As filed with the Securities and Exchange Commission on January , 2000
Securities Act Registration No. 333-
Investment Company Registration No. 811-7092
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. | |
Post-Effective Amendment No. | |
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 | |
AMENDMENT NO. 4 |X|
------------------
THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008
TERM TRUST
(Exact Name of Registrant as Specified In its Declaration of Trust)
800 Scudders Mill Road
Plainsboro, New Jersey 08536
(Address of Principal Executive Offices)
(800) 688-0928
(Registrant's Telephone Number, including Area Code)
Ralph L. Schlosstein, President
The BlackRock Florida Insured Municipal 2008 Term Trust
345 Park Avenue
New York, New York 10154
(Name and Address of Agent for Service)
------------------
Copies to:
<TABLE>
<CAPTION>
<S> <C> <C>
Richard T. Prins, Esq. Thomas A. DeCapo Cynthia G. Cobden, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP Skadden, Arps, Slate, Meagher & Flom LLP Simpson Thacher & Bartlett
Four Times Square One Beacon Street 425 Lexington Avenue
New York, New York 10036 Boston, MA 02108-3194 New York, New York 10017
</TABLE>
------------------
<TABLE>
<CAPTION>
Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this
Registration Statement.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
==============================================================================================================
PROPOSED PROPOSED
TITLE OF SECURITIES AMOUNT BEING MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
BEING REGISTERED REGISTERED PRICE PER UNIT OFFERING PRICE REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------
Auction Rate Municipal Preferred Shares
of Beneficial Interest, Series R7
(Liquidation preference $25,000 per
<S> <C> <C> <C> <C>
share).................................. 726 shares $25,000 $18,150,000 $4792
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM TRUST
CROSS REFERENCE SHEET
Part A-Prospectus
ITEMS IN PART A OF FORM N-2
SPECIFIED IN PROSPECTUS LOCATION IN PROSPECTUS
----------------------- ----------------------
<S> <C>
Item 1. Outside Front Cover.....................................Cover page
Item 2. Inside Front and Outside Back Cover Page................Inapplicable
Item 3. Fee Table and Synopsis..................................Inapplicable
Item 4. Financial Highlights....................................Financial Highlights
Item 5. Plan of Distribution....................................Cover Page; Prospectus Summary; the Auction;
Underwriting
Item 6. Selling Shareholders....................................Inapplicable
Item 7. Use of Proceeds.........................................Use of Proceeds; Investment Objective and Policies
Item 8. General Description of the Registrant...................Cover Page; Prospectus Summary The Trust;
Investment Objective and Policies
Item 9. Management..............................................Prospectus Summary; Management of the Trust
Item 10. Capital Stock, Long-Term Debt, and Other Securities.....Capitalization; Investment Objective and Policies;
Description of New Preferred Shares; the Auction;
Tax Matters
Item 11. Defaults and Arrears on Senior Securities.............. Inapplicable
Item 12. Legal Proceedings.......................................Inapplicable
Item 13. Table of Contents of the Statement of Additional Table of Contents of the Statement of Additional
Information.............................................Information
Part B-Statement of Additional Information
ITEMS IN PART B OF FORM N-2 LOCATION IN STATEMENT OF
ADDITIONAL INFORMATION
----------------------
Item 14. Cover Page..............................................Cover Page
Item 15. Table of Contents.......................................Back Cover Page
Item 16. General Information and History.........................Inapplicable
Item 17. Investment Objective and Policies.......................Investment Objective and Policies; Investment
Policies and Techniques
Item 18. Management..............................................Management of the Trust
Item 19. Control Persons and Principal Holders of Securities.....Management of the Trust
Item 20. Investment Advisory and Other Services..................Management of the Trust
Item 21. Brokerage Allocation and Other Practices................Portfolio Transactions
Item 22. Tax Status..............................................Tax Matters
Item 23. Financial Statements....................................Financial Statements (incorporated by reference)
Part C-Other Information
Items 24-33 have been answered in Part C of this Registration Statement
</TABLE>
[FLAG]
The information in this Prospectus is not complete and may be changed. We
may not sell these securities until the Registration Statement filed with
the Securities and Exchange Commission is effective. This Prospectus is not
an offer to sell these securities and is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED __________ __, 2000
PROSPECTUS
$18,150,000
THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM TRUST
AUCTION RATE MUNICIPAL PREFERRED SHARES OF BENEFICIAL INTEREST
("NEW PREFERRED SHARES") 726 SHARES, SERIES R7
LIQUIDATION PREFERENCE $25,000 PER SHARE
The BlackRock Florida Insured Municipal 2008 Term Trust (the "Trust")
is a closed-end, non-diversified management investment company.
The Trust's investment objective is:
o to provide current income that is exempt from regular Federal income
tax and Florida intangible personal property taxes; and
o to return $15 per common share (the initial public offering price per
common share) to holders of common shares on or about December 31, 2008.
The Trust seeks to achieve its investment objective by investing at
least 80% of its total assets in a portfolio of Florida municipal
obligations insured as to the timely payment of both principal and interest
by insurers with claims-paying abilities rated at the time of investment
Aaa by Moody's Investors Service, Inc. ("Moody's") or AAA by Standard &
Poor's Rating Services ("S&P") or which are determined by the Trust's
investment Adviser to have equivalent claims-paying abilities. The Trust
may invest up to 20% of its total assets in uninsured Florida municipal
obligations which are:
o rated at the time of investment Aaa by Moody's or AAA by S&P;
o guaranteed by an entity with a Aaa or AAA rating;
o backed by an escrow or trust account containing sufficient U.S.
Government or U.S. Government agency securities to ensure timely
payment of principal and interest; or
o determined by the Trust's investment adviser to be of Aaa or AAA credit
quality at the time of investment.
The Trust seeks to return $15 per common share to common shareholders on or
about December 31, 2008 (when the Trust will terminate) by actively
managing its portfolio of Florida municipal obligations which will have an
average final maturity on or about such date and by retaining each year a
small portion of its net investment income, which portion will not exceed
10% for any year, as determined in accordance with the Federal income tax
rules applicable to the Trust. No assurance can be given that the Trust
will achieve its investment objective. BlackRock Financial Management, Inc.
(the "Adviser") acts as the investment adviser to the Trust. The address of
the Trust is 800 Scudders Mill Road, Plainsboro, New Jersey 08536 and its
telephone number is (800) 688-0928.
This prospectus contains important information about the Trust. You
should read the prospectus before deciding whether to invest and retain it
for future reference. A statement of additional information, dated , 2000,
containing additional information about the Trust, has been filed with the
Securities and Exchange Commission ("SEC") and is incorporated by reference
in its entirety into this prospectus. You can review the table of contents
of the statement of additional information on page of this prospectus. You
may request a free copy of the statement of additional information by
calling (800) 227-7236. You may also obtain the statement of additional
information and other information regarding the Trust on the SEC web site
(http://www.sec.gov).
INVESTING IN THE NEW PREFERRED SHARES INVOLVES CERTAIN RISKS. SEE
"RISKS" BEGINNING ON PAGE ___. THE MINIMUM PURCHASE AMOUNT OF THE NEW
PREFERRED SHARES IS $25,000.
(continued on following page)
Neither the SEC nor any state securities commission has approved or
disapproved these securities or determined if this prospectus is truthful
or complete. Any representation to the contrary is a criminal offense.
Per Share Total
Public Offering Price $25,000 $18,150,000
Sales Load $ $
Proceeds to Trust (before expenses)1 $ $
1 Offering expenses payable by the Trust are estimated to be $[300,000].
The underwriters are offering the New Preferred Shares subject to various
conditions. The underwriters expect to deliver the New Preferred Shares to
purchasers, in book-entry form, through the facilities of The Depository
Trust Company on or about ___, 2000.
February __, 2000
The Trust is offering 726 newly issued Auction Rate Municipal
Preferred Shares of Beneficial Interest, Series R7. We refer to these
shares as the "New Preferred Shares" throughout this prospectus and the
related statement of additional information. Except for the initial
dividend rate and initial dividend period, the terms of the New Preferred
Shares are the same as the terms of the Trust's currently outstanding
Series R7 Preferred Shares (together, the "Preferred Shares").
The dividend rate for the initial dividend period (the period from
the date of issue through ____, 2000) will be ___%, and will be paid on
_________, 2000. After the initial dividend period, the dividend rate on
the New Preferred Shares for each subsequent dividend period generally will
be determined pursuant to weekly auctions. The letter/numeral indication
"R7" means that the auction for the New Preferred Shares normally will be
held every Thursday and that the dividend period normally will be 7 days.
Prospective purchasers should carefully review the auction procedures
described in this prospectus, including the appendices, and should note:
o a buy order (called a "bid") or sell order is a commitment
to buy or sell New Preferred Shares based on the results of
an auction;
o auctions will be conducted by telephone; and
o purchases and sales will be settled on the next business day
after the auction.
The New Preferred Shares will not be listed on an exchange. You
may only buy or sell New Preferred Shares through an order placed at an
auction with or through a broker-dealer that has entered into an agreement
with the auction agent and the Trust, or in a secondary market maintained
by certain broker-dealers. These broker-dealers are not required to
maintain this market, and it may not provide you with liquidity.
Dividends on New Preferred Shares, to the extent payable from
tax-exempt income earned on the Trust's investments, will be exempt from
regular Federal income tax and Florida intangible personal property taxes
in the hands of owners of such shares. All or a portion of the Trust's
dividends may be subject to the Federal alternative minimum tax. The Trust
is required to allocate net capital gains and other taxable income, if any,
proportionately between common shares and Preferred Shares, including the
New Preferred Shares, based on the percentage of total dividends
distributed to each class for that year. The Trust may at its election give
notice of the amount of any income subject to regular Federal income tax to
be included in a dividend on a New Preferred Share in advance of the
related auction. If the Trust does not give such advance notice, it
generally will be required to pay additional amounts to holders of New
Preferred Shares in order to adjust for their receipt of income subject to
regular Federal income tax.
The New Preferred Shares are redeemable, in whole or in part, at
the option of the Trust on any date dividends are paid on the New Preferred
Shares (except during certain non-call periods), and will be subject to
mandatory redemption, in certain circumstances, at a redemption price of
$25,000 per share plus accumulated but unpaid dividends to the redemption
date (whether or not declared), plus a premium in certain circumstances.
The Trust intends to redeem all of the New Preferred Shares and all of its
other Preferred Shares no later than the last dividend payment date prior
to December 31, 2008 (when the Trust will terminate).
The New Preferred Shares do not represent a deposit or obligation
of, and are not guaranteed or endorsed by, any bank or other insured
depository institution. The New Preferred Shares are not federally insured
by the Federal Deposit Insurance Corporation, the Federal Reserve Board or
any other government agency.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. THE TRUST HAS NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. THE TRUST IS NOT MAKING AN OFFER OF THESE SECURITIES
IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT
THE INFORMATION PROVIDED BY THIS PROSPECTUS IS ACCURATE AS OF ANY DATE
OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS.
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY................................................3
FINANCIAL HIGHLIGHTS..............................................7
THE TRUST.........................................................8
USE OF PROCEEDS...................................................9
CAPITALIZATION....................................................9
INVESTMENT OBJECTIVE AND POLICIES................................10
FLORIDA MUNICIPAL OBLIGATIONS....................................11
INSURANCE........................................................12
OTHER INVESTMENT PRACTICES.......................................14
RISKS............................................................15
MANAGEMENT OF THE TRUST..........................................17
DESCRIPTION OF PREFERRED SHARES..................................20
DESCRIPTION OF NEW PREFERRED SHARES..............................20
THE AUCTION......................................................27
TAXES............................................................30
DETERMINATION OF NET ASSET VALUE.................................31
REPURCHASE OF COMMON SHARES......................................32
DESCRIPTION OF SHARES OF BENEFICIAL INTEREST.....................32
CUSTODIAN........................................................34
UNDERWRITING.....................................................35
TRANSFER AGENT, DIVIDEND
DISBURSING AGENT AND REGISTRAR.................................35
LEGAL OPINIONS...................................................36
EXPERTS..........................................................36
REPORTS TO SHAREHOLDERS..........................................36
AVAILABLE INFORMATION............................................36
TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION....37
APPENDIX A......................................................A-1
PROSPECTUS SUMMARY
The following information is a summary of, and is qualified in its
entirety by reference to, more detailed information included in this
prospectus and the Trust's statement of additional information.
THE TRUST................. The BlackRock Florida Insured Municipal 2008
Term Trust (the "Trust") is a non-diversified,
closed-end management investment company. As of
December 31, 1999, the Trust had 8,707,093
common shares of beneficial interest
outstanding and 2,640 preferred shares of
beneficial interest outstanding, designated
Series R7. The Trust's common shares are traded
on the New York Stock Exchange under the symbol
"BRF." The Trust will distribute substantially
all of its net assets on or about December 31,
2008, when the Trust will terminate.
THE OFFERING.............. The Trust is offering 726 New Preferred Shares.
The purchase price for each New Preferred Share
is $25,000 plus accumulated dividends, if any,
from the date the share is first issued. Except
for the initial dividend rate and the length of
the initial dividend period for the New
Preferred Shares, the rights and preferences of
the New Preferred Shares are the same as the
Trust's outstanding Series R7 preferred shares.
The Trust intends to redeem all of its
Preferred Shares (including the New Preferred
Shares) no later than the last dividend payment
date prior to December 31, 2008 (when the Trust
will terminate).
The New Preferred Shares are being offered by a
group of underwriters listed under
"Underwriting."
INVESTMENT OBJECTIVE
AND POLICIES............ The Trust's investment objective is to provide
current income exempt from regular Federal
income tax and Florida intangible personal
property taxes and to return $15 per common
share (the initial offering price per common
share) to holders of common shares on or about
December 31, 2008. No assurance can be given
that the Trust will achieve its investment
objective.
The Trust seeks to achieve its investment
objective by investing at least 80% of its
total assets in a non-diversified portfolio of
Florida municipal obligations insured as to the
timely payment of both principal and interest
by insurers with claims-paying abilities rated
at the time of investment Aaa by Moody's
Investors Service, Inc. ("Moody's") or AAA by
Standard & Poor's Rating Services ("S&P") or
which are determined by the Adviser to have
equivalent claims-paying abilities. The Trust
may invest up to 20% of its total assets in
uninsured Florida municipal obligations which
are:
o rated at the time of investment Aaa by
Moody's or AAA by S&P;
o guaranteed by an entity with a Aaa or AAA
rating;
o backed by an escrow or trust account
containing sufficient U.S. Government or U.S.
Government agency securities to ensure timely
payment of principal and interest; or
o determined by the Adviser to be of Aaa or AAA
credit quality at the time of investment.
The Trust seeks to return $15 per common share
to holders of common shares on or about
December 31, 2008 (when the Trust will
terminate) by actively managing its portfolio
of tax-exempt Florida municipal obligations
which will have an average final maturity on or
about such date and by retaining each year a
small portion of its net investment income,
which portion will not exceed 10% for any year
as determined in accordance with the Federal
income tax rules applicable to the Trust.
INVESTMENT ADVISER........ BlackRock Financial Management, Inc. (the
"Adviser") acts as the Trust's investment
adviser. The Adviser is responsible for the
investment strategy of the Trust. The Adviser
and its affiliates comprise a global asset
management firm with assets of approximately
$[148] billion under management as of September
30, 1999.
RISK FACTORS.............. Before investing in New Preferred Shares, you
should consider carefully the following risks
of such an investment:
o if an auction fails you may not be able to
sell some or all of your shares;
o because of the nature of the market for New
Preferred Shares, you may receive less than
the price you paid for your shares if you
sell them outside of the auction, especially
when market interest rates are rising;
o a rating agency could downgrade the rating
assigned to the New Preferred Shares, which
could affect liquidity;
o the Trust may be forced to redeem your shares
to meet regulatory or rating agency
requirements or may voluntarily redeem your
shares in certain circumstances;
o in extraordinary circumstances the Trust may
not earn sufficient income from its
investments to pay dividends;
o if interest rates rise, the value of the
Trust's investment portfolio will decline,
reducing the asset coverage for the New
Preferred Shares;
o if an issuer of a municipal bond in which the
Trust invests experiences financial
difficulty or defaults, there may be a
negative impact on the income and net asset
value of the Trust's portfolio; and
o because the Trust invests primarily in a
portfolio of Florida municipal obligations,
the Trust is more susceptible to political,
economic, regulatory or other factors
affecting issuers of Florida municipal
obligations than a fund that does not invest
primarily in the obligations of such issuers.
SECONDARY MARKET TRADING.. The New Preferred Shares will not be listed on
a stock exchange. Instead, you may buy or sell
New Preferred Shares at a periodic auction by
submitting orders to a broker-dealer (a
"Broker- Dealer") that has entered into a
separate agreement with the auction agent and
the Trust or to a broker-dealer that has
entered into an agreement with a Broker-Dealer.
In addition to the auctions, Broker-Dealers and
other broker-dealers may maintain a separate
secondary trading market in New Preferred
Shares, but may discontinue this activity at
any time. You may transfer shares outside of
auctions only to or through a Broker-Dealer, a
broker-dealer that has entered into a separate
agreement with a Broker-Dealer, or other
persons as the Trust may agree. There can be no
assurance that a secondary trading market for
the New Preferred Shares will develop, or if it
does develop, that it will provide holders with
liquidity of investment.
DIVIDENDS AND DIVIDEND
PERIODS.................. After their initial dividend period, the New
Preferred Shares normally will have a dividend
period consisting of seven days. The board of
trustees of the Trust may, from time to time,
declare a special dividend period upon giving
notice to the holders of the New Preferred
Shares.
Dividends on the New Preferred Shares offered
hereby are cumulative from the date they are
first issued and are payable when, as and if
declared by the board of trustees of the Trust,
out of funds legally available therefor. The
Trust will pay the initial dividend for the New
Preferred Shares on [____________] and
thereafter generally on each succeeding Friday,
subject to certain exceptions.
After the initial dividend period, the dividend
rate for the New Preferred Shares will be
determined by auction. The dividend rate for
the initial dividend period is ___% and the
first auction will be held on ___.
TAXES.................... Because in normal circumstances the Trust will
invest substantially all of its assets in
Florida municipal obligations that pay interest
that is exempt from regular Federal income tax,
the income you receive will ordinarily be
exempt from Federal income tax. All or a
portion of the income from these bonds may be
subject to the Federal alternative minimum tax,
so New Preferred Shares may not be a suitable
investment if you are subject to this tax or
would become subject to such tax by investing
in New Preferred Shares. The Florida municipal
obligations in which the Trust invests will be
exempt from the Florida intangible personal
property tax. Taxable income or gain earned by
the Trust will be allocated proportionately to
holders of the Trust's preferred shares and
common shares, based on the percentage of total
dividends paid to each class for that year.
Accordingly, certain specified New Preferred
Share dividends may be subject to income tax on
income or gains attributed to the Trust. The
Trust may at its election give notice before
any applicable auction of the amount of any
taxable income and gain to be distributed for
the period relating to that auction. If the
Trust does not provide such notice, the Trust
generally will make holders of New Preferred
Shares whole for taxes owing on dividends paid
to shareholders that include taxable income or
gain.
ALTERNATIVE MINIMUM TAX.. All or a portion of the Trust's dividends may
be subject to federal Alternative Minimum Tax
("AMT").
LIQUIDATION PREFERENCE... The liquidation preference of each New
Preferred Share will be $25,000, plus an amount
equal to accumulated but unpaid dividends
(whether or not earned or declared) plus the
premium, if any, resulting from the designation
of a premium call period.
RATINGS.................. It is a condition to their issuance that the
New Preferred Shares be issued with a rating of
"Aaa" from Moody's and "AAA" from S&P and that
the Trust receive written assurance from each
of Moody's and S&P that the issuance of the New
Preferred Shares will not cause a downgrading
of the Trust's currently outstanding Preferred
Shares.
REDEMPTION............... Holders of New Preferred Shares will not have
the right to cause the Trust to redeem their
shares. The Trust may, however, be required by
applicable law or by rating agency guidelines
to redeem New Preferred Shares if, for example,
the Trust does not meet an asset coverage ratio
required by law or correct a failure to meet a
rating agency guideline in a timely manner. The
Trust may also voluntarily redeem New Preferred
Shares.
VOTING RIGHTS............ The Investment Company Act of 1940 requires
that the holders of New Preferred Shares and of
currently outstanding Preferred Shares, voting
together as a single class separate from the
holders of common shares, have the right to
elect at least two trustees of the Trust at all
times and to elect a majority of the trustees
at any time when two years' dividends on the
Preferred Shares are unpaid. The holders of New
Preferred Shares and any other outstanding
preferred shares will vote as a separate class
on certain other matters as required under the
Trust's Declaration of Trust, the Investment
Company Act of 1940 and Massachusetts law.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Year Ended December 31,
---------------------------------------------------
SEPTEMBER 28,
SIX MONTHS 1992***
ENDED JUNE THROUGH
PER COMMON SHARE OPERATING 30, 1999 DECEMBER
PERFORMANCE: (UNAUDITED) 1998 1997 1996 1995 1994 1993 31, 1992
---------- ------ ------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning $16.51 $16.35 $ 15.78 $ 16.04 $ 13.93 $ 16.13 $ 14.28 $ 14.10
period........................ ------- ------ ------- ------- ------- ------- ------- --------
Net investment income....... 0.59 1.18 1.17 1.16 1.15 1.15 1.15 0.15
Net realized and unrealized
gain (loss) on investments (0.69) 0.08 0.52 (0.31) 2.10 (2.27) 1.75 0.32
------- ------ ------- ------- ------- ------- ------- --------
Net increase (decrease)
from investment operations.... (0.10) 1.26 1.69 0.85 3.25 (1.12) 2.90 0.47
------- ------ ------- ------- ------- ------- ------- --------
Dividends and distributions:
Dividends from net investment
income to:
Common shareholders...... (0.43) (0.86) (0.86) (0.86) (0.86) (0.86) (0.86) (0.07)
Preferred shareholders... (0.12) (0.24) (0.26) (0.25) (0.28) (0.22) (0.17) (0.02)
Distributions from net realized
gain on investments to:
Common shareholders...... -- -- -- -- -- -- (0.02) --
Preferred shareholders... -- -- -- -- -- -- --** --
Distributions in excess of net
realized gain on investments to:
Common shareholders...... -- -- -- -- ** -- -- --
Preferred shareholders... -- -- -- -- ** -- -- --
------- ------ ------- ------- ------- ------- ------- --------
Total dividends and
distributions................ (0.55) (1.10) (1.12) (1.11) (1.14) (1.08) (1.05) (0.09)
Capital charge with respect to
issuance of shares........... -- -- -- -- -- -- -- (0.20)
Net asset value, end of
period*...................... $ 15.86 $16.51 $ 16.35 $ 15.78 $ 16.04 $ 13.93 $ 16.13 $ 14.28##
======= ====== ======= ======= ======= ======= ======= ========
Market value, end of period*. $ 15.69 $16.81 $ 16.06 $ 15.13 $ 15.00 $ 12.13 $14.875 $ 14.25
======= ====== ======= ======= ======= ======= ======= ========
TOTAL INVESTMENT RETURN +.... (4.17)% 10.32% 12.25% 6.88% 31.26% (13.27)% 9.94% 1.56%
======= ====== ======= ======= ======= ======= ======= ========
RATIOS TO AVERAGE NET ASSETS OF
COMMON SHAREHOLDERS:
Expenses++................... 0.97%+++ 0.93% 0.97% 1.02% 1.02% 1.09% 0.99% 0.92%+++
Net investment income before
preferred stock dividends++.. 7.23%+++ 7.17% 7.33% 7.26% 7.55% 7.86% 7.44% 4.27%+++
Preferred stock dividends.... 1.43%+++ 1.48% 1.65% 1.54% 1.84% 1.48% 1.15% 0.49%+++
Net investment income available
to common shareholders....... 5.80%+++ 5.69% 5.68% 5.72% 5.71% 6.38% 6.29% 3.78%+++
SUPPLEMENTAL DATA:
Average net assets of common
shareholders in thousands)... $142,346 $142,817 $138,890 $136,644 $133,042 $127,640 $134,476 $118,875
Portfolio turnover........... 0% 0% 0% 1% 11% 30% 3% 41%
Net assets of common
shareholders, end of period
(in thousands)............ $138,135 $143,769 $142,343 $137,394 $139,628 $121,268 $140,416 $124,380
Preferred stock outstanding
(in thousands)............ $66,000 $66,000 $66,000 $66,000 $66,000 $66,000 $66,000 $ 66,000
Asset coverage per share of
preferred stock, end of
period#...................... $77,324 $79,458 $78,918 $77,043 $77,889 $141,870 $156,375 $144,000
- -------------------
* Net asset value and market value are published in Barron's each
Saturday and The Wall Street Journal each Monday.
** Actual amount paid to preferred shareholders was $0.00344 per common
share for the fiscal year ended December 31, 1995 and December 31,
1993. For fiscal year ended December 31, 1995 the actual amount paid
to common shareholders was $0.001 per common share.
*** Commencement of investment operations.
# A stock split occurred on July 24, 1995.
## Net asset value immediately after the closing of the initial public offering was $14.06.
+ Total investment return is calculated assuming a purchase of common
stock at the current market price on the first day and a sale at the
current market value on the last day of the period reported.
Dividends and distributions, if any, are assumed for purposes of this
calculation to be reinvested at prices obtained under the Trust's
dividend reinvestment plan. Total investment return does not reflect
brokerage commissions. Total investment returns for periods of less
than one year are not annualized.
++ Ratios are calculated on the basis of income and expenses applicable
to both the common and preferred shares and preferred stock
dividends, relative to the average net assets of common shareholders.
+++ Annualized.
@ Certain changes have been made to the ratios to average net assets of
common shareholders for the period ended December 31, 1992, and the
year ended December 31, 1993 to conform to the current year
presentation.
</TABLE>
THE TRUST
The BlackRock Florida Insured Municipal 2008 Term Trust (the
"Trust") is a non-diversified, closed-end management investment company.
The Trust was incorporated under the laws of The Commonwealth of
Massachusetts on August 7, 1992, and has registered under the Investment
Company Act of 1940 (the "1940 Act"). The Trust will distribute
substantially all of its net assets on or about December 31, 2008, when the
Trust will terminate. The Trust's principal office is located at 800
Scudders Mill Road, Plainsboro, New Jersey 08536 and its telephone number
is (800) 688-0928.
The Trust commenced investment operations on September 28, 1992,
upon the closing of the initial public offering of 8,000,000 of its common
shares of beneficial interest. The net proceeds of such offering were
approximately $112.5 million. In November 1992, the Trust, pursuant to an
over-allotment option granted to the underwriters in the initial public
offering, sold an additional 700,000 of its common shares of beneficial
interest for net proceeds of approximately $9.9 million.
On November 16, 1992, the Trust issued 1,320 preferred shares of
beneficial interest, designated Series R7. The preferred shares were issued
with a liquidation preference per share of $50,000, plus accumulated and
unpaid dividends. On May 16, 1995, shareholders approved a proposal to
split each preferred share into two shares and simultaneously reduce each
share's liquidation preference from $50,000 to $25,000, plus in each case
accumulated and unpaid dividends, which occurred on July 24, 1995.
As of December 31, 1999, [8,707,093] common shares of beneficial
interest and 2,640 Preferred Shares of beneficial interest Series R7 were
outstanding. The Trusts common shares are traded on the New York Stock
Exchange under the symbol "BRF".
The following table provides information about the Preferred Shares since
their issuance:
Amount Outstanding
Exclusive of Treasury Asset Coverage Involuntary Liquidating
As of Securities Per Share* Preference Per Share
----- ---------- ---------- --------------------
12/31/1992 1,320 $ 144,000 $ 50,000
12/31/1993 1,320 $ 156,376 $ 50,000
12/31/1994 1,320 $ 141,870 $ 50,000
12/31/1995** 2,640 $ 77,889 $ 25,000
12/31/1996 2,640 $ 77,043 $ 25,000
12/31/1997 2,640 $ 78,918 $ 25,000
12/31/1998 2,640 $ 79,458 $ 25,000
* Calculated by dividing net assets by the number of Preferred Shares
outstanding.
** A 2-for-1 stock split with respect to the Preferred Shares
occurred on July 24, 1995.
The following table provides information about the Trust's outstanding
shares as of December 31, 1999:
<TABLE>
<CAPTION>
Amount Held by
the Trust or for
Title of Class Amount Authorized its Account Amount Outstanding
-------------- ----------------- ----------- ------------------
<S> <C> <C> <C>
Common Shares unlimited 0 8,707,093
Series R7 Preferred Shares 2,640 0 2,640
</TABLE>
USE OF PROCEEDS
The net proceeds of the offerings will be $[ ], after payment of
offering expenses (estimated to be $[300,000]) and the underwriting
discount.
The net proceeds of the offering will be invested in accordance
with the Trust's investment objective and policies as stated below. It is
presently anticipated that the Trust will be able to invest substantially
all of the net proceeds in Florida municipal securities that meet those
objective and policies at or shortly (within [six to eight] weeks) after
the completion of the offering. To the extent that all of the proceeds
cannot be so invested, pending such investment, they will be invested in
short-term, high quality tax-exempt securities. If necessary in order to
fully invest the net proceeds of the offerings immediately, the Trust may
also purchase, as temporary investments, short-term, taxable investments,
the income on which is subject to regular Federal income tax and which
investments are subject to Florida intangible personal property taxes.
CAPITALIZATION
The following table sets forth the unaudited capitalization of the
Trust as of _____________, 2000, and as adjusted to give effect to the
issuance of the New Preferred Shares pursuant to the offering.
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
-------------- ------------
<S> <C> <C>
Shareholders' equity:
Preferred Shares of Beneficial Interest, par value $.01 per
shares issued; 3,366 preferred shares issued and outstanding,
as adjusted, at $25,000 per share liquidation preference).....$ 66,000,000 $ 84,150,000
Common Shares, par value $.01 per share (8,707,093 shares
issued and outstanding).......................................
Paid in capital in excess at par ...............................$ 120,907,481 $120,425,981
Undistributed net investment income.............................
Accumulated net realized loss...................................
Unrealized appreciation of investments..........................
------------- ------------
Net assets.................................................... $ $
============= ============
</TABLE>
INVESTMENT OBJECTIVE AND POLICIES
The Trust's investment objective is to provide current income
exempt from regular Federal income tax and Florida intangible personal
property taxes and to return $15 per common share to holders of common
shares on or about December 31, 2008. No assurance can be given that the
Trust will achieve its investment objective.
The Trust seeks to achieve its investment objective by investing at
least 80% of its total assets in a portfolio of Florida municipal
obligations insured as to the timely payment of both principal and interest
by insurers with claims- paying abilities rated at the time of Investment
Aaa by Moody's Investors Service, Inc. ("Moody's") or AAA by Standard &
Poor's Ratings Services ("S&P") or which are determined by the Trust's
investment adviser, BlackRock Financial Management, Inc. (the "Adviser"),
to have equivalent claims-paying abilities. The Trust may invest up to 20%
of its total assets in uninsured Florida municipal obligations which are:
o rated at the time of investment Aaa by Moody's or AAA by S&P;
o guaranteed by an entity with a Aaa or AAA rating;
o backed by an escrow or trust account containing sufficient
U.S. Government or U.S. Government agency securities to
ensure timely payment of principal and interest; or
o determined by the Trust's Adviser to be of Aaa or AAA credit
quality at the time of investment.
Generally, Florida municipal obligations which are covered by insurance or
a guarantee would not be rated Aaa or AAA, and might not be considered to
be of investment grade credit quality in the absence of such insurance or
guarantee. In determining whether to purchase a particular Florida
municipal obligation which is covered by insurance or a guarantee, the
Adviser considers the credit quality of the underlying issuer (among other
factors such as price, yield and maturity), although such credit quality
will not necessarily be the determinative factor in making the investment
decision.
Florida municipal obligations which are backed by an escrow or
trust account which contains U.S. Government or U.S. Government agency
securities ("collateralized obligations") generally are not insured and may
not be rated Aaa by Moody's or AAA by S&P, and may not be of equivalent
credit quality in the view of the Adviser. Collateralized obligations
include, but are not limited to, Florida municipal obligations that have
been (i) advance refunded where the proceeds of the funding have been used
to purchase U.S. Government or U.S. Government agency securities that are
placed in escrow and whose interest or maturity principal payments, or
both, are sufficient to cover the remaining scheduled debt service on the
Florida municipal obligations, or (ii) issued under state and local housing
finance programs which use the issuance proceeds to fund mortgages that are
then exchanged for U.S. Government or U.S. Government agency securities and
deposited with a trustee as security for the municipal obligations. These
collateralized obligations are normally regarded as having the credit
characteristics of the underlying U.S. Government or U.S. Government agency
securities.
The Trust seeks to return $15 per common share to holders of common
shares on or about December 31, 2008 (when the Trust will terminate) by
actively managing its portfolio of tax-exempt Florida municipal
obligations, which will have an average final maturity on or about such
date and by retaining each year a small portion of its net investment
income, which portion will not exceed 10% for any year as determined in
accordance with the Federal income tax rules applicable to the Trust. The
purpose of retaining a small portion of net investment income is to enhance
the Trust's ability to return to investors $15 per common share outstanding
upon the Trust's termination. Such retained income will serve to increase
the net asset value of the Trust and a portion of such retained income will
be available to offset capital losses, if any. However, if the Trust
realizes any capital losses on dispositions of securities that are not
offset by capital gains on the disposition of other securities or the
retention of net investment income, the Trust may return less than $15 for
each common share outstanding at the end of the Trust's term. In addition,
the leverage caused by the Trust's issuance of preferred shares may
increase the possibility of incurring capital losses and the difficulty of
subsequently incurring capital gains to offset such losses. However, the
Adviser believes that it will be able to manage the Trust's assets so that
the Trust will not realize capital losses which are not offset by capital
gains over the life of the Trust on the disposition of its other assets and
retained net investment income. Although neither the Adviser nor the Trust
can guarantee these results, their achievement should enable the Trust, on
or about December 31, 2008, to have available for distribution to holders
of its common shares $15 for each common share then outstanding.
Moody's highest rating category is Aaa. S&P's highest rating
category is AAA. The process of determining ratings for Florida municipal
obligations by Moody's and S&P includes consideration of the likelihood of
the receipt by securityholders of all distributions, the nature of the
underlying securities, the credit quality of the guarantor, if any,
and the structural, legal and tax aspects associated with such securities.
Publications of Moody's indicate that it assigns a Aaa rating to securities
that "are judged to be of the best quality" and "carry the smallest degree
of investment risk." Publications of S&P indicate that it assigns a AAA
rating to securities for which the obligor's "capacity to meet its
financial commitment on the obligation is extremely strong."
In normal circumstances, the Trust disposes of insured Florida
municipal obligations in its portfolio if the claims-paying ability of
their insurer declines below Aaa in the case of Moody's or AAA in the case
of S&P, unless the Trust obtains appropriate alternate insurance covering
such Florida municipal obligations. The Trust may deviate from the
foregoing policy relating to the disposal of Florida municipal obligations
when, in the Adviser's judgment, appropriate alternative insurance is not
available or is unduly costly or if the Adviser believes that an insurer
whose claims-paying ability rating has been lowered is taking steps which
will cause its rating to be restored promptly to the Aaa or AAA level.
Similarly, the Trust intends to dispose of uninsured Florida municipal
obligations rated Aaa or AAA or guaranteed by an entity with such a rating
if their credit quality (or that of their guarantor) declines below Aaa or
AAA, or, if they are not rated, the Adviser no longer believes them to be
of triple-A credit quality.
All or a portion of the Trust's dividends paid in respect of its
common shares, its outstanding preferred shares and the New Preferred
Shares may be subject to Federal alternative minimum tax ("AMT"). See
"Florida Municipal Obligations."
The Trust may utilize certain options, futures, interest rate swaps
and related transactions for hedging purposes. To the extent the Trust
utilizes hedging strategies or invests in taxable securities, the Trust's
ability to achieve its investment objective of providing high current
income exempt from regular Federal income tax and Florida intangible
personal property taxes may be limited. Accordingly, in normal
circumstances, the Trust's use of such practices is not significant.
On a temporary defensive basis, the Trust may invest without limit
in securities issued by the U.S. Government or its agencies or
instrumentalities, repurchase agreements collateralized by such securities,
or certificates of deposit, time deposits or bankers' acceptances for
purposes of enhancing liquidity and/or preserving capital. The Trust may
also invest in Florida municipal obligations with maturities of less than
one year, other debt obligations of corporate issuers, such as
interest-paying corporate bonds, commercial paper and certificates of
deposit, bankers' acceptances and interest- bearing savings accounts of
banks having assets greater than $1 billion and which are members of the
Federal Deposit Insurance Corporation. During temporary defensive periods,
the current dividend rate on any Preferred Shares, including the New
Preferred Shares, will be more likely to approximate or exceed the net rate
of return on the Trust's investment portfolio, with the consequence that
the leverage resulting from the New Preferred Shares may become less
beneficial or adverse to the holders of common shares.
FLORIDA MUNICIPAL OBLIGATIONS
Florida municipal obligations include debt obligations issued by or
on behalf of the State, its political subdivisions, agencies and
instrumentalities, and by other qualifying issuers that pay interest which,
in the opinion of the bond counsel to the issuer, is exempt from regular
federal income tax and Florida taxes. Florida municipal obligations may be
issued to obtain funds for various public purposes, including the
construction of public facilities such as airports, bridges, highways,
housing, hospitals, mass transportation, schools, streets and water and
sewer works. Other public purposes for which Florida municipal obligations
may be issued include the refinancing of outstanding obligations and the
obtaining of funds for general operating expenses and for loans to other
public institutions and facilities. Subject to the credit standard policies
described under "Investment Objective and Policies," there are two
categories of Florida municipal obligations in which the Trust may invest
in normal circumstances: (i) "public purpose" obligations that generate
interest that is tax-exempt under regular Federal income tax rules and is
not treated as a preference item for AMT; and (ii) qualified "private
activity" obligations (typically industrial revenue bonds) that generate
income that is tax-exempt under regular Federal income tax rules and the
rules governing Florida taxes but must, if issued after August 7, 1986, be
included in computing AMT. The Trust will not invest in Florida municipal
obligations that generate interest that by its terms is subject to Federal
income tax other than AMT.
The types of Florida municipal obligations in which the Trust may
invest include general obligation bonds, revenue bonds, municipal lease
obligations, installment purchase contract obligations, variable and
floating rate obligations, zero coupon securities, tax-exempt notes and
municipal commercial paper.
The yields on Florida municipal obligations are dependent on a
variety of factors, including interest and income tax rates, the condition
of the general money market and the municipal obligations market, the size
of the particular issue, the maturity of the obligation and the rating of
the issue. The ratings of Moody's and S&P represent their opinions as to
the quality of those Florida municipal obligations that they rate.
It should be emphasized that ratings are general and are not
absolute standards of quality. Consequently, Florida municipal obligations
with the same maturity, coupon and rating may have different yields while
obligations of the same maturity and coupon with different ratings may have
the same yield. The market value of outstanding Florida municipal
obligations will vary with changes in prevailing interest rate levels and
as a result of changing evaluations of the ability of their issuers to meet
interest and principal payments.
The terms of Florida municipal obligations often give their issuers
the right periodically to "call" or prepay their municipal obligations.
Issuers will exercise call rights when interest rates decline and they can
refinance their municipal obligations at lower interest rates. At the time
the Trust was formed, most of the Florida municipal obligations available
in the market were subject to call provisions. When Florida municipal
obligations are called by their issuers, the Adviser reinvests the proceeds
from the called securities in other Florida municipal obligations. Because
the Trust has a limited term, the Adviser reinvests the proceeds in Florida
municipal obligations maturing prior to the expiration of the term. As the
Trust approaches its termination date on December 31, 2008, the Adviser
will be required to reinvest in shorter term municipal obligations with
relatively lower interest rates.
Obligations of issuers of Florida municipal obligations may be
subject to the provisions of bankruptcy, insolvency and other laws
affecting the rights and remedies of creditors, such as the United States
Bankruptcy Code and other applicable laws. In addition, the obligations of
such issuers may become subject to the laws enacted in the future by
Congress or state legislatures or referenda extending the time for payment
of principal and/or interest, or imposing other constraints upon
enforcement of such obligations or upon municipalities to levy taxes. There
is also the possibility that, as a result of legislation or other
conditions, the power or ability of any issuer to pay, when due, the
principal of and interest on its municipal obligations may be materially
affected.
INSURANCE
The Trust generally invests at least 80% of its total assets in a
portfolio of Florida municipal obligations insured as to the timely payment
of both principal and interest by insurers with claims-paying abilities
rated Aaa by Moody's or AAA by S&P at the time of investment or, if not
rated, which are determined by the Adviser to have equivalent claims-paying
abilities. See Appendix B to the statement of additional information for a
brief description of Moody's and S&P's insurance claims-paying ability
ratings.
Certain insurance companies will issue policies guaranteeing the
timely payment of principal of, and interest on, particular Florida
municipal obligations or on a portfolio of Florida municipal obligations.
Insurance may be purchased by the issuer of a municipal obligation or by a
third party at the time of issuance of the Florida municipal obligation
("Original Issue Insurance") or by the Trust or a third party subsequent to
the original issuance of a Florida municipal obligation ("Secondary
Insurance"). In each case, a single premium is paid to the insurer by the
party purchasing the insurance when the insurance is obtained. Original
Issue Insurance and Secondary Insurance policies are non-cancellable and
remain in effect for so long as the insured Florida municipal obligation is
outstanding and the insurer is in business. Accordingly, whether a
particular Florida municipal obligation is covered by Original Issue
Insurance as opposed to Secondary Insurance will not, in and of itself, be
determinative to the Trust in making an investment decision to purchase
such Florida municipal obligation.
The Trust may also purchase insurance covering certain Florida
municipal obligations which it intends to purchase for its portfolio or
which it already owns ("Portfolio Insurance"). Portfolio Insurance policies
guarantee the timely payment of principal of, and interest on, covered
Florida municipal obligations only while they are owned by the Trust. Such
policies are non-cancellable and remain in effect until the Trust
terminates provided the Trust pays the applicable insurance premiums and
the insurer remains in business. Florida municipal obligations in the
Trust's portfolio covered by a Portfolio Insurance policy will not be
covered by such policy after they are sold by the Trust unless the Trust
elects to obtain some form of Secondary Insurance for them at the time of
sale. The Trust would obtain such Secondary Insurance only if, in the
Adviser's view, it would be economically advantageous for the Trust to do
so.
The Trust may purchase Florida municipal obligations covered by
Original Issue Insurance provided by AMBAC Indemnity Corporation ("AMBAC"),
College Construction Loan Insurance Association, Bond Investors Guaranty
Insurance Company ("BIGI") ("ConnieLee"), Capital Markets Assurance Company
("CAPMAC"), Municipal Bond Investors Assurance Corporation ("MBIA"),
Financial Security Assurance Inc. ("FSA") and Financial Guaranty Insurance
Company ("FGIC"); each has received insurance claims-paying ability ratings
of Aaa from Moody's and AAA from S&P. See Appendix B to the statement of
additional information for a description of Moody's and S&P's insurance
claims-paying ability ratings and financial data regarding each of these
insurers. The Trust may also purchase Secondary Insurance and Portfolio
Insurance policies from any of such insurers. In the future, the Trust may
purchase Florida municipal obligations covered by Original Issue Insurance
provided by, and may purchase Secondary and Portfolio Insurance from, other
insurers (not listed above) whose claims-paying abilities are rated Aaa by
Moody's or AAA by S&P or, if unrated, are of comparable credit quality in
the view of the Adviser. Any payments received from an insurer, whether the
insurance is obtained by the Trust or by other parties, is treated for
Federal income tax purposes and for purposes of Florida taxes in the same
manner as if the payments were received directly from the issuer of the
Florida municipal obligations. See "Taxes".
The Adviser anticipates that a majority of insured tax-exempt
Florida municipal obligations purchased by the Trust will be insured under
policies obtained by parties other than the Trust. The Trust does not pay
the premiums for such policies; rather the cost of such policies may be
reflected in a higher purchase price for such insured Florida municipal
obligations. Accordingly, the yield on such Florida municipal obligations
may be lower than that on equivalent uninsured Florida municipal
obligations. The cost of insurance purchased by the Trust will increase its
expenses, and the yield on the Trust's portfolio will be reduced
accordingly.
In the event the claims-paying ability rating of an insurer of
Florida municipal obligations in the Trust's portfolio were to be lowered
from Aaa or AAA (in the case of Moody's or S&P, respectively), or if the
Adviser anticipates such a lowering or otherwise does not believe an
insurer's claims-paying ability merits its existing triple-A rating, the
Trust may seek to obtain additional insurance from an insurer whose
claims-paying ability is rated Aaa by Moody's or AAA by S&P or, if the
Adviser determines that the costs of obtaining such additional insurance
outweigh the benefits, the Trust may elect not to obtain additional
insurance. In making such determination, the Adviser will consider the
costs of the additional insurance, the new claims-paying ability rating and
financial condition of the existing insurer and the creditworthiness of the
issuer and/or guarantor of the underlying Florida municipal obligations.
The Adviser may also determine not to purchase additional insurance in such
circumstances if it believes that the insurer is taking steps which will
cause its triple-A claims-paying ability rating to be restored promptly.
The foregoing policies also will be applied in the case of insurers whose
claims-paying abilities are not rated but which are determined by the
Adviser to be comparable to Aaa or AAA. See "Investment Objective and
Policies".
Although the Adviser periodically reviews the financial condition
of each insurer, there can be no assurance that the insurers will be able
to honor their obligations in all circumstances. The Trust cannot predict
the consequences of a state takeover of an insurer's obligations and, in
particular, whether such an insurer (or its state regulatory agency or a
subsequent purchaser) could or would honor all of the insurer's contractual
obligations including any outstanding insurance contracts insuring the
timely payment of principal and interest on Florida municipal obligations.
The Trust cannot predict the impact which such events might have on the
market values of such Florida municipal obligations. In the event of a
default by an insurer on its obligations in respect of any Florida
municipal obligations in the Trust's portfolio, the Trust would look to the
issuer and/or guarantor of the relevant Florida municipal obligation for
payments of principal and interest and such issuer and/or guarantor may not
be rated Aaa by Moody's or AAA by S&P or, in the view of the Adviser, be of
equivalent credit quality. Accordingly, the Trust could be exposed to
greater risk of non- payment in such circumstances, which could adversely
affect the Trust's net asset value and the market price per common share.
Alternatively, the Trust could elect to dispose of such Florida municipal
obligations; however, the market prices for such Florida municipal
obligations may be lower than the Trust's purchase price for them and the
Trust could sustain a capital loss as a result. Capital losses incurred by
the Trust which are not offset by capital gains may adversely affect the
Trust's net asset value and the Trust's ability to return $15 per common
share outstanding to investors on or about December 31, 2008.
Although the insurance on Florida municipal obligations reduces
financial or credit risk in respect of the insured obligations (i.e., the
possibility that owners of the insured tax-exempt Florida municipal
obligations will not receive timely scheduled payments of principal or
interest), insured tax-exempt Florida municipal obligations remain subject
to market risk (i.e., fluctuations in market value as a result of changes
in prevailing interest rates). Accordingly, insurance on Florida municipal
obligations does not insure the market value of the Trust's assets or the
net asset value or the market price for the common shares. Furthermore,
insurance, while guaranteeing scheduled payments of principal and interest
on a timely basis, will not make accelerated payments of principal and
interest on Florida municipal obligations where the terms of the instrument
governing such Florida municipal obligations require acceleration in the
event of a default. In general, the Trust does not intend to hold Florida
municipal obligations in its portfolio which are covered only by Portfolio
Insurance unless the Trust has an irrevocable option to obtain permanent
insurance covering such Florida municipal obligations from the insurer
providing the Portfolio Insurance or such Florida municipal obligations
mature by their terms on or before December 31, 2008.
As of December 31, 1999, approximately 100% of the market value of
the Trust's portfolio was invested in long-term Florida municipal
obligations. All of such long-term Florida municipal obligations are rated
Aaa by Moody's or AAA by S&P or are insured by an insurer with a
claims-paying ability rating of Aaa by Moody's or AAA by S&P or guaranteed
by an entity with such a rating. As described under "Description of New
Preferred Shares - Rating Agency Guidelines and Asset Coverage," in
calculating the discounted value of insured Florida municipal obligations
held in the Trust's portfolio for the purpose of determining compliance
with certain rating agency guidelines applicable to the Trust's preferred
shares, the Trust may, in certain circumstances, utilize the insurance
claims-paying ability rating of an insurer of a municipal obligation or the
rating of a guarantor thereof in lieu of the Moody's or S&P's rating on the
underlying municipal obligation.
OTHER INVESTMENT PRACTICES
Certain of the other investment practices in which the Trust may
engage that are described herein or in the statement of additional
information may give rise to income that is subject to regular Federal
income tax. For additional investment practices, see "Investment Policies
and Techniques" in the statement of additional information. Accordingly, in
normal circumstances, the Trust does not intend to engage in such practices
to a significant extent. Moreover, the Trust intends that, so long as New
Preferred Shares are outstanding, its portfolio will reflect guidelines
established by Moody's and S&P in connection with the Trust's receipt of a
rating for such shares on the date they are first issued of at least "Aaa"
from Moody's and "AAA" from S&P. Such guidelines may preclude or limit the
Trust from engaging in many of the investment practices described under
this caption or in the statement of additional information. In particular,
for so long as New Preferred Shares are rated by Moody's, unless the
Moody's ratings guidelines change from those presently applicable as
described under "Description of New Preferred Shares -- Rating Agency
Guidelines and Asset Coverage," the Trust will not buy or sell futures
contracts or options thereon or write put or call options (except covered
call options) on portfolio securities unless it receives written
confirmation from Moody's that engaging in such transactions would not
impair the ratings then assigned to the New Preferred Shares by Moody's
except that the Trust may sell exchange traded futures contracts based on
the Municipal Index or Treasury Bonds and purchase exchange traded put
options on such futures contracts and write exchange traded call options on
such futures contracts (collectively "Moody's Hedging Transactions")
subject to the limitations described below. For so long as New Preferred
Shares are rated by S&P, unless S&P's ratings guidelines change from those
presently applicable as described under "Description of New Preferred
Shares -- Rating Agency Guidelines and Asset Coverage," the Trust will not
buy or sell futures contracts or options thereon or write put options
(except covered put options) or call options (except covered call options)
on portfolio securities unless it receives written confirmation from S&P
that engaging in such transactions will not impair the ratings then
assigned to the New Preferred Shares by S&P except that the Trust may buy
and sell futures contracts based on the Municipal Index or Treasury Bonds
and purchase put and call options on such contracts (collectively "S&P
Hedging Transactions") subject to the limitations described below.
HEDGING
Although in normal circumstances the Trust does not intend to
invest more than 5% of its assets in instruments other than Florida
municipal obligations, the Trust may also enter into certain hedging
transactions. In particular, the Trust may purchase and sell futures
contracts, exchange-listed and over-the-counter put and call options on
securities, financial indices and futures contracts and may enter into
various interest rate transactions (collectively, "Hedging Transactions").
Hedging Transactions may be used to attempt to protect against possible
changes in the market value of the Trust's portfolio resulting from
fluctuations in the debt securities markets and changes in interest rates,
to protect the Trust's unrealized gains in the value of its portfolio
securities, to facilitate the sale of such securities, for investment
purposes or to establish a position in the securities markets as a
temporary substitute for purchasing particular securities. Any or all of
these techniques may be used at any time. There is no particular strategy
that requires use of one technique rather than another. Use of any Hedging
Transaction is a function of market conditions. The Hedging Transactions
that the Trust may use are described in the statement of additional
information. The ability of the Trust to hedge successfully will depend on
the Adviser's ability to predict pertinent market movements, which cannot
be assured.
OTHER INVESTMENT TECHNIQUES
The Trust may engage in other types of transactions, including
investment in restricted and illiquid securities, repurchase and reverse
repurchase agreements, when-issued and forward commitment transactions,
borrowing, securities lending and other transactions. For a description of
such types of transactions, see "Investment Policies and Techniques - Other
Investment Policies and Techniques" in the statement of additional
information.
RISKS
Risk is inherent in all investing. Investing in any investment
company security involves risk, including the risk that you may receive
little or no return on your investment or that you may lose part or all of
your investment. Therefore, before investing you should consider carefully
the following risks that you assume when you invest in New Preferred
Shares.
INTEREST RATE RISK
The Trust issues preferred shares (including the New Preferred
Shares), which pay dividends based on short-term interest rates. The Trust
then uses the proceeds from the sale of preferred shares to buy Florida
municipal obligations, which pay interest based on long-term rates. Both
long-term and short-term interest rates may fluctuate. If short-term
interest rates rise, the preferred shares dividend rates may rise so that
the amount of dividends paid to holders of preferred shares exceeds the
income from the portfolio securities purchased with the proceeds from the
sale of preferred shares. Because income from the Trust's entire investment
portfolio (not just the portion of the portfolio purchased with the
proceeds of the preferred shares offering) is available to pay preferred
share dividends, however, preferred share dividend rates would need to
greatly exceed the yield on the Trust's portfolio before the Trust's
ability to pay preferred share dividends would be impaired. Generally,
Florida municipal obligations will decrease in value when interest rates
rise and increase in value when interest rates decline. If long-term rates
rise, the value of the Trust's investment portfolio will decline, reducing
the amount of assets serving as asset coverage for the preferred shares.
AUCTION RISK
The dividend rate for the New Preferred Shares normally is set
through an auction process. In the auction, holders of New Preferred Shares
may indicate the dividend rate at which they would be willing to hold or
sell their New Preferred Shares or purchase additional New Preferred
Shares. The auction also provides liquidity for the sale of New Preferred
Shares. An auction fails if there are more New Preferred Shares offered for
sale than there are buyers. You may not be able to sell your New Preferred
Shares at an auction if the auction fails. Also, if you place hold orders
(orders to retain New Preferred Shares) at an auction only at a specified
dividend rate, and that rate exceeds the rate set at the auction, you will
not retain your New Preferred Shares. Finally, if you buy shares or elect
to retain shares without specifying a dividend rate below which you would
not wish to buy or continue to hold those shares, you could receive a lower
rate of return on your shares than the market rate. See "The Auction".
SECONDARY MARKET RISK
If you try to sell your New Preferred Shares between auctions, you
may not be able to sell any or all of your shares, or you may not be able
to sell them for $25,000 per share or $25,000 per share plus accumulated
dividends. If the Trust has designated a Special Dividend Period (a rate
period of more than seven days), changes in interest rates could affect the
price you would receive if you sold your shares in the secondary market.
Broker-dealers that maintain a secondary trading market for New Preferred
Shares are not required to maintain this market, and the Trust is not
required to redeem shares either if an auction or an attempted secondary
market sale fails because of a lack of buyers. New Preferred Shares are not
listed on a stock exchange or the NASDAQ stock market. If you sell your New
Preferred Shares to a broker-dealer between auctions, you may receive less
than the price you paid for them, especially if market interest rates have
risen since the last auction.
RATINGS AND ASSET COVERAGE RISK
While it is a condition to the issuance of the New Preferred Shares
that Moody's assign a rating of aaa and S&P a rating of AAA to the New
Preferred Shares, such ratings do not eliminate or necessarily mitigate the
risks of investing in New Preferred Shares. Moody's or S&P could downgrade
New Preferred Shares, which may make your shares less liquid at an auction
or in the secondary market. If Moody's or S&P downgrades the New Preferred
Shares, the Trust may alter its portfolio or redeem New Preferred Shares in
an effort to improve the rating, although there is no assurance that it
will be able to do so to the extent necessary to restore the prior rating.
The Trust may voluntarily redeem New Preferred Shares. See "Description of
New Preferred Shares-Rating Agency Guidelines and Asset Coverage" for a
description of the asset maintenance tests the Trust must meet.
CREDIT RISK
Credit risk refers to an issuer's ability to make timely payments
of interest and principal. Credit risk should be low for the Trust because
it invests primarily in insured Florida municipal obligations.
FLORIDA MUNICIPAL OBLIGATIONS MARKET RISK
Investing in the market for Florida municipal obligations involves
certain risks. The amount of public information available about the Florida
municipal obligations in the Trust's portfolio is generally less than that
for corporate equities or bonds, and the investment performance of the
Trust may therefore be more dependent on the analytical abilities of the
Adviser than a stock fund or taxable bond fund. The secondary market for
Florida municipal obligations also tends to be less well-developed or
liquid than many other securities markets, which may adversely affect the
Trust's ability to sell its portfolio securities at attractive prices.
The ability of municipal issuers to make timely payments of
interest and principal may be diminished during general economic downturns
and as governmental cost burdens are reallocated among Federal, state and
local governments. In addition, laws enacted in the future by Congress or
state legislatures or referenda could extend the time for payment of
principal and/or interest, or impose other constraints on enforcement of
such obligations, or on the ability of municipalities to levy taxes. See
"Investment Objective and Policies -- Descriptions of Florida Municipal
Obligations" in the statement of additional information. Insurance on
Florida municipal obligations held by the Trust may reduce, but will not
necessarily eliminate, such risks. Issuers of municipal securities might
seek protection under the bankruptcy laws. In the event of bankruptcy of
such an issuer, the Trust could experience delays in collecting principal
and interest and the Trust may not, in all circumstances, be able to
collect all principal and interest to which it is entitled. To enforce its
rights in the event of a default in the payment of interest or repayment of
principal, or both, the Trust may take possession of and manage the assets
securing the issuer's obligations on such securities, which may increase
the Trust's operating expenses. Any income derived from the Trust's
ownership or operation of such assets may not be tax-exempt.
STATE-SPECIFIC RISK
Because the Trust invests primarily in a portfolio of Florida
municipal obligations, the Trust is more susceptible to political,
economic, regulatory or other factors affecting issuers of Florida
municipal obligations than a fund that does not invest primarily in the
obligations of such issuers. See "Investment Objective and Policies --
Descriptions of Florida Municipal Obligations" in the statement of
additional information.
NON-DIVERSIFICATION RISK
The Trust is classified as a "non-diversified" fund, which means
that the Trust may invest a greater portion of its assets in a more limited
number of issuers than a "diversified" fund. As a result, the Trust may be
subject to greater risk than a diversified fund because changes in the
financial condition or market assessment of a single issuer may cause
greater fluctuation in the net asset value of the Trust.
REINVESTMENT RISK
Reinvestment risk is the risk that income from the Trust's
portfolio will decline if and when the Trust invests the proceeds from
matured, traded, prepaid or called bonds at lower interest rates. This risk
will increase as the Trust approaches its termination date, because the
Trust will reinvest such proceeds in Florida municipal obligations with
maturities on or about its termination date, and shorter term Florida
municipal obligations generally pay lower rates of interest than longer
term Florida municipal obligations. A decline in income could affect the
Trust's ability to pay dividends on the New Preferred Shares.
INFLATION RISK
Inflation is the reduction in the purchasing power of money
resulting from the increase in the price of goods and services. Inflation
risk is the risk that the inflation adjusted (or "real") value of an
investment in New Preferred Shares or the income from that investment will
be worth less in the future. As inflation occurs, the real value of the New
Preferred Shares and distributions declines. In an inflationary period,
however, it is expected that, through the auction process, dividend rates
on the New Preferred Shares would increase, tending to offset this risk.
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
The board of trustees is responsible for the overall management of
the Trust, including supervision of the duties performed by the Adviser.
There are eight trustees of the Trust. Two of the trustees are "interested
persons" (as defined in the 1940 Act). The names and business addresses of
the trustees and officers of the Trust and their principal occupations and
other affiliations during the past five years are set forth under
"Management of the Trust" in the statement of additional information.
INVESTMENT ADVISER
BlackRock Financial Management, Inc. acts as the Trust's investment
adviser (the "Adviser"). BlackRock Advisors, Inc. together with its
investment advisory subsidiaries, including the Adviser, is a global asset
management firm with assets of approximately $148 billion under management
as of September 30, 1999. The Adviser has its principal office at 345 Park
Avenue, New York, New York 10154. BlackRock Advisors and its subsidiaries
constitute the asset management arm of PNC Bank, N.A., and together have
over 671 employees. The Adviser and its affiliates provide fixed income,
liquidity, equity, alternative investment, and risk management products for
clients worldwide. As of September 30, 1999, the Adviser managed
approximately $83 billion in various fixed income sectors, including $8
billion in municipal securities. The Adviser and its affiliates manage 13
closed-end, six open-end and six money market municipal funds. In addition,
the Adviser manages portfolios of municipal securities for large insurance
companies and high net worth individuals.
INVESTMENT PHILOSOPHY
The Adviser's investment decision-making process for the municipal
bond sector is subject to the same discipline, oversight and investment
philosophy that the firm applies to other sectors of the fixed income
market.
The Adviser uses a relative value strategy that evaluates the
trade-off between risk and return to seek to achieve the Trust's investment
objective. This strategy is combined with disciplined risk control
techniques and applied in sector, sub-sector and individual security
selection decisions. The Adviser's extensive personnel and technology
resources are the key drivers of the investment philosophy.
The Adviser's Municipal Bond Team. The Adviser uses a team approach
to managing municipal portfolios. The Adviser believes that this approach
offers substantial benefits over one that is dependent on the market wisdom
or investment expertise of only a few individuals.
The Adviser's municipal bond team includes three portfolio managers
and six credit research analysts. The team is led by Kevin M. Klingert, a
managing director and portfolio manager at the Adviser. Mr. Klingert is a
senior portfolio manager and head of municipal bonds at the Adviser, a
position he has held since joining the Adviser in 1991. Mr. Klingert has
over 15 years of experience in the municipal market. Prior to joining the
Adviser, Mr. Klingert was an Assistant Vice President in the Unit
Investment Trust Department at Merrill Lynch, Pierce, Fenner & Smith, which
he joined in 1985. Mr. Klingert has primary responsibility for managing
client portfolios with a special emphasis on municipal securities. The
portfolio management team also includes Craig Kasap. Mr. Kasap has been a
portfolio manager at the Adviser for over two years and is a member of the
Adviser's Investment Strategy Group. Prior to joining the Adviser in 1997,
Mr. Kasap spent three years as a municipal bond trader with Keystone
Investments in Boston where he was involved in formulating the firm's
municipal bond investment strategies. James McGinley is also a member of
the Adviser's municipal bond portfolio management team and Investment
Strategy Group. Prior to joining the Adviser in 1999 as a Vice President,
Mr. McGinley worked at Prudential Securities as an Associate Vice President
in Municipal Research.
The Adviser's municipal bond portfolio managers are responsible for
25 municipal bond portfolios, valued as of September 30, 1999 at
approximately $5.5 billion, plus approximately an additional $2.5 billion
in municipal bonds held across portfolios with broader investment mandates.
The team is responsible for portfolios with a variety of investment
objective and constraints, including national funds and state-specific
funds. As of September 30, 1999, the team managed 13 closed-end municipal
funds with over $3 billion in assets.
The Adviser's Investment Process. The Adviser has in-depth
expertise in the fixed income market. The Adviser applies the same
risk-controlled, active sector rotation style (discussed below) to the
management process for all of its fixed income portfolios. The Adviser
believes that it is unique in its integration of taxable and municipal bond
specialists. Both taxable and municipal bond portfolio managers share the
same trading floor and interact frequently for determining the firm's
overall investment strategy. This interaction allows each portfolio manager
to access the combined experience and expertise of the entire portfolio
management group at the Adviser.
The Adviser's portfolio management process emphasizes research and
analysis of specific sectors and securities, not interest rate speculation.
The Adviser believes that market-timing strategies can be highly volatile
and potentially produce inconsistent results. Instead, the Adviser thinks
that value over the long-term is best achieved through a risk- controlled
approach, focusing on sector allocation, security selection and yield curve
management (discussed below).
In the municipal market, the Adviser believes one of the most
important determinants of value is supply and demand. The Adviser's ability
to monitor investor flows and frequency and seasonality of issuance is
helpful in anticipating the impact of supply and demand on sectors. The
Adviser believes that the breadth and expertise of its municipal bond team
allows it to anticipate issuance flows, forecast which sectors are likely
to have the most supply and plan its investment strategy accordingly.
The Adviser also believes that over the long-term, intense credit
analysis will add value and avoid significant relative performance
impairments. The municipal credit team is led by Susan C. Heide, Ph.D who,
since December 15, 1998, has been managing director responsible for
municipal credit research at the Adviser. Ms. Heide supervises a team of
five municipal research analysts who have an average of 10 years of
experience in municipal credit research. Between 1993 and December 15,
1998, Ms. Heide served as a director at the Adviser, specializing in the
credit analysis of municipal securities.
The Adviser's approach to credit risk incorporates a combination of
sector-based top-down macro-analysis of industry sectors to determine
relative weightings with an issuer-specific, bottom-up detailed credit
analysis of issuers and structures. The sector-based approach focuses on
rotating into sectors that are undervalued and exiting sectors when
fundamentals or technicals become unattractive. The issuer-specific
approach focuses on identifying special opportunities where the market
undervalues a credit, and devoting concentrated resources to research the
credit and monitor the position. The Adviser's analytic process focuses on
anticipating changes in credit trends before market recognition. Credit
research is a critical element of the Adviser's municipal process. The
Adviser's yield curve management process involves, among other things, an
evaluation of the risk/return trade off for bonds having different
durations, and selecting bonds believed to present an attractive yield
relative to the degree of interest rate risk involved.
THE INVESTMENT ADVISORY AGREEMENT
Pursuant to an Investment Advisory Agreement (the "Advisory
Agreement"), the Adviser manages the investment of the Trust's assets and
provides such investment research, advice and supervision, in conformity
with the Trust's investment objective and policies, as necessary for the
operations of the Trust.
The Advisory Agreement provides, among other things, that the
Adviser will bear all expenses of its employees and overhead incurred in
connection with its duties under the Advisory Agreement, and will pay all
trustees' fees and salaries of the Trust's trustees and officers who are
affiliated persons (as such term is defined in the 1940 Act) of the
Adviser, except that the board of trustees may approve reimbursement for
the time spent on Trust operations of personnel who spend substantial time
on the operations (other than the provision of investment advice) of the
Trust or other investment companies advised by the Adviser. The Advisory
Agreement provides that the Trust shall pay to the Adviser for its services
a monthly fee at the annual rate of 0.35% of the Trust's average weekly net
asset value. The liquidation value of any outstanding preferred shares
(including the New Preferred Shares) of the Trust is not taken into account
in determining the Trust's average weekly net asset value.
Although the Adviser intends to devote such time and effort to the
business of the Trust as is reasonably necessary to perform its duties to
the Trust, the services of the Adviser are not exclusive and the Adviser
provides similar services to other investment companies and other clients
and may engage in other activities.
The Advisory Agreement also provides that, in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of
its obligations thereunder, the Adviser is not liable to the Trust or any
of the Trust's shareholders for any act or omission by the Adviser in the
supervision or management of its respective investment activities or for
any loss sustained by the Trust or the Trust's shareholders and provides
for indemnification by the Trust of the Adviser, its partners, officers,
employees, agents and control persons for liabilities incurred by them in
connection with their services to the Trust, subject to certain limitations
and conditions.
The Advisory Agreement will continue in effect, provided that each
continuance is specifically approved at least annually by both (i) the vote
of a majority of the Trust's board of trustees or the vote of a majority of
the outstanding voting securities of the Trust (as such term is defined in
the 1940 Act) and (ii) by the vote of a majority of the trustees who are
not parties to such Agreement or interested persons (as such term is
defined in the 1940 Act) of any such party, cast in person at a meeting
called for the purpose of voting on such approval. The Advisory Agreement
may be terminated as a whole at any time by the Trust, without the payment
of any penalty, upon the vote of a majority of the Trust's board of
trustees or a majority of the outstanding voting securities of the Trust or
by the Adviser, on 60 days' written notice by either party to the other.
Except as otherwise provided by order of the SEC or any rule or provision
of the 1940 Act, the Agreement will terminate automatically in the event of
its assignment (as such term is defined in the 1940 Act and the rules
thereunder).
THE ADMINISTRATION AGREEMENT
Princeton Administrators, L.P. (the "Administrator"), 800 Scudders
Mill Road, Plainsboro, New Jersey 08536, acts as administrator for the
Trust. [The Administrator is an affiliate of _________________________, one
of the underwriters of this offering.] Under the Administration Agreement
with the Trust (the "Administration Agreement"), the Administrator
administers the Trust's corporate affairs subject to the supervision of the
Trust's board of trustees and in connection therewith furnishes the Trust
with office facilities together with such ordinary clerical and bookkeeping
services (e.g., preparation of annual and other reports to shareholders and
the SEC and filing of Federal, state and local income tax returns) as are
not being furnished by the custodian. In connection with its administration
of the corporate affairs of the Trust, the Administrator will bear the
following expenses:
o the salaries and expenses of all personnel of the
Administrator; and
o all expenses incurred by the Administrator in
connection with administering the ordinary course of
the Trust's business, other than those assumed by the
Trust, as described below.
The Administration Agreement provides that the Trust shall pay to
the Administrator a monthly fee for its services and the facilities
furnished by the Administrator at the annual rate of 0.10% of the Trust's
average weekly net asset value. The liquidation value of any outstanding
preferred shares (including the New Preferred Shares) of the Trust is not
taken into account in determining the Trust's average weekly net asset
value.
The Administration Agreement is terminable on 60 days prior
written notice by either party to the other.
EXPENSES OF THE TRUST
Except as indicated above, the Trust will pay all of its expenses,
including fees of the trustees not affiliated with the Adviser and board
meeting expenses: fees of the Adviser and the Administrator; interest
charges; taxes; organization expenses; charges and expenses of the Trust's
legal counsel and independent accountants, and of the transfer agent,
registrar and dividend disbursing agent of the Trust; expenses of
repurchasing shares; expenses of issuing any preferred shares (including
the New Preferred Shares) or indebtedness; expenses of printing and mailing
share certificates, shareholder reports, notices, proxy statements and
reports to governmental offices; brokerage and other expenses connected
with the execution, recording and settlement of portfolio security
transactions; expenses connected with negotiating, effecting purchase or
sale, or registering privately issued portfolio securities; custodial fees
and expenses for all services to the Trust, including safekeeping of funds
and securities and maintaining required books and accounts; expenses of
calculating and publishing the net asset value of the Trust's shares;
expenses of membership in investment company associations; expenses of
fidelity bonding and other insurance expenses including insurance premiums;
expenses of shareholders meetings; SEC and state registration fees; New
York Stock Exchange listing fees; and fees payable to the National
Association of Securities Dealers, Inc. in connection with this offering
and fees of any rating agencies retained to rate any preferred shares
(including the New Preferred Shares) issued by the Trust.
DESCRIPTION OF PREFERRED SHARES
Certain of the capitalized terms used herein are defined in the
Certificate of Designation Establishing Preferred Shares and the amendment
thereto attached as Appendices C-1 and C-2 to the statement of additional
information.
The Preferred Shares of each series are preferred shares of
beneficial interest of the Trust 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 for each such series. In general, the
Applicable Rate for a particular Dividend Period for a particular series of
Preferred Shares will be determined by an Auction conducted on the day
before the start of such Dividend Period. Existing Holders and Potential
Holders of Preferred Shares may participate in Auctions therefor, although
Existing Holders desiring to continue to hold all of their Preferred Shares
regardless of the Applicable Rate resulting from Auctions need not
participate. For an explanation of Auctions and the method of determining
the Applicable Rate, see "The Auction". The Trust intends to redeem all of
the Preferred Shares of each series no later than the last Dividend Payment
Date in respect of each series prior to December 31, 2008 (when the Trust
will terminate).
The Preferred Shares have a liquidation preference of $25,000 per
share plus an amount equal to accumulated but unpaid dividends (whether or
not carried or declared) plus the premium, if any, resulting from the
designation of a Premium Call Period and are fully paid and non-assessable.
The Preferred Shares are not convertible into common shares or other shares
of the Trust and the holders thereof have no preemptive rights. The
Preferred Shares are not subject to any sinking fund but are generally
subject to redemption at the option of the Trust on any Dividend Payment
Date with respect thereto (provided that no Preferred Shares shall be
subject to optional redemption during a Non-Call Period) and, in certain
circumstances, are subject to mandatory redemption by the Trust.
In connection with the auction procedures described below, Deutsche
Bank Group is the Auction Agent, the transfer agent, registrar, dividend
disbursing agent and redemption agent for the Preferred Shares.
DESCRIPTION OF NEW PREFERRED SHARES
The following is a brief description of the terms of the New
Preferred Shares. For the complete terms of the New Preferred Shares,
including definitions of terms used but not defined, please refer to the
detailed description of the New Preferred Shares in the Certificate of
Designation Establishing Preferred Shares and the amendment thereto
attached as Appendices C-1 and C-2 to the statement of additional
information. We refer to the Certificate of Designation Establishing
Preferred Shares and the amendment thereto in this prospectus collectively
as the "Certificate of Designation."
GENERAL
The Trust is authorized to issue up to 100 million shares of
beneficial interest with preference rights, $.01 par value. The board of
trustees of the Trust is authorized to classify and reclassify any unissued
shares from time to time by setting or changing the preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption of such shares. In
connection with the offerings of New Preferred Shares described herein, the
board of trustees has reclassified 726 unissued shares of beneficial
interest as New Preferred Shares.
The New Preferred Shares will rank on parity with the currently
outstanding Preferred Shares of the Trust as to the payment of dividends
and the distribution of assets upon liquidation. Each New Preferred Share
carries one vote on matters that New Preferred Shares can be voted. New
Preferred Shares, when issued, will be fully paid and non- assessable and
have no preemptive, conversion or cumulative voting rights.
DIVIDENDS AND DIVIDEND PERIODS
General. The following is a general description of dividends and
Dividend Periods. The Initial Dividend Period for the New Preferred Shares
will be ___ days and the dividend rate for this period will be __%.
Subsequent Dividend Periods generally will be seven days and the dividend
rates for those periods will be determined by auction. The Trust, subject
to certain conditions, may change the length of subsequent Dividend Periods
by designating them as Special Dividend Periods. See "--Designation of
Special Dividend Periods" below.
Dividend Payment Dates. Dividends on New Preferred Shares will be
payable, when, as and if declared by the board of trustees, out of legally
available funds in accordance with the Trust's Declaration of Trust and
applicable law, on _____________, 2000, and thereafter generally on each
Friday. However, if dividends are payable on a Friday that is not a
Business Day, then dividends will generally be payable on the next day, if
such day is a Business Day, or as otherwise specified in the Trust's
Certificate of Designation. In addition, the Trust may specify different
Dividend Payment Dates in the Notice of Special Dividend Period issued for
a Special Dividend Period of more than 91 days.
Dividends will be paid through the Securities Depository on each
Dividend Payment Date. The Securities Depository, in accordance with its
current procedures, is expected to distribute dividends received from the
Auction Agent in same-day funds on each Dividend Payment Date to Agent
Members. These Agent Members are in turn expected to distribute such
dividends to the persons for whom they are acting as agents. However, each
of the current Broker-Dealers has indicated to the Trust that dividend
payments will be available in same-day funds on each Dividend Payment Date
to customers that use such Broker-Dealer or that Broker-Dealer's designee
as Agent Member.
Calculation of Dividend Payment. The Trust computes the dividend
per New Preferred Share by multiplying the Applicable Rate in effect by a
fraction. The numerator of this fraction will normally be seven (i.e. the
number of days in the Dividend Period) and the denominator will normally be
365. If the Trust has designated a Special Dividend Period of 365 days or
more, then the numerator will be the number of days in the Dividend Period,
and the denominator will be 360. In either case, this rate is then
multiplied by $25,000 to arrive at dividends per share.
Dividends on New Preferred Shares will accumulate from the date of
their original issue. For each Dividend Payment Period after the Initial
Dividend Period, the dividend rate will be the dividend rate determined at
the Auction, except as provided below. The dividend rate that results from
an Auction for New Preferred Shares will not be greater than the Maximum
Applicable Rate. In the case of a Special Dividend Period for which Bid
Requirements are specified, the dividend rate will not be less than the
Minimum Applicable Rate specified in the Notice of Special Dividend Period.
During Dividend Periods for which no Bid Requirements are specified, there
will be no Minimum Applicable Rate.
The Maximum Applicable Rate for any regular Dividend Payment Period
will be the Applicable Percentage of the higher of the 30-day "AA"
Composite Commercial Paper Rate and the Taxable Equivalent of the
Short-Term Municipal Bond Rate. In the case of a Special Dividend Period,
the Maximum Applicable Rate for any Dividend Payment Period included in
such Special Dividend Period will be the Applicable Percentage (determined
on the date of the Notice of Special Dividend Period in the case of any
such Notice that specifies a Maximum Applicable Rate applicable to such
Special Dividend Payment Period) of the Special Dividend Period Reference
Rate for such Dividend Payment Period. The Applicable Percentage will be
determined based on (i) the lower of the credit rating or ratings assigned
on such date to such shares by Moody's and S&P (or if Moody's or S&P or
both shall not make such rating available, the equivalent of either or both
of such ratings by a Substitute Rating Agency or two Substitute Rating
Agencies or, in the event that only one such rating shall be available,
such rating) and (ii) whether the Trust has provided notification to the
Auction Agent prior to the Auction establishing the Applicable Rate for any
dividend period that net capital gains or other taxable income will be
included in such dividend on New Preferred Shares as follows:
<TABLE>
<CAPTION>
Applicable Applicable
Credit Ratings Percentage: Percentage:
Moody's S&P No 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%
"ba3" to "bal" BB- to BB+ 200% 275%
Below "ba3" Below BB- 250% 300%
</TABLE>
Prior to each Dividend Payment Date, the Trust is required to deposit with
the Auction Agent sufficient funds for the payment of declared dividends.
The failure to make such deposit will not result in the cancellation of any
Auction. The Trust does not intend to establish any reserves for the
payment of dividends.
Additional Dividends. If, in the case of a Dividend Period of 28
days or fewer, the Trust retroactively allocates any net capital gain or
other taxable income to a dividend paid on New Preferred Shares and did not
give advance notice thereof to the Auction Agent as described below under
"The Auction-Auction Procedures" (the amount of the retroactive allocation
referred to herein as a "Retroactive Taxable Allocation") solely by reason
of the fact that the retroactive allocation is made as a result of the
redemption of all or a portion of the outstanding New Preferred Shares or
the liquidation of the Trust, the Trust will, within 90 days (and generally
within 60 days) after the end of the Trust's fiscal year for which a
Retroactive Taxable Allocation is made, provide notice thereof to the
Auction Agent and to each holder of New Preferred Shares (initially
expected to be Cede & Co. as nominee of the Securities Depository) during
such fiscal year at the holder's address listed on the books of the Trust.
The Trust will, within 30 days after such notice is given to the Auction
Agent, pay to the Auction Agent (who will then distribute to such holders
of New Preferred Shares), out of funds legally available therefor, an
amount equal to the aggregate Additional Dividend (as defined below) with
respect to all Retroactive Taxable Allocations made to such holders during
the fiscal year in question. See "Taxes".
If, in the case of a Dividend Period of 35 days or more, the Trust
makes a Retroactive Taxable Allocation to a dividend paid on New Preferred
Shares, the Trust will, within 90 days (and generally within 60 days) after
the end of the Trust's fiscal year for which a Retroactive Taxable
Allocation is made, provide notice thereof to the Auction Agent and to each
holder of New Preferred Shares (initially expected to be Cede & Co., as
nominee of the Securities Depository) during such fiscal year at the
holder's address list on the books of the Trust. The Trust will, within 30
days after such notice is given to the Auction Agent, pay to the Auction
Agent (who will then distribute to such holders of New Preferred Shares),
out of funds legally available therefor, an amount equal to the aggregate
Additional Dividend (as defined below) with respect to all Retroactive
Taxable Allocations made to such holders during the fiscal year in
question. See "Taxes".
In no other instance will the Trust be required to make payments to
holders of New Preferred Shares to offset the tax effect of any
reallocation of net capital gain or other taxable income.
An "Additional Dividend" means an amount paid to a holder of New
Preferred Shares that, when taken together with the aggregate amount of
Retroactive Taxable Allocations allocated to such holder with respect to
the fiscal year in question, would cause the holder's dividends from the
aggregate of both the Retroactive Taxable Allocations and the Additional
Dividend to be equal to the amount of the dividends that would have been
received and retained by the holder if the Retroactive Taxable Allocations
had not been made. Additional Dividends shall be calculated:
o without consideration being given to the time value of
money;
o assuming that no holder of New Preferred Shares is
subject to AMT with respect to dividends received from
the Trust; and
o assuming that each Retroactive Taxable Allocation would
be taxable in the hands of each holder of New Preferred
Shares at the maximum combined marginal regular Federal
and Florida income tax rate, if any, applicable to
individuals or corporations (taking into account the
Federal income tax deductibility of state and local
taxes paid or incurred), whichever is greater, in
effect at the end of the fiscal year in question.
Although the Trust generally intends to designate any Additional Dividend
as an exempt-interest dividend to the extent permitted by applicable law,
it is possible that all or a portion of any Additional Dividend will be
taxable to the recipient thereof. See "Taxes." The Trust will not pay a
further Additional Dividend with respect to any taxable portion of an
Additional Dividend.
Restrictions on Dividends and Other Distributions. Except as
otherwise described herein, when the Trust has any preferred shares
outstanding, including the New Preferred Shares, the Trust may not declare,
pay or set apart for payment, any dividend or other distribution (other
than a dividend or distribution paid in, or in options, warrants or rights
to subscribe for or purchase, its common shares) in respect of common
shares. In addition, the Trust may not call for redemption, redeem,
purchase or otherwise acquire for consideration any common shares (except
by conversion into or exchange for shares of the Trust ranking junior to
the New Preferred Shares as to the payment of dividends and the
distribution of assets upon liquidation). However, the Trust is not
confined by the above restrictions if:
o immediately after such transaction, the Discounted
Value of the Trust's portfolio would be equal to or
greater than the Preferred Shares Basic Maintenance
Amount and the 1940 Act Preferred Shares Asset Coverage
(see "-- Rating Agency Guidelines and Asset Coverage"
below),
o full cumulative dividends on the New Preferred Shares
due on or prior to the date of the transaction have
been declared and paid or shall have been declared and
sufficient funds for the payment thereof deposited with
the Auction Agent;
o any Additional Dividend required to be paid on or
before the date of such declaration or payment has been
paid; and
o the Trust has redeemed the full number of New Preferred
Shares required to be redeemed by any provision for
mandatory redemption contained in the Articles
Supplementary.
Except as set forth in the next sentence, the Trust will not
declare, pay or set apart for payment any dividend on any shares of the
Trust ranking, as to the payment of dividends, on a parity with New
Preferred Shares for any period unless the Trust has or contemporaneously
declares and pays full cumulative dividends on the New Preferred Shares
through its most recent Dividend Payment Date. However, when the Trust has
not paid dividends in full on the New Preferred Shares through the most
recent Dividend Payment Date or upon any shares of the Trust ranking, as to
the payment of dividends, on a parity with New Preferred Shares through
their most recent respective Dividend Payment Dates, the Trust will declare
all dividends upon New Preferred Shares and any shares of the Trust
ranking, as to the payment of dividends, on a parity with New Preferred
Shares, pro rata so that the amount of dividends declared per share on New
Preferred Shares and such other class or series of shares will in all cases
bear to each other the same ratio that accumulated dividends per share on
the New Preferred Shares and such other class or series of shares bear to
each other.
Designation of Special Dividend Periods. The Trust may, at its sole
option and whenever permitted by law, declare a Special Dividend Period. To
declare a Special Dividend Period, the Trust will give notice (a "Request
for Special Dividend Period") to the Auction Agent and to each
Broker-Dealer and request that the next succeeding Dividend Period for such
series of New Preferred Shares be a number of days (other than seven)
evenly divisible by seven and specified in such notice. For any Auction
occurring after the initial Auction, the Trust may not give a Request for
Special Dividend Period unless Sufficient Clearing Bids were made in the
last occurring Auction and unless full cumulative dividends, any amounts
due with respect to mandatory redemptions, and any Additional Dividends
payable prior to such date have been paid in full. The Trust must have also
received confirmation from Moody's and S&P or any Substitute Rating Agency
that the proposed Special Dividend Period will not adversely affect such
agency's then- current rating on the New Preferred Shares. A Request for
Special Dividend Period will also specify any proposed Bid Requirements.
Upon receiving a Request for Special Dividend Period, the Broker-Dealer(s)
will jointly determine whether, given the factors set forth in the Articles
Supplementary, it is advisable that the Trust issue a Notice of Special
Dividend Period for the New Preferred Shares as contemplated by the Request
for Special Dividend Period and, if advisable, the Specific Redemption
Provisions and will give the Trust and the Auction Agent notice of its
determination. If no Broker-Dealer objects to the Notice of Special
Dividend Period, the Trust may issue such notice specifying the duration of
the Special Dividend Period, the Bid Requirements, if any, and the Specific
Redemption Provisions, if any.
REDEMPTION
Mandatory Redemption. If the Trust does not timely cure a failure
to maintain (a) a Discounted Value of its portfolio equal to the Preferred
Shares Basic Maintenance Amount or (b) the 1940 Act Preferred Shares Asset
Coverage, in accordance with the requirements of the rating agencies that
rate the New Preferred Shares, the Trust must redeem all or a portion of
the New Preferred Shares. This mandatory redemption will take place on a
date that the board of trustees specifies out of legally available funds in
accordance with the Trust's Declaration of Trust and applicable law, at the
redemption price of $25,000 per share plus accumulated but unpaid dividends
(whether or not earned or declared) to the date fixed for redemption. The
mandatory redemption will be limited to the number of New Preferred Shares
necessary to restore the required Discounted Value or the 1940 Act
Preferred Shares Asset Coverage, as the case may be.
Optional Redemption. To the extent permitted under the 1940 Act and
Massachusetts law, upon giving a Notice of Redemption, as provided below,
the Trust, at its option, may redeem the New Preferred Shares, in whole or
in part, out of funds legally available therefor, on any Dividend Payment
Date at the optional redemption price per share of $25,000 per share plus
an amount equal to accumulated but unpaid dividends (whether or not earned
or declared) to the date fixed for redemption plus the premium, if any,
resulting from the designation of a Premium Call Period; provided that no
New Preferred Shares shall be subject to optional redemption during a
Non-Call Period. In addition, holders of New Preferred Shares may be
entitled to receive Additional Dividends in the event of redemption of such
New Preferred Shares to the extent provided herein. The Trust has the
authority to redeem the New Preferred Shares for any reason and may redeem
all or part of then-outstanding New Preferred Shares if it anticipates that
the Trust's leveraged capital structure will result in a lower rate of
return to holders of common shares of the Trust for any significant period
of time than that obtainable if such common shares were not leveraged. The
Trust intends to redeem all of its outstanding preferred shares (including
the New Preferred Shares) prior to the last Dividend Payment Date in
respect of each series prior to December 31, 2008 (when the Trust will
terminate).
LIQUIDATION
Upon a voluntary or involuntary liquidation of the Trust, the
holders of outstanding New Preferred Shares will receive, from the assets
of the Trust available for distribution to its shareholders, the
liquidation preference plus all accumulated but unpaid dividends (whether
or not earned or declared) plus the premium, if any, resulting from the
designation of a Premium Call Period and any applicable Additional
Dividends before any payment is made to the common shares. The holders of
outstanding New Preferred Shares will be entitled to receive these amounts
subject to the rights of holders of any series or class of shares,
including other series of Preferred Shares, ranking on a parity with the
New Preferred Shares with respect to the distribution of assets upon
liquidation of the Trust. After the payment to the holders of New Preferred
Shares of the full preferential amounts provided for as described, the
holders of New Preferred Shares will have no right or claim to any of the
remaining assets of the Trust.
