of the liquidation value of the
Fund's portfolio, after taking into account unrealized profits and unrealized
losses on any such transactions. Margin deposits may consist of cash or
securities acceptable to the broker and the relevant contract market.
When a Fund purchases a financial futures contract, or writes a put option
or purchases a call option thereon, it will maintain an amount of cash, cash
equivalents (e.g., commercial paper and daily tender adjustable notes) or liquid
securities in a segregated account with the Fund's custodian, so that the amount
so segregated plus the amount of initial and variation margin held in the
account of its broker equals the market value of the financial futures contract,
thereby ensuring that the use of such financial futures contract is unleveraged.
Although certain risks are involved in options and futures transactions,
FAM believes that, because each Fund will engage in options and futures
transactions only for hedging purposes, the options and futures portfolio
strategies of a Fund will not subject the Fund to the risks associated with
speculation in options and futures transactions.
The volume of trading in the exchange markets with respect to Florida
Municipal Bonds or Municipal Bond options may be limited, and it is impossible
to predict the amount of trading interest that may exist in such options. In
addition, there can be no assurance that viable exchange markets will continue
to be available.
Each Fund intends to enter into options and futures transactions, on an
exchange or in the over-the-counter market, only if there appears to be a liquid
secondary market for such options or futures. There can be no assurance,
however, that a liquid secondary market will exist at any specific time. Thus,
it may not be possible to close an option or futures transaction. The inability
to close options and futures positions also could have an adverse impact on a
Fund's ability to hedge effectively its portfolio. There is also the risk of
loss by a Fund of margin deposits or collateral in the event of bankruptcy of a
broker with which the Fund has an open position in an option or financial
futures contract.
The liquidity of a secondary market in a financial futures contract may be
adversely affected by "daily price fluctuation limits" established by commodity
exchanges that limit the amount of fluctuation in a financial futures contract
price during a single trading day. Once the daily limit has been reached in the
contract, no trades may
27
<PAGE>
be entered into at a price beyond the limit, thus preventing the liquidation of
open futures positions. Prices have in the past reached or exceeded the daily
limit on a number of consecutive trading days.
If it is not possible to close a financial futures position entered into
by a Fund, the Fund would continue to be required to make daily cash payments of
variation margin in the event of adverse price movements. In such a situation,
if the Fund has insufficient cash, it may have to sell portfolio securities to
meet daily variation margin requirements at a time when it may be
disadvantageous to do so.
The successful use of these transactions also depends on the ability of
FAM to forecast correctly the direction and extent of interest rate movements
within a given time frame. To the extent these rates remain stable during the
period in which a financial futures contract is held by a Fund or move in a
direction opposite to that anticipated, the Fund may realize a loss on the
hedging transaction that is not fully or partially offset by an increase in the
value of portfolio securities. As a result, the Fund's total return for such
period may be less than if it had not engaged in the hedging transaction.
Furthermore, the Fund will only engage in hedging transactions from time to time
and may not necessarily be engaging in hedging transactions when movements in
interest rates occur.
Investment Restrictions
The Funds have identical investment restrictions. The following are
fundamental investment restrictions of each Fund and may not be changed without
the approval of the holders of a majority of the outstanding Common Shares and
the outstanding AMPS and any other preferred shares, voting together as a single
class, and a majority of the outstanding AMPS and any other preferred shares,
voting separately as a class. (For this purpose and under the Investment Company
Act, for the Common Shares and AMPS voting together as a single class,
"majority" means the lesser of (i) 67% of the shares of each class of shares
represented at a meeting at which more than 50% of the outstanding shares of
each class of shares are represented or (ii) more than 50% of the outstanding
shares of each class of shares, but for the AMPS voting separately as a single
class "majority" means more than 50% of the outstanding AMPS.) Neither Fund may:
1. Make investments for the purpose of exercising control or management.
2. Purchase securities of other investment companies, except in connection
with a merger, consolidation, acquisition or reorganization, or by purchase in
the open market of securities of closed-end investment companies and only if
immediately thereafter not more than 10% of the Fund's total assets would be
invested in such securities.
3. Purchase or sell real estate, real estate limited partnerships,
commodities or commodity contracts; provided, that the Fund may invest in
securities secured by real estate or interests therein or issued by companies
that invest in real estate or interests therein, and the Fund may purchase and
sell financial futures contracts and options thereon.
4. Issue senior securities other than preferred shares or borrow amounts
in excess of 5% of its total assets taken at market value; provided, however,
that the Fund is authorized to borrow moneys in excess of 5% of the value of its
total assets for the purpose of repurchasing Common Shares or redeeming of
preferred shares.
5. Underwrite securities of other issuers except insofar as the Fund may
be deemed an underwriter under the Securities Act of 1933 (the "Securities Act")
in selling portfolio securities.
6. Make loans to other persons, except that the Fund may purchase Florida
Municipal Bonds, Municipal Bonds and other debt in accordance with its
investment objective, policies and limitations.
7. Purchase any securities on margin, except that the Fund may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities (the deposit or payment by the Fund of initial or
variation margin in connection with financial futures contracts and options
thereon is not considered the purchase of a security on margin).
8. Make short sales of securities or maintain a short position or invest
in put, call, straddle or spread options, except that the Fund may write,
purchase and sell options and futures on Florida Municipal Bonds, Municipal
Bonds, U.S. Government obligations and related indices or otherwise in
connection with bona fide hedging activities.
28
<PAGE>
9. Invest more than 25% of its total assets (taken at market value at the
time of each investment) in securities of issuers in a single industry;
provided, that for purposes of this restriction, states, municipalities and
their political subdivisions are not considered to be part of any industry.
For purposes of restriction (9), the exception for states, municipalities
and their political subdivisions applies only to tax-exempt securities issued by
such entities.
An additional investment restriction adopted by the Fund, which may be
changed by the Trustees, provides that the Fund may not mortgage, pledge,
hypothecate or in any manner transfer, as security for indebtedness, any
securities owned or held by the Fund except as may be necessary in connection
with borrowings mentioned in (4) above or except as may be necessary in
connection with transactions in financial futures contracts and options thereon.
If a percentage restriction on the investment or use of assets set
forth above is adhered to at the time a transaction is effected, later changes
in percentages resulting from changing values will not be considered a
violation.
For so long as shares of AMPS are rated by Moody's, no Fund will change
these additional investment restrictions unless it receives written confirmation
from Moody's that engaging in such transactions would not impair the rating then
assigned to the shares of AMPS by Moody's.
The Fund has no intention to file a voluntary application for relief under
Federal bankruptcy law or any similar application under state law for so long as
the Fund is solvent and does not foresee becoming insolvent.
FAM and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch") are owned and controlled by Merrill Lynch & Co., Inc. ("ML & Co.").
Because of the affiliation of Merrill Lynch with FAM, each Fund is prohibited
from engaging in certain transactions involving Merrill Lynch except pursuant to
an exemptive order or otherwise in compliance with the provisions of the
Investment Company Act and the rules and regulations thereunder. Included among
such restricted transactions will be purchases from or sales to Merrill Lynch of
securities in transactions in which it acts as principal. An exemptive order has
been obtained that permits the Funds to effect principal transactions with
Merrill Lynch in high quality, short-term, tax-exempt securities subject to
conditions set forth in such order. The Funds may consider in the future
requesting an order permitting other principal transactions with Merrill Lynch,
but there can be no assurance that such application will be made and, if made,
that such order would be granted.
Rating Agency Guidelines
Each Fund intends that, so long as shares of its AMPS are outstanding, the
composition of its portfolio will reflect guidelines established by Moody's and
S&P in connection with the Fund's receipt of a rating for such shares on or
prior to their date of original issue of at least "aaa" from Moody's and AAA
from S&P. Moody's and S&P, which are nationally recognized statistical rating
organizations, issue ratings for various securities reflecting the perceived
creditworthiness of such securities. The guidelines for rating AMPS have been
developed by Moody's and S&P in connection with issuances of asset-backed and
similar securities, including debt obligations and variable rate preferred
shares, generally on a case-by-case basis through discussions with the issuers
of these securities. The guidelines are designed to ensure that assets
underlying outstanding debt or preferred shares will be varied sufficiently and
will be of sufficient quality and amount to justify investment grade ratings.
The guidelines do not have the force of law but have been adopted by each Fund
in order to satisfy current requirements necessary for Moody's and S&P to issue
the above-described ratings for shares of AMPS, which ratings generally are
relied upon by institutional investors in purchasing such securities. The
guidelines provide a set of tests for portfolio composition and asset coverage
that supplement (and in some cases are more restrictive than) the applicable
requirements under the Investment Company Act.
Each Fund may, but is not required to, adopt any modifications to these
guidelines that hereafter may be established by Moody's or S&P. Failure to adopt
any such modifications, however, may result in a change in the ratings described
above or a withdrawal of the ratings altogether. In addition, any rating agency
providing a rating for the shares of AMPS, at any time, may change or withdraw
any such rating. As set forth in the Certificate of Designation of each Fund,
the Board of Trustees, without share approval, may modify certain definitions or
restrictions that have been adopted by the Fund pursuant to the rating agency
guidelines, provided the Board of Trustees has obtained written confirmation
from Moody's and S&P that any such change would not
29
<PAGE>
impair the ratings then assigned by Moody's and S&P to the AMPS. See "The
Reorganization--Risk Factors and Special Considerations--Ratings
Considerations."
For so long as any shares of a Fund's AMPS are rated by Moody's or S&P, as
the case may be, a Fund's use of options and financial futures contracts and
options thereon will be subject to certain limitations mandated by the rating
agencies.
Portfolio Composition
There are small differences in concentration among the categories of
issuers of the Florida Municipal Bonds and Municipal Bonds held in the
portfolios of the Funds. As of August 31, 1999, for MuniYield Florida, the
highest concentration of Florida Municipal Bonds and Municipal Bonds was in
Water and Sewer Utilities, Transportation and Other Revenue Bonds accounting for
17%, 16%, and 14% of the Fund's portfolio, respectively and for MuniVest
Florida, the highest concentration was in Industrial Revenue Pollution Control,
Hospitals/Healthcare and Transportation accounting for 21%, 14% and 13% of the
Fund's portfolio, respectively.
Although the investment portfolios of both Funds must satisfy the same
standards of credit quality (except that MuniVest Florida may invest up to 25%
of its assets in "junk bonds"), the actual securities owned by each Fund are
different, as a result of which there are certain differences in the composition
of the two investment portfolios. The tables below set forth rating information
for the Florida Municipal Bonds and Municipal Bonds held by each Fund, as of a
certain date. After the Reorganization, the surviving fund, MuniYield Florida,
will have 0% of its assets in bonds rated below BBB/Baa.
MuniYield Florida
As of August 31, 1999, approximately 96% of the market value of MuniYield
Florida's portfolio was invested in long-term municipal obligations and
approximately 4% of the market value of MuniYield Florida's portfolio was
invested in short-term municipal obligations. The following table sets forth
certain information with respect to the composition of MuniYield Florida's
long-term municipal obligation investment portfolio as of August 31, 1999.
Number of Value
S&P* Moody's* Issues (in thousands) Percent
- ----- --------- ---------- ------------ -------
AAA Aaa 45 $125,468 79.8%
AA Aa 2 5,873 3.7
A A 2 15,729 10.0
BBB Baa 2 4,228 2.7
NR NR 1 5,975 3.8
---------- ------------ -------
TOTAL 52 $157,273 100.0%
========== ============ =======
- ----------
* Ratings: Using the higher of S&P's or Moody's rating on the Fund's
municipal obligations, S&P's rating categories may be modified further by
a plus (+) or minus (-) in Aa, A and BBB, ratings. Moody's rating
categories may be modified further by a 1, 2 or 3 in Aa, A and Baa
ratings. See Exhibit V --"Ratings of Municipal Bonds."
MuniVest Florida
As of August 31, 1999, approximately 95% of the market value of MuniVest
Florida's portfolio was invested in long-term municipal obligations and
approximately 5% of the market value of MuniVest Florida's portfolio was
invested in short-term municipal obligations. The following table sets forth
certain information with respect to the composition of MuniVest Florida's
long-term municipal obligation investment portfolio as of August 31, 1999.
Number of Value
S&P* Moody's* Issues (in thousands) Percent
- ----- --------- ---------- ------------ -------
AAA Aaa 31 $84,880 77.1%
AA Aa 5 13,002 11.8
A A 2 4,595 4.2
BBB Baa 3 7,590 6.9
---------- ------------ -------
TOTAL 41 $110,067 100.0%
========== ============ =======
- ----------
* Ratings: Using the higher of S&P's or Moody's rating on the Fund's
municipal obligations, S&P's rating categories may be modified further by
a plus (+) or minus (-) in AA, A and BBB ratings. Moody's rating
categories may be modified further by a 1, 2 or 3 in Aa, A and Baa,
ratings. See Exhibit V --"Ratings of Municipal Bonds."
30
<PAGE>
Portfolio Transactions
The procedures for engaging in portfolio transactions are the same for
each of the Funds. Subject to policies established by the Board of Trustees of
each Fund, FAM is primarily responsible for the execution of each Fund's
portfolio transactions. In executing such transactions, FAM seeks to obtain the
best results for each Fund, taking into account such factors as price (including
the applicable brokerage commission or dealer spread), size of order, difficulty
of execution and operational facilities of the firm involved and the firm's risk
in positioning a block of securities. While FAM generally seeks reasonably
competitive commission rates, the Funds do not necessarily pay the lowest
commission or spread available.
Neither Fund has any obligation to deal with any broker or dealer in the
execution of transactions in portfolio securities. Subject to obtaining the best
price and execution, securities firms that provide supplemental investment
research to FAM, including Merrill Lynch, may receive orders for transactions by
a Fund. Information so received will be in addition to, and not in lieu of, the
services required to be performed by FAM under its investment advisory
agreements with the Funds, and the expenses of FAM will not necessarily be
reduced as a result of the receipt of such supplemental information.
Each Fund invests in securities that are primarily traded in the
over-the-counter markets, and each Fund normally deals directly with the dealers
who make markets in the securities involved, except in those circumstances where
better prices and execution are available elsewhere. Under the Investment
Company Act, except as permitted by exemptive order, persons affiliated with a
Fund are prohibited from dealing with the Fund as principals in the purchase and
sale of securities. Since transactions in the over-the-counter markets usually
involve transactions with dealers acting as principals for their own account,
the Funds do not deal with affiliated persons, including Merrill Lynch and its
affiliates, in connection with such transactions, except that, pursuant to an
exemptive order obtained by FAM, a Fund may engage in principal transactions
with Merrill Lynch in high quality, short-term, tax-exempt securities. An
affiliated person of a Fund may serve as its broker in over-the-counter
transactions conducted on an agency basis.
The Funds also may purchase tax-exempt debt instruments in individually
negotiated transactions with the issuers. Because an active trading market may
not exist for such securities, the prices that the Funds may pay for these
securities or receive on their resale may be lower than that for similar
securities with a more liquid market.
The Board of Trustees of each Fund has considered the possibility of
recapturing for the benefit of the Funds brokerage commissions, dealer spreads
and other expenses of possible portfolio transactions, such as underwriting
commissions, by conducting portfolio transactions through affiliated entities,
including Merrill Lynch. For example, brokerage commissions received by Merrill
Lynch could be offset against the investment advisory fees paid by the Fund to
FAM. After considering all factors deemed relevant, the Trustees of each Fund
made a determination not to seek such recapture. The Trustees will reconsider
this matter from time to time.
Periodic auctions are conducted for the AMPS of each of the Funds by the
Auction Agent for the Funds. The auctions require the participation of one or
more broker-dealers, each of whom enters into an agreement with the Auction
Agent. After each auction, the Auction Agent pays a service charge, from funds
provided by the issuing Fund, to each broker-dealer at the annual rate of .25%,
calculated on the basis of the purchase price of shares of the relevant AMPS
placed by such broker-dealer at such auction.
Portfolio Turnover
Generally, neither Fund purchases securities for short-term trading
profits. However, any of the Funds may dispose of securities without regard to
the time that they have been held when such action, for defensive or other
reasons, appears advisable to FAM. (The portfolio turnover rate is calculated by
dividing the lesser of purchases or sales of portfolio securities for the
particular fiscal year by the monthly average of the value of the portfolio
securities owned by a Fund during the particular fiscal year. For purposes of
determining this rate, all securities whose maturities at the time of
acquisition are one year or less are excluded.) A high portfolio turnover rate
results in greater transaction costs, which are borne directly by the Fund, and
also has certain tax consequences for shareholders. The portfolio turnover rate
for each of the Funds for the periods indicated is set forth below:
31
<PAGE>
MuniYield Florida
Six Months Ended
Year Ended Year Ended April 30, 1999
10/31/97 10/31/98 (unaudited)
----------------- ----------------- -----------------------
107.09% 92.25% 55.52%
MuniVest Florida
Six Months Ended
Year Ended Year Ended April 30, 1999
10/31/97 10/31/98 (unaudited)
----------------- ----------------- -----------------------
89.21% 92.75% 46.54%
Net Asset Value
The net asset value per Common Share of each Fund is determined after the
close of business on the NYSE (generally, 4:00 p.m., Eastern time) on the last
business day in each week. For purposes of determining the net asset value of a
Common Share of each Fund, the value of the securities held by the Fund plus any
cash or other assets (including interest accrued but not yet received) minus all
liabilities (including accrued expenses) and the aggregate liquidation value of
the outstanding shares of AMPS is divided by the total number of Common Shares
outstanding at such time. Expenses, including the fees payable to FAM, are
accrued daily.
The Florida Municipal Bonds and Municipal Bonds in which each Fund invests
are traded primarily in the over-the-counter markets. In determining net asset
value, each Fund uses the valuations of portfolio securities furnished by a
pricing service approved by its Board of Trustees. The pricing service typically
values portfolio securities at the bid price or the yield equivalent when
quotations are readily available. Florida Municipal Bonds and Municipal Bonds
for which quotations are not readily available are valued at fair market value
on a consistent basis as determined by the pricing service using a matrix system
to determine valuations. The procedures of the pricing service and its
valuations are reviewed by the officers of each Fund under the general
supervision of the Board of Trustees of the Fund. The Board of Trustees of each
Fund has determined in good faith that the use of a pricing service is a fair
method of determining the valuation of portfolio securities. Obligations with
remaining maturities of 60 days or less are valued at amortized cost, unless
this method no longer produces fair valuations. Positions in futures contracts
are valued at closing prices for such contracts established by the exchange 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 of each Fund.
Each Fund determines and makes available for publication the net asset
value of its Common Shares weekly. Currently, the net asset values of shares of
publicly traded closed-end investment companies investing in debt securities are
published in Barron's, the Monday edition of The Wall Street Journal, and the
Monday and Saturday editions of The New York Times.
Capital Shares
Each of the Funds has outstanding both Common Shares and AMPS. The Common
Shares of each of the Funds are traded on the NYSE. MuniYield Florida Common
Shares commenced trading on the NYSE on February 28, 1992. As of September 30,
1999, the net asset value per share of MuniYield Florida Common Shares was
$13.59 and the market price per share was $12.00. MuniVest Florida Common Shares
commenced trading on the NYSE on April 30, 1993. As of September 30, 1999, the
net asset value per share of MuniVest Florida Common Shares was $12.67 and the
market price per share was $11.50.
Each Fund is authorized to issue unlimited number of shares of beneficial
interest. The Board of Trustees of each Fund may authorize separate classes of
shares together with such designation or preferences, rights, voting powers,
restrictions, limitations, qualifications, or terms as may be determined from
time by the Trustees. Pursuant to such authority, the Trustees have authorized
the issuance of an unlimited number of Common Shares together with 1,000,000
preferred shares of beneficial interest. In connection with each respective
Fund's offering of AMPS, MuniYield Florida designated 2,200 preferred shares of
beneficial interest as AMPS and MuniVest Florida designated 1,600 preferred
shares of beneficial interest at AMPS.
The Funds are entities of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a trust may,
under certain circumstances, be held personally liable as
32
<PAGE>
partners for its obligations. However, the Declaration of Trust of each of the
Funds contains an express disclaimerof shareholder liability for acts or
obligations of that Fund and provides for indemnification and reimbursement of
expense out of that Fund's property for any shareholder held personally liable
for the obligations of that Fund. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Fund itself would be unable to meet its obligations. Given the
nature of the Funds' assets and operations, the possibility of a Fund being
unable to meet its obligations is remote and, in the opinion of Massachusetts
counsel to the Fund, the risk to a Fund's shareholders is remote.
The Declaration of Trust of each Fund further provides that no Trustee,
officer, employee or agent of that Fund is liable to that Fund or to any
shareholder, nor is any Trustee, officer, employee or agent liable to any third
persons in connection with the affairs of that Fund, except as such liability
may arise from his or her own bad faith, willful misfeasance, gross negligence,
or reckless disregard of their duties. It also provides that all third persons
shall look solely to the Funds' property for satisfaction of claims arising in
connection with the affairs of each Fund. With the exceptions stated, the
Declaration of Trust of each Fund provides that a Trustee, officer, employee or
agent is entitled to be indemnified against all liability in connection with the
affairs of that Fund.
Common Shares
Holders of each Fund's Common Shares are entitled to share equally in
dividends declared by the Fund's Board of Trustees payable to holders of the
Common Shares and in the net assets of the Fund available for distribution to
holders of the Common Shares after payment of the preferential amounts payable
to holders of any outstanding preferred shares. See "Voting Rights" and
"Liquidation Rights of Holders of AMPS" below. Holders of a Fund's Common Shares
do not have preemptive or conversion rights and shares of a Fund's Common Shares
are not redeemable. The outstanding Common Shares of each Fund are fully paid
and nonassessable.
So long as any shares of a Fund's AMPS or any other preferred shares are
outstanding, holders of the Fund's Common Shares will not be entitled to receive
any dividends of or other distributions from the Fund unless all accumulated
dividends on outstanding shares of the Fund's AMPS and any other preferred
shares have been paid, and unless asset coverage (as defined in the Investment
Company Act) with respect to such AMPS and any other preferred shares would be
at least 200% after giving effect to such distributions.
Preferred Shares
The AMPS of each of the Funds have a similar structure. The AMPS of each
Fund are preferred shares of the Fund that entitle their holders to receive
dividends when, as and if declared by the Board of Trustees, out of funds
legally available therefor, at a rate per annum that may vary for the successive
dividend periods. The AMPS of both Funds have liquidation preferences of $25,000
per share; none of the Fund's AMPS are traded on any stock exchange or
over-the-counter. Each Fund's AMPS can be purchased at an auction or through
broker-dealers who maintain a secondary market in the AMPS.
Auctions generally have been held and will be held every seven days for
the AMPS of each of the Funds, unless the applicable Fund elects, subject to
certain limitations, to declare a special dividend period. The following table
provides information about the dividend rates for AMPS of each of the Funds as
of a recent auction.
Dividend
Auction Date Fund Rate
--------------- ------------------- --------------
October 20, 1999 MuniYield Florida 3.50%
October 21, 1999 MuniVest Florida 3.40%
Under the Investment Company Act, each Fund is permitted to have
outstanding more than one series of preferred shares as long as no single series
has priority over another series as to the distribution of assets of the Fund or
the payment of dividends. Holders of a Fund's preferred shares do not have
preemptive rights to purchase any shares of AMPS or any other preferred shares
that might be issued. The net asset value per share of a Fund's AMPS equals its
liquidation preference plus accumulated dividends per share.
The redemption provisions pertaining to the AMPS of each Fund are
substantially similar. It is anticipated that shares of AMPS of each Fund will
generally be redeemable at the option of the Fund at a price equal to their
liquidation preference of $25,000 per share plus accumulated but unpaid
dividends (whether or not earned or
33
<PAGE>
declared) to the date of redemption plus, under certain circumstances, a
redemption premium. Shares of AMPS will also be subject to mandatory redemption
at a price equal to their liquidation preference plus accumulated but unpaid
dividends (whether or not earned or declared) to the date of redemption upon the
occurrence of certain specified events, such as the failure of the Fund to
maintain the asset coverage for the AMPS specified by Moody's and S&P in
connection with their issuance of ratings on the AMPS.
Certain Provisions of the Declaration of Trust
Each Fund's Declaration of Trust includes provisions that could have the
effect of limiting the ability of other entities or persons to acquire control
of the Fund or to change the composition of its Board of Trustees and could have
the effect of depriving shareholders of an opportunity to sell their shares at a
premium over prevailing market prices by discouraging a third party from seeking
to obtain control of the Fund. A Trustee may be removed from office with or
without cause by vote of the holders of at least 66 2/3% of the votes entitled
to be voted on the matter. A Trustee elected by all of the holders of shares of
beneficial interest may be removed only by action of such holders, and a Trustee
elected by the holders of AMPS and any other preferred shares may be removed
only by action of the holders of AMPS and any other preferred shares.
In addition, the Declaration of Trust of each Fund requires the favorable
vote of the holders of at least 66 2/3% of all of the Fund's capital shares,
then entitled to be voted, voting as a single class, to approve, adopt or
authorize the following:
o a merger or consolidation or statutory share exchange of the Fund
with any other corporation or entity,
o a sale of all or substantially all of the Fund's assets (other than
in the regular course of the Fund's investment activities), or
o a liquidation or dissolution of the Fund,
unless such action has been approved, adopted or authorized by the affirmative
vote of at least two-thirds of the total number of Trustees fixed in accordance
with the by-laws, in which case the affirmative vote of a majority of all of the
votes entitled to be cast by shareholders of the Fund, voting as a single class,
is required. Such approval, adoption or authorization of the foregoing also
would require the favorable vote of at least a majority of the Fund's preferred
shares then entitled to be voted thereon, including the AMPS, voting as a
separate class, where such action would adversely affect the rights of holders
of preferred shares.
In addition, conversion of a Fund to an open-end investment company would
require an amendment to the Fund's Declaration of Trust. The amendment would
have to be declared advisable by the Board of Trustees prior to its submission
to shareholders. Such an amendment would require the affirmative vote of the
holders of at least 66 2/3% of the Fund's outstanding shares (including the AMPS
and any other preferred shares) entitled to be voted on the matter, voting as a
single class (or a majority of such shares if the amendment was previously
approved, adopted or authorized by at least two-thirds of the total number of
Trustees fixed in accordance with the by-laws), and the affirmative vote of at
least a majority of outstanding preferred shares of a Fund (including the AMPS),
voting as a separate class. Such a vote also would satisfy a separate
requirement in the Investment Company Act that the change be approved by the
shareholders. Shareholders of an open-end investment company may require the
company to redeem their shares of common stock at any time (except in certain
circumstances as authorized by or under the Investment Company Act) at their net
asset value, less such redemption charge, if any, as might be in effect at the
time of a redemption. All redemptions will be made in cash. If the Fund is
converted to an open-end investment company, it could be required to liquidate
portfolio securities to meet requests for redemption and the Common Shares no
longer would be listed on a stock exchange. Conversion to an open-end investment
company would also require redemption of all outstanding preferred shares
(including the AMPS) and would require changes in certain of the Fund's
investment policies and restrictions, such as those relating to the issuance of
senior securities, the borrowing of money and the purchase of illiquid
securities.
The Board of Trustees of each Fund has determined that the 66 2/3% voting
requirements described above, which are greater than the minimum requirements
under Massachusetts law or the Investment Company Act, are in the best interests
of shareholders generally. Reference should be made to the Declaration of Trust
of each Fund on file with the SEC for the full text of these provisions.
34
<PAGE>
Management of the Funds
Trustees and Officers. The Board of Trustees of MuniVest Florida currently
consists of nine persons, seven of whom are not "interested persons," as defined
in the Investment Company Act. The Board of Trustees of MuniYield Florida
currently consists of seven persons, five of whom are not "interested persons,"
as defined in the Investment Company Act. Terry K. Glenn serves as a Trustee and
President of each of the Funds, and Arthur Zeikel serves as a Trustee of each of
the Funds. The Trustees of each Fund are responsible for the overall supervision
of the operations of the Fund and perform the various duties imposed on the
directors of investment companies by the Investment Company Act and under
applicable Massachusetts law. The Funds have the same slate of officers with a
few exceptions. For further information regarding the Trustees and officers of
each Fund, see Exhibit I -- "Information Pertaining to Each Fund."
William R. Bock serves as the portfolio manager for MuniYield Florida and
MuniVest Florida. Mr. Bock will continue to serve as the portfolio manager of
the combined fund after the Reorganization. The portfolio manager is primarily
responsible for the management of the applicable Fund's portfolio. Biographical
information about Mr. Bock is contained in Exhibit I -- "Information Pertaining
to Each Fund."
Management and Advisory Arrangements. FAM, which is owned and controlled
by ML & Co., serves as the investment adviser for each of the Funds pursuant to
separate investment advisory agreements that, except for their termination
dates, are identical. FAM provides each Fund with the same investment advisory
and management services. The Asset Management Group of ML & Co. (which includes
FAM) acts as the investment adviser to more than 100 registered investment
companies and offers services to individuals and institutional accounts. As of
September 1999, the Asset Management Group of ML &Co. had a total of
approximately $514 billion in investment company and other portfolio assets
under management (approximately $38.5 billion of which were invested in
municipal securities). This amount includes assets managed for certain
affiliates of FAM. FAM is a limited partnership, the partners of which are ML &
Co. and Princeton Services, Inc. FAM was organized as an investment adviser in
1977 and offers investment advisory services to more than 50 registered
investment companies. The principal business address of FAM is 800 Scudders Mill
Road, Plainsboro, New Jersey 08536.
Each Fund's investment advisory agreement with FAM provides that, subject
to the supervision of the Board of Trustees of the Fund, FAM is responsible for
the actual management of the Fund's portfolio. The responsibility for making
decisions to buy, sell or hold a particular security for each Fund rests with
FAM, subject to review by the Board of Trustees of the Fund.
FAM provides the portfolio management for each of the Funds. Such
portfolio management considers analyses from various sources (including
brokerage firms with which each Fund does business), makes the necessary
investment decisions, and places orders for transactions accordingly. FAM also
is responsible for the performance of certain administrative and management
services for each Fund.
For the services provided by FAM under each Fund's investment advisory
agreement, the Fund pays a monthly fee at an annual rate of .50 of 1% of the
Fund's average weekly net assets (i.e., the average weekly value of the total
assets of the Fund, including assets acquired from the sale of preferred shares,
minus the sum of accrued liabilities of the Fund and accumulated dividends on
its shares of preferred shares). For purposes of this calculation, average
weekly net assets are determined at the end of each month on the basis of the
average net assets of the Fund for each week during the month. The assets for
each weekly period are determined by averaging the net assets at the last
business day of a week with the net assets at the last business day of the prior
week.
Each Fund's investment advisory agreement obligates FAM to provide
investment advisory services and to pay all compensation of and furnish office
space for officers and employees of the Fund connected with investment and
economic research, trading and investment management of the Fund, as well as the
compensation of all Trustees of the Fund who are affiliated persons of FAM or
any of its affiliates. Each Fund pays all other expenses incurred in the
operation of the Fund, including, among other things, expenses for legal and
auditing services, taxes, costs of printing proxies, listing fees, share
certificates and shareholder reports, charges of the custodian and the transfer
agent, dividend disbursing agent and registrar, fees and expenses with respect
to the issuance of AMPS, SEC fees, fees and expenses of unaffiliated Trustees,
accounting and pricing costs, insurance, interest, brokerage costs, litigation
and other extraordinary or non-recurring expenses, mailing and other expenses
properly payable by the Fund. FAM provides accounting services to each Fund, and
each Fund reimburses FAM for its respective costs in connection with such
services.
35
<PAGE>
Unless earlier terminated as described below, the investment advisory
agreement between each Fund and FAM will continue from year to year if approved
annually (a) by the Board of Trustees of the Fund or by a majority of the Fund's
outstanding Common Shares and AMPS, voting together as a single class, and (b)
by a majority of the Trustees of the Fund who are not parties to such contract
or "interested persons," as defined in the Investment Company Act, of any such
party. The contract is not assignable and it may be terminated without penalty
on 60 days' written notice at the option of either party thereto or by the vote
of the shareholders of the Fund.
Securities held by a Fund may also be held by, or be appropriate
investments for, other funds or investment advisory clients for which FAM or its
affiliates act as an adviser. Because of different objectives or other factors,
a particular security may be bought for an advisory client when other clients
are selling the same security. If purchases or sales of securities by FAM for a
Fund or other funds for which it acts as investment adviser or for advisory
clients arise for consideration at or about the same time, transactions in such
securities will be made, insofar as feasible, for the respective funds and
clients in a manner deemed equitable to all. Transactions effected by FAM (or
its affiliates) on behalf of more than one of its clients during the same period
may increase the demand for securities being purchased or the supply of
securities being sold, causing an adverse effect on price.
Code of Ethics
The Board of Trustees of each of the Funds has adopted a Code of Ethics
pursuant to Rule 17j-1 under the Investment Company Act that incorporates the
Code of Ethics of FAM (together, the "Codes"). The Codes significantly restrict
the personal investing activities of all employees of FAM and, as described
below, impose additional, more onerous, restrictions on Fund investment
personnel.
The Codes require that all employees of FAM preclear any personal
securities investment (with limited exceptions, such as U.S. Government
securities). The preclearance requirement and associated procedures are designed
to identify any substantive prohibition or limitation applicable to the proposed
investment. The substantive restrictions applicable to all employees of FAM
include a ban on acquiring any securities in a "hot" initial public offering and
a prohibition from profiting on short-term trading securities. In addition, no
employee may purchase or sell any security that at the time is being purchased
or sold (as the case may be), or to the knowledge of the employee is being
considered for purchase or sale, by any fund advised by FAM. Furthermore, the
Codes provide for trading "blackout periods" that prohibit trading by investment
personnel of each of the Funds within periods of trading by the Fund in the same
(or equivalent) security (15 or 30 days depending upon the transaction).
Voting Rights
Voting rights are identical for the holders of each Fund's Common Shares.
Holders of each Fund's Common Shares are entitled to one vote for each share
held and will vote with the holders of any outstanding shares of the Fund's AMPS
or other preferred shares on each matter submitted to a vote of holders of
Common Shares, except as set forth below.
Voting rights of the holders of each Fund's AMPS are identical. Except as
otherwise indicated below, and except as otherwise required by applicable law,
holders of shares of a Fund's AMPS will be entitled to one vote per share on
each matter submitted to a vote of the Fund's shareholders and will vote
together with the holders of the Fund's Common Shares as a single
class.
The Common Shares, AMPS and any other preferred shares of each of the
Fund's do not have cumulative voting rights, which means that the holders of
more than 50% of a Fund's Common Shares, AMPS and any other preferred shares
voting for the election of Trustees can elect all of the Trustees standing for
election by such holders, and, in such event, the holders of the Fund's
remaining Common shares, AMPS and any other preferred shares will not be able to
elect any of such Trustees.
In connection with the election of a Fund's Trustees, holders of a Fund's
AMPS, voting separately as a class, shall be entitled at all times to elect two
of the Fund's Trustees, and the remaining Trustees will be elected by holders of
the Fund's Common Shares and AMPS and any other preferred shares, voting
together as a single class. In addition, if at any time dividends on a Fund's
outstanding AMPS shall be unpaid in an amount equal to at least two full years'
dividends thereon or if at any time holders of any of a Fund's preferred shares
are entitled, together with the holders of the Fund's AMPS, to elect a majority
of the Trustees of the Fund under the Investment Company Act, then the number of
Trustees constituting the Board of Trustees automatically shall be
36
<PAGE>
increased by the smallest number that, when added to the two Trustees elected
exclusively by the holders of AMPS and any other preferred shares as described
above, would constitute a majority of the Board of Trustees as so increased by
such smallest number, and at a special meeting of shareholders which will be
called and held as soon as practicable, and at all subsequent meetings at which
Trustees are to be elected, the holders of the Fund's AMPS and any other
preferred shares, voting separately as a class, will be entitled to elect the
smallest number of additional Trustees that, together with the two Trustees
which such holders in any event will be entitled to elect, constitutes a
majority of the total number of Trustees of the Fund as so increased. The terms
of office of the persons who are Trustees at the time of that election will
continue. If the Fund thereafter shall pay, or declare and set apart for payment
in full, all dividends payable on all outstanding shares of AMPS and any other
preferred shares for all past dividend periods, the additional voting rights of
the holders of AMPS and any other preferred shares as described above shall
cease, and the terms of office of all of the additional Trustees elected by the
holders of AMPS and any other preferred stock (but not of the Trustees with
respect to whose election the holders of Common Shares were entitled to vote or
the two Trustees the holders of AMPS and any other preferred shares have the
right to elect in any event) will terminate automatically.
The affirmative vote of the holders of a majority of the Fund's AMPS,
voting as a separate class, will be required to (i) authorize, create or issue,
or increase the authorized or issued amount of, any class or series of preferred
shares ranking prior to or on a parity with any series of preferred shares with
respect to payment of dividends or the distribution of assets on liquidation,
(ii) amend, alter or repeal the provisions of the Declaration of Trust, whether
by merger, consolidation or otherwise, so as to adversely affect any of the
contract rights expressly set forth in the Declaration of Trust of holders of
preferred shares (iii) approve any plan of reorganization adversely affecting
such AMPS or (iv) take any action to change a Fund's investment policies
requiring a vote of shareholders under section 13(a) of the Investment Company
Act.
Shareholder Inquiries
Shareholder inquiries with respect to any of the Funds may be addressed to
such Fund by telephone at (609) 282-2800 or at the address set forth on the
cover page of this Proxy Statement and Prospectus.
Dividends and Distributions
The Funds' current policies with respect to dividends and distributions
relating to their Common Shares are identical. Each Fund intends to distribute
all or a portion of its net investment income monthly to holders of a Fund's
Common Shares. Monthly distributions to holders of a Fund's Common Shares
normally consist of all or a portion of its net investment income remaining
after the payment of dividends (and any Additional Distribution) on the Fund's
AMPS. A Fund may at times pay out less than the entire amount of net investment
income earned in any particular period and may at times pay out such accumulated
undistributed income in addition to net investment income earned in other
periods in order to permit the Fund to maintain a more stable level of dividends
to holders of Common Shares. As a result, the dividend paid by a Fund to holders
of its Common Shares for any particular period may be more or less than the
amount of net investment income earned by the Fund during such period. For
Federal tax purposes, the Fund is required to distribute substantially all of
its net investment income for each year. All net realized long-term or
short-term capital gains, if any, are distributed pro rata at least annually to
holders of shares of a Fund's Common Shares and AMPS. While any shares of a
Fund's AMPS are outstanding, the Fund may not declare any cash dividend or other
distribution on the Fund's Common Shares, unless at the time of such declaration
(1) all accumulated dividends on the Fund's AMPS, including any Additional
Distribution, have been paid, and (2) the net asset value of the Fund's
portfolio (determined after deducting the amount of such dividend or other
distribution) is at least 200% of the liquidation value of the Fund's
outstanding shares of AMPS. This limitation on a Fund's ability to make
distributions on its Common Shares under certain circumstances could impair the
ability of the Fund to maintain its qualification for taxation as a regulated
investment company, which would have adverse tax consequences for shareholders.
See "Comparison of the Funds -- Tax Rules Applicable to the Funds and their
Shareholders."
Similarly, the Funds' current policies with respect to dividends and
distributions on shares of their AMPS are identical. The holders of shares of a
Fund's AMPS are entitled to receive, when, as and if declared by the Board of
Trustees of the Fund, out of funds legally available therefor, cumulative cash
dividends on their shares. Dividends on a Fund's shares of AMPS so declared and
payable shall be paid (i) in preference to and in priority over any dividends so
declared and payable on the Fund's 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 Fund's investments. Dividends
37
<PAGE>
for each Fund's AMPS are paid through The Depository Trust Company ("DTC") (or a
successor securities depository) on each dividend payment date. DTC's normal
procedures now provide for it to distribute dividends in same-day funds to agent
members, who in turn are expected to distribute such dividends to the person for
whom they are acting as agent in accordance with the instructions of such
person. Prior to each dividend payment date, the relevant Fund is required to
deposit with the Auction Agent sufficient funds for the payment of such declared
dividends. None of the Funds intends to establish any reserves for the payment
of dividends, and no interest will be payable in respect of any dividend payment
or payment on the shares of a Fund's AMPS which may be in arrears.
Dividends paid by each Fund, to the extent paid from tax-exempt income
earned on Municipal Bonds, are exempt from Federal income taxes subject to the
possible application of the Federal alternative minimum tax. However, each Fund
is required to allocate net capital gains and other income subject to regular
Federal income taxes, if any, proportionately between shares of its Common
Shares and shares of its AMPS in accordance with the current position of the IRS
described herein. See "Tax Rules Applicable to the Funds and their Shareholders"
below. Each Fund notifies the Auction Agent of the amount of any net capital
gains or other taxable income to be included in any dividend on shares of AMPS
prior to the auction establishing the applicable rate for such dividend. The
Auction Agent in turn notifies each broker-dealer whenever it receives any such
notice from a Fund, and each broker-dealer then notifies its customers who are
holders of the Fund's AMPS. Each Fund also may include such income in a dividend
on shares of its AMPS without giving advance notice thereof if it increases the
dividend by an additional amount to offset the tax effect thereof. The amount of
taxable income allocable to shares of a Fund's AMPS will depend upon the amount
of such income realized by the Fund and other factors, but generally is not
expected to be significant.
For information concerning the manner in which dividends and distributions
to holders of each Fund's Common Shares may be reinvested automatically in
shares of the Fund's Common Shares, see "Automatic Dividend Reinvestment Plan"
below. Dividends and distributions will be subject to the tax treatment
discussed below, whether they are reinvested in shares of a Fund or received in
cash.
If either Fund retroactively allocates any net capital gains or other
income subject to regular Federal income taxes to shares of its AMPS without
having given advance notice thereof as described above, which only may happen
when such allocation is made as a result of the redemption of all or a portion
of the outstanding shares of its AMPS or the liquidation of the Fund, the Fund
will make certain payments to holders of shares of its AMPS to which such
allocation was made to offset substantially the tax effect thereof. In no other
instances will the Fund be required to make payments to holders of shares of its
AMPS to offset the tax effect of any reallocation of net capital gains or other
taxable income.
Automatic Dividend Reinvestment Plan
Pursuant to each Fund's Automatic Dividend Reinvestment Plan (each, a
"Plan"), unless a holder of a Fund's Common Shares elects otherwise, all
dividend and capital gains distributions are automatically reinvested by The
Bank of New York, as agent for shareholders in administering the Plan (as
applicable, the "Plan Agent"), in additional shares of the Fund's Common Shares.
The Bank of New York will be the Plan Agent following the Reorganization.
Holders of a Fund's Common Shares who elect not to participate in the Plan
receive all distributions in cash paid by check mailed directly to the
shareholder of record (or, if the shares are held in street or other nominee
name, then to such nominee) by The Bank of New York as dividend paying agent.
Such shareholders may elect not to participate in the Plan and to receive all
distributions of dividends and capital gains in cash by sending written
instructions to The Bank of New York, as dividend paying agent, at the address
set forth below. Participation in the Plan is completely voluntary and may be
terminated or resumed at any time without penalty by written notice if received
by the Plan Agent not less than ten days prior to any dividend record date;
otherwise, such termination or resumption will be effective with respect to any
subsequently declared dividend or capital gains distribution.
Whenever a Fund declares an ordinary income dividend or a capital gain
dividend (collectively referred to as "dividends") payable either in shares or
in cash, non-participants in the Plan receive cash, and participants in the Plan
receive the equivalent in shares of the Fund's Common Shares. The shares are
acquired by the Plan Agent for the participant's account, depending upon the
circumstances described below, either (i) through receipt of additional unissued
but authorized Common Shares from the Fund ("newly-issued shares") or (ii) by
purchase of outstanding Common Shares on the open market ("open-market
purchases"), on the NYSE or elsewhere. If
38
<PAGE>
on the payment date for the dividend, the net asset value per share of the
Fund's Common Shares is equal to or less than the market price per share of the
Fund's Common Shares plus estimated brokerage commissions (such condition being
referred to herein as "market premium"), the Plan Agent invests the dividend
amount in newly-issued shares on behalf of the participant. The number of
newly-issued Common Shares of the Fund to be credited to the participant's
account is determined by dividing the dollar amount of the dividend by the net
asset value per share on the date the shares are issued, provided that the
maximum discount from the then-current market price per share on the date of
issuance may not exceed 5%. If on the dividend payment date, the net asset value
per share is greater than the market value (such condition being referred to
herein as "market discount"), the Plan Agent invests the dividend amount in
shares acquired on behalf of the participant in open-market purchases.
In the event of a market discount on the dividend payment date, the Plan
Agent has until the last business day before the next date on which the shares
trade on an "ex-dividend" basis or in no event more than 30 days after the
dividend payment date (the "last purchase date") to invest the dividend amount
in shares acquired in open-market purchases. Each Fund intends to pay monthly
income dividends. Therefore, the period during which open-market purchases can
be made exists only from the payment date on the dividend through the date
before the next "ex-dividend" date, which typically is approximately ten days.
If, before the Plan Agent has completed its open-market purchases, the market
price of a share of a Fund's Common Shares exceeds the net asset value per
share, the average per share purchase price paid by the Plan Agent may exceed
the net asset value of the Fund's shares, resulting in the acquisition of fewer
shares than if the dividend had been paid in newly-issued shares on the dividend
payment date. Because of the foregoing difficulty with respect to open-market
purchases, the Plan provides that if the Plan Agent is unable to invest the full
dividend amount in open-market purchases during the purchase period or if the
market discount shifts to a market premium during the purchase period, the Plan
Agent ceases making open-market purchases and invests the uninvested portion of
the dividend amount in newly-issued shares at the close of business on the last
purchase date.
The Plan Agent maintains all shareholders' accounts in the Plan and
furnishes written confirmation of all transactions in the account, including
information needed by shareholders for tax records. Shares in the account of
each Plan participant are held by the Plan Agent in non-certificated form in the
name of the participant, and each shareholder's proxy includes those shares
purchased or received pursuant to the Plan. The Plan Agent will forward all
proxy solicitation materials to participants and vote proxies for shares held
pursuant to the Plan in accordance with the instructions of the participants.
In the case of shareholders such as banks, brokers or nominees which hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
record shareholders as representing the total amount registered in the record
shareholder's name and held for the account of beneficial owners who are to
participate in the Plan.
There are no brokerage charges with respect to shares issued directly by
either Fund as a result of dividends or capital gains distributions payable
either in shares or in cash. However, each participant pays a pro rata share of
brokerage commissions incurred with respect to the Plan Agent's open-market
purchases in connection with the reinvestment of dividends.
The automatic reinvestment of dividends and distributions does not relieve
participants of any Federal, state or local income tax that may be payable (or
required to be withheld) on such dividends. See "Comparison of the Funds--Tax
Rules Applicable to the Funds and their Shareholders."
Shareholders participating in the Plan may receive benefits not available
to shareholders not participating in the Plan. If the market price (plus
commissions) of a Fund's Common Shares is higher than net asset value,
participants in the Plan receive the Fund's Common Shares at less than they
otherwise could purchase them and have shares with a cash value greater than the
value of any cash distribution they would have received on their shares. If the
market price plus commissions is less than net asset value, participants receive
distributions of shares with a net asset value greater than the value of any
cash distribution they would have received on their shares. However, there may
be insufficient shares available in the market to make distributions of shares
at prices below the net asset value. Also, since the Funds normally do not
redeem their shares, the price on resale may be more or less than the net asset
value. See "Comparison of the Funds -- Tax Rules Applicable to the Funds and
their Shareholders."
39
<PAGE>
Each Fund reserves the right to amend or terminate its Plan. There is no
direct service charge to participants in the Plan; however, each Fund reserves
the right to amend its Plan to include a service charge payable by the
participants.
After the Reorganization, a holder of shares of MuniVest Florida who has
elected to receive dividends in cash will continue to receive dividends in cash;
all other holders will have their dividends automatically reinvested in shares
of the combined fund. However, if a shareholder owns shares in MuniVest Florida
and in MuniYield Florida, after the Reorganization, the shareholder's election
with respect to the dividends of MuniYield will control unless the shareholder
specifically elects a different option at that time. Following the
Reorganization, all correspondence should be directed to the Plan Agent, The
Bank of New York, at 101 Barclay Street, New York, New York 10286.
Mutual Fund Investment Option
A holder of Common Shares of any Fund, who purchased his or her shares
through Merrill Lynch in the Fund's initial public offering, has the right to
reinvest the net proceeds from a sale of such shares in Class A shares of
certain Merrill Lynch-sponsored open-end funds without the imposition of an
initial sales charge, if certain conditions are satisfied. A holder of Common
Shares of MuniVest Florida who qualifies for this option will have the same
option with respect to the MuniYield Florida Common Shares received in the
Reorganization.
Liquidation Rights of Holders of AMPS
Upon any liquidation, dissolution or winding up of either Fund, whether
voluntary or involuntary, the holders of shares of the Fund's AMPS will be
entitled to receive, out of the assets of the Fund available for distribution to
shareholders, before any distribution or payment is made upon any of the Fund's
Common Shares or any other shares of beneficial interest of the Fund ranking
junior in right of payment upon liquidation to AMPS, $25,000 per share together
with the amount of any dividends accumulated but unpaid (whether or not earned
or declared) thereon to the date of distribution, and after such payment the
holders of AMPS will be entitled to no other payments except for any additional
dividends. If such assets of the Fund shall be insufficient to make the full
liquidation payment on the AMPS and liquidation payments on any other
outstanding class or series of preferred shares of the Fund ranking on a parity
with the AMPS as to payment upon liquidation, then such assets will be
distributed among the holders of shares of AMPS and the holders of shares of
such other class or series ratably in proportion to the respective preferential
amounts to which they are entitled. After payment of the full amount of
liquidation distribution to which they are entitled, the holders of shares of a
Fund's AMPS will not be entitled to any further participation in any
distribution of assets by the Fund except for any additional dividends. A
consolidation, merger or share exchange of a Fund with or into any other entity
or entities or a sale, whether for cash, shares, securities or properties, of
all or substantially all or any part of the assets of the Fund shall not be
deemed or construed to be a liquidation, dissolution or winding up of the Fund
for this purpose.
Tax Rules Applicable to the Funds and their Shareholders
The tax consequences of investing in Common Shares or AMPS of each of the
Funds are identical. Each of the Funds has elected and qualified for the special
tax treatment afforded RICs under the Code. As a result, in any taxable year in
which they distribute an amount equal to at least 90% of taxable net income and
90% of tax-exempt net income (see below), the Funds are not subject to Federal
income tax to the extent that they distribute their net investment income and
net realized capital gains. In all taxable years through the taxable year of the
Reorganization, each Fund has distributed substantially all of its income.
MuniYield Florida intends to continue to distribute substantially all of its
income following the Reorganization.
Each Fund is qualified to pay "exempt-interest dividends" as defined in
Section 852(b)(5) of the Code. Under such section, if, at the close of each
quarter of its taxable year, at least 50% of the value of a Fund's total assets
consists of obligations the interest on which is excludable from gross income
for Federal income tax purposes ("tax-exempt obligations") under Section 103(a)
of the Code (relating generally to obligations of a state or local governmental
unit), the Fund is qualified to pay exempt-interest dividends to its
shareholders. Exempt-interest dividends are dividends or any part thereof paid
by a Fund which are attributable to interest on tax-exempt obligations and
designated by the Fund as exempt-interest dividends in a written notice mailed
to shareholders within 60 days after the close of its taxable year. To the
extent that the dividends distributed to a Fund's shareholders are derived from
interest income exempt from Federal income tax under Code Section 103(a) and
40
<PAGE>
are properly designated as exempt-interest dividends, they are excludable from a
shareholder's gross income for Federal income tax purposes. Exempt-interest
dividends are included, however, in determining the portion, if any, of a
person's social security benefits and railroad retirement benefits subject to
Federal income taxes. Interest on indebtedness incurred or continued to purchase
or carry a Fund's shares is not deductible for Federal income tax purposes to
the extent attributable to exempt-interest dividends. A tax adviser should be
consulted with respect to whether exempt-interest dividends retain the exclusion
under Code Section 103(a) if a shareholder would be treated as a "substantial
user" or "related person" under Code Section 147(a) with respect to property
financed with the proceeds from an issue of "PABs or IDBs," if any, held by a
Fund.
Prior to July 1, 1999, shares similar to shares in the Funds were exempt
from Florida intangible personal property tax if the Fund's portfolio consisted
solely of assets exempt from the Florida intangible personal property tax. Under
this provision, each of the Funds received a ruling from the Florida Department
of Revenue that shares of that Fund are exempt from the Florida intangible
personal property tax in the following year, if, on the last day of any calendar
year, that Fund's assets consist solely of assets exempt from Florida intangible
personal property tax. Effective July 1, 1999, the Florida Legislature revised
this requirement so that a fund's shares will be exempt if at least 90% of the
net asset value of the portfolio of assets corresponding to the shares in the
fund is invested in assets that are exempt from the Florida intangible personal
property tax ("revised asset requirement"). The Funds will apply for a ruling
from the Florida Department of Revenue that if, on the last business day of any
calendar year, at least 90% of the net asset value of the portfolio of assets
corresponding to shares in the Funds is invested in assets that are exempt from
the tax, shares of the Fund owned by Florida residents will be exempt from the
Florida intangible personal property tax in the following year. Although there
is no assurance that the Florida Department of Revenue will issue a favorable
ruling on this issue, the Florida Department of Revenue has previously issued
similar rulings. The Florida Department of Revenue has the authority to revoke
or modify a previously issued ruling; however, if a ruling is revoked or
modified, the revocation or modification is prospective only. Prior to receipt
of the ruling from the Florida Department of Revenue, each Fund will rely on an
opinion of Florida counsel for the Funds, Holland & Knight LLP, stating that
each Fund's shares will be exempt from Florida intangible personal property tax
if the revised asset requirement is met. This opinion is based on existing
Florida law and interpretive authority which could be changed at any time
retroactively. While the opinion represents the best judgment of Holland &
Knight LLP, there is no guarantee that the legal conclusions will not be
challenged by the Department of Revenue or in judicial or administrative
proceedings. Thus, under Florida counsel's opinion or if a favorable ruling is
issued, and if the revised asset requirement is met, shares of each Fund owned
by Florida residents will be exempt from Florida intangible personal property
tax. Assets exempt from Florida intangible personal property tax include
obligations of the State of Florida and its political subdivisions; obligations
of the United States Government or its agencies; and cash.
A Fund may from time to time hold assets that are not exempt from Florida
intangible personal property tax ("non-exempt assets") and may not be able to
dispose of such assets so that 90% of the net asset value of the Fund's assets
on the last business day of the calendar year consists of assets exempt from the
Florida intangible personal property tax. This would subject shares of that Fund
to Florida intangible personal property tax. If shares of a Fund are subject to
Florida intangible personal property tax because of a failure to dispose of
sufficient non-exempt assets, only that portion of the value of the Fund shares
equal to the portion of the net asset value of the Fund that is attributable to
obligations of the United States Government will be exempt from taxation. Each
Fund will attempt to monitor its portfolio so that on the last business day of
each calendar year 90% of the net asset value of the Fund's assets consists of
assets exempt from Florida intangible personal property tax.
Dividends paid by a Fund to individuals who are Florida residents are not
subject to personal income taxation by Florida, because Florida does not impose
a personal income tax. Distribution of investment income and capital gains by a
Fund will be subject to Florida corporate income taxes, state taxes in states
other than Florida and local taxes in cities other than those in Florida.
Shareholders not subject to taxation by Florida do not benefit from the fact
that shares of a Fund will be exempt from the Florida intangible personal
property tax.
The IRS, in a revenue ruling, held that certain AMPS would be treated as
stock for Federal income tax purposes. The terms of the currently outstanding
AMPS of each of the Funds, as well as the Series B AMPS to be issued by
MuniYield Florida, are substantially similar, but not identical, to the AMPS
discussed in the revenue ruling. In the opinion of Brown & Wood LLP, counsel to
both Funds, the shares of each Fund's currently outstanding AMPS, as well as the
Series B AMPS to be issued by MuniYield Florida, constitute shares, and
distributions with respect to shares of such AMPS (other than distributions in
redemption of shares of AMPS subject to Section 302(b) of the Code) will
constitute dividends to the extent of current and accumulated earnings
41
<PAGE>
and profits as calculated for Federal income tax purposes. Nevertheless, the IRS
could take a contrary position, asserting, for example, that the shares of AMPS
constitute debt. If this position were upheld, the discussion of the treatment
of distributions below would not apply to holders of shares of AMPS. Instead,
distributions by each Fund to holders of shares of its AMPS would constitute
interest, whether or not they exceed the earnings and profits of the Fund, would
be included in full in the income of the recipient and taxed as ordinary income.
Counsel believes that such a position, if asserted by the IRS, would be unlikely
to prevail.
To the extent that a Fund's distributions are derived from interest on its
taxable investments or from an excess of net short-term capital gains over net
long-term capital losses ("ordinary income dividends"), such distributions are
considered taxable ordinary income for Federal income tax purposes.
Distributions, if any, from an excess of net long-term capital gains over net
short-term capital losses derived from the sale of securities or from certain
transactions in futures or options ("capital gain dividends") are taxable as
long-term capital gains for Federal income tax purposes, regardless of the
length of time the shareholder has owned Fund shares will be treated as capital
gains which are taxed at ordinary income rates. Certain categories of capital
gains are taxable at different rates for Federal income tax purposes. Generally
not later than 60 days after the close of its taxable year, a Fund provides its
shareholders with a written notice designating the amounts of any
exempt-interest dividends or capital gain dividends, as well as any amount of
capital gain dividends in the different categories of capital gain referred to
above. Distributions by a Fund, whether from exempt-interest income, ordinary
income or capital gains, are not eligible for the dividends received deduction
for corporations under the Code.
A loss realized on a sale or exchange of shares of a Fund is disallowed if
other Fund shares are acquired (whether under the Automatic Dividend
Reinvestment Plan or otherwise) within a 61-day period beginning 30 days before
and ending 30 days after the date that the shares are disposed of. In such a
case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.
All or a portion of a Fund's gain from the sale or redemption of
tax-exempt obligations purchased at a market discount will be treated as
ordinary income rather than capital gain. This rule may increase the amount of
ordinary income dividends received by shareholders. Any loss upon the sale or
exchange of Fund shares held for six months or less is treated as long-term
capital loss to the extent of exempt-interest dividends received by the
shareholder. In addition, such loss is disallowed to the extent of any capital
gain dividends received by the shareholder. Distributions in excess of a Fund's
earnings and profits first will reduce the adjusted tax basis of a holder's
shares and, after such adjusted tax basis is reduced to zero, will constitute
capital gains to such holder (assuming the shares are held as a capital asset).
If a Fund pays a dividend in January which was declared in the previous October,
November or December to shareholders of record on a specified date in one of
such months, then such dividend is treated for tax purposes as paid by the Fund
and received by its shareholders on December 31 of the year in which such
dividend was declared.
The IRS has taken the position in a revenue ruling that if a RIC has two
or more classes of shares it may designate distributions made to each class in
any year as consisting of no more than such class' proportionate share of
particular types of income, including exempt-interest dividends and capital gain
dividends. A class's proportionate share of a particular type of income is
determined according to the percentage of total dividends paid by the RIC during
such year that was paid to such class. Consequently, when Common Shares and one
or more series of AMPS are outstanding, each Fund intends to designate
distributions made to the classes as consisting of particular types of income in
accordance with each class's proportionate share of such income. After the
Reorganization, MuniYield Florida will, likewise, so designate distributions
with respect to its Common Shares and its AMPS. Each Fund may notify the Auction
Agent of the amount of any net capital gains and other taxable income to be
included in any dividend on shares of its AMPS prior to the auction establishing
the applicable rate for such dividend. Except for the portion of any dividend
that a Fund informs the Auction Agent will be treated as capital gains or other
taxable income, the dividends paid on the shares of AMPS constitute
exempt-interest dividends. Alternatively, each Fund may include such income in a
dividend on shares of its AMPS without giving advance notice thereof if it
increases the dividend by an additional amount to offset the tax effect thereof.
The amount of net capital gains and ordinary income allocable to shares of a
Fund's AMPS (the "taxable distribution") depends upon the amount of such gains
and income realized by the Fund and the total dividends paid by the Fund on
shares of its Common Shares and shares of its AMPS during a taxable year, but
the taxable distribution generally is not significant.
In the opinion of Brown & Wood LLP, counsel to both Funds, under current
law the manner in which each Fund allocates, and MuniYield Florida will
allocate, items of tax-exempt income, net capital gains, and other taxable
income, if any, among Common Shares and outstanding AMPS (including, for
MuniYield Florida, AMPS
42
<PAGE>
and the newly issued series of AMPS) will be respected for Federal income tax
purposes. However, the tax treatment of additional dividends may affect a Fund's
calculation of each class' allocable share of capital gains and other taxable
income. In addition, there is currently no direct guidance from the IRS or other
sources specifically addressing whether a Fund's method for allocating
tax-exempt income, net capital gains and other taxable income between its Common
Shares and the outstanding series of AMPS will be respected for Federal income
tax purposes, and it is possible that the IRS could disagree with counsel's
opinion and attempt to reallocate a Fund's net capital gains or other taxable
income. In the event of a reallocation, some of the dividends identified by a
Fund as exempt-interest dividends to holders of shares of its AMPS could be
recharacterized as additional capital gains or other taxable income. In the
event of such recharacterization, a Fund is not required to make payments to
such shareholders to offset the tax effect of such reallocation. In addition, a
reallocation could cause a Fund to be liable for income tax and excise tax on
all reallocated taxable income. Brown & Wood LLP has advised each Fund that, in
its opinion, if the IRS were to challenge in court a Fund's allocations of
income and gain, the IRS would be unlikely to prevail. The opinion of Brown &
Wood LLP, however, represents only its best legal judgment and is not binding on
the IRS or the courts.
The Code requires a RIC to pay a nondeductible 4% excise tax to the extent
it does not distribute during each calendar year 98% of its ordinary income,
determined on a calendar year basis, and 98% of its capital gains, determined in
general, on an October 31 year-end, plus certain undistributed amounts from
previous years. The required distributions, however, are based only on the
taxable income of a RIC. The excise tax, therefore, generally does not apply to
the tax-exempt income of RICs, such as the Funds, that pay exempt-interest
dividends.
The Code subjects interest received on certain otherwise tax-exempt
securities to Federal alternative minimum tax. The alternative minimum tax
applies to interest received on "private activity bonds" issued after August 7,
1986. "Private activity bonds" are bonds which, although tax-exempt, are used
for purposes other than those generally performed by governmental units and
which benefit non-governmental entities (e.g., bonds used for industrial
development or housing purposes). Income received on such bonds is classified as
an item of "tax preference" which could subject investors in such bonds,
including shareholders of the Funds, to an increased Federal alternative minimum
tax. Each Fund purchases such "private activity bonds" and reports to
shareholders within 60 days after calendar year-end the portion of its dividends
declared during the year which constitutes an item of tax preference for
alternative minimum tax purposes. The Code further provides that corporations
are subject to a Federal alternative minimum tax based, in part, on certain
differences between taxable income as adjusted for other tax preferences and the
corporation's "adjusted current earnings" which more closely reflect a
corporation's economic income. Because an exempt-interest dividend paid by a
Fund is included in adjusted current earnings, a corporate shareholder may be
required to pay a Federal alternative minimum tax on exempt-interest dividends
paid by such Fund.
MuniVest Florida may invest in non-investment grade obligations, as
previously described. Furthermore, the Funds may invest in instruments the
return on which includes nontraditional features such as indexed principal or
interest payments ("nontraditional instruments"). These instruments may be
subject to special tax rules under which a Fund may be required to accrue and
distribute income before amounts due under the obligations are paid. In
addition, it is possible that all or a portion of the interest payments on such
non-investment grade obligations and/or nontraditional instruments could be
recharacterized as taxable ordinary income.
If at any time when shares of AMPS are outstanding a Fund does not meet
the asset coverage requirements of the Investment Company Act, the Fund will be
required to suspend distributions to holders of Common Shares until the asset
coverage is restored. See "Dividends and Distributions." This may prevent such
Fund from distributing at least 90% of its net investment income and may,
therefore, jeopardize the Fund's qualification for taxation as a RIC. If a Fund
were to fail to qualify as a RIC, some or all of the distributions paid by the
Fund would be fully taxable to shareholders for Federal income and New York
State and New York City personal income tax purposes. Upon any failure to meet
the asset coverage requirements of the Investment Company Act, a Fund, in its
sole discretion, may redeem shares of AMPS in order to maintain or restore the
requisite asset coverage and avoid the adverse consequences to the Fund and its
shareholders of failing to qualify as a RIC. There can be no assurance, however,
that any such action would achieve such objectives.
As noted above, a Fund must distribute annually at least 90% of its net
taxable and tax-exempt interest income. A distribution will only be counted for
this purpose if it qualifies for the dividends paid deduction under the Code.
Some types of preferred shares that the Funds have that the Funds have issued
and that MuniYield
43
<PAGE>
Florida contemplates issuing may raise a question as to whether distributions on
such preferred shares are "preferential" under the Code and, therefore, not
eligible for the dividends paid deduction. Counsel has advised the Funds that
the outstanding preferred shares and the preferred shares to be issued by
MuniYield Florida will not result in the payment of a preferential dividend. If
a Fund ultimately relies solely on a legal opinion when it issues such preferred
shares, there is no assurance that the IRS would agree that dividends on the
preferred shares are not preferential. If the IRS successfully disallowed the
dividends paid deduction for dividends on the preferred shares, a Fund could be
disqualified as RICs. In this case, dividends paid by the Funds on the Common
Shares and the AMPS would not be exempt from Federal income taxes. Additionally,
the Fund would be subject to the Federal alternative minimum tax.
Under certain circumstances when a Fund is required to allocate taxable
income to the AMPS, it will pay Additional Distributions to holders of shares of
AMPS. The Federal income tax consequences of Additional Distributions under
existing law are uncertain. The Funds treat and MuniYield Florida intends to
continue to treat a holder as receiving a dividend distribution in the amount of
any Additional Distribution only as and when such Additional Distribution is
paid. An Additional Distribution generally is designated by a Fund as an
exempt-interest dividend except as otherwise required by applicable law.
However, the IRS may assert that all or part of an Additional Distribution is a
taxable dividend either in the taxable year for which the allocation of taxable
income is made or in the taxable year in which the Additional Distribution is
paid.
The value of shares acquired pursuant to a Fund's dividend reinvestment
plan is generally excluded from gross income to the extent that the cash amount
reinvested would be excluded from gross income. If, when a Fund's shares are
trading at a premium over net asset value, the Fund issues shares pursuant to
the dividend reinvestment plan that have a greater fair market value than the
amount of cash reinvested, it is possible that all or a portion of such discount
(which may not exceed 5% of the fair market value of the Fund's shares) could be
viewed as a taxable distribution. If the discount is viewed as a taxable
distribution, it is also possible that the taxable character of this discount
would be allocable to all of the shareholders, including shareholders who do not
participate in the Fund's dividend reinvestment plan. Thus, shareholders who do
not participate in the dividend reinvestment plan, as well as dividend
reinvestment plan participants, might be required to report as ordinary income a
portion of their distributions equal to the allocable share of the discount.
Under certain provisions of the Code, some shareholders may be subject to
a 31% withholding tax on certain ordinary income dividends and on capital gain
dividends and redemption payments ("backup withholding"). Generally,
shareholders subject to backup withholding will be those for whom no taxpayer
identification number is on file with a Fund or who, to the Fund's knowledge,
have furnished an incorrect number. When establishing an account, an investor
must certify under penalty of perjury that such number is correct and that such
shareholder is not otherwise subject to backup withholding.
Ordinary income dividends paid to shareholders who are nonresident aliens
or foreign entities are subject to a 30% United States withholding tax under
existing provisions of the Code applicable to foreign individuals and entities
unless a reduced rate of withholding or a withholding exemption is provided
under applicable treaty law. Nonresident shareholders are urged to consult their
own tax advisers concerning the applicability of the United States withholding
tax.
The Code provides that every shareholder required to file a tax return
must include for information purposes on such return the amount of
exempt-interest dividends received from all sources (including the Funds) during
the taxable year.
Tax Treatment of Options and Futures Transactions
Each Fund may purchase or sell municipal bond index financial futures
contracts and interest rate financial futures contracts on U.S. Government
securities. Each Fund may also purchase and write call and put options on such
financial futures contracts. In general, unless an election is available to a
Fund or an exception applies, such options and financial futures contracts that
are "Section 1256 contracts" will be "marked to market" for Federal income tax
purposes at the end of each taxable year, i.e., each such option or financial
futures contract will be treated as sold for its fair market value on the last
day of the taxable year, and any gain or loss attributable to Section 1256
contracts will be 60% long-term and 40% short-term capital gain or loss.
Application of these rules to Section 1256 contracts held by a Fund may alter
the timing and character of distributions to shareholders. The mark-to-market
rules outlined above, however, will not apply to certain transactions entered
into by a Fund solely to reduce the risk of changes in price or interest rates
with respect to its investments.
44
<PAGE>
Code Section 1092, which applies to certain "straddles," may affect the
taxation of a Fund's sales of securities and transactions in financial futures
contracts and related options. Under Section 1092, a Fund may be required to
postpone recognition for tax purposes of losses incurred in certain sales of
securities and certain closing transactions in financial futures contracts or
the related options.
Florida Taxation of the Funds
If a Fund does not have a taxable nexus to Florida, such as through the
location within the state of the Fund's activities or those of FAM, under
present Florida law, the Fund is not subject to Florida corporate income
taxation. Additionally, if a Fund's assets do not have a taxable situs in
Florida on January 1 of each calendar year, the Fund will not be subject to
Florida intangible personal property tax. If a Fund has a taxable nexus to
Florida or the Fund's assets have a taxable situs in Florida on January 1 of any
year, the Fund will be subject to Florida taxation.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations and Florida tax laws presently
in effect. For the complete provisions, reference should be made to the
pertinent Code sections, the Treasury Regulations promulgated thereunder and the
applicable tax laws. The Code and the Treasury Regulations, as well as the
Florida tax laws, are subject to change by legislative, judicial or
administrative action either prospectively or retroactively.
Shareholders are urged to consult their tax advisers regarding specific
questions as to Federal, foreign, state or local tax consequences of an
investment in a Fund.
AGREEMENT AND PLAN OF REORGANIZATION
General
Under the Agreement and Plan of Reorganization (attached hereto as Exhibit
II), MuniYield Florida will acquire substantially all of the assets, and will
assume substantially all of the liabilities, of MuniVest Florida, in exchange
solely for an equal aggregate value of MuniYield Florida Common Shares and
MuniYield Florida Series B AMPS to be issued by MuniYield Florida. The number of
MuniYield Florida Common Shares issued to MuniVest Florida will have an
aggregate net asset value equal to the aggregate net asset value of the Common
Shares of MuniVest Florida (except that cash will be paid in lieu of any
fractional shares), and the number of MuniYield Florida Series B AMPS issued to
MuniVest Florida will have an aggregate liquidation preference and value equal
to the aggregate liquidation preference and value of the MuniVest Florida AMPS.
Upon receipt by MuniVest Florida of such shares, MuniVest Florida will (i)
distribute the MuniYield Florida Common Shares to the holders of MuniVest
Florida Common Shares in exchange for their MuniVest Florida Common Shares and
(ii) distribute the shares of MuniYield Florida Series B AMPS to the holders of
MuniVest Florida AMPS in exchange for their MuniVest Florida AMPS. A Certificate
of Designation of MuniYield Florida establishing the powers, rights and
preferences of the MuniYield Florida Series B AMPS will have been filed with the
Office of the Secretary of State of the Commonwealth of Massachusetts prior to
the closing of the Reorganization. As soon as practicable after the date that
the Reorganization takes place (the "Exchange Date"), MuniVest Florida will
execute and lodge among the records of MuniVest Florida an instrument in writing
setting forth the fact of the Fund's termination and cause a copy thereof to be
filed in the Office of the Secretary of State of the Commonwealth of
Massachusetts.
MuniVest Florida will distribute the MuniYield Florida Common Shares and
MuniYield Florida Series B AMPS received by it pro rata to its holders of record
of Common Shares and AMPS, as applicable, in exchange for such shareholders'
shares in MuniVest Florida. Such distribution would be accomplished by opening
new accounts on the books of MuniYield Florida in the names of the common and
preferred shareholders of MuniVest Florida and transferring to those shareholder
accounts the MuniYield Florida Common Shares or MuniYield Florida Series B AMPS
previously credited on those books to the account of MuniVest Florida. Each
newly-opened account on the books of MuniYield Florida for the previous holders
of Common Shares of MuniVest Florida would represent the respective pro rata
number of MuniYield Florida Common Shares (rounded down, in the case of
fractional shares, to the next largest number of whole shares) due such holder
of Common Shares. No fractional MuniYield Florida Common Shares will be issued.
In lieu thereof, MuniYield Florida's transfer agent, The Bank of New York, will
aggregate all fractional MuniYield Florida Common Shares and sell the resulting
whole shares on the NYSE for the account of all holders of fractional interests,
and each such holder will be
45
<PAGE>
entitled to the pro rata share of the proceeds from such sale upon surrender of
the certificates representing MuniVest Florida Common Shares. Similarly, each
newly-opened account on the books of MuniYield Florida for the previous holders
of AMPS of MuniVest Florida would represent the respective pro rata number of
shares of MuniYield Florida Series B AMPS, due such holder of AMPS. See
"Surrender and Exchange of Share Certificates" below for a description of the
procedures to be followed by the shareholders of MuniVest Florida to obtain
their MuniYield Florida Common Shares (and cash in lieu of fractional shares, if
any).
Accordingly, as a result of the Reorganization, every holder of Common
Shares of MuniVest Florida would own MuniYield Florida Common Shares that
(except for cash payments received in lieu of fractional shares) would have an
aggregate net asset value immediately after the Exchange Date equal to the
aggregate net asset value of that shareholder's MuniVest Florida Common Shares
immediately prior to the Exchange Date. Since the MuniYield Florida Common
Shares would be issued at net asset value and the Common Shares of MuniVest
Florida would be valued at net asset value for the purposes of the exchange, the
holders of Common Shares of each of the Funds will not be diluted as a result of
the Reorganization. Similarly, since the MuniYield Florida Series B AMPS would
be issued at a liquidation preference and value per share equal to the
liquidation preference and value per share of the AMPS of MuniVest Florida,
holders of AMPS of each of the Funds will not be diluted as a result of the
Reorganization. However, as a result of the Reorganization, a shareholder of
either of the Funds likely will hold a reduced percentage of ownership in the
larger combined entity than he or she did in either of the constituent Funds.
Procedure
At a meeting of the Board of Trustees of MuniYield Florida, and at a
meeting of the Board of Trustees of MuniVest Florida, the Board of Trustees of
each of the Funds, including all of the Trustees who are not "interested
persons," as defined in the Investment Company Act, of the applicable Fund,
approved the Agreement and Plan of Reorganization and the submission of such
Agreement and Plan of Reorganization to the shareholders of each of the Funds
for approval. The Board of Trustees of MuniYield Florida voted unanimously to
approve the Reorganization. The Board of Trustees of MuniVest Florida approved
the Reorganization by a vote of all the Trustees present at the meeting
representing more than two-thirds of the total number of Trustees.
Also, the Board of Trustees of MuniYield Florida approved the issuance of
the Common Shares and Series B AMPS and the filing of a Certificate of
Designation to MuniYield Florida's Declaration of Trust establishing the powers,
rights and preferences of the MuniYield Florida Series B AMPS in order that they
may be distributed to holders of AMPS of MuniVest Florida as part of the
Reorganization.
As a result of such Board approvals, the Funds have jointly filed this
proxy statement with the SEC soliciting a vote of the shareholders of each of
the Funds to approve the Reorganization. The costs of such solicitation are to
be paid by MuniYield Florida after the Reorganization so as to be borne equally
and exclusively on a per share basis by the holders of Common Shares of each of
the Funds. Special meetings of shareholders of the Funds will be held on
December 15, 1999. If the shareholders of both Funds approve the Reorganization,
the Reorganization will take place as soon as practicable after such approval,
provided that the Funds have obtained prior to that time a favorable private
letter ruling from the IRS concerning the tax consequences of the Reorganization
as set forth in the Agreement and Plan of Reorganization or an opinion of
counsel to the same effect.
The Boards of Trustees of MuniYield Florida and MuniVest Florida,
recommend that the shareholders of the respective Funds approve the Agreement
and Plan of Reorganization.
Terms of the Agreement and Plan of Reorganization
The following is a summary of the significant terms of the Agreement and
Plan of Reorganization. This summary is qualified in its entirety by reference
to the Agreement and Plan of Reorganization, attached hereto as Exhibit II.
Valuation of Assets and Liabilities. The respective assets of each of the
Funds will be valued on the business day prior to the Exchange Date (the
"Valuation Date"). The valuation procedures are the same for both Funds: net
asset value per Common Share of each Fund will be determined after the close of
business on the NYSE (generally, 4:00 p.m., Eastern time) on the Valuation Date.
For the purpose of determining the net asset value of a Common Share of each
Fund, the value of the securities held by the issuing Fund plus any cash or
other assets (including interest accrued but not yet received) minus all
liabilities (including accrued expenses) and the aggregate liquidation value of
the outstanding AMPS of the issuing Fund is divided by the total number of
46
<PAGE>
Common Shares of the issuing Fund outstanding at such time. Daily expenses,
including the fees payable to FAM, will accrue on the Valuation Date.
The Florida Municipal Bonds and Municipal Bonds in which each Fund invests
are traded primarily in the over-the-counter markets. In determining net asset
value on the Valuation Date, each Fund will use the valuations of portfolio
securities furnished by a pricing service approved by the Boards of Trustees of
the Funds. The pricing service typically values portfolio securities at the bid
price or the yield equivalent when quotations are readily available. Florida
Municipal Bonds and Municipal Bonds for which quotations are not readily
available will be valued at fair market value on a consistent basis as
determined by the pricing service using a matrix system to determine valuations.
The Boards of Trustees of the Funds have determined in good faith that the use
of a pricing service is a fair method of determining the valuation of portfolio
securities. Positions in financial futures contracts will be valued on the
Valuation Date at closing prices for such contracts established by the exchange
on which they are traded, or if market quotations are not readily available,
will be valued at fair value on a consistent basis using methods determined in
good faith by the Board of Trustees.
Distribution of MuniYield Florida Common Shares and MuniYield Florida
Series B AMPS. On the Exchange Date, MuniYield Florida will issue to MuniVest
Florida a number of MuniYield Florida Common Shares the aggregate net asset
value of which will equal the aggregate net asset value of Common Shares of
MuniVest Florida on the Valuation Date. Each holder of Common Shares of MuniVest
Florida will receive the number of MuniYield Florida Common Shares corresponding
to his or her proportionate interest in the aggregate net asset value of the
Common Shares of MuniVest Florida.
On the Exchange Date, MuniYield Florida also will issue to MuniVest
Florida a number of shares of MuniYield Florida Series B AMPS, the aggregate
liquidation preference and value of which will equal the aggregate liquidation
preference and value of MuniVest Florida AMPS on the Valuation Date. Each holder
of AMPS of MuniVest Florida will receive the number of shares of MuniYield
Florida Series B AMPS corresponding to his or her proportionate interest in the
aggregate liquidation preference and value of the AMPS of MuniVest Florida. No
sales charge or fee of any kind will be charged to shareholders of MuniVest
Florida in connection with their receipt of MuniYield Florida Common Shares or
Series B AMPS in the Reorganization. It is anticipated that the auction for
MuniYield Florida Series B AMPS will be held on Thursday; MuniVest Florida AMPS
are auctioned on Thursday. The auction procedures for all of the AMPS are
substantially the same. As a result of the Reorganization, the last dividend
period for the AMPS of MuniVest Florida prior to the Exchange Date may be
shorter than the dividend period for such AMPS determined as set forth in the
applicable Certificate of Designation.
Expenses. MuniYield Florida shall pay, subsequent to the Exchange Date,
all expenses incurred in connection with the Reorganization, including, but not
limited to, all costs related to the preparation and distribution of materials
distributed to each Fund's Board of Trustees, expenses incurred in connection
with the preparation of the Agreement and Plan of Reorganization, a registration
statement on Form N-14 and a private letter ruling request submitted to the IRS,
SEC and state securities commission filing fees and legal and audit fees in
connection with the Reorganization, costs of printing and distributing this
Proxy Statement and Prospectus, legal fees incurred preparing each Fund's board
materials, attending each Fund's board meetings and preparing the minutes,
accounting fees associated with each Fund's financial statements, stock exchange
fees, rating agency fees, portfolio transfer taxes (if any) and any similar
expenses incurred in connection with the Reorganization. In this regard,
expenses of the Reorganization will be deducted from the assets of the combined
fund so as to be borne equally and exclusively on a per share basis by the
holders of Common Shares of each of the Funds. No Fund shall pay any expenses of
its respective shareholders arising out of or in connection with the
Reorganization.
Required Approvals. Under each Fund's Declaration of Trust (as amended to
date and including the Certificate of Designation establishing the powers,
rights and preferences of each Fund's AMPS), relevant Massachusetts law and the
rules of the NYSE, shareholder approval of the Agreement and Plan of
Reorganization requires the affirmative vote of shareholders representing more
than 50% of each Fund's outstanding Common Shares and AMPS, voting together as a
single class, and more than 50% of each Fund's AMPS, voting separately as a
single class. Because of the requirement that the Agreement and Plan of
Reorganization be approved by the shareholders of both Funds, the Reorganization
will not take place if the shareholders of either Fund do not approve the
Agreement and Plan of Reorganization.
47
<PAGE>
Deregistration and Termination. Following the transfer of the assets and
liabilities of MuniVest Florida and the distribution of MuniYield Florida Common
Shares and MuniYield Florida Series B AMPS to shareholders of MuniVest Florida,
in accordance with the foregoing, MuniVest Florida will terminate its
registration under the Investment Company Act and its organization under
Massachusetts law and will withdraw its authority to do business in any state
where it is required to do so.
Amendments and Conditions. The Agreement and Plan of Reorganization may be
amended at any time prior to the Exchange Date with respect to any of the terms
therein. The obligations of each Fund pursuant to the Agreement and Plan of
Reorganization are subject to various conditions, including a registration
statement on Form N-14 being declared effective by the Commission, approval by
the shareholders of each of the Funds, favorable IRS rulings or an opinion of
counsel being received as to tax matters, an opinion of counsel as to securities
matters being received and the continuing accuracy of various representations
and warranties of the Funds being confirmed by the respective parties.
Postponement, Termination. Under the Agreement and Plan of Reorganization,
the Board of Trustees of either Fund may cause the Reorganization to be
postponed or abandoned under certain circumstances should either Board determine
that it is in the best interests of the shareholders of its respective Fund to
do so. The Agreement and Plan of Reorganization may be terminated, and the
Reorganization abandoned at any time (whether before or after adoption thereof
by the shareholders of either Fund) prior to the Exchange Date, or the Exchange
Date may be postponed: (i) by mutual consent of the Boards of Trustees of the
Funds and (ii) by the Board of Trustees of any Fund if any condition to that
Fund's obligations set forth in the Agreement and Plan of Reorganization has not
been fulfilled or waived by such Board.
Potential Benefits to Common Shareholders of the Funds as a Result of the
Reorganization
In approving the Reorganization, the Board of Trustees of each Fund
identified certain benefits that are likely to result from the Reorganization,
including lower aggregate operating expenses per Common Share, greater
efficiency and flexibility in portfolio management and a more liquid trading
market for the Common Shares of the combined fund. With respect to MuniVest
Florida, following the Reorganization MuniVest Florida shareholders will remain
invested in a closed-end fund that has investment objectives and policies
substantially similar to those of MuniVest Florida. The Boards also considered
the possible risks and costs of combining the Funds, and examined the relative
credit strength, maturity characteristics, mix of type and purpose, and yield of
the Funds' portfolios of Florida Municipal Bonds and Municipal Bonds and the
costs involved in a transaction such as the Reorganization. The Boards noted the
many similarities between the Funds, including their substantially similar
investment objectives and investment policies, their use of substantially the
same management personnel and their similar portfolios of Florida Municipal
Bonds and Municipal Bonds. The Boards also considered the relative tax positions
of each of the Fund's portfolios. Based on these factors, the Boards concluded
that the Reorganization will potentially benefit the shareholders of each Fund
in that it (i) presents no significant risks that would outweigh the benefits
discussed above and (ii) involves minimal costs (including relatively minor
legal, accounting and administrative costs).
The surviving fund that would result from the Reorganization would have a
larger asset base than either of the Funds has currently. Based on data
presented by FAM, the Board of each Fund believes that administrative expenses
for a larger combined fund would be less than the aggregate expenses for the
individual Funds, resulting in a lower expense ratio for common shareholders of
the combined fund and higher earnings per common share. In particular, certain
fixed costs, such as costs of printing shareholder reports and proxy statements,
legal expenses, audit fees, mailing costs and other expenses will be spread
across a larger asset base, thereby lowering the expense ratio for the combined
fund. To illustrate the potential economies of scale, the table below shows the
total annualized operating expense ratio of each Fund and pro forma MuniYield
Florida, based on net assets both excluding and including assets attributable to
AMPS as of June 30, 1999:
<TABLE>
<CAPTION>
Total annualized Net assets, Total annualized Net assets,
operating excluding operating including
expense ratio, AMPS expense ratio, AMPS
Fund excluding AMPS (in millions) including AMPS (in millions)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MuniYield Florida 1.11% $ 113.5 0.75% $ 168.5
- -------------------------------------------------------------------------------------------------------------
MuniVest Florida 1.20% $ 79.3 0.80% $ 119.3
- -------------------------------------------------------------------------------------------------------------
Pro Forma MuniYield Florida(1) 1.06% $ 192.8 0.71% $ 287.8
- -------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
1 Assumes Reorganization had taken place on June 30, 1999.
48
<PAGE>
Management projections estimate that MuniYield Florida will have net
assets in excess of $287.8 million including assets attributable to AMPS upon
completion of the Reorganization. A larger asset base should provide benefits in
portfolio management. After the Reorganization, MuniYield Florida should be able
to purchase larger amounts of Florida Municipal Bonds and Municipal Bonds at
more favorable prices than either of the Funds separately and, with this greater
purchasing power, request improvements in the terms of the Florida Municipal
Bonds and Municipal Bonds (e.g., added indenture provisions covering call
protection, sinking funds and audits for the benefit of large holders) prior to
purchase.
Based on the foregoing, the Boards concluded that the Reorganization is in
the best interests of the shareholders of each of the Funds because the
Reorganization presents no significant risks or costs (including legal,
accounting and administrative costs) that would outweigh the benefits discussed
above.
In approving the Reorganization, the Board of Trustees of each Fund
determined that the Reorganization is in the best interests of that Fund and,
with respect to net asset value and liquidation preference, that the interests
of existing shareholders of that Fund would not be diluted as a result of the
Reorganization. Although the Reorganization is expected to result in a reduction
in net asset value per share of the combined fund after the Reorganization of
approximately $.02 as a result of the estimated costs of the Reorganization,
management of each Fund advised its Board that it expects that such costs would
be recovered within 1 to 2 1/2 years after the Exchange Date due to a decrease
in the operating expense ratio.
It is not anticipated that the Reorganization directly would benefit the
holders of shares of AMPS of either of the Funds; however, the Reorganization
will not adversely affect the holders of shares of AMPS of either of the Funds
and the expenses of the Reorganization will not be borne by the holders of
shares of AMPS of either of the Funds.
Surrender and Exchange of Share Certificates
After the Exchange Date, each holder of an outstanding certificate or
certificates formerly representing Common Shares of MuniVest Florida will be
entitled to receive, upon surrender of his or her certificate or certificates, a
certificate or certificates representing the number of MuniYield Florida Common
Shares distributable with respect to such holder's MuniVest Florida Common
Shares, together with cash in lieu of any fractional shares. Promptly after the
Exchange Date, the transfer agent for the MuniYield Florida Common Shares, will
mail to each holder of certificates formerly representing MuniVest Florida
Common Shares a letter of transmittal for use in surrendering his or her
certificates for certificates representing MuniYield Florida Common Shares or
and cash in lieu of any fractional shares.
Shares of AMPS are held in "street name" by the Depository Trust Company,
and all transfers will be accomplished by book entry. Surrender of physical
certificates for AMPS is not required.
<TABLE>
<CAPTION>
If prior to the Reorganization you held: After the Reorganization, you will hold:
- ---------------------------------------- -----------------------------------------
<S> <C>
MuniYield Florida Common Shares MuniYield Florida Common Shares
MuniYield Florida AMPS MuniYield Florida Series A AMPS
MuniVest Florida Common Shares MuniYield Florida Common Shares
MuniVest Florida AMPS MuniYield Florida Series B AMPS
</TABLE>
Please do not send in any share certificates at this time. Upon
consummation of the Reorganization, common shareholders of MuniVest Florida will
be furnished with instructions for exchanging their share certificates for
MuniYield Florida share certificates and, if applicable, cash in lieu of
fractional shares.
From and after the Exchange Date, certificates formerly representing
MuniVest Florida Common Shares will be deemed for all purposes to evidence
ownership of the number of full shares of MuniYield Florida Common Shares
distributable with respect to the shares of MuniVest Florida held before the
Reorganization as described above and as shown in the table above, provided
that, until such share certificates have been so surrendered, no dividends
payable to the holders of record of MuniVest Florida Common Shares as of any
date subsequent to the Exchange Date will be paid to the holders of such
outstanding share certificates. Dividends payable to holders of record of
MuniYield Florida Common Shares , as of any date after the Exchange Date and
prior to the exchange of certificates by any shareholder of MuniVest Florida,
will be paid to such shareholder, without interest, at the time such shareholder
surrenders his or her share certificates for exchange.
49
<PAGE>
From and after the Exchange Date, there will be no transfers on the share
transfer books of MuniVest Florida. If, after the Exchange Date, certificates
representing shares of Common Shares of MuniVest Florida are presented to
MuniYield Florida, they will be canceled and exchanged for certificates
representing Common Shares and cash in lieu of fractional shares, if any,
distributable with respect to such Common Shares in the Reorganization.
Tax Consequences of the Reorganization
General. The Reorganization has been structured with the intention that it
qualify for Federal income tax purposes as a tax-free reorganization under
Section 368(a)(1)(C) of the Code. Both Funds have elected and qualified for the
special tax treatment afforded RICs under the Code, and MuniYield Florida
intends to continue to so qualify after the Reorganization. The Funds have
jointly requested a private letter ruling from the IRS that for Federal income
tax purposes: (i) the exchange of assets by MuniVest Florida for MuniYield
Florida shares of beneficial interest, as described, will constitute a
reorganization within the meaning of Section 368(a)(1)(C) of the Code, and each
of MuniYield Florida and MuniVest Florida will be deemed a "party" to a
reorganization within the meaning of Section 368(b) of the Code; (ii) in
accordance with Section 361(a) of the Code, no gain or loss will be recognized
to MuniVest Florida as a result of the Reorganization or on the distribution of
MuniYield Florida Common Shares and MuniYield Florida Series B AMPS to MuniVest
shareholders under Section 361(c)(1) of the Code; (iii) under Section 1032 of
the Code, no gain or loss will be recognized to MuniYield Florida as a result of
the Reorganization; (iv) in accordance with Section 354(a)(1) of the Code, no
gain or loss will be recognized to the shareholders of MuniVest Florida on the
receipt of MuniYield Florida Common Shares and MuniYield Florida Series B AMPS
in exchange for their corresponding Common Shares or AMPS of MuniVest Florida
(except to the extent that MuniVest Common Shareholders receive cash
representing an interest in fractional shares of MuniYield Florida in the
Reorganization); (v) in accordance with Section 362(b) of the Code, the tax
basis of the assets of MuniVest Florida in the hands of MuniYield Florida will
be the same as the tax basis of such assets in the hands of MuniVest Florida
immediately prior to the consummation of the Reorganization; (vi) in accordance
with Section 358 of the Code, immediately after the Reorganization, the tax
basis of the MuniYield Florida Common Shares or MuniYield Florida Series B AMPS
received by the shareholders of MuniVest Florida in the Reorganization will be
equal to the tax basis of the Common Shares or AMPS of MuniVest Florida
surrendered in exchange; (vii) in accordance with Section 1223 of the Code, a
shareholder's holding period for the MuniYield Florida Common Shares or
MuniYield Florida Series B AMPS will be determined by including the period for
which such shareholder held the Common Shares or AMPS of MuniVest Florida
exchanged therefor, provided that such shares were held as a capital asset;
(viii) in accordance with Section 1223 of the Code, MuniYield Florida's holding
period with respect to the assets of MuniVest Florida transferred will include
the period for which such assets were held by MuniVest Florida; (ix) the payment
of cash to common shareholders of MuniVest Florida in lieu of fractional shares
of MuniYield Florida will be treated as though the fractional shares were
distributed as part of the Reorganization and then redeemed, with the result
that such shareholders will have short- or long-term capital gain or loss to the
extent that the cash distribution differs from the shareholder's basis allocable
to the MuniYield Florida fractional shares; and (x) the taxable year of MuniVest
Florida will end on the effective date of the Reorganization and pursuant to
Section 381(a) of the Code and regulations thereunder, MuniYield Florida will
succeed to and take into account certain tax attributes of MuniVest Florida,
such as earnings and profits, capital loss carryovers and method of accounting.
As noted in the discussion under "Comparison of the Funds--Tax Rules
Applicable to the Funds and Their Shareholders," a Fund must distribute annually
at least 90% of its net taxable and tax-exempt income. A distribution only will
be counted for this purpose if it qualifies for the dividends paid deduction
under the Code. In the opinion of Brown & Wood LLP, the issuance of MuniYield
Florida Series B AMPS pursuant to the Reorganization in addition to the already
existing MuniYield Florida AMPS will not cause distributions on any series of
MuniYield Florida AMPS to be treated as preferential dividends ineligible for
the dividends paid deduction. It is possible, however, that the IRS may assert
that, because there is more than one series of AMPS, distributions on such
shares are preferential under the Code and therefore not eligible for the
dividends paid deduction. If the IRS successfully disallowed the dividends paid
deduction for dividends on the AMPS, MuniYield Florida could lose the special
tax treatment afforded RICs. In this case, dividends on the MuniYield Florida
Common Shares and AMPS would not be exempt from Federal income tax.
Additionally, MuniYield Florida would be subject to the Federal alternative
minimum tax.
50
<PAGE>
Under Section 381(a) of the Code, MuniYield Florida will succeed to and
take into account certain tax attributes of MuniVest Florida, including, but not
limited to, earnings and profits, any net operating loss carryovers, any capital
loss carryovers and method of accounting. The Code, however, contains special
limitations with regard to the use of net operating losses, capital losses and
other similar items in the context of certain reorganizations, including
tax-free reorganizations pursuant to Section 368(a)(1)(C) of the Code, which
could reduce the benefit of these attributes to MuniYield Florida.
Shareholders should consult their tax advisers regarding the effect of the
Reorganization in light of their individual circumstances. As the foregoing
relates only to Federal income tax consequences, shareholders also should
consult their tax advisers as to the foreign, state and local tax consequences
of the Reorganization.
Regulated Investment Company Status. The Funds have elected and qualified
for taxation as RICs under Sections 851-855 of the Code, and after the
Reorganization MuniYield Florida intends to continue to so qualify.
Appraisal Rights
A shareholder of any of the Funds who does not vote in favor of the
Reorganization may have the right under Massachusetts law to object to the
Reorganization and demand payment for his or her shares from the applicable Fund
and an appraisal thereof upon compliance with the procedures specified in
Sections 86 through 98 of the Massachusetts Business Corporation Law (the
"Massachusetts Business Corporation Law"), which are set forth in Exhibit IV
hereto. A vote against the Reorganization or the execution of a proxy directing
such a vote will not satisfy the requirements of those provisions. A failure to
vote against the Reorganization will not constitute a waiver of such rights. The
Funds take the position that, if available, this statutory right of appraisal
may be exercised only by shareholders of record.
Section 92 of the Massachusetts Business Corporation Law provides that for
purposes of payment to any shareholder who elects to exercise his or her
statutory right of appraisal, the value of shares of such shareholder is to be
determined as of the day preceding the date of the shareholders' vote approving
the Agreement and Plan of Reorganization. Under the terms of the Agreement and
Plan of Reorganization, MuniYield Florida will assume the obligations of
MuniVest Florida, if any, with respect to statutory rights of appraisal.
For Federal income tax purposes, dissenting shareholders obtaining payment
for their shares will recognize gain or loss measured by the difference between
any such payment and the tax basis for their shares. Shareholders are advised to
consult their personal tax advisers as to the tax consequences of dissenting.
Capitalization
The following table sets forth as of April 30, 1999 (i) the capitalization
of MuniYield Florida, (ii) the capitalization of MuniVest Florida and (iii) the
capitalization of pro forma MuniYield Florida as adjusted to give effect to the
Reorganization.
51
<PAGE>
Pro Forma Capitalization of MuniYield Florida and MuniVest Florida
and Pro Forma MuniYield Florida as of April 30, 1999 (unaudited)
<TABLE>
<CAPTION>
ProForma
MuniYield MuniVest Pro Forma MuniYield
Florida Florida Adjustment Florida adjusted(a)
-------------- -------------- ------------ -------------------
<S> <C> <C> <C> <C>
Net Assets:
Net Assets Attributable to
Common Shares ............................ $119,014,117 $ 83,167,319 $ (2,490,337) $199,691,099
Net Assets Attributable to
AMPS ..................................... $ 55,000,000 $ 40,000,000 -- $ 95,000,000
Shares Outstanding:
Common Shares ............................ 7,993,842 5,988,782 (355,883) 13,626,741(b)
AMPS
Series A ............................... 2,200 1,600 (1,600) 2,200(b)
Series B ............................... -- -- 1,600 1,600(b)
Net Asset Value Per Share:
Common Shares ............................ $ 14.89 $ 13.89 -- $ 14.65(c)
AMPS ..................................... $ 25,000 $ 25,000 -- $ 25,000
</TABLE>
- ----------
(a) The adjusted balances are presented as if the Reorganization had been
consummated on April 30, 1999 and are for informational purposes only.
Assumes distribution of undistributed net investment income, undistributed
realized capital gains and accrual of estimated Reorganization expenses of
$245,000. No assurance can be given as to how many MuniYield Florida
Common Shares that shareholders of MuniVest Florida will receive on the
Exchange Date, and the foregoing should not be relied upon to reflect the
number of MuniYield Florida Common Shares that actually will be received
on or after such date.
(b) Assumes the issuance of 5,632,899 MuniYield Florida Common Shares and one
newly-created series of AMPS consisting of 1,600 shares in exchange for
the net assets of MuniVest Florida. The estimated number of shares issued
was based on the net asset value of each Fund, net of distributions, on
April 30, 1999.
(c) Net Asset Value Per Common Share net of Reorganization - related expenses
of $245,000 and distribution of undistributed net investment income of
$1,523,047 for MuniYield Florida, $519,558 for MuniVest Florida, and
undistributed realized capital gains of $202,732 for MuniYield Florida..
INFORMATION CONCERNING THE SPECIAL MEETINGS
Date, Time and Place of Meetings
The Meetings will be held on December 15, 1999 at the offices of MLAM, 800
Scudders Mill Road, Plainsboro, New Jersey at 3:00 p.m. Eastern time (for
MuniYield Florida) and 2:00 p.m. Eastern time (for MuniVest Florida).
Solicitation, Revocation and Use of Proxies
A shareholder executing and returning a proxy has the power to revoke it
at any time prior to its exercise by executing a superseding proxy, by giving
written notice of the revocation to the Secretary of the appropriate Fund or by
voting in person at the Meeting. Although mere attendance at the Meetings will
not revoke a proxy, a shareholder present at the Meetings may withdraw his or
her proxy and vote in person.
All shares represented by properly executed proxies, unless such proxies
previously have been revoked, will be voted at the Meetings in accordance with
the directions on the proxies; if no direction is indicated, the shares will be
voted "FOR" the approval of the Agreement and Plan of Reorganization. It is not
anticipated that any other matters will be brought before the Meetings. If,
however, any other business properly is brought before the Meetings, proxies
will be voted in accordance with the judgment of the persons designated on such
proxies.
Record Date and Outstanding Shares
Only holders of record of Common Shares or AMPS of either Fund at the
close of business on the Record Date are entitled to vote at the Meetings or any
adjournment thereof. At the close of business on the Record Date, the Funds had
the number of shares outstanding indicated in Exhibit I.
52
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
To the knowledge of the Funds, at the date hereof, no person or entity
owns beneficially 5% or more of the Common Shares or AMPS of any Fund.
As of the Record Date, the Trustees of neither Fund held shares of the
Funds except as set forth in the table below:
Trustee Fund and Class of Shares No. of Shares Held*
- --------------------- ---------------------------------- ---------------------
J. Thomas Touchton MuniVest Florida Common Shares 5,000
- ---------------
* These holdings represent less than 0.1% of the Common Shares
outstanding.
As of the Record Date, the Trustees and officers of MuniYield Florida as a
group (12 persons) owned an aggregate of less than 1% of the outstanding
MuniYield Florida Common Shares and owned no MuniYield Florida AMPS.
As of the Record Date, the Trustees and officers of MuniVest Florida as a
group (13 persons) owned an aggregate of less than 1% of the outstanding
MuniVest Florida Common Shares and owned no MuniVest Florida AMPS.
On the Record Date, Mr. Glenn, a Trustee and an officer of each of the
Funds, Mr. Zeikel, a Trustee of each of the Funds, and the other Trustees and
officers of each Fund owned an aggregate of less than 1% of the outstanding
shares of Common Stock of ML & Co.
Voting Rights and Required Vote
For purposes of this Proxy Statement and Prospectus, each Common Share and
AMPS of each of the Funds is entitled to one vote. Approval of the Agreement and
Plan of Reorganization requires the approval of each Fund. With respect to each
Fund, approval of the Agreement and Plan of Reorganization requires the
affirmative vote of shareholders representing (i) a majority of the Fund's
outstanding Common Shares and AMPS, voting together as a single class, and (ii)
a majority of the Fund's outstanding AMPS, voting separately as a single class.
See Exhibit IV -- "Sections 86 through 98 of Chapter 156B of the Massachusetts
General Laws (the Massachusetts Business Corporation Law)" for a discussion of
dissenters' rights under Massachusetts law.
For purposes of each Meeting, a quorum consists of a majority of the
shares entitled to vote at the Meeting, present in person or by proxy. If, by
the time scheduled for each Meeting, a quorum of the applicable Fund's
shareholders is not present, or if a quorum is present but sufficient votes in
favor of the Agreement and Plan of Reorganization are not received from the
shareholders of the applicable Fund, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitation of
proxies from shareholders. Any such adjournment will require the affirmative
vote of a majority of the shares of the applicable Fund present in person or by
proxy and entitled to vote at the session of the Meeting to be adjourned. The
persons named as proxies will vote in favor of any such adjournment if they
determine that adjournment and additional solicitation are reasonable and in the
interests of the applicable Fund's shareholders.
ADDITIONAL INFORMATION
The expenses of preparation, printing and mailing of the enclosed form of
proxy, the accompanying Notice and this Proxy Statement and Prospectus will be
borne by MuniYield Florida, the surviving fund after the Reorganization, so as
to be borne equally and exclusively on a per share basis by the holders of
Common Shares of each of the Funds. If the Reorganization is not approved, these
expenses will be allocated among the Funds according to the relative net asset
value of the Common Shares of each Fund on the Meeting date.
The Funds likewise will reimburse banks, brokers and others for their
reasonable expenses in forwarding proxy solicitation materials to the beneficial
owners of shares of each of the Funds and certain persons that the Funds may
employ for their reasonable expenses in assisting in the solicitation of proxies
from such beneficial owners of shares of beneficial interest the Funds.
In order to obtain the necessary quorum at the Meetings supplementary
solicitation may be made by mail, telephone, telegraph or personal interview by
officers of the Funds. Each of the Funds has retained, Shareholder
Communications Corporation, 17 State Street, New York, New York 10004, to aid in
the solicitation of proxies, at a cost to be borne by each of the Funds of
approximately $7,500, plus out-of-pocket expenses.
53
<PAGE>
Broker-dealer firms, including Merrill Lynch, holding Fund shares in
"street name" for the benefit of their customers and clients will request the
instructions of such customers and clients on how to vote their shares on each
Item before the Meetings. The Funds understand that with respect to Common
Shares, under the rules of the NYSE, broker-dealer firms, including Merrill
Lynch, will not be permitted to grant voting authority without instructions with
respect to the approval of the Agreement and Plan of Reorganization (Item 1).
