SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
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Invesco Van Kampen California Value Municipal Income Trust
Invesco California Municipal Income Trust
Invesco California Quality Municipal Securities
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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1.
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Title of each class of securities to which transaction applies:
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2.
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Aggregate number of securities to which transaction applies:
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3.
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Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and
state how it was determined):
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4.
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Proposed maximum aggregate value of transaction:
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5.
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Total fee paid:
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Fee paid previously with preliminary proxy materials.
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
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1)
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Amount Previously Paid:
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2)
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Form, Schedule or Registration Statement No.:
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3)
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Filing Party:
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4)
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Date Filed:
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Invesco Van Kampen California Value Municipal Income Trust
Invesco California Municipal Income Trust
Invesco California Quality Municipal Securities
1555 Peachtree Street, N.E.
Atlanta, GA 30309
(800) 341-2929
NOTICE OF JOINT ANNUAL MEETING OF SHAREHOLDERS
To Be Held on July 17, 2012
Notice is hereby given to holders of preferred shares of beneficial interest designated as
Variable Rate Muni Term Preferred Shares (VMTP Shares) of Invesco California Municipal Income
Trust (IIC), Invesco California Quality Municipal Securities (IQC) and Invesco Van Kampen
California Value Municipal Income Trust (the Acquiring Fund or VCV) that the Funds will hold a
joint annual meeting of shareholders (the Meeting) on July 17, 2012, at 1555 Peachtree Street,
N.E., Atlanta, Georgia 30309. The Meeting will begin at 1:00 p.m. Eastern time for IIC and IQC,
and at 2:00 p.m. Eastern time for the Acquiring Fund. At the Meeting, holders of VMTP Shares
(VMTP Shareholders) will be asked to vote on the following proposals:
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1)
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For IIC, IQC and the Acquiring Fund, approval of an Agreement and Plan of
Redomestication that provides for the reorganization of such Fund as a Delaware statutory
trust.
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2)
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Approval of the merger of each of IIC, IQC and Invesco California Municipal Securities
(ICS) into the Acquiring Fund, which shall require the following shareholder actions:
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(a)
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For IIC and IQC, approval of an Agreement and Plan of Merger that provides for such Fund
to merge with and into the Acquiring Fund.
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(b)
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For the Acquiring Fund, approval of the following sub-proposals:
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(i)
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Approval of an Agreement and Plan of Merger that provides for IIC to merge with and
into the Acquiring Fund.
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(ii)
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Approval of an Agreement and Plan of Merger that provides for IQC to merge with and
into the Acquiring Fund.
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(iii)
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Approval of an Agreement and Plan of Merger that provides for ICS to merge with
and into the Acquiring Fund.
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3)
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For IIC and IQC, the election of six Trustees to its Board of Trustees.
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4)
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For the Acquiring Fund, the election of three Trustees to its Board of Trustees.
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Each Fund may also transact such other business as may properly come before the Meeting or any
adjournment or postponement thereof. IIC, IQC and ICS collectively are referred to as the Target
Funds. The Target Funds and the Acquiring Fund collectively are referred to as the Funds and
each is referred to individually as a Fund. ICS does not have outstanding VMTP Shares.
VMTP Shareholders of record as of the close of business on May 25, 2012, are entitled to
notice of, and to vote at, the Meeting or any adjournment or postponement thereof. Holders of the
Funds common shares of beneficial interest, whose voting instructions are being separately
solicited, will also vote on certain matters at the Meeting.
The Board of Trustees of each Fund requests that you vote your shares by either (i)
completing the enclosed proxy card and returning it in the enclosed postage paid return envelope,
or (ii) voting by telephone or via the internet using the instructions on the proxy card. Please
vote your shares promptly regardless of the number of shares you own.
Each Target Funds governing documents provide that shareholders do not have dissenters
appraisal rights, and each Target Fund does not believe that its shareholders are entitled to
appraisal rights in connection with its merger.
Each Funds Board unanimously recommends that you cast your vote FOR the above proposals and
FOR ALL the Trustee nominees as described in the Joint Proxy Statement.