Neither the sale of all or substantially all the property or
business of the Trust, nor the consolidation of the Trust into or with any
other corporation or other entity, nor the merger or consolidation of any
corporation or other entity into or with the Trust, is a voluntary or
involuntary liquidation for the purposes of the foregoing paragraph.
RATING AGENCY GUIDELINES AND ASSET COVERAGE
The Trust is required under guidelines of Moody's and S&P to
maintain assets having in the aggregate a Discounted Value at least equal
to the Preferred Shares Basic Maintenance Amount. Moody's and S&P have each
established separate guidelines for calculating Discounted Value. To the
extent any particular portfolio holding does not satisfy a rating agency's
guidelines, all or a portion of the holding's value will not be included in
the rating agency's calculation of Discounted Value. The Moody's and S&P
guidelines do not impose any limitations on the percentage of the Trust's
assets that may be invested in holdings not eligible for inclusion in the
calculation of the Discounted Value of the Trust's portfolio. The amount of
such assets included in the portfolio at any time may vary depending upon
the rating, diversification and other characteristics of the eligible
assets included in the portfolio. The Preferred Shares Basic Maintenance
Amount includes the sum of (a) the aggregate liquidation preference of New
Preferred Shares then outstanding and (b) certain accrued and projected
payment obligations of the Trust.
The Trust is also required under rating agency guidelines to
maintain, with respect to New Preferred Shares, as of the last Business Day
of each month in which any such shares are outstanding, asset coverage of
at least 200% with respect to senior securities which are equity shares,
including the New Preferred Shares (or such other asset coverage as may in
the future be specified in or under the 1940 Act as the minimum asset
coverage for senior securities which are equity shares of a closed-end
investment company as a condition of declaring dividends on its common
shares) ("1940 Act Preferred Shares Asset Coverage"). Based on the
composition of the portfolio of the Trust and market conditions as of
__________ ___, 2000, the 1940 Act Preferred Shares Asset Coverage with
respect to all of the Trust's preferred shares, assuming the issuance on
that date of all New Preferred Shares offered hereby and giving effect to
the deduction of related sales load and related offering costs estimated at
$________, would have been computed as follows:
Value of Trust assets less liabilities
not constituting senior securities =$ = %
---------------------------------- ----------------
Senior securities representing indebtedness $
plus
liquidation value of the preferred shares
In the event the Trust does not timely cure a failure to maintain
(a) a Discounted Value of its portfolio equal to the Preferred Shares Basic
Maintenance Amount or (b) the 1940 Act Preferred Shares Asset Coverage, in
each case in accordance with the requirements of the rating agency or
agencies then rating the New Preferred Shares, the Trust will be required
to redeem New Preferred Shares as described under "--Redemption--Mandatory
Redemption" above.
Pursuant to S&P guidelines, for so long as the New Preferred Shares
are rated by S&P, the Trust will also be required under the Certificate of
Designation to have, as of each Valuation Date, Deposit Securities with
maturity or tender payment dates not later than the Dividend Payment Date
(collectively, "Dividend Coverage Assets") for each share of New Preferred
Shares outstanding that follows such Valuation Date and having in the
aggregate a value not less than the Dividend Coverage Amount (the "Minimum
Liquidity Level"). The "Dividend Coverage Amount", as of any Valuation
Date, means (A) the aggregate amount of cash dividends that will accumulate
on outstanding New Preferred Shares to (but not including) the next
Dividend Payment Date that follows such Valuation Date less (B) the
combined fair market value of Deposit Securities irrevocably deposited for
the payment of cash dividends on New Preferred Shares. "Deposit Securities"
means cash, the book value of municipal obligations sold for which payment
is due within five Business Days and before the next Valuation Date and
municipal obligations rated at least A-1 + or SP- I + by S&P, VMIG-1 or
MIG-1 by Moody's. The definitions of "Deposit Securities", "Dividend
Coverage Assets" and "Dividend Coverage Amount" may be changed from time to
time by the Trust without shareholder approval, but only in the event the
Trust receives confirmation from S&P that any such change would not impair
the ratings then assigned by S&P to New Preferred Shares.
The Trust may, but is not required to, adopt any modifications to
the guidelines that may be established by Moody's or S&P. Failure to adopt
any such modifications, however, may result in a change in the ratings
described above or a withdrawal of ratings altogether. In addition, any
rating agency providing a rating for the New Preferred Shares may, at any
time, change or withdraw any such rating. The Board may, without
shareholder approval, amend, alter or repeal any or all of the definitions
and related provisions which have been adopted by the Trust pursuant to the
rating agency guidelines in the event the Trust receives written
confirmation from Moody's or S&P, as the case may be, that any such
amendment, alteration or repeal would not impair the rating then assigned
to the New Preferred Shares.
As recently described by Moody's and S&P, a preferred share rating
is an assessment of the capacity and willingness of an issuer to pay
preferred stock obligations. The rating on the New Preferred Shares is not
a recommendation to purchase, hold or sell those shares, inasmuch as the
rating does not comment as to market price or suitability for a particular
investor. The rating agency guidelines described above also do not address
the likelihood that an owner of New Preferred Shares will be able to sell
such shares in an Auction or otherwise. The ratings are based on current
information furnished to Moody's and S&P by the Trust and the Adviser and
information obtained from other sources. The ratings may be changed,
suspended or withdrawn as a result of changes in, or the unavailability of,
such information. The common shares have not been rated by a nationally
recognized statistical rating organization.
A rating agency's guidelines will apply to New Preferred Shares
only so long as the rating agency is rating the shares. The Trust will pay
certain fees to Moody's and S&P for rating the New Preferred Shares.
VOTING RIGHTS
Except as otherwise provided in this prospectus and in the
statement of additional information or as otherwise required by law,
holders of New Preferred Shares will have equal voting rights with holders
of common shares and any other preferred shares of the Trust (one vote per
share) and will vote together with holders of common shares and any other
preferred shares as a single class.
In connection with the election of the Trust's trustees, holders of
outstanding preferred shares of the Trust, including New Preferred Shares,
voting as a separate class, are entitled to elect two of the Trust's
trustees, and the remaining trustees are elected by holders of common
shares and preferred shares, including New Preferred Shares, voting
together as a single class. In addition, if at any time dividends (whether
or not earned or declared) on outstanding preferred shares of the Trust,
including New Preferred Shares, are due and unpaid in an amount equal to
two full years of dividends, and sufficient cash or specified securities
have not been deposited with the Auction Agent for the payment of such
dividends, then, the sole remedy of holders of outstanding preferred shares
of the Trust, including New Preferred Shares, is that the number of
trustees constituting the board of trustees will be automatically increased
by the smallest number that, when added to the two trustees elected
exclusively by the holders of preferred shares of the Trust, including New
Preferred Shares, as described above, would constitute a majority of the
board of trustees. The holders of preferred shares of the Trust, including
New Preferred Shares, will be entitled to elect that smallest number of
additional trustees at a special meeting of shareholders held as soon as
possible and at all subsequent meetings at which trustees are to be
elected. The terms of office of the persons who are trustees at the time of
that election will continue. If the Trust thereafter shall pay, or declare
and set apart for payment, in full, all dividends payable on all
outstanding preferred shares of the Trust, including New Preferred Shares,
the special voting rights stated above will cease, and the terms of office
of the additional trustees elected by the holders of the preferred shares
will automatically terminate thereafter on the earliest date permitted by
Massachusetts law.
As long as any preferred shares of the Trust are outstanding, the
Trust will not, without the affirmative vote or consent of the holders of
at least a majority of the Preferred Shares (including New Preferred
Shares) outstanding at the time (voting as a separate class):
(a) authorize, create or issue, or increase the authorized or issued
amount of, any class or series of stock ranking prior to or on a
parity with the Preferred Shares (including the New Preferred
Shares) with respect to payment of dividends or the distribution
of assets on liquidation, or increase the authorized amount of
the Preferred Shares (including the New Preferred Shares) or any
other preferred stock, unless the Trust obtains written
confirmation from Moody's (if Moody's is then rating preferred
shares), S&P (if S&P is then rating preferred shares) or any
Substitute Rating Agency (if any such Substitute Rating Agency
is then rating preferred shares) that the issuance of such class
or series would not impair the rating then assigned by such
rating agency to the Preferred Shares) and the Trust continues
to comply with Section 13 of the 1940 Act, the 1940 Act
Preferred Shares Asset Coverage requirements and the Preferred
Shares Basic Maintenance Amount requirements, in which case the
vote or consent of the holders of the Preferred Shares
(including the New Preferred Shares) is not required;
(b) amend, alter or repeal the provisions of the Trust's Declaration
of Trust whether by merger, consolidation or otherwise, so as to
adversely affect any of the contract rights expressly set forth
in the Trust's Declaration of Trust of holders of Preferred
Shares (including the New Preferred Shares) or any other
preferred stock;
(c) authorize the Trust's conversion from a closed-end to an
open-end investment company; or
(d) amend the provisions of the Trust's Declaration of Trust which
provide for the classification of the board of trustees of the
Trust into three classes, each with a term of office of three
years with only one class of trustees standing for election in
any year (presently Article VI of the Trust's Declaration of
Trust).
To the extent permitted under the 1940 Act, the Trust shall not
approve any of the actions set forth in (a) or (b) above which adversely
affects the rights expressly set forth in the Trust's Declaration of Trust
of a holder of shares of a series of preferred shares differently than
those of a holder of shares of any other series of preferred shares without
the affirmative vote of the holders of at least a majority of the shares of
each series adversely affected and outstanding at such time, in person or
by proxy, at a meeting (each such adversely affected series voting
separately as a class) or by the unanimous written consent of the holders
of all outstanding preferred shares. Unless a higher percentage is provided
for under the Trust's Declaration of Trust, the affirmative vote of the
holders of a majority of the outstanding preferred shares, including New
Preferred Shares, voting together as a single class, will be required to
approve any plan of reorganization (including bankruptcy proceedings)
adversely affecting such shares or any action requiring a vote of security
holders under Section 13(a) of the 1940 Act. Notwithstanding the preceding
sentence, to the extent permitted by Massachusetts law, no vote of holders
of common shares, either separately or together with holders of preferred
shares as a single class, are necessary to take the actions contemplated by
(a) and (b) above and the holders of common shares will not be entitled to
vote in respect of such matters, unless, in the case of the actions
contemplated by (b) above, the action would adversely affect the contract
rights expressly set forth in the Declaration of Trust of the holders of
common shares.
The foregoing voting provisions will not apply with respect to New
Preferred Shares if, at or prior to the time when a vote is required, such
shares have been (i) redeemed or (ii) called for redemption and sufficient
funds have been deposited in trust to effect such redemption.
THE AUCTION
GENERAL
The Certificate of Designation provides that, except as otherwise
described herein, the Applicable Rate for the New Preferred Shares for each
Dividend Period after the Initial Dividend Period shall be equal to the
rate per annum that the Auction Agent advises has resulted on the Business
Day preceding the first day of such subsequent Dividend Period (an "Auction
Date") from implementation of the auction procedures (the "Auction
Procedures") set forth in the Trust's Declaration of Trust and summarized
below, in which persons determine to hold or offer to sell or, based on
dividend rates bid by them, offer to purchase or sell New Preferred Shares.
Each periodic implementation of the Auction Procedures is referred to
herein as an "Auction." See the Certificate of Designation for a more
complete description of the Auction process.
Auction Agency Agreement. The Trust will enter into an Auction
Agency Agreement (the "Auction Agency Agreement") with the Auction Agent
(currently, Deutsche Bank Group) which provides, among other things, that
the Auction Agent will follow the Auction Procedures to determine the
Applicable Rate for New Preferred Shares so long as the Applicable Rate for
New Preferred Shares is to be based on the results of an Auction.
The Auction Agent may terminate the Auction Agency Agreement upon
notice to the Trust no earlier than 60 days after such notice. If the
Auction Agent should resign, the Trust will use its best efforts to enter
into an agreement with a successor Auction Agent containing substantially
the same terms and conditions as the Auction Agency Agreement. The Trust
may remove the Auction Agent provided that prior to such removal the Trust
has entered into such an agreement with a successor Auction Agent.
Broker-Dealer Agreements. Each Auction requires the participation
of one or more Broker-Dealers. The Auction Agent will enter into agreements
(collectively, the "Broker-Dealer Agreements") with several Broker-Dealers
selected by the Trust, which provide for the participation of those
Broker-Dealers in Auctions for New Preferred Shares.
The Auction Agent after each Auction for New Preferred Shares will
pay to each Broker-Dealer, from funds provided by the Trust, a service
charge at the annual rate of 1/4 of 1% in the case of any Auction
immediately preceding a Dividend Period of [less than one year], or a
percentage agreed to by the Trust and the Broker-Dealers in the case of any
Auction immediately preceding a Dividend Period of [one year] or longer, of
the purchase price of New Preferred Shares placed by such Broker-Dealer at
such Auction. For the purposes of the preceding sentence, New Preferred
Shares will be placed by a Broker-Dealer if such shares were (a) the
subject of Hold Orders deemed to have been submitted to the Auction Agent
by the Broker-Dealer and were acquired by such Broker-Dealer for its own
account or were acquired by such Broker-Dealer for its customers who are
Beneficial Owners or (b) the subject of an Order submitted by such Broker-
Dealer that is (i) a Submitted Bid of an Existing Holder that resulted in
such Existing Holder continuing to hold such shares as a result of the
Auction or (ii) a Submitted Bid of a Potential Holder that resulted in such
Potential Holder purchasing such shares as a result of the Auction or (iii)
a valid Hold Order.
[The Trust may request the Auction Agent to terminate one or more
Broker-Dealer Agreements at any time, provided that at least one
Broker-Dealer Agreement is in effect after such termination. ]
AUCTION PROCEDURES
Prior to the Submission Deadline on each Auction Date for the New
Preferred Shares, each customer of a Broker-Dealer who is listed on the
records of that Broker-Dealer (or, if applicable, the Auction Agent) as a
holder of New Preferred Shares (a "Beneficial Owner") may submit orders
("Orders") with respect to New Preferred Shares to that Broker-Dealer as
follows:
1. Hold Order--indicating its desire to hold New Preferred
Shares without regard to the Applicable Rate for the next
Dividend Period thereof.
2. Bid--indicating its desire to sell New Preferred Shares at
$25,000 per share if the Applicable Rate for shares of such
series for the next Dividend Period thereof is less than the
rate or spread specified in such Bid.
3. Sell Order--indicating its desire to sell New Preferred
Shares at $25,000 per share without regard to the Applicable
Rate for shares of such series for the next Dividend Period
thereof.
A Beneficial Owner may submit different types of Orders to its
Broker-Dealer with respect to New Preferred Shares then held by such
Beneficial Owner. A Beneficial Owner that submits a Bid to its
Broker-Dealer having a rate higher than the Maximum Applicable Rate on the
Auction Date therefor will be treated as having submitted a Sell Order to
its Broker-Dealer. A Beneficial Owner that fails to submit an Order to its
Broker-Dealer will be deemed to have submitted a Hold Order to its
Broker-Dealer; provided however, that if a Beneficial Owner fails to submit
an Order to its Broker-Dealer for an Auction relating to a Dividend Period
of more than 91 days, such Beneficial Owner will be deemed to have
submitted a Sell Order to its Broker-Dealer. A Sell Order shall constitute
an irrevocable offer to sell the New Preferred Shares subject thereto. A
Beneficial Owner that offers to become the Beneficial Owner of additional
New Preferred Shares is, for purposes of such offer, a Potential Beneficial
Owner as discussed below.
A customer of a Broker-Dealer that is not a Beneficial Owner of New
Preferred Shares but that wishes to purchase New Preferred Shares, or that
is a Beneficial Owner that wishes to purchase additional New Preferred
Shares (in each case, a "Potential Beneficial Owner"), may submit Bids to
its Broker-Dealer in which it offers to purchase New Preferred Shares at
$25,000 per share if the Applicable Rate for the next Dividend Period
thereof is not less than the rate specified in such Bid. A Bid placed by a
Potential Beneficial Owner specifying a rate higher than the Maximum
Applicable Rate on the Auction Date therefor will not be accepted.
Any Bid by an Existing Holder that specifies a Spread with respect
to an Auction in which a Spread is not included in any Bid Requirements or
in which there are no Bid Requirements and an Order that does not specify a
Spread with respect to an Auction in which a Spread is included in any Bid
Requirements shall be treated as a Sell Order.
The Broker-Dealers in turn will submit the Orders of their
respective customers who are Beneficial Owners and Potential Beneficial
Owners to the Auction Agent, designating themselves (unless otherwise
permitted by the Trust) as Existing Holders in respect of shares subject to
Orders submitted or deemed submitted to them by Beneficial Owners and as
Potential Holders in respect of shares subject to Orders submitted to them
by Potential Beneficial Owners. However, neither the Trust nor the Auction
Agent will be responsible for a Broker-Dealer's failure to comply with the
foregoing. Any Order placed with the Auction Agent by a Broker-Dealer as or
on behalf of an Existing Holder or a Potential Holder will be treated in
the same manner as an Order placed with a Broker-Dealer by a Beneficial
Owner or Potential Beneficial Owner. Similarly, any failure by a
Broker-Dealer to submit to the Auction Agent an Order in respect of any New
Preferred Shares held by it or customers who are Beneficial Owners will be
treated in the same manner as a Beneficial Owner's failure to submit to its
Broker-Dealer an Order in respect of New Preferred Shares held by it. A
Broker-Dealer may also submit Orders to the Auction Agent for its own
account as an Existing Holder or Potential Holder, provided it is not an
affiliate of the Trust.
If Sufficient Clearing Bids for New Preferred Shares exist (that
is, the number of shares subject to Bids submitted or deemed submitted to
the Auction Agent by Broker-Dealers as or on behalf of Potential Holders
with rates or spreads equal to or lower than the Maximum Applicable Rate is
at least equal to the number of New Preferred Shares subject to Sell Orders
submitted or deemed submitted to the Auction Agent by Broker-Dealers as or
on behalf of Existing Holders), the Applicable Rate for New Preferred
Shares for the next succeeding Dividend Period thereof will be the lowest
rate specified in the Submitted Bids which, taking into account such rate
and all lower rates bid by Broker- Dealers as or on behalf of Existing
Holders and Potential Holders, would result in Existing Holders and
Potential Holders owning the New Preferred Shares available for purchase in
the Auction. If Sufficient Clearing Bids for New Preferred Shares do not
exist, the Applicable Rate for the next succeeding Dividend Period thereof
will be the Maximum Applicable Rate on the Auction Date therefor. In such
event, Beneficial Owners of New Preferred Shares that have submitted or are
deemed to have submitted Sell Orders may not be able to sell in such
Auction all shares subject to such Sell Orders. If all of the Outstanding
New Preferred Shares are the subject of Submitted Hold Orders, then the
Dividend Period next succeeding the Auction shall automatically be the same
length as the immediately preceding Dividend Period and the Applicable Rate
for the next succeeding Dividend Period will be the higher of the 30-day
"AA" Composite Commercial Paper Rate and the Taxable Equivalent of the
Short-Term Municipal Bond Rate multiplied by 1 minus the maximum marginal
regular Federal individual income tax rate then applicable to ordinary
income or the maximum marginal regular Federal corporate tax rate then
applicable, whichever is greater (or 90% of such rate if the Trust has
provided notification to the Auction Agent prior to the Auction
establishing the Applicable Rate that net capital gains or other taxable
income will be included in such dividend on New Preferred Shares) on the
date of the Auction.
The Auction Procedures include a pro rata allocation of shares for
purchase and sale, which may result in an Existing Holder continuing to
hold or selling, or a Potential Holder purchasing, a number of New
Preferred Shares that is different than the number of shares specified in
its Order. To the extent the allocation procedures have that result,
Broker-Dealers that have designated themselves as Existing Holders or
Potential Holders in respect of customer Orders will be required to make
appropriate pro rata allocations among their respective customers.
Settlement of purchases and sales will be made on the next Business
Day (also a Dividend Payment Date) after the Auction Date through the
Securities Depository. Purchasers will make payment through their Agent
Members in same-day funds to the Securities Depository against delivery to
their respective Agent Members. The Securities Depository will make payment
to the sellers' Agent Members in accordance with the Securities
Depository's normal procedures, which now provide for payment against
delivery by their Agent Members in same-day funds.
The Auctions for New Preferred Shares will normally be held every
Thursday, and each subsequent Dividend Period will normally begin on the
following Friday.
Whenever the Trust intends to include any net capital gains or
other income taxable for Federal income tax purposes in any dividend on New
Preferred Shares, the Trust may, at its election, notify the Auction Agent
of the amount to be so included not later than the Dividend Payment Date
next preceding the Auction Date on which the Applicable Rate for such
dividend is to be established. Whenever the Auction Agent receives such
notice from the Trust, it will be required in turn to notify each
Broker-Dealer, who, on or prior to such Auction Date, in accordance with
its Broker-Dealer Agreement, will be required to notify its customers who
are Beneficial Owners and Potential Beneficial Owners believed by it to be
interested in submitting an Order in the Auction to be held on such Auction
Date. In the event of such notice, the Trust will not be required to pay an
Additional Dividend with respect to such dividend.
SECONDARY MARKET TRADING AND TRANSFER OF NEW PREFERRED SHARES
The Broker-Dealers are expected to maintain a secondary trading
market in New Preferred Shares outside of Auctions, but are not obligated
to do so, and may discontinue such activity at any time. There can be no
assurance that any secondary trading market in New Preferred Shares will
provide owners with liquidity of investment. The New Preferred Shares are
not registered on any stock exchange or on the Nasdaq Stock Market.
Investors who purchase shares in an Auction for a Special Dividend Period
in which the Bid Requirements, if any, do not require a Bid to specify a
Spread, should note that because the dividend rate on such shares will be
fixed for the length of such Dividend Period, the value of the shares may
fluctuate in response to changes in interest rates, and may be more or less
than their original cost if sold on the open market in advance of the next
Auction therefor, depending upon market conditions. Investors who purchase
shares in an Auction for a Special Dividend Period in which the Bid
Requirements require a Bid to specify a Spread should be aware that the
value of their shares may also fluctuate and may be more or less than their
original cost if sold on the open market in advance of the next Auction,
particularly if market spreads narrow or widen in a manner unfavorable to
such purchaser's position.
A Beneficial Owner or an Existing Holder may sell, transfer or
otherwise dispose of New Preferred Shares only in whole shares and only:
o pursuant to a Bid or Sell Order placed with the
Auction Agent in accordance with the Auction
Procedures;
o to a Broker-Dealer; or
o to such other persons as may be permitted by the
Trust;
provided, however, that
o a sale, transfer or other disposition of New
Preferred Shares from a customer of a Broker- Dealer
who is listed on the records of that Broker-Dealer as
the holder of such shares to that Broker-Dealer or
another customer of that Broker-Dealer shall not be
deemed to be a sale, transfer or other disposition
for purposes of the foregoing if such Broker-Dealer
remains the Existing Holder of the shares so sold,
transferred or disposed of immediately after such
sale, transfer or disposition; and
o in the case of all transfers other than pursuant to
Auctions, the Broker-Dealer (or other person, if
permitted by the Trust) to whom such transfer is made
shall advise the Auction Agent of such transfer.
For the meaning of defined terms used but not defined, see the
Certificate of Designation and the amendment thereto attached as Appendices
C-1 and C-2 to the statement of additional information.
TAXES
FEDERAL INCOME TAX MATTERS
The Trust has qualified and elected, and intends to continue to
qualify, as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), and intends to
distribute at least 90% of its net investment income (including taxable
income, tax-exempt interest and net short-term capital gain, but not net
capital gain, which is the excess of net long-term capital gain over net
short-term capital loss) and substantially all of its net capital gain to
its shareholders. The Trust will not be subject to Federal income tax on
any net investment income and net capital gain that it distributes to its
shareholders, but will be subject to Federal income tax at the regular
corporate income tax rate on any net investment income (other than net
tax-exempt interest income) that it retains.
The Trust expects that substantially all of the Trust's dividends
to the common shareholders and Preferred Shareholders will qualify as
"exempt-interest dividends." A shareholder treats an exempt-interest
dividend as interest on state and local bonds which is exempt from regular
Federal income tax. Some or all of an exempt-interest dividend, however,
may be subject to Federal alternative minimum tax imposed on the
shareholder. Different Federal alternative minimum tax rules apply to
individuals and to corporations. In addition to exempt-interest dividends,
the Trust also may distribute to its shareholders amounts that are treated
as long-term capital gain or ordinary income. The Trust will allocate
distributions to shareholders that are treated as tax-exempt interest and
as long-term capital gain and ordinary income, if any, proportionately
among the common shares and Preferred Shares, including the New Preferred
Shares. The Trust intends to notify Preferred Shares, including New
Preferred Shares in advance if it will allocate income to them that is not
exempt from regular Federal income tax. In certain circumstances the Trust
will make payments to such shareholders to offset the tax effects of the
taxable distribution. See "Description of New Preferred Shares--Dividends
and Dividend Periods-Additional Dividends."
The sale or other disposition of common shares or Preferred Shares
of the Trust will normally result in capital gain or loss to shareholders.
Present law taxes both long-term and short-term capital gains of
corporations at the rates applicable to ordinary income. For non-corporate
taxpayers, under current law short-term capital gains and ordinary income
will be taxed at a maximum rate of 39.6%, while long-term capital gains
will generally be taxed at a maximum rate of 20%. Because of certain
limitations on itemized deductions and the deduction for personal
exemptions applicable to higher income taxpayers, the effective rate of tax
may be higher in certain circumstances. Losses realized by a shareholder on
the sale or exchange of shares of the Trust held for six months or less are
disallowed to the extent of any exempt-interest dividends received with
respect to such shares, and, if not disallowed, such losses are treated as
long- term capital losses to the extent of any distribution of net capital
gain received with respect to such shares. A shareholder's holding period
is suspended for any periods during which the shareholder's risk of loss is
diminished as a result of holding one or more other positions in
substantially similar or related property, or through certain options or
short sales. Any loss realized on a sale or exchange of shares of the Trust
will be disallowed to the extent those shares of the Trust are replaced by
other shares within a period of 61 days beginning 30 days before and ending
30 days after the date of disposition of the original shares. In that
event, the basis of the replacement shares of the Trust will be adjusted to
reflect the disallowed loss.
The statement of additional information contains a more detailed
summary of the Federal tax rules that apply to the Trust and its
shareholders. Legislative, judicial or administrative action may change the
tax rules that apply to the Trust or its shareholders, and any such change
may be retroactive. You should consult with your tax adviser about Federal
income tax matters.
FLORIDA TAX MATTERS [subject to review by Florida counsel]
Based on the opinion of special Florida tax counsel, New Preferred
Shares owned by a Florida resident will be exempt from the Florida
intangible personal property tax so long as the Trust's portfolio includes
on January 1 of each year only assets, such as Florida municipal
obligations and U.S. government securities, that are exempt from the
Florida intangible personal property tax. The Trust will normally invest in
tax-exempt obligations of the state of Florida, the U.S. government, the
U.S. territories or political subdivisions of the U.S. government or the
state of Florida so the New Preferred Shares should, in normal
circumstances, be exempt from Florida intangibles tax.
Florida*
Tax Rates as of January 2000
<TABLE>
<CAPTION>
SINGLE RETURN JOINT RETURN FEDERAL YIELD 3% 3.5% 4% 4.5% 4.75% 5.00% 8.00%
TAX RATE FORMULA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0 - 43,850 15.00 0.8500 3.53 4.12 4.71 5.29 5.59 5.88 9.41
$0-26,250 15.00 0.8500 3.53 4.12 4.71 5.29 5.59 5.88 9.41
$43,851 - 105,950 28.00 0.7200 4.17 4.86 5.56 6.25 6.60 6.94 11.11
$26,251 - 63,550 28.00 0.7200 4.17 4.86 5.56 6.25 6.60 6.94 11.11
$105,951 - 161,450 31.00 0.6900 4.35 5.07 5.80 6.52 6.88 7.25 11.59
$63,551 - 132,600 31.00 0.6900 4.35 5.07 5.80 6.52 6.88 7.25 11.59
$161,451 - 288,350 36.00 0.6400 4.69 5.47 6.25 7.03 7.42 7.81 12.50
$132,601 - 288,350 36.00 0.6400 4.69 5.47 6.25 7.03 7.42 7.81 12.50
Over $288,350 39.60 0.6040 4.97 5.79 6.62 7.45 7.86 8.28 13.25
OVER $288,350 39.60 0.6040 4.97 5.79 6.62 7.45 7.86 8.28 13.25
*SAME AS THE FEDERAL RATE
</TABLE>
DETERMINATION OF NET ASSET VALUE
The net asset value of common shares of the Trust will be computed
based upon the value of the Trust's portfolio securities and other assets.
Net asset value per common share of the Trust will be determined as of the
close of the regular trading session on the New York Stock Exchange no less
frequently than Friday of each week and the last business day of each
month, provided, however, that if any such day is a holiday or
determination of net asset value on such day is impracticable, the net
asset value shall be calculated on such earlier or later day as determined
by the Adviser. The Trust calculates net asset value per common share of
the Trust by subtracting the Trust's liabilities (including accrued
expenses, dividends payable and any borrowings of the Trust) and the
liquidation value of any outstanding preferred shares (including New
Preferred Shares) of the Trust from the Trust's total assets (the value of
the securities the Trust holds plus cash or other assets, including
interest accrued but not yet received) and dividing the result by the total
number of common shares of the Trust outstanding.
The Trust values its fixed income securities by using market
quotations provided by pricing services, prices provided by market makers
or estimates of market values obtained from yield data relating to
instruments or securities with similar characteristics in accordance with
procedures established by the board of trustees of the Trust. Short-term
securities which mature in more than 60 days are valued at current market
quotations. Short-term securities having a remaining maturity of 60 days or
less are valued at amortized cost, which approximates market value. Any
securities or other assets for which current market quotations are not
readily available are valued at their fair value as determined in good
faith under procedures established by and under the general supervision and
responsibility of the Trust's board of trustees.
REPURCHASE OF COMMON SHARES
Shares of closed-end investment companies often trade at a discount
to their net asset values, and the Trust's common shares may also trade at
a discount to their net asset value. The market price of the Trust's common
shares will be determined by such factors as relative demand for and supply
of such common shares in the market, the Trust's net asset value, general
market and economic conditions and other factors beyond the control of the
Trust. Although the Trust's common shareholders will not have the right to
redeem their common shares, the Trust may take action to repurchase common
shares in the open market or make tender offers for its common shares at
their net asset value. This may, but will not necessarily, have the effect
of reducing any market discount from net asset value. See "Repurchase of
Common Shares" in the statement of additional information.
DESCRIPTION OF SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust authorizes issuance of an
unlimited number of full and fractional common shares of beneficial
interest and up 100,000,000 shares of beneficial interest with preference
rights, including the Preferred Shares, having a par value of $0.01 per
share in one or more series, with rights as determined by the board of
trustees, by action of the board of trustees without the approval of
shareholders. Shareholders have no pre-emptive right to purchase any such
preferred shares.
COMMON SHARES
Each common share represents an equal proportionate interest in the
assets of the Trust with each other common share of the Trust, and is
entitled to one vote on any matter for which common shares of beneficial
interest are entitled to vote under applicable law. The Declaration of
Trust provides that shareholders are not liable for any liabilities of the
Trust, requires inclusion of a clause to that effect in every agreement
entered into by the Trust and indemnifies shareholders against any such
liability. Although shareholders of an unincorporated business trust
established under Massachusetts law may, in certain limited circumstances,
be held personally liable for the obligations of the Trust as though they
were general partners, the provisions of the Declaration of Trust described
in the foregoing sentence make the likelihood of such personal liability
remote.
The Trust's Declaration of Trust provides that the Trust will
terminate on December 31, 2008, without shareholder approval. In connection
with such termination, the Trust will liquidate all of its assets and
distribute to holders of outstanding common shares the net proceeds from
such liquidation after making appropriate provision for any liabilities of
the Trust and the payment of any liquidation preferences and accumulated
but unpaid dividends on any outstanding preferred shares of beneficial
interest. Prior to such termination, however, the board of trustees of the
Trust will consider whether it is in the best interests of shareholders to
terminate and liquidate the Trust on December 31, 2008 without shareholder
approval notwithstanding the foregoing provision of the Declaration of
Trust. In considering this matter, the board of trustees will take into
account, among other factors, the adverse effect which capital losses
realized upon disposition of securities in connection with liquidation (if
any such losses are anticipated) would have on the Trust and its
shareholders. In the event that the board of trustees determines that under
the circumstances, termination and liquidation of the Trust on December 31,
2008 without a shareholder vote would not be in the best interests of
shareholders, the board of trustees will call a special meeting of
shareholders to consider an appropriate amendment to the Trust's
Declaration of Trust. The Trust's Declaration of Trust would require the
affirmative vote of the holders of at least 75% of outstanding shares of
beneficial interest to approve such an amendment. The foregoing provisions
of the Trust's Declaration of Trust are governed by the laws of The
Commonwealth of Massachusetts and not the 1940 Act.
The Trust's shares of beneficial interest are or, when issued will
be, fully paid and, subject to the foregoing discussion of shareholder
liability for Massachusetts business trusts, nonassessable. All common
shares of beneficial interest are equal as to dividends, assets and voting
privileges and have no conversion, preemptive or other subscription rights.
Shareholders are entitled to one vote per share of beneficial interest and
do not have cumulative voting rights.
The Trust has no present intention of offering any additional
shares other than New Preferred Shares as described herein. Any additional
offerings of shares of beneficial interest, if made, will require approval
by the Trust's board of trustees. Any additional offering of common shares
will be subject to the requirements of the 1940 Act that common shares may
not be issued at a price below the then current net asset value (exclusive
of underwriting discounts and commissions) except in connection with an
offering to existing shareholders or with the consent of a majority of the
Trust's common shareholders.
On December 31, 1999, there were 8,707,093 common shares of the
Trust issued and outstanding.
So long as any New Preferred Shares or any other preferred shares
of the Trust are outstanding, holders of common shares of the Trust will
not be entitled to receive any net income of or other distributions from
the Trust unless all accumulated dividends on outstanding preferred shares
(including the New Preferred Shares) have been paid, and unless asset
coverage (as defined in the 1940 Act) with respect to such preferred shares
would be at least 200% after giving effect to such distributions. See
"Description of New Preferred Shares-Dividends and Dividend Periods" for
other restrictions on dividends to holders of common shares which will be
applicable for so long as any preferred shares of the Trust are
outstanding.
The common shares have traded on the New York Stock Exchange since
September 18, 1992 under the symbol BRF.
At __________, 2000, the net asset value per common share was
$__________ and the closing price per common share on the New York Stock
Exchange was $__________.
PREFERRED SHARES OF BENEFICIAL INTEREST
Under the Certificate of Designation, the Trust is authorized to
issue an aggregate of 3,366 Preferred Shares. Under the 1940 Act, the Trust
is permitted to have outstanding more than one series of preferred shares
so long as no single series has a priority over another series as to the
distribution of assets of the Trust or the payment of dividends. Holders of
common shares and outstanding Preferred Shares of the Trust have no
preemptive right to purchase any preferred shares (including the New
Preferred Shares) that might be issued. It is anticipated that the net
asset value per share of the New Preferred Shares will equal its original
purchase price per share plus accrued dividends per share. See "Description
of New Preferred Shares" for a description of the rights, preferences,
privileges and other terms of the New Preferred Shares.
ANTITAKEOVER PROVISIONS OF THE DECLARATION OF TRUST AND BY-LAWS
The Trust presently has provisions in its Declaration of Trust and
By-Laws (commonly referred to as "antitakeover" provisions) which may have
the effect of limiting the ability of other entities or persons to acquire
control of the Trust, to cause it to engage in certain transactions or to
modify its structure.
First, a trustee may be removed from office by a vote of at least
75% of the outstanding shares of the class or classes of shares of
beneficial interest that elected such Trustee. Second, the affirmative vote
of a majority of the trustees and of a majority of each class of the
Trust's "outstanding voting securities" as that term is defined in the 1940
Act will be required to authorize the Trust's conversion from a closed-end
to an open-end investment company, which conversion would result in
delisting of the common shares from the New York Stock Exchange. Conversion
to an open- end investment company would require redemption of all
outstanding preferred shares of the Trust. Third, the board of trustees is
classified into three classes, each with a term of three years with only
one class of trustees standing for election in any year. Such
classification may prevent replacement of a majority of the trustees for up
to a two year period. The affirmative vote of at least 75% of each class of
shares of beneficial interest will be required to amend the Declaration of
Trust to change any of the foregoing provisions (other than the provision
regarding the classification and term of the board of trustees, which
requires a majority vote of each class of the shares of beneficial
interest).
In addition, the Declaration of Trust requires the favorable vote
of the holders of at least 75% of the outstanding shares of beneficial
interest of the Trust, voting as a class, then entitled to vote to approve,
adopt or authorize certain transactions with 5%-or-greater holders of such
shares and their associates, unless the board or trustees shall by
resolution have approved a memorandum of understanding with such holders,
in which case normal voting requirements would be in effect. For the
purposes of these provisions, a 5%-or-greater holder of shares of
beneficial interest (a "Principal Shareholder") refers to any person who,
whether directly or indirectly and whether alone or together with its
affiliates and associates, beneficially owns 5% or more of the outstanding
shares of any class of beneficial interest of the Trust. The transactions
subject to these special approval requirements are: (i) the merger or
consolidation of the Trust or any subsidiary of the Trust with or into any
Principal Shareholder; (ii) the issuance of any securities of the Trust to
any Principal Shareholder for cash (except pursuant to the Trust's Dividend
Reinvestment Plan); (iii) the sale, lease or exchange of all or any
substantial part of the assets of the Trust to any Principal Shareholder
(except assets having an aggregate fair market value of less than
$1,000,000, aggregating for the purpose of such computation all assets
sold, leased or exchanged in any series of similar transactions within a
twelve-month period); (iv) the sale, lease or exchange to the Trust or any
subsidiary thereof, in exchange for securities of the Trust, of any assets
of any Principal Shareholder (except assets having an aggregate fair market
value of less than $1,000,000, aggregating for the purpose of such
computation all assets sold, leased or exchanged in any series of similar
transactions within a twelve-month period). The affirmative vote of at
least 75% of each class of the shares of beneficial interest is required to
amend the Declaration of Trust to change any of the foregoing provisions.
The percentage of votes required under these provisions, which are
greater than the minimum requirements under Massachusetts law absent the
elections described above or in the 1940 Act, will make more difficult a
change in the Trust's business or management and may have the effect of
depriving holders of common shares of an opportunity to sell shares at a
premium over prevailing market prices by discouraging a third party from
seeking to obtain control of the Trust in a tender offer or similar
transaction. The Trust's board of trustees, however, has considered these
antitakeover provisions and believes they are in the best interests of
shareholders.
CUSTODIAN
The Trust's securities and cash are held under a Custodial
Agreement with State Street Bank and Trust Company (the "Custodian"), 225
Franklin Street, Boston, Massachusetts.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and the Trust has agreed to sell to such underwriter, the number
of New Preferred Shares set forth opposite the name of such underwriter.
Number of
Series TR
Name Preferred Shares
- ---------------- ---------------------
Total ................ 726
============
The underwriting agreement provides that the obligations of the
underwriters to purchase the shares included in this offering are subject
to the approval of certain legal matters by counsel and to certain other
conditions. The underwriters are obligated to purchase all the New
Preferred Shares if they purchase any of the shares. In the underwriting
agreement, the Trust and the Adviser have agreed to indemnify the
underwriters against certain liabilities, including liabilities arising
under the Securities Act of 1933, or to contribute payments the
underwriters may be required to make for any of those liabilities.
The underwriters, for whom ___________ [and __________ ] are acting
as representatives, propose to initially offer some of the New Preferred
Shares directly to the public at the public offering price set forth on the
cover page of this prospectus and some of the New Preferred Shares to
certain dealers at the public offering price less a concession not in
excess of $______ per share. The sales load the Trust will pay of _____ per
share is equal to ____% of the initial offering price. The underwriters may
allow, and such dealers may reallow, a concession not in excess of $______
per share on sales to certain other dealers. After the initial public
offering, the underwriters may change the public offering price and the
concession. Investors must pay for any New Preferred Shares purchased in
the initial public offering on or before __________ , 2000.
The Trust anticipates that the underwriters may from time to time
act as brokers or dealers in executing the Trust's portfolio transactions
after they have ceased to be underwriters. The underwriters are active
underwriters of, and dealers in, securities and act as market makers in a
number of such securities, and therefore can be expected to engage in
portfolio transactions with the Trust.
The Trust anticipates that the underwriters or their respective
affiliates may, from time to time, act in Auctions as Broker-Dealers and
receive fees as set forth under "The Auction." [Each of such firms may also
provide information to be used in ascertaining the applicable reference
rates.] Each of the underwriters engages in transactions with, and perform
services for, the Trust in the ordinary course of business.
TRANSFER AGENT, DIVIDEND
DISBURSING AGENT AND REGISTRAR
The transfer agent, dividend disbursing agent and registrar for the
New Preferred Shares will be Deutsche Bank Group, [4 Albany Street, New
York, New York]. The transfer agent, dividend disbursing agent and
registrar for the common shares of the Trust is State Street Bank and Trust
Company.
LEGAL OPINIONS
Certain legal matters in connection with the New Preferred Shares
offered hereby will be passed upon for the Trust by Skadden, Arps, Slate,
Meagher & Flom LLP, New York, New York and for the Underwriters by Simpson
Thacher & Bartlett, New York, New York. Such counsel will rely, as to
matters of Florida law, on the opinion of [Squire, Sanders & Dempsey,
Jacksonville, Florida].
EXPERTS
The data in the "Financial Highlights" section of this prospectus
are based upon financial statements that have been audited by Deloitte &
Touche LLP, Two World Center, New York, New York, independent auditors, as
indicated in their reports with respect thereto, and are incorporated by
reference herein in reliance on their reports given on their authority as
experts in auditing and accounting.
REPORTS TO SHAREHOLDERS
The Trust sends unaudited semiannual reports and audited annual
reports, including a list of investments held, to shareholders.
AVAILABLE INFORMATION
The Trust is subject to the informational requirements of the
Securities Exchange Act of 1934 and the 1940 Act and in accordance
therewith is required to file reports, proxy statements and other
information with the SEC. Any such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
of the SEC, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and the SEC's New York Regional Office, Seven World Trade Center,
New York, New York 10048 and its Chicago Regional Office, Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661. Reports, proxy statements and other information concerning the Trust
can also be inspected at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
Additional information regarding the Trust and the New Preferred
Shares is contained in the Registration Statement on Form N-2, including
amendments, exhibits and schedules thereto, relating to such shares filed
by the Trust with the SEC. This prospectus does not contain all of the
information set forth in the Registration Statement, including any
amendments, exhibits and schedules thereto. For further information with
respect to the Trust and the shares offered hereby, reference is made to
the Registration Statement. Statements contained in this prospectus as to
the contents of any contract or other document referred to are not
necessarily complete and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
A copy of the Registration Statement may be inspected
without charge at the SEC's principal office in Washington, D.C., and
copies of all or any part thereof may be obtained from the SEC upon the
payment of certain fees prescribed by the SEC. The SEC maintains a web site
(http://www.sec.gov) that contains the Registration Statement, other
documents incorporated by reference, and other information the Trust has
filed electronically with the SEC, including proxy statements and reports
filed under the Securities Exchange Act of 1934.
TABLE OF CONTENTS FOR THE
STATEMENT OF ADDITIONAL INFORMATION
Page
----
Investment Objective and Policies..........................................S-2
Description of Florida Municipal Obligations...............................S-3
Investment Restrictions....................................................S-4
Investment Policies and Techniques.........................................S-5
Management of the Trust....................................................S-8
Portfolio Transactions and Brokerage......................................S-13
Additional Information Concerning the Auctions for New Preferred Shares...S-14
Repurchase of Common Shares...............................................S-15
Tax Matters...............................................................S-16
Financial Statements......................................................S-20
Additional Information....................................................S-20
Appendix A - General Characteristics and Risks of Hedging Transactions.....A-1
Appendix B - Insurance Ratings.............................................B-1
Appendix C-1 - Amended and Restated Certificate of Designation...........C-1-1
Appendix C-2 - Form of Certificate of Designation........................C-2-1
APPENDIX A
TAX EQUIVALENT YIELD TABLE
The table below gives the approximate yield a security must earn at
various income brackets to produce after- tax yields equivalent to those of
tax-exempt bonds yielding from 4.75% to 5.75% under the regular Federal
income tax law and tax rates applicable to individuals for 2000.
<TABLE>
<CAPTION>
(TAXABLE INCOME*) MARGINAL TAX EXEMPT YIELD OF:
------------------- FEDERAL
INCOME 4.75% 5.0% 5.25% 5.5% 5.75%
TAX
SINGLE RETURN JOINT RETURN BRACKET IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
----------------- ---------------- --------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Up to $26,250 Up to $43,850 15.00% % % % % %
$26,251 - $63,550 $43,851 - $105,950 28.00
$63,551 - $132,600 $105,951 - $161,450 31.00
$132,601 - $288,350 $161,451 - $288,350 36.00
Over $288,350 Over $288,350 39.60
---------------
*Net amount subject to Federal personal income tax after deductions and exemptions.
</TABLE>
The above indicated Federal income tax brackets do not take into
account the effect of a reduction in the deductibility of itemized
deductions for individual taxpayers with adjusted gross income in excess of
$128,950. The tax brackets also do not show the effects of phaseout of
personal exemptions for single filers with adjusted gross income in excess
of $128,950 and joint filers with adjusted gross income in excess of
$193,400. The effective tax brackets and equivalent taxable yields of those
taxpayers will be higher than those indicated above.
[A Florida intangibles tax on personal property of $2.00 per $1,000
is generally imposed after exemptions on the value of stocks, bonds, other
evidences of indebtedness and mutual fund shares. An example of the effect
of Florida intangible personal property taxes on the tax brackets of
Florida taxpayers is as follows. A $10,000 investment subject to the tax
would require payment of $20.00 annually. If the investment yielded 5.5%
annually or $550, the intangibles tax as a percentage of income would be
$20/$550 or 3.64% If a taxpayer were in the 36% tax bracket, assuming the
intangibles taxes were deducted as an itemized deduction on the federal tax
return, the taxpayer would be in a combined federal and Florida state tax
bracket of 38.33% [36% + (1-.36) x 3.64%] with respect to such investment.
A Florida taxpayer whose intangible personal property is exempt or
partially exempt from tax due to the availability of exemptions will have a
lower taxable equivalent yield than indicated above.]
Yields shown are for illustration purposes only and are not meant
to represent the Trust's actual yield. No assurance can be given that the
Trust will achieve any specific tax-exempt yield. While it is expected that
the Trust will invest principally in obligations the interest from which is
exempt from the regular Federal income tax and Florida intangible personal
property taxes, other income received by the Trust may be taxable. It
should also be noted that the interest earned on certain "private activity
bonds", while exempt from the regular Federal income tax, is treated as a
tax preference item which could subject the recipient to the AMT. The
illustrations assume that the AMT is not applicable and do not take into
account any tax credits that may be available.
The information set forth above is as of the date of this
prospectus. Subsequent tax law changes could result in prospective or
retroactive changes in the tax brackets, tax rates, and tax-equivalent
yields set forth above. Investors should consult their tax adviser for
additional information.
==============================================================================
$18,150,000
THE BLACKROCK
FLORIDA INSURED MUNICIPAL
2008 TERM TRUST
AUCTION RATE MUNICIPAL PREFERRED
SHARES OF BENEFICIAL INTEREST
726 SHARES, SERIES R7
---------------------
PROSPECTUS
, 2000
---------------------
==============================================================================
[FLAG]
The information in this statement of additional information is not complete
and may be changed. We may not sell these securities until the Registration
Statement filed with the Securities and Exchange Commission is effective.
This statement of additional information is not an offer to sell these
securities and is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED ________________,2000
THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM TRUST
STATEMENT OF ADDITIONAL INFORMATION
The BlackRock Florida Insured Municipal 2008 Term Trust (the "Trust") is a
closed-end, non-diversified management investment company. This statement
of additional information relating to New Preferred Shares does not
constitute a prospectus, but should be read in conjunction with the
prospectus relating hereto dated ________ __, 2000. This statement of
additional information does not include all information that a prospective
investor should consider before purchasing New Preferred Shares, and
investors should obtain and read the prospectus prior to purchasing such
shares. A copy of the prospectus may be obtained without charge by calling
(888) 825-2257. You may also obtain a copy of the prospectus on the
Securities and Exchange Commission's web site (http://www.sec.gov).
Capitalized terms used but not defined in this statement of additional
information have the meanings given to them in the prospectus or the
Certificate of Designation and the amendments thereto attached to this
Statement of Additional Information as Appendices C-1 and C-2.
TABLE OF CONTENTS
Page
----
Investment Objective and Policies..........................................S-2
Description of Florida Municipal Obligations...............................S-3
Investment Restrictions....................................................S-4
Investment Policies and Techniques.........................................S-5
Management of the Trust....................................................S-8
Portfolio Transactions and Brokerage......................................S-13
Additional Information Concerning the Auctions for New Preferred Shares...S-14
Repurchase of Common Shares...............................................S-15
Tax Matters...............................................................S-16
Financial Statements......................................................S-20
Additional Information....................................................S-20
Appendix A - General Characteristics and Risks of Hedging Transactions.....A-1
Appendix B - Insurance Ratings.............................................B-1
Appendix C-1 - Amended and Restated Certificate of Designation...........C-1-1
Appendix C-2 - Form of Certificate of Designation........................C-2-1
This statement of additional information is dated _______ __ , 2000.
INVESTMENT OBJECTIVE AND POLICIES
The Trust has not established any limit on the percentage of its
portfolio that may be invested in municipal obligations subject to the
alternative minimum tax provisions of Federal tax law. New Preferred Shares
may not be a suitable investment for investors who are subject to the
Federal alternative minimum tax or who would become subject to such tax by
purchasing New Preferred Shares. The suitability of an investment in New
Preferred Shares will depend upon a comparison of the after-tax yield
likely to be provided from the Trust with that from comparable tax-exempt
investments not subject to the alternative minimum tax, and from comparable
fully taxable investments, in light of each such investor's tax position.
Special considerations apply to corporate investors. See "Tax Matters."
The types of Florida municipal obligations in which the Trust may
invest include general obligation bonds, revenue bonds, municipal lease
obligations, installment purchase contract obligations, variable and
floating rate obligations, zero coupon securities, tax-exempt notes and
municipal commercial paper.
The two principal classifications of Florida municipal obligations
are "general obligation" bonds and "revenue" bonds. General obligation
bonds are secured by the issuer's pledge of its full faith, credit and
taxing power for the payment of principal and interest. Revenue bonds are
payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a special excise tax
or other specific revenue source. Industrial development, private activity
and pollution control bonds are in most cases revenue bonds and do not
generally constitute the pledge of the credit or taxing power of the issuer
of such bonds. There are, of course, depending on numerous factors,
variations in the quality of Florida municipal obligations both within a
particular classification and between classifications.
Also included within the general category of Florida municipal
obligations are certain lease obligations or installment purchase contract
obligations and participations therein (hereinafter collectively called
"lease obligations") of municipal authorities or entities. Although lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation is
ordinarily backed by the municipality's covenant to budget for, appropriate
and make the payments due under the lease obligation. Interest on lease
obligations is tax-exempt to the same extent as if the municipality had
issued debt obligations to finance the underlying project or purchase.
However, certain lease obligations contain "non-appropriation" clauses
which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated
for such purpose on a yearly basis. In addition to the "non-appropriation"
risk, these securities represent a relatively new type of financing that
has not yet developed the depth of marketability associated with more
conventional bonds and some lease obligations may be illiquid. Although
"non- appropriation" lease obligations are generally secured by the leased
property, disposition of the property in the event of foreclosure might
prove difficult. In addition, the tax treatment of such obligations in the
event of non-appropriation is unclear. The Trust does not intend to invest
more than 10% of its total assets in lease obligations that contain "non-
appropriation" clauses.
Certain Florida municipal obligations may carry variable or
floating rates of interest whereby the rate of interest is not fixed but
varies with changes in specified market rates or indices, such as a bank
prime rate or a tax-exempt money market index. Accordingly, the yield on
such obligations can be expected to fluctuate with changes in prevailing
interest rates.
Other Florida municipal obligations include zero coupon securities,
which are debt obligations that do not entitle the holder to any periodic
payments prior to maturity and are issued and traded at a discount from
their face amounts. The discount varies depending on the time remaining
until maturity, prevailing interest rates, liquidity of the security and
perceived credit quality of the issuer. Zero coupon Florida municipal
obligations may be created by investment banks under proprietary programs
in which they strip the interest component from the principal component and
sell both separately. The market prices of zero coupon securities are
generally more volatile than the market prices of securities that pay
interest periodically and are likely to respond to changes in interest
rates to a greater degree than do securities having similar maturities and
credit quality that do pay periodic interest.
The term Florida municipal obligations also includes obligations,
such as tax-exempt notes, municipal commercial paper and municipal lease
obligations, having relatively short-term maturities, although, as noted
above, the Trust intends to invest its assets in a portfolio of Florida
municipal obligations which will have an average final maturity on or about
the Trust's termination date of December 31, 2008, except in temporary
defensive situations in which case investments in short- term assets may be
increased.
DESCRIPTION OF FLORIDA MUNICIPAL OBLIGATIONS
As described in the Prospectus, except during temporary periods,
the Trust will invest substantially all of its assets in Florida municipal
obligations. In addition, the specific Florida municipal obligations in
which the Trust will invest will change from time to time. The Trust is
therefore susceptible to political, economic, regulatory or other factors
affecting issuers of Florida municipal obligations. The following
information constitutes only a brief summary of a number of the complex
factors which may impact issuers of Florida municipal obligations and does
not purport to be a complete or exhaustive description of all adverse
conditions to which issuers of Florida municipal obligations may be
subject. Such information is derived from official statements utilized in
connection with the issuance of Florida municipal obligations, as well as
from other publicly available documents. Such information has not been
independently verified by the Trust, and the Trust assumes no
responsibility for the completeness or accuracy of such information. The
summary below does not include all of the information pertaining to the
budget, receipts and disbursements of the State of Florida that would
ordinarily be included in various public documents issued thereby, such as
an Official Statement prepared in connection with the issuance of general
obligation bonds of the State of Florida. Such an Official Statement,
together with any updates or supplements thereto, may generally be obtained
upon request to the Budget Office of the State of Florida.
Because the Trust invests primarily in Florida municipal
obligations, it will be affected by political and economic conditions and
developments within the state of Florida. In general, the credit quality
and credit risk of any issuer's debt depend on the state and local economy,
the health of the issuer's finances, the amount of the issuer's debt, the
quality of management, and the strength of legal provisions in debt
documents that protect debt holders. Credit risk is usually lower whenever
the economy is strong, growing and diversified, financial operations are
sound, and the debt burden is reasonable.
The state of Florida's economy is characterized by a large service
sector, a dependence on the tourism and construction industries, and a
large retirement population. The management of rapid growth has been the
major challenge facing state and local governments. Florida's population
has grown rapidly and is now the fourth largest state; this growth is
expected to continue, but at reduced rates. The retiree component is
expected to continue to be a major factor. As this growth continues,
particularly within the retirement population, the demand for both public
and private services will increase, which may strain the service sector's
capacity and impede the state's budget balancing efforts.
In recent years, the Florida economy has been transforming from a
narrow base of agriculture and seasonal tourism into a service and trade
economy, with substantial insurance, banking and export participation as
well as greater year-round attraction. The outlook for the Florida economy
is continued expansion fueled by population growth but at a slower rate
than that of the 1980s.
Debt levels in the state of Florida are moderate to high,
reflecting the tremendous capital demands associated with rapid population
growth. Florida is unusual among states in that all general obligation full
faith and credit debt issues of municipalities must be approved by public
referendum and are, therefore, relatively rare. Most debt instruments
issued by local municipalities and authorities have a narrower pledge of
security, such as a sales tax stream, special assessment revenue, user
fees, utility taxes or fuel taxes. Credit quality of such debt instruments
tends to be somewhat lower than that of general obligation debt. The state
of Florida issues general obligation debt for a variety of purposes;
however, the state constitution requires a specific revenue stream to be
pledged to state general obligation bonds as well.
The state of Florida is heavily dependent upon sales tax, which
makes the state's general fund vulnerable to recession and presents
difficulties in expanding the tax base in an economy increasingly geared to
services. This dependence upon sales tax, combined with economic recession,
has resulted in budgetary shortfalls in the past; Florida has reacted to
preserve an adequate financial position primarily through expenditure
reductions. State officials, however, still face tremendous capital and
operating pressures due to the growth that will continue to strain the
state's narrow revenue base. Future budgets may require a wider revenue
base to meet such demands; the most likely candidate for such revenue
enhancement is a tax on consumer services. The creation of a Florida
personal income tax is a remote possibility because it would require an
amendment to the state's constitution. However, there can be no assurance
that a personal income tax will not be implemented in the future. If such a
tax were to be imposed, there is no assurance that interest earned on
Florida municipal obligations would be exempt from this tax.
County and municipal governments in Florida depend primarily upon
ad valorem property taxes, and sales, motor fuels and other local exercise
taxes and miscellaneous revenue sources, including revenues from utilities
services. Florida school districts derive substantially all of their
revenues from local property taxers. The overall levels of revenues from
these sources is in part dependant upon the local, state, and national
economy. Local governments obligations held by the Trust may constitute
general obligations or may be social obligations payable solely from one or
more specified revenue sources. The ability of the local governments to
repay their obligations on a timely basis will be dependent upon the
continued strength of the revenues pledges and of the overall fiscal status
of the local government.
An amendment to the Constitution of the State of Florida was
approved by the voters of the State of Florida at the November 1994 general
election. This amendment limits the amount of taxes, fees, licenses and
charges imposed by the State Legislature and collected during any fiscal
year to the amount of revenues allowed for the prior fiscal year, plus an
adjustment for growth. Growth is defined as the amount equal to the average
annual rate of growth in Florida personal income over the most recent
twenty quarters times the state revenues allowed for the prior fiscal year.
The revenues allowed for any fiscal year could be increased by a two-thirds
vote of the Legislature. The limit was effective in the fiscal year
1995-1996. Excess revenues generated will initially be deposited in the
budget stabilization fund until it is fully funded; any additional excess
revenues will then be refunded to taxpayers. This amendment could limit the
amount of actual revenues form which the State of Florida could appropriate
funds, including funds appropriated to local governments. It is unclear at
this point what effect, if any, this amendment would have on local
government debt obligations payable from state revenues which may be
subject to this amendment, such as state revenue sharing moneys or other
state revenues distributed to local governments. Certain State of Florida
debt obligations, which are not by their terms subject to appropriation,
should not be affected, depending upon the language of the legislation
authorizing the issuance of such obligations.
INVESTMENT RESTRICTIONS
The Trust's investment objective and the following investment
restrictions are fundamental and cannot be changed without the approval of
the holders of a majority of the Trust's outstanding voting securities
(defined in the 1940 Act as the lesser of (a) more than 50% of the
outstanding shares (including common shares, New Preferred Shares and any
other outstanding preferred shares) or (b) 67% or more of the shares
(including common shares and New Preferred Shares and any other outstanding
preferred shares) represented at a meeting at which more than 50% of the
outstanding shares (including common shares and New Preferred Shares and
any other outstanding preferred shares) are represented) and the approval
of the holders of a majority of New Preferred Shares and any other
outstanding preferred shares voting separately as a class. All other
investment policies or practices are considered by the Trust not to be
fundamental and accordingly may be changed without shareholder approval. If
a percentage restriction on investment or use of assets set forth below is
adhered to at a time a transaction is effected, later changes in percentage
resulting from changing market values will not be considered a deviation
from policy. The Trust may not:
(1) invest 25% of more of the value of its total assets in
any one industry provided that such limitation shall not be
applicable to Florida municipal obligations other than those
Florida municipal obligations backed only by assets and revenues of
non-governmental users;
(2) issue senior securities other than (a) preferred shares
not in excess of the excess of 50% of its total assets over any
senior securities described in clause (b) below that are
outstanding, (b) senior securities other than preferred shares of
beneficial interest (including borrowing money, including on margin
if margin securities are owned and through entering into reverse
repurchase agreements) not in excess of 331/3% of its total assets,
and (c) borrowings up to 5% of its total assets for temporary
purposes without regard to the amount of senior securities
outstanding under clauses (a) and (b) above; provided, however,
that the Trust's obligations under interest rate swaps, when issued
and forward commitment transactions and similar transactions are
not treated as senior securities if covering assets are
appropriately segregated; or pledge its assets other than to secure
such issuances or in connection with Hedging Transactions, short
sales, when-issued and forward commitment transactions and similar
investment strategies. For purposes of clauses (a), (b) and (c)
above, "total assets" shall be calculated after giving effect to
the net proceeds of any such issuance and net of any liabilities
and indebtedness that do not constitute senior securities except
for such liabilities and indebtedness as are excluded from
treatment as senior securities by the proviso to this item (2);
(3) make loans of money or property to any person, except
through loans of portfolio securities, the purchase of fixed income
securities consistent with the Trust's investment objective and
policies or the acquisition of securities subject to repurchase
agreements;
(4) underwrite the securities of other issuers, except to
the extent that in connection with the disposition of portfolio
securities or the sale of its own shares the Trust may be deemed to
be an underwriter;
(5) invest for the purpose of exercising control over any
issuer, except that the Trust may control a portfolio subsidiary;
(6) purchase or sell real estate or interests therein other
than municipal obligations secured by real estate or interests
therein;
(7) purchase or sell commodities or commodity contracts
except for purposes, and only to the extent, permitted by
applicable law without the Trust becoming subject to registration
with the Commodity Futures Trading Commission as a commodity pool;
or
(8) make any short sale of securities except in conformity
with applicable laws, rules and regulations and unless, giving
effect to such sale, the market value of all securities sold short
does not exceed 25% of the value of the Trust's total assets and
the Trust's aggregate short sales of a particular class of
securities does not exceed 25% of the then outstanding securities
of that class.
The Trust has no intention to file a voluntary application for
relief under Federal bankruptcy law of any similar application under state
law for as long as the Trust is solvent and does not foresee becoming
insolvent.
INVESTMENT POLICIES AND TECHNIQUES
The following information supplements the discussion of the Trust's
investment objective, policies and techniques that are described in the
prospectus.
HEDGING TRANSACTIONS
The following descriptions of types of hedging transactions in
which the Trust may engage supplements the information in the prospectus
under the caption "Other Investment Practices -- Hedging." For additional
information, see Appendix A "General Characteristics and Risks of Hedging
Transactions."
Interest Rate Transactions. Among the Hedging Transactions into
which the Trust may enter are interest rate swaps and the purchase or sale
of interest rate caps and floors. The Trust expects to enter into these
transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio as a duration management technique
or to protect against any increase in the price of securities the Trust
anticipates purchasing at a later date. The Trust intends to use these
transactions as a hedge and not as a speculative investment. The Trust will
not sell interest rate caps or floors that it does not own. Interest rate
swaps involve the exchange by the Trust with another party of their
respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments with respect to a notional
amount of principal. The purchase of an interest rate cap entitles the
purchaser, to the extent that a specified index exceeds a predetermined
interest rate, to receive payments of interest on a notional principal
amount from the party selling such interest rate cap. The purchase of an
interest rate floor entitles the purchaser, to the extent that a specified
index falls below a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such
interest rate floor.
The Trust may enter into interest rate swaps, caps and floors on
either an asset-based or liability-based basis, depending on whether it is
hedging its assets or liabilities, and will usually enter into interest
rate-swaps on a net basis, i.e., the two payment streams are netted out,
with the Trust receiving or paying, as the case may be, only the net amount
of the two payments on the payment dates. Inasmuch as these Hedging
Transactions are entered into for good faith hedging purposes, the Adviser
and the Trust believe such obligations do not constitute senior securities
and, accordingly, will not treat them as being subject to its borrowing
restrictions. The Trust will accrue the net amount of the excess, if any,
of the Trust's obligations over its entitlements with respect to each
interest rate swap on a daily basis and will segregate with a custodian an
amount of cash or liquid securities having an aggregate net asset value at
least equal to the accrued excess. The Trust will not enter into any
interest rate swap, cap or floor transaction unless the unsecured senior
debt or the claims-paying ability of the other party thereto is rated in
the highest rating category of at least one nationally recognized rating
organization at the time of entering into such transaction. If there is a
default by the other party to such a transaction, the Trust will have
contractual remedies pursuant to the agreements related to the transaction.
The swap market has grown substantially in recent years with a large number
of banks and investment banking firms acting both as principals and as
agents utilizing standardized swap documentation. Caps and floors are more
recent innovations for which standardized documentation has not yet been
developed and, accordingly, they are less liquid than swaps.
Futures Contracts and Options on Futures Contracts. In connection
with its hedging and other risk management strategies, the Trust may also
enter into contracts for the purchase or sale for future delivery ("futures
contracts") of debt securities, aggregates of debt securities, financial
indices, and U.S. Government debt securities or options on the foregoing to
hedge the value of its portfolio securities that might result from a change
in interest rates or market movements. The Trust will engage in such
transactions only for bona fide hedging, risk management and other
appropriate portfolio management purposes, in each case, in accordance with
the rules and regulations of the Commodity Futures Trading Commission.
Calls on Securities Indices and Futures Contracts. In order to
enhance income or reduce fluctuations in net asset value, the Trust may
sell or purchase call options ("calls") on Florida municipal obligations
and indices based upon the prices of debt securities that are traded on US.
securities exchanges and in the over-the-counter markets. A call option
gives the purchaser of the option the right to buy, and obligates the
seller to sell, the underlying security, futures contract or index at the
exercise price at any time or at a specified time during the option period.
All such calls sold by the Trust must be "covered" as long as the call is
outstanding (i.e., the Trust must own the instrument subject to the call or
other securities or assets acceptable for applicable segregation and
coverage requirements). A call sold by the Trust exposes the Trust during
the term of the option to possible loss of opportunity to realize
appreciation in the market price of the underlying security, index or
futures contract and may require the Trust to hold an instrument which it
might otherwise have sold. The purchase of a call gives the Trust the right
to buy the underlying instrument or index at a fixed price. Calls on
futures contracts on Florida municipal obligations written by the Trust
must also be covered by assets or instruments acceptable under applicable
segregation and coverage requirements.
Puts on Securities Indices and Futures Contracts. As with calls,
the Trust may purchase put options ("puts") on Florida municipal
obligations (whether or not it holds such securities in its portfolio). For
the same purposes the Trust may also sell puts on municipal obligations
financial indices and puts on futures contracts on municipal obligations if
the Trust's contingent obligations on such puts are secured by segregated
assets consisting of cash or liquid high grade debt securities having a
value not less than the exercise price. The Trust will not sell puts if, as
a result, more than 50% of the Trust's assets would be required to cover
its potential obligation under its hedging and other investment
transactions. In selling puts, there is a risk that the Trust may be
required to buy the underlying instrument or index at higher than the
current market price.
The principal risks relating to the use of Hedging Transactions
are: (i) less than perfect correlation between the prices of the hedging
instrument and the market value of the securities in the Trust's portfolio;
(ii) possible lack of a liquid secondary market for closing out a position
in such instruments; (iii) losses resulting from interest rate or other
market movements not anticipated by the Adviser; and (iv) the obligation to
meet additional variation margin or other payment requirements. See
Appendix A "General Characteristics and Risks of Hedging Transactions."
Certain provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), may restrict or affect the ability of the Trust to engage in
Hedging Transactions. See "Tax Matters" and the prospectus.
OTHER INVESTMENT POLICIES AND TECHNIQUES
Restricted and Illiquid Securities. Certain of the Trust's
investments may be illiquid. Illiquid securities are subject to legal or
contractual restrictions on disposition or lack an established secondary
trading market. The sale of restricted and illiquid securities often
requires more time and results in higher brokerage charges or dealer
discounts and other selling expenses than does the sale of securities
eligible for trading on national securities exchanges or in the over-
the-counter markets. Restricted securities may sell at a price lower than
similar securities that are not subject to restrictions on resale.
Repurchase Agreements. The Trust may invest temporarily, without
limitation, in repurchase agreements, which are agreements pursuant to
which securities are acquired by the Trust from a third party with the
understanding that they will be repurchased by the seller at a fixed price
on an agreed date. These agreements may be made with respect to any of the
portfolio securities in which the Trust is authorized to invest. Repurchase
agreements may be characterized as loans secured by the underlying
securities. The Trust may enter into repurchase agreements with (i) member
banks of the Federal Reserve System having total assets in excess of $500
million and (ii) securities dealers, provided that such banks or dealers
meet the creditworthiness standards established by the Trust's board of
trustees ("Qualified Institutions"). The Adviser will monitor the continued
creditworthiness of Qualified Institutions, subject to the supervision of
the Trust's board of trustees. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is unrelated to the
coupon rate or date of maturity of the purchased security. The collateral
is marked to market daily. Such agreements permit the Trust to keep all its
assets earning interest while retaining "overnight" flexibility in pursuit
of investments of a longer-term nature.
The use of repurchase agreements involves certain risks. For
example, if the seller of securities under a repurchase agreement defaults
on its obligation to repurchase the underlying securities, as a result of
its bankruptcy or otherwise, the Trust will seek to dispose of such
securities, which action could involve costs or delays. If the seller
becomes insolvent and subject to liquidation or reorganization under
applicable bankruptcy or other laws, the Trust's ability to dispose of the
underlying securities may be restricted. Finally, it is possible that the
Trust may not be able to substantiate its interest in the underlying
securities. To minimize this risk, the securities underlying the repurchase
agreement will be held by the custodian at all times in an amount at least
equal to the repurchase price, including accrued interest. If the seller
fails to repurchase the securities, the Trust may suffer a loss to the
extent proceeds from the sale of the underlying securities are less than
the repurchase price.
Reverse Repurchase Agreements. The Trust may enter into reverse
repurchase agreements with respect to its portfolio investments subject to
the investment restrictions set forth herein and in the prospectus. Reverse
repurchase agreements involve the sale of securities held by the Trust with
an agreement by the Trust to repurchase the securities at an agreed upon
price, date and interest payment. At the time the Trust enters into a
reverse repurchase agreement, it may establish and maintain a segregated
account with its custodian containing liquid instruments having a value not
less than the repurchase price (including accrued interest). If the Trust
establishes and maintains such a segregated account, a reverse repurchase
agreement will not be considered a borrowing by the Trust; however, under
circumstances in which the Trust does not establish and maintain such a
segregated account, such reverse repurchase agreement will be considered a
borrowing for the purpose of the Trust's limitation on borrowings. The use
by the Trust of reverse repurchase agreements involves many of the same
risks of leverage since the proceeds derived from such reverse repurchase
agreements may be invested in additional securities. Reverse repurchase
agreements involve the risk that the market value of the securities
acquired in connection with the reverse repurchase agreement may decline
below the price of the securities the Trust has sold but is obligated to
repurchase. Also, reverse repurchase agreements involve the risk that the
market value of the securities retained in lieu of sale by the Trust in
connection with the reverse repurchase agreement may decline in price.
If the buyer of securities under a reverse repurchase agreement
files for bankruptcy or becomes insolvent, such buyer or its trustee or
receiver may receive an extension of time to determine whether to enforce
the Trust's obligation to repurchase the securities, and the Trust's use of
the proceeds of the reverse repurchase agreement may effectively be
restricted pending such decision. Also, the Trust would bear the risk of
loss to the extent that the proceeds of the reverse repurchase agreement
are less than the value of the securities subject to such agreement.
When-Issued and Forward Commitment Securities. The Trust may
purchase Florida municipal obligations on a "when-issued" basis and may
purchase or sell Florida municipal obligations on a "forward commitment"
basis in order to hedge against anticipated changes in interest rates and
prices. When such transactions are negotiated, the price, which is
generally expressed in yield terms, is fixed at the time the commitment is
made, but delivery and payment for the securities take place at a later
date. When-issued securities and forward commitments may be sold prior to
the settlement date, but the Trust will enter into when-issued and forward
commitments only with the intention of actually receiving or delivering the
securities, as the case may be. If the Trust disposes of the right to
acquire a when-issued Florida municipal obligation prior to its acquisition
or disposes of its right to deliver or receive against a forward
commitment, it might incur a gain or loss. At the time the Trust enters
into a transaction on a when-issued or forward commitment basis, it will
segregate with the custodian cash or liquid high grade debt securities with
a value not less than the value of the when- issued or forward commitment
securities. The value of these assets will be monitored daily to ensure
that their marked to market value will at all times equal or exceed the
corresponding obligations of the Trust. There is always a risk that the
securities may not be delivered and that the Trust may incur a loss.
Settlements in the ordinary course, which may take substantially more than
five business days, are not treated by the Trust as when-issued or forward
commitment transactions and accordingly are not subject to the foregoing
restrictions.
Borrowings. Although it has no present intention of doing so, the
Trust receives the right to borrow funds to the extent permitted as
described under the caption "Investment Objective and Policies --
Investment Restrictions." The proceeds of borrowings may be used for any
valid purpose including, without limitation, liquidity, investing and
repurchases of capital stock of the Trust. Borrowing is a form of leverage
and, in that respect, entails risks, including volatility in net asset
value, market value and income available for distribution.
Lending of Securities. The Trust may lend its portfolio securities
to Qualified Institutions. By lending its portfolio securities, the Trust
attempts to increase its income through the receipt of interest on the
loan. Any gain or loss in the market price of the securities loaned that
may occur during the term of the loan will be for the account of the Trust.
The Trust may lend its portfolio securities so long as the terms and the
structure of such loans are not inconsistent with requirements of the 1940
Act, which currently require that (i) the borrower pledge and maintain with
the Trust collateral consisting of cash, a letter of credit issued by a
domestic U.S. bank, or securities issued or guaranteed by the U.S.
Government having a value at all times not less than 100% of the value of
the securities loaned, (ii) the borrower add to such collateral whenever
the price of the securities loaned rises (i.e., the value of the loan is
"marked to the market" on a daily basis), (iii) the loan be made subject to
termination by the Trust at any time and (iv) the Trust receive reasonable
interest on the loan (which may include the Trust's investing any cash
collateral in interest bearing short-term investments), any distributions
on the loaned securities and any increase in their market value. The Trust
will not lend portfolio securities if, as a result, the aggregate of such
loans exceeds 331/3% of the value of the Trust's total assets (including
such loans). Loan arrangements made by the Trust will comply with all other
applicable regulatory requirements, including the rules of the New York
Stock Exchange, which rules presently require the borrower, after notice,
to redeliver the securities within the normal settlement time of five
business days. All relevant facts and circumstances, including the
creditworthiness of the Qualified Institution, will be monitored by the
Adviser, and will be considered in making decisions with respect to lending
of securities, subject to review by the Trust's board of trustees.
The Trust may pay reasonable negotiated fees in connection with
loaned securities, so long as such fees are set forth in a written contract
and approved by the Trust's board of trustees. In addition, voting rights
may pass with the loaned securities, but if a material event were to occur
affecting such a loan, the loan must be called and the securities voted.
Zero Coupon Bonds. The Trust may invest in zero coupon bonds. A
zero coupon bond is a bond that does not pay interest for its entire life.
The market prices of zero coupon bonds are affected to a greater extent by
changes in prevailing levels of interest rates and thereby tend to be more
volatile in price than securities that pay interest periodically. In
addition, because the Trust accrues income with respect to these securities
prior to the receipt of such interest, it may have to dispose of portfolio
securities under disadvantageous circumstances in order to obtain cash
needed to pay income dividends in amounts necessary to avoid unfavorable
tax consequences.
MANAGEMENT OF THE TRUST
The officers of the Trust manage its day to day operations. The
officers are directly responsible to the Trust's board of trustees which
sets broad policies for the Trust and chooses its officers. The following
is a list of the trustees and officers of the Trust and a brief statement
of their present positions and principal occupations during the past five
years. Trustees who are interested persons of the Trust (as defined in the
1940 Act) are denoted by an asterisk (*). The business address of the
Trust, the Adviser and their board members and officers is 345 Park Avenue,
New York, New York 10154, unless specified otherwise below. The trustees
listed below are either trustees or directors of other closed-end funds in
which BlackRock Financial Management, Inc. or an affiliate acts as
investment adviser.
Principal Occupation
During the Past Five
Name and Address Title Years and Other Affiliations
- ---------------- ----- ----------------------------
Andrew F. Brimmer Trustee President of Brimmer & Company,
4400 MacArthur Blvd., N.W Inc., a Washington, D.C. based
Suite 302 economic and financial
Washington, DC 20007 consulting firm. Director of
Age: 72 CarrAmerica Realty Corporation
and Borg-Warner Automotive.
Formerly member of the Board of
Governors the Federal Reserve
System. Formerly Director of
AirBorne Express, BankAmerica
Corporation (Bank of America),
BellSouth Corporation, College
Retirement Equities Fund
(Trustee), Commodity Exchange,
Inc. (Public Governor),
Connecticut Mutual Life
Insurance Company, E.I. duPont
de Nemours & Company, Equitable
Life Assurance Society of the
United States, Gannett Company
(publishing), MNC Financial
Corporation (American Security
Bank), NMC Capital Management,
Navistar International
Corporation (truck
manufacturing), and UAL
Corporation (United Airlines).
Richard E. Cavanagh Trustee President and Chief Executive
845 Third Avenue Officer of The Conference
New York, NY 10022 Board, Inc., a leading global
Age: 52 business membership
organization, from
1995-present. Former Executive
Dean of the John F. Kennedy
School of Government at Harvard
University from 1988-1995.
Acting Director, Harvard Center
for Government (1991-1993).
Formerly Partner (principal) of
McKinsey & Company, Inc. (1980-
1988). Former Executive
Director of Federal Cash
Management, White House Office
of Management and Budget
(1977-1979). Co-author, THE
WINNING PERFORMANCE (best
selling management book
published in 13 national
editions). Trustee, Wesleyan
University, Drucker Foundation,
Educational Testing Services
(ETS) and Airplanes Group,
Aircraft Finance Trust (AFT).
Director, Arch Chemicals
(chemicals), Fremont Group
(investments) and The Guardian
Life Insurance Company of
America (insurance).
Kent Dixon Trustee Consultant/Investor.
9495 Blind Pass Road Former President and Chief
Unit #602 Executive Officer of Empire
St. Petersburg, FL 33706 Federal Savings Bank of America
Age: 61 and Banc PLUS Savings
Association, former Chairman of
the Board, President and Chief
Executive Officer of Northeast
Savings. Former Director of
ISFA (the owner of INVEST, a
national securities brokerage
service designed for banks and
thrift institutions).
Frank J. Fabozzi Trustee Consultant. Editor of THE
858 Tower View Circle JOURNAL OF PORTFOLIO MANAGEMENT
New Hope, PA 18938 and Adjunct Professor of
Age: 50 Finance at the School of
Management at Yale University.
Director, Guardian Mutual
Trusts Group. Author and editor
of several books on fixed
income portfolio management.
Visiting Professor of Finance
and Accounting at the Sloan
School of Management,
Massachusetts Institute of
Technology from 1986 to August
1992.
Laurence D. Fink* Trustee Chairman and Chief Executive
Age: 47 Officer of BlackRock Financial
Management, Inc. since March
1988. Formerly a Managing
Director of The First Boston
Corporation, member of its
Management Committee, co-head
of its Taxable Fixed Income
Division and head of its
Mortgage and Real Estate
Products Group (December
1980-March 1988). Currently,
Chairman of the board and
Director of each of BlackRock
Financial Management, Inc.'s
Trusts and Anthracite Capital,
Inc. Trustee of New York
University Medical Center,
Dwight Englewood School,
National Outdoor Leadership
School and Phoenix House. A
Director of VIMRx
Pharmaceuticals, Inc. and
Innovir Laboratories, Inc.
James Clayburn LaForce, Jr. Trustee Dean Emeritus of The John E.
P.O. Box 1595 Anderson Graduate School of
Pauma Valley, CA 92061 Management, University of
Age: 69 California since July 1, 1993.
Director, Imperial Credit
Industries (mortgage banking),
Jacobs Engineering Group, Inc.,
Rockwell International
Corporation, Payden & Rygel
Investment Trusts (investment
companies), Timken Company
(roller bearing and steel) and
Motor Cargo Industries
(transportation). Acting Dean
of The School of Business, Hong
Kong University of Science and
Technology 1990-1993. From 1978
to September 1993, Dean of The
John E. Anderson Graduate
School of Management,
University of California.
Walter F. Mondale Trustee Partner, Dorsey & Whitney, a
220 South Sixth Street law firm (December
Minneapolis, MN 55402 1996-present, September
Age: 71 1987-August 1993). Formerly
U.S. Ambassador to Japan
(1993-1996). Formerly Vice
President of the United States,
U.S. Senator and Attorney
General of the State of
Minnesota. 1984 Democratic
Nominee for President of the
United States.
Ralph L. Schlosstein* Trustee President of BlackRock
Age: 48 and Financial Management, Inc.
President since March 1988. Formerly a
Managing Director of Lehman
Brothers, Inc. and co-head of
its Mortgage and Savings
Institutional Group. Currently
President of each of the
closed-end funds in which
BlackRock Financial Management,
Inc. acts as investment
adviser. Trustee of Denison
University and New Visions for
Public Education in New York
City. A Director of the Pulte
Corporation and a member of the
Visiting Board of Overseers of
the John F. Kennedy School of
Government at Harvard
University.
Keith T. Anderson Vice Managing Director of BlackRock
Age: 40 President Financial Management, Inc.
since January 1991. Director of
BlackRock Financial Management,
Inc. from April 1988 to January
1991. From February 1987 to
April 1988, Vice President at
The First Boston Corporation in
the Fixed Income Research
Department. Previously Vice
President and Senior Portfolio
Manager at Criterion Investment
Management Company (now
Nicholas-Applegate).
Henry Gabbay Treasurer Managing Director and Chief
Age: 52 Operating Officer of BlackRock
Financial Management, Inc.
since January 1990. Director of
BlackRock Financial Management,
Inc. from February 1989 to
January 1990. From September
1984 to February 1989, Vice
President at The First Boston
Corporation.
Robert S. Kapito Vice Managing Director and Vice
Age: 42 President Chairman of BlackRock Financial
Management, Inc. since March
1988. Formerly Vice President
the First Boston Corporation in
the Mortgage Products Group
(from December 1985 to March
1988).
James Kong Assistant Managing Director of BlackRock
Age: 39 Treasurer Financial Management, Inc.
since January 1996. Director of
BlackRock Financial Management,
Inc. from January 1993 to
January 1996. Vice President
and Associate of BlackRock
Financial Management, Inc. from
January 1991 and April 1989 to
January 1993 and January 1991,
respectively. From April 1987
to April 1989, Assistant Vice
President at The First Boston
Corporation in the CMO/ABO
Administration Department.
Previously affiliated with
Deloitte Haskins & Sells (now
Deloitte & Touche LLP).
Karen H. Sabath Secretary Managing Director of BlackRock
Age: 34 Financial Management, Inc.
since January 1993. Vice
President and Associate of
BlackRock Financial Management,
Inc. from January 1989 and
August 1988 to January 1993 and
January 1989, respectively.
From June 1986 to July 1988,
Associate at The First Boston
Corporation in the Mortgage
Finance Department. From August
1988 to December 1992,
Associate Vice President of
BlackRock Advisers.
Michael C. Huebsch Vice Managing Director of the
Age: 41 President BlackRock Financial Management,
Inc. since January 1991.
Director of BlackRock Financial
Management, Inc. from January
1989 to January 1991. From July
1985 to January 1989, Vice
President at The First Boston
Corporation in the Fixed Income
Research Department.
Kevin Klingert Vice Managing Director of BlackRock
Age: 37 President Financial Management, Inc.
since January 1996. Director of
BlackRock Financial Management,
Inc. from January 1994 to
January 1996. Vice President of
BlackRock Financial Management,
Inc. from October 1991 to
January 1994. From March 1985
to October 1991, Assistant Vice
President at Merrill Lynch,
Pierce, Fenner & Smith in the
Unit Investment Trust
Department.
Richard Shea, Esq. Vice Effective January 2000 Managing
Age: 40 President Director of BlackRock Financial
Management, Inc. Director of
BlackRock Financial Management,
Inc. from January 1996 to
January 2000. Vice President of
BlackRock Financial Management,
Inc. from February 1993 to
January 1996. From December
1988 to February 1993,
Associate Vice President and
Tax Counsel at Prudential
Securities Incorporated. From
August 1984 to December 1988,
Senior Tax Specialist at
Laventhol & Horwath.
As of _________, 2000, no person is known to the Trust to own of
record or beneficially 5% or more of the outstanding common shares or
preferred shares, except Cede & Co., Bowling Green Station, P.O. Box 20,
New York, NY 10274-0020, which owned of record _____ of the outstanding
common shares.
Laurence D. Fink and Ralph L. Schlosstein serve as members of the
executive committee of the board of trustees. The executive committee,
which meets between regular meetings of the board of trustees, is
authorized to exercise all of the powers of the board of trustees except as
otherwise set forth in the Declaration of Trust.
The Trust has an Audit Committee consisting of those trustees who
are not interested persons of BlackRock Advisors, Inc. or the Adviser.
No officer or employee of the Trust receives any compensation from
the Trust for serving as an officer or trustee of the Trust. The Trust pays
each trustee who is not an "interested person" of the Trust (as defined in
the 1940 Act) $6,000 per year plus $1,500 per board meeting attended in
person or by telephone for travel and out-of-pocket expenses.
The aggregate estimated compensation received by each current
trustee of the Trust for the fiscal year ending December 31, 1999 and the
aggregate estimated compensation to be received by each current
director/trustee of the BlackRock family of funds for the fiscal year
ending December 31, 1999 as a whole are estimated as follows:
<TABLE>
<CAPTION>
1999 Estimated
Aggregate Estimated Total Compensation from
Compensation From the Trust and Fund
Name of Board Member Trust Complex Paid to Board Member*
- -------------------- ----- -----------------------------
<S> <C> <C>
Andrew R. Brimmer $12,000 $160,000
Richard E. Cavanagh $12,000 $160,000
Kent Dixon $12,000 $160,000
Frank J. Fabozzi $12,000 $160,000
Laurence D. Fink N/A N/A
James Grosfeld**
James Clayburn LaForce, Jr. $12,000 $160,000
Ralph L. Schlosstein
Walter F. Mondale $12,000 $160,000
* The BlackRock family of funds consists of 23 closed-end funds.
Total compensation from the Trust and Trust complex paid to each
board member is capped at $160,000; Trustee fees paid by the
Trust may be reduced based on the Trust's relative net asset
value in the event that the cap is applicable.
** Resigned on November 7, 1999.
</TABLE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is responsible for decisions to buy and sell securities
for the Trust, the selection of brokers and dealers to effect the
transactions and the negotiation of prices and any brokerage commissions.
The securities in which the Trust invests are traded principally in the
over-the-counter market. In the over-the-counter market, securities are
generally traded on a "net" basis with dealers acting as principal for
their own accounts without a stated commission, although price of the
security usually includes a mark-up to the dealer. Securities purchased in
underwritten offerings generally include, in the price, a fixed amount of
compensation for the manager(s), underwriter(s) and dealer(s). The Trust
may also purchase certain money market instruments directly from an issuer,
in which case no commissions or discounts are paid. Purchases and sales of
debt securities on a stock exchange are effected through brokers who charge
a commission for their services.