Shares of AMPS of a Fund held in "street name," however, may be voted without
instructions under certain conditions by broker-dealer firms with respect to
Item 1 and counted for purposes of establishing a quorum of that Fund if no
instructions are received one business day before the Meeting or, if adjourned,
one business day before the day to which the Meeting is adjourned. With respect
to each Fund, these conditions include, among others, that (i) at least 30% of
that Fund's AMPS outstanding have voted on Item 1, (ii) less than 10% of that
Fund's AMPS outstanding have voted against Item 1 and (iii) holders of that
Fund's Common Shares have voted to approve Item 1. In such instances, the
broker-dealer firm will vote that Fund's AMPS on Item 1 in the same proportion
as the votes cast by all holders of AMPS who voted on Item 1. The Funds will
include shares held of record by broker-dealers as to which such authority has
been granted in its tabulation of the total number of shares present for
purposes of determining whether the necessary quorum of shareholders of each
Fund exists. Proxies that are returned to a Fund but that are marked "abstain"
or on which a broker-dealer has declined to vote on any proposal ("broker
non-votes") will be counted as present for the purposes of determining a quorum.
Merrill Lynch has advised the Funds that it intends to vote shares held in its
name for which no instructions are received, except as limited by agreement or
applicable law, on Item 1 (with respect to AMPS only) in the same proportion as
the votes received from beneficial owners of those shares for which instructions
have been received, whether or not held in nominee name. Abstentions and broker
non-votes will not be counted as votes cast. Abstentions and broker non-votes
will have the same effect as a vote against the Reorganization.
This Proxy Statement and Prospectus does not contain all of the
information set forth in the registration statement and the exhibits relating
thereto that MuniYield Florida has filed with the Commission under the
Securities Act and the Investment Company Act, to which reference is hereby
made.
The Funds are subject to the informational requirements of the Exchange
Act and the Investment Company Act and in accordance therewith are required to
file reports, proxy statements and other information with the SEC. Any such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities of the SEC at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following regional
offices of the SEC: Regional Office, at Seven World Trade Center, Suite 1300,
New York, New York 10048; Pacific Regional Office, at 5670 Wilshire Boulevard,
11th Floor, Los Angeles, California 90036; and Midwest Regional Office, at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such materials can be obtained from the public
reference section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The SEC maintains a Web site at http://www.sec.gov
containing reports, proxy and information statements and other information
regarding registrants, including the Funds, that file electronically with the
SEC. Reports, proxy statements and other information concerning the Funds can
also be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
Year 2000 Issues
Many computer systems were designed using only two digits to designate
years. These systems may not be able to distinguish the Year 2000 from the Year
1900 (commonly known as the "Year 2000 Problem"). The Funds could be adversely
affected if the computer systems used by FAM or other Fund service providers do
not properly address this problem before January 1, 2000. FAM expects to have
addressed this problem before then, and does not anticipate that the services it
provides will be adversely affected. The Funds' other service providers have
told FAM that they also expect to resolve the Year 2000 Problem, and FAM will
continue to monitor the situation as the Year 2000 approaches. However, if the
problem has not been fully addressed, the Funds could be negatively affected.
The Year 2000 Problem could also have a negative impact on the issuers of
securities in which the Funds invest, and this could hurt the Funds' investment
returns.
CUSTODIAN
The Bank of New York acts as the custodian for cash and securities of
MuniYield Florida and MuniVest Florida. The principal business address of The
Bank of New York in such capacity is 90 Washington Street, New York, New York
10286.
54
<PAGE>
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR
The Bank of New York serves as the transfer agent, dividend disbursing
agent and registrar with respect to the Common Shares of MuniYield Florida and
MuniVest Florida, pursuant to separate registrar, transfer agency and service
agreements with each of the Funds. The principal business address of The Bank of
New York in such capacity is 101 Barclay Street, New York, New York 10286.
The Bank of New York serves as the transfer agent, dividend disbursing
agent, registrar and auction agent to MuniYield Florida and MuniVest Florida in
connection with their respective AMPS, pursuant to separate registrar, transfer
dividend disbursing agent, agency and service agreements with each of the Funds.
The principal business address of The Bank of New York in such capacity is 101
Barclay Street, New York, New York 10286.
LEGAL PROCEEDINGS
There are no material legal proceedings to which either Fund is a party.
LEGAL OPINIONS
Certain legal matters in connection with the Reorganization will be passed
upon for the Funds by Brown & Wood LLP, New York, New York. Brown & Wood LLP
will rely as to matters of Massachusetts law on the opinion of Bingham Dana LLP,
Boston, Massachusetts. Certain information under the caption "Taxes" relating to
matters of Florida law will be passed upon for the Fund by Holland & Knight LLP,
Tampa, Florida.
EXPERTS
The financial statements for the fiscal year ended October 31, 1998 and
the financial highlights for each of the years in the six-year period then ended
and for the period February 28, 1992 to October 31, 1992 for MuniYield Florida
and the financial statements for the fiscal year ended October 31, 1998 and the
financial highlights for each of the years in the five-year period then ended
and for the period April 30, 1993 to October 31, 1993 for MuniVest Florida
included in this Proxy Statement and Prospectus have been so included in
reliance on the reports of Deloitte & Touche LLP ("D&T"), the independent
auditors, given on their authority as experts in auditing and accounting. The
principal business address of D&T is 117 Campus Drive, Princeton, New Jersey
08540. D&T will serve as the independent auditors for the combined fund after
the Reorganization.
By Order of the Boards of Trustees
ALICE A. PELLEGRINO
Secretary of MuniVest Florida Fund and
MuniYield Florida Fund
55
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
Audited Financial Statements for MuniYield Florida Fund for the
Fiscal Year Ended October 31, 1998.................................. F-2
Unaudited Financial Statements for MuniYield Florida Fund for the
Six-Month Period Ended April 30, 1999............................... F-13
Audited Financial Statements for MuniVest Florida Fund for the
Fiscal Year Ended October 31, 1998.................................. F-23
Unaudited Financial Statements for MuniVest Florida Fund for the
Six-Month Period Ended April 30, 1999............................... F-34
Unaudited Financial Statements for Pro Forma MuniYield Florida as
of April 30, 1999................................................... F-44
F-1
<PAGE>
Audited Financial Statements for
MuniYield Florida Fund
for the Fiscal Year Ended October 31, 1998
F-2
<PAGE>
MuniYield Florida Fund October 31, 1998
================================================================================
INDEPENDENT AUDITORS' REPORT
================================================================================
The Board of Trustees and Shareholders,
MuniYield Florida Fund:
We have audited the accompanying statement of assets, liabilities and capital,
including the schedule of investments, of MuniYield Florida Fund as of October
31, 1998, the related statements of operations for the year then ended and
changes in net assets for each of the years in the two-year period then ended,
and the financial highlights for each of the years in the five-year period then
ended. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at October
31, 1998 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MuniYield Florida
Fund, as of October 31, 1998, the results of its operations, the changes in its
net assets, and the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 4, 1998
F-3
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Florida--98.8%
<S> <S> <C> <S> <C>
Boca Raton, Florida, Community Redevelopment Agency, Tax Increment Revenue
Refunding Bonds (Mizner Park)(f)(i):
AAA Aaa $ 1,850 4.95% due 3/01/2015 $ 838
AAA Aaa 1,650 4.98% due 3/01/2016 703
AAA Aaa 1,300 5% due 3/01/2017 523
AAA Aaa 2,600 5% due 3/01/2018 989
AAA Aaa 1,000 5% due 12/01/2018 366
AAA Aaa 2,650 Brevard County, Florida, IDR (NUI Corporation Project), AMT, 6.40% due
10/01/2024 (a) 2,951
A+ A1 13,700 Citrus County, Florida, PCR, Refunding (Florida Power Corporation--Crystal
River), Series A, 6.625% due 1/01/2027 14,843
Dade County, Florida, Aviation Revenue Bonds, AMT, Series B (b):
AAA Aaa 1,000 6.55% due 10/01/2013 1,105
AAA Aaa 5,000 6.60% due 10/01/2022 5,526
Escambia County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT:
NR* Aaa 1,930 (Multi-County Program), Series A, 6.90% due 4/01/2020 (e) 2,041
AAA Aaa 2,805 Refunding (Multi-County Program), 7% due 4/01/2028 (d) 3,097
NR* Aaa 1,850 Series A, 7.40% due 10/01/2023 (e) 1,948
BBB Baa1 3,000 Escambia County, Florida, PCR (Champion International Corporation Project)
AMT, 6.90% due 8/01/2022 3,296
NR* Aaa 1,380 Florida HFA, Home Ownership Revenue Refunding Bonds, AMT, Series G-1, 7.90%
due 3/01/2022 (e) 1,454
Florida State Board of Education, Capital Outlay (Public Education):
AA+ AA2 2,750 Series A, 6.10% due 6/01/2024 3,005
AAA AAA 7,500 Series B, 4.50% due 6/01/2028 (b) 6,935
AAA Aaa 3,000 Florida State Department of General Services, Division Facilities Management
Revenue Bonds (Facilities Pool), Series B, 4.50% due 9/01/2023 (f) 2,792
AAA Aaa 6,500 Florida State Division Board of Finance, Department of General Services
Revenue Bonds (Department of Natural Resource Preservation), Series 2000-A,
6.75% due 7/01/2001 (a)(g) 7,143
Florida State Mid-Bay Bridge Authority Revenue Bonds, Series A:
NR* NR* 5,495 7.50% due 10/01/2017 6,189
NR* Aaa 1,500 5.40% due 10/01/2018 (a)(i) 545
NR* Aaa 3,005 5.40% due 10/01/2019 (a)(i) 1,029
NR* Aaa 1,695 5.45% due 10/01/2020 (a)(i) 550
AAA Aaa 5,000 Florida State Turnpike Authority, Turnpike Revenue Bonds (Department of
Transportation), Series B, 5% due 7/01/2016 (b) 5,062
</TABLE>
================================================================================
PORTFOLIO ABBREVIATIONS
================================================================================
To simplify the listings of MuniYield Florida Fund's portfolio holdings in the
Schedule of Investments, we have abbreviated the names of many of the securities
according to the list at right.
AMT Alternative Minimum Tax (subject to)
DATES Daily Adjustable Tax-Exempt Securities
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
S/F Single-Family
VRDN Variable Rate Demand Notes
F-4
<PAGE>
MuniYield Florida Fund
October 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Florida (continued)
<S> <S> <C> <S> <C>
AA Aa3 $5,000 Gainesville, Florida, Utilities System Revenue Bonds, Series A, 6.50% due
10/01/2002 (g) $ 5,598
AAA Aaa 4,000 Greater Orlando Aviation Authority Revenue Bonds (Orlando Airport Facilities),
AMT, Series A, 6.50% due 10/01/2012 (c) 4,414
A A3 6,000 Hillsborough County, Florida, Capital Improvement Revenue Bonds (County
Center Project), Second Series, 6.75% due 7/01/2002 (g) 6,725
AAA Aaa 1,000 Hillsborough County, Florida, IDA, Revenue Bonds (Allegany Health System--J.
Knox Village), 6.375% due 12/01/2003 (g) 1,088
Hillsborough County, Florida, Utility Revenue Refunding Bonds:
BBB+ Baa1 1,245 Series A, 7% due 8/01/2014 1,345
AAA Aaa 2,000 Series B, 6.50% due 8/01/2016 (f) 2,171
AAA Aaa 1,300 Indian River County, Florida, Hospital Revenue Refunding Bonds, 5.70% due
10/01/2015 (f) 1,413
AAA Aaa 5,000 Jacksonville, Florida, Capital Improvement Revenue Refunding Bonds (Stadium
Project), 4.75% due 10/01/2025 (a) 4,795
A1+ VMIG1++ 500 Jacksonville, Florida, PCR, Refunding (Florida Power & Light Co. Project),
VRDN, 3.70% due 5/01/2029 (h) 500
AAA Aaa 4,000 Lee County, Florida, Solid Waste System Revenue Bonds, AMT, Series A, 6.50%
due 10/01/2013 (b) 4,345
AAA NR* 1,730 Leon County, Florida, HFA, S/F Mortgage Revenue Bonds (Multi-County Program),
AMT, Series B, 7.30% due 1/01/2028 (e) 2,001
AAA Aaa 2,500 Miami Beach, Florida, Parking Revenue Bonds, 5.125% due 9/01/2022 (f) 2,508
AAA Aaa 5,000 Miami--Dade County, Florida, Special Obligation Revenue Bonds, Sub-Series B,
5% due 10/01/2037 (b) 4,949
AAA Aaa 5,270 Miami--Dade County, Florida, Special Obligation Revenue Refunding Bonds,
Sub-Series A, 13.291% due 10/01/2016 (b)(i) 2,122
AAA Aaa 1,000 Ocoee, Florida, Transportation Revenue Refunding and Improvement Bonds, 4.50%
due 10/01/2023 (b) 931
AAA Aaa 2,625 Okaloosa County, Florida, Gas District Revenue Bonds (Gas System), Series A,
5.20% due 10/01/2019 (b) 2,682
Orange County, Florida, Health Facilities Authority Revenue Bonds (Hospital
--Orlando Regional Healthcare)(b):
AAA Aaa 500 Refunding, Series C, 6.25% due 10/01/2016 586
AAA Aaa 2,000 Series A, 6.25% due 10/01/2013 2,356
AAA Aaa 5,000 Orange County, Florida, Tourist Development, Tax Revenue Bonds, Series B,
6.50% due 10/01/2002 (a)(g) 5,602
AAA Aaa 6,000 Orlando & Orange County Expressway Authority, Florida, Revenue Refunding
Bonds, Junior Lien, 5% due 7/01/2021 (c) 5,983
AAA Aaa 1,500 Palm Beach County, Florida, Criminal Justice Facilities Revenue Bonds, 7.20%
due 6/01/2015 (c) 1,924
NR* Aaa 1,390 Palm Beach County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT, Series A,
6.80% due 10/01/2027 (d) 1,494
NR* Aaa 1,000 Peace River/Manasota, Florida, Regional Water Supply Authority, Revenue
Refunding Bonds (Peace River Option Project), Series A, 5% due 10/01/2023 (b) 997
A1+ VMIG1++ 2,800 Pinellas County, Florida, Health Facilities Authority, Revenue Refunding
Bonds, Pooled Hospital Loan Program, DATES, 3.70% due 12/01/2015 (h) 2,800
</TABLE>
F-5
<PAGE>
MuniYield Florida Fund
October 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Florida (concluded)
<S> <S> <C> <S> <C>
Saint Petersburg, Florida, Health Facilities Authority Revenue Bonds (Allegany
Health System)(b)(g):
AAA Aaa $1,550 (Saint Anthony's), 6.75% due 12/01/2003 $ 1,761
AAA Aaa 2,000 Series A, 7% due 12/01/2001 2,230
Sarasota County, Florida, Public Hospital Board, Revenue Refunding Bonds
(Sarasota Memorial Hospital), Series B (b):
AAA Aaa 3,100 5.25% due 7/01/2024 3,220
AAA Aaa 5,000 5.50% due 7/01/2028 5,392
AAA Aaa 7,250 Tallahassee, Florida, Energy System Revenue Refunding Bonds, Series A, 4.75%
due 10/01/2026 (f) 6,947
AAA Aaa 8,080 Tampa Bay, Florida, Water Utility System Revenue Bonds, Series B, 4.75% due
10/01/2027 (c) 7,737
AAA Aaa 4,000 Tampa--Hillsborough County, Florida, Expressway Authority, Revenue Refunding
Bonds, 5% due 7/01/2027 (a) 3,988
AAA Aaa 2,520 Village Center Community Development District, Florida, Recreational Revenue
Refunding Bonds, Series A, 5% due 11/01/2021 (b) 2,513
AAA Aaa 1,325 Winter Haven, Florida, Utility System Revenue Refunding and Improvement
Bonds, 4.75% due 10/01/2028 (b) 1,266
New York--4.5%
A1+ VMIG1++ 8,100 Long Island, New York, Power Authority, Electric System Revenue Bonds, VRDN,
Sub-Series 5, 3.70% due 5/01/2033 (h) 8,100
North Carolina--2.1%
A1+ NR* 3,800 Raleigh Durham, North Carolina, Airport Authority, Special Facility Revenue
Refunding Bonds (American Airlines), VRDN, Series A, 3.70% due 11/01/2015 (h) 3,800
Puerto Rico--0.6%
BBB+ Baa1 1,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series T, 6% due
7/01/2016 1,087
Utah--1.6%
A1+ VMIG1++ 2,800 Emery County, Utah, PCR, Refunding (Pacificorp Projects), VRDN, 3.70% due
11/01/2024 (h) 2,800
Wyoming--0.6%
NR* P1 1,100 Uinta County, Wyoming, PCR, Refunding (Chevron USA Inc. Project), VRDN,
3.70% due 8/15/2020 (h) 1,100
Total Investments (Cost--$184,915)--108.2% 194,200
Liabilities in Excess of Other Assets--(8.2%) (14,745)
--------
Net Assets--100.0% $179,455
========
<FN>
(a)AMBAC Insured.
(b)MBIA Insured.
(c)FGIC Insured.
(d)FNMA/GNMA Collateralized.
(e)GNMA Collateralized.
(f)FSA Insured.
(g)Prerefunded.
(h)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at October 31, 1998.
(i)Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
*Not Rated.
+Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche
LLP.
</FN>
See Notes to Financial Statements.
</TABLE>
F-6
<PAGE>
MuniYield Florida Fund
October 31, 1998
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Statement of Assets, Liabilities and Capital as of October 31, 1998
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$184,915,307) (Note 1a) $194,199,798
Cash 95,696
Interest receivable 2,051,816
Prepaid expenses and other assets 10,480
------------
Total assets 196,357,790
------------
Liabilities: Payables:
Securities purchased $ 16,758,094
Investment adviser (Note 2) 79,134 16,837,228
------------
Accrued expenses and other liabilities 65,802
------------
Total liabilities 16,903,030
------------
Net Assets: Net assets $179,454,760
============
Capital: Capital Shares (unlimited number of shares of beneficial
interest authorized) (Note 4):
Preferred Shares, par value $.05 per share (2,200
shares of AMPS* issued and outstanding at $25,000 per
share liquidation preference) $ 55,000,000
Common Shares, par value $.10 per share (7,928,215 shares
issued and outstanding) $ 792,822
Paid-in capital in excess of par 110,663,375
Undistributed investment income--net 1,397,349
Undistributed realized capital gains on investments--net 2,316,723
Unrealized appreciation on investments--net 9,284,491
------------
Total--Equivalent to $15.70 net asset value per Common Share
(market price--$16.00) 124,454,760
------------
Total capital $179,454,760
============
<FN>
*Auction Market Preferred Shares.
</FN>
See Notes to Financial Statements.
</TABLE>
F-7
<PAGE>
MuniYield Florida Fund
October 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
October 31, 1998
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 9,994,148
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 889,420
Commission fees (Note 4) 139,517
Professional fees 87,226
Accounting services (Note 2) 34,400
Transfer agent fees 30,482
Printing and shareholder reports 26,114
Trustees' fees and expenses 22,915
Custodian fees 14,462
Listing fees 13,522
Pricing fees 7,284
Other 15,259
------------
Total expenses 1,280,601
------------
Investment income--net 8,713,547
------------
Realized & Realized gain on investments--net 4,230,658
Unrealized Gain Change in unrealized appreciation on investments--net (1,550,972)
(Loss) on ------------
Investments Net Increase in Net Assets Resulting from Operations $ 11,393,233
- - --Net (Notes ============
1b, 1d & 3):
See Notes to Financial Statements.
</TABLE>
F-8
<PAGE>
MuniYield Florida Fund
October 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
October 31,
Increase (Decrease) in Net Assets: 1998 1997
<S> <S> <C> <C>
Operations: Investment income--net $ 8,713,547 $ 8,861,646
Realized gain on investments--net 4,230,658 1,872,160
Change in unrealized appreciation on investments--net (1,550,972) 1,383,784
------------ ------------
Net increase in net assets resulting from operations 11,393,233 12,117,590
------------ ------------
Dividends & Investment income--net:
Distributions Common Shares (6,806,895) (7,029,122)
to Shareholders Preferred Shares (1,531,002) (1,816,122)
(Note 1e): Realized gain on investments--net:
Common Shares (1,758,807) (347,814)
Preferred Shares (453,420) (95,370)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (10,550,124) (9,288,428)
------------ ------------
Beneficial Value of shares issued to Common Shareholders in
Interest reinvestment of dividends and distributions 880,850 197,507
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase in net assets 1,723,959 3,026,669
Beginning of year 177,730,801 174,704,132
------------ ------------
End of year* $179,454,760 $177,730,801
============ ============
<FN>
*Undistributed investment income--net $ 1,397,349 $ 1,021,699
============ ============
</FN>
See Notes to Financial Statements.
</TABLE>
F-9
<PAGE>
MuniYield Florida Fund
October 31, 1998
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the
Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 15.59 $ 15.23 $ 15.07 $ 13.82 $ 16.74
Operating -------- -------- -------- -------- --------
Performance: Investment income--net 1.10 1.13 1.13 1.14 1.15
Realized and unrealized gain (loss) on
investments--net .34 .41 .17 1.25 (2.46)
-------- -------- -------- -------- --------
Total from investment operations 1.44 1.54 1.30 2.39 (1.31)
-------- -------- -------- -------- --------
Less dividends and distributions to Common
Shareholders:
Investment income--net (.86) (.89) (.90) (.88) (.95)
Realized gain on investments--net (.22) (.04) -- -- (.43)
-------- -------- -------- -------- --------
Total dividends and distributions to Common
Shareholders (1.08) (.93) (.90) (.88) (1.38)
-------- -------- -------- -------- --------
Effect of Preferred Share activity:
Dividends and distributions to Preferred
Shareholders:
Investment income--net (.19) (.24) (.24) (.26) (.15)
Realized gain on investments--net (.06) (.01) -- -- (.08)
-------- -------- -------- -------- --------
Total effect of Preferred Share activity (.25) (.25) (.24) (.26) (.23)
-------- -------- -------- -------- --------
Net asset value, end of year $ 15.70 $ 15.59 $ 15.23 $ 15.07 $ 13.82
======== ======== ======== ======== ========
Market price per share, end of year $ 16.00 $ 15.50 $ 14.50 $ 13.375 $ 11.375
======== ======== ======== ======== ========
Total Investment Based on market price per share 10.66% 13.76% 15.29% 25.63% (24.94%)
Return:* ======== ======== ======== ======== ========
Based on net asset value per share 7.96% 8.93% 7.47% 16.50% (9.43%)
======== ======== ======== ======== ========
Ratios to Average Expenses .72% .75% .74% .77% .76%
Net Assets:** ======== ======== ======== ======== ========
Investment income--net 4.90% 5.04% 5.11% 5.32% 5.15%
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Shares, end of
Data: year (in thousands) $124,455 $122,731 $119,704 $118,402 $108,591
======== ======== ======== ======== ========
Preferred Shares outstanding, end of
year (in thousands) $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000
======== ======== ======== ======== ========
Portfolio turnover 92.25% 107.09% 119.29% 97.93% 18.31%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,263 $ 3,231 $ 3,176 $ 3,153 $ 2,974
======== ======== ======== ======== ========
Dividends Investment income--net $ 696 $ 826 $ 869 $ 927 $ 549
Per Share on ======== ======== ======== ======== ========
Preferred Shares
Outstanding:++
<FN>
*Total investment returns based on market value,
which can be significantly greater or lesser
than the net asset value, may result in
substantially different returns. Total investment
returns exclude the effects of sales loads.
**Do not reflect the effect of dividends to
Preferred Shareholders.
+Dividends per share have been adjusted to reflect a
two-for-one stock split that occurred on December 1, 1994.
</FN>
See Notes to Financial Statements.
</TABLE>
F-10
<PAGE>
MuniYield Florida Fund October 31, 1998
================================================================================
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. Significant Accounting Policies:
MuniYield Florida Fund (the "Fund") is registered under the Investment Company
Act of 1940 as a non-diversified, closed-end management investment company. The
Fund determines and makes available for publication the net asset value of its
Common Shares on a weekly basis. The Fund's Common Shares are listed on the New
York Stock Exchange under the symbol MYF. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments -- Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the most recent bid price or yield
equivalent as obtained by the Fund's pricing service from dealers that make
markets in such securities. Financial futures contracts and options thereon,
which are traded on exchanges, are valued at their closing prices as of the
close of such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Securities with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations are
not readily available are valued at their fair value as determined in good faith
by or under the direction of the Board of Trustees of the Fund, including
valuations furnished by a pricing service retained by the Fund, which may
utilize a matrix system for valuations. The procedures of the pricing service
and its valuations are reviewed by the officers of the Fund under the general
supervision of the Board of Trustees.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the debt markets. Losses may arise due to changes in the
value of the contract or if the counterparty does not perform under the
contract.
o Financial futures contracts -- The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
o Options -- The Fund is authorized to write covered call options and purchase
put options. When the Fund writes an option, an amount equal to the premium
received by the Fund is reflected as an asset and an equivalent liability. The
amount of the liability is subsequently marked to market to reflect the current
market value of the option written.
When a security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from) the basis of
the security acquired or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(d) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
F-11
<PAGE>
MuniYield Florida Fund October 31, 1998
================================================================================
================================================================================
Interest income is recognized on the accrual basis. Discounts and market
premiums are amortized into interest income. Realized gains and losses on
security transactions are determined on the identified cost basis.
(e) Dividends and distributions -- Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of 0.50% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Shares.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended October 31, 1998 were $164,339,462 and $160,390,223, respectively.
Net realized gains for the year ended October 31, 1998 and net unrealized gains
as of October 31, 1998 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- ------------------------------------------------------------ ----------
Long-term investments .................. $4,230,658 $9,284,491
---------- ----------
Total .................................. $4,230,658 $9,284,491
========== ==========
- --------------------------------------------------------------------------------
As of October 31, 1998, unrealized appreciation for Federal income tax purposes
aggregated $9,284,491, of which $9,549,775 related to appreciated securities and
$265,284 related to depreciated securities. The aggregate cost of investments at
October 31, 1998 for Federal income tax purposes was $184,915,307.
4. Beneficial Interest Transactions:
The Fund is authorized to issue an unlimited number of shares of beneficial
interest, including Preferred Shares, par value $.10 per share, all of which
were initially classified as Common Shares. The Board of Trustees is authorized,
however, to reclassify any unissued shares of beneficial interest without
approval of the holders of Common Shares.
Common Shares
Shares issued and outstanding during the years ended October 31, 1998 and
October 31, 1997 increased by 56,492 and 12,947, respectively, as a result of
dividend reinvestment.
Preferred Shares
Auction Market Preferred Shares ("AMPS") are Preferred Shares of the Fund, with
a par value of $.05 per share and a liquidation preference of $25,000 per share,
that entitle their holders to receive cash dividends at an annual rate that may
vary for the successive dividend periods. The yield in effect at October 31,
1998 was 3.23%.
Shares issued and outstanding during the years ended October 31, 1998 and
October 31, 1997 remained constant.
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from 0.25% to 0.375%, calculated on the proceeds of
each auction. For the year ended October 31, 1998, Merrill Lynch, Pierce, Fenner
& Smith Inc., an affiliate of FAM, earned $72,191 as commissions.
5. Subsequent Event:
On November 5, 1998 the Fund's Board of Trustees declared an ordinary income
dividend to holders of Common Shares in the amount of $.074297 per share,
payable on November 27, 1998 to shareholders of record as of November 20, 1998.
F-12
<PAGE>
Unaudited Financial Statements for
MuniYield Florida Fund
for the Six-Month Period
Ended April 30, 1999
F-13
<PAGE>
<TABLE>
Muni-Yield Florida Fund
April 30, 1999
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
Alabama--1.0%
AAA NR* $ 1,715 Jefferson County, Alabama, Sewer Revenue Bonds, RIB, Series 124, 6.39% due
2/01/2036 (c)(h) $ 1,780
Alaska--0.6%
A1 VMIG1++ 1,000 Valdez, Alaska, Marine Terminal, Revenue Refunding Bonds (Exxon Pipeline
Company Project), VRDN, Series C, 4.05% due 12/01/2033 (g) 1,000
Florida--100.1%
AAA Aaa 2,650 Brevard County, Florida, IDR (NUI Corporation Project), AMT, 6.40% due
10/01/2024 (a) 2,949
AAA Aaa 5,400 Broward County, Florida, Airport System Revenue Bonds (Passenger Facility),
Convertible Lien, Series H-2, 4.75% due 10/01/2023 (a) 5,109
A+ A1 13,700 Citrus County, Florida, PCR, Refunding (Florida Power Corporation--Crystal
River), Series A, 6.625% due 1/01/2027 14,714
Dade County, Florida, Aviation Revenue Bonds, AMT, Series B (b):
AAA Aaa 1,000 6.55% due 10/01/2013 1,094
AAA Aaa 5,000 6.60% due 10/01/2022 5,477
NR* Aaa 1,725 Escambia County, Florida, HFA, S/F Mortgage Revenue Bonds (Multi-County
Program), AMT, Series A, 6.90% due 4/01/2020 (d) 1,814
Escambia County, Florida, HFA, S/F Mortgage Revenue Refunding Bonds, AMT (d):
AAA Aaa 2,805 7% due 4/01/2028 (j) 3,075
NR* Aaa 2,500 (Multi-County Program), 5.20% due 4/01/2032 (b)(j) 2,484
NR* Aaa 1,850 Series A, 7.40% due 10/01/2023 (i) 1,935
BBB Baa1 3,000 Escambia County, Florida, PCR (Champion International Corporation Project),
AMT, 6.90% due 8/01/2022 3,311
A1 VMIG1++ 200 Escambia County, Florida, PCR, Refunding (Gulf Power Company Project), VRDN,
4.20% due 7/01/2022 (g) 200
NR* Aaa 1,155 Florida HFA, Home Ownership Revenue Refunding Bonds, AMT, Series G-1, 7.90%
due 3/01/2022 (d) 1,214
Florida State Board of Education, Capital Outlay, GO (Public Education):
AAA Aaa 1,000 Series A, 6.10% due 6/01/2004 (f) 1,110
AAA Aaa 4,000 Series B, 4.50% due 6/01/2023 (b) 3,648
AAA Aaa 7,500 Series B, 4.50% due 6/01/2028 (b) 6,769
AA+ Aa2 3,600 Florida State Board of Education, Capital Outlay, GO, Refunding (Public
Education), Series C, 5.25% due 6/01/2007 3,852
</TABLE>
================================================================================
PORTFOLIO ABBREVIATIONS
================================================================================
To simplify the listings of MuniYield Florida Fund's portfolio holdings in the
Schedule of Investments, we have abbreviated the names of many of the securities
according to the list below and at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DATES Daily Adjustable Tax-Exempt Securities
GO General Obligation Bonds
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
S/F Single-Family
VRDN Variable Rate Demand Notes
F-14
<PAGE>
MuniYield Florida Fund
April 30, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
Florida (continued)
NR* NR* $ 5,495 Florida State Mid-Bay Bridge Authority Revenue Bonds, Series A, 7.50% due
10/01/2017 $ 6,106
AAA Aaa 5,000 Florida State Turnpike Authority, Turnpike Revenue Bonds (Department of
Transportation), Series B, 5% due 7/01/2016 (b) 5,027
AAA Aaa 4,000 Greater Orlando Aviation Authority, Florida, Revenue Bonds (Orlando Airport
Facilities), AMT, Series A, 6.50% due 10/01/2012 (c) 4,369
AAA Aaa 1,000 Hillsborough County, Florida, IDA, Revenue Bonds (Allegany Health System--J.
Knox Village), 6.375% due 12/01/2003 (b)(f) 1,081
Hillsborough County, Florida, Utility Revenue Refunding Bonds:
BBB+ Baa1 1,245 Series A, 7% due 8/01/2014 1,328
AAA Aaa 2,000 Series B, 6.50% due 8/01/2016 (e) 2,149
AAA Aaa 1,300 Indian River County, Florida, Hospital Revenue Refunding Bonds, 5.70% due
10/01/2015 (e) 1,394
AAA Aaa 5,000 Jacksonville, Florida, Capital Improvement Revenue Refunding Bonds (Stadium
Project), 4.75% due 10/01/2025 (a) 4,713
AA Aa2 2,000 Jacksonville, Florida, Electric Authority, Revenue Refunding Bonds (Saint
Johns River), Issue 2, Series 15, 6% due 10/01/2005 2,216
NR* VMIG1++ 1,100 Jacksonville, Florida, Health Facilities Authority, Hospital Revenue Refunding
Bonds (Genesis Rehabilitation Hospital), VRDN, 4% due 5/01/2021 (g) 1,100
A1+ VMIG1++ 600 Jacksonville, Florida, PCR, Refunding (Florida Power & Light Co. Project),
VRDN, 4.20% due 5/01/2029 (g) 600
AA- A1 5,000 Lakeland, Florida, Electric and Water Revenue Refunding and Improvement Bonds,
Series B, 5.625% due 10/01/2006 (f) 5,510
AAA Aaa 4,000 Lee County, Florida, Solid Waste System Revenue Bonds, AMT, Series A, 6.50% due
10/01/2013 (b) 4,298
AAA NR* 1,640 Leon County, Florida, HFA, S/F Mortgage Revenue Bonds (Multi-County Program),
AMT, Series B, 7.30% due 1/01/2028 (d)(k) 1,864
A1+ VMIG1++ 100 Manatee County, Florida, PCR, Refunding (Florida Power and Light Company
Project), VRDN, 4% due 9/01/2024 (g) 100
AAA Aaa 2,500 Miami Beach, Florida, Parking Revenue Bonds, 5.125% due 9/01/2022 (e) 2,495
AAA Aaa 4,000 Miami--Dade County, Florida, School Board, COP, Revenue Refunding Bonds, Series C,
5% due 8/01/2025 (e) 3,903
AAA Aaa 7,600 Miami--Dade County, Florida, Water and Sewer Revenue Bonds, GO, Series A, 5% due
10/01/2029 (c) 7,414
AAA Aaa 2,625 Okaloosa County, Florida, Gas District, Revenue Refunding Bonds (Gas System),
Series A, 5.20% due 10/01/2019 (b) 2,664
AAA Aaa 2,000 Orange County, Florida, Health Facilities Authority Revenue Bonds (Hospital--
Orlando Regional Healthcare), Series A, 6.25% due 10/01/2013 (b) 2,326
AAA Aaa 500 Orange County, Florida, Health Facilities Authority, Revenue Refunding Bonds
(Hospital--Orlando Regional Healthcare), Series C, 6.25% due 10/01/2016 (b) 582
NR* Aaa 6,250 Orange County, Florida, School Board, COP, Series A, 5.25% due 8/01/2023 (b) 6,350
AAA Aaa 6,000 Orlando and Orange County Expressway Authority, Florida, Expressway Revenue
Refunding Bonds (Junior Lien), 5% due 7/01/2021 (c) 5,928
AAA Aaa 1,500 Palm Beach County, Florida, Criminal Justice Facilities Revenue Bonds, 7.20%
due 6/01/2015 (c) 1,912
NR* Aaa 1,390 Palm Beach County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT, Series A,
6.80% due 10/01/2027 (d)(j) 1,485
</TABLE>
F-15
<PAGE>
MuniYield Florida Fund
April 30, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
Florida (concluded)
AAA AAA $ 1,000 Peace River/Manasota, Florida, Regional Water Supply Authority Revenue
Bonds (Peace River Option Project), Series A, 5% due 10/01/2023 (b) $ 979
AAA Aaa 7,625 Pembroke Pines, Florida, Capital Improvement Revenue Refunding Bonds, 5.25%
due 12/01/2026 (a) 7,734
A1+ VMIG1++ 150 Pinellas County, Florida, Health Facilities Authority, Revenue Refunding
Bonds (Pooled Hospital Loan Program), DATES, 4% due 12/01/2015 (a)(g) 150
AAA Aaa 2,160 Polk County, Florida, School Board, COP, Series A, 5% due 1/01/2024 (e) 2,115
Saint Lucie County, Florida, PCR, Refunding (Florida Power and Light Company
Project), VRDN (g):
A1+ VMIG1++ 600 4% due 1/01/2026 600
A1+ VMIG1++ 4,000 4.20% due 3/01/2027 4,000
Saint Petersburg, Florida, Health Facilities Authority Revenue Bonds (b)(f):
AAA Aaa 1,550 (Allegany Health System--Saint Anthony's), 6.75% due 12/01/2003 1,742
AAA Aaa 2,000 (Allegany Health System), Series A, 7% due 12/01/2001 2,198
Sarasota County, Florida, Public Hospital Board, Revenue Bonds (b):
NR* Aaa 5,000 RIB, Series 99, 6.665% due 7/01/2028 (h) 5,650
AAA Aaa 3,100 (Sarasota Memorial Hospital), Series B, 5.25% due 7/01/2024 3,192
AAA Aaa 6,000 Tampa, Florida, Water and Sewer Revenue Refunding Bonds, Series A, 6.25% due
10/01/2002 (c)(f) 6,524
AAA Aaa 2,520 Village Center Community Development District, Florida, Recreational Revenue
Refunding Bonds, Series A, 5% due 11/01/2021 (b) 2,480
AAA Aaa 1,325 Winter Haven, Florida, Utility System Revenue Refunding and Improvement Bonds,
4.75% due 10/01/2028 (b) 1,245
New York--0.8%
A1+ VMIG1++ 1,400 Long Island Power Authority, New York, Electric System Revenue Bonds, VRDN,
Sub-Series 5, 4.25% due 5/01/2033 (g) 1,400
Puerto Rico--0.6%
BBB+ Baa1 1,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series T, 6% due
7/01/2016 1,079
Texas--2.8%
A1+ NR* 4,800 Harris County, Texas, Health Facilities Development Corporation, Hospital
Revenue Refunding Bonds (Methodist Hospital), VRDN, 4.25% due 12/01/2025 (g) 4,800
Total Investments (Cost--$179,516)--105.9% 184,337
Liabilities in Excess of Other Assets--(5.9%) (10,323)
--------
Net Assets--100.0% $174,014
========
<FN>
(a)AMBAC Insured.
(b)MBIA Insured.
(c)FGIC Insured.
(d)GNMA Collateralized.
(e)FSA Insured.
(f)Prerefunded.
(g)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at April 30, 1999.
(h)The interest rate is subject to change periodically and
inversely based upon prevailing market rates. The interest rate
shown is the rate in effect at April 30, 1999.
(i)FHA Insured.
(j)FNMA Collateralized.
(k)FHLMC Collateralized.
*Not Rated.
+Highest short-term rating by Moody's Investors Service, Inc.
</FN>
See Notes to Financial Statements.
</TABLE>
F-16
<PAGE>
MuniYield Florida Fund
April 30, 1999
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Statement of Assets, Liabilities and Capital as of April 30, 1999
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$179,515,730) (Note 1a) $184,337,188
Cash 65,913
Receivables:
Securities sold $ 6,641,594
Interest 2,136,432 8,778,026
------------
Prepaid expenses and other assets 10,480
------------
Total assets 193,191,607
------------
Liabilities: Payables:
Securities purchased 19,075,690
Investment adviser (Note 2) 76,552 19,152,242
------------
Accrued expenses and other liabilities 25,248
------------
Total liabilities 19,177,490
------------
Net Assets: Net assets $174,014,117
============
Capital: Capital Shares (unlimited number of shares of beneficial interest
authorized) (Note 4):
Preferred Shares, par value $.05 per share (2,200 shares of
AMPS* issued and outstanding at $25,000 per share liquidation
preference) $ 55,000,000
Common Shares, par value $.10 per share (7,993,842 shares issued
and outstanding) $ 799,384
Paid-in capital in excess of par 111,667,496
Undistributed investment income--net 1,523,047
Undistributed realized capital gains on investments--net 202,732
Unrealized appreciation on investments--net 4,821,458
Total--Equivalent to $14.89 net asset value per Common Share
(market price--$14.875) 119,014,117
------------
Total capital $174,014,117
============
<FN>
*Auction Market Preferred Shares.
</FN>
See Notes to Financial Statements.
</TABLE>
F-17
<PAGE>
MuniYield Florida Fund
April 30, 1999
FINANCIAL INFORMATION (continued)
<TABLE>>
Statement of Operations
<CAPTION>
For the Six Months Ended
April 30, 1999
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 4,667,312
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 440,528
Commission fees (Note 4) 67,289
Professional fees 40,841
Accounting services (Note 2) 32,176
Transfer agent fees 19,809
Printing and shareholder reports 16,201
Trustees' fees and expenses 11,275
Listing fees 7,806
Custodian fees 6,934
Pricing fees 4,060
Other 13,222
------------
Total expenses 660,141
------------
Investment income--net 4,007,171
------------
Realized & Realized gain on investments--net 2,029,374
Unrealized Gain Change in unrealized appreciation on investments--net (4,463,033)
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 1,573,512
(Notes 1b, ============
1d & 3):
See Notes to Financial Statements.
</TABLE>
F-18
<PAGE>
MuniYield Florida Fund
April 30, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 1999 1998
<S> <C> <C> <C>
Operations: Investment income--net $ 4,007,171 $ 8,713,547
Realized gain on investments--net 2,029,374 4,230,658
Change in unrealized appreciation on investments--net (4,463,033) (1,550,972)
------------ ------------
Net increase in net assets resulting from operations 1,573,512 11,393,233
------------ ------------
Dividends & Investment income--net:
Distributions to Common Shares (3,494,801) (6,806,895)
Shareholders Preferred Shares (386,672) (1,531,002)
(Note 1e): Realized gain on investments--net:
Common Shares (3,415,385) (1,758,807)
Preferred Shares (727,980) (453,420)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (8,024,838) (10,550,124)
------------ ------------
Beneficial Value of shares issued to Common Shareholders in reinvestment
Interest of dividends and distributions 1,010,683 880,850
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase (decrease) in net assets (5,440,643) 1,723,959
Beginning of period 179,454,760 177,730,801
------------ ------------
End of period* $174,014,117 $179,454,760
============ ============
<FN>
*Undistributed investment income--net $ 1,523,047 $ 1,397,349
============ ============
</FN>
See Notes to Financial Statements.
</TABLE>
F-19
<PAGE>
MuniYield Florida Fund
April 30, 1999
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
For the Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended For the Year Ended
April 30, October 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 15.70 $ 15.59 $ 15.23 $ 15.07 $ 13.82
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .50 1.10 1.13 1.13 1.14
Realized and unrealized gain (loss)
on investments--net (.30) .34 .41 .17 1.25
-------- -------- -------- -------- --------
Total from investment operations .20 1.44 1.54 1.30 2.39
-------- -------- -------- -------- --------
Less dividends and distributions to Common
Shareholders:
Investment income--net (.44) (.86) (.89) (.90) (.88)
Realized gain on investments--net (.43) (.22) (.04) -- --
-------- -------- -------- -------- --------
Total dividends and distributions to Common
Shareholders (.87) (1.08) (.93) (.90) (.88)
-------- -------- -------- -------- --------
Effect of Preferred Share activity:
Dividends and distributions to Preferred
Shareholders:
Investment income--net (.05) (.19) (.24) (.24) (.26)
Realized gain on investments--net (.09) (.06) (.01) -- --
-------- -------- -------- -------- --------
Total effect of Preferred Share activity (.14) (.25) (.25) (.24) (.26)
-------- -------- -------- -------- --------
Net asset value, end of period $ 14.89 $ 15.70 $ 15.59 $ 15.23 $ 15.07
======== ======== ======== ======== ========
Market price per share, end of period $ 14.875 $ 16.00 $ 15.50 $ 14.50 $ 13.375
======== ======== ======== ======== ========
Total Investment Based on market price per share (1.69%)++ 10.66% 13.76% 15.29% 25.63%
Return:** ======== ======== ======== ======== ========
Based on net asset value per share .29%++ 7.96% 8.93% 7.47% 16.50%
======== ======== ======== ======== ========
Ratios to Average Expenses .75%* .72% .75% .74% .77%
Net Assets:*** ======== ======== ======== ======== ========
Investment income--net 4.54%* 4.90% 5.04% 5.11% 5.32%
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Shares, end
Data: of period (in thousands) $119,014 $124,455 $122,731 $119,704 $118,402
======== ======== ======== ======== ========
Preferred Shares outstanding, end of period
(in thousands) $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000
======== ======== ======== ======== ========
Portfolio turnover 55.52% 92.25% 107.09% 119.29% 97.93%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,164 $ 3,263 $ 3,231 $ 3,176 $ 3,153
======== ======== ======== ======== ========
Dividends Investment income--net $ 176 $ 696 $ 826 $ 869 $ 927
Per Share on ======== ======== ======== ======== ========
Preferred Shares
Outstanding:
<FN>
*Annualized.
**Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result
in substantially different returns. Total investment returns exclude
the effects of sales loads.
***Do not reflect the effect of dividends to Preferred Shareholders.
+Aggregate total investment return.
</FN>
See Notes to Financial Statements.
</TABLE>
F-20
<PAGE>
MuniYield Florida Fund April 30, 1999
================================================================================
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. Significant Accounting Policies:
MuniYield Florida Fund (the "Fund") is registered under the Investment Company
Act of 1940 as a non-diversified, closed-end management investment company. The
Fund's financial statements are prepared in accordance with generally accepted
accounting principles which may require the use of management accruals and
estimates. These unaudited financial statements reflect all adjustments which
are, in the opinion of management, necessary to a fair statement of the results
for the interim period presented. All such adjustments are of a normal recurring
nature. The Fund determines and makes available for publication the net asset
value of its Common Shares on a weekly basis. The Fund's Common Shares are
listed on the New York Stock Exchange under the symbol MYF. The following is a
summary of significant accounting policies followed by the Fund.
(a) Valuation of investments -- Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the most recent bid price or yield
equivalent as obtained by the Fund's pricing service from dealers that make
markets in such securities. Financial futures contracts and options thereon,
which are traded on exchanges, are valued at their closing prices as of the
close of such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Securities with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations are
not readily available are valued at their fair value as determined in good faith
by or under the direction of the Board of Trustees of the Fund, including
valuations furnished by a pricing service retained by the Fund, which may
utilize a matrix system for valuations. The procedures of the pricing service
and its valuations are reviewed by the officers of the Fund under the general
supervision of the Board of Trustees.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the debt markets. Losses may arise due to changes in the
value of the contract or if the counterparty does not perform under the
contract.
o Financial futures contracts -- The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
o Options -- The Fund is authorized to write covered call options and purchase
put options. When the Fund writes an option, an amount equal to the premium
received by the Fund is reflected as an asset and an equivalent liability. The
amount of the liability is subsequently marked to market to reflect the current
market value of the option written.
When a security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from) the basis of
the security acquired or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(d) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Interest income is recognized on the accrual basis.
F-21
<PAGE>
MuniYield Florida Fund April 30, 1999
================================================================================
NOTES TO FINANCIAL STATEMENTS (concluded)
================================================================================
Discounts and market premiums are amortized into interest income. Realized gains
and losses on security transactions are determined on the identified cost basis.
(e) Dividends and distributions -- Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of 0.50% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Shares.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended April 30, 1999 were $91,967,863 and $94,242,106, respectively.
Net realized gains for the six months ended April 30, 1999 and net unrealized
gains as of April 30, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments .................. $2,029,374 $4,821,458
---------- ----------
Total .................................. $2,029,374 $4,821,458
========== ==========
- --------------------------------------------------------------------------------
As of April 30, 1999, unrealized appreciation for Federal income tax purposes
aggregated $4,821,458, of which $5,680,630 related to appreciated securities and
$859,172 related to depreciated securities. The aggregate cost of investments at
April 30, 1999 for Federal income tax purposes was $179,515,730.
4. Beneficial Interest Transactions:
The Fund is authorized to issue an unlimited number of shares of beneficial
interest, including Preferred Shares, par value $.10 per share, all of which
were initially classified as Common Shares. The Board of Trustees is authorized,
however, to reclassify any unissued shares of beneficial interest without
approval of the holders of Common Shares.
Common Shares
Shares issued and outstanding during the six months ended April 30, 1999 and the
year ended October 31, 1998 increased by 65,627 and 56,492, respectively, as a
result of dividend reinvestment.
Preferred Shares
Auction Market Preferred Shares ("AMPS") are Preferred Shares of the Fund, with
a par value of $.05 per share and a liquidation preference of $25,000 per share,
that entitle their holders to receive cash dividends at an annual rate that may
vary for the successive dividend periods. The yield in effect at April 30, 1999
was 3.43%.
Shares issued and outstanding during the six months ended April 30, 1999 and the
year ended October 31, 1998 remained constant.
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from 0.25% to 0.375%, calculated on the proceeds of
each auction. For the six months ended April 30, 1999, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, an affiliate of FAM, earned $34,426 as commissions.
5. Subsequent Event:
On May 6, 1999, the Fund's Board of Trustees declared an ordinary income
dividend to Common Shareholders in the amount of $.066353 per share, payable on
May 27, 1999 to shareholders of record as of May 21, 1999.
F-22
<PAGE>
Audited Financial Statements for
MuniVest Florida Fund
for the Fiscal Year Ended October 31, 1998
F-23
<PAGE>
MuniVest Florida Fund, October 31, 1998
================================================================================
INDEPENDENT AUDITORS' REPORT
================================================================================
The Board of Trustees and Shareholders,
MuniVest Florida Fund:
We have audited the accompanying statement of assets, liabilities and capital,
including the schedule of investments, of MuniVest Florida Fund as of October
31, 1998, the related statements of operations for the year then ended and
changes in net assets for each of the years in the two-year period then ended,
and the financial highlights for each of the years in the five-year period then
ended. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at October
31, 1998 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MuniVest Florida
Fund as of October 31, 1998, the results of its operations, the changes in its
net assets, and the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 4, 1998
F-24
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Alaska--1.6% A1+ P1 $ 2,000 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (Exxon Pipeline
Co. Project), VRDN, Series C, 3.70% due 12/01/2033 (a) $ 2,000
==================================================================================================================================
Colorado--2.7% A1+ VMIG1+ 3,350 Moffat County, Colorado, PCR, Refunding (Pacificorp Projects), VRDN,
3.75% due 5/01/2013 (a)(b) 3,350
==================================================================================================================================
Florida--97.2% AAA Aaa 1,000 Bay Medical Center, Florida, Hospital Revenue Bonds (Bay Medical Center
Project), 5% due 10/01/2027 (b) 984
AAA Aaa 5,000 Brevard County, Florida, IDR (NUI Corporation Project), AMT, 6.40% due
10/01/2024 (b) 5,568
AAA NR* 1,195 Broward County, Florida, HFA, Revenue Bonds, AMT, Series A, 7.35% due
3/01/2023 (e)(f) 1,261
AAA Aaa 8,200 Citrus County, Florida, PCR, Refunding (Florida Power Corp.--Crystal
River), Series B, 6.35% due 2/01/2022 (c) 8,991
AAA Aaa 1,125 Dade County, Florida, Educational Facilities Authority, Exchangeable
Revenue Bonds (University of Miami), 7.65% due 4/01/2010 (c) 1,208
AA- Aa3 2,250 Dade County, Florida, IDA, Solid Waste Disposal Revenue Bonds (Florida
Power & Light Co. Project), AMT, 7.15% due 2/01/2023 2,436
A1+ VMIG1+ 200 Dade County, Florida, Water and Sewer System Revenue Bonds, VRDN, 3.05%
due 10/05/2022 (a)(d) 200
Escambia County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT (f):
AAA Aaa 3,000 Refunding (Multi-County Program), 7% due 4/01/2028 (e) 3,312
NR* Aaa 2,075 Series A, 7.40% due 10/01/2023 2,185
BBB Baa1 4,045 Escambia County, Florida, PCR (Champion International Corporation
Project), AMT, 6.90% due 8/01/2022 4,444
NR* Aaa 1,355 Florida HFA, Home Ownership Revenue Bonds, AMT, Series G-1, 7.90% due
3/01/2022 (f) 1,428
AAA Aaa 1,155 Florida Ports Financing Commission Revenue Bonds (State Transportation
Trust Fund), AMT, 5.375% due 6/01/2027 (c) 1,178
AAA Aaa 5,000 Florida State Board of Education, Public Education Revenue Bonds
(Capital Outlay), Series B, 4.50% due 6/01/2028 (c) 4,623
AAA Aaa 2,075 Florida State Department of General Services, Division of Facilities
Management Revenue Bonds (Florida Facilities Pool), Series B, 4.50%
due 9/01/2023 (i) 1,931
AAA Aaa 4,700 Florida State Mid-Bay Bridge Authority, Crossover Revenue Refunding
Bonds, Series A, 5.95% due 10/01/2022 (b) 5,150
AAA Aaa 2,775 Florida State Turnpike Authority, Turnpike Revenue Bonds (Department of
Transportation), Series B, 5% due 7/01/2016 (c) 2,809
AAA Aaa 5,000 Fort Myers, Florida, Improvement Revenue Refunding Bonds, Series A, 5%
due 12/01/2022 (b) 4,986
AA Aa3 1,900 Gainesville, Florida, Utilities System Revenue Bonds, Series A, 6.50%
due 10/01/2002 (h) 2,127
A A3 5,400 Hillsborough County, Florida, Capital Improvement Revenue Bonds (County
Center Project), Second Series, 6.75% due 7/01/2002 (h) 6,053
AAA Aaa 2,000 Hillsborough County, Florida, Utility Revenue Refunding Bonds, Series
B, 6.50% due 8/01/2016 (c) 2,171
==================================================================================================================================
</TABLE>
Portfolio Abbreviations
To simplify the listings of MuniVest Florida Fund's portfolio holdings in the
Schedule of Investments, we have abbreviated the names of many of the securities
according to the list below and at right.
AMT Alternative Minimum Tax (subject to)
DATES Daily Adjustable Tax-Exempt Securities
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
S/F Single-Family
VRDN Variable Rate Demand Notes
F-25
<PAGE>
MuniVest Florida Fund, October 31, 1998
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Florida AAA Aaa $ 5,065 Jacksonville, Florida, Capital Improvement Revenue Refunding Bonds
(concluded) (Stadium Project), 4.75% due 10/01/2025 (b) $ 4,857
AA Aa2 4,000 Jacksonville, Florida, Electric Authority Revenue Bonds (Electric
System), Series 3-A, 5.10% due 10/01/2032 3,987
Jacksonville, Florida, Health Facilities Authority, Hospital Revenue
Refunding Bonds:
NR* VMIG1+ 100 (Genesis Rehabilitation Hospital), VRDN, 3.75% due 5/01/2021 (a) 100
AA+ NR* 2,000 (Saint Luke's Hospital Association Project), 7.125% due 11/15/2020 2,190
NR* Baa1 345 Jacksonville, Florida, Health Facilities Authority, IDR (National
Benevolent Cypress Village), Series A, 6.125% due 12/01/2016 368
NR* Aaa 3,030 Manatee County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT,
Sub-Series 2, 7.75% due 5/01/2026 (f) 3,544
A1+ VMIG1+ 2,500 Martin County, Florida, PCR, Refunding (Florida Power & Light Co.
Project), VRDN, 3.70% due 9/01/2024 (a) 2,500
Miami-Dade County, Florida, Special Obligation Revenue Bonds (c):
AAA Aaa 2,000 Refunding, Series A, 5.10%** due 10/01/2015 856
AAA Aaa 5,685 Refunding, Series A, 5.461%** due 10/01/2018 2,025
AAA Aaa 5,000 Series B, 5.66%** due 10/01/2032 807
BBB+ Baa 2,890 Nassau County, Florida, PCR, Refunding (ITT Rayonier, Inc. Project),
6.20% due 7/01/2015 3,049
AAA Aaa 1,000 Ocoee, Florida, Revenue Refunding and Improvement Bonds
(Transportation), 4.50% due 10/01/2028 (c) 924
AAA Aaa 1,150 Okaloosa County, Florida, Gas District Revenue Bonds (Gas System),
Series A, 5.125% due 10/01/2016 (c) 1,181
AAA Aaa 5,000 Orlando & Orange County, Florida, Expressway Authority, Revenue
Refunding Bonds (Junior Lien), 5% due 7/01/2021 (d) 4,986
AAA Aaa 1,890 Palm Beach County, Florida, Criminal Justice Facilities Revenue Bonds,
7.20% due 6/01/2015 (d) 2,424
AAA Aaa 2,000 Palm Beach County, Florida, Solid Waste Authority, Revenue Refunding
Bonds, Series A, 4.60%** due 10/01/2012 (b) 1,039
AAA Aaa 2,500 Peace River/Manasota, Florida, Regional Water Supply Authority Revenue
Bonds (Peace River Option Project), Series A, 5% due 10/01/2028 (c) 2,492
A1+ VMIG1+ 300 Pinellas County, Florida, Health Facilities Authority, Revenue
Refunding Bonds (Pooled Hospital Loan Program), DATES, 3.70% due
12/01/2015 (a) 300
AAA Aaa 1,200 Port Everglades Authority, Florida, Port Improvement Revenue Bonds,
7.125% due 11/01/2016 (g) 1,508
A1+ VMIG1+ 100 Saint Lucie County, Florida, PCR, Refunding (Florida Power & Light Co.
Project), VRDN, 3.30% due 3/01/2027 (a) 100
AA- Aa3 1,000 Saint Lucie County, Florida, Solid Waste Disposal Revenue Bonds
(Florida Power & Light Co. Project), AMT, 6.70% due 5/01/2027 1,091
AAA Aaa 5,000 Sarasota County, Florida, Public Hospital Board, Hospital Revenue
Refunding Bonds (Sarasota Memorial Hospital), Series B, 5.50% due
7/01/2028(c) 5,392
AAA Aaa 3,000 Tallahassee, Florida, Energy System Revenue Refunding Bonds, Series A,
4.75% due 10/01/2026 (i) 2,875
AAA Aaa 6,000 Tampa Bay, Florida, Water Utility System, Revenue Refunding Bonds,
Series A, 4.75% due 10/01/2027 (d) 5,745
Tampa, Florida, Sports Authority Revenue Bonds:
AAA Aaa 1,500 Refunding (County Interlocal Payments), 5% due 10/01/2028 (b) 1,495
AAA Aaa 2,500 (Sales Tax Payments--Stadium Project), 5.25% due 1/01/2027 (c) 2,559
==================================================================================================================================
</TABLE>
F-26
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Texas--1.8% A1+ NR* 2,200 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Methodist Hospital), VRDN, 3.70% due
12/01/2025 (a) 2,200
==================================================================================================================================
Puerto Rico--3.1% A Baa1 4,000 Puerto Rico Commonwealth Highway and Transportation Authority,
Transportation Revenue Bonds, Series A, 5% due 7/01/2038 3,905
==================================================================================================================================
Total Investments (Cost--$127,554)--106.4% 132,894
Liabilities in Excess of Other Assets--(6.4%) (7,945)
--------
Net Assets--100.0% $124,949
========
==================================================================================================================================
</TABLE>
(a) The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at October 31, 1998.
(b) AMBAC Insured.
(c) MBIA Insured.
(d) FGIC Insured.
(e) FNMA Collateralized.
(f) GNMA Collateralized.
(g) Escrowed to maturity.
(h) Prerefunded.
(i) FSA Insured.
* Not Rated.
** Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
+ Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
Quality Profile
The quality ratings of securities in the Fund as of October 31, 1998 were as
follows:
- --------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
- --------------------------------------------------------------------------------
AAA/Aaa.............................................................. 70.3%
AA/Aa ............................................................... 13.2
A/A.................................................................. 8.0
BBB/Baa.............................................................. 6.3
Other+............................................................... 8.6
- --------------------------------------------------------------------------------
+ Temporary investments in short-term municipal securities.
F-27
<PAGE>
MuniVest Florida Fund, October 31, 1998
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<TABLE>
<CAPTION>
As of October 31, 1998
==============================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$127,553,548) (Note 1a) ............. $132,894,252
Cash ........................................................................ 39,957
Receivables:
Interest .................................................................. $ 1,610,500
Securities sold ........................................................... 45,000 1,655,500
------------
Prepaid expenses and other assets ........................................... 6,657
------------
Total assets ................................................................ 134,596,366
------------
==============================================================================================================================
Liabilities: Payables:
Securities purchased ...................................................... 9,485,909
Investment adviser (Note 2) ............................................... 55,103
Dividends to shareholders (Note 1f) ....................................... 46,767 9,587,779
------------
Accrued expenses and other liabilities ...................................... 59,774
------------
Total liabilities ........................................................... 9,647,553
------------
==============================================================================================================================
Net Assets: Net assets .................................................................. $124,948,813
============
==============================================================================================================================
Capital: Capital Shares (unlimited number of shares of beneficial interest
authorized) (Note 4):
Preferred Shares, par value $.05 per share (1,600 shares of AMPS* issued
and outstanding at $25,000 per share liquidation preference) .............. $ 40,000,000
Common Shares, par value $.10 per share (5,982,149 shares issued and
outstanding) .............................................................. $ 598,215
Paid-in capital in excess of par ............................................ 83,246,930
Undistributed investment income--net ........................................ 544,924
Accumulated realized capital losses on investments--net (Note 5) ............ (4,781,960)
Unrealized appreciation on investments--net ................................. 5,340,704
------------
Total--Equivalent to $14.20 net asset value per Common Share (market
price--$14.125) ............................................................. 84,948,813
------------
Total capital ............................................................... $124,948,813
============
==============================================================================================================================
</TABLE>
* Auction Market Preferred Shares.
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended October 31, 1998
==============================================================================================================================
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned .................... $ 6,895,752
Income (Note 1d):
==============================================================================================================================
Expenses: Investment advisory fees (Note 2) ........................................... $ 618,817
Commission fees (Note 4) .................................................... 101,472
</TABLE>
F-28
<PAGE>
<TABLE>
<S> <C> <C> <C>
Professional fees ........................................................... 72,660
Accounting services (Note 2) ................................................ 39,393
Trustees' fees and expenses ................................................. 26,147
Transfer agent fees ......................................................... 24,641
Printing and shareholder reports ............................................ 20,353
Listing fees ................................................................ 15,856
Custodian fees .............................................................. 10,288
Pricing fees ................................................................ 7,090
Amortization of organization expenses (Note 1e) ............................. 2,642
Other ....................................................................... 12,728
------------
Total expenses .............................................................. 952,087
------------
Investment income--net ...................................................... 5,943,665
------------
==============================================================================================================================
Realized & Realized gain on investments--net ........................................... 3,590,397
Unrealized Gain Change in unrealized appreciation on investments--net ....................... (1,665,313)
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations ........................ $ 7,868,749
(Notes 1b, 1d & 3): ============
==============================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year Ended October 31,
------------------------------
Increase (Decrease) in Net Assets: 1998 1997
==============================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ...................................................... $ 5,943,665 $ 6,012,077
Realized gain on investments--net ........................................... 3,590,397 1,216,839
Change in unrealized appreciation/depreciation on investments--net .......... (1,665,313) 1,616,148
------------ ------------
Net increase in net assets resulting from operations ........................ 7,868,749 8,845,064
------------ ------------
==============================================================================================================================
Dividends to Investment income--net:
Shareholders Common Shares ............................................................. (4,560,158) (4,635,108)
(Note 1f): Preferred Shares .......................................................... (1,326,560) (1,349,984)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders ......... (5,886,718) (5,985,092)
------------ ------------
==============================================================================================================================
Beneficial Interest Value of shares issued to Common Shareholders in reinvestment of dividends .. 49,203 --
Transactions ------------ ------------
(Note 4):
==============================================================================================================================
Net Assets: Total increase in net assets ................................................ 2,031,234 2,859,972
Beginning of year ........................................................... 122,917,579 120,057,607
------------ ------------
End of year* ................................................................ $124,948,813 $122,917,579
============ ============
==============================================================================================================================
*Undistributed investment income--net ........................................ $ 544,924 $ 487,977
============ ============
==============================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-29
<PAGE>
MuniVest Florida Fund, October 31, 1998
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended October 31,
-------------------------------------------
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year .............................. $ 13.87 $ 13.39 $ 13.16 $ 11.82 $ 14.99
Operating ------- ------- ------- ------- -------
Performance: Investment income--net .......................................... .99 1.01 .99 1.01 1.00
Realized and unrealized gain (loss) on investments--net ......... .32 .48 .23 1.34 (3.05)
------- ------- ------- ------- -------
Total from investment operations ................................ 1.31 1.49 1.22 2.35 (2.05)
------- ------- ------- ------- -------
Less dividends and distributions to Common Shareholders:
Investment income--net ........................................ (.76) (.78) (.76) (.76) (.84)
Realized gain on investments--net ............................. -- -- -- -- (.11)
------- ------- ------- ------- -------
Total dividends and distributions to Common Shareholders ........ (.76) (.78) (.76) (.76) (.95)
------- ------- ------- ------- -------
Effect of Preferred Share activity:
Dividends and distributions to Preferred Shareholders:
Investment income--net ...................................... (.22) (.23) (.23) (.25) (.15)
Realized gain on investments--net ........................... -- -- -- -- (.02)
------- ------- ------- ------- -------
Total effect of Preferred Share activity ........................ (.22) (.23) (.23) (.25) (.17)
------- ------- ------- ------- -------
Net asset value, end of year .................................... $ 14.20 $ 13.87 $ 13.39 $ 13.16 $ 11.82
======= ======= ======= ======= =======
Market price per share, end of year ............................. $14.125 $ 13.00 $ 12.75 $ 11.50 $ 10.00
======= ======= ======= ======= =======
=================================================================================================================================
Total Investment Based on market price per share ................................. 14.78% 8.21% 17.87% 22.93% (28.20%)
Return:* ======= ======= ======= ======= =======
Based on net asset value per share .............................. 8.16% 9.93% 8.17% 19.02% (15.07%)
======= ======= ======= ======= =======
=================================================================================================================================
Ratios to Average Expenses, net of reimbursement .................................. .77% .78% .82% .85% .75%
Net Assets:** ======= ======= ======= ======= =======
Expenses ........................................................ .77% .78% .82% .85% .78%
======= ======= ======= ======= =======
Investment income--net .......................................... 4.80% 4.96% 4.96% 5.38% 4.94%
======= ======= ======= ======= =======
=================================================================================================================================
Supplemental Net assets, net of Preferred Shares, end of year (in thousands).. $84,949 $82,918 $80,058 $78,695 $70,674
Data: ======= ======= ======= ======= =======
Preferred Shares outstanding, end of year (in thousands) ........ $40,000 $40,000 $40,000 $40,000 $40,000
======= ======= ======= ======= =======
Portfolio turnover .............................................. 92.75% 89.21% 116.82% 92.54% 100.98%
======= ======= ======= ======= =======
=================================================================================================================================
Leverage: Asset coverage per $1,000 ....................................... $ 3,124 $ 3,073 $ 3,001 $ 2,967 $ 2,767
======= ======= ======= ======= =======
=================================================================================================================================
Dividends Investment income--net .......................................... $ 829 $ 844 $ 861 $ 940 $ 569
Per Share on ======= ======= ======= ======= =======
Preferred Shares
Outstanding:+
=================================================================================================================================
</TABLE>
* Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result
in substantially different returns. Total investment returns exclude
the effects of sales loads.
** Do not reflect the effect of dividends to Preferred Shareholders.
+ Dividends per share have been adjusted to reflect a two-for-one
stock split that occurred on December 1, 1994.
See Notes to Financial Statements.
F-30
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. Significant Accounting Policies:
MuniVest Florida Fund (the "Fund") is registered under the Investment Company
Act of 1940 as a non-diversified, closed-end management investment company. The
Fund determines and makes available for publication the net asset value of its
Common Shares on a weekly basis. The Fund's Common Shares are listed on the New
York Stock Exchange under the symbol MVS. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the most recent bid price or yield
equivalent as obtained by the Fund's pricing service from dealers that make
markets in such securities. Financial futures contracts and options thereon,
which are traded on exchanges, are valued at their closing prices as of the
close of such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Securities with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees of the Fund, including valuations
furnished by a pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Fund under the general supervision of the
Board of Trustees.
(b) Derivative financial instruments--The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the debt markets. Losses may arise due to changes in the
value of the contract or if the counterparty does not perform under the
contract.
o Financial futures contracts--The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
o Options--The Fund is authorized to write covered call options and purchase put
options. When the Fund writes an option, an amount equal to the premium received
by the Fund is reflected as an asset and an equivalent liability. The amount of
the liability is subsequently marked to market to reflect the current market
value of the option written.
When a security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from) the basis of
the security acquired, or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to
F-31
<PAGE>
MuniVest Florida Fund, October 31, 1998
================================================================================
NOTES TO FINANCIAL STATEMENTS
================================================================================
regulated investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax provision
is required.
(d) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Interest income is recognized on the accrual basis. Discounts and market
premiums are amortized into interest income. Realized gains and losses on
security transactions are determined on the identified cost basis.
(e) Deferred organization expenses--Deferred organization expenses are amortized
on a straight-line basis over a period not exceeding five years.
(f) Dividends and distributions--Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of 0.50% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Shares.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended October 31, 1998 were $111,836,787 and $112,260,791, respectively.
Net realized gains for the year ended October 31, 1998 and net unrealized gains
as of October 31, 1998 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments .................. $3,590,397 $5,340,704
---------- ----------
Total .................................. $3,590,397 $5,340,704
========== ==========
- --------------------------------------------------------------------------------
As of October 31, 1998, net unrealized appreciation for Federal income tax
purposes aggregated $5,339,077, of which $5,602,595 related to appreciated
securities and $263,518 related to depreciated securities. The aggregate cost of
investments at October 31, 1998 for Federal income tax purposes was
$127,555,175.
4. Beneficial Interest Transactions:
The Fund is authorized to issue an unlimited number of shares of beneficial
interest, including Preferred Shares, par value $.10 per share, all of which
were initially classified as Common Shares. The Board of Trustees is authorized,
however, to reclassify any unissued shares of beneficial interest without
approval of holders of Common Shares.
Common Shares
Shares issued and outstanding during the year ended October 31, 1998 increased
by 3,487 as a result of dividend reinvestment and during the year ended October
31, 1997 remained constant.
Preferred Shares
Auction Market Preferred Shares ("AMPS") are Preferred Shares of the Fund, with
a par value of $.05 per share and a liquidation preference of $25,000 per share,
that entitle their holders to receive cash dividends at an annual rate that may
vary for the successive dividend periods. The yield in effect at October 31,
1998 was 3.35%.
Shares issued and outstanding during the years ended October 31, 1998 and
October 31, 1997 remained constant.
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from 0.25% to 0.375%, calculated on the proceeds of
each auction. For
F-32
<PAGE>
the year ended October 31, 1998, Merrill Lynch, Pierce, Fenner & Smith Inc., an
affiliate of FAM, earned $73,287 as commissions.
5. Capital Loss Carryforward:
At October 31, 1998, the Fund had a capital loss carryforward of approximately
$2,726,000, of which $472,000 expires in 2002 and $2,254,000 expires in 2003.
This amount will be available to offset like amounts of any future taxable
gains.
6. Subsequent Event:
On November 5, 1998, the Fund's Board of Trustees declared an ordinary income
dividend to Common Shareholders in the amount of $.065566 per share, payable on
November 27, 1998 to shareholders of record as of November 20, 1998.
F-33
<PAGE>
Unaudited Financial Statements for
MuniVest Florida Fund
for the Six-Month Period
Ended April 30, 1999
F-34
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Alabama--0.8% AAA NR* $1,000 Jefferson County, Alabama, Sewer Revenue Bonds, RIB, Series 124,
6.39% due 2/01/2036 (d)(i) $ 1,038
===================================================================================================================================
California--1.1% A1+ NR* 1,300 California Pollution Control Financing Authority, PCR, Refunding
(Pacific Gas and Electric), VRDN, Series D, 4.10% due
11/01/2026 (a) 1,300
===================================================================================================================================
Florida--101.9% AAA Aaa 1,000 Bay Medical Center, Florida, Hospital Revenue Bonds (Bay Medical
Center Project), 5% due 10/01/2027 (b) 973
AAA Aaa 5,000 Brevard County, Florida, IDR (NUI Corporation Project), AMT, 6.40%
due 10/01/2024 (b) 5,564
AAA Aaa 4,000 Broward County, Florida, Airport System Revenue Bonds (Passenger
Facility), Convertible Lien, Series H-2, 4.75% due 10/01/2023 (b) 3,784
AAA NR* 1,100 Broward County, Florida, HFA, Revenue Refunding Bonds (Home
Mortgage), AMT, Series A, 7.35% due 3/01/2023 (e)(f) 1,152
AAA Aaa 8,200 Citrus County, Florida, PCR, Refunding (Florida Power
Corporation--Crystal River), Series B, 6.35% due 2/01/2022 (c) 8,918
AAA Aaa 1,125 Dade County, Florida, Educational Facilities Authority Revenue
Bonds (University of Miami), 7.65% due 4/01/2010 (c) 1,188
AA- Aa3 2,250 Dade County, Florida, IDA, Solid Waste Disposal Revenue Bonds
(Florida Power and Light Company Project), AMT, 7.15% due 2/01/2023 2,410
A1+ VMIG1+ 200 Dade County, Florida, Water and Sewer System Revenue Bonds, VRDN,
3.85% due 10/05/2022 (a)(d) 200
Escambia County, Florida, HFA, S/F Mortgage Revenue Refunding
Bonds, AMT (f):
AAA Aaa 3,000 7% due 4/01/2028 (e) 3,289
NR* Aaa 2,075 Series A, 7.40% due 10/01/2023 (j) 2,170
BBB Baa1 4,045 Escambia County, Florida, PCR (Champion International Corporation
Project), AMT, 6.90% due 8/01/2022 4,464
A1 VMIG1+ 600 Escambia County, Florida, PCR, Refunding (Gulf Power Company
Project), VRDN, 4.20% due 7/01/2022 (a) 600
NR* Aaa 1,135 Florida HFA, Home Ownership Revenue Bonds, AMT, Series G-1, 7.90%
due 3/01/2022 (f) 1,193
AAA Aaa 1,155 Florida Ports Financing Commission Revenue Bonds (State
Transportation Trust Fund), AMT, 5.375% due 6/01/2027 (c) 1,175
AAA Aaa 2,000 Florida State Board of Education, Capital Outlay, GO (Public
Education), Series B, 4.50% due 6/01/2023 (c) 1,824
===================================================================================================================================
</TABLE>
Portfolio
Abbreviations
To simplify the listings of MuniVest Florida Fund's portfolio holdings in the
Schedule of Investments, we have abbreviated the names of many of the securities
according to the list below and at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DATES Daily Adjustable Tax-Exempt Securities
GO General Obligation Bonds
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
S/F Single-Family
VRDN Variable Rate Demand Notes
F-35
<PAGE>
MuniVest Florida Fund, April 30, 1999
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Florida AA+ Aa2 $ 3,565 Florida State Board of Education, Capital Outlay, GO, Refunding
(concluded) (Public Education), Series C, 5.25% due 6/01/2007 $ 3,814
AA+ Aa2 5,000 Florida State Board of Education, Capital Outlay, GO, Series C,
5.85% due 6/01/2003 (g) 5,433
AAA Aaa 1,000 Florida State, GO (Department of Transportation--Right of Way),
5.875% due 7/01/2005 (c)(g) 1,111
NR* Aaa 4,700 Florida State Mid-Bay Bridge Authority Revenue Refunding Bonds,
Series A, 5.95% due 10/01/2022 (b) 5,102
AAA Aaa 2,775 Florida State Turnpike Authority, Turnpike Revenue Bonds
(Department of Transportation), Series B, 5% due 7/01/2016 (c) 2,790
AAA Aaa 5,000 Fort Myers, Florida, Improvement Revenue Refunding Bonds, Series A,
5% due 12/01/2022 (b) 4,905
A- Baa1 2,000 Highlands County, Florida, Health Facilities Authority Revenue
Bonds (Adventist Hospital Health System), 5.25% due 11/15/2020 1,950
A A3 3,000 Hillsborough County, Florida, Capital Improvement Revenue Bonds
(County Center Project), Second Series, 6.75% due 7/01/2002 (g) 3,322
AAA Aaa 2,000 Hillsborough County, Florida, Utility Revenue Refunding Bonds,
Series B, 6.50% due 8/01/2016 (c) 2,149
AA Aa2 2,500 Jacksonville, Florida, Electric Authority Revenue Bonds (Electric
System), Series 3-A, 5.10% due 10/01/2032 2,460
AA Aa2 4,000 Jacksonville, Florida, Electric Authority, Revenue Refunding Bonds
(St. John's River), Issue 2, Series 9, 5.25% due 10/01/2021 4,023
Jacksonville, Florida, Health Facilities Authority, Hospital
Revenue Refunding Bonds:
NR* VMIG1+ 1,500 (Genesis Rehabilitation Hospital), VRDN, 4.25% due 5/01/2021 (a) 1,500
AA+ NR* 2,000 (Saint Luke's Hospital Association Project), 7.125% due 11/15/2020 2,169
NR* Baa1 345 Jacksonville, Florida, Health Facilities Authority, IDR (National
Benevolent--Cypress Village), Series A, 6.125% due 12/01/2016 361
NR* Aaa 2,705 Manatee County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT,
Sub-Series 2, 7.75% due 5/01/2026 (f)(k) 2,949
AAA Aaa 2,460 Miami-Dade County, Florida, GO (Parks Program), 4.75% due
11/01/2023 (d) 2,327
BBB+ Baa1 2,890 Nassau County, Florida, PCR, Refunding (ITT Rayonier Inc. Project),
6.20% due 7/01/2015 3,047
AAA Aaa 1,150 Okaloosa County, Florida, Gas District, Revenue Refunding Bonds (Gas
Systems), Series A, 5.125% due 10/01/2016 (c) 1,175
Orange County, Florida, School Board, COP, Series A (c):
NR* Aaa 4,250 5.25% due 8/01/2023 4,318
NR* Aaa 5,000 5% due 8/01/2024 4,887
AAA Aaa 5,000 Orlando and Orange County Expressway Authority, Florida, Expressway
Revenue Refunding Bonds (Junior Lien), 5% due 7/01/2021 (d) 4,940
AAA Aaa 1,890 Palm Beach County, Florida, Criminal Justice Facilities Revenue
Bonds, 7.20% due 6/01/2015 (d) 2,409
AAA Aaa 2,500 Peace River/Manasota, Florida, Regional Water Supply Authority
Revenue Bonds (Peace River Option Project), Series A, 5% due
10/01/2028 (c) 2,443
A1+ VMIG1+ 3,300 Pinellas County, Florida, Health Facilities Authority, Revenue
Refunding Bonds (Pooled Hospital Loan Program), DATES, 4% due
12/01/2015 (a)(b) 3,300
AAA Aaa 1,500 Polk County, Florida, School Board, COP, Series A, 5% due
1/01/2024 (h) 1,469
AAA Aaa 1,200 Port Everglades Authority, Florida, Port Revenue Bonds, 7.125% due
11/01/2016 (l) 1,483
AA- Aa3 1,000 Saint Lucie County, Florida, Solid Waste Disposal Revenue Bonds
(Florida Power and Light Company Project), AMT, 6.70% due 5/01/2027 1,081
NR* Aaa 5,000 Sarasota County, Florida, Public Hospital Board, Revenue Refunding
Bonds, RIB, Series 99, 6.665% due 7/01/2028 (c)(i) 5,650
</TABLE>
F-36
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Florida (concluded) AAA Aaa 2,500 Tampa, Florida, Sports Authority Revenue Bonds (Sales Tax
Payments--Stadium Project), 5.25% due 1/01/2027 (c) 2,540
AAA Aaa 1,500 Tampa, Florida, Sports Authority, Revenue Refunding Bonds (County
Interlocal Payments), 5% due 10/01/2028 (b) 1,466
===================================================================================================================================
New York--3.4% A1+ VMIG1+ 4,200 Long Island Power Authority, New York, Electric System Revenue
Bonds, VRDN, Sub-Series 5, 4.25% due 5/01/2033 (a) 4,200
===================================================================================================================================
Texas--0.9% A1+ NR* 1,100 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Refunding Bonds (Methodist Hospital), VRDN, 4.25%
due 12/01/2025 (a) 1,100
===================================================================================================================================
Total Investments (Cost--$129,490)--108.1% 133,115
Liabilities in Excess of Other Assets--(8.1%) (9,948)
--------
Net Assets--100.0% $123,167
========
===================================================================================================================================
</TABLE>
(a) The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at April 30,
1999.
(b) AMBAC Insured.
(c) MBIA Insured.
(d) FGIC Insured.
(e) FNMA Collateralized.
(f) GNMA Collateralized.
(g) Prerefunded.
(h) FSA Insured.
(i) The interest rate is subject to change periodically and inversely based
upon prevailing market rates. The interest rate shown is the rate in
effect at April 30, 1999.
(j) FHA Insured.
(k) FHLMC Collateralized.
(l) Escrowed to maturity.
* Not Rated.
+ Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
Quality Profile
The quality ratings of securities in the Fund as of April 30, 1999 were as
follows:
- --------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
- --------------------------------------------------------------------------------
AAA/Aaa............................................................... 70.1%
AA/Aa ................................................................ 17.4
A/A................................................................... 4.3
BBB/Baa............................................................... 6.4
Other+................................................................ 9.9
- --------------------------------------------------------------------------------
+ Temporary investments in short-term municipal securities.
F-37
<PAGE>
MuniVest Florida Fund, April 30, 1999
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<TABLE>
As of April 30, 1999
============================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$129,489,541) (Note 1a) ..... $133,115,138
Cash ................................................................ 236,325
Receivables:
Interest .......................................................... $ 1,840,678
Securities sold ................................................... 1,189,865 3,030,543
------------
Prepaid expenses and other assets ................................... 6,657
------------
Total assets ........................................................ 136,388,663
------------
============================================================================================================================
Liabilities: Payables:
Securities purchased .............................................. 13,113,067
Investment adviser (Note 2) ....................................... 54,202
Dividends to shareholders (Note 1e) ............................... 42,780 13,210,049
------------
Accrued expenses and other liabilities .............................. 11,295
------------
Total liabilities ................................................... 13,221,344
------------
============================================================================================================================
Net Assets: Net assets .......................................................... $123,167,319
============
============================================================================================================================
Capital: Capital Shares (unlimited number of shares of beneficial interest
authorized) (Note 4):
Preferred Shares, par value $.05 per share (1,600 shares of AMPS*
issued and outstanding at $25,000 per share liquidation preference) $ 40,000,000
Common Shares, par value $.10 per share (5,988,782 shares issued
and outstanding) .................................................. $ 598,878
Paid-in capital in excess of par .................................... 83,340,130
Undistributed investment income--net ................................ 519,558
Accumulated realized capital losses on investments--net (Note 5) .... (4,916,844)
Unrealized appreciation on investments--net ......................... 3,625,597
------------
Total--Equivalent to $13.89 net asset value per Common Share
(market price--$13.5625) ............................................ 83,167,319
------------
Total capital ....................................................... $123,167,319
============
============================================================================================================================
</TABLE>
* Auction Market Preferred Shares.
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
For the Six Months Ended April 30, 1999
=================================================================================================================
<S> <C> <C>
Investment Interest and amortization of premium and discount earned ... $ 3,287,591
Income (Note 1d):
=================================================================================================================
Expenses: Investment advisory fees (Note 2) .......................... $ 310,276
Commission fees (Note 4) ................................... 49,216
</TABLE>
F-38
<PAGE>
<TABLE>
<S> <C> <C>
Professional fees .......................................... 34,948
Accounting services (Note 2) ............................... 24,905
Transfer agent fees ........................................ 19,382
Printing and shareholder reports ........................... 13,847
Trustees' fees and expenses ................................ 13,318
Listing fees ............................................... 7,852
Custodian fees ............................................. 5,521
Pricing fees ............................................... 3,440
Other ...................................................... 6,861
-----------
Total expenses ............................................. 489,566
-----------
Investment income--net ..................................... 2,798,025
-----------
=================================================================================================================
Realized & Realized loss on investments--net .......................... (134,884)
Unrealized Loss on Change in unrealized appreciation on investments--net ...... (1,715,107)
Investments--Net -----------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations ....... $ 948,034
===========
=================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 1999 1998
===================================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ...................................................... $ 2,798,025 $ 5,943,665
Realized gain (loss) on investments--net .................................... (134,884) 3,590,397
Change in unrealized appreciation/depreciation on investments--net .......... (1,715,107) (1,665,313)
------------ ------------
Net increase in net assets resulting from operations ........................ 948,034 7,868,749
------------ ------------
===================================================================================================================================
Dividends to Investment income--net:
Shareholders Common Shares ............................................................. (2,236,063) (4,560,158)
(Note 1e): Preferred Shares .......................................................... (587,328) (1,326,560)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders ......... (2,823,391) (5,886,718)
------------ ------------
===================================================================================================================================
Beneficial Interest Value of shares issued to Common Shareholders in reinvestment of dividends .. 93,863 49,203
Transactions ------------ ------------
(Note 4):
===================================================================================================================================
Net Assets: Total increase (decrease) in net assets ..................................... (1,781,494) 2,031,234
Beginning of period ......................................................... 124,948,813 122,917,579
------------ ------------
End of period* .............................................................. $123,167,319 $124,948,813
============ ============
===================================================================================================================================
* Undistributed investment income--net ........................................ $ 519,558 $ 544,924
============ ============
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-39
<PAGE>
MuniVest Florida Fund, April 30, 1999
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios have been
derived from information provided in the financial For the Six
statements. Months Ended For the Year Ended October 31,
April 30, -----------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ................... $ 14.20 $ 13.87 $ 13.39 $ 13.16 $ 11.82
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ................................. .47 .99 1.01 .99 1.01
Realized and unrealized gain (loss) on
investments--net ....................................... (.31) .32 .48 .23 1.34
-------- -------- -------- -------- --------
Total from investment operations ....................... .16 1.31 1.49 1.22 2.35
-------- -------- -------- -------- --------
Less dividends to Common Shareholders from investment
income--net ............................................ (.37) (.76) (.78) (.76) (.76)
-------- -------- -------- -------- --------
Effect of Preferred Share activity:
Dividends to Preferred Shareholders from investment
income--net .......................................... (.10) (.22) (.23) (.23) (.25)
-------- -------- -------- -------- --------
Net asset value, end of period ......................... $ 13.89 $ 14.20 $ 13.87 $ 13.39 $ 13.16
======== ======== ======== ======== ========
Market price per share, end of period .................. $13.5625 $ 14.125 $ 13.00 $ 12.75 $ 11.50
======== ======== ======== ======== ========
===================================================================================================================================
Total Investment Based on market price per share ........................ (1.38%)+ 14.78% 8.21% 17.87% 22.93%
Return:** ======== ======== ======== ======== ========
Based on net asset value per share ..................... .47%+ 8.16% 9.93% 8.17% 19.02%
======== ======== ======== ======== ========
===================================================================================================================================
Ratios to Average Expenses ............................................... .79%* .77% .78% .82% .85%
Net Assets:*** ======== ======== ======== ======== ========
Investment income--net ................................. 4.51%* 4.80% 4.96% 4.96% 5.38%
======== ======== ======== ======== ========
===================================================================================================================================
Supplemental Net assets, net of Preferred Shares, end of period
Data: (in thousands) ......................................... $ 83,167 $ 84,949 $ 82,918 $ 80,058 $ 78,695
======== ======== ======== ======== ========
Preferred Shares outstanding, end of period
(in thousands) ......................................... $ 40,000 $ 40,000 $ 40,000 $ 40,000 $ 40,000
======== ======== ======== ======== ========
Portfolio turnover ..................................... 46.54% 92.75% 89.21% 116.82% 92.54%
======== ======== ======== ======== ========
===================================================================================================================================
Leverage: Asset coverage per $1,000 .............................. $ 3,079 $ 3,124 $ 3,073 $ 3,001 $ 2,967
======== ======== ======== ======== ========
===================================================================================================================================
Dividends Investment income--net ................................. $ 367 $ 829 $ 844 $ 861 $ 940
Per Share on ======== ======== ======== ======== ========
Preferred Shares
Outstanding:
===================================================================================================================================
</TABLE>
* Annualized.
** Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result
in substantially different returns. Total investment returns exclude
the effects of sales loads.
*** Do not reflect the effect of dividends to Preferred Shareholders.
+ Aggregate total investment return.
See Notes to Financial Statements.
F-40
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. Significant Accounting Policies:
MuniVest Florida Fund (the "Fund") is registered under the Investment Company
Act of 1940 as a non-diversified, closed-end management investment company. The
Fund's financial statements are prepared in accordance with generally accepted
accounting principles which may require the use of management accruals and
estimates. These unaudited financial statements reflect all adjustments which
are, in the opinion of management, necessary to a fair statement of the results
for the interim period presented. All such adjustments are of a normal recurring
nature. The Fund determines and makes available for publication the net asset
value of its Common Shares on a weekly basis. The Fund's Common Shares are
listed on the New York Stock Exchange under the symbol MVS. The following is a
summary of significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the most recent bid price or yield
equivalent as obtained by the Fund's pricing service from dealers that make
markets in such securities. Financial futures contracts and options thereon,
which are traded on exchanges, are valued at their closing prices as of the
close of such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Securities with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees of the Fund, including valuations
furnished by a pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Fund under the general supervision of the
Board of Trustees.
(b) Derivative financial instruments--The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the debt markets. Losses may arise due to changes in the
value of the contract or if the counterparty does not perform under the
contract.
o Financial futures contracts--The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
o Options--The Fund is authorized to write covered call options and purchase put
options. When the Fund writes an option, an amount equal to the premium received
by the Fund is reflected as an asset and an equivalent liability. The amount of
the liability is subsequently marked to market to reflect the current market
value of the option written.
When a security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from) the basis of
the security acquired or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
F-41
<PAGE>
MuniVest Florida Fund, April 30, 1999
================================================================================
NOTES TO FINANCIAL STATEMENTS (concluded)
================================================================================
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(d) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Interest income is recognized on the accrual basis. Discounts and market
premiums are amortized into interest income. Realized gains and losses on
security transactions are determined on the identified cost basis.
(e) Dividends and distributions--Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of 0.50% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Shares.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended April 30, 1999 were $55,143,745 and $54,496,533, respectively.
Net realized losses for the six months ended April 30, 1999 and net unrealized
gains as of April 30, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Losses Gains
- --------------------------------------------------------------------------------
Long-term investments ................... $ (134,884) $3,625,597
---------- ----------
Total ................................... $ (134,884) $3,625,597
========== ==========
- --------------------------------------------------------------------------------
As of April 30, 1999, net unrealized appreciation for Federal income tax
purposes aggregated $3,625,597, of which $4,156,868 related to appreciated
securities and $531,271 related to depreciated securities. The aggregate cost of
investments at April 30, 1999 for Federal income tax purposes was $129,489,541.
4. Beneficial Interest Transactions:
The Fund is authorized to issue an unlimited number of shares of beneficial
interest, including Preferred Shares, par value $.10 per share, all of which
were initially classified as Common Shares. The Board of Trustees is authorized,
however, to reclassify any unissued shares of beneficial interest without
approval of holders of Common Shares.
Common Shares
Shares issued and outstanding during the six months ended April 30, 1999
increased by 6,633 as a result of dividend reinvestment and during the year
ended October 31, 1998 remained constant.
Preferred Shares
Auction Market Preferred Shares ("AMPS") are Preferred Shares of the Fund, with
a par value of $.05 per share and a liquidation preference of $25,000 per share,
that entitle their holders to receive cash dividends at an annual rate that may
vary for the successive dividend periods. The yield in effect at April 30, 1999
was 3.31%.
Shares issued and outstanding during the six months ended April 30, 1999 and the
year ended October 31, 1998 remained constant.
F-42
<PAGE>
MuniVest Florida Fund, April 30, 1999
================================================================================
NOTES TO FINANCIAL STATEMENTS (concluded)
================================================================================
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from 0.25% to 0.375%, calculated on the proceeds of
each auction. For the six months ended April 30, 1999, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, an affiliate of FAM, earned $26,350 as commissions.
5. Capital Loss Carryforward:
At October 31, 1998, the Fund had a capital loss carryforward of approximately
$2,726,000, of which $472,000 expires in 2002 and $2,254,000 expires in 2003.
This amount will be available to offset like amounts of any future taxable
gains.
6. Subsequent Event:
On May 6, 1999, the Fund's Board of Trustees declared an ordinary income
dividend to Common Shareholders in the amount of $.056659 per share, payable on
May 27, 1999 to shareholders of record as of May 21, 1999.
F-43
<PAGE>
Unaudited Financial Statements for
Pro Forma MuniYield Florida
as of April 30, 1999
F-44
<PAGE>
COMBINED SCHEDULE OF INVESTMENTS FOR
MUNIYIELD FLORIDA FUND AND MUNIVEST FLORIDA FUND (Unaudited)
APRIL 30, 1999
(in Thousands)
<TABLE>
<CAPTION>
ProForma
S&P Moody's Face MuniYield MuniVest MuniYield
Ratings Ratings Amount Florida++ Florida ++ Florida ++
- ---------------------------------------------------------------------------------------------------------------------------------
Alabama--1.0% Issue
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AAA NR* $ 2,715 Jefferson County, Alabama, Sewer Revenue Bonds, RIB,
Series 124, 6.39% due 2/01/2036(c)(h)................ $ 1,780 $ 1,038 $ 2,818
- ---------------------------------------------------------------------------------------------------------------------------------
Alaska--0.3%
- ---------------------------------------------------------------------------------------------------------------------------------
A-1+ VMIG1+ 1,000 Valdez, Alaska, Marine Terminal Revenue Refunding
Bonds (Exxon Pipeline Company Project), VRDN,
Series C, 4.05% due 12/01/2033(g).................... 1,000 -- 1,000
- ---------------------------------------------------------------------------------------------------------------------------------
California--0.4%
- ---------------------------------------------------------------------------------------------------------------------------------
A1+ NR* 1,300 California Pollution Control Financing Authority,
PCR, Refunding (Pacific Gas and Electric),
VRDN, Series D, 4.10% due 11/01/2026(g).............. -- 1,300 1,300
- ---------------------------------------------------------------------------------------------------------------------------------
Florida--101.7%
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Bay Medical Center, Florida, Hospital Revenue Bonds
(Bay Medical Center Project), 5% due
10/01/2027(a)........................................ -- 973 973
AAA Aaa 7,650 Brevard County, Florida, IDR (NUI Corporation
Project), AMT, 6.40% due 10/01/2024(a)............... 2,949 5,564 8,513
AAA Aaa 9,400 Broward County, Florida, Airport System Revenue
Bonds (Passenger Facility), Convertible Lien,
Series H-2, 4.75% due 10/01/2023(a).................. 5,109 3,784 8,893
AAA NR* 1,100 Broward County, Florida, HFA Revenue Refunding Bonds
(Home Mortgage), AMT, Series A, 7.35% due
3/01/2023(j)(d)...................................... -- 1,152 1,152
Citrus County, Florida, PCR, Refunding (Florida
Power Corporation-- Crystal River):
A+ A1 13,700 Series A, 6.625% due 1/01/2027....................... 14,714 -- 14,714
AAA Aaa 8,200 Series B, 6.35% due 2/01/2022(b)..................... -- 8,918 8,918
Dade County, Florida, Aviation Revenue Bonds, AMT,
Series B,
AAA Aaa 1,000 6.55% due 10/01/2013(b).............................. 1,094 -- 1,094
AAA Aaa 5,000 6.60% due 10/01/2022(b).............................. 5,477 -- 5,477
AAA Aaa 1,125 Dade County, Florida, Educational Facilities
Authority Revenue Bonds (University of Miami),
7.65% due 4/01/2010(b)............................... -- 1,188 1,188
AA-- Aa3 2,250 Dade County, Florida, IDA, Solid Waste Disposal
Revenue Bonds (Florida Power and Light Company
Project), AMT, 7.15% due 2/01/2023................... -- 2,410 2,410
A1+ VMIG1+ 200 Dade County, Florida, Water and Sewer System Revenue
Bonds, VRDN, 3.85% due 10/05/2022(c)(g).............. -- 200 200
NR* Aaa 1,725 Escambia County, Florida, HFA, S/F Mortgage Revenue
Bonds (Multi-County Program), AMT, Series A,
6.90% due 4/01/2020(d)............................... 1,814 -- 1,814
</TABLE>
F-45
<PAGE>
COMBINED SCHEDULE OF INVESTMENTS FOR
MUNIYIELD FLORIDA FUND AND MUNIVEST FLORIDA FUND (Unaudited) -- (continued)
APRIL 30, 1999
(in Thousands)
<TABLE>
<CAPTION>
ProForma
S&P Moody's Face MuniYield MuniVest MuniYield
Ratings Ratings Amount Florida++ Florida ++ Florida ++
- ---------------------------------------------------------------------------------------------------------------------------------
Florida (continued) Issue
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Escambia County, Florida, HFA, S/F Mortgage Revenue
Refunding Bonds, AMT(d):
NR* Aaa $ 5,805 7% due 4/01/2028(j).................................. $ 3,075 $ 3,289 $ 6,364
NR* Aaa 2,500 (Multi-County Program), 5.20% due 4/01/2032(b)(j).... 2,484 -- 2,484
NR* Aaa 3,925 Series A, 7.40% due 10/01/2023(i).................... 1,935 2,170 4,105
BBB Baa1 7,045 Escambia County, Florida, PCR (Champion International
Corporation Project), AMT, 6.90% due 8/01/2022....... 3,311 4,464 7,775
A1 VMIG1+ 800 Escambia County, Florida, PCR, Refunding (Gulf Power
Company Project), VRDN, 4.20% due 7/01/2022(g)....... 200 600 800
NR* Aaa 2,290 Florida, HFA, Home Ownership Revenue Refunding Bonds,
AMT, Series G-1, 7.90% due 3/01/2022(d).............. 1,214 1,193 2,407
AAA Aaa 1,155 Florida Ports Financing Commission Revenue Bonds
(State Transportation Trust Fund), AMT, 5.375%
due 6/01/2027(b)..................................... -- 1,175 1,175
Florida State Board of Education, Capital Outlay, GO
(Public Education):
AA+ Aaa 1,000 Series A, 6.10% due 6/01/2004(f)..................... 1,110 -- 1,110
AA+ Aa2 6,000 Series B, 4.50% due 6/01/2023(b)..................... 3,648 1,824 5,472
AAA Aaa 7,500 Series B, 4.50% due 6/01/2028(b)..................... 6,769 -- 6,769
AA+ Aa2 7,165 Florida State Board of Education, Capital Outlay, GO,
Refunding (Public Education),
Series C, 5.25% due 6/01/2007........................ 3,852 3,814 7,666
AA Aa2 5,000 Florida State Board of Education, Capital Outlay, GO,
Series C, 5.85% due 6/01/2003(f)..................... -- 5,433 5,433
AAA Aaa 1,000 Florida State, GO (Department of Transportation-Right
of Way), 5.875% due 7/01/2005(b)(f).................. -- 1,111 1,111
NR* NR* 5,495 Florida State Mid-Bay Bridge Authority Revenue Bonds,
Series A, 7.50% due 10/01/2017(a).................... 6,106 -- 6,106
NR* Aaa 4,700 Florida State Mid-Bay Bridge Authority Revenue
Refunding Bonds, Series A, 5.95% due
10/01/2022(a)........................................ -- 5,102 5,102
AAA Aaa 7,775 Florida State Turnpike Authority, Turnpike Revenue
Bonds (Department of Transportation), Series B,
5% due 7/01/2016(b).................................. 5,027 2,790 7,817
AAA Aaa 5,000 Fort Myers, Florida, Improvement Revenue Refunding
Bonds, Series A, 5% due 12/01/2022(a)................ -- 4,905 4,905
</TABLE>
F-46
<PAGE>
COMBINED SCHEDULE OF INVESTMENTS FOR
MUNIYIELD FLORIDA FUND AND MUNIVEST FLORIDA FUND (Unaudited) -- (continued)
APRIL 30, 1999
(in Thousands)
<TABLE>
<CAPTION>
ProForma
S&P Moody's Face MuniYield MuniVest MuniYield
Ratings Ratings Amount Florida++ Florida ++ Florida ++
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Florida (continued) Issue
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
AAA Aaa $ 4,000 Greater Orlando Aviation Authority Revenue Bonds
(Orlando Airport Facilities), AMT, Series A,
6.50% due 10/01/2012(c).............................. $ 4,369 -- $ 4,369
A- Baa1 2,000 Highlands County, Florida, Health Facilities
Authority Revenue Bonds (Adventist Hospital
Health System), 5.25% due 11/15/2020................. -- $ 1,950 1,950
A A3 3,000 Hillsborough County, Florida, Capital Improvement
Revenue Bonds (County Center Project) Second
Series, 6.75% due 7/01/2002(f)........................ -- 3,322 3,322
AAA Aaa 1,000 Hillsborough County, Florida, IDA Revenue Bonds
(Allegany Health System- J. Knox Village),
6.375% due 12/01/2003(b)(f).......................... 1,081 -- 1,081
Hillsborough County, Florida, Utility Revenue
Refunding Bonds:
BBB+ A3 1,245 Series A, 7% due 8/01/2014........................... 1,328 -- 1,328
AAA Aaa 4,000 Series B, 6.50% due 8/01/2016(e)..................... 2,149 2,149 4,298
AAA Aaa 1,300 Indian River County, Florida, Hospital Revenue
Refunding Bonds, 5.70% due 10/01/2015(e)............. 1,394 -- 1,394
AAA Aaa 5,000 Jacksonville, Florida, Capital Improvement Revenue
Refunding Bonds (Stadium Project), 4.75% due
10/01/2025(a)........................................ 4,713 -- 4,713
AA Aa2 2,500 Jacksonville, Florida, Electric Authority Revenue
Bonds (Electric System), Series 3-A, 5.10% due
10/01/2032........................................... -- 2,460 2,460
Jacksonville, Florida, Electric Authority, Revenue
Refunding Bonds (St. Johns River), Issue 2:
AA Aa2 4,000 Series 9, 5.25% due 10/01/2021....................... -- 4,023 4,023
AA Aa2 2,000 Series 15, 6% due 10/01/2005......................... 2,216 -- 2,216
Jacksonville, Florida, Health Facilities Authority,
Hospital Revenue Refunding Bonds:
NR* VMIG1+ 2,600 (Genesis Rehabilitation Hospital), VRDN, 4% due
5/01/2021(g)......................................... 1,100 1,500 2,600
AA+ NR* 2,000 (Saint Luke's Hospital Association Project),
7.125% due 11/15/2020................................ -- 2,169 2,169
NR* Baa1 345 Jacksonville, Florida, Health Facilities Authority,
IDR (National Benevolent-Cypress Village),
Series A, 6.125% due 12/01/2016...................... -- 361 361
A-1+ VMIG1+ 600 Jacksonville, Florida, PCR, Refunding (Florida Power
& Light Co. Project), VRDN, 4.20% due
5/01/2029(g)......................................... 600 -- 600
AA- A1 5,000 Lakeland, Florida, Electric and Water Revenue
Refunding and Improvement Bonds, Series B,
5.625% due 10/01/2006................................ 5,510 -- 5,510
AAA Aaa 4,000 Lee County, Florida, Solid Waste System Revenue
Bonds, Series A, AMT, 6.50% due 10/01/2013(b)........ 4,298 -- 4,298
</TABLE>
F-47
<PAGE>
COMBINED SCHEDULE OF INVESTMENTS FOR
MUNIYIELD FLORIDA FUND AND MUNIVEST FLORIDA FUND (Unaudited) -- (continued)
APRIL 30, 1999
(in Thousands)
<TABLE>
<CAPTION>
ProForma
S&P Moody's Face MuniYield MuniVest MuniYield
Ratings Ratings Amount Florida++ Florida ++ Florida ++
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Florida (continued) Issue
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
AAA NR* $ 1,640 Leon County, Florida, HFA, S/F Mortgage Revenue Bonds
(Multi-County Progarm), AMT, Series B, 7.30%
due 1/01/2028(d)..................................... $ 1,864 -- $ 1,864
NR* Aaa 2,705 Manatee County, Florida, HFA, S/F Mortgage Revenue
Bonds, AMT, Sub-Series 2, 7.75% due 5/01/2026(d)..... -- $ 2,949 2,949
A1+ VMIG1+ 100 Manatee County, Florida, PCR, Refunding (Florida Power
and Light Company Project), VRDN, 4% due
9/01/2024(g)......................................... 100 -- 100
AAA Aaa 2,500 Miami Beach, Florida, Parking Revenue Bonds, 5.125%
due 9/01/2022(e)..................................... 2,495 -- 2,495
AAA Aaa 2,460 Miami-Dade County, Florida, GO (Parks Program), 4.75%
due 11/01/2023(c).................................... -- 2,327 2,327
AAA Aaa 4,000 Miami-Dade County, Florida, School Board, COP,
Revenue Refunding Bonds, Series C, 5% due
8/01/2025(e)......................................... 3,903 -- 3,903
AAA Aaa 7,600 Miami-Dade County, Florida, Water and Sewer Revenue
Bonds, GO, Series A, 5% due 10/01/2029(c)............ 7,414 -- 7,414
BBB+ Baa2 2,890 Nassau County, Florida, PCR, Refunding (ITT Rayonier
Inc. Project), 6.20% due 7/01/2015................... -- 3,047 3,047
Okaloosa County, Florida, Gas District Revenue
Refunding Bonds (Gas System), Series A:
AAA Aaa 1,150 5.125% due 10/01/2016(b)............................. -- 1,175 1,175
AAA Aaa 2,625 5.20% due 10/01/2019(b).............................. 2,664 -- 2,664
AAA Aaa 2,000 Orange County, Florida, Health Facilities Authority
Revenue Bonds (Hospital-Orlando Regional
Healthcare), Series A, 6.25% due 10/01/2013(b)....... 2,326 -- 2,326
AAA Aaa 500 Orange County, Florida, Health Facilities Authority
Revenue Refunding Bonds (Hospital-Orlando
Regional Healthcare), Series C, 6.25% due
10/01/2016(b)........................................ 582 -- 582
Orange County, Florida, School Board, COP, Series A(b):
NR* Aaa 10,500 5.25% due 8/01/2023(b)............................... 6,350 4,318 10,668
NR* Aaa 5,000 5% due 8/01/2024..................................... -- 4,887 4,887
AAA Aaa 11,000 Orlando and Orange County Expressway Authority,
Florida, Expressway Revenue Refunding Bonds,
Junior Lien, 5% due 7/01/2021(c)..................... 5,928 4,940 10,868
AAA Aaa 3,390 Palm Beach County, Florida, Criminal Justice
Facilities Revenue Bonds, 7.20% due 6/01/2015(c)..... 1,912 2,409 4,321
NR* Aaa 1,390 Palm Beach County, Florida, HFA, S/F Mortgage
Revenue Bonds, AMT, Series A, 6.80% due
10/01/2027(d)(j)..................................... 1,485 -- 1,485
</TABLE>
F-48
<PAGE>
COMBINED SCHEDULE OF INVESTMENTS FOR
MUNIYIELD FLORIDA FUND AND MUNIVEST FLORIDA FUND (Unaudited) -- (continued)
APRIL 30, 1999
(in Thousands)
<TABLE>
<CAPTION>
ProForma
S&P Moody's Face MuniYield MuniVest MuniYield
Ratings Ratings Amount Florida++ Florida ++ Florida ++
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Florida (concluded) Issue
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Peace River/Manasota, Florida, Regional Water Supply
Authority, Revenue Bonds (Peace River Option
Project), Series A(b):
AAA NR* 1,000 5% due 10/01/2023......................................... $ 979 -- $ 979
AAA NR* 2,500 5% due 10/01/2028......................................... -- $ 2,443 2,443
NR* Aaa 7,625 Pembroke Pines, Florida, Capital Improvement Revenue
Refunding Bonds, 5.25% due 12/01/2026(a)............. 7,734 -- 7,734
A-1+ VMIG1+ 3,450 Pinellas County, Florida, Health Facilities Authority,
Revenue Refunding Bonds (Pooled Hospital Loan
Program), DATES, 4% due 12/01/2015(a)(g)............. 150 3,300 3,450
AAA Aaa 3,660 Polk County, Florida, School Board, COP, Series A,
5% due 1/01/2024(e).................................. 2,115 1,469 3,584
AAA Aaa 1,200 Port Everglades Authority, Florida, Port Revenue
Bonds, 7.125% due 11/01/2016......................... -- 1,483 1,483
Saint Lucie County, Florida, PCR, Refunding (Florida
Power and Light Company Project), VRDN(g):
A-1+ VMIG1+ 600 4% due 1/01/2026..................................... 600 -- 600
A-1+ VMIG1+ 4,000 4.20% due 3/01/2027.................................. 4,000 -- 4,000
AA- Aa3 1,000 Saint Lucie County, Florida, Solid Waste Disposal
Revenue Bonds (Florida Power and Light Company
Project), AMT, 6.70% due 5/01/2027................... -- 1,081 1,081
Saint Petersburg, Florida, Health Facilities Authority
Revenue Bonds(b)(f):
AAA* Aaa 1,550 (Alleghany Health System-Saint Anthony's), 6.75%
due 12/01/2003....................................... 1,742 -- 1,742
AAA Aaa 2,000 (Alleghany Health System), Series A, 7% due
12/01/2001........................................... 2,198 -- 2,198
Sarasota County, Florida, Public Hospital Board,
Revenue Refunding Bonds(b):
NR* Aaa 10,000 RITR, Series 99, 6.665% due 7/01/2028(b)(h).......... 5,650 5,650 11,300
AAA Aaa 3,100 (Sarasota Memorial Hospital), Series B, 5.25% due
7/01/2024(b)......................................... 3,192 -- 3,192
AAA Aaa 2,500 Tampa, Florida, Sports Authority Revenue Bonds, Sales
Tax Payments (Stadium Project), 5.25% due
1/01/2027(b)......................................... -- 2,540 2,540
AAA Aaa 1,500 Tampa, Florida, Sports Authority Revenue Refunding
Bonds (County Interlocal Payments), 5% due
10/01/2028(a)........................................ -- 1,466 1,466
AAA Aaa 6,000 Tampa, Florida, Water and Sewer Revenue Refunding
Bonds, Series A, 6.25% due 10/01/2002(c)(f).......... 6,524 -- 6,524
AAA Aaa 2,520 Village Center Community Development District,
Florida, Recreational Revenue Refunding Bonds,
Series A, 5% due 11/01/2021(b)....................... 2,480 -- 2,480
AAA Aaa 1,325 Winter Haven, Florida, Utility System Revenue
Refunding and Improvement Bonds, 4.75% due
10/01/2028(b)........................................ 1,245 -- 1,245
</TABLE>
F-49
<PAGE>
COMBINED SCHEDULE OF INVESTMENTS FOR
MUNIYIELD FLORIDA FUND AND MUNIVEST FLORIDA FUND (Unaudited) -- (concluded)
APRIL 30, 1999
(in Thousands)
<TABLE>
<CAPTION>
ProForma
S&P Moody's Face MuniYield MuniVest MuniYield
Ratings Ratings Amount Florida++ Florida ++ Florida ++
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
New York--1.9%
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
A- VMIG1+ $ 5,600 Long Island Power Authority, New York, Electric
System Revenue Bonds, VRDN, Sub-Series 5,
4.25% due 5/01/2033(g)............................... $ 1,400 $ 4,200 $ 5,600
- ---------------------------------------------------------------------------------------------------------------------------------
Puerto Rico--0.4%
- ---------------------------------------------------------------------------------------------------------------------------------
BBB+ Baa1 1,000 Puerto Rico Electric Power Authority, Power Revenue
Bonds, Series T, 6% due 7/01/2016.................... 1,079 -- 1,079
- ---------------------------------------------------------------------------------------------------------------------------------
Texas--2.0%
- ---------------------------------------------------------------------------------------------------------------------------------
A-1+ NR* 5,900 Harris County, Texas, Health Facilities Development
Corporation, Hospital Revenue Refunding Bonds
(Methodist Hospital), VRDN, 4.25% due
12/01/2025(g)........................................ 4,800 1,100 5,900
- ---------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$309,005)--107.7%................ 184,337 133,115 317,452
Liabilities in Excess of Other Assets--(7.7%)............. (10,323) (9,948) (22,761)
-------- -------- --------
Net Assets--100.0%........................................ $174,014 $123,167 $294,691
======== ======== ========
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) AMBAC Insured.
