INST DEFINING RIGHTS 4 itemg1bii123123cefmunifunds.htm

 

Item G.1.b.ii of Form N-CEN

 

On September 20, 2023, the Fund issued a single series of Remarketable Variable Rate MuniFund Term Preferred Shares, Series 2053 (the “RVMTP Shares”). The Fund’s Bylaws were amended and restated as of September 20, 2023 to include provisions related to the RVMTP Shares.1 The RVMTP Shares have a par value of $0.00001 per share and liquidation preference of $100,000 per share. The RVMTP Shares have various rights that were approved by the Board of Trustees of the Fund (the “Board”) without the approval of common shareholders, which are specified in the Fund’s Amended and Restated Bylaws of the Fund (the “Bylaws”).

 

Under the Investment Company Act of 1940, as amended (the “1940 Act”), the Fund is permitted to have outstanding more than one series of preferred shares of beneficial interest, including without limitation the RVMTP Shares, as long as no single series has priority over another series as to the distribution of assets of the Fund or the payment of dividends.

 

Certain rights, terms and conditions of the RVMTP Shares are summarized below: 

 

RVMTP Shares Dividends

 

The dividend rate paid on the RVMTP Shares is also determined over the course of the Rate Period. The dividends per share for the RVMTP Shares for a given Rate Period are dependent on the RVMTP Share dividend rate (the “RVMTP Share Dividend Rate”) for that Rate Period. The RVMTP Share Dividend Rate for the RVMTP Shares is equal to the greater of (i) the sum of a specified “Index Rate”2 plus an “Applicable Spread”3 for the Rate Period plus the “Failed Remarketing Spread”4, if any, and (ii) the sum of (a) the product of the Index Rate multiplied by the “Applicable Multiplier”5 for such Rate Period plus (b) 0.92% plus (c) the Failed Remarketing Spread, if any. The dividend per RVMTP Share for the Rate Period is then determined as described in the table below.6

 

 

1 As part of the September 20, 2023 amendments to the Fund’s Bylaws, Appendix A to the Fund’s Amended and Restated Statement Establishing and Fixing the Rights and Preferences of Remarketable Variable Rate MuniFund Term Preferred Shares dated September 20, 2023 (the “Statement of Rights”) was amended to extend the Early Term Redemption Date for the Fund’s Remarketable Variable Rate MuniFund Term Preferred Shares, Series 2051 (the “Series 2051 Shares”) to September 20, 2026. Subsequently, the counterparty requested, and the Fund agreed, to amend Appendix A to the Fund’s Statement of Rights on December 22, 2023 to revert the Early Term Redemption Date for the Series 2051 Shares to July 14, 2024. 

2 The Index Rate is determined by reference to a weekly, high-grade index comprised of seven-day, tax-exempt variable rate demand notes, generally the Securities Industry and Financial Markets Association Municipal Swap Index. 

3 The Applicable Spread for a Rate Period is a percentage per annum that is based on the long term rating most recently assigned by the applicable ratings agency to the RVMTP Shares. 

4 In connection with a failed remarketing related to an Early Term Redemption, the Failed Remarketing Spread is (i) 0.75% for the first 59 days following the applicable Early Term Redemption Date, (ii) 1.00% for the 60th to the 89th day following such Early Term Redemption Date, (iii) 1.25% for the 90th to the 119th day following such Early Term Redemption Date, (iv) 1.50% for the 120th to the 149th day following such Early Term Redemption Date, and (v) 1.75% for the 150th day following such Early Term Redemption Date to the date of the associated mandatory redemption of the RVMTP Shares. In connection with a failed remarketing related to a Special Terms Period (each a “Failed Special Terms Period Remarketing”), the Failed Remarketing Spread means (i) for so long as two or more Failed Special Terms Period Remarketings have not occurred, 0.05%, and (ii) following the second occurrence of a Failed Special Terms Period Remarketing, 0.10% multiplied by the number of Failed Special Terms Period Remarketings that have occurred after the first Failed Special Terms Period Remarketing. 

5 The Applicable Multiplier for a Rate Period is a percentage that is based on the long term rating most recently assigned by the applicable ratings agency to the RVMTP Shares. 

6 An increased RVMTP Share Dividend Rate could be triggered by the Fund’s failure to comply with certain requirements relating to the RVMTP Shares, certain actions taken by the applicable ratings agency or certain determinations regarding the tax status of the RVMTP Shares made by a court or other applicable governmental authority. The RVMTP Share Dividend Rate will in no event exceed 15% per year.

 

 

 

 

Dividend Rate       Rate Period Fraction       RVMTP Shares
Liquidation Preference		       Dividend
        Number of days in the Rate Period (or a part thereof)                
Dividend Rate   x   Divided by   x   100,000   =   Dividends per RVMTP Share
        Total number of days in the year                

 

Asset Coverage 

The Fund is required to maintain certain asset coverage requirements with respect to its RVMTP Shares under the terms of the Bylaws, which are summarized below.

 

1940 Act Asset Coverage.  

In accordance with the Fund’s governing documents and the 1940 Act, the Fund is required to maintain certain asset coverage with respect to all outstanding senior securities of the Fund which are stocks for purposes of the 1940 Act, including the RVMTP Shares.