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For IIC and IQC:
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/s/ Philip Taylor
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Mr. Philip Taylor
President and Principal Executive Officer
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June 29, 2012
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For the Acquiring Fund,
by order of the Board of Trustees:
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/s/ John M. Zerr
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John M. Zerr
Senior Vice President, Secretary and
Chief Legal Officer
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June 29, 2012
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE JOINT
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JULY 17, 2012:
The proxy statement and annual report to shareholders are available at www.invesco.com/us.
Invesco Van Kampen California Value Municipal Income Trust
Invesco California Municipal Income Trust
Invesco California Quality Municipal Securities
1555 Peachtree Street, N.E.
Atlanta, GA 30309
(800) 341-2929
JOINT PROXY STATEMENT
June 29, 2012
Introduction
This Joint Proxy Statement (the Proxy Statement) contains information that holders of
preferred shares of beneficial interest designated as Variable Rate Muni Term Preferred Shares
(VMTP Shares) of Invesco California Municipal Income Trust (IIC), Invesco California Quality
Municipal Securities (IQC) and Invesco Van Kampen California Value Municipal Income Trust (the
Acquiring Fund or VCV) should know before voting on the proposals that are described herein.
A joint annual meeting of the shareholders of the Funds (the Meeting) will be held on July
17, 2012 at 1555 Peachtree Street, N.E., Atlanta, Georgia 30309. The Meeting will begin at 1:00
p.m. Eastern time for IIC and IQC, and at 2:00 p.m. Eastern time for the Acquiring Fund. The
following describes the proposals to be voted on by holders of VMTP Shares (VMTP Shareholders) at
the Meeting:
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1)
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For IIC, IQC and the Acquiring Fund, approval of an Agreement and Plan of
Redomestication that provides for the reorganization of such Fund as a Delaware statutory
trust.
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2)
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Approval of the merger of each of IIC, IQC and Invesco California Municipal Securities
(ICS) into the Acquiring Fund, which shall require the following shareholder actions:
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(a)
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For IIC and IQC, approval of an Agreement and Plan of Merger that provides for such
Target Fund to merge with and into the Acquiring Fund.
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(b)
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For the Acquiring Fund, approval of the following sub-proposals:
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(i)
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Approval of an Agreement and Plan of Merger that provides for IIC to merge with and
into the Acquiring Fund.
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(ii)
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Approval of an Agreement and Plan of Merger that provides for IQC to merge with and
into the Acquiring Fund.
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(iii)
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Approval of an Agreement and Plan of Merger that provides for ICS to merge with
and into the Acquiring Fund.
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3)
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For IIC and IQC, the election of six Trustees to its Board of Trustees.
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4)
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For the Acquiring Fund, the election of three Trustees to its Board of Trustees.
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Each Fund may also transact such other business as may properly come before the Meeting or any
adjournment or postponement thereof. IIC, IQC and ICS collectively are referred to as the Target
Funds. The Target Funds and the Acquiring Fund collectively are referred to as the Funds and
each is referred to individually as a Fund. ICS does not have outstanding VMTP Shares.
The redomestications contemplated by Proposal 1 are referred to herein each individually as a
Redomestication and together as the Redomestications. The mergers contemplated by Proposal 2
are referred to herein each individually as a Merger and together as the Mergers.
The Boards of Trustees of the Funds (the Boards) have fixed the close of business on May 25,
2012, as the record date (Record Date) for the determination of shareholders entitled to notice
of and to vote at the Meeting and at any adjournment or postponement thereof. Shareholders will be
entitled to one vote for each share held (and a proportionate fractional vote for each fractional
share). Holders of the common shares of beneficial interest (Common Shares) of the Funds, whose
voting instructions are being separately solicited, will also vote on certain matters at the
Meeting.
This Proxy Statement, the enclosed Notice of Joint Annual Meeting of Shareholders, and the
enclosed proxy card will be mailed on or about July 5, 2012, to all VMTP Shareholders eligible
to vote at the Meeting. Each Fund is a closed-end management investment company registered under
the Investment Company Act of 1940, as amended (the 1940 Act). The Common Shares of each Fund
are listed on the New York Stock Exchange and the Common Shares of the Acquiring Fund are also
listed on the Chicago Stock Exchange (collectively with the New York Stock Exchange, the
Exchanges).