The Adviser is responsible for effecting securities transactions of
the Trust and will do so in a manner deemed fair and reasonable to
shareholders of the Trust and not according to any formula. The Adviser's
primary considerations in selecting the manner of executing securities
transactions for the Trust will be prompt execution of orders, the size and
breadth of the market for the security, the reliability, integrity and
financial condition and execution capability of the firm, the size of the
difficulty in executing the order, and the best net price. There are many
instances when, in the judgment of the Adviser, more than one firm can
offer comparable execution services. In selecting among such firms,
consideration is given to those firms which supply research and other
services in addition to execution services. Consideration may also be given
to the sale of shares of the Trust. However, it is not the policy of the
Adviser, absent special circumstances, to pay higher commissions to a firm
because it has supplied such research or other services.
The Adviser is able to fulfill its obligations to furnish a
continuous investment program to the Trust without receiving such
information from brokers; however, it considers access to such information
to be an important element of financial management. Although such
information is considered useful, its value is not determinable, as it must
be reviewed and assimilated by the Adviser, and does not reduce the
Adviser's normal research activities in rendering investment advice. It is
possible that the Adviser's expenses could be materially increased if it
attempted to purchase this type of information or generate it through its
own staff.
One or more of the other investment companies or accounts which the
Adviser manages may own from time to time some of the same investments as
the Trust. Investment decisions for the Trust are made independently from
those of such other investment companies or accounts; however, from time to
time, the same investment decision may be made for more than one company or
account. When two or more companies or accounts seek to purchase or sell
the same securities, the securities actually purchased or sold will be
allocated among the companies and accounts on a good faith equitable basis
by the Adviser in its discretion in accordance with the accounts' various
investment objective. In some cases, this system may adversely affect the
price or size of the position obtainable for the Trust. In other cases,
however, the ability of the Trust to participate in volume transactions may
produce better execution for the Trust. It is the opinion of the Trust's
board of trustees that this advantage, when combined with the other
benefits available due to the Adviser's organization, outweighs any
disadvantages that may be said to exist from exposure to simultaneous
transactions.
Although the investment management agreement contains no
restrictions on portfolio turnover, it is not the Trust's policy to engage
in transactions with the objective of seeking profits from short-term
trading. It is expected that the annual portfolio turnover rate of the
Trust will be less than 100% excluding securities having a maturity of one
year or less. Because it is difficult to predict accurately portfolio
turnover rates, actual turnover may be higher or lower. Higher portfolio
turnover results in increased Trust expenses, including brokerage
commissions, dealer mark-ups and other transaction costs on the sale of
securities and on the reinvestment in other securities.
ADDITIONAL INFORMATION CONCERNING
THE AUCTIONS FOR NEW PREFERRED SHARES
GENERAL
Auction Agency Agreement. The Trust will enter into an Auction
Agency Agreement (the "Auction Agency Agreement") with the Auction Agent
(currently, Deutsche Bank Group) which provides, among other things, that
the Auction Agent will follow the Auction Procedures for purposes of
determining the Applicable Rate for the New Preferred Shares so long as the
Applicable Rate for such shares is to be based on the results of an
Auction.
Broker-Dealer Agreements. Each Auction requires the participation
of one or more Broker-Dealers. The Auction Agent will enter into agreements
(collectively, the "Broker-Dealer Agreements") with several Broker-Dealers
selected by the Trust, which provide for the participation of those Broker-
Dealers in Auctions for New Preferred Shares. See "Broker- Dealers" below.
Securities Depository. The Depository Trust Company ("DTC") will
act as the Securities Depository for the Agent Members with respect to the
New Preferred Shares. One certificate for all of the New Preferred Shares
will be registered in the name of Cede & Co., as nominee of the Securities
Depository. Such certificate will bear a legend to the effect that such
certificate is issued subject to the provisions restricting transfers of
shares of New Preferred Shares contained in the Articles Supplementary. The
Trust will also issue stop-transfer instructions to the transfer agent for
New Preferred Shares. Prior to the commencement of the right of holders of
preferred shares of the Trust to elect a majority of the Trust's trustees,
as described under "Description of New Preferred Shares-Voting Rights" in
the prospectus, Cede & Co. will be the holder of record of all shares of
the New Preferred Shares and owners of such shares will not be entitled to
receive certificates representing their ownership interest in such shares.
DTC, a New York-chartered limited purpose trust company, performs
services for its participants (including the Agent Members), some of whom
(and/or their representatives) own DTC. DTC maintains lists of its
participants and will maintain the positions (ownership interests) held by
each such participant (the "Agent Member") in New Preferred Shares, whether
for its own account or as a nominee for another person. Additional
information concerning DTC and the DTC depository system is included as an
Exhibit to the Registration Statement of which this statement of additional
information forms a part.
CONCERNING THE AUCTION AGENT
The Auction Agent will act as agent for the Trust in connection
with Auctions. In the absence of bad faith or negligence on its part, the
Auction Agent will not be liable for any action taken, suffered, or omitted
or for any error of judgment made by it in the performance of its duties
under the Auction Agency Agreement and will not be liable for any error of
judgment made in good faith unless the Auction Agent will have been
negligent in ascertaining the pertinent facts.
The Auction Agent may rely upon, as evidence of the identities of
the Existing Holders of New Preferred Shares, the Auction Agent's registry
of Existing Holders, the results of Auctions and notices from any
Broker-Dealer (or other Person, if permitted by the Trust) with respect to
transfers described under "The Auction" in the prospectus and notices from
the Trust. The Auction Agent is not required to accept any such notice for
an Auction unless it is received by the Auction Agent by 3:00 p.m., New
York City time, on the Business Day preceding such Auction.
The Auction Agent may terminate the Auction Agency Agreement upon
notice to the Trust on a date no earlier than 60 days after such notice. If
the Auction Agent should resign, the Trust will use its best efforts to
enter into an agreement with a successor Auction Agent containing
substantially the same terms and conditions as the Auction Agency
Agreement. The Trust may remove the Auction Agent provided that prior to
such removal the Trust shall have entered into such an agreement with a
successor Auction Agent.
BROKER-DEALERS
The Auction Agent after each Auction for New Preferred Shares will
pay to each Broker-Dealer, from funds provided by the Trust, a service
charge at the annual rate of 0.25% in the case of any Auction immediately
preceding a Dividend Period of less than one year, or a percentage agreed
to by the Trust and the Broker-Dealers in the case of any Auction
immediately preceding a Dividend Period of one year or longer, of the
purchase price of shares of New Preferred Shares placed by such
Broker-Dealer at such Auction. For the purposes of the preceding sentence,
New Preferred Shares will be placed by a Broker-Dealer if such shares were
(a) the subject of Hold Orders deemed to have been submitted to the Auction
Agent by the Broker-Dealer and were acquired by such Broker- Dealer for its
own account or were acquired by such Broker- Dealer for its customers who
are Beneficial Owners or (b) the subject of an Order submitted by such
Broker-Dealer that is (i) a Submitted Bid of an Existing Holder that
resulted in such Existing Holder continuing to hold such shares as a result
of the Auction or (ii) a Submitted Bid of a Potential Holder that resulted
in such Potential Holder purchasing such shares as a result of the Auction
or (iii) a valid Hold Order. The Trust may request the Auction Agent to
terminate one or more Broker- Dealer Agreements at any time, provided that
at least one Broker-Dealer Agreement is in effect after such termination.
The Broker-Dealer Agreements provide that a Broker-Dealer (other
than an affiliate of the Trust) may submit Orders in Auctions for its own
account, unless the Trust notifies all Broker-Dealers that they may no
longer do so, in which case Broker-Dealers may continue to submit Hold
Orders and Sell Orders for their own accounts. Any Broker-Dealer that is an
affiliate of the Trust may submit Orders in Auctions, but only if such
Orders are not for its own account. If a Broker-Dealer submits an Order for
its own account in any Auction, it might have an advantage over other
Bidders because it would have knowledge of all Orders submitted by it in
that Auction; such Broker-Dealer, however, would not have knowledge of
Orders submitted by other Broker-Dealers in that Auction.
REPURCHASE OF COMMON SHARES
The Trust is a closed-end investment company and as such its common
shareholders will not have the right to cause the Trust to redeem their
shares. Instead, the Trust's common shares will trade in the open market at
a price that will be a function of several factors, including dividend
levels (which are in turn affected by expenses), net asset value, call
protection, price, dividend stability, relative demand for and supply of
such shares in the market, general market and economic conditions and other
factors. Because shares of a closed-end investment company may frequently
trade at prices lower than net asset value, the Trust's board of trustees
may consider action that might be taken to reduce or eliminate any material
discount from net asset value in respect of common shares, which may
include the repurchase of such shares in the open market or in private
transactions, the making of a tender offer for such shares at net asset
value, or the conversion of the Trust to an open-end investment company.
The board of trustees may not decide to take any of these actions. In
addition, there can be no assurance that share repurchases or tender
offers, if undertaken, will reduce market discount.
Notwithstanding the foregoing, at any time when preferred shares of
the Trust are outstanding, the Trust may not purchase, redeem or otherwise
acquire any of its common shares unless (1) all accrued preferred shares
dividends have been paid and (2) at the time of such purchase, redemption
or acquisition, the net asset value of the Trust's portfolio (determined
after deducting the acquisition price of the common shares) is at least
200% of the liquidation value of the outstanding preferred shares (expected
to equal the original purchase price per share plus any accrued and unpaid
dividends thereon). The staff of the SEC currently requires that any tender
offer made by a closed-end investment company for its shares must be at a
price equal to the net asset value of such shares on the close of business
on the last day of the tender offer. Any service fees incurred in
connection with any tender offer made by the Trust will be borne by the
Trust and will not reduce the stated consideration to be paid to tendering
shareholders.
Subject to its investment limitations, the Trust may borrow to
finance the repurchase of common shares or to make a tender offer. Interest
on any borrowings to finance share repurchase transactions or the
accumulation of cash by the Trust in anticipation of share repurchases or
tenders will reduce the Trust's net income. Any share repurchase, tender
offer or borrowing that might be approved by the Trust's board of trustees
would have to comply with the Securities Exchange Act of 1934 and the 1940
Act and the rules and regulations under each of those acts.
Although the decision to take action in response to a discount from
net asset value will be made by the board of trustees at the time it
considers such issue, it is the board's present policy, which may be
changed by the board of trustees, not to authorize repurchases of common
shares or a tender offer for such shares if (1) such transactions, if
consummated, would (a) result in the delisting of the common shares from
the New York Stock Exchange, or (b) impair the Trust's status as a
regulated investment company under the Internal Revenue Code of 1986 (which
would make the Trust a taxable entity, causing the Trust's income to be
taxed at the corporate level in addition to the taxation of shareholders
who receive dividends from the Trust) or as a registered closed-end
investment company under the 1940 Act; (2) the Trust would not be able to
liquidate portfolio securities in an orderly manner and consistent with the
Trust's investment objective and policies in order to repurchase shares; or
(3) there is, in the board's judgment, any (a) material legal action or
proceeding instituted or threatened challenging such transactions or
otherwise materially adversely affecting the Trust, (b) general suspension
of or limitation on prices for trading securities on the New York Stock
Exchange, (c) declaration of a banking moratorium by Federal or state
authorities or any suspension of payment by United States banks in which
the Trust invests, (d) material limitation affecting the Trust or the
issuers of its portfolio securities by Federal or state authorities on the
extension of credit by lending institutions or on the exchange of foreign
currency, (e) commencement of war, armed hostilities or other international
or national calamity directly or indirectly involving the United States, or
(f) other event or condition which would have a material adverse effect
(including any adverse tax effect) on the Trust or its shareholders if
shares were repurchased. The board of trustees may in the future modify
these conditions in light of experience.
The repurchase by the Trust of its common shares at prices below
net asset value will result in an increase in the net asset value of those
shares that remain outstanding. However, there can be no assurance that
share repurchases or tenders at or below net asset value will result in the
Trust's common shares trading at a price equal to their net asset value.
Nevertheless, the fact that the Trust's shares may be the subject of
repurchase or tender offers at net asset value from time to time, or that
the Trust may be converted to an open-end company, may reduce any spread
between market price and net asset value that might otherwise exist.
In addition, a purchase by the Trust of its common shares will
decrease the Trust's total assets which would likely have the effect of
increasing the Trust's expense ratio. Any purchase by the Trust of its
common shares at a time when preferred shares are outstanding will increase
the leverage applicable to the outstanding common shares then remaining and
decrease the asset coverage of the preferred shares.
Before deciding whether to take any action if the common shares
trade below net asset value, the Trust's board of trustees would likely
consider all relevant factors, including the extent and duration of the
discount, the liquidity of the Trust's portfolio, the impact of any action
that might be taken on the Trust or its shareholders and market
considerations. Based on these considerations, even if the Trust's shares
should trade at a discount, the board of trustees may determine that, in
the interest of the Trust and its shareholders, no action should be taken.
TAX MATTERS
The Trust has qualified and elected, and intends to continue to
qualify under the Code, as a regulated investment company and to satisfy
conditions which enable dividends on common shares or Preferred Shares
which are attributable to interest on tax-exempt municipal securities to be
exempt from Federal income tax in the hands of owners of such shares,
subject to the possible application of the Federal alternative minimum tax.
To qualify for tax treatment as a regulated investment company, the
Trust must, among other things: (a) distribute to its shareholders at least
an amount equal to the sum of (i) 90% of its net investment income (which
is its investment company taxable income as that term is defined in the
Code but determined without regard to the deduction for dividends paid) and
(ii) 90% of its net tax-exempt income and (b) diversify its holdings so
that, at the end of each fiscal quarter of the Trust (i) at least 50% of
the market value of the Trust's assets is represented by cash, cash items,
U.S. government securities and securities of other regulated investment
companies, and other securities, with these other securities limited, with
respect to any one issuer, to an amount not greater in value than 5% of the
Trust's total assets, and to not more than 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the market value
of the Trust's assets is invested in the securities of any one issuer
(other than U.S. government securities or securities of other regulated
investment companies). In meeting these requirements, the Trust may be
restricted in the utilization of certain of the investment techniques
described above and in the prospectus. If in any year the Trust should fail
to qualify for tax treatment as a regulated investment company, the Trust
would incur a regular Federal corporate income tax upon its taxable income
for that year, and distributions to its shareholders would be taxable to
such holders as ordinary income to the extent of the Trust's earnings and
profits. A regulated investment company that fails to distribute, by the
close of each calendar year, at least an amount equal to the sum of 98% of
its ordinary taxable income for such year and 98% of its capital gain net
income for the one year period ending October 31 in such year, plus any
shortfalls from the prior year's required distribution, is liable for a 4%
excise tax on the portion of the undistributed amount of such income that
is less than the required amount for such distributions. To avoid the
imposition of this excise tax, the Trust generally makes the required
distributions of its ordinary taxable income, if any, and its capital gain
net income, to the extent possible, by the close of each calendar year.
Certain of the Trust's investment practices are subject to special
provisions of the Code that, among other things, may defer the use of
certain deductions or losses of the Trust, affect the holding period of
securities held by the Trust and after the character of the gains or losses
realized by the Trust. These provisions may also require the Trust to
recognize income or gain without receiving cash with which to make
distributions in the amounts necessary to satisfy the requirements for
maintaining regulated investment company status and for avoiding income and
excise taxes. The Trust will monitor its transactions and may make certain
tax elections in order to mitigate the effect of these rules and prevent
disqualification of the Trust as a regulated investment company.
The Trust intends to qualify to pay "exempt-interest" dividends, as
defined in the Code on its common shares and Preferred Shares. In order for
any distributions to owners of the Trust's Preferred Shares to be eligible
to be treated as exempt- interest dividends, such Preferred Shares must be
treated as stock for Federal income tax purposes. Under the Code, at the
close of each quarter of its taxable year, if at least 50% of the value of
its total assets consists of municipal bonds, the Trust will be qualified
to pay exempt-interest dividends to its shareholders. Exempt-interest
dividends are dividends or any part thereof (other than a capital gain
dividend) paid by the Trust which are attributable to interest on municipal
bonds and are so designated by the Trust within 60 days of the Trust's
fiscal year-end. Exempt-interest dividends will be exempt from Federal
income tax, subject to the possible application of the Federal alternative
minimum tax. Insurance proceeds received by the Trust under any insurance
policies in respect of scheduled interest payments on defaulted municipal
bonds, as described herein, will generally be excludable from gross income
under Section 103(a) of the Code. In the case of non- appropriation by a
political subdivision, however, there can be no assurance that payments
made by the issuer representing interest on such "non-appropriation"
municipal lease obligations will be excludable from gross income for
Federal income tax purposes. See "Investment Objective and Policies" above.
Gains of the Trust that are attributable to market discount on certain
municipal obligations acquired after April 30, 1993 are treated as ordinary
income. The interest on private activity bonds in most instances is not
Federally tax-exempt to a person who is a "substantial user" of a facility
financed by such bonds or a "related person" of such "substantial user." As
a result, the Trust may not be an appropriate investment for shareholders
who are considered either a "substantial user" or a "related person" within
the meaning of the Code. In general, a "substantial user" of a facility
includes a "non- exempt person who regularly uses a part of such facility
in his trade or business." "Related persons" are in general defined to
include persons among whom there exists a relationship, either by family or
business, which would result in a disallowance of losses in transactions
among them under various provisions of the Code (or if they are members of
the same controlled group of corporations under the Code), including a
partnership and each of its partners (and certain members of their
families), an S corporation and each of its shareholders (and certain
members of their families) and various combinations of these and other
relationships. The foregoing is not a complete description of all of the
provisions of the Code covering the definitions of "substantial user" and
"related person." The Code provides that every holder of Preferred Shares
required to file a tax return must include for information purposes on such
return the amount of tax-exempt interest received during the taxable year,
including any exempt-interest dividends received from the Trust.
Federal tax law imposes an alternative minimum tax with respect to
both corporations and individuals. Interest on certain municipal
obligations, such as bonds issued to make loans for housing purposes or to
private entities (but not to certain tax-exempt organizations such as
universities and non-profit hospitals) is included as an item of tax
preference in determining the amount of a taxpayer's alternative minimum
taxable income. To the extent that the Trust receives income from municipal
obligations subject to the Federal alternative minimum tax, a portion of
the dividends paid by it, although otherwise exempt from Federal income
tax, will be taxable to its shareholders to the extent that their tax
liability is determined under the alternative minimum tax. The Trust will
annually supply a report indicating the percentage of the Trust's income
attributable to municipal obligations subject to the Federal alternative
minimum tax. In addition, for certain corporations, alternative minimum
taxable income is increased by 75% of the difference between an alternative
measure of income ("adjusted current earnings") and the amount otherwise
determined to be the alternative minimum taxable income. Interest on all
municipal obligations, and therefore all distributions by the Trust that
would otherwise be tax-exempt, is included in calculating a corporation's
adjusted current earnings. Certain small corporations are not subject to
the alternative minimum tax.
Tax-exempt income, including exempt-interest dividends paid by the
Trust, is taken into account in calculating the amount of social security
and railroad retirement benefits that may be subject to Federal income tax.
Distributions to shareholders by the Trust of net income received,
if any, from taxable temporary investments and net short-term capital
gains, if any, realized by the Trust will be taxable to its shareholders as
ordinary income. Distributions by the Trust of net capital gain (which is
the excess of net long-term capital gain over net short-term capital loss),
if any, are taxable as long-term capital gain, regardless of the length of
time the shareholder has owned common shares or Preferred Shares. The
amount of taxable income allocable to the Trust's Preferred Shares will
depend upon the amount of such income realized by the Trust, but is not
generally expected to be significant. Except for dividends paid on
Preferred Shares which include an allocable portion of any net capital gain
or other taxable income, the Trust anticipates that all dividends paid on
shares of its Preferred Shares will constitute exempt-interest dividends
for Federal income tax purposes. Distributions, if any, in excess of the
Trust's earnings and profits will first reduce the adjusted tax basis of a
shareholder's shares and, after that basis has been reduced to zero, will
constitute capital gains to the shareholder (assuming the shares are held
as a capital asset). As long as the Trust qualifies as a regulated
investment company under the Code, no part of its distributions to
shareholders will qualify for the dividends-received deduction for
corporations.
The Internal Revenue Service (the "IRS") requires that a regulated
investment company that has two or more classes of shares designate to each
such class proportionate amounts of each type of its income for each tax
year based upon the percentage of total dividends distributed to each class
for such year. The Trust intends each year to allocate, to the fullest
extent practicable, net tax-exempt interest, net capital gain and other
taxable income, if any, between its common shares and preferred shares,
including the Preferred Shares, in proportion to the total dividends paid
to each class with respect to such year. To the extent permitted under
applicable law, the Trust reserves the right to make special allocations of
income within a class, consistent with the objective of the Trust. The
Trust may, at its election, notify the Auction Agent of the amount of any
net capital gain or other income taxable for Federal income tax purposes to
be included in any dividend on shares of its Preferred Shares prior to the
Auction establishing the Applicable Rate for such dividend. If the Trust
allocates any net capital gain or other taxable income for Federal income
tax purposes to its Preferred Shares without having given advance notice
thereof as described above, the Trust generally will be required to make
payments to owners of its Preferred Shares to which such allocation was
made in order to offset the Federal income tax effect of the taxable income
so allocated as described under "Description of Preferred Shares-Dividends
and Dividend Periods-Additional Dividends" in the prospectus.
Although dividends generally will be treated as distributed when
paid, dividends declared in October, November or December, payable to
shareholders of record on a specified date in one of those months and paid
during the following January will be treated as having been distributed by
the Trust (and received by the shareholders) on December 31 of the year
declared.
If at any time when the Trust's Preferred Shares are outstanding
the Trust fails to meet the Preferred Shares Basic Maintenance Amount or
the 1940 Act Preferred Shares Asset Coverage, the Trust will be required to
suspend distributions to holders of its common shares until such
maintenance amount or asset coverage, as the case may be, is restored. See
"Description of New Preferred Shares-Dividends and Dividend Periods" in the
prospectus. This may prevent the Trust from distributing at least an amount
equal to the sum of 90% of its investment company taxable income and 90% of
its net tax- exempt interest income, and may therefore jeopardize the
Trust's qualification for taxation as a regulated investment company or
cause the Trust to incur a tax liability or a non-deductible 4% excise tax
on the undistributed taxable income (including gain), or both. Upon failure
to meet the Preferred Shares Basic Maintenance Amount or the 1940 Act
Preferred Shares Asset Coverage, the Trust will be required to redeem its
shares of Preferred Shares in order to maintain or restore such maintenance
amount or asset coverage and avoid the adverse consequences to the Trust
and its shareholders of failing to qualify as a regulated investment
company. There can be no assurance, however, that any such redemption would
achieve such objective.
The Trust may, at its option, redeem its Preferred Shares in whole
or in part, and is required to redeem Preferred Shares to the extent
required to maintain the Preferred Shares Basic Maintenance Amount and the
1940 Act Preferred Shares Asset Coverage. Gain or loss, if any, resulting
from a redemption of Preferred Shares will be taxed as gain or loss from
the sale or exchange of Preferred Shares under Section 302 of the Code
rather than as a dividend, but only if the redemption distribution (a) is
deemed not to be essentially equivalent to a dividend, (b) is in complete
redemption of an owner's interest in the Trust, (c) is substantially
disproportionate with respect to the owner, or (d) with respect to a
non-corporate owner, is in partial liquidation of the owner's interest in
the Trust. For purposes of (a), (b) and (c) above, a shareholder's
ownership of common shares will be taken into account.
The sale or other disposition of common shares or Preferred Shares
of the Trust will normally result in capital gain or loss to shareholders.
Present law taxes both long-term and short-term capital gains of
corporations at the rates applicable to ordinary income. For non-corporate
taxpayers, however, under current law short-term capital gains and ordinary
income will be taxed at a maximum rate of 39.6% while long-term capital
gains generally will be taxed at a maximum rate of 20%. However, because of
the limitations on itemized deductions and the deduction for personal
exemptions applicable to higher income taxpayers, the effective rate of tax
may be higher in certain circumstances. Losses realized by a shareholder on
the sale or exchange of shares of the Trust held for six months or less are
disallowed to the extent of any distribution of exempt- interest dividends
received with respect to such shares, and, if not disallowed, such losses
are treated as long-term capital losses to the extent of any distribution
of net capital gain received with respect to such shares. A shareholder's
holding period is suspended for any periods during which the shareholder's
risk of loss is diminished as a result of holding one or more other
positions in substantially similar or related property, or through certain
options or short sales. Any loss realized on a sale or exchange of shares
of the Trust will be disallowed to the extent those shares of the Trust are
replaced by other shares within a period of 61 days beginning 30 days
before and ending 30 days after the date of disposition of the original
shares. In that event, the basis of the replacement shares of the Trust
will be adjusted to reflect the disallowed loss.
The Code provides that interest on indebtedness incurred or
continued to purchase or carry the Trust's shares to which exempt-interest
dividends are allocated is not deductible. Under rules used by the IRS for
determining when borrowed funds are considered used for the purpose of
purchasing or carrying particular assets, the purchase or ownership of
shares may be considered to have been made with borrowed funds even though
such funds are not directly used for the purchase or ownership of such
shares.
Nonresident alien individuals and certain foreign corporations and
other entities ("foreign investors") generally are subject to U.S.
withholding tax at the rate of 30% (or possibly a lower rate provided by an
applicable tax treaty) on distributions of net investment income (which
includes net short-term capital gain). To the extent received by foreign
investors, exempt-interest dividends, distributions of net capital gain and
gain from the sale or other disposition of Preferred Shares generally are
exempt from United States Federal income taxation. Different tax
consequences may result if the owner is engaged in a trade or business in
the United States or, in the case of an individual, is present in the
United States for 183 or more days during a taxable year.
The Trust is required in certain circumstances to backup withhold
31% of taxable dividends and certain other payments paid to non-corporate
holders of the Trust's shares who do not furnish to the Trust their correct
taxpayer identification number (in the case of individuals, their social
security number) and certain certifications, or who are otherwise subject
to backup withholding. Backup withholding is not an additional tax. Any
amounts withheld from payments made to a shareholder may be refunded or
credited against such shareholder's United States Federal income tax
liability, if any, provided that the required information is furnished to
the IRS.
The foregoing is a general, summary of the provisions of the Code
and regulations thereunder presently in effect as they directly govern the
taxation of the Trust and its shareholders. These provisions are subject to
change by legislative or administrative action, and any such change may be
retroactive. Moreover, the foregoing does not address many of the factors
that may be determinative of whether an investor will be liable for the
alternative minimum tax. Shareholders are advised to consult their own tax
advisers for more detailed information concerning the Federal income tax
consequences of purchasing, holding and disposing of Trust shares.
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS
Deloitte & Touche LLP, located at Two World Financial Center, New
York, New York, provides auditing services to the Trust. The financial
statements and independent auditors report incorporated by reference into
this statement of additional information have been so incorporated and the
financial highlights included in the prospectus have been so included, in
reliance upon the report of Deloitte & Touche LLP given on their authority
as experts in auditing and accounting.
INCORPORATION BY REFERENCE
The Trust's Portfolio of Investments, dated December 31, 1998
(audited); Statement of Assets and Liabilities, dated December 31, 1998
(audited); Statement of Operations for the year ended December 31, 1998
(audited); Statement of Changes in Net Investment Assets for the two years
ended December 31, 1998 (audited) and the independent auditors report
included in the Trust's Annual Report for the fiscal year ended December
31, 1998 and the Trust's Portfolio of Investments, dated June 30, 1999
(unaudited); Statement of Assets and Liabilities, dated June 30, 1999
(unaudited); Statement of Operations for the period ended June 30, 1999
(unaudited); and Statement of Changes in Net Investment Assets for the
period ended June 30, 1999 (unaudited) included in the Trust's Semi-Annual
Report for the six-month period ended June 30, 1999 (the "Reports"), which
accompany this statement of additional information, are incorporated herein
by reference. The Trust will furnish, without charge, a copy of the Reports
upon written request to the Trust at 800 Scudders Mill Road, Plainsboro,
New Jersey 08536 or by telephone request at (800) 688-0928.
ADDITIONAL INFORMATION
A Registration Statement on Form N-2, including amendments thereto,
relating to the shares offered hereby, has been filed by the Trust with the
Securities and Exchange Commission, Washington, D.C. The prospectus and
this statement of additional information do not contain all of the
information set forth in the Registration Statement, including any exhibits
and schedules thereto. For further information with respect to the Trust
and the shares offered hereby, reference is made to the Registration
Statement. Statements contained in the prospectus and this statement of
additional information as to the contents of any contract or other document
referred to are not necessarily complete and in each instance reference is
made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all
respects by such reference.
A copy of the Registration Statement may be inspected without
charge at the SEC's principal office in Washington, D.C., and copies of all
or any part thereof may be obtained from the SEC upon the payment of
certain fees prescribed by the SEC. The SEC maintains a web site
(http://www.sec.gov) that contains the Registration Statement, other
documents incorporated by reference, and other information the Trust has
filed electronically with the SEC, including proxy statements and reports
filed under the Securities Exchange Act of 1934.
APPENDIX A
GENERAL CHARACTERISTICS AND
RISKS OF HEDGING TRANSACTIONS
In order to hedge against changes in the value of its portfolio
securities, the Trust may from time to time engage in certain hedging
strategies. The Trust will engage in such activities from time to time in
the Adviser's discretion, and may not necessarily be engaging in such
activities when movements in interest rates that could affect the value of
the assets of the Trust occur. The Trust's ability to pursue certain of
these strategies may be limited by the Commodity Exchange Act, applicable
regulations of the Commodity Futures Trading Commission ("CFTC") and the
federal income tax requirements applicable to regulated investment
companies.
PUT AND CALL OPTIONS ON SECURITIES AND INDICES
The Trust may purchase and sell put and call options on securities
and financial indices. A put option gives the purchaser of the option the
right to sell and the seller the obligation to buy the underlying security
at the exercise price during the option period. Index options are similar
to options on securities except that, rather than taking or making delivery
of securities underlying the option at a specified price upon exercise, an
index option gives the holder the right to receive cash upon exercise of
the option if the level of the index upon which the option is based is
greater, in the case of a call, or less, in the case of a put, than the
exercise price of the option. The purchase of a put option on a debt
security would be designed to protect the Trust's holdings in a security
against a substantial decline in the market value. A call option gives the
purchaser of the option the right to buy and the seller the obligation to
sell the underlying security at the exercise price during the option
period. The purchase of a call option on a security would be intended to
protect the Trust against an increase in the price of a security that it
intended to purchase in the future. In the case of either put or call
options that it has purchased, if the option expires without being sold or
exercised, the Trust will experience a loss in the amount of the option
premium plus any related commissions. When the Trust sells put and call
options, it receives a premium as the seller of the option. The premium
that the Trust receives for selling the option will serve as a partial
hedge, in the amount of the option premium, against changes in the value of
the securities in its portfolio. During the term of the option, however, a
covered call seller has, in return for the premium on the option, given up
the opportunity for capital appreciation above the exercise price of the
option if the value of the underlying security increases, but has retained
the risk of loss should the price of the underlying security decline.
Conversely, a secured put seller retains the risk of loss should the market
value of the underlying security decline below the exercise price of the
option, less the premium received on the sale of the option. The Trust is
authorized to purchase and sell exchange listed options and
over-the-counter options ("OTC Options") which are privately negotiated
with the counterparty to such contract. Listed options are issued by the
Options Clearing Corporation ("OCC"), which guarantees the performance of
the obligations of the parties to such options. All put and call options
written by the Trust will be covered.
The Trust's ability to close out its position as a purchaser or
seller of an exchange-listed put or call option is dependent upon the
existence of a liquid secondary market. Among the possible reasons for the
absence of a liquid secondary market on an exchange are: (i) insufficient
trading interest in certain options; (ii) restrictions on transactions
imposed by an exchange; (iii) trading halts, suspensions or other
restrictions imposed with respect to particular classes or series of
options or underlying securities; (iv) interruption of the normal
operations on an exchange; (v) inadequacy of the facilities of an exchange
or OCC to handle current trading volume; or (vi) a decision by one or more
exchanges to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that exchange
(or in that class or series of options) would cease to exist, although
outstanding options on that exchange that had been listed by the OCC as a
result of trades on that exchange would generally continue to be
exercisable in accordance with their terms. OTC options are purchased from
or sold to dealers, financial institutions or other counterparties which
have entered into direct agreements with the Trust. With OTC Options, such
variables as expiration date, exercise price and premium will be agreed
upon between the Trust and the counterparty, without the intermediation of
a third party such as the OCC. If the counterparty fails to make or take
delivery of the securities underlying an option it has written, or
otherwise settle the transaction in accordance with the terms of that
option as written, the Trust would lose the premium paid for the option as
well as any anticipated benefit of the transaction. As the Trust must rely
on the credit quality of the counterparty rather than the guarantee of the
OCC, it will only enter into OTC Options with counterparties with the
highest long-term credit ratings, and with primary U.S. Government
securities dealers recognized by the Federal Reserve Bank in New York.
The hours of trading for options on debt securities may not conform
to the hours during which the underlying securities are traded. To the
extent that the option markets close before the markets for the underlying
securities, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Characteristics. The Trust may purchase and sell futures contracts
and purchase put and call options on such futures contracts traded on
recognized domestic exchanges as a hedge against anticipated interest rate
changes or other market movements and future risk management. The sale of a
futures contract creates an obligation by the Trust, as seller, to deliver
the specific type of financial instrument called for in the contract at a
specified future time for a specified price. Options on futures contracts
are similar to options on securities except that an option on a futures
contract gives the purchaser the right in return for the premium paid to
assume a position in a futures contract (a long position if the option is a
call and a short position if the option is a put).
Margin Requirements. At the time a futures contract is purchased or
sold, the Trust must allocate cash or securities as a deposit payment
("initial margin"). It is expected that the initial margin that the Trust
will pay may range from approximately 1% to approximately 5% of the value
of the instruments underlying the contract. In certain circumstances,
however, such as periods of high volatility, the Trust may be required by
an exchange to increase the level of its initial margin payment
Additionally, initial margin requirements may be increased in the future
pursuant to regulatory action. An outstanding futures contract is valued
daily and the payment in cash of "variation margin" may be required, a
process known as "marking to the market." Transactions in listed options
and futures are usually settled by entering into an offsetting transaction,
and are subject to the risk that this position may not be able to be closed
if no offsetting transaction can be arranged.
Limitations on Use of Futures Contracts and Options on Futures
Contracts. The Trust's use of futures contracts and options on futures
contracts will in all cases be consistent with applicable regulatory
requirements and in particular, the rules and regulations of the CFTC and
will be entered into only for bona fide hedging purposes or other
appropriate risk management and duration management or other appropriate
portfolio strategies. In addition, the Trust may not sell futures contracts
if the value of such futures contracts exceeds the total market value of
the Trust's portfolio securities.
The Trust will not engage in transactions in futures contracts or
options thereon for speculative purposes but only as a hedge against
changes resulting from market conditions in the values of securities in its
portfolio. In addition, the Trust will not enter into a futures contract or
option thereon if, immediately thereafter, the sum of the amount of its
initial deposits and premiums on open contracts and options would exceed 5%
of the Trust's total assets (taken at current value); provided, however,
that in the case of an option that is in-the-money at the time of the
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation. Also, when required, a segregated account of cash or cash
equivalents will be maintained and marked to market in an amount equal to
the market value of the contract. The Adviser reserves the right to comply
with such different standards as may be established from time to time by
CFTC rules and regulations with respect to the purchase and sale of futures
contracts and options thereon.
Segregation and Cover Requirements. Futures contracts, interest
rate swaps, caps, floors and collars, and options on securities, indices
and futures contracts sold by the Trust are generally subject to
segregation and coverage requirements established by either the CFTC or the
SEC, with the result that, if the Trust does not hold the instrument
underlying the futures contract or option, the Trust will be required to
segregate on an ongoing basis with its custodian, cash, U.S. Government
securities, or other liquid high grade debt obligations in an amount at
least equal to the Trust's obligations with respect to such instruments.
Such amounts will fluctuate as the market value of the obligations
increases or decreases. The segregation requirement can result in the Trust
maintaining positions it would otherwise liquidate and consequently
segregating assets with respect thereto at a time when it might be
disadvantageous to do so.
---------------
Hedging Transactions present certain risks. In particular, the
variable degree of correlation between price movements of hedging
instruments and price movements in the position being hedged creates the
possibility that losses on the hedge may be greater than gains in the value
of the Trust's positions. In addition, certain hedging instruments and
markets may not be liquid in all circumstances. As a result, in volatile
markets, the Trust may not be able to close out a transaction in certain of
these instruments without incurring losses substantially greater than the
initial deposit. Although the contemplated use of these instruments should
tend to minimize the risk of loss due to a decline in the value of the
hedged position, at the same time they tend to limit any potential gain
which might result from an increase in the value of such position. The
ability of the Trust to hedge successfully will depend on the Adviser's
ability to predict pertinent market movements, which cannot be assured.
Finally, the daily variation margin deposit requirements in futures
contracts that the Trust has sold create an ongoing greater potential
financial risk than do options transactions, where the exposure is limited
to the cost of the initial premium and transaction costs paid by the Trust.
Losses due to Hedging Transactions will reduce net asset value.
The Trust's use of Hedging Transactions may be limited or affected
by certain provisions of the Code and rating agency guidelines.
APPENDIX B
INSURANCE RATINGS
The Trust will purchase or obtain insurance in respect of Florida
municipal obligations only from insurers having claims-paying ability
ratings of Aaa from Moody's Investors Service, ("Moody's") and AAA from
Standard & Poor's ("S&P") or, if unrated, which are viewed by the Adviser
to have similar claims-paying abilities.
A Moody's insurance claims-paying ability rating is an opinion of
the ability of an insurance company to repay punctually senior policyholder
obligations and claims. An insurer with an insurance claims-paying ability
rating of Aaa is adjudged by Moody's to be of the best quality. In the
opinion of Moody's, the policy obligations of an insurance company with an
insurance claims-paying ability rating of Aaa carry the smallest degree of
credit risk and, while the financial strength of these companies is likely
to change, such changes as can be visualized are most unlikely to impair
the company's fundamentally strong position. An S&P insurance claims-paying
ability rating is an assessment of an operating insurance company's
financial capacity to meet obligations under an insurance policy in
accordance with the terms. An insurer with an insurance claims-paying
ability rating of AAA has the highest rating assigned by S&P. Capacity to
honor insurance contracts is adjudged by S&P to be extremely strong and
highly likely to remain so over a long period of time.
An insurance claims-paying ability rating by Moody's or S&P does
not constitute an opinion on any specific contract in that such an opinion
can only be rendered upon the review of the specific insurance contract.
Furthermore, an insurance claims-paying ability rating does not take into
account deductibles, surrender or cancellation penalties or the timeliness
of payment; nor does it address the ability of a company to meet non-policy
obligations (i.e., debt contracts).
The assignment of ratings by Moody's or S&P to debt issues that are
fully or partially supported by insurance policies, contracts or guarantees
is a separate process from the determination of claims-paying ability
ratings. The likelihood of a timely flow of funds from the insurer to the
trustee for the bondholders is a key element in the rating determination
for such debt issues.
Each of AMBAC Indemnity Corporation ("AMBAC"), Municipal Bond
Investors Assurance Corporation ("MBIA") and its subsidiaries Bond
Investors Guaranty Insurance Company ("BIGI") and Capital Markets Assurance
Company ("CAPMAC"), Financial Guaranty Insurance Company ("FGIC") and
Financial Security Assurance, Inc. ("FSA") has a claims-paying ability
rating of Aaa from Moody's and AAA from S&P, and the Trust expects to
purchase insurance from any such firm in respect of particular Florida
municipal obligations.
AMBAC has received a letter ruling from the Internal Revenue
Service which holds in effect that insurance proceeds representing maturing
interest on defaulted Florida municipal obligations paid by AMBAC to
municipal bond funds substantially similar to the Trust, under policy
provisions substantially identical to the policy described herein, will be
excludable from Federal gross income under Section 103(a) of the Internal
Revenue Code.
As of September 30, 1999, AMBAC's insured portfolio (unaudited) was
approximately $232 billion supported by approximately $4.8 billion in
claims paying resources (unaudited).
As of September 30, 1999, MBIA's insured portfolio (unaudited) was
approximately $396 billion supported by approximately $8.3 billion in
claims paying resources (unaudited).
As of September 30, 1999, FGIC's insured portfolio (unaudited) was
approximately $136 billion supported by approximately $2.7 billion in
claims paying resources (unaudited).
As of September 30, 1999, FSA's insured portfolio (unaudited) was
approximately $126 billion supported by approximately $2.4 billion in
claims paying resources (unaudited).
None of AMBAC, MBIA, FGIC and FSA or any associate thereof, has any
material business relationship, direct or indirect, with the Trust.
AMBAC, MBIA, FGIC and FSA are subject to regulation by the
department of insurance in each state in which they are qualified to do
business. Such regulation, however, is not a guarantee that any of AMBAC,
MBIA, FGIC or FSA will be able to perform on its contractual insurance in
the event a claim should be made thereunder at some time in the future.
The information relating to AMBAC, MBIA, FGIC and FSA set forth
above, including the financial information, has been furnished by such
corporations. Financial information with respect to AMBAC, MBIA, FGIC and
FSA appears in reports filed by AMBAC, MBIA, FGIC and FSA with insurance
regulatory authorities and is subject to audit and review by such
authorities. No representation is made herein as to the accuracy or
adequacy of such information with respect to AMBAC, MBIA, FGIC or FSA or as
to the absence of material adverse changes in such information subsequent
to the date thereof.
APPENDIX C-1
THE COMMONWEALTH OF MASSACHUSETTS
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION ESTABLISHING
PREFERRED SHARES
I, Karen H. Sabath, Assistant Secretary, of The BlackRock Florida
Insured Municipal 2008 Term Trust (the "Trust") located at 800 Scudders
Mill Road, Plainsboro, New Jersey 08536, do hereby certify that the
following designation establishing and designating preferred shares of
beneficial interest and determining the relative rights and preferences
thereof was duly adopted by the Trustees of the Trust at a duly convened
meeting held on September 3, 1992 and by the Executive Committee by
unanimous consent on November 16, 1992:
FIRST: Pursuant to authority expressly vested in the Board of
Trustees of the Trust in the Trust's Declaration of Trust, the Board of
Trustees has authorized 2,640 unissued shares of beneficial interest with
preference rights of the Trust as a single series of 2,640 preferred shares
of beneficial interest, par value $.01 per share, liquidation preference
$25,000 per share plus an amount equal to accumulated but unpaid dividends
(whether or not earned or declared) thereon plus the premium, if any,
resulting from the designation of a Premium Call Period, is hereby
designated "Auction Rate Municipal Preferred Shares of Beneficial Interest,
Series R7". Each share of Auction Rate Municipal Preferred Shares of
Beneficial Interest, Series R7 shall be issued on November 23, 1992; have
an Initial Dividend Rate of 2.50% per annum and the Initial Dividend
Payment Date shall be December 4, 1992; and have such other preferences,
limitations and relative voting rights, in addition to those required by
applicable law or set forth in the Trust's Declaration of Trust applicable
to preferred shares of beneficial interest of the Trust, as are set forth
in this Certificate of Designation. The Auction Rate Municipal Preferred
Shares of Beneficial Interest, Series R7 shall constitute a separate series
of preferred shares of beneficial interest of the Trust, and each share of
Auction Rate Municipal Preferred Shares of Beneficial Interest, Series R7
shall be identical.
SECOND: The Board of Trustees and the Executive Committee of the
Board of Trustees of the Trust, acting in accordance with Massachusetts
General Laws, have fixed the preferences, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption, of the preferred shares of beneficial interest as follows:
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" for any period less than
183 days as of any date means (i) the Interest Equivalent of the rate on
commercial paper for such period placed on behalf of issuers whose
corporate bonds are rated "AA" by S&P, or the equivalent of such rating by
S&P or another nationally recognized statistical rating organization, as
the rate for such period is made available on a discount basis or otherwise
by the Federal Reserve Bank of New York for the Business Day immediately
preceding such date, or (ii) in the event that the Federal Reserve Bank of
New York does not make available such a rate, then the arithmetic average
of the Interest Equivalent of the rate on commercial paper for such period
placed on behalf of such issuers, as quoted to the Auction Agent on a
discount basis or otherwise by the Commercial Paper Dealers for the close
of business on the Business Day immediately preceding such date. If a
Commercial Paper Dealer does not quote a rate required to determine the
"AA" Composite Commercial Paper Rate for such period, the "AA" Composite
Commercial Paper Rate for such period will be determined on the basis of
the quotation or quotations furnished by any Substitute Commercial Paper
Dealer or Substitute Commercial Paper Dealers selected by the Trust to
provide such rate or rates not being supplied by the Commercial Paper
Dealer.
"Accountant's Confirmation" has the meaning set forth in paragraph
7(c) of 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, BlackRock Financial
Management L.P., formerly Blackstone Financial Management L.P., and any
successor thereto.
"Affiliate" shall mean any Person, known to the Auction Agent to be
controlled by, in control of, or under common control with, the Trust.
"Agent Member" means a member of the Securities Depository that
will act on behalf of an Existing Holder of one or more Preferred Shares or
a Potential Holder.
"Anticipation Notes" means the following New York Municipal
Obligations: tax anticipation notes, revenue anticipation notes and tax and
revenue anticipation notes.
"Applicable Percentage" has the meaning set forth in paragraph
11(a)(vi) of this Certificate of Designation.
"Applicable Rate" means (i) for purposes of the Auction Procedures,
the rate per annum or, in connection with any Auction in which Bid
Requirements are imposed by the Trust, the method by which one or more such
rates may be determined, at which cash dividends are payable (if declared)
on the Preferred Shares or Other Preferred Shares, as the case may be, for
any Dividend Period and any Dividend Payment Period included therein and
(ii) for purposes of determining the amount of cash dividends payable (if
declared) at any Dividend Payment Date, the rate per annum (including in
the case of any Applicable Rate expressed as a Spread the rate per annum
determined by periodic application of such Spread to the applicable
Reference Index or Reference Security at the frequency and weighting, if
any, specified in the related Bid Requirements, subject to any Maximum
Applicable Rate or Minimum Applicable Rate applicable to such Dividend
Payment Period) at which cash dividends are payable (if declared) on the
Preferred Shares, and includes, to the extent provided by paragraph 2(c)(i)
of this Certificate of Designation, any late charge provided for by such
paragraph.
"Auction" means a periodic operation of the Auction Procedures.
"Auction Agent" means Bankers 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 Trustees to
follow the Auction Procedures for the purpose of determining the Applicable
Rate and to act as transfer agent, registrar, dividend disbursing agent and
redemption agent for the Preferred Shares and other Preferred Shares.
"Auction Procedures" means the procedures for conducting Auctions
set forth in paragraph 11 of this Certificate of Designation.
"Bid Requirements" means (i) any requirement for a Special Dividend
Period longer than 91 days that Bids by Potential Holders shall be
expressed as a Spread below, at or above the rate of a specified Reference
Index or Reference Security, (ii) the Reference Index or Reference
Security, the most recently announced rate thereof and the frequency with
which the rate of Reference Index or the Reference Security, as the case
may be, shall be recalculated for purposes of determining rates expressed
as Spreads thereon in accordance with this Certificate of Designation,
which frequency shall be the same as the frequency with which the person
maintaining the Reference Index being utilized recalculates such Reference
Index, or the same as the frequency with which the interest rate on the
Reference Security being utilized changes or such other frequency as the
Trust shall specify (which specification may include a formula specified by
the Trust indicating the weighting to be given to each recalculation of the
Reference Index or change in the rate of the Reference Security during a
specified period), (iii) the frequency of Dividend Payment Dates during
such Special Dividend Period (which shall not be more often than the
frequency specified pursuant to clause (ii) above), (iv) one or more
Minimum Applicable Rate or Rates (the Indicated Minimum Applicable Rate or
Rates in the case of Bid Requirements set forth in a Request for Special
Dividend Period) and/or (v) one or more Special Dividend Period Reference
Rate or Rates and the Maximum Applicable Rate or Rates (the Indicated
Maximum Applicable Rate or Rates in the case of Bid Requirements set forth
in a Request for Special Dividend Period) derivable from such Special
Dividend Period Reference Rate or Rates, in each case as set forth in the
Notice of Special Dividend Period for such Special Dividend Period.
"Broker-Dealer" shall mean any broker-dealer, or other entity
permitted by law to perform the functions required of a Broker-Dealer in
paragraph 11 of 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.
"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.
"Closing Transaction" means the termination of a futures contract
or option position by taking a position opposite thereto.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Paper Dealers" means Merrill Lynch, Pierce, Fenner &
Smith Incorporated and such other commercial paper dealer or dealers as the
Trust may from time to time appoint, or, in lieu of any thereof, their
respective affiliates or successors.
"Common Shares of Beneficial Interest" means the common shares of
beneficial interest, par value $.01 per share, of the Trust.
"Date of Original Issue" means November 23, 1992, with respect to
the Preferred Shares and the date on which the Trust originally issues any
Other Preferred Shares with respect to such Other Preferred Shares.
"Declaration of Trust" means the Declaration of Trust, as amended
and supplemented (including this Certificate of Designation), of the Trust
on file with the Secretary of the Commonwealth of Massachusetts.
"Deposit Securities" means cash, the book value of Florida
Municipal Obligations sold for which payment is due within five Business
Days with counterparties rated at least Baa by Moody's and before the next
Dividend Payment Date or Valuation Date, as the case may be, and Florida
Municipal Obligations rated at least A-1+ or SP-l+ by S&P, VMIG-1 or MIG- 1
by Moody's.
"Discounted Value" means (i) with respect to a Moody's Eligible
Asset, the lower of par and the quotient of the Market Value thereof
divided by the applicable Moody's Discount Factor and (ii) with respect to
an S&P Eligible Asset, the quotient of the Market Value thereof divided by
the applicable S&P Discount Factor.
"Dividend Coverage Amount," as of any Valuation Date, means (i) the
aggregate amount of cash dividends that will accumulate on all Outstanding
Preferred Shares and Other Preferred Shares, in each case to (but not
including) the next Dividend Payment Date therefor that follows such
Valuation Date (calculated, in the case of cash dividends determined by
application of a Spread to a Reference Index or Reference Security, by
assuming that the Applicable Rate in effect for the immediately preceding
Dividend Payment Period will remain in effect until the next Dividend
Payment Period) plus the aggregate amount of any liabilities of the Trust
that are required to be paid on or prior to the next Dividend Payment Date
less (ii) the combined Market Value of Deposit Securities irrevocably
deposited with the Auction Agent for the payment of cash dividends on all
Preferred Shares and Other Preferred Shares.
"Dividend Coverage Assets," as of any Valuation Date, means, in the
case of Preferred Shares and Other Preferred Shares, Deposit Securities
with maturity or tender payment dates not later in each case than the
Dividend Payment Date therefor that follows such Valuation Date.
"Dividend Payment Date," with respect to Preferred Shares, has the
meaning set forth in paragraph 2(b)(i) of this Certificate of Designation
and, with respect to Other Preferred Shares, has the equivalent meaning.
"Dividend Payment Period" means the Initial Dividend Period and any
Subsequent Dividend Payment Period.
"Dividend Period" means the Initial Dividend Period, any 7-day
Dividend Period (in the case of Series R7 Preferred Shares) and any Special
Dividend Period.
"Existing Holder" means a Person who is listed as the holder of
record of Preferred Shares in the Share Books.
"Florida Municipal Obligations" means debt 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,
Florida State and local income tax.
"Holder" means a Person identified as a holder of record of
Preferred Shares in the Share Register.
"Independent Accountant" means a nationally recognized accountant,
or firm of accountants, that is, with respect to the Trust, an independent
public accountant or firm of independent public accountants under the
Securities Act of 1933, as amended.
"Indicated Maximum Applicable Rate" means the Maximum Applicable
Rate that would apply if the Auction with respect to which it is specified
were conducted on the date of the Request for Special Dividend Period in
which such Indicated Maximum Applicable Rate is specified.
"Indicated Minimum Applicable Rate" means the Minimum Applicable
Rate that would apply if the Auction with respect to which it is specified
were conducted on the date of the Request for Special Dividend Period in
which such Indicated Minimum Applicable Rate is specified.
"Initial Dividend Payment Date" means the Initial Dividend Payment
Date specified herein with respect to the Preferred Shares or Other
Preferred Shares, as the case may be.
"Initial Dividend Period," with respect to Preferred Shares, has
the meaning set forth in paragraph 2(c)(i) of this Certificate of
Designation and, with respect to Other Preferred Shares, has the equivalent
meaning.
"Initial Dividend Rate," with respect to the Preferred Shares,
means the rate per annum applicable to the Initial Dividend Period for the
Preferred Shares and, with respect to Other Preferred Shares, has the
equivalent meaning.
"Initial Margin" means the amount of cash or securities deposited
with a broker as a margin payment at the time of purchase or sale of a
futures contract.
"Interest Equivalent" means a yield on a 360-day basis of a
discount basis security which is equal to the yield on an equivalent
interest-bearing security.
"Mandatory Redemption Price" means $25,000 per share of Preferred
Shares plus an amount equal to accumulated but unpaid dividends (whether or
not earned or declared) to the date fixed for redemption plus the premium,
if any, resulting from the designation of a Premium Call Period.
"Market Value" of any asset of the 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 lower of the quoted bid price or the mean
between the quoted bid and ask price or the yield equivalent when
quotations are not readily available. Securities for which quotations are
not readily available shall be valued at fair value as determined by the
Pricing Service using methods which include consideration of: yields or
prices of municipal obligations of comparable quality, type of issue,
coupon, maturity and rating; indications as to value from dealers; and
general market conditions. The Pricing Service may employ electronic data
processing techniques and/or a matrix system to determine valuations. If
the Pricing Service fails to provide the Market Value of any Florida
Municipal Obligation, such Florida Municipal Obligation shall be valued at
the lower of two bid quotations (one of which shall be in writing) obtained
by the Trust from two dealers who are members of the National Association
of Securities Dealers, Inc. and are making a market in such Florida
Municipal Obligation. Futures contracts and options are valued at closing
prices for such instruments established by the exchange or board of trade
on which they are traded, or if market quotations are not readily
available, are valued at fair value as determined by the Pricing Service or
if the Pricing Service is not able to value such instruments they shall be
valued at fair value on a consistent basis using methods determined in good
faith by the Board of Trustees.
"Maximum Applicable Rate," for any Dividend Payment Period with
respect to Preferred Shares, has the meaning set forth in paragraph
11(a)(vi) of this Certificate of Designation and, with respect to Other
Preferred Shares, has the equivalent meaning.
"Maximum Marginal Tax Rate" means the maximum marginal regular
Federal individual income tax rate applicable to ordinary income or the
maximum marginal regular Federal corporate income tax rate, whichever is
greater.
"Maximum Potential Additional Dividend Liability," as of any
Valuation Date, means the aggregate amount of Additional Dividends that
would be due if the Trust were to make Retroactive Taxable Allocations,
with respect to any fiscal year, estimated based upon dividends paid and
the amount of undistributed realized net capital gains and other taxable
income earned by the Trust, as of the end of the calendar month immediately
preceding such Valuation Date and assuming such Additional Dividends are
fully taxable.
"Minimum Applicable Rate," for any Dividend Payment Period with
respect to Preferred Shares, has the meaning set forth in paragraph
11(a)(vii) of this Certificate of Designation and, with respect to Other
Preferred Shares, has the equivalent meaning.
"Minimum Liquidity Level" means, as of any Valuation Date, an
aggregate Market Value of the 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 Moody's Eligible Asset which is a Florida Municipal
Obligation or Other Municipal Obligation, the percentage determined by
reference to (i) (A) the rating by Moody's or S&P on such asset or (B) in
the event the Florida Municipal Obligation or Other Municipal Obligation,
is insured under an insurance policy which guarantees the timely payment of
interest on such Florida Municipal Obligation or Other Municipal Obligation
and principal thereof to maturity, the Moody's insurance claims-paying
ability rating of the issuer of the insurance policy (provided that for
purposes of clause (B) if the insurance claims-paying ability of an issuer
of an insurance policy is not rated by Moody's but is rated by S&P, such
issuer shall be deemed to have a Moody's insurance claims-paying ability
rating which is one full category lower than the S&P insurance
claims-paying ability rating) and (ii) the shortest Moody's Collateral
Period set forth opposite such rating that is the same length as or is
longer than the Moody's Exposure Period in accordance with the table set
forth below:
RATING CATEGORY
---------------------------------------------
MOODY'S COLLATERAL PERIOD AAA* AA* A* BAA* OTHER**
- -------------------------------- ------- -------- ------- ------- -------
7 weeks or less................. 151% 159% 168% 202% 229%
8 weeks or less but greater
than seven weeks................ 154 164 173 205 235
9 weeks or less but greater
than eight weeks................ 158 169 179 209 242
- ------------------
* Moody' s rating.
** Florida Municipal Obligations and Other Municipal Obligations not rated
by Moody's but rated BBB or BBB+ by S&P.
;provided, however, in the event a Moody's Discount Factor applicable to a
Florida Municipal Obligation or Other Municipal Obligation is determined by
reference to an insurance claims-paying ability rating in accordance with
clause (i)(B), such Moody's Discount Factor shall be increased by an amount
equal to 50% of the difference between (a) the percentage set forth in the
foregoing table under the applicable rating category and (b) the percentage
set forth in the foregoing table under the rating category which is one
category lower than the applicable rating category. If a Florida Municipal
Obligation or Other Municipal Obligation is covered by a Portfolio
Insurance policy which provides the Trust with an option to obtain
Permanent Insurance with respect to such Florida Municipal Obligation or
Other Municipal Obligation and such Portfolio Insurance policy has been
approved in writing by Moody's, the Moody's Discount Factor rating category
shall be determined by averaging the insurance claims paying ability rating
of the Portfolio Insurance provider and the next lowest rating category.
Notwithstanding the foregoing, (i) the Moody's Discount Factor for
short-term Florida Municipal Obligations and Other Municipal Obligations
will be 115% so long as such Florida Municipal Obligations and Other
Municipal Obligations are rated at least MIG-1, VMIG-1 or P-1 by Moody's or
125% if such Florida Municipal Obligations and Other Municipal Obligations
are not rated by Moody's but are rated A-l+ or SP-1+ or AA by S&P and
mature or have a demand feature at par exercisable in 30 days or less, and
(ii) no Moody's Discount Factor will be applied to cash or to Municipal
Receivables (except to the extent provided in the definition thereof).
"Moody's Eligible Asset" means cash, a Municipal Receivable or a
Florida Municipal Obligation or Other Municipal Obligation that (i) pays
interest in cash, (ii) is publicly rated Baa or higher by Moody's or, if
not rated by Moody's but rated by S&P, is rated at least BBB by S&P
(provided that, for purposes of determining the Moody's Discount Factor
applicable to any such S&P-rated Florida Municipal Obligation or other
Municipal Obligation, such Florida Municipal Obligation or Other Municipal
Obligation (excluding any short-term Florida Municipal Obligation or Other
Municipal Obligation) will be deemed to have a Moody's rating which is one
full rating category lower than its S&P rating), (iii) does not have its
Moody's rating suspended by Moody's and (iv) is part of an issue of Florida
Municipal Obligations and Other Municipal Obligations of at least
$10,000,000. In addition, Florida Municipal Obligations and Other Municipal
Obligations in the Trust's portfolio must be within the following
diversification requirements in order to be included within Moody's
Eligible Assets:
<TABLE>
<CAPTION>
Maximum Maximum Issue Maximum
Minimum Underlying Type County Maximum State
Issue Size Obligor Concentration Concentration Concentration
Rating ($ Millions) (%)(1) (%) (1)(3)(6) (%) (1)(4)(6) (%) (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
- ------------------
(1) The reference percentages represent maximum cumulative totals for the
related rated category and each lower rating category.
(2) Florida Municipal Obligations and Other Municipal Obligations not rated
by Moody's but rated BBB or BBB+ by S&P.
(3) Does not apply to general obligation bonds.
(4) Applicable to general obligation bonds only.
(5) Does not apply to Florida Municipal Obligations.
(6) Does not apply to Other Municipal Obligations.
</TABLE>
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 Obligations and Other
Municipal Obligations will be classified within one of the following
categories: health care issues (teaching and non-teaching hospitals, public
and private), housing issues (single- and multi-family), educational
facilities issues (public and private schools), student loan issues,
resource recovery issues, transportation issues (mass transit, airport and
highway bonds), industrial revenue/pollution control bond issues, utility
issues (including water, sewer and electricity), general obligation issues,
lease obligations/certificates of participation, escrowed bonds and other
issues ("Other Issues") not falling within one of the aforementioned
categories (includes special obligations to crossover, excise and sales tax
revenue, recreation revenue, special assessment and telephone revenue
bonds). In no event shall (a) more than 10% of Moody's Eligible Assets
consist of student loan issues, (b) more than 10% of Moody's Eligible
Assets consist of resource recovery issues or (c) more than 10% of Moody's
Eligible Assets consist of Other Issues. When the Trust sells a Florida
Municipal Obligation or Other Municipal Obligation and agrees to repurchase
it at a future date, the Trust must count as a liability for the purposes
of the Preferred Shares Basic Maintenance Amount the amount of the
repurchase price of such Florida Municipal Obligation or Other Municipal
Obligation and such Florida Municipal Obligation or Other Municipal
Obligation is considered a Moody's Eligible Asset to the extent it
satisfies Moody's current guidelines. When the Trust buys a Florida
Municipal Obligation or Other Municipal Obligation and agrees to sell it to
another party at a future date and the long-term debt of such other party
is rated at least A2 and the transaction has a term of 30 days or less, the
cash to be received by the Trust will be counted as a Moody's Eligible
Asset; otherwise such Florida Municipal Obligation or Other Municipal
Obligation will be counted as a Moody's Eligible Asset to the extent it
satisfies Moody's current guidelines.
Notwithstanding the foregoing, an asset will not be considered a
Moody's Eligible Asset if it is held in a margin account or if it is
subject to any material lien, mortgage, pledge, security interest or
security agreement of any kind, except for (i) Liens to secure payment for
services rendered or cash advanced to the Trust by the Adviser, the
custodian of the Trust's assets, the Auction Agent or any Broker-Dealers
and (ii) any Lien by virtue of a repurchase agreement. In addition, an
asset irrevocably deposited for the payment of any of the items set forth
in clauses (i) A through F of the Preferred Shares Basic Maintenance Amount
will not be considered Moody's Eligible Assets.
For purposes of the definition of Moody's Eligible Asset,
references to the S&P rating BBB shall be deemed to include the S&P ratings
BBB and BBB+.
"Moody's Exposure Period" means a period that is the same length or
longer than the number of days used in calculating the cash dividend
component of the Preferred Shares Basic Maintenance Amount and shall
initially be the period commencing on a given Valuation Date and ending 48
days thereafter.
"Moody's Hedging Transaction" means the selling of an exchange
traded futures contract based on the Municipal Index or Treasury Bonds or
the purchase of an exchange traded put option on such a futures contract or
the writing of an exchange traded call option on such a futures contract.
"Moody's Volatility Factor" means 100% during any Dividend Period
of greater than 49 days until 49 days prior to the last day of such
Dividend Period; otherwise, "Moody's Volatility Factor" means 272% except
during that time period where legislation increasing the federal income tax
rate has been enacted into law and such increase has not yet taken effect,
in which case for such time period Moody's Volatility Factor shall be
determined by reference to the increase in the Maximum Marginal Tax Rate as
follows: for increases of up to 5%, 292%; for increases greater than 5% and
up to 10%, 313%; for increases greater than 10% and up to 15%, 338%; for
increases greater than 15% and up to 20%, 364%; for increases greater than
20% and up to 25%, 396%; for increases greater than 25% and up to 30%,
432%; for increases greater than 30% and up to 35%, 472%; for increases
greater than 35% and up to 40%, 520%.
"Municipal Index" means The Bond Buyer Municipal Bond Index.
"Municipal Receivables" means no more than the aggregate of the
following: (i) the book value of receivables for Florida Municipal
Obligations sold as of or prior to a relevant Valuation Date if such
receivables are due within five Business Days of such Valuation Date, and
if the trades which generated such receivables are (A) settled through
clearing house firms with respect to which the Trust has received prior
written authorization from Moody's or (B) with counterparties having a
Moody's long-term debt rating of at least Baa3; and (ii) the Moody's
Discounted Value of Florida Municipal Obligations sold as of or prior to
such Valuation Rate which generated receivables, if such receivables are
due within five Business Days of such Valuation Date but do not comply with
either of conditions (A) or (B) of the preceding clause (i).
"1940 Act" means the Investment Company Act of 1940, as amended
from time to time.
"1940 Act Preferred Shares Asset Coverage" means asset coverage, as
defined in section 18(h) of the 1940 Act , of at least 200% with respect to
all outstanding senior securities of the Trust which are shares of
beneficial interest, including all outstanding Preferred Shares and Other
Preferred Shares (or such other asset coverage as may in the future be
specified in or under the 1940 Act as the minimum asset coverage for senior
securities which are stock of a closed-end investment company as a
condition of paying dividends on its common shares of beneficial interest).
"1940 Act Cure Date," with respect to the failure by the Trust to
maintain the 1940 Act Preferred Shares 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 "Specific
Redemption Provisions" below.
"Non-Payment Period," with respect to each series of Preferred
Shares, means any period commencing on and including the day on which the
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 Business Day
preceding such Dividend Payment Date, the full amount of any dividend on
Preferred Shares payable on such Dividend Payment Date or (ii) deposit,
irrevocably in trust, in same-day funds, with the Auction Agent by 12:00
noon, New York City time, (A) on such Dividend Payment Date the full amount
of any cash dividend on such shares payable (if declared) on such Dividend
Payment Date or (B) on any redemption date for any Preferred Shares called
for redemption, the Mandatory Redemption Price per share of such Preferred
Shares or, in the case of an optional redemption, the Optional Redemption
Price per share, and ending on and including the Business Day on which, by
12:00 noon, New York City Time, all unpaid cash dividends and unpaid
redemption prices shall have been so deposited or shall have otherwise been
made available to Holders in same-day funds; provided that, Non-Payment
Period shall not end unless the Trust shall have given at least five days,
but no more than 30 days written notice of such deposit or availability to
the Auction Agent, all Existing Holders (at their addresses appearing in
the Share Books) and the Securities Depository. Notwithstanding the
foregoing, the failure by the Trust to deposit the funds provided for by
clauses (ii)(A) and (ii)(B) above within three Business Days after a
Dividend Payment Date or any Redemption Date, as the case may be, in each
case to the extent contemplated by paragraph 2(c)(i) of this Certificate of
Designation, shall not constitute a "Non-Payment Period".
"Non-Payment Period Rate" means, initially, 250% of the 30-day "AA"
Composite Commercial Paper Rate (or 300% of such rate if the 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 Preferred Shares). Such percentages will be used to
calculate the Applicable Rate for any Non-Payment Period which occurs
during a Special Dividend Period on either series of Preferred Shares and
will be applied to the applicable Special Dividend Period Reference Rate
then in effect with respect to such series. However, the Board of Trustees
of the Trust shall have the authority to adjust, modify, alter or change
from time to time the initial Non-Payment Period Rate if the Board of
Trustees of the Trust determines and Moody's and S&P (and any Substitute
Rating Agency in lieu of Moody's or S&P in the event either of such parties
shall not rate the Preferred Shares) advise the Trust in writing that such
adjustment, modification, alteration or change will not adversely affect
their then-current ratings on the Preferred Shares.
"Normal Dividend Payment Date" has the meaning set forth in
paragraph 2(b)(i) of this Certificate of Designation.
"Notice of Redemption" means any notice with respect to the
redemption of Preferred Shares 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 $25,000 per share plus an
amount equal to accumulated but unpaid dividends (whether or not earned or
declared) to the date fixed for redemption plus the premium, if any,
resulting from the designation of a Premium Call Period.
"Original Issue Insurance" means insurance guaranteeing the timely
payment of principal of, and interest on, a Florida Municipal Obligation
purchased by the issuer of a Florida Municipal Obligation or by a third
party at the time of issuance of such Florida Municipal Obligation, as the
case may be.
"Other Municipal Obligations" means long-term obligations issued by
or on behalf of states, territories or possessions of the United States,
political subdivisions of the foregoing, or agencies and instrumentalities
paying interest which, in the opinion of the bond counsel to the issuer, is
exempt from Federal but not Florida State and local income tax.
"Other Preferred Shares" means the Auction Rate Municipal Preferred
Shares of Beneficial Interest of the Trust, other than the Preferred
Shares.
"Outstanding" means, as of any date (i) with respect to Preferred
Shares, Preferred Shares theretofore issued by the Trust except, without
duplication, (A) any Preferred Shares 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
Preferred Shares as to which the Trust or any Affiliate thereof shall be an
Existing Holder and (ii) with respect to shares of Other Preferred Shares
of Beneficial Interest, has the equivalent meaning.
"Parity Shares of Beneficial Interest" means the Preferred Shares
and each other outstanding series of Preferred Shares of Beneficial
Interest the holders of which, together with the holders of the Preferred
Shares, shall be entitled to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the case may
be, in proportion to the full respective preferential amounts to which they
are entitled, without preference or priority one over the other.
"Permanent Insurance" means insurance guaranteeing the timely
payment of principal of, and interest on, a Municipal Obligation purchased
by the Trust upon payment of a single, predetermined insurance premium
pursuant to an irrevocable commitment of the issuer of Portfolio Insurance
covering such Municipal Obligation.
"Person" shall mean and include an individual, a partnership a
corporation, a trust, an unincorporated association, a joint venture or
other entity or a government or any agency or political subdivision
thereof.
"Portfolio Insurance" means insurance guaranteeing the timely
payment of principal of, and interest on, a covered Florida Municipal
Obligation only while such Florida Municipal Obligation is owned by the
Trust.
"Potential Holder" shall mean any Person, including any Existing
Holder, who may be interested in acquiring Preferred Shares (or, in the
case of at Existing Holder, additional Preferred Shares).
"Preferred Shares" means Auction Rate Municipal Preferred Shares of
Beneficial Interest, Series R7.
"Preferred Shares Basic Maintenance Amount" as of any Valuation
Date, means the dollar amount equal to (i) the sum of (A) the product of
the number of Preferred Shares and Other Preferred Shares outstanding on
such Valuation Date multiplied by $25,000 plus the premium, if any,
resulting from the designation of a Premium Call Period; (B) the aggregate
amount of cash dividends that will have accumulated (whether or not earned
or declared) for each share of Preferred Shares and Other Preferred Shares
outstanding, in each case, to (but not including) the next Dividend Payment
Date therefor that follows such Valuation Date (calculated, in the case of
cash dividends determined by application of a Spread to a Reference Index
or Reference Security, by assuming that the Applicable Rate in effect for
the immediately preceding Dividend Payment Period will remain in effect
until the next Dividend Payment Period); (C) the aggregate amount of cash
dividends that would accumulate at the then current Maximum Applicable Rate
(assuming notification has been given to the Auction Agent that net capital
gains or other taxable income will be included in the relevant dividend as
contemplated pursuant to paragraphs 2(f) and 11(a)(vi) of this Certificate
of Designation) on any Preferred Shares and Other Preferred Shares
outstanding from such Dividend Payment Date through the 48th day after such
Valuation Date, multiplied by the larger of the Moody's Volatility Factor
and the S&P Volatility Factor determined from time to time by Moody's and
S&P respectively (except that if such Valuation Date occurs during a
Non-Payment Period, the cash dividend for purposes of calculation would
accumulate at the then current Non-Payment Period Rate); (D) the amount of
anticipated expenses of the 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, payables for Florida Municipal Obligations purchased as of
such Valuation Date) less (ii) the lesser of (A) either the Discounted
Value of the Trust's assets irrevocably deposited by the Trust for the
payment of any of (i)(A) through (i)(F) or the face value of such
irrevocably deposited assets that mature prior to the payment date of the
liabilities for which they are being deposited and are either fully
guaranteed by the U.S. government or have a rating of either P-1, VMIG-1 or
MIG-1 by Moody's or A-1+ and SP-1+ by S&P, and (B) the Market Value of any
of the Trust's assets irrevocably deposited by the Trust for the payment of
any of (i)(A) through (i)(F).
For purposes of determining as of any Valuation Date whether the
Trust has Moody's Eligible Assets and S&P Eligible Assets each with an
aggregate Discounted Value at least equal to the Preferred Shares Basic
Maintenance Amount, the Trust shall include as a liability in the
calculation of the Preferred Shares Basic Maintenance Amount an amount
calculated semi-annually equal to 150% of the estimated cost of obtaining
Permanent Insurance with respect to Moody's Eligible Assets or S&P Eligible
Assets, as applicable, that are (i) covered by Portfolio Insurance policies
which provide the Trust with the option to obtain such Permanent Insurance
and (ii) are discounted by a Moody's Discount Factor or S&P Discount
Factor, as applicable, determined by reference to the insurance
claims-paying ability rating of the issuer of such Portfolio Insurance
policy.
"Preferred Shares Basic Maintenance Cure Date," with respect to the
failure by the Trust to satisfy the Preferred Shares Basic Maintenance
Amount (as required by paragraph 7(a) of this Certificate of Designation)
as of a given Valuation Date, means the fifth Business Day following such
Valuation Date.
"Preferred Shares Basic Maintenance Report" means a report signed
by the President, Treasurer, or Vice President of the 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 Preferred Shares Basic Maintenance Amount.
"Preferred Shares of Beneficial Interest" means the preferred
shares of beneficial interest of the Trust, and includes Preferred Shares
and Other Preferred Shares.
"Premium Call Period" has the meaning set forth under "Specific
Redemption Provisions" below.
"Pricing Service" shall mean J.J. Kenny Co., Inc. or any pricing
service designated by the Board of Trustees of the Trust provided the Trust
obtains written assurance from S&P that such designation will not impair
the rating then assigned by S&P to the Preferred Shares.
"Quarterly Valuation Date" means the last Business Day of each
fiscal quarter of the Trust in each fiscal year of the Trust, commencing
December 31, 1992.
"Reference Index" shall mean an index of interest rates on Treasury
Securities, Municipal Obligations or high quality commercial paper or
dividend rates on preferred stock of issuers registered as closed-end
management investment companies under the 1940 Act that invest primarily in
Municipal Obligations or any other index or instrument selected and
approved by the Trust's Board of Trustees, after consultation with the
Broker-Dealers, as being an appropriate index or instrument, in each case
expressed as a rate and devised and calculated not less often than monthly
by one or more parties that are not affiliated with the Trust and made
available to the Trust, the Auction Agent, the Broker-Dealers and existing
and potential beneficial owners of the Preferred Shares.
"Reference Rate" means the higher of the 30-day "AA" Composite
Commercial Paper Rate and the Taxable Equivalent of the Short-Term
Municipal Bond Rate, or, in the case of a Special Dividend Period with a
single Applicable Rate throughout such Special Dividend Period, the Special
Dividend Period Reference Rate or, in the case of a Special Dividend Period
with a varying Applicable Rate, the Reference Rate specified in the
definition of S&P Volatility Factor that most closely approximates the
length of the interval between periodic applications of the Spread to the
relevant Reference Index or Reference Security.
"Reference Security" shall mean, in the case of a debt obligation,
a particular debt obligation which is publicly traded, which is
non-callable prior to the termination of the Special Dividend Period with
respect to which such Reference Security is relevant and the outstanding
aggregate principal amount of which at the time of the Notice of Special
Dividend Period exceeds $100 million or, in the case of a preferred stock,
a preferred stock issue which is publicly traded, which is non- redeemable
prior to the termination of the Special Dividend Period with respect to
which such Reference Security is relevant and the outstanding liquidation
value of which at the time of the Notice of Special Dividend Period exceeds
$50 million.
"Request for Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii) of this Certificate of Designation.
"Response" has the meaning set forth in paragraph 2(c)(iii) of this
Certificate of Designation.
"Retroactive Taxable Allocation" has the meaning set forth in
paragraph 2(e) of this Certificate of Designation.
"Right," with respect to Preferred Shares, has the meaning set
forth in paragraph 2(e) of this Certificate of Designation and, with
respect to Other Preferred Shares, has the equivalent meaning.
"Rightholder" has the meaning set forth in paragraph 2(e) of this
Certificate of Designation.
"S&P" means Standard & Poor's Corporation or its successors.
"S&P Discount Factor" means, for purposes of determining the
Discounted Value of any Florida Municipal Obligation which constitutes an
S&P Eligible Asset, the percentage determined by reference to (a)(i) in the
event the Florida Municipal Obligation is covered by a Portfolio Insurance
policy which does not provide the Trust with the option to obtain Permanent
Insurance with respect to such Florida Municipal Obligation, or is not
covered by bond insurance, the S&P or Moody's rating on such Florida
Municipal Obligation, (ii) in the event the Florida Municipal Obligation is
covered by an Original Issue Insurance policy or a Secondary Insurance
policy, the S&P insurance claims-paying ability rating of the issuer of the
policy or (iii) in the event the Florida Municipal Obligation is covered by
a Portfolio Insurance policy which provides the Trust with the option to
obtain Permanent Insurance with respect to such Florida Municipal
Obligation and such Portfolio Insurance policy has been reviewed and
approved in writing by S&P, at the Trust's option, the S&P or Moody's
rating on such Florida Municipal Obligation or the S&P insurance
claims-paying ability rating of the issuer of the Portfolio Insurance
policy and (b) the shortest S&P Collateral Period set forth opposite such
rating that is the same length as or is longer than the S&P Exposure
Period, in accordance with the table set forth below:
<TABLE>
<CAPTION>
RATING CATEGORY
-------------------------------------------------
FOR FLORIDA MUNICIPAL OBLIGATIONS: AAA* AA* A* BBB*
- ------------------------------------ ---------- ---------- ----------- -----------
S&P COLLATERAL PERIOD
<C> <C> <C> <C> <C>
40 Business Days.................... 210% 215% 230 % 270 %
22 Business Days.................... 190 195 210 250
10 Business Days.................... 175 180 195 235
7 Business Days.................... 170 175 190 230
3 Business Days.................... 150 155 170 210
- ------------------
* S&P rating.
</TABLE>
Notwithstanding the foregoing, (i) the S&P Discount Factor for
short-term Florida Municipal Obligations will be 115%, so long as such
Florida Municipal Obligations are rated A-1+ or SP-1+ by S&P or 125% if
such Florida Municipal Obligations are not rated by S&P but are rated
VMIG-1, P-1 or MIG-1 by Moody's and mature or have a demand feature
exercisable in 30 days or less; provided, however, that such Moody's rated
short-term Florida Municipal Obligations must be backed by a letter of
credit, liquidity facility or guarantee from a bank or other financial
institution, such bank or institution having a short-term rating of at
least A-1+ from S&P; and further provided that such short-term Florida
Municipal Obligations rated by Moody's but not rated by S&P may comprise no
more than 50% of short-term Florida Municipal Obligations that qualify as
S&P Eligible Assets and (ii) no S&P Discount Factor will be applied to cash
or to the book value of Florida Municipal Obligations sold for which
payment is due within five Business Days. The Trust may adopt S&P Discount
Factors for Other Municipal Obligations provided that S&P advises the Trust
in writing that such action will not adversely affect its then current
rating on the Preferred Shares. Anticipation Notes rated SP-1+ or, if not
rated by S&P, rated MIG-1 or VMIG-1 by Moody's, which do not mature or have
a demand feature at par exercisable in 30 days and which do not have a
long-term rating, will be considered to be short term Florida Municipal
Obligations for purposes of determining the Discounted Value of S&P
Eligible Assets.
"S&P Eligible Asset" means cash or the book value of Florida
Municipal Obligations sold for which payment is due within five Business
Days of a Valuation Date or a Florida Municipal Obligation that (i) is
interest bearing and pays interest at least semiannually; (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 Obligations will be included in S&P Eligible Assets only
to the extent the Market Value of such Florida Municipal Obligations do 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 Obligation, such
Florida Municipal Obligation 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 part of a private placement of Florida Municipal Obligations; and
(vi) is part of an issue of Florida Municipal Obligations with an original
issue size of at least $20 million or, if of an issue with an original
issue size below $20 million (but in no event below $10 million), is issued
by an issuer with a total of at least $50 million of securities
outstanding. Notwithstanding the foregoing:
(1) Florida Municipal Obligations of any one issuer or
guarantor (excluding bond insurers) will be considered S&P Eligible
Assets only to the extent the Market Value of such Florida
Municipal Obligations does not exceed 20% of the aggregate Market
Value of the S&P Eligible Assets, except that Florida Municipal
Obligations falling within the utility issue type category will be
broken down into three sub-categories (as described below) and such
Florida Municipal Obligations will be considered S&P Eligible
Assets to the extent the Market Value of such Bonds in each such
sub-category does not exceed 20% of the aggregate market value of
S&P Eligible Assets. For purposes of the issue type category
requirement described above, Florida Municipal Obligations 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 Obligations in the
utility issue type category will be classified within one of the
three following sub-categories: (i) electric, gas and combination
issues (if the combination issue includes an electric issue), (ii)
water and sewer utilities and combination issues (if the
combination issue does not include an electric issue), and (iii)
irrigation, resource recovery, solid waste and other utilities,
provided that Florida Municipal Obligations 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 Other Municipal Obligations 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 Preferred Shares.
"S&P Exposure Period" means the maximum period of time following a
Valuation Date, including the Valuation Date and the Preferred Shares Basic
Maintenance Cure Date, (currently 10 Business Days) that the 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 Preferred Shares Basic Maintenance Amount (as described in
paragraph 7(a) of this Certificate of Designation).
"S&P Hedging Transaction" means the purchasing or selling of a
futures contract based on the Municipal Index or Treasury Bonds or the
purchasing of an option on such a futures contract.
"S&P Volatility Factor" means, depending on the applicable
Reference Rate, the following:
Reference Rate
Taxable Equivalent of the Short-Term Municipal Bond Rate............. 277%
30-day "AA" Composite Commercial Paper Rate.......................... 228%
60-day "AA" Composite Commercial Paper Rate.......................... 228%
90-day "AA" Composite Commercial Paper Rate.......................... 222%
180-day "AA" Composite Commercial Paper Rate......................... 217%
1-year U.S. Treasury Bill Rate....................................... 198%
2-year U.S. Treasury Note Rate....................................... 185%
3-year U.S. Treasury Note Rate....................................... 178%
4-year U.S. Treasury Note Rate....................................... 171%
5-year U.S. Treasury Note Rate....................................... 169%
Notwithstanding the foregoing, the S&P Volatility Factor may mean such
other potential dividend rate increase factor as S&P advises the Trust in
writing is applicable.
"Secondary Insurance" means insurance guaranteeing the timely
payment of principal of, and interest on, a Florida Municipal Obligation
purchased by the Trust or a third party subsequent to the original issuance
of such Florida Municipal Obligation.
"Securities Depository" means The Depository Trust Company or any
successor company or other entity selected by the Trust as securities
depository for the Preferred Shares that agrees to follow the procedures
required to be followed by such securities depository in connection with
the Preferred Shares.
"Series R7 Preferred Shares" means the Auction Rate Municipal
Preferred Shares of Beneficial Interest, Series R7, liquidation preference
$25,000 per share plus an amount equal to accumulated but unpaid dividends
thereon (whether or not earned or declared), plus the premium, if any,
resulting from the designation of a Premium Call Period, of the Trust.
"Service" means the United States Internal Revenue Service.
"7-day Dividend Period" means any Dividend Period of 7 days for the
Preferred Shares.
"Special Dividend Period" means a Dividend Period consisting of a
specified number of days (other than 7), evenly divisible by seven (subject
to adjustment as provided in paragraph 2(c)(iii)).
"Special Dividend Period Reference Rate" means the rate or rates
per annum specified by the Trust (which may be expressed as the lower of a
specified rate or rates or a Spread under, at or over the Reference Index
or Reference Security being specified for such Special Dividend Period) in
the Notice of Special Dividend Period relating to a particular Special
Dividend Period and specifying a Reference Index or Reference Security or,
if the Trust shall fail to so specify any such rate or rates, then (i), in
the case of a Special Dividend Period of 182 days or less, the "AA"
Composite Commercial Paper Rate which most closely matches the length of
the Special Dividend Period, provided that in no case shall the Special
Dividend Reference Rate be a "AA" Composite Commercial Paper Rate which is
shorter in time than the 30-day "AA" Composite Commercial Paper Rate, or,
in the case of a Special Dividend Period of longer than 182 days, the
Treasury Rate which most closely matches the length of the Special Dividend
Period.
"Specific Redemption Provisions" means, with respect to a Special
Dividend Period either, or any combination of, (i) a period (a "Non-Call
Period") determined by the Board of Trustees of the Trust, after
consultation with the Auction Agent and the Broker-Dealers, during which
the Preferred Shares subject to such Dividend Period shall not be subject
to redemption at the option of the Trust and (ii) a period (a "Premium Call
Period"), consisting of a number of whole years and determined by the Board
of Trustees of the Trust, after consultation with the Auction Agent and the
Broker-Dealers, during each year of which the Preferred Shares subject to
such Dividend Period shall be redeemable at a price per share equal to
$25,000 plus accumulated but unpaid dividends plus a premium expressed as a
percentage of $25,000 as determined by the Board of Trustees of the Trust
after consultation with the Auction Agent and the Broker-Dealers; provided,
however, that the Trust shall not adopt Specific Redemption Provisions
unless Moody's and S&P or any Substitute Rating Agency advises the Trust in
writing that such adoption will not adversely affect their then-current
ratings on the Preferred Shares.
"Spread" means the negative or positive difference or the absence
of any difference, expressed in whole and fractional basis points, below,
at or above a Reference Index or Reference Security specified by the Trust
in a Notice of Special Dividend Period.
"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 Preferred Shares.
"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 Preferred Shares.
"Subsequent Dividend Payment Period," with respect to Preferred
Shares, has the meaning set forth in paragraph 2(c)(i) of this Certificate
of Designation and, with respect to Other Preferred Shares, has the
equivalent meaning.
"Substitute Commercial Paper Dealers" means such Substitute
Commercial Paper Dealer or Dealers as the 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" shall
mean a nationally recognized securities rating organization and two
nationally recognized securities rating organizations, respectively,
selected by Merrill Lynch, Pierce, Fenner & Smith Incorporated, or its
respective affiliates and successors, after consultation with the Trust, to
act as a substitute rating agency or substitute rating agencies, as the
case may be, to determine the credit ratings of the Series R7 Preferred
Shares.
"Taxable Equivalent of the Short-Term Municipal Bond Rate" means
(i) 90% of (A) the per annum rate expressed on an interest equivalent basis
equal to the index, made available for the Business Day immediately
preceding such date but in any event not later than 8:30 A.M., New York
City time, on such date by Kenny Information Systems or any successor
thereto, based upon 30-day yield evaluations at par of bonds the interest
on which is excludable for Federal income tax purposes under the Code, of
not less than "high grade" component issuers selected by Kenny Information
Systems or any such successor from time to time in its discretion, which
component issuers shall include, without limitation, issuers of general
obligation bonds but shall exclude any bonds the interest on which is
subject to the Federal alternative minimum tax or similar tax under the
Code, unless all bonds the interest on which is so excludable for Federal
income tax purposes are subject to such tax and (B) divided by 1 minus the
Maximum Marginal Regular Federal individual income tax rate applicable to
the character of the income being distributed or the maximum marginal
regular Federal corporate income tax rate applicable to the character of
the income being distributed (in each case expressed as a decimal),
whichever is greater; or (ii) in lieu of the rate determined pursuant to
clause (i) above, a percentage, determined by the Trust, of (A) the per
annum rate expressed on an interest equivalent basis equal to any
substitute index prepared by any person (other than an Affiliate of the
Trust), selected from time to time by the Trust, based on bonds the
interest on which is excludable from gross income for Federal income tax
purposes under the Code, and (B) divided by 1 minus the Maximum Marginal
Regular Federal individual income tax rate applicable to the character of
the income being distributed or the Maximum Marginal Regular Federal
corporate income tax rate applicable to the character of the income being
distributed (in each case expressed as a decimal), whichever is greater, as
made available on a discount basis or otherwise by the preparer of such
index for the Business Day immediately preceding such date but in any event
not later than 8:30 A.M., New York City time, on such date; provided that
the Trust shall not select any such substitute index or determine any such
percentage unless the Trust has received confirmation from Moody's and S&P
(or any Substitute Rating Agency) that the use of such index or percentage
would not affect the ratings assigned to the Preferred Shares by Moody's
and S&P (or any Substitute Rating Agency); provided, however, that if the
index then used by the Trust for purposes of determining the Taxable
Equivalent of the Short-Term Municipal Bond Rate is not made so available
by 8:30 A.M., the case of the index described in clause (i) above or by the
preparer of such index in the case of any substitute index described in
clause (ii) above, the Taxable Equivalent of the Short-Term Municipal Bond
Rate shall mean the per annum rate expressed on an interest equivalent
basis equal to the most recent such index so made available for any
preceding Business Day, without being multiplied by the 90% factor in the
case of the index described in such clause (i) or the percentage determined
by the Trust referred to in such clause (ii) in the case of the index
described in clause (ii).