(b) MBIA Insured.
(c) FGIC Insured.
(d) GNMA Collateralized.
(e) FSA Insured.
(f) Prerefunded.
(g) The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at April 30,
1999.
(h) The interest rate is subject to change periodically and inversely based
upon prevailing market rates. The interest rate shown is the rate in effect
at April 30, 1999.
(i) FHA Insured.
(j) FNMA Collateralized.
* Not Rated.
+ Highest short-term rating by Moody's Investors Service, Inc.
++ Value as discussed in the Combined Notes to Financial Statements.
See Notes to Financial Statements.
F-50
<PAGE>
PORTFOLIO ABBREVIATIONS
To simplify the listings of MuniYield Florida Fund's portfolio holdings in
the Schedule of Investments, we have abbreviated the names of many of the
securities according to the list below.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DATES Daily Adjustable Tax-Exempt Securities
GO General Obligation Bonds
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
S/F Single-Family
VRDN Variable Rate Demand Notes
F-51
<PAGE>
The following unaudited pro forma Combined Statement of Assets, Liabilities and
Capital has been derived from the Statements of Assets, Liabilities and Capital
of the respective Funds at April 30, 1999 and such information has been adjusted
to give effect to the Reorganization as if the Reorganization had occurred at
April 30, 1999. The pro forma Combined Statement of Assets, Liabilities and
Capital is presented for informational purposes only and does not purport to be
indicative of the financial condition that actually would have resulted if the
Reorganization had been consummated at April 30, 1999. The pro forma Combined
Statement of Assets, Liabilities and Capital should be read in conjunction with
the Funds' financial statements and related notes thereto which are included in
the Joint Proxy Statement and Prospectus.
PRO FORMA COMBINED STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
MUNIYIELD FLORIDA FUND AND MUNIVEST FLORIDA FUND
As of April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Pro Forma
MuniYield MuniVest MuniYield
Florida Florida Adjustments Florida
------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Assets:
Investments, at value* (Note 1a) .................... $ 184,337,188 $ 133,115,138 $ 317,452,326
Cash ................................................ 65,913 236,325 302,238
Receivables:
Securities sold .................................. 6,641,594 1,189,865 7,831,459
Interest ........................................ 2,136,432 1,840,678 3,977,110
Prepaid expenses and other assets ................... 10,480 6,657 17,137
------------- ------------- ----------- -------------
Total assets ........................................ 193,191,607 136,388,663 329,580,270
------------- ------------- ----------- -------------
Liabilities:
Payables:
Securities purchased ............................. 19,075,690 13,113,067 32,188,757
Dividends to shareholders (Note 1e) .............. 42,780 2,245,337(1) 2,288,117
Investment adviser (Note 2) ...................... 76,552 54,202 130,754
Accrued expenses and other liabilities .............. 25,248 11,295 245,000(2) 281,543
------------- ------------- ----------- -------------
Total liabilities ................................... 19,177,490 13,221,344 2,490,337 34,889,171
------------- ------------- ----------- -------------
Net Assets:
Net Assets .......................................... $ 174,014,117 $ 123,167,319 $(2,490,337) $ 294,691,099
============= ============= =========== =============
Capital
Capital Shares (unlimited number of shares
of beneficial interest authorized)
Preferred Shares, par value $.10 per share
of AMPS** issued and outstanding at
$25,000 per share liquidation
preference+ ..................................... $ 55,000,000 $ 40,000,000 $ 95,000,000
Common Shares, par value $.10 per share,
issued and outstanding++ ........................ 799,384 598,878 (35,588) 1,362,674
Paid-in capital in excess of par .................... 111,667,496 83,340,130 (209,412) 194,798,214
Undistributed investment income - net ............... 1,523,047 519,558 (2,042,605) --
Undistributed (accumulated) realized capital
gains (losses) on investments - net ............... 202,732 (4,916,844) (202,732) (4,916,844)
Unrealized appreciation on investments-net .......... 4,821,458 3,625,597 8,447,055
------------- ------------- ----------- -------------
- -------------
Total Capital ....................................... $ 174,014,117 $ 123,167,319 $(2,490,337) $ 294,691,099
============= ============= =========== =============
* Identified Cost .............................. $ 179,515,730 $ 129,489,541 -- $ 309,005,271
============= ============= =========== =============
+ AMPS issued and outstanding ................... 2,200 1,600 -- 3,800
============= ============= =========== =============
++ Shares issued and outstanding .................. 7,993,842 5,988,782 (355,883) 13,626,741
============= ============= =========== =============
Net asset value per Common Share .................... $ 14.89 $ 13.89 -- $ 14.65
============= ============= =========== =============
** Auction Market Preferred Shares ................
</TABLE>
- -------------
(1) Assumes the distribution of undistributed investment income and
undistributed realized capital gains.
(2) Reflects the charge for estimated Reorganization expenses of $245,000.
See Notes to Financial Statements.
F-52
<PAGE>
The following unaudited pro forma Combined Statement of Operations has been
derived from the statement of operations of the respective Funds for the six
months ended April 30, 1999 and such information has been adjusted to give
effect to the Reorganization as if the Reorganization had occurred on November
1, 1998. The pro forma Combined Statement of Operations is presented for
informational purposes only and does not purport to be indicative of the results
of operations that actually would have resulted if the Reorganization had been
consummated on November 1, 1998 nor which may result from future operations. The
pro forma Combined Statement of Operations should be read in conjunction with
the Funds' financial statements and related notes thereto which are included in
the Joint Proxy Statement and Prospectus.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR MUNIYIELD FLORIDA FUND AND MUNIVEST FLORIDA FUND
For the Six Months Ended April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Pro Forma
MuniYield MuniVest MuniYield
Florida Florida Adjustments Florida
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment Income (Note 1d):
Interest and amortization of premium and
discount earned ................................... $ 4,667,312 $ 3,287,591 $ 7,954,903
----------- ----------- ----------- -----------
Expenses:
Investment advisory fees (Note 2) ................... 440,528 310,276 750,804
Commission fees ..................................... 67,289 49,216 116,505
Professional fees ................................... 40,841 34,948 (34,948)(1) 40,841
Accounting services (Note 2) ........................ 32,176 24,905 (17,381)(1) 39,700
Transfer agent fees ................................. 19,809 19,382 39,191
Trustees' fees and expenses ......................... 11,275 13,318 (13,318)(1) 11,275
Printing and shareholder reports .................... 16,201 13,847 (4,972)(1) 25,076
Listing fees ........................................ 7,806 7,852 15,658
Custodian fees ...................................... 6,934 5,521 12,455
Pricing fees ........................................ 4,060 3,440 7,500
Other ............................................... 13,222 6,861 20,083
----------- ----------- ----------- -----------
Total expenses ...................................... 660,141 489,566 (70,619) 1,079,088
----------- ----------- ----------- -----------
Investment income - net ............................. 4,007,171 2,798,025 70,619 6,875,815
----------- ----------- ----------- -----------
Realized & Unrealized Gains(Losses) on
Investments - Net (Notes 1b & 1d)
Realized gain (loss) on investments - net ........... 2,029,374 (134,884) 0 1,894,490
Change in unrealized appreciation on
investments - net ................................. (4,463,033) (1,715,107) 0 (6,178,140)
----------- ----------- ----------- -----------
Net Increase in Net Assets Resulting
from Operations ................................... $ 1,573,512 $ 948,034 $ 70,619 $ 2,592,165
=========== =========== =========== ===========
</TABLE>
- ----------
(1) Reflects the anticipated savings as a result of the Reorganization through
fewer audits and consolidation of printing, accounting and other services.
(2) This Pro Forma Combined Statement of Operations excludes non-recurring
estimated Reorganization expenses of $245,000.
F-53
<PAGE>
MuniYield Florida Fund and MuniVest Florida Fund
COMBINED NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield Florida Fund (the "Fund," which term as used herein shall refer
to MuniYield Florida Fund after giving effect to the Reorganization) is
registered under the Investment Company Act of 1940 as a non-diversified,
closed-end management investment company. The Fund's financial statements are
prepared in accordance with generally accepted accounting principles which may
require the use of management accruals and estimates. These unaudited financial
statements reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period presented.
The Fund determines and makes available for publication the net asset value of
its Common Shares on a weekly basis. The Fund's Common Shares are listed on the
New York Stock Exchange under the symbol "MYF". The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments -- Municipal bonds are traded primarily in
the over-the-counter markets and are valued at the most recent bid price or
yield equivalent as obtained by the Fund's pricing service from dealers that
make markets in such securities. Financial futures contracts and options
thereon, which are traded on exchanges, are valued at their closing prices as of
the close of such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Securities with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations are
not readily available are valued at their fair value as determined in good faith
by or under the direction of the Board of Trustees of the Fund, including
valuations furnished by a pricing service retained by the Fund, which may
utilize a matrix system for valuations. The procedures of the pricing service
and its valuations are reviewed by the officers of the Fund under the general
supervision of the Board of Trustees.
(b) Derivative financial instruments-- The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its portfolio
against adverse movements in the debt markets. Losses may arise due to changes
in the value of the contract or if the counterparty does not perform under the
contract.
o Financial futures contracts -- The Fund may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
o Options -- The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written.
When a security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from) the basis of
the security acquired or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes-- It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
F-54
<PAGE>
(d) Security transactions and investment income - Security transactions
are recorded on the dates the transactions are entered into (the trade dates).
Interest income is recognized on the accrual basis. Discounts and market
premiums are amortized into interest income. Realized gains and losses on
security transactions are determined on the identified cost basis.
(e) Dividends and distributions - Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides
the necessary personnel, facilities, equipment and certain other services
necessary to the operations of the Fund. For such services, the Fund pays a
monthly fee at an annual rate of 0.50% of the Fund's average weekly net assets,
including proceeds from the issuance of Preferred Shares.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or directors
of FAM, PSI, and/or ML & Co.
F-55
<PAGE>
EXHIBIT I
INFORMATION PERTAINING TO EACH FUND
o General Information Pertaining to the Funds
State of
Defined Term Fiscal Organiza- Meeting
Fund Used in Exhibit I Year End tion Time
- --------- ------------------ -------- --------- ---------
MuniYield Florida ......... MuniYield Florida 10/31 MA 3:00 p.m.
MuniVest Florida .......... MuniVest Florida 10/31 MA 2:00 p.m.
Shares of Capital Stock
Outstanding as of
the Record Date
---------------------------------------
Common AMPS
Fund Shares
- --------- -------------------- -----------
MuniYield Florida......... 7,993,842 2,200
MuniVest Florida.......... 5,988,782 1,600
o Information Pertaining to Officers and Trustees
Set forth in the table below is information regarding board and committee
meetings held and the aggregate fees and expenses paid by the Fund to
non-affiliated Board members during each Fund's most recently completed fiscal
year.
<TABLE>
<CAPTION>
Board Audit Committee
---------------------------------- ------------------------------
# Per Aggregate
# Meetings Annual Per Meeting Meetings Annual Meeting Fees and
Fund Held* Fee ($) Fee ($)** Held Fee ($) Fee ($)** Expenses ($)
- --------- ---------- ------- ---------- ------- ------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
MuniYield Florida 6 2,500 250 4 500 125 22,915
MuniVest Florida 5 2,500 250 4 500 125 26,147
</TABLE>
- ----------
* Includes meetings held via teleconferencing equipment.
** The fee is payable for each meeting attended in person. A fee is not paid
for telephonic meetings.
Set forth in the table below is information regarding compensation paid by
the Fund to the non-affiliated Board members for the most recently completed
fiscal year.
<TABLE>
<CAPTION>
Compensation From MuniYield Florida ($)*
- ------------------------------------------------------------------------------------------------------------
Fund Bodurtha London Martin May Perold
- ---------- ------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
MuniYield Florida........... 4,500 4,500 4,500 4,500 4,500
<CAPTION>
Compensation From MuniVest Florida ($)*
- ------------------------------------------------------------------------------------------------------------
Fund Cecil Crum Meyer Sunderland Touchton Weiss
- --------- --------- -------- --------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
MuniVest Florida ........... 4,500 4,500 4,500 4,500 4,500 3,250
</TABLE>
- ----------
* No pension or retirement benefits are accrued as part of Fund expenses.
Set forth in the table below is information regarding the aggregate
compensation paid by all registered investment companies advised by FAM and its
affiliate, MLAM ("FAM/MLAM Advised Funds"), including the Funds, to the
non-affiliated Board members for the year ended December 31, 1998.
Aggregate Compensation From FAM/MLAM Advised Funds
Name of Board Member Paid to Board members ($)(1)
- --------------------- --------------------------------------------------
MuniYield Florida
James H. Bodurtha............ 163,500
Herbert I. London............ 163,500
Robert R. Martin............. 163,500
Joseph L. May................ 163,500
Andre F. Perold.............. 163,500
- ----------
(1) The Trustees serve on the boards of FAM/MLAM Advised Funds as follows: Mr.
Bodurtha (29 registered investment companies consisting of 47 portfolios);
Mr. London (29 registered investment companies consisting of 47
portfolios); Mr. Martin (29 registered investment companies consisting of
47 portfolios); Mr. May (29 registered investment companies consisting of
47 portfolios); and Mr. Perold (29 registered investment companies
consisting of 47 portfolios).
I-1
<PAGE>
Aggregate Compensation From FAM/MLAM Advised Funds
Name of Board Member Paid to Board members ($)(1)
- --------------------- --------------------------------------------------
MuniVest Florida
Donald Cecil.................. 277,808
M. Colyer Crum................ 116,600
Edward H. Meyer............... 214,558
Jack B. Sunderland............ 133,600
J. Thomas Touchton............ 133,660
Fred G. Weiss................. 140,842
- ----------
(1) The Trustees serve on the boards of MLAM/FAM-advised funds as follows: Mr.
Cecil (35 registered investment companies consisting of 35 portfolios);
Mr. Crum (17 registered investment companies consisting of 17 portfolios);
Mr.Meyer (35 registered investment companies consisting of 35
portfolios); Mr. Sunderland (20 registered investment companies consisting
of 36 portfolios); Mr. Touchton (20 registered investment companies
consisting of 36 portfolios) and Mr. Weiss (17 registered investment
companies consisting of 17 portfolios).
(2) Ms. Hodrick was elected a Trustee of the Fund on November 4, 1999.
Set forth in the table below is information about the Trustees of each of
the Funds. Unless otherwise noted, the address of each Trustee is 800 Scudders
Mill Road, Plainsboro, New Jersey 08536.
<TABLE>
<CAPTION>
Trustee Since
-------------
Name, Address and Biography Age MuniYield MuniVest
- ------------------------------------------------------ ------- ------------- ------------
<S> <C> <C> <C>
James H. Bodurtha....................................... 55 1995 --
36 Popponesset Road, Cotuit, Massachusetts 02635.
Director and Executive Vice President, The China
Business Group, Inc. since 1996; Chairman and Chief
Executive Officer, China Enterprise Management
Corporation from 1993 to 1996; Chairman, Berkshire
Corporation since 1980; Partner, Squire, Sanders &
Dempsey from 1980 to 1993; Director, Gilder Group LLC
and related companies since 1999.
Herbert I. London ...................................... 60 1992 --
2 Washington Square Village, New York, New York
10012. John M. Olin Professor of Humanities at
New York University since 1993 and Professor
thereof since 1980; Dean, Gallatin Division of
New York University from 1976 to 1993;
Distinguished Fellow, Herman Kahn Chair at Hudson
Institute from 1984 to 1985; Director, Damon
Corporation from 1991 to 1995; Overseer, Center
for Naval Analyses from 1983 to 1993; Limited
Partner, Hypertech LP in 1996.
Robert R. Martin........................................ 72 1993 --
513 Grand Hill, St. Paul, Minnesota 55102.
Chairman and Chief Executive Officer, Kinnard
Investments, Inc. from 1990 to 1993; Executive
Vice President, Dain Bosworth from 1974 to 1989;
Director, Carnegie Capital Management from 1977
to 1985 and Chairman thereof in 1979; Director,
Securities Industry Association from 1981 to 1982
and Public Securities Association from 1979 to
1980; Chairman of the Board, WTC Industries, Inc.
in 1994; Trustee, Northland College since 1992.
Joseph L. May........................................... 70 1992 --
424 Church Street, Suite 2000, Nashville,
Tennessee 37219. Attorney in private practice
since 1984; President, May and Athens Hosiery
Mills Division, Wayne-Gossard Corporation from
1954 to 1983; Vice President, Wayne-Gossard
Corporation from 1972 to 1983; Chairman, The May
Corporation (personal holding company) from 1972
to 1983; Director, Signal Apparel Co. from 1972
to 1989.
Andre F. Perold......................................... 47 1992 --
Morgan Hall, Soldiers Field, Boston,
Massachusetts 02163. Professor, Harvard Business
School since 1989 and Associate Professor from
1983 to 1989; Trustee, The Common Fund since
1989; Director, Quantec Limited from 1991 to
1999; Director, TIBCO from 1994 to 1996; Director,
Genbel Securities Limited and Genbel Bank since
1999.
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
Trustee Since
-------------
MuniYield MuniVest
Name, Address and Biography Age Florida Florida
- ------------------------------------------------------ ------- ------------- ------------
<S> <C> <C> <C>
Terry K. Glenn.......................................... 59 1999 1999
Executive Vice President of MLAM and FAM since
1983; Executive Vice President and Director of
Princeton Services, Inc. ("Princeton Services")
since 1993; President of Princeton Funds
Distributor, Inc. ("PFD") since 1986 and Director
thereof since 1991; President of Princeton
Administrators, L.P. since 1988.
Arthur Zeikel........................................... 67 1992 1993
300 Woodland Avenue, Westfield, New Jersey 07090.
Chairman of FAM and MLAM from 1997 to 1999;
President of FAM and MLAM from 1977 to 1997;
Chairman of Princeton Services from 1997 to 1999,
Director thereof from 1993 to 1999 and President
thereof from 1993 to 1997; Executive Vice
President of Merrill Lynch & Co., Inc. from 1990
to 1999.
Donald Cecil............................................ 72 -- 1993
1114 Avenue of the Americas, New York, New York
10036. Special Limited Partner of Cumberland
Associates (an investment partnership) since
1982; Member of Institute of Chartered Financial
Analysts; Member and Chairman of Westchester
County (N.Y.) Board of Transportation.
M. Colyer Crum.......................................... 67 -- 1993
104 Westcliff Road, Weston, Massachusetts 02193.
Currently James R. Williston Professor of
Investment Management Emeritus at Harvard
Business School; James R. Williston Professor of
Investment Management at Harvard Business School
from 1971 to 1996; Director of Cambridge Bancorp,
Copley Properties, Inc. and Sun Life Assurance
Company of Canada.
Laurie Simon Hodrick ................................... 37 -- 1999*
809 Uris Hall, 3022 Broadway, New York, New York 10027.
Professor of Finance and Economics, Graduate School of
Business, Columbia University since 1998; Associate
Professor of Finance and Economics, Graduate School of
Business, Columbia University from 1996 to 1998;
Associate Professor of Finance, J.L. Kellogg Graduate
School of Management, Northwestern University from
1992 to 1996.
Edward H. Meyer......................................... 72 -- 1993
777 Third Avenue, New York, New York 10017.
President of Grey Advertising Inc. since 1968,
Chief Executive Officer since 1970 and Chairman
of the Board of Directors since 1972; Director of
Harman International Industries, Inc. and Ethan
Allen Interiors, Inc.
Jack B. Sunderland...................................... 70 -- 1993
P.O. Box 7, West Cornwall, Connecticut 06796.
President and Director of American Independent
Oil Company, Inc. (an energy company) since 1987;
Member of Council on Foreign Relations since
1971.
J. Thomas Touchton...................................... 60 -- 1993
Suite 3405, One Tampa City Center, 201 North
Franklin Street, Tampa, Florida 33062. Managing
Partner of The Witt Touchton Company and its
predecessor, The Witt Co. (a private investment
partnership), since 1972; Trustee Emeritus of
Washington and Lee University; Director of TECO
Energy, Inc. (an electric utility holding
company).
Fred G. Weiss........................................... 58 -- 1998
16410 Maddalena Place, Delray Beach, Florida
33446. Managing Director of FGW Associates since
1997; Vice President, Planning Investment, and
Development of Warner Lambert Co. from 1979 to
1997.
* Ms Hodrick was elected to the Board of MuniVest Florida on November 4, 1999
and therefore no other information is required to be provided about her in
this Exhibit I.
</TABLE>
I-3
<PAGE>
Set forth in the table below is information about the officers of each of the
Funds.
<TABLE>
<CAPTION>
Officer Since
-----------------------
MuniVest MuniYield
Name and Biography Age Office Florida Florida
- ------------------------------------------------------ ------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Terry K. Glenn.......................................... 59 President 1993* 1992*
Executive Vice President of MLAM and FAM since
1983; Executive Vice President and Director of
Princeton Services since 1993; President of
Princeton Funds Distributor, Inc. ("PFD") since
1986 and Director thereof since 1991; President
of Princeton Administrators, L.P. since 1988.
Vincent R. Giordano..................................... 55 Senior Vice President 1993 1992
Senior Vice President of FAM and MLAM since 1984;
Portfolio Manager of FAM and MLAM since 1977;
Senior Vice President of Princeton Services since
1993.
William R. Bock......................................... 63 Vice President 1999 1999
Vice President of MLAM since 1989.
Kenneth A. Jacob ....................................... 48 Vice President 1993 1992
First Vice President of MLAM since 1997; Vice
President of MLAM from 1984 to 1997; Vice
President of FAM since 1984.
Donald C Burke.......................................... 39 Vice President 1993 1992
Senior Vice President and Treasurer of MLAM and Treasurer 1999 1999
FAM since 1999; Senior Vice President and
Treasurer of Princeton Services since 1999;
Vice President of PFD since 1999; First
Vice President of MLAM from 1997 to 1999;
Vice President of MLAM from 1990 to 1997;
Director of Taxation of MLAM since 1990.
Alice A. Pellegrino..................................... 39 Secretary 1999 1999
Vice President of MLAM since 1999; Attorney
associated with MLAM since 1997; Associate with
Kirkpatrick & Lockhart LLP from 1992 to 1997.
</TABLE>
- ------
* Mr. Glenn was elected President of each Fund in
1999. Prior to that he served as Executive Vice
President of each Fund.
I-4
<PAGE>
Exhibit II
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
the 9th day of November, 1999, by and between MuniYield Florida Fund, a
Massachusetts business trust ("MuniYield Florida") and MuniVest Florida Fund, a
Massachusetts business trust ("MuniVest Florida"). MuniYield Florida and
MuniVest Florida are sometimes referred to herein collectively as the "Funds".
PLAN OF REORGANIZATION
The reorganization will comprise the following:
(1) the acquisition by MuniYield Florida of substantially all of the
assets, and the assumption of substantially all of the liabilities of MuniVest
Florida in exchange solely for an equal aggregate value of newly issued (A)
common shares of beneficial interest, with a par value of $0.10 per share, of
MuniYield Florida ("MuniYield Florida Common Shares") and (B) auction market
preferred shares of MuniYield Florida, with a liquidation preference of $25,000
per share plus an amount equal to accumulated by unpaid dividends thereon
(whether or not earned or declared) to be designated Series B ("MuniYield
Florida Series B AMPS"), and (2) the subsequent distribution by MuniVest Florida
to MuniVest Florida shareholders of (x) all of the MuniYield Florida Common
Shares received by MuniVest Florida in exchange for such shareholders' common
shares of beneficial interest, with a par value of $0.10 per share, of MuniVest
Florida ("MuniVest Florida Common Shares") and (y) all of the MuniYield Florida
Series B AMPS received by MuniVest Florida in exchange for such shareholders'
auction market preferred shares of MuniVest Florida, with a liquidation
preference of $25,000 per share plus an amount equal to accumulated but unpaid
dividends thereon (whether or not earned or declared) ("MuniVest AMPS");
all upon and subject to the terms hereinafter set forth (collectively, the
"Reorganization").
In the course of the Reorganization, MuniYield Florida Common shares and
Series B AMPS will be distributed to the shareholders of MuniVest Florida as
follows:
(1) each holder of MuniVest Florida Common Shares will be entitled to
receive a number of MuniYield Florida Common Shares equal to the aggregate net
asset value of the MuniVest Florida Common Shares owned by such shareholder on
the Exchange Date (as defined in Section 7(a) of the Agreement); and (2) each
holder of MuniVest Florida AMPS will be entitled to receive a number of shares
of MuniYield Florida Series B AMPS equal to the aggregate liquidation preference
(and aggregate value) of the MuniVest Florida AMPS owned by such shareholder on
the Exchange Date;
It is intended that the Reorganization described in this Plan shall be a
reorganization within the meaning of Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended (the "Code"), and any successor provision.
Prior to the Exchange Date, MuniVest Florida shall declare a dividend or
dividends which, together with all such previous dividends, shall have the
effect of distributing to its shareholders all of MuniVest Florida's net
investment company taxable income to and including the Exchange Date, if any
(computed without regard to any deduction for dividends paid), and all of its
net capital gain, if any, realized to and including the Exchange Date. In this
regard and in connection with the Reorganization, the last dividend period for
the MuniVest Florida AMPS prior to the Exchange Date may be shorter than the
dividend period for such AMPS determined as set forth in the applicable
Certificate of Designation.
A Certificate of Designation of MuniYield Florida establishing the powers,
rights and preferences of the MuniYield Florida Series B AMPS will have been
filed with the Office of the Secretary of State of The Commonwealth of
Massachusetts prior to the Exchange Date.
As promptly as practicable after the consummation of the Reorganization,
MuniVest Florida shall be dissolved in accordance with the laws of the
Commonwealth of Massachusetts and will terminate its registration under the
Investment Company Act of 1940, as amended (the "1940 Act").
II-1
<PAGE>
AGREEMENT
In order to consummate the Reorganization and in consideration of the
promises and the covenants and agreements hereinafter set forth, and intending
to be legally bound, each of the Funds hereby agrees as follows:
1. Representations and Warranties of MuniYield Florida.
MuniYield Florida represents and warrants to, and agrees with, MuniVest
Florida that:
(a)MuniYield Florida is a trust with transferable shares duly organized,
validly existing and in good standing in conformity with the laws of the
Commonwealth of Massachusetts, and has the power to own all of its assets and to
carry out this Agreement. MuniYield Florida has all necessary Federal, state and
local authorizations to carry on its business as it is now being conducted and
to carry out this Agreement.
(b) MuniYield Florida is duly registered under the 1940 Act as a
non-diversified, closed-end management investment company (File No. 811-6502),
and such registration has not been revoked or rescinded and is in full force and
effect. MuniYield Florida has elected and qualified for the special tax
treatment afforded regulated investment companies ("RICs") under Sections
851-855 of the Code at all times since its inception and intends to continue to
so qualify until consummation of the Reorganization and thereafter.
(c) MuniVest Florida has been furnished with MuniYield Florida's Annual
Report to Shareholders for the fiscal year ended October 31, 1998, and the
audited financial statements appearing therein, having been audited by Deloitte
& Touche LLP, independent public accountants, fairly present the financial
position of MuniYield Florida as of the respective dates indicated, in
conformity with generally accepted accounting principles applied on a consistent
basis.
(d) MuniVest Florida has been furnished with MuniYield Florida's
Semi-Annual Report to Shareholders for the six months ended April 30, 1999, and
the unaudited financial statements appearing therein fairly present the
financial position of MuniYield Florida as of the respective dates indicated, in
conformity with generally accepted accounting principles applied on a consistent
basis.
(e) An unaudited statement of assets, liabilities and capital of MuniYield
Florida and an unaudited schedule of investments of MuniYield Florida, each as
of the Valuation Time (as defined in Section 3(d) of this Agreement), will be
furnished to MuniVest Florida, at or prior to the Exchange Date for the purpose
of determining the number of MuniYield Florida Common Shares, MuniYield Florida
Series B AMPS to be issued pursuant to Section 4 of this Agreement; each will
fairly present the financial position of MuniYield Florida as of the Valuation
Time in conformity with generally accepted accounting principles applied on a
consistent basis.
(f) MuniYield Florida has full power and authority to enter into and
perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement has been duly authorized by all necessary action
of its Board of Trustees, and this Agreement constitutes a valid and binding
contract enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto.
(g) There are no material legal, administrative or other proceedings
pending or, to the knowledge of MuniYield Florida, threatened against it which
assert liability on the part of MuniYield Florida or which materially affect its
financial condition or its ability to consummate the Reorganization. MuniYield
Florida is not charged with or, to the best of its knowledge, threatened with
any violation or investigation of any possible violation of any provisions of
any Federal, state or local law or regulation or administrative ruling relating
to any aspect of its business.
(h) MuniYield Florida is not obligated under any provision of its
Declaration of Trust, as amended, or its by-laws, as amended, or a party to any
contract or other commitment or obligation, and is not subject to any order or
decree which would be violated by its execution of or performance under this
Agreement, except insofar as the Funds have mutually agreed to amend such
contract or other commitment or obligation to cure any potential violation as a
condition precedent to the Reorganization.
(i) There are no material contracts outstanding to which MuniYield Florida
is a party that have not been disclosed in the N-14 Registration Statement (as
defined in subsection (l) below) or will not otherwise be disclosed to MuniVest
Florida prior to the Valuation Time.
II-2
<PAGE>
(j) MuniYield Florida has no known liabilities of a material amount,
contingent or otherwise, other than those shown on its statements of assets,
liabilities and capital referred to above, those incurred in the ordinary course
of its business as an investment company since April 30, 1999; and those
incurred in connection with the Reorganization. As of the Valuation Time,
MuniYield Florida will advise MuniVest Florida in writing of all known
liabilities, contingent or otherwise, whether or not incurred in the ordinary
course of business, existing or accrued as of such time, except to the extent
disclosed in the financial statements referred to above.
(k) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by MuniYield Florida of
the Reorganization, except such as may be required under the Securities Act of
1933, as amended (the "1933 Act"), the Securities Exchange Act of 1934, as
amended (the "1934 Act") and the 1940 Act or state securities laws (which term
as used herein shall include the laws of the District of Columbia and Puerto
Rico).
(l) The registration statement filed by MuniYield Florida on Form N-14
which includes the joint proxy statement of the Funds with respect to the
transactions contemplated herein and the prospectus of MuniYield Florida
relating to the MuniYield Florida Common shares and MuniYield Florida Series B
AMPs to be issued pursuant to this Agreement, (the "Joint Proxy Statement and
Prospectus"), and any supplement or amendment thereto or to the documents
therein (as amended or supplemented, the "N-14 Registration Statement"), on its
effective date, at the time of the shareholders' meetings referred to in Section
6(a) of this Agreement and at the Exchange Date, insofar as it relates to
MuniYield Florida (i) complied or will comply in all material respects with the
provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and
regulations thereunder and (ii) did not or will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; and the
Joint Proxy Statement and Prospectus included therein did not or will not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the
representations and warranties in this subsection only shall apply to statements
in or omissions from the N-14 Registration Statement made in reliance upon and
in conformity with information furnished by MuniYield Florida for use in the
N-14 Registration Statement as provided in Section 6(e) of this Agreement.
(m) MuniYield Florida is authorized to issue an unlimited number of common
shares of beneficial interest, par value $.10 per share and 1,000,000 preferred
shares of beneficial interest, par value $.05 per share. The Board of Trustees
of MuniYield Florida has designated 2,200 preferred shares as Auction Market
Preferred Shares. Each outstanding common share of beneficial interest and each
outstanding Auction Market Preferred Share of MuniYield Florida is fully paid
and nonassessable and has full voting rights.
(n) The shares of MuniYield Florida Common Shares and MuniYield Florida
Series B AMPS to be issued to MuniVest Florida pursuant to this Agreement will
have been duly authorized and, when issued and delivered pursuant to this
Agreement, will be legally and validly issued and will be fully paid and
nonassessable and will have full voting rights, and no shareholder of MuniYield
Florida will have any preemptive right of subscription or purchase in respect
thereof.
(o) At or prior to the Exchange Date, the MuniYield Florida Common Shares
to be transferred to MuniVest Florida for distribution to the shareholders of
MuniVest Florida on the Exchange Date will be duly qualified for offering to the
public in all states of the United States in which the sale of shares of the
Funds presently are qualified, and there will be a sufficient number of such
shares registered under the 1933 Act and, as may be necessary, with each
pertinent state securities commission to permit the transfers contemplated by
this Agreement to be consummated.
(p) At or prior to the Exchange Date, the shares of MuniYield Florida
Series B AMPS to be transferred to MuniVest Florida on the Exchange Date will be
duly qualified for offering to the public in all states of the United States in
which the sale of AMPS of MuniVest Florida presently are qualified, and there
are a sufficient number of MuniYield Florida Series B AMPS registered under the
1933 Act and with each pertinent state securities commission to permit the
transfers contemplated by this Agreement to be consummated.
(q) At or prior to the Exchange Date, MuniYield Florida will have obtained
any and all regulatory, Trustee and shareholder approvals necessary to issue the
MuniYield Florida Common Shares and MuniYield Florida Series B AMPS to MuniVest
Florida.
II-3
<PAGE>
2. Representations and Warranties of MuniVest Florida.
MuniVest Florida represents and warrants to, and agrees with, MuniYield
Florida, that:
(a) MuniVest Florida is a trust with transferable shares duly organized,
validly existing and in good standing in conformity with the laws of the
Commonwealth of Massachusetts, and has the power to own all of its assets and to
carry out this Agreement. MuniVest Florida has all necessary Federal, state and
local authorizations to carry on its business as it is now being conducted and
to carry out this Agreement.
(b) MuniVest Florida is duly registered under the 1940 Act as a
non-diversified, closed-end management investment company (File No. 811-7580),
and such registration has not been revoked or rescinded and is in full force and
effect. MuniVest Florida has elected and qualified for the special tax treatment
afforded RICs under Sections 851-855 of the Code at all times since its
inception, and intends to continue to so qualify through its taxable year ending
upon liquidation.
(c) As used in this Agreement, the term "MuniVest Florida Investments"
shall mean (i) the investments of MuniVest Florida shown on the schedule of its
investments as of the Valuation Time furnished to MuniYield Florida; and (ii)
all other assets owned by MuniVest Florida or liabilities incurred as of the
Valuation Time.
(d) MuniVest Florida has full power and authority to enter into and
perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement has been duly authorized by all necessary action
of its Board of Trustees and this Agreement constitutes a valid and binding
contract enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto.
(e) MuniYield Florida has been furnished with MuniVest Florida's Annual
Report to Shareholders for the fiscal year ended October 31, 1998, and the
audited financial statements appearing therein, having been audited by Deloitte
& Touche LLP, independent public accountants, fairly present the financial
position of MuniVest Florida as of the respective dates indicated, in conformity
with generally accepted accounting principles applied on a consistent basis.
(f) MuniYield Florida has been furnished with MuniVest Florida's
Semi-Annual Report to Shareholders for the six months ended April 30, 1999, and
the unaudited financial statements appearing therein fairly present the
financial position of MuniVest Florida as of the respective dates indicated, in
conformity with generally accepted accounting principles applied on a consistent
basis.
(g) An unaudited statement of assets, liabilities and capital of MuniVest
Florida and an unaudited schedule of investments of MuniVest Florida, each as of
the Valuation Time, will be furnished to MuniYield Florida at or prior to the
Exchange Date for the purpose of determining the number of MuniYield Florida
Common Shares and MuniYield Florida Series B AMPS to be issued to MuniVest
Florida pursuant to Section 4 of this Agreement; each will fairly present the
financial position of MuniVest Florida as of the Valuation Time in conformity
with generally accepted accounting principles applied on a consistent basis.
(h) There are no material legal, administrative or other proceedings
pending or, to the knowledge of MuniVest Florida, threatened against it which
assert liability on the part of MuniVest Florida or which materially affect its
financial condition or its ability to consummate the Reorganization. MuniVest
Florida is not charged with or, to the best of its knowledge, threatened with
any violation or investigation of any possible violation of any provisions of
any Federal, state or local law or regulation or administrative ruling relating
to any aspect of its business.
(i) There are no material contracts outstanding to which MuniVest Florida
is a party that have not been disclosed in the N-14 Registration Statement or
will not otherwise be disclosed to MuniYield Florida prior to the Valuation
Time.
(j) MuniVest Florida is not obligated under any provision of its
Declaration of Trust, as amended, or its by-laws, as amended, or a party to any
contract or other commitment or obligation, and is not subject to any order or
decree which would be violated by its execution of or performance under this
Agreement, except insofar as the Funds have mutually agreed to amend such
contract or other commitment or obligation to cure any potential violation as a
condition precedent to the Reorganization.
(k) MuniVest Florida has no known liabilities of a material amount,
contingent or otherwise, other than those shown on its statements of assets,
liabilities and capital referred to above, those incurred in the ordinary course
of its business as an investment company since April 30, 1999 and those incurred
in connection with the
II-4
<PAGE>
Reorganization. As of the Valuation Time, MuniVest Florida will advise MuniYield
Florida in writing of all known liabilities, contingent or otherwise, whether or
not incurred in the ordinary course of business, existing or accrued as of such
time.
(l) MuniVest Florida has filed, or has obtained extensions to file, all
Federal, state and local tax returns which are required to be filed by it, and
has paid or has obtained extensions to pay, all Federal, state and local taxes
shown on said returns to be due and owing and all assessments received by it, up
to and including the taxable year in which the Exchange Date occurs. All tax
liabilities of MuniVest Florida have been adequately provided for on its books,
and no tax deficiency or liability of MuniVest Florida has been asserted and no
question with respect thereto has been raised by the Internal Revenue Service or
by any state or local tax authority for taxes in excess of those already paid,
up to and including the taxable year in which the Exchange Date occurs.
(m) At both the Valuation Time and the Exchange Date, MuniVest Florida
will have full right, power and authority to sell, assign, transfer and deliver
the MuniVest Florida Investments. At the Exchange Date, subject only to the
obligation to deliver the MuniVest Florida Investments as contemplated by this
Agreement, MuniVest Florida will have good and marketable title to all of the
MuniVest Florida Investments, and MuniYield Florida will acquire all of the
MuniVest Florida Investments free and clear of any encumbrances, liens or
security interests and without any restrictions upon the transfer thereof
(except those imposed by the Federal or state securities laws and those
imperfections of title or encumbrances as do not materially detract from the
value or use of the MuniVest Florida Investments or materially affect title
thereto).
(n) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by MuniVest Florida of
the Reorganization, except such as may be required under the 1933 Act, the 1934
Act, the 1940 Act or state securities laws.
(o) The N-14 Registration Statement, on its effective date, at the time of
the shareholders' meetings referred to in Section 6(a) of this Agreement and on
the Exchange Date, insofar as it relates to MuniVest Florida (i) complied or
will comply in all material respects with the provisions of the 1933 Act, the
1934 Act and the 1940 Act and the rules and regulations thereunder, and (ii) did
not or will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Joint Proxy Statement and Prospectus
included therein did not or will not contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the representations and warranties in this
subsection shall apply only to statements in or omissions from the N-14
Registration Statement made in reliance upon and in conformity with information
furnished by MuniVest Florida for use in the N-14 Registration Statement as
provided in Section 6(e) of this Agreement.
(p) MuniVest Florida is authorized to issue an unlimited number of common
shares of beneficial interest, par value $.10 per share and 1,000,000 preferred
shares of beneficial interest, par value $.05 per share. The Board of Trustees
of MuniVest Florida has designated 1,600 preferred shares as Auction Market
Preferred Shares. Each outstanding common share of beneficial interest and each
outstanding Auction Market Preferred Share of MuniVest Florida is fully paid and
nonassessable and has full voting rights.
(q) All of the issued and outstanding shares of MuniVest Florida Common
shares and MuniVest Florida AMPS were offered for sale and sold in conformity
with all applicable Federal and state securities laws.
(r) The books and records of MuniVest Florida made available to MuniYield
Florida, and/or its counsel are substantially true and correct and contain no
material misstatements or omissions with respect to the operations of MuniVest
Florida.
(s) MuniVest Florida will not sell or otherwise dispose of any of the
shares of MuniYield Florida Common shares or MuniYield Florida Series B AMPS to
be received in the Reorganization, except in distribution to the shareholders of
MuniVest Florida, as provided in Section 3 of this Agreement.
3. The Reorganization.
(a) Subject to receiving the requisite approvals of the shareholders of
each of the Funds, and to the other terms and conditions contained herein, (i)
MuniVest Florida agrees to convey, transfer and deliver to MuniYield Florida and
MuniYield Florida agrees to acquire from MuniVest Florida, on the Exchange Date,
all of the MuniVest Florida Investments (including interest accrued as of the
Valuation Time on debt instruments), and assume substantially all of the
liabilities of MuniVest Florida, in exchange solely for that number of MuniYield
Florida Common shares and MuniYield Florida Series B AMPS provided in Section 4
of this Agreement.
II-5
<PAGE>
Pursuant to this Agreement, as soon as practicable after the Exchange Date
MuniVest Florida will distribute all MuniYield Florida Common Shares and
MuniYield Florida Series B AMPS received by it to its shareholders in exchange
for their of MuniVest Florida Common Shares and MuniVest Florida AMPS. Such
distributions shall be accomplished by the opening of shareholder accounts on
the stock ledger records of MuniYield Florida in the amounts due the
shareholders of MuniVest Florida based on their respective holdings in MuniVest
Florida as of the Valuation Time.
(b) Prior to the Exchange Date, MuniVest Florida shall declare a dividend
or dividends which, together with all such previous dividends, shall have the
effect of distributing to its shareholders all of its net investment company
taxable income to and including the Exchange Date, if any (computed without
regard to any deduction for dividends paid), and all of its net capital gain, if
any, realized to and including the Exchange Date. In this regard and in
connection with the Reorganization, the last dividend period for the MuniVest
Florida AMPS prior to the Exchange Date may be shorter than the dividend period
for such AMPS determined as set forth in the applicable Certificate of
Designation.
(c) MuniVest Florida will pay or cause to be paid to MuniYield Florida any
interest MuniVest Florida receives on or after the Exchange Date with respect to
any of MuniVest Florida Investments transferred to MuniYield Florida hereunder.
(d) The Valuation Time shall be 4:00 p.m., Eastern time, on February 18,
2000, or such earlier or later day and time as may be mutually agreed upon in
writing (the "Valuation Time").
(e) Recourse for liabilities assumed from MuniVest Florida by MuniYield
Florida in the Reorganization will be limited to the net assets of MuniVest
Florida acquired by MuniYield Florida. The known liabilities of MuniVest
Florida, as of the Valuation Time, shall be confirmed in writing to MuniYield
Florida pursuant to Section 2(k) of this Agreement.
(f) MuniVest Florida will be terminated following the Exchange Date by
terminating its organization under the Investment Company Act and its
organization under Massachusetts law and will withdraw its authority to do
business in any state where it is required to do so.
(g) MuniYield Florida will file with the Secretary of State of the
Commonwealth of Massachusetts a Certificate of Designation to its Declaration of
Trust establishing the powers, rights and preferences of the MuniYield Florida
Series B AMPS prior to the closing of the Reorganization.
(h) As promptly as practicable after the liquidation of MuniVest Florida
pursuant to the Reorganization, MuniVest Florida shall terminate its
registration under the 1940 Act.
4. Issuance and Valuation of MuniYield Florida Common Shares and MuniYield
Florida Series B AMPS in the Reorganization.
Full shares of MuniYield Florida Common Shares and MuniYield Florida
Series B AMPS of an aggregate net asset value or liquidation preference, as the
case may be, equal (to the nearest one ten thousandth of one cent) to the value
of the assets of MuniVest Florida acquired in the Reorganization determined as
hereinafter provided, reduced by the amount of liabilities of MuniVest Florida
assumed by MuniYield Florida in the Reorganization, shall be issued by MuniYield
Florida to MuniVest Florida in exchange for such assets of MuniVest Florida,
plus cash in lieu of fractional shares. MuniYield Florida will issue to MuniVest
Florida (a) a number of MuniYield Florida Common shares, the aggregate net asset
value of which will equal the aggregate net asset value of the MuniVest Florida
Common shares, determined as set forth below, and (b) a number of MuniYield
Florida Series B AMPS, the aggregate liquidation preference and value of which
will equal the aggregate liquidation preference and value of the MuniVest
Florida AMPS, determined as set forth below.
The net asset value of each of the Funds and the liquidation preference
and value of the AMPS of each of the Funds shall be determined as of the
Valuation Time in accordance with the procedures described in (i) the final
prospectus of MuniYield Florida, dated February 21, 1992, relating to the
MuniYield Florida Common shares and (ii) the final prospectus of MuniYield
Florida, dated April 6, 1992, relating to the MuniYield Florida AMPS, and no
formula will be used to adjust the net asset value so determined of any Fund to
take into account differences in realized and unrealized gains and losses.
Values in all cases shall be determined as of the Valuation Time. The value of
MuniVest Florida Investments to be transferred to MuniYield Florida shall be
determined by MuniYield Florida pursuant to the procedures utilized by MuniYield
Florida in valuing its own assets and determining its own liabilities for
purposes of the Reorganization. Such valuation and determination shall be
II-6
<PAGE>
made by MuniYield Florida in cooperation with MuniVest Florida and shall be
confirmed in writing by MuniYield Florida to MuniVest Florida. The net asset
value per share of the MuniYield Florida Common Shares and the liquidation
preference and value per share of the MuniYield Florida Series B AMPS shall be
determined in accordance with such procedures and MuniYield Florida shall
certify the computations involved. For purposes of determining the net asset
value of a Common Share of each Fund, the value of the securities held by the
Fund plus any cash or other assets (including interest accrued but not yet
received) minus all liabilities (including accrued expenses) and the aggregate
liquidation value of the outstanding shares of AMPS of that Fund is divided by
the total number of Common Shares of that Fund outstanding at such time.
MuniYield Florida shall issue to MuniVest Florida separate certificates or
share deposit receipts for the MuniYield Florida Common Shares and the MuniYield
Florida Series B AMPS, each registered in the name of MuniVest Florida. MuniVest
Florida then shall distribute the MuniYield Florida Common Shares and the
MuniYield Florida Series B AMPS to the holders of MuniVest Florida Common Shares
and MuniVest Florida AMPS by redelivering the certificates or share deposit
receipts evidencing ownership of (i) the MuniYield Florida Common Shares to The
Bank of New York as the transfer agent and registrar for the MuniYield Florida
Common shares for distribution to the holders of MuniVest Florida Common Shares
on the basis of such holder's proportionate interest in the aggregate net asset
value of the Common Shares of MuniVest Florida and (ii) the MuniYield Florida
Series B AMPS to The Bank of New York as the transfer agent and registrar for
the MuniYield Florida Series B AMPS for distribution to the holders of MuniVest
Florida AMPS on the basis of such holder's proportionate interest in the
aggregate liquidation preference and value of the AMPS of MuniVest Florida. With
respect to any MuniVest Florida shareholder holding certificates evidencing
ownership of either MuniVest Florida Common Shares or MuniVest Florida AMPS as
of the Exchange Date, and subject to MuniYield Florida being informed thereof in
writing by MuniVest Florida, MuniYield Florida will not permit such shareholder
to receive new certificates evidencing ownership of the MuniYield Florida Common
Shares or MuniYield Florida Series B AMPS, exchange MuniYield Florida Common
Shares or MuniYield Florida Series B AMPS credited to such shareholder's account
for shares of other investment companies managed by Merrill Lynch Asset
Management, L.P. ("MLAM") or any of its affiliates, or pledge or redeem such
MuniYield Florida Common Shares or MuniYield Florida Series B AMPS, in any case,
until notified by MuniVest Florida or its agent that such shareholder has
surrendered his or her outstanding certificates evidencing ownership of MuniVest
Florida Common Shares or MuniVest Florida AMPS or, in the event of lost
certificates, posted adequate bond. MuniVest Florida, at its own expense, will
request its shareholders to surrender their outstanding certificates evidencing
ownership of MuniVest Florida Common Shares or MuniVest Florida AMPS, as the
case may be, or post adequate bond therefor.
Dividends payable to holders of record of shares of MuniYield Florida
Common Shares or MuniYield Florida Series B AMPS, as the case may be, as of any
date after the Exchange Date and prior to the exchange of certificates by any
shareholder of MuniVest Florida shall be payable to such shareholder without
interest; however, such dividends shall not be paid unless and until such
shareholder surrenders the share certificates representing Common Shares or AMPS
of MuniVest Florida, as the case may be, for exchange.
No fractional MuniYield Florida Common Shares will be issued to holders of
MuniVest Florida Common Shares. In lieu thereof, MuniYield Florida's transfer
agent, The Bank of New York, will aggregate all fractional MuniYield Florida
Common Shares and sell the resulting full shares on the New York Stock Exchange
at the current market price for MuniYield Florida Common Shares for the account
of all holders of fractional interests, and each such holder will receive such
holder's pro rata share of the proceeds of such sale upon surrender of such
holder's certificates representing MuniVest Florida Common Shares.
5. Payment of Expenses.
(a) With respect to expenses incurred in connection with the
Reorganization, (i) each Fund shall pay all expenses incurred that are
attributable solely to such Fund and the conduct of its business, and (ii)
MuniYield Florida shall pay, subsequent to the Exchange Date and pro rata
according to each Fund's net assets at the Valuation Time, all expenses incurred
in connection with the Reorganization, including, but not limited to, all costs
related to the preparation and distribution of the N-14 Registration Statement.
Such fees and expenses shall include the cost of preparing and filing a ruling
request with the Internal Revenue Service, legal and accounting fees, printing
costs, filing fees, stock exchange fees, rating agency fees, portfolio transfer
taxes (if any) and any similar expenses incurred in connection with the
Reorganization.
II-7
<PAGE>
(b) If for any reason the Reorganization is not consummated, no party
shall be liable to any other party for any damages resulting therefrom,
including, without limitation, consequential damages.
6. Covenants of the Funds.
(a) Each Fund agrees to call a special meeting of its shareholders as soon
as is practicable after the effective date of the N-14 Registration Statement
for the purpose of considering the Reorganization as described in this
Agreement.
(b) Each Fund covenants to operate its business as presently conducted
between the date hereof and the Exchange Date.
(c) MuniVest Florida agrees that following the consummation of the
Reorganization, it will dissolve in accordance with the laws of the Commonwealth
of Massachusetts and any other applicable law, it will not make any
distributions of any MuniYield Florida Common Shares or MuniYield Florida Series
B AMPS, as applicable other than to its respective shareholders and without
first paying or adequately providing for the payment of all of its respective
liabilities not assumed by MuniYield Florida, if any, and on and after the
Exchange Date it shall not conduct any business except in connection with its
termination.
(d) MuniVest Florida undertakes that if the Reorganization is consummated,
it will file an application pursuant to Section 8(f) of the 1940 Act for an
order declaring that MuniVest Florida has ceased to be a registered investment
company.
(e) MuniYield Florida will file the N-14 Registration Statement with the
Securities and Exchange Commission (the "Commission") and will use its best
efforts to provide that the N-14 Registration Statement becomes effective as
promptly as practicable. Each Fund agrees to cooperate fully with the other, and
each will furnish to the other the information relating to itself to be set
forth in the N-14 Registration Statement as required by the 1933 Act, the 1934
Act, the 1940 Act, and the rules and regulations thereunder and the state
securities laws.
(f) MuniYield Florida has no plan or intention to sell or otherwise
dispose of MuniVest Florida Investments, except for dispositions made in the
ordinary course of business.
(g) Each of the Funds agrees that by the Exchange Date all of its Federal
and other tax returns and reports required to be filed on or before such date
shall have been filed and all taxes shown as due on said returns either have
been paid or adequate liability reserves have been provided for the payment of
such taxes. In connection with this covenant, the Funds agree to cooperate with
each other in filing any tax return, amended return or claim for refund,
determining a liability for taxes or a right to a refund of taxes or
participating in or conducting any audit or other proceeding in respect of
taxes. MuniYield Florida agrees to retain for a period of ten (10) years
following the Exchange Date all returns, schedules and work papers and all
material records or other documents relating to tax matters of MuniVest Florida
for its taxable period first ending after the Exchange Date and for all prior
taxable periods. Any information obtained under this subsection shall be kept
confidential except as otherwise may be necessary in connection with the filing
of returns or claims for refund or in conducting an audit or other proceeding.
After the Exchange Date, MuniVest Florida shall prepare, or cause its agents to
prepare, any Federal, state or local tax returns, including any Forms 1099,
required to be filed by such fund with respect to its final taxable year ending
with its complete liquidation and for any prior periods or taxable years and
further shall cause such tax returns and Forms 1099 to be duly filed with the
appropriate taxing authorities. Notwithstanding the aforementioned provisions of
this subsection, any expenses incurred by MuniVest Florida (other than for
payment of taxes) in connection with the preparation and filing of said tax
returns and Forms 1099 after the Exchange Date shall be borne by such Fund to
the extent such expenses have been accrued by such Fund in the ordinary course
without regard to the Reorganization; any excess expenses shall be borne by Fund
Asset Management, L.P. ("FAM") at the time such tax returns and Forms 1099 are
prepared.
(h) The Funds each agree to mail to its respective shareholders of record
entitled to vote at the special meeting of shareholders at which action is to be
considered regarding this Agreement, in sufficient time to comply with
requirements as to notice thereof, a combined proxy statement and prospectus
which complies in all material respects with the applicable provisions of
Section 14(a) of the 1934 Act and Section 20(a) of the 1940 Act, and the rules
and regulations, respectively, thereunder.
(i) Following the consummation of the Reorganization, MuniYield Florida
will stay in existence and continue its business as a non-diversified,
closed-end management investment company registered under the 1940 Act.
II-8
<PAGE>
7. Exchange Date.
(a) Delivery of the assets of MuniVest Florida to be transferred, together
with any other MuniVest Florida Investments, and the MuniYield Florida Common
Shares and MuniYield Florida Series B AMPS to be issued as provided in this
Agreement, shall be made at the offices of Brown & Wood LLP, One World Trade
Center, New York, New York 10048, at 10:00 a.m. on the next full business day
following the Valuation Time, or at such other place, time and date agreed to by
the Funds, the date and time upon which such delivery is to take place being
referred to herein as the "Exchange Date." To the extent that any MuniVest
Florida Investments, for any reason, are not transferable on the Exchange Date,
MuniVest Florida shall cause such MuniVest Florida Investments to be transferred
to MuniYield Florida's account with The Bank of New York at the earliest
practicable date thereafter.
(b) MuniVest Florida will deliver to MuniYield Florida on the Exchange
Date confirmations or other adequate evidence as to the tax basis of MuniVest
Florida Investments delivered to MuniYield Florida hereunder, certified by
Deloitte & Touche LLP.
(c) As soon as practicable after the close of business on the Exchange
Date, MuniVest Florida shall deliver to MuniYield Florida a list of the names
and addresses of all of the shareholders of record of MuniVest Florida on the
Exchange Date and the number of common shares and AMPS of MuniVest Florida owned
by each such shareholder, certified to the best of their knowledge and belief by
the applicable transfer agent for MuniVest Florida or by its President.
8. MuniVest Florida Conditions.
The obligations of MuniVest Florida hereunder shall be subject to the
following conditions:
(a) That this Agreement shall have been adopted, and the Reorganization
shall have been approved, by the affirmative vote of two-thirds of the members
of the Board of Trustees of each of the Funds and by the affirmative vote of (i)
the holders of (a) a majority of the MuniYield Florida Common Shares and
MuniYield Florida AMPS, voting together as a single class, and (b) a majority of
the MuniYield Florida AMPS, voting separately as a class, in each case issued
and outstanding and entitled to vote thereon; (ii) the holders of (a) a majority
of the MuniVest Florida Common Shares and MuniVest Florida AMPS, voting together
as a single class, and (b) a majority of the MuniVest Florida AMPS, voting
separately as a class, in each case issued and outstanding and entitled to vote
thereon, and further that each Fund shall have delivered to each other Fund a
copy of the resolution approving this Agreement adopted by such Fund's Board of
Trustees, and a certificate setting forth the vote of such Fund's shareholders
obtained at its Special Meeting, each certified by the Secretary of the
appropriate Fund.
(b) MuniVest Florida shall have received from MuniYield Florida a
statement of assets, liabilities and capital, with values determined as provided
in Section 4 of this Agreement, together with a schedule of MuniYield Florida's
investments, all as of the Valuation Time, certified on behalf of MuniYield
Florida's by its President (or any Vice President) and its Treasurer, and a
certificate signed by MuniYield Florida's President (or any Vice President) and
its Treasurer, dated as of the Exchange Date, certifying that as of the
Valuation Time and as of the Exchange Date there has been no material adverse
change in the financial position of MuniYield Florida since the date of its most
recent Annual or Semi-Annual Report as applicable, other than changes in its
portfolio securities since that date or changes in the market value of its
portfolio securities.
(c) That MuniYield Florida shall have furnished to MuniVest Florida a
certificate signed by MuniYield Florida's President (or any Vice President) and
its Treasurer, dated as of the Exchange Date, certifying that, as of the
Valuation Time and as of the Exchange Date all representations and warranties of
MuniYield Florida made in this Agreement are true and correct in all material
respects with the same effect as if made at and as of such dates, and that
MuniYield Florida has complied with all of the agreements and satisfied all of
the conditions on its part to be performed or satisfied at or prior to each of
such dates.
(d) That there shall not be any material litigation pending with respect
to the matters contemplated by this Agreement.
(e) That MuniVest Florida shall have received an opinion or opinions of
Brown & Wood LLP, as counsel to the Funds, in form and substance satisfactory to
MuniVest Florida and dated the Exchange Date, to the effect that (i) to the best
of such counsel's knowledge, no consent, approval, authorization or order of any
United States federal court or governmental authority is required for the
consummation by the Funds of the Reorganization,
II-9
<PAGE>
except such as have been obtained under the 1933 Act, the 1934 Act and the 1940
Act and the published rules and regulations of the Commission thereunder and
such as may be required under state securities laws; (ii) the N-14 Registration
Statement has become effective under the 1933 Act, no stop order suspending the
effectiveness of the N-14 Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or contemplated
under the 1933 Act, and the N-14 Registration Statement, and each amendment or
supplement thereto, as of their respective effective dates, appear on their face
to be appropriately responsive in all material respects to the requirements of
the 1933 Act, the 1934 Act and the 1940 Act and the published rules and
regulations of the Commission thereunder; (iii) the descriptions in the N-14
Registration Statement of statutes, legal and governmental proceedings and
contracts and other documents are accurate and fairly present the information
required to be shown; (iv) the information in the Joint Proxy Statement and
Prospectus under "Comparison of the Funds--Tax Rules Applicable to the Funds and
their Shareholders" and "Agreement and Plan of Reorganization--Tax Consequences
of the Reorganization," to the extent that it constitutes matters of law,
summaries of legal matters or legal conclusions, has been reviewed by such
counsel and is correct in all material respects as of the date of the Joint
Proxy Statement and Prospectus; (v) the execution and delivery of the Agreement
by the Funds does not and the consummation of the Reorganization will not,
violate any material provisions of any agreement (known to such counsel) to
which any Fund is a party or by which any Fund is bound, except insofar as the
parties have agreed to amend such provision as a condition precedent to the
Reorganization; (vi) such counsel does not know of any statutes, legal or
governmental proceedings or contracts or other documents related to the
Reorganization of a character required to be described in the N-14 Registration
Statement which are not described therein or, if required to be filed, filed as
required; (vii) no Fund, to the knowledge of such counsel, is required to
qualify to do business as a foreign corporation in any jurisdiction except as
may be required by state securities laws, and except where each has so qualified
or the failure so to qualify would not have a material adverse effect on such
Fund or its respective shareholders; (viii) such counsel does not have actual
knowledge of any material suit, action or legal or administrative proceeding
pending or threatened against any of the Funds, the unfavorable outcome of which
would materially and adversely affect such Fund; (ix) all actions required to be
taken by the Funds to authorize this Agreement and to effect the Reorganization
have been duly authorized by all necessary actions on the part of such Fund; and
(x) such opinion is solely for the benefit of the Funds and their Trustees and
officers. Such opinion also shall state that (a) while such counsel cannot make
any representation as to the accuracy or completeness of statements of fact in
the N-14 Registration Statement or any amendment or supplement thereto, nothing
has come to their attention that would lead them to believe that, on the
respective effective dates of the N-14 Registration Statement and any amendment
or supplement thereto, (1) the N-14 Registration Statement or any amendment or
supplement thereto contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading; and (2) the prospectus included in the
N-14 Registration Statement contained any untrue statement of a material fact or
omitted to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; and
(y) such counsel does not express any opinion or belief as to the financial
statements or other financial or statistical data relating to any Fund contained
or incorporated by reference in the N-14 Registration Statement. In giving the
opinion set forth above, Brown & Wood LLP may state that it is relying on
certificates of officers of a Fund with regard to matters of fact and certain
certificates and written statements of governmental officials with respect to
the good standing of a Fund in the opinion of Bingham Dana LLP as to matters of
Massachusetts law.
(f) That MuniVest Florida shall have received an opinion or opinions of
Bingham Dana LLP, as Massachusetts counsel to the Funds, in form and substance
satisfactory to MuniVest Florida and dated the Exchange Date, to the effect
that (i) each of the Funds is a trust with transferable shares duly organized,
validly existing and in good standing in conformity with the laws of the
Commonwealth of Massachusetts; (ii) the MuniYield Florida Common Shares, and
MuniYield Florida Series B AMPS to be issued pursuant to this Agreement are duly
authorized and, upon delivery, will be validly issued and outstanding and fully
paid and nonassessable by MuniYield Florida, and no shareholder of MuniYield
Florida has any preemptive right to subscription or purchase in respect thereof
(pursuant to the Declaration of Trust or the by-laws of MuniYield Florida or the
law of the Commonwealth of Massachusetts, or to the best of such counsel's
knowledge, otherwise); (iii) this Agreement has been duly authorized, executed
and delivered by each of the Funds, and represents a valid and binding contract,
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
pertaining to the enforcement of creditors' rights generally and court decisions
with respect thereto; provided, such counsel shall express no opinion with
II-10
<PAGE>
respect to the application of equitable principles in any proceeding, whether at
law or in equity; (iv) the execution and delivery of this Agreement does not,
and the consummation of the Reorganization will not, violate any material
provisions of Massachusetts law or the Declaration of Trust, as amended, the
by-laws, as amended, or any agreement (known to such counsel) to which any Fund
is a party or by which any Fund is bound, except insofar as the parties have
agreed to amend such provision as a condition precedent to the Reorganization;
(v) MuniVest Florida has the power to sell, assign, transfer and deliver the
assets transferred by it hereunder and, upon consummation of the Reorganization
in accordance with the terms of this Agreement, MuniVest Florida will have duly
transferred such assets and liabilities in accordance with this Agreement; (vi)
to the best of such counsel's knowledge, no filing or registration with, or
consent, approval, authorization or order of any Massachusetts state court or
governmental authority is required for the consummation by the Funds of the
Reorganization, except such as have been obtained from the Boards of Trustees
and shareholders of the Funds and such as may be required under Massachusetts
state securities laws; (vii) all necessary actions required to be taken by the
Funds to authorize this Agreement and to effect the Reorganization have been
duly authorized by all necessary actions on the part of such Fund; and (viii)
such opinion is solely for the benefit of the Funds and their Trustees and
officers. In giving the opinion set forth above, Bingham Dana LLP may state that
it is relying on certificates of officers of a Fund with regard to matters of
fact and certain certificates and written statements of governmental officials
with respect to the good standing of a Fund.
(g) That MuniVest Florida shall have received either (a) a private letter
ruling from the Internal Revenue Service or (b) an opinion of Brown & Wood LLP,
to the effect that for Federal income tax purposes (i) the transfer by MuniVest
Florida of substantially all of its assets to MuniYield Florida in exchange
solely for shares of MuniYield Florida Common Shares and MuniYield Florida
Series B AMPS as provided in this Agreement will constitute a reorganization
within the meaning of Section 368(a)(1)(C) of the Code, and the respective Funds
will each be deemed to be a "party" to a reorganization within the meaning of
Section 368(b); (ii) in accordance with Section 361(a) of the Code, no gain or
loss will be recognized to MuniVest Florida as a result of the asset transfer
solely in exchange for shares of MuniYield Florida Common Shares and MuniYield
Florida Series B AMPS, as the case may be, or on the distribution of the
MuniYield Florida shares to shareholders of MuniVest Florida under Section
361(c)(1); (iii) under Section 1032 of the Code, no gain or loss will be
recognized to MuniYield Florida on the receipt of assets of MuniVest Florida in
exchange for its shares; (iv) in accordance with Section 354(a)(1) of the Code,
no gain or loss will be recognized to the shareholders of MuniVest Florida on
the receipt of shares of MuniYield Florida in exchange for their shares of
MuniVest Florida (except to the extent that common shareholders receive cash
representing an interest in fractional MuniYield Florida Common Shares in the
Reorganization); (v) in accordance with Section 362(b) of the Code, the tax
basis of MuniVest Florida's assets in the hands of MuniYield Florida will be the
same as the tax basis of such assets in the hands of MuniVest Florida
immediately prior to the consummation of the Reorganization; (vi) in accordance
with Section 358 of the Code, immediately after the Reorganization, the tax
basis of the shares of MuniYield Florida received by the shareholders of
MuniVest Florida in the Reorganization will be equal, in the aggregate, to the
tax basis of the shares of MuniVest Florida surrendered in exchange; (vii) in
accordance with Section 1223 of the Code, a shareholder's holding period for the
shares of MuniYield Florida will be determined by including the period for which
such shareholder held MuniVest Florida shares exchanged therefor, provided that
such shares were held as a capital asset; (viii) in accordance with Section 1223
of the Code, MuniYield Florida's holding period with respect to MuniVest
Florida's assets transferred will include the period for which such assets were
held by MuniVest Florida; (ix) the payment of cash to common shareholders of
MuniVest Florida in lieu of fractional shares of MuniYield Florida Common Shares
will be treated as though the fractional shares were distributed as part of the
Reorganization and then redeemed, with the result that such shareholders will
have short- or long-term capital gain or loss to the extent that the cash
distribution differs from the shareholder's basis allocable to the MuniYield
Florida fractional shares; and (x) the taxable year of MuniVest Florida will end
on the effective date of the Reorganization and pursuant to Section 381(a) of
the Code and regulations thereunder, MuniYield Florida will succeed to and take
into account certain tax attributes of MuniVest Florida, such as earnings and
profits, capital loss carryovers and method of accounting.
(h) That all proceedings taken by each of the Funds and its counsel in
connection with the Reorganization and all documents incidental thereto shall be
satisfactory in form and substance to the others.
(i) That the N-14 Registration Statement shall have become effective under
the 1933 Act, and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of MuniYield Florida, be contemplated by the
Commission.
II-11
<PAGE>
(j) That MuniVest Florida shall have received from Deloitte & Touche LLP a
letter dated within three days prior to the effective date of the N-14
Registration Statement and a similar letter dated within five days prior to the
Exchange Date, in form and substance satisfactory to them, to the effect that
(i) they are independent public accountants with respect to MuniYield Florida
within the meaning of the 1933 Act and the applicable published rules and
regulations thereunder; (ii) in their opinion, the financial statements and
supplementary information of MuniYield Florida included or incorporated by
reference in the N-14 Registration Statement and reported on by them comply as
to form in all material respects with the applicable accounting requirements of
the 1933 Act and the published rules and regulations thereunder; (iii) on the
basis of limited procedures agreed upon by the Funds and described in such
letter (but not an examination in accordance with generally accepted auditing
standards) consisting of a reading of any unaudited interim financial statements
and unaudited supplementary information of MuniYield Florida included in the
N-14 Registration Statement, and inquiries of certain officials of MuniYield
Florida responsible for financial and accounting matters, nothing came to their
attention that caused them to believe that (a) such unaudited financial
statements and related unaudited supplementary information do not comply as to
form in all material respects with the applicable accounting requirements of the
1933 Act and the published rules and regulations thereunder, (b) such unaudited
financial statements are not fairly presented in conformity with generally
accepted accounting principles, applied on a basis substantially consistent with
that of the audited financial statements, or (c) such unaudited supplementary
information is not fairly stated in all material respects in relation to the
unaudited financial statements taken as a whole; and (iv) on the basis of
limited procedures agreed upon by the Funds and described in such letter (but
not an examination in accordance with generally accepted auditing standards),
the information relating to MuniYield Florida appearing in the N-14 Registration
Statement, which information is expressed in dollars (or percentages derived
from such dollars) (with the exception of performance comparisons, if any), if
any, has been obtained from the accounting records of MuniYield Florida or from
schedules prepared by officials of MuniYield Florida having responsibility for
financial and reporting matters and such information is in agreement with such
records, schedules or computations made therefrom.
(k) That the Commission shall not have issued an unfavorable advisory
report under Section 25(b) of the 1940 Act, nor instituted or threatened to
institute any proceeding seeking to enjoin consummation of the Reorganization
under Section 25(c) of the 1940 Act, and no other legal, administrative or other
proceeding shall be instituted or threatened which would materially affect the
financial condition of MuniYield Florida or would prohibit the Reorganization.
(l) That MuniVest Florida shall have received from the Commission such
orders or interpretations as Brown & Wood LLP, as their counsel, deems
reasonably necessary or desirable under the 1933 Act and the 1940 Act in
connection with the Reorganization, provided, that such counsel shall have
requested such orders as promptly as practicable, and all such orders shall be
in full force and effect.
9. MuniYield Florida Conditions.
The obligations of MuniYield Florida hereunder shall be subject to the
following conditions:
(a) That this Agreement shall have been adopted, and the Reorganization
shall have been approved, by the Board of Trustees and the shareholders of each
of the Funds as set forth in Section 8(a); and that MuniVest Florida shall have
delivered to MuniYield Florida a copy of the resolution approving this Agreement
adopted by MuniVest Florida's Board of Trustees, and a certificate setting forth
the vote of the shareholders of MuniVest Florida obtained, each certified by its
Secretary.
(b) That MuniVest Florida shall have furnished to MuniYield Florida a
statement of its assets, liabilities and capital, with values determined as
provided in Section 4 of this Agreement, together with a schedule of investments
with their respective dates of acquisition and tax costs, all as of the
Valuation Time, certified on Fund's behalf by its President (or any Vice
President) and its Treasurer, and a certificate signed by such Fund's President
(or any Vice President) and its Treasurer, dated as of the Exchange Date,
certifying that as of the Valuation Time and as of the Exchange Date there has
been no material adverse change in the financial position of MuniVest Florida
since the date of such Fund's most recent Annual Report or Semi-Annual Report,
as applicable, other than changes in MuniVest Florida Investments since that
date or changes in the market value of MuniVest Florida Investments.
(c) That MuniVest Florida shall have furnished to MuniYield Florida a
certificate signed by MuniVest Florida's President (or any Vice President) and
its Treasurer, dated the Exchange Date, certifying that as of the
II-12
<PAGE>
Valuation Time and as of the Exchange Date all representations and warranties of
MuniVest Florida made in this Agreement are true and correct in all material
respects with the same effect as if made at and as of such dates and the
Acquired Fund has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied at or prior to such dates.
(d) That MuniVest Florida shall have delivered to MuniYield Florida a
letter from Deloitte & Touche LLP, dated the Exchange Date, stating that such
firm has performed a limited review of the Federal, state and local income tax
returns of MuniVest Florida for the period ended October 31, 1999 (which returns
originally were prepared and filed by MuniVest Florida), and that based on such
limited review, nothing came to their attention which caused them to believe
that such returns did not properly reflect, in all material respects, the
Federal, state and local income taxes of MuniVest Florida for the period covered
thereby; and that for the period from November 1, 1999, to and including the
Exchange Date and for any taxable year of MuniVest Florida ending upon the
liquidation of MuniVest Florida, such firm has performed a limited review to
ascertain the amount of applicable Federal, state and local taxes, and has
determined that either such amount has been paid or reserves have been
established for payment of such taxes, this review to be based on unaudited
financial data; and that based on such limited review, nothing has come to their
attention which caused them to believe that the taxes paid or reserves set aside
for payment of such taxes were not adequate in all material respects for the
satisfaction of Federal, state and local taxes for the period from November 1,
1998, to and including the Exchange Date and for any taxable year of MuniVest
Florida, ending upon the liquidation of such fund or that such fund would not
qualify as a regulated investment company for Federal income tax purposes for
the tax years in question.
(e) That there shall not be any material litigation pending with respect
to the matters contemplated by this Agreement.
(f) That MuniYield Florida shall have received an opinion of Brown & Wood
LLP, as counsel to the Funds, in form and substance satisfactory to MuniYield
Florida and dated the Exchange Date, with respect to the matters specified in
Section 8(e) of this Agreement and such other matters as MuniYield Florida
reasonably may deem necessary or desirable.
(g) That MuniYield Florida shall have received an opinion of Bingham Dana
LLP, as Masachusetts counsel of the Funds, in form and substance satisfactory to
MuniYield Dlorida Insured and dated the Exchange Date, with respect to the
matters specified in Section 8(f) of this Agreement and such other matters as
MuniYield Florida reasonably may deem necessary or desirable.
(h) That MuniYield Florida shall have received a private letter ruling
from the Internal Revenue Service or an opinion of Brown & Wood LLP with respect
to the matters specified in Section 8(f) of this Agreement.
(i) That MuniYield Florida shall have received from Deloitte & Touche LLP
a letter dated within three days prior to the effective date of the N-14
Registration Statement and a similar letter dated within five days prior to the
Exchange Date, in form and substance satisfactory to MuniYield Florida, to the
effect that (i) they are independent public accountants with respect to MuniVest
Florida within the meaning of the 1933 Act and the applicable published rules
and regulations thereunder; (ii) in their opinion, the financial statements and
supplementary information of such fund included or incorporated by reference in
the N-14 Registration Statement and reported on by them comply as to form in all
material respects with the applicable accounting requirements of the 1933 Act
and the published rules and regulations thereunder; (iii) on the basis of
limited procedures agreed upon by the Funds and described in such letter (but
not an examination in accordance with generally accepted auditing standards)
consisting of a reading of any unaudited interim financial statements and
unaudited supplementary information of MuniVest Florida included in the N-14
Registration Statement, and inquiries of certain officials of MuniVest Florida
responsible for financial and accounting matters, nothing came to their
attention that caused them to believe that (a) such unaudited financial
statements and related unaudited supplementary information do not comply as to
form in all material respects with the applicable accounting requirements of the
1933 Act and the published rules and regulations thereunder, (b) such unaudited
financial statements are not fairly presented in conformity with generally
accepted accounting principles, applied on a basis substantially consistent with
that of the audited financial statements, or (c) such unaudited supplementary
information is not fairly stated in all material respects in relation to the
unaudited financial statements taken as a whole; and (iv) on the basis of
limited procedures agreed upon by the Funds and described in such letter (but
not an examination in accordance with generally accepted auditing standards),
the information relating to MuniVest Florida appearing in the N-14 Registration
Statement, which information is expressed in dollars (or percentages derived
from such dollars) (with the exception of performance comparisons, if any), if
any, has been obtained
II-13
<PAGE>
from the accounting records of MuniVest Florida or from schedules prepared by
officials of MuniVest Florida having responsibility for financial and reporting
matters and such information is in agreement with such records, schedules or
computations made therefrom.
(j) That the MuniVest Florida Investments to be transferred to MuniYield
Florida shall not include any assets or liabilities which MuniYield Florida, by
reason of limitations in the Declaration of Trust or otherwise, may not properly
acquire or assume.
(k) That the N-14 Registration Statement shall have become effective under
the 1933 Act and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of MuniVest Florida, be contemplated by the
Commission.
(l) That the Commission shall not have issued an unfavorable advisory
report under Section 25(b) of the 1940 Act, nor instituted or threatened to
institute any proceeding seeking to enjoin consummation of the Reorganization
under Section 25(c) of the 1940 Act, and no other legal, administrative or other
proceeding shall be instituted or threatened which would materially affect the
financial condition of MuniVest Florida or would prohibit the Reorganization.
(m) That MuniYield Florida shall have received from the Commission such
orders or interpretations as Brown & Wood LLP, as counsel to MuniYield Florida,
deems reasonably necessary or desirable under the 1933 Act and the 1940 Act in
connection with the Reorganization, provided, that such counsel shall have
requested such orders as promptly as practicable, and all such orders shall be
in full force and effect.
(n) That all proceedings taken by MuniVest Florida and its counsel in
connection with the Reorganization and all documents incidental thereto shall be
satisfactory in form and substance to MuniYield Florida.
(o) That prior to the Exchange Date, MuniVest Florida shall have declared
a dividend or dividends which, together with all such previous dividends, shall
have the effect of distributing to its shareholders all of its net investment
company taxable income for the period to and including the Exchange Date, if any
(computed without regard to any deduction for dividends paid), and all of its
net capital gain, if any, realized to and including the Exchange Date. In this
regard, the last dividend period for the MuniVest Florida AMPS may be shorter
than the dividend period for such AMPS determined as set forth in the applicable
Certificate of Designation.
10. Termination, Postponement and Waivers.
(a) Notwithstanding anything contained in this Agreement to the contrary,
this Agreement may be terminated and the Reorganization abandoned at any time
(whether before or after adoption thereof by the shareholders of the Funds)
prior to the Exchange Date, or the Exchange Date may be postponed, (i) by mutual
consent of the Boards of Trustees of the Funds, (ii) by the Board of Trustees of
MuniVest Florida if any condition of MuniVest Florida's obligations set forth in
Section 8 of this Agreement has not been fulfilled or waived by such Board; or
(iii) by the Board of Trustees of MuniYield Florida if any condition of
MuniYield Florida's obligations set forth in Section 9 of this Agreement have
not been fulfilled or waived by such Board.
(b) If the transactions contemplated by this Agreement have not been
consummated by August 31, 2000, this Agreement automatically shall terminate on
that date, unless a later date is mutually agreed to by the Boards of Trustees
of the Funds.
(c) In the event of termination of this Agreement pursuant to the
provisions hereof, the same shall become void and have no further effect, and
there shall not be any liability on the part of any Fund or persons who are
their Trustees, trustees, officers, agents or shareholders in respect of this
Agreement.
(d) At any time prior to the Exchange Date, any of the terms or conditions
of this Agreement may be waived by the Board of Trustees of either Fund
(whichever is entitled to the benefit thereof), if, in the judgment of such
Board after consultation with its counsel, such action or waiver will not have a
material adverse effect on the benefits intended under this Agreement to the
shareholders of their respective fund, on behalf of which such action is taken.
In addition, the Boards of Trustees of the Funds have delegated to FAM the
ability to make non-material changes to the transaction if it deems it to be in
the best interests of the Funds to do so.
(e) The respective representations and warranties contained in Sections 1
and 2 of this Agreement shall expire with, and be terminated by, the
consummation of the Reorganization, and no Fund nor any of its officers,
Trustees, trustees, agents or shareholders shall have any liability with respect
to such representations or warranties after the Exchange Date. This provision
shall not protect any officer, director, trustee, agent or
II-14
<PAGE>
shareholder of any Fund against any liability to the entity for which that
officer, director, trustee, agent or shareholder so acts or to its shareholders,
to which that officer, director, trustee, agent or shareholder otherwise would
be subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties in the conduct of such office.
(f) If any order or orders of the Commission with respect to this
Agreement shall be issued prior to the Exchange Date and shall impose any terms
or conditions which are determined by action of the Boards of Trustees of the
Funds to be acceptable, such terms and conditions shall be binding as if a part
of this Agreement without further vote or approval of the shareholders of the
Funds unless such terms and conditions shall result in a change in the method of
computing the number of MuniYield Florida Common Shares or MuniYield Florida
Series B AMPS, as applicable, in which event, unless such terms and conditions
shall have been included in the proxy solicitation materials furnished to the
shareholders of the Funds prior to the meetings at which the Reorganization
shall have been approved, this Agreement shall not be consummated and shall
terminate unless the Funds promptly shall call a special meeting of shareholders
at which such conditions so imposed shall be submitted for approval.
11. Indemnification.
(a) MuniVest Florida hereby agrees to indemnify and hold MuniYield Florida
harmless from all loss, liability and expenses (including reasonable counsel
fees and expenses in connection with the contest of any claim) which MuniYield
Florida may incur or sustain by reason of the fact that (i) MuniYield Florida
shall be required to pay any corporate obligation of MuniVest Florida, whether
consisting of tax deficiencies or otherwise, based upon a claim or claims
against MuniVest Florida which were omitted or not fairly reflected in the
financial statements to be delivered to MuniYield Florida in connection with the
Reorganization; (ii) any representations or warranties made by MuniVest Florida
in this Agreement should prove to be false or erroneous in any material respect;
(iii) any covenant of MuniVest Florida has been breached in any material
respect; or (iv) any claim is made alleging that (a) the N-14 Registration
Statement included any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make the
statements therein attributable to such Fund not misleading or (b) the Joint
Proxy Statement and Prospectus delivered to the shareholders of the Funds and
forming a part of the N-14 Registration Statement included any untrue statement
of a material fact or omitted to state any material fact necessary to make the
statements therein attributable to such Fund, in the light of the circumstances
under which they were made, not misleading, except with respect to (iv)(a) and
(b) herein insofar as such claim is based on written information furnished to
MuniVest Florida by MuniYield Florida.
(b) MuniYield Florida hereby agrees to indemnify and hold MuniVest Florida
harmless from all loss, liability and expenses (including reasonable counsel
fees and expenses in connection with the contest of any claim) which MuniVest
Florida may incur or sustain by reason of the fact that (i) any representations
or warranties made by MuniYield Florida in this Agreement should prove false or
erroneous in any material respect, (ii) any covenant of MuniYield Florida has
been breached in any material respect, or (iii) any claim is made alleging that
(a) the N-14 Registration Statement included any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein, not misleading or (b) the Joint Proxy
Statement and Prospectus delivered to shareholders of the Funds and forming a
part of the N-14 Registration Statement included any untrue statement of a
material fact or omitted to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except with respect to (iii)(a) and (b) herein insofar as
such claim is based on written information furnished to MuniYield Florida by
MuniVest Florida.
(c) In the event that any claim is made against MuniYield Florida in
respect of which indemnity may be sought by MuniYield Florida from MuniVest
Florida under Section 11(a) of this Agreement, or in the event that any claim is
made against MuniVest Florida in respect of which indemnity may be sought by
MuniVest Florida from MuniYield Florida under Section 11(b) of this Agreement,
then the party seeking indemnification (the "Indemnified Party"), with
reasonable promptness and before payment of such claim, shall give written
notice of such claim to the other party (the "Indemnifying Party"). If no
objection as to the validity of the claim is made in writing to the Indemnified
Party by the Indemnifying Party within thirty (30) days after the giving of
notice hereunder, then the Indemnified Party may pay such claim and shall be
entitled to reimbursement therefor, pursuant to this Agreement. If, prior to the
termination of such thirty-day period, objection in writing as to the validity
of such claim is made to the Indemnified Party, the Indemnified Party shall
withhold payment thereof until the validity of such claim is established (i) to
the satisfaction of the Indemnifying Party, or (ii) by a final
II-15
<PAGE>
determination of a court of competent jurisdiction, whereupon the Indemnified
Party may pay such claim and shall be entitled to reimbursement thereof,
pursuant to this Agreement, or (iii) with respect to any tax claims, within
seven (7) calendar days following the earlier of (A) an agreement between
MuniYield Florida and MuniVest Florida seeking indemnification that an indemnity
amount is payable, (B) an assessment of a tax by a taxing authority, or (C) a
"determination" as defined in Section 1313(a) of the Code. For purposes of this
Section 13, the term "assessment" shall have the same meaning as used in Chapter
63 of the Code and Treasury Regulations thereunder, or any comparable provision
under the laws of the appropriate taxing authority. In the event of any
objection by the Indemnifying Party, the Indemnifying Party promptly shall
investigate the claim, and if it is not satisfied with the validity thereof, the
Indemnifying Party shall conduct the defense against such claim. All costs and
expenses incurred by the Indemnifying Party in connection with such
investigation and defense of such claim shall be borne by it. These
indemnification provisions are in addition to, and not in limitation of, any
other rights the parties may have under applicable law.
12. Other Matters.
(a) Pursuant to Rule 145 under the 1933 Act, and in connection with the
issuance of any shares to any person who at the time of the Reorganization is,
to its knowledge, an affiliate of a party to the Reorganization pursuant to Rule
145(c), MuniYield Florida will cause to be affixed upon the certificate(s)
issued to such person (if any) a legend as follows:
THESE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED EXCEPT TO MUNIYIELD FLORIDA FUND (OR ITS STATUTORY
SUCCESSOR), OR ITS PRINCIPAL UNDERWRITER UNLESS (I) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER
THE SECURITIES ACT OF 1933 OR (II) IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE FUND, SUCH REGISTRATION IS NOT
REQUIRED.
and, further, that stop transfer instructions will be issued to MuniYield
Florida's transfer agent with respect to such shares. MuniVest Florida will
provide MuniYield Florida on the Exchange Date with the name of any shareholder
of MuniVest Florida who is to the knowledge of MuniVest Florida an affiliate of
MuniVest Florida on such date.
(b) All covenants, agreements, representations and warranties made under
this Agreement and any certificates delivered pursuant to this Agreement shall
be deemed to have been material and relied upon by each of the parties,
notwithstanding any investigation made by them or on their behalf.
(c) Any notice, report or demand required or permitted by any provision of
this Agreement shall be in writing and shall be made by hand delivery, prepaid
certified mail or overnight service, addressed to any Fund, at 800 Scudders Mill
Road, Plainsboro, New Jersey 08536, Attn: Terry K. Glenn, President.
(d) This Agreement supersedes all previous correspondence and oral
communications between the parties regarding the Reorganization, constitutes the
only understanding with respect to the Reorganization, may not be changed except
by a letter of agreement signed by each party and shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed in said state.
(e) It is expressly agreed that the obligations of the Funds hereunder
shall not be binding upon any of their respective Trustees, shareholders,
nominees, officers, agents, or employees personally, but shall bind only the
trust property of the respective Funds as provided in such Fund's Declaration of
Trust. The execution and delivery of this Agreement have been authorized by the
Trustees of each Fund and signed by authorized officers of each Fund, acting as
such, and neither such authorization by such Trustees nor such execution and
delivery by such officers shall be deemed to have been made by any of them
individually or to impose liability on any of them personally, but shall bind
only the trust property of each Fund, as provided in such Fund's Declaration of
Trust.
This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original but all
such counterparts together shall constitute but one instrument.
II-16
<PAGE>
MUNIYIELD FLORIDA FUND
/s/ Donald C. Burke
By: ---------------------------
Donald C. Burke, Vice
President and Treasurer
Attest:
/s/ Alice A. Pellegrino
- -------------------------------------
Alice A. Pellegrino, Secretary
- ------------------------------
MUNIVEST FLORIDA FUND
/s/Donald C. Burke
By: ---------------------------
Donald C. Burke, Vice
President and Treasurer
Attest:
/s/ Alice A. Pellegrino
- -------------------------------------
Alice A. Pellegrino, Secretary
- ------------------------------
II-17
<PAGE>
EXHIBIT III
ECONOMIC AND OTHER CONDITIONS IN FLORIDA
The following information is a brief summary of factors affecting the
economy of the State of Florida (the "State") and does not purport to be a
complete description of such factors. Other factors will affect issuers. The
summary is based upon one or more of the most recent publicly available offering
statements relating to debt offerings of the State, however, it has not been
updated. The Funds have not independently verified the information.
In the early 1990s, the State's unemployment rate generally tracked above
that of the nation. Beginning in calendar year 1995, the State's unemployment
rate has generally tracked below the national average. The State's unemployment
rate is projected to be 4.2% in calendar year 1999 and 4.4% in calendar year
2000, while the nation's unemployment rate for those calendar years is projected
to be 4.5% and 4.6%, respectively. (The projections set forth in this Appendix
were obtained from a report, prepared by the Revenue and Economic Analysis Unit
of the Executive Office of the Governor for the State of Florida, contained
within a recent official statement, dated August 20, 1999 for a State of Florida
debt offering ("State of Florida Report")).
During calendar years 1992 through 1998, the State's per capita income is
projected to have expanded approximately 29.0%, while the national per capita
income increased by approximately 30.3%. The structure of Florida's income
differs from that of the nation and the Southeast. Because Florida has a
proportionally greater retirement age population, property income (dividends,
interest, and rent) and transfer payments (social security and pension benefits,
among other sources of income) are relatively more important sources of income.
For example, Florida's employment income in calendar year 1998 represented 62.0%
of total personal income, while the nation's share of total personal income in
the form of wages and salaries and other labor benefits was 72.2%. Florida's
income is dependent upon transfer payments controlled by the federal government.
The State's strong population growth is one fundamental reason why its
economy has typically performed better than the nation as a whole. In census
year 1980, the State was ranked seventh among the 50 states with a population of
9.7 million people. The State has grown dramatically since then and as of April
1, 1998 ranked fourth with an estimated population of 15.0 million. Since census
year 1990, the State's estimated average annual rate of population increase has
been approximately 1.9% as compared to an approximately 1.0% for the nation as a
whole. While annual growth in the State's population is expected to decline
somewhat, it is expected to have grown by over 200,000 new residents per year
throughout the 1990s.
Tourism is one of the State's most important industries. An estimated 48.7
million people visited the State in calendar year 1998, according to the Florida
Department of Commerce. Tourism arrivals are expected to increase by 2.0% in
fiscal year 1998-99 and 1.7% the following fiscal year. In fiscal year 1998-99,
tourist arrivals are projected to approximate 49.7 million. In fiscal year
1999-2000, tourist arrivals are projected to reach 50.6 million. Florida tourism
appears to be recovering from the effects of negative publicity regarding crime
against tourists in the State. Factors such as "product maturity" of a Florida
vacation package, higher prices, and more aggressive marketing by competing
vacation destinations, could contribute to a tourism slowdown. The State's
fiscal year begins July 1 and ends June 30.
Florida's dependency on the highly cyclical construction and
construction-related manufacturing sectors has declined. Total contract
construction employment as a share of total non-farm employment declined from
7.5% in the late 1980s to approximately 5.3% in calendar year 1998. Florida,
nevertheless, has an important construction industry, with single and
multi-family housing starts projected to reach a combined level of 144,000 in
fiscal year 1998-99 and 143,000 in fiscal year 1999-2000. Multi-family starts
have been slow to recover from the early 1990's recession, but are showing
stronger growth now and are expected to approximate 46,500 in fiscal year
1998-99 and 46,300 in fiscal year 1999-2000. Total construction expenditures in
fiscal years 1998-99 and 1999-2000 are forecasted to increase 8.6% and 2.5%,
respectively. A driving force behind the State's construction industry is its
rapid population growth. Net migration to the State is forecasted to slow,
although the State's population is expected to have grown by over 200,000
persons per year during the 1990's.
Financial operations of the State covering all receipts and expenditures
are maintained through the use of four funds -- the General Revenue Fund, Trust
Funds, the Working Capital Fund, and the Budget Stabilization Fund. In fiscal
year 1996-97, the State derived approximately 67% of its total direct revenues
to these funds from State taxes and fees. Federal funds and other special
revenues accounted for the remaining revenues. Major sources of tax revenues to
the General Revenue Fund are the sales and use tax, corporate income tax,
intangible personal property tax, beverage tax, and estate tax which amounted to
68%, 8%, 4%, 3% and 3%, respectively, of total General Revenue Funds available.
State expenditures are categorized for budget and appropriation
III-1
<PAGE>
purposes by type of fund and spending unit, which are further subdivided by line
item. In fiscal year 1996-97, expenditures from the General Revenue Fund for
education, health and welfare, and public safety amounted to approximately 53%,
26% and 14%, respectively, of total General Revenues.
The Sales and Use Tax is the greatest single source of tax receipts in the
State. For fiscal year 1996-97, receipts from this source were $12,089 million,
an increase of 5.5% from fiscal year 1995-96, although not all of these receipts
are credited to the General Revenue Fund. The second largest source of State tax
receipts is the Motor Fuel Tax. The collections from this source during fiscal
year 1996-97 were $2,012 million, although these revenues are almost entirely
dedicated trust funds for specific purposes and are not included in the General
Revenue Fund. Alcoholic beverage tax revenues totalled $447.2 million for fiscal
year 1996-97, an increase of $5.7 million from the previous fiscal year. The
receipts of corporate income tax for fiscal year 1996-97 were $1,362.3 million,
an increase of 17.2% from fiscal year 1995-96. Documentary stamp tax collections
totalled $844.2 million during fiscal year 1996-97, posting an 8.9% increase
from the previous fiscal year. Gross receipts utility tax collections for fiscal
year 1996-97 totalled $575.7 million, an increase of 6.0% over the previous
fiscal year. The intangible personal property tax is a tax on stocks, bonds,
notes, governmental leaseholds, certain limited partnership interests, mortgages
and other obligations secured by liens on Florida realty, and other intangible
personal property. Total collections from intangible personal property taxes
were $952.4 million during fiscal year 1996-97, a 6.3% increase from the
previous fiscal year. Recent reductions in the intangible personal property tax
rate and expansions in the exclusions from that tax could reduce future revenues
from that source. A significant portion of these tax proceeds are unavailable to
the General Revenue Fund. The State's estate tax on resident decedents' estates
is generally equal to the amount allowable as a credit against federal estate
tax for state death taxes paid, and does not increase the estate's total federal
estate tax liability. For fiscal year 1996-97, estate tax receipts were $546.9
million, an increase of 30% from the prior fiscal year. In fiscal year 1996-97,
State-operated lotteries produced gross revenue of $2.09 billion-State law
requires allocating lottery revenues 50% to prizes, at least 38% to public
education, and no more than 12% to lottery administrative costs. In fiscal year
1996-97, education received approximately $792.3 million.
In addition to the foregoing information, the State of Florida Report
contains the following General Revenue information for fiscal year 1997-1998 in
tabular form of these revenues.
State of Florida
Total General Revenues
Fiscal Years 1997-98
(in millions of dollars)
1997-98
Actual
-----------
General Revenue Fund:
Sales Tax-GR........................................ $11,828.7
Beverage Tax & Licenses ............................ 550.1
Corporate Income Tax ............................... 1,395.7
Documentary Stamp Tax .............................. 429.6
Cigarette Tax ...................................... 142.1
Insurance Premium Tax .............................. 295.5
Pari-Mutuels Tax ................................... 25.6
Intangibles Tax .................................... 756.0
Estate Tax ......................................... 595.0
Interest Earnings .................................. 217.9
Public Safety Licenses ............................. 61.2
Medical & Hospital Fees ............................ 99.8
Motor Vehicle Charges .............................. 41.3
Auto Title & Lien Fees ............................. 24.0
Severance Taxes .................................... 35.4
Service Charges .................................... 383.8
Other Taxes, Licenses & Fees ....................... 262.5
Less: Refunds ...................................... (204.6)
--------
Net General Revenue ................................ $16,939.4
========
Executive Office of the Governor
Revenue and Economic Analysis
March 8, 1999
III-2
<PAGE>
Those tables also disclose that State Fuel Tax Trust Fund Revenues for
fiscal year 1997-1998 were $1,175.7 million.
For fiscal year 1998-99 the estimated General Revenue plus Working Capital
and Budget Stabilization funds available total $19,481.8 million, a 5.2%
increase over 1997-98. The $17,779.5 million in the Estimated Revenues component
of the fiscal year 1998-99 total represent a 5.0% increase over the analogous
figure in 1997-98. With combined General Revenue, Working Capital Fund and
Budget Stabilization Fund appropriations at $18,222.0 million, unencumbered
reserves at the end of 1998-99 are estimated at $1,360.7 million. For fiscal
year 1999-2000, the estimated total of General Revenue plus Working Capital and
Budget Stabilization funds available are $20,133.9 million, a 3.3% increase over
the total estimated for fiscal year 1998-99. The $18,555.2 million in the
Estimated Revenues component of the estimated 1999-2000 total represent a 4.4%
increase over the analogous figure for fiscal year 1998-99.
The State Constitution does not permit a state or local personal income
tax. An amendment to the State Constitution by the electors of the State would
be required in order to impose a personal income tax in the State.
Property valuations for homestead property are subject to a growth cap.
Growth in the just (market) value of property qualifying for the homestead
exemption is limited to 3% or the change in the Consumer Price Index, whichever
is less. If the property changes ownership or homestead status, it is to be
re-valued at full just value on the next tax roll. Although the impact of the
growth cap cannot be determined, it may have the effect of causing local
government units in the State to rely more on non-ad valorem tax revenues to
meet operating expenses and other requirements normally funded with ad valorem
tax revenues.
The State Constitution provides that State revenues collected for any
fiscal year shall be limited to State revenues allowed under that provision for
the prior fiscal year plus an adjustment for growth. Growth is defined as an
amount equal to the average annual rate of growth in State personal income over
the most recent twenty quarters times the State revenues allowed under that
provision for the prior fiscal year. State revenues collected for any fiscal
year in excess of this limitation are required to be transferred to the Budget
Stabilization Fund until the fund reaches the maximum balance specified in
Section 19(g) of Article III of the State Constitution, and thereafter is
required to be refunded to taxpayers as provided by general law. The limitation
on State revenues may be increased by the Legislature, by a two-thirds vote of
each house.
"State revenues" are defined as taxes, fees, licenses, and charges for
services imposed by the Legislature on individuals, businesses, or agencies
outside State government. However, the term "State revenues" does not include:
(i) revenues that are necessary to meet the requirements set forth in documents
authorizing the issuance of Bonds by the State; (ii) revenues that are used to
provide matching funds for the federal Medicaid program with the exception of
the revenues used to support the Public Medical Assistance Trust Fund or its
successor program and with the exception of State matching funds used to fund
elective expansions made after July 1, 1994; (iii) proceeds from the State
lottery returned as prizes; (iv) receipts of the Florida Hurricane Catastrophe
Fund; (v) balances carried forward from prior fiscal years; (vi) taxes,
licenses, fees and charges for services imposed by local, regional, or school
district governing bodies; or (vii) revenue from taxes, licenses, fees and
charges for services required to be imposed by any amendment or revision to the
State Constitution after July 1, 1994.