 

Under the 1940 Act, the Fund is not permitted to issue preferred shares unless, immediately after such issuance, the value of the Fund’s total net assets (as defined below) is at least 200% of the liquidation value of any outstanding preferred shares and the newly issued preferred shares plus the aggregate amount of any senior securities of the Fund representing indebtedness (i.e., such liquidation value plus the aggregate amount of senior securities representing indebtedness may not exceed 50% of the Fund’s total net assets). In addition, the Fund is not permitted to declare or pay common share dividends unless immediately thereafter the Fund has a minimum asset coverage ratio of 200% with respect to all outstanding senior securities of the Fund which are stocks for purposes of the 1940 Act after deducting the amount of such common share dividends.

 

Effective Leverage Ratio 

In accordance with the Bylaws, without the prior written consent of the holders of RVMTP Shares, the Fund’s Effective Leverage Ratio may not exceed 50% (or 51% solely by reason of fluctuations in the market value of the Fund’s portfolio securities) as of the close of business on any business day. If the Fund fails to comply with any additional requirements relating to the calculation of the Effective Leverage Ratio requirement applicable to the RVMTP Shares and, in any such case, such failure is not cured as of the close of business on the date that is ten business days following the business day on which such non-compliance is first determined (the “Effective Leverage Ratio Cure Date”), the Fund shall cause the Effective Leverage Ratio to not exceed 50% (or 51% solely by reason of fluctuations in the market value of the Fund’s portfolio securities), by (i) not later than the close of business on the business day next following the Effective Leverage Ratio Cure Date, engaging in transactions involving or relating to any floating rate securities not owned by the Fund and/or any inverse floating rate securities owned by the Fund, including the purchase, sale or retirement thereof, (ii) to the extent permitted by law, not later than the close of business on the second business day next following the Effective Leverage Ratio Cure Date, causing a notice of redemption to be issued for the redemption of a sufficient number of Preferred Shares, in accordance with the terms of the Preferred Shares, or (iii) engaging in any combination, in the Fund’s discretion, of the actions contemplated by clauses (i) and (ii).

 

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Liquidation Preference 

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Fund, holders of RVMTP Shares are entitled to receive a preferential liquidating distribution (equal the original purchase price per share of $100,000 plus accumulated and unpaid dividends thereon, whether or not earned or declared) before any distribution of assets is made to Common Shareholders.

 

Mandatory Redemptions 

The RVMTP Shares are subject to a mandatory term redemption date of September 20, 2053, subject to the Fund’s right to extend the term with the consent of the holders of the RVMTP Shares (the “RVMTP Share Term Redemption Date”). There is no assurance that the term of the RVMTP Shares will be extended. 

 

In addition, a “Mandatory Tender Event” will occur on each date that is (i) 20 business days before each three-year anniversary since the date of original issue of the RVMTP Shares, (ii) the date the Fund delivers a notice designating a Special Terms Period, and (iii) 20 business days before the end of a Special Terms Period (provided that no subsequent Terms Period is designated). If any RVMTP Shares subject to a Mandatory Tender Event upon a three-year anniversary of the date of original issue of the RVMTP Shares or upon the end of a Special Terms Period (each, an “RVMTP Share Early Term Redemption Date”) have not been either retained by the holders or remarketed by the Mandatory Tender Date, the Fund will redeem such RVMTP Shares on the RVMTP Share Early Term Redemption Date.

 

The RVMTP Shares are also subject to mandatory redemption by the Fund, in whole or in part, in certain circumstances, such as the failure by the Fund to comply with asset coverage and/or effective leverage ratio requirements described above (and the failure to cure any such failure within the applicable cure period) or certain actions taken by the applicable ratings agency. 

 

At least six months prior to the RVMTP Share Term Redemption Date, the Fund will maintain segregated assets of a minimum credit rating quality with a market value equal to at least 110% of the redemption price of all outstanding RVMTP Shares to be redeemed until the redemption of all such outstanding RVMTP Shares, as applicable. The Fund will include certain liquid and/or highly rated assets in an amount equal to 20% of such segregated assets with five months remaining to the Redemption Date, which amount will increase monthly by 20% and reach 100% with one month remaining to the Redemption Date.

 

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Optional Redemptions 

The Fund may redeem, in whole or from time to time in part, the outstanding RVMTP Shares at a redemption price per share equal to (i) the liquidation preference of the RVMTP Shares, as applicable, plus (ii) an amount equal to all unpaid dividends and other distributions on such RVMTP Shares, as applicable, accumulated from and including the date of issuance to (but excluding) the date of redemption (whether or not earned or declared by the Fund, but without interest thereon) plus (iii) any applicable optional redemption premium. An optional redemption premium means, with respect to the RVMTP Shares, the premium payable by the Fund upon the redemption of the RVMTP Shares at the option of the Fund, as set forth in Appendix B to the Statement of Rights for the RVMTP Shares.

 

Voting Rights 

Under the 1940 Act, Preferred Shares (including, without limitation, the RVMTP Shares) are required to be voting shares and to have equal voting rights with Common Shares. Except as otherwise indicated in the Prospectus or this Statement of Additional Information, and except as otherwise required by applicable law, Preferred Shares vote together with Common Shareholders as a single class.

 

In addition, holders of Preferred Shares, including RVMTP Shares, voting as a separate class, are entitled to elect two of the Fund’s trustees. The remaining trustees are elected by Common Shareholders and Preferred Shareholders, voting together as a single class. In the unlikely event that two full years of accrued dividends are unpaid on the Preferred Shares, the holders of all outstanding Preferred Shares, voting as a separate class, are entitled to elect a majority of the Fund’s trustees until all dividends in arrears with respect to the Preferred Shares have been paid or declared and set apart for payment. In order for the Fund to take certain actions or enter into certain transactions, a separate class vote of Preferred Shareholders is required, in addition to the single class vote of the holders of Preferred Shares and Common Shares.

 

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