"30-day 'AA' Composite Commercial Paper Rate," on any date, means
(i) the Interest Equivalent of the 30day rate on commercial paper placed on
behalf of issuers whose corporate bonds are rated "AA" by S&P, or the
equivalent of such rating by S&P or another nationally recognized
statistical rating organization, as such 30-day rate is made available on a
discount basis or otherwise by the Federal Reserve Bank of New York for the
Business Day immediately preceding such date, or (i) in the event that the
Federal Reserve Bank of New York does not make available such a rate, then
the arithmetical average of the Interest Equivalent of the 30-day rate on
commercial paper placed on behalf of such issuers, as quoted to the Auction
Agent on a discount basis or otherwise by the Commercial Paper Dealer for
the close of business on the Business Day immediately preceding such date.
If the Commercial Paper Dealer does not quote a rate required to determine
the 30-day "AA" Composite Commercial Paper Rate, the 30-day "AA" Composite
Commercial Paper Rate will be determined on the basis of the quotation or
quotations furnished by any Substitute Commercial Paper Dealer or
Substitute Commercial Paper Dealers selected by the Trust to provide such
rate or rates not being supplied by the Commercial Paper Dealer.
"Treasury Bonds" means United States Treasury Bonds with remaining
maturities of ten years or more.
"Treasury Rate," on any date for any Special Dividend Period
exceeding 182 days, means:
(i) the yield on the most recently auctioned
non-callable direct obligations of the U.S. Government (excluding
"flower" bonds) with a remaining maturity closest to the duration
of such Special Dividend Period, as quoted in The Wall Street
Journal on such date for the Business Day next preceding such date;
or
(ii) in the event that any such rate is not published
by The Wall Street Journal, then the arithmetic average of the
yields on the most recently auctioned noncallable direct
obligations of the U.S. Government (excluding "flower" bonds) with
a remaining maturity closest to the duration of such Special
Dividend Period as quoted on a discount basis or otherwise by the
U.S. Government Securities Dealers to the Auction Agent for the
close of business on the Business Day immediately preceding such
date.
If any U.S. Government Securities Dealer does not quote a rate
required to determine the Treasury Rate, the Treasury Rate shall be
determined on the basis of the quotation or quotations furnished by the
remaining U.S. Government Securities Dealer or U.S. Government Securities
Dealers and any Substitute U.S. Government Dealers selected by the Trust to
provide such rate or rates not being supplied by any U.S. Government
Securities Dealer or U.S. Government Securities Dealers, as the case may
be, or, if the Trust does not select any such Substitute U.S. Government
Securities Dealer or Substitute U.S. Government Securities Dealers, by the
remaining U.S. Government Securities Dealer or U.S. Government Securities
Dealers.
"Treasury Securities" means United States Treasury bills, notes or
bonds.
"Trust" means The BlackRock Florida Insured Municipal 2008 Term
Trust, a Massachusetts business trust.
"28-day Dividend Period" means any Dividend Period of 28 days for a
series of Preferred Shares.
"U.S. Government Securities Dealer" means Merrill Lynch, Pierce,
Fenner & Smith Incorporated and its respective affiliates or successors, if
such entity is a U.S. Government securities dealer. As used herein,
"Substitute U.S. Government Securities Dealer" shall mean Kidder, Peabody &
Co. Incorporated, PaineWebber Incorporated, Prudential Securities
Incorporated and Shearson Lehman Brothers Inc. or their respective
affiliates or successors, if such entity is a U.S. Government securities
dealer, provided that none of such entities shall be a U.S. Government
Securities Dealer.
"Valuation Date" means, for purposes of determining whether the
Trust is maintaining the Preferred Shares Basic Maintenance Amount and the
Minimum Liquidity Level, each Friday which is a Business Day, or the
Business Day preceding any Friday which is not a Business Day, and the Date
of Original Issue.
"Variation Margin" means, in connection with an outstanding futures
contract owned or sold by the Trust, the amount of cash or securities paid
to and received from a broker (subsequent to the Initial Margin payment)
from time to time as the price of such futures contract fluctuates.
(b) The foregoing definitions of Accountant's Confirmation,
Deposit Securities, Discounted Value, Dividend Coverage Amount, Dividend
Coverage Assets, Independent Accountant, Market Value, Maximum Potential
Additional Dividend Liability, Minimum Liquidity Level, Moody's Discount
Factor, Moody's Eligible Asset, Moody's Exposure Period, Moody's Hedging
Transaction, Moody's Volatility Factor, Preferred Shares Basic Maintenance
Amount, Preferred Shares Basic Maintenance Cure Date, Preferred Shares
Basic Maintenance Report, Reference Rate, S&P Discount Factor, S&P Eligible
Asset, S&P Exposure Period, S&P Hedging Transaction, S&P Volatility Factor
and Valuation Date have been determined by the Board of Trustees of the
Trust in order to obtain an "aaa" rating from Moody's and an AAA rating
from S&P on the Preferred Shares on their Date of Original Issue; and such
definitions shall be adjusted from time to time and without further action
by the Board of Trustees to reflect changes made thereto independently by
Moody's, S&P or any Substitute Rating Agency if each of Moody's, S&P and
any Substitute Rating Agency has advised the Trust in writing (i)
separately or collectively of such adjustments and (ii) collectively that
such adjustments will not adversely affect their then- current ratings on
the Preferred Shares. The adjustments contemplated by the preceding
sentence shall be made effective upon the time the Trust receives the
written notice from Moody's S&P and any Substitute Rating Agency
contemplated by clause (ii) of the preceding sentence.
2. Dividends. (a) The Holders shall be entitled to receive, when,
as and if declared by the Board of Trustees of the Trust, out of funds
legally available therefor, cumulative dividends each consisting of (i)
cash at the Applicable Rate and (ii) an uncertificated Right to receive
cash as set forth in paragraph 2(e) below, and no more, payable on the
respective dates set forth below. Dividends on the Preferred Shares so
declared and payable shall be paid (i) in preference to and in priority
over any dividends declared and payable on the Common Shares of Beneficial
Interest, and (ii) to the extent permitted by law and to the extent
available, out of net tax-exempt income earned on the Trust's investments.
To the extent permitted by law, dividends on Preferred Shares will be
designated as exempt-interest dividends. For the purposes of this section,
the term "net tax-exempt income" shall exclude capital gains and other
taxable income of the Trust.
(b) (i) Cash dividends on Preferred Shares shall accumulate
from the Date of Original Issue and shall be payable commencing on
the Initial Dividend Payment Date with respect to each series of
Preferred Shares. Following the Initial Dividend Payment Date for
each series of Preferred Shares, dividends on the Preferred Shares
will be payable, at the option of the Trust, (ii) with respect to
any Dividend Period of 35 or fewer days on the day next succeeding
the last day thereof, (iii) with respect to any Dividend Period of
more than 35 and fewer than 92 days, on the day next succeeding
each period of 30 days to occur during such Dividend Period (or in
the case of any Dividend Period of more than 91 days, as specified
in the relevant Notice of Special Dividend Period), and on the day
next succeeding the last day thereof, (iv) with respect to any
Dividend Period of 365 days or more, monthly on the first day of
each calendar month during such Dividend Period (or in the case of
any Dividend Period of more than 91 days, as specified in the
relevant Notice of Special Dividend Period), and on the day next
succeeding the last day thereof (each such date referred to in
clauses (i), (ii), (iii) and (iv) being hereinafter referred to as
a "Normal Dividend Payment Date"), except that (i) if such Normal
Dividend Payment Date is not a Business Day, then the Dividend
Payment Date shall be the next succeeding date if both such dates
following the Normal Dividend Payment Date are Business Days, or
(ii) if the date following such Normal Dividend Payment Date is not
a Business Day, then the Dividend Payment Date will be the date
next preceding such Normal Dividend Payment Date if both such date
and such Normal Dividend Payment Date are Business Days or (iii) if
such Normal Dividend Payment Date and either the preceding date or
the succeeding date are not Business Days, then the Dividend
Payment Date shall be the first Business Day next preceding such
Normal Dividend Payment Date that is next succeeded by a Business
Day. If, however, the Securities Depository shall make available to
its participants and members in funds immediately available in New
York City on Dividend Payment Dates, the amount due as dividends on
such Dividend Payment Dates (and the Securities Depository shall
have so advised the Trust), and if the day that otherwise would be
the Dividend Payment Date is not a Business Day, then the Dividend
Payment Date shall be the next succeeding Business Day. Although
any particular Dividend Payment Date may not occur on a Normal
Dividend Payment Date because of the exceptions discussed above,
the next succeeding Dividend Payment Date shall be, subject to such
provisos, the next Normal Dividend Payment Date. If for any reason
a Dividend Payment Date cannot be fixed as described above, then
the Board of Trustees shall fix the Dividend Payment Date. Each
dividend payment date determined as provided above is hereinafter
referred to as a "Dividend Payment Date."
(ii) Each dividend shall be paid to the Holders as
they appear in the Share Register as of 12:00 noon, New York City
time, on the Business Day preceding the Dividend Payment Date.
Dividends in arrears for any past Dividend Period may be declared
and paid at any time, without reference to any regular Dividend
Payment Date, to the Holders as they appear on the Share Register
on a date, not exceeding 15 days prior to the payment date
therefor, as may be fixed by the Board of Trustees of the Trust.
(c) (i) During the period from and including the Date of
Original Issue to but excluding the Initial Dividend Payment Date
(the "Initial Dividend Period"), the Applicable Rate shall be the
Initial Dividend Rate. Commencing on the Initial Dividend Payment
Date, the Applicable Rate for each subsequent Dividend Period or
portion thereof (hereinafter referred to as a "Subsequent Dividend
Payment Period"), which Subsequent Dividend Payment Period shall
commence on a Dividend Payment Date, and shall end on the calendar
day prior to the next Dividend Payment Date, shall be equal to the
lesser of (x) the Maximum Applicable Rate for such Dividend Period,
or for such Subsequent Dividend Payment Period included therein or
(y) the greater of (i) the Minimum Applicable Rate for such
Dividend Period or for such Subsequent Dividend Payment Period
included therein or (ii) the rate per annum that results for such
Dividend Period or Subsequent Dividend Payment Period included
therein from implementation of the Auction Procedures including any
periodic application of a Spread to a specified Reference Index or
Reference Security.
Notwithstanding the foregoing sentence, the Applicable Rate
for each Dividend Period commencing during a Non-Payment Period
shall be equal to the Non-Payment Period Rate and each Dividend
Payment Period for the Preferred Shares, commencing after the first
day of, and during, a Non-Payment Period shall be a 7-day Dividend
Payment 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
Preferred Shares 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 Preferred
Shares as of 12:00 noon, New York City time, on the Business Day
preceding such Dividend Payment Date) or redemption price with
respect to any Preferred Shares not paid to such Holders when due
may be paid to such Holders in the same form of funds by 12:00
noon, New York City time, on any of the first three Business Days
after such Dividend Payment Date or due date, as the case may be,
provided that, such amount is accompanied by a late charge
calculated for such period of non-payment at the Non-Payment Period
Rate applied to the amount of such non-payment based on the actual
number of days comprising such period divided by 365. In the case
of a willful failure of the Trust to pay a dividend on a Dividend
Payment Date or to redeem any Preferred Shares on the date set for
such redemption, the preceding sentence shall not apply and the
Applicable Dividend Rate for the Dividend Period commencing during
the Non-Payment Period resulting from such failure shall be the
Non-Payment Period Rate. For the purposes of the foregoing, payment
to a person in same-day funds on any Business Day at any time shall
be considered equivalent to payment to such person in New York
Clearing House (next-day) funds at the same time on the preceding
Business Day, and any payment made after 12:00 noon, New York City
time, on any Business Day shall be considered to have been made
instead in the same form of funds and to the same person before
12:00 noon, New York City time, on the next Business Day.
(ii) The amount of cash dividends per share of
Preferred Shares payable (if declared) for any Dividend Payment
Period or part thereof shall be computed by multiplying the
Applicable Rate for such Dividend Payment Period by a fraction, the
numerator of which shall be the number of days in such Dividend
Payment Period or part thereof such share was outstanding and the
denominator of which shall be 365 (or 360 for a Dividend Period of
365 days or more), multiplying the amount so obtained by $25,000,
and rounding the amount so obtained to the nearest cent.
(iii) With respect to each Dividend Period that the
Trust desires to be 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 such series of Preferred Shares be a
number of days (other than 7), evenly divisible by seven and
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 Sufficient Clearing Bids were made in the last
occurring Auction and unless full cumulative dividends, any amounts
due with respect to mandatory redemptions, and any Additional
Dividends payable prior to such date have been paid in full. Such
Request for Special Dividend Period, in the case of a Dividend
Period of 182 days or less, shall be given on or prior to the 4th
day but not more than 7 days prior to an Auction Date for the
Preferred Shares and, in the case of a Dividend Period of more than
182 days, shall be given on or prior to the 14th day but not more
than 28 days prior to an Auction Date for the Preferred Shares.
Such Request for Special Dividend Period shall also specify any
proposed Bid Requirements. Upon receiving such Request for Special
Dividend Period, the Broker-Dealer(s) shall jointly determine
whether, given the factors set forth below, it is advisable that
the Trust issue a Notice of Special Dividend Period for the
Preferred Shares as contemplated by such Request for Special
Dividend Period and, if advisable, the Specific Redemption
Provisions and shall give the 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 Preferred Shares, (4)
industry and financial conditions which may affect the Preferred
Shares, (5) the investment objective of the Trust, and (6) the
Dividend Periods and dividend rates at which current and potential
beneficial holders of the Preferred Shares would remain or become
beneficial holders. If none of the Broker-Dealer(s) give the Trust
and the Auction Agent a Response by such third day or if the
Response of all of the Broker-Dealers providing a Response states
that given the factors set forth above it is not advisable that the
Trust give a Notice of Special Dividend Period for the Preferred
Shares, 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 of at least one Broker-Dealer does not indicate
that it is not advisable that the Trust give a Notice of Special
Dividend Period for the Preferred Shares, 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 the duration of the Special Dividend Period, the Bid
Requirements (if any) applicable to the Auction relating to such
Special Dividend Period and Specific Redemption Provisions (if
any). The Trust shall not give a Notice of Special Dividend Period
or convert to a Special Dividend Period and, if the Trust has given
a Notice of Special Dividend, the Trust is required to give
telephonic and written notice of revocation (a "Notice of
Revocation") to the Auction Agent, each Broker-Dealer, and the
Securities Depository on or prior to the Business Day prior to the
relevant Auction Date if it has not obtained the advice in writing
of Moody's and S&P or any Substitute Rating Agency that the
proposed Special Dividend Period will not adversely affect their
then-current rating on the Preferred Shares or if (w) either the
1940 Act Preferred Shares Asset Coverage is not satisfied or the
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 Preferred Shares Basic Maintenance Amount, in each
case on each of the two Valuation Dates immediately preceding the
Business Day prior to the relevant Auction Date (and in each case,
with respect to Moody's Eligible Assets, using a Moody's Exposure
Period equivalent to 14 days longer than normal) on an actual basis
and on a pro forma basis giving effect to the proposed Special
Dividend Period (using as a pro forma dividend rate with respect to
such Special Dividend Period the dividend rate which the
Broker-Dealers shall advise the Trust is an approximately equal
rate for securities similar to the Preferred Shares with an equal
frequency of recalculation of the Reference Index or Reference
Security as is utilized by the Trust with respect to the first
Dividend Payment Period within such Special Dividend Period and
using as a pro forma Maximum Applicable Rate the highest rate
specified in the Notice of Special Dividend Period for the Dividend
Payment Periods covering not less than the first 49 days of such
proposed Special Dividend Period or, if no such rate is specified
in the Notice of Special Dividend Period, the Maximum Applicable
Rate resulting by operation of the definition of Special Dividend
Period Reference Rate for the Special Dividend Period specified in
such Notice of Special Dividend Period), (x) sufficient funds for
the payment of dividends payable on the immediately succeeding
Dividend Payment Date have not been irrevocably deposited with the
Auction Agent by the close of business on third Business Day
preceding the related Auction Date, (y) the Broker-Dealer(s)
jointly advise the Trust that after consideration of the factors
listed above they have concluded that it is advisable to give a
Notice of Revocation or (z) the Trust has determined to terminate
the Special Dividend Period for any reason. If the Trust is
prohibited from giving a Notice of Special Dividend Period as a
result of any of the factors enumerated in clause (w), (x), (y) or
(z) of the prior sentence or if the 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 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 Preferred Shares (and any such attempted notice shall be
null and void) until Sufficient Clearing Bids have been made in an
Auction with respect to a 7-day Dividend Period.
(d) (i) Holders shall not be entitled to any dividends,
whether payable in cash, property or shares, in excess of full cumulative
dividends, as herein provided, on the Preferred Shares. No interest, or sum
of money in lieu of interest, shall be payable in respect of any dividend
payment on the Preferred Shares that may be in arrears.
(ii) For so long as any share of the Preferred Shares
is outstanding, the 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 of Beneficial Interest
or other shares of beneficial interest, if any, ranking junior to
the Preferred Shares as to dividends or upon liquidation) in
respect of the Common Shares of Beneficial Interest or any other
shares of beneficial interest of the Trust ranking junior to or on
a parity with the Preferred Shares as to dividends or upon
liquidation, or call for redemption, redeem, purchase or otherwise
acquire for consideration any shares of the Common Shares of
Beneficial Interest or any other such junior shares of beneficial
interest (except by conversion into or exchange for shares of
beneficial interest of the Trust ranking junior to the Preferred
Shares as to dividends and upon liquidation) or any other such
Parity Shares of Beneficial Interest (except by conversion into or
exchange for shares of beneficial interest of the Trust ranking
junior to or on a parity with the Preferred Shares as to dividends
and upon liquidation), unless (A) immediately after such
transaction, the Trust shall have Moody's Eligible Assets and S&P
Eligible Assets each with an aggregate Discounted Value equal to or
greater than the Preferred Shares Basic Maintenance Amount and the
Trust shall maintain the 1940 Act Preferred Shares Asset Coverage,
(B) full cumulative dividends on Preferred Shares and shares of
Other Preferred Shares due on or prior to the date of the
transaction have been declared and paid or shall have been declared
and sufficient funds for the payment thereof deposited with the
Auction Agent, (C) any Additional Dividend required to be paid
under paragraph 2(e) below on or before the date of such
declaration or payment has been paid and (D) the Trust has redeemed
the full number of Preferred Shares required to be redeemed by any
provision for mandatory redemption contained herein.
(e) Each dividend shall consist of (i) cash at the
Applicable Rate and (ii) an uncertificated right (a "Right") to receive an
Additional Dividend (as defined below). Each Right shall thereafter be
independent of the share or Preferred Shares on which the dividend was
paid. The Trust shall cause to be maintained a record of each Right
received by the respective Holders. The Trust shall not be required to
recognize any transfer of a Right.
If, in the case of a Dividend Period of 28 days or fewer, the Trust
retroactively allocates any net capital gains or other taxable income to
Preferred Shares without having given advance notice thereof to the Auction
Agent as described in paragraph 2(f) hereof (the amount of such allocation
referred to herein as a "Retroactive Taxable Allocation") solely by reason
of the fact that such allocation is made as a result of the redemption of
all or a portion of the outstanding Preferred Shares or the liquidation of
the Trust, the Trust will, within 90 days (and generally within 60 days)
after the end of the Trust's fiscal year for which a Retroactive Taxable
Allocation is made, provide notice thereof to the Auction Agent and to each
holder of a Right applicable to such Preferred Shares (initially Cede & Co.
as nominee of The Depository Trust Company) during such fiscal year at such
holder's address as the same appears or last appeared on the Share Books of
the Trust. The Trust will, within 30 days after such notice is given to the
Auction Agent, pay to the Auction Agent (who will then distribute to such
holders of Rights), out of funds legally available therefor, an amount
equal to the aggregate Additional Dividend with respect to all Retroactive
Taxable Allocations made to such holders during the fiscal year in
question.
If the Trust, in the case of a Dividend Period of 35 days or more,
makes a Retroactive Taxable Allocation to a dividend paid on Preferred
Shares, the Trust will, within 90 days (and generally within 60 days) after
the end of the Trust's fiscal year for which a Retroactive Taxable
Allocation is made, provide notice thereof to the Auction Agent and to each
holder of a Right applicable to such Preferred Shares (initially Cede & Co.
as nominee of The Depository Trust Company) during such fiscal year at such
holder's address as the same appears or last appeared on the Share Books of
the Trust. The Trust will, within 30 days after such notice is given to the
Auction Agent, pay to the Auction Agent (who will then distribute to such
holders of Rights), out of funds legally available therefor, an amount
equal to the aggregate Additional Dividend with respect to all Retroactive
Taxable Allocations made to such holders during the fiscal year in
question.
An "Additional Dividend" means payment to a holder of Preferred
Shares of an amount which, when taken together with the aggregate amount of
Retroactive Taxable Allocations allocated to such holder with respect to
the fiscal year in question, would cause such holder's dividends from the
aggregate of both the Retroactive Taxable Allocations and the Additional
Dividend to be equal to the dollar amount of the dividends which would have
been received and retained by such holder if the Retroactive Taxable
Allocations had not been made. Such Additional Dividend shall be calculated
(i) without consideration being given to the time value of money; (ii)
assuming that no holder of Preferred Shares is subject to the Federal
alternative minimum tax with respect to dividends received from the Trust;
and (iii) assuming that each Retroactive Taxable Allocation would be
taxable in the hands of each holder of Preferred Shares at the maximum
marginal combined regular Federal and Florida State and local income tax
rate, if any, applicable to individuals or corporations (taking into
account the Federal income tax deductibility of state taxes paid or
incurred), whichever is greater, in effect at the end of the fiscal year in
question.
(f) Whenever the Trust intends to include any net capital
gains or other taxable income in any dividend on Preferred Shares, the
Applicable Rate for which will be established at the next succeeding
Auction, the Trust will, in the case of a Dividend Period of 28 days or
fewer, and may, in the case of a Dividend Period of 35 days or more, notify
the Auction Agent of the amount to be so included at least five Business
Days prior to the Auction Date on which the Applicable Rate for such
dividend is to be established. If, in the case of a Dividend Period of 28
days or fewer, the Trust retroactively allocates any net capital gains or
other taxable income to a dividend paid on Preferred Shares without having
given advance notice thereof to the Auction Agent as described in paragraph
2(f) hereof solely by reason of the fact that such allocation is made as a
result of the redemption of all or a portion of the outstanding Preferred
Shares or the liquidation of the Trust, the Trust will make certain
payments to holders of Preferred Shares to offset the tax effect thereof.
If, in the case of a Dividend Period of 35 days or more, the Trust
allocates any net capital gains or other taxable income to a dividend paid
on Preferred Shares without having given advance notice thereof to the
Auction Agent as described in Paragraph 2(f) hereof, the Trust will make
certain payments to holders of Preferred Shares to offset the tax effect
thereof.
(g) No fractional share of Preferred Shares shall be issued.
3. Liquidation Rights. Upon any liquidation, dissolution or winding
up of the 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 of Beneficial Interest or any other capital shares
of beneficial interest ranking junior in right of payment upon liquidation
to the Preferred Shares, the sum of $25,000 per share plus accumulated but
unpaid dividends (whether or not earned or declared) thereon plus the
premium, if any, resulting from the designation of a Premium Call Period to
the date of distribution, and after such payment the holders of Preferred
Shares will be entitled to no other payments other than Additional
Dividends as provided in paragraph 2(e) hereof. If upon any liquidation,
dissolution or winding up of the Trust, the amounts payable with respect to
the Preferred Shares and any other outstanding class or series of Preferred
Shares of Beneficial Interest of the Trust ranking on a parity with the
Preferred Shares as to payment upon liquidation are not paid in full, the
Holders and the holders of such other class or series will share ratably in
any such distribution of assets in proportion to the respective
preferential amounts to which they are entitled. After payment of the full
amount of the liquidating distribution to which they are entitled, the
Holders will not be entitled to any further participation in any
distribution of assets by the Trust except for any Additional Dividends. A
consolidation or merger of the Trust with or into any corporation or
corporations or a sale, whether for cash, shares of stock, securities or
properties, of all or substantially all or any part of the assets of the
Trust shall not be deemed or construed to be a liquidation, dissolution or
winding up of the Trust.
4. Redemption. (a) Preferred Shares shall be redeemable by the
Trust as provided below:
(i) To the extent permitted under the 1940 Act and
Massachusetts law, upon giving a Notice of Redemption, the Trust at
its option may redeem Preferred Shares, in whole or in part, out of
funds legally available therefor, at the Optional Redemption Price
per share, on any Dividend Payment Date; provided that no Preferred
Shares shall be subject to optional redemption during a Non-Call
Period. In addition, holders of Preferred Shares which are redeemed
shall be entitled to receive Additional Dividends to the extent
provided herein. The Trust may not give a Notice of Redemption
relating to an optional redemption as described in this paragraph
4(a)(i) or effect an optional redemption unless, at the time of
giving such Notice of Redemption or effecting such optional
redemption, the 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
Preferred Shares on such redemption date and, if as a result of
such optional redemption, the Trust would fail to maintain S&P
Eligible Assets and Moody's Eligible Assets each with an aggregate
Discounted Value equal to the Preferred Shares Basic Maintenance
Amount.
(ii) The Trust shall redeem, out of funds legally
available therefor, at the Mandatory Redemption Price per share,
Preferred Shares to the extent permitted under the 1940 Act and
Massachusetts law, on a date fixed by the Board of Trustees, if the
Trust fails to maintain Moody's Eligible Assets and S&P Eligible
Assets each with an aggregate Discounted Value equal to or greater
than the Preferred Shares Basic Maintenance Amount as provided in
paragraph 7(a) or to satisfy the 1940 Act Preferred Shares Asset
Coverage as provided in paragraph 6 and such failure is not cured
on or before the Preferred Shares Basic Maintenance Cure Date or
the 1940 Act Cure Date (herein respectively referred to as the
"Cure Date"), as the case may be. In addition, holders of Preferred
Shares so redeemed shall be entitled to receive Additional
Dividends to the extent provided herein. The number of Preferred
Shares to be redeemed shall be equal to the lesser of (i) the
minimum number of Preferred Shares the redemption of which, if
deemed to have occurred immediately prior to the opening of
business on the Cure Date, would together with all shares of Other
Preferred Shares of Beneficial Interest subject to redemption or
retirement, 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 Preferred Shares Basic Maintenance
Amount or satisfaction of the 1940 Act Preferred Shares Asset
Coverage, as the case may be, on such Cure Date (provided that, if
there is no such minimum number of Preferred Shares and shares of
Other Preferred Shares of Beneficial Interest the redemption of
which would have such result, all Preferred Shares and shares of
Other Preferred Stock then outstanding shall be redeemed), and (ii)
the maximum number of Preferred Shares, together with all shares of
other Preferred Stock subject to redemption or retirement, that can
be redeemed out of funds expected to be legally available therefor
on such redemption date. In determining the number of Preferred
Shares required to be redeemed in accordance with the foregoing,
the Trust shall allocate the number required to be redeemed which
would result in the Trust having Moody's Eligible Assets and S&P
Eligible Assets each with an aggregate Discounted Value equal to or
greater than the Preferred Shares Basic Maintenance Amount or
satisfaction of the 1940 Act Preferred Shares Asset Coverage, as
the case may be, pro rata among Preferred Shares, Other Preferred
Shares and other Preferred Shares of Beneficial Interest subject to
redemption pursuant to provisions similar to those contained in
this paragraph 4(a)(ii) provided that, Preferred Shares which may
not be redeemed at the option of the Trust (a) will be subject to
mandatory redemption only to the extent that other shares are not
available to satisfy the number of shares required to be redeemed
and (b) will be selected for redemption in an ascending order of
outstanding number of days in the Non- Call Period during which
such shares are not subject to optional redemption (with shares
with the lowest number of days to be redeemed first) and by lot in
the event of shares having an equal number of days in such period.
The Trust shall effect such redemption on a Business Day which is
not later than 30 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 Preferred Shares and shares of other
Preferred Shares of Beneficial Interest which are subject to
mandatory redemption or the Trust otherwise is unable to effect
such redemption on or prior to 30 days after such Cure Date, the
Trust shall redeem those Preferred Shares which it is unable to
redeem on the earliest practicable date on which it is able to
effect such redemption out of funds legally available therefor.
(b) Notwithstanding any other provision of this paragraph 4,
no Preferred Shares may be redeemed pursuant to paragraph 4(a)(i) of this
Certificate of Designation unless all dividends in arrears on all remaining
outstanding shares of Parity Shares of Beneficial Interest shall have been
or are being contemporaneously paid or declared and set apart for payment.
In the event that less than all the outstanding Preferred Shares are to be
redeemed and there is more than one Holder, the shares to be redeemed shall
be selected by lot or such other method as the Trust shall deem fair and
equitable.
(c) Whenever Preferred Shares are to be redeemed, the Trust,
not less than 20 or more than 60 days prior to the date fixed for
redemption, shall mail a notice ("Notice of Redemption") by first-class
mail, postage prepaid, to each Holder of Preferred Shares to be redeemed
and to the Auction Agent. The Trust shall cause the Notice of Redemption
also to be published in the eastern and national editions of The Wall
Street Journal. The Notice of Redemption to set forth (i) the redemption
date, (ii) the amount of the redemption price, (iii) the aggregate number
of Preferred Shares to be redeemed, (iv) the place or places where
Preferred Shares are to be surrendered for payment of the redemption price,
(v) a statement that dividends on the shares to be redeemed shall cease to
accumulate on such redemption date (except that holders may be entitled to
Additional Dividends) and (vi) the provision of 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
Preferred Shares 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
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 of Trust, each Holder of Preferred Shares shall be entitled to
one vote for each share held on each matter submitted to a vote of
shareholders of the Trust to which the shareholders are entitled to vote,
and the holders of outstanding shares of Preferred Shares of Beneficial
Interest, including Preferred Shares, and of shares of Common Shares of
Beneficial Interest shall vote together as a single class with respect to
all matters on which all Shareholders are entitled to vote. Notwithstanding
the preceding sentence, at the first annual meeting of Shareholders, the
holders of outstanding shares of Preferred Shares of Beneficial Interest,
including Preferred Shares, represented in person or by proxy shall be
entitled as a class, and to the exclusion of the holders of all other
securities and classes of capital shares of beneficial interest of the
Trust, to elect one Class I trustee and one Class II trustee and shall
thereafter be so entitled to elect any successors from time to time to the
Class I and Class II trustees so elected at any meeting of shareholders in
which successors are elected. At each meeting of shareholders at which
entire classes of Class I and Class II trustees are to be elected, or at
any meeting at which a successor to a trustee elected by the holders of
Preferred Shares of Beneficial Interest in accordance with this Section is
to be elected (including trustees elected pursuant to this sentence), the
holders of outstanding shares of Preferred Shares of Beneficial Interest,
including Preferred Shares, represented in person or by proxy shall be
entitled as a class and to the exclusion of the holders of all other
securities and classes of capital shares of beneficial interest of the
Trust to elect one Class I and one Class II trustee or to elect such
successor. In the event that the Declaration of Trust is amended to
eliminate the classification of the Trust's Board of Trustees, the holders
of outstanding shares of Preferred Stock, including Preferred Shares,
represented in person or by proxy shall be entitled as a class, and to the
exclusion of the holders of all other securities and classes of capital
shares of beneficial interest of the Trust, to elect two trustees. Subject
to paragraph 5(b) hereof, the holders of outstanding shares of capital
shares of beneficial interest of the Trust, voting as a single class, shall
elect the balance of the trustees.
(b) Right to Elect Majority 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 shares of Preferred Shares
of Beneficial Interest, would constitute a majority of the Board of
Trustees as so increased by such smallest number; and the holders of shares
of Preferred Shares of Beneficial Interest shall be entitled, voting as a
class on a one-vote-per-share basis (to the exclusion of the holders of all
other securities and classes of capital 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
Preferred Shares equal to at least two full years' dividends shall
be due and unpaid and sufficient cash or specified securities shall
not have been deposited with the Auction Agent for the payment of
such accumulated dividends; or
(ii) if at any time holders of any Preferred Shares
of Beneficial Interest are entitled to elect a majority of the
trustees of the Trust under the 1940 Act.
Upon the termination of a Voting Period, the voting rights
described in this paragraph 5(b) shall cease, subject always, however, to
the revesting of such voting rights in the Holders upon the further
occurrence of any of the events described in this paragraph 5(b).
(c) Right to Vote with Respect to Certain Other Matters. So
long as any Preferred Shares are outstanding, the Trust shall not, without
the affirmative vote of the holders of a majority of the Outstanding shares
of Preferred Shares of Beneficial Interest outstanding at the time, in
person or by proxy, at a meeting (voting separately as one class) or by the
unanimous written consent of the holders of all Outstanding shares of
Preferred Shares of Beneficial Interest: (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 of Beneficial Interest with respect to payment of
dividends or the distribution of assets on liquidation, or increase the
authorized amount of Preferred Shares or any other Preferred Shares of
Beneficial Interest (except that, notwithstanding the foregoing, but
subject to the provisions of Section 13 of the 1940 Act, the Board of
Trustees, without the vote or consent of the Holders of Preferred Shares,
may from time to time authorize, create and issue, and may increase the
authorized or issued amount of, classes or series of Preferred Shares of
Beneficial Interest, including Preferred Shares, ranking on a parity with
the Preferred Shares with respect to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up of the
affairs of the Trust, subject to continuing compliance by the Trust with
1940 Act Preferred Shares Asset Coverage and Preferred Shares Basic
Maintenance Amount requirements, provided that the Fund obtains written
confirmation from Moody's (if Moody's is then rating Preferred Shares), S&P
(if S&P is then rating Preferred Shares) or any Substitute Rating Agency
(if any such Substitute Rating Agency is then rating Preferred Shares) that
the issuance of such class or series would not impair the rating then
assigned by such rating agency to the Preferred Shares), (ii) amend, alter
or repeal the provisions of the 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 or any Other Preferred Shares of Beneficial Interest,
(iii) authorize the Trust's conversion from a closed-end to an open-end
investment company as defined in Section 5(a) of the 1940 Act, or (iv)
amend the provisions of the Declaration of Trust which provide for the
classification of the Board of Trustees of the Trust into three classes,
each with a term of office of three years with only one class of trustees
standing for election in any year (presently Article VI of the Declaration
of Trust). To the extent permitted under the 1940 Act, 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 Trust
of a Holder of shares of a series of Preferred Shares differently than
those of a Holder of shares of any other series of Preferred Shares without
the affirmative vote of the holders of at least a majority of the Preferred
Shares of each series adversely affected and Outstanding at such time, in
person or by proxy, at a meeting (each such adversely affected series
voting separately as a class) or by the unanimous written consent of the
holders of all Outstanding shares of Preferred Shares of Beneficial
Interest. The Trust shall notify Moody's and S&P 10 Business Days prior to
any such vote described in clauses (i) and (ii). Unless a higher percentage
is provided for under the Declaration of Trust, the affirmative vote of the
holders of a majority of the Outstanding shares of Preferred Shares of
Beneficial Interest, including Preferred Shares, voting together as a
single class, will be required to approve any plan of reorganization
(including bankruptcy proceedings) adversely affecting such shares or any
action requiring a vote of security holders under Section 13(a) of the 1940
Act. The class vote of holders of shares of Preferred Shares of Beneficial
Interest, including Preferred Shares, described above will in each case be
in addition to a separate vote of the requisite percentage of shares of
Common Shares of Beneficial Interest and shares of Preferred Shares of
Beneficial Interest, including Preferred Shares, voting together as a
single class necessary to authorize the action in question. Notwithstanding
the preceding sentence, to the extent permitted by Massachusetts General
Laws, no vote of holders of Common Shares of Beneficial Interest, either
separately or together with holders of Preferred Shares as a single class,
shall be necessary to take the actions contemplated by clauses (i) and (ii)
of the first sentence of this Section 5(c) and the holders of Common Shares
of Beneficial Interest shall not be entitled to vote in respect of such
matters, unless, in the case of the actions contemplated by clause (ii) of
the first sentence of this Section 5(c), the action would adversely affect
the contract rights expressly set forth in the Declaration of Trust of the
holders of Common Shares of Beneficial Interest.
(d) Voting Procedures.
(i) As soon as practicable after the accrual of any
right of the Holders of shares of Preferred Shares of Beneficial
Interest to elect additional trustees as described in paragraph
5(b) above, the Trust shall notify the Secretary of the Trust and
instruct the Secretary to call a special meeting of such Holders,
by mailing a notice of such special meeting to such Holders, such
meeting to be held not less than 10 nor more than 20 days after the
date of mailing of such notice. If the Secretary of the Trust does
not call such a special meeting, it may be called by Holders of at
least 25% of the votes entitled to be cast at such meeting on like
notice. The record date for determining the Holders entitled to
notice of and to vote at such special meeting shall be the close of
business on the fifth Business Day preceding the day on which such
notice is mailed. At any such special meeting and at each meeting
held during a Voting Period, such Holders, voting together as a
class (to the exclusion of the holders of all other securities and
classes of capital shares of beneficial interest of the Trust),
shall be entitled to elect the number of trustees prescribed in
paragraph 5(b) above on a one-vote-per-share basis. At any such
meeting or adjournment thereof in the absence of a quorum, a
majority of such holders present in person or by proxy shall have
the power to adjourn the meeting without notice, other than by an
announcement at the meeting, to a date not more than 120 days after
the original record date.
(ii) For purposes of determining any rights of the
Holders to vote on any matter or the number of shares required to
constitute a quorum, whether such right is created by this
Certificate of Designation, by the other provisions of the
Declaration of Trust, by statute or otherwise, a share of Preferred
Shares which is not outstanding shall not be counted.
(iii) The terms of office of all persons who are
trustees of the Trust at the time of a special meeting of Holders
and holders of other Preferred Shares of Beneficial Interest 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 of Beneficial Interest and the
remaining incumbent trustees elected by the holders of the Common
Shares of Beneficial Interest and Preferred Shares of Beneficial
Interest, shall constitute the duly elected trustees of the Trust.
(iv) The terms of office of the additional trustees
elected by the Holders and holders of other Preferred Shares of
Beneficial Interest pursuant to paragraph 5(b) above shall
terminate on the earliest date permitted by the Massachusetts
General Laws following the termination of a Voting Period, 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 Preferred Shares shall not have any relative rights or
preferences or other special rights other than those specifically set forth
herein. The Holders of Preferred Shares shall have no preemptive rights or
rights to cumulative voting. In the event that the Trust fails to pay any
dividends on the Preferred Shares, 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 Moody's and S&P. In the event a vote of
Holders of Preferred Shares is required pursuant to the provisions of
Section 13(a) of the 1940 Act, the Trust shall, not later than ten business
days prior to the date on which such vote is to be taken, notify Moody's
and S&P that such vote is to be taken and the nature of the action with
respect to which such vote is to be taken. Upon completion of any such
vote, the Trust shall notify Moody's and S&P as to the result of such vote.
6. 1940 Act Preferred Shares Asset Coverage. The Trust shall
maintain, as of the last Business Day of each month in which any share of
Preferred Shares is outstanding, the 1940 Act Preferred Shares Asset
Coverage.
7. Preferred Shares Basic Maintenance Amount. (a) The Trust shall
maintain, on each Valuation Date, and shall verify to its satisfaction that
it is maintaining on such Valuation Date, (i) Moody's Eligible Assets
having an aggregate Discounted Value equal to or greater than the Preferred
Shares Basic Maintenance Amount and (ii) S&P Eligible Assets having an
aggregate Discounted Value equal to or greater than the Preferred Shares
Basic Maintenance Amount. Upon any failure to maintain the required
Discounted Value, the Trust will use its best efforts to alter the
composition of its portfolio to reattain the Preferred Shares Basic
Maintenance Amount on or prior to the Preferred Shares Basic Maintenance
Cure Date.
(b) On or before 5:00 p.m., Florida time, on the third
Business Day after a Valuation Date on which the Trust fails to satisfy the
Preferred Shares Basic Maintenance Amount, the Trust shall complete and
deliver to the Auction Agent, Moody's and S&P a complete Preferred Shares
Basic Maintenance Report as of the date of such failure, which 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 Preferred Shares Basic
Maintenance Report. The Trust shall also give a notice of cure of its
failure to satisfy the Preferred Shares Basic Maintenance Amount along with
the complete Preferred Shares Basic Maintenance Report to the Auction
Agent, Moody's and S&P within three Business Days of its determination that
it has satisfied such requirement following any period during which it has
failed to satisfy such requirement. The Trust will also deliver a Preferred
Shares Basic Maintenance Report to the Auction Agent as of (i) the
fifteenth day of each month (or, if such day is not a Business Day, the
next succeeding Business Day) and (ii) the last Business Day of each month,
in each case on or before the third Business Day after such day. The Trust
will also deliver a Preferred Shares Basic Maintenance Report to Moody's or
S&P, as the case may be, for each Valuation Date that the Discounted Value
of Moody's Eligible Assets or S&P Eligible Assets is less than or equal to
125% of the Preferred Shares Basic Maintenance Amount, provided, however,
that if the Valuation Date is every day that is a Business Day, the Trust
will deliver a Preferred Shares Basic Maintenance Report to Moody's or S&P,
as the case may be, for each Valuation Date that the Discounted Value of
Moody's Eligible Assets or S&P Eligible Assets is less than or equal to
105% of the Preferred Shares Basic Maintenance Amount. The Trust will
deliver a Preferred Shares Basic Maintenance Report to Moody's upon request
and when the Trust redeems any shares of Common Shares of Beneficial
Interest. The Trust will deliver a Preferred Shares Basic Maintenance
Report to S&P upon request. A failure by the Trust to deliver a Preferred
Shares Basic Maintenance Report under this paragraph 7(b) shall be deemed
to be delivery of a Preferred Shares Basic Maintenance Report indicating
the Discounted Value for S&P Eligible Assets and Moody's Eligible Assets of
the Trust is less than the Preferred Shares Basic Maintenance Amount, as of
the relevant Valuation Date.
(c) Within ten Business Days after the date of delivery of a
Preferred Shares Basic Maintenance Report and a Certificate of Minimum
Liquidity in accordance with paragraph 7(b) above relating to a Quarterly
Valuation Date, the Trust shall cause the Independent Accountant to confirm
in writing to the Auction Agent, Moody's and S&P (i) the mathematical
accuracy of the calculations reflected in such Report (and in any other
Preferred Shares Basic Maintenance Report, randomly selected by the
Independent Accountant, that was delivered by the Trust during the quarter
ending on such Quarterly Valuation Date) and (with respect to S&P only
while S&P is rating the Preferred Shares) such Certificate, (ii) that, in
such Report (and in such randomly selected Report), the 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 Preferred Shares Basic Maintenance
Amount and Moody's Eligible Assets of an aggregate Discounted Value at
least equal to the Preferred Shares Basic Maintenance Amount, (iv) that
(with respect 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 Municipal Obligations, the issuer
name, issue size and coupon rate listed in such Report and (with respect to
S&P only) such Certificate, that the Independent Accountant has requested
that S&P verify such information and the Independent Accountant shall
provide a listing in its letter of any differences, (vi) with respect to
the Moody's ratings on Municipal Obligations, the issuer name, issue size
and coupon rate listed in such Report and (with respect to S&P only) such
Certificate, that such information has been verified by Moody's (in the
event such information is not verified by Moody's, the Independent
Accountant will inquire of Moody's what such information is, and provide a
listing in its letter of any differences), and (vii) with respect to the
bid or mean price (or such alternative permissible factor used in
calculating the Market Value) provided by the custodian of the 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) (such confirmation is
herein called the "Accountant's Confirmation").
(d) Within ten Business Days after the date of delivery to
the Auction Agent, S&P and Moody's of a Preferred Shares Basic Maintenance
Report in accordance with paragraph 7(b) above relating to any Valuation
Date on which the 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 Preferred Shares Basic
Maintenance Amount, and relating to the Preferred Shares Basic Maintenance
Cure Date with respect to such failure, the Independent Accountant will
provide to the Auction Agent, S&P and Moody's an Accountant's Confirmation
as to such Preferred Shares Basic Maintenance Report.
(e) If any Accountant's Confirmation delivered pursuant to
subparagraph (c) or (d) of this paragraph 7 shows that an error was made in
the Preferred Shares Basic Maintenance Report for a particular Valuation
Date for which such Accountant's Confirmation was required to be delivered,
or shows that a lower aggregate Discounted Value for the aggregate of all
S&P Eligible Assets or Moody's Eligible Assets, as the case may be, of the
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 Preferred Shares 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 Preferred Shares, the
Trust will complete and deliver to S&P and Moody's a Preferred Shares Basic
Maintenance Report as of the close of business on such Date of Original
Issue. Within five business days of such Date of Original Issue, the Trust
shall cause the Independent Accountant to confirm in writing to S&P and
Moody's (i) the mathematical accuracy of the calculations reflected in such
Report and (ii) that the aggregate Discounted Value of S&P Eligible Assets
and the aggregate Discounted Value of Moody's Eligible Assets reflected
thereon equals or exceeds the Preferred Shares Basic Maintenance Amount
reflected thereon.
(g) For so long as Preferred Shares are rated by Moody's, in
managing the Trust's portfolio, the Trust shall require that 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 Preferred Shares Basic Maintenance Amount as of such Valuation Date;
provided, however, that in the event that, as of the immediately preceding
Valuation Date, the aggregate Discounted Value of Moody's Eligible Assets
exceeded the Preferred Shares Basic Maintenance Amount by twenty-five
percent or less (or, in the event the Valuation Date is every day that is a
Business Day, five percent or less), the Adviser will not alter the
composition of the 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
Preferred Shares Basic Maintenance Amount.
8. Minimum Liquidity Level. (i) For so long as any Preferred Shares
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 value not less
than the Dividend Coverage Amount.
(ii) As of each Valuation Date as long as any
Preferred Shares are rated by S&P, the Trust shall determine (A)
the Market Value of the Dividend Coverage Assets owned by the Trust
as of that Valuation Date, (B) the Dividend Coverage Amount on that
Valuation Date, and (C) whether the Minimum Liquidity Level is met
as of that Valuation Date. The calculations of the Dividend
Coverage Assets, the Dividend Coverage Amount and whether the
Minimum Liquidity Level is met shall be set forth in a certificate
(a "Certificate of Minimum Liquidity") dated as of the Valuation
Date. The Preferred Shares Basic Maintenance Report and the
Certificate of Minimum Liquidity may be combined in one
certificate. The Trust shall cause the Certificate of Minimum
Liquidity to be delivered to S&P not later than the close of
business on the third Business Day after the Valuation Date
applicable to such Certificate pursuant to paragraph 7(b). The
Minimum Liquidity Level shall be deemed to be met as of any date of
determination if the 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.
(iii) 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) So long as there are Preferred
Shares Outstanding, the Trust will enter into futures and options
transactions only for bona fide hedging purposes and not for leveraging or
speculative purposes. So long as Moody's and S&P are rating the Preferred
Shares, the Trust will only engage in futures or options transactions in
accordance with the then-current guidelines of such ratings agencies, only
if it is valuing its assets daily and only after it has received written
confirmation from Moody's and S&P, as appropriate, that such transactions
would not impair the ratings then assigned by S&P and Moody's to Preferred
Shares. The S&P guidelines in effect as of the Date of Original Issue are
set forth in their entirety in the following paragraph. The Trust may
engage in futures and options transactions in accordance therewith and such
transactions shall have the consequences included in such guidelines set
forth therein (as such guidelines are amended, modified and supplemented
from time to time by S&P), provided, however, that it may not engage in any
such transactions unless it has satisfied the relevant provisions of this
paragraph relating to complying with Moody's guidelines and obtaining
written confirmation from Moody's and S&P.
For so long as Preferred Shares are rated by S&P, the Trust will
not, unless it has received written confirmation from S&P that any such
action would not impair the rating then assigned by S&P to Preferred
Shares, purchase or sell futures contracts or options thereon or write
uncovered put or uncovered call options on portfolio securities except
(provided that the Trust has received such written confirmation in advance
from S&P) that (i) the Trust may engage in S&P Hedging Transactions based
on the Municipal Index, provided that (A) the Trust shall not engage in any
S&P 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 (1) more than 1,000 outstanding futures contracts based
on the Municipal Index, (2) outstanding futures contracts based on
Municipal Index exceeding in number 25% of the quotient of the fair market
value of the Trust's total assets divided by 100,000 or (3) outstanding
futures contracts based on the Municipal Index exceeding in number 10% of
the average number of daily traded futures contracts based on the Municipal
Index in the month prior to the time of effecting such transaction as
reported by The Wall Street Journal and (ii) the Trust may engage in S&P
Hedging Transactions based on Treasury Bonds, provided that (A) the Trust
shall not engage in any S&P Hedging Transactions 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 (1) outstanding
futures contracts based on Treasury Bonds exceeding in number 25% of the
quotient of the fair market value of the Trust's total assets divided by
100,000 or (2) outstanding futures contracts based on Treasury Bonds
exceeding in number 10% of the average number of daily traded futures
contracts based on Treasury Bonds in the month prior to the time of
effecting such transaction as reported by The Wall Street Journal. For so
long as Preferred Shares are rated by S&P, the 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 (i) the Trust does not have S&P Eligible Assets with an aggregate
Discounted Value equal to or greater than the Preferred Shares Basic
Maintenance Amount on two consecutive Valuation Dates and (ii) the Trust is
required to pay Variation Margin on the second such Valuation Date. For so
long as Preferred Shares are rated by S&P, 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 securities
deliverable under such terms. For purposes of calculating the Discounted
Value of S&P Eligible Assets to determine compliance with the Preferred
Shares Basic Maintenance Amount, such Discounted Value shall be reduced 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. For so long as
Preferred Shares are rated by S&P, when the Trust writes a futures contract
or option thereon, it will maintain an amount of cash, cash equivalents or
short-term, fixed-income securities in a segregated account with the
Trust's custodian, so that the amount so segregated plus the amount of
Initial Margin and Variation Margin held in the account of the Trust's
broker equals the fair market value of the futures contract, except that in
the event the Trust writes a futures contract or option thereon which
requires delivery of an underlying security, the Trust shall hold such
underlying security.
(b) For so long as Preferred Shares are rated by Moody's or
S&P, the Trust will not, unless it has received written confirmation from
Moody's and/or S&P, as the case may be, that such action would not impair
the ratings then assigned to Preferred Shares by Moody's and/or S&P, as the
case may be, (i) borrow money, (ii) engage in short sales of securities,
(iii) lend any securities, (iv) issue any class or series of shares of
beneficial interest ranking prior to or on a parity with the Preferred
Shares with respect to the payment of dividends or the distribution of
assets upon dissolution, liquidation or winding up of the Trust, (v)
reissue any Preferred Shares previously purchased or redeemed by the Trust,
(vi) merge or consolidate into or with any other trust, (vii) change the
Pricing Service or (viii) engage in reverse repurchase agreements.
10. Notice. All notices or communications, unless otherwise
specified in 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:
(i) "Auction Date" shall mean the first Business Day
preceding the first day of a Dividend Period.
(ii) "Available Preferred Shares" shall have the
meaning specified in paragraph 11(d)(i) below.
(iii) "Bid" shall have the meaning specified in
paragraph 11(b)(i) below.
(iv) "Bidder" shall have the meaning specified in
paragraph 11(b)(i) below.
(v) "Hold Order" shall have the meaning specified in
paragraph 11(b)(i) below.
(vi) "Maximum Applicable Rate," for any Dividend
Payment Period for the Preferred Shares will be the Applicable
Percentage of the higher of the 30-day "AA" Composite Commercial
Paper Rate and the Taxable Equivalent of the Short-Term Municipal
Bond Rate except in the case of a Special Dividend Period in which
case the Maximum Applicable Rate for any Dividend Payment Period
included in such Special Dividend Period will be the Applicable
Percentage (determined on the date of the Notice of Special
Dividend Period in the case of any such Notice that specifies a
Maximum Applicable Rate applicable to such Special Dividend Payment
Period) of the Special Dividend Period Reference Rate for such
Dividend Payment Period. The Applicable Percentage will be
determined based on (i) the lower of the credit rating or ratings
assigned on such date to such shares by Moody's and S&P (or if
Moody's or S&P or both shall not make such 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 Preferred
Shares as follows:
<TABLE>
<CAPTION>
APPLICABLE PERCENTAGE: APPLICABLE PERCENTAGE:
CREDIT RATINGS NO NOTIFICATION NOTIFICATION
- ------------------------------------------ ---------------------------- --------------------------
MOODY'S S&P
- --------------------- ------------------- ---------------------------- --------------------------
<S> <C> <C> <C>
"aa3" or higher AA- or higher 110% 150%
"a3" to "a1" A- to A+ 125% 160%
"baa3" to "baa1" BBB- to BBB+ 150% 250%
"ba3" to "ba1" BB- to BB+ 200% 275%
Below "ba3" Below BB- 250% 300%
</TABLE>
The Trust will take all reasonable action necessary
to enable Moody's and S&P to provide a rating for the Preferred
Shares. If either Moody's or S&P shall not make such a rating
available, or neither Moody's nor S&P shall make such a rating
available, Merrill Lynch, Pierce, Fenner & Smith Incorporated or
its affiliates and successors, after consultation with the Trust,
will select a nationally recognized statistical rating organization
(a "Substitute Rating Agency") or two nationally recognized
statistical rating organizations ("Substitute Rating Agencies") to
act as Substitute Rating Agency or Substitute Rating Agencies, as
the case may be; provided that if such a rating is not made
available with respect to the Preferred Shares, Merrill Lynch,
Pierce, Fenner & Smith or its affiliates and successors, after
consultation with the Corporation, shall select a Substitute Rating
Agency or Agencies.
(vii) "Minimum Applicable Rate," for any Dividend
Payment Period included in a Special Dividend Period for which Bid
Requirements are imposed will be such rate as may be specified by
the Trust in the Notice of Special Dividend Period relating to the
Special Dividend Period within which such Dividend Payment Period
occurs.
(viii) "Order" shall have the meaning specified in
paragraph 11(b)(i) below.
(ix) "Preferred Shares" shall mean the Preferred
Shares being auctioned pursuant to this paragraph 11.
(x) "Sell Order" shall have the meaning specified in
paragraph 11(b)(i) below.
(xi) "Submission Deadline" shall mean 1:00 P.M., New
York City time, on any Auction Date or such other time on any
Auction Date as may be specified by the Auction Agent from time to
time as the time by which each Broker-Dealer must submit to the
Auction Agent in writing all orders obtained by it for the Auction
to be conducted on such Auction Date.
(xii) "Submitted Bid" shall have the meaning
specified in paragraph 11(d)(i) below.
(xiii) "Submitted Hold Order" shall have the meaning
specified in paragraph 11(d)(i) below.
(xiv) "Submitted Order" shall have the meaning
specified in paragraph 11(d)(i) below.
(xv) "Submitted Sell Order" shall have the meaning
specified in paragraph 11(d)(i) below.
(xvi) "Sufficient Clearing Bids" shall have the
meaning specified in paragraph 11(d)(i) below.
(xvii) "Winning Bid Rate" shall have the meaning
specified in paragraph 11(d)(i) below.
(b) Orders by Existing Holders and Potential Holders.
(i) On or prior to the Submission Deadline on each
Auction Date:
(A) each Existing Holder may submit to a Broker-Dealer
information as to:
(1) the number of Outstanding shares, if any, of
Preferred Shares held by such Existing Holder which such
Existing Holder desires to continue to hold without regard
to the Applicable Rate for the next succeeding Dividend
Period;
(2) the number of Outstanding shares, if any, of
Preferred Shares held by such Existing Holder which such
Existing Holder desires to continue to hold, provided that
the Applicable Rate for the next succeeding Dividend Period
shall not be less than the rate per annum or, in the case of
an Auction with Bid Requirements including a Spread, the
Spread specified by such Existing Holder; and/or
(3) the number of Outstanding shares, if any, of
Preferred Shares held by such Existing Holder which such
Existing Holder offers to sell without regard to the
Applicable Rate for the next succeeding Dividend Period; and
(B) each Broker-Dealer, using a list of Potential Holders
that shall be maintained in good faith for the purpose of
conducting a competitive Auction, shall contact Potential Holders,
including Persons that are not Existing Holders, on such list to
determine the number of outstanding shares, if any, of Preferred
Shares which each such Potential Holder offers to purchase,
provided that the Applicable Rate for the next succeeding Dividend
Period shall not be less than the rate per annum or Spread
specified by such Potential Holder.
For the purposes hereof, the communication to a Broker-Dealer of
information referred to in clause (A) or (B) of this paragraph 11(b)(i) is
hereinafter referred to 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 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 Preferred Shares
specified in such Bid if the Applicable Rate determined on
such Auction Date shall be less than the rate per annum or
Spread specified in such Bid; or
(2) such number of a lesser number of Outstanding
Preferred Shares to be determined as set forth in paragraph
11(e)(i)(D) if the Applicable Rate determined on such
Auction Date shall be equal to the rate per annum or Spread
specified therein; or
(3) a lesser number of Outstanding Preferred Shares
to be determined as set forth in paragraph 11(e)(ii)(C) if
such specified rate per annum shall be higher than the
Maximum Applicable Rate and Sufficient Clearing Bids do not
exist.
(B) A Sell Order by an Existing Holder shall constitute an
irrevocable offer to sell:
(1) the number of Outstanding Preferred Shares
specified in such Sell Order; or
(2) such number or a lesser number of Outstanding
Preferred Shares to be determined as set forth in paragraph
11(e)(ii)(C) if Sufficient Clearing Bids do not exist.
(C) A Bid by a Potential Holder shall constitute an
irrevocable offer to purchase:
(1) the number of Outstanding Preferred Shares
specified in such Bid if the Applicable Rate determined on
such Auction Date shall be higher than the rate per annum or
Spread specified in such Bid; or
(2) such number or a lesser number of Outstanding
Preferred Shares to be determined as set forth in paragraph
11(e)(i)(E) if the Applicable Rate determined on such
Auction Date shall be equal to the rate per annum or Spread
specified therein.
(c) Submission of Orders by Broker-Dealers to Auction Agent.
(i) Each Broker-Dealer shall submit in writing or
through the Auction Agent's Auction Processing System to the
Auction Agent prior to the Submission Deadline on each Auction Date
all Orders obtained by such Broker-Dealer and specifying with
respect to each Order:
(A) the name of the Bidder placing such Order;
(B) the aggregate number of Outstanding Preferred Shares
that are 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
Preferred Shares subject to any Hold Order placed by such
Existing Holder;
(2) the number of Outstanding shares, if any, of
Preferred Shares subject to any Bid placed by such Existing
Holder and the rate per annum or Spread specified in such
Bid; and
(3) the number of Outstanding shares, if any, of
Preferred Shares subject to any Sell Order placed by such
Existing Holder; and
(D) (i) to the extent such Bidder is a Potential Holder, the
rate per annum or Spread specified in such Potential Holder's Bid.
(ii) If any rate per annum or Spread specified in any
Bid contains more than three figures to the right of the decimal
point, the Auction Agent shall round such rate up to the next
highest one-thousandth (.001) of 1% and shall round such Spread to
the next highest one-thousandth (.001) of a basis point.
(iii) If an Order or Orders covering all of the
Outstanding Preferred Shares held by an Existing Holder is not
submitted to the Auction Agent prior to the Submission Deadline,
the Auction Agent shall deem a Hold Order to have been submitted on
behalf of such Existing Holder covering the number of Outstanding
Preferred Shares held by such Existing Holder and not subject to
Orders submitted to the Auction Agent; provided, however, that with
respect to an Auction to establish a Special Dividend Period longer
than 91 days, the Auction Agent shall deem a Sell Order to have
been submitted on behalf of such Existing Holder covering such
number of Outstanding Preferred Shares.
(iv) If one or more Orders on behalf of an Existing
Holder covering in the aggregate more than the number of
Outstanding Preferred Shares held by such Existing Holder are
submitted to the Auction Agent, such orders shall be considered
valid as follows and in the following order of priority:
(A) any Hold Order submitted on behalf of such Existing
Holder shall be considered valid up to and including the number of
Outstanding Preferred Shares held by such Existing Holder; provided
that if more than one Hold Order is submitted on behalf of such
Existing Holder and the number of Preferred Shares subject to such
Hold Orders exceeds the number of Outstanding Preferred Shares held
by such Existing Holder, the number of Preferred Shares subject to
each of such Hold Orders shall be reduced pro rata so that such
Hold Orders, in the aggregate, will cover exactly the number of
Outstanding Preferred Shares held by such Existing Holder;
(B) any Bids submitted on behalf of such Existing Holder
shall be considered valid, in the ascending order of their
respective rates per annum or Spread, if more than one Bid is
submitted on behalf of such Existing Holder, up to and including
the excess of the number of Outstanding Preferred Shares held by
such Existing Holder over the number of Preferred Shares subject to
any Hold Order referred to in paragraph 11(c)(iv)(A) above (and if
more than one Bid submitted on behalf of such Existing Holder
specifies the same rate per annum or Spread and together they cover
more than the remaining number of shares that can be the subject of
valid Bids after application of paragraph 11(c)(iv)(A) above and of
the foregoing portion of this paragraph 11(c)(iv)(B) to any Bid or
Bids specifying a lower rate or rates per annum or Spread, the
number of shares subject to each of such Bids shall be reduced pro
rata so that such Bids, in the aggregate, cover exactly such
remaining number of shares); and the number of shares, if any,
subject to Bids not valid under this paragraph 11(c)(iv)(B) shall
be treated as the subject of a Bid by a Potential Holder; and
(C) any Sell Order shall be considered valid up to and
including the excess of the number of Outstanding Preferred Shares
held by such Existing Holder over the number of Preferred Shares
subject to Hold Orders referred to in paragraph 11(c)(iv)(A) and
Bids referred to in paragraph 11(c)(iv)(B); provided that if more
than one Sell Order is submitted on behalf of any Existing Holder
and the number of Preferred Shares subject to such Sell Orders is
greater than such excess, the number of Preferred Shares subject to
each of such Sell Orders shall be reduced pro rata so that such
Sell Orders, in the aggregate, cover exactly the number of
Preferred Shares equal to such excess.
(v) If more than one Bid is submitted on behalf of
any Potential Holder, each Bid submitted shall be a separate Bid
with the rate per annum or Spread and number of Preferred Shares
specified.
(vi) Any Bid by an Existing Holder that specifies a
Spread, with respect to an Auction in which a Spread is not
included in any Bid Requirements or in which there are no Bid
Requirements and any order that does not specify a Spread with
respect to an Auction in which a Spread is included in any Bid
Requirements shall be treated as a Sell Order.
(d) Determination of Sufficient Clearing Bids, Winning Bid
Rate and Applicable Rate.
(i) Not earlier than the Submission Deadline on each
Auction Date, the Auction Agent shall assemble all Orders submitted
or deemed submitted to it by the Broker-Dealers (each such Order as
submitted or deemed submitted by a Broker-Dealer being hereinafter
referred to individually as a "Submitted Hold Order", a "Submitted
Bid" 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 Preferred
Shares over the number of Outstanding Preferred Shares that are the
subject of Submitted Hold Orders (such excess being hereinafter
referred to as the "Available Preferred Shares");
(B) from the Submitted Orders whether the number of
outstanding Preferred Shares that are the subject of Submitted Bids
by Potential Holders specifying one or more rates per annum or
Spreads that result in one or more rates per annum on such date
equal to or lower than the Maximum Applicable Rate in effect for
the first Dividend Payment Period after the Auction Date exceeds or
is equal to the sum of:
(1) the number of outstanding Preferred Shares that
are the subject of Submitted Bids by Existing Holders
specifying one or more rates per annum or Spreads that
result in one or more rates per annum on such date higher
than such Maximum Applicable Rate, and
(2) the number of Outstanding Preferred Shares that
are subject to Submitted Sell Orders (if such excess or such
equality exists (other than because the number of
Outstanding Preferred Shares in clauses (1) and (2) above
are each zero because all of the Outstanding Preferred
Shares are the subject of Submitted Hold Orders), such
Submitted Bids by Potential Holders being hereinafter
referred to collectively as "Sufficient Clearing Bids"); and
(C) if Sufficient Clearing Bids exist, the lowest rate per
annum or, in the case of an Auction with Bid Requirements including
a Spread, the lowest Spread specified in the Submitted Bids (the
"Winning Bid Rate") that if:
(1) each Submitted Bid from Existing Holders
specifying the Winning Bid Rate and all other Submitted Bids
from Existing Holders specifying lower rates per annum or
Spreads were rejected, thus entitling such Existing Holders
to continue to hold the Preferred Shares that are the
subject of such Submitted Bids, and
(2) each Submitted Bid from Potential Holders
specifying the Winning Bid Rate and all other Submitted Bids
from Potential Holders specifying lower rates per annum or
Spreads were accepted, thus entitling the Potential Holders
to purchase the Preferred Shares that are the subject of
such Submitted Bids, would result in the number of shares
subject to all Submitted Bids specifying the Winning Bid
Rate or a lower rate per annum or Spread being at least
equal to the Available Preferred Shares.
(D) For purposes of this Certificate of Designation, a
positive Spread shall be considered lower than another positive
Spread to the extent it is a lower number, a Spread of zero shall
be considered lower than a positive Spread, a negative Spread shall
be considered lower than a Spread of zero and a negative Spread
shall be considered lower than another negative Spread to the
extent it is a higher number.
(ii) Promptly after the Auction Agent has made the
determinations pursuant to paragraph 11(d)(i), the Auction Agent
shall advise the Trust of the Maximum Applicable Rate (or, in the
event the Trust has specified a Maximum Applicable Rate or Rates,
or a Minimum Applicable Rate or Rates the Auction Agent shall
confirm to the Trust the calculation of such Maximum Applicable
Rate or Rates or such Minimum Applicable Rate or Rates) and, based
on such determinations, the Applicable Rate for the next succeeding
Dividend Period as follows:
(A) if Sufficient Clearing Bids exist, that the Applicable
Rate for the next succeeding Dividend Period shall be equal to the
Winning Bid Rate, subject to the effect of any applicable Minimum
Applicable Rate and any applicable Maximum Applicable Rate;
(B) if Sufficient Clearing Bids do not exist (other than
because all of the Outstanding Preferred Shares are the subject of
Submitted Hold Orders and other than in the event the Auction is
being conducted with respect to a Special Dividend Period), that
the Applicable Rate for the next succeeding Dividend Period shall
be equal to the Maximum Applicable Rate;
(C) if all of the Outstanding Preferred Shares are the
subject of Submitted Hold Orders, that the Dividend Period next
succeeding the Auction shall automatically be the same length as
the immediately preceding Dividend Period and the Applicable Rate
for the next succeeding Dividend Period will be the higher of the
30-day "AA" Composite Commercial Paper Rate and the Taxable
Equivalent of the Short-Term Municipal Bond Rate multiplied by 1
minus the maximum marginal combined regular Federal Florida income
tax rate then applicable to ordinary income or the maximum marginal
regular Federal corporate tax rate then applicable, whichever is
greater (or 90% of such rate if the Trust has provided notification
to the Auction Agent prior to the Auction establishing the
Applicable Rate for any dividend pursuant to paragraph 2(f) hereof
that net capital gains or other taxable income will be included in
such dividend on Preferred Shares) on the date of the Auction; or
(D) if the Auction is being conducted with respect to a
Special Dividend Period and Sufficient Clearing Bids do not exist,
that the Dividend Period next succeeding the Auction shall
automatically be 7 days and the Applicable Rate for the next
succeeding Dividend Period will be as set forth in paragraph
11(d)(ii)(C) above.
(e) Acceptance and Rejection of Submitted Bids and Submitted
Sell Orders and Allocation of Shares. Based on the determinations made
pursuant to paragraph 11(d)(i), the Submitted Bids and Submitted Sell
Orders shall be accepted or rejected and the Auction Agent shall take such
other action as set forth below:
(i) If Sufficient Clearing Bids have been made,
subject to the provisions of paragraph 11(e)(iii) and paragraph
11(e)(iv), Submitted Bids and Submitted Sell Orders shall be
accepted or rejected in the following order of priority and all
other Submitted Bids shall be rejected:
(A) the Submitted Sell Orders of Existing Holders shall be
accepted and the Submitted Bid of each of the Existing Holders
specifying any rate per annum or Spread that is higher than the
Winning Bid Rate shall be accepted, thus requiring each such
Existing Holder to sell the Outstanding Preferred Shares that are
the subject of such Submitted Sell Order or Submitted Bid;
(B) the Submitted Bid of each of the Existing Holders
specifying any rate per annum or Spread that is lower than the
Winning Bid Rate shall be rejected, thus entitling each such
Existing Holder to continue to hold the Outstanding Preferred
Shares that are the subject of such Submitted Bid;
(C) the Submitted Bid of each of the Potential Holders
specifying any rate per annum that is lower than the Winning Bid
Rate or Spread shall be accepted;
(D) the Submitted Bid of each of the Existing Holders
specifying a rate per annum or Spread that is equal to the Winning
Bid Rate shall be rejected, thus entitling each such Existing
Holder to continue to hold the Outstanding Preferred Shares that
are the subject of such Submitted Bid, unless the number of
outstanding Preferred Shares subject to all such Submitted Bids
shall be greater than the number of Outstanding Preferred Shares
("Remaining Shares") equal to the excess of the Available Preferred
Shares over the number of Outstanding Preferred Shares subject to
Submitted Bids described in paragraph 11(e)(i)(B) and paragraph
11(e)(i)(C), in which event the Submitted Bids of each such
Existing Holder shall be accepted, and each such Existing Holder
shall be required to sell outstanding Preferred Shares, but only in
an amount equal to the difference between (1) the number of
Outstanding Preferred Shares then held by such Existing Holder
subject to such Submitted Bid and (2) the number of Preferred
Shares obtained by multiplying (x) the number of Remaining Shares
by (y) a fraction the numerator of which shall be the number of
Outstanding Preferred Shares held by such Existing Holder subject
to such Submitted Bid and the denominator of which shall be the sum
of the numbers of Outstanding Preferred Shares subject to such
Submitted Bids made by all such Existing Holders that specified a
rate per annum or Spread equal to the Winning Bid Rate; and
(E) the Submitted Bid of each of the Potential Holders
specifying a rate per annum or Spread that is equal to the Winning
Bid Rate shall be accepted but only in an amount equal to the
number of Outstanding Preferred Shares obtained by multiplying (x)
the difference between the Available Preferred Shares and the
number of Outstanding Preferred Shares subject to Submitted Bids
described 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 Preferred Shares subject to such
Submitted Bid and the denominator of which shall be the sum of the
numbers of Outstanding Preferred Shares subject to such Submitted
Bids made by all such Potential Holders that specified a rate per
annum or Spread equal to the Winning Bid Rate.
(ii) If Sufficient Clearing Bids have not been made
(other than because all of the Outstanding Preferred Shares are
subject to Submitted Hold Orders), subject to the provisions of
paragraph 11(e)(iii), Submitted Orders shall be accepted or
rejected as follows in the following order of priority and all
other Submitted Bids shall be rejected:
(A) the Submitted Bid of each Existing Holder specifying any
rate per annum or Spread that is equal to or lower than the Maximum
Applicable Rate (a Bid specifying a Spread being converted to a
rate per annum for this purpose by applying the Spread to the most
recently available Reference Index or Reference Security) shall be
rejected, thus entitling such Existing Holder to continue to hold
the Outstanding Preferred Shares that are the subject of such
Submitted Bid;
(B) the Submitted Bid of each Potential Holder specifying
any rate per annum or Spread that is equal to or lower than the
Maximum Applicable Rate (a Bid specifying a Spread being converted
to a rate per annum for this purpose by applying the Spread to the
most recently available Reference Index or Reference Security)
shall be accepted, thus requiring such Potential Holder to purchase
the Outstanding Preferred Shares that are the subject of such
Submitted Bid; and
(C) the Submitted Bids of each Existing Holder specifying
any rate per annum or Spread that is higher than the Maximum
Applicable Rate (a Bid specifying a Spread being converted to a
rate per annum for this purpose by applying the Spread to the most
recently available Reference Index or Reference Security) shall be
accepted and the Submitted Sell Orders of each Existing Holder
shall be accepted, in both cases only in an amount equal to the
difference between (1) the number of Outstanding Preferred Shares
then held by such Existing Holder subject to such Submitted Bid or
Submitted Sell Order and (2) the number of Preferred Shares
obtained by multiplying (x) the difference between the Available
Preferred Shares and the aggregate number of Outstanding Preferred
Shares subject to Submitted Bids described in paragraph
11(e)(ii)(A) and paragraph 11(e)(ii)(B) by (y) a fraction the
numerator of which shall be the number of Outstanding Preferred
Shares 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 Preferred Shares subject to all such
Submitted Bids and Submitted Sell Orders.
(iii) If, as a result of the procedures described in
paragraph 11(e)(i) or paragraph 11(e)(ii), any Existing Holder
would be entitled or required to sell, or any Potential Holder
would be entitled or required to purchase, a fraction of a share of
Preferred Shares on any Auction Date, the Auction Agent shall, in
such manner as in its sole discretion it shall determine, round up
or down the number of Preferred Shares to be purchased or sold by
any Existing Holder or Potential Holder on such Auction Date so
that each Outstanding share of Preferred Shares purchased or sold
by each Existing Holder or Potential Holder on such Auction Date
shall be a whole share of Preferred Shares.
(iv) If, as a result of the procedures described in
paragraph 11(e)(i), any Potential Holder would be entitled or
required to purchase less than a whole share of Preferred Shares on
any Auction Date, the Auction Agent shall, in such manner as in its
sole discretion it shall determine, allocate Preferred Shares for
purchase among Potential Holders so that only whole Preferred
Shares are purchased on such Auction Date by any Potential Holder,
even if such allocation results in one or more of such Potential
Holders not purchasing any Preferred Shares on such Auction Date.
(v) Based on the results of each Auction, the Auction
Agent shall determine, with respect to each Broker-Dealer that
submitted Bids or Sell Orders on behalf of Existing Holders or
Potential Holders, the aggregate number of Outstanding Preferred
Shares to be purchased and the aggregate number of Outstanding
Preferred Shares to be sold by such Potential Holders and Existing
Holders and, to the extent that such aggregate number of
Outstanding shares to be purchased and such aggregate number of
Outstanding shares to be sold differ, the Auction Agent shall
determine to which other Broker-Dealer or Broker-Dealers acting for
one or more purchasers such Broker-Dealer shall deliver, or from
which other Broker-Dealer or Broker-Dealers acting for one or more
sellers such Broker-Dealer shall receive, as the case may be,
Outstanding Preferred Shares.
(f) Miscellaneous. An Existing Holder (A) may sell, transfer
or otherwise dispose of Preferred Shares only pursuant to a Bid or Sell
Order in accordance with the procedures described in this paragraph 11 or
to or through a Broker-Dealer, provided that in the case of all transfers
other than pursuant to Auctions such Existing Holder, its Broker- Dealer or
its Agent Member advises the Auction Agent of such transfer and (B) except
as otherwise required by law, shall have the ownership of the Preferred
Shares held by it maintained in book entry form by the Securities
Depository in the account of its Agent Member, which in turn will maintain
records of such Existing Holder's beneficial ownership. Neither the 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
Preferred Shares to any Person other than the Trust. All of the Outstanding
Preferred Shares 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 Preferred Shares may be registered
in the Share 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 Preferred Shares
shall be issued to the Securities Depository and registered in the name of
the Securities Depository or its nominee. Additional certificates may be
issued as necessary to represent Preferred Shares. All such certificates
shall bear a legend to the effect that such certificates are issued subject
to the provisions restricting the transfer of Preferred Shares contained in
this Certificate of Designation. Unless the Trust shall have elected,
during a Non-Payment Period, to waive this requirement, the Trust will also
issue stop-transfer instructions to the Auction Agent for the Preferred
Shares. Except as provided in paragraph (b) below, the Securities
Depository or its nominee will be the Holder, and no existing Holder shall
receive certificates representing its ownership interest in such shares.
(b) If the Applicable Rate applicable to all Preferred
Shares shall be the Non-Payment Period Rate or there is no Securities
Depository, the Trust may at its option issue one or more new certificates
with respect to such shares (without the legend referred to in paragraph
12(a)) registered in the names of the Existing Holders or their nominees
and rescind the stop-transfer instructions referred to in paragraph 12(a)
with respect to such shares.
13. Interpretations. The Board of Trustees may interpret the
provisions of this Certificate of Designation to resolve any inconsistency
or ambiguity, remedy any formal defect or make any other change or
modification that does not adversely affect the rights of Existing Holders
of Preferred Shares.
IN WITNESS WHEREOF, the undersigned has caused this Amended and
Restated Certificate of Designation Establishing Preferred Shares to be
executed as of June 13, 1995.
/s/ Karen H. Sabath
--------------------
Karen H. Sabath
Secretary
State of New York )
) ss
County of New York )
Then personally appeared before me Karen H. Sabath, who
acknowledged the foregoing instrument to be her free act and deed and the
free act and deed in her capacity as Secretary of the BlackRock Florida
Insured Municipal 2008 Term Trust.
Before me,
MARY A. PABON
Notary Public, State of New York
No. 01-PA5032777
Qualified in Orange County
Commission Expires Sept. 6, 1996
Notary Public [Mary Pabon]
My commission expires:
APPENDIX C-2
FORM OF
CERTIFICATE OF DESIGNATION
OF THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM TRUST
THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM TRUST, a
Massachusetts business trust (the "Trust"), certifies to the Secretary of
the Commonwealth of The Commonwealth of Massachusetts that:
FIRST: Pursuant to the authority expressly vested in the Board of
Trustees of the Trust in the Trust's Declaration of Trust, the Board of
Trustees has authorized 726 preferred shares of beneficial interest, par
value $0.01 per share, liquidation preference $25,000, by increasing the
number of authorized preferred shares of beneficial interest designated as
Auction Rate Municipal Preferred Shares of Beneficial Interest, Series R7
from 2,640 to 3,366.
SECOND: All of the authorized shares of the Auction Rate Municipal
Preferred Stock, Series R7 shall be subject in all respects to identical
preferences, voting powers, restrictions, qualifications, and terms and
conditions of redemption; provided, however, that the Initial Dividend
Period for such 726 shares shall be days and the Initial Dividend Rate for
such shares shall be %.
IN WITNESS WHEREOF, the Trust has caused this Certificate of
Designation to be signed and acknowledged in its name and on its behalf on
this ___ day of , 2000, by its President, who acknowledges that this
Certificate of Designation is the act of the Trust and, to the best of his
knowledge, information and belief and under penalties of perjury, all
matters and facts contained in this Certificate of Designation are true in
all material respects.
THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008
TERM TRUST
By:_____________________________
Ralph L. Schlosstein
President
Attest:
------------------------------------
Karen H. Sabath
Secretary
PART C - OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(1) FINANCIAL STATEMENTS:
Included in Part A of the Registration Statement
Financial Highlights for the period ended December 31, 1992 each of the six
years ended December 31, 1998 and the period ended June 30, 1999
PART I
Incorporated by reference to Registrant's most recent Annual and
Semi-Annual Reports to Shareholders dated December 31, 1998 and June 30,
1999, respectively:
Independent Auditors Report for year ended December 31, 1998
Portfolio of Investments, December 31, 1998 (audited)
Portfolio of Investments, June 30, 1999 (unaudited)
Statement of Assets and Liabilities, December 31, 1998 (audited)
Statement of Assets and Liabilities, June 30, 1999 (unaudited)
Statement of Operations for the year ended December 31, 1998 (audited)
Statement of Operations for the six-month period ended June 30, 1999 (unaudited)
Statement of Changes in Net Investment Assets for the two years ended
December 31, 1998 (audited)
Statement of Changes in Net Investments Assets for the six-month period
ended June 30, 1999 (unaudited)
(2) EXHIBITS
The exhibits to this Registration Statement are listed in the Exhibit Index
located elsewhere herein.
ITEM 25: MARKETING ARRANGEMENTS
See Sections ___ and ___ of the Purchase Agreement filed as an Exhibit
herein.
ITEM 26: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Securities and Exchange Commission fees $
Printing and engraving expenses
Legal fees
Accounting expenses
Rating Agency fees
Blue Sky filing fees and expenses
Miscellaneous expenses
Total* $
- ----------
* Estimated
ITEM 27: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The Trust is not under common control with any person except to the extent
that the existence of identical boards of directors or trustees as the case
may be, at other investment companies advised by the Adviser would render
the Trust under common control with such other investment companies. The
Trust does not control any person.
ITEM 28: NUMBER OF HOLDERS OF SECURITIES
At December 31, 1999:
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
-------------- --------------\
Common Stock, $.01 par value
Preferred Shares, $.01 par value
ITEM 29: INDEMNIFICATION
Article V of the Registrant's Agreement and Declaration of Trust provides
as follows:
Section 5.1 No Personal Liability of Shareholders, Trustees, etc.
No Shareholder of the Trust 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 bad
faith, willful misfeasance, gross negligence or reckless disregard for 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.
Section 5.2 Non-Liability of Trustees, etc. Subject to Section
5.3(b) below, 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 a 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 involved in the conduct of his office.
Section 5.3 Mandatory Indemnification.
1. Subject to the exceptions and limitations contained in paragraph
(b) below:
(a) every person who is or has been a Trustee or officer of
the Trust shall be indemnified by the Trust to the fullest extent permitted
by law against all liability and against all expenses reasonably incurred
or paid by him in connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by virtue of his being or
having been a Trustee or officer and against amounts paid or incurred by
him in the settlement thereof;
(b) the words "claim," "action," "suit," or "proceeding
shall apply to all claims, actions, suits or proceedings (civil, criminal,
administrative or other, including appeals), actual or threatened; and the
words "liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
2. No indemnification shall be provided hereunder to a Trustee or
officer:
(a) against any liability to the Trust or its Shareholders
by reason of a final adjudication by the court or other body before which
the proceeding was brought that he engaged in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office;
(b) with respect to any matter as to which he shall have
been finally adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust;
(c) in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraph (b)(i) or (b)(ii)
resulting in a payment by a Trustee or officer, unless there has been
either a determination that such Trustee or officer did not engage in
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his officer by the court or other
body approving the settlement or other disposition or a reasonable
determination, based upon a review of readily available facts (as opposed
to a full trial-type inquiry) that he did not engage in such conduct:
(i) by vote of a majority of the Disinterested
Trustees acting on the matter (provided that a majority of the
Disinterested Trustees then in office act on the matter); or
(ii) by written opinion of independent legal counsel.
3. The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not
affect any other rights to which any Trustee or officer may now or
hereafter be entitled, shall continue as to a Person who has ceased to be
such Trustee or officer and shall inure to the benefit of the heirs,
executors, administrators, and assigns of such Person. Nothing contained
herein shall affect any rights to indemnification to which personnel of the
Trust other than Trustees and officers may be entitled by contract or
otherwise under law.
4. Expenses of preparation and presentation of a defense to any
claim, action, suit, or proceeding of the character described in paragraph
(a) of this Section 5.3 shall be advanced by the Trust prior to final
disposition thereof upon receipt of an undertaking by or on behalf of the
recipient to repay such amount if it is ultimately determined that he is
not entitled to indemnification under this Section 5.3, provided that
either
(a) such undertaking is secured by a surety bond or some
other appropriate security or the Trust shall be insured against losses
arising out of any such advances; or
(b) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in
office act on the matter) or an independent legal counsel in a written
opinion shall determine, based upon a review of readily available facts (as
opposed to a full trial-type inquiry), that there is reason to believe that
the recipient ultimately will be found entitled to indemnification.
As used in this Section 5.3, a "Disinterested Trustee" is one (i)
who is not an "Interested Person" of the Trust (including anyone who has
been exempted from being an "Interested Person" by any rule, regulation or
order of the Commission), and (ii) against whom none of such actions, suits
or other proceedings or another action, suit or other proceeding on the
same or similar grounds is then or had been pending.
Section 5.4 No Bond Required of Trustees. No Trustee shall be
obligated to give any bond or other security for the performance of any of
his duties hereunder.
Section 5.5 No Duty of Investigation; Notice in Trust Instruments,
etc. No purchaser, lender, transfer agent or other Person dealing with the
Trustee 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 Trustee 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, Common Share or Preferred
Share, other security of the Trust or undertaking, and every other act or
thing whatsoever executed in connection with the Trust shall be
conclusively presumed to have been executed or done by the executors
thereof only in their capacity as Trustees under the Declaration or in
their capacity as officers, employees or agents of the Trust. Every written
obligation, contract, instrument, certificate, Common Share or Preferred
Share, other security of the Trust or undertaking made or issued by the
Trustees shall recite that the same is executed or made by them not
individually, but as Trustees under the Declaration, and that the
obligations of the Trust under any such instrument are not binding upon any
of the Trustees or Shareholders, individually, but bind only the trust
estate, and may contain any further recital which they or he may deem
appropriate, but the omission of such recital shall not operate to bind the
Trustees or Shareholders individually. The Trustees shall seek diligently
at all times to 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.
Section 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 the Investment
Adviser, the Distributor, Transfer Agent, selected dealers, accountants,
appraisers or other experts or consultants selected with reasonable care by
the Trustees, officers or employees of the Trust, regardless of whether
such counsel or expert may also be a Trustee. The underwriting agreements
filed as Exhibit h hereto contain provisions requiring indemnification of
the Registrant's underwriters by the Registrant.
ITEM 30: BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See "Management of the Trust" in the Prospectus and for information
regarding the business of the investment adviser. For information as to the
business, profession, vocation or employment of a substantial nature of
each of the officers and directors of BlackRock Financial Management Inc.,
reference is made to the Adviser's current Form ADV filed under the
Investment Advisers Act of 1940, incorporated herein by reference.
ITEM 31: LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of the Registrant are maintained in part at the
office of the Adviser at 345 Park Avenue, New York, NY 10154, in part at
the offices of State Street, 1776 Heritage Drive, North Quincy,
Massachusetts 02171, in part at the offices of State Street Bank & Trust
Company, 150 Royal Street, Canton, Massachusetts 02021 and in part at the
offices of the Administrator, 800 Scudders Mill Road, Plainsboro, New
Jersey 08536.
ITEM 32: MANAGEMENT SERVICES
Except as described in Part I of this Registration Statement under the
caption "Management of the Trust," the Registrant is not a party to any
management service related contract.
ITEM 33: UNDERTAKINGS
(1) Registrant undertakes to suspend the offering of its shares until it
amends its prospectus if (a) subsequent to the effective date of its
Registration Statement, the net assets value declines more than 10 percent
from its net asset value as of the effective date of the Registration
Statement, or (b) the net asset value increases to an amount greater than
its net proceeds as stated in the prospectus.