It should be noted that many of these provisions, which were adopted by
constitutional amendment in 1994, are ambiguous, and likely will not be
clarified until State courts have ruled on their meanings. Further, it is
uncertain how the Legislature will implement the provisions and whether such
implementing legislation will itself be the subject of court interpretation.
The Fund cannot predict the impact of these provisions on State finances.
To the extent local governments traditionally receive revenues from the State
which are subject to, and limited by, these provisions the future distribution
of such State revenues may be adversely affected.
Hurricanes continue to endanger the coastal and interior portions of
Florida. Substantial damage resulted from tropical storms and hurricanes in the
1992, 1995, 1998 and 1999 hurricane seasons. The hurricane season runs from June
1 through November 30. The Fund cannot predict the economic impact, if any, of
future hurricanes and storms.
As of August 20, 1999, the State had a bond rating of Aa2 from Moody's
Investors Service, Inc., AA+ from Standard & Poor's and AA from Fitch IBCA, Inc.
on all of its general obligation bonds. Outstanding general obligation bonds at
June 30, 1998 totalled almost $8.7 billion and were issued to finance capital
outlay for
III-3
<PAGE>
educational projects of both local school districts, community colleges and
state universities, environmental protection and highway construction. The State
has issued over $787 million of general obligation bonds since July 1, 1998.
In May 1999, as supplemented in June 1999, the Florida Auditor General
notified the Governor's Office that it identified, as of September 30, 1997,
forty local government entities as meeting one or more of the financial
emergency conditions prescribed by State statute. The Auditor General's
notification indicated that ten of those local government entities (including
the City of Miami) were on September 30, 1997 in a state of financial emergency.
Stating that a statutorily defined financial emergency is not necessarily
indicative of a local governmental entity's solvency or ability to pay its
current financial obligations, the Auditor General's notification indicated that
the remaining thirty local government entities were not facing a true financial
crisis and / or the financial emergency was due to accounting practices. For
these purposes, a state of emergency is considered two consecutive years of
budget deficits. Municipalities or special districts that may be in a state of
financial emergency are those that the Auditor General was unable to conclude
had sufficient revenues to cover their deficits. The operations of all these
entities mentioned in the Auditor General's notification may be adversely
affected by their financial condition.
III-4
<PAGE>
EXHIBIT IV
SECTIONS 86 THROUGH 98 OF CHAPTER 156B
OF THE MASSACHUSETTS GENERAL LAWS
(THE MASSACHUSETTS BUSINESS CORPORATION LAW)
ss. 86. Sections applicable to appraisal; prerequisites
If a corporation proposes to take a corporate action as to which any
section of this chapter provides that a stockholder who objects to such action
shall have the right to demand payment for his shares and an appraisal thereof,
sections eighty-seven to ninety-eight, inclusive, shall apply except as
otherwise specifically provided in any section of this chapter. Except as
provided in sections eighty-two and eighty-three, no stockholder shall have such
right unless (1) he files with the corporation before taking the vote of the
shareholders on such corporate action, written objection to the proposed action
stating that he intends to demand payment for his shares if the action is taken
and (2) his shares are not voted in favor of the proposed action.
ss. 87. Statement of rights of objecting stockholders in notice of meeting; form
The notice of the meeting of stockholders at which the approval of such
proposed action to be considered shall contain a statement of the rights of
objecting stockholders. The giving of such notice shall not be deemed to create
any rights in any stockholder receiving the same to demand payment for his
stock, and the directors may authorize the inclusion in any such notice of a
statement of opinion by the management as to the existence or non-existence of
the right of stockholders to demand payment for their stock on account of the
proposed corporate action. The notice may be in such form as the directors or
officers calling the meeting deem advisable, but the following form of notice
shall be sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the meeting and
effected by the corporation, any stockholder (1) who files with the corporation
before the taking of the vote on the approval of such action, written objection
to the proposed action stating that he intends to demand payment for his shares
if the action is taken and (2) whose shares are not voted in favor of such
action has or may have the right to demand in writing from the corporation (or,
in the case of a consolidation or merger, the name of the resulting or surviving
corporation shall be inserted), within twenty days after the date of mailing to
him of notice in writing that the corporate action has become effective, payment
for his shares and an appraisal of the value thereof. Such corporation and any
such stockholder shall in such cases have the rights and duties and shall follow
the procedure set forth in sections 88 to 98, inclusive, of chapter 156B of the
General Laws of Massachusetts."
ss. 88. Notice of effectiveness of action objected to
The corporation taking such action, or in the case of a merger or
consolidation the surviving or resulting corporation, shall, within ten days
after the date on which such corporate action became effective, notify each
stockholder who filed a written objection meeting the requirements of section
eighty-six and whose shares were not voted in favor of the approval of such
action, that the action approved at the meeting of the corporation of which he
is a stockholder has become effective. The giving of such notice shall not be
deemed to create any rights in any stockholder receiving the same to demand
payment for his stock. The notice shall be sent by registered or certified mail,
addressed to the stockholder at his last known address as it appears in the
records of the corporation.
ss. 89. Demand for payment; time for payment
If within twenty days after the date of mailing of a notice under
subsection (e) of section eighty-two, subsection (f) of section eighty-three, or
section eighty-eight, any stockholder to whom the corporation was required to
give such notice shall demand in writing from the corporation taking such
action, or in the case of a consolidation or merger from the resulting or
surviving corporation, payment for his stock, the corporation upon which such
demand is made shall pay to him the fair value of his stock within thirty days
after the expiration of the period during which such demand may be made.
ss. 90. Demand for determination of value; bill in equity; venue
If during the period of thirty days provided for in section eighty-nine
the corporation upon which such demand is made and any such objecting
stockholder fail to agree as to the value of such stock, such corporation or any
such stockholder may within four months after the expiration of such thirty-day
period demand a determination of the value of the stock of all such objecting
stockholders by a bill in equity filed in the superior court in the county where
the corporation in which such objecting stockholder held stock had or has its
principal office in the commonwealth.
IV-1
<PAGE>
ss. 91. Parties to suit to determine value; service
If the bill is filed by the corporation, it shall name as parties
respondent all stockholders who have demanded payment for their shares and with
whom the corporation has not reached agreement as to the value thereof. If the
bill is filed by a stockholder, he shall bring the bill in his own behalf and in
behalf of all other stockholders who have demanded payment for their shares and
with whom the corporation has not reached agreement as to the value thereof, and
service of the bill shall be made upon the corporation by subpoena with a copy
of the bill annexed. The corporation shall file with its answer a duly verified
list of all such other stockholders, and such stockholders shall thereupon be
deemed to have been added as parties to the bill. The corporation shall give
notice in such form and returnable on such date as the court shall order to each
stockholder party to the bill by registered or certified mail, addressed to the
last known address of such stockholder as shown in the records of the
corporation, and the court may order such additional notice by publication or
otherwise as it deems advisable. Each stockholder who makes demand as provided
in section eighty-nine shall be deemed to have consented to the provisions of
this section relating to notice, and the giving of notice by the corporation to
any such stockholder in compliance with the order of the court shall be
sufficient service of process on him. Failure to give notice to any stockholder
making demand shall not invalidate the proceedings as to other stockholders to
whom notice was properly given, and the court may at any time before the entry
of a final decree make supplementary orders of notice.
ss. 92. Decree determining value and ordering payment; valuation date
After hearing the court shall enter a decree determining the fair value of
the stock of those stockholders who have become entitled to the valuation of and
payment for their shares, and shall order the corporation to make payment of
such value, together with interest, if any, as hereinafter provided to the
stockholders entitled thereto upon the transfer by them to the corporation of
the certificates representing such stock if certificated or, if uncertificated,
upon receipt of the instruction transferring such stock to the corporation. For
this purpose, the value of the shares shall be determined as of the day
preceding the date of the vote approving the proposed corporate action and shall
be exclusive of any element of value arising from the expectation or
accomplishment of the proposed corporate action.
ss. 93 Reference to special master
The court in its discretion may refer the bill or any question arising
thereunder to a special master to hear the parties, make findings and report the
same to the court, all in accordance with the usual practice in suits in equity
in the superior court.
ss. 94. Notation on stock certificates of pendency of bill
On motion the court may order stockholder parties to the bill to submit
their certificates of stock to the corporation for the notation thereon of the
pendency of the bill and may order the corporation to note such pendency in its
records with respect to any uncertificated shares held by such stockholder
parties, and may on motion dismiss the bill as to any stockholder who fails to
comply with such order.
ss. 95. Costs; interest
The costs of the bill, including the reasonable compensation and expenses
of any master appointed by the court, but exclusive of fees of counsel or of
experts retained by any party, shall be determined by the court and taxed upon
the parties to the bill, or any of them, in such manner as appears to be
equitable, except that all costs of giving notice to stockholders as provided in
this chapter shall be paid by the corporation. Interest shall be paid upon any
award from the date of the vote approving the proposed corporate action, and the
court may on application of any interested party determine the amount of
interest to be paid in the case of any stockholder.
ss. 96. Dividends and voting rights after demand for payment
Any stockholder who has demanded payment for his stock as provided in this
chapter shall not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and shall not be entitled to
the payment of dividends or other distribution on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the date of the vote, approving the proposed corporate action) unless:
IV-2
<PAGE>
1) A bill shall not be filed within the time provided in section
ninety;
2) A bill, if filed, shall be dismissed as to such stockholder; or
3) Such stockholder shall with the written approval of the corporation,
or in the case of a consolidation or merger, the resulting or
surviving corporation, deliver to it a written withdrawal of his
objections to and an acceptance of such corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not so demand
payment for his stock as provided in this chapter.
ss. 97. Status of shares paid for
The shares of the corporation paid for by the corporation pursuant to the
provisions of this chapter shall have the status of treasury stock, or in the
case of a consolidation or merger the shares or the securities of the resulting
or surviving corporation into which the shares of such objecting stockholder
would have been converted had he not objected to such consolidation or merger
shall have the status of treasury stock or securities.
ss. 98. Exclusive remedy; exception
The enforcement by a stockholder of his right to receive payment for his
shares in the manner provided in this chapter shall be an exclusive remedy
except that this chapter shall not exclude in the right of such stockholder to
bring or maintain an appropriate proceeding to obtain relief on the ground that
such corporate action will be or is illegal or fraudulent as to him.
IV-3
<PAGE>
EXHIBIT V
RATINGS OF MUNICIPAL BONDS
Description of Moody's Investors Service, Inc.'s ("Moody's") Municipal Bond
Ratings
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edge." Interest payments
are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements
are likely to change, such changes can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be
as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment some time in the
future.
Baa Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security
appear adequate for the present, but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both
good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of a
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger
with respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default
or have other marked shortcomings.
C Bonds which arc rated C are the lowest rated class of bonds
and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Note: These bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols Aal, Al, Baal, Bal and Bl.
Short-term Notes: The three ratings of Moody's for short-term notes are
MIG 1/VMIG 1, MIG 2/VMIG 2, and MIG 3/VMIG 3; MIG 1 /VMIG 1 denotes "best
quality, enjoying strong protection from established cash flows"; MIG 2/VMIG 2
denotes "high quality" with "ample margins of protection"; MIG 3/VMIG 3
instruments are of "favorable quality ... but ... lacking the undeniable
strength of the preceding grades."
Description of Moody's Commercial Paper Ratings
Moody's Commercial Paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's employs the following three designations, all
judged to be investment grade, to indicate the relative repayment capacity of
rated issuers:
Issuers rated Prime-1 (or supporting institutions) have a superior ability
for repayment of short-term promissory obligations. Prime-1 repayment capacity
will often be evidenced by the following characteristics:
V-1
<PAGE>
leading market positions in well established industries; high rates of return on
funds employed; conservative capitalization structures with moderate reliance on
debt and ample asset protection; broad margins, in earning coverage of fixed
financial charges and high internal cash generation; and with established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong ability
for repayment of short-term promissory obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of short-term promissory obligations. The effects of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes to the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Description of Standard & Poor's, a Division of The McGraw-Hill Companies, Inc.
("Standard & Poor's"), Municipal Debt Ratings
A Standard & Poor's municipal debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific financial obligation,
a specific class of financial obligations or a specific program. It takes into
consideration the creditworthiness of guarantors, insurers, or other forms of
credit enhancement on the obligation.
The debt rating is not a recommendation to purchase, sell or hold a
financial obligation, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources Standard & Poor's considers
reliable. Standard & Poor's does not perform an audit in connection with any
rating and may, on occasion, rely on unaudited financial information. The
ratings may be changed, suspended or withdrawn as a result of changes in, or
unavailability of, such information, or based on other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default-capacity and willingness of the
obligor as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded to, and relative position of, the
obligation in the event of bankruptcy, reorganization or other arrangement
under the laws of bankruptcy and other laws affecting creditors' rights.
AAA Debt rated "AAA" has the highest rating assigned by Standard &
Poor's. Capacity of the obligor to meet its financial
commitment on the obligation is extremely strong.
AA Debt rated "AA" differs from the highest-rated issues only in
small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
A Debt rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions
than debt in higher-rated categories. However, the obligor's
capacity to meet its financial commitment on the obligation is
still strong.
BBB Debt rated "BBB" exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor
to meet its financial commitment on the obligation.
BB Debt rated "BB," "B," "CCC," "CC", and "C" are regarded as
B having significant speculative characteristics. "BB" indicates
CCC the least degree of speculation and "C" the highest degree of
C speculation. While such debt will likely have some quality and
protective characteristics, these may be outweighed by large
uncertainties or major risk exposures to adverse conditions.
V-2
<PAGE>
D Debt rated "D" is in payment default. The "D" rating category
is used when payments on an obligation are not made on the
date due even if the applicable grace period has not expired,
unless Standard & Poor's believes that such payments will be
made during such grace period. The "D" rating also will be
used upon the filing of a bankruptcy petition or the taking of
similar action if payments on an obligation are jeopardized.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
Description of Standard & Poor's Commercial Paper Ratings
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. Ratings are graded into several categories, ranging from "A-1" for the
highest quality obligations to "D" for the lowest. These categories are as
follows:
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a
plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issues designated "A-1."
A-3 Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations
carrying the higher designations.
B Issues rated "B" are regarded as having only speculative
capacity for timely payment.
C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D Debt rated "D" is in payment default. The "D" rating category
is used when interest payments or principal payments are not
made on the date due, even if the applicable grace period has
not expired unless Standard & Poor's believes that such
payments will be made during such grace period.
c The "c" subscript is used to provide additional information to
investors that the bank may terminate its obligation to
purchase tendered bonds if the long-term credit rating of the
issuer is below an investment-grade level and/or the issuer's
bonds are deemed taxable.
p The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the
project financed by the debt being rated and indicates that
payment of the debt service requirements is largely or
entirely dependent upon the successful, timely completion of
the project. This rating, however, while addressing credit
quality subsequent to completion of the project, makes no
comment on the likelihood of or the risk of default upon
failure of such completion. The investor should exercise his
own judgment with respect to such likelihood and risk.
Continuance of the ratings is contingent upon Standard &
Poor's receipt of an executed copy of the escrow agreement or
closing documentation confirming investments and cash flows.
r The "r" highlights derivative, hybrid, and certain other
obligations that Standard & Poor's believes may experience
high volatility or high variability in expected returns as a
result of noncredit risks. Examples of such obligations are
securities with principal or interest return indexed to
equities, commodities, or currencies; certain swaps and
options; and interest-only and principal-only mortgage
securities. The absence of an "r" symbol should not be taken
as an indication that an obligation will exhibit no volatility
or variability in total return.
A commercial paper rating is not a recommendation to purchase or sell a
security. The ratings are based on current information furnished to Standard &
Poor's by the issuer or obtained by Standard & Poor's from other sources it
considers reliable. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information.
V-3
<PAGE>
A Standard & Poor's note rating reflects the liquidity factors and market
access risks unique to such notes. Notes due in three years or less will likely
receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in making
that assessment.
-- Amortization schedule--the larger the final maturity relative to other
maturities, the more likely it will be treated as a note.
-- Source of payment--the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note.
Note rating symbols are as follows:
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt
service is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest with some
vulnerability to adverse financial and economic changes over
the term of the notes.
SP-3 Speculative capacity to pay principal and interest
Description of Fitch IBCA, Inc.'s ("Fitch") Investment Grade Bond Ratings
Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The rating
represents Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided
by insurance policies or financial guarantees unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.
AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is unlikely
to be affected by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and
repay principal is very strong, although not quite as strong
as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these
issuers is generally rated "F-1+."
A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes
in economic conditions and circumstances, however, are more
likely to have an adverse impact on these
V-4
<PAGE>
bonds, and therefore impair timely payment. The likelihood
that the ratings of these bonds will fall below investment
grade is higher than for bonds with higher ratings.
Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol
to indicate the relative position of a credit within the rating category. Plus
and minus signs, however, are not used in the "AAA" category.
NR Indicates that Fitch does not rate the specific issue.
Conditional
A conditional rating is premised on the successful completion of a project
or the occurrence of a specific event.
Suspended
A rating is suspended when Fitch deems the amount of information available
from the issuer to be inadequate for rating purposes.
Withdrawn
A rating will be withdrawn when an issue matures or is called or
refinanced and, at Fitch's discretion, when an issuer fails to furnish proper
and timely information.
FitchAlert
Ratings are placed on FitchAlert to notify investors of an occurrence that
is likely to result in a rating change and the likely direction of such change.
These are designated as "Positive," indicating a potential upgrade, "Negative,"
for potential downgrade, or "Evolving," where ratings may be raised or lowered.
FitchAlert is relatively short-term, and should be resolved within three to 12
months.
Ratings Outlook
An outlook is used to describe the most likely direction of any rating
change over the intermediate term. It is described as "Positive" or "Negative."
The absence of a designation indicates a stable outlook.
Description of Fitch's Speculative Grade Bond Ratings
Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
("BB" to "C") represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ("DDD" to "D") is an
assessment of the ultimate recovery value through reorganization or liquidation.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength.
Bonds that have the rating are of similar but not necessarily identical
credit quality since rating categories cannot fully reflect the differences in
degrees of credit risk.
BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by
adverse economic changes. However, business and financial
alternatives can be identified which could assist the obligor
in satisfying its debt service requirements.
B Bonds are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the
probability of continued timely payment of principal and
interest reflects the obligor's limited margin of safety and
the need for reasonable business and economic activity
throughout the life of the issue.
CCC Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
V-5
<PAGE>
CC Bonds are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C Bonds are in imminent default in payment of interest or
principal.
DDD Bonds are in default on interest and/or principal payments.
DD Such bonds are extremely speculative and should be valued on
D the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. "DDD" represents the highest
potential for recovery on these bonds, and "D" represents the
lowest potential for recovery.
Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol
to indicate the relative position of a credit within the rating category. Plus
and minus signs, however, are not used in the "DDD," "DD," or "D" categories.
Description of Fitch's Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
The short-term rating places greater emphasis than a long-term rating on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
Fitch short-term ratings are as follows:
F-1+ Exceptionally Strong Credit Quality. Issues assigned this
rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 Very Strong Credit Quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in
degree than issues rated "F-l+".
F-2 Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as for issues assigned "F-1+"
and "F-l" ratings.
F-3 Fair Credit Quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for
timely payment is adequate; however, near-term adverse changes
could cause these securities to be rated below investment
grade.
F-S Weak Credit Quality. Issues assigned this rating have
characteristics suggesting a minimal degree of assurance for
timely payment and are vulnerable to near-term adverse changes
in financial and economic conditions.
D Default. Issues assigned this rating are in actual or imminent
payment default.
LOC The symbol "LOC" indicates that the rating is based on a
letter of credit issued by a commercial bank.
V-6
<PAGE>
COMMON SHARES
MUNIYIELD FLORIDA FUND
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
PROXY
This proxy is solicited on behalf of the Board of Trustees
The undersigned hereby appoints Terry K. Glenn, Donald C. Burke and Alice A.
Pellegrino as proxies, each with the power to appoint his or her substitute, and
hereby authorizes each of them to represent and to vote, as designated on the
reverse hereof, all of the Common Shares of MuniYield Florida Fund (the "Fund")
held of record by the undersigned on October 20, 1999 at a Special Meeting of
Shareholders of the Fund to be held on December 15, 1999, or any adjournment
thereof.
This proxy when properly executed will be voted in the manner herein
directed by the undersigned shareholder. If no direction is made, this proxy
will be voted "FOR" Proposal 1.
By signing and dating the reverse side of this card, you authorize the
proxies to vote the proposal as marked, or if not marked, to vote "FOR" the
proposal, and to use their discretion to vote for any other matter as may
properly come before the meeting or any adjournment thereof. If you do not
intend to personally attend the meeting, please complete and return this card at
once in the enclosed envelope.
(continued, and to be signed on the reverse side)
<PAGE>
Please mark boxes /X/ or [X] in blue or black ink.
1. To consider and act upon a proposal to approve the Agreement and Plan of
Reorganization between the Fund and MuniVest Florida Fund.
For |_| Against |_| Abstain |_|
2. In the discretion of such proxies, upon such other business as properly
may come before the meeting or any adjournment thereof.
Please sign exactly as name appears hereon. When shares
are held by joint tenants, both should sign. When
signing as attorney or as executor, administrator,
trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership,
please sign in partnership name by authorized persons.
Dated: _______________________________
X_____________________________________
Signature
X_____________________________________
Signature, if held jointly
Sign, date and return the Proxy Card promptly using the enclosed envelope.
<PAGE>
AUCTION MARKET
PREFERRED SHARES
MUNIYIELD FLORIDA FUND
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
PROXY
This proxy is solicited on behalf of the Board of Trustees
The undersigned hereby appoints Terry K. Glenn, Donald C. Burke and Alice A.
Pellegrino as proxies, each with the power to appoint his or her substitute, and
hereby authorizes each of them to represent and to vote, as designated on the
reverse hereof, all the Auction Market Preferred Shares of MuniYield Florida
Fund (the "Fund") held of record by the undersigned on October 20, 1999 at a
Special Meeting of Shareholders of the Fund to be held on December 15, 1999, or
any adjournment thereof.
This proxy when properly executed will be voted in the manner herein
directed by the undersigned shareholder. If no direction is made, this proxy
will be voted "FOR" Proposal 1.
By signing and dating the reverse side of this card, you authorize the
proxies to vote the proposal as marked, or if not marked, to vote "FOR" the
proposal, and to use their discretion to vote for any other matter as may
properly come before the meeting or any adjournment thereof. If you do not
intend to personally attend the meeting, please complete and return this card at
once in the enclosed envelope.
(Continued, and to be signed on the reverse side)
<PAGE>
Please mark boxes /X/ or [X] in blue or black ink.
1. To consider and act upon a proposal to approve the Agreement and Plan of
Reorganization between the Fund and MuniVest Florida Fund.
For |_| Against |_| Abstain |_|
2. In the discretion of such proxies, upon such other business as properly
may come before the meeting or any adjournment thereof. If the undersigned
is a broker-dealer, it hereby instructs the proxies, pursuant to Rule 452
of the New York Stock Exchange, to vote any uninstructed Auction Market
Preferred Shares, in the same proportion as votes cast by holders of
Auction Market Preferred Shares, who have responded to this proxy
solicitation.
Please sign exactly as name appears hereon. When shares
are held by joint tenants, both should sign. When
signing as attorney or as executor, administrator,
trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership,
please sign in partnership name by authorized persons.
Dated: _______________________________
X_____________________________________
Signature
X_____________________________________
Signature, if held jointly
Sign, date and return the Proxy Card promptly using the enclosed envelope.
<PAGE>
COMMON SHARES
MUNIVEST FLORIDA FUND
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
PROXY
This proxy is solicited on behalf of the Board of Trustees
The undersigned hereby appoints Terry K. Glenn, Donald C. Burke and Alice A.
Pellegrino as proxies, each with the power to appoint his or her substitute, and
hereby authorizes each of them to represent and to vote, as designated on the
reverse hereof, all of the Common Shares of MuniVest Florida Fund (the "Fund")
held of record by the undersigned on October 20, 1999 at a Special Meeting of
Shareholders of the Fund to be held on December 15, 1999, or any adjournment
thereof.
This proxy when properly executed will be voted in the manner herein
directed by the undersigned shareholder. If no direction is made, this proxy
will be voted "FOR" Proposal 1.
By signing and dating the reverse side of this card, you authorize the
proxies to vote the proposal as marked, or if not marked, to vote "FOR" the
proposal, and to use their discretion to vote for any other matter as may
properly come before the meeting or any adjournment thereof. If you do not
intend to personally attend the meeting, please complete and return this card at
once in the enclosed envelope.
(Continued, and to be signed on the reverse side)
<PAGE>
Please mark boxes /X/ or [X] in blue or black ink.
1. To consider and act upon a proposal to approve the Agreement and Plan of
Reorganization between the Fund and MuniYield Florida Fund.
For |_| Against |_| Abstain |_|
2. In the discretion of such proxies, upon such other business as properly
may come before the meeting or any adjournment thereof.
Please sign exactly as name appears hereon. When shares
are held by joint tenants, both should sign. When
signing as attorney or as executor, administrator,
trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Dated: _______________________________
X_____________________________________
Signature
X_____________________________________
Signature, if held jointly
Sign, date and return the Proxy Card promptly using the enclosed envelope.
<PAGE>
AUCTION MARKET
PREFERRED SHARES
MUNIVEST FLORIDA FUND
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
PROXY
This proxy is solicited on behalf of the Board of Trustees
The undersigned hereby appoints Terry K. Glenn, Donald C. Burke and Alice A.
Pellegrino as proxies, each with the power to appoint his or her substitute, and
hereby authorizes each of them to represent and to vote, as designated on the
reverse hereof, all the Auction Market Preferred Shares of MuniVest Florida Fund
(the "Fund") held of record by the undersigned on October 20, 1999 at a Special
Meeting of Shareholders of the Fund to be held on December 15, 1999, or any
adjournment thereof.
This proxy when properly executed will be voted in the manner herein
directed by the undersigned shareholder. If no direction is made, this proxy
will be voted "FOR" Proposal 1.
By signing and dating the reverse side of this card, you authorize the
proxies to vote the proposal as marked or if not marked, to vote "FOR" the
proposal, and to use their discretion to vote for any other matter as may
properly come before the meeting or any adjournment thereof. If you do not
intend to personally attend the meeting, please complete and return this card at
once in the enclosed envelope.
(Continued, and to be signed on the reverse side)
<PAGE>
Please mark boxes /X/ or [X] in blue or black ink.
1. To consider and act upon a proposal to approve the Agreement and Plan of
Reorganization between the Fund and MuniYield Florida Fund.
For |_| Against |_| Abstain |_|
2. In the discretion of such proxies, upon such other business as properly
may come before the meeting or any adjournment thereof. If the undersigned
is a broker-dealer, it hereby instructs the proxies, pursuant to Rule 452
of the New York Stock Exchange, to vote any uninstructed Auction Market
Preferred Shares, in the same proportion as votes cast by holders of
Auction Market Preferred Shares, who have responded to this proxy
solicitation.
Please sign exactly as name appears hereon. When shares
are held by joint tenants, both should sign. When
signing as attorney or as executor, administrator,
trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Dated: _______________________________
X_____________________________________
Signature
X_____________________________________
Signature, if held jointly
Sign, date and return the Proxy Card promptly using the enclosed envelope.
<PAGE>
PART C
OTHER INFORMATION
Item 15. 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 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 receipt 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.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to Trustees, officers and controlling persons of the
Registrant and the principal underwriter pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a Trustee, officer or controlling
person of the Registrant and the principal underwriter in connection with any
successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person or the principal underwriter in
connection with the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
Reference is made to (i) Section 6 of the Purchase Agreement relating to
the Registrant's Common Shares, a form of which was filed as an exhibit to the
Common Shares Registration Statement, and (ii) Section 7 of the
C-1
<PAGE>
Purchase Agreement relating to the Registrant's AMPS, a form of which was
filed as an exhibit to the to the AMPS Registration Statement (defined below),
for provisions relating to the indemnification of the underwriter.
Item 16. Exhibits.
1 (a) -- Declaration of Trust of the Registrant, dated January 21, 1992.
(b) -- Amendment to Declaration of Trust relating to term of office of
Trustees.
(c) -- Form of Certificate of Designation creating the Series A AMPS.
(d) -- Amendment to Certificate of Designation, dated April 6, 1992.*
(e) -- Form of Certificate of Designation creating the Series B AMPS.(a)
2 -- By-Laws of the Registrant.
3 -- Not Applicable.
4 -- Form of Agreement and Plan of Reorganization among the Registrant
and MuniVest Florida Fund (included in Exhibit II to the Proxy
Statement and Prospectus contained in this Registration
Statement).
5 (a) -- Copies of instruments defining the rights of shareholders,
including the relevant portions of the Declaration of Trust
and the By-Laws of the Registrant. (b)
(b) -- Form of specimen certificate for the Common Shares of the
Registrant.
(c) -- Form of specimen certificate for the AMPS of the Registrant
6 -- Form of Investment Advisory Agreement between Registrant and
Fund Asset Management, L.P.
7 (a) -- Form of Purchase Agreement for the Common Shares.
(b) -- Form of Purchase Agreement for the AMPS.
(c) -- Form of Merrill Lynch Standard Dealer Agreement.
8 -- Not applicable.
9 -- Custodian Agreement between the Registrant and The Bank of New
York
10 -- Not applicable.
11 -- Opinion and Consent of Brown & Wood LLP, counsel for the
Registrant.
12 -- Private Letter Ruling from the Internal Revenue Service*
13 (a) -- Transfer Agency, Dividend Disbursing Agency and Shareholder
Servicing Agency Agreement between the Registrant and The Bank
of New York
(b) -- Form of Auction Agent Agreement between the Registrant and IBJ
Whitehall Bank & Trust Company
(c) -- Form of Broker-Dealer Agreement between the Auction Agent and
Lehman Special Securities Incorporated.
(d) -- Form of Broker-Dealer Agreement between the Auction Agent and
Kidder Peabody & Co.
(e) -- Form of Broker-Dealer Agreement between the Auction Agent and
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
(f) -- Form of Letter of Representations.
14 (a) -- Consent of Deloitte & Touche LLP, independent auditors for
the Registrant.
(b) -- Consent of Deloitte & Touche LLP, independent auditors for
MuniVest Florida Fund.
15 -- Not applicable.
16 -- Power of Attorney (Included on the signature page of this
Registration Statement).
- ----------
* To be filed by amendment.
(a) Filed on October 4, 1999 as an Exhibit to the Registrant's Registration
Statement on Form N-14 (File No. 333-88355).
(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, filed as Exhibit 1(a) to this Registration
Statement; and to Article I, Article II, Article V, Article VI and Article
VII of the Registrant's By-Laws, filed as Exhibit 2 to this Registration
Statement.
C-2
<PAGE>
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any public reoffering of
the securities registered through use of a prospectus which is part of
this Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of
1933, as amended, the reoffering prospectus will contain information
called for by the applicable registration form for reofferings by persons
who may be deemed underwriters, in addition to the information called for
by other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act
of 1933, as amended, each post-effective amendment shall be deemed to be a
new registration statement for the securities offered therein, and the
offering of securities at that time shall be deemed to be the initial bona
fide offering of them.
(3) The Registrant undertakes to file, by post-effective amendment, either a
copy of the Internal Revenue Service private letter ruling applied for or
an opinion of counsel as to certain tax matters, within a reasonable time
after receipt of such ruling or opinion.
C-3
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has
been signed on behalf of the Registrant, in the Township of Plainsboro and State
of New Jersey, on the 10th day of November, 1999.
MUNIYIELD FLORIDA FUND
(Registrant)
By /s/ Terry K. Glenn
-----------------------------
(Terry K. Glenn, President)
Each person whose signature appears below hereby authorizes Terry K.
Glenn, Donald C. Burke and Alice A. Pellegrino, or any of them, as
attorney-in-fact, to sign on his behalf, individually and in each capacity
stated below, any amendments to this Registration Statement (including
post-effective amendments) and to file the same, with all exhibits thereto, with
the Securities and Exchange Commission.
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
Signatures Title Date
---------- ----- -----
/s/ Terry K. Glenn President and Trustee
- --------------------------- (Principal Executive Officer)
(Terry K. Glenn) November 10, 1999
/s/ Donald C. Burke Treasurer (Principal Financial
- --------------------------- and Accounting Officer)
(Donald C. Burke) November 10, 1999
/s/ James H. Bodurtha Trustee November 10, 1999
- ---------------------------
(James H. Bodurtha)
/s/ Herbert I. London Trustee November 10, 1999
- ---------------------------
(Herbert I. London)
/s/ Robert R. Martin Trustee November 10, 1999
- ---------------------------
(Robert R. Martin)
/s/ Joseph L. May Trustee November 10, 1999
- ---------------------------
(Joseph L. May)
/s/ Andre F. Perold Trustee November 10, 1999
- ---------------------------
(Andre F. Perold)
/s/ Arthur Zeikel Trustee November 10, 1999
- ---------------------------
(Arthur Zeikel)
C-4
<PAGE>
EXHIBIT INDEX
1 (a) -- Declaration of Trust of the Registrant, dated January 21, 1992.
(b) -- Amendment to Declaration of Trust relating to term of office of
Trustees.
(c) -- Form of Certificate of Designation creating the Series A AMPS
2 -- By-Laws of the Registrant.
5 (b) -- Form of specimen certificate for the Common Shares of the Registrant.
(c) -- Form of specimen certificate for the AMPS of the Registrant.
6 -- Form of Investment Advisory Agreement between Registrant and Fund
Asset Management, L.P.
7 (a) -- Form of Purchase Agreement for Common Shares.
(b) -- Form of Purchase Agreement for AMPS.
(c) -- Form of Merrill Lynch Standard Dealer Agreement.
9 -- Custodian Agreement between the Registrant and the Bank of New York.
11 -- Opinion and Consent of Brown & Wood LLP, Counsel for the Registrant.
13 (a) -- Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing
Agency Agreement between the Registrant and the Bank of New York.
(b) -- Form of Auction Agent Agreement between the Registrant and IBJ
Whitehall Bank & Trust Company.
(c) -- Form of Broker-Dealer Agreement between the Auction Agent and Lehman
Special Securities Incorporated.
(d) -- Form of Broker-Dealer Agreement between the Auction Agent and Kidder
Peabody & Co.
(e) -- Form of Broker-Dealer Agreement between the Auction Agent and
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
(f) -- Form of Letter of Representations.
14 (a) -- Consent of Deloitte & Touche LLP, independent auditors for the
Registrant.
(b) -- Consent of Deloitte & Touche LLP, independent auditors for
MuniVest Florida Fund.
C-5
Exhibit 1(a)
DECLARATION OF TRUST
OF
MUNIYIELD FLORIDA FUND
THE DECLARATION OF TRUST of MuniYield Florida Fund is made the 21st day
of January, 1992, by the parties signatory hereto, as trustees (such persons, so
long as they shall continue in office in accordance with the terms of this
Declaration of Trust, and all other persons who at the time in question have
been duly elected or appointed as trustees in accordance with the provisions of
this Declaration of Trust and are then in office, being hereinafter called the
"Trustees").
W I T N E S S E T H:
WHEREAS, the Trustees desire to form a trust fund under the law of
Massachusetts for the investment and reinvestment of funds contributed thereto;
and
WHEREAS, it is proposed that the beneficial interest in the trust
assets be divided into transferable shares of beneficial interest as hereinafter
provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold in
trust all money and property contributed to the trust fund to manage and dispose
of the same for the benefit of the holders from time to time of the shares of
beneficial interest issued hereunder and subject to the provisions hereof, to
wit:
ARTICLE I
The Trust
1.1 Name. The name of the trust created hereby (the "Trust") shall, be
"MuniYield Florida Fund", and so far as may be practicable the Trustees shall
conduct the Trust's activities, execute all documents and sue or be sued under
that name, which name (and the word "Trust" wherever hereinafter used) shall
refer to the Trustees as Trustees, and not individually, and shall not refer to
the officers, agents, employees or Shareholders of the Trust. However, should
the Trustees determine that the use of such name is not advisable, they may
select such other name for the Trust as they deem proper and the Trust may hold
its property and conduct its activities under such other name. Any name change
shall become effective upon the execution by a majority of the then Trustees of
an instrument setting forth the new name. Any such instrument shall have the
status of an amendment to this Declaration.
1.2 Definitions. As used in this Declaration, the following terms shall
have the following meanings:
The terms "Affiliated Person", "Assignment", "Commission", "Interested
Person", "Majority Shareholder Vote" (the 67% or more than 50% requirement of
the third sentence of
<PAGE>
Section 2(a) (42) of the 1940 Act, whichever may be applicable) and "Principal
Underwriter" shall have the meanings given them in the 1940 Act.
"Certificate of Designation" means a certificate signed by the
Secretary or an Assistant Secretary of the Trust setting forth the resolution or
resolutions providing for the issuance of Preferred Shares as described in
Article VI hereof.
"Common Shareholders" means a record owner of outstanding Common
Shares.
"Common Shares" means the common shares of beneficial interest in the
Trust as described in Article VI hereof and includes fractions of Common Shares
as well as whole Common Shares.
"Declaration" shall mean this Declaration as amended from time to time.
References in this Declaration to "declaration", "hereof" "herein" and
"hereunder" shall be deemed to refer to the Declaration rather than the article
or section in which such words appear.
"Fundamental Policies" shall mean the investment restrictions set forth
in the Prospectus and designated as fundamental policies therein.
The "1940 Act" refers to the Investment Company Act of 1940, as amended
from time to time, and shall include the rules and regulations and any relevant
order of exemption promulgated thereunder by the Commission.
"Person" shall mean and include individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof.
"Preferred Shareholders" means a record owner of outstanding Preferred
Shares.
"Preferred Shares" means the preferred shares of beneficial interest in
the Trust as described in Article VI hereof and includes fractions of Preferred
Shares as well as whole Preferred Shares.
"Prospectus" shall mean the currently effective Prospectus of the Trust
under the Securities Act of 1933, as amended.
"Registration Statement" means the Registration Statement of the Trust
under the Securities Act of 1933 as such Registration Statement may be amended
and filed with the Commission from time to time.
"Shareholders" shall mean as of any particular time all holders of
record of outstanding Shares at such time.
"Shares" shall mean the equal proportionate transferable units of
interest into which the beneficial interest in the Trust shall be divided from
time to time and includes fractions of Shares as well as whole Shares. As
provided in Article VI hereof, the Trust may issue separate classes
2
<PAGE>
of Shares; all references to Shares shall be deemed to be Shares of a single
class or all classes as the context may require.
"Trustees" shall mean the signatories to this Declaration, so long as
they shall continue in office in accordance with the terms hereof, and all other
persons who at the time in question have been duly elected or appointed and have
qualified as trustees in accordance with the provisions hereof and are then in
office, are herein referred to as the "Trustees", and reference in this
Declaration to a Trustee or Trustees shall refer to such person or persons in
their capacity as trustees hereunder.
"Trust Property" shall mean as of any particular time any and all
property, real or personal, tangible or intangible, which at such time is owned
or held by or for the account of the Trust or the Trustees.
3
<PAGE>
ARTICLE II
Trustees
2.1 Number and Qualification. The number of Trustees shall be fixed
from time to time by written instrument signed by a majority of the Trustees
then in office; provided, however, that the number of Trustees shall in no event
be less than three or more than fifteen (except prior to the first public
offering of Shares of the Trust) . Any vacancy created by an increase in
Trustees may, to the extent permitted by the 1940 Act, be filled by the
appointment of an individual having the qualifications described in this Article
made by a written instrument signed by a majority of the Trustees then in
office. Any such appointment shall not become effective, however, until the
individual named in the written instrument of appointment shall have accepted in
writing such appointment and agreed in writing to be bound by the terms of this
Declaration. No reduction in the number of Trustees shall have the effect of
removing any Trustee from office prior to the expiration of this term. Whenever
a vacancy in the number of Trustees shall occur, until such vacancy is filled as
provided in Section 2.3 hereof, the Trustees in office, regardless of their
number, shall have all the powers granted to the Trustees and shall discharge
all the duties imposed upon the Trustees by this Declaration. A Trustee shall be
an individual at least 21 years of age who is not under legal disability.
Trustees need not own Shares.
2.2 Term of Office of Trustees. The term of office of all of the
Trustees named herein, or elected or appointed prior to the first annual meeting
of Shareholders, shall expire on the date of the first annual meeting of
Shareholders or special meeting in lieu thereof. Beginning with the Trustees
elected at the first annual meeting of Shareholders, the term of each Trustee
shall expire at the next annual meeting of shareholders following the election
or appointment of such Trustee and upon the election and qualification of his
successor. The Trustees shall be elected by the affirmative vote of the holders
of a majority of the Shares present in person or by proxy at an annual meeting
of Shareholders or special meeting in lieu thereof called for that purpose,
except as provided in Section 2.3 of this Article; provided, however, that the
Preferred Shareholders voting as a class at an annual meeting of the
Shareholders or special meeting in lieu thereof called for such purpose, shall
elect at least two (2) Trustees at all times, and, provided, further, that the
Preferred Shareholders voting as a class shall elect at least a majority of the
Trustees, which number of Trustees shall be increased appropriately in order to
effectuate such rights after giving effect to resignations of Trustees, (i) if
at any time the dividends on the Preferred Shares shall be unpaid in an amount
equal to two (2) full years' dividends on the Preferred Shares, with such
representation to continue until all dividends in arrears shall have been paid
or otherwise provided for, or (ii) pursuant to the designations and powers,
preferences and rights and the qualifications, limitations and restrictions of
the Preferred Shares as determined in accordance with Section 6.1 hereof. Each
Trustee elected shall hold office until his successor shall have been elected
and shall have qualified; except that (a) any Trustee may resign his trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by him or her and delivered to the other Trustees, which shall take
effect upon such delivery or upon such later date as is specified therein; (b)
any Trustee may be removed (provided the aggregate number of Trustees after such
removal shall not be less than the number required by Section 2.1 hereof) with
cause, at any time by written instrument, signed by the remaining Trustees,
specifying the date when such removal shall become effective, provided,
4
<PAGE>
however, that the Trustees elected by one class of Shares shall have no power to
so remove any Trustee elected by another class of shares; (c) any Trustee who
requests in writing to be retired or who has become incapacitated by illness or
injury may be retired by written instrument signed by a majority of the other
Trustees, specifying the date of his retirement; and (d) a Trustee may be
removed at any meeting of Shareholders by a vote of two thirds of the
outstanding Shares of the class or classes of Shares of beneficial interest that
elected such Trustee. Upon the resignation or removal of a Trustee, or his
otherwise ceasing to be Trustee, he shall execute and deliver such documents as
the remaining Trustees shall require for the purpose of conveying to the Trust
or the remaining Trustees any Trust property held in the name of the resigning
or removed Trustee. Upon the incapacity or death of any Trustee, his legal
representative shall execute and deliver on his behalf such documents as the
remaining Trustees shall require as provided in the preceding sentence.
2.3 Resignation and Appointment of Trustees. In case of the
declination, death, resignation, retirement, removal or inability of any of the
Trustees, or in case a vacancy shall, by reason of an increase in number, or for
any other reason, exist, the remaining Trustees or, prior to the public offering
of Shares of the Trust, if only one Trustee shall then remain in office, the
remaining Trustee, shall fill such vacancy by appointing such other person as
they or he, in their or his discretion, shall see fit. Such appointment shall be
evidenced by a written instrument signed by a majority of the remaining Trustees
or by the remaining Trustee, as the case may be. Any such appointment shall not
become effective, however, until the person named in the written instrument or
appointment shall have accepted in writing such appointment and agreed in
writing to be bound by the terms of the Declaration. Within twelve months of
such appointment, the Trustees shall cause notice of such appointment to be
mailed to each Shareholder at his address as recorded on the books of the Trust.
An appointment of a Trustee may be made by the Trustees then in office and
notice thereof mailed to Shareholders aforesaid in anticipation of a vacancy to
occur by reason of retirement, resignation or increase in number of Trustees
effective at a later date, provided that said appointment shall become effective
only at or after the effective date of said retirement, resignation or increase
in number of Trustees. The power of appointment is subject to the provisions of
Section 16(a) of the 1940 Act.
2.4 Vacancies. The death, declination, resignation, retirement, removal
or incapacity of the Trustees, or any one of them, shall not operate to annul
the Trust or to revoke any existing agency created pursuant to the terms of this
Declaration. Whenever a vacancy in the number of Trustees shall occur, until
such vacancy is filled as provided in Section 2.3, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by the Declaration
subject to the rights of the holders of the Preferred Shares to elect a Trustee
to fill such vacancy in accordance with the terms and provisions hereof. A
written instrument certifying the existence of such vacancy signed by a majority
of the Trustees shall be conclusive evidence of the existence of such vacancy.
2.5 Meetings. Meetings of the Trustees shall be held from time to time
upon the call of the chairman, if any, the President, the Secretary or any two
Trustees. Regular meetings of the Trustees may be held without call or notice at
a time and place fixed by the By-Laws or by resolution of the Trustees. Notice
of any other meeting shall be mailed or otherwise given not less than 48 hours
before the meeting but may be waived in writing by any Trustee either before
5
<PAGE>
or after such meeting. The attendance of a Trustee at a meeting shall constitute
a waiver of notice of such meeting except where a Trustee attends a meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting has not been lawfully called or convened. The Trustees
may act with or without a meeting. A quorum for all meetings of the Trustees
shall be a majority of the Trustees. Unless provided otherwise in this
Declaration, any action of the Trustees may be taken at a meeting by vote of a
majority of the Trustees present (a quorum being present) or without a meeting
by written consents of a majority of the Trustees.
Any committee of the Trustees, including an executive committee, if
any, may act with or without a meeting. A quorum for all meetings of any such
committee shall be a majority of the members thereof. Unless provided otherwise
in this Declaration, any action of any such committee may be taken at a meeting
by vote of a majority of the members present (a quorum being present) or without
a meeting by written consent of a majority of the members.
With respect to actions of the Trustees and any committee of the
Trustees, Trustees who are Interested Persons of the Trust within the meaning of
Section 1.2 hereof or otherwise interested in any action to be taken may be
counted for quorum purposes under this Section and shall be entitled to vote to
the extent permitted by the 1940 Act.
All or any one or more Trustees may participate in a meeting of the
Trustees or any committee thereof by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and participation in a meeting pursuant to such
communications systems shall constitute presence in person at such meeting.
2.6 Officers. The Trustees shall annually elect a President, a
Secretary and a Treasurer and may elect a Chairman. The Trustees may elect or
appoint or authorize the Chairman, if any, or President to appoint such other
officers or agents with such powers as the Trustees may deem to be advisable.
The Chairman and President shall be and the Secretary and Treasurer may, but
need not, be a Trustee.
2.7 By-Laws. The Trustees may adopt and from time to time amend or
repeal the By-Laws for the conduct of the business of the Trust.
6
<PAGE>
ARTICLE III
Powers of Trustees
3.1 General. The Trustees shall have exclusive and absolute control
over the Trust Property and over the business of the Trust to the same extent as
if the Trustees were the sole owners of the Trust Property and business in their
own right, but with such powers of delegation as may be permitted by this
Declaration. The Trustees may perform such acts as in their sole discretion are
proper for conducting the business of the Trust. The enumeration of any specific
power herein shall not be construed as limiting the aforesaid power. Such powers
of the Trustees may be exercised without order of or resort to any court.
3.2 Investments. The Trustees shall have power, subject to the
Fundamental Policies, to:
(1) conduct, operate and carry on the business of an investment
company;
(2) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute or
otherwise deal in or dispose of negotiable or non-negotiable
instruments, obligations, evidences of indebtedness, certificates of
deposit or indebtedness, commercial paper, repurchase agreements,
reverse repurchase agreements, options, futures contracts, options on
futures contracts and other investments, including, without
limitation, those issued, guaranteed or sponsored by any state,
territory or possession of the United States and the District of
Columbia and their political subdivisions, agencies and
instrumentalities, or by the United States Government or its agencies
or instrumentalities, or international instrumentalities, or by any
bank, savings institution, corporation or other business entity
organized under the laws of the United States and, to the extent
provided in the Prospectus and Registration Statement and not
prohibited by the Fundamental Policies, organized under foreign laws;
and to exercise any and all rights, powers and privileges of ownership
or interest in respect of any and all such investments of every kind
and description, including, without limitation, the right to consent
and otherwise act with respect thereto, with power to designate one or
more persons, firms, associations or corporations to exercise any of
said rights, powers and privileges in respect of any of said
instruments; and the Trustees shall be deemed to have the foregoing
powers with respect to any additional securities in which the Trust
may invest should the investment policies set forth in the Prospectus
and Registration Statement or the Fundamental Policies be amended.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
3.3 Legal Title. Legal title to all the Trust Property shall be vested
in the Trustees as joint tenants except that the Trustees shall have power to
cause legal title to any Trust Property to be held by or in the name of one or
more of the Trustees, or in the name of the Trust, or in the name of any other
Person as nominee, on such terms as the Trustees may determine, provided that
the interest of the Trust therein is appropriately protected.
7
<PAGE>
The right, title and interest of the Trustees in the Trust Property
shall vest automatically in each person who may hereafter become a Trustee upon
his due election and qualification. Upon the resignation, removal or death of a
Trustee he shall automatically cease to have any right, title or interest in any
of the Trust Property, and the right, title and interest of such Trustee in the
Trust Property shall vest automatically in the remaining Trustees. Such vesting
and cessation of title shall be effective whether or not conveyancing documents
have been executed and delivered.
3.4 Issuance and Repurchase of Securities. The Trustees shall have the
power to issue, sell, repurchase, retire, cancel, acquire, hold, resell,
reissue, dispose of, transfer, and otherwise deal in, Shares, including shares
in fractional denominations, and, subject to the more detailed provisions set
forth in Articles VI, VIII and X, to apply to any such repurchase, retirement,
cancellation or acquisition of Shares any funds or property of the Trust whether
capital or surplus or otherwise, to the full extent now or hereafter permitted
by the laws of the Commonwealth of Massachusetts governing business
corporations.
3.5 Borrow Money. Subject to the Fundamental Policies, the Trustees
shall have power to borrow money or otherwise obtain credit and to secure the
same by mortgaging, pledging or otherwise subjecting as security the assets of
the Trust, including the lending of portfolio securities, and to endorse,
guarantee, or undertake the performance of any obligation, contract or
engagement of any other person, firm, association or corporation.
3.6 Delegation; Committees. The Trustees shall have power, consistent
with their continuing exclusive authority over the management of the Trust and
the Trust Property, to delegate from time to time to such of their number or to
officers, employees or agents of the Trust the doing of such things and the
execution of such instruments either in the name of the Trust or the names of
the Trustees or otherwise as the Trustees may deem expedient, to the same extent
as such delegation is permitted to directors of a Massachusetts business
corporation and is permitted by the 1940 Act.
3.7 Collection and Payment. The Trustees shall have power to collect
all property due to the Trust; to pay all claims including taxes, against the
Trust Property; to prosecute, defend, compromise or abandon any claim relating
to the Trust Property; to foreclose any security interest securing any
obligation, by virtue of which any property is owed to the Trust; and to enter
into releases, agreements and other instruments.
3.8 Expenses. The Trustees shall have power to incur and pay any
expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of this Declaration, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The Trustees
shall fix the compensation of all officers, employees and Trustees. The Trustees
may pay themselves such compensation for special services, including legal,
underwriting, syndicating and brokerage services, as they in good faith may deem
reasonable and reimbursement for expenses reasonably incurred by themselves on
behalf of the Trust.
3.9 Miscellaneous Powers. The Trustees shall have the power to: (a)
employ or contract with such Persons as the Trustees may deem desirable for the
transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or
8
<PAGE>
associations; (c) purchase, and pay for out of Trust Property, insurance
policies insuring the Shareholders, Trustees, officers, employees, agents,
investment advisers, distributors, selected dealers or independent contractors
of the Trust against all claims arising by reason of holding any such position
or by reason of any action taken or omitted by any such Person in such capacity,
whether or not constituting negligence, or whether or not the Trust would have
the power to indemnify such Person against such liability; (d) establish
pension, profit-sharing, share purchase, and other retirement, incentive and
benefit plans for any Trustees, officers, employees and agents of the Trust; (e)
make donations, irrespective of benefit to the Trust, for charitable, religious,
educational, scientific, civic or similar purposes; (f) to the extent permitted
by law, indemnify any Person with whom the Trust has dealings, including any
advisor, administrator, manager, distributor and selected dealers, to such
extent as the Trustees shall determine; (g) guarantee indebtedness or
contractual obligations of others; (h) determine and change the fiscal year of
the Trust and the method by which its accounts shall be kept; and (i) adopt a
seal for the Trust, but the absence of such seal shall not impair the validity
of any instrument executed on behalf of the Trust.
3.10 Further Powers. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the Commonwealth of Massachusetts,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as they deem necessary, proper or desirable in order to promote the
interests of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive. In construing the provisions of
this Declaration, the presumption shall be in favor of a grant of power to the
Trustees. The Trustees will not be required to obtain any court order to deal
with the Trust Property.
9
<PAGE>
ARTICLE IV
Management and Distribution Arrangements
4.1 Management Arrangements. Subject to a Majority Shareholder Vote,
as required by the 1940 Act, the Trustees may in their discretion from time to
time enter into advisory or management contracts whereby the other party to such
contract shall undertake to furnish the Trustees such advisory and management
services as the Trustees shall from time to time consider desirable and all upon
such terms and conditions as the Trustees may in their discretion determine.
Notwithstanding any provisions of this Declaration, the Trustees may authorize
any adviser or manager (subject to such general or specific instructions as the
Trustees may from time to time adopt) to effect purchases, sales, loans or
exchanges of portfolio securities of the Trust on behalf of the Trustees or may
authorize any officer, employee or Trustee to effect such purchases, sales,
loans or exchanges pursuant to recommendations of any such adviser or manager
(and all without further action by the Trustees) . Any such purchases, sales,
loans and exchanges shall be deemed to have been authorized by all of the
Trustees.
4.2 Distribution Arrangements. The Trustees may in their discretion
from time to time enter into a contract, providing for the sale of the Shares of
the Trust to net the Trust not less than the par value per share, whereby the
Trust may either agree to sell the Shares to the other party to the contract or
appoint such other party its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions as the Trustees may in their
discretion determine not inconsistent with the provisions of this Article IV or
the By-Laws; and such contract may also provide for the repurchase or sale of
Shares by such other party as principal or as agent of the Trust and may provide
that such other party may enter into selected dealer agreements with registered
securities dealers to further the purpose of the distribution or repurchase of
the Shares.
4.3 Parties to Contract. Any contract of the character described in
Section 4 .1 and 4.2 of this Article IV or in Article VII hereof may be entered
into with any corporation, firm, trust or association, although one or more of
the Trustees or officers of the Trust may be an officer, director, Trustee,
shareholder, or member of such other party to the contract, and no such contract
shall be invalidated or rendered voidable by reason of the existence of any such
relationship, nor shall any person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was
reasonable and fair and not inconsistent with the provisions of this Article IV
or the By-Laws. The same person (including a firm, corporation, trust, or
association) may be the other party to contracts entered into pursuant to
Sections 4.1 and 4.2 above or Article VII, and any individual may be financially
interested or otherwise affiliated with persons who are parties to any or all of
the contracts mentioned in this Section 4.3.
4.4 Provisions and Amendments. Any contract entered into pursuant to
Section 4.1 and 4.2 of this Article IV shall be consistent with and subject to
the requirements of Section 15 of the 1940 Act with respect to its continuance
in effect, its termination, and the method of authorization and approval of such
contract or renewal thereof, and no amendment to any contract, entered into
pursuant to Section 4.1 shall be effective unless assented to by a Majority
Shareholder Vote.
10
<PAGE>
ARTICLE V
Limitations of Liability of Shareholders,
Trustees and Others
5.1 No Personal Liability of Shareholders, Trustees, etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. No Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from his bad faith, willful misfeasance, gross negligence
or reckless disregard of his duty to such Person; and all such Persons shall
look solely to the Trust Property for satisfaction of claims of any nature
arising in connection with the affairs of the Trust. If any Shareholder,
Trustee, officer, employee, or agent, as such, of the Trust, is made a party to
any suit or proceeding to enforce any such liability, he shall not on account
thereof, be held to any personal liability. The Trust shall indemnify and hold
each Shareholder harmless from and against all claims and liabilities, to which
such Shareholder may become subject by reason of his being or having been a
Shareholder, and shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability. The rights accruing to a Shareholder under this Section 5.1 shall not
exclude any other right to which such Shareholder may be lawfully entitled, nor
shall anything herein contained restrict the right of the Trust to indemnify or
reimburse a Shareholder in any appropriate situation even though not
specifically provided herein.
5.2 Non-Liability of Trustees, etc. No Trustee, officer, employee or
agent of the Trust shall be liable to the Trust, its Shareholders, or to any
Shareholder, Trustee, officer, employee, or agent thereof for any action or
failure to act (including without limitation the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except for his own
bad faith, willful misfeasance, gross negligence or reckless disregard of his
duties.
5.3 Mandatory Indemnification. 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
11
<PAGE>
been adjudicated in favor of such person. The rights accruing to any Person
under these 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.
5.4 No Bond Required of Trustees. No Trustee shall, as such, be
obligated to give any bond or surety or other security for the performance of
any of his duties hereunder.
5.5 No Duty of Investigation; Notice in Trust Instruments, etc. No
purchaser, lender, transfer agent or other person dealing with the Trustees or
any officer, employee or agent of the Trust shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made by the Trustees
or by said officer, employee or agent or be liable for the application of money
or property paid, loaned, or delivered to or on the order of the Trustees or of
said officer, employee or agent. Every obligation, contract, instrument,
certificate, Share, other security of the Trust or undertaking, and every other
act or thing whatsoever executed in connection with the Trust shall be
conclusively taken to have been executed or done by the executors thereof only
in their capacity as Trustees under this Declaration or in their capacity as
officers, employees or agents of the Trust. Every written obligation, contract,
instrument, certificate, Share, other security of the Trust or undertaking made
or issued by the Trustees or by any officers, employees or agents of the Trust,
in their capacity as such, shall contain an appropriate recital to the effect
that the Shareholders, Trustees, officers, employees and agents of the Trust
shall not personally be bound by or liable thereunder, nor shall resort be had
to their private property for the satisfaction of any obligation or claim
thereunder, and appropriate references shall be made therein to the Declaration,
and may contain any further recital which they may deem appropriate, but the
omission of such recital shall not operate to impose personal liability on any
of the Trustees, Shareholders, officers, employees or agents of the Trust. The
Trustees may maintain insurance for the protection of the Trust Property, its
Shareholders, Trustees, officers, employees and agents in such amount as the
Trustees shall deem adequate to cover possible tort liability, and such other
insurance as the Trustees in their sole judgment shall deem advisable.
5.6 Reliance on Experts, etc. Each Trustee and officer or employee of
the Trust shall, in the performance of his duties, be fully and completely
justified and protected with regard to any act or any failure to act resulting
from reliance in good faith upon the books of account or other records of the
Trust, upon an opinion of counsel, or upon reports made to the Trust by any of
its officers or employees or by any investment adviser, distributor, selected
dealers, accountants, appraisers or other experts or consultants elected with
reasonable care by the Trustees, officers or employees of the Trust, regardless
of whether such counsel or expert may also be a Trustee.
12
<PAGE>
ARTICLE VI
Shares of Beneficial Interest
6.1 Beneficial Interest. The interest of the beneficiaries hereunder
shall be divided into transferable shares of beneficial interest of $0.10 par
value. The Trustees of the Trust may authorize separate classes of shares
together with such designations and powers, preferences and rights,
qualifications, limitations and restrictions as may be determined from time to
time by the Trustees. The number of such shares of beneficial interest
authorized hereunder is unlimited. All Shares issued hereunder including,
without limitation, Shares issued in connection with a dividend in Shares or a
split in Shares, shall be fully paid and nonassessable.
Pursuant to the powers vested in the Trustees by this Section 6.1, the
Trustees hereby authorize the issuance of an unlimited number of common shares
of beneficial interest, par value $0.10 per share (the "Common Shares") ,
together with 1,000,000 preferred shares of beneficial interest, par value of
$0.10 per share (the "Preferred Shares") .
The designations and powers, preferences and rights, and the
qualifications, limitations and restrictions of the Common Shares are as set
forth in this Declaration of Trust.
The designations and powers, preferences and rights, and the
qualifications, limitations and restrictions of the Preferred Shares are as
follows:
The Preferred Shares shall be issued from time to time in one or more
series with such distinctive serial designations and (i) may have such voting
powers, full or limited; (ii) may be subject to redemption at such time or times
and at such price or prices; (iii) may be entitled to receive dividends (which
may be cumulative or noncumulative) at such rate or rates, on such conditions,
and at such times, and payable in preference to, or in such relation to, the
dividends payable on any other class or classes of shares; (iv) may have such
preferences or other rights upon the dissolution of, or upon any distribution of
the assets of, the Trust; (v) may be made convertible into, or exchangeable for,
shares of any other class or classes of shares of the Trust, at such price or
prices or at such rates of exchange and with such adjustments; (vi) shall have
such other relative, participating, optional or other special rights,
qualifications, limitations or restrictions thereof, all as shall hereafter be
stated and expressed in the resolution or resolutions providing for the issue of
such Preferred Shares from time to time adopted by the Trustees pursuant to
authority so to do which is hereby expressly vested in the Board; and are as
further set out in this Declaration of Trust. A certificate signed by the
Secretary or an Assistant Secretary of the Trust setting forth the resolution or
resolutions providing for such issuance of Preferred Shares and reciting that
such resolution was or such resolutions were duly adopted by the Trustees (the
"Certificate of Designation") shall be conclusive evidence of the action
providing for the issuance of such Preferred Shares when lodged among the
records of the Trust.
6.2 Rights of Shareholders. The ownership of the Trust Property of
every description and the right to conduct any business hereinbefore described
are vested exclusively in the Trustees, and the Shareholders shall have no
interest therein other than the beneficial interest conferred by their Shares,
and they shall have no right to call for any partition or division of any
property, profits, rights or interests of the Trust nor can they be called upon
to share or assume
13
<PAGE>
any losses of the Trust or suffer an assessment of any kind by virtue of their
ownership of Shares. The Shares shall be personal property giving only the
rights in this Declaration specifically set forth. The Shares shall not entitle
the holder to preference, preemptive, appraisal, conversion or exchange rights,
except for rights or appraisal specified in Section 10.4 and except as the
Trustees may determine with respect to any class or series of Shares.
6.3 Trust Only. It is the intention of the Trustees to create only the
relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
6.4 Issuance of Shares. The Trustees, in their discretion, may from
time to time without a vote of the Shareholders issue shares, in addition to the
then issued and outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount not less than par value and type of
consideration, including cash or property, at such time or times, and on such
terms as the Trustees may deem best, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection with the
assumption of, liabilities) and businesses. In connection with any issuance of
Shares, the Trustees may issue fractional Shares. The Trustees may from time to
time divide or combine the Shares into a greater or lesser number without
thereby changing the proportionate beneficial interests in the Trust.
Contributions to the Trust may be accepted for, and Shares shall be redeemed as,
whole Shares and/or 1/1,000ths of a Share or multiples thereof.
6.5 Register of Shares. A register shall be kept at the Trust or a
transfer agent duly appointed by the Trustees under the direction of the
Trustees which shall contain the names and addresses of the Shareholders and the
number of Shares held by them respectively and a record of all transfers
thereof. Such register shall be conclusive as to who are the holders of the
Shares and who shall be entitled to receive dividends or distributions, or
otherwise to exercise or enjoy the rights of Shareholders. No Shareholder shall
be entitled to receive payment of any dividend or distribution, nor to have
notice given to him as herein provided, until he has given his address to a
transfer agent or such other officer or agent of the Trustees as shall keep the
said register for entry thereon. It is not contemplated that certificates will
be issued for the Shares; however, the Trustees, in their discretion, may
authorize the issuance of share certificates and promulgate appropriate rules
and regulations as to their use.
6.6 Transfer Agent and Registrar. The Trustee shall have power to
employ a transfer agent or transfer agents, and a registrar or registrars. The
transfer agent or transfer agents may keep the said register and record therein
the original issues and transfers, if any, of the said Shares. Any such transfer
agent and registrar shall perform the duties usually performed by transfer
agents and registrars of certificates of stock in a corporation, except as
modified by the Trustees.
6.7 Transfer of Shares. Shares shall be transferable on the records of
the Trust only by the record holder thereof or by his agent thereto duly
authorized in writing, upon delivery to the Trustees or a transfer agent of the
Trust of a duly executed instrument of transfer, together with
14
<PAGE>
such evidence of the genuineness of each such execution and authorization and of
other matters as may reasonably be required. Upon such delivery the transfer
shall be recorded on the register of the Trust. Until such record is made, the
Shareholder of record shall be deemed to be the holder of such Shares for all
purposes hereof and neither the Trustees nor any transfer agent or registrar nor
any officer, employee or agent of the Trust shall be affected by any notice of
the proposed transfer.
Any person becoming entitled to any Shares in consequence of the
death, bankruptcy, or incompetence of any Shareholder, or otherwise by operation
of law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or a transfer
agent of the Trust, but until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereof and
neither the Trustees nor any transfer agent or registrar nor any officer or
agent of the Trust shall be affected by any notice of such death, bankruptcy or
incompetence, or other operation of law.
6.8 Notices. Any and all notices to which any Shareholder hereunder
may be entitled and any and all communications shall be deemed duly served or
given if mailed, postage prepaid, addressed to any Shareholder of record at his
last known address as recorded on the register of the Trust.
15
<PAGE>
ARTICLE VII
Custodian
7.1 Appointment and Duties. The Trustees shall at all times employ
custodian or custodians, meeting the qualifications for custodians for portfolio
securities of investment companies contained in the 1940 Act, as custodian with
authority as its agent, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in the By-Laws of the Trust and the
1940 Act:
(1) to hold the securities owned by the Trust and deliver the
same upon written order;
(2) to receive and receipt for any moneys due to the Trust and
deposit the same in its own banking department or elsewhere as the
Trustees may direct;
(3) to disburse such funds upon orders or vouchers;
(4) if authorized by the Trustees, to keep the books and accounts
of the Trust and furnish clerical and accounting services; and
(5) if authorized to do so by the Trustees, to compute the net
income of the Trust;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote, the custodian
shall deliver and pay over all property of the Trust held by it as specified in
such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall meet the qualifications for custodians
contained in the 1940 Act.
7.2 Central Certificate System. Subject to such rules, regulations and
orders as the Commission may adopt, the Trustees may direct the custodian to
deposit all or any part of the securities owned by the Trust in a system for the
central handling of securities established by a national securities exchange or
a national securities association registered with the Commission under the
Securities Exchange Act of 1934, or such other person as may be permitted by the
commission, or otherwise in accordance with the 1940 Act, pursuant to which
system all securities of any particular class or series of any issuer deposited
within the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities, provided that
all such deposits shall be subject to withdrawal only upon the order of the
Trust.
16
<PAGE>
ARTICLE VIII
Determination of Net Asset Value,
Net Income and Distributions
8.1 Net Asset Value. The net asset value of each outstanding Share of
the Trust shall be determined at such time or times on such days as the Trustees
may determine, in accordance with the 1940 Act. The method of determination of
net asset value of Shares of each class shall be determined by the Trustees and
shall be as set forth in the Prospectus and Registration Statement with any
expenses being borne solely by a class of Shares being reflected in the net
asset value of such Shares. The power and duty to make the daily calculations
may be delegated by the Trustees to the adviser, administrator, manager,
custodian, transfer agent or such other person as the Trustees may determine.
The Trustees may suspend the daily determination of net asset value to the
extent permitted by the 1940 Act.
8.2 Distributions to Shareholders. The Trustees shall from time to
time distribute ratably among the Shareholders such proportion of the net
profits, surplus (including paid-in surplus) , capital, or assets held by the
Trustees as they deem proper with any expenses being borne solely by a class of
Shares being reflected in the net profits or other assets being distributed to
such class. Such distribution may be made in cash or property (including without
limitation any type of obligations of the Trust or any assets thereof) , and the
Trustees may distribute ratably among the Shareholders additional Shares
issuable hereunder in such manner, at such times, and on such terms as the
Trustees may deem proper. Such distributions may be among the Shareholders of
record at the time of declaring a distribution or among the Shareholders of
record at such later date as the Trustees shall determine. The Trustees may
always retain from the net profits such amounts as they may deem necessary to
pay the debts or expenses of the Trust or to meet obligations of the Trust, or
as they deem desirable to use in the conduct of its affairs or to retain for
future requirements or extensions of the business. The Trustees may adopt and
offer to Shareholders such dividend reinvestment plans, cash dividend payout
plans, or related plans as the Trustees shall deem appropriate.
Inasmuch as the computation of net income and gains for federal income
tax purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes.
8.3 Power to Modify Foregoing Procedures. Notwithstanding any of the
foregoing provisions of this Article VIII, the Trustees may prescribe, in their
absolute discretion, such other bases and times for determining the per share
net asset value of the Trust's Shares or net income, or the declaration and
payment of dividends and distributions as they deem necessary or desirable or to
enable the Trust to comply with any provision of the 1940 Act, including any
rule or regulation adopted pursuant to the 1940 Act by the Commission or any
securities association registered under the Securities Exchange Act of 1934, all
as in effect now or hereafter amended or modified.
17
<PAGE>
ARTICLE IX
Shareholders
9.1 Voting Powers. The Shareholders shall have power to vote only (i)
for the election of Trustees as provided in Section 2.2 hereof, (ii) for the
removal of Trustees as provided in Section 2.2 hereof, (iii) with respect to any
investment advisory or management contract as provided in Section 4.1, (iv) with
respect to the termination of the Trust as provided in Section 10.2, (v) with
respect to any amendment of the Declaration to the extent and as provided in
Section 10.3, (vi) with respect to any merger, consolidation or sale of assets
as provided in Section 10.4 (vii) with respect to any conversion to an
"open-end" company as provided in Section 10.5, (viii) with respect to
incorporation or reorganization of the Trust to the extent and as provided in
Section 10.6, (ix) to the same extent as the stockholders of a Massachusetts
business corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Trust or the Shareholders, (x) with respect to such additional
matters relating to the Trust as may be required by law, the Declaration, the
By-Laws or any registration of the Trust with the Commission (or any successor
agency) or any state, or as and when the Trustees may consider necessary or
desirable, and (xi) with respect to those matters set forth in the designations
and powers, preferences and rights and the qualifications, limitations and
restrictions of the Preferred Shares, as determined in accordance with Section
6.1 hereof. Each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote, except that Shares held in the treasury of the
Trust as of the record date, as determined in accordance with the By-Laws, shall
not be voted. There shall be no cumulative voting in the election of Trustees.
Until Shares are issued, the Trustees may exercise all rights of Shareholders
and may take any action required by law, the Declaration or the By-Laws, to be
taken by Shareholders. The By-Laws may include further provisions for
Shareholders votes and meetings and related matters.
9.2 Meetings of Shareholders.
(a) Annual Meetings. Annual meetings of the Shareholders shall be held
at such place within or without the Commonwealth of Massachusetts on such day
and at such time as the Trustees shall designate.
(b) Special Meetings. Special meetings of the Shareholders may be
called at any time by a majority of the Trustees and shall be called by any
Trustee upon written request of Shareholders holding in the aggregate not less
than 10% of the outstanding Shares having voting rights, such request specifying
the purpose or purposes for which such meeting is to be called. Any such meeting
shall be held within or without the commonwealth of Massachusetts on such day
and at such time as the Trustees shall designate.
The holders of a majority of the outstanding shares present in person
or by proxy shall constitute a quorum at any annual or special meeting for the
transaction of any business, except as may otherwise be required by the 1940
Act, the laws of the Commonwealth of Massachusetts or other applicable law or by
this Declaration or the By-Laws of the Trust. If a quorum is present at a
meeting, the affirmative vote of a majority of the Shares represented at the
meeting
18
<PAGE>
constitutes the action of the Shareholders, unless the 1940 Act, the laws of the
Commonwealth of Massachusetts or other applicable law, the Declaration or the
By-Laws of the Trust requires a greater number of affirmative votes. If the
Shares shall be divided into classes with a class having exclusive voting rights
with respect to certain matters, the aforesaid quorum and voting requirements
with respect to action to be taken by the Shareholders of the class on such
matters shall be applicable only to the Shares of such class.
9.3 Notice of Meetings. Notice of all meetings of the Shareholders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail to each Shareholder at his registered address, mailed at least
10 days and not more than 60 days before the meeting. Only the business stated
in the notice of the meeting shall be considered at such meeting. Any adjourned
meeting may be held as adjourned without further notice.
9.4 Record Date for Meetings. For the purpose of determining the
Shareholders who are entitled to notice of and to vote at any meeting, or to
participate in any distribution, or for the purposes of any other action, the
Trustees may from time to time close the transfer books for such period, not
exceeding 30 days, as the Trustees may determine; or without closing the
transfer books the Trustees may fix a date not more than 60 days prior to the
date of any meeting of Shareholders or daily dividends or other action as a
record date for the determination of the Persons to be treated as Shareholders
of record for such purposes, except for dividend payments which shall be
governed by Section 8.2 hereof.
9.5 Proxies, etc. At any meeting of Shareholders, any holder of Shares
entitled to vote thereat may vote by proxy, provided that no proxy shall be
voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a resolution of a majority of the Trustees, proxies may be solicited
in the name of one or more Trustees or one or more of the officers of the Trust.
Only Shareholders of record shall be entitled to vote. Each full Share shall be
entitled to one vote and fractional Shares shall be entitled to a vote of such
fraction. When any Share is held jointly by several persons, any one of them may
vote at any meeting in person or by proxy in respect of such Share, but if more
than one of them shall be present at such meeting in person by proxy, and such
joint owners or their proxies so present disagree as to any vote to be cast,
such vote shall not be received in respect of such Share. A proxy purporting to
be executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving invalidity
shall rest on the challenger. If the holder of any such Share is a minor or a
person of unsound mind, and subject to guardianship or to the legal control of
any other person as regards the charge or management of such Share, he may vote
by his guardian or such other person appointed or having such control, and such
vote may be given in person or by proxy.
9.6 Reports. The Trustees shall cause to be prepared at least annually
a report of operations containing a balance sheet and statement of income and
undistributed income of the Trust prepared in conformity with generally accepted
accounting principles and an opinion of an independent public accountant on such
financial statements. Copies of such reports shall be mailed to all Shareholders
of record within the time required by the 1940 Act, and in any event within a
reasonable period preceding the annual meeting of Shareholders. The Trustees
shall, in addition, furnish to the Shareholders at least semi-annually interim
reports containing an
19
<PAGE>
unaudited balance sheet of the Trust as of the end of such period and an
unaudited statement of income and surplus for the period from the beginning of
the current fiscal year to the end of such period.
9.7 Inspection of Records. The records of the Trust shall be open to
inspection by Shareholders to the same extent as is permitted shareholders of a
Massachusetts business corporation.
9.8 Shareholder Action by Written Consent. Any action which may be
taken by Shareholders may be taken without a meeting if a majority of
Shareholders entitled to vote on the matter (or such larger proportion thereof
as shall be required by any express provision of this Declaration) consent to
the action in writing and the written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.
20
<PAGE>
ARTICLE X
Duration; Termination of Trust;
Amendment; Mergers, Etc.
10.1 Duration. Subject to possible termination in accordance with the
provisions of Section 10.2 hereof, the Trust created hereby shall continue
without limitation of time.
10.2 Termination of Trust.
(a) The Trust may be terminated by the affirmative vote of the holders
of not less than two-thirds of the Shares at any meeting of Shareholders or if
such termination has been approved by the affirmative vote of at least two
thirds of the Trustees, in which case the affirmative vote of the holders of not
less than a majority of such Shares. Upon the termination of the Trust,
(i) The Trust shall carry on no business except for the purpose
of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the
Trust and all of the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust shall have been wound
up, including the power to fulfill or discharge the contracts of the
Trust, collect its assets, sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of the remaining Trust Property
to one or more persons at public or private sale for consideration
which may consist in whole or in part of cash, securities or other
property of any kind, discharge or pay its liabilities, and do all
other acts appropriate to liquidate its business.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and
refunding agreements, as they deem necessary for their protection, the
Trustees may distribute the remaining Trust Property, in cash or in
kind or partly each, among the Shareholders of each class, according
to their respective rights taking into account the proper allocation
of expenses being borne solely by any class of Shares.
(b) After termination of the Trust and distribution to the
Shareholders as herein provided, a majority of the Trustees shall execute and
lodge among the records of the Trust an instrument in writing setting forth the
fact of such termination, and the Trustees shall thereupon be discharged from
all further liabilities and duties hereunder, and the rights and interests of
all Shareholders shall thereupon cease.
10.3 Amendment Procedure.
(a) Except as provided in paragraph (b) of this Section 10.3, this
Declaration may be amended by a vote of a majority of the Shares at a meeting of
Shareholders, or by an
21
<PAGE>
instrument in writing, without a meeting signed by a majority of the Trustees
and consented to by the holders of not less than a majority of such Shares. The
Trustees may also amend this Declaration without the vote or consent of
Shareholders (i) to change the name of the Trust, (ii) to supply any omission,
or cure, correct or supplement any ambiguous, defective or inconsistent
provision hereof, (iii) if they deem it necessary to conform this Declaration to
the requirements of applicable federal or state laws or regulations or the
requirements of the Internal Revenue Code, or to eliminate or reduce any
federal, state or local taxes which are or may be payable by the Trust or the
Shareholders, but the Trustees shall not be liable for failing to do so, (iv) to
make any changes deemed necessary to effectuate the designations and powers,
preferences and rights, and the qualifications, limitations and restrictions
adopted by the Trustees with respect to the Preferred Shares pursuant to Section
6.1 hereof, or (v) for any other purpose which does not adversely affect the
rights of any Shareholder with respect to which the amendment is or purports to
be applicable.
(b) No amendment may be made, under Section 10.3(a) above, which would
change any rights with respect to any Shares of the Trust by reducing the amount
payable thereon upon liquidation of the Trust or by diminishing or eliminating
any voting rights pertaining thereto, except with the vote or consent of the
holders of two-thirds of the Shares of the Trust so affected outstanding and
entitled to vote. Nothing contained in this Declaration shall permit the
amendment of this Declaration to impair the exemption from personal liability of
the Shareholders, Trustees, officers, employees and agents of the Trust or to
permit assessments upon Shareholders.
(c) A certification in recordable form signed by a majority of the
Trustees or by the Secretary or any Assistant Secretary of the Trust setting
forth an amendment and reciting that it was duly adopted by the Shareholders or
by the Trustees as aforesaid or a copy of the Declaration, as amended, in
recordable form, and executed by a majority of the Trustees or certified by the
Secretary or any Assistant Secretary of the Trust, shall be conclusive evidence
of such amendment when lodged among the records of the Trust.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of Shares of the Trust shall have become effective,
this Declaration may be terminated or amended in any respect by the affirmative
vote of a majority of the Trustees or by an instrument signed by a majority of
the Trustees.
10.4 Merger, Consolidation and Sale of Assets. Notwithstanding any
other provisions of this Declaration or the By-Laws of the Trust, a favorable
vote of the holders of at least two-thirds of the outstanding Shares of the
Trust entitled to be voted on the matter shall be required to approve, adopt or
authorize (i) a merger or consolidation or share exchange of the Trust with any
other entity, or (ii) a sale or exchange of all or substantially all of the
assets of the Trust (other than in the regular course of its investment
activities), unless such action has previously been approved, adopted or
authorized by the affirmative vote of at least two-thirds of the total number of
Trustees fixed in accordance with this Declaration, in which case the
affirmative vote of the holders of a majority of the outstanding Shares of the
Trust entitled to vote thereon shall be required. In respect of any such merger,
consolidation, sale or exchange of assets, any Shareholder shall be entitled to
rights of appraisal of his Shares to the same extent as
22
<PAGE>
a shareholder of a Massachusetts business corporation in respect of a merger,
consolidation, sale or exchange of assets of a Massachusetts business
corporation, and such right shall be his exclusive remedy in respect of his
dissent from any such action.
10.5 Conversion to Open-End Company. Notwithstanding any other
provisions of this Declaration or the By-Laws of the Trust, a favorable vote of
the holders of two-thirds of the outstanding Shares of the Trust entitled to be
voted on the matter shall be required to approve, adopt or authorize an
amendment to this Declaration that makes the Common Shares a "redeemable
security" (as that term is defined in section 2(a) (32) of the Investment
Company Act of 1940, as amended) unless such action has previously been
approved, adopted or authorized by the affirmative vote of at least two-thirds
of the total number of Trustees fixed in accordance with this Declaration, in
which case the affirmative vote of the holders of a majority of the outstanding
Shares of the Trust entitled to vote thereon shall be required.
10.6 Incorporation. With the approval of the holders of a majority of
the Shares, the Trustees may cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction or any other
trust, partnership, association or other organization to take over all of the
Trust Property or to carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, convey and transfer the Trust
Property to any such corporation, trust, association or organization in exchange
for the Shares or securities thereof or otherwise, and to lend money to,
subscribe for the Shares or securities of, and enter into any contracts with any
such corporation, trust, partnership, association or organization, or any
corporation, partnership, trust, association or organization in which the Trust
holds or is about to acquire shares or any other interest. The Trustees may also
cause merger or consolidation between the Trust or any successor thereto and any
such corporation, trust, partnership, association or other organization if and
to the extent permitted by law, as provided under the law then in effect.
Nothing contained herein shall be construed as requiring approval of
Shareholders for the Trustees to organize or assist in organizing one or more
corporations, trusts, partnerships, associations or other organizations and
selling, conveying or transferring a portion of the Trust Property to such
organizations or entities.
23
<PAGE>
ARTICLE XI
Miscellaneous
11.1 Filing. This Declaration, any amendment hereto or any Certificate
of Designation shall be filed in the office of the Secretary of the Commonwealth
of Massachusetts and in such other places as may be required under the laws of
Massachusetts and may also be filed or recorded in such other places as the
Trustees deem appropriate. Each amendment so filed shall be accompanied by a
certificate signed and acknowledged by a Trustee or the Secretary or any
Assistant Secretary stating that such action was duly taken in a manner provided
herein. Unless an amendment or certificate or Certificate of Designation sets
forth some later time for the effectiveness thereof, such amendment or
certificate or Certificate of Designation shall be effective upon its filing. A
restated Declaration, containing the original Declaration and all amendments
theretofore made, may be executed from time to time by a majority of the
Trustees and shall, upon filing with the Secretary of the Commonwealth of
Massachusetts, be conclusive evidence of all amendments contained therein and
may thereafter be referred to in lieu of the original Declaration and the
various amendments thereto.
11.2 Resident Agent. The Trust shall maintain a resident agent in the
Commonwealth of Massachusetts, which agent shall initially be CT Corporation
System, 10 Post Office Square, Boston, Massachusetts 02109. The Trustees may
designate a successor resident agent provided, however, that such appointment
shall not become effective until written notice thereof is delivered to the
office of the Secretary of the Commonwealth.
11.3 Governing Law. This Declaration is executed by the Trustees and
delivered in the Commonwealth of Massachusetts and with reference to the laws
thereof, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to the laws
of said State and reference shall be specifically made to the business
corporation law of the Commonwealth of Massachusetts as to the construction of
matters not specifically covered herein or as to which an ambiguity exists.
11.4 Counterparts. This Declaration may be simultaneously executed in
several counterparts, each of which shall be deemed to be an original, and such
counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
11.5 Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust, or of any recording
office in which this Declaration may be recorded, appears to be a Trustee
hereunder, or Secretary or Assistant Secretary of the Trust, certifying to (a)
the number or identity of Trustees or Shareholders, (b) the due authorization of
the execution of any instrument or writing, (c) the form of any vote passed at a
meeting of Trustees or Shareholders, (d) the fact that the number of Trustees or
Shareholders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (e) the form of any By-Laws
adopted by or the identity of any officers elected by the Trustees, or (f) the
existence of any fact or facts which in any manner relate to the affairs of the
Trust, shall be conclusive evidence as to the matters so certified in favor of
any person dealing with the Trustees and their successors.
24
<PAGE>
11.6 Provisions in Conflict With Law or Regulations.
(a) The provisions of this Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have constituted
a part of this Declaration; provided, however, that such determination shall not
affect any of the remaining provisions of this Declaration or render invalid or
improper any action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
25
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
/s/ Terry K. Glenn
-------------------------------------
Terry K. Glenn
Box 342
Bryn Athyn, Pennsylvania 19009
/s/ Mark B. Goldfus
-------------------------------------
Mark B. Goldfus
509 Bergen Street
Lawrenceville, New Jersey 08648
/s/ Susan B. Baker
-------------------------------------
Susan B. Baker
1015 Buckingham Way
Morrisville, Pennsylvania 19067
/s/ William E. Aldrich
-------------------------------------
William E. Aldrich
111 Windsor Road
Needham, Massachusetts 02192
Exhibit 1(b)
MUNIYIELD FLORIDA FUND
The undersigned, constituting a majority of the Trustees of MuniYield
Florida Fund (the "Trust") , a Massachusetts business trust, hereby certify that
the sole shareholder of the Trust and the Trustees of the Trust have duly
adopted the following amendment to the Declaration of Trust of the Trust dated
January 21, 1992 (the "Declaration of Trust").
VOTED: The Declaration of Trust be and it hereby is amended
to restate the language of Article II Section 2.2
in the following manner:
2.2 Term of Office of Trustees. The term of office of
all of the Trustees named herein, or elected or
appointed prior to the first annual meeting of
Shareholders, shall expire on the date of the first
annual meeting of Shareholders or special meeting in
lieu thereof. Beginning with the Trustees elected at
the first annual meeting of Shareholders, the term of
each Trustee shall expire at the next annual meeting
of shareholders following the election or appointment
of such Trustee and upon the election and
qualification of his successor or at such time as may
otherwise be provided by the By-Laws adopted or
amended pursuant to Section 2.7 hereof. The Trustees
shall be elected by the affirmative vote of the
holders of a majority of the Shares present in person
or by proxy at an annual meeting of Shareholders or
special meeting in lieu thereof called for that
purpose, except as provided in Section 2.3 of this
Article; provided, however, that the Preferred
Shareholders voting as a class at an annual meeting
of the Shareholders or special meeting in lieu
thereof called for such purpose, shall elect at least
two (2) Trustees at all times, and, provided,
further, that the Preferred Shareholders voting as a
class shall elect at least a majority of the
Trustees, which number of Trustees shall be increased
appropriately in order to effectuate such rights
after giving effect to resignations of Trustees, (i)
if at any time the dividends on the Preferred Shares
shall be unpaid in an amount equal to two (2) full
years dividends on the Preferred Shares, with such
representation to continue until all dividends in
arrears shall have been paid or otherwise provided
for, or (ii) pursuant to the designations and powers,
preferences and rights and the qualifications,
limitations and restrictions of the Preferred Shares
as determined in accordance with Section 6.1 hereof.
Each Trustee elected shall hold office until his
successor shall have been elected and shall have
qualified or until such time as may otherwise be
provided in the By-Laws adopted or amended pursuant
to Section 2.7 hereof; except that (a) any Trustee
may resign his trust (without need for prior or
subsequent accounting) by an instrument in writing
signed by him or her and delivered to the other
Trustees, which shall take effect upon such delivery
or upon such later date as is specified therein; (b)
any Trustee may be removed (provided the aggregate
number of Trustees after such removal shall not be
less than the number required by Section 2.1 hereof)
with cause, at any time by written instrument, signed
by the remaining Trustees, specifying the date when
such removal shall become
<PAGE>
effective, provided, however, that the Trustees
elected by one class of shares shall have no power
to so remove any Trustee elected by another class of
Shares; (c) any Trustee who requests in writing to
be retired or who has become incapacitated by
illness or injury may be retired by written
instrument signed by a majority of the other
Trustees, specifying the date of his retirement; and
(d) a Trustee may be removed at any meeting of
Shareholders by a vote of two-thirds of the
outstanding Shares of the class or classes of Shares
of beneficial interest that elected such Trustee.
Upon the resignation or removal of a Trustee, or his
otherwise ceasing to be Trustee, he shall execute
and deliver such documents as the remaining Trustees
shall require for the purpose of conveying to the
Trust or the remaining Trustees any Trust Property
held in the name of the resigning or removed
Trustee. Upon the incapacity or death of any
Trustee, his legal representative shall execute and
deliver on his behalf such documents as the
remaining Trustees shall require as provided in the
preceding sentence.
IN WITNESS WHEREOF, the undersigned, constituting a majority of the
Trustees of the Trust, have signed this Certificate in duplicate original
counterparts and have caused a duplicate original to be lodged among the records
of the Trust as required by Article X, Section 10.3(c) of the Declaration of
Trust, as of the 14th day of February, 1992.
/s/ Arthur Zeikel
--------------------------------------
Arthur Zeikel
279 Watchung Fork
Westfield, NJ 07090
/s/ Kenneth S. Axelson
--------------------------------------
Kenneth S. Axelson
75 James Point Road
Rockland, ME 048410
/s/ Herbert I. London
--------------------------------------
Herbert I. London
715 Broadway
New York, NY 10003
/s/ Joseph L. May
--------------------------------------
Joseph L. May
222 Fourth Avenue North
Nashville, TN 37159
/s/ Andre F. Perold
--------------------------------------
Andre F. Perold
Dillon 34
Soldiers Field Road
Boston, MA 02163
MUNIYIELD FLORIDA FUND
CERTIFICATE OF DESIGNATION DATED APRIL 6, 1992
ESTABLISHING POWERS, QUALIFICATIONS, RIGHTS
AND PREFERENCES OF THE AUCTION MARKET
PREFERRED SHARES ("AMPS(R)")
WHEREAS the Board of Trustees of MuniYield Florida Fund (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 such preferred shares.
NOW THEREFORE, the Board of Trustees does hereby authorize the issuance
of a series of 1,100 preferred shares, par value $0.10 per share, liquidation
preference $50,000 per share plus an amount equal to accumulated but unpaid
dividends thereon (whether or not earned or declared), designated Auction Market
Preferred Shares.
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 1,100 preferred shares, par value $.10 per share,
liquidation preference $50,000 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." Each Auction Market Preferred
Share (sometimes referred to herein as "AMPS") shall be issued on a
- ----------------------
(R) Registered Trademark of Merrill Lynch & Co., Inc.
<PAGE>
date to be determined by the Board of Trustees of the Trust; have an Initial
Dividend Rate and Initial Dividend Payment Date as shall be determined in
advance of the issuance thereof by the Board of Trustees of the Trust; 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 shall constitute
a separate series of preferred shares of the Trust, and each Auction Market
Preferred Share 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
2
<PAGE>
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 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, Inc.
"Affiliate" shall mean 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.
3
<PAGE>
"Agent Member" means a member of the Securities Depository that will
act on behalf of an Existing Holder of one or more shares of AMPS or a Potential
Holder that is identified as such in such holder's Purchaser's Letter.
"AMPS" means the Auction Market Preferred Shares.
"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 shares of
AMPS and Other AMPS Outstanding on such Valuation Date multiplied by the sum of
(a) $50,000 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; (C) the aggregate
amount of cash dividends that would accumulate at the then current Maximum
Applicable Rate on any shares of 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 potential dividend rate increase factors (currently 304%)
determined from time to time by Moody's and S&P (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; (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
payables for Florida Municipal Bonds or Municipal Bonds purchased as of such
Valuation Date) less (ii) the
4
<PAGE>
sum of (A) the lesser of (1) the aggregate of (a) 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 counter parties
having a Moody's long-term debt rating of at least Baa3, and (b) the Discounted
Value of Florida Municipal Bonds or Municipal Bonds sold as of or prior to such
Valuation Date which generated receivables calculated using the Moody's Discount
Factor applicable to such Florida Municipal Bonds or Municipal Bonds, 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 (a) and (2)
the Discounted Value of such Florida Municipal Bonds or Municipal Bonds
calculated using the higher of the S&P Discount Factor and the Moody's Discount
Factor applicable to such Florida Municipal Bonds or Municipal Bonds and (B) the
Discounted Value of any of the Trust's assets irrevocably deposited by the Trust
for the payment of the amount needed to redeem shares of AMPS subject to
redemption or any of (i)(B) through (i)(F).
"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 these Articles Supplementary) 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.
5
<PAGE>
"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
11(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 Schroder 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 11 of this Certificate of Designation.
"Broker-Dealer" shall mean any broker-dealer, or other entity permitted
by law to perform the functions required of a Broker-Dealer in paragraph 11 of
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" shall mean an agreement between the Auction
Agent and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow
the procedures specified in paragraph 11 of this Certificate of Designation.
6
<PAGE>
"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.
"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, 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
in the office ofthe Secretary of State of the Commonwealth of Massachusetts.
"Deposit Securities" means cash and Florida Municipal Bonds and
Municipal Bonds rated at least AAA, 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 Coverage Amount," as of any Valuation Date, means (A)(i) the
aggregate amount of cash dividends that will accumulate on all shares of
Outstanding AMPS and Other AMPS, in each case to (but not including) the next
Dividend Payment Date therefor that follows such Valuation Date plus (ii) the
aggregate amount of all liabilities existing on such Valuation
7
<PAGE>
Date which are payable on or prior to such next Dividend Payment Date less (B)
the sum of (i) the combined Market Value of Deposit Securities irrevocably
deposited with the Auction Agent for the payment of cash dividends on all shares
of AMPS and Other AMPS, (ii) the book value of receivables for Florida Municipal
Bonds and 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 in any
event on or prior to such next Dividend Payment Date, and (iii) interest on
Florida Municipal Bonds and Municipal Bonds which is scheduled to be paid on or
prior to such next Dividend Payment Date.
"Dividend Coverage Assets," as of any Valuation Date, means, in the
case of shares of AMPS and Other AMPS, Deposit Securities with maturity or
tender payment dates not later in each case than the Dividend Payment Date
therefor that follows such Valuation Date.
"Dividend Payment Date," with respect to 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 Person who has signed a Purchaser's Letter
and is listed as the holder of record of shares of AMPS in the Stock Books.
"Florida Municipal Bonds" means municipal obligations issued by or on
behalf of the State of Florida, its political subdivisions, agencies and
instrumentalities and by other qualifying issuers that pay interest which, in
the opinion of bond counsel to the issuer, is exempt from Federal income taxes.
8
<PAGE>
"Forward Commitment" has the meaning set forth in paragraph 9(c) of
this Certificate of Designation.
"Holder" means a Person identified as a holder of record of shares of
AMPS in the Stock 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 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 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.
"Long Term Dividend Period" means a Special Dividend Period consisting
of a specified period of whole years not greater than five years.
9
<PAGE>
"Mandatory Redemption Price" means $50,000 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.
"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,
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 11(a)(vii) of this Certificate of Designation and, with
respect to Other AMPS, has the equivalent meaning.
"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
10
<PAGE>
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.
"Minimum Liquidity Level" means, as of any Valuation Date, an aggregate
Market Value of the Trust's Dividend Coverage Assets not less than the Dividend
Coverage Amount.
"Moody's" means Moody's Investors Service or its successors.
"Moody's Discount Factor" means, for purposes of determining the
Discounted Value of any Florida Municipal Bond or Municipal Bond which
constitutes a Moody's Eligible Asset, the percentage determined by reference to
(a) the rating by Moody's or S&P on such Bond and (b) the Moody's Exposure
Period, in accordance with the table set forth below:
<TABLE>
<CAPTION>
Rating Category
----------------------------------------------------------
Moody's Exposure Period Aaa* Aa* A* Baa* Other** VMIG-1*** SP-1+***
----------------------- ---- --- -- ---- ------- --------- --------
<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>
- -----------------
* Moody's rating.
** Florida Municipal Bonds and Municipal Bonds not rated by Moody's but
rated BBB or BBB+ by S&P.
*** Florida Municipal Bonds and Municipal Bonds rated MIG-1 or VMIG-l or,
if not rated by Moody's, rated SP-l+ 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.
Notwithstanding the foregoing, (i) no 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
11
<PAGE>
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 (as defined for purposes of calculating Moody's
Eligible Assets), 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 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 $10,000,000. In addition, Florida
12
<PAGE>
Municipal Bonds and Municipal Bonds in the Trust's portfolio must be within the
following diversification requirements in order to be included within Moody's
Eligible Assets:
<TABLE>
<CAPTION>
Maximum Maximum Maximum
Minimum Maximum Issue Type County State
Issue Size Underlying Concentration Concentration Concentration
Rating ($ Millions) Obligor (%)(1) (%)(1)(3) (%)(1)(4) (%)(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 Municipals Bonds.
For purposes of the maximum underlying obligor requirement described above, any
such 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
13
<PAGE>
Assets consist of resource recovery issues or (c) more than 10% of Moody's
Eligible Assets consist of other Issues.
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. 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 Transaction" has the meaning set forth in paragraph
9(b) of this Certificate of Designation.
14
<PAGE>
"Municipal Bonds" means "Municipal Bonds" as defined in the Trust's
Registration Statement on Form N-2 (File No. 33-45642) 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.
"Municipal Index" has the meaning set forth in paragraph 9(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 stock, including all outstanding shares
of 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 after
such Dividend Payment Date to the Holders as of 12:00 noon, New York City time,
on the
15
<PAGE>
Business Day preceding such Dividend Payment Date, the full amount of any
dividend on shares of 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 shares of 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 Stock 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 shares of 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
16
<PAGE>
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)(1) of this Certificate of Designation.
"Notice of Redemption" means any notice with respect to the redemption
of shares 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" shall mean $50,000 per share plus an amount
equal to accumulated but unpaid dividends (whether or not earned or declared) to
the date fixed for redemption 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, shares of
AMPS theretofore issued by the Trust except, without duplication, (A) any shares
of 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 moneys shall have been deposited in trust by the Trust
pursuant to paragraph 4(c) and (B) any shares of AMPS as to which the Trust
17
<PAGE>
or any Affiliate thereof shall be an Existing Holder, provided that shares of
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" shall mean and include an individual, a partnership, a
corporation, a trust, an unincorporated association, a joint venture or other
entity or a government or any agency or political subdivision thereof.
"Potential Holder" shall mean any Person, including any Existing
Holder, (A) who shall have executed a Purchaser's Letter and (B) who may be
interested in acquiring shares of AMPS (or, in the case of an Existing Holder,
additional shares of AMPS).
"Preferred Shares" means the preferred shares of beneficial interest 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" shall mean J.J. Kenney 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.
18
<PAGE>
"Purchaser's Letter" means a letter addressed to the Trust, the Auction
Agent and a Broker-Dealer in which a Person agrees, among other things, to offer
to purchase, purchase, offer to sell and/or sell shares of AMPS as set forth in
paragraph 11 of this Certificate of Designation.
"Quarterly Valuation Date" means the twenty-first 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 April
30, 1992.
"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 fewer than 35 days, the applicable "AA"
Composite Commercial Paper Rate; provided that, if Moody's and S&P (or any such
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 use of the
following will not adversely affect their then-current rating on the AMPS, 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 Short
Term Dividend Period having 35 or more 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.
19
<PAGE>
"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 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 Trust 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) the rating by S&P or Moody's on such
Bond and (b) the S&P Exposure Period, in accordance with the tables set forth
below:
For Florida Municipal Bonds:
<TABLE>
<CAPTION>
Rating Category
---------------------------------------------------------------------------
S&P Exposure Period AAA* AA* A* BBB*
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
40 Business Days....................... 205% 210% 225% 265%
22 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 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; provided,
however, that if such short-term Florida Municipal Bonds are backed by any
letter of credit, liquidity facility or guarantee from a bank or other financial
institution, such bank
20
<PAGE>
or institution must have 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
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 and (ii) no S&P Discount
Factor will be applied to cash or to Receivables for Florida Municipal Bonds
Sold. "Receivables for Florida Municipal Bonds Sold," for purposes of
calculating S&P's 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 if such receivables are due within five business days of such Valuation
Date. The Trust may adopt S&P Discount Factors for 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, which need
not mature or have a demand feature exercisable in 30 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 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, if not rated by S&P but rated by Moody's, is
rated at least A by Moody's (provided that such Moody's-rated 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
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);
(iv) is not subject to a covered call or covered put option written by the
Trust; (v) is not
21
<PAGE>
part of a private placement of Florida Municipal Bonds; and (vi) 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 issued by an issuer with a total of at least $50
million of securities outstanding. 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 guaranteed or insured by any one
bond insurer will be considered S&P Eligible Assets only to the extent
the fair market value of such Florida Municipal Bonds does not exceed
25% of the aggregate fair market value of the S&P Eligible Assets; and
(3) Florida Municipal Bonds of any one issue type category (as
described below) will be considered S&P Eligible Assets only to the
extent the fair market value of such Bonds does not exceed 20% of the
aggregate fair 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 fair market value of such Bonds in each such sub-category
does not exceed 20% of the aggregate fair market value of S&P Eligible
22
<PAGE>
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. 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 subcategories: (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.
The Trust may include Municipal Bonds as S&P Eligible Assets pursuant
to guidelines and restrictions to be established by S&P provided that 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).
23
<PAGE>
"S&P Hedging Transactions" has the meaning set forth in paragraph 9(a)
of this Certificate of Designation.
"Securities Depository" means The Depository Trust Company or any
successor company or other entities elected by the Trust as securities
depository for the shares of AMPS that agrees to follow the procedures required
to be followed by such securities depository in connection with the shares of
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 Dividend Period consisting of a
specified number of days (other than seven), evenly divisible by seven and not
fewer than seven or 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 number of whole years not
greater than five years (in each case subject to adjustment as provided in
paragraph 2(b)(i)).
"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 shares of 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
24
<PAGE>
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 shares of AMPS subject to such Dividend Period shall be redeemable at
the Trust's option at a price per share equal to $50,000 plus accumulated but
unpaid dividends plus a premium expressed as a percentage of $50,000, as
determined by the Board of 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 shares of 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 or any successor
index (the "Kenny 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
25
<PAGE>
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 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 maximum
marginal regular Federal individual income tax rate applicable to ordinary
income or the maximum marginal regular Federal corporation income tax rate (in
each case expressed as a decimal), whichever is greater; 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 maximum marginal regular Federal individual income tax rate
applicable to ordinary income or the maximum marginal regular Federal corporate
income tax rate (in each case expressed as a decimal), whichever is greater.
"Treasury Bonds" shall have the meaning set forth in paragraph 9(a) of
this Certificate of Designation.
"Trust" means MuniYield Florida Fund, 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
26
<PAGE>
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 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 and the Minimum Liquidity
Level, each Business Day commencing with the Date of Original Issue.
27
<PAGE>
"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, Dividend Coverage Amount, Dividend
Coverage Assets, Independent Accountants, Initial Margin, Market Value, Maximum
Potential Additional Dividend Liability, Minimum Liquidity Level, Moody's
Discount Factor, Moody's Eligible Asset, Moody's Exposure Period, Moody's
Hedging Transactions, S&P Discount Factor, S&P Eligible Asset, S&P Exposure
Period, S&P Hedging Transactions, 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
to adjust, modify, alter or change 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 adjustment,
modification, alteration or change 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 each consisting of (i) cash at the
Applicable Rate and (ii) a Right to receive cash as set forth in paragraph 2(e)
below, and no more, payable on the respective dates set forth below. Dividends
on the shares of AMPS so declared and payable shall be paid (i) in preference to
and in priority over any dividends declared and payable on the Common Stock, and
(ii) to the extent permitted
28
<PAGE>
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
shares of 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 shares of 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 each series of 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 28-day Dividend Period
and any Short Term Dividend Period of 91 or fewer days on the day next
succeeding the last day thereof, (ii) with respect to any Short Term Dividend
Period of more than 91 and fewer than 365 days, on the 92nd day thereof, the
183rd day thereof, if any, the 274th day thereof, if any, and on the day next
succeeding the last day thereof and (iii) with respect to any Long Term Dividend
Period, quarterly on the first day of each January, April, July and October
during such Long Term Dividend Period and on the day next succeeding the last
day thereof (each such date referred to in clause (i), (ii) or (iii) being
herein referred to as a "Normal Dividend Payment Date"), except that (i) if such
Normal Dividend Payment Date is not a Business Day, then the Dividend Payment
Date shall be the next succeeding date if both such dates following the Normal
Dividend Payment Date are Business Days, or (ii) if the date following such
Normal Dividend Payment Date is not a Business Day, then the Dividend Payment
Date will be the date next preceding such Normal Dividend Payment Date if both
such date and such Normal Dividend Payment Date are Business Days or (iii) if
such Normal Dividend Payment Date and either the preceding date or the
succeeding date are not Business
29
<PAGE>
Days, then the Dividend Payment Date shall be the first Business Day next
preceding such Normal Dividend Payment Date that is next succeeded by a Business
Day. 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 Initial Dividend Period, 7-day Dividend Periods
and Special Dividend Periods are hereinafter 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
Stock Register as of 12:00 noon, New York City time, on the Business Day
preceding the Dividend Payment Date. Dividends in arrears for any past Dividend
Period may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to the Holders as they appear on the Stock Register on a
date, not exceeding 15 days prior to the payment date therefor, as may be fixed
by the Board of 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
30
<PAGE>
Payment Date, shall be equal to the rate per annum that results from
implementation of the Auction Procedures.