(2) Not applicable
(3) Not applicable
(4) Not applicable
(5) Registrant undertakes that:
(a) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as a part of a registration statement in reliance upon Rule
430A and contained in a form of prospectus filed by the Registrant
under Rule 497(h) under the Securities Act of 1933 shall be deemed
to be a part of this Registration Statement as of the time it was
declared effective.
(b) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains
a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of the securities at that time shall be deemed to be the
initial bona fide offering thereof.
(6) Registrant undertakes to send by first class mail or other means
designed to ensure equally prompt delivery, within two business days of
receipt of a written or oral request, any Statement of Additional
Information.
(7) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or proceeding
(is asserted by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of New York,
on the [ ] day of January, 2000.
THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM TRUST
*
---------------------
Ralph L. Schlosstein
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
Signatures Title Date
- ---------- ----- ----
*
- ----------------- President (Principal Executive January 3, 2000
Ralph L. Schlosstein Officer) and Director
*
- ----------------- Treasurer (Principal Financial January 3, 2000
Henry Gabbay and Accounting Officer)
*
- ----------------- Director January 3, 2000
Laurence D. Fink
*
- ----------------- Director January 3, 2000
Andrew F. Brimmer
*
- ----------------- Director January 3, 2000
Richard E. Cavanagh
*
- ----------------- Director January 3, 2000
Kent Dixon
*
- ----------------- Director January 3, 2000
Frank J. Fabozzi
*
- ----------------- Director January 3, 2000
James Clayburn LaForce, Jr.
*
- ----------------- Director January 3, 2000
Walter F. Mondale
- --------------
* Signed by Karen Sabath pursuant to power of attorney, dated January 3,
2000.
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER PAGE
- ------- ----
a. (1) Agreement and Declaration of Trust*
(2) Amended and Restated Certificate of Designation dated June 13,
1995 (for outstanding preferred shares)*
(3) Form of Amendment to the Certificate of Designation (for
outstanding preferred shares)*
b. By-Laws*
c. None
d. (1) Specimen Certificate Representing Common Shares of
Beneficial Interest*
(2) Form of Specimen Certificate Representing Series R7 Preferred
Shares*
e. Dividend Reinvestment Plan*
f. Not Applicable
g. (1) Advisory Agreement*
(2) Administration Agreement*
h. (1) Form of Purchase Agreement for initial public offering+
(2) Form of Master Agreement Among Underwriters for initial public
offering+
(3) Form of Master Selected Dealer Agreement for initial public offering+
i. Not Applicable
j. (1) Custodian Agreement*
(2) Transfer Agent Agreement*
k. (1) Auction Agent Agreement*
(2) Broker-Dealer Agreement*
(3) Depository Agreement+
l. Opinion and consent of counsel+
m. Not Applicable
n. Consent of Independent Accountants+
o. Not Applicable
p. Not Applicable
q. Not Applicable
r. Code of Ethics+
s. Powers of Attorney*
- --------------
* Filed herewith.
+ To be filed by amendment.
Exhibit a.(1)
DECLARATION OF TRUST
OF
THE BLACKROCK FLORIDA INSURED MUNICIPAL
2008 TERM TRUST
August 7, 1992
DECLARATION OF TRUST made as of August 7, 1992, by the undersigned
(together with all other persons from time to time duly elected, qualified
and serving as Trustees in accordance with the provisions of Article 11
hereof, the "Trustees"), and by the holders of shares of beneficial
interest to be issued hereunder as hereinafter provided;
WHEREAS the Trustee desires to establish a trust for the investment
and reinvestment of funds contributed thereto; and
WHEREAS, the Trustee desires that the beneficial interest in the trust
assets be divided into transferable shares of beneficial interest, as
hereinafter provided;
NOW, THEREFORE, the Trustee hereby declares that all money and
property contributed to the trust established hereunder shall be held and
managed in trust for the benefit of holders, from time to time, of the
shares of beneficial interest issued hereunder and subject to the
provisions hereof.
ARTICLE I
NAME, PRINCIPAL OFFICE, RESIDENT AGENT AND DEFINITIONS
Section 1.1 Name, Principal Office and Resident Agent. The name of
the trust created hereby is "The BlackRock Florida Insured municipal 2008
Term Trust (the "Trust").
The post office address of the principal office of the Trust is 800
Scudders Mill Road, Plainsboro, New Jersey 08536. The name of the resident
agent of the Trust in the Commonwealth of Massachusetts is CT Corporation
System, a Delaware corporation, and the post office address of the resident
agent is 2 Oliver Street, Boston, Massachusetts 02109.
Section 1.2 Definitions. Wherever they are used herein, the
following terms have the following respective meanings:
(a) "By-Laws" means the By-Laws referred to in Section 3.1, as
from time to time amended.
(b) The terms "Commission," "Interested Person" and "Majority
Shareholder Vote" (67% or 50% requirement of the third sentence of Section
2(a)(42) of the 1940 Act, whichever may be applicable) have the meanings
given them in the 1940 Act.
(c) "Common Shareholder" means a record owner of outstanding
Common Shares.
(d) "Common Shares" means the common shares of beneficial
interest in the Trust as described in Section 6.1 hereof and includes
fractions of Common Shares as well as whole Common Shares.
(e) "Custodian" means any person other than the Trust who has
custody by any Trust Property as required by Section 17(f) of the 1940 Act,
but does not include a system for the central handling of securities
described in said Section 17(f).
(f) "Declaration" means this Declaration of Trust as amended
from to time. Reference in this Declaration of Trust to "Declaration,"
"hereof, "herein" and "hereunder" shall be deemed to referred to ration
rather the article or section in which such words appear.
(g) "Investment Adviser" means a party furnishing services to
the Trust pursuant to the contract described in Section 4.1 hereof.
(h) The "1940 Act" means the Investment Company Act of 1940 and
the Rules and Regulations thereunder, as amended from time to time.
(i) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities,
whether or not legal entities, and governments and agencies and political
subdivisions thereof, whether domestic or foreign.
(j) "Preferred Shareholder" means a record owner of outstanding
Preferred Shares.
(k) "Preferred Shares" means the preferred shares of beneficial
interest in the Trust as described in Section 6.1 hereof and includes
fractions of Preferred Shares as well as whole Preferred Shares.
(l) "Shareholder" means a record owner of outstanding Shares.
(m) "Shares" means the units of beneficial interest in the Trust
as described in Section 6.1 hereof and includes fractions of Shares as well
as whole Shares.
(n) "Transfer Agent" means a party furnishing services to The
Trust pursuant to the contract described in Section 4.3 hereof.
(o) The "Trust" means the trust created hereby.
(p) The "Trust Property " means any and all property, real or
personal, tangible or intangible, which is owned or held by or for the
account of the Trust or the Trustees.
(q) The "Trustee" or "Trustees" means the person who has signed
the Declaration, so long as he shall continue in office in accordance with
the terms hereto, and all other persons who may from time to time be duly
elected qualified and serving as Trustees in accordance with the provisions
hereof, and references herein to a Trustee or the Trustees shall refer to
such person or persons in their capacity as trustees hereunder.
(r) "Underwriters" means the parties, other than the Trust, to
the contract described in Section 4.2 hereof.
ARTICLE II
TRUSTEES
Section 2.1 Number of Trustees. The number of Trustees shall
initially be one (1), and thereafter the number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed
by a majority of the Trustees, provided, however, that, after a
registration statement under the Securities Act of 1933, as amended,
covering the first public offering of securities of the Trust shall have
been filed and becomes effective (the "effective date"), the number of
Trustees shall in no event be less than three (3) nor more than fifteen
(15), except as such number shall be increased in connection with the
rights of the holders of the Preferred Shares to elect a majority of the
Trustees, as provided for in Section 2.2 hereof. No reduction in the
number of Trustees shall have the effect of removing any Trustee from
office prior to the expiration of his term unless the Trustee is
specifically removed pursuant to Section 2.2 of this Article II at the time
of the decrease. The initial Trustee shall be:
Henry Gabbay
345 Park Avenue
New York, NY 10154
Section 2.2 Term of Office of Trustees. The Board of Trustees
shall be divided into three classes. The number of Trustees in each class
shall be as nearly equal as practicable as determined from time to time by
resolution of the Board of Trustees. The term of office of the first class
shall expire on the date of the first annual meeting of Shareholders or
special meeting in lieu thereof following the effective date. The term of
office of the second class shall expire on the date of the second annual
meeting of Shareholders or special meeting in lieu thereof. The term of
office of the third class shall expire on the date of the third annual
meeting of Shareholder or special meeting in lieu thereof. Upon expiration
of the term of office of each class as set forth above, the number of
Trustees in such class, as determined by the Board of Trustees, shall be
elected for a term expiring on the date of the third annual meeting of
Shareholders or special meeting in lieu thereof following such expiration
to succeed the Trustees whose terms in office expire. Subject to the
rights of the Preferred Shareholders, the Trustees shall be elected by the
Common Shareholders owning of record a plurality of the Common Shares
voting as a class at an annual meeting of the Shareholders or special
meeting in lieu thereof called for that purpose, except as provided in
Section 2.3 of this Article; provided, however, that the Preferred
Shareholders owning of record a plurality of the Preferred Shares voting as
a class at an annual meeting of 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 owning of
record a plurality of the Preferred Shares 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, if (i) 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 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 at least two-thirds of the remaining Trustees,
specifying the date when such removal shall become effective (provided,
however, that the Trustees elected by any 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 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) any
Trustee may be removed at any meeting of Shareholders by a vote of 75% 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 a 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.
Section 2.3 Resignation and Appointment of Trustees. The term of
office of a Trustee shall terminate and a vacancy shall occur in the event
of the death, declination, resignation, removal, retirement, bankruptcy,
adjudicated incompetence or other incapacity to perform the duties of the
office of a Trustee. In the case of an existing vacancy, including a
vacancy existing by reason of an increase in the number of Trustees, the
remaining Trustees shall fill such vacancy by appointing such other person
as they in their discretion shall see fit. Such appointment shall be
evidenced by a written instrument signed by a majority of the Trustees then
in office. Any such appointment shall not become effective, however, until
the person 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. An appointment of a Trustee may be made by
the Trustees then in office and notice thereof mailed to Shareholders as
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.
Section 2.4 Vacancies. The death, declination, resignation,
retirement, removal, bankruptcy, adjudicated incompetence or incapacity to
perform the duties of a Trustee, 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.
Section 2.5 Delegation of Power to Other Trustees. Any Trustee
may, by power of attorney, delegate his power for a period not exceeding
six (6) months at any one time to any other Trustee or Trustees; provided
that in no case shall less than two (2) Trustees personally exercise the
powers granted to the Trustees under this Declaration except as herein
otherwise expressly provided. Nothing in this Section 2.5 shall apply to,
or limit the ability of any Trustee to grant, any power of attorney for the
purpose of executing any registration statement filed with the Commission,
or amendment thereto, relating to Shares.
Section 2.6 Meetings. Meetings of the Trustees shall be held from
time to time upon the call of the Chairman, if any, the President, the
Secretary or any two Trustees. Regular meetings of the Trustees may be
held without call or notice at a time and place fixed by the By-Laws or by
resolution of the Trustees. Notice of any other meeting shall be mailed
not less than 48 hours before the meeting or otherwise actually delivered
orally or in writing not less than 24 hours before the meeting, but may be
waived in writing by any Trustee either before or after such meeting. The
attendance of a Trustee at a meeting shall constitute a waiver of notice
of such meeting except where a Trustee attends a meeting for the express
purpose of objecting to the transaction of any business on the ground that
the meeting has not been 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 of Trust, any action of the Trustees may be taken at a meeting
by vote of a majority of the Trustees present (a quorum being present) or
without a meeting by written consent of a majority of the Trustees.
Any committee of the Trustees, including an executive committee,
if any, may act with or without a meeting. A quorum for all meetings of
any such committee shall be a majority of the members thereof. Unless
provided otherwise in this Declaration, any action of any such committee
may be taken at a meeting by vote of a majority of the members present (a
quorum being present) or without a meeting by written consent of a majority
of the members.
With respect to actions of the Trustees and any committee of the
Trustees, Trustees who are Interested Persons in any action to be taken may
be counted for quorum purposes under this Section and shall be entitled to
vote to the extent not prohibited by the 1940 Act.
Section 2.7 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 may authorize the Chairman, if any, or
President to appoint such other officers or agents with such powers as the
Trustees may deem to be advisable. A Chairman shall, and the President,
Secretary and Treasurer may, but need not, be a Trustee.
ARTICLE III
POWERS OF TRUSTEES
Section 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 the Declaration. The Trustees shall have
power to conduct the business 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 the Trustees 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 provisions of the Declaration, the presumption shall be in favor
of a grant of power to the Trustees.
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.
Section 3.2 Investments. (a) The Trustees shall have the power
to:
(i) operate as and carry on the business of an investment
company, and exercise all of the powers necessary or appropriate to
the conduct of such operations;
(ii) To subscribe for, invest in, hold for investment, or
reinvest in, securities, including common and preferred stocks;
warrants; bonds, debentures, bills, time notes and all other evidences
of indebtedness; negotiable or non-negotiable instruments; government
securities, including securities of any state, municipality or other
political subdivision thereof, or any governmental or quasi-
governmental agency or instrumentality; and money market instruments
including bank certificates of deposit, finance paper, commercial
paper, bankers acceptances and all kinds of repurchase agreements, of
any corporation, company, trust, association, firm or other business
organization however established, and of any country, state,
municipality or other political subdivision, or any governmental or
quasi-governmental agency or instrumentality;
(iii) To acquire (by purchase, subscription or otherwise), to
hold, to trade in and deal in, to acquire any rights or options to
purchase or sell, to sell or otherwise dispose of, to lend, to write
(or sell) and purchase put and call options on any such securities and
to pledge any such securities and repurchase agreements;
(iv) To exercise all rights, powers and privileges of ownership
or interest in all securities and repurchase agreements included in
the Trust Property, including the right to vote thereon and otherwise
act with respect thereto and to do all acts for the preservation,
protection, improvement and enhancement in value of all such
securities and repurchase agreements;
(v) To acquire (by purchase, lease or otherwise) and to hold,
use, maintain, develop and dispose of (by sale or otherwise) any
property, real or personal, including futures contracts and options
thereon, cash, and any interest therein;
(vi) To borrow money or otherwise obtain credit and in this
connection issue notes or other evidence of indebtedness; to secure
borrowings by mortgaging, pledging or otherwise subjecting as security
the Trust Property; to endorse, guarantee, or undertake the
performance of any obligation, contract or engagement of any other
Person and to lend Trust Property;
(vii) To aid by further investment any corporation, company,
trust, association or firm, any obligation of or interest in which is
included in the Trust Property or in the affairs of which the Trustees
have any direct or indirect interest; to do all acts and things
designed to protect, preserve, improve or enhance the value of such
obligation or interest; to guarantee or become surety on any or all
other contracts, stocks, bonds, notes, debentures and other
obligations of any such corporation, company, trust, association or
firm; and
(viii) to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary,
suitable or proper for the accomplishment of any purpose or the
attainment of any object or the furtherance of any power hereinbefore
set forth, and to do every other act or thing incidental or
appurtenant to or connected with the aforesaid purposes, objects or
powers.
The foregoing clauses shall be construed both as objects and powers,
and the foregoing enumeration of specific powers shall not be held to limit
or restrict in any manner the general powers of the Trustees.
(b) 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.
Section 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. 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 the termination of the term of office,
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.
Section 3.4 Issuance and Purchase of Securities. The Trustees
shall have the power to issue, sell, purchase, redeem, retire, cancel,
acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal in
Shares and subject to the provisions set forth in Articles VI, VII and VIII
hereof, to apply to any such repurchase, retirement, cancellation or
acquisition of Common Shares or Preferred 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.
Section 3.5 Delegation; Committees. The Trustees shall have power
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 not prohibited by the 1940 Act.
Section 3.6 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 claims relating to the Trust Property; to foreclose any
security interest securing any obligations by virtue of which any property
is owed to the Trust; and to enter into releases, agreements and other
instruments.
Section 3.7 Expenses. The Trustees shall have the 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 the 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.
Section 3.8 Manner of Acting; By-Laws. Except as otherwise
provided herein or in the By-laws, any action to be taken by the Trustees
may be taken by a majority of the Trustees present at a meeting of Trustees
(a quorum being present), including any meeting held by means of a
conference telephone circuit or similar communications equipment by means
of which all persons participating in the meeting can hear each other, or
by written consents of all the Trustees. The Trustees may adopt By-laws to
the extent such power is not reserved to the Shareholders.
Notwithstanding the foregoing provisions of this Section 3.8 and in
addition to such provisions or any other provision of this Declaration or
of the By-laws, the Trustees may by resolution appoint a committee
consisting of less than the whole number of Trustees then in office, which
committee may be empowered to act for and bind the Trustees and the Trust,
as if the acts of such committee were the acts of all the Trustees then in
office, with respect to the institution, prosecution, dismissal,
settlement, review or investigation of any action, suit or proceeding which
shall be pending or threatened to be brought before any court,
administrative agency or other adjudicatory body.
Section 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 associations;
(c) remove Trustees or fill vacancies in or add to their number, elect and
remove such officers and appoint and terminate such agents or employees as
they consider appropriate, and appoint from their own number, and
terminate, any one or more committees which may exercise some or all of the
power and authority of the Trustees as the Trustees may determine; (d)
purchase, and pay for out of Trust Property, insurance policies insuring
the Common Shareholders and Preferred 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; (e) establish pension, profit sharing, Share
purchase and other retirement, incentive and benefit plans for any
Trustees, officers, employees or agents of the Trust; (f) make donations,
irrespective of benefit to the Trust, for charitable, religious,
educational, scientific, civil or similar purposes; (g) to the extent
permitted by law, indemnify any person with whom the Trust has dealings,
including the Investment Adviser, Underwriter, Transfer Agent, Custodian
and selected dealers to such extent as the Trustees shall determine; (h)
guarantee indebtedness or contractual obligations of others; (i) determine
and change the fiscal year of the Trust and the method by which its
accounts shall be kept; and (j) adopt a seal for the Trust but the absence
of such seal shall not impair the validity of any instrument executed on
behalf of the Trust.
Section 3.10 Principal Transactions. Except in transactions
permitted by the 1940 Act or rules and regulations adopted by the
Commission, or any order of exemption issued by the Commission, the
Trustees shall not, on behalf of the Trust, buy any securities (other than
Common or Preferred Shares) from or sell any securities (other than Common
or Preferred Shares) to, or lend any assets of the Trust to, any Trustee or
officer of the Trust or any firm of which any such Trustee or officer is a
member acting as principal, or have any such dealings with the Investment
Adviser, Underwriter or Transfer Agent or with any Interested Person, or
firm or company in which such Person is an Interested Person, as broker,
legal counsel, registrar, transfer agent, dividend disbursing agent or
custodian.
ARTICLE IV
INVESTMENT ADVISER, UNDERWRITER AND TRANSFER AGENT
Section 4.1 Investment Adviser. Subject to a Majority Shareholder
Vote of both the Common Shareholders and the Preferred Shareholders voting
without regard to class, the Trustees may in their discretion from time to
time enter into one or more investment advisory or management contracts
whereby a party to such a contract shall undertake to furnish the Trust
such administrative, management, investment advisory, statistical and
research facilities and services, and such other facilities and services,
if any, 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 delegate to the Investment Adviser authority (subject to such
general or specific instructions as the Trustees may from time to time
adopt) to effect purchases, sales, loans or exchanges of assets of the
Trust on behalf of the Trustees or may authorize any officer, employee or
Trustee to effect such purchases, sales, loan or exchanges pursuant to
recommendations of the Investment Adviser (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.
Section 4.2 Underwriter. The Trustees may in their discretion
enter into a contract providing for the sale of shares of beneficial
interest of the Trust whereby the Trust may either agree to sell such
Shares to the other parties to the contract or appoint such other party the
underwriter for such Shares. 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 sale of Shares by such other parties
as principal or as agent of the Trust and may provide that such other party
may enter into agreements with registered securities dealers to further the
purpose of the distribution of such Shares.
Section 4.3 Transfer Agent. The Trustees may in their discretion
from time to time enter into a transfer agency and Shareholder service
contract whereby the other party to such contract shall undertake to
furnish transfer agency and Shareholder services to the Trust. The
contract shall have such terms and conditions as the Trustees may in their
discretion determine not inconsistent with the Declaration or the By-laws.
Such services may be provided by one or more Persons.
Section 4.4 Parties to Contract. Any contract of the character
described in Section 4.1, 4.2 or 4.3 of this Article IV or any Custodian
contract, as described in the By-laws, may be entered into with any Person,
although one or more of the Trustees or officers of the Trust may be an
officer, partner, 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 disqualified from voting upon
or executing any such contract; 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 not inconsistent with the provisions of this
Article IV or the By-laws. The same Person may be the other party to
contracts entered into pursuant to Sections 4.1, 4.2 and 4.3 above or
custodian contracts, 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 4.4.
Section 4.5 Compliance with 1940 Act. Any contract entered into
pursuant to Sections 4.1 and 4.2 shall be consistent with and subject to
the requirements of Section 15 of the Investment Company Act of 1940
(including any amendment thereof or other applicable Act of Congress
hereafter enacted) with respect to its continuance in effect, its
termination and the method of authorization and approval of such contract
or renewal thereof.
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 5.1 No Personal Liability of Shareholders, Trustees, etc.
No Shareholder of the Trust 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 bad
faith, willful misfeasance, gross negligence or reckless disregard for 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.
Section 5.2 Non-Liability of Trustees, etc. Subject to Section
5.3(b) below, 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 a 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 involved in the conduct of his office.
Section 5.3 Mandatory Indemnification.
(a) Subject to the exceptions and limitations contained in
paragraph (b) below:
(i) every person who is or has been a Trustee or officer of the
Trust shall be indemnified by the Trust to the fullest extent
permitted by law against all liability and against all expenses
reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been a Trustee or officer
and against amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding shall
apply to all claims, actions, suits or proceedings (civil, criminal,
administrative or other, including appeals), actual or threatened; and
the words "liability" and "expenses" shall include, without
limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee
or officer:
(i) against any liability to the Trust or its Shareholders by
reason of a final adjudication by the court or other body before which
the proceeding was brought that he engaged in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved
in the conduct of his office;
(ii) with respect to any matter as to which he shall have been
finally adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust;
(iii) in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraph (b)(i) or
(b)(ii) resulting in a payment by a Trustee or officer, unless there
has been either a determination that such Trustee or officer did not
engage in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his
officer by the court or other body approving the settlement or other
disposition or a reasonable determination, based upon a review of
readily available facts (as opposed to a full trial-type inquiry)
that he did not engage in such conduct:
(A) by vote of a majority of the Disinterested
Trustees acting on the matter (provided that a majority of
the Disinterested Trustees then in office act on the
matter); or
(B) by written opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not
affect any other rights to which any Trustee or officer may now or
hereafter be entitled, shall continue as to a Person who has ceased to be
such Trustee or officer and shall inure to the benefit of the heirs,
executors, administrators, and assigns of such Person. Nothing contained
herein shall affect any rights to indemnification to which personnel of the
Trust other than Trustees and officers may be entitled by contract or
otherwise under law.
(d) Expenses of preparation and presentation of a defense to any
claim, action, suit, or proceeding of the character described in paragraph
(a) of this Section 5.3 shall be advanced by the Trust prior to final
disposition thereof upon receipt of an undertaking by or on behalf of the
recipient to repay such amount if it is ultimately determined that he is
not entitled to indemnification under this Section 5.3, provided that
either
(i) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against losses
arising out of any such advances; or
(ii) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in
office act on the matter) or an independent legal counsel in a written
opinion shall determine, based upon a review of readily available
facts (as opposed to a full trial-type inquiry), that there is reason
to believe that the recipient ultimately will be found entitled to
indemnification.
As used in this Section 5.3, a "Disinterested Trustee" is one (i) who
is not an "Interested Person" of the Trust (including anyone who has been
exempted from being an "Interested Person" by any rule, regulation or order
of the Commission), and (ii) against whom none of such actions, suits or
other proceedings or another action, suit or other proceeding on the same
or similar grounds is then or had been pending.
Section 5.4 No Bond Required of Trustees. No Trustee shall be
obligated to give any bond or other security for the performance of any of
his duties hereunder.
Section 5.5 No Duty of Investigation; Notice in Trust Instruments,
etc. No purchaser, lender, transfer agent or other Person dealing with the
Trustee 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 Trustee 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, Common Share or Preferred
Share, other security of the Trust or undertaking, and every other act or
thing whatsoever executed in connection with the Trust shall be
conclusively presumed to have been executed or done by the executors
thereof only in their capacity as Trustees under the Declaration or in
their capacity as officers, employees or agents of the Trust. Every written
obligation, contract, instrument, certificate, Common Share or Preferred
Share, other security of the Trust or undertaking made or issued by the
Trustees shall recite that the same is executed or made by them not
individually, but as Trustees under the Declaration, and that the
obligations of the Trust under any such instrument are not binding upon any
of the Trustees or Shareholders, individually, but bind only the trust
estate, and may contain any further recital which they or he may deem
appropriate, but the omission of such recital shall not operate to bind the
Trustees or Shareholders individually. The Trustees shall seek diligently
at all times to 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.
Section 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 the Investment
Adviser, the Distributor, Transfer Agent, selected dealers, accountants,
appraisers or other experts or consultants selected with reasonable care by
the Trustees, officers or employees of the Trust, regardless of whether
such counsel or expert may also be a Trustee.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1 Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable shares of beneficial interest
with par value of $.01 per share (the "Shares"). The Board of 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
Board of Trustees. The number of 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 of shares, shall be fully paid and non-assessable.
Pursuant to the powers vested in the Board of Trustees by this Section
6.1, the Board of Trustees hereby authorizes the issuance of an unlimited
number of Common Shares of beneficial interest, par value $.01 per share
(the "Common Shares") together with 100,000,000 shares of beneficial
interest, par value of $.01 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
or of any other series of the same or 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 Board of 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.
Section 6.2 Rights of Shareholders. The ownership to 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 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
assume any losses of the Trust or suffer any assessment of any kind by
virtue of their ownership of Shares. The Shares shall be personal property
giving only the rights in the Declaration specifically set forth. The
Shares shall not entitle the holder to preference, preemptive, appraisal,
conversion or exchange rights, except as the Trustees may determine with
respect to any class or series of Shares.
Section 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 the Declaration shall be construed to make
the Shareholders, either by themselves or with the Trustees, partners and
members of a joint stock association.
Section 6.4 Issuance of Shares. The Trustees in their discretion
may, from time to time without 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 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 and Shares held in the treasury. The Trustees may from time to time
divide or combine the Shares or any class or series into a greater or
lesser number of such series without thereby changing the proportionate
beneficial interests in the Trust. Contributions to the Trust may be
accepted for whole Shares and/or 1/1,000ths of a Share or integral
multiples thereof.
Section 6.5 Register of Shares. A register or registers shall be
kept at the principal office of the Trust or at an office of the Transfer
Agent 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 Common Shares and Preferred Shares and who shall be entitled
to receive dividends or distributions or otherwise to exercise or enjoy
the rights of Common Shareholders and Preferred Shareholders. No
Shareholder shall be entitled to receive payment of any dividend or
distribution, nor to have notice given to him as herein or in the By-laws
provided, until he has given his address to the Transfer Agent or such
other officer or agent of the Trustees as shall keep the said register for
entry thereon. The Trustees, in their discretion, may authorize the
issuance of Share certificates and promulgate appropriate rules and
regulations as to their use.
Section 6.6 Transfer of Shares. Shares shall be transferable on
the records of the Trust only by the record holder thereof or by his agent
thereunto duly authorized in writing, upon delivery to the Trustees or the
Transfer Agent of a duly executed instrument of transfer, together with any
certificate or certificates (if issued) for such Shares and 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 hereunder and neither the Trustees nor any Transfer Agent
or register 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 the Transfer Agent; but until such record is made, the
Shareholder of record shall be deemed to be the holder of such Shares for
all purposes hereunder and neither the Trustees not 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. Section 6.7 Notices. Any and all notices to which any Shareholder
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.
Section 6.7 Treasury Shares. Shares held in the treasury shall,
until reissued pursuant to Section 6.4, not confer any voting rights on the
Trustees, nor shall such Shares be entitled to any dividends or other
distributions declared with respect to the Shares.
Section 6.8 Voting Powers. The Shareholders shall have power to
vote only (i) for the election of Trustees as provided in Section 2.2
hereof, (ii) with respect to any investment advisory or management contract
as provided in Section 4.1, (iii) with respect to termination of the Trust
as provided in Section 9.2, (iv) with respect to any amendment of the
Declaration to the extent and as provided in Section 9.3, (v) with respect
to any merger, consolidation, conversion or sale of assets as provided in
Sections 9.4, 9.5, and 9.7, (vi) with respect to incorporation of the Trust
to the extent and as provided in Section 9.5, (vii) 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, (viii) with respect to such additional matters relating to
the Trust as may be required by the Declaration, the By-laws or any
registration of the Trust as an investment company under the 1940 Act with
the Commission (or any successor agency) or any state, or as the Trustees
may consider necessary or desirable and (ix) 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. 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.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
The Trustees, in their absolute discretion, may prescribe and shall
set forth in the By-laws or in a duly adopted vote of the Trustees such
bases and times for determining the per share net asset value of the Common
Shares or net income, or the declaration and payment of dividends and
distributions, as they may deem necessary or desirable.
ARTICLE VIII
CUSTODIANS
The Trustee shall at all times employ one or more custodians, meeting
the qualifications for custodians for portfolio securities of investment
companies contained in the 1940 Act, as custodian with respect to the
Trust. If so directed by a Majority Shareholder Vote of each the Common
Shares and the Preferred Shares voting as separate classes, the custodian
shall deliver and pay over all property of the Trust held by it as
specified in such vote.
The Trustees may also authorize each custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services
of the custodian and upon such terms and conditions, as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees,
provided that in every case such sub-custodian shall meet the
qualifications for custodians contained in the 1940 Act.
ARTICLE IX
LIMITED TERM OF EXISTENCE; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC.
Section 9.1 Limited Term of Existence. The Trust shall have a
limited period of existence and shall cease to exist at the close of
business on December 31, 2008, except that the Trust shall continue to
exist for the purpose of paying, satisfying, and discharging any existing
debts or obligations, collecting and distributing its assets, and doing all
other acts required to liquidate and wind up its business and affairs. The
Board of Trustees may, to the extent it deems it appropriate, adopt a plan
of termination at any time during the twelve months immediately preceding
December 31, 2008, which plan of termination may set forth the terms and
conditions for implementing the termination of the Trust's existence under
this Article IX. Shareholders of the Trust shall not be entitled to vote on
the adoption of any such plan or the termination of the Trust's existence
under this Article IX.
Section 9.2 Termination of Trust. (a) 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 to do all other acts appropriate to liquidate its
business; provided, that any sale, conveyance, assignment, exchange,
transfer or other disposition of all or substantially all of the Trust
Property shall require Shareholder approval in accordance with Section
9.4 hereof; and
(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 in cash and partly in kind, among the Shareholders
according to their respective rights, including any preferential
rights of Preferred Shares to receive such distribution.
(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.
Section 9.3 Amendment Procedure. (a) Except as provided in
paragraph (c) of this Section 9.3, this Declaration may be amended by a
Majority Shareholder Vote of each of the Common Shares and the Preferred
Shares, voting as separate classes, or by an 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 each of the Common Shareholders and
the Preferred Shareholders, voting as separate classes. The Trustees may
also amend this Declaration without the vote or consent of Shareholders to
change the name of the Trust, to supply any omission, to cure, correct or
supplement any ambiguous, defective or inconsistent provision hereof, 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 if they deem it necessary to conform
this Declaration to the requirements of applicable federal laws or
regulations or the requirements of the regulated investment company
provisions of the Internal Revenue Code, but the Trustees shall not be
liable for failing so to do.
(b) No amendment, except pursuant to Section 6.1, may be made
under this Section 9.3 which would change any rights with respect to any
Shares 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 class
of Shares so effected 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 assessment upon
Shareholders.
(c) No amendment may be made under this Section 9.3 which shall
amend, alter, change or repeal any of the provisions of Sections 2.2(d),
9.1, 9.2, 9.3, 9.4, 9.6 and 9.7 unless the amendment effecting such
amendment, alteration, change or repeal shall receive the affirmative vote
or consent of seventy-five percent (75%) of each the Common Shareholders
and the Preferred Shareholders, voting as separate classes. Such
affirmative vote or consent shall be in addition to the vote or consent of
the holders of Shares otherwise required by law or by the terms of any
class or series of Preferred Shares, whether now or hereafter authorized,
or any agreement between the Trust and any national securities exchange.
(d) A certificate signed by a majority of the Trustees 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, and executed by a majority of the Trustees, 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 securities 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.
Section 9.4 Merger, Consolidation and Sale of Assets. Subject to
Section 9.7, the Trust may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all
or substantially all of the Trust Property, including its good will, upon
such terms and conditions and for such consideration when and as authorized
at any meeting of Shareholders called for the purpose by the affirmative
vote of the holders of not less than two-thirds of the Common Shares and
the Preferred Shares outstanding and entitled to vote, voting as separate
classes or by an instrument or instruments in writing without a meeting,
consented to by the holders of not less than two-thirds of each such class
of Common Shares and Preferred Shares, provided, however, that if such
merger, consolidation, sale, lease or exchange is recommended by the
Trustees, the vote or written consent of the holders of a majority of the
Common Shares and the Preferred Shares outstanding and entitled to vote,
voting as separate classes shall be sufficient authorization and any such
merger, consolidation, sale, lease or exchange shall be deemed for all
purposes to have been accomplished under and pursuant to the statutes of
the Commonwealth of Massachusetts.
Section 9.5 Incorporation and Reorganization. Subject to Section
9.7 with the approval of the holders of a majority of the Common Shares and
Preferred Shares outstanding and entitled to vote, voting as separate
classes 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, partnership,
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, association, trust, or organization in which the Trust holds
or is about to acquire shares or any other interest. The Trustees may also
cause a 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 organization or entities.
Section 9.6 Conversion to Open-End Company. Notwithstanding any
other provisions of this Declaration or the By-Laws, an amendment to this
Declaration that makes the Shares a "redeemable security" (as that term is
defined in the 1940 Act) shall be required to be approved by at least (a) a
majority of the Trustees, including a majority of the Trustees who are not
Interested Persons; and (b) a Majority Shareholder vote of each the Common
Shareholders and the Preferred Shareholders, voting as separate classes.
The Trust shall notify the holders of all capital securities of the
approval, in accordance with the preceding paragraph of this Section 9.6,
of any amendment to this Declaration that makes the Shares a "redeemable
security" (as that term is defined in the 1940 Act) no later than thirty
(30) days prior to the date of filing of such amendment with the Secretary
of State of the Commonwealth of Massachusetts; provided, however, that such
amendment may not be so filed until the later of ninety (90) days following
the date of approval of such amendment by the holders of Shares in
accordance with the preceding paragraph of this Section 9.6 or thirty (30)
days following the date on which notice of the approval of such amendment
is first given to Shareholders.
Section 9.7 Certain Transactions. (a) Notwithstanding any other
provision of this Declaration and subject to the exceptions provided in
paragraph (d) of this Section, the types of transactions described in
paragraph (c) of this Section shall require the affirmative vote or consent
of the holders of seventy-five percent (75%) of the Common Shares and
Preferred Shares outstanding and entitled to vote, voting as separate
classes when a Principal Shareholder (as defined in paragraph (b) of this
Section) is a party to the transaction. Such affirmative vote or consent
shall be in addition to the vote or consent of the holders of Shares
otherwise required by law or by the terms of any class or series of
Preferred Shares, whether now or hereafter authorized, or any agreement
between the Trust and any national securities exchange.
(b) The term "Principal Shareholder" shall mean any corporation,
person or other entity which is the beneficial owner, directly or
indirectly, of more than five percent (5%) of the outstanding Shares and
shall include any affiliate or associate, as such terms are defined in
clause (ii) below, of a Principal Shareholder. For the purposes of this
Section, in addition to the Shares which a corporation, person or other
entity beneficially owns directly, (a) any corporation, person or other
entity shall be deemed to be the beneficial owner of any Shares (i) which
it has the right to acquire pursuant to any agreement or upon exercise of
conversion rights or warrants, or otherwise (but excluding share options
granted by the Trust) or (ii) which are beneficially owned, directly or
indirectly (including Shares deemed owned through application of clause (i)
above), by any other corporation, person or entity with which it or its
"affiliate" or "associate" (as defined below) has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting
or disposing of Shares, or which is its "affiliate", or "associate" as
those terms are defined in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934 as in effect on August 1, 1988,
and (b) the outstanding Shares shall include Shares deemed owned through
application of clauses (i) and (ii) above but shall not include any other
Shares which may be issuable pursuant to any agreement, or upon exercise of
conversion rights or warrants, or otherwise.
(c) This Section shall apply to the following transactions:
(i) The merger or consolidation of the Trust or any subsidiary
of the Trust with or into any Principal Shareholder.
(ii) The issuance of any securities of the Trust to any Principal
Shareholder for cash.
(iii) The sale, lease or exchange of all or any substantial
part of the assets of the Trust to any Principal Shareholder (except
assets having an aggregate fair market value of less than $1,000,000,
aggregating for the purpose of such computation all assets sold,
leased or exchanged in any series of similar transactions within a
twelve-month period).
(iv) The sale, lease or exchange to the Trust or any subsidiary
thereof, in exchange for securities of the Trust of any assets of any
Principal Shareholder (except assets having an aggregate fair market
value of less than $1,000,000, aggregating for the purposes of such
computation all assets sold, leased or exchanged in any series of
similar transactions within a twelve-month period).
(d) The provisions of this Section shall not be applicable to
(i) any of the transactions described in paragraph (c) of this Section if
the Board of Trustees of the Trust shall by resolution have approved a
memorandum of understanding with such Principal Shareholder with respect to
and substantially consistent with such transaction, or (ii) any such
transaction with any corporation of which a majority of the outstanding
shares of all classes of stock normally entitled to vote in elections of
directors is owned of record or beneficially by the Trust and its
subsidiaries.
(e) The Board of Trustees shall have the power and duty to
determine for the purposes of this Section on the basis of information
known to the Trust, whether (i) a corporation, person or entity
beneficially owns more than five percent (5%) of the outstanding Shares,
(ii) a corporation, person or entity is an "affiliate" or "associate" (as
defined above) of another, (iii) the assets being acquired or leased to or
by the Trust or any subsidiary thereof, constitute a substantial part of
the assets of the Trust and have an aggregate fair market value of less
than $1,000,000, and (iv) the memorandum of understanding referred to in
paragraph (d) hereof is substantially consistent with the transaction
covered thereby. Any such determination shall be conclusive and binding
for all purposes of this Section.
ARTICLE X
SHAREHOLDERS
Section 10.1 Meetings of Shareholders. An annual meeting of the
Shareholders for the election of Trustees and for the transaction of such
other business as may properly be brought before the meeting shall be held
if the holding of such a meeting is required by law or by the rules of any
exchange on which Shares are listed for trading, in May of each year, or at
such other date, at such place within or without the Commonwealth of
Massachusetts at such time as the Trustees shall designate from time to
time. A Special Meeting of Shareholders may be called at any time by a
majority of the Trustees and shall be called by any Trustee for any proper
purpose upon written request of Shareholders of the Trust holding in the
aggregate: with respect to matters not requiring voting by the Common
Shareholders and Preferred Shareholders as separate classes, not less than
51% of the outstanding Common Shares and Preferred Shares voting as single
class, such request specifying the purpose or purposes for which such
meeting is to be called; with respect to matters requiring voting by the
Common Shareholders and Preferred Shareholders as separate classes, not
less than 51% of the outstanding Common Shares and not less than 51% of the
outstanding Preferred Shares, unless some other percentage for the
Preferred Shares is set forth in the designation pursuant to Section 6.1
hereof, voting as separate classes, such request specifying the purpose or
purposes for which such meeting is to be called; or, in the case of a
meeting for the purpose of voting on the question of removal of any Trustee
or Trustees, upon written request of the class of Shareholders entitled to
vote on the removal of such Trustee or Trustees holding in the aggregate
not less than 10% of the outstanding Shares of such class; or, in the case
of a meeting for the purpose of voting on the question of removal of the
independent public accountants of the Trust, upon written request of Common
Shareholders and Preferred Shareholders voting as a single class, holding
in the aggregate not less than 10% of the outstanding Common Shares and
Preferred Shares. Any Special Meeting shall be held within or without the
Commonwealth of Massachusetts on such day and at such time as the Trustees
shall designate.
Section 10.2 Voting. Shareholders shall have no power to vote on
any matter except matters on which a vote of Shareholders is required by
applicable law, this Declaration or resolution of the Trustees. There
shall be no cumulative voting in the election or removal of Trustees.
Section 10.3 Notice of Meeting and Record Date. Notice of all
meetings of Shareholders, stating time, place and purposes of the meeting,
shall be given by the Trustees by mail to each Shareholder of record
entitled to vote thereat at 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. For the
purposes of determining the Shareholders who are entitled to notice of and
to vote at any meeting the Trustees may, without closing the transfer
books, fix a date not more than 60 days prior to the date of such meeting
of Shareholders as a record date for the determination of the Persons to be
treated as Shareholders of record for such purposes.
Section 10.4 Quorum and Required Vote. The holders of a majority of
outstanding Shares of each class or series or combined class entitled to
vote thereat of the Trust present in person or by proxy shall constitute a
quorum at any meeting of the Shareholders for purposes of conducting
business on which a vote of Shareholders of the Trust is being taken.
Subject to any provision of applicable law, this Declaration or resolution
of the Trustees specifying a greater or lesser vote requirement for the
transaction of any item of business at any meeting of Shareholders, the
affirmative vote of a majority of the Shares of any class or series present
in person or represented by proxy and entitled to vote on the subject
matter shall be the act of the Shareholders of such class or series with
respect to such matter.
Section 10.5 Proxies, etc. At any meeting of Shareholders, any
holder of Shares entitled to vote thereat may vote by properly executed
proxy, provided that no proxy shall be voted at any meeting unless it shall
have been placed on file with the Secretary, or with such other officer or
agent of the Trust as the Secretary may direct, for verification prior to
the time at which such vote shall be taken. Pursuant to a resolution of a
majority of the Trustees, proxies may be solicited in the name of one or
more Trustees or one or more of the officers or employees of the Trust.
Only Shareholders of record shall be entitled to vote. Each full Share
shall be entitled to one vote and fractional Shares shall be entitled to a
vote of such fractions. When any Share is held jointly by several persons,
any one of them may vote at any meeting in person or by proxy in respect of
such Share, but if more than one of them shall be present at such meeting
in person or by proxy, and such joint owners or their proxies so present
disagree as to any vote to be cast, such vote shall not be received in
respect of such Share. A proxy purporting to be executed by or on behalf
of a Shareholder shall be deemed valid unless challenged at or prior to its
exercise, and the burden of proving invalidity shall rest on the
challenger. If the holder of any such Share is a minor or a person of
unsound mind, and subject to guardianship or to the legal control of any
other person as regards the charge or management of such Share, he may vote
by his guardian or such other person appointed or having such control, and
such vote may be given in person or by proxy.
Section 10.6 Reports. The Trustees shall cause to be prepared at
least annually and more frequently to the extent required by law 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. The Trustees shall, in addition, furnish to the Shareholders at least
semi-annually to the extent required by law, interim reports containing an
unaudited balance sheet 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.
Section 10.7 Inspection of Records. The records of the Trust shall
be open to inspection by Shareholders to the same extent as is permitted
shareholders of a Massachusetts business corporation.
Section 10.8 Shareholder Action by Written Consent. Any action
which may be taken by Shareholders by vote may be taken without a meeting
if the holders entitled to vote thereon of the proportion of Shares of the
class or classes required for approval of such action at a meeting of
Shareholders pursuant to Section 10.4 consent to the action in writing and
the written consents be filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as a vote
taken at a meeting of Shareholders.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Filing. This Declaration and any amendment hereto
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 stating that such action
was duly taken in a manner provided herein, and unless such amendment or
such certificate sets forth some later time for the effectiveness of such
amendment, such amendment shall be effective upon its filing. A restated
Declaration, integrating into a single instrument all of the provisions of
the Declaration which are then in effect and operative, 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.
Section 11.2 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 Commonwealth.
Section 11.3 Counterparts. This Declaration may be simultaneously
executed by 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.
Section 11.4 Reliance by Third Parties. Any certificate executed by
an individual who, according to the records of the Trust appears to be a
Trustee hereunder, certifying: (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.
Section 11.5 Provisions in Conflict with Law or Regulations.
(a) The provisions of the 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 of 1986, or any amendments
or successor statute thereto, or with other applicable laws and
regulations, the conflicting provision shall be deemed not to constitute
and never to have constituted a part of the Declaration; provided, however,
that such determination shall not affect any of the remaining provisions of
the Declaration or render invalid or improper any action taken or omitted
prior to such determination.
(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability
shall apply 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 the Declaration in any jurisdiction.
Section 11.6 Use of the Name "BlackRock". BlackRock Financial
Management L.P. ("BlackRock") has consented to the use by the Trust of the
identifying word or name "BlackRock" in the name of the Trust. Such
consent is conditioned upon the employment of BlackRock its successors or
any affiliate thereof, as investment advisor or distributor of the Trust.
As between the Trust and itself, BlackRock controls the use of the name of
the Trust insofar as such name contains "BlackRock". The name or
identifying word "BlackRock" may be used from time to time in other
connections and for other purposes by BlackRock or affiliated entities.
BlackRock may re quire the Trust to cease using "BlackRock" in the name of
the Trust if the Trust ceases to employ, for any reason, BlackRock, an
affiliate, or any successor as investment advisor or distributor of the
Trust.
IN WITNESS WHEREOF, the undersigned has caused these presents
to be executed as of the day and year first above written.
/s/ Henry Gabbay
--------------------------
Henry Gabbay
being the only member of the
Board of Trustees of the Trust.
State of New York )
) ss
County of New York )
Then personally appeared before me Henry Gabbay who acknowledged the
foregoing instrument to be his free act and deed and the free act and deed
of the sole Trustee of The BlackRock Florida Insured Municipal 2008 Term
Trust.
Before me,
/s/ Alec Chang
-------------------------
Notary Public
ALEC CHANG
Notary Public, State of New York
No. 31-[__________]
Qualified in New York County
My Commission Expires: Dec. 30, 1993
THE COMMONWEALTH OF MASSACHUSETTS
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION ESTABLISHING
PREFERRED SHARES
I, Karen H. Sabath, Assistant Secretary, of The BlackRock Florida
Insured Municipal 2008 Term Trust (the "Trust'') located at 800 Scudders
Mill Road, Plainsboro, New Jersey 08536, do hereby certify that the
following designation establishing and designating preferred shares of
beneficial interest and determining the relative rights and preferences
thereof was duly adopted by the Trustees of the Trust at a duly convened
meeting held on September 3, 1992 and by the Executive Committee by
unanimous consent on November 16, 1992:
FIRST: Pursuant to authority expressly vested in the Board of
Trustees of the Trust in the Trust's Declaration of Trust, the Board of
Trustees has authorized 2,640 unissued shares of beneficial interest with
preference rights of the Trust as a single series of 2,640 preferred shares
of beneficial interest, par value $.01 per share, liquidation preference
$25,000 per share plus an amount equal to accumulated but unpaid dividends
(whether or not earned or declared) thereon plus the premium, if any,
resulting from the designation of a Premium Call Period, is hereby
designated ''Auction Rate Municipal Preferred Shares of Beneficial
Interest, Series R7". Each share of Auction Rate Municipal Preferred
Shares of Beneficial Interest, Series R7 shall be issued on November 23,
1992; have an Initial Dividend Rate of 2.50% per annum and the Initial
Dividend Payment Date shall be December 4, 1992; and have such other
preferences, limitations and relative voting rights, in addition to those
required by applicable law or set forth in the Trust's Declaration of Trust
applicable to preferred shares of beneficial interest of the Trust, as are
set forth in this Certificate of Designation. The Auction Rate Municipal
Preferred Shares of Beneficial Interest, Series R7 shall constitute a
separate series of preferred shares of beneficial interest of the Trust,
and each share of Auction Rate Municipal Preferred Shares of Beneficial
Interest, Series R7 shall be identical.
SECOND: The Board of Trustees and the Executive Committee of the
Board of Trustees of the Trust, acting in accordance with Massachusetts
General Laws, have fixed the preferences, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption, of the preferred shares of beneficial interest as follows:
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" for any period less than 183
days as of any date means (i) the Interest Equivalent of the rate on
commercial paper for such period placed on behalf of issuers whose
corporate bonds are rated "AA" by S&P, or the equivalent of such rating by
S&P or another nationally recognized statistical rating organization, as
the rate for such period is made available on a discount basis or otherwise
by the Federal Reserve Bank of New York for the Business Day immediately
preceding such date, or (ii) in the event that the Federal Reserve Bank of
New York does not make available such a rate, then the arithmetic average
of the Interest Equivalent of the rate on commercial paper for such period
placed on behalf of such issuers, as quoted to the Auction Agent on a
discount basis or otherwise by the Commercial Paper Dealers for the close
of business on the Business Day immediately preceding such date. If a
Commercial Paper Dealer does not quote a rate required to determine the
"AA" Composite Commercial Paper Rate for such period, the "AA" Composite
Commercial Paper Rate for such period will be determined on the basis of
the quotation or quotations furnished by any Substitute Commercial Paper
Dealer or Substitute Commercial Paper Dealers selected by the Trust to
provide such rate or rates not being supplied by the Commercial Paper
Dealer.
"Accountant's Confirmation" has the meaning set forth in paragraph
7(c) of 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, BlackRock Financial
Management L.P., formerly Blackstone Financial Management L.P., and any
successor thereto.
"Affiliate" shall mean any Person, known to the Auction Agent to be
controlled by, in control of, or under common control with, the Trust.
"Agent Member" means a member of the Securities Depository that will
act on behalf of an Existing Holder of one or more Preferred Shares or a
Potential Holder.
"Anticipation Notes'' means the following New York Municipal
Obligations: tax anticipation notes, revenue anticipation notes and tax
and revenue anticipation notes.
"Applicable Percentage" has the meaning set forth in paragraph
11(a)(vi) of this Certificate of Designation.
"Applicable Rate" means (i) for purposes of the Auction Procedures,
the rate per annum or, in connection with any Auction in which Bid
Requirements are imposed by the Trust, the method by which one or more such
rates may be determined, at which cash dividends are payable (if declared)
on the Preferred Shares or Other Preferred Shares, as the case may be, for
any Dividend Period and any Dividend Payment Period included therein and
(ii) for purposes of determining the amount of cash dividends payable (if
declared) at any Dividend Payment Date, the rate per annum (including in
the case of any Applicable Rate expressed as a Spread the rate per annum
determined by periodic application of such Spread to the applicable
Reference Index or Reference Security at the frequency and weighting, if
any, specified in the related Bid Requirements, subject to any Maximum
Applicable Rate or Minimum Applicable Rate applicable to such Dividend
Payment Period) at which cash dividends are payable (if declared) on the
Preferred Shares, and includes, to the extent provided by paragraph 2(c)(i)
of this Certificate of Designation, any late charge provided for by such
paragraph.
"Auction" means a periodic operation of the Auction Procedures.
"Auction Agent" means Bankers 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 Trustees to follow the
Auction Procedures for the purpose of determining the Applicable Rate and
to act as transfer agent, registrar, dividend disbursing agent and
redemption agent for the Preferred Shares and other Preferred Shares.
"Auction Procedures" means the procedures for conducting Auctions set
forth in paragraph 11 of this Certificate of Designation.
"Bid Requirements" means (i) any requirement for a Special Dividend
Period longer than 91 days that Bids by Potential Holders shall be
expressed as a Spread below, at or above the rate of a specified Reference
Index or Reference Security, (ii) the Reference Index or Reference
Security, the most recently announced rate thereof and the frequency with
which the rate of Reference Index or the Reference Security, as the case
may be, shall be recalculated for purposes of determining rates expressed
as Spreads thereon in accordance with this Certificate of Designation,
which frequency shall be the same as the frequency with which the person
maintaining the Reference Index being utilized recalculates such Reference
Index, or the same as the frequency with which the interest rate on the
Reference Security being utilized changes or such other frequency as the
Trust shall specify (which specification may include a formula specified by
the Trust indicating the weighting to be given to each recalculation of the
Reference Index or change in the rate of the Reference Security during a
specified period), (iii) the frequency of Dividend Payment Dates during
such Special Dividend Period (which shall not be more often than the
frequency specified pursuant to clause (ii) above), (iv) one or more
Minimum Applicable Rate or Rates (the Indicated Minimum Applicable Rate or
Rates in the case of Bid Requirements set forth in a Request for Special
Dividend Period) and/or (v) one or more Special Dividend Period Reference
Rate or Rates and the Maximum Applicable Rate or Rates (the Indicated
Maximum Applicable Rate or Rates in the case of Bid Requirements set forth
in a Request for Special Dividend Period) derivable from such Special
Dividend Period Reference Rate or Rates, in each case as set forth in the
Notice of Special Dividend Period for such Special Dividend Period.
"Broker-Dealer" shall mean any broker-dealer, or other entity
permitted by law to perform the functions required of a Broker-Dealer in
paragraph 11 of 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.
"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.
"Closing Transaction" means the termination of a futures contract or
option position by taking a position opposite thereto.
"Code'' means the Internal Revenue Code of 1986, as amended.
"Commercial Paper Dealers'' means Merrill Lynch, Pierce, Fenner &
Smith Incorporated and such other commercial paper dealer or dealers as the
Trust may from time to time appoint, or, in lieu of any thereof, their
respective affiliates or successors.
"Common Shares of Beneficial Interest" means the common shares of
beneficial interest, par value $.01 per share, of the Trust.
"Date of Original Issue" means November 23, 1992, with respect to the
Preferred Shares and the date on which the Trust originally issues any
other Preferred Shares with respect to such Other Preferred Shares.
"Declaration of Trust'' means the Declaration of Trust, as amended and
supplemented (including this Certificate of Designation), of the Trust on
file with the Secretary of the Commonwealth of Massachusetts.
"Deposit Securities'' means cash, the book value of Florida Municipal
Obligations sold for which payment is due within five Business Days with
counterparties rated at least Baa by Moody's and before the next Dividend
Payment Date or Valuation Date, as the case may be, and Florida Municipal
Obligations rated at least A-1+ or SP-l+ by S&P, VMIG-1 or MIG-1 by
Moody's.
"Discounted Value'' means (i) with respect to a Moody's Eligible
Asset, the lower of par and the quotient of the Market Value thereof
divided by the applicable Moody's Discount Factor and (ii) with respect to
an S&P Eligible Asset, the quotient of the Market Value thereof divided by
the applicable S&P Discount Factor.
''Dividend Coverage Amount,'' as of any Valuation Date, means (i) the
aggregate amount of cash dividends that will accumulate on all Outstanding
Preferred Shares and Other Preferred Shares, in each case to (but not
including) the next Dividend Payment Date therefor that follows such
Valuation Date (calculated, in the case of cash dividends determined by
application of a Spread to a Reference Index or Reference Security, by
assuming that the Applicable Rate in effect for the immediately preceding
Dividend Payment Period will remain in effect until the next Dividend
Payment Period) plus the aggregate amount of any liabilities of the Trust
that are required to be paid on or prior to the next Dividend Payment Date
less (ii) the combined Market Value of Deposit Securities irrevocably
deposited with the Auction Agent for the payment of cash dividends on all
Preferred Shares and Other Preferred Shares.
"Dividend Coverage Assets," as of any Valuation Date, means, in the
case of Preferred Shares and Other Preferred Shares, Deposit Securities
with maturity or tender payment dates not later in each case than the
Dividend Payment Date therefor that follows such Valuation Date.
"Dividend Payment Date," with respect to Preferred Shares, has the
meaning set forth in paragraph 2(b)(i) of this Certificate of Designation
and, with respect to Other Preferred Shares, has the equivalent meaning.
"Dividend Payment Period" means the Initial Dividend Period and any
Subsequent Dividend Payment Period.
"Dividend Period" means the Initial Dividend Period, any 7-day
Dividend Period (in the case of Series R7 Preferred Shares) and any Special
Dividend Period.
"Existing Holder" means a Person who is listed as the holder of record
of Preferred Shares in the Share Books.
"Florida Municipal Obligations" means debt 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,
Florida State and local income tax.
"Holder" means a Person identified as a holder of record of Preferred
Shares in the Share Register.
''Independent Accountant" means a nationally recognized accountant, or
firm of accountants, that is, with respect to the Trust, an independent
public accountant or firm of independent public accountants under the
Securities Act of 1933, as amended.
"Indicated Maximum Applicable Rate'' means the Maximum Applicable Rate
that would apply if the Auction with respect to which it is specified were
conducted on the date of the Request for Special Dividend Period in which
such Indicated Maximum Applicable Rate is specified.
"Indicated Minimum Applicable Rate" means the Minimum Applicable Rate
that would apply if the Auction with respect to which it is specified were
conducted on the date of the Request for Special Dividend Period in which
such Indicated Minimum Applicable Rate is specified.
"Initial Dividend Payment Date" means the Initial Dividend Payment
Date specified herein with respect to the Preferred Shares or Other
Preferred Shares, as the case may be.
"Initial Dividend Period," with respect to Preferred Shares, has the
meaning set forth in paragraph 2(c)(i) of this Certificate of Designation
and, with respect to Other Preferred Shares, has the equivalent meaning.
"Initial Dividend Rate,'' with respect to the Preferred Shares, means
the rate per annum applicable to the Initial Dividend Period for the
Preferred Shares and, with respect to Other Preferred Shares, has the
equivalent meaning.
"Initial Margin" means the amount of cash or securities deposited with
a broker as a margin payment at the time of purchase or sale of a futures
contract.
''Interest Equivalent" means a yield on a 360-day basis of a discount
basis security which is equal to the yield on an equivalent interest-
bearing security.
"Mandatory Redemption Price'' means $25,000 per share of Preferred
Shares plus an amount equal to accumulated but unpaid dividends (whether or
not earned or declared) to the date fixed for redemption plus the premium,
if any, resulting from the designation of a Premium Call Period.
''Market Value'' of any asset of the 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 lower of the quoted bid price or the mean
between the quoted bid and ask price or the yield equivalent when
quotations are not readily available. Securities for which quotations are
not readily available shall be valued at fair value as determined by the
Pricing Service using methods which include consideration of: yields or
prices of municipal obligations of comparable quality, type of issue,
coupon, maturity and rating; indications as to value from dealers; and
general market conditions. The Pricing Service may employ electronic data
processing techniques and/or a matrix system to determine valuations. If
the Pricing Service fails to provide the Market Value of any Florida
Municipal Obligation, such Florida Municipal Obligation shall be valued at
the lower of two bid quotations (one of which shall be in writing) obtained
by the Trust from two dealers who are members of the National Association
of Securities Dealers, Inc. and are making a market in such Florida
Municipal Obligation. Futures contracts and options are valued at closing
prices for such instruments established by the exchange or board of trade
on which they are traded, or if market quotations are not readily
available, are valued at fair value as determined by the Pricing Service or
if the Pricing Service is not able to value such instruments they shall be
valued at fair value on a consistent basis using methods determined in good
faith by the Board of Trustees.
"Maximum Applicable Rate," for any Dividend Payment Period with
respect to Preferred Shares, has the meaning set forth in paragraph
11(a)(vi) of this Certificate of Designation and, with respect to Other
Preferred Shares, has the equivalent meaning.
''Maximum Marginal Tax Rate" means the maximum marginal regular
Federal individual income tax rate applicable to ordinary income or the
maximum marginal regular Federal corporate income tax rate, whichever is
greater.
''Maximum Potential Additional Dividend Liability," as of any
Valuation Date, means the aggregate amount of Additional Dividends that
would be due if the Trust were to make Retroactive Taxable Allocations,
with respect to any fiscal year, estimated based upon dividends paid and
the amount of undistributed realized net capital gains and other taxable
income earned by the Trust, as of the end of the calendar month immediately
preceding such Valuation Date and assuming such Additional Dividends are
fully taxable.
"Minimum Applicable Rate,'' for any Dividend Payment Period with
respect to Preferred Shares, has the meaning set forth in paragraph
11(a)(vii) of this Certificate of Designation and, with respect to Other
Preferred Shares, has the equivalent meaning.
"Minimum Liquidity Level" means, as of any Valuation Date, an
aggregate Market Value of the 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 Moody's Eligible Asset which is a Florida Municipal
Obligation or Other Municipal Obligation, the percentage determined by
reference to (i) (A) the rating by Moody's or S&P on such asset or (B) in
the event the Florida Municipal Obligation or Other Municipal Obligation,
is insured under an insurance policy which guarantees the timely payment of
interest on such Florida Municipal Obligation or Other Municipal Obligation
and principal thereof to maturity, the Moody's insurance claims-paying
ability rating of the issuer of the insurance policy (provided that for
purposes of clause (B) if the insurance claims-paying ability of an issuer
of an insurance policy is not rated by Moody's but is rated by S&P, such
issuer shall be deemed to have a Moody's insurance claims-paying ability
rating which is one full category lower than the S&P insurance claims-
paying ability rating) and (ii) the shortest Moody's Collateral Period set
forth opposite such rating that is the same length as or is longer than the
Moody's Exposure Period in accordance with the table set forth below:
Rating Category
--------------------------------------------
MOODY'S COLLATERAL PERIOD Aaa* Aa* A* Baa* Other**
- -------------------------------- ----- ----- ----- ----- -------
7 weeks or less . . . . . . . . 151% 159% 168% 202% 229%
8 weeks or less but greater
than seven weeks . . . . . . . 154 164 173 205 235
9 weeks or less but greater
than eight weeks . . . . . . . 158 169 179 209 242
___________________
* Moody' s rating.
** Florida Municipal Obligations and Other Municipal Obligations not
rated by Moody's but rated BBB or BBB+ by S&P.
;provided, however, in the event a Moody's Discount Factor applicable to a
Florida Municipal Obligation or Other Municipal Obligation is determined by
reference to an insurance claims-paying ability rating in accordance with
clause (i)(B), such Moody's Discount Factor shall be increased by an amount
equal to 50% of the difference between (a) the percentage set forth in the
foregoing table under the applicable rating category and (b) the percentage
set forth in the foregoing table under the rating category which is one
category lower than the applicable rating category. If a Florida Municipal
Obligation or Other Municipal Obligation is covered by a Portfolio
Insurance policy which provides the Trust with an option to obtain
Permanent Insurance with respect to such Florida Municipal Obligation or
Other Municipal Obligation and such Portfolio Insurance policy has been
approved in writing by Moody's, the Moody's Discount Factor rating category
shall be determined by averaging the insurance claims paying ability rating
of the Portfolio Insurance provider and the next lowest rating category.
Notwithstanding the foregoing, (i) the Moody's Discount Factor for
short-term Florida Municipal Obligations and Other Municipal Obligations
will be 115% so long as such Florida Municipal Obligations and Other
Municipal Obligations are rated at least MIG-1, VMIG-1 or P-1 by Moody's or
125% if such Florida Municipal Obligations and Other Municipal Obligations
are not rated by Moody's but are rated A-l+ or SP-1+ or AA by S&P and
mature or have a demand feature at par exercisable in 30 days or less, and
(ii) no Moody's Discount Factor will be applied to cash or to Municipal
Receivables (except to the extent provided in the definition thereof).
"Moody's Eligible Asset" means cash, a Municipal Receivable or a
Florida Municipal Obligation or Other Municipal Obligation that (i) pays
interest in cash, (ii) is publicly rated Baa or higher by Moody's or, if
not rated by Moody's but rated by S&P, is rated at least BBB by S&P
(provided that, for purposes of determining the Moody's Discount Factor
applicable to any such S&P-rated Florida Municipal Obligation or other
Municipal Obligation, such Florida Municipal Obligation or Other Municipal
Obligation (excluding any short-term Florida Municipal Obligation or Other
Municipal Obligation) will be deemed to have a Moody's rating which is one
full rating category lower than its S&P rating), (iii) does not have its
Moody's rating suspended by Moody's and (iv) is part of an issue of Florida
Municipal Obligations and Other Municipal Obligations of at least
$10,000,000. In addition, Florida Municipal Obligations and Other
Municipal Obligations in the Trust's portfolio must be within the following
diversification requirements in order to be included within Moody's
Eligible Assets:
<TABLE>
<CAPTION>
Maximum Maximum Maximum Maximum
Minimum Underlying Issue Type County State
Issue Size Obligor Concentration Concentration Concentration
Rating ($ Millions) (%)(1) (%) (1)(3)(6) (%) (1)(4)(6) (%) (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
__________________
(1) The reference percentages represent maximum cumulative totals for
the related rated category and each lower rating category.
(2) Florida Municipal Obligations and Other Municipal Obligations not
rated by Moody's but rated BBB or BBB+ by S&P.
(3) Does not apply to general obligation bonds.
(4) Applicable to general obligation bonds only.
(5) Does not apply to Florida Municipal Obligations.
(6) Does not apply to Other Municipal Obligations.
</TABLE>
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 Obligations and Other
Municipal Obligations will be classified within one of the following
categories: health care issues (teaching and non-teaching hospitals,
public and private), housing issues (single- and multi-family), educational
facilities issues (public and private schools), student loan issues,
resource recovery issues, transportation issues (mass transit, airport and
highway bonds), industrial revenue/pollution control bond issues, utility
issues (including water, sewer and electricity), general obligation issues,
lease obligations/certificates of participation, escrowed bonds and other
issues ("Other Issues") not falling within one of the aforementioned
categories (includes special obligations to crossover, excise and sales tax
revenue, recreation revenue, special assessment and telephone revenue
bonds). In no event shall (a) more than 10% of Moody's Eligible Assets
consist of student loan issues, (b) more than 10% of Moody's Eligible
Assets consist of resource recovery issues or (c) more than 10% of Moody's
Eligible Assets consist of Other Issues. When the Trust sells a Florida
Municipal Obligation or Other Municipal Obligation and agrees to repurchase
it at a future date, the Trust must count as a liability for the purposes
of the Preferred Shares Basic Maintenance Amount the amount of the
repurchase price of such Florida Municipal Obligation or Other Municipal
Obligation and such Florida Municipal Obligation or Other Municipal
Obligation is considered a Moody's Eligible Asset to the extent it
satisfies Moody's current guidelines. When the Trust buys a Florida
Municipal Obligation or Other Municipal Obligation and agrees to sell it to
another party at a future date and the long-term debt of such other party
is rated at least A2 and the transaction has a term of 30 days or less, the
cash to be received by the Trust will be counted as a Moody's Eligible
Asset; otherwise such Florida Municipal Obligation or Other Municipal
Obligation will be counted as a Moody's Eligible Asset to the extent it
satisfies Moody's current guidelines.
Notwithstanding the foregoing, an asset will not be considered a
Moody's Eligible Asset if it is held in a margin account or if it is
subject to any material lien, mortgage, pledge, security interest or
security agreement of any kind, except for (i) Liens to secure payment for
services rendered or cash advanced to the Trust by the Adviser, the
custodian of the Trust's assets, the Auction Agent or any Broker-Dealers
and (ii) any Lien by virtue of a repurchase agreement. In addition, an
asset irrevocably deposited for the payment of any of the items set forth
in clauses (i) A through F of the Preferred Shares Basic Maintenance Amount
will not be considered Moody's Eligible Assets.
For purposes of the definition of Moody's Eligible Asset, references
to the S&P rating BBB shall be deemed to include the S&P ratings BBB and
BBB+.
"Moody's Exposure Period'' means a period that is the same length or
longer than the number of days used in calculating the cash dividend
component of the Preferred Shares Basic Maintenance Amount and shall
initially be the period commencing on a given Valuation Date and ending 48
days thereafter.
"Moody's Hedging Transaction" means the selling of an exchange traded
futures contract based on the Municipal Index or Treasury Bonds or the
purchase of an exchange traded put option on such a futures contract or the
writing of an exchange traded call option on such a futures contract.
"Moody's Volatility Factor'' means 100% during any Dividend Period of
greater than 49 days until 49 days prior to the last day of such Dividend
Period; otherwise, "Moody's Volatility Factor" means 272% except during
that time period where legislation increasing the federal income tax rate
has been enacted into law and such increase has not yet taken effect, in
which case for such time period Moody's Volatility Factor shall be
determined by reference to the increase in the Maximum Marginal Tax Rate as
follows: for increases of up to 5%, 292%; for increases greater than 5%
and up to 10%, 313%; for increases greater than 10% and up to 15%, 338%;
for increases greater than 15% and up to 20%, 364%; for increases greater
than 20% and up to 25%, 396%; for increases greater than 25% and up to 30%,
432%; for increases greater than 30% and up to 35%, 472%; for increases
greater than 35% and up to 40%, 520%.
"Municipal Index" means The Bond Buyer Municipal Bond Index.
"Municipal Receivables" means no more than the aggregate of the
following: (i) the book value of receivables for Florida Municipal
Obligations sold as of or prior to a relevant Valuation Date if such
receivables are due within five Business Days of such Valuation Date, and
if the trades which generated such receivables are (A) settled through
clearing house firms with respect to which the Trust has received prior
written authorization from Moody's or (B) with counterparties having a
Moody's long-term debt rating of at least Baa3; and (ii) the Moody's
Discounted Value of Florida Municipal Obligations sold as of or prior to
such Valuation Rate which generated receivables, if such receivables are
due within five Business Days of such Valuation Date but do not comply with
either of conditions (A) or (B) of the preceding clause (i).
"1940 Act" means the Investment Company Act of 1940, as amended from
time to time.
"1940 Act Preferred Shares Asset Coverage'' means asset coverage, as
defined in section 18(h) of the 1940 Act , of at least 200% with respect to
all outstanding senior securities of the Trust which are shares of
beneficial interest, including all outstanding Preferred Shares and Other
Preferred Shares (or such other asset coverage as may in the future be
specified in or under the 1940 Act as the minimum asset coverage for senior
securities which are stock of a closed-end investment company as a
condition of paying dividends on its common shares of beneficial interest).
"1940 Act Cure Date,'' with respect to the failure by the Trust to
maintain the 1940 Act Preferred Shares 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 "Specific Redemption
Provisions'' below.
"Non-Payment Period," with respect to each series of Preferred Shares,
means any period commencing on and including the day on which the 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 Business Day preceding such
Dividend Payment Date, the full amount of any dividend on Preferred Shares
payable on such Dividend Payment Date or (ii) deposit, irrevocably in
trust, in same-day funds, with the Auction Agent by 12:00 noon, New York
City time, (A) on such Dividend Payment Date the full amount of any cash
dividend on such shares payable (if declared) on such Dividend Payment Date
or (B) on any redemption date for any Preferred Shares called for
redemption, the Mandatory Redemption Price per share of such Preferred
Shares or, in the case of an optional redemption, the Optional Redemption
Price per share, and ending on and including the Business Day on which, by
12:00 noon, New York City Time, all unpaid cash dividends and unpaid
redemption prices shall have been so deposited or shall have otherwise been
made available to Holders in same-day funds; provided that, Non-Payment
Period shall not end unless the Trust shall have given at least five days,
but no more than 30 days written notice of such deposit or availability to
the Auction Agent, all Existing Holders (at their addresses appearing in
the Share Books) and the Securities Depository. Notwithstanding the
foregoing, the failure by the Trust to deposit the funds provided for by
clauses (ii)(A) and (ii)(B) above within three Business Days after a
Dividend Payment Date or any Redemption Date, as the case may be, in each
case to the extent contemplated by paragraph 2(c)(i) of this Certificate of
Designation, shall not constitute a ''Non-Payment Period".
"Non-Payment Period Rate" means, initially, 250% of the 30-day ''AA"
Composite Commercial Paper Rate (or 300% of such rate if the 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 Preferred Shares). Such percentages will be used to
calculate the Applicable Rate for any Non-Payment Period which occurs
during a Special Dividend Period on either series of Preferred Shares and
will be applied to the applicable Special Dividend Period Reference Rate
then in effect with respect to such series. However, the Board of Trustees
of the Trust shall have the authority to adjust, modify, alter or change
from time to time the initial Non-Payment Period Rate if the Board of
Trustees of the Trust determines and Moody's and S&P (and any Substitute
Rating Agency in lieu of Moody's or S&P in the event either of such parties
shall not rate the Preferred Shares) advise the Trust in writing that such
adjustment, modification, alteration or change will not adversely affect
their then-current ratings on the Preferred Shares.
"Normal Dividend Payment Date" has the meaning set forth in paragraph
2(b)(i) of this Certificate of Designation.
"Notice of Redemption" means any notice with respect to the redemption
of Preferred Shares 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 $25,000 per share plus an
amount equal to accumulated but unpaid dividends (whether or not earned or
declared) to the date fixed for redemption plus the premium, if any,
resulting from the designation of a Premium Call Period.
"Original Issue Insurance" means insurance guaranteeing the timely
payment of principal of, and interest on, a Florida Municipal Obligation
purchased by the issuer of a Florida Municipal Obligation or by a third
party at the time of issuance of such Florida Municipal Obligation, as the
case may be.
"Other Municipal Obligations'' means long-term obligations issued by
or on behalf of states, territories or possessions of the United States,
political subdivisions of the foregoing, or agencies and instrumentalities
paying interest which, in the opinion of the bond counsel to the issuer, is
exempt from Federal but not Florida State and local income tax.
''Other Preferred Shares'' means the Auction Rate Municipal Preferred
Shares of Beneficial Interest of the Trust, other than the Preferred
Shares.
"Outstanding" means, as of any date (i) with respect to Preferred
Shares, Preferred Shares theretofore issued by the Trust except, without
duplication, (A) any Preferred Shares 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
Preferred Shares as to which the Trust or any Affiliate thereof shall be an
Existing Holder and (ii) with respect to shares of Other Preferred Shares
of Beneficial Interest, has the equivalent meaning.
"Parity Shares of Beneficial Interest" means the Preferred Shares and
each other outstanding series of Preferred Shares of Beneficial Interest
the holders of which, together with the holders of the Preferred Shares,
shall be entitled to the receipt of dividends or of amounts distributable
upon liquidation, dissolution or winding up, as the case may be, in
proportion to the full respective preferential amounts to which they are
entitled, without preference or priority one over the other.
"Permanent Insurance" means insurance guaranteeing the timely payment
of principal of, and interest on, a Municipal Obligation purchased by the
Trust upon payment of a single, predetermined insurance premium pursuant to
an irrevocable commitment of the issuer of Portfolio Insurance covering
such Municipal Obligation.
"Person" shall mean and include an individual, a partnership a
corporation, a trust, an unincorporated association, a joint venture or
other entity or a government or any agency or political subdivision
thereof.
"Portfolio Insurance'' means insurance guaranteeing the timely payment
of principal of, and interest on, a covered Florida Municipal Obligation
only while such Florida Municipal Obligation is owned by the Trust.
"Potential Holder'' shall mean any Person, including any Existing
Holder, who may be interested in acquiring Preferred Shares (or, in the
case of at Existing Holder, additional Preferred Shares).
"Preferred Shares" means Auction Rate Municipal Preferred Shares of
Beneficial Interest, Series R7.
"Preferred Shares Basic Maintenance Amount'' as of any Valuation Date,
means the dollar amount equal to (i) the sum of (A) the product of the
number of Preferred Shares and Other Preferred Shares outstanding on such
Valuation Date multiplied by $25,000 plus the premium, if any, resulting
from the designation of a Premium Call Period; (B) the aggregate amount of
cash dividends that will have accumulated (whether or not earned or
declared) for each share of Preferred Shares and Other Preferred Shares
outstanding, in each case, to (but not including) the next Dividend Payment
Date therefor that follows such Valuation Date (calculated, in the case of
cash dividends determined by application of a Spread to a Reference Index
or Reference Security, by assuming that the Applicable Rate in effect for
the immediately preceding Dividend Payment Period will remain in effect
until the next Dividend Payment Period); (C) the aggregate amount of cash
dividends that would accumulate at the then current Maximum Applicable Rate
(assuming notification has been given to the Auction Agent that net capital
gains or other taxable income will be included in the relevant dividend as
contemplated pursuant to paragraphs 2(f) and 11(a)(vi) of this Certificate
of Designation) on any Preferred Shares and Other Preferred Shares
outstanding from such Dividend Payment Date through the 48th day after such
Valuation Date, multiplied by the larger of the Moody's Volatility Factor
and the S&P Volatility Factor determined from time to time by Moody's and
S&P respectively (except that if such Valuation Date occurs during a Non-
Payment Period, the cash dividend for purposes of calculation would
accumulate at the then current Non-Payment Period Rate); (D) the amount of
anticipated expenses of the 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, payables for Florida Municipal Obligations purchased as of
such Valuation Date) less (ii) the lesser of (A) either the Discounted
Value of the Trust's assets irrevocably deposited by the Trust for the
payment of any of (i)(A) through (i)(F) or the face value of such
irrevocably deposited assets that mature prior to the payment date of the
liabilities for which they are being deposited and are either fully
guaranteed by the U.S. government or have a rating of either P-1, VMIG-1 or
MIG-1 by Moody's or A-1+ and SP-1+ by S&P, and (B) the Market Value of any
of the Trust's assets irrevocably deposited by the Trust for the payment of
any of (i)(A) through (i)(F).
For purposes of determining as of any Valuation Date whether the Trust
has Moody's Eligible Assets and S&P Eligible Assets each with an aggregate
Discounted Value at least equal to the Preferred Shares Basic Maintenance
Amount, the Trust shall include as a liability in the calculation of the
Preferred Shares Basic Maintenance Amount an amount calculated semi-
annually equal to 150% of the estimated cost of obtaining Permanent
Insurance with respect to Moody's Eligible Assets or S&P Eligible Assets,
as applicable, that are (i) covered by Portfolio Insurance policies which
provide the Trust with the option to obtain such Permanent Insurance and
(ii) are discounted by a Moody's Discount Factor or S&P Discount Factor, as
applicable, determined by reference to the insurance claims-paying ability
rating of the issuer of such Portfolio Insurance policy.
"Preferred Shares Basic Maintenance Cure Date," with respect to the
failure by the Trust to satisfy the Preferred Shares Basic Maintenance
Amount (as required by paragraph 7(a) of this Certificate of Designation)
as of a given Valuation Date, means the fifth Business Day following such
Valuation Date.
"Preferred Shares Basic Maintenance Report'' means a report signed by
the President, Treasurer, or Vice President of the 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
Preferred Shares Basic Maintenance Amount.
"Preferred Shares of Beneficial Interest" means the preferred shares
of beneficial interest of the Trust, and includes Preferred Shares and
Other Preferred Shares.
''Premium Call Period" has the meaning set forth under ''Specific
Redemption Provisions'' below.
''Pricing Service'' shall mean J.J. Kenny Co., Inc. or any pricing
service designated by the Board of Trustees of the Trust provided the Trust
obtains written assurance from S&P that such designation will not impair
the rating then assigned by S&P to the Preferred Shares.
"Quarterly Valuation Date" means the last Business Day of each fiscal
quarter of the Trust in each fiscal year of the Trust, commencing December
31, 1992.
"Reference Index" shall mean an index of interest rates on Treasury
Securities, Municipal Obligations or high quality commercial paper or
dividend rates on preferred stock of issuers registered as closed-end
management investment companies under the 1940 Act that invest primarily in
Municipal Obligations or any other index or instrument selected and
approved by the Trust's Board of Trustees, after consultation with the
Broker-Dealers, as being an appropriate index or instrument, in each case
expressed as a rate and devised and calculated not less often than monthly
by one or more parties that are not affiliated with the Trust and made
available to the Trust, the Auction Agent, the Broker-Dealers and existing
and potential beneficial owners of the Preferred Shares.
"Reference Rate" means the higher of the 30-day "AA" Composite
Commercial Paper Rate and the Taxable Equivalent of the Short-Term
Municipal Bond Rate, or, in the case of a Special Dividend Period with a
single Applicable Rate throughout such Special Dividend Period, the Special
Dividend Period Reference Rate or, in the case of a Special Dividend Period
with a varying Applicable Rate, the Reference Rate specified in the
definition of S&P Volatility Factor that most closely approximates the
length of the interval between periodic applications of the Spread to the
relevant Reference Index or Reference Security.
"Reference Security" shall mean, in the case of a debt obligation, a
particular debt obligation which is publicly traded, which is non-callable
prior to the termination of the Special Dividend Period with respect to
which such Reference Security is relevant and the outstanding aggregate
principal amount of which at the time of the Notice of Special Dividend
Period exceeds $100 million or, in the case of a preferred stock, a
preferred stock issue which is publicly traded, which is non-redeemable
prior to the termination of the Special Dividend Period with respect to
which such Reference Security is relevant and the outstanding liquidation
value of which at the time of the Notice of Special Dividend Period exceeds
$50 million.
"Request for Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii) of this Certificate of Designation.
"Response" has the meaning set forth in paragraph 2(c)(iii) of this
Certificate of Designation.
"Retroactive Taxable Allocation" has the meaning set forth in
paragraph 2(e) of this Certificate of Designation.
"Right," with respect to Preferred Shares, has the meaning set forth
in paragraph 2(e) of this Certificate of Designation and, with respect to
Other Preferred Shares, has the equivalent meaning.
"Rightholder" has the meaning set forth in paragraph 2(e) of this
Certificate of Designation.
"S&P" means Standard & Poor's Corporation or its successors.
"S&P Discount Factor" means, for purposes of determining the
Discounted Value of any Florida Municipal Obligation which constitutes an
S&P Eligible Asset, the percentage determined by reference to (a)(i) in the
event the Florida Municipal Obligation is covered by a Portfolio Insurance
policy which does not provide the Trust with the option to obtain Permanent
Insurance with respect to such Florida Municipal Obligation, or is not
covered by bond insurance, the S&P or Moody's rating on such Florida
Municipal Obligation, (ii) in the event the Florida Municipal Obligation is
covered by an Original Issue Insurance policy or a Secondary Insurance
policy, the S&P insurance claims-paying ability rating of the issuer of the
policy or (iii) in the event the Florida Municipal Obligation is covered by
a Portfolio Insurance policy which provides the Trust with the option to
obtain Permanent Insurance with respect to such Florida Municipal
Obligation and such Portfolio Insurance policy has been reviewed and
approved in writing by S&P, at the Trust's option, the S&P or Moody's
rating on such Florida Municipal Obligation or the S&P insurance claims-
paying ability rating of the issuer of the Portfolio Insurance policy and
(b) the shortest S&P Collateral Period set forth opposite such rating that
is the same length as or is longer than the S&P Exposure Period, in
accordance with the table set forth below:
Rating Category
---------------------------------
For Florida Municipal Obligations: AAA* AA* A* BBB*
- ------------------------------------ ------ ------ ----- -----
S&P Collateral Period
40 Business Days . . . . . . . . 210% 215% 230% 270%
22 Business Days . . . . . . . . 190 195 210 250
10 Business Days . . . . . . . . 175 180 195 235
7 Business Days . . . . . . . . 170 175 190 230
3 Business Days . . . . . . . . 150 155 170 210
___________________
* S&P rating.
Notwithstanding the foregoing, (i) the S&P Discount Factor for short-
term Florida Municipal Obligations will be 115%, so long as such Florida
Municipal Obligations are rated A-1+ or SP-1+ by S&P or 125% if such
Florida Municipal Obligations are not rated by S&P but are rated VMIG-1, P-
1 or MIG-1 by Moody's and mature or have a demand feature exercisable in 30
days or less; provided, however, that such Moody's rated short-term Florida
Municipal Obligations must be backed by a letter of credit, liquidity
facility or guarantee from a bank or other financial institution, such bank
or institution having a short-term rating of at least A-1+ from S&P;
and further provided that such short-term Florida Municipal Obligations
rated by Moody's but not rated by S&P may comprise no more than 50% of
short-term Florida Municipal Obligations that qualify as S&P Eligible
Assets and (ii) no S&P Discount Factor will be applied to cash or to the
book value of Florida Municipal Obligations sold for which payment is due
within five Business Days. The Trust may adopt S&P Discount Factors for
Other Municipal Obligations provided that S&P advises the Trust in writing
that such action will not adversely affect its then current rating on the
Preferred Shares. Anticipation Notes rated SP-1+ or, if not rated by S&P,
rated MIG-1 or VMIG-1 by Moody's, which do not mature or have a demand
feature at par exercisable in 30 days and which do not have a long-term
rating, will be considered to be short term Florida Municipal Obligations
for purposes of determining the Discounted Value of S&P Eligible Assets.
"S&P Eligible Asset" means cash or the book value of Florida Municipal
Obligations sold for which payment is due within five Business Days of a
Valuation Date or a Florida Municipal Obligation that (i) is interest
bearing and pays interest at least semiannually; (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 Obligations will be included in S&P Eligible Assets only
to the extent the Market Value of such Florida Municipal Obligations do 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 Obligation, such
Florida Municipal Obligation 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 part of a private placement of Florida Municipal Obligations; and
(vi) is part of an issue of Florida Municipal Obligations with an original
issue size of at least $20 million or, if of an issue with an original
issue size below $20 million (but in no event below $10 million), is issued
by an issuer with a total of at least $50 million of securities
outstanding. Notwithstanding the foregoing:
(1) Florida Municipal Obligations of any one issuer or guarantor
(excluding bond insurers) will be considered S&P Eligible Assets only
to the extent the Market Value of such Florida Municipal Obligations
does not exceed 20% of the aggregate Market Value of the S&P Eligible
Assets, except that Florida Municipal Obligations falling within the
utility issue type category will be broken down into three sub-
categories (as described below) and such Florida Municipal Obligations
will be considered S&P Eligible Assets to the extent the Market Value
of such Bonds in each such sub-category does not exceed 20% of the
aggregate market value of S&P Eligible Assets. For purposes of the
issue type category requirement described above, Florida Municipal
Obligations 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 Obligations in
the utility issue type category will be classified within one of the
three following sub-categories: (i) electric, gas and combination
issues (if the combination issue includes an electric issue), (ii)
water and sewer utilities and combination issues (if the combination
issue does not include an electric issue), and (iii) irrigation,
resource recovery, solid waste and other utilities, provided that
Florida Municipal Obligations 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 Other Municipal Obligations 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 Preferred
Shares.
"S&P Exposure Period'' means the maximum period of time following a
Valuation Date, including the Valuation Date and the Preferred Shares Basic
Maintenance Cure Date, (currently 10 Business Days) that the 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 Preferred Shares Basic Maintenance Amount (as described in
paragraph 7(a) of this Certificate of Designation).
"S&P Hedging Transaction" means the purchasing or selling of a futures
contract based on the Municipal Index or Treasury Bonds or the purchasing
of an option on such a futures contract.
"S&P Volatility Factor'' means, depending on the applicable Reference
Rate, the following:
Reference Rate
Taxable Equivalent of the Short-Term Municipal Bond Rate . . . . . . 277%
30-day "AA" Composite Commercial Paper Rate . . . . . . . . . . . . . 228%
60-day "AA" Composite Commercial Paper Rate . . . . . . . . . . . . . 228%
90-day "AA" Composite Commercial Paper Rate . . . . . . . . . . . . . 222%
180-day "AA" Composite Commercial Paper Rate . . . . . . . . . . . . 217%
1-year U.S. Treasury Bill Rate . . . . . . . . . . . . . . . . . . . 198%
2-year U.S. Treasury Note Rate . . . . . . . . . . . . . . . . . . . 185%
3-year U.S. Treasury Note Rate . . . . . . . . . . . . . . . . . . . 178%
4-year U.S. Treasury Note Rate . . . . . . . . . . . . . . . . . . . 171%
5-year U.S. Treasury Note Rate . . . . . . . . . . . . . . . . . . . 169%
Notwithstanding the foregoing, the S&P Volatility Factor may mean such
other potential dividend rate increase factor as S&P advises the Trust in
writing is applicable.
"Secondary Insurance" means insurance guaranteeing the timely payment
of principal of, and interest on, a Florida Municipal Obligation purchased
by the Trust or a third party subsequent to the original issuance of such
Florida Municipal Obligation.
"Securities Depository" means The Depository Trust Company or any
successor company or other entity selected by the Trust as securities
depository for the Preferred Shares that agrees to follow the procedures
required to be followed by such securities depository in connection with
the Preferred Shares.
"Series R7 Preferred Shares" means the Auction Rate Municipal
Preferred Shares of Beneficial Interest, Series R7, liquidation preference
$25,000 per share plus an amount equal to accumulated but unpaid dividends
thereon (whether or not earned or declared), plus the premium, if any,
resulting from the designation of a Premium Call Period, of the Trust.
"Service'' means the United States Internal Revenue Service.
"7-day Dividend Period" means any Dividend Period of 7 days for the
Preferred Shares.
"Special Dividend Period" means a Dividend Period consisting of a
specified number of days (other than 7), evenly divisible by seven (subject
to adjustment as provided in paragraph 2(c)(iii)).
"Special Dividend Period Reference Rate'' means the rate or rates per
annum specified by the Trust (which may be expressed as the lower of a
specified rate or rates or a Spread under, at or over the Reference Index
or Reference Security being specified for such Special Dividend Period) in
the Notice of Special Dividend Period relating to a particular Special
Dividend Period and specifying a Reference Index or Reference Security or,
if the Trust shall fail to so specify any such rate or rates, then (i), in
the case of a Special Dividend Period of 182 days or less, the "AA"
Composite Commercial Paper Rate which most closely matches the length of
the Special Dividend Period, provided that in no case shall the Special
Dividend Reference Rate be a "AA" Composite Commercial Paper Rate which is
shorter in time than the 30-day "AA" Composite Commercial Paper Rate, or,
in the case of a Special Dividend Period of longer than 182 days, the
Treasury Rate which most closely matches the length of the Special Dividend
Period.
''Specific Redemption Provisions" means, with respect to a Special
Dividend Period either, or any combination of, (i) a period (a ''Non-Call
Period") determined by the Board of Trustees of the Trust, after
consultation with the Auction Agent and the Broker-Dealers, during which
the Preferred Shares subject to such Dividend Period shall not be subject
to redemption at the option of the Trust and (ii) a period (a "Premium Call
Period"), consisting of a number of whole years and determined by the Board
of Trustees of the Trust, after consultation with the Auction Agent and the
Broker-Dealers, during each year of which the Preferred Shares subject to
such Dividend Period shall be redeemable at a price per share equal to
$25,000 plus accumulated but unpaid dividends plus a premium expressed as a
percentage of $25,000 as determined by the Board of Trustees of the Trust
after consultation with the Auction Agent and the Broker-Dealers; provided,
however, that the Trust shall not adopt Specific Redemption Provisions
unless Moody's and S&P or any Substitute Rating Agency advises the Trust in
writing that such adoption will not adversely affect their then-current
ratings on the Preferred Shares.
"Spread'' means the negative or positive difference or the absence of
any difference, expressed in whole and fractional basis points, below, at
or above a Reference Index or Reference Security specified by the Trust in
a Notice of Special Dividend Period.
"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 Preferred Shares.
"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 Preferred Shares.
"Subsequent Dividend Payment Period," with respect to Preferred
Shares, has the meaning set forth in paragraph 2(c)(i) of this Certificate
of Designation and, with respect to Other Preferred Shares, has the
equivalent meaning.
"Substitute Commercial Paper Dealers'' means such Substitute
Commercial Paper Dealer or Dealers as the 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'' shall
mean a nationally recognized securities rating organization and two
nationally recognized securities rating organizations, respectively,
selected by Merrill Lynch, Pierce, Fenner & Smith Incorporated, or its
respective affiliates and successors, after consultation with the Trust, to
act as a substitute rating agency or substitute rating agencies, as the
case may be, to determine the credit ratings of the Series R7 Preferred
Shares.
''Taxable Equivalent of the Short-Term Municipal Bond Rate" means (i)
90% of (A) the per annum rate expressed on an interest equivalent basis
equal to the index, made available for the Business Day immediately
preceding such date but in any event not later than 8:30 A.M., New York
City time, on such date by Kenny Information Systems or any successor
thereto, based upon 30-day yield evaluations at par of bonds the interest
on which is excludable for Federal income tax purposes under the Code, of
not less than "high grade'' component issuers selected by Kenny Information
Systems or any such successor from time to time in its discretion, which
component issuers shall include, without limitation, issuers of general
obligation bonds but shall exclude any bonds the interest on which is
subject to the Federal alternative minimum tax or similar tax under the
Code, unless all bonds the interest on which is so excludable for Federal
income tax purposes are subject to such tax and (B) divided by 1 minus the
Maximum Marginal Regular Federal individual income tax rate applicable to
the character of the income being distributed or the maximum marginal
regular Federal corporate income tax rate applicable to the character of
the income being distributed (in each case expressed as a decimal),
whichever is greater; or (ii) in lieu of the rate determined pursuant to
clause (i) above, a percentage, determined by the Trust, of (A) the per
annum rate expressed on an interest equivalent basis equal to any
substitute index prepared by any person (other than an Affiliate of the
Trust), selected from time to time by the Trust, based on bonds the
interest on which is excludable from gross income for Federal income tax
purposes under the Code, and (B) divided by 1 minus the Maximum Marginal
Regular Federal individual income tax rate applicable to the character of
the income being distributed or the Maximum Marginal Regular Federal
corporate income tax rate applicable to the character of the income being
distributed (in each case expressed as a decimal), whichever is greater, as
made available on a discount basis or otherwise by the preparer of such
index for the Business Day immediately preceding such date but in any event
not later than 8:30 A.M., New York City time, on such date; provided that
the Trust shall not select any such substitute index or determine any such
percentage unless the Trust has received confirmation from Moody's and S&P
(or any Substitute Rating Agency) that the use of such index or percentage
would not affect the ratings assigned to the Preferred Shares by Moody's
and S&P (or any Substitute Rating Agency); provided, however, that if the
index then used by the Trust for purposes of determining the Taxable
Equivalent of the Short-Term Municipal Bond Rate is not made so available
by 8:30 A.M., the case of the index described in clause (i) above or by the
preparer of such index in the case of any substitute index described in
clause (ii) above, the Taxable Equivalent of the Short-Term Municipal Bond
Rate shall mean the per annum rate expressed on an interest equivalent
basis equal to the most recent such index so made available for any
preceding Business Day, without being multiplied by the 90% factor in the
case of the index described in such clause (i) or the percentage determined
by the Trust referred to in such clause (ii) in the case of the index
described in clause (ii).
"30-day 'AA' Composite Commercial Paper Rate,'' on any date, means (i)
the Interest Equivalent of the 30day rate on commercial paper placed on
behalf of issuers whose corporate bonds are rated "AA" by S&P, or the
equivalent of such rating by S&P or another nationally recognized
statistical rating organization, as such 30-day rate is made available on a
discount basis or otherwise by the Federal Reserve Bank of New York for the
Business Day immediately preceding such date, or (i) in the event that the
Federal Reserve Bank of New York does not make available such a rate, then
the arithmetical average of the Interest Equivalent of the 30-day rate on
commercial paper placed on behalf of such issuers, as quoted to the Auction
Agent on a discount basis or otherwise by the Commercial Paper Dealer for
the close of business on the Business Day immediately preceding such date.
If the Commercial Paper Dealer does not quote a rate required to determine
the 30-day "AA" Composite Commercial Paper Rate, the 30-day "AA" Composite
Commercial Paper Rate will be determined on the basis of the quotation or
quotations furnished by any Substitute Commercial Paper Dealer or
Substitute Commercial Paper Dealers selected by the Trust to provide such
rate or rates not being supplied by the Commercial Paper Dealer.
"Treasury Bonds" means United States Treasury Bonds with remaining
maturities of ten years or more.
"Treasury Rate," on any date for any Special Dividend Period exceeding
182 days, means:
(i) the yield on the most recently auctioned non-callable direct
obligations of the U.S. Government (excluding "flower" bonds) with a
remaining maturity closest to the duration of such Special Dividend
Period, as quoted in The Wall Street Journal on such date for the
Business Day next preceding such date; or
(ii) in the event that any such rate is not published by The Wall
Street Journal, then the arithmetic average of the yields on the most
recently auctioned noncallable direct obligations of the U.S.
Government (excluding "flower" bonds) with a remaining maturity
closest to the duration of such Special Dividend Period as quoted on a
discount basis or otherwise by the U.S. Government Securities Dealers
to the Auction Agent for the close of business on the Business Day
immediately preceding such date.
If any U.S. Government Securities Dealer does not quote a rate
required to determine the Treasury Rate, the Treasury Rate shall be
determined on the basis of the quotation or quotations furnished by the
remaining U.S. Government Securities Dealer or U.S. Government Securities
Dealers and any Substitute U.S. Government Dealers selected by the Trust to
provide such rate or rates not being supplied by any U.S. Government
Securities Dealer or U.S. Government Securities Dealers, as the case may
be, or, if the Trust does not select any such Substitute U.S. Government
Securities Dealer or Substitute U.S. Government Securities Dealers, by the
remaining U.S. Government Securities Dealer or U.S. Government Securities
Dealers.
"Treasury Securities'' means United States Treasury bills, notes or
bonds.
''Trust'' means The BlackRock Florida Insured Municipal 2008 Term
Trust, a Massachusetts business trust.
"28-day Dividend Period" means any Dividend Period of 28 days for a
series of Preferred Shares.
"U.S. Government Securities Dealer'' means Merrill Lynch, Pierce,
Fenner & Smith Incorporated and its respective affiliates or successors, if
such entity is a U.S. Government securities dealer. As used herein,
"Substitute U.S. Government Securities Dealer" shall mean Kidder, Peabody &
Co. Incorporated, PaineWebber Incorporated, Prudential Securities
Incorporated and Shearson Lehman Brothers Inc. or their respective
affiliates or successors, if such entity is a U.S. Government securities
dealer, provided that none of such entities shall be a U.S. Government
Securities Dealer.
"Valuation Date" means, for purposes of determining whether the Trust
is maintaining the Preferred Shares Basic Maintenance Amount and the
Minimum Liquidity Level, each Friday which is a Business Day, or the
Business Day preceding any Friday which is not a Business Day, and the Date
of Original Issue.
"Variation Margin" means, in connection with an outstanding futures
contract owned or sold by the Trust, the amount of cash or securities paid
to and received from a broker (subsequent to the Initial Margin payment)
from time to time as the price of such futures contract fluctuates.
(b) The foregoing definitions of Accountant's Confirmation, Deposit
Securities, Discounted Value, Dividend Coverage Amount, Dividend Coverage
Assets, Independent Accountant, Market Value, Maximum Potential Additional
Dividend Liability, Minimum Liquidity Level, Moody's Discount Factor,
Moody's Eligible Asset, Moody's Exposure Period, Moody's Hedging
Transaction, Moody's Volatility Factor, Preferred Shares Basic Maintenance
Amount, Preferred Shares Basic Maintenance Cure Date, Preferred Shares
Basic Maintenance Report, Reference Rate, S&P Discount Factor, S&P Eligible
Asset, S&P Exposure Period, S&P Hedging Transaction, S&P Volatility Factor
and Valuation Date have been determined by the Board of Trustees of the
Trust in order to obtain an "aaa" rating from Moody's and an AAA rating
from S&P on the Preferred Shares on their Date of Original Issue; and such
definitions shall be adjusted from time to time and without further action
by the Board of Trustees to reflect changes made thereto independently by
Moody's, S&P or any Substitute Rating Agency if each of Moody's, S&P and
any Substitute Rating Agency has advised the Trust in writing (i)
separately or collectively of such adjustments and (ii) collectively that
such adjustments will not adversely affect their then-current ratings on
the Preferred Shares. The adjustments contemplated by the preceding
sentence shall be made effective upon the time the Trust receives the
written notice from Moody's S&P and any Substitute Rating Agency
contemplated by clause (ii) of the preceding sentence.
2. Dividends. (a) The Holders shall be entitled to receive,
when, as and if declared by the Board of Trustees of the Trust, out of
funds legally available therefor, cumulative dividends each consisting of
(i) cash at the Applicable Rate and (ii) an uncertificated Right to receive
cash as set forth in paragraph 2(e) below, and no more, payable on the
respective dates set forth below. Dividends on the Preferred Shares so
declared and payable shall be paid (i) in preference to and in priority
over any dividends declared and payable on the Common Shares of Beneficial
Interest, and (ii) to the extent permitted by law and to the extent
available, out of net tax-exempt income earned on the Trust's investments.
To the extent permitted by law, dividends on Preferred Shares will be
designated as exempt-interest dividends. For the purposes of this section,
the term ''net tax-exempt income" shall exclude capital gains and other
taxable income of the Trust.
(b) (i) Cash dividends on Preferred Shares shall
accumulate from the Date of Original Issue and shall be payable
commencing on the Initial Dividend Payment Date with respect to
each series of Preferred Shares. Following the Initial Dividend
Payment Date for each series of Preferred Shares, dividends on
the Preferred Shares will be payable, at the option of the Trust,
(ii) with respect to any Dividend Period of 35 or fewer days on
the day next succeeding the last day thereof, (iii) with respect
to any Dividend Period of more than 35 and fewer than 92 days, on
the day next succeeding each period of 30 days to occur during
such Dividend Period (or in the case of any Dividend Period of
more than 91 days, as specified in the relevant Notice of Special
Dividend Period), and on the day next succeeding the last day
thereof, (iv) with respect to any Dividend Period of 365 days or
more, monthly on the first day of each calendar month during such
Dividend Period (or in the case of any Dividend Period of more
than 91 days, as specified in the relevant Notice of Special
Dividend Period), and on the day next succeeding the last day
thereof (each such date referred to in clauses (i), (ii), (iii)
and (iv) being hereinafter referred to as a "Normal Dividend
Payment Date"), except that (i) if such Normal Dividend Payment
Date is not a Business Day, then the Dividend Payment Date shall
be the next succeeding date if both such dates following the
Normal Dividend Payment Date are Business Days, or (ii) if the
date following such Normal Dividend Payment Date is not a
Business Day, then the Dividend Payment Date will be the date
next preceding such Normal Dividend Payment Date if both such
date and such Normal Dividend Payment Date are Business Days or
(iii) if such Normal Dividend Payment Date and either the
preceding date or the succeeding date are not Business Days, then
the Dividend Payment Date shall be the first Business Day next
preceding such Normal Dividend Payment Date that is next
succeeded by a Business Day. If, however, the Securities
Depository shall make available to its participants and members
in funds immediately available in New York City on Dividend
Payment Dates, the amount due as dividends on such Dividend
Payment Dates (and the Securities Depository shall have so
advised the Trust), and if the day that otherwise would be the
Dividend Payment Date is not a Business Day, then the Dividend
Payment Date shall be the next succeeding Business Day. Although
any particular Dividend Payment Date may not occur on a Normal
Dividend Payment Date because of the exceptions discussed above,
the next succeeding Dividend Payment Date shall be, subject to
such provisos, the next Normal Dividend Payment Date. If for any
reason a Dividend Payment Date cannot be fixed as described
above, then the Board of Trustees shall fix the Dividend Payment
Date. Each dividend payment date determined as provided above is
hereinafter referred to as a "Dividend Payment Date."
(ii) Each dividend shall be paid to the Holders as they
appear in the Share Register as of 12:00 noon, New York City
time, on the Business Day preceding the Dividend Payment Date.
Dividends in arrears for any past Dividend Period may be declared
and paid at any time, without reference to any regular Dividend
Payment Date, to the Holders as they appear on the Share Register
on a date, not exceeding 15 days prior to the payment date
therefor, as may be fixed by the Board of Trustees of the Trust.
(c) (i) During the period from and including the Date of
Original Issue to but excluding the Initial Dividend Payment Date (the
"Initial Dividend Period"), the Applicable Rate shall be the Initial
Dividend Rate. Commencing on the Initial Dividend Payment Date, the
Applicable Rate for each subsequent Dividend Period or portion thereof
(hereinafter referred to as a "Subsequent Dividend Payment Period"),
which Subsequent Dividend Payment Period shall commence on a Dividend
Payment Date, and shall end on the calendar day prior to the next
Dividend Payment Date, shall be equal to the lesser of (x) the Maximum
Applicable Rate for such Dividend Period, or for such Subsequent
Dividend Payment Period included therein or (y) the greater of (i) the
Minimum Applicable Rate for such Dividend Period or for such
Subsequent Dividend Payment Period included therein or (ii) the rate
per annum that results for such Dividend Period or Subsequent Dividend
Payment Period included therein from implementation of the Auction
Procedures including any periodic application of a Spread to a
specified Reference Index or Reference Security.
Notwithstanding the foregoing sentence, the Applicable Rate for
each Dividend Period commencing during a Non-Payment Period shall be
equal to the Non-Payment Period Rate and each Dividend Payment Period
for the Preferred Shares, commencing after the first day of, and
during, a Non-Payment Period shall be a 7-day Dividend Payment 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 Preferred Shares
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 Preferred Shares as of 12:00 noon, New York City
time, on the Business Day preceding such Dividend Payment Date) or
redemption price with respect to any Preferred Shares not paid to such
Holders when due may be paid to such Holders in the same form of funds
by 12:00 noon, New York City time, on any of the first three Business
Days after such Dividend Payment Date or due date, as the case may be,
provided that, such amount is accompanied by a late charge calculated
for such period of non-payment at the Non-Payment Period Rate applied
to the amount of such non-payment based on the actual number of days
comprising such period divided by 365. In the case of a willful
failure of the Trust to pay a dividend on a Dividend Payment Date or
to redeem any Preferred Shares on the date set for such redemption,
the preceding sentence shall not apply and the Applicable Dividend
Rate for the Dividend Period commencing during the Non-Payment Period
resulting from such failure shall be the Non-Payment Period Rate. For
the purposes of the foregoing, payment to a person in same-day funds
on any Business Day at any time shall be considered equivalent to
payment to such person in New York Clearing House (next-day) funds at
the same time on the preceding Business Day, and any payment made
after 12:00 noon, New York City time, on any Business Day shall be
considered to have been made instead in the same form of funds and to
the same person before 12:00 noon, New York City time, on the next
Business Day.
(ii) The amount of cash dividends per share of Preferred
Shares payable (if declared) for any Dividend Payment Period or
part thereof shall be computed by multiplying the Applicable Rate
for such Dividend Payment Period by a fraction, the numerator of
which shall be the number of days in such Dividend Payment Period
or part thereof such share was outstanding and the denominator of
which shall be 365 (or 360 for a Dividend Period of 365 days or
more), multiplying the amount so obtained by $25,000, and
rounding the amount so obtained to the nearest cent.
(iii) With respect to each Dividend Period that the
Trust desires to be 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 such series of Preferred
Shares be a number of days (other than 7), evenly divisible by
seven and 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 Sufficient Clearing Bids were made in
the last occurring Auction and unless full cumulative dividends,
any amounts due with respect to mandatory redemptions, and any
Additional Dividends payable prior to such date have been paid in
full. Such Request for Special Dividend Period, in the case of a
Dividend Period of 182 days or less, shall be given on or prior
to the 4th day but not more than 7 days prior to an Auction Date
for the Preferred Shares and, in the case of a Dividend Period of
more than 182 days, shall be given on or prior to the 14th day
but not more than 28 days prior to an Auction Date for the
Preferred Shares. Such Request for Special Dividend Period shall
also specify any proposed Bid Requirements. Upon receiving such
Request for Special Dividend Period, the Broker-Dealer(s) shall
jointly determine whether, given the factors set forth below, it
is advisable that the Trust issue a Notice of Special Dividend
Period for the Preferred Shares as contemplated by such Request
for Special Dividend Period and, if advisable, the Specific
Redemption Provisions and shall give the 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 Preferred Shares, (4) industry and financial conditions
which may affect the Preferred Shares, (5) the investment
objective of the Trust, and (6) the Dividend Periods and dividend
rates at which current and potential beneficial holders of the
Preferred Shares would remain or become beneficial holders. If
none of the Broker-Dealer(s) give the Trust and the Auction Agent
a Response by such third day or if the Response of all of the
Broker-Dealers providing a Response states that given the factors
set forth above it is not advisable that the Trust give a Notice
of Special Dividend Period for the Preferred Shares, 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 of at least one Broker-Dealer does not indicate that it
is not advisable that the Trust give a Notice of Special Dividend
Period for the Preferred Shares, 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 the duration of the Special Dividend Period, the Bid
Requirements (if any) applicable to the Auction relating to such
Special Dividend Period and Specific Redemption Provisions (if
any). The Trust shall not give a Notice of Special Dividend
Period or convert to a Special Dividend Period and, if the Trust
has given a Notice of Special Dividend, the Trust is required to
give telephonic and written notice of revocation (a "Notice of
Revocation") to the Auction Agent, each Broker-Dealer, and the
Securities Depository on or prior to the Business Day prior to
the relevant Auction Date if it has not obtained the advice in
writing of Moody's and S&P or any Substitute Rating Agency that
the proposed Special Dividend Period will not adversely affect
their then-current rating on the Preferred Shares or if (w)
either the 1940 Act Preferred Shares Asset Coverage is not
satisfied or the 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 Preferred Shares Basic Maintenance
Amount, in each case on each of the two Valuation Dates
immediately preceding the Business Day prior to the relevant
Auction Date (and in each case, with respect to Moody's Eligible
Assets, using a Moody's Exposure Period equivalent to 14 days
longer than normal) on an actual basis and on a pro forma basis
giving effect to the proposed Special Dividend Period (using as a
pro forma dividend rate with respect to such Special Dividend
Period the dividend rate which the Broker-Dealers shall advise
the Trust is an approximately equal rate for securities similar
to the Preferred Shares with an equal frequency of recalculation
of the Reference Index or Reference Security as is utilized by
the Trust with respect to the first Dividend Payment Period
within such Special Dividend Period and using as a pro forma
Maximum Applicable Rate the highest rate specified in the Notice
of Special Dividend Period for the Dividend Payment Periods
covering not less than the first 49 days of such proposed Special
Dividend Period or, if no such rate is specified in the Notice of
Special Dividend Period, the Maximum Applicable Rate resulting by
operation of the definition of Special Dividend Period Reference
Rate for the Special Dividend Period specified in such Notice of
Special Dividend Period), (x) sufficient funds for the payment of
dividends payable on the immediately succeeding Dividend Payment
Date have not been irrevocably deposited with the Auction Agent
by the close of business on third Business Day preceding the
related Auction Date, (y) the Broker-Dealer(s) jointly advise the
Trust that after consideration of the factors listed above they
have concluded that it is advisable to give a Notice of
Revocation or (z) the Trust has determined to terminate the
Special Dividend Period for any reason. If the Trust is
prohibited from giving a Notice of Special Dividend Period as a
result of any of the factors enumerated in clause (w), (x), (y)
or (z) of the prior sentence or if the 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 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 Preferred Shares (and any such
attempted notice shall be null and void) until Sufficient
Clearing Bids have been made in an Auction with respect to a 7-
day Dividend Period.
(d) (i) Holders shall not be entitled to any dividends, whether
payable in cash, property or shares, in excess of full cumulative
dividends, as herein provided, on the Preferred Shares. No interest,
or sum of money in lieu of interest, shall be payable in respect of
any dividend payment on the Preferred Shares that may be in arrears.
(ii) For so long as any share of the Preferred Shares is
outstanding, the 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 of Beneficial
Interest or other shares of beneficial interest, if any, ranking
junior to the Preferred Shares as to dividends or upon
liquidation) in respect of the Common Shares of Beneficial
Interest or any other shares of beneficial interest of the Trust
ranking junior to or on a parity with the Preferred Shares as to
dividends or upon liquidation, or call for redemption, redeem,
purchase or otherwise acquire for consideration any shares of the
Common Shares of Beneficial Interest or any other such junior
shares of beneficial interest (except by conversion into or
exchange for shares of beneficial interest of the Trust ranking
junior to the Preferred Shares as to dividends and upon
liquidation) or any other such Parity Shares of Beneficial
Interest (except by conversion into or exchange for shares of
beneficial interest of the Trust ranking junior to or on a parity
with the Preferred Shares as to dividends and upon liquidation),
unless (A) immediately after such transaction, the Trust shall
have Moody's Eligible Assets and S&P Eligible Assets each with an
aggregate Discounted Value equal to or greater than the Preferred
Shares Basic Maintenance Amount and the Trust shall maintain the
1940 Act Preferred Shares Asset Coverage, (B) full cumulative
dividends on Preferred Shares and shares of Other Preferred
Shares due on or prior to the date of the transaction have been
declared and paid or shall have been declared and sufficient
funds for the payment thereof deposited with the Auction Agent,
(C) any Additional Dividend required to be paid under paragraph
2(e) below on or before the date of such declaration or payment
has been paid and (D) the Trust has redeemed the full number of
Preferred Shares required to be redeemed by any provision for
mandatory redemption contained herein.
(e) Each dividend shall consist of (i) cash at the Applicable Rate
and (ii) an uncertificated right (a ''Right'') to receive an Additional
Dividend (as defined below). Each Right shall thereafter be independent
of the share or Preferred Shares on which the dividend was paid. The Trust
shall cause to be maintained a record of each Right received by the
respective Holders. The Trust shall not be required to recognize any
transfer of a Right.
If, in the case of a Dividend Period of 28 days or fewer, the Trust
retroactively allocates any net capital gains or other taxable income to
Preferred Shares without having given advance notice thereof to the Auction
Agent as described in paragraph 2(f) hereof (the amount of such allocation
referred to herein as a ''Retroactive Taxable Allocation") solely by reason
of the fact that such allocation is made as a result of the redemption of
all or a portion of the outstanding Preferred Shares or the liquidation of
the Trust, the Trust will, within 90 days (and generally within 60 days)
after the end of the Trust's fiscal year for which a Retroactive Taxable
Allocation is made, provide notice thereof to the Auction Agent and to each
holder of a Right applicable to such Preferred Shares (initially Cede & Co.
as nominee of The Depository Trust Company) during such fiscal year at such
holder's address as the same appears or last appeared on the Share Books of
the Trust. The Trust will, within 30 days after such notice is given to
the Auction Agent, pay to the Auction Agent (who will then distribute to
such holders of Rights), out of funds legally available therefor, an amount
equal to the aggregate Additional Dividend with respect to all Retroactive
Taxable Allocations made to such holders during the fiscal year in
question.
If the Trust, in the case of a Dividend Period of 35 days or more,
maker a Retroactive Taxable Allocation to a dividend paid on Preferred
Shares, the Trust will, within 90 days (and generally within 60 days) after
the end of the Trust's fiscal year for which a Retroactive Taxable
Allocation is made, provide notice thereof to the Auction Agent and to each
holder of a Right applicable to such Preferred Shares (initially Cede & Co.
as nominee of The Depository Trust Company) during such fiscal year at such
holder's address as the same appears or last appeared on the Share Books of
the Trust. The Trust will, within 30 days after such notice is given to
the Auction Agent, pay to the Auction Agent (who will then distribute to
such holders of Rights), out of funds legally available therefor, an amount
equal to the aggregate Additional Dividend with respect to all Retroactive
Taxable Allocations made to such holders during the fiscal year in
question.
An ''Additional Dividend'' means payment to a holder of Preferred
Shares of an amount which, when taken together with the aggregate amount of
Retroactive Taxable Allocations allocated to such holder with respect to
the fiscal year in question would cause such holder's dividends, from the
aggregate of both the Retroactive Taxable Allocations and the Additional
Dividend to be equal to the dollar amount of the dividends which would have
been received and retained by such holder if the Retroactive Taxable
Allocations had not been made. Such Additional Dividend shall be
calculated (i) without consideration being given to the time value of
money; (ii) assuming that no holder of Preferred Shares is subject to the
Federal alternative minimum tax with respect to dividends received from the
Trust; and (iii) assuming that each Retroactive Taxable Allocation would be
taxable in the hands of each holder of Preferred Shares at the maximum
marginal combined regular Federal and Florida State and local income tax
rate, if any, applicable to individuals or corporations (taking into
account the Federal income tax deductibility of state taxes paid or
incurred), whichever is greater, in effect at the end of the fiscal year in
question.
(f) Whenever the Trust intends to include any net capital gains or
other taxable income in any dividend on Preferred Shares, the Applicable
Rate for which will be established at the next succeeding Auction, the
Trust will, in the case of a Dividend Period of 28 days or fewer, and may,
in the case of a Dividend Period of 35 days or more, notify the Auction
Agent of the amount to be so included at least five Business Days prior to
the Auction Date on which the Applicable Rate for such dividend is to be
established. If, in the case of a Dividend Period of 28 days or fewer, the
Trust retroactively allocates any net capital gains or other taxable income
to a dividend paid on Preferred Shares without having given advance notice
thereof to the Auction Agent as described in paragraph 2(f) hereof solely
by reason of the fact that such allocation is made as a result of the
redemption of all or a portion of the outstanding Preferred Shares or the
liquidation of the Trust, the Trust will make certain payments to holders
of Preferred Shares to offset the tax effect thereof. If, in the case of a
Dividend Period of 35 days or more, the Trust allocates any net capital
gains or other taxable income to a dividend paid on Preferred Shares
without having given advance notice thereof to the Auction Agent as
described in Paragraph 2(f) hereof, the Trust will make certain payments to
holders of Preferred Shares to offset the tax effect thereof.
(g) No fractional share of Preferred Shares shall be issued.
3. Liquidation Rights. Upon any liquidation, dissolution or winding
up of the 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 of Beneficial Interest or any other capital shares
of beneficial interest ranking junior in right of payment upon liquidation
to the Preferred Shares, the sum of $25,000 per share plus accumulated but
unpaid dividends (whether or not earned or declared) thereon plus the
premium, if any, resulting from the designation of a Premium Call Period to
the date of distribution, and after such payment the holders of Preferred
Shares will be entitled to no other payments other than Additional
Dividends as provided in paragraph 2(e) hereof. If upon any liquidation,
dissolution or winding up of the Trust, the amounts payable with respect to
the Preferred Shares and any other outstanding class or series of Preferred
Shares of Beneficial Interest of the Trust ranking on a parity with the
Preferred Shares as to payment upon liquidation are not paid in full, the
Holders and the holders of such other class or series will share ratably in
any such distribution of assets in proportion to the respective
preferential amounts to which they are entitled. After payment of the full
amount of the liquidating distribution to which they are entitled, the
Holders will not be entitled to any further participation in any
distribution of assets by the Trust except for any Additional Dividends. A
consolidation or merger of the Trust with or into any corporation or
corporations or a sale, whether for cash, shares of stock, securities or
properties, of all or substantially all or any part of the assets of the
Trust shall not be deemed or construed to be a liquidation, dissolution or
winding up of the Trust.
4. Redemption. (a) Preferred Shares shall be redeemable by the
Trust as provided below:
(i) To the extent permitted under the 1940 Act and
Massachusetts law, upon giving a Notice of Redemption, the Trust
at its option may redeem Preferred Shares, in whole or in part,
out of funds legally available therefor, at the Optional
Redemption Price per share, on any Dividend Payment Date;
provided that no Preferred Shares shall be subject to optional
redemption during a Non-Call Period. In addition, holders of
Preferred Shares which are redeemed shall be entitled to receive
Additional Dividends to the extent provided herein. The Trust
may not give a Notice of Redemption relating to an optional
redemption as described in this paragraph 4(a)(i) or effect an
optional redemption unless, at the time of giving such Notice of
Redemption or effecting such optional redemption, the 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 Preferred Shares on such redemption
date and, if as a result of such optional redemption, the Trust
would fail to maintain S&P Eligible Assets and Moody's Eligible
Assets each with an aggregate Discounted Value equal to the
Preferred Shares Basic Maintenance Amount.
(ii) The Trust shall redeem, out of funds legally available
therefor, at the Mandatory Redemption Price per share, Preferred
Shares to the extent permitted under the 1940 Act and
Massachusetts law, on a date fixed by the Board of Trustees, if
the Trust fails to maintain Moody's Eligible Assets and S&P
Eligible Assets each with an aggregate Discounted Value equal to
or greater than the Preferred Shares Basic Maintenance Amount as
provided in paragraph 7(a) or to satisfy the 1940 Act Preferred
Shares Asset Coverage as provided in paragraph 6 and such failure
is not cured on or before the Preferred Shares Basic Maintenance
Cure Date or the 1940 Act Cure Date (herein respectively referred
to as the "Cure Date''), as the case may be. In addition,
holders of Preferred Shares so redeemed shall be entitled to
receive Additional Dividends to the extent provided herein. The
number of Preferred Shares to be redeemed shall be equal to the
lesser of (i) the minimum number of Preferred Shares the
redemption of which, if deemed to have occurred immediately prior
to the opening of business on the Cure Date, would together with
all shares of Other Preferred Shares of Beneficial Interest
subject to redemption or retirement, 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 Preferred
Shares Basic Maintenance Amount or satisfaction of the 1940 Act
Preferred Shares Asset Coverage, as the case may be, on such Cure
Date (provided that, if there is no such minimum number of
Preferred Shares and shares of Other Preferred Shares of
Beneficial Interest the redemption of which would have such
result, all Preferred Shares and shares of Other Preferred Stock
then outstanding shall be redeemed), and (ii) the maximum number
of Preferred Shares, together with all shares of other Preferred
Stock subject to redemption or retirement, that can be redeemed
out of funds expected to be legally available therefor on such
redemption date. In determining the number of Preferred Shares
required to be redeemed in accordance with the foregoing, the
Trust shall allocate the number required to be redeemed which
would result in the Trust having Moody's Eligible Assets and S&P
Eligible Assets each with an aggregate Discounted Value equal to
or greater than the Preferred Shares Basic Maintenance Amount or
satisfaction of the 1940 Act Preferred Shares Asset Coverage, as
the case may be, pro rata among Preferred Shares, Other Preferred
Shares and other Preferred Shares of Beneficial Interest subject
to redemption pursuant to provisions similar to those contained
in this paragraph 4(a)(ii) provided that, Preferred Shares which
may not be redeemed at the option of the Trust (a) will be
subject to mandatory redemption only to the extent that other
shares are not available to satisfy the number of shares required
to be redeemed and (b) will be selected for redemption in an
ascending order of outstanding number of days in the Non-Call
Period during which such shares are not subject to optional
redemption (with shares with the lowest number of days to be
redeemed first) and by lot in the event of shares having an equal
number of days in such period. The Trust shall effect such
redemption on a Business Day which is not later than 30 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 Preferred Shares and shares of other Preferred Shares
of Beneficial Interest which are subject to mandatory redemption
or the Trust otherwise is unable to effect such redemption on or
prior to 30 days after such Cure Date, the Trust shall redeem
those Preferred Shares which it is unable to redeem on the
earliest practicable date on which it is able to effect such
redemption out of funds legally available therefor.
(b) Notwithstanding any other provision of this paragraph 4, no
Preferred Shares may be redeemed pursuant to paragraph 4(a)(i) of this
Certificate of Designation unless all dividends in arrears on all remaining
outstanding shares of Parity Shares of Beneficial Interest shall have been
or are being contemporaneously paid or declared and set apart for payment.
In the event that less than all the outstanding Preferred Shares are to be
redeemed and there is more than one Holder, the shares to be redeemed shall
be selected by lot or such other method as the Trust shall deem fair and
equitable.
(c) Whenever Preferred Shares are to be redeemed, the Trust, not less
than 20 or more than 60 days prior to the date fixed for redemption, shall
mail a notice ("Notice of Redemption") by first-class mail, postage
prepaid, to each Holder of Preferred Shares to be redeemed and to the
Auction Agent. The Trust shall cause the Notice of Redemption also to be
published in the eastern and national editions of The Wall Street Journal.
The Notice of Redemption to set forth (i) the redemption date, (ii) the
amount of the redemption price, (iii) the aggregate number of Preferred
Shares to be redeemed, (iv) the place or places where Preferred Shares are
to be surrendered for payment of the redemption price, (v) a statement that
dividends on the shares to be redeemed shall cease to accumulate on such
redemption date (except that holders may be entitled to Additional
Dividends) and 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
Preferred Shares 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
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 of Trust, each Holder of Preferred Shares shall be entitled
to one vote for each share held on each matter submitted to a vote of
shareholders of the Trust to which the shareholders are entitled to vote,
and the holders of outstanding shares of Preferred Shares of Beneficial
Interest, including Preferred Shares, and of shares of Common Shares of
Beneficial Interest shall vote together as a single class with respect to
all matters on which all Shareholders are entitled to vote.
Notwithstanding the preceding sentence, at the first annual meeting of
Shareholders, the holders of outstanding shares of Preferred Shares of
Beneficial Interest, including Preferred Shares, represented in person or
by proxy shall be entitled as a class, and to the exclusion of the holders
of all other securities and classes of capital shares of beneficial
interest if the Trust, to elect one Class I trustee and one Class II
trustee and shall thereafter be so entitled to elect any successors from
time to time to the Class I and Class II trustees so elected at any meeting
of shareholders in which successors are elected. At each meeting of
shareholders at which entire classes of Class I and Class II trustees are
to be elected, or at any meeting at which a successor to a trustee elected
by the holders of Preferred Shares of Beneficial Interest in accordance
with this Section is to be elected (including trustees elected pursuant to
this sentence), the holders of outstanding shares of Preferred Shares of
Beneficial Interest, including Preferred Shares, represented in person or
by proxy shall be entitled as a class and to the exclusion of the holders
of all other securities and classes of capital shares of beneficial
interest of the Trust to elect one Class I and one Class II trustee or to
elect such successor. In the event that the Declaration of Trust is
amended to eliminate the classification of the Trust's Board of Trustees,
the holders of outstanding shares of Preferred Stock, including Preferred
Shares, represented in person or by proxy shall be entitled as a class, and
to the exclusion of the holders of all other securities and classes of
capital shares of beneficial interest of the Trust, to elect two trustees.
Subject to paragraph 5(b) hereof, the holders of outstanding shares of
capital shares of beneficial interest of the Trust voting as a single
class, shall elect the balance of the trustees.
(b) Right to Elect Majority 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 shares of Preferred Shares of
Beneficial Interest, would constitute a majority of the Board of Trustees
as so increased by such smallest number; and the holders of shares of
Preferred Shares of Beneficial Interest shall be entitled, voting as a
class on a one-vote-per-share basis (to the exclusion of the holders of all
other securities and classes of capital 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
Preferred Shares equal to at least two full years, dividends
shall be due and unpaid and sufficient cash or specified
securities shall not have been deposited with the Auction Agent
for the payment of such accumulated dividends; or
(ii) if at any time holders of any Preferred Shares of
Beneficial Interest are entitled to elect a majority of the
trustees of the Trust under the 1940 Act.
Upon the termination of a Voting Period, the voting rights described
in this paragraph 5(b) shall cease, subject always, however, to the
revesting of such voting rights in the Holders upon the further occurrence
of any of the events described in this paragraph 5(b).
(c) Right to Vote with Respect to Certain Other Matters. So long as
any Preferred Shares are outstanding, the Trust shall not, without the
affirmative vote of the holders of a majority of the Outstanding shares of
Preferred Shares of Beneficial Interest outstanding at the time, in person
or by proxy, at a meeting (voting separately as one class) or by the
unanimous written consent of the holders of all outstanding shares of
Preferred Shares of Beneficial Interest: (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 of Beneficial Interest with respect to payment
of dividends or the distribution of assets on liquidation, or increase the
authorized amount of Preferred Shares or any other Preferred Shares of
Beneficial Interest (except that, notwithstanding the foregoing, but
subject to the provisions of Section 13 of the 1940 Act, the Board of
Trustees, without the vote or consent of the Holders of Preferred Shares,
may from time to time authorize, create and issue, and may increase the
authorized or issued amount of, classes or series of Preferred Shares of
Beneficial Interest, including Preferred Shares, ranking on a parity with
the Preferred Shares with respect to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up of the
affairs of the Trust, subject to continuing compliance by the Trust with
1940 Act Preferred Shares Asset Coverage and Preferred Shares Basic
Maintenance Amount requirements, provided that the Fund obtains written
confirmation from Moody's (if Moody's is then rating Preferred Shares), S&P
(if S&P is then rating Preferred Shares) or any Substitute Rating Agency
(if any such Substitute Rating Agency is then rating Preferred Shares) that
the issuance of such class or series would not impair the rating then
assigned by such rating agency to the Preferred Shares), (ii) amend, alter
or repeal the provisions of the 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 or any Other Preferred Shares of Beneficial Interest,
(iii) authorize the Trust's conversion from a closed-end to an open-end
investment company as defined in Section 5(a) of the 1940 Act, or (iv)
amend the provisions of the Declaration of Trust which provide for the
classification of the Board of Trustees of the Trust into three classes,
each with a term of office of three years with only one class of trustees
standing for election in any year (presently Article VI of the Declaration
of Trust). To the extent permitted under the 1940 Act, 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 Trust
of a Holder of shares of a series of Preferred Shares differently than
those of a Holder of shares of any other series of Preferred Shares without
the affirmative vote of the holders of at least a majority of the Preferred
Shares of each series adversely affected and outstanding at such time, in
person or by proxy, at a meeting (each such adversely affected series
voting separately as a class) or by the unanimous written consent of the
holders of all Outstanding shares of Preferred Shares of Beneficial
Interest. The Trust shall notify Moody's and S&P 10 Business Days prior to
any such vote described in clauses (i) and (ii). Unless a higher
percentage is provided for under the Declaration of Trust, the affirmative
vote of the holders of a majority of the Outstanding shares of Preferred
Shares of Beneficial Interest, including Preferred Shares, voting together
as a single class, will be required to approve any plan of reorganization
(including bankruptcy proceedings) adversely affecting such shares or any
action requiring a vote of security holders under Section 13(a) of the 1940
Act. The class vote of holders of shares of Preferred Shares of Beneficial
Interest, including Preferred Shares, described above will in each case be
in addition to a separate vote of the requisite percentage of shares of
Common Shares of Beneficial Interest and shares of Preferred Shares of
Beneficial Interest, including Preferred Shares, voting together as a
single class necessary to authorize the action in question.
Notwithstanding the preceding sentence, to the extent permitted by
Massachusetts General Laws, no vote of holders of Common Shares of
Beneficial Interest either separately or together with holders of Preferred
Shares as a single class, shall be necessary to take the actions
contemplated by clauses (i) and (ii) of the first sentence of this Section
5(c) and the holders of Common Shares of Beneficial Interest shall not be
entitled to vote in respect of such matters, unless, in the case of the
actions contemplated by clause (ii) of the first sentence of this section
5(c), the action would adversely affect the contract rights expressly set
forth in the Declaration of Trust of the holders of Common Shares of
Beneficial Interest.
(d) Voting Procedures.
(i) As soon as practicable after the accrual of any right of the
Holders of shares of Preferred Shares of Beneficial Interest to elect
additional trustees as described in paragraph 5(b) above, the Trust
shall notify the Secretary of the Trust and instruct the Secretary to
call a special meeting of such Holders, by mailing a notice of such
special meeting to such Holders, such meeting to be held not less than
10 nor more than 20 days after the date of mailing of such notice. If
the Secretary of the Trust does not call such a special meeting, it
may be called by Holders of at least 25% of the votes entitled to be
cast at such meeting on like notice. The record date for determining
the Holders entitled to notice of and to vote at such special meeting
shall be the close of business on the fifth Business Day preceding the
day on which such notice is mailed. At any such special meeting and
at each meeting held during a Voting Period, such Holders, voting
together as a class (to the exclusion of the holders of all other
securities and classes of capital shares of beneficial interest of the
Trust), shall be entitled to elect the number of trustees prescribed
in paragraph 5(b) above on a one-vote-per-share basis. At any such
meeting or adjournment thereof in the absence of a quorum, a majority
of such holders present in person or by proxy shall have the power to
adjourn the meeting without notice, other than by an announcement at
the meeting, to a date not more than 120 days after the original
record date.
(ii) For purposes of determining any rights of the Holders to
vote on any matter or the number of shares required to constitute a
quorum, whether such right is created by this Certificate of
Designation, by the other provisions of the Declaration of Trust, by
statute or otherwise, a share of Preferred Shares which is not
outstanding shall not be counted.
(iii) The terms of office of all persons who are trustees of
the Trust at the time of a special meeting of Holders and holders of
other Preferred Shares of Beneficial Interest 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 of Beneficial
Interest and the remaining incumbent trustees elected by the holders
of the Common Shares of Beneficial Interest and Preferred Shares of
Beneficial Interest, shall constitute the duly elected trustees of the
Trust.
(iv) The terms of office of the additional trustees elected by
the Holders and holders of other Preferred Shares of Beneficial
Interest pursuant to paragraph 5(b) above shall terminate on the
earliest date permitted by the Massachusetts General Laws following
the termination of a Voting Period, 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 Preferred Shares shall not have any relative rights or preferences or
other special rights other than those specifically set forth herein. The
Holders of Preferred Shares shall have no preemptive rights or rights to
cumulative voting. In the event that the Trust fails to pay any dividends
on the Preferred Shares, 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 Moody's and S&P. In the event a vote of Holders
of Preferred Shares is required pursuant to the provisions of Section 13(a)
of the 1940 Act, the Trust shall, not later than ten business days prior to
the date on which such vote is to be taken, notify Moody's and S&P that
such vote is to be taken and the nature of the action with respect to which
such vote is to be taken. Upon completion of any such vote, the Trust
shall notify Moody's and S&P as to the result of such vote.
6. 1940 Act Preferred Shares Asset Coverage. The Trust shall
maintain, as of the last Business Day of each month in which any share of
Preferred Shares is outstanding, the 1940 Act Preferred Shares Asset
Coverage.
7. Preferred Shares Basic Maintenance. (a) The Trust shall
maintain, on each Valuation Date, and shall verify to its satisfaction that
it is maintaining on such Valuation Date, (i) Moody's Eligible Assets
having an aggregate Discounted Value equal to or greater than the Preferred
Shares Basic Maintenance Amount and (ii) S&P Eligible Assets having an
aggregate Discounted Value equal to or greater than the Preferred Shares
Basic Maintenance Amount. Upon any failure to maintain the required
Discounted Value, the Trust will use its best efforts to alter the
composition of its portfolio to reattain the Preferred Shares Basic
Maintenance Amount, on or prior to the Preferred Shares Basic Maintenance
Cure Date.
(b) On or before 5:00 p.m., Florida time, on the third Business Day
after a Valuation Date on which the Trust fails to satisfy the Preferred
Shares Basic Maintenance Amount, the Trust shall complete and deliver to
the Auction Agent, Moody's and S&P a complete Preferred Shares Basic
Maintenance Report as of the date of such failure, which 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 Preferred Shares Basic Maintenance Report. The
Trust shall also give a notice of cure of its failure to satisfy the
Preferred Shares Basic Maintenance Amount along with the complete Preferred
Shares Basic Maintenance Report to the Auction Agent, Moody's and S&P
within three Business Days of its determination that it has satisfied such
requirement following any period during which it has failed to satisfy such
requirement. The Trust will also deliver a Preferred Shares Basic
Maintenance Report to the Auction Agent as of (i) the fifteenth day of each
month (or, if such day is not a Business Day, the next succeeding Business
Day) and (ii) the last Business Day of each month, in each case on or
before the third Business Day after such day. The Trust will also deliver
a Preferred Shares Basic Maintenance Report to Moody's or S&P, as the case
may be, for each Valuation Date that the Discounted Value of Moody's
Eligible Assets or S&P Eligible Assets is less than or equal to 125% of the
Preferred Shares Basic Maintenance Amount, provided, however, that if the
Valuation Date is every day that is a Business Day, the Trust will deliver
a Preferred Shares Basic Maintenance Report to Moody's or S&P, as the case
may be, for each Valuation Date that the Discounted Value of Moody's
Eligible Assets or S&P Eligible Assets is less than or equal to 105% of the
Preferred Shares Basic Maintenance Amount. The Trust will deliver a
Preferred Shares Basic Maintenance Report to Moody's upon request and when
the Trust redeems any shares of Common Shares of Beneficial Interest. The
Trust will deliver a Preferred Shares Basic Maintenance Report to S&P upon
request. A failure by the Trust to deliver a Preferred Shares Basic
Maintenance Report under this paragraph 7(b) shall be deemed to be delivery
of a Preferred Shares Basic Maintenance Report indicating the Discounted
Value for S&P Eligible Assets and Moody's Eligible Assets of the Trust is
less than the Preferred Shares Basic Maintenance Amount, as of the relevant
Valuation Date.
(c) Within ten Business Days after the date of delivery of a
Preferred Shares Basic Maintenance Report and a Certificate of Minimum
Liquidity in accordance with paragraph 7(b) above relating to a Quarterly
Valuation Date, the Trust shall cause the Independent Accountant to confirm
in writing to the Auction Agent, Moody's and S&P (i) the mathematical
accuracy of the calculations reflected in such Report (and in any other
Preferred Shares Basic Maintenance Report, randomly selected by the
Independent Accountant, that was delivered by the Trust during the quarter
ending on such Quarterly Valuation Date) and (with respect to S&P only
while S&P is rating the Preferred Shares) such Certificate, (ii) that, in
such Report (and in such randomly selected Report), the 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 Preferred Shares Basic Maintenance
Amount and Moody's Eligible Assets of an aggregate Discounted value at
least equal to the Preferred Shares Basic Maintenance Amount, (iv) that
(with respect 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 Municipal Obligations, the issuer
name, issue size and coupon rate listed in such Report and (with respect to
S&P only) such Certificate, that the Independent Accountant has requested
that S&P verify such information and the Independent Accountant shall
provide a listing in its letter of any differences, (vi) with respect to
the Moody's ratings on Municipal Obligations, the issuer name, issue size
and coupon rate listed in such Report and (with respect to S&P only) such
Certificate, that such information has been verified by Moody's (in the
event such information is not verified by Moody's, the Independent
Accountant will inquire of Moody's what such information is, and provide a
listing in its letter of any differences), and (vii) with respect to the
bid or mean price (or such alternative permissible factor used in
calculating the Market Value) provided by the custodian of the 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) (such confirmation is
herein called the ''Accountant's Confirmation").
(d) Within ten Business Days after the date of delivery to the
Auction Agent, S&P and Moody's of a Preferred Shares Basic Maintenance
Report in accordance with paragraph 7(b) above relating to any Valuation
Date on which the 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 Preferred Shares Basic
Maintenance Amount, and relating to the Preferred Shares Basic Maintenance
Cure Date with respect to such failure, the Independent Accountant will
provide to the Auction Agent, S&P and Moody's an Accountant's Confirmation
as to such Preferred Shares Basic Maintenance Report.
(e) If any Accountant's Confirmation delivered pursuant to
subparagraph (c) or (d) of this paragraph 7 shows that an error was made in
the Preferred Shares Basic Maintenance Report for a particular Valuation
Date for which such Accountant's Confirmation was required to be delivered,
or shows that a lower aggregate Discounted Value for the aggregate of all
S&P Eligible Assets or Moody's Eligible Assets, as the case may be, of the
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 Preferred Shares 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 Preferred Shares, the Trust
will complete and deliver to S&P and Moody's a Preferred Shares Basic
Maintenance Report as of the close of business on such Date of Original
Issue. Within five business days of such Date of Original Issue, the Trust
shall cause the Independent Accountant to confirm in writing to S&P and
Moody's (i) the mathematical accuracy of the calculations reflected in such
Report and (ii) that the aggregate Discounted Value of S&P Eligible Assets
and the aggregate Discounted Value of Moody's Eligible Assets reflected
thereon equals or exceeds the Preferred Shares Basic Maintenance Amount
reflected thereon.
(g) For so long as Preferred Shares are rated by Moody's, in managing
the Trust's portfolio, the Trust shall require that 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 Preferred
Shares Basic Maintenance Amount as of such Valuation Date; provided,
however, that in the event that, as of the immediately preceding Valuation
Date, the aggregate Discounted Value of Moody's Eligible Assets exceeded
the Preferred Shares Basic Maintenance Amount by twenty-five percent or
less (or, in the event the Valuation Date is every day that is a Business
Day, five percent or less), the Adviser will not alter the composition of
the 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
Preferred Shares Basic Maintenance Amount.
8. Minimum Liquidity Level. (i) For so long as any Preferred Shares
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 value not less
than the Dividend Coverage Amount.
(ii) As of each Valuation Date as long as any Preferred Shares
are rated by S&P, the Trust shall determine (A) the Market Value of
the Dividend Coverage Assets owned by the Trust as of that Valuation
Date, (B) the Dividend Coverage Amount on that Valuation Date, and (C)
whether the Minimum Liquidity Level is met as of that Valuation Date.
The calculations of the Dividend Coverage Assets, the Dividend
Coverage Amount and whether the Minimum Liquidity Level is met shall
be set forth in a certificate (a "Certificate of Minimum Liquidity'')
dated as of the Valuation Date. The Preferred Shares Basic
Maintenance Report and the Certificate of Minimum Liquidity may be
combined in one certificate. The Trust shall cause the Certificate of
Minimum Liquidity to be delivered to S&P not later than the close of
business on the third Business Day after the Valuation Date applicable
to such Certificate pursuant to paragraph 7(b). The Minimum Liquidity
Level shall be deemed to be met as of any date of determination if the
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.
(iii) If the Minimum Liquidity Level is not met as of any
Variation 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) so long as there are Preferred
Shares Outstanding, the Trust will enter into futures and options
transactions only for bona fide hedging purposes and not for leveraging or
speculative purposes. So long as Moody's and S&P are rating the Preferred
Shares, the Trust will only engage in futures or options transactions in
accordance with the then-current guidelines of such ratings agencies, only
if it is valuing its assets daily and only after it has received written
confirmation from Moody's and S&P, as appropriate, that such transactions
would not impair the ratings then assigned by S&P and Moody's to Preferred
Shares. The S&P guidelines in effect as of the Date of Original Issue are
set forth in their entirety in the following paragraph. The Trust may
engage in futures and options transactions in accordance therewith and such
transactions shall have the consequences included in such guidelines set
forth therein (as such guidelines are amended, modified and supplemented
from time to time by S&P), provided, however, that it may not engage in any
such transactions unless it has satisfied the relevant provisions of this
paragraph relating to complying with Moody's guidelines and obtaining
written confirmation from Moody's and S&P.
For so long as Preferred Shares are rated by S&P, the Trust will not,
unless it has received written confirmation from S&P that any such action
would not impair the rating then assigned by S&P to Preferred Shares,
purchase or sell futures contracts or options thereon or write uncovered
put or uncovered call options on portfolio securities except (provided that
the Trust has received such written confirmation in advance from S&P) that
(i) the Trust may engage in S&P Hedging Transactions based on the Municipal
Index, provided that (A) the Trust shall not engage in any S&P 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 (1) more than 1,000 outstanding futures contracts based on the
Municipal Index, (2) outstanding futures contracts based on Municipal Index
exceeding in number 25% of the quotient of the fair market value of the
Trust's total assets divided by 100,000 or (3) outstanding futures
contracts based on the Municipal Index exceeding in number 10% of the
average number of daily traded futures contracts based on the Municipal
Index in the month prior to the time of effecting such transaction as
reported by The Wall Street Journal and (ii) the Trust may engage in S&P
Hedging Transactions based on Treasury Bonds, provided that (A) the Trust
shall not engage in any S&P Hedging Transactions 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 (1) outstanding
futures contracts based on Treasury Bonds exceeding in number 25% of the
quotient of the fair market value of the Trust's total assets divided by
100,000 or (2) outstanding futures contracts based on Treasury Bonds
exceeding in number 10% of the average number of daily traded futures
contracts based on Treasury Bonds in the month prior to the time of
effecting such transaction as reported by The Wall Street Journal. For so
long as Preferred Shares are rated by S&P, the 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 (i) the Trust does not have S&P Eligible Assets with an aggregate
Discounted Value equal to or greater than the Preferred Shares Basic
Maintenance Amount on two consecutive Valuation Dates and (ii) the Trust is
required to pay Variation Margin on the second such Valuation Date. For so
long as Preferred Shares are rated by S&P, 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 securities
deliverable under such terms. For purposes of calculating the Discounted
Value of S&P Eligible Assets to determine compliance with the Preferred
Shares Basic Maintenance Amount, such Discounted Value shall be reduced 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. For so long as
Preferred Shares are rated by S&P, when the Trust writes a futures contract
or option thereon, it will maintain an amount of cash, cash equivalents or
short-term, fixed-income securities in a segregated account with the
Trust's custodian, so that the amount so segregated plus the amount of
Initial Margin and Variation Margin held in the account of the Trust's
broker equals the fair market value of the futures contract, except that in
the event the Trust writes a futures contract or option thereon which
requires delivery of an underlying security, the Trust shall hold such
underlying security.
(b) For so long as Preferred Shares are rated by Moody's or S&P, the
Trust will not, unless it has received written confirmation from Moody's
and/or S&P, as the case may be, that such action would not impair the
ratings then assigned to Preferred Shares by Moody's and/or S&P, as the
case may be, (i) borrow money, (ii) engage in short sales of securities,
(iii) lend any securities, (iv) issue any class or series of shares of
beneficial interest ranking prior to or on a parity with the Preferred
Shares with respect to the payment of dividends or the distribution of
assets upon dissolution, liquidation or winding up of the Trust, (v)
reissue any Preferred Shares previously purchased or redeemed by the Trust,
(vi) merge or consolidate into or with any other trust, (vii) change the
Pricing Service or (viii) engage in reverse repurchase agreements.
10. Notice. All notices or communications, unless otherwise
specified in 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:
(i) "Auction Date" shall mean the first Business Day preceding
the first day of a Dividend Period.
(ii) "Available Preferred Shares" shall have the meaning
specified in paragraph 11(d)(i) below.
(iii) "Bid" shall have the meaning specified in paragraph
11(b)(i) below.
(iv) "Bidder" shall have the meaning specified in paragraph
11(b)(i) below.
(v) "Hold Order" shall have the meaning specified in paragraph
11(b)(i) below.
(vi) "Maximum Applicable Rate,'' for any Dividend Payment Period
for the Preferred Shares will be the Applicable Percentage of the
higher of the 30-day "AA" Composite Commercial Paper Rate and the
Taxable Equivalent of the Short-Term Municipal Bond Rate except in the
case of a Special Dividend Period in which case the Maximum Applicable
Rate for any Dividend Payment Period included in such Special Dividend
Period will be the Applicable Percentage (determined on the date of
the Notice of Special Dividend Period in the case of any such Notice
that specifies a Maximum Applicable Rate applicable to such Special
Dividend Payment Period) of the Special Dividend Period Reference Rate
for such Dividend Payment Period. The Applicable Percentage will be
determined based on (i) the lower of the credit rating or ratings
assigned on such date to such shares by Moody's and S&P (or if Moody's
or S&P or both shall not make such 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 Preferred Shares as follows:
<TABLE>
<CAPTION>
Credit Ratings
--------------------------------- Applicable Percentage: Applicable Percentage:
Moody's S&P No Notification Notification
---------- -------- ---------------------- ----------------------
<S> <C> <C> <C>
"aa3" or higher AA- or higher 110% 150%
"a3" to "a1" A- to A+ 125% 160%
"baa3" to "baa1" BBB- to BBB+ 150% 250%
"ba3" to "ba1" BB- to BB+ 200% 275%
Below "ba3" Below BB- 250% 300%
</TABLE>
(vii) The Trust will take all reasonable action
necessary to enable Moody's and S&P to provide a rating for the
Preferred Shares. If either Moody's or S&P shall not make such a
rating available, or neither Moody's nor S&P shall make such a
rating available, Merrill Lynch, Pierce, Fenner & Smith
Incorporated or its affiliates and successors, after consultation
with the Trust, will select a nationally recognized statistical
rating organization (a "Substitute Rating Agency'') or two
nationally recognized statistical rating organizations
("Substitute Rating Agencies") to act as Substitute Rating Agency
or Substitute Rating Agencies, as the case may be; provided that
if such a rating is not made available with respect to the
Preferred Shares, Merrill Lynch, Pierce, Fenner & Smith or its
affiliates and successors, after consultation with the
Corporation, shall select a Substitute Rating Agency or Agencies.
(viii) "Minimum Applicable Rate" for any Dividend Payment
Period included in a Special Dividend Period for which Bid
Requirements are imposed will be such rate as may be specified by the
Trust in the Notice of Special Dividend Period relating to the Special
Dividend Period within which such Dividend Payment Period occurs.
(ix) ''Order'' shall have the meaning specified in
paragraph 11(b)(i) below.
(x) ''Preferred Shares'' shall mean the Preferred Shares being
auctioned pursuant to this paragraph 11.
(xi) ''Sell Order'' shall have the meaning specified in paragraph
11(b)(i) below.
(xii) ''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.
(xiii) "Submitted Bid" shall have the meaning specified in
paragraph 11(d)(i) below.
(xiv) "Submitted Hold Order'' shall have the meaning
specified in paragraph 11(d)(i) below.
(xv) "Submitted Order" shall have the meaning specified in
paragraph 11(d)(i) below.
(xvi) "Submitted Sell Order'' shall have the meaning
specified in paragraph 11(d)(i) below.
(xvii) "Sufficient Clearing Bids" shall have the meaning
specified in paragraph 11(d)(i) below.
(xviii) "Winning Bid Rate" shall have the meaning specified in
paragraph 11(d)(i) below.
(b) Orders by Existing Holders and Potential Holders.
(i) On or prior to the Submission Deadline on each Auction Date:
(A) each Existing Holder may submit to a Broker-Dealer information as
to:
(1) the number of Outstanding shares, if any, of Preferred
Shares held by such Existing Holder which such Existing Holder desires
to continue to hold without regard to the Applicable Rate for the next
succeeding Dividend Period;
(2) the number of Outstanding shares, if any, of Preferred
Shares held by such Existing Holder which such Existing Holder desires
to continue to hold, provided that the Applicable Rate for the next
succeeding Dividend Period shall not be less than the rate per annum
or, in the case of an Auction with Bid Requirements including a
Spread, the Spread specified by such Existing Holder; and/or
(3) the number of Outstanding shares, if any, of Preferred
Shares held by such Existing Holder which such Existing Holder offers
to sell without regard to the Applicable Rate for the next succeeding
Dividend Period; and
(B) each Broker-Dealer, using a list of Potential Holders that shall
be maintained in good faith for the purpose of conducting a competitive
Auction, shall contact Potential Holders, including Persons that are not
Existing Holders, on such list to determine the number of outstanding
shares, if any, of Preferred Shares which each such Potential Holder offers
to purchase, provided that the Applicable Rate for the next succeeding
Dividend Period shall not be less than the rate per annum or Spread
specified by such Potential Holder.
For the purposes hereof, the communication to a Broker-Dealer of
information referred to in clause (A) or (B) of this paragraph 11(b)(i) is
hereinafter referred to 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 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 Preferred Shares specified in such
Bid if the Applicable Rate determined on such Auction Date shall be
less than the rate per annum or Spread specified in such Bid; or
(2) such number of a lesser number of Outstanding Preferred
Shares to be determined as set forth in paragraph 11(e)(i)(D) if the
Applicable Rate determined on such Auction Date shall be equal to the
rate per annum or Spread specified therein; or
(3) a lesser number of Outstanding Preferred Shares to be
determined as set forth in paragraph 11(e)(ii)(C) if such specified
rate per annum shall be higher than the Maximum Applicable Rate and
Sufficient Clearing Bids do not exist.
(B) A Sell Order by an Existing Holder shall constitute an
irrevocable offer to sell:
(1) the number of Outstanding Preferred Shares specified in such
Sell Order; or
(2) such number or a lesser number of Outstanding Preferred
Shares to be determined as set forth in paragraph 11(e)(ii)(C) if
Sufficient Clearing Bids do not exist.
(C) A Bid by a Potential Holder shall constitute an irrevocable offer
to purchase:
(1) the number of Outstanding Preferred Shares specified in such
Bid if the Applicable Rate determined on such Auction Date shall be
higher than the rate per annum or Spread specified in such Bid; or
(2) such number or a lesser number of Outstanding Preferred
Shares to be determined as set forth in paragraph 11(e)(i)(E) if the
Applicable Rate determined on such Auction Date shall be equal to the
rate per annum or Spread specified therein.
(c) Submission of Orders by Broker-Dealers to Auction Agent.
(i) Each Broker-Dealer shall submit in writing or through the
Auction Agent's Auction Processing System to the Auction Agent prior
to the Submission Deadline on each Auction Date all Orders obtained by
such Broker-Dealer and specifying with respect to each Order:
(A) the name of the Bidder placing such Order;
(B) the aggregate number of Outstanding Preferred Shares that are 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 Preferred
Shares subject to any Hold Order placed by such Existing Holder;
(2) the number of Outstanding shares, if any, of Preferred
Shares subject to any Bid placed by such Existing Holder and the rate
per annum or Spread specified in such Bid; and
(3) the number of Outstanding shares, if any, of Preferred
Shares subject to any Sell Order placed by such Existing Holder; and
(D) (i) to the extent such Bidder is a Potential Holder, the rate
per annum or Spread specified in such Potential Holder's Bid.
(ii) If any rate per annum or Spread specified in any Bid
contains more than three figures to the right of the decimal point,
the Auction Agent shall round such rate up to the next highest one-
thousandth (.001) of 1% and shall round such Spread to the next
highest one-thousandth (.001) of a basis point.
(iii) If an Order or Orders covering all of the Outstanding
Preferred Shares held by an Existing Holder is not submitted to the
Auction Agent prior to the Submission Deadline, the Auction Agent
shall deem a Hold Order to have been submitted on behalf of such
Existing Holder covering the number of Outstanding Preferred Shares
held by such Existing Holder and not subject to Orders submitted to
the Auction Agent; provided, however, that with respect to an Auction
to establish a Special Dividend Period longer than 91 days, the
Auction Agent shall deem a Sell Order to have been submitted an behalf
of such Existing Holder covering such number of Outstanding Preferred
Shares.
(iv) If one or more Orders on behalf of an Existing Holder
covering in the aggregate more than the number of Outstanding
Preferred Shares held by such Existing Holder are submitted to the
Auction Agent, such orders shall be considered valid as follows and in
the following order of priority:
(A) any Hold Order submitted on behalf of such Existing Holder shall
be considered valid up to and including the number of Outstanding Preferred
Shares held by such Existing Holder; provided that if more than one Hold
Order is submitted on behalf of such Existing Holder and the number of
Preferred Shares subject to such Hold orders exceed the number of
Outstanding Preferred Shares held by such Existing Holder, the number of
Preferred Shares subject to each of such Hold Orders shall be reduced pro
rata so that such Hold Orders, in the aggregate, will cover exactly the
number of Outstanding Preferred Shares held by such Existing Holder;
(B) any Bids submitted on behalf of such Existing Holder shall be
considered valid, in the ascending order of their respective rates per
annum or Spread, if more than one Bid is submitted on behalf of such
Existing Holder, up to and including the excess of the number of
Outstanding Preferred Shares held by such Existing Holder over the number
of Preferred Shares subject to any Hold Order referred to in paragraph
11(c)(iv)(A) above (and if more than one Bid submitted on behalf of such
Existing Holder specifies the same rate per annum or Spread and together
they cover more than the remaining number of shares that can be the subject
of valid Bids after application of paragraph 11(c)(iv)(A) above and of the
foregoing portion of this paragraph 11(c)(iv)(B) to any Bid or Bids
specifying a lower rate or rates per annum or Spread, the number of shares
subject to each of such Bids shall be reduced pro rata so that such Bids,
in the aggregate, cover exactly such remaining number of shares); and the
number of shares, if any, subject to Bids not valid under this paragraph
11(c)(iv)(B) shall be treated as the subject of a Bid by a Potential
Holder; and
(C) any Sell Order shall be considered valid up to and including the
excess of the number of Outstanding Preferred Shares held by such Existing
Holder over the number of Preferred Shares subject to Hold Orders referred
to in paragraph 11(c)(iv)(A) and Bids referred to in paragraph
11(c)(iv)(provided that if more than one Sell Order is submitted on behalf
of any Existing Holder and the number of Preferred Shares subject to such
Sell Orders is greater than such excess, the number of Preferred Shares
subject to each of such Sell Orders shall be reduced pro rata so that such
Sell Orders, in the aggregate, cover exactly the number of Preferred Shares
equal to such excess.
(v) If more than one Bid is submitted on behalf of any Potential
Holder, each Bid submitted shall be a separate Bid with the rate per
annum or Spread and number of Preferred Shares specified.
(vi) Any Bid by an Existing Holder that specifies a Spread, with
respect to an Auction in which a Spread is not included in any Bid
Requirements or in which there are no Bid Requirements and any order
that does not specify a Spread with respect to an Auction in which a
Spread is included in any Bid Requirements shall be treated as a Sell
Order.
(d) Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate.
(i) Not earlier than the Submission Deadline on each Auction
Date, the Auction Agent shall assemble all Orders submitted or deemed
submitted to it by the Broker-Dealers (each such order as submitted or
deemed submitted by a Broker-Dealer being hereinafter referred to
individually as a "Submitted Hold Order", a "Submitted Bid" 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 Preferred Shares
over the number of outstanding Preferred Shares that are the subject of
Submitted Hold Orders (such excess being hereinafter referred to as the
"Available Preferred Shares");
(B) from the Submitted Orders whether the number of outstanding
Preferred Shares that are the subject of Submitted Bids by Potential
Holders specifying one or more rates per annum or Spreads that result in
one or more rates per annum on such date equal to or lower than the Maximum
Applicable Rate in effect for the first Dividend Payment Period after the
Auction Date exceeds or is equal to the sum of:
(1) the number of outstanding Preferred Shares that are the
subject of Submitted Bids by Existing Holders specifying one or more
rates per annum or Spreads that result in one or more rates per annum
on such date higher than such Maximum Applicable Rate, and
(2) the number of outstanding Preferred Shares that are subject
to Submitted Sell Orders (if such excess or such equality exists
(other than because the number of Outstanding Preferred Shares in
clauses (1) and (2) above are each zero because all of the Outstanding
Preferred Shares are the subject of Submitted Hold Orders), such
Submitted Bids by Potential Holders being hereinafter referred to
collectively as "Sufficient Clearing Bids''); and
(C) if Sufficient Clearirg Bids exist, the lowest rate per annum or,
in the case of an Auction with Bid Requirements including a Spread, the
lowest Spread specified in the Submitted Bids (the "Winning Bid Rate") that
if:
(1) each Submitted Bid from Existing Holders specifying the
Winning Bid Rate and all other Submitted Bids from Existing Holders
specifying lower rates per annum or Spreads were rejected, thus
entitling such Existing Holders to continue to hold the Preferred
Shares that are the subject of such Submitted Bids, and
(2) each Submitted Bid from Potential Holders specifying the
Winning Bid Rate and all other Submitted Bids from Potential Holders
specifying lower rates per axanmn or Spreads were accepted, thus
entitling the Potential Holders to purchase the Preferred Shares that
are the subject of such Submitted Bids, would result in the number of
shares subject to all Submitted Bids specifying the Winning Bid Rate
or a lower rate per annum or Spread being at least equal to the
Available Preferred Shares.
(D) For purposes of this Certificate of Designation, a positive
Spread shall be considered lower than another positive Spread to the extent
it is a lower number, a Spread of zero shall be considered lower than a
positive Spread, a negative Spread shall be considered lower than a Spread
of zero and a negative Spread shall be considered lower than another
negative Spread to the extent it is a higher number.
(ii) Promptly after the Auction Agent has made the determinations
pursuant to paragraph 11(d)(i), the Auction Agent shall advise the
Trust of the Maximum Applicable Rate (or, in the event the Trust has
specified a Maximum Applicable Rate or Rates, or a Minimum Applicable
Rate or Rates the Auction Agent shall confirm to the Trust the
calculation of such Maximum Applicable Rate or Rates or such Minimum
Applicable Rate or Rates) and, based on such determinations, the
Applicable Rate for the next succeeding Dividend Period as follows:
(A) if Sufficient Clearing Bids exist, that the Applicable Rate for
the next succeeding Dividend Period shall be equal to the Winning Bid Rate,
subject to the effect of any applicable Minimum Applicable Rate and any
applicable Maximum Applicable Rate;
(B) if Sufficient Clearing Bids do not exist (other than because all
of the Outstanding Preferred Shares are the subject of Submitted Hold
Orders and other than in the event the Auction is being conducted with
respect to a Special Dividend Period), that the Applicable Rate for the
next succeeding Dividend Period shall be equal to the Maximum Applicable
Rate;
(C) if all of the Outstanding Preferred Shares are the subject of
Submitted Hold orders that the Dividend Period next succeeding the Auction
shall automatically be the same length as the immediately preceding
Dividend Period and the Applicable Rate for the next succeeding Dividend
Period will be the higher of the 30-day "AA" Composite Commercial Paper
Rate and the Taxable Equivalent of the Short-Term Municipal Bond Rate
multiplied by 1 minus the maximum marginal combined regular Federal Florida
income tax rate then applicable to ordinary income or the maximum marginal
regular Federal corporate tax rate then applicable, whichever is greater
(or 90% of such rate if the Trust has provided notification to the Auction
Agent prior to the Auction establishing the Applicable Rate for any
dividend pursuant to paragraph 2(f) hereof that net capital gains or other
taxable income will be included in such dividend on Preferred Shares) on
the date of the Auction; or
(D) If the Auction is being conducted with respect to a Special
Dividend Period and Sufficient Clearing Bids do not exist, that the
Dividend Period next succeeding the Aucticn shall automatically be 7 days
and the Applicable Rate for the next succeeding Dividend Period will be as
set forth in paragraph 11(d)(ii)(C) above.
(e) Acceptance and Rejection of Submitted Bids and Submitted Sell
Orders and Allocation of Shares. Based on the determinationa 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 ail other Submitted Bids shall be
rejected:
(A) the Submitted Sell Orders of Existing Holders shall be accepted
and the Submitted Bid of each of the Existing Holders specifying any rate
per annum or Spread that is higher than the Winning Bid Rate shall be
accepted, thus requiring each such Existing Holder to sell the Outstanding
Preferred Shakes that are the subject of such Submitted Sell order or
Submitted Bid;
(B) the Submitted Bid of each of the Existing Holders specifying any
rate per annum or Spread that is lower than the Winning Bid Rate shall be
rejected, thus entitling each such Existing Holder to continue to hold the
outstanding Preferred Shares that are the subject of such Submitted Bid;
(C) the Submitted Bid of each of the Potential Holders specifying any
rate per annum that is lower than the Winning Bid Rate or Spread shall be
accepted;
(D) the Submitted Bid of each of the Existing Holders specifying a
rate per annum or Spread that is equal to the Winning Bid Rate shall be
rejected, thus entitling each such Existing Holder to continue to hold the
Outstanding Preferred Shares that are the subject of such Submitted Bid,
unless the number of outstanding Preferred Shares subject to all such
Submitted Bids shall be greater than the number of Outstanding Preferred
Shares ("Remaining Shares") equal to the excess of the Available Preferred
Shares over the number of Outstanding Preferred Shares subject to Submitted
Bids described in paragraph 11(e)(i)(B) and paragraph 11(e)(i)(C), in which
event the Submitted Bids of each such Existing Holder shall be accepted,
and each such Existing Holder shall be required to sell outstanding
Preferred Shares, but only in an amount equal to the difference between (1)
the number of Outstanding Preferred Shares then held by such Existing
Holder subject to such Submitted Bid and (2) the number of Preferred Shares
obtained by multiplying (x) the number of Remaining Shares by (y) a
fraction the numerator of which shall be the number of Outstanding
Preferred Shares held by such Existing Holder subject to such Submitted Bid
and the denominator of which shall be the sum of the numbers of Outstanding
Preferred Shares subject to such Submitted Bids made by all such Existing
Holders that specified a rate per annum or Spread equal to the Winning Bid
Rate; and
(E) the Submitted Bid of each of the Potential Holders specifying a
rate per annum or Spread that is equal to the Winning Bid Rate shall be
accepted but only in an amount equal to the number of Outstanding Preferred
Shares obtained by multiplying (x) the difference between the Available
Preferred Shares and the number of Outstanding Preferred Shares subject to
Submitted Bids described 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 Preferred Shares subject to such Submitted Bid
and the denominator of which shall be the sum of the numbers of Outstanding
Preferred Shares subject to such Submitted Bids made by all such Potential
Holders that specified a rate per annum or Spread equal to the Winning Bid
Rate.
(ii) If Sufficient Clearing Bids have not been made (other than
because all of the Outstanding Preferred Shares are subject to
Submitted Hold orders), subject to the provisions of paragraph
11(e)(iii), Submitted Holders shall be accepted or rejected as follows
in the following order of priority and all other Submitted Bids shall
be rejected:
(A) The Submitted Bid of each Existing Holder specifying any rate per
annum or Spread that is equal to or lower than the Maximum Applicable Rate
(a Bid specifying a Spread being converted to a rate per annum for this
purpose by applying the Spread to the most recently available Reference
Index or Reference Security) shall be rejected, thus entitling such
Existing Holder to continue to hold the Outstanding Preferred Shares that
are the subject of such Submitted Bid;
(B) the Submitted Bid of each Potential Holder specifying any rate
per annum or Spread that is equal to or lower than the Maximum Applicable
Rate (a Bid specifying a Spread being converted to a rate per annum for
this purpose by applying the Spread to the most recently available
Reference Index or Reference Security) shall be accepted, thus requiring
such Potential Holder to purchase the Outstanding Preferred Shares that are
the subject of such Submitted Bid; and
(C) the Submitted Bids of each Existing Holder specifying any rate
per annum or Spread that is higher than the Maximum Applicable Rate (a Bid
specifying a Spread being converted to a rate per annum for this purpose by
applying the Spread to the most recently available Reference Index or
Reference Security) shall be accepted and the Submitted Sell Orders of each
Existing Holder shall be accepted, in both cases only in an amount equal to
the difference between (1) the number of Outstanding Preferred Shares then
held by such Existing Holder subject to such Submitted Bid or Submitted
Sell Order and (2) the number of Preferred Shares obtained by multiplying
(x) the difference between the Available Preferred Shares and the aggregate
number of Outstanding Preferred Shares subject to Submitted Bids described
in paragraph 11(e)(ii)(A) and paragraph 11(e)(ii)(B) by (y) a fraction the
numerator of which shall be the number of Outstanding Preferred Shares held
by much Existing Holder subject to such Submitted Bid or Submitted Sell
Order and the denominator of which shall be the number of outstanding
Preferred Shares subject to all such Submitted Bids and Submitted Sell
Orders.
(iii) If, as a result of the procedures described in
paragraph 11(e)(i) or paragraph 11(e)(ii), any Existing Holder would
be entitled or required to sell, or any Potential Holder would be
entitled or required to purchase, a fraction of a share of Preferred
Shares on any Auction Date, the Auction Agent shall, in such manner as
in its sole discretion it shall determine, round up or down the number
of Preferred Shares to be purchased or sold by any Existing Holder or
Potential Holder on such Auction Date so that each Outstanding share
of Preferred Shares purchased or sold by each Existing Holder or
Potential Holder on such Auction Date shall be a whole share of
Preferred Shares.
(iv) if, as a result of the procedures described in paragraph
11(e)(i), any Potential Holder would be entitled or required to
purchase less than a whole share of Preferred Shares on any Auction
Date, the Auction Agent shall, in such manner as in its sole
discretion it shall determine, allocate Preferred Shares for purchase
among Potential Holders so that only whole Preferred Shares are
purchased on such Auction Date by any Potential Holder, even if such
allocation results in one or more of such Potential Holders not
purchasing any Preferred Shares on such Auction Date.
(v) Based on the results of each Auction, the Auction Agent
shall determine, with respect to each Broker-Dealer that submitted
Bids or Sell Orders on behalf of Existing Holders or Potential
Holders, the aggregate number of Outstanding Preferred Shares to be
purchased and the aggregate number of Outstanding Preferred Shares to
be sold by such Potential Holders and Existing Holders and, to the
extent that such aggregate number of outstanding shares to be
purchased and such aggregate number of Outstanding shares to be sold
differ, the Auction Agent shall determine to which other Broker-Dealer
or Broker-Dealers acting for one or more purchasers such Broker-Dealer
shall deliver, or from which other Broker-Dealer or Broker-Dealers
acting for one or more sellers such Broker-Dealer shall receive, as
the case may be, Outstanding Preferred Shares.
(f) Miscellaneous. An Existing Holder (A) may sell, transfer or
otherwise dispose of Preferred Shares only pursuant to a Bid or Sell Order
in accordance with the procedures described in this paragraph 11 or to or
through a broker-dealer, provided that in the case of all transfers other
than pursuant to Auctions such Existing Holder, its Broker-Dealer or its
Agent member advises the Auction Agent of such transfer and (B) except as
otherwise required by law, shall have the ownership of the Preferred Shares
held by it maintained in book entry form by the Securities Depository in
the account of its Agent Member, which in turn will maintain records of
such Existing Holder's beneficial ownership. Neither the 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 Preferred
Shares to any Person other than the Trust. All of the Outstanding
Preferred Shares 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 Preferred Shares may be
registered in the Share 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 Preferred Shares
shall be issued to the Securities Depository and registered in the name of
the Securities Depository or its nominee. Additional certificates may be
issued as necessary to represent Preferred Shares. All such certificates
shall bear a legend to the effect that such certificates are issued subject
to the provisions restricting the transfer of Preferred Shares contained in
this Certificate of Designation. Unless the Trust shall have elected,
during a Non-Payment Period, to waive this requirement, the Trust will also
issue stop-transfer instructions to the Auction Agent for the Preferred
Shares. Except as provided in paragraph (b) below, the Securities
Depository or its nominee will be the Holder, and no existing Holder shall
receive certificates representing its ownership interest in such shares.
(b) If the Applicable Rate applicable to all Preferred Shares shall
be the Non-Payment Period Rate or there is no Securities Depository, the
Trust may at its option issue one or more new certificates with respect to
such shares (without the legend referred to in paragraph 12(a)) registered
in the names of the Existing Holders or their nominees and rescind the
stop-transfer instructions referred to in paragraph 12(a) with respect to
such shares.
13. Interpretations. The Board of Trustees may interpret the
provisions of this Certificate of Designation to resolve any inconsistency
or ambiguity, remedy any formal defect or make any other change or
modification that does not adversely affect the rights of Existing Holders
of Preferred Shares.
IN WITNESS WHEREOF, the undersigned has caused this Amended and
Restated Certificate of Designation Establishing Preferred Shares to be
executed as of June 13, 1995.
/s/ Karen H. Sabath
----------------------------
Karen H. Sabath
Secretary
State of New York )
) ss
County of New York )
Then personally appeared before me Karen H. Sabath, who acknowledged
the foregoing instrument to be her free act and deed and the free act and
deed in her capacity as Secretary of the BlackRock Florida Insured
Municipal 2008 Term Trust.
Before me,
MARY A. PABON
Notary Public, State of New York
No. 01-PA5032777
Qualified in Orange County
Commission Expires Sept. 6, 1996
Notary Public [Mary Pabon]
My commission expires:______________________
FORM OF
CERTIFICATE OF DESIGNATION
OF THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM TRUST
THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM TRUST, a
Massachusetts business trust (the "Trust"), certifies to the Secretary of
the Commonwealth of The Commonwealth of Massachusetts that:
FIRST: Pursuant to the authority expressly vested in the Board of
Trustees of the Trust in the Trust's Declaration of Trust, the Board of
Trustees has authorized 726 preferred shares of beneficial interest, par
value $0.01 per share, liquidation preference $25,000, by increasing the
number of authorized preferred shares of beneficial interest designated as
Auction Rate Municipal Preferred Shares of Beneficial Interest, Series R7
from 2,640 to 3,366.
SECOND: All of the authorized shares of the Auction Rate Municipal
Preferred Stock, Series R7 shall be subject in all respects to identical
preferences, voting powers, restrictions, qualifications, and terms and
conditions of redemption; provided, however, that the Initial Dividend
Period for such 726 shares shall be days and the Initial Dividend Rate for
such shares shall be %.
IN WITNESS WHEREOF, the Trust has caused this Certificate of
Designation to be signed and acknowledged in its name and on its behalf on
this ___ day of , 2000, by its President, who acknowledges that this
Certificate of Designation is the act of the Trust and, to the best of his
knowledge, information and belief and under penalties of perjury, all
matters and facts contained in this Certificate of Designation are true in
all material respects.
THE BLACKROCK FLORIDA
INSURED MUNICIPAL 2008 TERM
TRUST
By:_____________________________
Ralph L. Schlosstein
President
Attest:
--------------------------------
Karen H. Sabath
Secretary
BY-LAWS
OF
THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008
TERM TRUST INC.
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the Trust
shall be in the City of Baltimore, State of Maryland.
Section 2. Executive Office. The principal executive offices of
the Trust shall be at 800 Scudders Mill Road, Plainsboro, New Jersey
08536.
Section 3. Other Offices. The Trust may have such other offices
in such places as the Board of Directors may from time to time determine.
ARTICLE II
Meetings of Stockholders
Section 1. Annual Meeting. An annual meeting of the shareholders
of the Trust for the election of directors and for the transaction of such
other business as may properly be brought before the meeting shall be held
in May of each year.
Section 2. Special Meetings. Special meetings of the
shareholders, unless otherwise provided by law or by the Declaration of
Trust, may be called for any purpose or purposes by a majority of the Board
of Trustees, the President, or on the written request of the holders of at
least 25% of the outstanding capital stock of the Corporation entitled to
vote at such meeting.
Section 3. Place of Meetings. Annual and special meetings of the
stockholders shall be held at such place within the United States as the
Board of Directors may from time to time determine.
Section 4. Notice of Meetings; Waiver of Notice. Notice of the
place, date and time of the holding of each annual and special meeting of
the shareholders and the purpose or purposes of each special meeting shall
be given personally or by mail, not less than ten nor more than ninety days
before the date of such meeting, to each shareholder entitled to vote at
such meeting and to each other shareholder entitled to notice of the
meeting. Notice by mail shall be deemed to be duly given when deposited in
the United States mail addressed to the shareholder at his address as it
appears on the records of the Trust, with postage thereon prepaid.
Notice of any meeting of shareholders shall be deemed waived by any
shareholder who shall attend such meeting in person or by proxy, or who
shall, either before or after the meeting, submit a signed waiver of notice
which is filed with the records of the meeting. When a meeting is
adjourned to another time and place, unless the Board of Trustees, after
the adjournment, shall fix a new record date for an adjourned meeting, or
the adjournment is for more than one hundred and twenty days after the
original record date, notice of such adjourned meeting need not be given if
the time and place to which the meeting shall be adjourned were announced
at the meeting at which the adjournment is taken.
Section 5. Quorum. At all meetings of the shareholders, the
holders of a majority of the shares of the Trust entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum for the
transaction of any business, except as otherwise provided by statute or by
the Declaration of Trust. In the absence of a quorum no business may be
transacted, except that the holders of a majority of the shares present in
person or by proxy and entitled to vote may adjourn the meeting from time
to time, without notice other than announcement thereat except as otherwise
required by these By-Laws, until the holders of the requisite amount of
shares of stock shall be so present. At any such adjourned meeting at
which a quorum may be present any business may be transacted which might
have been transacted at the meeting as originally called. The absence from
any meeting, in person or by proxy, of holders of the number of shares of
the Trust in excess of a majority thereof which may be required by the laws
of the Commonwealth of Massachusetts, the Investment Company Act of 1940,
as amended, or other applicable statute, the Declaration of Trust, or these
By-Laws, for action upon any given matter shall not prevent action at such
meeting upon any other matter or matters which may properly come before the
meeting, if there shall be present thereat, in person or by proxy, holders
of the number of shares of stock of the Trust required for action in
respect of such other matter or matters.