The Applicable Dividend 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 shares of 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 shares of 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
shares of 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 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 shares of AMPS on the date
set for such redemption, the preceding sentence shall not apply and the
Applicable Dividend Rate for the Dividend Period commencing during the
Non-Payment Period resulting from such failure shall be the Non-Payment Period
Rate. For the purposes of the foregoing, payment to a person in same-day funds
on any Business Day at any time shall be considered equivalent to payment to
such person in New York Clearing House (next-day) funds at the same
31
<PAGE>
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 each Dividend Payment Date of each 7-day Dividend Period and 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 such share was outstanding and the denominator of
which will be 365, multiplying the amount so obtained by $50,000, and rounding
the amount so obtained to the nearest cent. During any Long Term Dividend
Period, the amount of dividends per share payable on any Dividend Payment Date
shall be computed on the basis of a year consisting of twelve 30-day months.
(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 the number of days (other than seven) evenly
divisible by seven, and not fewer than seven or more than 364 in the case of a
Short Term Dividend Period or a number of whole years not greater than five
years in the case of a Long Term Dividend Period, specified in such notice,
provided that for any Auction occurring after the initial Auction, the Trust may
not give a Request for special Dividend Period of greater than 28 days (and any
such request shall be null and void) unless the Trust has received written
confirmation from Moody's and S&P that such action would not impair the ratings
then assigned to the AMPS by Moody's and S&P and unless Sufficient Clearing Bids
were made in the last occurring Auction and unless full cumulative dividends,
any amounts due with respect to
32
<PAGE>
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 fourth day but not more
than seven 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 14th 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 series of 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 third day prior to such
Auction Date. In making such determination the Broker-Dealer(s) will consider
(1) existing short-term and long-term market rates and indices of such
short-term and long-term rates, (2) existing market supply and demand for
short-term and long-term securities, (3) existing yield curves for short-term
and long-term securities comparable to the 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 third 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 series of 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 series of AMPS, the Trust may by no later than
33
<PAGE>
the second day prior to such Auction Date give a notice (a "Notice of Special
Dividend Period") to the Auction Agent, the Securities Depository and each
Broker-Dealer which notice will specify (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 Response. 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 (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. If the Trust is prohibited from giving
a Notice of Special Dividend Period
34
<PAGE>
as a result of any of the factors enumerated in clause (x), (y) or (z) of the
prior sentence 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 of beneficial interest, in excess of full cumulative
dividends and applicable late charge, as herein provided, on the shares of AMPS
(except for Additional Dividends as provided in paragraph 2(e) hereof). Except
for the late charge payable pursuant to paragraph 2(c)(i) hereof, no interest,
or sun of money in lieu of interest, shall be payable in respect of any dividend
payment on the shares of 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 shares of AMPS as to
dividends or upon liquidation) in respect of the Common Shares or any other
shares of beneficial interest of the Trust ranking junior to or on a parity with
the shares of AMPS as to dividends or upon liquidation, or call for redemption,
redeem, purchase or otherwise acquire for consideration any of the Common Shares
or any other such junior shares (except by conversion into or exchange for
shares of the Trust ranking junior to the shares of AMPS as to dividends and
upon liquidation) or any other such Parity Shares (except by conversion into or
exchange for shares of beneficial interest of the Trust ranking junior to or on
a parity with the shares of AMPS as to dividends and upon
35
<PAGE>
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 shares of 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 shares 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 Dividend Rate and
(ii) an uncertificated right (a "Right") to receive an Additional Dividend (as
defined below). Each Right shall thereafter be independent of the share or
shares of 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 taxable income to shares
of AMPS without having given advance notice thereof to the Auction Agent as
described in paragraph 2(f) hereof solely by reason of the fact that such
allocation is made as a result of the redemption of all or a portion of the
outstanding shares of 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
36
<PAGE>
Allocation is made, provide notice thereof to the Auction Agent and to each
holder of a Right applicable to such shares of 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 stock books of the
Trust. The Trust will, within 30 days after such notice is given to the Auction
Agent, pay to the Auction Agent (who will then distribute to such holders of
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
shares 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 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 shares 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 shares of AMPS at the maximum marginal regular Federal income tax rate
(taking into account the Federal income tax deductibility of state taxes paid or
incurred) applicable to individuals or corporations, whichever is greater, in
effect during the fiscal year in question.
37
<PAGE>
(f) Except as provided below, whenever the Trust intends to include any
net capital gains or other taxable income in any dividend on shares of AMPS, the
Trust will notify the Auction Agent of the amount to be so included at least
five Business Days prior to the Auction Date on which the Applicable Rate for
such dividend is to be established. 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.
(g) No fractional shares of 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 $50,000 per share plus accumulated but
unpaid dividends (whether or not earned or declared) thereon to date of
distribution, and after such payment the holders of AMPS 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 share
38
<PAGE>
exchange of the Trust with or into any other 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 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, upon giving a Notice of
Redemption, the Trust at its option may redeem shares of 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 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
shares of AMPS on such redemption date.
(ii) The Trust shall redeem, out of funds legally available therefor,
at the Mandatory Redemption Price per share, shares of 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
39
<PAGE>
Cure Date (herein respectively 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 shares of AMPS
to be redeemed shall be equal to the lesser of (i) the minimum number of shares
of AMPS the redemption of which, if deemed to have occurred immediately prior to
the opening of business on the Cure Date, together with all other Preferred
Shares subject to redemption or retirement, 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 say be, on such Cure Date
(provided that, if there is no such minimum number of shares of AMPS and other
Preferred Shares the redemption of which would have such result, all shares of
AMPS and of other Preferred Shares then outstanding shall be redeemed), and (ii)
the maximum number of shares 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 shares 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 shares of AMPS, Other AMPS and other Preferred
Shares subject to redemption pursuant to provisions similar to those contained
in this paragraph 4(a)(ii); provided that, shares of AMPS which may not be
redeemed at the option of the Trust due to the designation of a Non-Call Period
40
<PAGE>
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 shares of AMPS and of 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 shares of 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 shares
of AMPS may be redeemed pursuant to paragraph 4(a)(i) of this Certificate of
Designation (i) unless all dividends in arrears 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 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 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 deems fair and equitable.
41
<PAGE>
(c) Whenever shares of AMPS are to be redeemed, the Trust, not less
than 10 nor more than 30 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 shares 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 shares of AMPS to be redeemed, (iv) the place or places
where shares of AMPS are to be surrendered for payment of the redemption price,
(v) a statement that dividends on the shares to the 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 a cash amount equal to the redemption payment for the shares of
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 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
42
<PAGE>
Agent the interest, if any, on such moneys deposited with it and the Holders of
any shares so redeemed shall have no claim to any of such interest. In case the
Holder of any shares so called for redemption shall not claim the redemption
payment for his shares within one year after the date of redemption, the Auction
Agent shall, upon demand, pay over to the 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 shares 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 shall 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
43
<PAGE>
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:
(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 shares of 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 directors 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
shares of 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, or
increase the authorized or issued amount of, any class or series of shares of
beneficial interest ranking prior to or on a parity with any series of Preferred
Shares with respect to payment of dividends or the distribution of assets on
liquidation, or increase the authorized amount of AMPS or any other Preferred
Shares, 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 shares
of
44
<PAGE>
AMPS or any other Preferred Shares. To the extent permitted under the 1940
Act, in the event shares of AMPS are issued in more than one series, 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 shares of 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 10 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 Shares, including AMPS,
described above will in each case be in addition to a separate vote of the
requisite percentage of Common Shares 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
45
<PAGE>
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 capital stock 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, until a quorum is present.
(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.
46
<PAGE>
(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)(ii).
(e) Exclusive Remedy. Unless otherwise required by law, the Holders of
shares of AMPS shall not have any rights or preferences other than those
specifically set forth herein. The Holders of shares 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 shares of 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
47
<PAGE>
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 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 Trust shall complete and deliver to the Auction Agent,
Moody's and S&P 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 Moody's 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 with an aggregate Discounted Value equal to or greater than the AMPS
Basic Maintenance Amounts or on which the Trust fails to maintain Moody's
Eligible Assets with an aggregate Discounted Value which exceeds that AMPS Basic
Maintenance Amount by 5% or more. As long as required by S&P, the Trust will
also deliver an AMPS Basic Maintenance Report to the Auction Agent and S&P and a
Certificate of Minimum Liquidity to S&P as of (i) the seventh day of each month
(or, if such day is not a Business Day, the next succeeding Business Day) and
(ii) the twenty-first day of each month (or, if such day is not a Business Day,
the next succeeding Business Day), in each case on or before the third Business
Day after such day. A failure by the Trust to deliver an AMPS Basic Maintenance
Report under
48
<PAGE>
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 and a Certificate of Minimum Liquidity 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) and (with respect to S&P only while S&P
is rating the AMPS) such Certificate, (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 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) that (with respect to S&P only)
in such Certificate, the Trust determined the Minimum Liquidity Level and the
Trust's Deposit Securities in accordance with this Certificate of Designation,
including maturity or tender date, (v) with respect to the S&P rating on Florida
Municipal Bonds or Municipal Bonds, the issuer name, issue size and coupon rate
listed in such Report and (with respect to S&P only) such Certificate, that the
Independent Accountant has requested that S&P verify such information and the
Independent Accountant shall provide a listing in its letter of any differences,
(vi) 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 and
(with respect to S&P only) such Certificate,
49
<PAGE>
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), (vii) with respect to the bid or mean price (or such alternative
permissible factor used in calculating the Market Value) provided by the
custodian of the 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 and (with respect to S&P only) such Certificate to the bid or
mean price listed in such Report and (with respect to S&P only) such Certificate
as provided to the 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 (viii) with respect to such
confirmation to Moody's, that the Trust has satisfied the requirements of
paragraph 9(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
50
<PAGE>
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 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 shares of 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.
51
<PAGE>
(g) For so long as shares of 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.
8. Minimum Liquidity Level. (a) For so long as any shares of AMPS are
rated by S&P, the Trust shall be required to have, as of each Valuation Date,
Dividend Coverage Assets having in the aggregate a Market Value not less than
the Dividend Coverage Amount.
(b) As of each Valuation Date, as long as any shares of AMPS are rated
by S&P, the Trust shall determine (i) the Market Value of the Dividend Coverage
Assets owned by the Trust as of that Valuation Date, (ii) the Dividend Coverage
Amount on that Valuation Date, and (iii) whether the Minimum Liquidity Level is
met as of that Valuation Date. The calculations of the Dividend Coverage Assets,
the Dividend Coverage Amount and whether the Minimum Liquidity Level is met
shall be set forth in a certificate (a "Certificate of Minimum Liquidity") dated
as of the Valuation Date. The AMPS Basic Maintenance Report and the Certificate
of Minimum Liquidity may be combined in one certificate. The Trust shall cause
the Certificate of Minimum
52
<PAGE>
Liquidity to be delivered to S&P not later than the close of business on the
third Business Day after the Valuation Date applicable to such Certificate
pursuant to paragraph 7(b). The Minimum Liquidity Level shall be deemed to be
met as of any date of determination if the Trust has timely delivered a
Certificate of Minimum Liquidity relating to such date which states that the
same has been met and which is not manifestly inaccurate. In the event that a
Certificate of Minimum Liquidity is not delivered to S&P when required, the
Minimum Liquidity Level shall be deemed not to have been met as of the
applicable date.
(c) If the Minimum Liquidity Level is not met as of any Valuation Date,
then the Trust shall purchase or otherwise acquire Dividend Coverage Assets to
the extent necessary so that the Minimum Liquidity Level is met as of the fifth
Business Day following such Valuation Date. The Trust shall, by such fifth
Business Day, Provide to S&P a Certificate of Minimum Liquidity setting forth
the calculations of the Dividend Coverage Assets and the Dividend Coverage
Amount and showing that the Minimum Liquidity Level is met as of such fifth
Business Day together with a report of the custodian of the Trust's assets
confirming the amount of the Trust's Dividend Coverage Assets as of such fifth
Business Day.
9. Certain Other Restrictions.
(a) For so long as any shares of 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 shares of 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 with remaining
maturities of ten years of
53
<PAGE>
more ("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 $100,000 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 thirty 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 and on the Municipal Index exceeding
in number 25% of the quotient of the Market Value of the Trust's total assets
divided by $100,000 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 thirty days preceding the time of effecting such
transaction as reported by The Wall Street Journal;
(iii) the Trust will engage in Closing Transactions to close out any
outstanding futures contract which the Trust owns or has sold or any outstanding
option thereon owned by the Trust in the event (A) the Trust does not have S&P
Eligible Assets with an aggregate Discounted
54
<PAGE>
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 short-term, 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.
55
<PAGE>
(b) For so long as any shares of 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
impair the ratings then assigned to the shares of 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 thirty 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 the Market Value of all 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 40%
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
56
<PAGE>
rated by S&P, rated AAA by S&P) or (B) outstanding futures contracts based on
Treasury Bonds having an aggregate Market Value exceeding 80% of the aggregate
Market Value of all 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);
(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) 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;
(vii) 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
57
<PAGE>
(viii) 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 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 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
58
<PAGE>
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 shares of 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 9(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-I
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
(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 Account.
59
<PAGE>
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 shares of 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 shares of 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), (ii) engage in short sales of securities, (iii)
lend any securities, (iv) issue any class or series of shares of beneficial
interest 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 entity,
(vii) change the Pricing Service or (viii) engage in reverse repurchase
agreements.
10. 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.
11. Auction Procedures. (a) Certain definitions. As used in this
paragraph 11, the following terms shall have the following meanings, unless the
context otherwise requires:
60
<PAGE>
(i) "AMPS" shall mean the shares of AMPS being auctioned pursuant to
this paragraph 11.
(ii) "Auction Date" shall mean the first Business Day preceding the
first day of a Dividend Period.
(iii) "Available AMPS" shall have the meaning specified in paragraph
11(d)(i) below.
(iv) "Bid" shall have the meaning specified in paragraph 11(b)(i)
below.
(v) "Bidder" shall have the meaning specified in paragraph 11(b)(i)
below.
(vi) "Hold Order" shall have the meaning specified in paragraph
11(b)(i) below.
(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 shares of AMPS as follows:
<TABLE>
<CAPTION>
Credit Ratings Applicable Percentage of Applicable Percentage of
- --------------------------------------------------------- Reference Rate - No Reference Rate -
Moody's S&P Notification Notification
- ------------------------ ------------------------- -------------------------- ------------------------
<S> <C> <C> <C>
"aa3" or higher AA- or higher 110% 150%
"a3" to "al" A- to A+ 125% 160%
"baa3" to "baal" 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,
61
<PAGE>
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" shall have the meaning specified in paragraph 11(b)(i)
below.
(ix) "Sell Order" shall have the meaning specified in paragraph
11(b)(i) below.
(x) "Submission Deadline" shall mean 1:00 P.M., New York City time, on
any Auction Date or such other time on any Auction Date as may be specified by
the Auction Agent from time to time as the time by which each Broker-Dealer must
submit to the Auction Agent in writing all orders obtained by it for the Auction
to be conducted on such Auction Date.
(xi) "Submitted Bid" shall have the meaning specified in paragraph
11(d)(i) below.
(xii) "Submitted Hold Order" shall have the meaning specified in
paragraph 11(d)(i) below.
(xiii) "Submitted Order" shall have the meaning specified in paragraph
11(d)(i) below.
(xiv) "Submitted Sell Order" shall have the meaning specified in
paragraph 11(d)(i) below.
(xv) "Sufficient Clearing Bids" shall have the meaning specified in
paragraph 11(d)(i) below.
(xvi) "Winning Bid Rate" shall have the meaning specified in paragraph
11(d)(i) below.
(b) Orders by Existing Holders and Potential Holders.
(i) On or prior to the Submission Deadline on each Auction Date:
(A) each Existing Holder may submit to a Broker-Dealer information as
to:
62
<PAGE>
(1) the number of Outstanding shares, if any, of AMPS held by
such Existing Holder which such Existing Holder desires to continue to
hold without regard to the Applicable Rate for the next succeeding
Dividend Period;
(2) the number of Outstanding shares, if any, of AMPS held by
such Existing Holder which such Existing Holder desires to continue to
hold, provided that the Applicable Rate for the next succeeding
Dividend Period shall not be less than the rate per annum specified by
such Existing Holder; and/or
(3) the number of Outstanding shares, if any, of AMPS held by
such Existing Holder which such Existing Holder offers to sell without
regard to the Applicable Rate for the next succeeding Dividend Period;
and
(B) each Broker-Dealer, using a list of Potential Holders that shall be
maintained in good faith for the purpose of conducting a competitive Auction,
shall contact Potential Holders, including Persons that are not Existing
Holders, on such list to determine the number of Outstanding shares, if any, of
AMPS which each such Potential Holder offers to purchase, provided that the
Applicable Rate for the next succeeding Dividend Period shall not be less than
the rate per annum specified by such Potential Holder.
For the purposes hereof, the communication to a Broker-Dealer of
information referred to in clause (A) or (B) of this paragraph 11(b)(i) is
hereinafter referred to as an "Order" and each Existing Holder and each
Potential Holder placing an Order is hereinafter referred to as a "Bidder"; an
Order containing the information referred to in clause (A)(1) of this paragraph
11(b)(i) is hereinafter referred to as a "Hold Order"; an Order containing the
information referred to in clause (A)(2) or (B) of this paragraph 11(b)(i) is
hereinafter referred to as a "Bid"; and an
63
<PAGE>
Order containing the information referred to in clause (A)(3) of this
paragraph 11(b)(i) is hereinafter referred to as a "Sell Order".
(ii) (A) A Bid by an Existing Holder shall constitute an irrevocable
offer to sell:
(1) the number of Outstanding shares of AMPS specified in such
Bid if the Applicable Rate determined on such Auction Date, shall be
less than the rate per annum specified in such Bid; or
(2) such number or a lesser number of Outstanding shares of
AMPS to be determined as set forth in paragraph 11(e)(i)(D) of the
Applicable Rate determined on such Auction Date shall be equal to the
rate per annum, specified therein; or
(3) a lesser number of Outstanding shares of AMPS to be
determined as set forth in paragraph 11(e)(ii)(C) if such specified
rate per annum shall be higher than the Maximum Applicable Rate and
Sufficient Clearing Bids do not exist.
(B) A Sell Order by an Existing Holder shall constitute an irrevocable
offer to sell:
(1) the number of Outstanding shares of AMPS specified in such
Sell Order; or
(2) such number or a lesser number of Outstanding shares of
AMPS to be determined as set forth in paragraph 11(e)(ii)(C) if
Sufficient Clearing Bids do not exist.
(C) A Bid by a Potential Holder shall constitute an irrevocable offer
to purchase:
64
<PAGE>
(1) the number of Outstanding shares of AMPS specified in such
Bid if the Applicable Rate determined on such Auction Date shall be
higher than the rate per annum specified in such Bid; or
(2) such number or a lesser number of Outstanding shares of
AMPS to be determined as set forth in paragraph 11(e)(i)(E) if the
Applicable Rate determined on such Auction Date shall be equal to the
rate per annum specified therein.
(c) Submission of Orders by Broker-Dealers to Auction Agent.
(i) Each Broker-Dealer shall submit in writing or through the Auction
Agent's Auction Processing System to the Auction Agent prior to the Submission
Deadline on each Auction Date all Orders obtained by such Broker-Dealer and
specifying with respect to each Order:
(A) the name of the Bidder placing such Order;
(B) the aggregate number of Outstanding shares of AMPS that
are the subject of such Order;
(C) to the extent that such Bidder is an Existing Holder:
(1) the number of Outstanding shares, if any, of AMPS
subject to any Hold Order placed by such Existing Holder;
(2) the number of Outstanding shares, if any, of AMPS
subject to any Bid placed by such Existing Holder and the rate
per annum specified in such Bid; and
(3) the number of Outstanding shares, if any, of AMPS
subject to any Sell Order placed by such Existing Holder; and
65
<PAGE>
(D) to the extent such Bidder is a Potential Holder, the rate
per annum specified in such Potential Holder's Bid.
(ii) If any rate per annum specified in any Bid contains more than
three figures to the right of the decimal point, the Auction Agent shall round
such rate up to the next highest one-thousandth (.001) of 1%.
(iii) If an Order or Orders covering all of the Outstanding shares of
AMPS held by an Existing Holder are not submitted to the Auction Agent prior to
the Submission Deadline, the Auction Agent shall deem a Hold Order (in the case
of an Auction relating to a Dividend Period which is not a Special Dividend
Period).and a Sell Order (in the case of an Auction relating to a Special
Dividend Period) to have been submitted on behalf of such Existing Holder
covering the number of Outstanding shares of AMPS held by such Existing Holder
and not subject to Orders submitted to the Auction Agent.
(iv) If one or more Orders on behalf of an Existing Holder covering in
the aggregate more than the number of Outstanding shares of AMPS held by such
Existing Holder are submitted to the Auction Agent, such 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
shares of AMPS held by such Existing Holder; provided that if more than
one Hold Order is submitted on behalf of such Existing Holder and the
number of shares of AMPS subject to such Hold Orders exceeds the number
of Outstanding shares of AMPS held by such Existing Holder, the number
of shares of AMPS subject to each of such Hold Orders shall be reduced
pro rata
66
<PAGE>
so that such Hold Orders, in the aggregate, will cover exactly the
number of Outstanding shares of AMPS held by such Existing Holder;
(B) any Bids submitted on behalf of such Existing Holder shall be
considered valid, in the ascending order of their respective rates per annum if
more than one Bid is submitted on behalf of such Existing Holder, up to and
including the excess of the number of Outstanding shares of AMPS held by such
Existing Holder over the number of shares of AMPS subject to any Hold Order
referred to in paragraph 11(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 11(c)(iv)(A) above and of the
foregoing portion of this paragraph 11(c)(iv)(B) to any Bid or Bids specifying a
lower rate or rates per annum, the number of shares subject to each of such Bids
shall be reduced pro rata so that such Bids, in the aggregate, cover exactly
such remaining number of shares); and the number of shares, if any, subject to
Bids not valid under this paragraph 11(c)(iv)(B) shall be treated as the subject
of a Bid by a Potential Holder; and
(C) any Sell Order shall be considered valid up to and including the
excess of the number of Outstanding shares of AMPS held by such Existing Holder
over the number of shares of AMPS subject to Hold Orders referred to in
paragraph 11(c)(iv)(A) and Bids referred to in paragraph 11(c)(iv)(B); provided
that if more than one Sell Order is submitted on behalf of any Existing Holder
and the number of shares of AMPS subject to such Sell orders is greater than
such excess, the number of shares of AMPS subject to each of such Sell orders
shall be reduced pro rata so that such Sell Orders, in the aggregate, cover
exactly the number of shares of AMPS equal to such excess.
67
<PAGE>
(v) If more than one Bid is submitted on behalf of any Potential
Holder, each Bid submitted shall be a separate Bid with the rate per annum and
number of shares of AMPS therein specified.
(d) Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate.
(i) Not earlier than the Submission Deadline on each Auction Date, the
Auction Agent shall assemble all Orders submitted or deemed submitted to it by
the Broker-Dealers (each such Order as submitted or deemed submitted by a
Broker-Dealer being hereinafter referred to individually as a "Submitted Hold
Order", a "Submitted Bid" or a "Submitted Sell Order", as the case may be, or as
a "Submitted Order") and shall determine:
(A) the excess of the total number of Outstanding shares of
AMPS over the number of outstanding shares of AMPS that are the subject
of Submitted Hold Orders (such excess being hereinafter referred to as
the "Available AMPS");
(B) from the Submitted orders whether the number of Outstanding
shares of AMPS that are the subject of Submitted Bids by Potential
Holders specifying one or more rates per annum equal to or lower than
the Maximum Applicable Rate exceeds or is equal to the sum of:
(1) the number of Outstanding shares of AMPS that are
the subject of Submitted Bids by Existing Holders specifying one
or more rates per annum higher than the Maximum Applicable Rate,
and
(2) the number of Outstanding shares of AMPS that are
subject to Submitted Sell Orders (if such excess or such equality
exists (other than because the number of outstanding shares of
AMPS in clauses (1) and (2) above are each
68
<PAGE>
zero because all of the Outstanding shares of AMPS are the subject of
Submitted Hold Orders), such Submitted Bids by Potential Holders being
hereinafter referred to collectively as "Sufficient Clearing Bids");
and
(C) if Sufficient Clearing Bids exist, the lowest rate per annum
specified in the Submitted Bids (the "Winning Bid Rate") that if:
(1) each Submitted Bid from Existing Holders specifying the
Winning Bid Rate and all other Submitted Bids from Existing Holders
specifying lower rates per annum were rejected, thus entitling such
Existing Holders to continue to hold the shares of AMPS that are the
subject of such Submitted Bids, and
(2) each Submitted Bid from Potential Holders specifying the
Winning Bid Rate and all other Submitted Bids from Potential Holders
specifying lower rates per annum were accepted, thus entitling the
Potential Holders to purchase the shares of AMPS that are the subject
of such Submitted Bids, would result in the number of shares subject to
all Submitted Bids specifying the Winning Bid Rate or a lower rate per
annum being at least equal to the Available AMPS.
(ii) Promptly after the Auction Agent has made the determinations
pursuant to paragraph 11(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;
(B) if Sufficient Clearing Bids do not exist (other than
because all of the Outstanding shares of AMPS are the subject of
Submitted Hold Orders), that the
69
<PAGE>
Applicable Rate for the next succeeding Dividend Period shall be equal
to the Maximum Applicable Rate; or
(C) if all of the Outstanding shares of 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 59% of the Reference Rate
(or 90% 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 shares of
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 11(d)(i), the Submitted Bids and Submitted Sell Orders shall be
accepted or rejected and the Auction Agent shall take such other action as set
forth below:
(i) If Sufficient Clearing Bids have been made, subject to the
provisions of paragraph 11(e)(iii) and paragraph 11(e)(iv), Submitted Bids and
Submitted Sell Orders shall be accepted or rejected in the following order of
priority and all other Submitted Bids shall be rejected:
(A) the Submitted Sell Orders of Existing Holders shall be
accepted and the Submitted Bid of each of the Existing Holders
specifying any rate per annum that is
higher than the Winning Bid Rate shall be accepted, thus requiring each
such Existing Holder to sell the Outstanding shares of AMPS that are
the subject of such Submitted Sell Order or Submitted Bid;
70
<PAGE>
(B) the Submitted Bid of each of the Existing Holders
specifying any rate per annum that is lower than the Winning Bid Rate
shall be rejected, thus entitling each such Existing Holder to continue
to hold the Outstanding shares of AMPS that are the subject of such
Submitted Bid;
(C) the Submitted Bid of each of the Potential Holders
specifying any rate per annum that is lower than the Winning Bid Rate
shall be accepted;
(D) the Submitted Bid of each of the Existing Holders
specifying a rate per annum that is equal to the Winning Bid Rate shall
be rejected, thus entitling each such Existing Holder to continue to
hold the Outstanding shares of AMPS that are the subject of such
Submitted Bid, unless the number of Outstanding shares of AMPS subject
to all such Submitted Bids shall be greater than the number of
Outstanding shares of AMPS ("Remaining Shares") equal to the excess of
the Available AMPS over the number of Outstanding shares of AMPS
subject to Submitted Bids described in paragraph 11(e)(i)(B) and
paragraph 11(e)(i)(C), in which event the Submitted Bids of each such
Existing Holder shall be accepted, and each such Existing Holder shall
be required to sell Outstanding shares of AMPS, but only in an amount
equal to the difference between (1) the number of Outstanding shares of
AMPS then held by such Existing Holder subject to such Submitted Bid
and (2) the number of shares of AMPS obtained by multiplying (x) the
number of Remaining Shares by (y) a fraction the numerator of which
shall be the number of Outstanding shares of AMPS held by such Existing
Holder subject to such Submitted Bid and the denominator of which shall
be the sum of the numbers of Outstanding shares of AMPS subject to such
Submitted Bids made by all such Existing Holders that specified a rate
per annum equal to the Winning Bid Rate; and
71
<PAGE>
(E) the Submitted Bid of each of the Potential Holders
specifying a rate per annum that is equal to the Winning Bid Rate shall
be accepted but only in an amount equal to the number of Outstanding
shares of AMPS obtained by multiplying (x) the difference between the
Available AMPS and the number of Outstanding shares of AMPS subject to
Submitted Bids described in paragraph 11(e)(i)(B), paragraph
11(e)(i)(C) and paragraph 11(e)(i)(D) by (y) a fraction the numerator
of which shall be the number of Outstanding shares of AMPS subject to
such Submitted Bid and the denominator of which shall be the sum of the
number of Outstanding shares of AMPS subject to such Submitted Bids
made by all such Potential Holders that specified rates per annum equal
to the Winning Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other than because
all of the Outstanding shares of AMPS are subject to Submitted Hold Orders),
subject to the provisions of paragraph 11(e)(iii), Submitted Orders shall be
accepted or rejected as follows in the following order of priority and all other
Submitted Bids shall be rejected:
(A) the Submitted Bid of each Existing Holder specifying any rate
per annum that is equal to or lower than the Maximum Applicable Rate
shall be rejected, thus entitling such Existing Holder to continue to
hold the Outstanding shares of AMPS that are the subject of such
Submitted Bid;
(B) the Submitted Bid of each Potential Holder specifying any rate
per annum that is equal to or lower than the Maximum Applicable Rate
shall be accepted, thus requiring such Potential Holder to purchase the
Outstanding shares of AMPS that are the subject of such Submitted Bid;
and
72
<PAGE>
(C) the Submitted Bids of each Existing Holder specifying any rate
per annum that is higher than the Maximum Applicable Rate shall be
accepted and the Submitted Sell Orders of each Existing Holder shall be
accepted, in both cases only in an amount equal to the difference
between (1) the number of Outstanding shares of AMPS then held by such
Existing Holder subject to such Submitted Bid or Submitted Sell Order
and (2) the number of shares of AMPS obtained by multiplying (x) the
difference between the Available AMPS and the aggregate number of
Outstanding shares of AMPS subject to Submitted Bids described in
paragraph 11(e)(ii)(A) and paragraph 11(e)(ii)(B) by (y) a fraction the
numerator of which shall be the number of Outstanding shares of AMPS
held by such Existing Holder subject to such Submitted Bid or Submitted
Sell Order and the denominator of which shall be the number of
Outstanding shares of AMPS subject to all such Submitted Bids and
Submitted Sell Orders.
(iii) If, as a result of the procedures described in paragraph 11(e)(i)
or paragraph 11(e)(ii), any Existing Holder would be entitled or required to
sell, or any potential Holder would be entitled or required to purchase, a
fraction of a share of AMPS on any Auction Date, the Auction Agent shall, in
such manner as in its sole discretion it shall determine, round up or down the
number of shares of AMPS to be purchased or sold by any Exiting Holder or
Potential Holder on such Auction Date so that each Outstanding share of AMPS
purchased or sold by each Existing Holder or Potential Holder on such Auction
Date shall be a whole share of AMPS.
(iv) If, as a result of the procedures described in paragraph 11(e)(i),
any Potential Holder would be entitled or required to purchase less than a whole
share of AMPS on any Auction Date, the Auction Agent shall, in such manner as in
its sole discretion it shall determine, allocate shares of AMPS for purchase
among Potential Holders so that only whole shares of
73
<PAGE>
AMPS are purchased on such Auction Date by any Potential Holder, even if such
allocation results in one or more of such Potential Holders not purchasing any
shares of AMPS on such Auction Date.
(v) Based on the results of each Auction, the Auction Agent shall
determine, with respect to each Broker-Dealer that submitted Bids or Sell Orders
on behalf of Existing Holders or Potential Holders, the aggregate number of
Outstanding shares of AMPS to be purchased and the aggregate number of the
Outstanding shares of AMPS to be sold by such Potential Holders and Existing
Holders and, to the extent that such aggregate number of Outstanding shares to
be purchased and such aggregate number of outstanding shares to be sold differ,
the Auction Agent shall determine to which other Broker-Dealer or Broker-Dealers
acting for one or more purchasers such Broker-Dealer shall deliver, or from
which other Broker-Dealer or Broker-Dealers acting for one or more sellers such
Broker-Dealer shall receive, as the case may be, Outstanding shares of AMPS.
(f) Miscellaneous. The Board of Trustees may interpret the provisions
of this paragraph 11 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 Existing Holders of AMPS. An
Existing Holder (A) may sell, transfer or otherwise dispose of shares of AMPS
only pursuant to a Bid or Sell Order in accordance with the procedures described
in this paragraph 11 or to or through a Broker-Dealer or to a Person that has
delivered a signed copy of a Purchaser's Letter to the Auction Agent, provided
that in the case of all transfers other than pursuant to Auctions such Existing
Holder, its Broker-Dealer or its Agent Member advises the Auction Agent of such
transfer and (B) except as otherwise required by law, shall have the ownership
of the shares of AMPS held by it maintained in book entry form by the Securities
74
<PAGE>
Depository in the account of its Agent Member, which in turn will maintain
records of such Existing Holder's beneficial ownership. Neither the Trust nor
any affiliate shall submit an Order in any Auction. Any Existing Holder that is
an Affiliate shall not sell, transfer or otherwise dispose of shares of AMPS to
any Person other than the Trust. All of the Outstanding shares of AMPS shall be
represented by a single certificate registered in the name of the nominee of the
Securities Depository unless otherwise required by law or unless there is no
Securities Depository. If there is no Securities Depository, at the Trust's
option and upon its receipt of such documents as it deems appropriate, any
shares of AMPS may be registered in the Stock Register in the name of the
Existing Holder thereof and such Existing Holder thereupon will be entitled to
receive certificates therefor and required to deliver certificates therefor upon
transfer or exchange thereof.
12. Securities Depository; Share Certificates. (a) If there is a
Securities Depository, one certificate for all of the shares of AMPS shall be
issued to the Securities Depository and registered in the name of the Securities
Depository or its nominee. Additional certificates may be issued as necessary to
represent shares of AMPS. All such certificates shall bear a legend to the
effect that such certificates are issued subject to the provisions restricting
the transfer of shares of AMPS contained in this Certificate of Designation and
each Purchaser's Letter. 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 shares of AMPS. Except
as provided in paragraph (b) below, the Securities Depository or its nominee
will be the Holder, and no Existing Holder shall receive certificates
representing its ownership interest in such shares.
(b) If the Applicable Rate applicable to all shares of AMPS shall be
the Non-Payment Period Rate or there is no Securities Depository, the Trust may
at its option issue one or more
75
<PAGE>
new certificates with respect to such shares (without the legend referred to in
paragraph 12(a)) registered in the names of the Existing Holders or their
nominees and rescind the stop-transfer instructions referred to in paragraph
12(a) with respect to such shares.
13. Personal Liability. The Declaration of Trust establishing MuniYield
Florida Fund, dated January 21, 1992, 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 "MuniYield Florida Fund"
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.
Exhibit 2
================================================================================
BY-LAWS
OF
MUNIYIELD FLORIDA FUND
================================================================================
<PAGE>
MUNIYIELD FLORIDA FUND
BY-LAWS
These By-Laws are made and adopted pursuant to Section 2.7 of the
Declaration of Trust establishing MUNIYIELD FLORIDA FUND, dated January 21,
1992, as from time to time amended (hereinafter called the "Declaration"). All
words and terms capitalized in these By-Laws shall have the meaning or meanings
set forth for such words or terms in the Declaration.
ARTICLE I
Shareholder Meetings
Section 1.1. Chairman. The Chairman, if any, shall act as chairman at
all meetings of the Shareholders; in his absence, the President shall act as
chairman; and in the absence of the Chairman and President, the Trustee or
Trustees present at each meeting may elect a temporary chairman for the meeting,
who may be one of themselves.
Section 1.2. Proxies; Voting. Shareholders may vote either in person
or by duly executed proxy and each full share represented at the meeting shall
have one vote, all as provided in Article IX of the Declaration. No proxy shall
be valid after eleven (11) months from the date of its execution, unless a
longer period is expressly stated in such proxy.
Section 1.3. Closing of Transfer Books and Fixing Record Dates. For
the purpose of determining the Shareholders who are entitled to notice of or to
vote or act at any meeting, including any adjournment thereof, or who are
entitled to participate in from time to time close the transfer books or fix a
record date in the manner provided in Section 9.4 of the Declaration. If the
Trustees do not prior to any meeting of Shareholders so fix a record date or
close the
<PAGE>
transfer books, then the date of mailing notice of the meeting or the date upon
which the dividend resolution is adopted, as the case may be, shall be the
record date.
Section 1.4. Inspectors of Election. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the Chairman, if any, of any meeting of Shareholders may, and on the
request of any Shareholder or his proxy shall, appoint Inspectors of Election of
the meeting. The number of Inspectors shall be either one or three. If appointed
at the meeting on the request of one or more Shareholders or proxies, a majority
of Shares present shall determine whether one or three Inspectors are to be
appointed, but failure to allow such determination by the Shareholders shall not
affect the validity of the appointment of Inspectors of Election. In case any
person appointed as Inspector fails to appear or fails or refuses to act, the
vacancy may be filled by appointment made by the Trustees in advance of the
convening of the meeting or at the meeting by the person acting as chairman. The
Inspectors of Election shall determine the number of Shares outstanding, the
Shares represented at the meeting, the existence of a quorum, the authenticity,
validity and effect of proxies, shall receive votes, ballots or consents, shall
hear and determine all challenges and questions in any way arising in connection
with the right to vote, shall count and tabulate all votes or consents,
determine the results, and do such other acts as may be proper to conduct the
election or vote with fairness to all Shareholders. If there are three
Inspectors of Election, the decision, act or certificate of a majority is
effective in all respects as the decision, act or certificate of all. On request
of the Chairman, if any, of the meeting, or of any Shareholder or his proxy, the
Inspectors of Election shall make a report in writing of any challenge or
question or matter determined by them and shall execute a certificate of any
facts found by them.
2
<PAGE>
Section 1.5. Records at Shareholder Meetings. At each meeting of the
Shareholders there shall be open for inspection the minutes of the last previous
Shareholder Meeting of the Trust and a list of the Shareholders of the Trust,
certified to be true and correct by the Secretary or other proper agent of the
Trust, as of the record date of the meeting or the date of closing of transfer
books, as the case may be. Such list of Shareholders shall contain the name of
each Shareholder in alphabetical order and the address of and number of Shares
owned by such Shareholder. Shareholders shall have such other rights and
procedures of inspection of the books and records of the Trust as are granted to
shareholders of a Massachusetts business corporation.
ARTICLE II
Trustees
Section 2.1. Annual and Regular Meetings. The Trustees shall hold an
annual meeting for the election of officers and the transaction of other
business which may come before such meeting, on such date as shall be fixed by
the Trustees from time to time. Regular meetings of the Trustees may be held
without call or notice at such place or places and times as the Trustees may by
resolution provide from time to time.
Section 2.2. Special Meetings. Special Meetings of the Trustees shall
be held upon the call of the Chairman, if any, the President, the Secretary or
any two Trustees, at such time, on such day, and at such place, as shall be
designated in the notice of the meeting.
Section 2.3. Notice. Notice of a meeting shall be given by mail or by
telegram (which term shall include a cablegram) or delivered personally. If
notice is given by mail, it shall be mailed not later than 48 hours preceding
the meeting and if given by telegram or personally, such telegram shall be sent
or delivery made not later than 48 hours preceding the meeting. Notice by
3
<PAGE>
telephone shall constitute personal delivery for these purposes. Notice of a
meeting of Trustees may be waived before or after any meeting by signed written
waiver. Neither the business to be transacted at, nor the purpose of, any
meeting of the Board of Trustees need be stated in the notice or waiver of
notice of such meeting, and no notice need be given of action proposed to be
taken by unanimous written consent. The attendance of a Trustee at a meeting
shall constitute a waiver of notice of such meeting except where a Trustee
attends a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting has not been lawfully called or
convened.
Section 2.4. Chairman; Records. The Chairman, if any, shall act as
chairman at all meetings of the Trustees; in his absence, the President shall
act as chairman; and, in the absence of the Chairman and the President, the
Trustees present shall elect one of their number to act as temporary chairman.
The results of all actions taken at a meeting of the Trustees, or by unanimous
written consent of the Trustees, shall be recorded by the Secretary.
Section 2.5. Retirement. Each Trustee's term of office shall expire as
of December 31 of the year in which such Trustee reaches seventy-two years of
age.
ARTICLE III
Officers
Section 3.1. Officers of the Trust. The officers of the Trust shall
consist of a Chairman, if any, a President, a Secretary, a Treasurer and such
other officers or assistant officers, including Vice Presidents, as may be
elected by the Trustees. Any two or more of the offices may be held by the same
person, except that the same person may not be both President and Secretary. The
Trustees may designate a Vice President as an Executive Vice President and may
designate the
4
<PAGE>
order in which the other Vice Presidents may act. The Chairman and the President
shall be Trustees, but no other officer of the Trust need be a Trustee.
Section 3.2. Election and Tenure. At the initial organizational
meeting and thereafter at each annual meeting of the Trustees, the Trustees
shall elect the Chairman, if any, President, Secretary, Treasurer and such other
officers as the Trustees shall deem necessary or appropriate in order to carry
out the business of the Trust. Such officers shall hold office until the next
annual meeting of the Trustees and until their successors have been duly elected
and qualified. The Trustees may fill any vacancy in office or add any additional
officers at any time.
Section 3.3. Removal of Officer. Any officer may be removed at any
time, with or without cause, by action of a majority of the Trustees. This
provision shall not prevent the making of a contract of employment for a
definite term with any officer and shall have no effect upon any cause of action
which any officer may have as a result of removal in breach of a contract of
employment. Any officer may resign at any time by notice in writing signed by
such officer and delivered or mailed to the chairman, if any, President, or
Secretary, and such resignation shall take effect immediately upon receipt by
the. Chairman, if any, President, or Secretary, or at a later date according to
the terms of such notice in writing.
Section 3.4. Bonds and Surety. Any officer may be required by the
Trustees to be bonded for the faithful performance of his duties in such amount
and with such sureties as the Trustees may determine.
Section 3.5. Chairman, President, and Vice Presidents. The Chairman,
if any, shall, if present, preside at all meetings of the Shareholders and of
the Trustees and shall exercise and perform such other powers and duties as may
from time to time be assigned to him by the Trustees. Subject to such
supervisory powers, if any, as may be given by the Trustees to the
5
<PAGE>
Chairman, if any, the President shall be the chief executive officer of the
Trust and, subject to the control of the Trustees, shall have general
supervision, direction and control of the business of the Trust and of its
employees and shall exercise such general powers of management as are usually
vested in the office of President of a corporation. In the absence of the
Chairman, if any, the President shall preside at all meetings of the
Shareholders and the Trustees. The President shall be, ex-officio, a member of
all standing committees, except as otherwise provided in the resolutions or
instruments creating any such committees. Subject to direction of the Trustees,
the Chairman, if any, and the President shall each have power in the name and on
behalf of the Trust to execute any and all loan documents, contracts,
agreements, deeds, mortgages, and other instruments in writing, and to employ
and discharge employees and agents of the Trust. Unless otherwise directed by
the Trustees, the Chairman, if any, and the President shall each have full
authority and power, on behalf of all of the Trustees, to attend and to act and
to vote, on behalf of the Trust at any meetings of business organizations in
which the Trust holds an interest, or to confer such powers upon any other
persons, by executing any proxies duly authorizing such persons. The Chairman,
if any, and the President shall have such further authorities and duties as the
Trustees shall from time to time determine. In the absence or disability of the
President, the Vice Presidents in order of their rank as fixed by the Trustees
or, if more than one and not ranked, the Vice President designated by the
Trustees, shall perform all of the duties of the President, and when so acting
shall have all the powers of and be subject to all of the restrictions upon the
President. Subject to the direction of the Trustees, and of the President, each
Vice President shall have the power in the name and on behalf of the Trust to
execute any and all loan documents, contracts, agreements, deeds, mortgages and
other instruments in writing, and, in addition, shall
6
<PAGE>
have such other duties and powers as shall be designated from time to time by
the Trustees or by the President.
Section 3.6. Secretary. The Secretary shall keep the minutes of all
meetings of, and record all votes of, Shareholders, Trustees and the Executive
Committee, if any. He shall be custodian of the seal of the Trust, if any, and
he (and any other person so authorized by the Trustees) shall affix the seal or,
if permitted, a facsimile thereof, to any instrument executed by the Trust which
would be sealed by a Massachusetts corporation executing the same or a similar
instrument and shall attest the seal and the signature or signatures of the
officer or officers executing such instrument on behalf of the Trust. The
Secretary shall also perform any other duties commonly incident to such office
in a Massachusetts business corporation, and shall have such other authorities
and duties as the Trustees shall from time to time determine.
Section 3.7. Treasurer. Except as otherwise directed by the Trustees,
the Treasurer shall have the general supervision of the monies, funds,
securities, notes receivable and other valuable papers and documents of the
Trust, and shall have and exercise under the supervision of the Trustees and of
the President all powers and duties normally incident to his office. He may
endorse for deposit or collection all notes, checks and other instruments
payable to the Trust or to its order. He shall deposit all funds of the Trust in
such depositories as the Trustees shall designate. He shall be responsible for
such disbursement of the funds of the Trust as may be ordered by the Trustees or
the President. He shall keep accurate account of the books of the Trust's
transactions which shall be the property of the Trust, and which together with
all other property of the Trust in his possession, shall be subject at all times
to the inspection and control of the Trustees. Unless the Trustees shall
otherwise determine, the Treasurer shall be the principal accounting officer of
the Trust and shall also be the principal financial officer of the Trust. He
7
<PAGE>
shall have such other duties and authorities as the Trustees shall from time to
time determine. Notwithstanding anything to the contrary herein contained, the
Trustees may authorize any adviser, administrator, manager or transfer agent to
maintain bank accounts and deposit and disburse funds of the Trust.
Section 3.8. Other Officers and Duties. The Trustees may elect such
other officers and assistant officers as they shall from time to time determine
to be necessary or desirable in order to conduct the business of the Trust.
Assistant officers shall act generally in the absence of the officer whom they
assist and shall assist that officer in the duties of his office. Each officer,
employee and agent of the Trust shall have such other duties and authority as
may be conferred upon him by the Trustees or delegated to him by the President.
ARTICLE IV
Miscellaneous
Section 4.1. Custodians. In accordance with Section 7.1 of the
Declaration, the funds of the Trust shall be deposited with such custodian or
custodians as the Trustees shall designate and shall be drawn out on checks,
drafts or other orders signed by such officer, officers, agent or agents
(including any adviser, administrator or manager), as the Trustees may from time
to time authorize.
Section 4.2. Signatures. All contracts and other instruments shall be
executed on behalf of the Trust by such officer, officers,, agent or agents, as
provided in these By-Laws or as the Trustees may from time to time by resolution
provide.
Section 4.3. Seal. The seal of the Trust, if any, may be affixed to
any document, and the seal and its attestation may be lithographed, engraved or
otherwise printed on any document with
8
<PAGE>
the same force and effect as if it had been imprinted and attested manually in
the same manner and with the same effect as if done by a Massachusetts business
corporation.
ARTICLE V
Share Certificates and Share Transfers
Section 5.1. Share Certificates. Each holder of Shares of the Trust
shall be entitled upon request to have a certificate or certificates, in such
form as shall be approved by the Trustees, representing the number of Shares
owned by him, provided, however, that certificates for fractional shares shall
not be delivered in any case. The certificates representing Shares shall be
signed by or in the name of the Trust by the President or a Vice President and
by the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer and sealed with the seal of the Trust. Any or all of the signatures on
the seal on the certificate may be a facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate shall be issued, it may be issued by the Trust
with the same effect as if such officer, transfer agent or registrar were still
in office at the date of issue.
Section 5.2. Transfer Agents, Registrars and the Like. As provided in
Section 6.6 of the Declaration, the Trustees shall have authority to employ and
compensate such transfer agents and registrars with respect to the Shares of the
Trust as the Trustees shall deem necessary or desirable. In addition, the
Trustees shall have power to employ and compensate such dividend disbursing
agents, warrant agents and agents for the reinvestment of dividends as they
shall deem necessary or desirable. Any of such agents shall have such power and
authority as is delegated to any of them by the Trustees.
9
<PAGE>
Section 5.3. Transfer of Shares. The Shares of the Trust shall be
transferable on the books of the Trust only upon delivery to the Trustees or a
transfer agent of the Trust of proper documentation as provided in Section 6.7
of the Declaration, and on surrender of the certificate or certificates, if
issued, for such Shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. The Trust, or its
transfer agents, shall be authorized to refuse any transfer unless and until
presentation of such evidence as may be reasonably required to show that the
requested transfer is proper.
Section 5.4. Registered Shareholders. The Trust may deem and treat the
holder of record of any Share as the absolute owner thereof for all purposes and
shall not be required to take any notice of any right or claim of right of any
other person.
Section 5.5. Regulations. The Trustees may make such additional rules
and regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of Shares of the Trust.
Section 5.6. Lost, Destroyed or Mutilated Certificates. The holder of
any certificate representing Shares of the Trust shall immediately notify the
Trust of any loss, destruction or mutilation of such certificate, and the Trust
may issue a new certificate in the place of any certificate theretofore issued
by it which the owner thereof shall allege to have been lost or destroyed or
which shall have been mutilated, and the Trustees may, in their discretion,
require such owner or his legal representatives to give the Trust a bond in such
sum, limited or unlimited, and in such form and with such surety or sureties, as
the Trustees in their absolute discretion shall determine, to indemnify the
Trust against any claim that may be made against it on account of the alleged
loss or destruction of any such certificate, or issuance of a new certificate.
Anything herein to the contrary notwithstanding, the Trustees in their absolute
discretion, may refuse to
10
<PAGE>
issue any such new certificates, except pursuant to legal proceedings under the
laws of the Commonwealth of Massachusetts.
ARTICLE VI
Advancement of Indemnification Moneys
Section 6.1. Conditions to Advancement. Insofar as the conditional
advancing of indemnification moneys to Trustees, officers, employees or agents
of the Trust pursuant to Section 5.3 of the Declaration 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 that he is entitled to receive from the Trust
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 Trust 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 Trust'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.
11
<PAGE>
ARTICLE VII
Amendment of By-Laws
Section 7.1. Amendment and Repeal of By-Laws. In accordance with
Section 2.7 of the Declaration, the Trustees shall have the power to alter,
amend or repeal the By-Laws or adopt new By-laws at any time. Action by the
Trustees with respect to the By-Laws shall be taken by an affirmative vote of a
majority of the Trustees. The Trustees shall in no event adopt By-Laws which are
in conflict with the Declaration, and any apparent inconsistency shall be
construed in favor of the related provisions in the Declaration.
The Declaration establishing MuniYield Florida Fund, 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 "MuniYield Florida
Fund" 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 MuniYield Florida Fund 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 said
MuniYield Florida Fund but the "Trust Property" only shall be liable.
12
COMMON SHARES COMMON SHARES
Par Value $0.10 Par Value $0.10
ORGANIZED AS A BUSINESS TRUST UNDER
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
MUNIYIELD FLORIDA FUND
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON SHARES OF BENEFICIAL INTEREST OF
MUNIYIELD FLORIDA FUND (THE "TRUST") TRANSFERABLE ON THE BOOKS OF THE TRUST BY
THE HOLDER IN PERSON OR BY DULY AUTHORIZED ATTORNEY UPON SURRENDER OF THIS
CERTIFICATE PROPERLY ENDORSED. THIS CERTIFICATE AND THE SHARES REPRESENTED
HEREBY ARE ISSUED AND SHALL BE HELD SUBJECT TO ALL THE PROVISIONS OF THE
DECLARATION OF TRUST, DATED JANUARY 21, 1992 (A COPY OF WHICH HAS BEEN FILED
WITH THE SECRETARY OF THE COMMONWEALTH OF MASSACHUSETTS), AND OF THE BY-LAWS OF
THE TRUST AND OF ALL THE AMENDMENTS FROM TIME TO TIME MADE THERETO. THE
DECLARATION OF TRUST PROVIDES THAT THE NAME MUNIYIELD FLORIDA FUND REFERS TO THE
TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES AND NOT AS INDIVIDUALS
OR PERSONALLY AND NO TRUSTEE, SHAREHOLDER, OFFICER, EMPLOYEE OR AGENT OF THE
TRUST MAY BE HELD TO ANY PERSONAL LIABILITY, NOR MAY RESORT BE HAD TO THEIR
PRIVATE PROPERTY FOR THE SATISFACTION OF ANY OBLIGATION OR CLAIM OTHERWISE IN
CONNECTION WITH THE AFFAIRS OF THE TRUST BUT THE TRUST PROPERTY ONLY SHALL BE
LIABLE. THIS CERTIFICATE IS NOT VALID UNLESS COUNTERSIGNED AND REGISTERED BY THE
TRANSFER AGENT AND REGISTRAR.
WITNESS THE FACSIMILE SEAL OF THE TRUST AND THE FACSIMILE SIGNATURE OF ITS DULY
AUTHORIZED OFFICERS.
Dated:
Countersigned and Registered:
/s/ Arthur Zeikel THE BANK OF NEW YORK
- -----------------
President
By Transfer Agent
/s/ Mark B. Goldfus and Registrar
- -------------------
Secretary
Authorized Signature
<PAGE>
MUNIYIELD FLORIDA FUND
A full statement of the designations and any preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the shares of each
class and series of shares which the Trust is authorized to issue and the
differences in the relative rights and preferences between the shares of each
class and series to the extent that they have been set, and the authority of the
Board of Trustees to set the relative rights and preferences of subsequent
classes and series, will be furnished by the Trust to any shareholder, without
charge, upon request to the Secretary of the Trust at its principal office.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM--as tenants in common UNIF GIFT MIN ACT--______ Custodian ______
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with right under Uniform Gifts to Minors Act _________
of survivorship and not as tenants (State)
in common
</TABLE>
For value received, ______________________ hereby sell, assign and transfer unto
Please insert social security or other identifying number of assignee
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address, Including Zip Code, of Assignee)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------- Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint
- -------------------------------------------------------------------- Attorney to
transfer the said shares on the books of the within-named Trust with full power
of substitution in the premises.
Dated:________________________
-------------------------------------------
Signatures must be guaranteed by a national bank or other bank
which is a member of the Federal Reserve System (not a savings
bank) or by a member firm of any national or regional stock
exchange. Notarized signatures are not sufficient.
NOTICE: The Signature to this assignment must correspond with
the name as written upon the face of the Certificate
in every particular, without alteration or enlargement
or any change whatsoever.
Auction Market Preferred Shares
NUMBER 1 1,100 SHARES
MUNIYIELD FLORIDA FUND
ORGANIZED AS A BUSINESS TRUST UNDER SEE REVERSE FOR
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS CERTAIN DEFINITIONS
THIS CERTIFICATE IS TRANSFERABLE IN NEW YORK, NY CUSIP # 626297204
THIS CERTIFIES THAT
CEDE & CO.
IS THE OWNER OF ELEVEN HUNDRED (1,100)
FULLY PAID AND NON-ASSESSABLE SHARES OF AUCTION MARKET PREFERRED SHARES OF
BENEFICIAL INTEREST, PAR VALUE $.10 PER SHARE, LIQUIDATION PREFERENCE $50,000
PER SHARE PLUS AN AMOUNT EQUAL TO ACCUMULATED BUT UNPAID DIVIDENDS THEREON
(WHETHER OR NOT EARNED OR DECLARED) OF
MUNIYIELD FLORIDA FUND
TRANSFERABLE ON THE BOOKS OF SAID TRUST IN PERSON OR BY DULY AUTHORIZED ATTORNEY
UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED. THIS CERTIFICATE IS NOT
VALID UNTIL COUNTERSIGNED BY THE TRANSFER AGENT AND REGISTERED BY THE REGISTRAR.
THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE ISSUED AND SHALL BE HELD
SUBJECT TO ALL THE PROVISIONS OF THE DECLARATION OF TRUST, DATED JANUARY 21,
1992 (A COPY OF WHICH HAS BEEN FILED WITH THE SECRETARY OF THE COMMONWEALTH OF
MASSACHUSETTS), AND OF THE BY-LAWS OF THE TRUST AND OF ALL THE AMENDMENTS FROM
TIME TO TIME MADE THERETO. THE DECLARATION OF TRUST PROVIDES THAT THE NAME
MUNIYIELD FLORIDA FUND REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY
AS TRUSTEES AND NOT AS INDIVIDUALS OR PERSONALLY AND NO TRUSTEE, SHAREHOLDER,
OFFICER, EMPLOYEE OR AGENT OF THE TRUST MAY BE HELD TO ANY PERSONAL LIABILITY,
NOR MAY RESORT BE HAD TO THEIR PRIVATE PROPERTY FOR THE SATISFACTION OF ANY
OBLIGATION OR CLAIM OTHERWISE IN CONNECTION WITH THE AFFAIRS OF THE TRUST BUT
THE TRUST PROPERTY ONLY SHALL BE LIABLE.
IN WITNESS WHEREOF, MUNIYIELD FLORIDA FUND HAS CAUSED ITS SEAL TO BE HERETO
AFFIXED AND THIS CERTIFICATE TO BE EXECUTED IN ITS NAME AND BEHALF BY ITS DULY
AUTHORIZED OFFICERS.
Dated: April 10, 1992
Countersigned and Registered:
IBJ SCHRODER BANK & TRUST COMPANY /s/ Kenneth A. Jacob
(New York) Transfer Agent --------------------
Vice President
By: /s/ Mark B. Goldfus
------------- --------------------
Authorized Signature Secretary
<PAGE>
THE TRANSFER OF THE AUCTION MARKET PREFERRED SHARES OF BENEFICIAL INTEREST
REPRESENTED HEREBY IS SUBJECT TO THE RESTRICTIONS CONTAINED IN THE TRUST'S
CERTIFICATE OF DESIGNATION AND THE PURCHASER'S LETTERS REFERRED TO THEREIN. THE
TRUST WILL FURNISH INFORMATION ABOUT SUCH RESTRICTION TO ANY SHAREHOLDER,
WITHOUT CHARGE, UPON REQUEST TO THE SECRETARY OF THE TRUST.
MUNIYIELD FLORIDA FUND
A full statement of the designations and any preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of each class and series
of shares of beneficial interest which the Trust is authorized to issue and the
differences in the relative rights and preferences between the shares of each
class to the extent that they have been set, and the authority of the Trustees
to set the relative rights and preferences of subsequent classes, will be
furnished by the Trust to any shareholder, without charge, upon request to the
Secretary of the Trust at its principal office.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM--as tenants in common UNIF GIFT MIN ACT--______ Custodian ______
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with right under Uniform Gifts to Minors Act _________
of survivorship and not as tenants (State)
in common
</TABLE>
Additional abbreviations also may be used though not in the above list.
For value received, ______________________ hereby sell, assign and transfer unto
Please insert social securities or other identifying number of assignee
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address, Including Zip Code, of Assignee)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------- shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- -------------------------------------------------------------------- Attorney to
transfer the said stock on the books of the within named Trust with full power
of substitution in the premises.
Dated:________________________
------------------------------------------------------
NOTICE: The Signature to this assignment must correspond with
the name as written upon the face of the Certificate
in every particular, without alteration or enlargement
or any change whatsoever.
Exhibit 6
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 14th day of February, 1992, by and between
MUNIYIELD FLORIDA FUND, a Massachusetts business trust (hereinafter referred to
as the "Fund"), and FUND ASSET MANAGEMENT, INC., a Delaware corporation
(hereinafter referred to as the "Investment Adviser").
W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as a closed-end management
investment company registered under the Investment Company Act of 1940, as
amended (hereinafter referred to as the "Investment Company Act"); and
WHEREAS, the Investment Adviser is engaged principally in rendering
management and investment advisory services and is registered as an investment
adviser under the Investment Adviser's Act of 1940; and
WHEREAS, the Fund desires to retain the Investment Adviser to provide
management and investment advisory services to the Fund in the manner and on the
terms hereinafter set forth; and
WHEREAS, the Investment Adviser is willing to provide management and
investment advisory services to the Fund on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund and the Investment Adviser hereby agree as
follows:
ARTICLE I
Duties of the Investment Adviser
The Fund hereby employs the Investment Adviser to act as a manager and
investment adviser of the Fund and to furnish, or arrange for affiliates to
furnish, the management and investment advisory services described below,
subject to the policies of, review by and overall control of the Board of
Trustees of the Fund, for the period and on the terms and conditions set forth
in this Agreement. The Investment Adviser hereby accepts such employment and
agrees during such period, at its own expense, to render, or arrange for the
rendering of, such services and to assume the obligations herein set forth for
the compensation provided for herein. The
<PAGE>
Investment Adviser and its affiliates shall for all purposes herein be deemed to
be independent contractors and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Fund in any way or
otherwise be deemed agents of the Fund.
(a) Investment Advisory Services. The Investment Adviser shall perform
(or arrange for the performance by affiliates of) the management and
administrative services necessary for the operation of the Fund including
administering shareholder accounts and handling shareholder relations. The
Investment Adviser shall provide the Fund with office space, facilities,
equipment and necessary personnel and such other services as the Investment
Adviser, subject to review by the Board of Trustees, shall from time to time
determine to be necessary or useful to perform its obligations under this
Agreement. The Investment Adviser shall also, on behalf of the Fund, conduct
relations with custodians, depositories, transfer agents, pricing agents,
dividend disbursing agents, other shareholder servicing agents, accountants,
attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers,
banks and such other persons in any such other capacity deemed to be necessary
or desirable. The Investment Adviser shall generally monitor the Fund's
compliance with investment policies and restrictions as set forth in filings
made by the Fund under the Federal securities laws. The Investment Adviser shall
make reports to the Board of Trustees of its performance of obligations
hereunder and furnish advice and recommendations with respect to such other
aspects of the business and affairs of the Fund as it shall determine to be
desirable.
(b) Investment Advisory Services. The Investment Adviser shall provide
(or arrange for affiliates to provide) the Fund with such investment research,
advice and supervision as the latter may from time to time consider necessary
for the proper supervision of the assets of the Fund, shall furnish continuously
an investment program for the Fund and shall determine from time to time which
securities shall be purchased, sold or exchanged and what portion of the assets
of the Fund shall be held in the various securities in which the Fund invests,
options, futures, options on futures or cash, subject always to the restrictions
of the Declaration of Trust and By-Laws of the Fund, as amended from time to
time, the provisions of the Investment Company Act and the statements relating
to the Fund's investment objectives, investment policies and investment
restrictions as the same are set forth in filings made by the Fund under the
Federal securities laws. The Investment Adviser shall make decisions for the
Fund as to foreign currency matters and make determinations as to foreign
exchange contracts, foreign
2
<PAGE>
currency options, foreign currency futures and related options on foreign
currency futures. The Investment Adviser shall make decisions for the Fund as to
the manner in which voting rights, rights to consent to corporate action and any
other rights pertaining to the Fund's portfolio securities shall be exercised.
Should the Trustees at any time, however, make any definite determination as to
investment policy and notify the Investment Adviser thereof in writing, the
Investment Adviser shall be bound by such determination for the period, if any,
specified in such notice or until similarly notified that such determination has
been revoked. The Investment Adviser shall take, on behalf of the Fund, all
actions which it deems necessary to implement the investment policies determined
as provided above, and in particular to place all orders for the purchase or
sale of portfolio securities for the Fund's account with brokers or dealers
selected by it, and to that end, the Investment Adviser is authorized as the
agent of the Fund to give instructions to the Custodian of the Fund as to
deliveries of securities and payments of cash for the account of the Fund. In
connection with the selection of such brokers or dealers and the placing of such
orders with respect to assets of the Fund, the Investment Adviser is directed at
all times to seek to obtain execution and prices within the policy guidelines
determined by the Board of Trustees and set forth in filings made by the Fund
under the Federal securities laws. Subject to this requirement and the
provisions of the Investment Company Act, the Securities Exchange Act of 1934,
as amended, and other applicable provisions of law, the Investment Adviser may
select brokers or dealers with which it or the Fund is affiliated.
ARTICLE II
Allocation of Charges and Expenses
(a) The Investment Adviser. The Investment Adviser assumes and shall
pay for maintaining the staff and personnel necessary to perform its obligations
under this Agreement, and shall at its own expense, provide the office space,
facilities, equipment and necessary personnel which it is obligated to provide
under Article I hereof, and shall pay all compensation of officers of the Fund
and all Trustees of the Fund who are affiliated persons of the Investment
Adviser.
(b) The Fund. The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund including, without limitation: taxes, expenses for
legal and auditing services, costs of printing proxies, stock certificates,
shareholder reports, prospectuses, charges of the custodian,
3
<PAGE>
any sub-custodian and transfer agent, expenses of portfolio transactions,
Securities and Exchange Commission fees, expenses of registering the shares
under Federal, state and foreign laws, fees and actual out-of-pocket expenses of
Trustees who are not affiliated persons of the Investment Adviser, accounting
and pricing costs (including the daily calculation of the net asset value),
insurance, interest, brokerage costs, litigation and other extraordinary or
non-recurring expenses, and other expenses properly payable by the Fund. It is
also understood that the Fund will reimburse the Investment Adviser for its
costs in providing accounting services to the Fund.
ARTICLE III
Compensation of the Investment Adviser
(a) Investment Advisory Fee. For the services rendered, the facilities
furnished and expenses assumed by the Investment Adviser, the Fund shall pay to
the Investment Adviser at the end of each calendar month a fee based upon the
average weekly value of the net assets of the Fund at the annual rate of 0.50 of
1.0% (0.50%) of the average weekly net assets of the Fund (i.e., the average
weekly value of the total assets of the Fund, minus the sum of accrued
liabilities of the Fund and accumulated dividends on outstanding preferred
shares), commencing on the day following effectiveness hereof. For purposes of
this calculation, average weekly net assets is determined at the end of each
month on the basis of the average net assets of the Fund for each week during
the month. The assets for each weekly period are determined by averaging the net
assets at the last business day of a week with the net assets at the last
business day of the prior week. It is understood that the liquidation preference
of any outstanding preferred shares (other than accumulated dividends) is not
considered a liability in determining the Fund's average weekly net assets. If
this Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calculation of the fee as set forth above. Subject to the provisions of
subsection (b) hereof, payment of the Investment Adviser's compensation for the
preceding month shall be made as promptly as possible after completion of the
computations contemplated by subsection (b) hereof. During any period when the
determination of net asset value is suspended by the Board of Trustees, the
average net asset value of a share for the last week prior to such suspension
shall for this purpose be deemed to be the net asset value at the close of each
succeeding week until it is again determined.
4
<PAGE>
(b) Expense Limitations. In the event the operating expenses of the
Fund, including amounts payable to the Investment Adviser pursuant to subsection
(a) hereof, for any fiscal year ending on a date on which this Agreement is in
effect exceed the expense limitations applicable to the Fund imposed by
applicable state securities laws or regulations thereunder, as such limitations
may be raised or lowered from time to time, the Investment Adviser shall reduce
its management and investment advisory fee by the extent of such excess and, if
required pursuant to any such laws or regulations, will reimburse the Fund in
the amount of such excess, provided, however, to the extent permitted by law,
there shall be excluded from such expenses the amount of any interest, taxes,
brokerage fees and commissions and extraordinary expenses (including but not
limited to legal claims and liabilities and litigation costs and any
indemnification related thereto) paid or payable by the Fund. Whenever the
expenses of the Fund exceed a pro rata portion of the applicable annual expense
limitations, the estimated amount of reimbursement under such limitations shall
be applicable as an offset against the monthly payment of the fee due to the
Investment Adviser. Should two or more such expenses limitations be applicable
as at the end of the last business day of the month, that expense limitation
which results in the largest reduction in the Investment Adviser's fee shall be
applicable.
ARTICLE IV
Limitation of Liability of the Investment Adviser
The Investment Adviser shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in the management of the Fund, except for willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties hereunder. As used in this
Article IV, the term "Investment Adviser" shall include any affiliates of the
Investment Adviser performing services for the Fund contemplated hereby and
directors, officers and employees of the Investment Adviser and such affiliates.
ARTICLE V
Activities of the Investment Adviser
The services of the Investment Adviser to the Fund are not to be deemed
to be exclusive: the Investment Adviser and any person controlled by or under
common control with the Investment Adviser (for purposes of this Article V
referred to as "affiliates") are free to render
5
<PAGE>
services to others. It is understood that Trustees, officers, employees and
shareholders of the Fund are or may become interested in the Investment Adviser
and its affiliates, as directors, officers, employees, partners and shareholders
or otherwise, and that directors, officers, employees, partners and shareholders
of the Investment Adviser and its affiliates are or may become similarly
interested in the Fund, and that the Investment Adviser and directors, officers,
employees, partners and shareholders of its affiliates may become interested in
the Fund as shareholder or otherwise.
ARTICLE VI
Duration and Termination of this Agreement
This Agreement shall become effective as of the date first above
written and shall remain in force until January 31, 1994 and thereafter, but
only so long as such continuance is specifically approved at least annually by
(i) the Board of Trustees of the Fund, or by the vote of a majority of the
outstanding voting securities of the Fund, and (ii) a majority of those Trustees
who are not parties to this Agreement or interested persons of any such party
cast in person at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of
any penalty, by the Board of Trustees or by vote of a majority of the
outstanding voting securities of the Fund, or by the Investment Adviser, on
sixty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment.
ARTICLE VII
Amendments of this Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the vote of a majority of outstanding voting
securities of the Fund, and (ii) a majority of those Trustees who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
ARTICLE VIII
Definitions of Certain Terms
The terms "vote of a majority of the outstanding voting securities"
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the
6
<PAGE>
respective meanings specified in the Investment Company Act and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act.
ARTICLE IX
Governing Law
This Agreement shall be construed in accordance with laws of the State
of New York and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
ARTICLE X
Personal Liability
The Declaration of Trust establishing MuniYield Florida Fund, dated
January 21, 1992, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name "MuniYield Florida Fund" refers to the
Trustees under the Declaration collectively as Trustees, but not as individuals
of personally; and no Trustee, shareholder, officer, employee or agent of the
Fund 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 Fund, but the "Trust Property" only shall be
liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MUNIYIELD FLORIDA FUND
By /s/ K. A. Jacob
--------------------------------------
(Authorized Signatory)
FUND ASSET MANAGEMENT, INC.
By /s/ Mark B. Goldfus
--------------------------------------
(Authorized Signatory)
7
Exhibit 7(a)
7,000,000 Shares
MuniYield Florida Fund
(a Massachusetts business trust)
Common Shares
(Par Value $0.10 Per Share)
PURCHASE AGREEMENT
February 21, 1992
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
Merrill Lynch World Headquarters
World Financial Center
North Tower
New York, NY 10281-1305
Dear Sirs:
MuniYield Florida Fund, a Massachusetts business trust (the "Fund"),
and Fund Asset Management, Inc., a Delaware corporation (the "Adviser"), each
confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated (the "Underwriter"), with respect to the sale by the Fund and
the purchase by the Underwriter of 7,000,000 common shares of beneficial
interest, par value $.10 per share, of the Fund (the "Common Shares") and, with
respect to the grant by the Fund to the Underwriter of the option described in
Section 2 hereof to purchase all or any part of 1,050,000 additional Common
Shares to cover over-allotments. The aforesaid 7,000,000 shares (the "Initial
Shares"), together with all or any part of the 1,050,000 additional Common
Shares subject to the option described in Section 2 hereof (the "Option
Shares"), are collectively hereinafter called the "Shares".
Prior to the purchase and public offering of the Shares by the
Underwriter, the Fund and the Underwriter shall enter into an agreement
substantially in the form of Exhibit A hereto (the "Pricing Agreement"). The
Pricing Agreement may take the form of an exchange of any standard form of
written telecommunication between the Fund and the Underwriter and shall specify
such applicable information as is indicated in Exhibit A hereto. The offering of
the Shares will be governed by this Agreement, as supplemented by the Pricing
Agreement. From and after the date of the execution and delivery of the Pricing
Agreement, this Agreement shall be deemed to incorporate the Pricing Agreement.
1
<PAGE>
The Fund has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form N-2 (No. 33-44446) and a related
preliminary prospectus for the registration of the Shares under the Securities
Act of 1933, as amended (the "1933 Act"), and a notification on Form N-8A of
registration of the Fund as an investment company under the Investment Company
Act of 1940, as amended (the "1940 Act"), and the rules and regulations of the
Commission under the 1940 Act (together with the rules and regulations under the
1933 Act, the "Rules and Regulations") and has filed such amendments to such
registration statement on Form N-2, if any, and such amended preliminary
prospectuses as may have been required to the date hereof. The Fund will prepare
and file such additional amendments thereto and such amended prospectuses as may
hereafter be required. Such registration statement (as amended, if applicable)
and the prospectus constituting a part thereof (including in each case the
information, if any, deemed to be part thereof pursuant to Rule 430A(b) of the
Rules and Regulations), as from time to time amended or supplemented pursuant to
the 1933 Act, are hereinafter referred to as the "Registration Statement" and
the "Prospectus", respectively, except that if any revised prospectus shall be
provided to the Underwriter by the Fund for use in connection with the offering
of the Shares which differs from the Prospectus on file at the Commission at the
time the Registration Statement becomes effective (whether such revised
prospectus is required to be filed by the Fund pursuant to Rule 497(b) or Rule
497(h) of the Rules and Regulations), the term "Prospectus" shall refer to each
such revised prospectus from and after the time it is first provided to the
Underwriter for such use.
The Fund understands that the Underwriter proposes to make a public
offering of the Shares as soon as the Underwriter deems advisable after the
Registration Statement becomes effective and the Pricing Agreement has been
executed and delivered.
SECTION 1. REPRESENTATIONS AND WARRANTIES. (a) The Fund and the Adviser
each severally represents and warrants to the Underwriter as of the date hereof
and as of the date of the Pricing Agreement (such later date being hereinafter
referred to as the "Representation Date") as follows:
(i) At the time the Registration Statement becomes effective and at
the Representation Date, the Registration Statement will comply in all material
respects with the requirements of the 1933 Act, the 1940 Act and the Rules and
Regulations and will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading. At the time the Registration Statement
becomes effective, at the Representation Date and at Closing Time referred to in
Section 2, the Prospectus (unless the term "Prospectus" refers to a prospectus
which has been provided to the Underwriter by the Fund for use in connection
with the offering of the Shares which differs from the Prospectus on file with
the Commission at the time the Registration Statement becomes effective, in
which case at the time such prospectus is first provided to the Underwriter for
such use) will not contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, that the representations and warranties in this subsection shall not
apply to statements in or omissions from the Registration Statement or
Prospectus made in reliance upon and in conformity with information furnished to
the Fund in writing by the Underwriter expressly for use in the Registration
Statement or Prospectus.
2
<PAGE>
(ii) The accountants who certified the statement of assets and
liabilities included in the Registration Statement are independent public
accountants as required by the 1933 Act and the Rules and Regulations.
(iii) The statement of assets and liabilities included in the
Registration Statement presents fairly the financial position of the Fund as at
the date indicated and said statement has been prepared in conformity with
generally accepted accounted principles.
(iv) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as otherwise stated
therein, (A) there has been no material adverse change in the condition,
financial or otherwise, of the Fund, or in the earnings, business affairs or
business prospects of the Fund, whether or not arising in the ordinary course of
business, (B) there have been no transactions entered into by the Fund which are
material to the Fund other than those in the ordinary course of business, and
(C) there has been no dividend or distribution of any kind declared, paid or
made by the Fund on any class of its capital stock.
(v) The Fund has been duly organized and is validly existing as a
voluntary association (commonly referred to as a business trust) in good
standing under the laws of the commonwealth of Massachusetts with power and
authority to own, lease and operate its properties and conduct its business as
described in the Registration Statement; the Fund is duly qualified to transact
business and is in good standing in each jurisdiction in which such
qualification is required; and the Fund has no subsidiaries.
(vi) The Fund is registered with the Commission under the 1940 Act
as a closed-end non-diversified management investment company, and no order of
suspension or revocation of such registration has been issued or proceedings
therefor initiated or threatened by the Commission.
(vii) The authorized, issued and outstanding shares of beneficial
interest of the Fund are as set forth in the Prospectus under the caption
"Description of Shares," the Shares have been duly authorized for issuance and
sale to the Underwriter pursuant to this Agreement and, when issued and
delivered by the Fund pursuant to this Agreement against payment of the
consideration set forth in the Pricing Agreement, will be validly issued and
fully paid and nonassessable; the Shares conform in all material respects to all
statements relating thereto contained in the Registration Statement; and the
issuance of the Shares is not subject to preemptive rights.
(viii) The Fund is not in violation of its Declaration of Trust or
its By-laws (the "By-Laws") or in default in the performance or observance of
any material obligation, agreement, covenant or condition contained in any
material contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which it is a party or by which it or its properties may be bound;
and the execution and delivery of this Agreement, the Pricing Agreement and the
Investment Advisory Agreement and the Custodial Agreement referred to in the
Registration Statement (as used herein, the "Advisory Agreement" and the
"Custody Agreement," respectively) and the consummation of the transactions
contemplated herein and therein have been duly authorized by all necessary Fund
action and will not conflict with or constitute a
3
<PAGE>
breach of, or default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Fund pursuant to
any material contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which the Fund is a party or by which it may be bound or to which
any of the property or assets of the Fund is subject, nor will such action
result in any violation of the provisions of the Declaration of Trust or
By-Laws, as amended, of the Fund or, to the best knowledge of the Fund and the
Adviser, any law, administrative regulation or administrative or court decree;
and no consent, approval, authorization or order of any court or governmental
authority or agency is required for the consummation by the Fund of the
transactions contemplated by this Agreement, the Pricing Agreement, the Advisory
Agreement and the Custody Agreement, except such as has been obtained under the
1940 Act or as may be required under the 1933 Act, state securities or Blue Sky
laws or foreign securities laws in connection with the purchase and distribution
of the Shares by the Underwriter.
(ix) The Fund owns or possesses or has obtained all material
governmental licenses, permits, consents, orders, approvals and other
authorizations necessary to lease or own, as the case may be, and to operate its
properties and to carry on its businesses as contemplated in the Prospectus.
(x) There is no action, suit or proceeding before or by any court
or governmental agency or body, domestic or foreign, now pending, or, to the
knowledge of the Fund, threatened against or affecting, the Fund, which might
result in any material adverse change in the condition, financial or otherwise,
business affairs or business prospects of the Fund, or might materially and
adversely affect the properties or assets of the Fund; and there are no material
contracts or documents of the Fund which are required to be filed as exhibits to
the Registration Statement by the 1933 Act, the 1940 Act or by the Rules and
Regulations which have not been so filed.
(xi) The Fund owns or possesses, or can acquire on reasonable
terms, adequate trademarks, service marks and trade names necessary to conduct
its business as described in the Registration Statement, and the Fund has not
received any notice of infringement of or conflict with asserted rights of
others with respect to any trademarks, service marks or trade names which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would materially adversely affect the conduct of the business,
operations, financial condition or income of the Fund.
(xii) The Shares have been approved for listing on the New York
Stock Exchange upon notice of issuance.
(b) The Adviser represents and warrants to the Underwriter as of the
date hereof and as of the Representation Date as follows:
(i) The Adviser has been duly incorporated as a corporation under
the laws of the State of Delaware with corporate power and authority to conduct
its business as described in the Prospectus.
4
<PAGE>
(ii) The Adviser is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and is not
prohibited by the Advisers Act or the 1940 Act, or the rules and regulations
under such acts, from acting under the Advisory Agreement for the Fund as
contemplated by the Prospectus.
(iii) This Agreement has been duly authorized, executed and
delivered by the Adviser; the Advisory Agreement has been duly authorized,
executed and delivered by the Adviser and constitutes a valid and binding
obligation of the Adviser, enforceable in accordance with its terms, subject, as
to enforcement, to bankruptcy, insolvency, reorganization or other laws relating
to or affecting creditors' rights and to general equity principles; and neither
the execution and delivery of this Agreement, or the Advisory Agreement nor the
performance by the Adviser of its obligations hereunder or thereunder will
conflict with, or result in a breach of any of the terms and provisions of, or
constitute, with or without the giving of notice or lapse of time or both, a
default under, any agreement or instrument to which the Adviser is a party or by
which it is bound, or any law, order, rule or regulation applicable to it of any
jurisdiction, court, federal or state regulatory body, administrative agency or
other governmental body, stock exchange or securities association having
jurisdiction over the Adviser or its respective properties or operations.
(iv) The Adviser has the financial resources available to it
necessary f or the performance of its services and obligations as contemplated
in the Prospectus.
(v) Any advertisement approved by the Adviser for use in the public
offering of the Shares pursuant to Rule 482 under the Rules and Regulations (an
"Omitting Prospectus") complies with the requirements of such Rule 482.
(c) Any certificate signed by any officer of the Fund or the Adviser
and delivered to the Underwriter shall be deemed a representation and warranty
by the Fund or the Adviser, as the case may be, to the Underwriter, as to the
matters covered thereby.
SECTION 2. SALE AND DELIVERY TO THE UNDERWRITER; CLOSING. On the basis
of the representations and warranties herein contained and subject to the terms
and conditions herein set forth, the Fund agrees to sell the Initial Shares to
the Underwriter, and the Underwriter agrees to purchase the Initial Shares from
the Fund, at the price per share set forth in the Pricing Agreement.
(a) If the Fund has elected not to rely upon Rule 430A under the Rules
and Regulations, the initial public offering prices and the purchase price per
share to be paid by the Underwriter for the Shares has been determined and set
forth in the Pricing Agreement, dated the date hereof, and an amendment to the
Registration Statement and the Prospectus will be filed before the Registration
Statement becomes effective.
(b) If the Fund has elected to rely upon Rule 430A under the Rules and
Regulations, the purchase price per share to be paid by the Underwriter for the
Shares shall be an amount equal to the applicable initial public offering price,
less an amount per share to be determined by agreement between the Underwriter
and the Fund. The applicable initial public offering price per share shall be a
fixed price based upon the number of Shares purchased in a single transaction to
5
<PAGE>
be determined by agreement between the Underwriter and the Fund. The initial
public offering prices and the purchase price, when so determined, shall be set
forth in the Pricing Agreement. In the event that such prices have not been
agreed upon and the Pricing Agreement has not been executed and delivered by all
parties thereto by the close of business on the fourth business day following
the date of this Agreement, this Agreement shall terminate forthwith, without
liability of any party to any other party, except as provided in Section 4,
unless otherwise agreed to by the Fund, the Adviser and the Underwriter.
In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Fund
hereby grants an option to the Underwriter to purchase all or any part of the
Option Shares at the price per share set forth above. The option hereby granted
will expire 45 days after the date hereof (or, if the Fund has elected to rely
upon Rule 430A under the Rules and Regulations, 45 days after the execution of
the Pricing Agreement) and may be exercised only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Initial Shares upon notice by the Underwriter to the Fund
setting forth the number of Option Shares as to which the Underwriter is then
exercising the option and the time, date and place of payment and delivery for
such Option Shares. Any such time and date of delivery (a "Date of Delivery")
shall be determined by the Underwriter but shall not be later than seven full
business days after the exercise of said option, nor in any event prior to
Closing Time, as hereinafter defined, unless otherwise agreed upon by the
Underwriter and the Fund.
Payment of the purchase price for, and delivery of certificates for,
the Initial Shares shall be made at the office of Brown & Wood, One World Trade
Center, New York, New York 10048-0557, or at such other place as shall be agreed
upon by the Underwriter and the Fund, at 10:00 A.M. on the fifth business day
(unless postponed in accordance with the provisions of Section 10) following the
date the Registration Statement becomes effective (or, if the Fund has elected
to rely upon Rule 430A under the Rules and Regulations, the fifth business day
after execution of the Pricing Agreement), or such other time not later than ten
business days after such date as shall be agreed upon by the Underwriter and the
Fund (such time and date of payment and delivery being herein called "Closing
Time"). In addition, in the event that any or all of the Option Shares are
purchased by the Underwriter, payment of the purchase price for, and delivery of
certificates for, such Option Shares shall be made at the above-mentioned office
of Brown & Wood, or at such other place as shall be mutually agreed upon by the
Fund and the Underwriter, on each Date of Delivery as specified in the notice
from the Underwriter to the Fund. Payment shall be made to the Fund by check or
checks drawn in New York Clearing House or similar next day funds and payable to
the order of the Fund, against delivery to the Underwriter of certificates for
the Shares to be purchased by it. Certificates for the Initial Shares and Option
Shares shall be in such denominations and registered in such names as the
Underwriter may request in writing at least two business days before Closing
Time or the Date of Delivery, as the case may be. The certificates for the
Initial Shares and the Option Shares will be made available by the Fund for
examination and packaging by the Underwriter not later than 10:00 A.M. on the
last business day prior to Closing Time or the Date of Delivery, as the case may
be.
SECTION 3. COVENANTS OF THE FUND. The Fund covenants with the
Underwriter as follows:
6
<PAGE>
(a) The Fund will use its best efforts to cause the Registration
Statement to become effective under the 1933 Act, and will advise the
Underwriter promptly as to the time at which the Registration Statement and any
amendments thereto (including any post-effective amendment) becomes so effective
and, if required, to cause the issuance of any orders exempting the Fund from
any provisions of the 1940 Act and will advise the Underwriter promptly as to
the time at which any such orders are granted.
(b) The Fund will notify the Underwriter immediately, and confirm the
notice in writing, (i) of the effectiveness of the Registration Statement and
any amendment thereto (including any post-effective amendment), (ii) of the
receipt of any comments from the Commission, (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information, (iv) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose,
and (v) of the issuance by the Commission of an order of suspension or
revocation of the notification on Form N-8A of registration of the Fund as an
Investment Company under the 1940 Act or the initiation of any proceeding for
that purpose. The Fund will make every reasonable effort to prevent the issuance
of any stop order described in subsection (iv) hereunder or any order of
suspension or revocation described in subsection (v) hereunder and, if any such
stop order or order of suspension or revocation is issued, to obtain the lifting
thereof at the earliest possible moment.
(c) The Fund will give the Underwriter notice of its intention to file
any amendment to the Registration Statement (including any post-effective
amendment) or any amendment or supplement to the Prospectus (including any
revised prospectus which the Fund proposes for use by the Underwriter in
connection with the offering of the Shares, which differs from the prospectus on
file at the Commission at the time the Registration Statement becomes effective,
whether such revised prospectus is required to be filed pursuant to Rule 497(b)
or Rule 497(h) of the Rules and Regulations), whether pursuant to the 1940 Act,
the 1933 Act, or otherwise, and will furnish the Underwriter with copies of any
such amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such amendment or
supplement to which the Underwriter shall reasonably object.
(d) The Fund will deliver to the Underwriter, as soon as practicable,
two signed copies of the notification of registration and registration statement
as originally filed and of each amendment thereto, in each case with two sets of
the exhibits filed therewith, and will also deliver to the Underwriter a
conformed copy of the registration statement as originally filed and of each
amendment thereto (but without exhibits to the registration statement or any
such amendment) for the Underwriter.
(e) The Fund will furnish to the Underwriter, from time to time during
the period when the Prospectus is required to be delivered under the 1933 Act,
such number of copies of the Prospectus (as amended or supplemented) as the
Underwriter may reasonably request for the purposes contemplated by the 1933 Act
or the Rules and Regulations.
(f) If any event shall occur as a result of which it is necessary, in
the opinion of counsel for the Underwriter, to amend or supplement the
Prospectus in order to make the Prospectus not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, the
7
<PAGE>
Fund will forthwith amend or supplement the Prospectus by preparing and
furnishing to the Underwriter a reasonable number of copies of an amendment or
amendments of or a supplement or supplements to, the Prospectus (in form and
substance satisfactory to counsel for the Underwriter, so that, as so amended or
supplemented, the Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time the Prospectus
is delivered to a purchaser, not misleading.
(g) The Fund will endeavor, in cooperation with the Underwriter, to
qualify the Shares for offering and sale under the applicable securities laws of
such states and other jurisdictions of the United States as the Underwriter may
designate, and will maintain such qualifications in effect for a period of not
less than one year after the date hereof . The Fund will file such statements
and reports as may be required by the laws of each jurisdiction in which the
Shares have been qualified as above provided.
(h) The Fund will make generally available to its security holders as
soon as practicable, but no later than 60 days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 of the Rules and Regulations) covering a twelve-month period beginning
not later than the first day of the Funds' fiscal quarter next following the
"effective" date (as defined in said Rule 158) of the Registration Statement.
(i) Between the date of this Agreement and the termination of any
trading restrictions or Closing Time, whichever is later, the Fund will not,
without your prior consent, offer or sell, or enter into any agreement to sell,
any equity or equity related securities of the Fund other than the Shares and
shares of Common Stock issued in reinvestment of dividends or distributions.
(j) If , at the time that the Registration Statement becomes effective,
any information shall have been omitted therefrom in reliance upon Rule 430A of
the Rules and Regulations, then immediately following the execution of the
Pricing Agreement, the Fund will prepare, and file or transmit for filing with
the Commission in accordance with such Rule 430A and Rule 497(h) of the Rules
and Regulations, copies of amended Prospectus, or, if required by such Rule
430A, a post-effective amendment to the Registration Statement (including an
amended Prospectus), containing all information so omitted.
(k) Trading of the Shares on the New York Stock Exchange will begin no
later than four weeks from the date of the Prospectus.
SECTION 4. PAYMENT OF EXPENSES. The Fund will pay all expenses incident
to the performance of its obligations under this Agreement, including, but not
limited to, expenses relating to (i) the printing and filing of the registration
statement as originally filed and of each amendment thereto, (ii) the printing
of this Agreement and the Pricing Agreement, (iii) the preparation, issuance and
delivery of the certificates for the Shares to the Underwriter, (iv) the fees
and disbursements of the Fund's counsel and accountants, (v) the qualification
of the Shares under securities laws in accordance with the provisions of Section
3(g) of this Agreement, including filing fees and any reasonable fees or
disbursements of counsel for the Underwriter in connection therewith and in
connection with the preparation of the Blue Sky Survey, (vi) the printing and
delivery to the Underwriter of copies of the registration statement as
originally filed
8
<PAGE>
and of each amendment thereto, of the preliminary prospectus, and of the
Prospectus and any amendments or supplements thereto, (vii) the printing and
delivery to the Underwriter of copies of the Blue Sky Survey, (viii) the fees
and expenses incurred with respect to the filing with the National Association
of Securities Dealers, Inc. and (ix) the fees and expenses incurred with respect
to the listing of the Shares on the New York Stock Exchange.
If this Agreement is terminated by the Underwriter in accordance with
the provisions of Section 5 or Section 9 (a) (i) , the Fund or the Adviser shall
reimburse the Underwriter for all of their reasonable out-of-pocket expenses,
including the reasonable fees and disbursements of counsel for the Underwriter.
In the event the transactions contemplated hereunder are not consummated, the
Adviser agrees to pay all of the costs and expenses set forth in the first
paragraph of this Section 4 which the Fund would have paid if such transactions
were consummated.
SECTION 5. CONDITIONS OF UNDERWRITER'S OBLIGATIONS. The obligations of
the Underwriter hereunder are subject to the accuracy of the representations and
warranties of the Fund and the Adviser herein contained, to the performance by
the Fund and the Adviser of their respective obligations hereunder, and to the
following further conditions:
(a) The Registration Statement shall have become effective not later
than 5:30 P.M., New York City time, on the date of this Agreement, or at a later
time and date not later, however, than 5:30 P.M. on the first business day
following the date hereof, or at such later time and date as may be approved by
the Underwriter, and at Closing Time no stop order suspending the effectiveness
of the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission. If the Fund has
elected to rely upon Rule 430A of the Rules and Regulations, the prices of the
Shares and any price-related information previously omitted from the effective
Registration Statement pursuant to such Rule 430A shall have been transmitted to
the Commission for filing pursuant to Rule 497 (h) of the Rules and Regulations
within the prescribed time period, and prior to Closing Time the Fund shall have
provided evidence satisfactory to the Underwriter of such timely filing, or a
post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A of
the Rules and Regulations.
(b) At Closing Time, the Underwriter shall have received:
(1) The favorable opinion, dated as of Closing Time, of Brown &
Wood, counsel for the Fund and the Underwriter, to the effect that:
(i) The Fund has been duly organized and is validly
existing as a voluntary association (commonly referred to as a
business trust) in good standing under the laws of the
Commonwealth of Massachusetts.
(ii) The Fund has corporate power and authority to own,
lease and operate its properties and conduct its business as
described in the Registration Statement and the Prospectus.
9
<PAGE>
(iii) The Fund is duly qualified to transact business and
is in good standing in each jurisdiction in which such
qualification is required.
(iv) The Shares have been duly authorized for issuance and
sale to the Underwriter pursuant to this Agreement and, when
issued and delivered by the Fund pursuant to this Agreement
against payment of the consideration set forth in the Pricing
Agreement, will be validly issued and fully paid and
nonassessable (except for certain possible liability of
shareholders described in the Prospectus under "Description of
Shares"); the issuance of the Shares is not subject to
preemptive rights; and the authorized shares of beneficial
interest conform as to legal matters in all material respects
to the description thereof in the Registration Statement under
the caption "Description of Shares".
(v) This Agreement and the Pricing Agreement have each
been duly authorized, executed and delivered by the Fund and
each complies with all applicable provisions of the 1940 Act.
(vi) The Registration Statement is effective under the
1933 Act and, to the best of their knowledge and information,
no stop order suspending the effectiveness of the Registration
Statement has been issued under the 1933 Act or proceedings
therefor initiated or threatened by the commission.
(vii) At the time the Registration Statement became
effective and at the Representation Date, the Registration
Statement (other than the financial statements included
therein, as to which no opinion need be rendered) complied as
to form in all material respects with the requirements of the
1933 Act and the 1940 Act and the Rules and Regulations.
(viii) To the best of their knowledge and information,
there are no legal or governmental proceedings pending or
threatened against the Fund which are required to be disclosed
in the Registration Statement, other than those disclosed
therein.
(ix) To the best of their knowledge and information, there
are no contracts, indentures, mortgages, loan agreements,
notes, leases or other instruments of the Fund required to be
described or referred to in the Registration Statement or to
be filed as exhibits thereto other than those described or
referred to therein or filed as exhibits thereto, the
descriptions thereof are correct in all material respects,
references thereto are correct, and no default exists in the
due performance or observance of any material obligation,
agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other
instrument so described, referred to or filed.
10
<PAGE>
(x) No consent, approval, authorization or order of any
court or governmental authority or agency is required in
connection with the sale of the Shares to the Underwriter,
except such as has been obtained under the 1933 Act, the 1940
Act or the Rules and Regulations or such as may' be required
under state or foreign securities laws; and to the best of
their knowledge and information, the execution and delivery of
this Agreement, the Pricing Agreement, the Advisory Agreement
and the Custody Agreement and the consummation of the
transactions contemplated herein and therein will not conflict
with or constitute a breach of, or default under, or result in
the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Fund pursuant to, any
contract, indenture, mortgage, loan agreement, note, lease or
other instrument to which the Fund is a party or by which it
may be bound or to which any of the property or assets of the
Fund is subject, nor will such action result in any violation
of the provisions of the Declaration of Trust or By-Laws of
the Fund, or any law or administrative regulation, or, to the
best of their knowledge and information, administrative or
court decree.
(xi) The Advisory Agreement and the Custody Agreement have
each been duly authorized and approved by the Fund and comply
as to form in all material respects with all applicable
provisions of the 1940 Act, and both have been duly executed
by the Fund.
(xii) The Fund is registered with the Commission under the
1940 Act as a closed-end non-diversified management investment
company, and all required action has been taken by the Fund
under the 1933 Act, the 1940 Act and the Rules and Regulations
to make the public offering and consummate the sale of the
Shares pursuant to this Agreement; the provisions of the
Declaration of Trust and By-Laws of the Fund comply as to form
in all material respects with the requirements of the 1940
Act; and, to the best of their knowledge and information, no
order of suspension or revocation of such registration under
the 1940 Act, pursuant to Section 8(e) of the 1940 Act, has
been issued or proceedings therefor initiated or threatened by
the Commission.
(xiii) The information in the Prospectus under the caption
"Taxes" (other than information related to Florida law as to
which no opinion need be rendered), to the extent that it
constitutes matters of law or legal conclusions, has been
reviewed by them and is correct in all material respects.
(2) The favorable opinion, dated as of Closing Time, of Holland &
Knight, Special Counsel for the Fund, to the effect that:
(i) The information in the Prospectus under the caption
"Taxes", to the extent that it constitutes matters of Florida
law or legal conclusions
11
<PAGE>
involving matters of law, has been reviewed by them and is
correct in all material respects.
(ii) Nothing has come to their attention that would lead
them to believe that the information in the Registration
Statement under the caption "Investment Objective and Policies
- Special Considerations Relating to Florida Municipal Bonds"
and in Appendix I entitled "Economic Conditions in Florida",
at the time it became effective or at the Representation Date,
contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading or
that the information under such caption and in such appendix
in the Prospectus, at the Representation Date (unless the term
"Prospectus" refers to a prospectus which has been provided to
the Underwriter by the Fund for use in connection with the
offering of the Shares which differs from the Prospectus on
file at the Commission at the time the Registration Statement
becomes effective, in which case at the time they are first
provided to the Underwriter for such use) or at Closing Time,
included an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading.
(3) The favorable opinion, dated as of Closing Time, of Philip L.
Kirstein, Esq., General Counsel to the Adviser, in form and substance
satisfactory to counsel for the Underwriter, to the effect that:
(i) The Adviser has been duly organized as a corporation
under. the laws of the State of Delaware with corporate power
and authority to conduct its business as described in the
Registration Statement and the Prospectus.
(ii) The Adviser is duly registered as an investment
adviser under the Advisers Act and is not prohibited by the
Advisers Act or the 1940 Act, or the rules and regulations
under such Acts, from acting under the Advisory Agreement for
the Fund as contemplated by the Prospectus.
(iii) This Agreement and the Advisory Agreement have been
duly authorized, executed and delivered by the Adviser, and
the Advisory Agreement constitutes a valid and binding
obligation of the Adviser, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization or other laws relating to or affecting
creditors' rights and to general equity principles; and, to
the best of his knowledge and information, neither the
execution and delivery of this Agreement or the Advisory
Agreement nor the performance by the Adviser of its
obligations hereunder or thereunder will conflict with, or
result in a breach of, any of the terms and provisions of, or
constitute, with or without giving notice or lapse of time or
both, a default under, any
12
<PAGE>
agreement or instrument to which the Adviser is a party or by
which the Adviser is bound, or any law, order, rule or
regulation applicable to the Adviser of any jurisdiction,
court, federal or state regulatory body, administrative agency
or other governmental body, stock exchange or securities
association having jurisdiction over the Adviser or its
properties or operations.
(iv) To the best of his knowledge and information, the
description of the Adviser in the Registration Statement and
the Prospectus does not contain any untrue statement of a
material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein
not misleading.
(4) In giving their opinion required by sub-section (b)(1) of this
Section, Brown & Wood shall additionally state that nothing has come to
their attention that would lead them to believe that the Registration
Statement (other than the financial statements included therein, as to
which no opinion need be rendered) , at the time it became effective or
at the Representation Date, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or that the
Prospectus (other than the financial statement included therein, as to
which no opinion need be rendered), at the Representation Date (unless
the term "Prospectus" refers to a prospectus which has been provided to
the Underwriter by the Fund for use in connection with the offering of
the Shares which differs from the Prospectus on file at the Commission
at the time the Registration Statement becomes effective, in which case
at the time they are first provided to the Underwriter for such use) or
at Closing Time, included an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. In giving their opinion, Brown & Wood may
rely as to matters involving the laws of the Commonwealth of
Massachusetts upon the opinion of Bingham, Dana & Gould. Bingham, Dana
& Gould and Brown & Wood may rely, as to matters of fact, upon
certificates and written statements of officers and employees of and
accountants for the Fund and the Adviser and of public officials.
(c) At Closing Time, (i) the Registration Statement and the Prospectus
shall contain all statements which are required to be stated therein in
accordance with the 1933 Act, the 1940 Act and the Rules and Regulations and in
all material respects shall conform to the requirements of the 1933 Act, the
1940 Act and the Rules and Regulations and the Prospectus shall not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, and no action, suit or proceeding at law or in
equity shall be pending or, to the knowledge of the Fund or the Adviser,
threatened against the Fund or the Adviser which would be required to be set
forth in the Prospectus other than as set forth therein, (ii) there shall not
have been, since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change in the
condition, financial or otherwise, of the Fund or in its earnings, business
affairs or business prospects, whether or not
13
<PAGE>
arising in the ordinary course of business, from that set forth in the
Registration Statement and Prospectus, (iii) the Adviser shall have the
financial resources available to it necessary for the performance of its
services and obligations as contemplated in the Registration Statement and the
Prospectus and (iv) no proceedings shall be pending or, to the knowledge of the
Fund or the Adviser, threatened against the Fund or the Adviser before or by any
Federal, state or other commission, board or administrative agency wherein an
unfavorable decision, ruling or finding would materially and adversely affect
the business, property, financial condition or income of either the Fund or the
Adviser other than as set forth in the Registration Statement and the
Prospectus; and the Underwriter shall have received, at Closing Time, a
certificate of the President or Treasurer of the Fund and of the President or a
Vice President of the Adviser dated as of Closing Time, evidencing compliance
with the appropriate provisions of this subsection (c).
(d) At Closing Time, the Underwriter shall have received certificates,
dated as of Closing Time, (i) of the President or Treasurer of the Fund to the
effect that the representations and warranties of the Fund contained in Section
1(a) are true and correct with the same force and effect as though expressly
made at and as of Closing Time and, (ii) of the President or a Vice President of
the Adviser to the effect that the representations and warranties of the Adviser
contained in Sections 1(a) and (b) are true and correct with the same force and
effect as though expressly made at and as of Closing Time.
(e) At the time of execution of this Agreement, the Underwriter shall
have received from Deloitte & Touche a letter, dated such date in form and
substance satisfactory to the Underwriter, to the effect that:
(i) they are independent accountants with respect to the Fund
within the meaning of the 1933 Act and the Rules and Regulations;
(ii) in their opinion, the statement of assets and liabilities
examined by them and included in the Registration Statement
complies as to form in all material respects with the applicable
accounting requirements of the 1933 Act and the 1940 Act and the
Rules and Regulations; and
(iii) they have performed specified procedures, not
constituting an audit, including a reading of the latest available
interim financial statements of the Fund, a reading of the minute
books of the Fund, inquiries of officials of the Fund responsible
for financial accounting matters and such other inquiries and
procedures as may be specified in such letter, and on the basis of
such inquiries and procedures nothing came to their attention that
caused them to believe that at the date of the latest available
statement of assets and liabilities read by such accountants, or at
a subsequent specified date not more than five days prior to the
date of this Agreement, there was any change in the capital stock
or net assets of the Fund as compared with amounts shown on the
statement of net assets included in the Prospectus.
14
<PAGE>
(f) At Closing Time, the Underwriter shall have received from Deloitte
& Touche a letter, dated as of Closing Time, to the effect that they reaffirm
the statements made in the letter furnished pursuant to subsection (e) of this
Section, except that the "specified date" referred to shall be a date not more
than five days prior to Closing Time.
(g) At Closing Time, all proceedings taken by the Fund and the Adviser
in connection with the organization and registration of the Fund under the 1940
Act and the issuance and sale of the Shares as herein and therein contemplated
shall be satisfactory in form and substance to the Underwriter.
(h) In the event the underwriter exercises its option provided in
Section 2 hereof to purchase all or any portion of the Option Shares, the
representations and warranties of the Fund and the Adviser contained herein and
the statements in any certificate furnished by the Fund and the Adviser
hereunder shall be true and correct as of each Date of Delivery, and the
Underwriter shall have received:
(1) Certificates, dated the Date of Delivery, of the President or
Treasurer of the Fund and of the President or a Vice President of the
Adviser confirming that the information contained in the certificate
delivered by each of them at Closing Time pursuant to Sections 5(c) and
(d), as the case may be, remains true as of such Date of Delivery.
(2) The favorable opinion of Brown & Wood, counsel for the Fund,
Holland & Knight, special Florida counsel for the Fund and Philip L.
Kirstein, Esq., General Counsel to the Adviser, each in form and
substance satisfactory to the Underwriter, dated such Date of Delivery,
relating to the Option Shares and otherwise to the same effect as the
opinions required by Sections 5(b)(1), (2) and (3), respectively.
(3) A letter from Deloitte & Touche, in form and substance
satisfactory to the Underwriter and dated such Date of Delivery,
substantially the same in scope and substance as the letter furnished
to the Underwriter pursuant to Section 5(e), except that the `specified
date" in the letter furnished pursuant to this Section 5 (h)(3) shall
be a date not more than five days prior to such Date of Delivery.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by the Underwriter by notice to the Fund at any time at or prior to Closing
Time, and such termination shall be without liability of any party to any other
party except as provided in Section 4.
SECTION 6INDEMNIFICATION. (a) The Fund and the Adviser, jointly and
severally, agree to indemnify and hold harmless the Underwriter and each person,
if any, who controls the Underwriter within the meaning of Section 15 of the
1933 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue
statement "or alleged untrue statement of a material fact
contained in the Registration Statement (or any amendment
thereto), including the information deemed to be part of the
Registration Statement pursuant to Rule 430A of the Rules and
15
<PAGE>
Regulations, if applicable, or the omission or alleged
omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged
untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus (or any amendment or
supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage
and expense whatsoever as incurred to the extent of the
aggregate amount paid in settlement of any litigation, or
investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is
effected with the written consent of the indemnifying party;
and
(iii) against any and all expense whatsoever (including
the fees and disbursements of counsel chosen by the
Underwriter) reasonably incurred in investigating, preparing
or defending against any litigation, or investigation or
proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid
under (i) or (ii) above;
PROVIDED, HOWEVER, that this indemnity agreement does not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Fund by the
Underwriter expressly for use in the Registration Statement (or any amendment
thereto) or any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto).
(b) The Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Fund and the Adviser, their respective trustees and directors,
each of the Fund's officers who signed the Registration Statement, and each
person, if any, who controls the Fund or the Adviser within the meaning of
Section 15 of the 1933 Act, against any and all loss, liability, claim, damage
and expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but only with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the Registration Statement
(or any amendment thereto) or any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Fund by the Underwriter expressly for use
in the Registration Statement (or any amendment thereto) or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto).
(c) In addition to the foregoing indemnification, the Adviser also
agrees to indemnify and hold harmless the Underwriter and each person, if any,
who controls the Underwriter within
16
<PAGE>
the meaning of Section 15 of the 1933 Act, against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, with respect to any omitting Prospectus or any advertising
materials approved by the Adviser for use in connection with the public offering
of the Shares.
(d) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve it from any liability which it may have
otherwise than on account of this indemnity agreement. An indemnifying party may
participate at its own expense in the defense of any such action. In no event
shall the indemnifying parties be liable for the fees and expenses of more than
one counsel (in addition to any local counsel) separate from their own counsel
for all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances.
SECTION 7. CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 6 is for any reason held to be unenforceable by the indemnified parties
although applicable in accordance with its terms, the Fund, the Adviser and the
Underwriter shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by said indemnity agreement as
incurred by the Fund, the Adviser and the Underwriter, as incurred, in such
proportion that the Underwriter is responsible for that portion represented by
the percentage that the aggregate underwriting compensation payable pursuant to
Section 2 hereof bears to the aggregate initial public offering price of the
Shares sold under this Agreement and the Fund and the Adviser are responsible
for the balance; provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section, each person, if any, who
controls the Underwriter within the meaning of section 15 of the 1933 Act shall
have the same rights to contribution as the Underwriter, and each trustee and
director of the Fund and the Adviser, respectively, each officer of the Fund who
signed the Registration Statement, and each person, if any, who controls the
Fund or the Adviser within the meaning of Section 15 of the 1933 Act shall have
the same rights to contribution as the Fund and the Adviser, respectively.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement or the Pricing Agreement, or contained in certificates of officers of
the Fund or the Adviser submitted pursuant hereto, shall remain operative and in
full force and effect, regardless of any investigation made by or on behalf of
the Underwriter or controlling person, or by or on behalf of the Fund or the
Adviser and shall survive delivery of the Shares to the Underwriter.
SECTION 9. TERMINATION OF AGREEMENT. (a) The Underwriter, by notice to
the Fund, may terminate this Agreement at any time at or prior to Closing Time
(i) if there has been, since the date of this Agreement or since the respective
dates as of which information is given in the Registration Statement, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Fund or the Adviser,
whether or not arising in the ordinary course of business, or (ii) if there has
occurred any material adverse
17
<PAGE>
change in the financial markets in the United States or elsewhere or any
outbreak of hostilities or other calamity or crisis or any escalation of
existing hostilities the effect of which is such as to make it, in the
Underwriter's judgment, impracticable to market the Shares or enforce contracts
for the sale of the Shares, or (iii) if trading in the Common Stock has been
suspended by the Commission or if trading generally on either the American Stock
Exchange or the New York Stock Exchange has been suspended, or minimum or
maximum prices for trading have been fixed, or maximum ranges for prices for
securities have been required, by either of said exchanges or by order of the
Commission or any other governmental authority, or if a banking moratorium has
been declared by Federal or New York authorities.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party except as
provided in Section 4.
SECTION 10. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of written telecommunication. Notices to the
Underwriter shall be directed to Merrill Lynch World Headquarters, North Tower,
World Financial Center, New York, New York 10281, Attention: Theresa Lang,
Director; notices to the Fund or the Adviser shall be directed to each of them
at 800 Scudders Mill Road, Plainsboro, New Jersey 08536, Attention: Arthur
Zeikel, President.
SECTION 11. PARTIES. This Agreement and the Pricing Agreement shall
inure to the benefit of and be binding upon the Underwriter, the Fund, the
Adviser and their respective successors. Nothing expressed or mentioned in this
Agreement or the Pricing Agreement is intended or shall be construed to give any
person, firm or corporation, other than the parties hereto and their respective
successors and the controlling persons and officers, directors and trustees
referred to in Sections 6 and 7 and their heirs and legal representatives, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision herein contained. This Agreement and the Pricing Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the parties hereto and thereto and their respective
successors, and said controlling persons and officers, directors and trustees
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Shares from the Underwriter shall
be deemed to be a successor by reason merely of such purchase.
SECTION 12. LIABILITY OF SHAREHOLDERS, TRUSTEES AND OFFICERS. This
Agreement is executed by or on behalf of the trustees of the Fund solely in
their capacity as such trustees, and shall not constitute their personal
obligation either jointly or severally in their individual capacities. No
trustee, of f icer or shareholder of the Fund shall be liable for any
obligations of the Fund under this instrument and the Fund shall be solely
liable therefor; all parties hereto shall look solely to the Fund property for
the payment of any claim, or the performance of any obligation, hereunder.
SECTION 13. GOVERNING LAW AND TIME. This Agreement and the Pricing
Agreement shall be governed by the laws of the State of New York applicable to
agreements made and to be performed in said State. Specified times of day refer
to New York City time.
18
<PAGE>
If the foregoing is in accordance with your understanding of our
Agreement, please sign and return to us a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a single binding agreement
among the Underwriter, the Fund and the Adviser in accordance with its terms.
Very truly yours,
MUNIYIELD FLORIDA FUND
By: /S/ K.A. JACOB
--------------------------------
(Authorized Officer)
FUND ASSET MANAGEMENT, INC.
By: /S/ MARK B. GOLDBUS
--------------------------------
(Authorized Officer)
Confirmed and Accepted, as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
------------------------------------------
Vice President
Investment Banking Group
19
<PAGE>
Exhibit A
7,000,000 Shares
MuniYield Florida Fund
(a Massachusetts business trust)
Common Shares
(Par Value $0.10 Per Share)
PRICING AGREEMENT
February 21, 1992
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281
Dear Sirs:
Reference is made to the Purchase Agreement, dated February 21, 1992
(the "Purchase Agreement"), relating to the purchase by Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, (the "Underwriter"), of the
above common shares of beneficial interest, par value $.10 per share (the
"Initial Shares"), of MuniYield Florida Fund (the "Fund") and relating to the
option granted to the Underwriter to purchase up to an additional 1,050,000
common shares of beneficial interest, par value $.10 per share, of the Fund to
cover over-allotments in connection with the sale of the Initial Shares (the
"Option Shares"). The Initial Shares and all or any part of the option Shares
are collectively herein referred to as the "Shares".
Pursuant to Section 2 of the Purchase Agreement, the Fund agrees with
the Underwriter as follows:
1. The applicable initial public offering price per share for the
Shares, determined as provided in said Section 2, shall be as follows:
(a) $15.00 for purchases in single transactions of less than 3,500
Shares;
A-1
<PAGE>
(b) $14.85 for purchases in single transactions of 3,500 or more
Shares but less than 7,000 Shares; and
(c) $14.70 for purchases in single transactions of 7,000 or more
Shares.
2. The purchase price per share for the Shares to be paid by the
Underwriter shall be $14.175 being an amount equal to the applicable initial
public offering price set forth above less (i) $.825 per share for purchases in
single transactions of less than 3,500 Shares; (ii) $.675 per share for
purchases in single transactions of 3,500 or more Shares but less than 7,000
Shares and (iii) $.525 per share for purchases in single transactions of 7,000
or more Shares.
This Agreement is executed by or on behalf of the trustees of the Fund
solely in their capacity as such trustees, and shall not constitute their
personal obligation either jointly or severally in their individual capacities.
No trustee, officer or shareholder of the Fund shall be liable for any
obligations of the Fund under this instrument and the Fund shall be solely
liable therefor; all parties hereto shall look solely to the Fund property for
the payment of any claim, or the performance of any obligation, hereunder.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Fund a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Underwriter and the Fund in accordance with its terms.
Very truly yours,
MUNIYIELD FLORIDA FUND
By:______________________
(Authorized Officer)
Confirmed and Accepted, as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER SMITH
INCORPORATED
By:_____________________________________
Vice President
Investment Banking Group
A-2
Exhibit 7(b)
$55,000,000
MUNIYIELD FLORIDA FUND
(a Massachusetts business trust)
AUCTION MARKET PREFERRED SHARES ["AMPS"(R)]
1,100 Shares
Liquidation Preference $50,000 Per Share
PURCHASE AGREEMENT
------------------
April 3, 1992
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
World Financial Center
North Tower
New York, New York 10281-1201
Dear Sirs:
MuniYield Florida Fund, a Massachusetts business trust (the "Fund"),
and Fund Asset Management, Inc., a Delaware corporation (the "Adviser"), each
confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated (the "Underwriter") with respect to the sale by the Fund and
the purchase by the Underwriter of 1,000 shares of auction market preferred
shares of the Fund (the "Shares"), par value $.10 per share, liquidation
preference $50,000 per share plus an amount equal to accumulated but unpaid
dividends (whether or not earned or declared).
Prior to the purchase and public offering of the Shares by the
Underwriter, the Fund and the Underwriter, shall enter into an agreement
substantially in the form of Exhibit A hereto (the "Pricing Agreement"). The
Pricing Agreement may take the form of an exchange of any standard form of
written telecommunication between the Fund and the Underwriter and shall specify
such applicable information as is indicated in Exhibit A hereto. The offering of
the Shares will be governed by this Agreement, as supplemented by the Pricing
Agreement. From and after the date of the execution and delivery of the Pricing
Agreement, this Agreement shall be deemed to incorporate the Pricing Agreement.
- ----------
(R) Registered trademark of Merrill Lynch & Co., Inc.
<PAGE>
The Fund has filed with the Securities and Exchange Commission (the
"Commission") a notification on Form N-8A of registration of the Fund as an
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act") and a registration statement on Form N-2 (No. 33-45642) and a
related preliminary prospectus for the registration of the Shares under the
Securities Act of 1933, as amended (the "1933 Act"), and the 1940 Act, and the
rules and regulations of the Commission under the 1933 Act and the 1940 Act (the
"Rules and Regulations") and has filed such amendments to such registration
statement on Form N-2, if any, and such amended preliminary prospectuses as may
have been required to the date hereof. The Fund will prepare and file such
additional amendments thereto and such amended prospectuses as may hereafter be
required. Such registration statement (as amended at the time it becomes
effective, if applicable) and the prospectus constituting a part thereof
(including in each case the information, if any, deemed to be part thereof
pursuant to Rule 430A(b) of the Rules and Regulations), as from time to time
amended or supplemented pursuant to the 1933 Act, are hereinafter referred to as
the "Registration Statement" and the "Prospectus", respectively, except that if
any revised prospectus shall be provided to the Underwriter by the Fund for use
in connection with the offering of the shares which differs from the Prospectus
on file at the Commission at the time the Registration Statement becomes
effective (whether such revised prospectus is required to be filed by the Fund
pursuant to Rule 497(b) or Rule 497(h) of the Rules and Regulations) the term
"Prospectus" shall refer to such revised prospectus from and after the time it
is first provided to the Underwriter for such use.
The Fund understands that the Underwriter proposes to make a public
offering of the Shares as soon as the Underwriter deems advisable after the
Registration Statement becomes effective and the Pricing Agreement has been
executed and delivered.
SECTION 1. Representations and Warranties. (a) The Fund and the Adviser
each severally represents and warrants to the Underwriter as of the date hereof
and as of the date of the Pricing Agreement (such later date being hereinafter
referred to as the "Representation Date") as follows:
(i) At the time the Registration Statement becomes effective and
at the Representation Date, the Registration Statement will comply in
all material respects with the requirements of the 1933 Act, the 1940
Act and the Rules and Regulations and will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading. At the time the Registration Statement becomes effective,
at the Representation Date and at Closing Time as defined in Section 2,
the Prospectus (unless the term "Prospectus" refers to a prospectus
which has been provided to the Underwriter by the Fund for use in
connection with the offering of the Shares which differs from the
Prospectus on file with the Commission at the time the Registration
Statement becomes effective, in which case at the time it is first
provided to the Underwriter for such use) will not contain an untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the representations and warranties in this subsection
shall not apply to statements in or omissions from the Registration
Statement or Prospectus made in reliance upon and in conformity with
information furnished to the
2
<PAGE>
Fund in writing by the Underwriter expressly for use in the
Registration Statement or Prospectus.
(ii) The accountants who certified the statement of assets and
liabilities included in the Registration Statement are independent
public accountants as required by the 1933 Act and the Rules and
Regulations.
(iii) The financial statements included in the Registration
Statement present fairly the financial position of the Fund as at the
date indicated and the results of its operations for the period
specified; such financial statements have been prepared in conformity
with generally accepted accounting principles; and the information in
the Prospectus under the headings "Description of Shares" and
"Portfolio Composition" has been fairly presented.
(iv) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as otherwise
stated therein, (A) there has been no material adverse change in the
condition, financial or otherwise, of the Fund, or in the earnings,
business affairs or business prospects of the Fund, whether or not
arising in the ordinary course of business, (B) there have been no
transactions entered into by the Fund which are material to the Fund
other than those in the ordinary course of business and (C) except for
regular monthly dividends on the outstanding common shares of
beneficial interest, par value $.10 per share ("Common Shares") of the
Fund, there has been no dividend or distribution of any kind declared,
paid or made by the Fund or any class of its shares.
(v) The Fund has been duly organized and is validly existing as a
voluntary association (commonly referred to as a business trust) in
good standing under the laws of the Commonwealth of Massachusetts with
power and authority to own, lease and operate its properties and
conduct its business as described in the Registration Statement; the
Fund is duly qualified to transact business and is in good standing in
each jurisdiction in which such qualification is required; and the Fund
has no subsidiaries.
(vi) The Fund is registered with the commission under the 1940
Act as a closed-end, non-diversified management investment company, and
no order of suspension or revocation of such registration has been
issued or proceedings therefor initiated or threatened by the
Commission.
(vii) The authorized, issued and outstanding shares of beneficial
interest of the Fund is as set forth in the Prospectus under the
caption "Description of Shares"; the outstanding Common Shares have
been duly authorized and validly issued and are fully paid and
non-assessable; the Shares have been duly authorized for issuance and
sale to the Underwriter pursuant to this Agreement and, when issued and
delivered by the Fund pursuant to this Agreement against payment of the
consideration set forth in the Pricing Agreement, will be validly
issued and fully paid and nonassessable; the Common Shares and the
Shares conform in all material respects to all statements relating
thereto contained in the Registration Statement; and the issuance of
the Shares to be purchased by the Underwriter is not subject to
preemptive rights.
3
<PAGE>
(viii) The Fund is not in violation of its Declaration of Trust or
By-Laws, as amended (the "By-Laws") or in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note,
lease or other instrument to which it is a party or by which it or its
properties may be bound; and the execution and delivery of this
Agreement, the Pricing Agreement and the Investment Advisory Agreement,
the Custodian Agreement, the Auction Agent Agreement and the Depository
Agreement referred to in the Registration Statement (the "Advisory
Agreement," "Auction Agreement," "Custodian Agreement" and "Depository
Agreement," respectively), and the consummation of the transactions
contemplated herein and therein, will not conflict with or constitute a
breach of, or default under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Fund
pursuant to any contract, indenture, mortgage, loan agreement, note,
lease or other instrument to which the Fund is a party or by which it
may be bound or to which any of the property or assets of the Fund is
subject, nor will such action result in any violation of the provisions
of the Declaration of Trust or By-Laws of the Fund or, to the best
knowledge of the Fund and the Adviser, any law, administrative
regulation or administrative or court decree; and no consent, approval,
authorization or order of any court or governmental authority or agency
is required for the consummation by the Fund of the transactions
contemplated by this Agreement, the Pricing Agreement, the Advisory
Agreement, the Custodian Agreement, the Auction Agreement and the
Depository Agreement, except such as has been obtained under the 1940
Act or as may be required under the 1933 Act or state securities or
Blue Sky laws in connection with the purchase and distribution of the
Shares by the Underwriter.
(ix) The Fund owns or possesses or has obtained all material
governmental licenses, permits, consents, orders, approvals and other
authorizations necessary to lease or own, as the case may be, and to
operate its properties and to carry on its businesses as contemplated
in the Prospectus and the Fund has not received any notice of
proceedings relating to the revocation or modification of any such
licenses, permits, covenants, orders, approvals or authorizations.
(x) There is no action, suit or proceeding before or by any court
or governmental agency or body, domestic or foreign, now pending, or,
to the knowledge of the Fund or the Adviser, threatened against or
affecting, the Fund, which might result in any material adverse change
in the condition, financial or otherwise, business affairs or business
prospects of the Fund, or might materially and adversely affect the
properties or assets of the Fund; and there are no material contracts
or documents of the Fund which are required to be filed as exhibits to
the Registration Statement by the 1933 Act, the 1940 Act or by the
Rules and Regulations which have not been so filed.
(xi) The Fund owns or possesses, or can acquire on reasonable
terms, adequate trademarks, service marks and trade names necessary to
conduct the business now operated by it, and the Fund has not received
any notice of infringement of or conflict with asserted rights of
others with respect to any trademarks, service marks and trade names
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling
4
<PAGE>
or finding, would materially and adversely affect the conduct of the
business, operations, financial condition or income of the Fund.
(xii) The Fund intends to, and will, direct the investment of the
proceeds of the offering described in the Registration Statement in
such a manner as to comply with the requirements of Subchapter M of the
Internal Revenue Code of 1986, as amended ("Subchapter M of the Code"),
and intends to qualify as a regulated investment company under
Subchapter M of the Code.
(xiii) This Agreement, the Pricing Agreement, the Advisory
Agreement and the Custodian Agreement have each been duly authorized,
executed and delivered by the Fund and each complies with all
applicable provisions of the 1940 Act.
(xiv) The Auction Agreement and the Depository Agreement have each
been duly authorized for execution and delivery by the Fund and, when
executed and delivered by the Fund, will constitute a valid and binding
obligation of the Fund, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization
or other laws relating to or affecting creditors' rights and to general
equity principles.
(b) The Adviser represents and warrants to the Underwriter as of the date
hereof and as of the Representation Date as follows:
(i) The Adviser has been duly incorporated under the laws of the State
of Delaware with corporate power and authority to conduct its business as
described in the Prospectus.
(ii) The Adviser is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), and is
not prohibited by the Advisers Act or the 1940 Act or the rules and
regulations under such acts from acting under the Advisory Agreement for
the Fund as contemplated by the Prospectus.
(iii) This Agreement has been duly authorized, executed and delivered
by the Adviser; the Advisory Agreement is in full force and effect and
constitutes a valid and binding obligation of the Adviser, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization or other laws relating to or affecting
creditors' rights and to general equity principles; and neither the
execution and delivery of this Agreement nor the performance by the Adviser
of its obligations hereunder or under the Advisory Agreement will conflict
with, or result in a breach of any of the terms and provisions of, or
constitute, with or without the giving of notice or lapse of time or both,
a default under, any agreement or instrument to which the Adviser is a
party or by which it is bound, or any law, order, rule or regulation
applicable to it of any jurisdiction, court, federal or state regulatory
body, administrative agency or other governmental body, stock exchange or
securities association having jurisdiction over the Adviser or its
respective properties or operations.
(iv) The Adviser has the financial resources available to it necessary
for the performance of its services and obligations as contemplated in the
Prospectus.
5
<PAGE>
(c) Any certificate signed by any officer of the Fund or the Adviser and
delivered to the Underwriter shall be deemed a representation and warranty by
the Fund or the Adviser, as the case may be, to the Underwriter as to the
matters covered thereby.
SECTION 2. Sale and Delivery to the Underwriter; Closing.
(a) On the basis of the representations and warranties herein contained and
subject to the terms and conditions herein set forth, the Fund agrees to sell
the Shares to the Underwriter and the Underwriter agrees to purchase the Shares
from the Fund, at the price per share set forth in the Pricing Agreement.
(i) If the Fund has elected not to rely upon rule 430A under the Rules
and Regulations, the initial public offering price and the purchase price
per share to be paid by the Underwriter for the Shares each has been
determined and set forth in the Pricing Agreement, dated the date hereof,
and an amendment to the Registration Statement and the Prospectus will be
filed before the Registration Statement becomes effective.
(ii) If the Fund has elected to rely upon rule 430A under the Rules
and Regulations, the purchase price per share to be paid by the Underwriter
for the Shares shall be an amount equal to the initial public offering
price, less an amount per share to be determined by agreement between the
Underwriter and the Fund. The initial public offering price per share shall
be a fixed price to be determined by agreement between the Underwriter and
the Fund. The initial public offering price and the purchase price, when so
determined, shall be set forth in the Pricing Agreement. In the event that
such prices have not been agreed upon and the Pricing Agreement has not
been executed and delivered by all parties thereto by the close of business
on the fourth business day following the date of this Agreement, this
Agreement shall terminate forthwith, without liability of any party to any
other party, except as provided in Section 5, unless otherwise agreed to by
the Fund, the Adviser and the Underwriter.
(b) Payment of the purchase price for, and delivery of certificates for,
the Shares shall be made at the office of Brown & Wood, One World Trade Center,
New York, New York 10048-0557, or at such other place as shall be agreed upon by
the Underwriter and the Fund, at 10:00 A.M. on the fifth business day following
the date the Registration Statement becomes effective (or, if the Fund has
elected to rely upon rule 430A under the Rules and Regulations, the fifth
business day after execution of the Pricing Agreement), or such other time not
later than ten business days after such date as shall be agreed upon by the
Underwriter and the Fund (such time and date of payment and delivery being
herein called "Closing Time"). Payment shall be made to the Fund by Federal fund
check or checks or similar same-day funds and payable to the order of the Fund,
against delivery to the Underwriter of the certificates for the Shares to be
purchased by it. The Shares shall be represented by a certificate registered in
the name of Cede & Co., as nominee for The Depository Trust Company. The
certificates for the Shares will be made available for examination by the
Underwriter not later than 10:00 A.M. on the last business day prior to Closing
Time.
SECTION 3. Covenants of the Fund. The Fund covenants with the Underwriter
as follows:
6
<PAGE>
(a) The Fund will use its best efforts (i) to cause the Registration
Statement to become effective under the 1933 Act, and will advise the
Underwriter promptly as to the time at which the Registration Statement and any
amendments thereto (including any post-effective amendment) becomes so effective
and (ii) if required, to cause the issuance of any orders exempting the Fund
from any provisions of the 1940 Act and will advise the Underwriter promptly as
to the time at which any such orders are granted.
(b) The Fund will notify the Underwriter immediately, and confirm the
notice in writing, (i) of the effectiveness of the Registration Statement and
any amendments thereto (including any post-effective amendment), (ii) of the
receipt of any comments from the Commission, (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information, (iv) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose and
(v) of the issuance by the Commission of an order of suspension or revocation of
the notification on Form N-8A of registration of the Fund as an investment
company under the 1940 Act or initiation of any proceeding for that purpose. The
Fund will make every reasonable effort to prevent the issuance of any stop order
described in subsection (iv) hereunder or any order of suspension or revocation
described in subsection (v) hereunder and, if any stop order or order of
suspension or revocation is issued, to obtain the lifting thereof at the
earliest possible moment.
(c) The Fund will give the Underwriter notice of its intention to file any
amendment to the Registration Statement (including any post-effective amendment)
or any amendment or supplement to the Prospectus (including any revised
prospectus which the Fund proposes for use by the Underwriter in connection with
the offering of the Shares which differs from the prospectus on file at the
Commission at the time the Registration Statement becomes effective, whether
such revised prospectus is required to be filed pursuant to Rule 497(b) or Rule
497(h) of the Rules and Regulations) whether pursuant to the 1940 Act, the 1933
Act, or otherwise, and will furnish the Underwriter with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such amendment or
supplement to which the Underwriter or counsel for the Underwriter shal1
reasonably object.
(d) The Fund will deliver to the Underwriter, as soon as practicable, two
signed copies of the registration statement as originally filed and of each
amendment thereto, in each case with two sets of the exhibits filed therewith,
and will also deliver to the Underwriter a conformed copy of the registration
statement as originally filed and of each amendment thereto (but without
exhibits to the registration statement or to any such amendment) for the
Underwriter.
(e) The Fund will furnish to the Underwriter, from time to time during the
period when the Prospectus is required to be delivered under the 1933 Act, such
number of copies of the Prospectus (as amended or supplemented) as the
Underwriter may reasonably request for the purposes contemplated by the 1933 Act
or the Rules and Regulations.
(f) If any event shall occur as a result of which it is necessary, in the
opinion of counsel for the Underwriter, to amend or supplement the Prospectus in
order to make the
7
<PAGE>
Prospectus not misleading in the light of the circumstances existing at the time
it is delivered to a purchaser, the Fund will forthwith amend or supplement the
Prospectus by preparing and furnishing to the Underwriter a reasonable number of
copies of an amendment or amendments of, or a supplement or supplements to, the
Prospectus (in form and substance satisfactory to counsel for the Underwriter),
so that, as so amended or supplemented, the Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
existing at the time the Prospectus is delivered to a purchaser, not misleading.
(g) The Fund will endeavor, in cooperation with the Underwriter, to qualify
the Shares for offering and sale under the applicable securities laws of such
states and other jurisdictions of the United States as the Underwriter may
designate, and will maintain such qualifications in effect for a period of not
less than one year after the date hereof. The Fund will file such statements and
reports as may be required by the laws of each jurisdiction in which the Shares
have been qualified as above provided.
(h) The Fund will make generally available to its security holders as soon
as practicable, but not later than 60 days after the close of the period covered
thereby, an earnings statement (in form complying with the provisions of Rule
158 of the Rules and Regulations) covering a twelve-month period beginning not
later than the first day of the Fund's fiscal quarter next following the
"effective" date (as defined in said Rule 158) of the Registration Statement.
(i) Between the date of this Agreement and the termination of any trading
restrictions or Closing Time, whichever is later, the Fund will not, without
your prior consent, offer or sell or enter into any agreement to sell any equity
or equity related securities of the Fund other than the Shares and Common Shares
issued in reinvestment of dividends or distributions.
(j) If, at the time that the Registration Statement becomes effective, any
information shall have been omitted therefrom in reliance upon Rule 430A of the
Rules and Regulations, then immediately following the execution of the Pricing
Agreement, the Fund will prepare and file or transmit for filing with the
Commission in accordance with such Rule 430A and Rule 497(h) of the Rules and
Regulations, copies of an amended Prospectus, or, if required by such Rule 430A,
a post-effective amendment to the Registration Statement (including an amended
Prospectus) containing all information so omitted.
(k) The Fund will use its best efforts to maintain its qualification as a
regulated investment company under Subchapter M of the Code.
SECTION 4. Covenants of the Underwriter. The Underwriter covenants and
agrees with the Fund as follows:
(a) It will sell Shares only to a person who has agreed to execute and
deliver or who has already executed and delivered a Master Purchaser's Letter
(as defined in the Prospectus) in accordance with the terms of the Prospectus.
(b) No later than Closing Time, it will execute and deliver a Master
Purchaser's Letter in accordance with the terms of the Prospectus.
8
<PAGE>
(c) No later than the second business day succeeding Closing Time, it will
provide the Fund and the Auction Agent (as defined in the Prospectus) with a
list of the persons to whom it has sold Shares, the number of Shares sold to
each such person and the number of Shares it is holding as of the date of such
notice.
SECTION 5. Payment of Expenses. The Fund will pay all expenses incident to
the performance of its obligations under this Agreement, including, but not
limited to, expenses relating to (i) the printing and filing of the registration
statement as originally filed and of each amendment thereto, (ii) the
preparation, issuance and delivery of the certificates for the Shares to the
Underwriter, (iii) the fees and disbursements of the Fund's counsel and
accountants, (iv) the qualification of the Shares under securities laws in
accordance with the provisions of Section 3(g) of this Agreement, including
filing fees and any fees or disbursements of counsel for the Underwriter in
connection therewith and in connection with the preparation of the Blue Sky
Survey, (v) the printing and delivery to the Underwriter of copies of the
registration statement as originally filed and of each amendment thereto, of the
preliminary prospectuses, and of the Prospectus and any amendments or
supplements thereto, (vi) the printing and delivery to the Underwriter of copies
of the Blue Sky Survey and (vii) the fees charged by rating agencies for the
rating of the Shares.
If this Agreement is terminated by the Underwriter in accordance with the
provisions of Section 6 or Section 10(a)(i), the Fund or the Adviser shall
reimburse the Underwriter for all of their out-of-pocket expenses, including the
reasonable fees and disbursements of counsel for the Underwriter. In the event
the transactions contemplated hereunder are not consummated, the Adviser agrees
to pay all of the costs and expenses set forth in the first paragraph of this
Section 5 which the Fund would have paid if such transactions had been
consummated.
SECTION 6. Conditions of Underwriter's Obligations. The obligations of the
Underwriter hereunder are subject to the accuracy of the representations and
warranties of the Fund and the Adviser herein contained, to the performance by
the Fund and the Adviser of their respective obligations hereunder, and to the
following further conditions:
(a) The Registration Statement shall have become effective not later than
5:30 P.M., New York City time, on the date hereof or at such later time and date
as may be approved by the Underwriter, and at Closing Time no stop order
suspending the effectiveness of the Registration Statement shall have been
issued under the 1933 Act or proceedings therefor initiated or threatened by the
Commission. If the Fund has elected to rely upon Rule 430A of the Rules and
Regulations, the price of the Shares and any price-related information
previously omitted from the effective Registration Statement pursuant to such
Rule 430A shall have been transmitted to the Commission for filing pursuant to
Rule 497(h) of the Rules and Regulations within the prescribed time period, and
prior to Closing Time the Fund shall have provided evidence satisfactory to the
Underwriter of such timely filing, or a post-effective amendment providing such
information shall have been promptly filed and declared effective in accordance
with the requirements of Rule 430A of the Rules and Regulations.
(b) At Closing Time, the Underwriter shall have received:
9
<PAGE>
(i) The favorable opinion, dated as of Closing Time, of Brown & Wood,
counsel for the Fund and the Underwriter, to the effect that:
(1) The Fund has been duly organized and is validly existing as a
business trust in good standing under the laws of the Commonwealth of
Massachusetts.
(2) The Fund has the power and authority to own, lease and
operate its properties and conduct its business as described in the
Prospectus.
(3) The Fund is duly qualified to transact business and is in
good standing in each jurisdiction in which such qualification is
required, except where the failure to so qualify would not have a
material adverse effect on the condition, financial or otherwise,
business affairs or business prospects of the Fund.
(4) The outstanding Common Shares have been duly authorized and
validly issued and are fully paid and non-assessable.
(5) The Shares have been duly authorized for issuance and sale to
the Underwriter pursuant to this Agreement and, when issued and
delivered by the Fund pursuant to this Agreement against payment of
the consideration set forth in the Pricing Agreement, will be validly
issued and fully paid and non-assessable (except for certain possible
liability of shareholders described in the Prospectus under
"Description of Shares"); the issuance of the Shares is not subject to
preemptive or other similar rights; and the authorized shares of
beneficial interest conform as to legal matters in all material
respects to the description thereof in the Registration Statement
under the caption "Description of Shares".
(6) This Agreement and the Pricing Agreement each has been duly
authorized, executed and delivered by the Fund and each complies with
all applicable provisions of the 1940 Act.
(7) The Registration Statement is effective under the 1933 Act
and, to the best of their knowledge and information, no stop order
suspending the effectiveness of the Registration Statement has been
issued under the 1933 Act and no proceedings for that purpose have
been instituted, are pending or are contemplated.
(8) At the time the Registration Statement became effective and
at the Representation Date, the Registration Statement (other than the
financial statements included therein, as to which no opinion need be
rendered) complied as to form in all material respects with the
requirements of the 1933 Act, the 1940 Act and the Rules and
Regulations.
(9) To the best of their knowledge and information, there are no
legal or governmental proceedings pending or threatened against the
Fund which are required to be disclosed in the Registration Statement,
other than those disclosed therein.
10
<PAGE>
(10) To the best of their knowledge and information, there are no
contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments of the Fund required to be described or referred to
in the Registration Statement or to be filed as exhibits thereto other
than those described or referred to therein or filed as exhibits
thereto, the descriptions thereof or references thereto are correct,
and no default exists in the due performance or observance of any
material obligation, agreement, covenant or condition contained in any
contract, indenture, loan agreement, note or lease so described,
referred to or filed.
(11) No consent, approval, authorization or order of any court or
governmental authority or agency is required in connection with the
sale of the Shares to the Underwriter, except such as has been
obtained under the 1933 Act, the 1940 Act or the Rules and Regulations
or such as may be required under state securities laws; and to the
best of their knowledge and information, the execution and delivery of
this Agreement, the Pricing Agreement, the Advisory Agreement, the
Custodian Agreement, the Auction Agreement and the Depository
Agreement and the consummation of the transactions contemplated herein
and therein will not conflict with or constitute a breach of, or
default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Fund pursuant
to any contract, indenture, mortgage, loan agreement, note, lease or
other instrument to which the Fund is a party or by which it may be
bound or to which any of the property or assets of the Fund is
subject, nor will such action result in any violation of the
provisions of the Declaration of Trust or By-Laws of the Fund, or any
law, administrative regulation or administrative or court decree.
(12) The Advisory Agreement and the Custodian Agreement have each
been duly authorized, executed and delivered by the Fund and each
complies with all applicable provisions of the 1940 Act.
(13) The Fund is registered with the Commission under the 1940
Act as a closed-end non-diversified management investment company, and
all required action has been taken by the Fund under the 1933 Act, the
1940 Act and the Rules and Regulations to make the public offering and
consummate the sale of the Shares pursuant to this Agreement; the
provisions of the Declaration of Trust and By-Laws of the Fund comply
as to form in all material respects with the requirements of the 1940
Act; and, to the best of their knowledge and information, no order of
suspension or revocation of such registration under the 1940 Act,
pursuant to Section 8(e) thereof, has been issued or proceedings
therefor initiated or threatened by the Commission.
(14) The information in the Prospectus under the caption "Taxes"
(other than information related to Florida law as to which no opinion
need be rendered), to the extent that it constitutes matters of law or
legal conclusions or legal opinions, has been reviewed by them and is
correct in all material respects.
11
<PAGE>
(15) The Auction Agreement and the Depository Agreement each have
been duly authorized, executed and delivered by the Fund and each
constitutes a valid and binding obligation of the Fund, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization or other laws relating to or affecting
creditors' rights and to general equity principles.
(ii) The favorable opinion, dated as of Closing Time, of Holland &
Knight, Special Counsel for the Fund, to the effect that:
(1) The information in the Prospectus under the caption "Taxes",
to the extent that it constitutes matters of Florida law or legal
conclusions or legal opinions involving matters of law, has been
reviewed by them and is correct in all material respects.
(2) Nothing has come to their attention that would lead them to
believe that the information in the Registration Statement under the
caption "Investment Objective and Policies - Special Considerations
Relating to Florida Municipal Bonds" and in Appendix A entitled
"Economic Conditions in Florida", at the time it became effective or
at the Representation Date, contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading or that the information under such caption and in such
appendix in the Prospectus, at the Representation Date (unless the
term "Prospectus" refers to a prospectus which has been provided to
the Underwriter by the Fund for use in connection with the offering of
the Shares which differs from the Prospectus on file at the Commission
at the time the Registration Statement becomes effective, in which
case at the time they are first provided to the Underwriter for such
use) or at Closing Time, included an untrue statement of a material
fact or omitted to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which
they were made, not misleading.
(iii) The favorable opinion, dated as of Closing Time, of Philip L.
Kirstein, Esq., General Counsel to the Adviser, in form and substance
satisfactory to counsel for the Underwriter, to the effect that:
(1) The Adviser has been duly organized as a corporation under
the laws of the State of Delaware with corporate power and authority
to conduct its business as described in the Registration Statement and
the Prospectus.
(2) The Adviser is duly registered as an investment adviser under
the Advisers Act and is not prohibited by the Advisers Act or the 1940
Act or the rules and regulations under such Acts from acting under the
Advisory Agreement for the Fund as contemplated by the Prospectus.
(3) This Agreement has been duly authorized, executed and
delivered by the Adviser; the Advisory Agreement is in full force and
effect and constitutes a valid and binding obligation of the Adviser,
enforceable in accordance with its
12
<PAGE>
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization or other laws relating to or affecting creditors'
rights and to general equity principles; and, to the best of his
knowledge and information, neither the execution and delivery of this
Agreement or the Advisory Agreement nor the performance by the Adviser
of its obligations hereunder or thereunder will conflict with, or
result in a breach of, any of the terms and provisions of, or
constitute, with or without giving notice or lapse of time or both, a
default under, any agreement or instrument to which it is a party or
by which the Adviser is bound, or any law, order, rule or regulation
applicable to the Adviser of any jurisdiction, court, Federal or state
regulatory body, administrative agency or the governmental body, stock
exchange or securities association have jurisdiction over the Adviser
or its respective properties or operations.
(4) To the best of his knowledge and information, the description
of the Adviser in the Registration Statement and the Prospectus does
not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading.
(iv) In giving their opinion required by subsection (b)(i) of this
Section, Brown & Wood shall additionally state that nothing has come to
their attention that would lead them to believe that the Registration
Statement (excluding the financial statements and financial schedules
included therein, as to which such counsel need express no belief), at the
time it became effective or at the Representation Date, contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading or that the Prospectus (except for the financial statements and
financial schedules included therein as to which such counsel need express
no belief), at the Representation Date (unless the term "Prospectus" refers
to a prospectus which has been provided to the Underwriter by the Fund for
use in connection with the offering of the Shares which differs from the
Prospectus on file at the Commission at the time the Registration Statement
becomes effective, in which case at the time it is first provided to the
Underwriter for such use) or at Closing Time, included an untrue statement
of a material fact or omitted to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under
which they were made, not misleading. In giving their opinion, Brown & Wood
may rely, as to all matters governed by the law of the Commonwealth of
Massachusetts, upon the opinion of Bingham, Dana & Gould and Brown & Wood
may rely, as to matters of fact, upon certificates and written statements
of officers and employees of and accountants of the Fund and the Adviser
and of public officials.
(c) At Closing Time (i) the Registration Statement and the Prospectus shall
contain all statements which are required to be stated therein in accordance
with the 1933 Act, the 1940 Act and the Rules and Regulations and in all
material respects shall conform to the requirements of the 1933 Act, the 1940
Act and the Rules and Regulations and the Prospectus shall not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein in the light of the circumstances under which
they were made, not misleading and no action, suit or proceeding at law or in
equity shall be pending or, to the knowledge of the Fund or the Adviser,
threatened against the Fund or the Adviser which would be required to be
13
<PAGE>
set forth in the Prospectus other than as set forth therein, (ii) there shall
not have been, since the respective dates as of which information is given in
the Registration Statement and the Prospectus, any material adverse change in
the condition, financial or otherwise, of the Fund or in its earnings, business
affairs or business prospects, whether or not arising in the ordinary course of
business, from that set forth in the Registration Statement and Prospectus,
(iii) the Adviser shall have the financial resources available to it necessary
for the performance of its services and obligations as contemplated in the
Registration Statement and the Prospectus, (iv) no proceedings shall be pending
or, to the knowledge of the Fund or the Adviser, threatened against the Fund or
the Adviser before or by any Federal, state or other commission, board or
administrative agency wherein an unfavorable decision, ruling or finding would
materially and adversely affect the business, property, financial condition or
income of either the Fund or the Adviser other than as set forth in the
Registration Statement and the Prospectus and (v) Moody's Investors Service,
Inc. ("Moody's") and Standard & Poor's Corporation ("S&P") shall have confirmed
that the Shares have been rated "aaa" and AAA respectively, by such agencies;
and the Underwriter shall have received, at Closing Time, a certificate of the
President or Treasurer of the Fund and of the President or a Vice President of
the Adviser dated as of Closing Time, evidencing compliance with the appropriate
provisions of this subsection (c), together with true and correct copies of
letters from Moody's and S&P confirming their rating.
(d) At Closing Time, the Underwriter shall have received certificates,
dated as of Closing Time, (i) of the President or Treasurer of the Fund to the
effect that the representations and warranties of the Fund contained in Section
1(a) are true and correct with the same force and effect as though expressly
made at and as of Closing Time and (ii) of the President or a Vice President of
the Adviser contained in Sections 1(a) and (b) are true and correct with the
same force and effect as though expressly made at and as of Closing Time.
(e) At the time of execution of this Agreement, the Underwriters shall have
received from Deloitte & Touche a letter, dated the date hereof, in form and
substance satisfactory to the Underwriter, to the effect that:
(i) they are independent accountants with respect to the Fund within
the meaning of the 1933 Act and the Rules and Regulations;
(ii) in their opinion, the statement of assets and liabilities
examined by them and included in the Registration Statement complies as to
form in all material respects with the applicable accounting requirements
of the 1933 Act and 1940 Act and the Rules and Regulations;
(iii) they have performed specified procedures, not constituting an
audit, including a reading of the latest available interim financial
statements of the Fund, a reading of the minute books of the Fund,
inquiries of officials of the Fund responsible for financial accounting
matters and such other inquiries and procedures as may be specified in such
letter, and on the basis of such inquiries and procedures nothing came to
their attention that caused them to believe that (A) the unaudited
financial statements as of March 6, 1992 and for the period from February
13, 1992 to March 6, 1992 included in the Registration Statement do not
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act and the 1933 Act Regulations
14
<PAGE>
applicable to unaudited interim financial statements included in
registration statements or are not in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that
of the audited financed statements included in the Registration Statement
and (B) at the date of the latest available financial statements read by
such accountants, or at a subsequent specified date not more than five days
prior to the date of this Agreement, there was any change in the shares of
beneficial interest or net assets of the Fund (other than by reason of the
issuance of Common Shares in connection with the exercise by the
underwriter of the Common Shares of the over-allotment option relating to
the initial public offering of the Common Shares, as specified in such
letter) as compared with amounts shown on the statement of net assets
included in the Prospectus; and
(iv) in addition to the procedures referred to in clause (iii) above,
they have performed other specified procedures, not constituting an audit,
with respect to certain amounts, percentages, numerical data, financial
information and financial statements appearing in the Registration
Statement, which have previously been specified by you and which shall be
specified in such letter, and have compared certain of such items with, and
have found such items to be in agreement with, the accounting and financial
records of the Fund.
(f) At Closing Time, the Underwriter shall have received from Deloitte &
Touche a letter, dated as of Closing Time, to the effect that they reaffirm the
statements made in the letter furnished pursuant to subsection (e) of this
Section, except that the "specified date" referred to shall be a date not more
than five days prior to Closing Time.
(g) At Closing Time, counsel for the Underwriter shall have been furnished
with such documents and opinions as they may reasonably require for the purpose
of enabling them to pass upon the issuance and sale of the Shares as herein
contemplated and to pass upon related proceedings, or in order to evidence the
accuracy of any of the representations or warranties, or the fulfillment of any
of the conditions, herein contained; and all proceedings taken by the Fund and
the Adviser in connection with the organization and registration of the Fund
under the 1940 Act and the issuance and sale of the shares as herein
contemplated shall be satisfactory in form and substance to the Underwriter and
counsel for the Underwriter.
If any condition specified in this section shall not have been fulfilled
when and as required to be fulfilled, this Agreement may be terminated by the
Underwriter by notice to the Fund at any time at or prior to Closing Time, and
such termination shall be without liability of any party to any other party
except as provided in Section 5.
SECTION 7. Indemnification. (a) The Fund and the Adviser, jointly and
severally, agree to indemnify and hold harmless the Underwriter and each person,
if any, who controls the Underwriter within the meaning of Section 15 of the
1933 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the information deemed to be part of
the Registration Statement pursuant to Rule 430A of the
15
<PAGE>
Rules and Regulations, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever as incurred to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of the Fund; and
(iii) against any and all expenses whatsoever (including the fees and
disbursements of counsel chosen by the Underwriter) reasonably incurred in
investigating, preparing or defending against any litigation or
investigation or proceeding by any governmental agency or body, commenced
or threatened, or any claim whatsoever based upon any such untrue statement
or omission, to the extent such alleged untrue statement or omission, to
the extent that any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement does not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Fund by the
Underwriter expressly for use in the Registration Statement (or any amendment
thereto) or any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto).
(b) The Underwriter severally agrees to indemnify and hold harmless the
Fund and the Adviser, their respective directors, each of the Fund's officers
who signed the Registration Statement, and each person, if any, who controls the
Fund or the Adviser within the meaning of Section 15 of the 1933 Act, against
any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment or supplement
thereto) or any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with written information
furnished to the Fund by the Underwriter expressly for use in the Registration
Statement (or any amendment thereto) or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve it from any liability which it may have
otherwise than on account of this indemnity agreement. An indemnifying party may
participate at its own expense in the defense of such action. In no event shall
the indemnifying parties be liable for the fees and expenses of more than one
counsel (in
16
<PAGE>
addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances.
SECTION 8. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 7 is for any reason held to be enforceable by the indemnified parties
although applicable in accordance with its terms, the Fund and the Underwriter
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by said indemnity agreement as incurred
by,the Fund and the Underwriter, as incurred, in such proportions that the
Underwriter is responsible for that portion represented by the percentage that
the underwriting compensation payable pursuant to Section 2 hereof bears to the
initial public offering price appearing on the cover page of the Prospectus and
the Fund is responsible for the balance; provided, however, that no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Notwithstanding provisions of this
Section 8, no Underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Shares underwritten by it
and distributed to the public were offered to the public exceeds the amount of
any damages which such Underwriter has otherwise been required to pay in respect
of such losses, liabilities, claims, damages and expenses. For purposes of this
Section, each person, if any, who controls the Underwriter within the meaning of
Section 15 of the 1933 Act shall have the same rights to contribution as the
Underwriter, and each director of the Fund, each officer of the Fund who signed
the Registration Statement, and each person, if any, who controls the Fund
within the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as the Underwriter, and each director of the Fund, each officer of
the Fund who signed the Registration Statement, and each person, if any, who
controls the Fund within the meaning of Section 15 of the 1933 Act shall have
the same rights to contribution as the Fund.
SECTION 9. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement and
the Pricing Agreement, or contained in certificates of officers of the Fund or
the Adviser submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of the
Underwriter or controlling person, or by or on behalf of the Fund or the Adviser
and shall survive delivery of the Shares to the Underwriter.
SECTION 10. Termination of Agreement. (a) The Underwriter, by notice to the
Fund, may terminate this Agreement at any time or prior to Closing Time (i) if
there has been, since the date of this Agreement or since the respective dates
as of which information is given in the Registration Statement, any material
adverse change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Fund or the Adviser, whether or
not arising in the ordinary course of business, or (ii) if there has occurred
any material adverse change in the financial markets in the United States or any
outbreak of hostilities or escalation thereof or other calamity or crisis the
effect of which is such as to make it, in the Underwriter's judgment,
impracticable to market the Shares or enforce contracts for the sale of the
Shares, or (iii) if trading in the Common Shares has been suspended by the
Commission or if trading generally on either the American Stock Exchange or the
New York Stock Exchange has been suspended, or minimum or maximum prices for
trading have been fixed, or maximum ranges for
17
<PAGE>
prices for securities have been required, by either of said exchanges or by
order of the Commission or any other governmental authority, or if a banking
moratorium has been declared by Federal or New York authorities.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party except as
provided in Section 5.
SECTION 11. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of written telecommunication. Notices to the
Underwriter shall be directed to Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated at Merrill Lynch World Headquarters, North Tower,
World Financial Center, New York, New York 10281-1201, Attention: Theresa Lang,
Director; notices to the Fund or the Adviser shall be directed to each of them
at 800 Scudders Mill Road, Plainsboro, New Jersey, 08536, Attention: Arthur
Zeikel.
SECTION 12. Parties. This Agreement and the Pricing Agreement shall inure
to the benefit of and be binding upon the Underwriter, the Fund, the Adviser and
their respective successors. Nothing expressed or mentioned in this Agreement or
the Pricing Agreement is intended or shall be construed to give any person, firm
or corporation, other than the parties hereto and their respective successors
and the controlling persons and officers and directors referred to in Sections 7
and 8 and their heirs and legal representatives, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and the Pricing Agreement and all conditions and
provisions hereof are intended to be for the sole and exclusive benefit of the
parties hereto and thereto and their respective successors, and said controlling
persons and officers and directors and their heirs and legal representatives,
and for the benefit of no other person, firm or corporation. No purchaser of
Shares from the Underwriter shall be deemed to be a successor by reason merely
of such purchase.
SECTION 13. Governing Law and Time. This Agreement and the Pricing
Agreement shall be governed by the laws of the State of New York applicable to
agreement made and to be performed in said State. Specified times of day refer
to New York City time.
SECTION 14. Personal Liability. The Declaration of Trust establishing
MuniYield Florida Fund, dated January 21, 1992, a copy of which, together with
all amendments thereto (the "Declaration"), is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name
"MuniYield Florida Fund" refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals personally; and no Trustee,
shareholder, officer, employee or agent of the Fund 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 Fund, but the "Fund Property" only shall be liable.
18
<PAGE>
If the foregoing is in accordance with your understanding of our Agreement,
please sign and return to us a counterpart hereof, whereupon this instrument,
along with all counterparts, will become a binding agreement among the
Underwriter, the Fund and the Adviser in accordance with its terms.
Very truly yours,
MUNIYIELD FLORIDA FUND
By: /s/ Kenneth A. Jacob
Authorized Officer
FUND ASSET MANAGEMENT, INC.
By: /s/ Mark B. Goldfus
Authorized Officer
CONFIRMED AND ACCEPTED,
as of the date first above written:
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By:_______________________________
Vice President
Investment Banking
19
<PAGE>
If the foregoing is in accordance with your understanding of our Agreement,
please sign and return to us a counterpart hereof, whereupon this instrument,
along with all counterparts, will become a binding agreement among the
Underwriter, the Trust and the Adviser in accordance with its terms.
Very truly yours,
MUNIYIELD FLORIDA FUND
By:________________________
Authorized Officer
FUND ASSET MANAGEMENT, INC.
By:________________________
Authorized Officer
CONFIRMED AND ACCEPTED,
as of the date first above written:
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By: /s/ Richard N. Doyle
-------------------------------
Vice President
Investment Banking
20
<PAGE>
EXHIBIT A
$55,000,000
MUNIYIELD FLORIDA FUND
(a Maryland business trust)
AUCTION MARKET PREFERRED SHARES ["AMPS"(R) ]
1,100 Shares
Liquidation Preference $50,000 Per Share
PRICING AGREEMENT
April 6, 1992
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
World Financial Center
North Tower
New York, New York 10281-1201
Dear Sirs:
Reference is made to the Purchase Agreement, dated April 3, 1992 (the
"Purchase Agreement"), relating to the purchase by Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated (the "Underwriter") of 1,100 shares
of auction market preferred shares, par value $.10 per share, liquidation
preference $50,000 per share plus an amount equal to accumulated but unpaid
dividends (whether or not earned or declared) (the "Shares") of MuniYield
Florida Fund, (the "Fund").
Pursuant to Section 2 of the Purchase Agreement, the Fund agrees with the
Underwriter as follows:
1. The initial public offering price per share for the Shares,
determined as provided in said Section 2, shall be $50,000.
2. The purchase price per share for the Shares to be paid by the
Underwriter shall be $49,125, being an amount equal to the initial public
offering price set forth above less $875 per share.
- --------
(R) Registered trademark of Merrill Lynch & Co., Inc.
<PAGE>
3. The dividend rate for the Shares for the Initial Dividend Period
ending April 22, 1992 will be 3.35%.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Fund a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Underwriter and the Fund in accordance with its terms.
Very truly yours,
MUNIYIELD FLORIDA FUND
By:________________________
Authorized Officer
CONFIRMED AND ACCEPTED,
as of the date first above written:
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By:______________________________
Vice President
Investment Banking
2
Exhibit 7(c)
Revised October 29, 1990
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, N.Y. 10281-1305
STANDARD DEALER AGREEMENT
Dear Sirs:
In connection with public offerings of securities underwritten by us,
or by a group of underwriters (the "Underwriters") represented by us, you may be
offered the opportunity to purchase a portion of such securities, as principal,
at a discount from the offering price representing a selling concession or
reallowance granted as consideration for services rendered by you in the sale of
such securities. We request that you agree to the following terms and
provisions, and make the following representations, which, together with any
additional terms and provisions set forth in any wire or letter sent to you in
connection with a particular offering, will govern all such purchases of
securities and the reoffering thereof by you.
Your subscription to, or purchase of, such securities will constitute
your reaffirmation of this Agreement.
1. When we are acting as representative (the "Representative") of the
Underwriters in offering securities to you, it should be understood that all
offers are made subject to prior sale of the subject securities, when, as and if
such securities are delivered to and accepted by the Underwriters and subject to
the approval of legal matters by their counsel. In such cases, any order from
you for securities will be strictly subject to confirmation and we reserve the
right in our uncontrolled discretion to reject any order in whole or in part.
Upon release by us, you may reoffer such securities at the offering price fixed
by us. With our consent, you may allow a discount, not in excess of the
reallowance fixed by us, in selling such securities to other dealers, provided
that in doing so you comply with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. (the "NASD"). Upon our request, you will
advise us of the identity of any dealer to whom you allow such a discount and
any Underwriter or dealer from whom you receive such a discount. After the
securities are released for sale to the public, we may vary the offering price
and other selling terms.
2. You represent that you are a dealer actually engaged in the
investment banking or securities business and that you are either (i) a member
in good standing of the NASD or (ii) a dealer with its principal place of
business located outside the United States, its territories or possessions and
not registered under the Securities Exchange Act of 1934 (a "non-member foreign
dealer") or (iii) a bank not eligible for membership in the NASD. If you are a
non-member foreign dealer, you agree to make no sales of securities within the
United States, its territories or its possessions or to persons who are
nationals thereof or residents therein. Non-member foreign dealers and banks
agree, in making any sales, to comply with the NASD's
<PAGE>
interpretation with respect to free-riding and withholding. In accepting a
selling concession where we are acting as Representative of the Underwriters, in
accepting a reallowance from us whether or not we are acting as such
Representative, and in allowing a discount to any other person, you agree to
comply with the provisions of Section 24 of Article III of the Rules of Fair
Practice of the NASD, and, in addition, if you are a non-member foreign dealer
or bank, you agree to comply, as though you were a member of the NASD, with the
provisions of Sections 8 and 36 of Article III of such Rules of Fair Practice
and to comply with Section 25 of Article III thereof as that Section applies to
a non-member foreign dealer or bank. You represent that you are fully familiar
with the above provisions of the Rules of Fair Practice of the NASD.
3. If the securities have been registered under the Securities Act of
1933 (the "1933 Act") in offering and selling such securities, you are not
authorized to give any information or make any representation not contained in
the prospectus relating thereto. You confirm that you are familiar with the
rules and policies of the Securities and Exchange Commission relating to the
distribution of preliminary and final prospectuses, and you agree that you will
comply therewith in any offering covered by this Agreement. If we are acting as
Representative of the Underwriters, we will make available to you, to the extent
made available to us by the issuer of the securities, such number of copies of
the prospectus or offering documents, for securities not registered under the
1933 Act, as you may reasonably request.
4. If we are acting as Representative of the Underwriters of securities
of an issuer that is not required to file reports under the Securities Exchange
Act of 1934 (the "1934 Act"), you agree that you will not sell any of the
securities to any account over which you have discretionary authority.
5. Payment for securities purchased by you is to be made at our office,
One Liberty Plaza, 165 Broadway, New York, N.Y. 10006 (or at such other place as
we may advise) at the offering price less the concession allowed to you, on such
date as we may advise, by certified or official bank check in New York Clearing
House funds (or such other funds as we may advise), payable to our order,
against delivery of the securities to be purchased by you. We shall have
authority to make appropriate arrangements for payment for and/or delivery
through the facility of The Depository Trust Company or any such other
depository or similar facility for the securities.
6. In the event that, prior to the completion of the distribution of
securities covered by this Agreement, we purchase in the open market or
otherwise any securities delivered to you, if we are acting as Representative of
the Underwriters, you agree to repay to us for the accounts of the Underwriters
the amount of the concession allowed to you plus brokerage commissions and any
transfer taxes paid in connection with such purchase.
7. At any time prior to the completion of the distribution of
securities covered by this Agreement you will, upon our request as
Representative of the Underwriters, report to us the amount of securities
purchased by you which then remains unsold and will, upon our request, sell to
us for the account of one or more of the Underwriters such amount of such unsold
securities as we may designate, at the offering price less an amount to be
determined by us not in excess of the concession allowed to you.
2
<PAGE>
8. If we are acting as Representative of the Underwriters, upon
application to us, we will inform you of the states and other jurisdictions of
the United States in which it is believed that the securities being offered are
qualified for sale under, or are exempt from the requirements of, their
respective securities laws, but we assume no responsibility with respect to your
right to sell securities in any jurisdiction. We shall have authority to file
with the Department of State of the State of New York a Further State Notice
with respect to the securities, if necessary.
9. You agree that in connection with any offering of securities covered
by this Agreement you will comply with the applicable provisions of the 1933 Act
and the 1934 Act and the applicable rules and regulations of the Securities and
Exchange Commission thereunder, the applicable rules and regulations of the
NASD, and the applicable rules of any securities exchange having jurisdiction
over the offering.
10. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to any offering covered by this
Agreement. We shall be under no liability to you except for our lack of good
faith and for obligations assumed by us in this Agreement, except that you do
not waive any rights that you may have under the 1933 Act or the rules and
regulations thereunder.
11. Any notice from us shall be deemed to have been duly given if
mailed or transmitted by any standard form of written telecommunications to you
at the above address or at such other address as you shall specify to us in
writing.
12. With respect to any offering of securities covered by this
Agreement, the price restrictions contained in Paragraph 1 hereof and the
provisions of Paragraphs 6 and 7 hereof shall terminate as to such offering at
the close of business on the 45th day after the securities are released for sale
or, as to any or all such provisions, at such earlier time as we may advise. All
other provisions of this Agreement shall remain operative and in full force and
effect with respect to such offering.
13. This Agreement shall be governed by the laws of the State of New
York.
3
<PAGE>
Please confirm your agreement hereto by signing the enclosed duplicate
copy hereof in the place provided below and returning such signed duplicate copy
to us at World Headquarters, North Tower, World Financial Center, New York, N.Y.
10281-1305, Attention: Corporate Syndicate. Upon receipt thereof, this
instrument and such signed duplicate copy will evidence the agreement between
us.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Fred F. Hessinger
--------------------------------------
Name: Fred F. Hessinger
Confirmed and accepted as of the
day of , 19
___________________________________________
Name of Dealer
___________________________________________
Authorized Officer or Partner
(if not Officer or Partner, attach copy of
Instrument of Authorization)
Exhibit 9
CUSTODY AGREEMENT
Agreement made as of this day of 28th day of February, 1992, between
MUNIYIELD FLORIDA FUND, a Massachusetts business trust organized and existing
under the laws of the Commonwealth of Massachusetts, having its principal office
and place of business at
(hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New York
corporation authorized to do a banking business, having its principal office and
place of business at 48 Wall Street, New York, New York 10286 (hereinafter
called the "Custodian").
W I T N E S S E T H
that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1. "Authorized Person" shall be deemed to include any person, whether
or not such person is an Officer or employee of the Fund, duly authorized by the
Board of Trustees of the Fund to give Oral Instructions and Written Instructions
on behalf of the Fund and listed in the Certificate annexed hereto as Appendix A
or such other Certificate as may be received by the Custodian from time to time.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities, its successor
or successors and its nominee or nominees.
3. "Call Option" shall mean an exchange traded option with respect to
Securities other than Stock Index options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer thereof the
specified underlying Securities.
4. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given to
the Custodian which is actually received by the Custodian and signed on behalf
of the Fund by any two Officers.
5. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such a clearing member.
1
<PAGE>
6. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of (a) any Put
Option guarantee letter or similar document described in paragraph 8 of Article
V herein, or (b) any receipt described in Article V or VIII herein.
7. "Covered Call Option" shall mean an exchange traded option entitling
the holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying securities
(excluding Futures Contracts) which are owned by the writer thereof and subject
to appropriate restrictions.
8. "Depository" shall mean The Depository Trust Company CIDTC11), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Fund's Board of Trustees specifically approving deposits therein by the
Custodian.
9. "Financial Futures Contract" shall mean the firm commitment to buy
or sell fixed income securities including, without limitation, U.S. Treasury
Bills, U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of
deposit, and Eurodollar certificates of deposit, during a specified month at an
agreed upon price.
10. "Futures Contract" shall mean a Financial Futures Contract and/or
Stock Index Futures Contracts.
11. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
12. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall 'be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or the Depository shall be deemed to have been
deposited in, or withdrawn from, a Margin Account upon the Custodian's effecting
an appropriate entry in its books and records.
13. "Money Market Security" shall be deemed to include, without
limitation, certain Reverse Repurchase Agreements, debt obligations issued or
guaranteed as to interest and principal by the government of the United States
or agencies or instrumentalities thereof, any tax, bond or revenue anticipation
note issued by any state or municipal government or public authority, commercial
paper, certificates of deposit and bankers' acceptances, repurchase agreements
with respect to the same and bank time deposits, where the purchase and sale of
such securities normally requires settlement in federal funds on the same day as
such purchase or sale.
2
<PAGE>
14. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
15. "Officers" shall be deemed to include the President,, any Vice
President, the Secretary, the Clerk, the Treasurer, the Controller, any
Assistant Secretary, any Assistant Clerk, any Assistant Treasurer, and any other
person or persons, whether or not any such other person is an officer of the
Fund, duly authorized by the Board of Trustees of the Fund to execute any
Certificate, instruction, notice or other instrument on behalf of the Fund and
listed in the Certificate annexed hereto as Appendix B or such other Certificate
as may be received by the Custodian from time to time.
16. "Option" shall mean a Call option, Covered Call Option, Stock Index
Option and/or a Put Option.
17. "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from an Authorized Person or from a person reasonably
believed by the Custodian to be an Authorized Person.
18. "Put Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and tender of the
specified underlying Securities, to sell such Securities to the writer thereof
for the exercise price.
19. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
20. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Stock Index Options, Stock Index
Futures Contracts, Stock Index Futures Contract Options, Financial Futures
Contracts, Financial Futures Contract options, Reverse Repurchase Agreements,
common stocks and other securities having characteristics similar to common
stocks, preferred stocks, debt obligations issued by state or municipal
governments and by public authorities, (including, without limitation, general
obligation bonds, revenue bonds, industrial bonds and industrial development
bonds), bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase, sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or any property or assets.
21. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.
22. "Series" shall mean the various portfolios, if any, of the Fund as
described from time to time in the current and effective prospectus for the
Fund.
3
<PAGE>
23. "Shares" shall mean the shares of beneficial interest of the Fund,
each of-which is, in the case of a Fund having Series, allocated to a particular
series.
24. "Stock Index Futures Contract" shall mean a bilateral agreement
pursuant to which -the parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the value
of a particular stock index at the close of the last business day of the
contract and the price at which the futures contract is originally struck.
25. "Stock Index Option" shall mean an exchange traded option entitling
the holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
26. "Written Instructions" shall mean written communications actually
received by the Custodian from an Authorized Person or from a person reasonably
believed by the Custodian to be an Authorized Person by telex or any other such
system whereby the receiver of such communications is able to verify by codes or
otherwise with a reasonable degree of certainty the identity of the sender of
such communication.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian
of the Securities and moneys at any time owned by the Fund during the period of
this Agreement.
2. The Custodian hereby accepts appointment as such custodian and
agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the Custodian
all Securities and all moneys owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated. The Custodian shall
segregate, keep and maintain the assets of the series separate and apart. The
Custodian will not be responsible for any Securities and moneys not actually
received by it. The Custodian will be entitled to reverse any credits made on
the Fund's behalf where such credits have been previously made and moneys are
not finally collected. The Fund shall deliver to the Custodian a certified
resolution of the Board of Trustees of the Fund, substantially in the form of
Exhibit A hereto, approving, authorizing and instructing the Custodian on a
continuous and on-going basis to deposit in the Book-Entry System all Securities
eligible for deposit therein, regardless of the Series to which the same are
specifically allocated and to utilize the Book-Entry System to the extent
possible in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities
loans of securities and deliveries and returns of Securities collateral. Prior
to a deposit of Securities specifically allocated to a Series in the Depository,
the Fund shall deliver to the Custodian a certified
4
<PAGE>
resolution of the Board of Trustees of the Fund, substantially in the form of
Exhibit B hereto, approving, authorizing and instructing the Custodian on a
continuous and ongoing basis until instructed to the contrary by a Certificate
actually received by the Custodian to deposit in the Depository all Securities
specifically allocated to such Series eligible for deposit therein, and to
utilize the Depository to the extent possible with respect to such Securities in
connection with its performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities, loans of
Securities, and deliveries and returns of Securities collateral. Securities and
moneys deposited in either the Book-Entry System or- the Depository will be
represented in accounts which include only assets held by the Custodian for
customers, including, but not limited to, accounts in which the Custodian acts
in a fiduciary or representative capacity and will be specifically allocated on
the Custodian's books to the separate account for the applicable Series. Prior
to the Custodian's accepting, utilizing and acting with respect to Clearing
Member confirmations for Options and transactions in Options for a Series as
provided in this Agreement, the Custodian shall have received a certified
resolution of the Fund's Board of Trustees, substantially in the form of Exhibit
C hereto, approving, authorizing and instructing the Custodian on a continuous
and on-going basis, until instructed to the contrary by a Certificate actually
received by the Custodian, to accept, utilize and act in accordance with such
confirmations as provided in this Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all moneys received by it for the account of the Fund with respect to such
Series. Money credited to a separate account for a Series shall be disbursed by
the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Certificates setting forth the name and
address of the person to whom the payment is to be made, the Series account from
which payment is to be made and the purpose for which payment is to be made; or
(c) In payment of the fees and in reimbursement of the
expenses and liabilities of the Custodian attributable to such Series.
3. Promptly after the close of business on each day, the Custodian
shall furnish the Fund with confirmations and a summary, on a per Series basis,
of all transfers to or from the account of the Fund for a Series, either
hereunder or with any co-custodian or sub-custodian appointed in accordance with
this Agreement during said day where securities are transferred to the account
of the Fund for a Series, the Custodian shall also by book-entry or otherwise
identify as belonging to such Series a quantity of Securities in a fungible bulk
of Securities registered in the name of the Custodian (or its nominee) or shown
on the Custodian's account on the books of the Book-Entry System or the
Depository. At least monthly and from time to time, the Custodian shall furnish
the Fund with a detailed statement, on a per series basis, of the Securities and
moneys held by the Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the
5
<PAGE>
name of any duly appointed registered nominee of the Custodian as the Custodian
may from time to time determine, or in the name of the Book-Entry System or the
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish to the custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry System or the
Depository any Securities which it may hold hereunder and which may from time to
time be registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in the
Book-Entry System or in the Depository in a separate account in the name of such
Series physically segregated at all times from those of any other person or
persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or the Depository with respect to Securities
held hereunder and therein deposited, shall with respect to all Securities held
for the Fund hereunder in accordance with preceding paragraph 4:
(a) Collect all income due or payable;
(b) Present for payment and collect the amount payable upon
such Securities which are called, but only if either (i) the Custodian receives
a written notice of such call, or (ii) notice of such call appears in one or
more of the publications listed in Appendix C annexed hereto, which may be
amended at any time by the Custodian without the prior notification or consent
of the Fund;
(c) Present for payment and collect the amount payable upon
all Securities which mature;
(d) Surrender Securities in temporary form for definitive
Securities;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect; and
(f) Hold directly, or through the Book-Entry System or the
Depository with respect to securities therein deposited, for the account of a
Series, all rights and similar securities issued with respect to any Securities
held by the Custodian for such Series hereunder.
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:
(a) Execute and deliver to such persons as may be designated
in such Certificate proxies, consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any Securities held by 'the
Custodian hereunder for the Series-specified in such Certificate may be
exercised;
(b) Deliver any Securities held by the Custodian hereunder for
the series specified in such Certificate in exchange for other Securities or
cash issued or paid in connection with the liquidation, reorganization,
refinancing, merger, consolidation or recapitalization of any
6
<PAGE>
corporation, or the exercise of any conversion privilege and receive and hold
hereunder specifically allocated to such Series any cash or other Securities
received in exchange;
(c) Deliver any Securities held by the Custodian hereunder for
the Series specified in such Certificate to any protective committee,
reorganization committee or other person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization or sale of assets of any
corporation, and receive and hold hereunder specifically allocated to such
Series such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of the
Series specified in such Certificate, and take such other steps as shall be
stated in such Certificate to be for the purpose of effectuating any duly
authorized plan of liquidation, reorganization, merger, consolidation or
recapitalization of the Fund; and
(e) Present for payment and collect the amount payable upon
Securities not described in preceding paragraph 5(b) of this Article which may
be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have received a
Certificate from the Fund stating, that any such instruments or certificates are
available. The Fund shall deliver to the Custodian such a Certificate no later
than the business day preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall comply with Section
17(f) of the Investment Company Act of 1940, as amended, in connection with the
purchase, sale, settlement, closing out or writing of Futures Contracts,
Options, or Futures Contract options by making payments or deliveries specified
in Certificates received by the Custodian in connection with any such purchase,
sale, writing, settlement or closing out upon its receipt from a broker, dealer,
or futures commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by brokers,
dealers, or future commission merchants with respect to such Futures Contracts,
Options, or Futures Contract Options, as the case may be, confirming that such
Security is held by such broker, dealer or futures commission merchant, in
book-entry form or otherwise, in the name of the Custodian (or any nominee of
the Custodian) as custodian for the Fund, provided, however, that
notwithstanding the foregoing, payments to or deliveries from the Margin Account
and payments with respect to Securities to which a Margin Account relates, shall
be made in accordance with the terms and conditions of the Margin Account
Agreement. Whenever any such instruments or certificates are available, the
Custodian shall, notwithstanding any provision in this Agreement to the
contrary, make payment for any Futures' Contract, Option, or Futures Contract
Option for which such instruments or such certificates are available only
against the delivery to the Custodian of such instrument or such certificate,
and deliver any Futures Contract, Option or Futures Contract Option for which
such instruments or such certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or certificate delivered to
the Custodian shall be held by the Custodian hereunder in accordance with, and
subject to, the provisions of this Agreement.
7
<PAGE>
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other than a
purchase of an Option, a Futures Contract, or a Futures Contract Option, the
Fund shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate, and (ii) with
respect to each purchase of Money Market Securities, a Certificate, Oral
Instructions or Written Instructions, specifying with respect to each such
purchase: (a) the Series to which such Securities are to be specifically
allocated; (b) the name of the issuer and the title of the Securities; (c) the
number of shares or the principal amount purchased and accrued interest, if any;
(d) the date of purchase and settlement; (e) the purchase price per unit; (f)
the total amount payable upon such purchase; (g) the name of the person from
whom or the broker through whom the purchase was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom payment is to be
made. The Custodian shall, upon receipt of Securities purchased by or for the
Fund, pay to the broker specified in the Certificate out of the moneys held for
the account of such Series the total amount payable upon such purchase, provided
that the same conforms to the total amount payable as set forth in such
Certificate, Oral Instructions or Written Instructions.
2. Promptly after each sale of Securities by the Fund, other than a
sale of any Option, Futures Contract, Futures Contract Option, or any Reverse
Repurchase Agreement, the Fund shall deliver to the Custodian (i) with respect
to each sale of Securities which are not Money Market Securities, a Certificate,
and (ii) with respect to each sale of Money Market Securities, a Certificate,
Oral Instructions or Written Instructions, specifying with respect to each such
sale: (a) the Series to which such Securities were specifically allocated; (b)
the name of the issuer and the title of the Security; (c) the number of shares
or principal amount sold, and accrued interest, if any; (d) the date of sale;
(e) the sale price per unit; (f) the total amount payable to the Fund upon such
sale; (g) the name of the broker through whom or the person to whom the sale was
made, and the name of the clearing broker, if any; and (h) the name of the
broker to whom the Securities are to be delivered. The Custodian shall deliver
the Securities specifically allocated to such Series to the broker specified in
the Certificate against payment upon receipt of the total amount payable to the
Fund upon such sale, provided that the same conforms to the total amount payable
as set forth in such Certificate, Oral Instructions or Written Instructions.
8
<PAGE>
ARTICLE V
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the Fund
shall deliver to the Custodian a Certificate specifying with respect to each
Option purchased: (a) the Series to which such option is specifically allocated;
(b) the type of Option (put or call); (c) the name of the issuer and the title
and number of shares subject to such Option or, in the case of a Stock Index
Option, the stock index to which such Option relates and the number -of Stock
Index Options purchased; (d) the expiration date; (e) the exercise price; (f)
the dates of purchase and settlement; (g) the total amount payable by the Fund
in connection with such purchase; (h) the name of the Clearing Member through
whom such Option was purchased; and (i) the name of the broker to whom payment
is to be made. The Custodian shall pay, upon receipt of a Clearing Member's
statement confirming the purchase of such Option held by such Clearing Member
for the account of the Custodian (or any duly appointed and registered nominee
of the Custodian).as custodian for the Fund, out of moneys held for the account
of the Series to which such Option is to be specifically allocated, the total
amount payable upon such purchase to the Clearing Member through whom the
purchase was made, provided that the same conforms to the total amount payable
as set forth in such Certificate.
2. Promptly after the sale of any Option purchased by the Fund pursuant
to paragraph 1 hereof, the Fund shall deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) the Series to which such option
was specifically allocated; (b) the type of Option (put or call); (c) the name
of the issuer and the title and number of shares subject to such option or, in
the case of a Stock Index Option, the stock index to which such option relates
and the number of Stock Index Options sold; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the Clearing Member through whom the sale was
made. The Custodian shall consent to the delivery of the option sold by the
Clearing Member which previously supplied the confirmation described in
preceding paragraph 1 of this Article with respect to such Option against
payment to the Custodian of the total amount payable to the Fund, provided that
the same conforms to the total amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Call Option: (a) the
Series to which such Call Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Call option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call option was exercised.
The Custodian shall, upon receipt of the Securities underlying the Call option
which was exercised, pay out of the moneys held for the account of the Series to
which such Call Option was specifically allocated the total amount payable to
the Clearing Member through whom the Call option was exercised, provided that
the same conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying
9
<PAGE>
with respect to such Put Option: (a) the Series to which such Put Option was
specifically allocated; (b) the name of the issuer and the title and number of
shares subject to the Put Option; (c) the expiration date; (d) the date of
exercise and settlement; (e) the exercise price per share; (f) the total amount
to be paid to the Fund upon such exercise; and (g) the name of the Clearing
Member through whom such Put Option was exercised. The Custodian shall, upon
receipt of the amount payable upon the exercise of the Put Option, deliver or
direct the Depository to deliver the Securities specifically allocated to such
Series, provided the same conforms to the amount payable to the Fund as set
forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such Stock Index Option:
(a) the Series to which such Stock Index Option was specifically allocated; (b)
the type of Stock Index Option (put or call); (c) the number of Options being
exercised; (d) the stock index to which such option relates; (e) the expiration
date; (f) the exercise price; (g) the total amount to be received by the Fund in
connection with such exercise; and (h) the Clearing Member from whom such
payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Covered Call option: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares for which
the Covered Call Option was written and which underlie the same; (c) the
expiration date; (d) the exercise price; (e) the premium to be received by the
Fund; (f) the date such Covered Call Option was written; and (g) the name of the
Clearing Member through whom the premium is to be received. The Custodian shall
deliver or cause to be delivered, in exchange for receipt of the premium
specified in the Certificate with respect to such Covered Call Option, such
receipts as are required in accordance with the customs prevailing among
Clearing Members dealing in Covered Call Options and shall impose, or direct the
Depository to impose, upon the underlying Securities specified in the
Certificate specifically allocated to such Series such restrictions as may be
required by such receipts. Notwithstanding the foregoing, the Custodian has the
right, upon prior written notification to the Fund, at any time to refuse to
issue any receipts for securities in the possession of the Custodian and not
deposited with the Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such Covered Call option was
written; (b) the name of the issuer and the title and number of shares subject
to the Covered Call Option; (c) the Clearing Member to whom the underlying
Securities are to be delivered; and (d) the total amount payable to the Fund
upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian, shall deliver,
or direct the Depository to deliver, the underlying securities as specified in
the Certificate against payment of the amount to be received as set forth in
such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Put
Option: (a) the Series for which such Put Option was written; (b) the name of
the issuer and the- title and number of shares for which the Put Option is
written and which underlie the same; (c) the expiration date; (d) the exercise
10
<PAGE>
price; (e) the premium to be received by the Fund; (f) the date such Put Option
is written; (g) the name of the Clearing Member through whom the premium is to
be received and to whom a Put Option guarantee letter is to be delivered; (h)
the amount of cash, and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Senior Security
Account for such Series; and (i) the amount of cash and/or the amount and kind
of Securities specifically allocated to such Series to be deposited into the
Collateral Account for such Series. The Custodian shall, after making the
deposits into the Collateral Account specified in the Certificate, issue a Put
Option guarantee letter substantially in the form utilized by the Custodian on
the date hereof, and deliver the same to the Clearing Member specified in the
Certificate against receipt of the premium specified in said Certificate.
Notwithstanding the foregoing, the Custodian shall be under no obligation to
issue any Put Option guarantee letter or similar document if it is unable to
make any of the representations contained therein.
9. Whenever a Put option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option was
written; (b) the name of the issuer and title and number of shares subject to
the Put Option; (c) the Clearing Member from whom the underlying Securities are
to be received; (d) the total amount payable by the Fund upon such delivery; (e)
the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of Securities,
specifically allocated to such Series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian in connection with
such Put Option, the Custodian shall pay out of the moneys held for the account
of the Series to which such Put Option was specifically allocated the total
amount payable to the Clearing member specified in the Certificate as set forth
in such Certificate against delivery of such Securities, and shall make the
withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Stock Index Option: (a) the Series for which such Stock Index Option was
written; (b) whether such Stock Index Option is a put or a call; (c) the number
of options written; (d) the stock index to which such Option relates; (e) the
expiration date; (f) the exercise price; (g) the Clearing Member through whom
such Option was written; (h) the premium to be received by the Fund; (i) the
amount of cash and/or the amount and kind of Securities, if any ' specifically
allocated to such Series to be deposited in the Senior Security Account for such
Series; (j) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Collateral Account
for such Series; and (k) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be deposited in a
Margin Account, and the name in which such account is to be or has been
established. The Custodian shall, upon receipt of the premium specified in the
Certificate, make the deposits, if any, into the Senior Security Account
specified in the Certificate, and either (1) deliver such receipts, if any,
which the Custodian has specifically agreed to issue, which are in accordance
with the customs prevailing among Clearing Members in Stock Index options and
make the deposits into the Collateral Account specified in the Certificate, or
(2) make the deposits into the Margin Account specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian
11
<PAGE>
a Certificate specifying with respect to such Stock Index option: (a) the Series
for which such Stock Index Option was written; (b) such information as may be
necessary to identify the Stock Index Option being exercised; (c) the Clearing
Member through whom such Stock Index Option is being exercised; (d) the total
amount payable upon such exercise, and whether such amount is to be paid by or
to the Fund; (e) the amount of cash and/or amount and kind of Securities, if
any, to be withdrawn from the Margin Account; and (f) the amount of cash and/or
amount and kind of Securities, if any, to be withdrawn from the Senior Security
Account for such Series; and the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Collateral Account for such Series.
Upon the return and/or cancellation of the receipt, if any, delivered pursuant
to the preceding paragraph of this Article, the Custodian shall pay out of' the
moneys held for the account of the Series to which such Stock Index Option was
specifically allocated to the Clearing Member specified in the Certificate the
total amount payable, if any, as specified therein.
12. Whenever the Fund purchases any Option identical to a previously
written option described in paragraphs, 6, 8 or 10 of this Article in a
transaction expressly designated as a "Closing Purchase Transaction" in order to
liquidate its position as a writer of an Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to the Option being
purchased: (a) that the transaction is a Closing Purchase Transaction; (b) the
Series for which the option was written; (c) the name of the issuer and the
title and number of shares subject to the option, or, in the case of a Stock
Index Option, the stock index to which such Option relates and the number of
options held; (d) the exercise price; (e) the premium to be paid by the Fund;
(f) the expiration date; (g) the type of Option (put or call); (h) the date of
such purchase; (i) the name of the Clearing Member to whom the premium is to be
paid; and (j) the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Collateral Account, a specified Margin Account, or
the Senior Security Account for such Series. Upon the Custodian's payment of the
premium and the return and/or cancellation of ,any receipt issued pursuant to
paragraphs 6, 8 or 10 of this Article with respect to the Option being
liquidated through the Closing Purchase Transaction, the Custodian shall remove,
or direct the Depository to remove, the previously imposed restrictions on the
Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any option purchased or written by the Fund and
described in this Article, the Custodian shall delete such option from the
statements delivered to the Fund pursuant to paragraph 3 Article III herein, and
upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a certificate received
in connection with such expiration, exercise, or consummation.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund
shall deliver to the Custodian a Certificate specifying with respect to such
Futures Contract, (or with respect to any number of identical Futures
Contract(s)): (a) the Series for which the Futures Contract is
12
<PAGE>
being entered; (b) the category of Futures Contract (the name of the underlying
stock index or financial instrument); (c) the number of identical Futures
Contracts entered into; (d) the delivery or settlement date of the Futures
Contract(s); (e) the date the Futures Contract(s) was (were) entered into and
the maturity date; (f) whether the Fund is buying (going long) or selling (going
short) on such Futures Contract(s); (g) the amount of cash and/or the amount and
kind of Securities, if any, to be deposited in the Senior Security Account for
such Series; (h) the name of the broker, dealer, or futures commission merchant
through whom the Futures Contract was entered into; and (i) the amount of fee or
commission, if any, to be paid and the name of the broker, dealer, or futures
commission merchant to whom such amount is to be paid. The Custodian shall make
the deposits, if any, to the Margin Account in accordance with the terms and
conditions of the Margin Account Agreement. The Custodian shall make payment out
of the moneys specifically allocated to such Series of the fee or commission, if
any, specified in the Certificate and deposit in the Senior Security Account for
such Series the amount of cash and/or the amount and kind of Securities
specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to be
made by the Fund to a broker, dealer, or futures commission merchant with
respect to an outstanding Futures Contract, shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a
broker, dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract, shall be received and dealt with by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Fund until delivery or settlement is made on such Futures
Contract, the Fund shall deliver to the Custodian a Certificate specifying: (a)
the Futures Contract and the Series to which the same relates; (b) with respect
to a Stock Index Futures Contract, the total cash settlement amount to be paid
or received, and with respect to a Financial Futures Contract, the Securities
and/or amount of cash to be delivered or received; (c) the broker, dealer, or
futures commission merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be withdrawn from the
Senior Security Account for such Series. The Custodian shall make the payment or
delivery specified in the Certificate, and delete such Futures Contract from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
13
<PAGE>
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by the
Fund, the Fund shall promptly deliver to the Custodian a Certificate specifying
with respect to such Futures Contract Option: (a) the Series to which such
option is specifically allocated; (b) the type of Futures Contract Option (put
or call); (c) the type of Futures Contract and such other information as may be
necessary to identify the Futures Contract underlying the Futures Contract
option purchased; (d) the expiration date; (e) the exercise price; (f) the dates
of purchase and settlement; (g) the amount of premium to be paid by the Fund
upon such purchase; (h) the name of the broker or futures commission merchant
through whom such option was purchased; and (i) the name of the broker, or
futures commission merchant, to whom payment is to be made. The Custodian shall
pay out of the moneys specifically allocated to such Series, the total amount to
be paid upon such purchase to the broker or futures commissions merchant through
whom the purchase was made, provided that the same conforms to the amount set
forth in such Certificate.
2. Promptly after the sale of any Futures Contract Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to each such sale: (a) Series to
which such Futures Contract Option was specifically allocated; (b) the type of
Future Contract Option (put or call); (c) the type of Futures Contract and such
other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the broker of futures commission merchant through
whom the 'sale was made. The Custodian shall consent to the cancellation of the
Futures Contract Option being closed against payment to the Custodian of the
total amount payable to the Fund, provided the same conforms to the total amount
payable as set forth in such Certificate.
3. Whenever a Futures Contract option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract option was specifically allocated; (b) the particular Futures Contract
option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall make, out of the moneys and
Securities specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be necessary to identify
the Futures Contract underlying the Futures Contract Option; (d) the
14
<PAGE>
expiration date; (e) the exercise price; (f) the premium to be received by the
Fund; (g) the name of the broker or futures commission merchant through whom the
premium is to be received; and (h) the amount of cash and/or the amount and kind
of Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the moneys and securities specifically allocated to
such Series the deposits into the Senior Security Account, if any, as specified
in the Certificate. The deposits, if any, to be made to the Margin Account shall
be made by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a
call is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Futures Contract option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures Contract Option
is exercised; (e) the net total amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in the Certificate, make out of the moneys and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
7. Whenever the Fund purchases any Futures Contract option identical to
a previously written Futures Contract option described in this Article in order
to liquidate its position as a writer of such Futures Contract Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect to
the Futures Contract Option being purchased: (a) the Series to which such option
is specifically allocated; (b) that the transaction is a closing transaction;
(c) the type of Future Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Option Contract; (d) the
exercise price; (e) the premium to be paid by the Fund; (f) the expiration date;
(g) the name of the broker or futures commission merchant to whom the premium is
to be paid; and (h) the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security
15
<PAGE>
Account for such Series. The Custodian shall effect the withdrawals from the
Senior Security Account specified in the Certificate. The withdrawals, if any,
to be made from the Margin Account shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or purchased by
the Fund and described in this Article, the Custodian shall (a) delete such
Futures Contract Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such withdrawals from and/or in
the case of an exercise such deposits into the Senior Security Account as may be
specified in a Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract option described in this Article shall be subject to Article VI
hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the Fund
shall promptly deliver to the Custodian a Certificate specifying: (a) the Series
for which such short sale was made; (b) the name of the issuer and the title of
the Security; (c) the number of shares or principal amount sold, and accrued
interest or dividends, if any; (d) the dates of the sale and settlement; (e) the
sale price per unit; (f) the total amount credited to the Fund upon such sale,
if any, (g) the amount of cash and/or the amount and kind of Securities, if any,
which are to be deposited in a Margin Account and the name in which such Margin
Account has been or is to be established; (h) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited in a senior security
Account, and (i) the name of the broker through whom such short sale was made.
The Custodian shall upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to the Fund upon such sale, if any,
as specified in the Certificate is held by such broker for the account of the
Custodian (or any nominee of the Custodian) as custodian of the Fund, issue a
receipt or make the deposits into the Margin Account and the Senior Security
Account specified in the Certificate.
2. In connection with the closing-out of any short sale, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to each
such closing out: (a) the Series for which such transaction is being made; (b)
the name of the issuer and the title of the Security; (c) the number of shares
or the principal amount, and accrued interest or dividends, if any, required to
effect such closing-out to be delivered to the broker; (d) the dates of
closing-out and settlement; (e) the purchase price per unit; (f) the net total
amount payable to the Fund upon such closing-out; (g) the net total amount
payable to the broker upon such closing-out; (h) the amount of cash and the
amount and kind of Securities to be withdrawn, if any, from the Margin Account;
(i) the amount of cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account; and (j) the name of the broker
through whom the Fund is effecting such closing-out. The Custodian shall, upon
receipt of the net total amount payable to the Fund upon such closing-out, and
the return and/ or cancellation of the receipts, if
16
<PAGE>
any, issued by the Custodian with respect to the short sale being closed-out,
pay out of the moneys held for the account of the Fund to the broker the net
total amount payable to the broker, and make the withdrawals from the Margin
Account and the Senior Security Account, as the same are specified in the
Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, the Fund shall
deliver to the Custodian a Certificate, or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate, Oral Instructions, or
Written Instructions specifying: (a) the Series for which the Reverse Repurchase
Agreement is entered; (b) the total amount payable to the Fund in connection
with such Reverse Repurchase Agreement and specifically allocated to such
Series; (c) the broker or dealer through or with whom the Reverse Repurchase
Agreement is entered; (d) the amount and kind of Securities to be delivered by
the Fund to such broker or dealer; (e) the date of such Reverse Repurchase
Agreement; and (f) the amount of cash and/or the amount and kind ' of
Securities, if any, specifically allocated to such Series to be deposited in a
Senior Security Account for such Series in connection with such Reverse
Repurchase Agreement. The Custodian shall, upon receipt of the total amount
payable to the Fund specified in the Certificate, Oral Instructions, or Written
Instructions make the delivery to the broker or dealer, and the deposits, if
any, to the Senior Security Account, specified in such Certificate, Oral
Instructions, or Written Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described in
preceding paragraph I of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate, Oral Instructions, or Written Instructions to the
Custodian specifying: (a) the Reverse Repurchase Agreement being terminated and
the Series for which same was entered; (b) the total amount payable by the Fund
in connection with such termination; (c) the amount and kind of Securities to be
received by the Fund and specifically allocated to such Series in connection
with such termination; (d) the date of termination; (e) the name of the broker
or dealer with or through whom the Reverse Repurchase Agreement is to be
terminated; and (f) the amount of cash and/or the amount and kind of Securities
to be withdrawn from the Senior securities Account for such Series. The
Custodian shall, upon receipt of the amount and kind of Securities to be
received by the Fund specified in the Certificate, Oral Instructions, or Written
Instructions, make the payment to the broker or dealer, and the withdrawals, if
any, from the Senior Security Account, specified in such Certificate, Oral
Instructions, or Written Instructions.
ARTICLE X
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall deliver or
cause to be delivered to the Custodian a Certificate specifying with respect to
each such loan: (a) the Series to which the loaned
17
<PAGE>
Securities are specifically allocated; (b) the name of the issuer and the title
of the Securities, (c) the number of shares or the principal amount loaned, (d)
the date of loan and delivery, (e) the total amount to be delivered to the
Custodian against the loan of the Securities, including the amount of cash
collateral and the premium, if any, separately identified, and (f) the name of
the broker, dealer, or financial institution to which the loan was made. The
Custodian shall deliver the Securities thus designated to the broker, dealer or
financial institution to which the loan was made upon receipt of the total
amount designated as to be delivered against the loan of Securities. The
Custodian may accept payment in connection with a delivery otherwise than
through the Book-Entry System or Depository only in the form of a certified or
bank cashier's check payable to the order of the Fund or the Custodian drawn on
New York Clearing House funds and may deliver Securities in accordance with the
customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of Securities by the
Fund, the Fund shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan termination and return of
Securities: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities to be
returned, (c) the number of shares or the principal amount to be returned, (d)
the date of termination, (e) the total amount to be delivered by the Custodian
(including the cash collateral for such Securities minus any offsetting credits
as described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the total amount
payable upon such return of securities as set forth in the Certificate.
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or
withdrawals from, a Senior Security Account as specified in a Certificate
received by the Custodian. Such Certificate shall specify the Series for which
such deposit or withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such Series to be
deposited in, or withdrawn from, such Senior Security Account for such Series.
In the event that the Fund fails to specify in a Certificate the Series, the
name of the issuer, the title and the number of shares or the principal amount
of any particular securities to be deposited by the Custodian into, or withdrawn
from, a Senior Securities Account, the Custodian shall be under no obligation to
make any such deposit or withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from a Margin
Account to the broker, dealer, futures commission merchant or Clearing Member in
whose name, or for whose benefit, the account was established as specified in
the Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
18
<PAGE>
4. The Custodian shall have a continuing lien and security interest in
and to any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce'
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6. Promptly after the close of business on each business day in which
cash and/or Securities are maintained in a Collateral Account for any Series,
the Custodian shall furnish the Fund with a statement with respect to such
Collateral Account specifying the amount of cash and/or the amount and kind of
Securities held therein. No later than the close of business next succeeding the
delivery to the Fund of such statement, the Fund shall furnish to the Custodian
a Certificate or Written Instructions specifying the then market value of the
Securities described in such statement. In the event such then market value is
indicated to be less than the Custodian's obligation with respect to any
outstanding Put Option guarantee letter or similar document, the Fund shall
promptly specify in a Certificate the additional cash and/or Securities to be
deposited in such Collateral Account to eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of
the Board of Trustees of the Fund, certified by the Secretary, the Clerk, any
Assistant Secretary or any Assistant Clerk, either (i) setting forth with
respect to the Series specified therein the date of the declaration of a
dividend or distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent and any sub-dividend agent or
co-dividend agent of the Fund on the payment date, or (ii) authorizing with
respect to the Series specified therein the declaration of dividends and
distributions on a daily basis and authorizing the Custodian to rely on Oral
Instructions, Written Instructions or a Certificate setting forth the date of
the declaration of such dividend or distribution, the date of payment thereof,
the record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the shareholders of
record as of that date and the total amount payable to the Dividend Agent on the
payment date.
19
<PAGE>
2. Upon the payment date specified in such resolution, Oral
Instructions, Written Instructions or Certificate, as the case may be, the
Custodian shall pay out of the moneys held for the account of each Series the
total amount payable to the Dividend Agent and any sub-dividend agent or
co-dividend agent of the Fund with respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver to the
Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date, and
price; and
(b) The amount of money to be received by the Custodian for
the sale of such Shares and specifically allocated to the separate account in
the name of such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian
shall credit such money to the separate account in the name of the Series for
which such money was received.
3. Upon issuance of any Shares of any Series described in the foregoing
provisions of this Article, the Custodian shall pay, out of the money held for
the account of such series, all original issue or other taxes required to be
paid by the Fund in connection with such issuance upon the receipt of a
Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by the Custodian hereunder in
connection with a redemption of any Shares, it shall furnish to the Custodian a
Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth the
Series and number of Shares received by the Transfer Agent for redemption and
that such Shares are in good form for redemption, the Custodian shall make
payment to the Transfer Agent out of the moneys held in the separate account in
the name of the Series the total amount specified in the Certificate issued
pursuant to the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption of any
Shares, whenever any Shares are redeemed pursuant to any check redemption
privilege which may from time to time be offered by the Fund, the Custodian,
unless otherwise instructed by a Certificate, shall, upon receipt of an advice
from the Fund or its agent setting forth that the redemption is in good form for
redemption in accordance with the check redemption procedure, honor the check
presented as part of such check redemption privilege out of the moneys held in
the separate account of the Series of the Shares being redeemed.
20
<PAGE>
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance funds on
behalf of any Series which results in an overdraft because the moneys held by
the Custodian in the separate account for such Series shall be insufficient to
pay the total amount payable upon a purchase of Securities specifically
allocated to such Series, as set forth in a Certificate, Oral Instructions, or
Written Instructions or which results in an overdraft in the separate account of
such Series for some other reason, or if the Fund is for any other reason
indebted to the Custodian with respect to a Series, including any indebtedness
to The Bank of New York under the Fund's Cash Management and Related Services
Agreement, (except a borrowing for investment or for temporary or emergency
purposes using Securities as collateral pursuant to a separate agreement and
subject to the provisions of paragraph 2 of this Article), such overdraft or
indebtedness shall be deemed to-be a loan made by the Custodian to the Fund for
such Series payable on demand and shall bear interest from the date incurred at
a rate per annum (based on a 360-day year for the actual number of days
involved) equal to 1/2% over Custodian's prime commercial lending rate in effect
from time to time, such rate to be adjusted on the effective date of any change
in such prime commercial lending rate but in no event to be less than 6% per
annum. In addition, the Fund hereby agrees that the Custodian shall have a
continuing lien and security interest in and to any property specifically
allocated to such Series at any time held by it for the benefit of such series
or in which the Fund may have an interest which is then in the Custodian's
possession or control or in possession or control of any third party acting in
the Custodian's behalf. The Fund authorizes the Custodian, in its sole
discretion, at any time to charge any such overdraft or indebtedness together
with interest due thereon against any balance of account standing to such
Series' credit on the Custodian's books. In addition, the Fund hereby covenants
that on each Business Day on which either it intends to enter a Reverse
Repurchase Agreement and/ or otherwise borrow from a third party, or which next
succeeds a Business Day on which at the close of business the Fund had
outstanding a Reverse Repurchase Agreement or such a borrowing, it shall prior
to 9 a.m., New York City time, advise the Custodian, in writing, of each such
borrowing, shall specify the Series to which the same relates, and shall not
incur any indebtedness not so specified other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from which it borrows money for investment or for temporary or emergency
purposes using Securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to each such borrowing: (a)
the Series to which such borrowing relates; (b) the name of the bank, (c) the
amount and terms of the borrowing, which may be set forth by incorporating by
reference an attached promissory note, duly endorsed by the Fund, or other loan
agreement, (d) the time and date, if known, on which the loan is to be entered
into, (e) the date on which the loan becomes due and payable, (f) the total
amount payable to the Fund on the borrowing date, (g) the market value of
Securities to be delivered as collateral for such loan, including the name of
the issuer, the title and the number of shares or the principal amount of any
particular Securities, and (h) a statement specifying whether such loan is for
investment purposes or for temporary or emergency purposes and that such loan is
in
21
<PAGE>
conformance with the Investment Company Act of 1940 and the Fund's prospectus.
The Custodian shall deliver on the borrowing date specified in a certificate the
specified collateral and the executed promissory note, if any, against delivery
by the lending bank of the total amount of the loan payable, provided that the
same conforms to the total amount payable as set forth in the Certificate. The
Custodian may, at the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights therein given the
lending bank by virtue of any promissory note or loan agreement. The Custodian
shall deliver such Securities as additional collateral as may be specified in a
Certificate to collateralize further any transaction described in this
paragraph. The Fund shall cause all Securities released from collateral status
to be returned directly to the Custodian, and the Custodian shall receive from
time to time such return of collateral as may be tendered to it. In the event
that the Fund fails to specify in a Certificate the Series, the name of the
issuer, the title and number of shares or the principal amount of any particular
Securities to be delivered as collateral by the Custodian, the Custodian shall
not be under any obligation to deliver any Securities.
ARTICLE XV
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, neither the Custodian nor its
nominee shall be liable for any loss or damage, including counsel fees,
resulting from its action or omission to act or otherwise, either hereunder or
under any Margin Account Agreement, except for any such loss or damage arising
out of its own negligence or willful misconduct. In no event shall the Custodian
be liable to the Fund or any third party for special, indirect or consequential
damages or lost profits or loss of business, arising under or in connection with
this Agreement, even if previously informed of the possibility of such damages
and regardless of the form of action. The Custodian may, with respect to
questions of law arising hereunder or under any Margin Account Agreement, apply
for and obtain the advice and opinion of counsel to the Fund or of its own
counsel, at the expense of the Fund, and shall be fully protected with respect
to anything done or omitted by it in good faith in conformity with such advice
or opinion. The Custodian shall be liable to the Fund for any loss or damage
resulting from the use of the Book-Entry System or any Depository arising by
reason of any negligence or willful misconduct on the part of the Custodian or
any of its employees or agents.
2. Without limiting the generality of the foregoing, the Custodian
shall be under no obligation to inquire into, and shall not be liable for:
(a) The validity of the issue of any Securities purchased,
sold, or written by or for the Fund, the legality of the purchase, sale or
writing thereof, or the propriety of the amount paid or received therefor;
(b) The legality of the sale or redemption of any Shares, or
the propriety of the amount to be received or paid therefor;
(c) The legality of the declaration or payment of any dividend
by the Fund;
(d) The legality of any borrowing by the Fund using Securities
as collateral;
22
<PAGE>
(e) The legality of any loan of portfolio Securities, nor
shall the Custodian be under any duty or obligation to see to it that any cash
collateral delivered to it by a broker, dealer, or financial institution or held
by it at any time as a result of such loan of portfolio Securities of the Fund
is adequate collateral for the Fund against any loss it might sustain as a
result of such loan. The Custodian specifically, but not by way of limitation,
shall not be under any duty or obligation periodically to check or notify the
Fund that the amount of such cash collateral held by it for the Fund is
sufficient collateral for the Fund, but such duty or obligation shall be the
sole responsibility of the Fund. In addition, the Custodian shall be under no
duty or obligation to see that any broker, dealer or financial institution to
which portfolio Securities of the Fund are lent pursuant to Article XIV of this
Agreement makes payment to it of any dividends or interest which are payable to
or for the account of the Fund during the period of such loan or at the
termination of such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are not paid and
received when due; or
(f) The sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or Collateral
Account in connection with transactions by the Fund. In addition, the Custodian
shall be under no duty or obligation to see that any broker, dealer, futures
commission merchant or Clearing Member makes payment to the Fund of any
variation margin payment or similar payment which the Fund may be entitled to
receive from such broker, dealer, futures commission merchant or Clearing
Member, to see that any payment received by the Custodian from any broker,
dealer, futures commission merchant or Clearing Member is the amount the Fund is
entitled to receive, or to notify the Fund of the Custodian's receipt or
non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the Fund
until the Custodian actually receives and collects such money directly or by the
final crediting of the account representing the Fund's interest at the
Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall not be liable
for ascertaining or acting upon any calls, conversions, exchange offers,
tenders, interest rate changes or similar matters relating to Securities held in
the Depository, unless the Custodian shall have actually received timely notice
from the Depository. In no event shall the Custodian have any responsibility or
liability for the failure of the Depository to collect, or for the late
collection or late crediting by the Depository of any amount payable upon
Securities deposited ' in the Depository which may mature or be redeemed,
retired, called or otherwise become payable. However, upon receipt of a
Certificate from the Fund of an overdue amount on Securities held in the
Depository the Custodian shall make a claim against the Depository on behalf of
the Fund, except that the Custodian shall not be under any obligation to appear
in, prosecute or defend any action suit or proceeding in respect to any
Securities held by the Depository which in its opinion may involve it in expense
or liability, unless indemnity satisfactory to it against all expense and
liability be furnished as often as may be required.
5. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount due to the Fund from the Transfer
Agent of the Fund nor to take any
23
<PAGE>
action to effect payment or distribution by the Transfer Agent of the Fund of
any amount paid by the Custodian to the Transfer Agent of the Fund in accordance
with this Agreement.
6. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount if the Securities upon which such
amount is payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action.
7. The Custodian may appoint one or more banking institutions as
Depository or Depositories, as Sub-Custodian or Sub-Custodians, or as
Co-Custodian or Co-Custodians including, but not limited to, banking
institutions located in foreign countries, of Securities and moneys at any time
owned by the Fund, upon such terms and conditions as may be approved in a
Certificate or contained in an agreement executed by the Custodian, the Fund and
the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it, for
the account of the Fund and specifically allocated to a Series are such as
properly may be held by the Fund or such Series under the provisions of its then
current prospectus, or (b) to ascertain whether any transactions by the Fund,
whether or not involving the Custodian, are such transactions as may properly be
engaged in by the Fund.