Section 6. Organization. At each meeting of the shareholders, the
Chairman of the Board (if one has been designated by the Board), or in the
Chairman of the Board's absence or inability to act, the President, or in
the absence or inability of the Chairman of the Board and the President, a
Vice President, shall act as chairman of the meeting. The Secretary, or in
the Secretary's absence or inability to act, any person appointed by the
chairman of the meeting, shall act as secretary of the meeting and keep
the minutes thereof.
Section 7. Order of Business. The order of business at all
meetings of the stockholders shall be as determined by the chairman of the
meeting.
Section 8. Voting. Except as otherwise provided by statute or the
Declaration of Trust, each holder of record of shares of the Trust having
voting power shall be entitled at each meeting of the shareholders to one
vote for every such share standing in such shareholder's name on the record
of shareholders of the Trust as of the record date determined pursuant to
Section 9 of this Article or if such record date shall not have been so
fixed, then at the later of (i) the close of business on the day on which
notice of the meeting is mailed or (ii) the thirtieth day before the
meeting.
Each shareholder entitled to vote at any meeting of shareholders may
authorize another person or persons to act for him by a proxy signed by
such shareholder or his attorney-in-fact. No proxy shall be valid after
the expiration of eleven months from the date thereof, unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure of
the shareholder executing it, except in those cases where such proxy states
that it is irrevocable and where an irrevocable proxy is permitted by law.
Except as otherwise provided by statute, the Declaration of Trust or these
By-Laws, any corporate action to be taken by vote of the shareholders shall
be authorized by a majority of the total votes cast at a meeting of
shareholders by the holders of shares present in person or represented by
proxy and entitled to vote on such action.
If a vote shall be taken on any question other than the election of
trustees, which shall be by written ballot, then unless required by statute
or these By-Laws, or determined by the chairman of the meeting to be
advisable, any such vote need not be by ballot. On a vote by ballot, each
ballot shall be signed by the shareholder voting, or by his proxy, if there
be such proxy, and shall state the number of shares voted.
Section 9. Fixing of Record Date. The Board of Directors may set
a record date for the purpose of determining shareholders entitled to vote
at any meeting of the shareholders. The record date, which may not be
prior to the close of business on the day the record date is fixed, shall
be not more than ninety nor less than ten days before the date of the
meeting of the shareholders. All persons who were holders of record of
shares at such time, and not others, shall be entitled to vote at such
meeting and any adjournment thereof.
Section 10. Inspectors. The Board may, in advance of any meeting
of shareholders, appoint one or more inspectors to act at such meeting or
any adjournment thereof. If the inspector shall not be so appointed or if
any of them shall fail to appear or act, the chairman of the meeting may,
and on the request of any shareholder entitled to vote thereat shall,
appoint inspectors. Each inspector, before entering upon the discharge of
his duties, shall take and sign an oath to execute faithfully the duties of
inspector at such meeting with strict impartiality and according to the
best of his ability. The inspectors shall determine the number of shares
outstanding and the voting powers of each, the number of shares represented
at the meeting, the existence of a quorum, the validity and effect of
proxies, and shall receive votes, ballots or consents, hear and determine
all challenges and questions arising in connection with the right to vote,
count and tabulate all votes, ballots or consents, determine the result,
and do such acts as are proper to conduct the election or vote with
fairness to all shareholders. On request of the chairman of the meeting or
any shareholder entitled to vote thereat, the inspectors shall make a
report in writing of any challenge, request or matter determined by them
and shall execute a certificate of any fact found by them. No trustee or
candidate for the office of trustee shall act as inspector of an election
of directors. Inspectors need not be shareholders.
Section 11. Consent of Shareholders in Lieu of Meeting. Except as
otherwise provided by statute or the Declaration of Trust, any action
required to be taken at any annual or special meeting of shareholders, or
any action which may be taken at any annual or special meeting of such
shareholders, may be taken without a meeting, without prior notice and
without a vote, if the following are filed with the records of shareholders
meetings: (i) a unanimous written consent which sets forth the action and
is signed by each shareholder entitled to vote on the matter and (ii) a
written waiver of any right to dissent signed by each shareholder entitled
to notice of the meeting but not entitled to vote thereat.
ARTICLE III
Board of Directors
Section 1. General Powers. Except as otherwise provided in the
Declaration of Trust, the business and affairs of the Trust shall be
managed under the direction of the Board of Trustees. All powers of the
Trust may be exercised by or under authority of the Board of Trustees
except as conferred on or reserved to the shareholders by law or by the
Declaration of Trust or these By-Laws.
Section 2. Number of Trustees. The number of trustees shall be
fixed from time to time by resolution of the Board of Trustees adopted by a
majority of the Trustees then in office; provided, however, that the number
of Trustees shall in no event be less than two nor more than nine. Any
vacancy created by an increase in Trustees may be filled in accordance with
Section 6 of this Article III. No reduction in the number of trustees
shall have the effect of removing any trustee from office prior to the
expiration of his term. Trustees need not be shareholders.
Section 3. Election and Term of Trustees. Each class of Trustees
as to which vacancies exist shall be elected by written ballot at the
annual meeting of shareholders, or a special meeting held for that purpose
unless otherwise provided by statute or the Declaration of Trust. The term
of office of each trustee shall be from the time of his election and
qualification until the expiration of the term of his class or until the
annual election of trustees next succeeding his election and until his
successor shall have been elected and shall have qualified, or until his
death, or until he shall have resigned, or have been removed as hereinafter
provided in these By-Laws, or as otherwise provided by statute or the
Declaration of Trust.
Section 4. Resignation. A trustee of the Trust may resign at any
time by giving written notice of his resignation to the Board or the
Chairman of the Board or the President or the Secretary. Any such
resignation shall take effect at the time specified therein or, if the time
when it shall become effective shall not be specified therein, immediately
upon its receipt; and, unless otherwise specified therein, the acceptance
of such resignation shall not be necessary to make it effective.
Section 5. Removal of Trustees. Any trustee of the Trust may be
removed for cause (but not without cause) by the shareholders by a vote of
seventy-five percent (75%) of the votes entitled to be cast for the
election of trustees.
Section 6. Vacancies. Subject to the provisions of the Investment
Company Act of 1940, as amended, any vacancies in the Board, whether
arising from death, resignation, removal, an increase in the number of
trustees or any other cause, shall be filled by a vote of the Board of
Trustees in accordance with the Declaration of Trust.
Section 7. Place of Meetings. Meetings of the Board may be held
at such place as the Board may from time to time determine or as shall be
specified in the notice of such meeting.
Section 8. Regular Meeting. Regular meetings of the Board may be
held without notice at such time and place as may be determined by the
Board of Trustees.
Section 9. Special Meetings. Special meetings of the Board may be
called by two or more trustees of the Trust or by the Chairman of the Board
or the President.
Section 10. Annual Meeting. The annual meeting of each newly
elected Board of Trustees (including a Board of Trustees to which only one
class of Trustees has been newly elected) shall be held as soon as
practicable after the meeting of shareholders at which trustees were
elected. No notice of such annual meeting shall be necessary if held
immediately after the adjournment, and at the site, of the meeting of
shareholders. If not so held, notice shall be given as hereinafter
provided for special meetings of the Board of Trustees.
Section 11. Notice of Special Meetings. Notice of each special
meeting of the Board shall be given by the Secretary as hereinafter
provided, in which notice shall be stated the time and place of the
meeting. Notice of each such meeting shall be delivered to each trustee,
either personally or by telephone or any standard form of
telecommunication, at least twenty-four hours before the time at which such
meeting is to be held, or mailed by first-class mail, postage prepaid,
addressed to him at his residence or usual place of business, at least
three days before the day on which such meeting is to be held.
Section 12. Waiver of Notice of Meetings. Notice of any special
meeting need not be given to any trustee who shall, either before or after
the meeting, sign a written waiver of notice which is filed with the
records of the meeting or who shall attend such meeting. Except as
otherwise specifically required by these By-Laws, a notice or waiver of
notice of any meeting need not state the purpose of such meeting.
Section 13. Quorum and Voting. One-third, but not less than two,
of the members of the entire Board shall be present in person at any
meeting of the Board in order to constitute a quorum for the transaction of
business at such meeting, and except as otherwise expressly required by
statute, the Declaration of Trust, these By-Laws, the Investment Company
Act of 1940, as amended, or other applicable statute, the act of a majority
of the trustees present at any meeting at which a quorum is present shall
be the act of the Board; provided, however, that the approval of any
contract with an investment adviser or principal underwriter, as such terms
are defined in the Investment Company Act of 1940, as amended, which the
Trust enters into or any renewal or amendment thereof, the approval of the
fidelity bond required by the Investment Company Act of 1940, as amended,
and the selection of the Trust's independent public accountants shall each
require the affirmative vote of a majority of the trustees who are not
interested persons, as defined in the Investment Company Act of 1940, as
amended, of the Trust. In the absence of a quorum at any meeting of the
Board, a majority of the trustees present thereat may adjourn such meeting
to another time and place until a quorum shall be present thereat. Notice
of the time and place of any such adjourned meeting shall be given to the
trustees who were not present at the time of the adjournment and, unless
such time and place were announced at the meeting at which the adjournment
was taken, to the other trustees. At any adjourned meeting at which a
quorum is present, any business may be transacted which might have been
transacted at the meeting as originally called.
Section 14. Organization. The Board may, by resolution adopted by
a majority of the entire Board, designate a Chairman of the Board, who
shall preside at each meeting of the Board. In the absence or inability of
the Chairman of the Board to preside at a meeting, the President or, in his
absence or inability to act, another director chosen by a majority of the
trustees present, shall act as chairman of the meeting and preside thereat.
The Secretary (or, in his absence or inability to act, any person appointed
by the Chairman) shall act as secretary of the meeting and keep the minutes
thereof.
Section 15. Written Consent of Trustees in Lieu of a Meeting.
Subject to the provisions of the Investment Company Act of 1940, as
amended, any action required or permitted to be taken at any meeting of the
Board of Trustees or of any committee thereof may be taken without a
meeting if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writings or writing are filed with the
minutes of the proceedings of the Board or committee.
Section 16. Compensation. Trustees may receive compensation for
services to the Trust in their capacities as trustees or otherwise in such
manner and in such amounts as may be fixed from time to time by the Board.
Section 17. Investment Policies. It shall be the duty of the Board
of Trustees to ensure that the purchase, sale, retention and disposal of
portfolio securities and the other investment practices of the Trust are at
all times consistent with the investment policies and restrictions with
respect to securities investments and otherwise of the Trust, as recited in
the Prospectus included in the registration statement of the Trust covering
the initial public offering of shares of its common shares of beneficial
interest, as filed with the Securities and Exchange Commission (or as such
investment policies and restrictions may be modified by the Board of
Trustees or, if required, by majority vote of the shareholders of the Trust
in accordance with the Investment Company Act of 1940, as amended) and as
required by the Investment Company Act of 1940, as amended. The Board,
however, may delegate the duty of management of the assets and the
administration of its day to day operations to one or more individuals or
corporate management companies and/or investment advisers pursuant to a
written contract or contracts which have obtained the requisite approvals,
including the requisite approvals of renewals thereof, of the Board of
Trustees and/or the shareholders of the Trust in accordance with the
provisions of the Investment Company Act of 1940, as amended.
Section 18. Asset Value. The Board of Trustees shall determine the
times and method of calculation of the net asset value per share of the
Fund subject to conditions with the requirements of the 1940 Act.
ARTICLE IV
Committees
Section 1. Committees of the Board. The Board of Trustees may
from time to time, by resolution adopted by a majority of the whole Board,
designate one or more committees of the Board, each such committee to
consist of two or more trustees and to have such powers and duties as the
Board of Trustees may, by resolution, prescribe.
Section 2. General. One-third, but not less than two, of the
members of any committee shall be present in person at any meeting of such
committee in order to constitute a quorum for the transaction of business
at such meeting, and the act of a majority present shall be the act of such
committee. The Board may designate a chairman of any committee and such
chairman or any two members of any committee may fix the time and place of
its meetings unless the Board shall otherwise provide. In the absence or
disqualification of any member of any committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or
not he or they constitute a quorum, may unanimously appoint another member
of the Board of Trustees to act at the meeting in the place of any such
absent or disqualified member. The Board shall have the power at any time
to change the membership of any committee, to fill all vacancies, to
designate alternate members to replace any absent or disqualified member,
or to dissolve any such committee. Nothing herein shall be deemed to
prevent the Board from appointing one or more committees consisting in
whole or in part of persons who are not trustees of the Trust; provided,
however, that no such committee shall have or may exercise any authority or
power of the Board in the management of the business or affairs of the
Trust.
ARTICLE V
Officers, Agents and Employees
Section 1. Number of Qualifications. The officers of the Trust
shall be a President, who shall be a trustee of the Trust, a Secretary and
a Treasurer, each of whom shall be elected by the Board of Trustees. The
Board of Trustees may elect or appoint one or more Vice Presidents and may
also appoint such other officers, agents and employees as it may deem
necessary or proper. Any two or more offices may be held by the same
person, except the offices of President and Vice President, but no officer
shall execute, acknowledge or verify any instrument as an officer in more
than one capacity. Such officers shall be elected by the Board of Trustees
each year at its first meeting held after the annual meeting of
shareholders, each to hold office until the meeting of the shareholders and
until his successor shall have been duly elected and shall have qualified,
or until his death, or until he shall have resigned, or have been removed,
as hereinafter provided in these By-Laws. The Board may from time to time
elect, or delegate to the President the power to appoint, such officers
(including one or more Assistant Vice Presidents, one or more Assistant
Treasurers and one or more Assistant Secretaries) and such agents, as may
be necessary or desirable for the business of the Trust. Such officers and
agents shall have such duties and shall hold their offices for such terms
as may be prescribed by the Board or by the appointing authority.
Section 2. Resignations. Any officer of the Trust may resign at
any time by giving written notice of resignation to the Board, the Chairman
of the Board, President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt;
and, unless otherwise specified therein, the acceptance of such resignation
shall be necessary to make it effective.
Section 3. Removal of Officer, Agent or Employee. Any officer,
agent or employee of the Trust may be removed by the Board of Trustees with
or without cause at any time, and the Board may delegate such power of
removal as to agents and employees not elected or appointed by the Board of
Trustees. Such removal shall be without prejudice to such person's
contract rights, if any, but the appointment of any person as an officer,
agent or employee of the Trust shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office, either arising
from death, resignation, removal or any other cause, may be filled for the
unexpired portion of the term of the office which shall be vacant, in the
manner prescribed in these By-Laws for the regular election or appointment
to such office.
Section 5. Compensation. The compensation of the officers of the
Trust shall be fixed by the Board of Trustees, but this power may be
delegated to any officer in respect of other officers under his control.
Section 6. Bonds or Other Security. If required by the Board, any
officer, agent or employee of the Trust shall give a bond or other security
for the faithful performance of his duties, in such amount and with such
surety or sureties as the Board may require.
Section 7. President. The President shall be the chief executive
officer of the Trust. In the absence of the Chairman of the Board (or if
there be none), he shall preside at all meetings of the shareholders and of
the Board of Trustees. He shall have, subject to the control of the Board
of Trustees, general charge of the business and affairs of the Trust. He
may employ and discharge employees and agents of the Trust, except such as
shall be appointed by the Board, and he may delegate these powers.
Section 8. Vice President. Each Vice President shall have such
powers and perform such duties as the Board of Trustees or the President
may from time to time prescribe.
Section 9. Treasurer. The Treasurer shall
(a) have charge and custody of, and be responsible for, all the
funds and securities of the Trust, except those which the Trust has placed
in the custody of a bank or trust company or member of a national
securities exchange (as that term is defined in the Securities Exchange Act
of 1934, as amended) pursuant to a written agreement designating such bank
or trust company or member of a national securities exchange as a custodian
or sub-custodian of the property of the Trust;
(b) keep full and accurate accounts of receipts and
disbursements in books belonging to the Trust;
(c) cause all moneys and other valuables to be deposited to the
credit of the Trust;
(d) receive, and give receipts for, moneys due and payable, to
the Trust from any source whatsoever;
(e) disburse the funds of the Trust and supervise the investment
of its funds as ordered or authorized by the Board, taking proper vouchers
therefor; and
(f) in general, perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him
by the Board or the President.
Section 10. Secretary. The Secretary shall
(a) keep or cause to be kept in one or more books provided for
the purpose, the minutes of all meetings of the Board, the committees of
the Board and the shareholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Trust and
affix and attest the seal to all share certificates of the Trust (unless
the seal of the Trust on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents
to be executed on behalf of the Trust under its seal;
(d) see that the books, reports, statements, certificates and
other documents and records required by law to be kept and filed are
properly kept and filed; and
(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him
by the Board or the President.
Section 11. Delegation of Duties. In case of the absence of any
officer of the Trust, or for any other reason that the Board may deem
sufficient, the Board may confer for the time being the powers or duties,
or any of them, of such officer upon any other officer or upon any trustee.
ARTICLE VI
Indemnification
Each officer and trustee of the Trust shall be indemnified by the
Trust to the full extent permitted under the General Laws of the State of
Maryland, including the advancing of expenses, except that such indemnity
shall not protect any such person against any liability to the Trust or any
shareholder thereof to which such person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office. Absent a
court determination that an officer or director seeking indemnification was
not liable on the merits or guilty of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office, the decision by the Trust to indemnify such person must be
based upon the reasonable determination of independent counsel or nonparty
independent trustees, after review of the facts, that such officer or
trustee is not guilty of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office.
The Trust may purchase insurance on behalf of an officer or trustee
protecting such person to the full extent permitted under the General Laws
of the State of Maryland, from liability arising from his activities as
officer or trustee of the Trust. The Trust, however, may not purchase
insurance on behalf of any officer or trustee of the Trust that protects or
purports to protect such person from liability to the Trust or to its
shareholders to which such officer or trustee would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
The Trust may indemnify or purchase insurance to the extent provided
in this Article VI on behalf of an employee or agent who is not an officer
or director of the Trust.
ARTICLE VII
Common Shares of Beneficial Interest
Section 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 Board, representing the number of
shares of the Trust owned by him, provided, however, that certificates for
fractional shares will 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 or the seal on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose fascimile 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 2. Books of Accounts and Record of Shareholders. There
shall be kept at the principal executive office of the Trust correct and
complete books and records of account of all the business and transactions
of the Trust. There shall be made available upon request of any
shareholder, in accordance with Massachusetts law, a record containing the
number of shares of share issued during a specified period not to exceed
twelve months and the consideration received by the Trust for each such
share.
Section 3. Transfers of Shares. Transfers of shares of the Trust
shall be made on the share records of the Trust only by the registered
holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer
agent or transfer clerk, and on surrender of the certificate or
certificates, if issued, for such shares properly endorsed or accompanied
by a duly executed share transfer power and the payment of all taxes
thereon. Except as otherwise provided by law, the Trust shall be entitled
to recognize the exclusive rights of a person in whose name any share or
shares stand on the record of shareholders as the owner of such share or
shares for all purposes, including, without limitation, the rights to
receive dividends or other distributions, and to vote as such owner, and
the Trust shall not be bound to recognize any equitable or legal claim to
or interest in any such share or shares on the part of any other person.
Section 4. Regulations. The Board may make such additional rules
and regulations, not inconsistent with these By-Laws, as it may deem
expedient concerning the issue, transfer and registration of certificates
for shares of the Trust. It may appoint, or authorize any officer or
officers to appoint, one or more transfer agents or one or more transfer
clerks and one or more registrars and may require all certificates for
shares to bear the signature or signatures of any of them.
Section 5. Lost, Destroyed or Mutilated Certificates. The holder
of any certificates representing shares of 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
Board may, in its discretion, require such owner or his legal
representatives to give to the Trust a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board
in its absolute discretion shall determine, to indemnify the 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 Board, in its absolute
discretion, may refuse to issue any such new certificate, except pursuant
to legal proceedings under the laws of the Commonwealth of Massachusetts.
Section 6. Fixing of a Record Date for Dividends and
Distributions. The Board may fix, in advance, a date not more than ninety
days preceding the date fixed for the payment of any dividend or the making
of any distribution. Once the Board of Trustees fixes a record date as the
record date for the determination of the shareholders entitled to receive
any such dividend or distribution, in such case only the shareholders of
record at the time so fixed shall be entitled to receive such dividend or
distribution.
Section 7. Information to Shareholders and Others. Any
shareholder of the Trust or his agent may inspect and copy during usual
business hours the Trust's By-Laws, minutes of the proceedings of its
shareholders, annual statements of its affairs, and voting trust agreements
on file at its principal office.
ARTICLE VIII
Seal
The seal of the Trust shall be circular in form and shall bear, in
addition to any other emblem or device approved by the Board of Trustees,
the name of the Trust, the year of its incorporation and the words "Seal"
and "Massachusetts". Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or in any other manner reproduced.
ARTICLE IX
Fiscal Year
Unless otherwise determined by the Board, the fiscal year of the Trust
shall end on the 31st day of December.
ARTICLE X
Depositories and Custodians
Section 1. Depositories. The funds of the Trust shall be
deposited with such banks or other depositories as the Board of Trustees of
the Trust may from time to time determine.
Section 2. Custodians. All securities and other investments shall
be deposited in the safe keeping of such banks or other companies as the
Board of Trustees of the Trust may from time to time determine. Every
arrangement entered into with any bank or other company for the safe
keeping of the securities and investments of the Trust shall contain
provisions complying with the Investment Company Act of 1940, as amended,
and the general rules and regulations thereunder.
ARTICLE XI
Execution of Instruments
Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts,
acceptances, bills of exchange and other orders or obligations for the
payment of money shall be signed by such officer or officers or person or
persons as the Board of Trustees by resolution shall from time to time
designate.
Section 2. Sale or Transfer of Securities. Share certificates,
bonds or other securities at any time owned by the Trust may be held on
behalf of the Trust or sold, transferred or otherwise disposed of subject
to any limits imposed by these By-Laws and pursuant to authorization by the
Board and, when so authorized to be held on behalf of the Trust or sold,
transferred or otherwise disposed of, may be transferred from the name of
the Trust by the signature of the President or a Vice President or the
Treasurer or pursuant to any procedure approved by the Board of Trustees,
subject to applicable law.
ARTICLE XII
Independent Public Accountants
The firm of independent public accountants which shall sign or certify
the financial statements of the Trust which are filed with the Securities
and Exchange Commission shall be selected annually by the Board of Trustees
and ratified by the shareholders in accordance with the provisions of the
Investment Company Act of 1940, as amended.
ARTICLE XIII
Annual Statement
The books of account of the Trust shall be examined by an independent
firm of public accountants at the close of each annual period of the Trust
and at such other times as may be directed by the Board. A report to the
shareholders based upon each such examination shall be mailed to each
shareholder of the Trust of record on such date with respect to each report
as may be determined by the Board, at his address as the same appears on
the books of the Trust. Such annual statement shall also be available at
the annual meeting of shareholders and be placed on file at the Trust's
principal office in the Commonwealth of Massachusetts. Each such report
shall show the assets and liabilities of the Trust as of the close of the
annual or quarterly period covered by the report and the Securities in
which the funds of the Trust were then invested. Such report shall also
show the Trust's income and expenses for the period from the end of the
Trust's preceding fiscal year to the close of the annual or quarterly
period covered by the report and any other information required by the
Investment Company Act of 1940, as amended, and shall set forth such other
matters as the Board or such firm of independent public accountants shall
determine.
ARTICLE XIV
Amendments
The Board of Trustees, by affirmative vote of a majority thereof,
shall have the exclusive right to amend, alter or repeal these By-Laws at
any regular or special meeting of the Board of Trustees, except any
particular By-Law which is specified as not subject to alteration or repeal
by the Board of Trustees, subject to the requirements of the Investment
Company Act of 1940, as amended.
ARTICLE XV
Shareholder Liability
The Declaration of Trust establishing The BlackRock Florida Insured
Municipal 2008 Term Trust, dated as of August 7, 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 The
BlackRock Florida Insured Municipal 2008 Term Trust 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
The BlackRock Florida Insured Municipal 2008 Term 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 BlackRock Florida Insured Municipal 2008 Term Trust
but the Trust Property only shall be liable.
Number
BRF
[GRAPHIC OMITTED]
COMMON STOCK
PAR VALUE $.01
INCORPORATED UNDER THE LAWS
OF THE STATE OF MASSACHUSETTS
[GRAPHIC OMITTED]
Shares
THIS CERTIFICATE
IS TRANSFERABLE IN
BOSTON, MA OR IN
NEW YORK, NY
CUSIP [ ]
SEE REVERSE FOR CERTAIN DEFINITIONS
The BlackRock Florida Insured Municipal 2008 Term Trust Inc.
THIS CERTIFIES THAT
IS THE OWNER OF
FULL PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK OF
The BlackRock Florida Insured Municipal 2008 Term Trust Inc., transferable
on the books of the Trust by the holder hereof in person or by duly
authorized attorney upon surrender of this Certificate properly endorsed.
This Certificate and the shares represented hereby are issued and shall be
subject to all of the provisions of the Declaration of Trust and By-Laws of
the [Trust], each as from time to time amended, to all of which the holder
by acceptance hereof assents. This Certificate is not valid until
countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the [Corporation] and the facsimile
signatures of its duly authorized officers.
[THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM
TRUST INC.
CORPORATE
SEAL
[ ]
MASSACHUSETTS]
DATED
/s/ Barbara Novick /s/ [ILLEGIBLE]
SECRETARY PRESIDENT
COUNTERSIGNED AND REGISTERED
STATE STREET BANK [ILLEGIBLE]
TRUST COMPANY
[ILLEGIBLE]
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM TRUST INC.
The Trust will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof
of the Trust and the qualifications, limitations, or restrictions of such
preferences and/or rights The Trust will also furnish without charge to
each stockholder who so requests a description of the authority of the
Trust's board of Trustees to set the relative rights and preferences of
unissued series of the Trust as capital stock. Such requests may be made to
the Trust or the transfer agent.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations.
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT -- Custodian
(Cust) (Minor)
under Uniform Gifts to Minors Act
--------------------------
(State)
Additional abbreviations may also be used though not in the above list
For value received, _____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------------------------------------
- --------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING
POSTAL ZIP CODE OF ASSIGNEE
- --------------------------------------------------------------------
Shares
of the 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: ___________________
----------------------------------------
Signature
NOTICE: THE SIGNATURE TO THIS
ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER.
SPECIMEN
Auction Rate Municipal SHARES
Preferred Shared of Beneficial Interest, Series R7 1,320
THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM TRUST
ORGANIZED UNDER THE COMMONWEALTH SEE REVERSE FOR
OF MASSACHUSETTS CERTAIN DEFINITIONS
THIS CERTIFICATE IS TRANSFERABLE CUSIP 09247H 20 5
IN NEW YORK, NY
THIS CERTIFIES THAT
CEDE & CO.
IS THE OWNER OF One Thousand Three Hundred Twenty (1,320)
FULL PAID AND NON-ASSESSABLE SHARES OF AUCTION RATE MUNICIPAL
PREFERRED SHARES OF BENEFICIAL INTEREST, SERIES R7, PAR VALUE $.01
PER SHARE, LIQUIDATION PREFERENCE $50,000 PER SHARE PLUS AN AMOUNT
EQUAL TO ACCUMULATED BUT UNPAID DIVIDENDS (WHETHER OR NOT EARNED
OR DECLARED) THEREON PLUS THE PREMIUM, IF ANY, RESULTING FROM THE
DESIGNATION OF A PREMIUM CALL PERIOD OF
THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM TRUST
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.
In Witness Whereof, THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008
TERM TRUST 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: November 23, 1992
Countersigned and Registered: /s/ [ILLEGIBLE]
BANKERS TRUST COMPANY ------------------------------------
(New York) Transfer Agent President
By /s/ [ILLEGIBLE]
------------------------------------
Treasurer
Authorized Signature
/s/ [ILLEGIBLE]
------------------------------------
THE TRANSFER OF THE SHARES OF AUCTION RATE MUNICIPAL PREFERRED STOCK
REPRESENTED HEREBY IS SUBJECT TO THE RESTRICTIONS CONTAINED IN THE
CORPORATION'S CHARTER, AND THE PURCHASER'S LETTERS REFERRED TO THEREIN. THE
CORPORATION WILL FURNISH INFORMATION ABOUT SUCH RESTRICTION TO ANY
STOCKHOLDER, WITHOUT CHARGE, UPON REQUEST TO THE SECRETARY OF THE
CORPORATION.
THE BLACKROCK CALIFORNIA INSURED MUNICIPAL 2008
TERM TRUST INC.
A full statement of the designations and any preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption of the
shares of each class of stock which the Corporation is authorized to issue
and the differences in the relative rights and preferences between the
shares of each series to the extent that they have been set, and the
authority of the Board of Directors to set the relative rights and
preferences of subsequent series, will be furnished by the Corporation to
any stockholder, without charge, upon request to the Secretary of the
Corporation at its principal office.
The following abbreviations, when used in the inscription
on the face of this certificate, shall be construed as though they were
written out in full according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT--_____Custodian_____
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with rights under Uniform Gifts
of survivorship and not as to Minors Act_______
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For value received ____________ hereby sell, assign and transfer unto
Please insert social security or other
identifying number of assignee
------------------------------
/ /
/-------------------------------/
- ------------------------------------------------------------------------------
(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 Corporation with
full power of substitution in the premises.
Dated ______________
NOTICE: ________________________________________________
The Signature to this assignment must correspond
with the name as written upon the face of the
Certificate in every particular, without alteration
or enlargement or any change whatever.
TERMS AND CONDITIONS OF
DIVIDEND REINVESTMENT PLAN
1. You, State Street Bank and Trust Company, will act as Agent for
me, and will open an account for me under the Dividend Reinvestment Plan
(the "Plan") in the same name as my present shares are registered, and put
the Plan into effect for me as of the first record date for a dividend or
capital gains distribution after you receive the Authorization duly
executed by me.
2. Whenever The BlackRock Florida Insured Municipal 2008 Term Trust
Inc. (the "Trust") declares a distribution from capital gains or an income
dividend payable in cash you shall use such cash to purchase additional
shares of Trust common stock for me in the open market or otherwise. Such
purchases will be made on or shortly after the payable date for such
dividend or distribution, and in no event more than 45 days after such date
except where temporary curtailment or suspension of purchase is necessary
to comply with applicable provisions of federal securities law.
3. For all purposes of the Plan:
(a) The market price of the Trust's
common stock on a particular date shall be the mean between the highest and
lowest sales prices on the New York Stock Exchange on that date, or, if
there is no sale on such Exchange on that date, then the mean between the
closing bid and asked quotations for such stock on such Exchange on such
date.
(b) The net asset value per share of
the Trust's common stock on a particular
date shall be as determined by or on behalf
of the Trust; and
(c) All dividends, distributions and other payment shall be made
net of any applicable withholding tax.
4. The open-market purchases provided for above may be made on any
securities exchange where the Trust's common stock is traded, in the
over-the- counter market or in negotiated transactions and may be on such
terms as to price, delivery and otherwise as you shall determine. My funds
held by you uninvested will not bear interest, and it is understood that,
in any event, you shall have no liability in connection with any inability
to purchase shares within 45 days after the initial date of such purchase
as herein provided, or with the timing of any purchases effected. You shall
have no responsibility as to the value of the common stock of the Trust
acquired for my account. For the purposes of cash investments you may
commingle my funds with those of other shareholders of the Trust for whom
you similarly act as Agent, and the average price (including brokerage
commissions) of all shares purchased by you as Agent shall be the price per
share allocable to me in connection therewith.
5. You may hold my shares acquired pursuant to my authorization,
together with the shares of other shareholders of the Trust acquired
pursuant to similar authorizations, in noncertificated form in your name or
that of your nominee. You will forward to me any proxy solicitation
material and will vote any shares so held for me only in accordance with
the proxy returned by me to the Trust. Upon my written request, you will
deliver to me, without charge, a certificate or certificates for the full
shares.
6. You will confirm to me each acquisition made for my account as
soon as practical but not later than 60 days after the date thereof.
Although I may from time to time have an undivided fractional interest
(computed to three decimal places) in a share of the Trust, no certificates
for a fractional share will be issued. However, dividends and distributions
on fractional shares will be credited to my account. In the event of
termination of my account under the Plan, you will adjust for any such
undivided fractional interest in cash at the market value of the Trust's
shares at the time of termination less the pro rata expense of any sale
required to make such adjustment.
7. Any stock dividends or split shares distributed by the Trust on
shares held by you for me will be credited to my account. In the event that
the Trust makes available to its shareholders rights to purchase additional
shares or other securities, the shares held for me under the Plan will be
added to other shares held by me in calculating the number of rights to be
issued to me.
8. Your service fee for handling capital gains distributions or
income dividends will be paid by the Trust. I will be charged a pro rata
share of brokerage commissions on all open-market purchases.
9. I may terminate my account under the Plan by notifying you by
telephone or in writing. Such termination will be effective immediately if
my notice is received by you not less than ten days prior to any dividend
or distribution record date; otherwise such termination will be effective
on the first trading day after the payment date for such dividend or
distribution with respect to any subsequent dividend or distribution. The
Plan may be terminated by you or the Trust upon notice in writing mailed to
me at least 90 days prior to any record date for the payment of any
dividend or distribution by the Trust. Upon any termination you will cause
a certificate or certificates for the full shares held for me under the
Plan and cash adjustment for any fraction to be delivered to me without
charge. If I elect by notice to you in writing in advance of such
termination to have you sell part or all of my shares and remit the
proceeds to me, you are authorized to deduct a $2.50 fee plus brokerage
commission for this transaction from the proceeds.
10. These terms and conditions may be amended or supplemented by
you or the Trust at any time or times but, except when necessary or
appropriate to comply with applicable law or the rules or policies of the
Securities and Exchange Commission or any other regulatory authority, only
by mailing to me appropriate written notice at least 90 days prior to the
record date for the first dividend or distribution to which such amendment
or supplement applies if by the Trust or if by you 90 days prior to the
effective date of such amendment or supplement. The amendment or supplement
shall be deemed to be accepted by me unless, prior to the effective date
thereof, you receive written notice of the termination of my account under
the Plan. Any such amendment may include an appointment by you in your
place and stead of a successor Agent under these terms and conditions, with
full power and authority to perform all or any of the acts to be performed
by the Agent under these terms and conditions. Upon any such appointment of
an Agent for the purpose of receiving dividends and distributions, the
Trust will be authorized to pay to such successor Agent, for my account,
all dividends and distributions payable on common stock of the Trust held
in my name or under the Plan for retention or application by such successor
Agent as provided in these terms and conditions.
11. You shall at all times act in good faith and agree to use your
best efforts within reasonable limits to ensure the accuracy of all
services performed under this Agreement and to comply with applicable law,
but assume no responsibility, and shall not be liable for loss or damage
due to errors unless such error is caused by your negligence, bad faith, or
willful misconduct or that of your employees.
12. These terms and conditions shall be governed by the laws of the
Commonwealth of Massachusetts.
- ----------------------------------------------------------------------------
THE BLACKROCK FLORIDA This form is for shareholders who
INSURED MUNICIPAL hold stock in their own names. If
2008 TERM TRUST INC. your shares are held through a
DIVIDEND REINVESTMENT PLAN brokerage firm, bank, or other
nominee, you should instruct your
nominee to participate on your
behalf. If you wish to participate
in the Plan, but your brokerage
firm, bank or other nominee is
unable to participate on your
behalf, you should request it to
re-register your shares in your
own name, which will enable your
participation in the Plan.
- ----------------------------------------------------------------------------
AUTHORIZATION FOR REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
(Please read carefully before signing)
I hereby authorize the BlackRock Florida Insured Municipal 2008
Term Trust Inc. (the "Trust") to pay to State Street Bank and Trust Company
for my account all income dividends and capital gains distributions payable
to me on shares of Common Stock of the Trust now or hereafter registered in
my name, and hereby elect to receive in shares of Common Stock all such
dividends and distributions payable in cash, except as set forth below.
I hereby appoint State Street Bank and Trust Company as my Agent,
subject to the Terms and Conditions of the Dividend Reinvestment Plan (the
"Plan") set forth in the accompanying brochure, and authorize State Street
Bank and Trust Company, as such Agent, in accordance with such Terms and
Conditions to apply all such income dividends and capital gains
distributions payable solely in cash, after deducting the charges as
provided in such Terms and Conditions, to the purchase of shares of Common
Stock of the Trust.
(continued on other side)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, dated September 15, 1992, between The
BlackRock Florida Insured Municipal 2008 Term Trust (the "Trust"), a
Massachusetts business trust, and BlackRock Financial Management L.P. (the
"Adviser"), a Delaware limited partnership.
In consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of
which is hereby acknowledged, it is agreed by and between the parties
hereto as follows:
1. In General
The Adviser agrees, all as more fully set forth herein,
to act as investment adviser to the Trust with respect to the investment of
the Trust's assets and to supervise and arrange the purchase of securities
for and the sale of securities held in the investment portfolio of the
Trust.
2. Duties and obligations of the Adviser with
respect to investments of assets of the Trust
(a) Subject to the succeeding provisions of this
section and subject to the direction and control of the Trust's Board of
Trustees, the Adviser shall (i) act as investment adviser for and supervise
and manage the investment and reinvestment of the Trust's assets and in
connection therewith have complete discretion in purchasing and selling
securities and other assets for the Trust and in voting, exercising
consents and exercising all other rights appertaining to such securities
and other assets on behalf of the Trust; (ii) supervise continuously the
investment program of the Trust and the composition of its investment
portfolio; and (iii) arrange, subject to the provisions of paragraph 3
hereof, for the purchase and sale of securities and other assets held in
the investment portfolio of the Trust.
(b) In the performance of its duties under this
Agreement, the Adviser shall at all times conform to, and act in accordance
with, any requirements imposed by (i) the provisions of the Investment
Company Act of 1940 (the "Act"), and of any rules or regulations in force
thereunder; (ii) any other applicable provision of law; (iii) the
provisions of the Declaration of Trust and By-Laws of the Trust, as such
documents are amended from time to time; (iv) the investment objective and
policies of the Trust as set forth in its registration statement on Form N-
2; and (v) any policies and determinations of the Board of Trustees of the
Trust.
(c) The Adviser will bear all costs and expenses
of its partners and employees and any overhead incurred in connection with
its duties hereunder and shall bear the costs of any salaries or trustees
fees of any officers or trustees of the Trust who are affiliated persons
(as defined in the Act) of the Adviser except that the Board of Trustees of
the Trust may approve reimbursement to the Adviser of the pro rata portion
of the salaries, bonuses, health insurance, retirement benefits and all
similar employment Costs for the time spent on Trust operations (other than
the provision of investment advice) of all personnel employed by the
Adviser who devote substantial time to Trust operations or the operations
of other investment companies advised by the Adviser.
(d) The Adviser shall give the Trust the benefit
of its best judgment and effort in rendering services hereunder, but the
Adviser shall not be liable for any act or omission or for any loss
sustained by the Trust in connection with the matters to which this
Agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
its reckless disregard of its obligations and duties under this Agreement.
(e) Nothing in this Agreement shall prevent the
Adviser or any partner, officer, employee or other affiliate thereof from
acting as investment adviser for any other person, firm or corporation, or
from engaging in any other lawful activity, and shall not in any way limit
or restrict the Adviser or any of its partners, officers, employees or
agents from buying, selling or trading any securities for its or their own
accounts or for the accounts of others for whom it or they may be acting,
provided, however that the Adviser will undertake no activities which, in
its judgment, will adversely affect the performance of its obligations
under this Agreement.
3. Portfolio Transactions and Brokerage
The Adviser is authorized, for the purchase and sale of
the Trust's portfolio securities, to employ such securities dealers as may,
in the judgment of the Adviser, implement the policy of the Trust to obtain
the best net results taking into account such factors as price, including
dealer spread, the size, type and difficulty of the transaction involved,
the firm's general execution and operational facilities and the firm's risk
in positioning the securities involved. Consistent with this policy, the
Adviser is authorized to direct the execution of the Trust's portfolio
transactions to dealers and brokers furnishing statistical information or
research deemed by the Adviser to be useful or valuable to the performance
of its investment advisory functions for the Trust.
4. Compensation of the Adviser
(a) The Trust agrees to pay to the Adviser and
the Adviser agrees to accept as full compensation for all services rendered
by the Adviser as such, a fee computed and payable monthly in an amount
equal to .35% of the Trust's average weekly net asset value on an
annualized basis until termination of the Trust pursuant to its Declaration
of Trust. For any period less than a month during which this Agreement is
in effect, the fee shall be prorated according to the proportion which such
period bears to a full month of 28, 29, 30 or 31 days, as the case may be.
(b) For purposes of this Agreement, the net
assets of the Trust shall be calculated pursuant to the procedures adopted
by resolutions of the Trustees of the Trust for calculating the net asset
value of the Trust's shares or delegating such calculations to third
parties, provided, however, that the liquidation value of any outstanding
preferred shares of the Trust shall not be taken into account in
calculating the Trust's average weekly net asset value for purposes of
Section 4(a) of this Agreement.
5. Indemnity
(a) The Trust hereby agrees to indemnify the
Adviser and each of the Adviser's partners, officers, employees, agents,
associates and controlling persons and the partners, officers, employees
and agents thereof (including any individual who serves at the Adviser's
request as director, officer, partner, trustee or the like of another
corporation) (each such person being an "indemnitee") against any
liabilities and expenses, including amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and counsel fees (all
as provided in accordance with applicable corporate law) reasonably
incurred by such indemnitee in connection with the defense or disposition
of any action, suit or other proceeding, whether civil or criminal, before
any court or administrative or investigative body in which he may be or may
have been involved as a party or otherwise or with which he may be or may
have been threatened, while acting in any capacity set forth above in this
Section 5 or thereafter by reason of his having acted in any such capacity,
except with respect to any matter as to which he shall have been
adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best interest of the Trust and furthermore, in the
case of any criminal proceeding, so long as he had no reasonable cause to
believe that the conduct was unlawful, provided, however, that (1) no
indemnitee shall be indemnified hereunder against any liability to the
Trust or its shareholders or any expense of such indemnitee arising by
reason of (i) willful misfeasance, (ii) bad faith, (iii) gross negligence
or (iv) reckless disregard of the duties involved in the conduct of his
position (the conduct referred to in such clauses (i) through (iv) being
sometimes referred to herein as "disabling conduct"), (2) as to any matter
disposed of by settlement or a compromise payment by such indemnitee,
pursuant to a consent decree or otherwise, no indemnification either for
said payment or for any other expenses shall be provided unless there has
been a determination that such settlement or compromise is in the best
interests of the Trust and that such indemnitee appears to have acted in
good faith in the reasonable belief that his action was in the best
interest of the Trust and did not involve disabling conduct by such
indemnitee and (3) with respect to any action, suit or other proceeding
voluntarily prosecuted by any indemnitee as plaintiff, indemnification
shall be mandatory only if the prosecution of such action, suit or other
proceeding by such indemnitee was authorized by a majority of the full
Board of the Trust.
(b) The Trust shall make advance payments in
connection with the expenses of defending any action with respect to which
indemnification might be sought hereunder if the Trust receives a written
affirmation of the indemnitee's good faith belief that the standard of
conduct necessary for indemnification has been met and a written
undertaking to reimburse the Trust unless it is subsequently determined
that he is entitled to such indemnification and if the directors of the
Trust determine that the facts then known to them would not preclude
indemnification. In addition, at least one of the following conditions must
be met: (A) the indemnitee shall provide a security for his undertaking,
(B) the Trust shall be insured against losses arising by reason of any
lawful advances, or (C) a majority of a quorum consisting of trustees of
the Trust who are neither "interested persons" of the Trust (as defined in
Section 2(a)(19) of the Act) nor parties to the proceeding ("Disinterested
Non-Party Trustees") or an independent legal counsel in a written opinion,
shall determine, based on a review of readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that the
indemnitee ultimately will be found entitled to indemnification.
(c) All determinations with respect to
indemnification hereunder shall be made (1) by a final decision on the
merits by a court or other body before whom the proceeding was brought that
such indemnitee is not liable by reason of disabling conduct or, (2) in the
absence of such a decision, by (i) a majority vote of a quorum of the
Disinterested Non-party Trustees of the Trust, or (ii) if such a quorum is
not obtainable or even, if obtainable, if a majority vote of such quorum so
directs, independent legal counsel in a written opinion. All determinations
that advance payments in connection with the expense of defending any
proceeding shall be authorized shall be made in accordance with the
immediately preceding clause (2) above.
The rights accruing to any indemnitee under
these provisions shall not exclude any other right to which he may be
lawfully entitled.
6. Duration and Termination
This Agreement shall become effective on the date it is
approved by the shareholder of the Trust and shall continue in effect for a
period of two years and thereafter from year to year, but only so long as
such continuation is specifically approved at least annually in accordance
with the requirements of the Act.
This Agreement may be terminated by the Adviser at any
time without penalty upon giving the Trust sixty days written notice (which
notice may be waived by the Trust) and may be terminated by the Trust at
any time without penalty upon giving the Adviser sixty days notice (which
notice may be waived by the Adviser), provided that such termination by the
Trust shall be directed or approved by the vote of a majority of the
Trustees of the Trust in office at the time or by the vote of the holders
of a "majority" (as defined in the Act) of the voting securities of the
Trust at the time outstanding and entitled to vote. This Agreement shall
terminate automatically in the event of its assignment (as "assignment" is
defined in the Act.) The Adviser is a partnership and will notify the Trust
promptly after any change in the membership of such partnership.
7. Notices
Any notice under this Agreement shall be in writing to
the other party at such address as the other party may designate from time
to time for the receipt of such notice and shall be deemed to be received
on the earlier of the date actually received or on the fourth day after the
postmark if such notice is mailed first class postage prepaid.
8. Governing Law
This Agreement shall be construed in accordance with the
laws of the State of New York for contracts to be performed entirely
therein without reference to choice of law principles thereof and in
accordance with the applicable provisions of the Act.
9. Liability of the Trust's Shareholders, Trustees,
Officers, Employees or Agents
No shareholder of the Trust 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 bad faith, willful misfeasance, gross
negligence or reckless disregard for 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.
IN WITNESS WHEREOF, the parties hereto have caused the
foregoing instrument to be executed by their duly authorized officers as of
the day and the year first above written.
THE BLACKROCK FLORIDA INSURED MUNICIPAL
2008 TERM TRUST
By:---------------------------------------
Ralph L. Schlosstein, President
BLACKSTONE FINANCIAL MANAGEMENT L.P.
By:---------------------------------------
Laurence D. Fink, General Partner
THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008
TERM TRUST INC.
AMENDED ADMINISTRATION AGREEMENT
ADMINISTRATION AGREEMENT, made as of the 29th day of January, 1993
between THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM TRUST INC., a
Massachusetts business trust, (the "Trust"), and MIDDLESEX ADMINISTRATORS
L.P., a Delaware limited partnership (the "Administrator").
W I T N E S S E T H:
- - - - - - - - - --
WHEREAS, the Trust is a diversified closed-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"); and
WHEREAS, the Trust has retained an investment adviser for the
purpose of investing its assets in securities and desires to retain the
Administrator for certain administrative services, and the Administrator is
willing to furnish such administrative services on the terms and conditions
hereinafter set forth,
NOW, THEREFORE, the parties hereto agree as follows:
1. The Trust hereby appoints the Administrator to provide the
services set forth below, subject to the overall supervision of the Board
of Directors of the Trust for the period and on the terms set forth in this
Agreement. The Administrator hereby accepts such appointment and agrees
during such period to render the services herein described and to assume
the obligations herein set forth, for the compensation herein provided.
2. Subject to the supervision of the Board of Directors and
officers of the Trust, the Administrator shall provide facilities for
meetings of the Board of Directors and shareholders of the Trust and office
facilities and personnel to assist the officers of the Trust in the
performance of the following services:
(a) Oversee the determination and publication of the
Trust's net asset value in accordance with the Trust's policy as adopted from
time to time by the Board of Trustees;
(b) Oversee the maintenance by State Street Bank and
Trust Company of certain books and records of the Trust as required under
Rule 31a-1(b) (4) of the Investment Company Act;
(c) Prepare or arrange for preparation for review,
approval and execution by officers of the Trust the Trust's federal, state
and local income tax returns, and any other required tax returns, as may be
mutually agreed upon;
(d) Review the appropriateness of and arrange for
payment of the Trust's expenses;
(e) Prepare for review and approval by officers of the
Trust financial information for the Trust's semi-annual and annual reports,
proxy statements and other communications with shareholders required or
otherwise to be sent to Trust shareholders, and arrange for the printing
and dissemination of such reports and communications to shareholders;
(f) Prepare for review by an officer of the Trust the
Trust's periodic financial reports required to be filed with the Securities
and Exchange Commission (the "SEC") on Form N-SAR and Form N-2 and such
other reports, forms or filings, as may be mutually agreed upon;
(g) Prepare reports relating to the business and affairs
of the Trust as may be mutually agreed upon and not otherwise appropriately
prepared by the Trust's investment adviser, custodian, counsel or auditors;
(h) Prepare such information and reports as may be
required by any stock exchange or exchanges on which the Trust's shares are
listed;
(i) Make such reports and recommendations to the Board
concerning the performance of the independent accountants as the Board may
reasonably request or deems appropriate;
(j) Make such reports and recommendations to the Board
concerning the performance and fees of the Trust's custodian, transfer and
dividend disbursing agent as the Board may reasonably request or deems
appropriate;
(k) Oversee and review calculations of fees paid to the
Administrator, the investment adviser and the custodian;
(l) Consult as necessary with the Trust's officers,
independent accountants, legal counsel, custodian, accounting agent and
transfer and dividend disbursing agent in establishing the accounting
policies of the Trust;
(m) Review implementation of any stock purchase or
dividend reinvestment programs authorized by the Board of Trustees;
(n) Assist the investment adviser in facilitating bank or
other borrowings by the Trust;
(o) Prepare such information and reports as may be
required by any banks from which the Trust borrows funds;
(p) Provide such assistance to the investment adviser,
the custodian and the Trust's counsel and auditors as generally may be
required to properly carry on the business and operations of the Trust;
(q) Respond to, or refer to the Trust's officers or
transfer agent, shareholder inquiries relating to the Trust;
(r) Provide to Standard & Poor's Corporation ("S&P"),
upon its request, corporate or financial information reasonably available
to the Administrator to assist S&P in the rating of the Trust's common
shares; and
(s) Assist in the preparation and filing of Forms 3, 4
and 5 pursuant to Section 16 of the Securities Exchange Act of 1934 and
Section 30(f) of the Investment Company Act for the officers and directors
of the Trust, except as otherwise requested by the Trust's investment
adviser, such filings to be based on information provided by those persons
and the Trust's investment adviser.
All services are to be furnished through the medium of
any directors, officers or employees of the Administrator as the
Administrator deems appropriate in order to fulfill its obligations
hereunder.
Each party shall bear all its own expenses incurred in
connection with this Agreement. Printing and dissemination expenses, such
as those for reports to shareholders and proxy statements, shall be
expenses of the Trust.
3. The Trust will pay the Administrator a fee on the first
business day of each calendar month for the previous month based on the
Trust's average weekly net asset value computed at the per annum rate of
.10% from the effective date of this Agreement until termination of the
Trust pursuant to its Declaration of Trust.
4. The Administrator assumes no responsibility under this
Agreement other than to render the services called for hereunder, and
specifically assumes no responsibilities for investment advice or the
investment or reinvestment of the Trust's assets.
5. (a) The Administrator shall not be liable to the Trust for any
action taken or omitted to be taken by the Administrator in connection with
the performance of any of its duties or obligations under this Agreement,
and the Trust shall indemnify the Administrator and hold it harmless from
and against all damages, liabilities, costs and expenses (including
reasonable attorneys' fees and amounts reasonably paid in settlement)
incurred by the Administrator in or by any reason of any pending,
threatened or contemplated action, suit, investigation or other proceeding
(including an action or suit by or in the right of the Trust or its
security holders) arising out of or otherwise based upon any action
actually or allegedly taken or omitted to be taken by the Administrator in
connection with the performance of any of its duties or obligations under
this Agreement; provided, however, that nothing contained herein shall
protect or be deemed to protect the Administrator against or entitle or be
deemed to entitle the Administrator to indemnification in respect of any
liability to the Trust or its security holders to which the Administrator
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of its
reckless disregard of its duties and obligations under this Agreement.
(b) Such expenses shall be paid by the Trust in advance
of the final disposition of such matter upon invoice by the Administrator
and receipt by the Trust of an undertaking from the Administrator to repay
such amounts if it shall ultimately be established that the Administrator
is not entitled to payment of such expenses hereunder.
(c) As used in this Paragraph 5, the term "Administrator"
shall include any affiliates of the Administrator performing services for
the Trust contemplated hereby, and directors, officers, agents and
employees of the Administrator and such affiliates.
(d) The Administrator may, with respect to questions of
law, apply for and obtain the advice and opinion of legal counsel to the
Trust, at the expense of the Trust, and with respect to the application of
generally accepting accounting principles, apply for and obtain the advice
and opinion of the Trust's accounting experts, at the expense of the Trust.
The Administrator shall be fully protected with respect to any action taken
or omitted by it in good faith in conformity with such advice or opinion.
6. This Agreement shall become effective as of the date on which
the Trust's Registration Statement on Form N-2 shall be declared effective
by the SEC and shall thereafter continue in effect unless terminated as
herein provided. This Agreement may be terminated by either party hereto
(without penalty) at any time upon not less than 60 days' prior written
notice to the other party hereto.
7. The services of the Administrator to the Trust hereunder are
not exclusive and nothing in this Agreement shall limit or restrict the
right of the Administrator to engage in any other business or to render
services of any kind to any other corporation, firm, individual or
association. The Administrator shall be deemed to be an independent
contractor, unless otherwise expressly provided or authorized by this
Agreement.
8. During the term of this Agreement, the Trust agrees to furnish
the Administrator at the principal office of the Administrator prior to use
thereof drafts and final copies of all prospectuses, proxy statements,
reports to shareholders, sales literature, or other material prepared for
distribution to shareholders of the Trust or the public that refer in any
way to the Administrator. If the Administrator reasonably objects to such
references within five business days (or such other time as may be mutually
agreed) after receipt thereof, the Trust will modify such references in a
manner reasonably satisfactory to the Administrator. In the event of
termination of this Agreement, the Trust will continue to furnish to the
Administrator copies of any of the above-mentioned materials that refer in
any way to the Administrator. The Trust shall timely furnish or otherwise
make available to the Administrator such other information relating to the
business affairs of the Trust, its directors, officers, and service
providers, as the Administrator at any time, or from time to time,
reasonably requests in order to discharge its obligations hereunder.
9. This Agreement may be amended by mutual written consent.
10. Any notice of other communication required to be given in
writing pursuant to this Agreement shall be deemed duly given if delivered
or mailed by registered mail, postage prepaid, (1) to the Administrator at
P.O. Box 9011, Princeton, New Jersey 08543, Attention: Stephen M. M.
Miller, (2) to the Trust at 345 Park Avenue, New York, New York 10154,
Attention: President.
11. This Agreement sets forth the agreement and understanding of
the parties hereto solely with respect to the matters covered hereby and
the relationship between the Trust and Middlesex Administrators L.P. as
Administrator. Nothing in this Agreement shall govern, restrict or limit in
any respect any other business dealings between the parties hereto unless
otherwise expressly provided herein.
12. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without reference to
choice of law principles thereof and in accordance with the Investment
Company Act. In the case of any conflict, the Investment Company Act shall
control.
13. No shareholder of the Trust shall be subject to any personal
liability whatsoever to any person in connection with the 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 bad faith, willful misfeasance, gross negligence or reckless
disregard for 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.
14. This Agreement may be executed by the parties hereto in
counterparts, and if executed in more than one counterpart, the separate
instruments shall constitute one agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
THE BLACKROCK FLORIDA INSURED MUNICIPAL
2008 TERM TRUST INC.
By_________________________________________
Title:_____________________________________
MIDDLESEX ADMINISTRATORS L.P.
By MIDDLESEX ADMINISTRATORS, INC.,
General Partner
By_________________________________________
Title:_____________________________________
CUSTODIAN CONTRACT
Between
BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM TRUST INC.
and
STATE STREET BANK AND TRUST COMPANY
22C691
WP1979C
TABLE OF CONTENTS
1. Employment of Custodian and Property to be Held by It . . . . . . . . 4
2. Duties of the Custodian with Respect to Property of the Fund Held
By the Custodian . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Holding Securities . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Delivery of Securities . . . . . . . . . . . . . . . . . . . . 5
2.3 Registration of Securities . . . . . . . . . . . . . . . . . . 7
2.4 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Availability of Federal Funds . . . . . . . . . . . . . . . . . 8
2.6 Collection of Income . . . . . . . . . . . . . . . . . . . . . 8
2.7 Payment of Fund Monies . . . . . . . . . . . . . . . . . . . . 9
2.8 Liability for Payment in Advance of Receipt
of Securities Purchased . . . . . . . . . . . . . . . . . . 10
2.9 Appointment of Agents . . . . . . . . . . . . . . . . . . . . 10
2.10 Deposit of Fund Assets in Securities Systems . . . . . . . . 11
2.10A Fund Assets Held in the Custodian's Direct Paper System . 12
2.11 Segregated Account . . . . . . . . . . . . . . . . . . . . . 13
2.12 Ownership Certificates for Tax Purposes . . . . . . . . . . . 14
2.13 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.14 Communications Relating to Fund Portfolio Securities . . . . 14
2.15 Proper Instructions . . . . . . . . . . . . . . . . . . . . . 14
2.16 Actions Permitted without Express Authority . . . . . . . . . 15
2.17 Evidence of Authority . . . . . . . . . . . . . . . . . . . . 15
3. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income. . . . . . . . . 16
4. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5. Opinion of Fund's Independent Accountant . . . . . . . . . . . . . 16
6. Reports to Fund by Independent Public Accountants . . . . . . . . 17
7. Compensation of Custodian . . . . . . . . . . . . . . . . . . . . 17
8. Responsibility of Custodian . . . . . . . . . . . . . . . . . . . 17
9. Effective Period, Termination an Amendment . . . . . . . . . . . . 18
10. Successor Custodian . . . . . . . . . . . . . . . . . . . . . . . 19
11. Interpretive and Additional Provisions . . . . . . . . . . . . . . 20
12. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . . . 20
13. Prior Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 20
14. Shareholder Liability . . . . . . . . . . . . . . . . . . . . . . 20
CUSTODIAN CONTRACT
This Contract between BlackRock Florida Insured Municipal 2008 Term
Trust Inc., a corporation organized and existing under the laws of the
Commonwealth of Massachusetts, having its principal place of business at
345 Park Avenue, New York, New York 10154, hereinafter called the "Fund",
and State Street Bank and Trust Company, a Massachusetts trust company,
having its principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of its assets
pursuant to the provisions of the Declaration of Trust. The Fund agrees to
deliver to the Custodian all securities and cash owned by it, and all
payments of income, payments of principal or capital distributions received
by it with respect to all securities owned by the Fund from time to time,
and the cash consideration received by it for such new or treasury shares
of beneficial interest, ("Shares") of the Fund as may be issued or sold
from time to time. The Custodian shall not be responsible for any property
of the Fund held or received by the Fund and not delivered to the
Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.15), the Custodian shall from time to time employ one or more sub-
custodians, but only in accordance with an applicable vote by the Board of
Trustees of the Fund, and provided that the Custodian shall have no more or
less responsibility or liability to the Fund on account of any actions or
omissions of any sub-custodian so employed than any such sub-custodian has
to the Custodian.
2. Duties of the Custodian with Respect to Property of the Fund Held By
the Custodian
2.1 Holding Securities.
The Custodian shall hold and physically segregate for the account
of the Fund all non-cash property, including all securities owned by
the Fund, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities
depository or in a book-entry system authorized by the U S. Department
of the Treasury, collectively referred to herein as "Securities
System" and (b) commercial paper of an issuer for which State Street
Bank and Trust Company acts as issuing and paying agent ("Direct
Paper") which is deposited and/or maintained in the Direct Paper
System of the Custodian pursuant to Section 2.10A.
2.2 Delivery of Securities.
The Custodian shall release and deliver securities owned by the
Fund held by the Custodian or in a Securities System account of the
Custodian or in the Custodian's Direct Paper book entry system account
("Direct Paper System Account") only upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
1)Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
2)Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Fund;
3)In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
4)To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
5)To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6)To the issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee or nominees
of the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.9 or into the name or nominee
name of any sub-custodian appointed pursuant to Article 1; or
for exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or
number of units: provided that, in any such case, the new
securities are to be delivered to the Custodian;
7)Upon the sale of such securities for the account of the Fund,
to the broker or its clearing agent, against a receipt,
for examination in accordance with "street delivery" custom;
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8)For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9)In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Fund, but only against receipt of adequate collateral
as agreed upon from time to time by the Custodian and the
Fund, which may be in the form of cash or obligations issued
by the United States government, its agencies or
instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned by
the Fund prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings
by the Fund requiring a pledge of assets by the Fund, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the
"Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract Market, or any
similar organization or organizations, regarding account
deposits in connection with transactions by the Fund; and
14) For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions, a certified
copy of a resolution of the Board of Directors or of the
Executive Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant Secretary,
specifying the securities to be delivered, setting forth the
purpose for which such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the
person or persons to whom delivery of such securities shall be
made.
2.3 Registration of Securities.
Securities held by the Custodian (other than bearer securities)
shall be registered in the name of the Fund or in the name of any
nominee of the Fund or of any nominee of the Custodian which nominee
shall be assigned exclusively to the Fund, unless the Fund has
authorized in writing the appointment of a nominee to be used in
common with other registered investment companies having the same
investment adviser as the Fund, or in the name or nominee name of any
agent appointed pursuant to Section 2.9 or in the name or nominee
name of any sub- custodian appointed pursuant to Article 1. All
securities accepted by the Custodian on behalf of the Fund under the
terms of this Contract shall be in "street name" or other good
delivery form. If, however, the Fund directs the Custodian to
maintain securities in "street name", the Custodian shall utilize its
best efforts only to timely collect income due the Fund on such
securities and to notify the Fund on a best efforts basis only of
relevant corporate actions including, without limitation, pendency of
calls, maturities, tender or exchange offers.
2.4 Bank Accounts.
The Custodian shall open and maintain a separate bank account or
accounts in the name of Fund, subject only to draft or order by the
Custodian acting pursuant to the terms of this Contract, and shall
hold in such account or accounts, subject to the provisions hereof,
all cash received by it from or for the account of the Fund, other
than cash maintained by the Fund in a bank account established and
used in accordance with Rule 17f-3 under the Investment Company Act of
1940. Funds held by the Custodian for Fund may be deposited by it to
its credit as Custodian in the Banking Department of the Custodian or
in such other banks or trust companies as it may in its discretion
deem necessary or desirable; provided, however, that every such bank
or trust company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or trust
company and the funds to be deposited with each such bank or trust
company shall be approved by vote of a majority of the Board of
Trustees of the Fund. Such funds shall be deposited by the Custodian
in its capacity as Custodian and shall be withdrawals by the Custodian
only in that capacity.
2.5 Availability of Federal Funds.
Upon mutual agreement between the Fund and the Custodian, the
Custodian shall, upon the receipt of Proper Instructions, make federal
funds available to the Fund as of specified times agreed upon from
time to time by the Fund and the Custodian in the amount of checks
received in payment for Shares of the Fund which are deposited into
the Fund's account.
2.6 Collection of Income.
Subject to the provisions of Section 2.3, the Custodian shall
collect on a timely basis all income and other payments with respect
to registered securities held hereunder to which the Fund shall be
entitled either by law or pursuant to custom in the securities
business, and shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date of payment
by the issuer, such securities are held by the Custodian or its agent
thereof and shall credit such income, as collected, to the Fund's
custodian account. Without limiting the generality of the foregoing,
the Custodian shall detach and present for payment all coupons and
other income items requiring presentation as and when they become due
and shall collect interest when due on securities held hereunder.
Income due the Fund on securities loaned pursuant to the provisions of
Section 2.2 (10) shall be the responsibility of the Fund. The
Custodian will have no duty or responsibility in connection therewith,
other than to provide the Fund with such information or data as may be
necessary to assist the Fund in arranging for the timely delivery to
the Custodian of the income to which the Fund is properly entitled.
2.7 Payment of Fund Monies.
Upon receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of the Fund in the following cases only:
1)Upon the purchase of securities, options, futures contracts or
options on futures contracts for the account of the Fund but
only (a) against the delivery of such securities or evidence
of title to such options, futures contracts or options on
futures contracts to the Custodian (or any bank, banking firm
or trust company doing business in the United States or abroad
which is qualified under the Investment Company Act of 1940,
as amended, to act as a custodian and has been designated by
the Custodian as its agent for this purpose) registered in the
name of the Fund or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a
Securities System, in accordance with the conditions set forth
in Section 2.10 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.10A; (d) in the case of
repurchase agreements entered into between the Fund and the
Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities either
in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing
purchase by the Fund of securities owned by the Custodian
along with written evidence of the agreement by the Custodian
to repurchase such securities from the Fund or (e) for
transfer to a time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer may be effected
prior to receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from the Fund
as defined in Section 2.15;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2
hereof;
3)For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments for
the account of the Fund: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
4)For the payment of any dividends declared pursuant to the
governing documents of the Fund;
5)For payment of the amount of dividends received in respect of
securities sold short;
6)For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a
resolution of the Board of Trustees or of the Executive
Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or
persons to whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities
Purchased.
Except as specifically stated otherwise in this Contract, in any
and every case where payment for purchase of securities for the
account of the Fund is made by the Custodian in advance of receipt of
the securities purchased in the absence of specific written
instructions from the Fund to so pay in advance, the Custodian shall
be absolutely liable to the Fund for such securities to the same
extent as if the securities had been received by the Custodian.
2.9 Appointment of Agents.
The Custodian may at any time or times in its discretion appoint
(and may at any time remove) any other bank or trust company which is
itself qualified under the Investment Company Act of 1940, as amended,
to act as a custodian, as its agent to carry out such of the
provisions of this Article 2 as the Custodian may from time to time
direct; provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities
hereunder.
2.10 Deposit of Fund Assets in Securities Systems.
The Custodian may deposit and/or maintain securities owned by the
Fund in a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934,
which acts as a securities depository, or in the book-entry system
authorized by the U.S. Department of the Treasury and certain federal
agencies, collectively referred to herein as "Securities System" in
accordance with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and subject to the
following provisions:
1)The Custodian may keep securities of the Fund in a Securities
System provided that such securities are represented in an
account ("Account") of the Custodian in the Securities System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for customers;
2)The records of the Custodian with respect to securities of the
Fund which are maintained in a Securities System shall identify
by book-entry those securities belonging to the Fund;
3)The Custodian shall pay for securities purchased for the account
of the Fund upon (i) receipt of advice from the Securities System
that such securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the Fund.
The Custodian shall transfer securities sold for the account of
the Fund upon (i) receipt of advice from the Securities System
that payment for such securities has been transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account of
the Fund. Copies of all advices from the Securities System of
transfers of securities for the account of the Fund shall
identify the Fund, be maintained for the Fund by the Custodian
and be provided to the Fund at its request. Upon request, the
Custodian shall furnish the Fund confirmation of each transfer to
or from the account of the Fund in the form of a written advice
or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the
Securities System for the account of the Fund;
4)The Custodian shall provide the Fund with any report obtained by
the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
5)The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article 9 hereof;
6)Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to
the Fund resulting from use of the Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian or any
of its agents or of any of its or their employees or from failure
of the Custodian or any such agent to enforce effectively such
rights as it may have against the Securities System; at the
election of the Fund, it shall be entitled to be subrogated to
the rights of the Custodian with respect to any claim against the
Securities System or any other person which the Custodian may
have as a consequence of any such loss or damage if and to the
extent that the Fund has not been made whole for any such loss or
damage.
2.10A Fund Assets Held in the Custodian's Direct Paper System.
The Custodian may deposit and/or maintain securities owned by
the Fund in the Direct Paper System of the Custodian subject to the
following provisions:
1)No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions;
2)The Custodian may keep securities of the Fund in the Direct Paper
System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for customers;
3)The records of the Custodian with respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;
4)The Custodian shall pay for securities purchased for the account
of the Fund upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to
the account of the Fund. The Custodian shall transfer securities
sold for the account of the Fund upon the making of an entry on
the records of the Custodian to reflect such transfer and receipt
of payment for the account of the Fund;
5)The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of a
written advice or notice, of Direct Paper on the next business
day following such transfer and shall furnish to the Fund copies
of daily transaction sheets reflecting each day's transaction in
the Securities System for the account of the Fund;
6)The Custodian shall provide the Fund with any report on its
system of internal accounting control as the Fund may reasonably
request from time to time.
2.11 Segregated Account.
The Custodian shall upon receipt of Proper Instructions establish
and maintain a segregated account or accounts for and on behalf of the
Fund, into which account or accounts may be transferred cash and/or
securities, including securities maintained in an account by the
Custodian pursuant to Section 2.10 hereof, (i) in accordance with the
provisions of any agreement among the Fund, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the
NASD (or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions by the Fund, (ii) for purposes of segregating cash
or government securities in connection with options purchased, sold or
written by the Fund or commodity futures contracts or options thereon
purchased or sold by the Fund, (iii) for the purposes of compliance by
the Fund with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the
Securities and Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies and (iv) for
other proper corporate purposes, but only, in the case of clause (iv),
upon receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Board of Trustees or of the Executive Committee
signed by an officer of the Fund and certified by the Secretary or an
Assistant Secretary, setting forth the purpose or purposes of such
segregated account and declaring such purposes to be proper corporate
purposes.
2.12 Ownership Certificates for Tax Purposes.
The Custodian shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in connection with
receipt of income or other payments with respect to securities of the
Fund held by it and in connection with transfers of securities.
2.13 Proxies.
The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in
the name of the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Fund such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.14 Communications Relating to Fund Portfolio Securities.
Subject to the provisions of Section 2.3, the Custodian shall
transmit promptly to the Fund all written information (including,
without limitation, pendency of calls and maturities of securities and
expirations of rights in connection therewith and notices of exercise
of call and put options written by the Fund and the maturity of
futures contracts purchased or sold by the Fund) received by the
Custodian from issuers of the securities being held for the Fund.
With respect to tender or exchange offers, the Custodian shall
transmit promptly to the Fund all written information received by the
Custodian from issuers of the securities whose tender or exchange is
sought and from the party (or his agents) making the tender or
exchange offer. If the Fund desires to take action with respect to
any tender offer, exchange offer or any other similar transaction, the
Fund shall notify the Custodian at least three business days prior to
the date on which the Custodian is to take such action.
2.15 Proper Instructions.
Proper Instructions as used throughout this Article 2 means a
writing signed or initialed by one or more person or persons as the
Board of Trustees shall have from time to time authorized. Each such
writing shall set forth the specific transaction or type of
transaction involved, including a specific statement of the purpose
for which such action is requested. Oral instructions will be
considered Proper Instructions if the Custodian reasonably believes
them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Fund shall
cause all oral instructions to be confirmed in writing. Upon receipt
of a certificate of the Secretary or an Assistant Secretary as to the
authorization by the Board of Trustees of the Fund accompanied by a
detailed description of procedures approved by the Board of Trustees,
Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the
Board of Trustees and the Custodian are satisfied that such procedures
afford adequate safeguards for the Fund's assets. For purposes of
this Section, Proper Instructions shall include instructions received
by the Custodian pursuant to any three-party agreement which requires
a segregated asset account in accordance with Section 2.11.
2.16 Actions Permitted without Express Authority.
The Custodian may in its discretion, without express authority
from the Fund:
1)make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under
this Contract, provided that all such payments shall be accounted
for to the Fund;
2)surrender securities in temporary form for securities in
definitive form;
3)endorse for collection, in the name of the Fund, checks, drafts
and other negotiable instruments; and
4)in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of the Fund
except as otherwise directed by the Board of Directors of the
Fund.
2.17 Evidence of Authority.
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper
believed by it to be genuine and to have been properly executed by or
on behalf of the Fund. The Custodian may receive and accept a
certified copy of a vote of the Board of Trustees of the Fund as
conclusive evidence (a) of the authority of any person to act in
accordance with such vote or (b) of any determination or of any action
by the Board of Trustees pursuant to the Declaration of Trust as
described in such vote, and such vote may be considered as in full
force and effect until receipt by the Custodian of written notice to
the contrary.
3. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board of
Directors of the Fund to keep the books of account of the Fund and/or
compute the net asset value per share of the outstanding shares of the
Fund or, if directed in writing to do so by the Fund, shall itself
keep such books of account and/or compute such net asset value per
share. If so directed, the Custodian shall also calculate weekly the
net income of the Fund as described in the Fund's currently effective
prospectus and shall advise the Fund and the Transfer Agent weekly of
the total amounts of such net income and, if instructed in writing by
an officer of the Fund to do so, shall advise the Transfer Agent
periodically of the division of such net income among its various
components. The calculations of the net asset value per share and the
weekly income of the Fund shall be made at the time or times described
from time to time in the Fund's currently effective prospectus.
4. Records.
The Custodian shall create and maintain all records relating to
its activities and obligations under this Contract in such manner as
will meet the obligations of the Fund under the Investment Company Act
of 1940, with particular attention to Section 31 thereof and Rules
31a-1 and 31a-2 thereunder. All such records shall be the property of
the Fund and shall at all times during the regular business hours of
the Custodian be open for inspection by duly authorized officers,
employees or agents of the Fund and employees and agents of the
Securities and Exchange Commission. The Custodian shall, at the
Fund's request, supply the Fund with a tabulation of securities owned
by the Fund and held by the Custodian and shall, when requested to do
so by the Fund and for such compensation as shall be agreed upon
between the Fund and the Custodian, include certificate numbers in
such tabulations.
5. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund may
from time to time request, to obtain from year to year favorable
opinions from the Fund's independent accountants with respect to its
activities hereunder in connection with the preparation of the Fund's
Form N-2, and Form N-SAR or other annual reports to the Securities and
Exchange Commission and with respect to any other requirements of such
Commission.
6. Reports to Fund by Independent Public Accountants.
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on
the accounting system, internal accounting control and procedures for
safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a
Securities System, relating to the services provided by the Custodian
under this Contract; such reports, shall be of sufficient scope and in
sufficient detail, as may reasonably be required by the Fund to
provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies,
the reports shall so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time
between the Fund and the Custodian.
8. Responsibility of Custodian
So long as and to the extent that it is in the exercise of
reasonable care, the Custodian shall not be responsible for the title,
validity or genuineness of any property or evidence of title thereto
received by it or delivered by it pursuant to this Contract and shall
be held harmless in acting upon any notice, request, consent,
certificate or other instrument reasonably believed by it to be
genuine and to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a three-
party futures or options agreement. The Custodian shall be held to
the exercise of reasonable care in carrying out the provisions of this
Contract, but shall be kept indemnified by and shall be without
liability to the Fund for any action taken or omitted by it in good
faith without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice.
If the Fund requires the Custodian to take any action with
respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the
Custodian or its nominee assigned to the Fund being liable for the
payment of money or incurring liability of some other form, the Fund,
as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian, its affiliates,
subsidiaries or agents, to advance cash or securities for any purpose
(including but not limited to securities settlements, foreign exchange
contracts and assumed settlement) or in the event that the Custodian
or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the
performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund
shall be security therefor and should the Fund fail to repay the
Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of the Fund assets to the extent
necessary to obtain reimbursement.
9. Effective Period, Termination an Amendment.
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the
parties hereto and may be terminated by either party by an instrument
in writing delivered or mailed, postage prepaid to the other party,
such termination to take effect not sooner than thirty (30) days after
the date of such delivery or mailing; provided, however that the
Custodian shall not act under Section 2.10 hereof in the absence of
receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Trustees of the Fund has approved the
initial use of a particular Securities System and the receipt of an
annual certificate of the Secretary or an Assistant Secretary that the
Board of Trustees has reviewed the use by the Fund of such Securities
System, as required in each case by Rule 17f-4 under the Investment
Company Act of 1940, as amended and that the Custodian shall not act
under Section 2.10A hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board
of Trustees has approved the initial use of the Direct Paper System
and the receipt of an annual certificate of the Secretary or an
Assistant Secretary that the Board of Trustees has reviewed the use by
the Fund of the Direct Paper System; provided further, however, that
the Fund shall not amend or terminate this Contract in contravention
of any applicable federal or state regulations, or any provision of
the Declaration of Trust, and further provided, that the Fund may at
any time by action of its Board of Trustees (i) substitute another
bank or trust company for the Custodian by giving notice as described
above to the Custodian, or (ii) immediately terminate this Contract in
the event of the appointment of a conservator or receiver for the
Custodian by the Comptroller of the Currency or upon the happening of
a like event at the direction of an appropriate regulatory agency or
court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to
the Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its costs,
expenses and disbursements.
10. Successor Custodian.
If a successor custodian shall be appointed by the Board of
Trustees of the
Fund, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the
form for transfer, all securities then held by it hereunder and shall
transfer to an account of the successor custodian all of the Fund's
securities held in a Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of
the Board of Trustees of the Fund, deliver at the office of the
Custodian and transfer such Securities, funds and other properties in
accordance with such vote.
In the event that no written order designating a successor
custodian or certified copy of a vote of the Board of Trustees shall
have been delivered to the Custodian on or before the date when such
termination shall become effective, then the Custodian shall have the
right to deliver to a bank or trust company, which is a "bank" as
defined in the Investment Company Act of 1940, doing business in
Boston, Massachusetts, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds
and other properties held by the Custodian and all instruments held by
the Custodian relative thereto and all other property held by it under
this Contract and to transfer to an account of such successor
custodian all of the Fund's securities held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the
Custodian under this Contract.
In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of
termination hereof owing to failure of the Fund to the procure the
certified copy of the vote referred to or of the Board of Trustees to
appoint a successor custodian, the Custodian be entitled to fair
compensation for its services during such period as the Custodian
retains possession of such securities funds and other properties and
the provisions of this Contract relating to the duties and obligations
of the Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian
and the Fund may from time to time agree on such provisions
interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of
this Contract. Any such interpretive or additional provisions shall
be in a writing signed by both parties and shall be annexed hereto,
provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any
provision of the Declaration of Trust of the Fund. No interpretive or
additional provisions made as provided in the preceding sentence shall
be deemed to be an amendment of this Contract.
12. Massachusetts Law to Apply.
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
13. Prior Contracts.
This Contract supersedes and terminates, as of the date hereof,
all prior contracts between the Fund and the Custodian relating to the
custody of the Fund's assets.
14. Shareholder Liability
No shareholder of the Trust 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 affairs of the
Trust, save only that arising from bad faith, willful malfeasance,
gross negligence or reckless disregard for 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 harmless each shareholder 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.
IN WITNESS WHEREOF, each of the parties has caused this instrument
to be executed in its name and behalf by its duly authorized representative
and its seal to be hereunder affixed as of the day of
, 1992.
ATTEST BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM
TRUST INC.
_______________________ By __________________________________
ATTEST STATE STREET BANK AND TRUST COMPANY
_______________________ By ___________________________________
Assistant Secretary Senior Vice President
STATE STREET BANK AND TRUST COMPANY
Custodian Fee Schedule
BLACKROCK FINANCIAL MANAGEMENT
BlackRock Income Trust
BlackRock High Income Fund
BlackRock Advantage Term Trust
BlackRock Target Term Trust
BlackRock FNMA Fund
BlackRock Insured Municipal Term Trust
BlackRock Investment Quality Term Trust
The BlackRock Insured Municipal 2008 Term Trust Inc.
The BlackRock California Insured Municipal 2008 Term Trust Inc.
BlackRock Strategic Term Trust
BlackRock 1998 Term Trust
BlackRock Municipal Target Term Trust
BlackRock Freddie MAC Fund
BlackRock North American Gov't Income Trust
The BFM Institutional Trust Inc.
The BlackRock 2001 Term Trust
The BlackRock New York Insured Municipal 2008 Term Trust Inc.
The BlackRock Florida Insured Municipal 2008 Term Trust Inc.
I. ADMINISTRATION
A. Custody Service - Maintain custody of fund assets. Settle
portfolio purchases and sales. Report buy and sell fails. Determine
and collect portfolio income. Make cash disbursements and report cash
transactions. Maintain investment ledgers, provide selected portfolio
transactions position and income reports.
The administration fees shown below are annual charges, billed and
payable monthly.
ANNUAL FEES
Fund Net Assets Annual Fees
First $500 Million 3.00 BP
Next $500 Million 1.75 BP
Next $1 Billion 1.30 BP
Excess 1.25 BP
These fees will take the total domestic assets of all the above BFM
portfolios into account.
B. Global Custody Service
Services provided include: Security and Cash Movements through
Subcustodian network, Foreign Communication, Foreign Exchange (local
currency settlements).
Annual Fees
Canada 10 BP
II. FUND ACCOUNTING SERVICE
Maintain general ledger and capital stock accounts. Prepare daily
trial balance. Calculate net asset value weekly (daily for the BFM
Institutional Trust). Provide selected general ledger reports.
Securities yield or market value quotations will be provided to State
Street by the fund.
Annual Fees, Based on Fund Assets
First $250M 15,000 per fund
Excess $250M - $750M 15,000 per fund
Excess $750M .25BP
III. PORTFOLIO TRADES For each line item processed
State Street Bank Repos $ 7.00
New York Physical Settlements $ 25.00
Maturity Collections $ 8.00
Fed Book Entry Settlements $ 12.00
Canadian Transactions $ 30.00
All Other Trades $ 16.00
IV. OPTIONS
Options charge for each option written or closing contract,
per issue, per broker $ 25.00
Option expiration charge, per issue, per broker $ 15.00
Option exercised charge, per issue, per broker $ 15.00
V. LENDING OF SECURITIES
Deliver loaned securities versus cash collateral $ 20.00
Deliver loaned securities versus securities
collateral $ 30.00
Receive/deliver additional cash collateral $ 6.00
Substitutions of securities collateral $ 30.00
Deliver cash collateral versus receipt of loaned
securities $ 15.00
Deliver securities collateral versus receipt of
loaned securities $ 25.00
Loan Administration mark-to-market per day,
per loan $ 3.00
VI. FUTURES
Transactions -- no security movement $ 10.00
VII. HOLDINGS CHARGE
For each issue maintained - monthly charge $ 5.00
VIII. PRINCIPAL REDUCTION PAYMENTS
Paydown on Government Securities, per paydown $ 8.00
IX. SPECIAL SERVICES
Fees for activities such as fund consolidations or reorganization,
extraordinary security shipments, the preparation of special reports,
daily fund pricing and quotes from sources other than BFM will be
subject to negotiation.
X. OUT-OF-POCKET EXPENSES
A billing for the recovery of applicable out-of-pocket expenses will be
made as of the end of each month. Out-of-pocket expenses include, but are
not limited to the following:
Telephone
Wire Charges ($5.25 per wire in and $5.00 out)
Postage and Insurance
Courier Service
Duplicating
Legal Fees
Supplies Related to Fund Records
Rush Transfer -- $8.00 Each
Transfer Fees
Sub-custodian Charges
Price Waterhouse Audit Letter
Federal Reserve Fee for Return Check Items over $2,500 - $4.2S
GNMA Transfer - $15.00 Each
XI. This fee schedule will be effective September 1, 1991.
BLACKROCK FINANCIAL STATE STREET BANK & TRUST
MANAGEMENT
BY:_____________________ BY:_______________________
TITLE:__________________ TITLE:____________________
DATE:___________________ DATE:_____________________
Exhibit j.(2)
REGISTRAR,
TRANSFER AGENCY AND SERVICE AGREEMENT
between
BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM TRUST
and
STATE STREET BANK AND TRUST COMPANY
2B592
WP1978C
TABLE OF CONTENTS
Page
3 Article 1 Terms of Appointment; Duties of the Bank
4 Article 2 Fees and Expenses
5 Article 3 Representations and Warranties of the Bank
5 Article 4 Representations and Warranties of the Fund
6 Article 5 Data Access and Proprietary Information
7 Article 6 Indemnification
9 Article 7 Standard of Care
9 Article 8 Covenants of the Fund and the Bank
10 Article 9 Termination of Agreement
10 Article 10 Assignment
10 Article 11 Amendment
10 Article 12 Massachusetts Law to Apply
11 Article 13 Force Majeure
11 Article 14 Consequential Damages
11 Article 15 Merger of Agreement
12 Article 16 Shareholder Liability
REGISTRAR, TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 15th day of September
, 1992, by and between BLACKROCK
FLORIDA INSURED MUNICIPAL 2008 TERM TRUST, a Massachusetts business trust,
having its principal office and place of business at 345 Park Avenue, New
York, New York 10154, (the "Fund"), and STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company having its principal office and
place of business at 225 Franklin Street, Boston, Massachusetts 02110 (the
"Bank").
WHEREAS, the Fund desires to appoint the Bank as its registrar,
transfer agent, dividend disbursing agent, custodian of certain retirement
plans and agent in connection with certain other activities and the Bank
desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Article 1 Terms of Appointment: Duties of the Bank
1.01 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints the Bank to act
as, and the Bank agrees to act as registrar, transfer agent for
the Fund's authorized and issued shares of its beneficial
interests ("Shares"), dividend disbursing agent, custodian of
certain retirement plans and agent in connection with any
dividend reinvestment plan as set out in the prospectus of the
Fund, corresponding to the date of this Agreement.
1.02 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from
time to time by agreement between the Fund and the Bank, the
Bank shall:
(i) Issue and record the appropriate number of Shares as authorized and
hold such Shares in the appropriate Shareholder account;
(ii) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate documentation;
(iii) Execute transactions directly with broker-dealers authorized by the
Fund who shall thereby be deemed to be acting on behalf of the Fund;
(iv) Prepare and transmit payments for dividends and distributions declared
by the Fund;
(v) Act as agent for Shareholders pursuant to the dividend reinvestment and
cash purchase plan as amended from time to time in accordance with the
terms of the agreement to be entered into between the Shareholders and the
Bank in substantially the form attached as Exhibit A hereto:
(vi) Issue replacement certificates for those certificates alleged to have
been lost, stolen or destroyed upon receipt by the Bank of indemnification
satisfactory to the Bank and protecting the Bank and the Fund, and the Bank
as its option, may issue replacement certificates in place of mutilated
stock certificates upon presentation thereof and without such indemnity.
(b) In addition to and neither in lieu nor in contravention
of the services set forth in the above paragraph (a), the
Bank shall: (i) perform all of the customary services of a
registrar, transfer agent, dividend disbursing agent,
custodian of certain retirement plans and agent of the
dividend reinvestment and cash purchase plan as described in
Article 1 consistent with those requirements in effect as at
the date of this Agreement. The detailed definition,
frequency, limitations and associated costs (if any) set out
in the attached fee schedule, include but not limited to:
maintaining all Shareholder accounts, preparing Shareholder
meeting lists, mailing proxies, and mailing Shareholder
reports to current Shareholders, withholding taxes on U.S.
resident and non-resident alien accounts where applicable,
preparing and filing U.S. Treasury Department Forms 1099 and
other appropriate forms required with respect to dividends
and distributions by federal authorities for all registered
Shareholders.
(c) The Bank shall provide additional services on behalf of
the Fund (i.e., escheatment services) which may be agreed
upon in writing between the Fund and the Bank.