9. The Custodian shall be entitled to receive and the Fund agrees to
pay to the Custodian all out-of-pocket expenses and such compensation as may be
agreed upon from time to time between the Custodian and the Fund. The Custodian
may charge such compensation and any expenses with respect to a Series incurred
by the Custodian in the performance of its duties pursuant to such agreement
against any money specifically allocated to such Series. Unless and until the
Fund instructs the Custodian by a Certificate to apportion any loss, damage,
liability or expense among the Series in a specified manner, the Custodian shall
also be entitled to charge against any money held by it for the account of a
Series such Series' pro rata share (based on such Series net asset value at the
time of the charge to the aggregate net asset value of all Series at that time)
of the amount of any loss, damage, liability or expense, including counsel fees,
for which it shall be entitled to reimbursement under the provisions of this
Agreement. The expenses for which the Custodian shall be entitled to
reimbursement hereunder shall include, but are not limited to, the expenses of
sub-custodians and foreign branches of the Custodian incurred in settling
outside of New York City transactions involving the purchase and sale of
Securities of the Fund.
10. The Custodian shall be entitled to rely upon any Certificate,
notice or other instrument in writing received by the Custodian and reasonably
believed by the Custodian to be a Certificate. The Custodian shall be entitled
to rely upon any Oral Instructions and any Written Instructions actually
received by the Custodian hereinabove provided for. The Fund agrees to forward
to the Custodian a Certificate or facsimile thereof confirming such Oral
Instructions or Written Instructions in such manner so that such Certificate or
facsimile thereof is received by the Custodian, whether by hand delivery,
telecopier or other similar device, or otherwise, by the close of business of
the same day that such Oral Instructions or Written Instructions are given to
the Custodian. The Fund agrees that the fact that such confirming instructions
are not received
24
<PAGE>
by the Custodian shall in no way affect the validity of the transactions or
enforceability of the transactions hereby authorized by the Fund. The Fund
agrees that the Custodian shall incur no liability to the Fund in acting upon
oral Instructions or Written Instructions given to the Custodian hereunder
concerning such transactions provided such instructions reasonably appear to
have been received from an Authorized Person.
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member.
12. The books and records pertaining to the Fund which are in the
possession of the Custodian shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the Investment Company
Act of 1940, as amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representatives, shall have
access to such books and records during the Custodian's normal business hours.
Upon the reasonable request of the Fund, copies of any such books and records
shall be provided by the Custodian to the Fund or the Fund's authorized
representative, and the Fund shall reimburse the Custodian its expenses of
providing such copies. Upon reasonable request of the Fund, the Custodian shall
provide in hard copy or on micro-film, whichever the Custodian elects, any
records included in any such delivery which are maintained by the-Custodian on a
computer disc, or are similarly maintained, and the Fund shall reimburse the
Custodian for its expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report obtained by
the Custodian on the system of internal accounting control of the Book-Entry
System, the Depository or O.C.C., and with such reports on its own systems of
internal accounting control as the Fund may reasonably request from time to
time.
14. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising or incurred because of or in
connection with this Agreement, including the Custodian's payment or non-payment
of checks pursuant to paragraph 6 of Article XIII as part of any check
redemption privilege program of the Fund, except for any such liability, claim,
loss and demand arising out of the Custodian's own negligence or willful
misconduct.
15. Subject to the foregoing provisions of this Agreement, the
Custodian may deliver and receive Securities, and receipts with respect to such
Securities, and arrange for payments to be made and received by the Custodian in
accordance with the customs prevailing from time to time among brokers or
dealers in such Securities. When the Custodian is instructed to deliver
Securities against payment, delivery of such .Securities and receipt of payment
therefor may not be completed simultaneously. The Fund assumes all
responsibility and liability for all credit risks involved in connection with
the Custodian's delivery of securities pursuant to instructions of the Fund,
which responsibility and liability shall continue until final payment in full
has been received by the Custodian.
25
<PAGE>
16. The Custodian shall have no duties - or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
ARTICLE XVI
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving
to the other party a notice in writing specifying the date of such termination,
which shall be not less than ninety (90) days after the date of giving of such
notice. In the event such notice is given by the Fund, it shall be accompanied
by a copy of a resolution of the Board of Trustees of the Fund, certified by the
Secretary, the Clerk, any Assistant Secretary or any Assistant Clerk, electing
to terminate this Agreement and designating a successor custodian or custodians,
each of which shall be a bank or trust company having not less than $2,000,000
aggregate capital, surplus and undivided profits. In the event such notice is
given by the Custodian, the Fund shall, on or before the termination date,
deliver to the Custodian a copy of a resolution of the Board of Trustees of the
Fund, certified by the Secretary, the Clerk, any Assistant Secretary or any
Assistant Clerk, designating a successor custodian or custodians. In the absence
of such designation by the Fund, the Custodian may designate a successor
custodian which shall be a bank or trust company having not less than $2,000,000
aggregate capital, surplus and undivided profits. Upon the date set forth in
such notice this Agreement shall terminate, and the Custodian shall upon receipt
of a notice of acceptance by the successor custodian on that date deliver
directly to the successor custodian all Securities and moneys then owned by the
Fund and held by it as Custodian, after deducting all fees, expenses and other
amounts for the payment or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall upon the
date specified in the notice of termination of this Agreement and upon the
delivery by the Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and moneys then owned
by the Fund be deemed to be its own custodian and the Custodian shall thereby be
relieved of all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book Entry System which
cannot be delivered to the Fund to hold such Securities hereunder in accordance
with this Agreement.
ARTICLE XVII
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Authorized Persons. The Fund agrees to furnish to the
Custodian a new Certificate in similar form in the event that any such present
Authorized Person ceases to be an Authorized Person or in the event that other
or additional Authorized Persons are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be fully protected in acting
under the provisions of this Agreement upon Oral Instructions or signatures of
the present Authorized Persons as set forth in the last delivered Certificate.
26
<PAGE>
2. Annexed hereto as Appendix B is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Officers of the Fund. The Fund agrees to furnish to
the Custodian a new Certificate in similar form in the event any such present
officer ceases to be an Officer of the Fund, or in the event that other or
additional officers are elected or appointed. Until such new Certificate shall
be received, the Custodian shall be fully protected in acting under the
provisions of this Agreement upon the signatures of the officers as set forth in
the last delivered Certificate.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at 90
Washington Street, New York, New York 10286, or at such other place as the
Custodian may from time to time designate in writing.
4. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund may from time to
time designate in writing.
5. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Trustees of the Fund.
6. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian without the written consent of the Fund,
authorized or approved by a resolution of the Fund's Board of Trustees.
7. This Agreement shall be construed in accordance with the laws' of
the State of New York without giving effect to conflict of laws principles
thereof. Each party hereby consents to the jurisdiction of a state or federal
court situated in New York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.
8. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
9. A copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however, that
the Declaration of Trust of the Fund provides that the assets of a particular
Series of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and that all persons extending
credit to, or contracting with or having any claim against a particular Series
of the Fund shall look only to the assets of that particular Series for payment
of such credit, contract or claim.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
MUNIYIELD FLORIDA FUND
[SEAL] By /s/ Gerald M. Richard
--------------------------
TREASURER
Attest:
- -------------------------
THE BANK OF NEW YORK
[SEAL] By
--------------------------
TREASURER
Attest:
/s/ illegible
- ------------------------
28
<PAGE>
APPENDIX A
I, President and I,
of MUNIYIELD FLORIDA FUND, a Massachusetts business trust (the "Fund"), do
hereby certify that:
The following individuals have been duly authorized by the Board of
Trustees of the Fund in conformity with the Fund's Declaration of Trust and
By-Laws to give Oral Instructions and Written Instructions on behalf of the
Fund, and the signatures set forth opposite their respective names are their
true and correct signatures:
Name Signature
________________________________ ___________________________________
29
<PAGE>
APPENDIX B
I, President and I,
of MUNIYIELD FLORIDA FUND, a Massachusetts business trust (the "Fund"), do
hereby certify that:
The following individuals serve in the following positions with the
Fund and each has been duly elected or appointed by the Board of Trustees of the
Fund to each such position and qualified therefor in conformity with the Fund's
Declaration of Trust and By-Laws, and the signatures set forth opposite their
respective names are their true and correct signatures:
Name Position Signature
- -------------------------- -------------------------- -----------------
30
<PAGE>
APPENDIX C
I, /s/ illegible, a Vice President with THE BANK OF NEW YORK do hereby
designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
31
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies that he or she
is the duly elected and acting of MUNIYIELD FLORIDA FUND, a
Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1992, at which a quorum was at all times present and that
such resolution has not been modified or rescinded and is in full force and
effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated as
of , 1992, (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis to deposit in the Book-Entry System, as
defined in the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are specifically
allocated, and to utilize the Book-Entry System to the extent possible
in connection with its performance thereunder, including, without
limitation, in connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and returns of
securities collateral.
IN WITNESSWHEREOF, I have hereunto set my hand and the seal of as of
, the ,day of 1992.
___________________________________
[SEAL]
32
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies that he or she is
the duly elected and acting of MUNIYIELD FLORIDA FUND, a
Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on 1992, at which a quorum was at all times present and that
such resolution has not been modified or rescinded and is in full force and
effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated as
of , 1992, (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the contrary to
deposit in the Depository, as defined in the Custody Agreement, all
securities eligible for deposit therein, regardless of the Series to
which the same are specifically allocated, and to utilize the
Depository to the extent possible in connection with its performance
thereunder, including, without limitation, in connection with
settlements of purchases and sales of securities, loans of securities,
and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal
of , as of the day of 1992.
___________________________________
[SEAL]
33
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies that he
or she is the duly elected and acting of MUNIYIELD
FLORIDA FUND, a Massachusetts business trust (the "Fund"), and further certifies
that the following resolution was adopted by the Board of Trustees of the Fund
at a meeting duly held on , 1992, at which a quorum was at all times present and
that such resolution has not been modified or rescinded and is in full force and
effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated as
of , 1992, (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the contrary to
deposit in the Participants Trust Company as Depository, as defined in
the Custody Agreement, all securities eligible for deposit therein,
regardless of the Series to which the same are specifically allocated,
and to utilize the Participants Trust Company to the extent possible in
connection with its performance thereunder, including, without
limitation, in connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and returns of
securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
, as of the day of , 1992.
--------------------------------
[SEAL]
34
<PAGE>
DOMESTIC CUSTODIAN FEE SCHEDULE
FOR
MUNIYIELD FLORIDA FUMD
Safekeeping/Income Collection/Reporting via LASER DTC/ID Affirmations
5/8ths of a basis point per annum on the aggregate net assets of the
portfolio's securities.
Security Transaction Charges
$ 8 - Book-entry settlement - DTC/FRB
$25 - Physicals, options, and futures
$ 5 - Futures maintenance margins
Other Transaction Charges
$8.50 Bank official checks and money transfers in/out not related to
securities transactions.
Out-of-Pocket Expenses
These expenses are in addition to quoted fees and are billed as they are
incurred. These expenses traditionally include, but are not limited to, postage
and handling on physical transfer items, telephone charges, Fed Wire charges
relating to security settlements, etc.
MuniYield Florida Fund The Bank of New York
Approved by /s/ Gerald M. Richard Submitted by:
Date: February 28, 1992 Date: January 6, 1992
35
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned , hereby certifies that he or she
is the duly elected and acting of MUNIYIELD FLORIDA FUND, a
Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1992, at which a quorum was at all times present and that
such resolution has not been modified or rescinded and is in full force and
effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated as
of , 1992, (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it receives a
certificate, as defined in the Custody Agreement, to the contrary, to
accept, utilize and act with respect to Clearing Member confirmations
for Options and transaction in Options, regardless of the Series to
which the same are specifically allocated, as such terms are defined in
the Custody Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
as of the day of , 1992.
------------------------------
(SEAL)
36
Exhibit 11
BROWN & WOOD LLP
ONE WORLD TRADE CENTER
NEW YORK, N.Y. 10048-0057
TELEPHONE: 212-839-5300
FACSIMILE: 212-839-5599
November 10, 1999
MuniYield Florida Fund
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Ladies and Gentlemen:
We have acted as counsel for MuniYield Florida Fund (the "Fund") in
connection with the proposed acquisition by the Fund of substantially all of the
assets and the assumption by the Fund of substantially all of the liabilities of
MuniVest Florida Fund ("MuniVest Florida"), in exchange for newly-issued common
shares of beneficial interest and auction market preferred shares of the Fund
(collectively the "Reorganization"). This opinion is furnished in connection
with the Fund's Registration Statement on Form N-14 under the Securities Act of
1933, as amended (File No. 333-88355) (the "Registration Statement"), relating
to common shares of beneficial interest par value $0.10 and auction market
preferred shares, par value $0.05 per share, of the Fund (the "Shares"), to
be issued in the Reorganization.
As counsel for the Fund, we are familiar with the proceedings taken by it
and to be taken by it in connection with the authorization, issuance and sale of
the Shares. In addition, we have examined and are familiar with the Declaration
of Trust of the Fund, as amended, the By-Laws of the Fund, as amended, and such
other documents as we have deemed relevant to the matters referred to in this
opinion.
Based upon the foregoing, we are of the opinion that subsequent to the
approval of the Agreement and Plan of Reorganization between the Fund and
MuniVest Florida set forth in the joint proxy statement and prospectus
constituting a part of the Registration Statement (the "Proxy Statement and
Prospectus"), the Shares, upon issuance in the manner referred to in the
Registration Statement, for consideration not less than the par value thereof,
will be legally issued, fully paid and non-assessable common shares of
beneficial interest or auction market preferred
<PAGE>
shares, as the case may be, of the Fund (except for certain possible liability
of shareholders described in the Proxy Statement and Prospectus under
"Item 1. The Reorganization -- Comparison of the Funds -- Capital Shares").
In rendering the foregoing opinions, we have relied, without independent
investigation or verification, as to all matters involving the laws of the
Commonwealth of Massachusetts, upon the opinion of Bingham Dana LLP.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Proxy Statement and
Prospectus constituting a part thereof.
Very truly yours,
/s/ Brown & Wood LLP
2
Exhibit 13(a)
AGREEMENT, made as of February 28, 1992, between MuniYield Florida Fund, a trust
organized and existing under the laws of the State of Massachusetts (hereinafter
referred to as the "Customer"), and The Bank of New York, a New York trust
company (hereinafter referred to as the "Bank").
WITNESSETH:
That for and in consideration of the mutual promises hereinafter set forth, the
parties hereto covenant and agree as follows:
ARTICLE I
DEFINITION
Whenever used in this Agreement, the following words and phrases shall have the
following meanings:
1. "Business Day" shall be deemed to be each day on which the Bank is open for
business.
2. "Certificate" shall mean any notice, instruction, or other instrument in
writing, authorized or required by this Agreement to be given to the Bank by the
Customer which is signed by any Officer, as hereinafter defined, and actually
received by the Bank.
3. "Officer" shall be deemed to be the Customer's Chief Executive Officer,
President, any Vice President, the Secretary, the Treasurer, the Controller, any
Assistant Treasurer and any Assistant Secretary duly authorized by the Board of
Directors of the Customer to execute any Certificate, instruction, notice or
other instrument on behalf of the Customer and named in a Certificate, as such
Certificate may be amended from time to time.
4. "Prospectus" shall mean the last Customer prospectus actually received by the
Bank from the Customer with respect to which the Customer has indicated a
registration statement under the Securities Act of 1933, as amended, has become
effective, including the Statement of Additional Information incorporated by
reference therein.
5. "Shares" shall mean all or any part of each class of the shares of capital
stock of the Customer which from time to time are authorized and/or issued by
the Customer and identified in a Certificate of the Secretary of the Customer
under corporate seal, as such Certificate may be amended from time to time.
ARTICLE II
APPOINTMENT OF BANK
1. The Customer hereby constitutes and appoints the Bank as its agent to perform
the services described herein and as more particularly described in Schedule I
attached hereto (the "Services"), and the Bank hereby accepts appointment as
such agent and agrees to perform the Services in accordance with the terms
hereinafter set forth.
<PAGE>
2. In connection with such appointment, the Customer shall deliver the following
documents to the Bank on or about the closing date of the initial public
offering:
(a) A certified copy of the Certificate of Incorporation or other document
evidencing the Customer's form of organization (the "Charter") and all
amendments thereto;
(b) A certified copy of the By-Laws of the Customer;
(c) A certified copy of a resolution of the Board of Directors of the
Customer appointing the Bank to perform the Services and authorizing the
execution and delivery of this Agreement;
(d) A Certificate signed by the Secretary of the Customer specifying: the
number of authorized Shares, the number of such authorized Shares issued and
currently outstanding, and the names and specimen signatures of all persons duly
authorized by the Board of Directors of the Customer to execute any Certificate
on behalf of the Customer, which Certificate may be amended from time to time;
(e) A Specimen Share certificate for each class of Shares in the form
approved by the Board of Directors of the Customer, together with a Certificate
signed by the Secretary of the Customer as to such approval;
(f) A copy of the Customer's Registration Statement, filed by the Customer
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended.
(g) An opinion of counsel for the Customer with respect to the validity of
the authorized and outstanding Shares, whether such Shares are fully paid and
non-assessable and the status of such Shares under the Securities Act of 1933,
as amended, and any other applicable law or regulation (i.e., if subject to
registration, that they have been registered and that the Registration Statement
has become effective or, if exempt, the specific grounds therefor).
3. The Customer shall furnish the Bank with a sufficient supply of blank Share
certificates and from time to time will renew such supply upon request of the
Bank. Such blank Share certificates shall be properly signed, by facsimile or
otherwise, by officers of the Customer authorized by law or by the By-Laws to
sign Share certificates, and, if required, shall bear the corporate seal or a
facsimile thereof.
ARTICLE III
AUTHORIZATION AND ISSUANCE OF SHARES
1. The Customer shall deliver to the Bank a certified copy of the amendment to
the Charter giving effect to such increase, decrease or change, on or before the
effective date of any increase, decrease or other change in the total number of
Shares authorized to be issued.
(a) A certified copy of the amendment to the Charter giving effect to such
increase, decrease or change;
(b) An opinion of counsel for the Customer with respect to the validity of
the Shares and the status of such Shares under the Securities Act of 1933, as
amended, and any other applicable
-2-
<PAGE>
federal law or regulations (i.e., if subject to registration, that they have
been registered and that the Registration Statement has become effective or, if
exempt, the specific grounds therefor); and
(c) In the case of an increase, if the appointment of the Bank was
theretofore expressly limited, a certified copy of a resolution of the Board of
Directors of the Customer increasing the authority of the Bank.
2. Prior to the issuance of any additional Shares pursuant to stock dividends,
stock splits or otherwise, and prior to any reduction in the number of Shares
outstanding, the Customer shall deliver the following documents to the Bank:
(a) A certified copy of the resolutions adopted by the Board of Directors
and/or the shareholders of the Customer authorizing such issuance of additional
Shares of the Customer or such reduction, as the case may be;
(b) A certified copy of the order or consent, if applicable, of each
governmental or regulatory authority required by law as a prerequisite to the
issuance or reduction of such Shares; and
(c) An opinion of counsel for the Customer with respect to the validity of
the Shares and the status of such the Shares under the Securities Act of 1933,
as amended, and any other applicable law or regulation (i.e., if subject to
registration, that they have been registered and that the Registration Statement
has become effective, or, if exempt, the specific grounds therefor).
ARTICLE IV
RECAPITALIZATION OR CAPITAL ADJUSTMENT
1. In the case of any negative stock split, recapitalization or other
capital adjustment requiring a change in the form of Share certificates, the
Bank will issue Share certificates in the new form in exchange for, or upon
transfer of, outstanding Share certificates in the old form, upon receiving:
(a) A Certificate authorizing the issuance of Share certificates in the new
form;
(b) A certified copy of any amendment to the Charter with respect to the
change;
(c) Specimen Share certificates for each class of Shares in the new form
approved by the Board of Directors of the Customer, with a Certificate signed by
the Secretary of the Customer as to such approval;
(d) A certified copy of the order or consent of each governmental or
regulatory authority required by law as a prerequisite to the issuance of the
Shares in the new form, and an opinion of counsel for the Customer that the
order or consent of no other governmental or regulatory authority is required;
and
(e) An opinion of counsel for the Customer with respect to the validity of
the Shares in the new form and the status of such Shares under the Securities
Act of 1933, as amended, and any other applicable law or regulation (i.e., if
subject to registration that the Shares have been
-3-
<PAGE>
registered and that the Registration Statement has become effective or, if
exempt, the specific grounds therefor).
2. The Customer shall furnish the Bank with a sufficient supply of blank Share
certificates in the new form, and from time to time will replenish such supply
upon the request of the Bank. Such blank Share certificates shall be properly
signed, by facsimile or otherwise, by Officers of the Customer authorized by law
or by the By-Laws to sign Share Certificates and, if required, shall bear the
corporate seal or a facsimile thereof.
ARTICLE V
ISSUANCE AND TRANSFER OF SHARES
1. (a) The Bank will issue Share certificates upon receipt of a Certificate from
an Officer, but shall not be required to issue Share certificates after it has
received from an appropriate federal or state authority written notification
that the sale of Shares has been suspended or discontinued, and the Bank shall
be entitled to rely upon such written notification. The Bank shall not be
responsible for the payment of any original issue or other taxes required to be
paid by the Customer in connection with the issuance of any shares.
(b) Shares will be transferred upon presentation to the Bank of Share
certificates in form deemed by the Bank properly endorsed for transfer,
accompanied by such documents as the Bank deems necessary to evidence the
authority of the person making such transfer, and bearing satisfactory evidence
of the payment of applicable stock transfer taxes. In the case of small estates
where no administration is contemplated, the Bank may, when furnished with an
appropriate surety bond, and without further approval of the Customer, transfer
Shares registered in the name of the decedent where the current market value of
the Shares being transferred does not exceed such amount as may from time to
time be prescribed by the various states. The Bank reserves the right to refuse
to transfer Shares until it is satisfied that the endorsements on Share
certificates are valid and genuine, and for that purpose it may require, unless
otherwise instructed by an Officer of the Customer, a guaranty of signature by a
member firm of the New York Stock Exchange or by a bank or trust company
acceptable to the Bank. The Bank also reserves the right to refuse to transfer
Shares until it is satisfied that the requested transfer is legally authorized,
and it shall incur no liability for the refusal in good faith to make transfers
which the Bank, in its judgment, deems improper or unauthorized, or until it is
satisfied that there is no basis to any claims adverse to such transfer. The
Bank may, in effecting transfers of Shares, rely upon those provisions of the
Uniform Act for the Simplification of Fiduciary Security Transfers or the
Uniform Commercial Code, as the same may be amended from time to time,
applicable to the transfer of securities, and the Customer shall indemnify the
Bank for any act done or omitted by it in good faith in reliance upon such laws.
(c) All certificates representing Shares that are subject to restrictions
on transfer (e.g., securities acquired pursuant to an investment representation,
securities held by controlling persons, securities subject to stockholders'
agreements, etc.), other than the general restrictions on the transferability of
the Shares described in the Prospectus, shall be stamped with a legend
describing the extent and conditions of the restrictions or referring to the
source of such restrictions. The Bank assumes no responsibility with respect to
the transfer of restricted securities where counsel for the Customer advises
that such transfer may be properly effected.
-4-
<PAGE>
(d) Notwithstanding the foregoing or any other provision contained in this
Agreement to the contrary, the Bank shall be fully protected by the Customer in
not requiring any instruments, documents, assurances, endorsements or
guarantees, including, without limitation, any signature guarantees, in
connection with a transfer of Shares whenever the Bank reasonably believes that
requiring the same would be inconsistent with the transfer procedures as
described in the Prospectus.
ARTICLE VI
DIVIDENDS AND DISTRIBUTIONS
1. The Customer shall furnish to the Bank a copy of a resolution of its Board of
Directors, certified by the Secretary or any Assistant Secretary, either (i)
setting forth the date of the declaration of a dividend or distribution, the
date of accrual or payment, as the case may be, the record date as of which
shareholders entitled to payment, or accrual, as the case may be, shall be
determined, the amount per Share of such dividend or distribution, the payment
date on which all previously accrued and unpaid dividends are to be paid, and
the total amount, if any, payable to the Bank on such payment date, or (ii)
authorizing the declaration of dividends and distributions on a periodic basis
and authorizing the Bank to rely on a Certificate setting forth the information
described in subsection (i) of this paragraph.
2. Prior to the payment date specified in such Certificate or resolution, as the
case may be, the Customer shall, in the case of a cash dividend or distribution,
pay to the Bank an amount of cash, sufficient for the Bank to make the payment,
specified in such Certificate or resolution, to the shareholders of record as of
such payment date. The Bank will, upon receipt of any such cash, (i) in the case
of shareholders who are participants in a dividend reinvestment and/or cash
purchase plan of the Customer, reinvest such cash dividends or distributions in
accordance with the terms of such plan, and (ii) in the case of shareholders who
are not participants in any such plan, make payment of such cash dividends or
distributions to the shareholders of record as of the record date by mailing a
check, payable to the registered shareholder, to the address of record or
dividend mailing address. The Bank shall not be liable for any improper payment
made in accordance with a Certificate or resolution described in the preceding
paragraph. If the Bank shall not receive sufficient cash prior to the payment
date to make payments of any cash dividend or distribution pursuant to
subsections (i) and (ii) above to all shareholders of the Customer as of the
record date, the Bank shall, upon notifying the Customer, withhold payment to
all shareholders of the Customer as of the record date until sufficient cash is
provided to the Bank.
3. It is understood that the Bank shall in no way be responsible for the
determination of the rate or form of dividends or distributions due to the
shareholders.
4. It is understood that the Bank shall file such appropriate information
returns concerning the payment of dividends and distributions with the proper
federal, state and local authorities as are required by law to be filed by the
Customer but shall in no way be responsible for the collection or withholding of
taxes due on such dividends or distributions due to shareholders, except and
only to the extent required of it by applicable law.
-5-
<PAGE>
ARTICLE VII
CONCERNING THE CUSTOMER
1. The Customer shall promptly deliver to the Bank written notice of any change
in the Officers authorized to sign Share certificates, Certificates,
notifications or requests, together with a specimen signature of each new
Officer. In the event any Officer who shall have signed manually or whose
facsimile signature shall have been affixed to blank Share certificates shall
die, resign or be removed prior to issuance of such Share certificates, the Bank
may issue such Share certificates as the Share certificates of the Customer
notwithstanding such death, resignation or removal, and the Customer shall
promptly deliver to the Bank such approvals, adoptions or ratifications as may
be required by law.
2. Each copy of the Charter of the Customer and copies of all amendments thereto
shall be certified by the Secretary of State (or other appropriate official) of
the state of incorporation, and if such Charter and/or amendments are required
by law also to be filed with a county or other officer or official body, a
certificate of such filing shall be filed with a certified copy submitted to the
Bank. Each copy of the By-Laws and copies of all amendments thereto, and copies
of resolutions of the Board of Directors of the Customer, shall be certified by
the Secretary or an Assistant Secretary of the Customer under the corporate
seal.
3. It shall be the sole responsibility of the Customer to deliver to the Bank
the Customer's currently effective Prospectus and, for purposes of this
Agreement, the Bank shall not be deemed to have notice of any information
contained in such Prospectus until it is actually received by the Bank.
ARTICLE VIII
CONCERNING THE BANK
1. The Bank shall not be liable and shall be fully protected in acting upon any
oral instruction, writing or document reasonably believed by it to be genuine
and to have been given, signed or made by the proper person or persons and shall
not be held to have any notice of any change of authority of any person until
receipt of written notice thereof from an Officer of the Customer. It shall also
be protected in processing Share certificates which it reasonably believes to
bear the proper manual or facsimile signatures of the duly authorized officers
of the Customer and the proper countersignature of the Bank.
2. The Bank may establish such additional procedures, rules and regulations
governing the transfer or registration of Share certificates as it may deem
advisable and consistent with such rules and regulations generally adopted by
bank transfer agents.
3. The Bank may keep such records as it deems advisable but not inconsistent
with resolutions adopted by the Board of Directors of the Customer. The Bank may
deliver to the Customer from time to time at its discretion, for safekeeping or
disposition by the Customer in accordance with law, such records, papers, Share
certificates which have been cancelled in transfer or exchange and other
documents accumulated in the execution of its duties hereunder as the Bank may
deem expedient, other than those which the Bank is itself required to maintain
pursuant to applicable laws and regulations, and the Customer shall assume all
responsibility for
-6-
<PAGE>
any failure thereafter to produce any record, paper, cancelled Share certificate
or other document so returned, if and when required. The records maintained by
the Bank pursuant to this paragraph which have not been previously delivered to
the Customer pursuant to the foregoing provisions of this paragraph shall be
considered to be the property of the Customer, shall be made available upon
request for inspection by the Officers, employees and auditors of the Customer,
and shall be delivered to the Customer upon request and in any event upon the
date of termination of this Agreement, as specified in Article IX of this
Agreement, in the form and manner kept by the Bank on such date of termination
or such earlier date as may be requested by the Customer.
4. The Bank may employ agents or attorneys-in-fact at the reasonable expense of
the Customer, and shall not be liable for any loss or expense arising out of, or
in connection with, the actions or omissions to act of its agents or
attorneys-in-fact, so long as the Bank acts in good faith and without negligence
or willful misconduct in connection with the selection of such agents or
attorneys-in-fact.
5. The Bank shall not be liable for any loss or damage, including reasonable
attorney's fees, resulting from its actions or omissions to act or otherwise,
except for any loss or damage arising out of its own negligence or willful
misconduct.
6. The Customer shall indemnify and hold harmless the Bank from and against any
and all claims (whether with or without basis in fact or law), costs, demands,
expenses and liabilities, including reasonable attorney's fees, which the Bank
may sustain or incur or which may be asserted against the Bank by reason of or
as a result of any action taken or omitted to be taken by the Bank without its
own negligence or willful misconduct in reliance upon (i) any provision of this
Agreement, (ii) the Prospectus, (iii) any instrument, order or Share certificate
reasonably believed by it to be genuine and to be signed, countersigned or
executed by any duly authorized Officer of the Customer, (iv) any Certificate or
other instructions of an Officer, (v) any opinion of legal counsel for the
Customer or the Bank, or (vi) any law, act, regulation or any interpretation of
the same even though such law, act or regulation may thereafter have been
altered, changed, amended or repealed.
7. Specifically, but not by way of limitation, the Customer shall indemnify and
hold harmless the Bank from and against any and all claims (whether with or
without basis in fact or law), costs, demands, expenses and liabilities,
including reasonable attorney's fees, of any and every nature which the Bank may
sustain or incur or which may be asserted against the Bank in connection with
the genuineness of a Share certificate, the Bank's capacity and authorization to
issue Shares and the form and amount of authorized Shares.
8. At any time the Bank may apply to an Officer of the Customer for written
instructions with respect to any matter arising in connection with the Bank's
duties and obligations under this Agreement, and the Bank shall not be liable
for any action taken or omitted to be taken by the Bank in good faith in
accordance with such instructions. Such application by the Bank for instructions
from an Officer of the Customer may, at the option of the Bank, set forth in
writing any action proposed to be taken or omitted to be taken by the Bank with
respect to its duties or obligations under this Agreement and the date on and/or
after which such action shall be taken, and the Bank shall not be liable for any
action taken or omitted to be taken in accordance with a
-7-
<PAGE>
proposal included in any such application on or after the date specified therein
unless, prior to taking or omitting to take any such action, the Bank has
received written instructions in response to such application specifying the
action to be taken or omitted. The Bank may consult counsel to the Customer or
its own counsel, at the expense of the Customer, and shall be fully protected
with respect to anything done or omitted by it in good faith in accordance with
the advice or opinion of such counsel.
9. When mail is used for delivery of non-negotiable Share certificates, the
value of which does not exceed the limits of the Bank's Blanket Bond, the Bank
shall send such non-negotiable Share certificates by first class mail, and such
deliveries will be covered while in transit by the Bank's Blanket Bond.
Non-negotiable Share certificates, the value of which exceed the limits of the
Bank's Blanket Bond, will be sent by insured registered mail. Negotiable Share
certificates will be sent by insured registered mail. The Bank shall advise the
Customer of any Share certificates returned as undeliverable after being mailed
as herein provided for.
10. The Bank may issue new Share certificates in place of Share certificates
represented to have been lost, stolen or destroyed upon receiving instructions
in writing from an Officer and indemnity satisfactory to the Bank. Such
instructions from the Customer shall be in such form as approved by the Board of
Directors of the Customer in accordance with applicable law or the By-Laws of
the Customer governing such matters. If the Bank receives written notification
from the owner of the lost, stolen or destroyed Share certificate within a
reasonable time after he has notice of it, the Bank shall promptly notify the
Customer and shall act pursuant to written instructions signed by an Officer. If
the Customer receives such written notification from the owner of the lost,
stolen or destroyed Share certificate within a reasonable time after he has
notice of it, the Customer shall promptly notify the Bank and the Bank shall act
pursuant to written instructions signed by an Officer. The Bank shall not be
liable for any act done or omitted by it pursuant to the written instructions
described herein. The Bank may issue new Share certificates in exchange for, and
upon surrender of, mutilated Share certificates.
11. The Bank will issue and mail subscription warrants for Shares, Shares
representing stock dividends, exchanges or splits, or act as conversion agent
upon receiving written instructions from an Officer and such other documents as
the Bank may deem necessary.
12. The Bank will supply shareholder lists to the Customer from time to time
upon receiving a request therefor from an Officer of the Customer.
13. In case of any requests or demands for the inspection of the shareholder
records of the Customer, the Bank will notify the Customer and endeavor to
secure instructions from an officer as to such inspection. The Bank reserves the
right, however, to exhibit the shareholder records to any person whenever it is
advised by its counsel that there is a reasonable likelihood that the Bank will
be held liable for the failure to exhibit the shareholder records to such
person.
14. At the request of an Officer, the Bank will address and mail such
appropriate notices to shareholders as the Customer may direct.
15. Notwithstanding any provisions of this Agreement to the contrary, the Bank
shall be under no duty or obligation to inquire into, and shall not be liable
for:
-8-
<PAGE>
(a) The legality of the issue, sale or transfer of any Shares, the
sufficiency of the amount to be received in connection therewith, or the
authority of the Customer to request such issuance, sale or transfer;
(b) The legality of the purchase of any Shares, the sufficiency of the
amount to be paid in connection therewith, or the authority of the Customer to
request such purchase;
(c) The legality of the declaration of any dividend by the Customer, or the
legality of the issue of any Shares in payment of any stock dividend; or
(d) The legality of any recapitalization or readjustment of the Shares.
16. The Bank shall be entitled to receive and the Customer hereby agrees to pay
to the Bank for its performance hereunder (i) out-of-pocket expenses (including
reasonable attorney's fees and expenses) incurred in connection with this
Agreement and its performance hereunder, and (ii) the compensation for services
as set forth in Schedule I.
17. The Bank shall not be responsible for any money, whether or not represented
by any check, draft or other instrument for the payment of money, received by it
on behalf of the Customer, until the Bank actually receives and collects such
funds.
18. The Bank shall have no duties or responsibilities whatsoever except such
duties and responsibilities as are specifically set forth in this Agreement, and
no covenant or obligation shall be implied against the Bank in connection with
this Agreement.
ARTICLE IX
TERMINATION
Either of the parties hereto may terminate this Agreement by giving to the other
party a notice in waiting specifying the date of such termination, which shall
be not less than 60 days after the date of receipt of such notice. In the event
such notice is given by the Customer, it shall be accompanied by a copy of a
resolution of the Board of Directors of the Customer, certified by the Secretary
electing to terminate this Agreement and designating a successor transfer agent
or transfer agents. In the event such notice is given by the Bank, the Customer
shall, on or before the termination date, deliver to the Bank a copy of a
resolution of its Board of Directors certified by the Secretary designating a
successor transfer agent or transfer agents. In the absence of such designation
by the Customer, the Bank may designate a successor transfer agent. If the
Customer fails to designate a successor transfer agent and if the Bank is unable
to find a successor transfer agent, the Customer shall, upon the date specified
in the notice of termination of this Agreement and delivery of the records
maintained hereunder, be deemed to be its own transfer agent and the Bank shall
thereafter be relieved of all duties and responsibilities hereunder. Upon
termination hereof, the Customer shall pay to the Bank such compensation as may
be due to the Bank as of the date of such termination, and shall reimburse the
Bank for any disbursements and expenses made or incurred by the Bank and payable
or reimbursable hereunder.
-9-
<PAGE>
ARTICLE X
MISCELLANEOUS
1. The Customer agrees that prior to effecting any change in the Prospectus
which would increase or alter the duties and obligations of the Bank hereunder,
it shall advise the Bank of such proposed change at least ten business days
prior to the intended date of the same, and shall proceed with such change only
if it shall have received the written consent of the Bank thereto.
2. The indemnities contained herein shall be continuing obligations of the
Customer, its successors and assigns, notwithstanding the termination of this
Agreement.
3. Any notice or other instrument in writing, authorized or required by this
Agreement to be given to the Customer shall be sufficiently given if addressed
to the Customer and mailed or delivered to it at 800 Scudders Mill Road,
Plainsboro, NJ 08536 or at such place as the Customer may from time to time
designate in writing.
4. Any notice or other instrument in writing, authorized or required by this
Agreement to be given to the Bank shall be sufficiently given if addressed to
the Bank and mailed or delivered to it at its office at 101 Barclay Street
(22W), New York, New York 10286 or at such other place as the Bank may from time
to time designate in writing.
5. This Agreement may not be amended or modified in any manner except by a
written agreement duly authorized and executed by both parties. Any duly
authorized Officer may amend any Certificate naming Officers authorized to
execute and deliver Certificates, instructions, notices or other instruments,
and the Secretary or any Assistant Secretary may amend any Certificate listing
the shares of capital stock of the Customer for which the Bank performs Services
hereunder.
6. This Agreement shall extend to and shall be binding upon the parties hereto
and their respective successors and assigns; provided however, that this
Agreement shall not be assignable by either party without the prior written
consent of the other party.
7. This Agreement shall be governed by and construed in accordance with the laws
of the State of New York.
8. This Agreement may be executed in any number of counterparts each of which
shall be deemed to be an original; but such counterparts, together, shall
constitute only one instrument.
9. The provisions of this Agreement are intended to benefit only the Bank and
the Customer, and no rights shall be granted to any other person, by virtue of
this Agreement.
10. This Agreement is executed by or on behalf of the trustees of the Fund
solely in their capacity as such trustees, and shall not constitute their
personal obligation either Jointly or severally in their individual capacities.
No trustee, officer or shareholder of the Fund shall be liable for any
obligations of the Fund under this instrument and the Fund shall be solely
liable therefor; all parties hereto shall look solely to the Fund property for
the payment of any claim, or the performance of any obligation, hereunder.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective corporate officer, thereunto duly authorized and their
respective corporate seals to be hereunto affixed, as of the day and year first
above written.
Attest: MUNIYIELD FLORIDA FUND
/s/ Mark B. Goldfus By: /s/ Gerald M. Richard
- ------------------------- -----------------------------
Title: Treasurer
-----------------------------
Attest: THE BANK OF NEW YORK
_______________________________ By:__________________________________
Title:_______________________________
-11-
<PAGE>
MUNIYIELD FLORIDA FUND
STOCK TRANSFER FEE SCHEDULE
February 25, 1992
Account Maintenance Fee, (per account) ...........................$2.64
Certificate Issuance (per certificate) ...........................$1.20
Check Issuance Fee, (per check)...................................$0.25
Fees will be billed monthly and include all services, as illustrated below. Fees
will remain in effect for a period of 2 years from the date of our appointment.
Account Maintenance:
We will:
o Maintain all shareholder name and address records and process all
changes.
o Issue and register all certificates.
o Record all certificate transactions.
o Answer shareholder inquiries, including written correspondence.
o Provide hard-copy or microfiche reports of daily transfer
activity.
o Address, insert and mail up to three quarterly reports and one
annual report. (The material must be adaptable to automatic
equipment.)
o Address, insert and mail proxy cards and standard proxy material
for annual meeting. (The material must be adaptable to automatic
equipment.)
o Tabulate proxies and provide terminal access to our database for
your annual meeting.
o Provide a secondary proxy mailing to shareholders who have not
voted.
o Provide a shareholder list and a final voted and unvoted list as
of the annual meeting date.
o Mail W-9 certifications.
<PAGE>
o Solicit taxpayer identification numbers on new accounts.
o Issue, enclose and reconcile each dividend check.
o File IRS Forms 1099 and 1096 covering dividends paid, plus Forms
1042S and 1042 NRA Tax (for foreign holders).
o Initiate mailings to shareholders with uncashed dividend checks
over one year old.
o Cease delivery of checks to undeliverable accounts.
o Provide escheatment reporting.
o Provide arrangements for handling restricted stock.
o Process all stock options.
o Place, remove and maintain all stop transfers.
o Process all legal transfers.
o Replace all lost, stolen or destroyed checks and certificates.
o Provide three analytical reports as follows:
1 Geographical Analysis
1 Class Code Analysis
1 Share Range Analysis
o Install and provide access via company terminal to The Bank of
New York database. Training will be completed on site at your
offices by personnel from The Bank of New York.
<PAGE>
Dividend Reinvestment Plan
Account Maintenance Fee...........................................$3.00
This account maintenance fee will be billed monthly at a rate of $0.25
per dividend reinvestment account record.
We will:
o Reinvest each dividend.
o Process terminations.
o Process optional cash payments and send acknowledgements.
o Provide an efficient way of purchasing and selling shares through
our Discount Brokerage services. This service is affiliated with
our Trust Sector and will be provided at a discounted rate.
<PAGE>
TERMS OF PROPOSAL
o The Bank of New York does not levy a conversion charge or setup fee for
assumption of records in an automated tape format in connection with our
appointment as Transfer Agent and Registrar. Any charges made by your
existing agent in connection with our assumption of your shareholder
records in an automated tape format would be passed through to your
account.
o Out-of-pocket expenses are defined as costs paid by The Bank of New York
for the purchase of goods or services required to fulfill our obligations
under our agreement. These expenses may include, but not be limited to,
postage, insurance on physical transfer items, and costs for obtaining
prices for security valuations. These expenses are billed at our cost, on
a pro-rata basis for goods and services received.
o There will not be a usage charge applied for utilizing the Bank's Stock
Transfer Inquiry System. Connect time will be billed at cost, based on a
dedicated line or dial-up expense.
o For issuing purchase warrants, stock dividends and splits, the handling of
tenders and exchanges of stock, subscriptions, preparing state information
returns, and any other services not covered by this fee schedule, charges
will be based on an analysis and appraisal of the services rendered.
o All fees are based upon the use of automatic equipment. Any services
requiring manual processing and/or overtime, will result in a special or
higher charge.
o The Bank of New York's minimum charge is $10,000. If at the end of each
year (12 months from appointment date) the total fees are less than the
minimum, the difference will be billed to your account. The fees are
charged on a monthly basis.
o In the event that we do not enter into a written agreement within three
months of the date of this proposal, this offer will be subject to
revision.
<PAGE>
Proposal Submitted by: ________________________________
Mr. David J. May
Assistant Treasurer
The Bank of New York
January 3, 1992
Proposal Accepted by: /s/ Gerald M. Richard
--------------------------------
Treasurer
MuniYield Florida Fund
Date: February 28, 1992
--------------------------------
<PAGE>
OUT-OF-POCKET EXPENSES AND SAVINGS
Expenses
Out-of-pocket expenses are defined as costs paid by The Bank of New York
for the purchase of goods or services required to fulfill our obligations
as Transfer Agent, Registrar, Dividend Disbursement Agent or for other
related services. Out-of-pocket expenses are billed to our customers on a
pro-rata basis for goods or services received. The bills you receive are
for pass-through costs only. We do not add on a service or handling
charge.
Savings
Our customers typically realize savings of 30% or more because of our
volume purchases of materials. As the largest financial institution
mailer in the United States, The Bank of New York negotiates substantial
volume discounts on checks, envelopes and other stationery which we pass
on to our customers. In addition, you can expect savings through our
investment in automated equipment such as our.
o Ink-jet Spray System - We utilize an ink-jet spray system for
addressing envelopes. The system uses a magnetic tape feed to
address envelopes at the rate of 30,000 per hour. Various type fonts
are available as well as colors for customized envelopes. You can
imprint seasonal greetings or messages (e.g., IMPORTANT NOTICE) on
envelopes, thereby generating savings usually spent for
custom-printed envelopes. The ink-jet spray system also allows us to
avoid the use of cheshire or heat-sensitive labels which are an
expensive component of mailing costs. Cheshire or heat-sensitive
labels are available upon request.
o Pre-Sort Mailing System - The equipment we use pre-sorts an average
of 80% of outgoing first class mail and runs at the speed of 35,000
pieces per hour. We receive a first-class discount of up to $0.045
per item. These savings are shared with you.
o This equipment also sorts by company, incoming proxies through use
of an optical scan of bar codes on return envelopes. This capability
allows us to have a unique Zip Code (not a P.O. Box) for receipt of
voted proxies, thus avoiding sorting by the U.S. Post Office.
o Centralized Recordkeeping System - Our centralized recordkeeping
system allows us to combine mailings of dividends, proxies and
reports across all company issues or stock plans. This results in a
substantial reduction in duplicate mailings. Share positions are
itemized on proxies and dividends to provide shareholders with
adequate detail.
Exhibit 13(b)
================================================================================
AUCTION AGENT AGREEMENT
between
MUNIYIELD FLORIDA FUND
and
IBJ SCHRODER BANK & TRUST COMPANY
Dated as of April 10, 1992
Relating to
Auction Market Preferred Stock(R)
( "AMPS"(R) )
of
MUNIYIELD FLORIDA FUND
================================================================================
(R) Registered trademark of Merrill Lynch Co., Inc.
<PAGE>
THIS AUCTION AGENT AGREEMENT dated as of April 10, 1992, between
MUNIYIELD FLORIDA FUND, a Massachusetts business trust (the "Trust"), and IBJ
SCHRODER BANK & TRUST COMPANY, a New York banking corporation.
The Trust proposes to,-,duly authorize and issue 1,000 shares of
Auction Market Preferred Stock(R) (the "AMPS"), with a par value of $.10 per
share and a liquidation preference of $50,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared) pursuant to
the Trust's Certificate of Designation (as defined below). The Trust desires
that IBJ Schroder Bank & Trust Company perform certain duties as agent in
connection with each Auction of shares of AMPS (the "Auction Agent") and as the
transfer agent, registrar, dividend disbursing agent and redemption agent with
respect to the shares of AMPS (the "Paying Agent") upon the terms and conditions
of this Agreement, and hereby appoints IBJ Schroder Bank & Trust Company as said
Auction Agent and Paying Agent in accordance with those terms and conditions
(hereinafter generally referred to as the "Auction Agent" except in Sections 3
and 4 below).
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Trust and the Auction Agent agree as follows:
1. Definitions and Rules of Construction.
1.1 Terms Defined by Reference to Certification of Designation.
Capitalized terms not defined herein shall have the respective meanings
specified in the Certificate of Designation.
1.2 Terms Defined Herein.
As used herein and in the Settlement Procedures (as defined below), the
following terms shall have the following meanings, unless the context otherwise
requires:
(a) "Affiliate" shall mean any Person, other than Merrill Lynch, Pierce, Fenner
& Smith Incorporated, made known to the Auction Agent to be controlled by,
in control of or under common control with, the Trust, or its successors.
(b) "Agent Member" of any Person shall mean such Person's agent member of the
Securities Depository who is identified as such in such Person's
Purchaser's Letter.
(c) "Auction" shall have the meaning specified in Section 2.1 hereof.
(d) "Auction Procedures" shall mean the Auction Procedures that are set forth
in Paragraph 11 of the Certificate of Designation.
(e) "Authorized Officer" shall mean each Senior Vice President, Vice President,
Assistant Vice President, Trust officer, and Assistant Secretary and
Assistant Treasurer of the Auction Agent assigned to its Corporate Trust
and Agency Group and
- --------
(R) Registered trademark of Merrill Lynch & Co., Inc.
<PAGE>
every other officer or employee of the Auction Agent designated as an
"Authorized Officer" for purposes hereof in a communication to the Trust.
(f) "Broker-Dealer Agreement" shall mean each agreement between the Auction
Agent and a Broker-Dealer substantially in the form attached hereto as
Exhibit A.
(g) "Certificate of Designation" shall mean the Certificate of Designation of
the Trust, establishing the powers, preferences and rights of the AMPS,
filed on April 7, 1992, in the office of the Secretary of State of the
Commonwealth of Massachusetts.
(h) "Trust Officer" shall mean the Chairman and Chief Executive Officer, the
President, each Vice President (whether or not designated by a number or
word or words added before or after the title "Vice President"), the
Secretary, the Treasurer, each Assistant Secretary and each Assistant
Treasurer of the Trust and every other officer or employee of the Trust
designated as a "Trust Officer" for purposes hereof in a notice from the
Trust to the Auction Agent.
(i) "Holder" shall be a holder of record of one or more shares of AMPS, listed
as such in the stock register maintained by the Paying Agent pursuant to
Section 4.6.
(j) "Purchaser's Letter" shall mean a letter addressed to the Trust, the
Auction Agent and a Broker-Dealer, substantially in the form attached to
the Broker-Dealer Agreement as Exhibit A.
(k) "Settlement Procedures" shall mean the Settlement Procedures attached to
the Broker-Dealer Agreement as Exhibit B.
1.3 Rules of Construction.
Unless the context or use indicates another or different meaning or
intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural number and
vice versa.
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of this Agreement nor shall they
affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar
import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York
City time.
2
<PAGE>
2. The Auction.
2.1 Purpose; Incorporation by Reference of
Auction Procedures and Settlement Procedures.
(a) The certificate of Designation provides that the
Applicable Rate on shares of AMPS for each Dividend Period therefor
after the Initial Dividend Period shall be the rate per annum that a
commercial bank, trust company, or other financial institution
appointed by the Trust advises results from implementation of the
Auction Procedures. The Board of Trustees of the Trust has adopted a
resolution appointing IBJ Schroder Bank & Trust Company as Auction
Agent for purposes of the Auction Procedures. The Auction Agent hereby
accepts such appointment and agrees that, on each Auction Date, it
shall follow the procedures set forth in this Section 2 and the Auction
Procedures for the purpose of determining the Applicable Rate for the
AMPS, for the next Dividend Period therefor. Each periodic operation of
such procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction
Procedures and the settlement Procedures are incorporated herein by
reference in their entirety and shall be deemed to be a part hereof to
the same extent as if such provisions were fully set forth herein.
2.2 Preparation for Each Auction;
Maintenance of Registry of Beneficial Owners.
(a) Pursuant to Section 2.5 hereof, the Trust shall not
designate any Person to act as a Broker-Dealer without prior written
approva;,of the Auction Agent (which approval shall not be withheld
unreasonably). At the time of closing of the initial issuance and sale
of the AMPS (the "Closing"), the Trust shall provide the Auction Agent
with a list of the Broker-Dealers previously approved by the Auction
Agent and shall cause to be delivered to the Auction Agent for
execution by the Auction Agent a Broker-Dealer Agreement signed by each
such Broker-Dealer. The Auction Agent shall keep such list current and
accurate, and shall indicate thereon, or on a separate list, the
identity of each Existing Holder, if any, whose most recent Order was
submitted by a Broker-Dealer on such list and resulted in such Existing
Holder continuing to hold or purchasing shares of AMPS. Not later than
five days prior to any Auction Date for which any change in such list
of Broker-Dealers is to be effective, the Trust shall notify the
Auction Agent in writing of such change and, if any such change is the
addition of a Broker-Dealer to such list, the Trust shall cause to be
delivered to the Auction Agent for execution by the Auction Agent a
Broker-Dealer Agreement signed by such Broker-Dealer. The Auction Agent
shall have entered into a Broker-Dealer Agreement with each
Broker-Dealer prior to the participation of any such Broker-Dealer in
any Auction.
(b) In the event that the Auction Date for any Auction shall
be changed after the Auction Agent shall have given the notice referred
to in clause (vii) of Paragraph (a) of the Settlement Procedures, the
Auction Agent, by such means as the Auction Agent
3
<PAGE>
deems practicable, shall give notice of such change to the
Broker-Dealers not later than the earlier of 9:15 A.M. on the new
Auction Date or 9:15 A.M. on the old Auction Date.
(c) 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 will 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 a number of whole years not greater than
five years in the case of a Long Term Dividend Period, specified in
such notice, provided that for any Auction occurring after the initial
Auction, the Trust may not give a Request for Special Dividend Period
(and any such request shall be null and void) unless the Trust has
received written confirmation from S&P that such action would not
impair the rating then assigned to the AMPS by S&P and unless
sufficient Clearing Bids were made in the last occurring Auction and,
unless full cumulative dividends, any amounts due with respect to
mandatory redemptions and any Additional Dividends payable prior to
such date have been paid in full. Such Request for Special Dividend
Period, in the case of a Short Term Dividend Period, shall be given on
or prior to the fourth day but not more than seven 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 14th day but not more than 28
days prior to the Auction Date for the AMPS. Upon receiving such
Request for Special Dividend Period, the Broker-Dealers(s) shall
jointly determine whether given the factors set forth in paragraph
2(c)(iii) of the Certificate of Designation 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 third day prior to such Auction
Date. If the Broker-Dealers shall not give the Trust and the Auction
Agent a Response by such third day or if the Response states that given
the factors referred to above it is not advisable that the Trust give a
Notice of Special Dividend Period (as defined below) 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
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 Response. The Trust
shall not give a Notice of Special Dividend Period, or, if such Notice
of Special Dividend Period shall have already been given, shall give
telephonic and written notice (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 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
4
<PAGE>
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-Dealers jointly advise the Trust that after consideration of
the factors referred to above they have concluded that it is advisable
to give a Notice of Revocation. If the Trust is prohibited from giving
a Notice of Special Dividend Period as a result of the factors
enumerated in clause (x), (y) or (z) of the preceding sentence or if
the Trust gives a Notice of Revocation with respect to a Notice of
Special Dividend Period, the next succeeding Dividend Period will be a
7-day Dividend Period, in addition, in the event sufficient Clearing
Bids are not made in any Auction or an Auction is not held for any
reason, the next succeeding Dividend Period will be a 7-day Dividend
Period and the Trust may not again give a Notice of Special Dividend
Period (and any such attempted notice shall be null and void) until
sufficient Clearing Bids have been made in an Auction with respect to
a 7-day Dividend Period.
(d) (i) Whenever the Trust intends to include any net
capital gains or other taxable income in any dividend on shares of
AMPS, the Trust will notify the Auction Agent of the amount to be so
included at least five Business Days prior to the Auction Date on which
the Applicable Rate for such dividend is to be established. Whenever
the Auction Agent receives such notice from the Trust, it will in turn
notify each Broker-Dealer, who, on or prior to such Auction Date, in
accordance with its Broker-Dealer Agreement, will notify its Existing
Holders and Potential Holders believed to be interested in submitting
an order in the Auction to be held on such Auction Date.
(ii) If the Trust makes a Retroactive Taxable allocation,
the Trust will, within 90 days (and generally within 60 days) after the
end of its fiscal year for which a Retroactive Taxable Allocation is
made provide notice thereof to the Auction Agent and to each holder of
shares (initially the Securities Depository) 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 shares of AMPS), out of funds legally
available therefor, a cash amount equal to the aggregate Additional
Dividend with respect to all Retroactive Taxable Allocations made to
such holders during the fiscal year in question.
(e) (i) On each Auction Date, the Auction Agent shall
determine the Reference Rate and the Maximum Applicable Rate. If the
Reference Rate is not quoted on an interest basis but is quoted on a
discount basis, the Auction Agent shall convert the quoted rate to an
Interest Equivalent, as set forth in paragraph 1 of the Certificate of
Designation; or, if the rate obtained by the Auction Agent is not
quoted on an interest or discount basis, the Auction Agent shall
convert the quoted rate to an interest rate after
5
<PAGE>
consultation with the Trust as to the method of such conversion. Not
later than 9:30 A.M. on each Auction Date, the Auction Agent shall
notify the Trust and the Broker-Dealers of the Reference Rate so
determined and the Maximum Applicable Rate.
(ii) Upon receipt by the Trust of the written advice
contemplated by subsection (i) of the definition of "Reference Rate" in
section 1(a) of the Certificate of Designation, the Trust shall as soon
as practicable, and in no event later than the day next preceding the
next Auction Date, forward a copy of such written advice to the Auction
Agent.
(iii) If the Reference Rate is the applicable "AA" Composite
Commercial Paper Rate and such rate is to be based on rates supplied by
Commercial Paper Dealers and one or more of the Commercial Paper
Dealers shall not provide a quotation for the determination of the
applicable "AA" Composite Commercial Paper Rate, the Auction Agent
shall immediately notify the Trust so that the Trust can determine
whether to select a Substitute Commercial Paper Dealer or Substitute
Commercial Paper Dealers to provide the quotation or quotations not
being supplied by any Commercial Paper Dealer or Commercial Paper
Dealers. The Trust shall promptly advise the Auction Agent of any such
selection. If the Trust does not select any such Substitute Commercial
Paper Dealer or Substitute Commercial Paper Dealers, then the rates
shall be supplied by the remaining Commercial Paper Dealer or
Commercial Paper Dealers.
(iv) If, after the date of this Agreement, there is any
change in the prevailing rating of AMPS by either of the rating
agencies (or substitute or successor rating agencies) referred to in
the definition of the Maximum Applicable Rate, thereby resulting in any
change in the corresponding applicable percentage for the AMPS, as set
forth in said definition (the "Percentage"), the Trust shall notify the
Auction Agent in writing of such change in the Percentage prior to 9:00
A.M. on the Auction Date for AMPS next succeeding such change. The
Percentage for the AMPS on the date of this Agreement is as specified
in paragraph 11(a)(vii) of the Certificate of Designation. The Auction
Agent shall be entitled to rely on the last Percentage of which it has
received notice from the Trust (or, in the absence of such notice, the
Percentage set forth in the preceding sentence) in determining the
Maximum Applicable Rate as set forth in Section 2.2(e)(i) hereof.
(f) (i) The Auction Agent shall maintain a current registry
of the beneficial owners of the shares of AMPS who shall constitute the
Existing Holders for purposes of each Auction. The Trust shall use its
best efforts to provide or cause to be provided to the Auction Agent
within ten days following the date of Closing a list of the initial
Existing Holders of AMPS, and the Broker-Dealer of each such Existing
Holder through which such Existing Holder purchased such shares. The
Auction Agent may rely upon, as evidence of the identities of the
Existing Holders, such list, the results of each Auction and notices
from any Existing Holder, the Agent Member of any Existing Holder or
the Broker-Dealer of any Existing Holder with respect to such Existing
Holder's transfer of any shares of AMPS to another Person.
6
<PAGE>
(ii) In the event of any partial redemption of AMPS, upon
notice by the Trust to the Auction Agent of such partial redemption,
the Auction Agent shall promptly request the Securities Depository to
notify the Auction Agent of the identities of the Agent Members (and
the respective numbers of shares) from the account of which shares have
been called for redemption and the person or department at such Agent
Member to contact regarding such redemption, and at least two Business
Days prior to the Auction preceding the date of redemption with respect
to shares of the series being partially redeemed, the Auction Agent
shall request each Agent Member so identified to disclose to the
Auction Agent (upon selection by such Agent Member of the Existing
Holders whose shares are to be redeemed) the number of shares of AMPS
of each such Existing Holder, if any, to be redeemed by the Trust;
provided the Auction Agent has been furnished with the name and
telephone number of a person or department at such Agent Member from
which it is to request such information. If necessary to procure such
information, the Auction Agent shall deliver to each Agent Member a
facsimile copy of the Purchaser's Letter of each Existing Holder
represented by such Agent Member, which authorizes and instructs such
Agent Member to release such information to the Auction Agent. In the
absence of receiving any such information with respect to an Existing
Holder, from such Existing Holder's Agent Member or otherwise, the
Auction Agent may continue to treat such Existing Holder as the
beneficial owner of the number of shares of AMPS shown in the Auction
Agent's registry of beneficial owners.
(iii) The Auction Agent shall register a transfer of the
beneficial ownership of shares of AMPS from an Existing Holder to
another Person only if such transfer is made to a Person that has
delivered a signed Purchaser's Letter to the Auction Agent and only if
(A) such transfer is pursuant to an Auction or (B) if such transfer is
made other than pursuant to an Auction, the Auction Agent has been
notified in writing in a notice substantially in the form of Exhibit D
to the Broker-Dealer Agreements, by such Existing Holder, the Agent
Member of such Existing Holder, or the Broker-Dealer of such Existing
Holder of such transfer. The Auction Agent is not required to accept
any notice of transfer delivered for an Auction unless it is received
by the Auction Agent by 3:00 P.M. on the Business Day next preceding
the applicable Auction Date. The Auction Agent shall rescind a transfer
made on the registry of the beneficial owners of any shares of AMPS if
the Auction Agent has been notified in writing in a notice
substantially in the form of Exhibit E to the Broker-Dealer Agreement
by the Agent Member or the Broker-Dealer of any Person that (i)
purchased any shares of AMPS and the seller failed to deliver such
shares or (ii) sold any shares of AMPS and the purchaser failed to make
payment to such Person upon delivery to the purchaser of such shares.
(g) The Auction Agent may request that the Broker-Dealers,
as set forth in Section 3.2(c) of the Broker-Dealer Agreements, provide
the Auction Agent with a list of their respective customers that such
Broker-Dealers believe are Existing Holders of shares of AMPS. The
Auction Agent shall keep confidential any such information and shall
not disclose any such information so provided to any Person other than
the relevant Broker-Dealer and the Trust, provided that the Auction
Agent reserves the right to disclose any such information if it is
advised by its counsel that its failure to do so would be unlawful.
7
<PAGE>
2.3 Auction Schedule.
The Auction Agent shall conduct Auctions in accordance with the
schedule set forth below. Such schedule may be changed by the Auction Agent with
the consent of the Trust, which consent shall not be unreasonably withheld. The
Auction Agent shall give notice of any such change to each Broker-Dealer. Such
notice shall be received prior to the first Auction Date on which any such
change shall be effective.
Time Event
By 9:30 A.M. Auction Agent advises the Trust and the
Broker-Dealers of the Reference Rate and the
Maximum Applicable Rate as set forth in Section
2.2(e)(i) hereof.
9:30 A.M. - 1:00 P.M. Auction Agent assembles information communicated
to it by Broker-Dealers as provided in Paragraph
11(c)(i) of the Certificate of Designation.
Submission deadline is 1:00 P.M.
Not earlier than 1:00 P.M. Auction Agent makes determinations pursuant
to Paragraph 11(d)(i) of the Certificate of
Designation.
By approximately 3:00 P.M. Auction Agent advises Trust of results of Auction
as provided in Paragraph 11(d)(ii) of the
Certificate of Designation.
Submitted Bids and Submitted Sell Orders are
accepted and rejected in whole or in part and
shares of AMPS allocated as provided in Paragraph
11(e) of the Certificate of Designation.
By approximately 10:00 A.M. Auction Agent gives notice of Auction results as
on the next succeeding set Business Day forth in Section 2.4 hereof.
Business Day
2.4 Notice of Auction Results.
On each Auction Date, the Auction Agent shall notify Broker-Dealers of
the results of the Auction held on such date by telephone or through the Auction
Agent's Auction Processing System as set forth in Paragraph (a) of the
Settlement Procedures.
2.5 Broker-Dealers.
(a) Not later than 12:00 noon on each Auction Date, the Trust shall
pay to the Auction Agent in New York Clearing House or similar next-day
funds an amount in cash
8
<PAGE>
equal to (i) in the case of any Auction Date immediately preceding a 7-day
Dividend Period or Short-Term Dividend Period, the product of (A) a
fraction the numerator of which is the number of days in such Dividend
Period (calculated by counting the first day of such Dividend Period but
excluding the last day thereof) and the denominator of which is 360, times
(B) 1/4 of 1%, times (C) $50,000, times (D) the sum of the aggregate number
of outstanding shares of AMPS for which the Auction is conducted and (ii)
in the case of any Long Term Dividend Period, the amount determined by
mutual consent of the Trust and the Broker-Dealers pursuant to Section 3.5
of the Broker-Dealer Agreements. In lieu of making such payment in New York
Clearing House or similar next-day funds, the Trust may make such payment
by noon on the Business Day immediately following the Auction Date in the
form of Federal funds or similar same-day funds. The Auction Agent shall
apply such moneys as set forth in Section 3.5 of the Broker-Dealer
Agreements and shall thereafter remit to the Trust any remaining funds paid
to the Auction Agent pursuant to this Section 2.5(a).
(b) The Trust shall not designate any Person to act as a Broker-Dealer
without the prior written approval of the Auction Agent, which written
approval shall not be unreasonably withheld. The Trust may designate an
Affiliate and Merrill Lynch, Pierce, Fenner & Smith Incorporated to act as a
Broker-Dealer.
(c) The Auction Agent shall terminate any Broker-Dealer Agreement as
set forth therein if so directed by the Trust.
(d) Subject to Section 2.5(b) hereof, the Auction Agent shall from
time to time enter into such Broker-Dealer Agreements as the Trust shall
request.
(e) The Auction Agent shall maintain a list of Broker-Dealers.
2.6 Ownership of Shares of AMPS and
Submission of Bids by Trust and Affiliates.
Neither the Trust nor any Affiliate of the Trust may submit any Sell
order or Bid, directly or indirectly, in any Auction, except that an Affiliate
of the Trust that is a Broker-Dealer may submit a Sell Order or Bid on behalf of
an Existing Holder or Potential Holder. The Trust shall notify the Auction Agent
if the Trust or, to the best of the Trust's knowledge, any Affiliate of the
Trust becomes an Existing Holder of any shares of AMPS. Any shares of AMPS
redeemed, purchased or otherwise acquired (i) by the Trust shall not be reissued
or (ii) by its Affiliates shall not be transferred (other than to the Trust).
The Auction Agent shall have no duty or liability with respect to enforcement of
this Section 2.6.
2.7 Access to and Maintenance of Auction Records.
The Auction Agent shall afford to the Trust, its agents, independent
public accountants and counsel, access at reasonable times during normal
business hours to review and make extracts or copies (at the Trust's sole cost
and expense) of all books, records, documents and other information concerning
the conduct and results of Auctions, provided that any such agent, accountant,
or counsel shall furnish the Auction Agent with a letter from the Trust
requesting that the Auction Agent afford such person access. The Auction Agent
shall maintain records
9
<PAGE>
relating to any Auction for a period of two years after such Auction (unless
requested by the Trust to maintain such records for such longer period not in
excess of four years, then for such longer period), and such records shall, in
reasonable detail, accurately and fairly reflect the actions taken by the
Auction Agent hereunder. The Trust agrees to keep any information regarding the
customers of any Broker-Dealer received from the Auction Agent in connection
with this Agreement or any Auction confidential and shall not disclose such
information or permit the disclosure of such information without the prior
written consent of the applicable Broker-Dealer to anyone except such agent,
accountant or counsel engaged to audit or review the results of Auctions as
permitted by this Section 2.7. Any such agent, accountant or counsel, before
having access to such information, shall agree to keep such information
confidential and not to disclose such information or permit disclosure of such
information without the prior written consent of the applicable Broker-Dealer.
3. The Auction Agent as Paying Agent.
3.1 Paying Agent.
The Board of Trustees of the Trust has adopted a resolution appointing
IBJ Schroder Bank & Trust Company as transfer agent, registrar, dividend
disbursing agent and redemption agent for the Trust in connection with any
shares of AMPS (the "Paying Agent"). The Paying Agent hereby accepts such
appointment and agrees to act in accordance with its standard procedures and the
provisions of the Certificate of Designation which are specified herein as
Paying Agent with respect to the shares of AMPS and as set forth in this Section
3.
3.2 The Trust's Notices to Paying Agent.
Whenever any shares of AMPS are to be redeemed, the Trust shall
promptly deliver to the Paying Agent the Notice of Redemption, which will be
mailed by the Trust to each Holder, at least five days prior to the date such
Notice of Redemption is required to be mailed by the Certificate of Designation.
The Paying Agent shall have no responsibility to confirm or verify the accuracy
of any such notice.
3.3 Trust to Provide Funds for Dividends, Redemptions and Additional
Dividends.
(a) Not later than noon, on the Business Day immediately preceding
each Dividend Payment Date, the Trust shall deposit with the Paying Agent an
aggregate amount of New York Clearing House or similar next-day funds equal
to the declared dividends to be paid to Holders on such Dividend Payment
Date and shall give the Paying Agent irrevocable instructions to apply such
funds to the payment of such dividends on such Dividend Payment Date. In
lieu of making such deposit in New York Clearing House or similar next-day
funds, the Trust may make such deposit by noon on each Dividend Payment Date
in the form of Federal funds or similar same-day funds.
(b) If the Trust shall give the Notice of Redemption then, by noon of
the Business Day immediately preceding the date fixed for redemption, the
Trust shall deposit in trust with the Paying Agent an aggregate amount of
New York Clearing House or similar next-day funds sufficient to redeem such
shares of AMPS called for redemption and shall give the Paying Agent
irrevocable instructions and authority to pay
10
<PAGE>
the redemption price to the Holders of shares of AMPS called for redemption
upon surrender of the certificate or certificates therefor. In lieu of
making such deposit in New York Clearing House or similar next-day funds,
the Trust may make such deposit by noon on the date fixed for redemption in
the form of Federal funds or similar same-day funds.
(c) If the Trust provides notice to the Auction Agent of a Retroactive
Taxable Allocation, the Trust shall, within 30 days after such notice is
given and by noon of the Business Day immediately preceding the date fixed
for payment of an Additional Dividend, deposit in trust with the Paying
Agent an aggregate amount of New York Clearing House or similar next-day
funds equal to such Additional Dividend and shall give the Paying Agent
irrevocable instructions and authority to pay the Additional Dividends to
Holders (or former Holders) of AMPS entitled thereto. In lieu of making such
deposit in New York Clearing House or similar next-day funds, the Trust may
make such deposit by noon on the date fixed for payment of an Additional
Dividend in the form of Federal funds or similar same-day funds.
3.4 Disbursing Dividends, Redemption Price and Additional Dividends.
After receipt of the New York Clearing House or similar next-day funds
(or Federal funds or similar same-day funds) and instructions from the Trust
described in Sections 3.3(a), (b) and (c) above, the Paying Agent shall pay to
the Holders (or former Holders) entitled thereto (i) on each corresponding
Dividend Payment Date, dividends on the AMPS, (ii) on any date fixed for
redemption, the redemption price of any shares of AMPS called for redemption and
(iii) on the date fixed for payment of an Additional Dividend, such Additional
Dividend. The amount of dividends for any Dividend Period to be paid by the
Paying Agent to Holders will be determined by the Trust as set forth in
Paragraph 2 of the Certificate of Designation. The redemption price to be paid
by the Paying Agent to the Holders of any shares of AMPS called for redemption
will be determined as set forth in Paragraph 4 of the Certificate of
Designation. The amount of Additional Dividends to be paid by the Paying Agent
in the event of a Retroactive Taxable Allocation to Holders will be determined
by the Trust pursuant to paragraph 2(e) of the Certificate of Designation. The
Trust shall notify the Paying Agent in writing of a decision to redeem any
shares of AMPS on or prior to the date specified in Section 3.2 above, and such
notice by the Trust to the Paying Agent shall contain the information required
to be stated in the Notice of Redemption required to be mailed by the Trust to
such Holders. The Paying Agent shall have no duty to determine the redemption
price and may rely on the amount thereof set forth in the Notice of Redemption.
4. The Paying Agent as Transfer Agent and Registrar.
4.1 Original Issue of Share Certificate.
On the Date of Original Issue, one certificate for the AMPS shall be
issued by the Trust and registered in the name of Cede & Co., as nominee of the
Securities Depository, and countersigned by the Paying Agent.
11
<PAGE>
4.2 Registration of Transfer or Exchange of Shares.
Except as provided in this Section 4.2, the shares of AMPS shall be
registered solely in the name of the Securities Depository or its nominee. If
the Securities Depository shall give notice of its intention to resign as such,
and if the Trust shall not have selected a substitute Securities Depository
acceptable to the Paying Agent prior to such resignation, then upon such
resignation, the shares of AMPS may, at the Trust's request, be registered for
transfer or exchange, and new certificates thereupon shall be issued in the name
of the designated transferee or transferees, upon surrender of the old
certificate in form deemed by the Paying Agent properly endorsed for transfer
with (a) all necessary endorsers' signatures guaranteed in such manner and form
as the Paying Agent may require by a guarantor reasonably believed by the Paying
Agent to be responsible, (b) such assurances as the Paying Agent shall deem
necessary or appropriate to evidence the genuineness and effectiveness of each
necessary endorsement and (c) satisfactory evidence of compliance with all
applicable laws relating to the collection of taxes in connection with any
registration of transfer and exchange or funds necessary for the payment of such
taxes. If the certificate or certificates for shares of AMPS are not held by the
Securities Depository or its nominee, payments upon transfer of shares in an
Auction shall be made in same-day funds to the Auction Agent against delivery of
certificates therefor.
4.3 Removal of Legend.
Any request for removal of a legend indicating a restriction on
transfer from a certificate evidencing shares of AMPS shall be accompanied by an
opinion of counsel stating that such legend may be removed and such shares
transferred free of the restriction described in such legend, said opinion to be
delivered under cover of a letter from a Trust Officer authorizing the Paying
Agent to remove the legend on the basis of said opinion.
4.4 Lost Stock Certificates.
The Paying Agent shall issue and register replacement certificates for
certificates represented to have been lost, stolen or destroyed, upon the
fulfillment of such requirements as shall be deemed appropriate by the Trust and
the Paying Agent, subject at all times to provisions of law, the By-Laws of the
Trust governing such matters and resolutions adopted by the Trust with respect
to lost securities. The Paying Agent may issue new certificates in exchange for
and upon the cancellation of mutilated certificates. Any request by the Trust to
the Paying Agent to issue a replacement or new certificate pursuant to this
Section 4.4 shall be deemed to be a representation and warranty by the Trust to
the Paying Agent that such issuance will comply with such provisions of
applicable law and the By-Laws and resolutions of the Trust.
4.5 Disposition of Cancelled Certificates; Record Retention.
The Paying Agent shall retain share certificates which have been
cancelled in transfer or in exchange and accompanying documentation in
accordance with applicable rules and regulations of the Securities and Exchange
Commission for two calendar years from the date of such cancellation. The Paying
Agent shall, upon written request from the Trust, afford to the Trust, its
agents and counsel access at reasonable times during normal business hours to
review and make extracts or copies (at the Trust's sole cost and expense) of
such certificates and
12
<PAGE>
accompanying documentation. Upon request by the Trust at any time after the
expiration of this two-year period, the Paying Agent shall deliver to the Trust
the cancelled certificates and accompanying documentation. The Trust shall, at
its expense, retain such records for a minimum additional period of four
calendar years from the date of delivery of the records to the Trust and shall
make such records available during this period at any time, or from time to
time, for reasonable periodic, special, or other examinations by representatives
of the Securities and Exchange Commission. The Trust shall also undertake to
furnish to the Securities and Exchange commission, upon demand, at either the
principal office or at any regional office, complete, correct and current hard
copies of any and all such records. Thereafter such records shall not be
destroyed by the Trust without the approval of the Paying Agent, which shall not
be unreasonably withheld, but will be safely stored for possible future
reference.
4.6 Share Register.
The Paying Agent shall maintain the stock register, which shall contain
a list of the Holders, the number of shares held by each Holder and the address
of each Holder. The Paying Agent shall record in the share register any change
of address of a Holder upon notice by such Holder. In case of any written
request or demand for the inspection of the stock register or any other books of
the Trust in the possession of the Paying Agent, thd Paying Agent will notify
the Trust and secure instructions as to permitting or refusing such inspection.
The Paying Agent reserves the right, however, to exhibit the stock register or
other records to any person in case it is advised by its counsel that its
failure to do so would (i) be unlawful or (ii) expose it to liability, unless
the Trust shall have offered indemnification satisfactory to the Paying Agent.
4.7 Return of Funds.
Any funds deposited with the Paying Agent by the Trust for any reason
under this Agreement, including for the payment of dividends or the redemption
of shares of AMPS, that remain with the Paying Agent after 12 months shall be
repaid to the Trust upon the written request of the Trust.
5. Representations and Warranties.
(a) The Trust represents and warrants to the Auction Agent that:
(i) the Trust is duly organized and validly existing as a
business trust under the laws of the Commonwealth of Massachusetts and has
full power to execute and deliver this Agreement and to authorize, create
and issue the shares of AMPS;
(ii) the Trust is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended, as
a closed-end non-diversified management investment company;
(iii) this Agreement has been duly and validly authorized,
executed and delivered by the Trust and constitutes the legal, valid and
binding obligation of the Trust, enforceable against the Trust in accordance
with its terms, subject as to such enforceability to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equitable principles;
13
<PAGE>
(iv) the form of certificate evidencing the shares of AMPS
complies with all applicable laws of the Commonwealth of Massachusetts;
(v) the shares of AMPS have been duly and validly authorized
by the Trust and, upon completion of the initial sale of the shares of AMPS
and receipt of payment therefor, will be validly issued, fully paid and
nonassessable;
(vi) the offering of the shares of AMPS has been registered
under the Securities Act of 1933, as amended, and no further action by or
before any governmental body or authority of the United States or of any
state thereof as required in connection with the execution and delivery of
this Agreement or the issuance of the shares of AMPS except as required by
applicable state securities or insurance laws, all of which have been taken;
(vii) the execution and delivery of this Agreement and the
issuance and delivery of the shares of AMPS do not and will not conflict
with, violate, or result in a breach of, the terms, conditions or provisions
of, or constitute a default under, the Declaration of Trust or the By-Laws
of the Trust, any law or regulation applicable to the Trust, any order or
decree of any court or public authority having jurisdiction over the Trust,
or any mortgage, indenture, contract, agreement or undertaking to which the
Trust is a party or by which it is bound; and
(viii) no taxes are payable upon or in respect of the
execution of this Agreement or the issuance of the shares of AMPS.
(b) The Auction Agent represents and warrants to the Trust that the
Auction Agent is duly organized and is validly existing as a banking
corporation in good standing under the laws of the State of New York and has
the corporate power to enter into and perform its obligations under this
Agreement.
6. The Auction Agent.
6.1 Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Trust
hereunder and owes no fiduciary duties to any Person except as provided by
this Agreement.
(b) The Auction Agent undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the
Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction
Agent shall not be liable for any action taken, suffered or omitted or for
any error of judgment made by it in the performance of its duties under this
Agreement. The Auction Agent shall not be liable for any error of judgment
made in good faith unless the Auction Agent shall have been negligent in
ascertaining (or failing to ascertain) the pertinent facts.
14
<PAGE>
6.2 Rights of the Auction Agent.
(a) The Auction Agent may rely and shall be protected in acting or
refraining from acting upon any communication authorized hereby and upon any
written instruction, notice, request, direction, consent, report,
certificate, share certificate or other instrument, paper or document
reasonably believed by it to be genuine. The Auction Agent shall not be
liable for acting upon any telephone communication authorized hereby which
the Auction Agent believes in good faith to have been given by the Trust or
by a Broker-Dealer. The Auction Agent may record telephone communications
with the Trust or with the Broker-Dealers or both.
(b) The Auction Agent may consult with counsel of its choice, and the
written advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk
its own funds or otherwise incur or become exposed to financial liability in
the performance of its duties hereunder. The Auction Agent shall be under no
liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Trust.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys.
6.3 Auction Agent's Disclaimer.
The Auction Agent makes no representation as to the validity or
adequacy of this Agreement, the Broker-Dealer Agreements or the AMPS.
6.4 Compensation, Expenses and Indemnification.
(a) The Trust shall pay the Auction Agent from time to time reasonable
compensation for all services rendered by it under this Agreement and the
Broker-Dealer Agreements.
(b) The Trust shall reimburse the Auction Agent upon its request for
all reasonable expenses, disbursements and advances incurred or made by the
Auction Agent in accordance with any provision of this Agreement and the
Broker-Dealer Agreements (including the reasonable compensation, expenses
and disbursements of its agents and counsel), except any expense,
disbursement and advances attributable to its negligence or bad faith.
(c) The Trust shall indemnify the Auction Agent for, and hold it
harmless against, any loss, liability or expense incurred without negligence
or bad faith on its part arising out of or in connection with its agency
under this Agreement and the Broker-Dealer Agreements, including the costs
and expenses of defending itself against any claim or liability in
connection with its exercise or performance of any of its duties hereunder
and thereunder, except such as may result from its negligence or bad faith.
15
<PAGE>
7. Miscellaneous.
7.1 Term of Agreement.
(a) The term of this Agreement is unlimited unless it shall be
terminated as provided in this Section 7.1. The Trust may terminate this
Agreement at any time by so notifying the Auction Agent, provided that if
any AMPS remain outstanding the Trust has entered into an agreement in
substantially the form of this Agreement with a successor auction agent. The
Auction Agent may terminate this Agreement upon prior notice to the Trust on
the date specified in such notice, which shall be no earlier than 60 days
after delivery of such notice. If the Auction Agent resigns while any shares
of AMPS remain outstanding, the Trust shall use its best efforts to enter
into an agreement with a successor auction agent containing substantially
the same term and conditions as this Agreement.
(b) Except as otherwise provided in this Section 7.1(b), the
respective rights and duties of the Trust and the Auction Agent under this
Agreement shall cease upon termination of this Agreement. The Trust's
representations, warranties, covenants and obligations to the Auction Agent
under Sections 5 and 6.4 hereof shall survive the termination hereof. Upon
termination of this Agreement, the Auction Agent shall (i) resign as Auction
Agent under the Broker-Dealer Agreements, (ii) at the Trust's request,
promptly deliver to the Trust copies of all books and records maintained by
it in connection with its duties hereunder, and (iii) at the request of the
Trust, promptly transfer to the Trust or any successor auction agent any
funds deposited by the Trust with the Auction Agent (whether in its capacity
as Auction Agent or Paying Agent) pursuant to this Agreement which have not
previously been distributed by the Auction Agent in accordance with this
Agreement.
7.2 Communications.
Except for (i) communications authorized to be made by telephone
pursuant to this Agreement or the Auction Procedures and (ii) communications
in connection with Auctions (other than those expressly required to be in
writing), all notices, requests and other communications to any party
hereunder shall be in writing (including telecopy or similar writing) and
shall be given to such party addressed to it at its address, or telecopy
number set forth below:
16
<PAGE>
If to the Trust, addressed: MuniYield Florida Fund
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Attention: Treasurer
Telephone No.: (609) 282-2800
Telecopier No.: (609) 282-3472
If to the Auction Agent, IBJ Schroder Bank & Trust Trust
addressed: One State Street
New York, New York 10004
Attention: Auction Window
Subcellar 1
Telephone No.: (212) 858-2272
Telecopier No.:(212) 797-1148
or such other address or telecopy number as such party may hereafter specify for
such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of the Trust by a Trust Officer and on
behalf of the Auction Agent by an Authorized Officer.
7.3 Entire Agreement.
This Agreement contains the entire agreement between the parties
relating to the subject matter hereof, and there are no other representations,
endorsements, promises, agreements or understandings, oral, written or inferred
between the parties relating to the subject matter hereof except for agreements
relating to the compensation of the Auction Agent.
7.4 Benefits.
Nothing herein, express or implied, shall give to any Person, other
than the Trust, the Auction Agent and their respective successors and assigns,
any benefit of any legal or equitable right, remedy or claim hereunder.
7.5 Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be modified,
amended, rescinded, cancelled or waived, in whole or in part, except by a
written instrument signed by a duly authorized representative of the party
to be charged. The Trust shall notify the Auction Agent of any change in the
Certificate of Designation prior to the effective date of any such change.
(b) Failure of either party hereto to exercise any right or remedy
hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any
subsequent breach.
17
<PAGE>
7.6 Successor and Assigns.
This Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors and permitted assigns of each of the
Trust and the Auction Agent. This Agreement may not be assigned by either party
hereto absent the prior written consent of the other party, which consent shall
not be unreasonably withheld.
7.7 Severability.
If any clause, provision or section hereof shall be ruled invalid or
unenforceable by any court of competent jurisdiction, the invalidity or
unenforceability of such clause, provision or section shall not affect any of
the remaining clauses, provisions or sections hereof.
7.8 Execution in Counterparts.
This Agreement may be executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
instrument.
7.9 Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to agreements made and to be
performed in said state.
7.10 Personal Liability.
The Declaration of Trust establishing MuniYield Florida Fund, dated
January 21, 1992, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name "MuniYield Florida Fund" refers to the
Trustees under the Declaration collectively as Trustees, but not as individuals
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.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
MUNIYIELD FLORIDA FUND
By: /s/ K.A. Jacob
----------------------------------
Title: Vice President
IBJ SCHRODER BANK & TRUST COMPANY
By:
----------------------------------
Title: Assistant Vice President
================================================================================
BROKER-DEALER AGREEMENT
between
IBJ SCHRODER BANK & TRUST COMPANY
and
LEHMAN SPECIAL SECURITIES INCORPORATED
Dated as of April 10, 1992
Relating to
AUCTION MARKET PREFERRED STOCK(R)
("AMPS" (R))
of
MUNIYIELD FLORIDA FUND
================================================================================
(R) Registered trademark of Merrill Lynch Co., Inc.
<PAGE>
BROKER-DEALER AGREEMENT dated as of April 10, 1992 between IBJ Schroder
Bank & Trust Company, a New York banking corporation (the "Auction Agent") (not
in its individual capacity but solely as agent of MuniYield Florida Fund, a
Massachusetts business trust (the "Trust"), pursuant to authority granted to it
in the Auction Agent Agreement dated as of April 10, 1992, between the Trust and
the Auction Agent (the "Auction Agent Agreement")) and [Name of Broker-Dealer]
(together with its successors and assigns hereinafter referred to as "BD").
The Trust has duly authorized and issued 1,000 shares of Auction Market
Preferred Stock(R), par value $.10 per share, liquidation preference $50,000 per
share plus accumulated but unpaid dividends (whether or not earned or declared)
(the "AMPS"), pursuant to the Trust's Certificate of Designation (as defined
below).
The Trust's Certificate of Designation provides that the dividend rate on
the AMPS for each Dividend Period therefor after the Initial Dividend Period
shall be the Applicable Rate therefor, which in each case, in general, shall be
the rate per annum. that a commercial bank, trust company or other financial
institution appointed by the Trust advises results from implementation of the
Auction Procedures (as defined below). The Trustees of the Trust has adopted a
resolution appointing IBJ Schroder Bank & Trust Company as Auction Agent for
purposes of the Auction Procedures, and pursuant to Section 2.5(d) of the
Auction Agent Agreement, the Trust have requested and directed the Auction Agent
to execute and deliver this Agreement.
The Auction Procedures require the participation of one or more
Broker-Dealers.
- ----------------
(R) Registered trademark of Merrill Lynch & Co., Inc.
2
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the Auction Agent and BD agree as follows:
1. Definitions and Rules of Construction.
1.1 Terms Defined by Reference to the Certificate of Designation.
Capitalized terms not defined herein shall have the respective meanings
specified in the Certificate of Designation of the Trust.
1.2 Terms Defined Herein. As used herein and in the Settlement Procedures
(as defined below), the following terms shall have the following meanings,
unless the context otherwise requires:
(a) "Auction" shall have the meaning specified in Section 3.1 hereof.
(b) "Auction Procedures" shall mean the Auction Procedures that are set
forth in Paragraph 11 of the Certificate of Designation.
(c) "Authorized Officer" shall mean each Senior Vice President, Vice
President, Assistant Vice President, Trust Officer, Assistant Secretary and
Assistant Treasurer of the Auction Agent assigned to its Corporate Trust and
Agency Group and every other officer or employee of the Auction Agent designated
as an "Authorized Officer" for purposes of this Agreement in a communication to
BD.
(d) "BD Officer" shall mean each officer or employee of BD designated as a
"BD Officer" for purposes of this Agreement in a communication to the Auction
Agent.
(e) "Broker-Dealer Agreement" shall mean this Agreement and any
substantially similar agreement between the Auction Agent and a Broker-Dealer.
(f) "Certificate of Designation" shall mean the Certificate of Designation,
as amended, of the Trust, establishing the powers, preferences and rights of the
AMPS filed on April 7, 1992 in the office of the Department of the Secretary of
State of the Commonwealth of Massachusetts.
(g) "Purchaser's Letter" shall mean a letter addressed to the Trust, the
Auction Agent and a Broker-Dealer, substantially in the form attached hereto as
Exhibit A.
(h) "Settlement Procedures" shall mean the Settlement Procedures attached
hereto as Exhibit B.
1.3 Rules of Construction. Unless the context or use indicates another or
different meaning or intent, the following rules shall apply to the construction
of this Agreement:
(a) Words importing the singular number shall include the plural number and
vice versa.
3
<PAGE>
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of this Agreement nor shall they
affect its meaning, construction or effect.
(c) The words "hereof ," "herein," "hereto," and other words of similar
import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York
City time.
2. Notification of Dividend Period and Advance Notice of Allocation of
Taxable Income.
(a) The provisions contained in paragraph 2 of the Certificate of
Designation concerning the notification of a Special Dividend Period will be
followed by the Auction Agent and BD and the provisions contained therein are
incorporated herein by reference in their entirety and shall be deemed to be a
part of this Agreement to the same extent as if such provisions were fully set
forth herein.
(b) Whenever the Trust intends to include any net capital gains or other
taxable income in any dividend on shares of AMPS, the Trust will notify the
Auction Agent of the amount to be so included at least five Business Days prior
to the Auction Date on which the Applicable Rate for such dividend is to be
established. Whenever the Auction Agent receives such notice from the Trust, it
will in turn notify BD, who, on or prior to such Auction Date, will notify its
Existing Holders and Potential Holders believed to be interested in submitting
an order in the Auction to be held on such Auction Date.
3. The Auction.
3.1 Purpose; Incorporation by Reference of Auction Procedures and
Settlement Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures will be
followed by the Auction Agent for the purpose of determining the Applicable Rate
for the AMPS, for the next Dividend Period therefor. Each periodic operation of
such procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their entirety and
shall be deemed to be a part of this Agreement to the same extent as if such
provisions were fully set forth herein.
(c) BD is delivering herewith a Purchaser's Letter executed by BD and, in
the case of Merrill Lynch, Pierce, Fenner & Smith Incorporated, a list of
persons to whom BD will initially sell the shares of AMPS, the number of shares
of AMPS BD will sell to each such person and the number of shares of AMPS BD
will hold for its own account. BD agrees to act as, and assumes the obligations
of and limitations and restrictions placed upon, a Broker-Dealer under this
Agreement. BD understands that other Persons meeting the requirements specified
in the definition of "Broker-Dealer" contained in Paragraph 1 of the Certificate
of Designation may execute a Broker-Dealer Agreement and a Purchaser's Letter
and participate as Broker-Dealers in Auctions.
4
<PAGE>
(d) BD and other Broker-Dealers may participate in Auctions for their own
accounts, provided that BD or such other Broker-Dealers, as the case may be, has
executed a Purchaser's Letter. However, the Trust may by notice to BD and all
other Broker-Dealers prohibit all Broker-Dealers from submitting Bids in
Auctions for their own accounts, provided that Broker-Dealers may continue to
submit Hold Orders and Sell orders.
3.2 Preparation for Each Auction.
(a) Not later than 9:30 A.M. on each Auction Date for the AMPS, the Auction
Agent shall advise BD by telephone of the Reference Rate and the Maximum
Applicable Rate in effect on such Auction Date.
(b) In the event that the Auction Date for any Auction shall be changed
after the Auction Agent has given the notice referred to in clause (vii) of
paragraph (a) of the Settlement Procedures, the Auction Agent, by such means as
the Auction Agent deems practicable, shall give notice of such change to BD not
later than the earlier of 9:15 A.M. on the new Auction Date or 9:15 A.M. on the
old Auction Date. Thereafter, BD shall promptly notify customers of BD that BD
believes are Existing Holders of shares of AMPS of such change in the Auction
Date.
(c) The Auction Agent from time to time may request BD to provide it with a
list of the respective customers BD believes are Existing Holders of shares of
AMPS. BD shall comply with any such request, and the Auction Agent shall keep
confidential any such information, including information received as to the
identity of Bidders in any Auction, and shall not disclose any such information
so provided to any Person other than the Trust; and such information shall not
be used by the Auction Agent or its officers, employees, agents or
representatives for any purpose other than such purposes as are described
herein. The Auction Agent shall transmit any list of customers BD believes are
Existing Holders of shares of AMPS and information related thereto only to its
officers, employees, agents or representatives in the Corporate Trust and Agency
Group who need to know such information for the purposes of acting in accordance
with this Agreement and shall prevent the transmission of such information to
others and shall cause its officers, employees, agents and representatives to
abide by the foregoing confidentiality restrictions; provided, however, that the
Auction Agent shall have no responsibility or liability for the actions of any
of its officers, employees, agents or representatives' after they have left the
employ of the Auction Agent.
(d) The Auction Agent is not required to accept the Purchaser's Letter for
any Potential Holder for an Auction unless it is received by the Auction Agent
by 3:00 P.M. on the Business Day next preceding such Auction.
3.3 Auction Schedule; Method of Submission of Orders.
(a) The Trust and the Auction Agent shall conduct Auctions for the AMPS in
accordance with the schedule set forth below. Such schedule may be changed at
any time by the Auction Agent with the consent of the Trust, which consent shall
not be unreasonably withheld. The Auction Agent shall give notice of any such
change to BD. Such notice shall be received prior to the first Auction Date on
which any such change shall be effective.
5
<PAGE>
Time Event
---- -----
By 9:30 A.M. 9:30 A.M. Auction Agent advises the Trust and
Broker-Dealers of Reference Rate and the Maximum
Applicable Rate as set forth in Section 3.2(a)
hereof.
9:30 A.M. 1:00 P.M. Auction Agent assembles information communicated
to it by Broker-Dealers as provided in Paragraph
11(c)(i) of the Certificate of Designation.
Submission Deadline is 1:00 P.M.
Not earlier than Auction Agent makes determinations pursuant to
1:00 P.M. Paragraph 11(d)(i) of the Certificate of
Designation.
By approximately Auction Agent advises Trust of results of Auction
3:00 P.M. as provided in Paragraph 11(d)(ii) of the
Certificate of Designation.
Submitted Bids and Submitted Sell Orders are
accepted and rejected in whole or in part and
shares of AMPS are allocated as provided in
Paragraph 11(e) of the Certificate of Designation.
By approximately 10:00 A.M. Auction Agent gives notice of Auction results as
on the next succeeding set forth in Section 3.4(a) hereof.
Business Day
(b) BD agrees to maintain a list of Potential Holders and to contact the
Potential Holders on such list on or prior to each Auction Date for the purposes
set forth in Paragraph 11 of the Certificate of Designation.
(c) BD agrees not to sell, assign or dispose of any shares of AMPS, to any
Person who has not delivered a signed Purchaser's Letter to the Auction Agent.
(d) BD shall submit orders to the Auction Agent in writing in substantially
the form attached hereto as Exhibit C. BD shall submit separate Orders to the
Auction Agent for each Potential Holder or Existing Holder on whose behalf BD is
submitting an order and shall not net or aggregate the Orders of Potential
Holders or Existing Holders on whose behalf BD is submitting orders.
(e) BD shall deliver to the Auction Agent (i) a written notice,
substantially in the form attached hereto as Exhibit D, of transfers of shares
of AMPS, made through BD by an Existing Holder to another Person other than
pursuant to an Auction, and (ii) a written notice, substantially in the form
attached hereto as Exhibit E, of the failure of shares of AMPS to be
6
<PAGE>
transferred to or by any Person that purchased or sold shares of AMPS or through
BD pursuant to an Auction. The Auction Agent is not required to accept any
notice delivered pursuant to the terms of the foregoing sentence with respect to
an Auction unless it is received by the Auction Agent by 3:00 P.M. on the
Business Day next preceding the applicable Auction Date.
3.4 Notice of Auction Results.
(a) On each Auction Date, the Auction Agent shall notify BD by telephone as
set forth in paragraph (a) of the Settlement Procedures. On the Business Day
next succeeding such Auction Date, the Auction Agent shall notify BD in writing
of the disposition of all Orders submitted by BD in the Auction held on such
Auction Date.
(b) BD shall notify each Existing Holder or Potential Holder on whose
behalf BD has submitted an Order as set forth in paragraph (b) of the Settlement
Procedures and take such other action as is required of BD pursuant to the
Settlement Procedures.
If any Existing Holder selling shares of AMPS in an Auction fails to
deliver such shares, the BD of any Person that was to have purchased shares of
AMPS in such Auction may deliver to such Person a number of whole shares of AMPS
that is less than the number of shares that otherwise was to be purchased by
such Person. In such event, the number of shares of AMPS to be so delivered
shall be determined by such BD. Delivery of such lesser number of shares shall
constitute good delivery. Upon the occurrence of any such failure to deliver
shares, such BD shall deliver to the Auction Agent the notice required by
Section 3.3(a)(ii) hereof. Notwithstanding the foregoing terms of this Section
3.4(b), any delivery or non-delivery of shares of AMPS which represents any
departure from the results of an Auction, as determined by the Auction Agent,
shall be of no effect unless and until the Auction Agent shall have been
notified of such delivery or non-delivery in accordance with the terms of
Section 3.3(e) hereof. The Auction Agent shall have no duty or liability with
respect to enforcement of this Section 3.4(b).
3.5 Service Charge to Be Paid to BD. on the Business Day next succeeding
each Auction Date, the Auction Agent shall pay to BD from moneys received from
the Trust an amount equal to: (a) in the case of any Auction Date immediately
preceding a 7-day Dividend Period or Short Term Dividend Period, the product of
(i) a fraction the numerator of which is the number of days in such Dividend
Period (calculated by counting the first day of such Dividend Period but
excluding the last day thereof) and the denominator of which is 360, times (ii)
1/4 of 1%, times (iii) $50,000, times (iv) the sum of (A) the aggregate number
of AMPS placed by BD in the applicable Auction that were (x) the subject of a
Submitted Bid of an Existing Holder submitted by BD and continued to be held as
a result of such submission and (y) the subject of a Submitted Bid of a
Potential Holder submitted by BD and were purchased as a result of such
submission plus (B) the aggregate number of AMPS subject to valid Hold Orders
(determined in accordance with Paragraph 11 of the Certificate of Designation)
submitted to the Auction Agent by BD plus (C) the number of AMPS deemed to be
subject to Hold Orders by Existing Holders pursuant to Paragraph 11 of the
Certificate of Designation that were acquired by such Existing Holders through
BD and (b) in the case of any Auction Date immediately preceding a Long Term
Dividend Period, that amount as mutually agreed upon by the Trust and BD, based
on the selling concession that would be applicable to an underwriting of fixed
or variable rate preferred shares
7
<PAGE>
with a similar final maturity or variable rate dividend period, at the
commencement of such Long Term Dividend Period.
For purposes of subclause (a)(iv)(C) of the foregoing sentence, if any
Existing Holder who acquired shares of AMPS through BD transfers those shares to
another Person other than pursuant to an Auction, then the Broker-Dealer for the
shares so transferred shall continue to be BD, provided, however, that if the
transfer was effected by, or if the transferee is, a Broker-Dealer other than
BD, then such Broker-Dealer shall be the Broker-Dealer for such shares.
4. The Auction Agent.
4.1 Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Trust hereunder and
owes no fiduciary duties to any other Person by reason of this Agreement.
(b) The Auction Agent undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement, and no implied covenants
or obligations shall be read into this Agreement against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction
Agent shall not be liable for any action taken, suffered, or omitted or for any
error of judgment made by it in the performance of its duties under this
Agreement. The Auction Agent shall not be liable for any error of judgment made
in good faith unless the Auction Agent shall have been negligent in ascertaining
(or failing to ascertain) the pertinent facts.
4.2 Rights of the Auction Agent.
(a) The Auction Agent may rely and shall be protected in acting or
refraining from acting upon any communication authorized by this Agreement and
upon any written instruction, notice, request, direction, consent, report,
certificate, share certificate or other instrument, paper or document believed
by it to be genuine. The Auction Agent shall not be liable for acting upon any
telephone communication authorized by this Agreement which the Auction Agent
believes in good faith to have been given by the Trust or by a Broker-Dealer.
The Auction Agent may record telephone communications with the Broker-Dealers.
(b) The Auction Agent may consult with counsel of its own choice, and the
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its
own funds or otherwise incur or become exposed to financial liability in the
performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys.
8
<PAGE>
4.3 Auction Agent's Disclaimer. The Auction Agent makes no representation
as to the validity or adequacy of this Agreement or the AMPS.
5. Miscellaneous.
5.1 Termination. Any party may terminate this Agreement at any time upon
five days' prior notice to the other party; provided, however, that if BD is
Merrill Lynch, Pierce, Fenner & Smith Incorporated, neither BD nor the Auction
Agent may terminate this Agreement without first obtaining prior written consent
of the Trust of such termination, which consent shall not be unreasonably
withheld.
5.2 Participant in Securities Depository; Payment of Dividends in Same-Day
Funds.
(a) BD is, and shall remain for the term of this Agreement, a member of, or
participant in, the securities Depository (or an affiliate of such a member or
participant).
(b) BD represents that it (or if such BD does not act as Agent Member, one
of its affiliates) shall make all dividend payments on the AMPS available in
same-day funds on each Dividend Payment Date to customers that use such BD or
affiliate as Agent Member.
5.3 Agent Member. At the date hereof, BD is a participant of the Securities
Depository.
5.4 Communications. Except for (i) communications authorized to be made by
telephone pursuant to this Agreement or the Auction Procedures and (ii)
communications in connection with the Auctions (other than those expressly
required to be in writing), all notices, requests and other communications to
any party hereunder shall be in writing (including telecopy or similar writing)
and shall be given to such party, addressed to it, at its address or telecopy
number set forth below:
If to BD Lehman Special Securities Incorporated
addressed: American Express Tower
World Financial Center, 9th Floor
New York, New York 10285
Attention: Thomas Corcoran
Telecopier No.: (212) 528-6385
Telephone No.: (212) 640-0044
If to the Auction IBJ Schroder Bank & Trust Company
Agent, addressed: One State Street
New York, New York 10004
Attention: Auction Window Subcellar 1
Telecopier No.: (212) 797-1148
Telephone No.: (212) 858-2272
9
<PAGE>
or such other address or telecopy number as such party may hereafter specify for
such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of BD by a BD Officer and on behalf of
the Auction Agent by an Authorized Officer. BD may record telephone
communications with the Auction Agent.
5.5 Entire Agreement. This Agreement contains the entire agreement between
the parties relating to the subject matter hereof, and there are no other
representations, endorsements, promises, agreements or understandings, oral,
written or inferred, between the parties relating to the subject matter hereof.
5.6 Benefits. Nothing in this Agreement, express or implied, shall give to
any person, other than the Trust, the Auction Agent and BD and their respective
successors and assigns, any benefit of any legal or equitable right, remedy or
claim under this Agreement.
5.7 Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be modified,
amended, rescinded, cancelled or waived, in whole or in part, except by a
written instrument signed by a duly authorized representative of the party to be
charged.
(b) Failure of either party to this Agreement to exercise any right or
remedy hereunder in the event of a breach of this Agreement by the other party
shall not constitute a waiver of any such right or remedy with respect to any
subsequent breach.
5.8 Successors and Assigns. This Agreement shall be binding upon, inure to
the benefit of, and be enforceable by, the respective successors and permitted
assigns of each of BD and the Auction Agent. This Agreement may not be assigned
by either party hereto absent the prior written consent of the other party;
provided, however, that this Agreement may be assigned by the Auction Agent to a
successor Auction Agent selected by the Trust without the consent of BD.
5.9 Severability. If any clause, provision or section of this Agreement
shall be ruled invalid or unenforceable by any court of competent jurisdiction,
the invalidity or unenforceability of such clause, provision or section shall
not affect any remaining clause, provision or section hereof.
5.10 Execution in Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed in said State.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
IBJ SCHRODER BANK TRUST COMPANY
By:
---------------------------
Title:
LEHMAN SPECIAL SECURITIES INC.
By:
---------------------------
Title:
11
<PAGE>
EXHIBIT A
TO BE SUBMITTED TO YOUR BROKER-DEALER WHO WILL THEN
DELIVER COPIES ON YOUR BEHALF TO THE RESPECTIVE TRUST
COMPANY OR REMARKETING AGENT
MASTER PURCHASER'S LETTER
Relating to
Securities Involving Rate Settings Through Auctions or Remarketings
THE COMPANY
A REMARKETING AGENT
THE TRUST COMPANY
A BROKER-DEALER
AN AGENT MEMBER
OTHER PERSONS
Dear Sirs:
1. This letter is designed to apply to publicly or privately offered debt
or equity securities ("Securities") of any issuer ("Company") which are
described in any final prospectus or other offering materials relating to such
Securities as the same may be amended or supplemented (collectively, with
respect to the particular securities concerned, the "Prospectus") and which
involve periodic rate settings through auctions ("Auctions") or remarketing
procedures ("Remarketings"). This letter shall be for the benefit of any Company
and of any trust company, auction agent, paying agent (collectively, "trust
company"), remarketing agent, broker-dealer, agent member, securities depository
or other interested person in connection with any Securities and related
Auctions or Remarketings (it being understood that such persons may be required
to execute specified agreements and nothing herein shall alter such
requirements). The terminology used herein is intended to be general in its
application and not to exclude any Securities in respect of which (in the
Prospectus or otherwise) alternative terminology is used.