Article 2 Fees and Expenses
2.01 For the performance by the Bank pursuant to this Agreement,
the Fund agrees to pay the Bank an annual maintenance fee as
set out in the initial fee schedule attached hereto. Such
fees and out-of-pocket expenses and advances identified under
Section 2.02 below may be changed from time to time subject
to mutual written agreement between the Fund and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the
Fund agrees to reimburse the Bank for out-of-pocket expenses,
including but not limited to confirmation production,
postage, forms, telephone, microfilm, microfiche, tabulating
proxies, records storage, or advances incurred by the Bank
for the items set out in the fee schedule attached hereto.
In addition, any other expenses incurred by the Bank at the
request or with the consent of the Fund, will be reimbursed
by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses
within five days following the receipt of the respective
billing notice. Postage and the cost of materials for
mailing of dividends, proxies, Fund reports and other
mailings to all Shareholder accounts shall be advanced to the
Bank by the Fund at least seven (7) days prior to the mailing
date of such materials.
Article 3 Representations and Warranties of the Bank
The Bank represents and warrants to the Fund that:
3.01 It is a trust company duly organized and existing and in
good standing under the laws of the Commonwealth of
Massachusetts.
3.02 It is duly qualified to carry on its business in the
Commonwealth of Massachusetts.
3.03 It is empowered under applicable laws and by its Charter
and By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties
and obligations under this Agreement.
Article 4 Representations and Warranties of the Fund
The Fund represents and warrants to the Bank that:
4.01 It is a corporation duly organized and existing and in
good standing under the laws of Massachusetts.
4.02 It is empowered under applicable laws and by its
Declaration of Trust and By-Laws to enter into and
perform this Agreement.
4.03 All corporate proceedings required by said Declaration of
Trust and By-Laws have been taken to authorize it to
enter into and perform this Agreement.
4.04 It is a closed-end, diversified investment company
registered under the Investment Company Act of 1940, as
amended.
4.05 To the extent required by federal securities laws a
registration statement under the Securities Act of 1933,
as amended is currently effective and appropriate state
securities law filings have een made with respect to all
Shares of the Fund being offered for sale; information to
the contrary will result in immediate notification to the
Bank.
4.06 It shall make all required filings under federal and
state securities laws.
Article 5 Data Access and Proprietary Information
5.01 The Fund acknowledges that the data bases, computer
programs, screen formats, report formats, interactive
design techniques, and documentation manuals furnished to
the Fund by the Bank as part of the Fund's ability to
access certain related data ("Customer Data") maintained
by the Bank on data bases under the control and ownership
of the Bank ("Data Access Services") constitute
copyrighted, trade secret, or other proprietary
information (collectively, "Proprietary Information") of
substantial value to the Bank. The Fund agrees to treat
all Proprietary Information as proprietary to the Bank
and further agrees that it shall not divulge any
Proprietary Information to any person or organization
except as may be provided hereunder. Without limiting the
foregoing, the Fund agrees for itself and its employees
and agents:
(a) to access Customer Data solely from locations as
may be designated in writing by the Bank and solely in
accordance with the Bank's applicable user
documentation;
(b) to refrain from copying or duplicating in any way
the Proprietary Information;
(c) to refrain from obtaining unauthorized access to
any portion of the Proprietary Information, and if such
access is inadvertently obtained, to inform in a timely
manner of such fact and dispose of such information in
accordance with the Bank's instructions;
(d) to refrain from causing or allowing third-party
data acquired hereunder from being retransmitted to any
other computer facility or other location, except with
the prior written consent of the Bank;
(e) that the Fund shall have access only to those
authorized transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by
the Bank to protect at the Bank's expense the rights of
the Bank in Proprietary Information at common law,
under federal copyright law and under other federal or
state law.
Each party shall take reasonable efforts to advise its
employees of their obligations pursuant to this Article 5.
The obligations of this Article shall survive any earlier
termination of this Agreement.
5.02 If the Fund notifies the Bank that any of the Data Access
Services do not operate in material compliance with the
most recently issued user documentation for such
services, the Bank shall endeavor in a timely manner to
correct such failure. Organizations from which the Bank
may obtain certain data included in the Data Access
Services are solely responsible for the contents of such
data and the Fund agrees to make no claim against the
Bank arising out of the contents of such third-party
data, including, but not limited to, the accuracy
thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS
AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH
ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE BANK
EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY
STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
5.03 If the transactions available to the Fund include the
ability to originate electronic instructions to the Bank
in order to (i) effect the transfer or movement of cash
or Shares or (ii) transmit Shareholder information or
other information (such transactions constituting a
"COEFI"), then in such event the Bank shall be entitled
to rely on the validity and authenticity of such
instruction without undertaking any further inquiry as
long as such instruction is undertaken in conformity with
security procedures established by the Bank from time to
time.
Article 6 Indemnification
6.01 The Bank shall not be responsible for, and the Fund shall
indemnify and hold the Bank harmless from and against,
any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liability arising out of or
attributable to:
a) All actions of the Bank or its agents or
subcontractors required to be taken pursuant to this
Agreement, provided that such actions are taken in good
faith and without negligence or willful misconduct.
b) The Fund's lack of good faith, negligence or
willful misconduct which arise out of the breach of any
representation or warranty of the Fund hereunder.
c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or
services which (i) are received by the Bank or its
agents or subcontractors, and (ii) have been prepared,
maintained or performed by the Fund or any other person
or firm on behalf of the Fund including but not limited
to any previous transfer agent or registrar.
d) The reliance on, or the carrying out by the Bank or
its agents or subcontractors of any instructions or
requests of the Fund.
e) The offer or sale of Shares in violation of any
requirement under the federal securities laws or
regulations or the securities laws or regulations of
any state that such Shares be registered in such state
or in violation of any stop order or other
determination or ruling by any federal agency or any
state with respect to the offer or sale of such Shares
in such state.
6.02 At any time the Bank may apply to any officer of the Fund
for instructions, and may consult with legal counsel with
respect to any matter arising in connection with the
services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors
shall not be liable and shall be indemnified by the Fund
for any action taken or omitted by it in reliance upon
such instructions or upon the opinion of such counsel.
The Bank, its agents and subcontractors shall be
protected and indemnified in acting upon any paper or
document furnished by or on behalf of the Fund,
reasonably believed to be genuine and to have been signed
by the proper person or persons, or upon any instruction,
information, data, records or documents provided the Bank
or its agents or subcontractors by telephone, in person,
machine readable input, telex, CRT data entry or other
similar means authorized by the Fund, and shall not be
held to have notice of any change of authority of any
person, until receipt of written notice thereof from the
Fund. The Bank, its agents and subcontractors shall also
be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the
proper manual or facsimile signatures of the officers of
the Fund, and the proper countersignature of any former
transfer agent or former registrar, or of a co-transfer
agent or co-registrar.
6.03 In order that the indemnification provisions contained in
this Article 6 shall apply, upon the assertion of a claim
for which the Fund may be required to indemnify the Bank,
the Bank shall promptly notify the Fund of such
assertion, and shall keep the Fund advised with respect
to all developments concerning such claim. The Fund shall
have the option to participate with the Bank in the
defense of such claim or to defend against said claim in
its own name or in the name of the Bank. The Bank shall
in no case confess any claim or make any compromise in
any case in which the Fund may be required to indemnify
the Bank except with the Fund's prior written consent.
Article 7 Standard of Care
7.01 The Bank shall at all times act in good faith and agrees
to use its best efforts within reasonable limits to
insure the accuracy of all services performed under this
Agreement, but assumes no responsibility and shall not be
liable for loss or damage due to errors unless said
errors are caused by its negligence, bad faith, or
willful misconduct of that of its employees.
Article 8 Covenants of the Fund and the Bank
8.01 The Fund shall promptly furnish to the Bank the
following: (a) A certified copy of the resolution of the
Board of Trustees of the Fund authorizing the appointment
of the Bank and the execution and delivery of this
Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the
Fund and all amendments thereto.
8.02 The Bank hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to the
Fund for safekeeping of stock certificates, check forms
and facsimile signature imprinting devices, if any; and
for the preparation or use, and for keeping account of,
such certificates, forms and devices.
8.03 The Bank shall keep records relating to the services to
be performed hereunder, in the form and manner as it may
deem advisable. To the extent required by Section 31 of
the Investment Company Act of 1940, as amended, and the
Rules thereunder, the Bank agrees that all such records
prepared or maintained by the Bank relating to the
services to be performed by the Bank hereunder are the
property of the Fund and will be preserved, maintained
and made available in accordance with such Section and
Rules, and will be surrendered promptly to the Fund on
and in accordance with its request.
8.04 The Bank and the Fund agree that all books, records,
information and data pertaining to the business of the
other party which are exchanged or received pursuant to
the negotiation or the carrying out of this Agreement
shall remain confidential, and shall not be voluntarily
disclosed to any other person, except as may be required
by law.
8.05 In cases of any requests or demands for the inspection of
the Shareholder records of the Fund, the Bank will
endeavor to notify the Fund and to secure instructions
from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to
exhibit the Shareholder records to any person whenever it
is advised by its counsel that it may be held liable for
the failure to exhibit the Shareholder records to such
person.
Article 9 Termination of Agreement
9.01 This Agreement may be terminated by either party upon one
hundred twenty (120) days written notice to the other.
9.02 Should the Fund exercise its right to terminate, all out-
of-pocket expenses associated with the movement of
records and material will be borne by the Fund.
Additionally, the Bank reserves the right to charge for
any other reasonable expenses associated with such
termination and/or a charge equivalent to the average of
three (3) month's fees.
Article 10 Assignment
10.01 Except as provided in Section 10.03 below, neither this
Agreement nor any rights or obligations hereunder may be
assigned by either party without the written consent of
the other party.
10.02 This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted
successors and assigns.
10.03 The Bank may, without further consent on the part of the
Fund, subcontract for the performance hereof with (i)
Boston Financial Data Services, Inc., a Massachusetts
corporation ( "BFDS") which is duly registered as a
transfer agent pursuant to Section 17A(c)(l) of the
Securities Exchange Act of 1934, as amended ("Section
17A(c)(l)"), (ii) a BFDS subsidiary duly registered as a
transfer agent pursuant to Section 17A(c)(l) or (iii)
BFDS affiliate; provided, however, that the Bank shall be
as fully responsible to the Fund for the acts and
omissions of any subcontractor as it is for its own acts
and omissions.
Article 11 Amendment.
11.01 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or
approved by a resolution of the Board of Trustees of the
Fund.
Article 12 Massachusetts Law to Apply
12.01 This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws
of the Commonwealth of Massachusetts.
Article 13 Force Majeure
13.01 In the event either party is unable to perform its
obligations under the terms of this Agreement because of
acts of God, strikes, equipment or transmission failure
or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be
liable for damages to the other for any damages resulting
from such failure to perform or otherwise from such
causes.
Article 14 Consequential Damages
14.01 Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision
of this Agreement or for any consequential damages
arising out of any act or failure to act hereunder.
Article 15 Merger of Agreement
15.01 This Agreement constitutes the entire agreement between
the parties hereto and supersedes any prior agreement
with respect to the subject hereof whether oral or
written.
Article 16 Shareholder Liability
No shareholder of the Trust 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 affairs of the
Trust, save only that arising from bad faith, willful malfeasance,
gross negligence or reckless disregard for 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.
IN WITNESS WHEREOF, the parties hereto have caused this
agreement to be executed in their names and on their behalf by and through
their duly authorized officers, as of the day and year first above written.
BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM TRUST INC.
BY:_____________________________________________________
ATTEST:
_______________________________
STATE STREET BANK AND TRUST CO
BY:________________________________
Senior Vice President
ATTEST:
_________________________________
Assistant Secretary
FEE SCHEDULE
For
The BlackRock Advantage Term Trust Inc.
The BlackRock Income Trust Inc.
The BlackRock Insured Municipal Term Trust Inc.
The BlackRock Municipal Target Term Trust Inc.
The BlackRock North American Government Income Trust
The BlackRock Target Term Trust Inc.
The BlackRock 1998 Term Trust Inc.
The BlackRock Investment Quality Term Trust Inc.
The BlackRock 2001 Term Trust Inc.
The BlackRock Insured Municipal 2008 Term Trust Inc.
The BlackRock New York Insured Municipal 2008 Term Trust Inc.
The BlackRock California Insured Municipal 2008 Term Trust Inc.
The BlackRock Florida Insured Municipal 2008 Term Trust Inc.
First 15,000 shareholders $8.75 (Per account/Per annum)
Next 15,000 - 30,000 shareholders at $8.25 (Per account/Per annum)
Next 30,000 or more shareholders at $7.50 (Per account/Per annum)
Includes the issuance and registration of the first 5,000 credit
certificates per fund. Excess credits to be billed at $1.25 each.
For each dividend reinvestment per participant $0.75
For each optional cash infusion $0.75
ACCOUNT MAINTENANCE SERVICES
o Establishing new accounts
o Preparation and mailing of W-9 solicitation to new accounts without
T.I.N.'s.
o Address changes
o Processing T.I.N. changes
o Processing routine and non-routine transfers of ownership
o Issuance of credit certificates (see limits)
o Posting debit and credit transactions
o Providing a daily transfer journal of ownership changes
o Responding to written shareholder communications
o Responding to shareholder telephone inquiries
o Placing stop transfers
o Releasing stop transfers
o Replacing lost certificates
o Registration of credit certificates (see limits)
DIVIDEND DISBURSEMENT SERVICES
o Generate and mail monthly dividend checks with one enclosure
(12 per annum)
o Replace lost dividend checks
o Processing of backup withholding and remittance
o Preparation and filing of Federal Tax Forms 1099 and 1042
o Preparation and filing of State Tax information as directed
o Preparation of escheatment information (shares and dividends)
DIVIDEND REINVESTMENT SERVICES PROVIDED
o Addressing and mailing of enrollment confirmation notice
o Processing optional cash investments and acknowledging same
o The monthly reinvestment of dividend proceeds for participants
(12 per annum)
o Participant withdrawal or sell requests
o Preparation, mailing and filing of Federal Tax Form 1099B for sales
ANNUAL MEETING SERVICE
o Preparation for the mailing of proxies, proxy statement, annual report
and business reply envelope
o Providing one set of labels of banks, brokers and nominees for broker
search
o Providing a record date list
o tabulation of returned proxies
o Daily reporting of tabulation results
o Interface support during solicitation effort
o Providing one inspector of election at annual meeting
o Providing an annual meeting voted list
ADDRESSING AND MAILING SERVICES
o Addressing and mailing of three (3) quarterly reports
o Addressing and mailing new shareholder welcome materials on a weekly
basis
TERM OF FEE CONTRACT
o Two years from date of execution
o Minimum $1,000- per month per Fund
o Escalation Clause - The per account annual fee in effect during 1994
shall be equal to the fee for 1993 increased by the lesser of (I) 6%
or, (ii) the percentage increase in the U. S. Department of Labor
national index of "Cost of Services Less Rent" for the year 1993. The
fee for 1994-1996, after taking into effect this increase, will not
change.
MISCELLANEOUS
o All out-of-pocket expenses such as postage, stationery, etc. will be
billed as incurred.
ADDITIONAL SERVICES
o Services over and above this Fee Schedule will be invoiced in
accordance with our current Schedule of Services.
Dated:_______________________
The BlackRock Funds Company State Street Bank and Trust
By:________________________ By:____________________________
Name: Henry Gabbay Name: Charles V. Rossi
Title: Treasurer Title: Vice President
- ----------------------------------------------------------------------------
AUCTION AGENT AGREEMENT
between
THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM TRUST
and
BANKERS TRUST COMPANY
Dated as of November 23, 1992
Relating to
Auction Rate Municipal Preferred Shares of Beneficial Interest, Series R7
(the "Preferred Shares")
of
THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM TRUST
- -----------------------------------------------------------------------------
THIS AUCTION AGENT AGREEMENT dated as of November 23, 1992,
between THE BLACKROCK FLORIDA INSURED MUNICIPAL 2008 TERM TRUST, a
Massachusetts business trust (the "Company"), and BANKERS TRUST COMPANY, a
New York banking corporation.
The Company proposes to duly authorize and issue 1,030 shares of
Auction Rate Municipal Preferred Shares of Beneficial Interest, Series R7,
with a par value of $.01 per share and a liquidation preference of $50,000
per share plus an amount equal to accumulated but unpaid dividends (whether
or not earned or declared) plus the premium, if any, resulting from the
designation of a Premium Call Period (the "Preferred Shares"); pursuant to
the Company's Certificate of Designation (as defined below). An Auction (as
defined below) will be conducted for the Preferred Shares. The Company
desires that Bankers Trust Company perform certain duties as agent in
connection with the Auction of Preferred Shares (the "Auction Agent") and
as the transfer agent, registrar, dividend disbursing agent and redemption
agent with respect to the Preferred Shares (the "Paying Agent") upon the
terms and conditions of this Agreement, and hereby appoints Bankers Trust
Company as said Auction Agent and Paying Agent in accordance with those
terms and conditions (hereinafter generally referred to as the "Auction
Agent" except in Sections 3 and 4 below).
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Company and the Auction Agent agree as
follows:
1. Definitions and Rules of Construction.
1.1 Terms Defined by Reference to Certificate 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 made known to the Auction
Agent to be controlled by, in control of or under common control with, the
Company, or its successors.
(b) Agent Member" of any Person shall mean such Person's agent
member of the Securities Depository who is identified as such in such
Person's Purchaser's Letter.
(c) "Certificate of Designation" shall mean the Certificate of
Designation of the Company, establishing the powers, preferences and rights
of the Preferred Shares filed on November 18, 1992 in the Office of the
State Department of Assessments and Taxation of the Commonwealth of
Massachusetts.
(d) "Auction" shall have the meaning specified in Section 2.1
hereof.
(e) "Auction Procedures" shall mean the Auction Procedures that
are set forth in Paragraph 11 of the Certificate of Designation.
(f) "Authorized Officer" shall mean each Senior Vice President,
Vice President, Assistant Vice President, Trust Officer and Assistant
Secretary and Assistant Treasurer of the Auction Agent assigned to its
Corporate Trust and Agency Group and every other officer or employee of the
Auction Agent designated as an "Authorized Officer" for purposes hereof in
a communication to the Company.
(g) "Broker-Dealer Agreement" shall mean each agreement between
the Auction Agent and a Broker-Dealer substantially in the form attached
hereto as Annex A.
(h) "Company Officer" shall mean the Chairman, the President, each
Vice President (whether or not designated by a number or word or words
added before or after the title "Vice President"), the Secretary, the
Treasurer, each Assistant Secretary and each Assistant Treasurer of the
Company and every other officer or employee of the Company designated as a
"Company Officer" for purposes hereof in a notice from the Company to the
Auction Agent.
(i) "Holder" shall be a holder of record of one or more shares of
Preferred Shares, listed as such in the share register maintained by the
Paying Agent pursuant to Section 4.6.
(j) "Purchaser's Letter" shall mean a letter addressed to the
Company, 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. 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 the Preferred Shares for each Dividend Period therefor after the
Initial Dividend Period shall be the rate per annum that a commercial bank,
trust company, or other financial institution appointed by the Company
advises results from implementation of the Auction Procedures. The Board of
Trustees of the Company has adopted a resolution appointing Bankers Trust
Company as Auction Agent for purposes of the Auction Procedures. The
Auction Agent hereby accepts such appointment and agrees that, on each
Auction Date, it shall follow the procedures set forth in this Section 2
and the Auction Procedures for the purpose of determining the Applicable
Rate for the Preferred Shares for the next Dividend Period therefor. Each
periodic operation of such procedures is hereinafter referred to as an
"Auction".
(b) All of the provisions contained in the Auction Procedures and
the Settlement Procedures are incorporated herein by reference in their
entirety and shall be deemed to be a part hereof to the same extent as if
such provisions were fully set forth herein.
2.2 Preparation for Each Auction; Maintenance of Registry of Beneficial
Owners.
(a) At the time of closing of the initial issuance and sale of the
Preferred Shares (the "Closing"), the Company shall provide the Auction
Agent with a list of initial Broker-Dealers previously approved by the
Auction Agent and shall cause to be delivered to the Auction Agent for
execution by the Auction Agent a Broker- Dealer Agreement signed by each
such Broker-Dealer. Subsequent to the Closing and pursuant to Section
2.5(b) and subject to Section 2.5(c) hereof, the Auction Agent may, from
time to time, designate additional Broker Dealers. The Auction Agent shall
keep the list of Broker Dealers current and accurate, and shall indicate
thereon, or on a separate list, the identity of each Existing Holder, if
any, whose most recent Order was submitted by a Broker-Dealer on such list
and resulted in such Existing Holder continuing to hold or purchasing
Preferred Shares. Not later than seven days prior to any Auction Date for
which any change in such list of Broker- Dealers is to be effective, the
Auction Agent shall notify the Company in writing of such change and, if
any such change is the addition of a Broker-Dealer to such list, the
Auction Agent shall have entered into a Broker-Dealer Agreement with such
additional Broker-Dealer prior to the participation of any such
Broker-Dealer in any Auction.
(b) (i) In the event that the Auction Date for any Auction shall
be changed after the Auction Agent shall have given the notice referred to
in clause (vii) of Paragraph (a) of the Settlement Procedures, the Auction
Agent, by such means as the Auction Agent deems practicable, shall give
notice of such change to the Broker- Dealers not later than the earlier of
9:15 A.M. on the new Auction Date or 9:15 A.M. on the old Auction Date.
(ii) If, after the date of this Agreement, there is any
change in the prevailing rating of Preferred Shares by either of the rating
agencies (or substitute or successor rating agencies) referred to in the
definition of the Maximum Applicable Rate, thereby resulting in any change
in the corresponding percentage for the Preferred Shares, as set forth in
said definition (the "Percentage"), the Company shall notify the Auction
Agent in writing of such change in the Percentage prior to 9:00 A.M. on the
Auction Date for Preferred Shares next succeeding such change. The
Percentage for the Preferred Shares on the date of this Agreement is 110%.
The Auction Agent shall be entitled to rely on the last Percentage of which
it has received notice from the Company (or, in the absence of such notice,
the Percentage set forth in the preceding sentence) in determining the
Maximum Applicable Rate as set forth in Section 2.2(e)(i) hereof.
(c) With respect to each Dividend Period that is a Special
Dividend Period, on or prior to the fourth day but not more than seven days
prior to an Auction Date for the Preferred Shares, the Company may, at its
sole option and to the extent permitted by law, by telephonic and written
notice (a "Request for Special Dividend Period") to the Auction Agent and
to each Broker-Dealer, request that the next succeeding Dividend Period for
the Preferred Shares will be a number of days (other than 7) evenly
divisible by 7 and specified in such notice, provided that for any Auction
occurring after the initial Auction, the Company may not give a Request for
Special Dividend Period (and any such request shall be null and void)
unless sufficient Clearing Bids were made in the last occurring Auction and
unless full cumulative dividends, any amounts due with respect to mandatory
redemptions and any Additional Dividends payable prior to such date have
been paid in full. Such Request for Special Dividend Period, in the case of
a Dividend Period of 182 days or less, shall be made on or prior to the 4th
day but not more than 7 days prior to an Auction Date for the Preferred
Shares and, in the case of a Dividend Period of more than 182 days, shall
be given on or prior to the 14th day but not more than 28 days prior to an
Auction Date for the Preferred Shares. Upon receiving such Request for
Special Dividend Period, the Broker-Dealer(s) shall jointly determine
whether given the factors set forth in paragraph 2(c)(iii) of the
Certificate of Designation it is advisable that the Company issue a Notice
of Special Dividend Period for the Preferred Shares as contemplated by such
Request for Special Dividend Period and shall give the Company and the
Auction Agent written notice (a "Response") of such determination by no
later than the third day prior to such Auction Date. If the
Broker-Dealer(s) shall not give the Company and the Auction Agent a
Response by such third day or if the Response states that given the factors
referred to above it is not advisable that the Company give a Notice of
Special Dividend Period (as defined below) for the Preferred Shares, the
Company may not give a Notice of Special Dividend Period in respect of such
Request for Special Dividend Period. In the event the Response indicates
that it is advisable that the Company give a Notice of Special Dividend
Period for the Preferred Shares, the Company will by no later than the
second day prior to such Auction Date give a notice (a "Notice of Special
Dividend Period") to the Auction Agent, the Securities Depository and each
Broker-Dealer, which notice will specify the duration of the Special
Dividend Period, the Maximum Applicable Rate therefor and Specific
Redemption Provisions, if any. The Company shall not give a Notice of
Special Dividend Period or convert to a Special Dividend Period, or, if
such Notice of Special Dividend Period shall have already been given, shall
give telephonic and written notice of revocation (a "Notice of Revocation")
to the Auction Agent, each Broker-Dealer, and the Securities Depository on
or prior to the Business Day prior to the relevant Auction Date if (i) it
has not obtained the advice in writing of Moody's and S&P or any Substitute
Rating Agency that the proposed Special Dividend Period will not adversely
affect their then-current rating on the Preferred Shares, (ii) either the
1940 Act Preferred Shares Coverage is not satisfied or the Company shall
fail to maintain S&P Eligible Assets and Moody's Eligible Assets each with
an aggregate Discounted Value at least equal to the Preferred Shares Basic
Maintenance Amount in each case on the Valuation Date immediately preceding
the Business Day prior to the Auction Date on an actual basis and on a pro
forma basis giving effect to the proposed Special Dividend Period (using as
a pro forma dividend rate with respect to such Special Dividend Period the
dividend rate which the Broker-Dealers shall advise the Company is an
approximately equal rate for securities similar to the Preferred Shares
with an equal dividend period), (iii) sufficient funds for the payment of
dividends payable on the immediately succeeding Dividend Payment Date have
not been irrevocably deposited with the Auction Agent by the close of
business on the third Business Day preceding the related Auction Date or
(iv) the Broker-Dealer(s) jointly advise the Company that after
consideration of the factors referred to above they have concluded that it
is advisable to give a Notice of Revocation. If the Company is prohibited
from giving a Notice of Special Dividend Period as a result of the factors
enumerated in clause (i), (ii), (iii) or (iv) of the preceding sentence or
if the Company gives a Notice of Revocation with respect to a Notice of
Special Dividend Period, the next succeeding Dividend Period will be a
7-day Dividend Period, provided that if the then-current Dividend Period is
a Special Dividend Period of less than 7 days, the next succeeding Dividend
Period will be the same length as the current Dividend Period. In addition,
in the event sufficient Clearing Bids are not made in any Auction or an
Auction is not held for any reason, the next succeeding Dividend Period
will be a 7- day Dividend Period and the Company may not again give a
Notice of Special Dividend Period (and any such attempted notice shall be
null and void) until sufficient Clearing Bids have been made in an Auction
with respect to a 7-day Dividend Period.
(d) (i) Whenever the Company intends to include any net capital
gains or other taxable income in any dividend on Preferred Shares, the
Company will, in the case of a Dividend Period of 28 days or fewer, and
may, in the case of a Dividend Period of 35 days or more, notify the
Auction Agent of the amount to be so included at least five Business Days
prior to the Auction Date on which the Applicable Rate for such dividend is
to be established. Whenever the Auction Agent receives such notice from the
Company, it will in turn notify each Broker Dealer, who, on or prior to
such Auction Date, in accordance with its Broker-Dealer Agreement, will
notify its Existing Holders and Potential Holders believed to be interested
in submitting an Order in the Auction to be held on such Auction Date.
(ii) If the Company makes a Retroactive Taxable
Allocation, the Company will, within 90 days (and generally within 60 days)
after the end of its fiscal year for which a Retroactive Taxable Allocation
is made provide notice thereof to the Auction Agent and to each holder of
Preferred Shares (initially the Securities Depository) during such fiscal
year at such holder's address as the same appears or last appeared on the
share books of the Company. The Company will, within 30 days after such
notice is given to the Auction Agent, pay to the Auction Agent (who will
then distribute to such holders of Preferred Shares), a cash amount equal
to the aggregate Additional Dividend with respect to all Retroactive
Taxable Allocations made to such holders during the fiscal year in
question.
(e) (i) On each Auction Date, the Auction Agent shall determine
the Maximum Applicable Rate from the higher of the 30-day "AA" Composite
Commercial Paper Rate and the Taxable Equivalent of the Short-Term
Municipal Bond Rate (except in the case of a Special Dividend Period in
which case the Maximum Applicable Rate shall be determined from the higher
of the Special Dividend Period Reference Rate and the Taxable Equivalent of
the Short-Term Municipal Bond Rate). If any such rate on which the Maximum
Applicable Rate is to be based is not quoted on an interest basis but is
quoted on a discount basis, the Auction Agent shall convert the quoted rate
to an Interest Equivalent, as set forth in Paragraph 1 of the 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 consultation with the Company as to
the method of such conversion. Not later than 9:30 A.M. on each Auction
Date for the Preferred Shares, the Auction Agent shall notify the Company
and the Broker- Dealers of the applicable rate so determined and the
Maximum Applicable Rate.
(ii) If the rate on which the Maximum Applicable Rate is
to be based is the 30-day "AA" Composite Commercial Paper Rate and such
rate is to be based on rates supplied by Commercial Paper Dealers and one
or more of the Commercial Paper Dealers shall not provide a quotation for
the determination of the 30-day "AA" Composite Commercial Paper Rate, the
Auction Agent shall immediately notify the Company so that the Company can
determine whether to select a Substitute Commercial Paper Dealer or
Substitute Commercial Paper Dealers to provide the quotation or quotations
not being supplied by any Commercial Paper Dealer or Commercial Paper
Dealers. The Company shall promptly advise the Auction Agent of any such
selection. If the Company does not select any such Substitute Commercial
Paper Dealer or Substitute Commercial Paper Dealers, then the rates shall
be supplied by the remaining Commercial Paper Dealer or Commercial Paper
Dealers.
(f) (i) The Auction Agent shall maintain by series a current
registry of the beneficial owners of Preferred Shares who shall constitute
the Existing Holders for purposes of each Auction. The Company shall use
its best efforts to provide or cause to be provided to the Auction Agent
within ten days following the date of Closing a list of the initial
Existing Holders of Preferred Shares and the respective 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 Preferred Shares to another Person.
(ii) In the event of any partial redemption of any
Preferred Shares upon notice by the Company to the Auction Agent of such
partial redemption, the Auction Agent shall promptly request the Securities
Depository to notify the Auction Agent of the identities of the Agent
Members (and the respective numbers of Preferred Shares) from the accounts
of which Preferred Shares have been called for redemption and the person or
department at such Agent Member to contact regarding such redemption and,
at least two Business Days prior to the next Auction with respect to the
Preferred Shares 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 Preferred
Shares are to be redeemed) the number of Preferred Shares of each such
Existing Holder, if any, to be redeemed by the Company; provided that the
Auction Agent has been furnished with the name and telephone number of a
person or department at such Agent Member from which it is to request such
information. 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 Preferred Shares shown in the Auction
Agent's registry of beneficial owners.
(iii) The Auction Agent shall register a transfer of the
beneficial ownership of Preferred Shares 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
Agreement, 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 Preferred Shares 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 Preferred Shares and the seller failed to
deliver such shares or (ii) sold any Preferred Shares and the purchaser
failed to make payment to such Person upon delivery to the purchaser of
such shares.
(g) The Auction Agent may request that the Broker-Dealers, as set
forth in Section 3.2(c) of the Broker-Dealer Agreements, provide the
Auction Agent with a list of their respective customers that such
Broker-Dealers believe are Existing Holders of Preferred Shares. The
Auction Agent shall keep confidential any such information and shall not
disclose any such information so provided to any Person other than the
relevant Broker-Dealer and the Company provided that the Auction Agent
reserves the right to disclose any such information if it is advised by its
counsel that its failure to do so would be unlawful.
2.3 Auction Schedule.
The Auction Agent shall conduct Auctions for the Preferred Shares
in accordance with the schedule set forth below. Such schedule may be
changed by the Auction Agent with the consent of the Company, which consent
shall not be unreasonably withheld. The Auction Agent shall give notice of
any such change to each Broker-Dealer. Such notice shall be received prior
to the first Auction Date on which any such change shall be effective.
Time Event
By 9:30 A.M. Auction Agent advises the Company and the
Broker-Dealers of the Maximum Applicable Rate as determined from the higher
of the 30-day "AA" Composite Commercial Paper Rate and the Taxable
Equivalent of the Short-Term Municipal Bond Rate (except in the case of a
Special Dividend Period in which case the Maximum Applicable Rate shall be
the higher of the Special Dividend Period Reference Rate and the Taxable
Equivalent of the Short-Term Municipal Bond Rate) as set forth in Section
2.2(e)(i) hereof. 9:30 A.M. - 1:00 P.M. Auction Agent assembles information
communicated to it by Broker-Dealers as provided in Paragraph 11(c)(i) of
the Certificate of Designation Submission deadline is 1:00 P.M.
Not earlier than Auction Agent makes determination pursuant to
1:00 P.M. Paragraph 11(d)(i) of the Certificate of Designation.
By approximately Auction Agent advises Company of results of 3:00
P.M. 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 Preferred Shares allocated as provided in
Paragraph 11(e) of the Certificate of Designation.
Auction Agent gives notice of Auction results as set forth in
Section 2.4 hereof.
2.4 Notice of Auction Results.
On each Auction Date, the Auction Agent shall notify
Broker-Dealers of the results of the Auction held on such date by telephone
or through the Auction Agent's Auction Processing System as set forth in
Paragraph (a) of the Settlement Procedures.
2.5 Broker-Dealers.
(a) Not later than 12:00 noon on each Auction Date for the
Preferred Shares, the Company shall pay to the Auction Agent in New York
Clearing House or similar next-day funds an amount in cash equal to, (i) in
the case of any Auction Date immediately preceding any Dividend Period of
28 days or less, the product of (A) a fraction the numerator of which is
the number of days in such Dividend Period (calculated by counting the
first day of such Dividend Period but excluding the last day thereof) and
the denominator of which is 365, times (B) 1/4 of 1%, times (C) $50,000,
times (D) the sum of the aggregate number of outstanding Preferred Shares
for which the Auction is conducted and (ii) in the case of any Auction Date
immediately preceding any Dividend Period of more than 28 days, the amount
determined by mutual consent of the Company and the Broker-Dealer or
Broker- Dealers pursuant to Section 3.5 of the Broker-Dealer Agreements.
The Auction Agent shall apply such monies as set forth in Section 3.5 of
the Broker-Dealer Agreements and shall thereafter remit to the Company any
remaining funds paid to the Auction Agent pursuant to this Section 2.5(a).
(b) Subject to Section 2.5(c) hereof, the Auction Agent is hereby
authorized by the Company to designate at any time or from time to time any
Person to act as a Broker-Dealer without the prior written approval of the
Company. The Auction Agent may designate an Affiliate of the Company or of
itself to act as a Broker-Dealer subject to Section 2.5(c) hereof.
(c) The Auction Agent shall terminate any Broker-Dealer
Agreement as set forth therein if so directed by the Company.
(d) Notwithstanding Section 2.5(b) hereof, no person may act as a
Broker-Dealer unless such person shall have entered into a Broker-Dealer
Agreement with the Auction Agent.
(e) The Auction Agent shall maintain a list of Broker-Dealers.
2.6 Ownership of Series R7 Preferred Shares and Submission of Bids by
Company and Affiliates.
Neither the Company nor any Affiliate of the Company may submit
any Sell Order or Bid, directly or indirectly, in any Auction, except that
an Affiliate of the Company that is a Broker-Dealer may submit a Sell Order
or Bid on behalf of an Existing Holder or Potential Holder. The Company
shall notify the Auction Agent if the Company or, to the best of the
Company's knowledge, any Affiliate of the Company becomes an Existing
Holder of any Preferred Shares. Any Preferred Shares redeemed, purchased or
otherwise acquired (i) by the Company shall not be reissued or (ii) by its
Affiliates shall not be transferred (other than to the Company). The
Auction Agent shall have no duty or liability with respect to enforcement
of this Section 2.6.
2.7 Access to and Maintenance of Auction Records.
The Auction Agent shall afford to the Company, its agents,
independent public accountants and counsel, access at reasonable times
during normal business hours to review and make extracts or copies (at the
Company's sole cost and expense) of all books, records, documents and other
information concerning the conduct and results of Auctions, provided that
any such agent, accountant, or counsel shall furnish the Auction Agent with
a letter from the Company requesting that the Auction Agent afford such
person access. The Auction Agent shall maintain records relating to any
Auction for a period of two years after such Auction (unless requested by
the Company to maintain such records for such longer period not in excess
of four years, then for such longer period), and such records shall, in
reasonable detail, accurately and fairly reflect the actions taken by the
Auction Agent hereunder. The Company agrees to keep any information
regarding the customers of any Broker- Dealer received from the Auction
Agent in connection with this Agreement or any Auction confidential and
shall not disclose such information or permit the disclosure of such
information without the prior written consent of the applicable
Broker-Dealer to anyone except such agent, accountant or counsel engaged to
audit or review the results of Auctions as permitted by this Section 2.7.
Any such agent, accountant or counsel, before having access to such
information, shall agree to keep such information confidential and not to
disclose such information or permit disclosure of such information without
the prior written consent of the applicable Broker-Dealer.
3. The Auction Agent as Paying Agent.
3.1 Paying Agent.
The Board of Directors of the Company has adopted a resolution
appointing Bankers Trust Company as transfer agent, registrar, dividend
disbursing agent and redemption agent for the Company in connection with
any Preferred Shares (the "Paying Agent"). The Paying Agent hereby accepts
such appointment and agrees to act in accordance with its standard
procedures and the provisions of the Certificate of Designation which are
specified herein as Paying Agent with respect to the Preferred Shares and
as set forth in this Section 3.
3.2 The Company's Notices to Paying Agent.
Whenever any Preferred Shares are to be redeemed, the Company
shall promptly deliver to the Paying Agent the Notice of Redemption, which
will be mailed by the Company to each Holder, at least five days prior to
the date such Notice of Redemption is required to be mailed by the
Certificate of Designation. The Paying Agent shall have no responsibility
to confirm or verify the accuracy of any such notice.
3.3 Company to Provide Funds for Dividends and Redemptions and Additional
Dividends
(a) Not later than noon, on the Business Day immediately preceding
each Dividend Payment Date, the Company shall deposit with the Paying Agent
an aggregate amount of New York Clearing House or similar next-day funds
equal to the declared dividends to be paid to Holders on such Dividend
Payment Date and shall give the Paying Agent irrevocable instructions to
apply such funds to the payment of such dividends on such Dividend Payment
Date.
(b) If the Company shall give the Notice of Redemption then, by
noon of the Business Day immediately preceding the date fixed for
redemption, the Company shall deposit in trust with the Paying Agent an
aggregate amount of New York Clearing House or similar next day funds
sufficient to redeem such Preferred Shares called for redemption and shall
give the Paying Agent irrevocable instructions and authority to pay the
redemption price to the Holders of Preferred Shares called for redemption
upon surrender of the certificate or certificates therefor.
(c) If the Company provides notice to the Auction Agent of a
Retroactive Taxable Allocation, the Company shall, within 30 days after
such notice is given and by noon of the Business Day immediately preceding
the date fixed for payment of an Additional Dividend, deposit in trust with
the Paying Agent an aggregate amount of New York Clearing House or similar
next-day funds equal to such Additional Dividend and shall give the Paying
Agent irrevocable instructions and authority to pay the Additional
Dividends to Holders (or former Holders) of Preferred Shares entitled
thereto.
3.4 Disbursing Dividends, Redemption Price and Additional Dividends.
After receipt of the New York Clearing House or similar next-day
funds and instructions from the Company described in Sections 3.3(a), (b)
and (c) above, the Paying Agent shall pay to the Holders (or former
Holders) entitled thereto (i) on each Dividend Payment Date, dividends on
the Preferred Shares, (ii) on any date fixed for redemption, the redemption
price of any Preferred Shares called for redemption and (iii) on the date
fixed for payment of an Additional Dividend, such Additional Dividend. The
amount of dividends for any Dividend Period to be paid by the Paying Agent
to Holders will be determined by the Company as set forth in Paragraph 2 of
the Certificate of Designation. The redemption price to be paid by the
Paying Agent to the Holders of any Preferred Shares called for redemption
will be determined as set forth in Paragraph 4 of the 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 Company pursuant to paragraph 2(e) of the Certificate of
Designation. The Company shall notify the Paying Agent in writing of a
decision to redeem any Preferred Shares on or prior to the date specified
in Section 3.2 above, and such notice by the Company to the Paying Agent
shall contain the information required to be stated in the Notice of
Redemption required to be mailed by the Company to such Holders. The Paying
Agent shall have no duty to determine the redemption price and may rely on
the amount thereof set forth in the Notice of Redemption.
4. The Paying Agent as Transfer Agent and Registrar.
4.1 Original Issue of Share Certificates.
On the Date of Original Issue, one certificate for all the Preferred
Shares shall be issued by the Company and registered in the name of Cede &
Co., as nominee of the Securities Depository, and countersigned by the
Paying Agent.
4.2 Registration of Transfer or Exchange of Preferred Shares.
Except as provided in this Section 4.2, the Preferred Shares shall
be registered solely in the name of the Securities Depository or its
nominee. If the Securities Depository shall give notice of its intention to
resign as such, and if the Company shall not have selected a substitute
Securities Depository acceptable to the Paying Agent prior to such
resignation, then upon such resignation, the Preferred Shares may, at the
Company's request, be registered for transfer or exchange, and new
certificates thereupon shall be issued in the name of the designated
transferee, 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 or funds necessary
for the payment of such taxes. If the certificate for the Preferred Shares
is not held by the Securities Depository or its nominee, payments upon
transfer of shares in an Auction shall be made in same-day funds to the
Auction Agent against delivery of certificates therefor.
4.3 Removal of Legend.
Any request for removal of a legend indicating a restriction on
transfer from certificates evidencing the Preferred Shares shall be
accompanied by an opinion of counsel stating that such legend may be
removed and such shares transferred free of the restriction described in
such legend, said opinion to be delivered under cover of a letter from a
Company Officer authorizing the Paying Agent to remove the legend on the
basis of said opinion.
4.4 Lost Stock Certificates.
The Paying Agent shall issue and register a replacement
certificate should it be represented that the original certificate has been
lost, stolen or destroyed, upon the fulfillment of such requirements as
shall be deemed appropriate by the Company and the Paying Agent, subject at
all times to provisions of law, the By-Laws of the Company governing such
matters and resolutions adopted by the Company with respect to lost
securities. The Paying Agent may issue a new certificate in exchange for
and upon the cancellation of a mutilated certificate. Any request by the
Company to the Paying Agent to issue a replacement or new certificate
pursuant to this Section 4.4 shall be deemed to be a representation and
warranty by the Company to the Paying Agent that such issuance will comply
with such provisions of applicable law and the By-Laws and resolutions of
the Company.
4.5 Disposition of Cancelled Certificate; 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 afford to the Company, its agents and
counsel access at reasonable times during normal business hours to review
and make extracts or copies (at the Company's sole cost and expense) of
such certificates and accompanying documentation. Upon the expiration of
this two-year period, the Paying Agent shall deliver to the Company the
cancelled certificates and accompanying documentation. The Company shall,
at its expense, retain such records for a minimum additional period of four
calendar years from the date of delivery of the records to the Company and
shall make such records available during this period at any time, or from
time to time, for reasonable periodic, special, or other examinations by
representatives of the Securities and Exchange Commission. The Company
shall also undertake to furnish to the Securities and Exchange Commission,
upon demand, at either the principal office or at any regional office,
complete, correct and current hard copies of any and all such records.
Thereafter such records shall not be destroyed by the Company without the
approval of the Paying Agent, which shall not be unreasonably withheld, but
will be safely stored for possible future reference.
4.6 Share Register.
The Paying Agent shall maintain the share register, which shall
contain a list of the Holders, the number of Preferred Shares held by each
Holder and the address of each Holder. The Paying Agent shall record in the
share register any change of address of a Holder upon notice by such
Holder. In case of any request or demand for the inspection of the share
register or any other books of the Company in the possession of the Paying
Agent, the Paying Agent will notify the Company and secure instructions as
to permitting or refusing such inspection. The Paying Agent reserves the
right, however, to exhibit the share register or other records to any
person in case it is advised by its counsel that its failure to do so would
(i) be unlawful or (ii) expose it to liability, unless the Company shall
have offered indemnification satisfactory to the Paying Agent.
4.7 Return of Funds.
Any funds deposited with the Paying Agent by the Company for any
reason under this Agreement, including for the payment of dividends or the
redemption of shares of Preferred Shares, that remain with the Paying Agent
after 12 months shall be repaid to the Company upon the written request of
the Company.
5. Representations and Warranties.
(a) The Company represents and warrants to the Auction Agent
that:
(i) the Company is a duly incorporated and validly
existing business trust in good standing 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 Preferred Shares;
(ii) the Company is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended,
as a closed- end, diversified management investment company;
(iii) this Agreement has been duly and validly
authorized, executed and delivered by the Company and constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject as to such enforceability to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equitable principles;
(iv) the form of the certificates evidencing the Preferred
Shares comply with all applicable laws of the Commonwealth of Massachusetts
(v) the Preferred Shares have been duly and validly
authorized by the Company and, upon completion of the initial sale of the
shares of Preferred Shares and receipt of payment therefor, will be validly
issued, fully paid and nonassessable;
(vi) the offering of the Preferred Shares has been
registered under the Securities Act of 1933, as amended, and no action by
or before any governmental body or authority of the United States or of any
state thereof is required in connection with the execution and delivery of
this Agreement or the issuance of the Preferred Shares except as required
by applicable state securities or insurance laws, all of which have been
taken;
(vii) the execution and delivery of this Agreement and
the issuance and delivery of the Preferred Shares do not and will not
conflict with, violate, or result in a breach of, the terms, conditions or
provisions of, or constitute a default under, the Charter or the By-Laws of
the Company, any law or regulation applicable to the Company, any order or
decree of any court or public authority having jurisdiction over the
Company, or any mortgage, indenture, contract, agreement or undertaking to
which the Company is a party or by which it is bound; and
(viii) no taxes are payable upon or in respect of the
execution of this Agreement or the issuance of the shares of any series of
Preferred Shares.
(b) The Auction Agent represents and warrants to the Company that
the Auction Agent is duly organized and is validly existing as a business
trust in good standing under the laws of the Commonwealth of Massachusetts
and has the corporate power to enter into and perform its obligations under
this Agreement.
6. The Auction Agent.
6.1 Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Company
hereunder and owes no fiduciary duties to any Person except as provided by
this Agreement.
(b) The Auction Agent undertakes to perform such duties and only
such duties as are specifically set forth in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the
Auction Agent.
(c) In the absence of bad faith or negligence on its part, the
Auction Agent shall not be liable for any action taken, suffered or omitted
or for any error of judgment made by it in the performance of its duties
under this Agreement. The Auction Agent shall not be liable for any error
of judgment made in good faith unless the Auction Agent shall have been
negligent in ascertaining (or failing to ascertain) the pertinent facts.
6.2 Rights of the Auction Agent.
(a) The Auction Agent may rely and shall be protected in acting or
refraining from acting upon any communication authorized hereby and upon
any written instruction, notice, request, direction, consent, report,
certificate, share certificate or other instrument, paper or document
reasonably believed by it to be genuine. The Auction Agent shall not be
liable for acting upon any telephone communication authorized hereby which
the Auction Agent believes in good faith to have been given by the Company
or by a Broker-Dealer. The Auction Agent may record telephone
communications with the Company or with the Broker-Dealers or both.
(b) The Auction Agent may consult with counsel of its choice, and
the written advice of such counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or
risk its own funds or otherwise incur or become exposed to financial
liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its
rights hereunder either directly or by or through agents or attorneys.
6.3 Auction Agent's Disclaimer.
The Auction Agent makes no representation as to the validity or
adequacy of this Agreement, the Broker-Dealer Agreements or the Preferred
Shares.
6.4 Compensation, Expenses and Indemnification.
(a) The Company shall pay the Auction Agent from time to time
reasonable compensation for all services rendered by it under this
Agreement and the Broker-Dealer Agreements.
(b) The Company shall reimburse the Auction Agent upon its request
for all reasonable expenses, disbursements and advances incurred or made by
the Auction Agent in accordance with any provision of this Agreement and
the Broker- Dealer Agreements (including the reasonable compensation,
expenses and disbursements of its agents and counsel), except any expense,
disbursement and advances attributable to its negligence or bad faith.
(c) The Company shall indemnify the Auction Agent for, and hold it
harmless against, any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in connection with
its agency under this Agreement and the Broker-Dealer Agreements, including
the costs and expenses of defending itself against any claim or liability
in connection with its exercise or performance of any of its duties
hereunder and thereunder, except such as may result from its negligence or
bad faith.
7. Miscellaneous.
7.1 Term of Agreement.
(a) The term of this Agreement is unlimited unless it shall be
terminated as provided in this Section 7.1. The Company may terminate this
Agreement at any time by so notifying the Auction Agent, provided that if
any Preferred Shares remain outstanding the Company has entered into an
agreement in substantially the form of this Agreement with a successor
auction agent. The Auction Agent may terminate this Agreement upon prior
notice to the Company on the date specified in such notice, which shall be
no earlier than 60 days after the delivery of such notice. If the Auction
Agent resigns while any shares of Preferred Shares remain outstanding, the
Company shall use its best efforts to enter into an agreement with a
successor auction agent containing substantially the same terms and
conditions as this Agreement.
(b) Except as otherwise provided in this Section 7.1(b), the
respective rights and duties of the Company and the Auction Agent under
this Agreement shall cease upon termination of this Agreement. The
Company's representations, warranties, covenants and obligations to the
Auction Agent under Sections 5 and 6.4 hereof shall survive the termination
hereof. Upon termination of this Agreement, the Auction Agent shall (i)
resign as Auction Agent under the Broker-Dealer Agreements, (ii) at the
Company's request, promptly deliver to the Company copies of all books and
records maintained by it in connection with its duties hereunder, and (iii)
at the request of the Company, promptly transfer to the Company or any
successor auction agent any funds deposited by the Company with the Auction
Agent (whether in its capacity as Auction Agent or Paying Agent) pursuant
to this Agreement which have not previously been distributed by the Auction
Agent in accordance with this Agreement.
7.2 Communications.
Except for (i) communications authorized to be made by telephone
pursuant to this Agreement or the Auction Procedures and (ii)
communications in connection with Auctions (other than those expressly
required to be in writing), all notices, requests and other communications
to any party hereunder shall be in writing (including telecopy or similar
writing) and shall be given to such party addressed to it at its address,
or telecopy number set forth below:
If to the Company, The BlackRock Insured Municipal addressed:
2008 Term Trust Inc.
345 Park Avenue, 31st Floor
New York, NY 10154
Attention: Treasurer
Telephone No.: (212) 935-2626
Telecopier No.: (212) 935-1370
If to the Auction Bankers Trust Company Agent, addressed
4 Albany Street
New York, NY 10006
Attention: Auction Rate Securities
Telephone No.: (212) 250-6850
Telecopier No.: (212) 250-6215
or such other address or telecopy number as such party may hereafter
specify for such purpose by notice to the other party. Each such notice,
request or communication shall be effective when delivered at the address
specified herein. Communications shall be given on behalf of the Company by
a Company Officer and on behalf of the Auction Agent by an Authorized
Officer.
7.3 Entire Agreement.
This Agreement contains the entire agreement between the parties
relating to the subject matter hereof, and there are no other
representations, endorsements, promises, agreements or understandings,
oral, written or inferred between the parties relating to the subject
matter hereof except for agreements relating to the compensation of the
Auction Agent.
7.4 Benefits.
Nothing herein, express or implied, shall give to any Person,
other than the Company, the Auction Agent and their respective successors
and assigns, any benefit of any legal or equitable right, remedy or claim
hereunder.
7.5 Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be
modified, amended, rescinded, cancelled or waived, in whole or in part,
except by a written instrument signed by a duly authorized representative
of the party to be charged. The Company shall notify the Auction Agent of
any change in the 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.
7.6 Successor and Assigns.
This Agreement shall be binding upon, inure to the benefit of, and
be enforceable by, the respective successors and permitted assigns of each
of the Company and the Auction Agent. This Agreement may not be assigned by
either party hereto absent the prior written consent of the other party,
which consent shall not be unreasonably withheld.
7.7 Severability.
If any clause, provision or section hereof shall be ruled invalid
or unenforceable by any court of competent jurisdiction, the invalidity or
unenforceability of such clause, provision or section shall not affect any
of the remaining clauses, provisions or sections hereof.
7.8 Execution in Counterparts.
This Agreement may be executed in several counterparts, each of
which shall be an original and all of which shall constitute but one and
the same instrument.
7.9 Governing Law.
This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts applicable to agreements
made and to be performed in said state.
7.10 Shareholder Liability.
No shareholder of the Trust 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 bad
faith, willful misfeasance, gross negligence or reckless disregard for 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their proper and duly authorized
officers as of the date first above written.
THE BLACKROCK FLORIDA INSURED
MUNICIPAL 2008 TERM TRUST INC.
By: /s/ Ralph L. Schlosstein
------------------------
Ralph L. Schlosstein,
President
BANKERS TRUST COMPANY
By: /s/ Sandy Becker
--------------------------
Sandy Becker,
Assistant Treasurer
- -----------------------------------------------------------------------------
BROKER-DEALER AGREEMENT
between
BANKERS TRUST COMPANY
and
----------------------
Dated as of November 23, 1992
Relating to
AUCTION RATE MUNICIPAL PREFERRED SHARES
OF BENEFICIAL INTEREST, SERIES R7
(the "Preferred Shares")
of
THE BLACKROCK FLORIDA INSURED
MUNICIPAL 2008 TERM TRUST
- -----------------------------------------------------------------------------
BROKER-DEALER AGREEMENT dated as of November 23, 1992, between
Bankers Trust Company, a New York banking corporation (the "Auction Agent")
(not in its individual capacity but solely as agent of The BlackRock
Florida Insured Municipal 2008 Term Trust, a Massachusetts business trust
(the "Company"), pursuant to authority granted to it in the Auction Agent
Agreement dated as of _________, 1992, between the Company and the Auction
Agent (the "Auction Agent Agreement")) and ______________ (together with
its successors and assigns hereinafter referred to as "BD").
The Company has duly authorized and issued 1,320 shares of Auction
Rate Municipal Preferred Shares of Beneficial Interest, Series R7, with a
par value of $.0l per share and a liquidation preference of $50,000 per
share plus an amount equal to accumulated but unpaid dividends (whether or
not earned or declared) plus the premium, if any, resulting from the
designation of a Premium Call Period ("the Preferred Shares") pursuant to
the Company's Certificate of Designation (as defined below).
The Company's Certificate of Designation provides that the
dividend rate on the Preferred Shares, for each Dividend Period therefor
after the Initial Dividend Period shall be the Applicable Rate therefor,
which, in general, shall be the rate per annum that a commercial bank,
trust company or other financial institution appointed by the Company
advises results from implementation of the Auction Procedures (as defined
below). The Board of Trustees of the Company has adopted a resolution
appointing Bankers Trust Company as Auction Agent for purposes of the
Auction Procedures, and pursuant to Section 2.5(d) of the Auction Agent
Agreement, the Company has authorized and directed the Auction Agent to
execute and deliver this Agreement.
The Auction Procedures require the participation of one or more
Broker- Dealers.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the Auction Agent and BD agree as follows:
1. Definitions and Rules of Construction.
(a) 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 Company.
(b) 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:
(i) "Certificate of Designation" shall mean the
Certificate of Designation of the Company, establishing the powers,
preferences and rights of the Series R7 Preferred Shares filed on November
18, 1992 with the Secretary of State of the Commonwealth of Massachusetts.
(ii) "Auction" shall have the meaning specified in
Section 3.1 hereof.
(iii) "Auction Procedures" shall mean the Auction
Procedures that are set forth in Paragraph 11 of the Certificate of
Designation.
(iv) "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.
(v) "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.
(vi) "Broker-Dealer Agreement" shall mean this Agreement
and any substantially similar agreement between the Auction Agent and a
Broker-Dealer.
(vii) "Purchaser's Letter" shall mean a letter addressed
to the Company, the Auction Agent and a Broker-Dealer, substantially in the
form attached hereto as Exhibit A.
(viii) "Settlement Procedures" shall mean the Settlement
Procedures attached hereto as Exhibit B.
(c) 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: (i) Words importing the
singular number shall include the plural number and vice versa.
(ii) 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.
(iii) The words "hereof," "herein," "hereto," and other
words of similar import refer to this Agreement as a whole.
(iv) 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 Company intends to include any net capital gains
or other taxable income in any dividend on Preferred Shares, the Company
will notify the Auction Agent of the amount to be so included at least five
Business Days prior to the Auction Date on which the Applicable Rate for
such dividend is to be established. Whenever the Auction Agent receives
such notice from the Company, it will in turn notify BD, who, on or prior
to such Auction Date, will notify its 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.
(a) Purpose; Incorporation by Reference of Auction Procedures and
Settlement Procedures.
(i) 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 Preferred Shares, as the case may
be, for the next Dividend Period therefor. Each periodic operation of such
procedures is hereinafter referred to as an "Auction."
(ii) 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.
(iii) BD is delivering herewith a Purchaser's Letter
executed by BD and, in the case of _______________ , a list of persons to
whom BD will initially sell the Preferred Shares, the number of Preferred
Shares BD will sell to each such person and the number of Preferred Shares
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.
(iv) 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 Company may by notice to BD and all other Broker-Dealers
prohibit all Broker-Dealers from submitting Bids in Auctions for their own
accounts, provided that Broker-Dealers may continue to submit Hold Orders
and Sell Orders.
(b) Preparation for Each Auction.
(i) Not later than 9:30 A.M. on each Auction Date for the
Preferred Shares, the Auction Agent shall advise BD by telephone of the
Maximum Applicable Rate in effect on such Auction Date as determined from
the higher of the 30-day "AA" Composite Commercial Paper Rate and the
Taxable Equivalent of the Short-Term Municipal Bond Rate (except in the
case of a Special Dividend Period in which case the Maximum Applicable Rate
shall be determined from the higher of the Special Dividend Period
Reference Rate and the Taxable Equivalent of the Short- Term Municipal Bond
Rate.
(ii) 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
Preferred Shares of such change in the Auction Date.
(iii) 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 Series R7 Preferred Shares. BD shall comply
with any such request, and the Auction Agent shall keep confidential any
such information, including information received as to the identity of
Bidders in any Auction, and shall not disclose any such information so
provided to any Person other than the Company; and such information shall
not be used by the Auction Agent or its officers, employees, agents or
representatives for any purpose other than such purposes as are described
herein. The Auction Agent shall transmit any list of customers BD believes
are Existing Holders of Preferred Shares and information related thereto
only to its officers, employees, agents or representatives in the Corporate
Trust and Agency Group who need to know such information for the purposes
of acting in accordance with this Agreement and shall prevent the
transmission of such information to others and shall cause its officers,
employees, agents and representatives to abide by the foregoing
confidentiality restrictions; provided, however, that the Auction Agent
shall have no responsibility or liability for the actions of any of its
officers, employees, agents or representatives after they have left the
employ of the Auction Agent.
(iv) 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.
(c) Auction Schedule; Method of Submission of Orders.
(i) The Company and the Auction Agent shall conduct
Auctions for the Preferred Shares in accordance with the schedule set forth
below. Such schedule may be changed at any time by the Auction Agent with
the consent of the Company, which consent shall not be unreasonably
withheld. The Auction Agent shall give notice of any such change to BD.
Such notice shall be received prior to the first Auction Date on which any
such change shall be effective.
Time Event
By 9:30 A.M. Auction Agent advises the Company and Broker-Dealers
of the Maximum Applicable Rate as determined from the higher of the 30-day
"AA" Composite Commercial Paper Rate and the Taxable Equivalent of the
Short-Term Municipal Bond Rate (except in the case of a Special Dividend
Period in which case the Maximum Applicable Rate shall be the higher of the
Special Dividend Period Reference Rate and the Taxable Equivalent of the
Short-Term Municipal Bond Rate) as set forth in Section 3.2(a) hereof.
9:30 A.M. - 1:00 P.M. Auction Agent assembles information communicated
to it by Broker-Dealers as provided in Paragraph 11(c)(i) of the 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 Company 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 Preferred Shares are allocated
as provided in Paragraph 11(e) of the Certificate of Designation.
Auction Agent gives notice of Auction results as set forth in
Section 3.4(a) hereof.
(ii) 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.
(iii) BD agrees not to sell, assign or dispose of any
Preferred Shares to any Person who has not delivered a signed Purchaser's
Letter to the Auction Agent.
(iv) 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.
(v) BD shall deliver to the Auction Agent (i) a written
notice, substantially in the form attached hereto as Exhibit D, of
transfers of Preferred Shares 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 any Preferred Shares to be transferred to or by any Person that
purchased or sold Preferred Shares or through BD pursuant to an Auction.
The Auction Agent is not required to accept any notice delivered pursuant
to the terms of the foregoing sentence with respect to an Auction unless it
is received by the Auction Agent by 3:00 P.M. on the Business Day next
preceding the applicable Auction Date.
(d) Notice of Auction Results.
(i) 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.
(ii) 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 Preferred Shares in an Auction
fails to deliver such shares, the BD of any Person that was to have
purchased Preferred Shares in such Auction may deliver to such Person a
number of whole shares of such Preferred Shares that is less than the
number of shares that otherwise was to be purchased by such Person. In such
event, the number of such Preferred Shares to be so delivered shall be
determined by such BD. Delivery of such lesser number of shares shall
constitute good delivery. Upon the occurrence of any such failure to
deliver shares, such BD shall deliver to the Auction Agent the notice
required by Section 3.3(e)(ii) hereof. Notwithstanding the foregoing terms
of this Section 3.4(b), any delivery or non-delivery of Preferred Shares
which represents any departure from the results of an Auction, as
determined by the Auction Agent, shall be of no effect unless and until the
Auction Agent shall have been notified of such delivery or non-delivery in
accordance with the terms of Section 3.3(e)(ii) hereof. The Auction Agent
shall have no duty or liability with respect to enforcement of this Section
3.4(b).
(e) Service Charge to Be Paid to BD. On the Business Day next
succeeding each Auction Date for the Preferred Shares, the Auction Agent
shall pay to BD from moneys received from the Company an amount equal to,
(a) in the case of any Auction Date immediately preceding any Dividend
Period of 28 days or less, the product of (i) a fraction the numerator of
which is the number of days in such Dividend Period (calculated by counting
the first day of such Dividend Period but excluding the last day thereof)
and the denominator of which is 365, times (ii) 1/4 of 1%, times (iii)
$50,000, times (iv) the sum of (A) the aggregate number of Preferred Shares
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 Preferred Shares 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 shares of Preferred Shares 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 any Dividend
Period of 35 days or more, that amount as mutually agreed on by the Company
and BD, based on a selling concession that would be applicable to an
underwriting of fixed or variable rate preferred shares with a similar
final maturity or variable rate dividend period, respectively, at the
commencement of the Dividend Period with respect to such Auction. For the
purposes of calculating any such fee, Preferred Shares will be placed by a
Broker-Dealer if such shares were (i) the subject of Hold Orders deemed to
have been made by Existing Holders that were acquired by such Existing
Holders through such Broker-Dealer or (ii) the subject of the following
Orders submitted by such Broker-Dealer: (A) a Submitted Bid of an Existing
Holder that resulted in such Existing Holder continuing to hold such shares
as a result of the Auction, (B) a Submitted Bid of a Potential Holder that
resulted in such Potential Holder purchasing such shares as a result of the
Auction or (C) a Submitted Hold Order.
For purposes of subclause (iv) (C) of the foregoing sentence, if
any Existing Holder who acquired the Preferred Shares through BD transfers
those shares to another Person other than pursuant to an Auction, then the
Broker-Dealer for the shares so transferred shall continue to be BD,
provided, however, that if the transfer was effected by, or if the
transferee is, a Broker-Dealer other than BD, then such Broker-Dealer shall
be the Broker-Dealer for such shares.
4. The Auction Agent.
(a) Duties and Responsibilities.
(i) The Auction Agent is acting solely as agent for the
Company hereunder and owes no fiduciary duties to any other Person by
reason of this Agreement.
(ii) 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.
(iii) 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.
(b) Rights of the Auction Agent.
(i) The Auction Agent may rely and shall be protected in
acting or refraining from acting upon any communication authorized by this
Agreement and upon any written instruction, notice, request, direction,
consent, report, certificate, share certificate or other instrument, paper
or document believed by it to be genuine. The Auction Agent shall not be
liable for acting upon any telephone communication authorized by this
Agreement which the Auction Agent believes in good faith to have been given
by the Company or by BD. The Auction Agent may record telephone
communications with BD.
(ii) 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.
(iii) 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.
(iv) The Auction Agent may perform its duties and
exercise its rights hereunder either directly or by or through agents or
attorneys.
(c) Auction Agent's Disclaimer. The Auction Agent makes no
representation as to the validity or adequacy of this Agreement or the Series
R7 Preferred Shares.
5. Miscellaneous.
(a) Termination. Any party may terminate this Agreement at any
time upon five days' prior notice to the other party.
(b) Agent Member. At the date hereof, BD is a participant of the
Securities Depository.
(c) Communications. Except for (i) communications authorized to be
made by telephone pursuant to this Agreement or the Auction Procedures and
(ii) communications in connection with the Auctions (other than those
expressly required to be in writing), all notices, requests and other
communications to any party hereunder shall be in writing (including
telecopy or similar writing) and shall be given to such party, addressed to
it, at its address or telecopy number set forth below:
If to BD
addressed: __________________________________________
__________________________________________
__________________________________________
__________________________________________
__________________________________________
Attention:
Telecopier No.:
Telephone No.:
If to the Auction Bankers Trust Company
Agent, addressed: 4 Albany Street
New York, New York 10006
Attention: Auction Rate Securities
Telecopier No.: (212) 250-6850
Telephone No.:(212) 250-6215
or such other address or telecopy number as such party may hereafter
specify for such purpose by notice to the other party. Each such notice,
request or communication shall be effective when delivered at the address
specified herein. Communications shall be given on behalf of BD by a BD
Officer and on behalf of the Auction Agent by an Authorized Officer. BD may
record telephone communications with the Auction Agent.
(d) 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.
(e) Benefits. Nothing in this Agreement, express or implied, shall
give to any person, other than the Company, the Auction Agent and BD and
their respective successors and assigns, any benefit of any legal or
equitable right, remedy or claim under this Agreement.
(f) Amendment; Waiver.
(i) 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.
(ii) 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.
(g) Successors and Assigns. This Agreement shall be binding upon,
inure to the benefit of, and be enforceable by, the respective successors
and permitted assigns of each of BD and the Auction Agent. This Agreement
may not be assigned by either party hereto absent the prior written consent
of the other party; provided, however, that this Agreement may be assigned
by the Auction Agent to a successor Auction Agent selected by the Company
without the consent of BD.
(h) 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.
(i) Execution in Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed in said State.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their proper and duly authorized
officers as of the date first above written.
BANKERS TRUST COMPANY
By:___________________________________
Title:
______________________________________
By:___________________________________
Title:
EXHIBIT A
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.
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 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
_________________________________
_________________________________
_________________________________
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 constitutes a representation by the Trust 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 E to the Prospectus, as the case may be.
(a) On each Auction Date, the Auction Agent shall notify by
telephone the Broker-Dealers that participated in the Auction held on such
Auction Date and submitted an Order on behalf of any 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 Sell Order on behalf of an Existing Holder, the number
of shares, if any, of Preferred Shares 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 Preferred Shares to be purchased by such Potential Holder;
(v) if the aggregate number of Preferred Shares 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 Preferred Shares 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
Preferred Shares 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 Preferred Shares to be
purchased by all Potential Holders on whose behalf such Broker-Dealer
submitted a Bid exceeds the aggregate number of Preferred Shares 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
Preferred Shares 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 Preferred Shares.
(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 Preferred Shares 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 Preferred
Shares to be sold pursuant to such Order against payment therefor and
advise any such Existing Holder that will continue to hold Preferred Shares
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 Auction.
(c) On the basis of the information provided to it pursuant to (a)
above, each Broker-Dealer that submitted a Bid or a Sell Order on behalf of
a Potential Holder or an Existing Holder shall, in such manner and at such
time or times as in its sole discretion it may determine, allocated any
funds received by it pursuant to (b)(i) above and any Preferred Shares
received by it pursuant to (b)(ii) above among the Potential 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 Preferred Shares 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 Preferred Shares that is less than the
number of shares that otherwise was to be purchased by such Potential
Holder. In such event, the number of Preferred Shares to be so delivered
shall be determined solely by such Broker-Dealer. Delivery of such lesser
number of shares shall constitute good delivery. Notwithstanding the
foregoing terms of this paragraph (f), any delivery or non- delivery of
shares which shall represent any departure from the results of an Auction,
as determined by the Auction Agent, shall be of no effect unless and until
the Auction Agent shall have been notified of such delivery or non-delivery
in accordance with the provisions of the Auction Agent Agreement and the
Broker- Dealer Agreements.
EXHIBIT C
BANKERS TRUST COMPANY
AUCTION BID FORM
Submit To: Bankers Trust Co.
Issue: The BlackRock Florida Insured
4 Albany Street Municipal 2008 Term Trust
New York, New York 10006
Series: ____________________________
Auction Date:_____________________________
Attention: Auction Rate Telephone (212) 250-6215
Securities Facsimile (212) 250-6850
The undersigned Broker-Dealer submits the following Order on behalf of the
Bidder listed below:
Name of Bidder: ______________________
EXISTING HOLDER
Shares now held __________
HOLD _____________________
BID at rate of _____________________
SELL _____________________
POTENTIAL HOLDER
# of shares bid _____________________
BID at rate of _____________________
Notes:
(a) If submitting more than one Bid for one Bidder, use additional Auction
Bid Forms.
(b) If one or more Bids covering in the aggregate more than the number of
outstanding shares held by any Existing Holder are submitted, such Bids
shall be considered valid in the order of priority set forth in the
Auction Procedures on the above issue.
(c) 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.
(d) 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.
(e) Bids may contain no more than three figures to the right of the decimal
point (.001 of 1%). Fractions will not accepted.
NAME OF BROKER-DEALER ___________________________
Authorized Signature ___________________________
EXHIBIT D
(To be used only for transfers made other than pursuant to
an Auction).
TRANSFER FORM
Re: The BlackRock Florida Insured Municipal 2008 Term Trust Series R7 Preferred
Shares (the "Preferred Shares")
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 Series R7 Preferred Shares to __________.
---------------------------------
(Name of Existing Holder)
---------------------------------
(Name of Broker-Dealer)
---------------------------------
(Name of Agent Member)
By:______________________________
Printed Name:
Title:
EXHIBIT E
(To be used only for failures to deliver Preferred Shares sold pursuant to
an Auction)
NOTICE OF A FAILURE TO DELIVER
Complete either I or II
I. We are a Broker-Dealer for _________________ (the "Purchaser"),
which purchased _______ Series R7 Preferred Shares of The
BlackRock Florida Insured Municipal 2008 Term Trust in the Auction
held on ___________ from the seller of such shares.
II. We are a Broker-Dealer for _________________ (the "Seller"), which
sold _______ Series R7 Preferred Shares of the BlackRock Florida
Insured Municipal 2008 Term Trust in the Auction held on
____________ to the Purchaser of such shares.
We hereby notify you that (check one) --
_________ the Seller failed to deliver such shares to the Purchaser
_________ the Purchaser failed to make payment to the Seller upon delivery
of such shares
Name:______________________________
(Name of Broker-Dealer)
By: _______________________________
Printed Name:
Title:
- -----------------------------------------------------------------------------
BOOK-ENTRY-ONLY AUCTION-RATE/MONEY MARKET PREFERRED/AND
REMARKETED PREFERRED SECURITIES
- -----------------------------------------------------------------------------
Letter of Representations
[To be Completed by Issuer and Trust Company]
The BlackRock Florida Insured Municipal 2008 Term Trust Inc.
------------------------------------
[Name of Issuer]
Bankers Trust Company
[Name of Trust Company]
November 23, 1992
------------------------------------
(Date)
Attention: General Counsel's Office
The Depository Trust Company
55 Water Street; 49th Floor
New York, NY 10041-0099
Re: Auction Rate Municipal Preferred Shares of Beneficial
Interest, Series R7, Cusip No. 09247H 20 5
(Issue Description, including CUSIP number)
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain
mattersrelating to the above-referenced issue (the "Securities"). Trust
Company willact as transfer agent, registrar, dividend disbursing agent,
and redemptionagent with respect to the Securities. The Securities will be
issued pursuant toa prospectus, private placement memorandum, or other such
document authorizingthe issuance of the Securities dated November 16, 1992
(the "Document"). Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Kidder, Peabody & Co.Incorporated, PaineWebber Incorporated, Prudential
Securities Incorporated,Shearson Lehman Brothers Inc. ("Underwriter") is
distributing the Securities through The Depository Trust Company ("DTC").
To induce DTC to accept the Securities as eligible for deposit at
DTC, andto act in accordance with its Rules with respect to the Securities,
Issuer and Trust Company make the following representations to DTC:
1. Prior to closing on the Securities on November 23, 1992, there shall
bedeposited with DTC one Security certificate registered in the name of
DTC'snominee, Cede & Co., which represents the total number of Securities
issued. Said certificate shall remainin DTC's custody as provided in the
Document. If, however, the aggregateprincipal amount of the Securities
exceeds $150 million, one certificate will beissued with respect to each
$150 million of principal amount and an additionalcertificate will be
issued with respect to any remaining principal amount. Each $150 million
Securities certificate shall bear the following legend:
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation
("DTC"), to Issuer or its agent for registration of transfer, exchange, or
payment, and any certificate issued is registered in the name of Cede & Co.
or in such other name as is requested by an authorized representative of
DTC, (and any payment is made to Cede & Co. or to such other entity as is
requested by an authorized representative at DTC), ANY TRANSFER, PLEDGE, OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
2. In the event of any solicitation of consents from or voting by holders
of the Securities, Issuer shall establish a record for such purposes (with
no provision for revocation of consents or votes by subsequent holders) and
shall, to the extent possible, send notice of such record date to DTC not
less than 15 calendar days in advance of such record date. Notices to DTC
pursuant to this Paragraph by telecopy shall be sent to DTC's
Reorganization Department at (212) 709-6896 or (212) 709- 6897, and receipt
of such notices shall be confirmed by telephoning (212) 709-6870. Notices
to DTC pursuant to this Paragraph by mail or by any other means shall be
sent to DTC's Reorganization Department as indicated in Paragraph 4.
3. In the event of a full or partial redemption of the outstanding
Securities, Issuer or Trust Company shall send a notice to DTC specifying:
(a) the number of Securities to be redeemed; and (b) the date such notice
is to be mailed to Security holders or published (the "Publication Date").
Such notice shall be sent to DTC by a secure means (e.g., legible telecopy,
registered or certified mail, overnight delivery) in a timely manner
designed to assure that such notice is in DTC's possession no later than
the close of business on the business day before or, if possible, two
business days before the Publication Date. Issuer or Trust Company shall
forward such notice either in a separate secure transmission for each CUSIP
number or in a secure transmission for multiple CUSIP numbers (if
applicable) which includes a manifest or list of each CUSIP number
submitted in that transmission. (The party sending such notice shall have a
method to verify subsequently the use of such means and the timeliness of
such notice.) The Publication Date shall be not less than 20 days nor more
than 60 days prior to the redemption date. Notices to DTC pursuant to this
Paragraph by telecopy shall be sent to DTC's Call Notification Department
at (516) 227-4039 or (516) 227-4190. If the party sending the notice does
not receive a telecopy receipt from DTC confirming that the notice has been
received, such party shall telephone (516) 227-4070. Notices to DTC
pursuant to this Paragraph by mail or by any other means shall be sent to:
Manager; Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719
4. In the event of an invitation to tender the Securities, notice by Issuer
or Trust Company to Security holders specifying the terms of the tender and
the Publication Date of such notice shall be sent to DTC by a secure means
in the manner set forth in the preceding Paragraph. Notices to DTC pursuant
to this Paragraph and notices of other corporate actions (including
mandatory tenders, exchanges, and capital changes) by telecopy shall be
sent to DTC's Reorganization Department at (212) 709-1093 or (212)
709-1094, and receipt of such notices shall be confirmed by telephoning
(212) 709-6884. Notices to DTC pursuant to the above by mail or by any
other means shall be sent to:
Manager; Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 10004-2695
5. All notices and payment advices sent to DTC shall contain the CUSIP
number of the Securities.
6. The Document indicates that the dividend rate for the Securities may
vary from time to time. Absent other existing arrangements with DTC, Issuer
or Trust Company shall give DTC notice of each such change in the dividend
rate, on the same day that the new rate is determined by telephoning the
Supervisor of DTC's Dividend Announcement Section at (212) 709-1270, or by
telecopy sent to (212) 709-1723. Such verbal or telecopy notice shall be
followed by prompt written confirmation sent by a secure means in the
manner set forth in Paragraph 3 to:
Manager; Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square; 22nd Floor
New York, NY 1O004-2695
7. The Document indicates that each purchaser of Securities must sign a
purchaser's letter which contains provisions restricting transfer of the
Securities purchased. Issuer and Trust Company acknowledge that as long as
Cede & Co. is the sole record owner of the Securities, Cede & Co. shall be
entitled to all voting rights applicable to the Securities and to receive
the full amount of all dividends, liquidation proceeds, and redemption
proceeds payable with respect to the Securities, even if the credits of
Securities to the DTC accounts of any DTC Participant ("Participant")
result from transfers or failures to transfer in violation of the
provisions of the purchaser's letter. Issuer and Trust Company acknowledge
that DTC shall treat any Participant having Securities credited to its DTC
accounts as entitled to the full benefits of ownership of such Securities.
Without limiting the generality of the preceding sentence, Issuer and Trust
Company acknowledge that DTC shall treat any Participant having Securities
credited to its DTC accounts as entitled to receive dividends
distributions, and voting rights, if any, in respect of Securities and,
subject to Paragraphs 11 and 12 to receive certificates evidencing
Securities if such certificates are to be issued in accordance with
Issuer's certificate of incorporation. (The treatment by DTC of the effects
of the crediting by it of Securities to the accounts of Participants
described in the preceding two sentences shall not affect the rights of
Issuers, participants in auctions relating to the Securities, purchasers,
sellers, or holders of Securities against any Participant.) DTC shall not
have any responsibility to ascertain whether any transfer of Securities is
made in accordance with the provisions of the purchaser's letter.
8. Transactions in the Securities shall be eligible for same-day funds
settlement in DTC's Same-Day Funds Settlement ("SDFS") system.
(a) Dividend payments shall be received by Cede & Co., as nominee
of DTC, or its registered assigns in same-day funds on each payment date
(or the equivalent in accordance with existing arrangements between Issuer
or Trust Company and DTC). Such payments shall be made payable to the order
of Cede & Co. Absent any other existing arrangements such payments shall be
addressed as follows:
Manager; Cash Receipts
Dividend Department
The Depository Trust Company
7 Hanover Square; 24th Floor
New York, NY 10004-2695
(b) Redemption payments shall be made in same-day funds by Trust
Company in the manner set forth in the SDFS Paying Agent Operating
Procedures, a copy of which previously has been furnished to Trust Company.
9. DTC may direct Issuer or Trust Company to use any other number or
address as the number or address to which notices, payments of dividends,
or redemption proceeds may be sent.
10. In the event of a redemption necessitating a reduction in the number of
Securities outstanding. DTC, in its discretion: (a) may request Issuer or
Trust Company to issue and authenticate a new Security certificate; or (b)
may make an appropriate notation on the Security certificate indicating the
date and amount of such reduction in the number of Securities outstanding,
except in the case of final redemption, in which case the certificate will
be presented to Issuer or Trust Company prior to payment, if required.
11. In the event that Issuer determines that beneficial owners of
Securities shall be able to obtain certificated Securities. Issuer or Trust
Company shall notify DTC of the availability of certificates. In such
event, Issuer or Trust Company shall issue, transfer, and exchange
certificates in appropriate amounts, as required by DTC and others.
12. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to
Issuer or Trust Company (at which time DTC will confirm with Issuer or
Trust Company the aggregate principal amount of Securities outstanding).
Under such circumstances, at DTC's request Issuer and Trust Company shall
cooperate fully with DTC by taking appropriate action to make available one
or more separate certificates evidencing Securities to any DTC Participant
having Securities credited to its DTC accounts.
13. Issuer hereby authorizes DTC to provide to Trust Company security
position listings of Participants with respect to the Securities from time
to time at the request of Trust Company. Issuer also authorizes DTC, in the
event of a partial redemption of Securities, to provide Trust Company, upon
request, with the names of those Participants whose positions in Securities
have been selected for redemption by DTC. DTC will use its best efforts to
notify Trust Company of those Participants whose positions in Securities
have been selected for redemption by DTC. Issuer authorizes and instructs
Trust Company to provide DTC with such signatures, examples of signatures,
and authorizations to act as may be deemed necessary or appropriate by DTC
to permit DTC to discharge its obligations to its Participants and
appropriate regulatory authorities. Such requests for security position
listings shall be sent to DTC's Reorganization Department in the manner set
forth in Paragraph 4.
This authorization, unless revoked by Issuer, shall continue with
respect to the Securities while any Securities are on deposit at DTC, until
and unless Trust Company shall no longer be acting. In such event, Issuer
shall provide DTC with similar evidence, satisfactory to DTC, of the
authorization of any successor thereto so to act.
14. Nothing herein shall be deemed to require Trust Company to advance
funds on behalf of Issuer.
15. No shareholder of the Trust 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 bad
faith, willful misfeasance, gross negligence or reckless disregard for 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.
Notes:
A. If there is a Trust Company (as defined in this Letter of
Representations), Trust Company as well as Issuer must sign this
Letter. If there is no Trust Company, in signing this Letter
Issuer itself undertakes to perform all of the obligations set
forth herein.
B. Schedule A contains statements that DTC believes accurately
describe DTC, the method of effecting book-entry transfers of
securities distributed through DTC, and certain related matters.
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By: /s/ Richard B. Nasson
----------------------------------
CC: Underwriter
Underwriter's Counsel
Very truly yours,
THE BLACKROCK FLORIDA INSURED MUNICIPAL
2008 TERM TRUST INC.
(Issuer)
By: /s/ [ILLEGIBLE]
----------------------------------
(Authorized Officer's Signature)
BANKERS TRUST COMPANY
- -------------------------------------
(Trust Company)
By: /s/ [ILLEGIBLE]
----------------------------------
(Authorized Officer's Signature)
SCHEDULE A
SAMPLE OFFERING DOCUMENT LANGUAGE
DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
(Prepared by DTC--bracketed material may be applicable only to certain issues)
1. The Depository Trust Company ("DTC"), New York, NY, will act as
securities depository for the securities (the "Securities"). The Securities
will be issued as fully-registered securities registered in the name of
Cede & Co. (DTC's partnership nominee). One fully-registered Security
certificate will be issued for [each issue of] the Securities, [each] in
the aggregate principal amount of such issue, and will be deposited with
DTC. [If, however, the aggregate principal amount of [any] issue exceeds
$150 million, one certificate will be issued with respect to each $150
million of principal amount and an additional certificate will be issued
with respect to any remaining principal amount of such issue.]
2. DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934. DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the need
for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. DTC is owned by a number of
its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear
through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The Rules
applicable to DTC and its Participants are on file with the Securities and
Exchange Commission.
3. Purchases of Securities under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Securities on
DTC's records. The ownership interest of each actual purchaser of each
Security ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are expected
to receive written confirmations providing details of the transaction, as
well as periodic statements of their holdings, from the Direct or Indirect
Participant through which the Beneficial Owner entered into the
transaction. Transfers of ownership interests in the Securities are to be
accomplished by entries made on the books of Participants acting on behalf
of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Securities, except in the event
that use of the book-entry system for the Securities is discontinued.
4. To facilitate subsequent transfers, all Securities deposited by
Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co. The deposit of Securities with DTC and their
registration in the name of Cede & Co. effect no change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the
Securities; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Securities are credited, which may or
may not be the Beneficial Owners. The Participants will remain responsible
for keeping account of their holdings on behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
[6. Redemption notices shall be sent to Cede & Co. If less than all of the
Securities within an issue are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct Participant in
such issue to be redeemed.]
7. Neither DTC nor Cede & Co. will consent or vote with respect to
Securities. Under its usual procedures, DTC mails an Omnibus Proxy to the
Issuer as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts the Securities are credited on the record date (identified
in [ILLEGIBLE].
8. Principal and interest payments on the Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on payable date
in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on payable date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held
for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of such Participant and not of DTC,
the Agent, or the Issuer, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal
and interest to DTC is the responsibility of the Issuer or the Agent,
disbursement of such payments to Direct Participants shall be the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners shall be the responsibility of Direct and Indirect Participants.
[9. A Beneficial Owner shall give notice to elect to have its Securities
purchased or tendered, through its Participant, to the [Tender/Remarketing]
Agent, and shall effect delivery of such Securities by causing the Direct
Participant to transfer the Participant's interest in the Securities, on
DTC's records, to the [Tender/Remarketing] Agent. The requirement for
physical delivery of Securities in connection with a demand for purchase or
a mandatory purchase will be deemed satisfied when the ownership rights in
the Securities are transferred by Direct Participants on DTC's records.]
10. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to
the Issuer or the Agent. Under such circumstances, in the event that a
successor securities depository is not obtained, Security certificates are
required to be printed and delivered.
11. The Issuer may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that
event, Security certificates will be printed and delivered.
12. The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Issuer believes to be
reliable, but the Issuer takes no responsibility for the accuracy thereof.
POWER OF ATTORNEY
That each of the undersigned officers and Trustees of The
BlackRock Florida Insured Municipal 2008 Term Trust Inc., a Business Trust
formed under the laws of the State of Massachusetts (the "Trust"), do
constitute and appoint Ralph L. Schlosstein, Laurence D. Fink and Karen H.
Sabath, and each of them, his or her true and lawful attorneys and agents,
each with full power and authority (acting alone and without the other) to
execute in the name and on behalf of each of the undersigned as such
officer or director, a Registration Statement on Form N-2, including any
pre- effective amendments and/or any post-effective amendments hereto and
any subsequent Registration Statement of the Trust pursuant to Rule 462(b)
of the Securities Act of 1933, as amended (the "1933 Act") and any other
filings in connection therewith, and to file the same under the 1933 Act or
the Investment Company Act of 1940, as amended, or otherwise, with respect
to the registration and offering by the Trust of its preferred stock,
liquidation preference $25,000 per share, granting to such attorneys and
agents and each of them, full power of substitution and revocation in the
premises; and ratifying and confirming all that such attorneys and agents
or any of them, may do or cause to be done by virtue of these presents.
This Power of Attorney may be executed in multiple counterparts,
each of which shall be deemed an original, but which taken together shall
constitute one instrument.
IN WITNESS WHEREOF, each of the undersigned has executed this
Power of Attorney this 3rd day of January, 2000.
/s/ Dr. Andrew F. Brimmer
---------------------------------------
Dr. Andrew F. Brimmer
Director
/s/ Richard E. Cavanagh
---------------------------------------
Richard E. Cavanagh
Director
/s/ Kent Dixon
---------------------------------------
Kent Dixon
Director
/s/ Frank J. Fabozzi
---------------------------------------
Frank J. Fabozzi
Director
/s/James Clayburn LaForce, Jr.
---------------------------------------
James Clayburn LaForce, Jr.
Director
/s/ Walter F. Mondale
---------------------------------------
Walter F. Mondale
Director
/s/ Ralph L. Schlosstein
---------------------------------------
Ralph L. Schlosstein
Director and President
/s/ Laurence D. Fink
---------------------------------------
Laurence D. Fink
Director
/s/ Henry Gabbay
---------------------------------------
Henry Gabbay
Treasurer