2. We may from time to time offer to purchase, purchase, offer to sell
and/or sell Securities of any Company as described in the Prospectus relating
thereto. We agree that this letter shall apply to all such purchases, sales and
offers and to Securities owned by us. We understand that the dividend/interest
rate on Securities may be based from time to time on the results of Auctions or
Remarketings as set forth in the Prospectus.
3. We agree that any bid or sell order placed by us in an Auction or a
Remarketing shall constitute an irrevocable offer (except as otherwise described
in the Prospectus) by us to purchase or sell the Securities subject to such bid
or sell order, or such lesser amount of Securities as we shall be required to
sell or purchase as a result of such Auction or Remarketing, at the applicable
price, all as set forth in the Prospectus, and that if we fail to place a bid or
sell order with respect to Securities owned by us with a broker-dealer on any
Auction or Remarketing date, or a broker-dealer to which we communicate a bid or
sell order fails to submit such bid or sell order to the trust company or
remarketing agent concerned, we shall be deemed to have placed a hold order with
respect to such Securities as described in the Prospectus. We authorize any
broker-dealer that submits a bid or sell order as our agent in Auctions or
Remarketings to execute contracts for the sale of Securities covered by such bid
or sell order. We recognize that the payment by such broker-dealer for
Securities purchased on our behalf shall not relieve us of any liability to such
broker-dealer for payment for such Securities.
1
<PAGE>
4. We understand that in a Remarketing, the dividend or interest rate or
rates on the Securities and the allocation of Securities tendered for sale
between dividend or interest periods of different lengths will be based from
time to time on the determinations of one or more remarketing agents, and we
agree to be conclusively bound by such determinations. We further agree to the
payment of different dividend or interest rates to different holders of
Securities depending on the length of the dividend or interest period elected by
such holders. We agree that any notice given by us to a remarketing agent (or to
a broker-dealer for transmission to a remarketing agent) of our desire to tender
Securities in a Remarketing shall constitute an irrevocable (except to the
limited extent set forth in the Prospectus) offer by us to sell the Securities
specified in such notice, or such lesser number of Securities as we shall be
required to sell as a result of such Remarketing, in accordance with the terms
set forth in the Prospectus, and we authorize the remarketing agent to sell,
transfer or otherwise dispose of such Securities as set forth in the Prospectus.
5. We agree that, during the applicable period as described in the
Prospectus, dispositions of Securities can be made only in the denominations set
forth in the Prospectus and we will sell, transfer or otherwise dispose of any
Securities held by us from time to time only pursuant to a bid or sell order
placed in an Auction, in a Remarketing, to or through a broker-dealer or, when
permitted in the Prospectus, to a person that has signed and delivered to the
applicable trust company or a remarketing agent a letter substantially in the
form of this letter (or other applicable purchaser's letter), provided that in
the case of all transfers other than pursuant to Auctions or Remarketings we or
our broker-dealer or our agent member shall advise such trust company or a
remarketing agent of such transfer. We understand that a restrictive legend will
be placed on certificates representing the Securities and stop-transfer
instructions will be issued to the transfer agent and/or registrar, all as set
forth in the Prospectus.
6. We agree that, during the applicable period as described in the
Prospectus, ownership of Securities shall be represented by one or more global
certificates registered in the name of the applicable securities depository or
its nominee, that we will not be entitled to receive any certificate
representing the Securities and that our ownership of any Securities will be
maintained in book entry form by the securities depository for the account of
our agent member, which in turn will maintain records of our beneficial
ownership. We authorize and instruct our agent member to disclose to the
applicable trust company or remarketing agent such information concerning our
beneficial ownership of Securities as such trust company or remarketing agent
shall request.
7. We acknowledge that partial deliveries of Securities purchased in
Auctions or Remarketings may be made to us and such deliveries shall constitute
good delivery as set forth in the Prospectus.
8. This letter is not a commitment by us to purchase any Securities.
9. This letter supersedes any prior-dated version of this master
purchaser's letter, and supplements any prior or post-dated purchaser's letter
specific to particular Securities, and this letter may only be revoked by a
signed writing delivered to the original recipients hereof.
10. The descriptions of Auction or Remarketing procedures set forth in each
applicable Prospectus are incorporated by reference herein and in case of any
conflict between this letter, any purchaser's letter specific to particular
Securities and any such description, such description shall control.
11. Any xerographic or other copy of this letter shall be deemed of equal
effect as a signed original.
2
<PAGE>
12. Our agent member of The Depository Trust Company currently is
13. Our personnel authorized to place orders with broker-dealers for the
purposes set forth in the Prospectus in Auctions or Remarketings currently
is/are telephone number
14. Our taxpayer identification number is
15. In the case of each offer to purchase, purchase, offer to sell or sale
by us of Securities not registered under the Securities Act of 1933, as amended
(the "Act"), we represent and agree as follows:
A. We understand and expresssly acknowledge that the Securities have
not been and will not be registered under the Act and, accordiingly, that
the Securities may not be reoffered, resold or otherwise pledged,
hypothecated or transferred unless an applicable exemption from the
registration requirements of the Act is available.
B. We hereby confirm that any purchase of Securities made by us will
be for our own account, or for the account of one or more parties for which
we are acting as trustee or agent with complete investment discretion and
with authority to bind such parties, and not with a view to any public
resale or distribution thereof. We and each other party for which we are
acting which will acquire Securities will be "accredited investors" within
the meaning of Regulation D under the Act with respect to the Securities to
be purchased by us or such party, as the case may be, will have previously
invested in similar types of instruments and will be able and prepared to
bear the economic risk of investing in and holding such Securities.
C. We acknowledge that prior to purchasing any Securities we shall
have received a Prospectus (or private placement memorandum) with respect
thereto and acknowledge that we will have had access to such financial and
other information, and have been afforded the opportunity to ask such
questions of representatives of the Company and receive answers thereto, as
we deem necessary in connection with our decision to purchase Securities.
D. We recognize that the Company and broker-dealers will rely upon the
truth and accuracy of the foregoing investment representations and
agreements, and we agree that each of our purchases of Securities now or in
the future shall be deemed to constitute our concurrence in all of the
foregoing which shall be binding on us and each party for which we are
acting as set forth in Subparagraph B above.
___________________________________
(Name of Purchaser)
By_________________________________
Printed Name:
Title:
Dated:_______________________
Mailing Address of Purchaser
_____________________________
_____________________________
_____________________________
3
<PAGE>
EXHIBIT B
SETTLEMENT PROCEDURES
The following summary of Settlement Procedures sets forth the procedures
expected to be followed in connection with the settlement of each Auction and
will be incorporated by reference in the Auction Agent Agreement and each
Broker-Dealer Agreement. Nothing contained in this Appendix C constitutes a
representation by the Fund that in each Auction each party referred to herein
will actually perform the procedures described herein to be performed by such
party. Capitalized terms used herein shall have the respective meanings
specified in the glossary of this Prospectus or Appendix D hereto, as the case
may be.
(a) On each Auction Date, the Auction Agent shall notify by telephone or
through the Auction Agent's Processing System the Broker-Dealers that
participated in the Auction held on such Auction Date and submitted an Order on
behalf of any Existing Holder or Potential Holder of:
(i) the Applicable Rate fixed for the next succeeding Dividend Period;
(ii) whether Sufficient Clearing Bids existed for the determination of
the Applicable Rate;
(iii) if such Broker-Dealer (a "Seller's Broker-Dealer") submitted a
Bid or a Sell Order on behalf of an Existing Holder, the number of shares,
if any, of AMPS to be sold by such Existing Holder;
(iv) if such Broker-Dealer (a "Buyer's Broker-Dealer") submitted a Bid
on behalf of a Potential Holder, the number of shares, if any, of AMPS to
be purchased by such Potential Holder;
(v) if the aggregate number of shares of AMPS to be sold by all
Existing Holders on whose behalf such Broker-Dealer submitted a Bid or a
Sell Order exceeds the aggregate number of shares of AMPS to be purchased
by all potential Holders on whose behalf such Broker-Dealer submitted a
Bid, the name or names of one or more Buyer's Broker-Dealers (and the name
of the Agent Member, if any, of each such Buyer's Broker-Dealer) acting for
one or more purchasers of such excess number of shares of AMPS and the
number of such shares to be purchased from one or more Existing Holders on
whose behalf such Broker-Dealer acted by one or more Potential Holders on
whose behalf each of such Buyer's Broker-Dealers acted;
(vi) if the aggregate number of shares of AMPS to be purchased by all
Potential Holders on whose behalf such Broker-Dealer submitted a Bid
exceeds the aggregate number of shares of AMPS to be sold by all Existing
Holders on whose behalf such Broker-Dealer submitted a Bid or a Sell Order,
the name or names of one or more Seller's Broker-Dealers (and the name of
the Agent Member, if any, of each such Seller's Broker-Dealer) acting for
one or more sellers of such excess number of shares of AMPS and the number
of such shares to be sold to one or more Potential Holders on whose
1
<PAGE>
behalf such Broker-Dealer acted by one or more Existing Holders on whose
behalf each of such Seller's Broker-Dealers acted; and
(vii) the Auction Date of the next succeeding Auction with respect to
the AMPS.
(b) On each Auction Date, each Broker-Dealer that submitted an Order on
behalf of any Existing Holder or Potential Holder shall:
(i) in the case of a Broker-Dealer that is a Buyer's Broker-Dealer,
instruct each Potential Holder on whose behalf such Broker-Dealer submitted
a Bid that was accepted, in whole or in part to instruct such Potential
Holder's Agent Member to pay to such Broker-Dealer (or its Agent Member)
through the Securities Depository the amount necessary to purchase the
number of shares of AMPS to be purchased pursuant to such Bid against
receipt of such shares and advise such Potential Holder of the Applicable
Rate for the next succeeding Dividend Period;
(ii) in the case of a Broker-Dealer that is a Seller's Broker-Dealer,
instruct each Existing Holder on whose behalf such Broker-Dealer submitted
a Sell Order that was accepted, in whole or in part, or a Bid that was
accepted, in whole or in part, to instruct such Existing Holder's Agent
Member to deliver to such Broker-Dealer (or its Agent Member) through the
Securities Depository the number of shares of AMPS to be sold pursuant to
such Order against payment therefor and advise any such Existing Holder
that will continue to hold shares of AMPS of the Applicable Rate for the
next succeeding Dividend Period;
(iii) advise each Existing Holder on whose behalf such Broker-Dealer
submitted a Hold Order of the Applicable Rate for the next succeeding
Dividend Period;
(iv) advise each Existing Holder on whose behalf such Broker-Dealer
submitted an Order of the Auction Date for the next succeeding Auction; and
(v) advise each Potential Holder on whose behalf such Broker-Dealer
submitted a Bid that was accepted, in whole or in part, of the Auction Date
for the next succeeding Action.
(c) On the basis of the information provided to it pursuant to (a) above,
each Broker-Dealer that submitted a Bid or a Sell Order on behalf of a Potential
Holder or an Existing Holder shall, in such manner and at such time or times as
in its sole discretion it may determine, allocate any funds received by it
pursuant to (b)(i) above and any shares of AMPS received by it pursuant to
(b)(ii) above among the Potential Holders, if any, on whose behalf such
Broker-Dealer submitted Bids, the Existing Holders, if any, on whose behalf such
Broker-Dealer submitted Bids that were accepted or Sell Orders, and any
Broker-Dealer or Broker-Dealers identified to it by the Auction Agent pursuant
to (a)(v) or (a)(vi) above.
(d) On each Auction Date:
2
<PAGE>
(i) each Potential Holder and Existing Holder shall instruct its Agent
Member as provided in (b)(i) or (ii) above, as he case may be;
(ii) each Seller's Broker-Dealer which is not an Agent Member of the
Securities Depository shall instruct its Agent Member to (A) pay through
the Securities Depository to the Agent Member of the Existing Holder
delivering shares to such Broker-Dealer pursuant to (b)(ii) above the
amount necessary to purchase such shares against receipt of such shares,
and (B) deliver such shares through the Securities Depository to a Buyer's
Broker-Dealer (or its Agent Member) identified to such Seller's
Broker-Dealer pursuant to (a)(v) above against payment therefor; and
(iii) each Buyer's Broker-Dealer which is not an Agent Member of the
Securities Depository shall instruct its Agent Member to (A) pay through
the Securities Depository to a Seller's Broker-Dealer (or its Agent Member)
identified pursuant to (a)(vi) above the amount necessary to purchase the
shares to be purchased pursuant to (b)(i) above against receipt of such
shares, and (B) deliver such shares through the Securities Depository to
the Agent Member of the purchaser thereof against payment therefor.
(e) On the day after the Auction Date:
(i) each Bidder's Agent Member referred to in (d)(i) above shall
instruct the Securities Depository to execute the transactions described
under (b)(i) or (ii) above, and the Securities Depository shall execute
such transactions;
(ii) each Seller's Broker-Dealer or its Agent Member shall instruct
the Securities Depository to execute the transactions described in (d)(ii)
above, and the Securities Depository shall execute such transactions; and
(iii) each Buyer's Broker-Dealer or its Agent Member shall instruct
the Securities Depository to execute the transactions described in (d)(iii)
above, and the Securities Depository shall execute such transactions.
(f) If an Existing Holder selling shares of AMPS in an Auction fails to
deliver such shares (by authorized book-entry), a Broker-Dealer may deliver to
the Potential Holder on behalf of which it submitted a Bid that was accepted a
number of whole shares of AMPS that is less than the number of shares that
otherwise was to be purchased by such Potential Holder. In such event, the
number of shares of AMPS to be so delivered shall be determined solely by such
Broker-Dealer. Delivery of such lesser number of shares shall constitute good
delivery. Notwithstanding the foregoing terms of this paragraph (f), any
delivery or non-delivery of shares which shall represent any departure from the
results of an Auction, as determined by the Auction Agent, shall be of no effect
unless and until the Auction Agent shall have been notified of such delivery or
non-delivery in accordance with the provisions of the Auction Agent Agreement
and the Broker-Dealer Agreements.
3
<PAGE>
EXHIBIT C
IBJ SCHRODER BANK & TRUST COMPANY
AUCTION BID FORM
Submit To: IBJ Schroder Bank & Trust Company Issue _________________
Securities Transfer Department Series_________________
One State Street Auction Date___________
New York, New York 10004
Telephone (212) 858-2272
Attention: Auction Window Facsimile (212) 797-1148
The undersigned Broker-Dealer submits the following Order on behalf of the
Bidder listed below:
Name of Bidder:________________________________
EXISTING HOLDER
Shares now held___________________ HOLD_______________________
BID at rate of_____________
SELL
POTENTIAL HOLDER
# of shares bid____________
BID at rate of_____________
Notes:
(1) If submitting more than one Bid for one Bidder, use additional Auction Bid
Forms.
(2) If one or more Bids covering in the aggregate more than the number of
outstanding shares held by any Existing Holder are submitted, such bid
shall be considered valid in the order of priority set forth in the Auction
Procedures on the above issue.
(3) A Hold or Sell may be placed only by an Existing Holder covering a number
of shares not greater than the number of shares currently held.
(4) Potential Holders may make only Bids, each of which must specify a rate. If
more than one Bid is submitted on behalf of any Potential Holder, each Bid
submitted shall be a separate Bid with the rate specified.
(5) Bids may contain no more than three figures to the right of the decimal
point (.001 of 1%). Fractions will not be accepted.
NAME OF BROKER-DEALER____________________________________________
Authorized Signature_____________________________________________
<PAGE>
EXHIBIT D
(To be used only for transfers made other than pursuant to an Auction.)
TRANSFER FORM
Re: MuniYield Florida Fund
Auction Market Preferred Stock ("AMPS")
We are (check one):
[ ] the Existing Holder named below;
[ ] the Broker-Dealer for such Existing Holder; or
[ ] the Agent Member for such Existing Holder.
We hereby notify you that such Existing Holder has transferred
________ shares of AMPS to _______________
___________________________________
(Name of Existing Holder)
___________________________________
(Name of Broker-Dealer)
___________________________________
(Name of Agent Member)
By:________________________________
Printed Name:
Title:
<PAGE>
EXHIBIT E
(To be used only for failures to deliver
AMPS sold pursuant to an Auction)
NOTICE OF A FAILURE TO DELIVER
Complete either I or II
I. We are a Broker-Dealer for __________________________ (the "Purchaser"),
which purchased ____________ shares of AMPS of MuniYield Florida Funding
the Auction held on __________________________from the seller of such
shares.
II. We are a Broker-Dealer for _________________________ (the "Seller"), which
sold __________ shares of AMPS of MuniYield Florida Fund in the Auction
held on ________________________ to the Purchaser of such shares.
We hereby notify you that (check one)
_______ the Seller failed to deliver such shares to the Purchaser
_______ the Purchaser failed to make payment to the Seller upon delivery of
such shares
Name:______________________________________
(Name of Broker-Dealer)
By:________________________________________
Printed Name:
Title:
Exhibit 13(d)
================================================================================
BROKER-DEALER AGREEMENT
between
IBJ SCHRODER BANK & TRUST COMPANY
and
KIDDER PEABODY & CO. INCORPORATED
Dated as of April 10, 1992
Relating to
AUCTION MARKET PREFERRED STOCK(R)
("AMPS"(R))
of
MUNIYIELD FLORIDA FUND
================================================================================
(R) Registered trademark of Merrill Lynch & Co., Inc.
<PAGE>
BROKER-DEALER AGREEMENT dated as of April 10, 1992 between IBJ Schroder
Bank & Trust Company, a New York banking corporation (the "Auction Agent") (not
in its individual capacity but solely as agent of MuniYield Florida Fund, a
Massachusetts business trust (the "Trust"), pursuant to authority granted to it
in the Auction Agent Agreement dated as of April 10, 1992, between the Trust and
the Auction Agent (the "Auction Agent Agreement") and [Name of Broker-Dealer]
(together with its successors and assigns hereinafter referred to as "BD").
The Trust has duly authorized and issued 1,000 shares of Auction Market
Preferred Stock(R), par value $.10 per share, liquidation preference $50,000 per
share plus accumulated but unpaid dividends (whether or not earned or declared)
(the "AMPS"), pursuant to the Trust's Certificate of Designation (as defined
below).
The Trust's Certificate of Designation provides that the dividend rate
on the AMPS for each Dividend Period therefor after the Initial Dividend Period
shall be the Applicable Rate therefor, which in each case, in general, shall be
the rate per annum that a commercial bank, trust company or other financial
institution appointed by the Trust advises results from implementation of the
Auction Procedures (as defined below). The Trustees of the Trust has adopted a
resolution appointing IBJ Schroder Bank & Trust Company as Auction Agent for
purposes of the Auction Procedures, and pursuant to Section 2.5(d) of the
Auction Agent Agreement, the Trust has requested and directed the Auction Agent
to execute and deliver this Agreement.
The Auction Procedures require the participation of one or more
Broker-Dealers.
- -----------
(R)Registered trademark of Merrill Lynch & Co., Inc.
2
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the Auction Agent and BD agree as follows:
1. Definition and Rules of Construction.
1.1 Terms Defined by Reference to the Certificate of Designation.
Capitalized terms not defined herein shall have the respective meanings
specified in the Certificate of Designation of the Trust.
1.2 Terms Defined Herein. As used herein and in the Settlement
Procedures (as defined below), the following terms shall have the following
meanings, unless the context otherwise requires:
(a) "Auction" shall have the meaning specified in Section 3.1 hereof.
(b) "Auction Procedures" shall mean the Auction Procedures that are set
forth in Paragraph 11 of the Certificate of Designation.
(c) "Authorized Officer" shall mean each Senior Vice President, Vice
President, Assistant Vice President, Trust Officer, Assistant Secretary and
Assistant Treasurer of the Auction Agent assigned to its Corporate Trust and
Agency Group and every other officer or employee of the Auction Agent designated
as an "Authorized Officer" for purposes of this Agreement in a communication to
BD.
(d) "BD Officer" shall mean each officer or employee of BD designated
as a "BD Officer" for purposes of this Agreement in a communication to the
Auction Agent.
(e) "Broker-Dealer Agreement" shall mean this Agreement and any
substantially similar agreement between the Auction Agent and a Broker-Dealer.
(f) "Certificate of Designation" shall mean the Certificate of
Designation, as amended, of the Trust, establishing the powers, preferences and
rights of the AMPS filed on April 7, 1992 in the office of the Department of the
Secretary of State of the Commonwealth of Massachusetts.
(g) "Purchaser's Letter" shall mean a letter addressed to the Trust,
the Auction Agent and a Broker-Dealer, substantially in the form attached hereto
as Exhibit A.
(h) "Settlement Procedures" shall mean the Settlement Procedures
attached hereto as Exhibit B.
1.3 Rules of Construction. Unless the context or use indicates another
or different meaning or intent, the following rules shall apply to the
construction of this Agreement:
(a) Words importing the singular number shall include the plural number
and vice versa.
3
<PAGE>
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of this Agreement nor shall they
affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar
import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New
York City time.
2. Notification of Dividend Period and Advance Notice of Allocation of
Taxable Income.
(a) The provisions contained in paragraph 2 of the Certificate of
Designation concerning the notification of a Special Dividend Period will be
followed by the Auction Agent and BD and the provisions contained therein are
incorporated herein by reference in their entirety and shall be deemed to be a
part of this Agreement to the same extent as if such provisions were fully set
forth herein.
(b) Whenever the Trust intends to include any net capital gains or
other taxable income in any dividend on shares of AMPS, the Trust will notify
the Auction Agent of the amount to be so included at least five Business Days
prior to the Auction Date on which the Applicable Rate for such dividend is to
be established. Whenever the Auction Agent receives such notice from the Trust,
it will in turn notify BD, who, on or prior to such Auction Date, will notify
its Existing Holders and Potential Holders believed to be interested in
submitting an order in the Auction to be held on such Auction Date.
3. The Auction.
3.1 Purpose; Incorporation by Reference of Auction Procedures and
Settlement Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures will
be followed by the Auction Agent for the purpose of determining the Applicable
Rate for the AMPS, for the next Dividend Period therefor. Each periodic
operation of such procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their entirety and
shall be deemed to be a part of this Agreement to the same extent as if such
provisions were fully set forth herein.
(c) BD is delivering herewith a Purchaser's Letter executed by BD and,
in the case of Merrill Lynch, Pierce, Fenner & Smith Incorporated, a list of
persons to whom BD will initially sell the shares of AMPS, the number of shares
of AMPS BD will sell to each such person and the number of shares of AMPS BD
will hold for its own account. BD agrees to act as, and assumes the obligations
of and limitations and restrictions placed upon, a Broker-Dealer under this
Agreement. BD understands that other Persons meeting the requirements specified
in the definition of "Broker-Dealer" contained in Paragraph 1 of the Certificate
of Designation may
4
<PAGE>
execute a Broker-Dealer Agreement and a Purchaser's Letter and participate as
Broker-Dealers in Auctions.
(d) BD and other Broker-Dealers may participate in Auctions for their
own accounts, provided that BD or such other Broker-Dealers, as the case may be,
has executed a Purchaser's Letter. However, the Trust may by notice to BD and
all other Broker-Dealers prohibit all Broker-Dealers from submitting Bids in
Auctions for their own accounts, provided that Broker-Dealers may continue to
submit Hold Orders and Sell Orders.
3.2 Preparation for Each Auction.
(a) Not later than 9:30 A.M. on each Auction Date for the AMPS, the
Auction Agent shall advise BD by telephone of the Reference Rate and the Maximum
Applicable Rate in effect on such Auction Date.
(b) In the event that the Auction Date for any Auction shall be changed
after the Auction Agent has given the notice referred to in clause (vii) of
paragraph (a) of the Settlement Procedures, the Auction Agent, by such means as
the Auction Agent deems practicable, shall give notice of such change to BD not
later than the earlier of 9:15 A.M. on the new Auction Date or 9:15 A.M. on the
old Auction Date. Thereafter, BD shall promptly notify customers of BD that BD
believes are Existing Holders of shares of AMPS of such change in the Auction
Date.
(c) The Auction Agent from time to time may request BD to provide it
with a list of the respective customers BD believes are Existing Holders of
shares of AMPS. BD shall comply with any such request, and the Auction Agent
shall keep confidential any such information, including information received as
to the identity of Bidders in any Auction, and shall not disclose any such
information so provided to any Person other than the Trust; and such information
shall not be used by the Auction Agent or its officers, employees, agents or
representatives for any purpose other than such purposes as are described
herein. The Auction Agent shall transmit any list of customers BD believes are
Existing Holders of shares of AMPS and information related thereto only to its
officers, employees, agents or representatives in the Corporate Trust and Agency
Group who need to know such information for the purposes of acting in accordance
with this Agreement and shall prevent the transmission of such information to
others and shall cause its officers, employees, agents and representatives to
abide by the foregoing confidentiality restrictions; provided, however, that the
Auction Agent shall have no responsibility or liability for the actions of any
of its officers, employees, agents or representatives after they have left the
employ of the Auction Agent.
(d) The Auction Agent is not required to accept the Purchaser's Letter
for any Potential Holder for an Auction unless it is received by the Auction
Agent by 3:00 P.M. on the Business Day next preceding such Auction.
3.3 Auction Schedule; Method of Submission of Orders.
(a) The Trust and the Auction Agent shall conduct Auctions for the AMPS
in accordance with the schedule set forth below. Such schedule may be changed at
any time by the
5
<PAGE>
Auction Agent with the consent of the Trust, which consent shall not be
unreasonably withheld. The Auction Agent shall give notice of any such change to
BD. Such notice shall be received prior to the first Auction Date on which any
such change shall be effective.
Time Event
---- -----
By 9:30 A.M. Auction Agent advises the Trust and
Broker-Dealers of Reference Rate and the
Maximum Applicable Rate as set forth in
Section 3.2(a) hereof.
9:30 A.M.--1:00 P.M. Auction Agent assembles information
communicated to it by Broker-Dealers as
provided in Paragraph 11(c)(i) of the
Certificate of Designation. Submission
Deadline is 1:00 P.M.
Not earlier than 1:00 P.M. Auction Agent makes determinations pursuant
to Paragraph 11(d)(i) of the Certificate of
Designation.
By approximately 3:00 P.M. Auction Agent advises Trust of results of
Auction as provided in Paragraph 11(d)(ii)
of the Certificate of Designation.
Submitted Bids and Submitted Sell Orders are
accepted and rejected in whole or in part
and shares of AMPS are allocated as provided
in Paragraph 11(e) of the Certificate of
Designation.
By approximately 10:00 A.M. Auction Agent gives notice of Auction
on the next succeeding results as set forth in Section 3.4(a)
Business Day hereof.
(b) BD agrees to maintain a list of Potential Holders and to contact
the Potential Holders on such list on or prior to each Auction Date for the
purposes set forth in Paragraph 11 of the Certificate of Designation.
(c) BD agrees not to sell, assign or dispose of any shares of AMPS, to
any Person who has not delivered a signed Purchaser's Letter to the Auction
Agent.
(d) BD shall submit Orders to the Auction Agent in writing in
substantially the form attached hereto as Exhibit C. BD shall submit separate
Orders to the Auction Agent for each Potential Holder or Existing Holder on
whose behalf BD is submitting an Order and shall not net or aggregate the Orders
of Potential Holders or Existing Holders on whose behalf BD is submitting
Orders.
(e) BD shall deliver to the Auction Agent (i) a written notice,
substantially in the form attached hereto as Exhibit D, of transfers of shares
of AMPS, made through BD by an Existing Holder to another Person other than
pursuant to an Auction, and (ii) a written notice, substantially in the form
attached hereto as Exhibit E, of the failure of shares of AMPS to be
6
<PAGE>
transferred to or by any Person that purchased or sold shares of AMPS or through
BD pursuant to an Auction. The Auction Agent is not required to accept any
notice delivered pursuant to the terms of the foregoing sentence with respect to
an Auction unless it is received by the Auction Agent by 3:00 P.M. on the
Business Day next preceding the applicable Auction Date.
3.4 Notice of Auction Results.
(a) On each Auction Date, the Auction Agent shall notify BD by
telephone as set forth in paragraph (a) of the Settlement Procedures. On the
Business Day next succeeding such Auction Date, the Auction Agent shall notify
BD in writing of the disposition of all Orders submitted by BD in the Auction
held on such Auction Date.
(b) BD shall notify each Existing Holder or Potential Holder on whose
behalf BD has submitted an Order as set forth in paragraph (b) of the Settlement
Procedures and take such other action as is required of BD pursuant to the
Settlement Procedures.
If any Existing Holder selling shares of AMPS in an Auction fails to
deliver such shares, the BD of any Person that was to have purchased shares of
AMPS in such Auction may deliver to such Person a number of whole shares of AMPS
that is less than the number of shares that otherwise was to be purchased by
such Person. In such event, the number of shares of AMPS to be so delivered
shall be determined by such BD. Delivery of such lesser number of shares shall
constitute good delivery. Upon the occurrence of any such failure to deliver
shares, such BD shall deliver to the Auction Agent the notice required by
Section 3.3(e)(ii) hereof. Notwithstanding the foregoing terms of this Section
3.4(b), any delivery or non-delivery of shares of AMPS which represents any
departure from the results of an Auction, as determined by the Auction Agent,
shall be of no effect unless and until the Auction Agent shall have been
notified of such delivery or non-delivery in accordance with the terms of
Section 3.3(e) hereof. The Auction Agent shall have no duty or liability with
respect to enforcement of this Section 3.4(b).
3.5 Service Charge to Be Paid to BD. On the Business Day next
succeeding each Auction Date, the Auction Agent shall pay to BD from moneys
received from the Trust an amount equal to: (a) in the case of any Auction Date
immediately preceding a 7-day Dividend Period or Short Term Dividend Period, the
product of (i) a fraction the numerator of which is the number of days in such
Dividend Period (calculated by counting the first day of such Dividend Period
but excluding the last day thereof) and the denominator of which is 360, times
(ii) 1/4 of 1%, times (iii) $50,000, times (iv) the sum of (A) the aggregate
number of AMPS placed by BD in the applicable Auction that were (x) the subject
of a Submitted Bid of an Existing Holder submitted by BD and continued to be
held as a result of such submission and (y) the subject of a Submitted Bid of a
Potential Holder submitted by BD and were purchased as a result of such
submission plus (B) the aggregate number of AMPS subject to valid Hold Orders
(determined in accordance with Paragraph 11 of the Certificate of Designation)
submitted to the Auction Agent by BD plus (C) the number of AMPS deemed to be
subject to Hold Orders by Existing Holders pursuant to Paragraph 11 of the
Certificate of Designation that were acquired by such Existing Holders through
BD and (b) in the case of any Auction Date immediately preceding a Long Term
Dividend Period, that amount as mutually agreed upon by the Trust and BD, based
on the selling
7
<PAGE>
concession that would be applicable to an underwriting of fixed or variable rate
preferred shares with a similar final maturity or variable rate dividend period,
at the commencement of such Long Term Dividend Period.
For purposes of subclause (a)(iv)(C) of the foregoing sentence, if any
Existing Holder who acquired shares of AMPS through BD transfers those shares to
another Person other than pursuant to an Auction, then the Broker-Dealer for the
shares so transferred shall continue to be BD, provided, however, that if the
transfer was effected by, or if the transferee is, a Broker-Dealer other than
BD, then such Broker-Dealer shall be the Broker-Dealer for such shares.
4. The Auction Agent.
4.1 Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Trust hereunder
and owes no fiduciary duties to any other Person by reason of this Agreement.
(b) The Auction Agent undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement, and no implied covenants
or obligations shall be read into this Agreement against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction
Agent shall not be liable for any action taken, suffered, or omitted or for any
error of judgment made by it in the performance of its duties under this
Agreement. The Auction Agent shall not be liable for any error of judgment made
in good faith unless the Auction Agent shall have been negligent in ascertaining
(or failing to ascertain) the pertinent facts.
4.2 Rights of the Auction Agent.
(a) The Auction Agent may rely and shall be protected in acting or
refraining from acting upon any communication authorized by this Agreement and
upon any written instruction, notice, request, direction, consent, report,
certificate, share certificate or other instrument, paper or document believed
by it to be genuine. The Auction Agent shall not be liable for acting upon any
telephone communication authorized by this Agreement which the Auction Agent
believes in good faith to have been given by the Trust or by a Broker-Dealer.
The Auction Agent may record telephone communications with the Broker-Dealers.
(b) The Auction Agent may consult with counsel of its own choice, and
the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk
its own funds or otherwise incur or become exposed to financial liability in the
performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys.
8
<PAGE>
4.3 Auction Agent's Disclaimer. The Auction Agent makes no
representation as to the validity or adequacy of this Agreement or the AMPS.
5. Miscellaneous.
5.1 Termination. Any party may terminate this Agreement at any time
upon five days' prior notice to the other party; provided, however, that if BD
is Merrill Lynch, Pierce, Fenner & Smith Incorporated, neither BD nor the
Auction Agent may terminate this Agreement without first obtaining prior written
consent of the Trust of such termination, which consent shall not be
unreasonably withheld.
5.2 Participant in Securities Depository; Payment of Dividends in
Same-Day Funds.
(a) BD is, and shall remain for the term of this Agreement, a member
of, or participant in, the Securities Depository (or an affiliate of such a
member or participant).
(b) BD represents that it (or if such BD does not act as Agent Member,
one of its affiliates) shall make all dividend payments on the AMPS available in
same-day funds on each Dividend Payment Date to customers that use such BD or
affiliate as Agent Member.
5.3 Agent Member. At the date hereof, BD is a participant of the
Securities Depository.
5.4 Communications. Except for (i) communications authorized to be made
by telephone pursuant to this Agreement or the Auction Procedures and (ii)
communications in connection with the Auctions (other than those expressly
required to be in writing), all notices, requests and other communications to
any party hereunder shall be in writing (including telecopy or similar writing)
and shall be given to such party, addressed to it, at its address or telecopy
number set forth below:
If to BD Kidder Peabody & Co. Incorporated
addressed: 60 Broad Street, 5th Floor
New York, New York 10004
Attention: Paul A. St. Pierre
Telecopier No.: (212) 656-1154
Telephone No.: (212) 656-1156
If to the Auction IBJ Schroder Bank & Trust Company
Agent, addressed: One State Street
New York, New York 10004
Attention: Auction Window Subcellar 1
Telecopier No.: (212) 797-1148
Telephone No.: (212) 858-2272
9
<PAGE>
or such other address or telecopy number as such party may hereafter specify for
such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of BD by a BD Officer and on behalf of
the Auction Agent by an Authorized Officer. BD may record telephone
communications with the Auction Agent.
5.5 Entire Agreement. This Agreement contains the entire agreement
between the parties relating to the subject matter hereof, and there are no
other representations, endorsements, promises, agreements or understandings,
oral, written or inferred, between the parties relating to the subject matter
hereof.
5.6 Benefits. Nothing in this Agreement, express or implied, shall give
to any person, other than the Trust, the Auction Agent and BD and their
respective successors and assigns, any benefit of any legal or equitable right,
remedy or claim under this Agreement.
5.7 Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be modified,
amended, rescinded, cancelled or waived, in whole or in part, except by a
written instrument signed by a duly authorized representative of the party to be
charged.
(b) Failure of either party to this Agreement to exercise any right or
remedy hereunder in the event of a breach of this Agreement by the other party
shall not constitute a waiver of any such right or remedy with respect to any
subsequent breach.
5.8 Successors and Assigns. This Agreement shall be binding upon, inure
to the benefit of, and be enforceable by, the respective successors and
permitted assigns of each of BD and the Auction Agent. This Agreement may not be
assigned by either party hereto absent the prior written consent of the other
party; provided, however, that this Agreement may be assigned by the Auction
Agent to a successor Auction Agent selected by the Trust without the consent of
BD.
5.9 Severability. If any clause, provision or section of this Agreement
shall be ruled invalid or unenforceable by any court of competent jurisdiction,
the invalidity or unenforceability of such clause, provision or section shall
not affect any remaining clause, provision or section hereof.
5.10 Execution in Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
5.11 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to agreements
made and to be performed in said State.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
IBJ SCHRODER BANK TRUST & COMPANY
By:
----------------------
Title: Assistant Vice President
KIDDER PEABODY & CO. INCORPORATED
By:
-----------------------
Title: AVP
11
<PAGE>
EXHIBIT A
TO BE SUBMITTED TO YOUR BROKER-DEALER WHO WILL THEN
DELIVER COPIES ON YOUR BEHALF TO THE RESPECTIVE TRUST
COMPANY OR REMARKETING AGENT
MASTER PURCHASER'S LETTER
Relating to
Securities Involving Rate Settings Through Auctions or Remarketings
THE COMPANY
A REMARKETING AGENT
THE TRUST COMPANY
A BROKER-DEALER
AN AGENT MEMBER
OTHER PERSONS
Dear Sirs:
1. This letter is designed to apply to publicly or privately offered
debt or equity securities ("Securities") of any issuer ("Company") which are
described in any final prospectus or other offering materials relating to such
Securities as the same may be amended or supplemented (collectively, with
respect to the particular Securities concerned, the "Prospectus") and which
involve periodic rate settings through auctions ("Auctions") or remarketing
procedures ("Remarketings"). This letter shall be for the benefit of any Company
and of any trust company, auction agent, paying agent (collectively, "trust
company"), remarketing agent, broker-dealer, agent member, securities depository
or other interested person in connection with any Securities and related
Auctions or Remarketings (it being understood that such persons may be required
to execute specified agreements and nothing herein shall alter such
requirements). The terminology used herein is intended to be general in its
application and not to exclude any Securities in respect of which (in the
Prospectus or otherwise) alternative terminology is used.
2. We may from time to time offer to purchase, purchase, offer to sell
and/or sell Securities of any Company as described in the Prospectus relating
thereto. We agree that this letter shall apply to all such purchases, sales and
offers and to Securities owned by us. We understand that the dividend/interest
rate on Securities may be based from time to time on the results of Auctions or
Remarketings as set forth in the Prospectus.
3. We agree that any bid or sell order placed by us in an Auction or a
Remarketing shall constitute an irrevocable offer (except as otherwise described
in the Prospectus) by us to purchase or sell the Securities subject to such bid
or sell order, or such lesser amount of Securities as we shall be required to
sell or purchase as a result of such Auction or Remarketing, at the applicable
price, all as set forth in the Prospectus, and that if we fail to place a bid or
sell order with respect to Securities owned by us with a broker-dealer on any
Auction or Remarketing date, or a broker-dealer to which we communicate a bid or
sell order fails to submit such bid or sell order to the trust company or
remarketing agent concerned, we shall be deemed to have placed a hold order with
respect to such Securities as described in the Prospectus. We authorize any
broker-dealer that submits a bid or sell order as our agent in Auctions or
Remarketings to execute contracts for the sale of Securities covered by such bid
or sell order. We recognize that the payment by such broker-dealer for
Securities purchased on our behalf shall not relieve us of any liability to such
broker-dealer for payment for such Securities.
4. We understand that in a Remarketing, the dividend or interest rate
or rates on the Securities and the allocation of Securities tendered for sale
between dividend or interest periods of different lengths will be based from
time to time on the determinations of one or more remarketing agents, and we
agree to be conclusively bound by such determinations. We further agree to the
payment of different dividend or interest rates to different holders of
Securities depending on the length of the dividend or interest period elected by
such holders. We agree that any notice given by us to a remarketing agent (or to
a broker-dealer for transmission to a remarketing agent) of our desire to tender
Securities in a Remarketing shall constitute an irrevocable (except to the
limited extent set forth in the Prospectus) offer by us to sell the Securities
specified in such notice, or such lesser number of Securities as we shall be
required to sell as a result of such Remarketing, in accordance with the terms
set forth in the Prospectus, and we authorize the remarketing agent to sell,
transfer or otherwise dispose of such Securities as set forth in the Prospectus.
1
<PAGE>
5. We agree that, during the applicable period as described in the
Prospectus, dispositions of Securities can be made only in the denominations set
forth in the Prospectus and we will sell, transfer or otherwise dispose of any
Securities held by us from time to time only pursuant to a bid or sell order
placed in an Auction, in a Remarketing, to or through a broker-dealer or, when
permitted in the Prospectus, to a person that has signed and delivered to the
applicable trust company or a remarketing agent a letter substantially in the
form of this letter (or other applicable purchaser's letter), provided that in
the case of all transfers other than pursuant to Auctions or Remarketings we or
our broker-dealer or our agent member shall advise such trust company or a
remarketing agent of such transfer. We understand that a restrictive legend will
be placed on certificates representing the Securities and stop-transfer
instructions will be issued to the transfer agent and/or registrar, all as set
forth in the Prospectus.
6. We agree that, during the applicable period as described in the
Prospectus, ownership of Securities shall be represented by one or more global
certificates registered in the name of the applicable securities depository or
its nominee, that we will not be entitled to receive any certificate
representing the Securities and that our ownership of any Securities will be
maintained in book entry form by the securities depository for the account of
our agent member, which in turn will maintain records of our beneficial
ownership. We authorize and instruct our agent member to disclose to the
applicable trust company or remarketing agent such information concerning our
beneficial ownership of Securities as such trust company or remarketing agent
shall request.
7. We acknowledge that partial deliveries of Securities purchased in
Auctions or Remarketings may be made to us and such deliveries shall constitute
good delivery as set forth in the Prospectus.
8. This letter is not a commitment by us to purchase any Securities.
9. This letter supersedes any prior-dated version of this master
purchaser's letter, and supplements any prior or post-dated purchaser's letter
specific to particular Securities, and this letter may only be revoked by a
signed writing delivered to the original recipients hereof.
10. The descriptions of Auction or Remarketing procedures set forth in
each applicable Prospectus are incorporated by reference herein and in case of
any conflict between this letter, any purchaser's letter specific to particular
Securities and any such description, such description shall control.
11. Any xerographic or other copy of this letter shall be deemed of
equal effect as a signed original.
12. Our agent member of The Depository Trust Company currently is
13. Our personnel authorized to place orders with broker-dealers for
the purposes set forth in the Prospectus in Auctions or Remarketings currently
is/are , telephone number ( ) .
14. Our taxpayer identification number is .
15. In the case of each offer to purchase, purchase, offer to sell or
sale by us of Securities not registered under the Securities Act of 1933, as
amended (the "Act"), we represent and agree as follows:
A. We understand and expressly acknowledge that the Securities
have not been and will not be registered under the Act and,
accordingly, that the Securities may not be reoffered, resold or
otherwise pledged, hypothecated or transferred unless an applicable
exemption from the registration requirements of the Act is available.
B. We hereby confirm that any purchase of Securities made by us
will be for our own account, or for the account of one or more parties
for which we are acting as trustee or agent with complete investment
discretion and with authority to bind such parties, and not with a view
to any public resale or distribution thereof. We and each other party
for which we are acting which will acquire Securities will be
"accredited investors" within the meaning of Regulation D under the Act
with respect to the Securities to be purchased
2
<PAGE>
by us or such party, as the case may be, will have previously invested
in similar types of instruments and will be able and prepared to bear
the economic risk of investing in and holding such Securities.
C. We acknowledge that prior to purchasing any Securities we shall
have received a Prospectus (or private placement memorandum) with
respect thereto and acknowledge that we will have had access to such
financial and other information, and have been afforded the opportunity
to ask such questions of representatives of the Company and receive
answers thereto, as we deem necessary in connection with our decision
to purchase Securities.
D. We recognize that the Company and broker-dealers will rely upon
the truth and accuracy of the foregoing investment representations and
agreements, and we agree that each of our purchases of Securities now
or in the future shall be deemed to constitute our concurrence in all
of the foregoing which shall be binding on us and each party for which
we are acting as set forth in Subparagraph B above.
..........................................
(Name of Purchaser)
By........................................
Printed Name:
Title:
Dated:..............................
Mailing Address of Purchaser
....................................
....................................
....................................
3
<PAGE>
EXHIBIT B
SETTLEMENT PROCEDURES
The following summary of Settlement Procedures sets forth the
procedures expected to be followed in connection with the settlement of each
Auction and will be incorporated by reference in the Auction Agent Agreement and
each Broker-Dealer Agreement. Nothing contained in this Appendix C constitutes a
representation by the Fund that in each Auction each party referred to herein
will actually perform the procedures described herein to be performed by such
party. Capitalized terms used herein shall have the respective meanings
specified in the glossary of this Prospectus or Appendix D hereto, as the case
may be.
(a) On each Auction Date, the Auction Agent shall notify by telephone
or through the Auction Agent's Processing System the Broker-Dealers that
participated in the Auction held on such Auction Date and submitted an Order on
behalf of any Existing Holder or Potential Holder of:
(i) the Applicable Rate fixed for the next succeeding Dividend
Period;
(ii) whether Sufficient Clearing Bids existed for the
determination of the Applicable Rate;
(iii) if such Broker-Dealer (a "Seller's Broker-Dealer")
submitted a Bid or a Sell Order on behalf of an Existing Holder, the
number of shares, if any, of AMPS to be sold by such Existing Holder;
(iv) if such Broker-Dealer (a "Buyer's Broker-Dealer")
submitted a Bid on behalf of a Potential Holder, the number of shares,
if any, of AMPS to be purchased by such Potential Holder;
(v) if the aggregate number of shares of AMPS to be sold by
all Existing Holders on whose behalf such Broker-Dealer submitted a Bid
or a Sell Order exceeds the aggregate number of shares of AMPS to be
purchased by all potential Holders on whose behalf such Broker-Dealer
submitted a Bid, the name or names of one or more Buyer's
Broker-Dealers (and the name of the Agent Member, if any, of each such
Buyer's Broker-Dealer) acting for one or more purchasers of such excess
number of shares of AMPS and the number of such shares to be purchased
from one or more Existing Holders on whose behalf such Broker-Dealer
acted by one or more Potential Holders on whose behalf each of such
Buyer's Broker-Dealers acted;
(vi) if the aggregate number of shares of AMPS to be purchased
by all Potential Holders on whose behalf such Broker-Dealer submitted a
Bid exceeds the aggregate number of shares of AMPS to be sold by all
Existing Holders on whose behalf such Broker-Dealer submitted a Bid or
a Sell Order, the name or names of one or more Seller's Broker-Dealers
(and the name of the Agent Member, if any, of each such Seller's
Broker-Dealer) acting for one or more sellers of such excess number of
shares of AMPS and the number of such shares to be sold to one or more
Potential Holders on whose behalf such Broker-Dealer acted by one or
more Existing Holders on whose behalf each of such Seller's
Broker-Dealers acted; and
(vii) the Auction Date of the next succeeding Auction with
respect to the AMPS.
(b) On each Auction Date, each Broker-Dealer that submitted an Order on
behalf of any Existing Holder or Potential Holder shall:
(i) in the case of a Broker-Dealer that is a Buyer's
Broker-Dealer, instruct each Potential Holder on whose behalf such
Broker-Dealer submitted a Bid that was accepted, in whole or in part
to instruct such Potential Holder's Agent Member to pay to such
Broker-Dealer (or its Agent Member) through the Securities Depository
the amount necessary to purchase the number of shares of AMPS to be
purchased pursuant to such Bid against receipt of such shares and
advise such Potential Holder of the Applicable Rate for the next
succeeding Dividend Period;
(ii) in the case of a Broker-Dealer that is a Seller's
Broker-Dealer, instruct each Existing Holder on whose behalf such
Broker-Dealer submitted a Sell Order that was accepted, in whole or in
part, or a Bid that was accepted, in whole or in part, to instruct
such Existing Holder's Agent Member to deliver to such
1
<PAGE>
Broker-Dealer (or its Agent Member) through the Securities Depository
the number of shares of AMPS to be sold pursuant to such Order against
payment therefor and advise any such Existing Holder that will continue
to hold shares of AMPS of the Applicable Rate for the next succeeding
Dividend Period;
(iii) advise each Existing Holder on whose behalf such
Broker-Dealer submitted a Hold Order of the Applicable Rate for the
next succeeding Dividend Period;
(iv) advise each Existing Holder on whose behalf such
Broker-Dealer submitted an Order of the Auction Date for the next
succeeding Auction; and
(v) advise each Potential Holder on whose behalf such
Broker-Dealer submitted a Bid that was accepted, in whole or in part,
of the Auction Date for the next succeeding Action.
(c) On the basis of the information provided to it pursuant to (a)
above, each Broker-Dealer that submitted a Bid or a Sell Order on behalf of a
Potential Holder or an Existing Holder shall, in such manner and at such time or
times as in its sole discretion it may determine, allocate any funds received by
it pursuant to (b)(i) above and any shares of AMPS received by it pursuant to
(b)(ii) above among the Potential Holders, if any, on whose behalf such
Broker-Dealer submitted Bids, the Existing Holders, if any, on whose behalf such
Broker-Dealer submitted Bids that were accepted or Sell Orders, and any
Broker-Dealer or Broker-Dealers identified to it by the Auction Agent pursuant
to (a)(v) or (a)(vi) above.
(d) On each Auction Date:
(i) each Potential Holder and Existing Holder shall instruct
its Agent Member as provided in (b)(i) or (ii) above, as the case may
be;
(ii) each Seller's Broker-Dealer which is not an Agent Member
of the Securities Depository shall instruct its Agent Member to (A)
pay through the Securities Depository to the Agent Member of the
Existing Holder delivering shares to such Broker-Dealer pursuant to
(b)(ii) above the amount necessary to purchase such shares against
receipt of such shares, and (B) deliver such shares through the
Securities Depository to a Buyer's Broker-Dealer (or its Agent Member)
identified to such Seller's Broker-Dealer pursuant to (a)(v) above
against payment therefor; and
(iii) each Buyer's Broker-Dealer which is not an Agent Member
of the Securities Depository shall instruct its Agent Member to (A)
pay through the Securities Depository to a Seller's Broker-Dealer (or
its Agent Member) identified pursuant to (a)(vi) above the amount
necessary to purchase the shares to be purchased pursuant to (b)(i)
above against receipt of such shares, and (B) deliver such shares
through the Securities Depository to the Agent Member of the purchaser
thereof against payment therefor.
(e) On the day after the Auction Date:
(i) each Bidder's Agent Member referred to in (d)(i) above
shall instruct the Securities Depository to execute the transactions
described under (b)(i) or (ii) above, and the Securities Depository
shall execute such transactions;
(ii) each Seller's Broker-Dealer or its Agent Member shall
instruct the Securities Depository to execute the transactions
described in (d)(ii) above, and the Securities Depository shall
execute such transactions; and
(iii) each Buyer's Broker-Dealer or its Agent Member shall
instruct the Securities Depository to execute the transactions
described in (d)(iii) above, and the Securities Depository shall
execute such transactions.
(f) If an Existing Holder selling shares of AMPS in an Auction fails to
deliver such shares (by authorized book-entry), a Broker-Dealer may deliver to
the Potential Holder on behalf of which it submitted a Bid that was accepted a
number of whole shares of AMPS that is less than the number of shares that
otherwise was to be purchased by such Potential Holder. In such event, the
number of shares of AMPS to be so delivered shall be determined solely by such
Broker-Dealer. Delivery of such lesser number of shares shall constitute good
delivery. Notwithstanding the foregoing terms of this paragraph (f), any
delivery or non-delivery of shares which shall
2
<PAGE>
represent any departure from the results of an Auction, as determined by the
Auction Agent, shall be of no effect unless and until the Auction Agent shall
have been notified of such delivery or non-delivery in accordance with the
provisions of the Auction Agent Agreement and the Broker-Dealer Agreements.
3
<PAGE>
EXHIBIT C
IBJ SCHRODER BANK & TRUST COMPANY
AUCTION BID FORM
Submit To: IBJ Schroder Bank & Trust Company Issue __________________________
Securities Transfer Department Series__________________________
One State Street Auction Date____________________
New York, New York 10004
Telephone (212) 858-2272
Attention: Auction Window Facsimile (212) 797-1148
The undersigned Broker-Dealer submits the following Order on behalf of the
Bidder listed below:
Name of Bidder:______________________
EXISTING HOLDER
Shares now held______________________ HOLD _________________
BID at rate of _________________
SELL _________________
POTENTIAL HOLDER
# of shares bid ________________
BID at rate of ________________
Notes:
(1) If submitting more than one Bid for one Bidder, use additional Auction
Bid Forms.
(2) If one or more Bids covering in the aggregate more than the number of
outstanding shares held by any Existing Holder are submitted, such bid
shall be considered valid in the order of priority set forth in the
Auction Procedures on the above issue.
(3) A Hold or Sell may be placed only by an Existing Holder covering a
number of shares not greater than the number of shares currently held.
(4) Potential Holders may make only Bids, each of which must specify a
rate. If more than one Bid is submitted on behalf of any Potential
Holder, each Bid submitted shall be a separate Bid with the rate
specified.
<PAGE>
(5) Bids may contain no more than three figures to the right of the decimal
point (.001 of 1%). Fractions will not be accepted.
NAME OF BROKER-DEALER __________________
Authorized Signature __________________
<PAGE>
EXHIBIT D
(To be used only for transfers made other than pursuant to an Auction.)
TRANSFER FORM
Re: MuniYield Florida Fund
Auction Market Preferred Stock ("AMPS")
We are (check one):
[ ] the Existing Holder named below;
[ ] the Broker-Dealer for such Existing Holder; or
[ ] the Agent Member for such Existing Holder.
[ ] We hereby notify you that such Existing Holder has transferred
_________ shares of AMPS to_____________________.
_____________________________________
(Name of Existing Holder)
_____________________________________
(Name of Broker-Dealer)
_____________________________________
(Name of Agent Member)
By:_____________________________________
Printed Name:
Title:
<PAGE>
EXHIBIT E
(To be used only for failures to deliver
AMPS sold pursuant to an Auction)
NOTICE OF A FAILURE TO DELIVER
Complete either I or II
I. We are a Broker-Dealer for (the "Purchaser"), which purchased
____________ shares of AMPS of MuniYield Florida Fund in the
Auction held on ____________ from the seller of such shares.
II. We are a Broker-Dealer for ______________(the "Seller"), which
sold ___________shares of AMPS of MuniYield Florida Fund in
the Auction held on __________to the Purchaser of such shares.
We hereby notify you that (check one) -
___ the Seller failed to deliver such shares to the Purchaser
___ the Purchaser failed to make payment to the Seller upon
delivery of such shares
Name:_____________________________
(Name of Broker-Dealer)
By:_____________________________
Printed Name:
Title:
Exhibit 13(e)
================================================================================
BROKER-DEALER AGREEMENT
between
IBJ SCHRODER BANK & TRUST COMPANY
and
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
Dated as of April 10, 1992
Relating to
AUCTION MARKET PREFERRED STOCK(R)
("AMPS" (R))
of
MUNIYIELD FLORIDA FUND
================================================================================
(R) Registered trademark of Merrill Lynch & Co., Inc.
<PAGE>
BROKER-DEALER AGREEMENT dated as of April 10, 1992 between IBJ Schroder
Bank & Trust Company, a New York banking corporation (the "Auction Agent") (not
in its individual capacity but solely as agent of MuniYield Florida Fund, a
Massachusetts business trust (the "Trust"), pursuant to authority granted to it
in the Auction Agent Agreement dated as of April 10, 1992, between the Trust and
the Auction Agent (the "Auction Agent Agreement")) and [Name of Broker-Dealer]
(together with its successors and assigns hereinafter referred to as "BD").
The Trust has duly authorized and issued 1,000 shares of Auction Market
Preferred Stock(R), par value $.10 per share, liquidation preference $50,000 per
share plus accumulated but unpaid dividends (whether or not earned or declared)
(the "AMPS"), pursuant to the Trust's Certificate of Designation (as defined
below).
The Trust's Certificate of Designation provides that the dividend rate on
the AMPS for each Dividend Period therefor after the Initial Dividend Period
shall be the Applicable Rate therefor, which in each case, in general, shall be
the rate per annum that a commercial bank, trust company or other financial
institution appointed by the Trust advises results from implementation of the
Auction Procedures (as defined below). The Trustees of the Trust have adopted a
resolution appointing IBJ Schroder Bank & Trust Company as Auction Agent for
purposes of the Auction Procedures, and pursuant to Section 2.5(d) of the
Auction Agent Agreement, the Trust has requested and directed the Auction Agent
to execute and deliver this Agreement.
The Auction Procedures require the participation of one or more
Broker-Dealers.
- ------------
(R) Registered trademark of Merrill Lynch & Co., Inc.
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the Auction Agent and BD agree as follows:
1. Definitions and Rules of Construction.
1.1. Terms Defined by Reference to the Certificate of Designation.
Capitalized terms not defined herein shall have the respective meanings
specified in the Certificate of Designation of the Trust.
1.2. Terms Defined Herein. As used herein and in the Settlement Procedures
(as defined below), the following terms shall have the following meanings,
unless the context otherwise requires:
(a) "Auction" shall have the meaning specified in Section 3.1 hereof.
(b) "Auction Procedures" shall mean the Auction Procedures that are set
forth in Paragraph 11 of the Certificate of Designation.
(c) "Authorized Officer" shall mean each Senior Vice President, Vice
President, Assistant Vice President, Trust Officer, Assistant Secretary and
Assistant Treasurer of the Auction Agent assigned to its Corporate Trust and
Agency Group and every other officer or employee of the Auction Agent designated
as an "Authorized Officer" for purposes of this Agreement in a communication to
BD.
(d) "BD Officer" shall mean each officer or employee of BD designated as a
"BD Officer" for purposes of this Agreement in a communication to the Auction
Agent.
(e) "Broker-Dealer Agreement" shall mean this Agreement and any
substantially similar agreement between the Auction Agent and a Broker-Dealer.
(f) "Certificate of Designation" shall mean the Certificate of Designation,
as amended, of the Trust, establishing the powers, preferences and rights of the
AMPS filed on April 7, 1992 in the office of the Department of the Secretary of
State of the Commonwealth of Massachusetts.
(g) "Purchaser's Letter" shall mean a letter addressed to the Trust, the
Auction Agent and a Broker-Dealer, substantially in the form attached hereto as
Exhibit A.
(h) "Settlement Procedures" shall mean the Settlement Procedures attached
hereto as Exhibit B.
1.3. Rules of Construction. Unless the context or use indicates another or
different meaning or intent, the following rules shall apply to the construction
of this Agreement:
(a) Words importing the singular number shall include the plural number and
vice versa.
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of this Agreement nor shall they
affect its meaning, construction or effect.
3
<PAGE>
(c) The words "hereof," "herein," "hereto," and other words of similar
import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York
City time.
2. Notification of Dividend Period and Advance Notice of Allocation of
Taxable Income.
(a) The provisions contained in paragraph 2 of the Certificate of
Designation concerning the notification of a Special Dividend Period will be
followed by the Auction Agent and BD and the provisions contained therein are
incorporated herein by reference in their entirety and shall be deemed to be a
part of this Agreement to the same extent as if such provisions were fully set
forth herein.
(b) Whenever the Trust intends to include any net capital gains or other
taxable income in any dividend on shares of AMPS, the Trust will notify the
Auction Agent of the amount to be so included at least five Business Days prior
to the Auction Date on which the Applicable Rate for such dividend is to be
established. Whenever the Auction Agent receives such notice from the Trust, it
will in turn notify BD, who, on or prior to such Auction Date, will notify its
Existing Holders and Potential Holders believed to be interested in submitting
an order in the Auction to be held on such Auction Date.
3. The Auction.
3.1. Purpose; Incorporation by Reference of Auction Procedures and
Settlement Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures will be
followed by the Auction Agent for the purpose of determining the Applicable Rate
for the AMPS, for the next Dividend Period therefor. Each periodic operation of
such procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their entirety and
shall be deemed to be a part of this Agreement to the same extent as if such
provisions were fully set forth herein.
(c) BD is delivering herewith a Purchaser's Letter executed by BD and, in
the case of Merrill Lynch, Pierce, Fenner & Smith Incorporated, a list of
persons to whom BD will initially sell the shares of AMPS, the number of shares
of AMPS BD will sell to each such person and the number of shares of AMPS BD
will hold for its own account. BD agrees to act as, and assumes the obligations
of and limitations and restrictions placed upon, a Broker-Dealer under this
Agreement. BD understands that other Persons meeting the requirements specified
in the definition of "Broker-Dealer" contained in Paragraph 1 of the Certificate
of Designation may execute a Broker-Dealer Agreement and a Purchaser's Letter
and participate as Broker-Dealers in Auctions.
(d) BD and other Broker-Dealers may participate in Auctions for their own
accounts, provided that BD or such other Broker-Dealers, as the case may be, has
executed a Purchaser's
4
<PAGE>
Letter. However, the Trust may by notice to BD and all other Broker-Dealers
prohibit all Broker-Dealers from submitting Bids in Auctions for their own
accounts, provided that Broker-Dealers may continue to submit Hold Orders and
Sell Orders.
3.2. Preparation for Each Auction.
(a) Not later than 9:30 A.M. on each Auction Date for the AMPS, the Auction
Agent shall advise BD by telephone of the Reference Rate and the Maximum
Applicable Rate in effect on such Auction Date.
(b) In the event that the Auction Date for any Auction shall be changed
after the Auction Agent has given the notice referred to in clause (vii) of
paragraph (a) of the Settlement Procedures, the Auction Agent, by such means as
the Auction Agent deems practicable, shall give notice of such change to BD not
later than the earlier of 9:15 A.M. on the new Auction Date or 9:15 A.M. on the
old Auction Date. Thereafter, BD shall promptly notify customers of BD that BD
believes are Existing Holders of shares of AMPS of such change in the Auction
Date.
(c) The Auction Agent from time to time may request BD to provide it with a
list of the respective customers BD believes are Existing Holders of shares of
AMPS. BD shall comply with any such request, and the Auction Agent shall keep
confidential any such information, including information received as to the
identity of Bidders in any Auction, and shall not disclose any such information
so provided to any Person other than the Trust; and such information shall not
be used by the Auction Agent or its officers, employees, agents or
representatives for any purpose other than such purposes as are described
herein. The Auction Agent shall transmit any list of customers BD believes are
Existing Holders of shares of AMPS and information related thereto only to its
officers, employees, agents or representatives in the Corporate Trust and Agency
Group who need to know such information for the purposes of acting in accordance
with this Agreement and shall prevent the transmission of such information to
others and shall cause its officers, employees, agents and representatives to
abide by the foregoing confidentiality restrictions; provided, however, that the
Auction Agent shall have no responsibility or liability for the actions of any
of its officers, employees, agents or representatives after they have left the
employ of the Auction Agent.
(d) The Auction Agent is not required to accept the Purchaser's Letter for
any Potential Holder for an Auction unless it is received by the Auction Agent
by 3:00 P.M. on the Business Day next preceding such Auction.
3.3. Auction Schedule; Method of Submission of Orders.
(a) The Trust and the Auction Agent shall conduct Auctions for the AMPS in
accordance with the schedule set forth below. Such schedule may be changed at
any time by the Auction-Agent with the consent of the Trust, which consent shall
not be unreasonably withheld. The Auction Agent shall give notice of any such
change to BD. Such notice shall be received prior to the first Auction Date on
which any such change shall be effective.
5
<PAGE>
Time Event
---- -----
By 9:30 A.M. Auction Agent advises the Trust and Broker-Dealers
of Reference Rate and the Maximum Applicable Rate
as set forth in Section 3.2(a) hereof.
9:30 A.M. - 1:00 P.M. Auction Agent assembles information communicated
to it by Broker-Dealers as provided in Paragraph
11(c)(i) of the Certificate of Designation.
Submission Deadline is 1:00 P.M.
Not earlier than Auction Agent makes determinations pursuant to
1:00 P.M. Paragraph 11(d)(i) of the Certificate of
Designation.
By approximately Auction Agent advises-Trust of results of Auction
3:00 P.M. as provided in Paragraph 11(d)(ii) of the
Certificate of Designation. Submitted Bids and
Submitted Sell Orders are accepted and rejected in
wholeor in part and shares of AMPS are allocated
as provided in Paragraph 11(e) of the Certificate
of Designation.
By approximately 10:00 A.M. Auction Agent gives notice of Auction results as
on the next succeeding set forth in Section 3.4(a) hereof.
Business Day
(b) BD agrees to maintain a list of Potential Holders and to contact the
Potential Holders on such list on or prior to each Auction Date for the purposes
set forth in Paragraph 11 of the Certificate of Designation.
(c) BD agrees not to sell, assign or dispose of any shares of AMPS, to any
Person who has not delivered a signed Purchaser's Letter to the Auction Agent.
(d) BD shall submit orders to the Auction Agent in writing in substantially
the form attached hereto as Exhibit C. BD shall submit separate Orders to the
Auction Agent for each Potential Holder or Existing Holder on whose behalf BD is
submitting an order and shall not net or aggregate the Orders of Potential
Holders or Existing Holders on whose behalf BD is submitting orders.
(e) BD shall deliver to the Auction Agent (i) a written notice,
substantially in the form attached hereto as Exhibit D, of transfers of shares
of AMPS, made through BD by an Existing Holder to another Person other than
pursuant to an Auction, and (ii) a written notice, substantially in the form
attached hereto as Exhibit E, of the failure of shares of AMPS to be transferred
to or by any Person that purchased or sold shares of AMPS or through BD pursuant
to an Auction. The Auction Agent is not required to accept any notice delivered
pursuant to the terms of the foregoing sentence with respect to an Auction
unless it is received by the Auction Agent by 3:00 P.M. on the Business Day next
preceding the applicable Auction Date.
3.4. Notice of Auction Results.
(a) On each Auction Date, the Auction Agent shall notify BD by telephone as
set forth in paragraph (a) of the Settlement Procedures. On the Business Day
next succeeding such
6
<PAGE>
Auction Date, the Auction Agent shall notify BD in writing of the disposition of
all Orders submitted by BD in the Auction held on such Auction Date.
(b) BD shall notify each Existing Holder or Potential Holder on whose
behalf BD has submitted an Order as set forth in paragraph (b) of the Settlement
Procedures and take such other action as is required of BD pursuant to the
Settlement Procedures.
If any Existing Holder selling shares of AMPS in an Auction fails to
deliver such shares, the BD of any Person that was to have purchased shares of
AMPS in such Auction may deliver to such Person a number of whole shares of AMPS
that is less than the number of shares that otherwise was to be purchased by
such Person. In such event, the number of shares of AMPS to be so delivered
shall be determined by such BD. Delivery of such lesser number of shares shall
constitute good delivery. Upon the occurrence of any such failure to deliver
shares, such BD shall deliver to the Auction Agent the notice required by
Section 3.3(e)(ii) hereof. Notwithstanding the foregoing terms of this Section
3.4(b), any delivery or non-delivery of shares of AMPS which represents any
departure from the results of an Auction, as determined by the Auction Agent,
shall be of no effect unless and until the Auction Agent shall have been
notified of such delivery or non-delivery in accordance with the terms of
Section 3.3(e) hereof. The Auction Agent, shall have no duty or liability with
respect to enforcement of this Section 3.4(b).
3.5. Service Charge to Be Paid to BD. On the Business Day next succeeding
each Auction Date, the Auction Agent shall pay to BD from moneys received from
the Trust an amount equal to: (a) in the case of any Auction Date immediately
preceding a 7-day Dividend Period or Short Term Dividend Period, the product of
(i) a fraction the numerator of which is the number of days in such Dividend
Period (calculated by counting the first day of such Dividend Period but
excluding the last day thereof) and the denominator of which is 360, times (ii)
1/4 of 1%, times (iii) $50,000, times (iv) the sum of (A) the aggregate number
of AMPS placed by BD in the applicable Auction that were (x) the subject of a
Submitted Bid of an Existing Holder submitted by BD and continued to be held as
a result of such submission and (y) the subject of a Submitted Bid of a
Potential Holder submitted by BD and were purchased as a result of such
submission plus (B) the aggregate number of AMPS subject to valid Hold Orders
(determined in accordance with Paragraph 11 of the Certificate of Designation)
submitted to the Auction Agent by BD plus (C) the number of AMPS deemed to be
subject to Hold Orders by Existing Holders pursuant to Paragraph 11 of the
Certificate of Designation that were acquired by such Existing Holders through
BD and (b) in the case of any Auction Date immediately preceding a Long Term
Dividend Period, that amount as mutually agreed upon by the Trust and BD, based
on the selling concession that would be applicable to an underwriting of fixed
or variable rate preferred shares with a similar final maturity or variable rate
dividend period, at the commencement of such Long Term Dividend Period.
For purposes of subclause (a)(iv)(C) of the foregoing. sentence, if any
Existing Holder who acquired shares of AMPS through BD transfers those shares to
another Person other than pursuant to an Auction, then the Broker-Dealer for the
shares so transferred shall continue to be BD, provided, however, that if the
transfer was effected by, or if the transferee is, a Broker-Dealer other than
BD, then such Broker-Dealer shall be the Broker-Dealer for such shares.
7
<PAGE>
4. The Auction Agent.
4.1. Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Trust hereunder and
owes no fiduciary duties to any other Person by reason of this Agreement.
(b) The Auction Agent undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement, and no implied covenants
or obligations shall be read into this Agreement against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction
Agent shall not be liable for any action taken, suffered, or omitted or for any
error of judgment made by it in the performance of its duties under this
Agreement. The Auction Agent shall not be liable for any error of judgment made
in good faith unless the Auction Agent shall have been negligent in ascertaining
(or failing to ascertain) the pertinent facts.
4.2. Rights of the Auction Agent.
(a) The Auction Agent may rely and shall be protected in acting or
refraining from acting upon any communication authorized by this Agreement and
upon any written instruction, notice, request, direction, consent, report,
certificate, share certificate or other instrument, paper or document believed
by it to be genuine. The Auction Agent shall not be liable for acting upon any
telephone communication authorized by this Agreement which the Auction Agent
believes in good faith to have been given by the Trust or by a Broker-Dealer.
The Auction Agent may record telephone communications with the Broker-Dealers.
(b) The Auction Agent may consult with counsel of its own choice, and the
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its
own funds or otherwise incur or become exposed to financial liability in the
performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys.
4.3. Auction Agent's Disclaimer. The Auction Agent makes no representation
as to the validity or adequacy of this Agreement or the AMPS.
5. Miscellaneous.
5.1. Termination. Any party may terminate this Agreement at any time upon
five days' prior notice to the other party; provided, however, that if BD is
Merrill Lynch, Pierce, Fenner Smith Incorporated, neither BD nor the Auction
Agent may terminate this Agreement without first obtaining prior written consent
of the Trust of such termination, which consent shall not be unreasonably
withheld.
8
<PAGE>
5.2. Participant in Securities Depository; Payment of Dividends in
Same-Day-Funds.
(a) BD is, and shall remain for the term of this Agreement, a member of, or
participant in, the Securities Depository (or an affiliate of such a member or
participant).
(b) BD represents that it (or if such BD does not act as Agent Member, one
of its affiliates) shall make all dividend payments on the AMPS available in
same-day funds on each Dividend Payment Date to customers that use such BD or
affiliate as Agent Member.
5.3. Agent Member. At the date hereof, BD is a participant of the
Securities Depository.
5.4. Communications. Except for (i) communications authorized to be made by
telephone pursuant to this Agreement or the Auction Procedures and (ii)
communications in connection with the Auctions (other than those expressly
required to be in writing), all notices, requests and other communications to
any party hereunder shall be in writing (including telecopy or similar writing)
and shall be given to such party, addressed to it, at its address or telecopy
number set forth below:
If to BD Merrill Lynch, Pierce, Fenner & Smith
Incorporated
addressed: Merrill Lynch World Headquarters
World Financial Center - North Tower
New York, New York 10281-1205
Attention: Richard N. Doyle
Telecopier No.: (212) 449-2760
Telephone No.: (212) 449-4940
If to the Auction IBJ Schroder Bank & Trust Company
Agent, addressed: One State Street
New York, New York 10004
Attention: Auction Window Subcellar 1
Telecopier No.: (212) 797-1148
Telephone No.: (212) 858-2272
or such other address or telecopy number as such party may hereafter specify for
such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of BD by a BD Officer and on behalf of
the Auction Agent by an Authorized Officer. BD may record telephone
communications with the Auction Agent.
5.5. Entire Agreement. This Agreement contains the entire agreement between
the parties relating to the subject matter hereof, and there are no other
representations, endorsements, promises, agreements or understandings, oral,
written or inferred, between the parties relating to the subject matter hereof.
9
<PAGE>
5.6. Benefits. Nothing in this Agreement, express or implied, shall give to
any person, other than the Trust, the Auction Agent and BD and their respective
successors and assigns, any benefit of any legal or equitable right, remedy or
claim under this Agreement.
5.7. Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be modified,
amended, rescinded, cancelled or waived, in whole or in part, except by a
written instrument signed by a duly authorized representative of the party to be
charged.
(b) Failure of either party to this Agreement to exercise any right or
remedy hereunder in the event of a breach of this Agreement by the other party
shall not constitute a waiver of any such right or remedy with respect to any
subsequent breach.
5.8. Successors and Assigns. This Agreement shall be binding upon, inure to
the benefit of, and be enforceable by, the respective successors and permitted
assigns of each of BD and the Auction Agent. This Agreement may not be assigned
by either party hereto absent the prior written consent of the other party;
provided, however, that this Agreement may be assigned by the Auction Agent to a
successor Auction Agent selected by the Trust without the consent of BD.
5.9. Severability. If any clause, provision or section of this Agreement
shall be ruled invalid or unenforceable by any court of competent jurisdiction,
the invalidity or unenforceability of such clause, provision or section shall
not affect any remaining clause, provision or section hereof.
5.10. Execution in Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed in said State.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
IBJ SCHRODER BANK & TRUST COMPANY
By:
---------------------------------
Title: Assistant Vice President
MERRILL LYNCH, PIERCE, FENNER SMITH|
INCORPORATED
By: /s/ Richard N. Doyle
--------------------------------
Title:
11
<PAGE>
EXHIBIT A
TO BE SUBMIITTED TO YOUR BROKER-DEALER WHO WILL THEN
DELIVER COPIES ON YOUR BEHALF TO THE RESPECTIVE TRUST
CO.NIPANY OR REMARKETING AGENT
MASTER PURCHASER'S LETTER
Relating to
Securities Involving Rate Settings Through Auctions or Rernarketings
THE COMPANY
A REMARKETING AGENT
THE TRUST COMPANY
A BROKER-DEALER
AN AGENT MEMBER
OTHER PERSONS
Dear Sirs:
1. This letter is designed to apply to publicly or privately offered debt
or equity securities ("Securities") of any issuer ("Company") which are
described in any final prospectus or other offering materials relating to such
Securities as the same may be amended or supplemented (collectively, with
respect to the particular Securities concerned, the "Prospectus") and which
involve periodic rate settings through auctions ("Auctions") or remarketing
procedures ("Remarketings"). This letter shall be for the benefit of any Company
and of any trust company, auction agent, paying agent (collectively, "trust
company"), remarketing agent, broker-dealer, agent member, securities depository
or other interested person in connection with any Securities and related
Auctions or Remarketings (it being understood that such persons may be required
to execute specified agreements and nothing herein shall alter such
requirements). The terminology used herein is intended to be general in its
application and not to exclude any Securities in respect of which (in the
Prospectus or otherwise) alternative terminology is used.
2. We may from time to time offer to purchase, purchase, offer to sell
and/or sell Securities of any Company as described in the Prospectus relating
thereto. We agree that this letter shall apply to all such purchases, sales and
offers and to Securities owned by us. We understand that the dividend/interest
rate on Securities may be based from time to time on the results of Auctions or
Remarketings as set forth in the Prospectus.
3. We agree that any bid or sell order placed by us in an Auction or a
Remarketing shall constitute an irrevocable offer (except as otherwise described
in the Prospectus) by us to purchase or sell the Securities subject to such bid
or sell order, or such lesser amount of Securities as we shall be required to
sell or purchase as a result of such Auction or Remarketing, at the applicable
price, all as set forth in the Prospectus, and that if we fail to place a bid or
sell order with respect to Securities owned by us with a broker-dealer on any
Auction or remarketing date, or a broker-dealer to which we communicate a bid or
sell order fails to submit such bid or sell order to the trust company or
remarketing agent concerned, we shall be deemed to have placed a hold order with
respect to such Securities as described in the Prospectus. We authorize
<PAGE>
any broker-dealer that submits a bid or sell order as our agent in Auctions or
Remarketings to execute contracts for the sale of Securities covered by such bid
or sell order. We recognize that the payment by such broker-dealer for
Securities purchased on our behalf shall not relieve us of any liability to such
broker-dealer for payment for such Securities.
4. We understand that in a Remarketing, the dividend or interest rate or
rates on the Securities and the allocation of Securities tendered for sale
between dividend or interest periods of different lengths will be based from
time to time on the determinations of one or more remarketing agents, and we
agree to be conclusively bound by such determinations. We further agree to the
payment of different dividend or interest rates to different holders if
Securities depending on the length of the dividend or interest period elected by
such holders. We agree that any notice given by us to a remarketing agent (or to
a broker-dealer for transmission to a remarketing agent) of our desire to tender
Securities in a Remarketing shall constitute an irrevocable (except to the
limited extent set forth in the Prospectus) offer by us to sell the Securities
specified in such notice, or such lesser number of Securities as we shall be
required to sell as a result of such Remarketing, in accordance with the terms
set forth in the Prospectus, and we authorize the remarketing agent to sell,
transfer or otherwise dispose of such Securities as set forth in the Prospectus.
5. We agree that, during the applicable period as described in the
Prospectus, dispositions of Securities can be made only in the denominations set
forth in the Prospectus and we will sell, transfer or otherwise dispose of any
Securities held by us from time to time only pursuant to a bid or sell order
placed in an Auction, in a Remarketing, to or, through a broker-dealer or, when
permitted in the Prospectus, to a person that has signed and delivered to the
applicable trust company or a remarketing agent a letter substantially in the
form of this letter (or other applicable purchaser's letter), provided that in
the case of all transfers other than pursuant to Auctions or Remarketings we or
our broker-dealer or our agent member shall advise such trust company or a
remarketing agent of such transfer. We understand that a restrictive legend will
be placed on certificates representing the Securities and stop-transfer
instructions will be issued to the transfer agent and/or registrar, all as set
forth in the Prospectus.
6. We agree that. during the applicable period as described in the
Prospectus, ownership of Securities shall be represented by one or more global
certificates registered in the name of the applicable securities depository or
its nominee, that we will not be entitled to receive any certificate
representing the Securities and that our ownership of any Securities will be
maintained in book-entry form by the securities depository for the account of
our agent member, which in turn will maintain records of our beneficial
ownership. We authorize and instruct our agent member to disclose to the
applicable trust company or remarketing agent such information concerning our
beneficial ownership of Securities as such trust company or remarketing agent
shall request.
7. We acknowledge that partial deliveries of Securities purchased in
Auctions or Remarketings may be made to us and such deliveries shall constitute
good delivery as set forth in the Prospectus.
8. This letter is not a commitment by us to purchase any Securities.
2
<PAGE>
9. This letter supersedes any prior-dated version of this master
purchaser's letter, and supplements any prior or post-dated purchaser's letter
specific to particular Securities, and this letter may only be revoked by a
signed writing delivered to the original recipients hereof.
10. The descriptions of Auction or Remarketing procedures set forth in each
applicable Prospectus are incorporated by reference herein and in case of any
conflict between this letter, any purchaser's letter specific to particular
Securities and any such description, such description shall control.
11. Any xerographic or other copy of this letter shall be deemed of equal
effect as a signed original.
12. Our agent member of The Depository Trust Company currently is .
13. Our personnel authorized to place orders with broker-dealers for the
purposes set forth in the Prospectus in Auctions or Remarketings currently
is/are , telephone number ( ) .
14. Our taxpayer identification number is .
15. In the case of each offer to purchase, purchase, offer to sell or sale
by us of Securities not registered under the Securities Act of 1933, as amended
(the "Act"), we represent and agree as follows:
A. We understand and expressly acknowledge that the Securities have
not been and will not be registered under the Act and, accordingly, that
the Securities may not be reoffered, resold or otherwise pledged,
hypothecated or transferred unless an applicable exemption from the
registration requirements of the Act is available.
B. We hereby confirm that any purchase of Securities made by us will
be for our own account, or for the account of one or more parties for which
we are acting as trustee or agent with complete investment discretion and
with authority to bind such parties, and not with a view to any public
resale or distribution thereof. We and each other party for which we are
acting which will acquire Securities will be "accredited investors" within
the meaning of Regulation D under the Act with respect to the Securities to
be purchased by us or such party, as the case may be, will have previously
invested in similar types of instruments and will be able and prepared to
bear the economic risk of investing in and holding such Securities.
C. We acknowledge that prior to purchasing any Securities we shall
have received a Prospectus (or private placement memorandum) with respect
thereto and acknowledge that we will have had access to such financial and
other information, and have been afforded the opportunity to ask such
questions of representatives of the Company and receive answers thereto, as
we deem necessary in connection with our decision to purchase Securities.
D. We recognize that the Company and broker-dealers will rely upon the
truth and accuracy of the foregoing investment representations and
agreements, and we agree
3
<PAGE>
that each of our purchases of Securities now or in the future shall be deemed to
constitute our concurrence in all of the foregoing which shall be binding on us
and each party for which we are acting as set forth in Subparagraph B above.
________________________________________
(Name of Purchaser)
By:_____________________________________
Printed Name:
Title:
Dated:_________________________
Mailing Address of Purchaser
_______________________________
_______________________________
_______________________________
4
<PAGE>
EXHIBIT B
SETTLEMENT PROCEDURES
The following summary of Settlement Procedures sets forth the procedures
expected to be followed in connection with the settlement of each Auction and
will be incorporated by reference in the Auction Agent Agreement and each
Broker-Dealer Agreement. Nothing contained in this Appendix C constitutes a
representation by the Fund that in each Auction each party referred to herein
will actually perform the procedures described herein to be performed by such
party. Capitalized terms used herein shall have the respective meanings
specified in the glossary of this Prospectus or Appendix D hereto, as the case
may be.
(a) On each Auction Date, the Auction Agent shall notify by telephone or
through the Auction Agent's Processing System the Broker-Dealers that
participated in the Auction held on such Auction Date and submitted an Order on
behalf of any Existing Holder or Potential Holder of.
(i) the Applicable Rate fixed for the next succeeding Dividend Period;
(ii) whether Sufficient Clearing Bids existed for the determination of
the Applicable Rate;
(iii) if such Broker-Dealer (a "Seller's Broker-Dealer") submitted a
Bid or a Sell Order on behalf of an Existing Holder, the number of shares,
if any, of AMPS to be sold by such Existing Holder;
(iv) if such Broker-Dealer (a "Buyer's Broker-Dealer") submitted a Bid
on behalf of a Potential Holder, the number of shares, if any, of AMPS to
be purchased by such Potential Holder;
(v) if the aggregate number of shares of AMPS to be sold by all
Existing Holders on whose behalf such Broker-Dealer submitted a Bid or a
Sell Order exceeds the aggregate number of shares of AMPS to be purchased
by all potential Holders on whose behalf such Broker-Dealer submitted a
Bid, the name or names of one or more Buyer's Broker-Dealers (and the name
of the Agent Member, if any, of each such Buyer's Broker-Dealer) acting for
one or more purchasers of such excess number of shares of AMPS and the
number of such shares to be purchased from one or more Existing Holders on
whose behalf such Broker-Dealer acted by one or more Potential Holders on
whose behalf each of such Buyer's Broker-Dealers acted;
(vi) if the aggregate number of shares of AMPS to be purchased by all
Potential Holders on whose behalf such Broker-Dealer submitted a Bid
exceeds the aggregate number of shares of AMPS to be sold by all Existing
Holders on whose behalf such Broker-Dealer submitted a Bid or a Sell Order,
the name or names of one or more Seller's Broker-Dealers (and the name of
the Agent Member, if any, of each such Seller's Broker-Dealer) acting for
one or more sellers of such excess number of shares of AMPS and the number
of such shares to be sold to one or more Potential Holders on whose
<PAGE>
behalf such Broker-Dealer acted by one or more Existing Holders on whose
behalf each of such Seller's Broker-Dealers acted; and
(vii) the Auction Date of the next succeeding Auction with respect to
the AMPS.
(b) On each Auction Date, each Broker-Dealer that submitted an Order on
behalf of any Existing Holder or Potential Holder shall:
(i) in the case of a Broker-Dealer that is a Buyer's Broker-Dealer,
instruct each Potential Holder on whose behalf such Broker-Dealer submitted
a Bid that was accepted, in whole or in part to instruct such Potential
Holder's Agent Member to pay to such Broker-Dealer (or its Agent Member)
through the Securities Depository the amount necessary to purchase the
number of shares of AMPS to be purchased pursuant to such Bid against
receipt of such shares and advise such Potential Holder of the Applicable
Rate for the next succeeding Dividend Period;
(ii) in the case of a Broker-Dealer that is a Seller's Broker-Dealer,
instruct each Existing Holder on whose behalf such Broker-Dealer submitted
a Sell Order that was accepted, in whole or in part, or a Bid that was
accepted, in whole or in part, to instruct such Existing Holder's Agent
Member to deliver to such Broker-Dealer (or its Agent Member) through the
Securities Depository the number of shares of AMPS to be sold pursuant to
such Order against payment therefor and advise any such Existing Holder
that will continue to hold shares of AMPS of the Applicable Rate for the
next succeeding Dividend Period;
(iii) advise each Existing Holder on whose behalf such Broker-Dealer
submitted a Hold Order of the Applicable Rate for the next succeeding
Dividend Period;
(iv) advise each Existing Holder on whose behalf such Broker-Dealer
submitted an Order of the Auction Date for the next succeeding Auction; and
(v) advise each Potential Holder on whose behalf such Broker-Dealer
submitted a Bid that was accepted, in whole or in part, of the Auction Date
for the next succeeding Action.
(c) On the basis of the information provided to it pursuant to (a) above,
each Broker-Dealer that submitted a Bid or a Sell Order on behalf of a Potential
Holder or an Existing Holder shall, in such manner and at such time or times as
in its sole discretion it may determine, allocate any funds received by it
pursuant to (b)(i) above and any shares of AMPS received by it pursuant to
(b)(ii) above among the Potential Holders, if any, on whose behalf such
Broker-Dealer submitted Bids, the Existing Holders, if any, on whose behalf such
Broker-Dealer submitted Bids that were accepted or Sell Orders, and any
Broker-Dealer or Broker-Dealers identified to it by the Auction Agent pursuant
to (a)(v) or (a)(vi) above.
(d) On each Auction Date:
2
<PAGE>
(i) each Potential Holder and Existing Holder shall instruct its Agent
Member as provided in (b)(i) or (ii) above, as the case may be;
(ii) each Seller's Broker-Dealer which is not an Agent Member of the
Securities Depository shall instruct its Agent Member to (A) pay through
the Securities Depository to the Agent Member of the Existing Holder
delivering shares to such Broker-Dealer pursuant to (b)(ii) above the
amount necessary to purchase such shares against receipt of such shares,
and (B) deliver such shares through the Securities Depository to a Buyer's
Broker-Dealer (or its Agent Member) identified to such Seller's
Broker-Dealer pursuant to (a)(v) above against payment therefor; and
(iii) each Buyer's Broker-Dealer which is not an Agent Member of the
Securities Depository shall instruct its Agent Member to (A) pay through
the Securities Depository to a Seller's Broker-Dealer (or its Agent Member)
identified pursuant to (a)(vi) above the amount necessary to purchase the
shares to be purchased pursuant to (b)(i) above against receipt of such
shares, and (B) deliver such shares through the Securities Depository to
the Agent Member of the purchaser thereof against payment therefor.
(e) On the day after the Auction Date:
(i) each Bidder's Agent Member referred to in (d)(i) above shall
instruct the Securities Depository to execute the transactions described
under (b)(i) or (ii) above, and the Securities Depository shall execute
such transactions;
(ii) each Seller's Broker-Dealer or its Agent Member shall instruct
the Securities Depository to execute the transactions described in (d)(ii)
above, and the Securities Depository shall execute such transactions; and
(iii) each Buyer's Broker-Dealer or its Agent Member shall instruct
the Securities Depository to execute the transactions described in (d)(iii)
above, and the Securities Depository shall execute such transactions.
(f) If an Existing Holder selling shares of AMPS in an Auction fails to
deliver such shares (by authorized book-entry), a Broker-Dealer may deliver to
the Potential Holder on behalf of which it submitted a Bid that was accepted a
number of whole shares of AMPS that is less than the number of shares that
otherwise was to be purchased by such Potential Holder. In such event, the
number of shares of AMPS to be so delivered shall be determined solely by such
Broker-Dealer. Delivery of such lesser number of shares shall constitute good
delivery. Notwithstanding the foregoing terms of this paragraph (f), any
delivery or non-delivery of shares which shall represent any departure from the
results of an Auction, as determined by the Auction Agent, shall be of no effect
unless and until the Auction Agent shall have been notified of such delivery or
non-delivery in accordance with the provisions of the Auction Agent Agreement
and the Broker-Dealer Agreements.
3
<PAGE>
EXHIBIT C
IBJ SCHRODER BANK & TRUST COMPANY
AUCTION BID FORM
Submit To: IBJ Schroder Bank & Trust Company Issue_____________________
Securities Transfer Department Series____________________
One State Street Auction Date______________
New York, New York 10004 Telephone: (212) 858-2272
Facsimile: (212) 797-1148
Attention: Auction Window
The undersigned Broker-Dealer submits the following Order on behalf of the
Bidder listed below:
Name of Bidder:________________________
EXISTING HOLDER
Shares now held__________________ HOLD_____________________
BID at rate of___________
SELL_____________________
POTENTIAL HOLDER
# of shares bid__________
BID at rate of___________
Notes:
(1) If submitting more than one Bid for one Bidder, use additional Auction Bid
Forms.
(2) If one or more Bids covering in the aggregate more than the number of
outstanding shares held by any Existing Holder are submitted, such bid
shall be considered valid in the order of priority set forth in the Auction
Procedures on the above issue.
(3) A Hold or Sell may be placed only by an Existing Holder covering a number
of shares not greater than the number of shares currently held.
(4) Potential Holders may make only Bids, each of which must specify a rate. If
more than one Bid is submitted on behalf of any Potential Holder, each Bid
submitted shall be a separate Bid with the rate specified.
<PAGE>
(5) Bids may contain no more than three figures to the right of the decimal
point (.001 of 1%). Fractions will not be accepted.
NAME OF BROKER-DEALER_____________________________________
Authorized Signature______________________________________
2
<PAGE>
EXHIBIT D
(To be used only for transfers made other than pursuant to an Auction.)
TRANSFER FORM
Re: MuniYield Florida Fund
Auction Market Preferred Stock ("AMPS")
We are (check one):
[ ] the Existing Holder named below;
[ ] the Broker-Dealer for such Existing Holder; or
[ ] the Agent Member for such Existing Holder.
We hereby notify you that such Existing Holder has transferred
___________________ shares of AMPS to _______________.
_______________________________
(Name of Existing Holder)
______________________________
(Name of Broker-Dealer)
_______________________________
(Name of Agent Member)
By:____________________________
Printed Name:
Title:
<PAGE>
EXHIBIT E
(To be used only for failures to deliver
AMPS sold pursuant to an Auction)
NOTICE OF A FAILURE TO DELIVER
Complete either I or II
I. We are a Broker-Dealer for ________________________(the "Purchaser"), which
purchased ______ shares of AMPS of MuniYield Florida Fund in the Auction
held on ________________ from the seller of such shares.
II. We are a Broker-Dealer for ________________________(the "Seller"), which
sold ______ shares of AMPS of MuniYield Florida Fund in the Auction
held on ________________ to the Purchaser of such shares.
We hereby notify you that (check one) --
_________ the Seller failed to deliver such shares to the Purchaser
_________ the Purchaser failed to make payment to the Seller upon delivery
of such shares
Name:_________________________
(Name of Broker-Dealer)
By:___________________________
Printed Name:
Title:
Exhibit 13(f)
LETTER OF REPRESENTATIONS
MUNIYIELD FLORIDA FUND
and
IBJ SCHRODER BANK & TRUST COMPANY
April 10, 1992
The Depository Trust Company
55 Water Street
New York, New York 10041
Attention: General Counsel's Office
Re: MuniYield Florida Fund Issuance
of Auction Market Preferred Stock[ "AMPS"](R)
Ladies and Gentlemen:
The purpose of this letter is to set forth certain matters relating to
the issuance and sale by MuniYield Florida Fund, a Massachusetts business trust
(the "Issuer"), of 1,100 shares of Auction Market Preferred Stock. IBJ Schroder
Bank & Trust Company in its capacity as Auction Agent (as defined in the
Prospectus), will act as the transfer agent, registrar, dividend disbursing
agent and redemption agent with respect to the shares of AMPS. The shares of
AMPS are being distributed through The Depository Trust Company ("DTC") by
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (the
"Underwriter").
To induce DTC to accept the shares of AMPS as eligible for deposit at
DTC and to act in accordance with its rules (the "DTC Rules") with respect to
the shares of AMPS, the Issuer and the Auction Agent make the following
representations to DTC:
- -------------------
(R) Registered Trademark of Merrill Lynch & Co., Inc.
<PAGE>
1. Prior to the issuance of the shares of AMPS on April 10, 1992 the Issuer
shall cause the Underwriter to deposit with DTC one share certificate
representing the AMPS, registered in the name of DTC's nominee, CEDE &
Co., which will respectively represent the total number of shares of AMPS,
and said certificate shall remain in DTC's custody.
2. The Prospectus describes provisions for the solicitation of consents from,
and voting by, holders of the shares of AMPS under certain circumstances.
The Issuer shall establish a record date or record dates for such purposes
and give DTC notice of such record date or dates not less than 15 calendar
days in advance of such record date or dates to the extent practicable.
3. In the event of a full or partial redemption of outstanding shares of AMPS
the Issuer or the Auction Agent shall give DTC notice of such event not
less than 30 days prior to the redemption date.
4. In the event of a partial redemption of shares of AMPS outstanding, the
Issuer or the Auction Agent shall send DTC a notice specifying: the number
of shares of AMPS to be redeemed and the date such notice is to be mailed
to shareholders of the Issuer or published by the Issuer ("Publication
Date"). Such notice shall be sent to DTC by a secure means (e.g., legible
facsimile transmission, registered or certified mail, overnight express
delivery or hand delivery) in a timely manner designed to assure that such
notice is in DTC's possession no later than the close of business on the
Business Day (as defined in the Prospectus) before the Publication Date.
(The Issuer or the Auction Agent sending such notice shall have a method
to verify subsequently the use of such means and timeliness of the
notice.) In the event of a partial redemption, the Publication Date shall
not be less than 30 days prior to the redemption date.
5. The Prospectus indicates that the dividend rate for the shares of AMPS may
vary from time to time. Absent other existing arrangements with DTC, the
Issuer or the Auction Agent shall give DTC notice of each such change in
the dividend rate on the same day the new rate is determined by telephone
to the Supervisor of the Dividend Announcement Section at (212) 709-1270
and such notice shall be followed by prompt written confirmation sent by a
secure means as described in paragraph 4 above to:
Manager, Announcements, Dividend Department
The Depository Trust Company
7 Hanover Square, 22nd Floor
New York, New York 10004
6. The Prospectus indicates that each purchaser of shares of AMPS will be
required to sign a Purchaser's Letter (as defined in the Prospectus) that
contains provisions restricting transfer of the shares of AMPS purchased.
The Issuer and the Auction Agent acknowledge that as long as CEDE & CO. is
the sole record owner of the shares of AMPS, CEDE & CO. shall be entitled
to all voting rights applicable to
<PAGE>
the shares of AMPS and to receive the full amount of all dividends,
Additional Dividends, liquidation proceeds and redemption proceeds payable
with respect to the shares of AMPS. The Issuer and the Auction Agent
acknowledge that DTC shall treat any DTC Participant (defined in the DTC
Rules to mean, generally, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations for whom
DTC, directly or indirectly, holds securities) having shares of AMPS
credited to its DTC account as entitled to the full benefits of ownership
of such shares even if the credits of shares of AMPS to the DTC account of
such DTC Participant result from transfers or failures to transfer in
violation of the provisions of the Purchaser's Letter. Without limiting
the generality of the preceding sentence, the Issuer and the Auction Agent
acknowledge that DTC shall treat any DTC Participant having shares of AMPS
credited to its account as entitled to receive dividends, distributions
and voting rights, if any, in respect of such shares and, subject to
Section 13 hereof to receive certificates evidencing such shares of AMPS
if such certificates are to be issued in accordance with the Issuer's
Charter (as defined in the Prospectus). (The treatment by DTC of the
effects of the crediting by it of shares of AMPS to the accounts of DTC
Participants described in the preceding two sentences shall not affect the
rights of the Issuer, participants in Auctions (as defined in the
Prospectus) relating to the shares of AMPS, purchasers, sellers or holders
of shares of AMPS against any DTC Participant.) DTC shall have no
responsibility to ascertain that any transfer of shares of AMPS is made in
accordance with the provisions of the Purchaser's Letter.
7. The Prospectus indicates that in the event the Issuer retroactively
allocates any net capital gains or other taxable income to shares of AMPS
without having given advance notice thereof to the Auction Agent as
described in the Prospectus 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 shares of AMPS or the liquidation of the Issuer (the
amount of such allocation referred to herein as a "Retroactive Taxable
Allocation"), the Issuer will, within 90 days (and generally within 60
days) after the end of the Issuer's fiscal year for which a Retroactive
Taxable Allocation is made, provide notice thereof to the Auction Agent
and to each holder of shares of AMPS (initially CEDE & CO. as nominee of
DTC) during such fiscal year at such holder's address as the same appears
or last appeared on the stock books of the Issuer. The Issuer 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 AMPS), out of
funds legally available therefor, an amount equal to the aggregate
Additional Dividend (as defined in the Prospectus) with respect to all
Retroactive Taxable Allocations made to such holders during the fiscal
year in question.
8. The Issuer will notify DTC, at least 10 business days prior to the payment
date for any Additional Dividends, of (i) the record date for holders of
shares of each AMPS entitled to receive Additional Dividends, (ii) the
amount of Additional Dividends payable on a per share basis to such
holders and (iii) the CUSIP number set forth on the share certificate
representing the AMPS.
<PAGE>
9. The Prospectus indicates that in the event a Response (as defined in the
Prospectus) indicates that it is advisable that the Issuer give a Notice
of Special Dividend Period (as defined in the Prospectus) for the AMPS,
the Issuer may by no later than the second day prior to such Auction Date
give a Notice of Special Dividend Period (as defined in the Prospectus) to
the Auction Agent, DTC 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
response. The Issuer is required to give telephonic and written notice (a
"Notice of Revocation") to the Auction Agent, each Broker-Dealer, and DTC
on or prior to the Business Day prior to the relevant Auction Date under
the circumstances specified in the Prospectus.
10. All notices and payment advices sent to DTC shall contain the CUSIP number
set forth on the share certificate representing the AMPS.
11. Notices to DTC by facsimile transmission shall be sent to (212) 709-1093
or (212) 709-1094. The Issuer or Auction Agent shall call (212) 709-6884
to confirm such receipt of notice. Except as provided in paragraph 5
hereof, notices to DTC by any other means shall be sent to:
Manager, Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004
12. Dividend payments shall be received by CEDE & CO., as nominee of DTC, or
its registered assigns in same-day funds on each payment date or the
equivalent as agreed between the Issuer or the Auction Agent and DTC ("Fed
Funds"). Such payment shall be made payable to the order of "CEDE & CO."
Absent any other agreement between the Issuer or the Auction Agent and DTC
such payments shall be addressed as follows:
Manager, Cash Receipts, Dividends
The Depository Trust Company
7 Hanover Square, 24th Floor
New York, New York 10004
13. Redemption payments shall be made in Fed-Funds in the manner set forth in
the SDFS Paying Agent Operating Procedures, a copy of which has previously
been provided to the Auction Agent.
14. DTC may direct the Issuer or the Auction Agent to use any other telephone
number for facsimile transmission, address, or department of DTC as the
number, address or department to which payments of dividends, redemption
proceeds or notices may be sent.
<PAGE>
15. In the event of a redemption necessitating a reduction in the number of
shares of AMPS outstanding, DTC in its discretion may (a) request the
Issuer to execute and deliver a new share certificate representing the
remaining outstanding shares of AMPS or (b) may make appropriate notations
on the certificate indicating the date and amounts of such reductions. In
the case of redemption of all of the shares, DTC will surrender the
certificate to the Auction Agent for cancellation if required.
16. In the event the Issuer determines that beneficial owners of the shares of
AMPS of any series (generally, the Existing Holders as defined in the
Issuer's Charter) shall be able to obtain certificates representing such
shares of AMPS (as provided for in the issuer's Charter), the Issuer or
the Auction Agent shall notify DTC of the availability of share
certificates representing such shares of AMPS, as the case may be, and
shall issue, transfer and exchange such certificates as required by DTC
and others in appropriate amounts.
17. DTC may determine to discontinue providing its services as securities
depository with respect to the shares of AMPS at any time by giving
reasonable notice to the Issuer or the Auction Agent (at which time DTC
will confirm with the Auction Agent the aggregate amount of the respective
shares of AMPS outstanding). Under such circumstances the Issuer will
cooperate with DTC in taking appropriate action to provide for a
substitute or successor securities depository or to make available one or
more separate certificates evidencing the shares of AMPS, to any DTC
Participant having such shares credited to its DTC account.
18. The Issuer hereby authorizes DTC to provide to the Auction Agent position
listings of its DTC Participants with respect to the shares of AMPS from
time to time at the request of the Auction Agent and at DTC's customary
fee, and also authorizes DTC, in the event of a partial redemption of
shares of AMPS, to provide, and DTC hereby agrees to provide upon request,
the Auction Agent, upon request, with the names of those DTC Participants
whose positions in such shares of AMPS have been selected for redemption
by DTC. DTC agrees to use its best efforts to notify the Auction Agent of
those DTC Participants whose positions in the shares of AMPS have been
selected for redemption by DTC. The Issuer authorizes the Auction Agent to
provide DTC with such signatures, exemplars of signatures and
authorizations to act as may be deemed necessary by DTC 'to permit DTC to
discharge its obligations to its DTC Participants and appropriate
regulatory authorities.
This authorization, unless revoked by the Issuer, shall continue with
respect to the shares of AMPS while any such shares are on deposit at DTC,
until and unless the Auction Agent shall no longer be acting. In such
event, the Issuer shall provide DTC with similar evidence of the
authorization of any successor thereto so to act.
19. Nothing herein shall be deemed to require the Auction Agent to advance
funds on behalf of the Issuer.
<PAGE>
20. The Declaration of Trust establishing MuniYield Florida Fund, dated
January 21, 1992, a copy of which, together with all amendments thereto
(the "Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name "MuniYield Florida
Fund" refers to the Trustees under the Declaration collectively as
Trustees, but not as individuals personally; and no Trustee, shareholder,
officer, employee or agent of the Issuer 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 Issuer, but the "Trust Property" only shall be liable.
<PAGE>
Very truly yours,
MUNIYIELD FLORIDA FUND
as Issuer
By: /s/ Kenneth A. Jacob
---------------------------------
Title: Vice President
IBJ SCHRODER BANK & TRUST COMPANY
as Auction Agent
By:
---------------------------------
Title: Assistant Vice President
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By:
------------------------------
Title
cc: Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Exhibit 14(a)
INDEPENDENT AUDITORS' CONSENT
MuniYield Florida Fund:
We consent to the use in this Pre-Effective Amendment No. 1 to Registration
Statement No. 333-88355 of our report dated December 4, 1998 appearing in
the Proxy Statement and Prospectus, which is a part of such Registration
Statement, and to the reference to us under the captions "Comparison of the
Funds -- Financial Highlights" and "Experts" also appearing in such Proxy
Statement and Prospectus.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Princeton, New Jersey
November 9, 1999
Exhibit 14(b)
INDEPENDENT AUDITORS' CONSENT
MuniVest Florida Fund:
We consent to the use in this Pre-Effective Amendment No. 1 to Registration
Statement No. 333-88355 of our report dated December 4, 1998 appearing in
the Proxy Statement and Prospectus, which is a part of such Registration
Statement, and to the reference to us under the captions "Comparison of the
Funds -- Financial Highlights" and "Experts" also appearing in such Proxy
Statement and Prospectus.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Princeton, New Jersey
November 9, 1999