The Meeting is scheduled as a joint meeting of the shareholders of the Funds and certain
affiliated funds, whose votes on proposals applicable to such funds are being solicited separately,
because the shareholders of the funds are expected to consider and vote on similar matters.
A joint Proxy Statement is being used in order to reduce the preparation, printing, handling
and postage expenses that would result from the use of separate proxy materials for each Fund. You
should retain this Proxy Statement for future reference, as it sets forth concisely information
about the Funds that you should know before voting on the proposals. Additional information about
each Fund is available in the annual and semi-annual reports to shareholders of such Fund. Each
Funds most recent annual report to shareholders, which contains audited financial statements for
the Funds most recently completed fiscal year, and each Funds most recent semi-annual report to
shareholders have been previously mailed to shareholders and are available on the Funds website at
www.invesco.com/us. These documents are on file with the U.S. Securities and Exchange Commission
(the SEC). Copies of all of these documents are also available upon request without charge by
writing to the Funds at 11 Greenway Plaza, Suite 1000, Houston, Texas 77046, or by calling (800)
341-2929.
You also may view or obtain these documents from the SECs Public Reference Room, which is
located at 100 F Street, N.E., Washington, D.C. 20549, or from the SECs website at www.sec.gov.
Information on the operation of the SECs Public Reference Room may be obtained by calling the SEC
at (202) 551-8090. You can also request copies of these materials, upon payment at the prescribed
rates of the duplicating fee, by electronic request to the SECs e-mail address
(publicinfo@sec.gov) or by writing to the Public Reference Branch, Office of Consumer Affairs and
Information Services, U.S. Securities and Exchange Commission, Washington, D.C. 20549-1520. You
may also inspect reports, proxy material and other information concerning each of the Funds at the
Exchanges.
The VMTP Shares have not been registered under the Securities Act of 1933, as amended (the
Securities Act), or any state securities laws and, unless so registered, may not be offered or
sold except pursuant to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities laws. Accordingly, VMTP Shares
to be issued in a Merger are not offered for sale hereby, and may not be transferred or resold
except in compliance with the Securities Act. No person has been authorized to give any
information or make any representations not contained herein and, if so given or made, such
information or representation must not be relied upon as having been authorized.
TABLE OF CONTENTS
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Page
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PROPOSAL 1: APPROVAL OF REDOMESTICATION
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1
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On what am I being asked to vote?
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1
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Has my Funds Board of Trustees approved the Redomestication?
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1
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Will VMTP
Shares issued in connection with a Redomestication be the same as my current VMTP Shares?
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1
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What are the reasons for the proposed Redomestications?
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2
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What effect will a Redomestication have on me as a shareholder?
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2
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How do the
laws governing each Fund pre- and post-Redomestication compare?
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3
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How do the
governing documents of each Fund pre- and post-Redomestication compare?
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3
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Will there be any tax consequences resulting from a Redomestication?
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4
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What is the Tax Treatment of the VMTP Shares of the DE Fund?
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5
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When are the Redomestications expected to occur?
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5
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What will happen if shareholders of a Fund do not approve Proposal 1?
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5
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PROPOSAL 2: APPROVAL OF MERGERS
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5
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On what am I being asked to vote?
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5
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Has my Funds Board of Trustees approved the Merger(s)?
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6
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Will VMTP
Shares issued in connection with the Mergers be the same as my current VMTP Shares?
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6
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What are the reasons for the proposed Mergers?
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7
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What effect will a Merger have on me as a VMTP Shareholder?
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7
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How do the Funds investment objectives and principal investment strategies compare?
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8
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How do the Funds principal risks compare?
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8
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How do the Funds expenses compare?
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9
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How do the management, investment adviser and other service providers of the Funds compare?
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10
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Does the Acquiring Fund have the same portfolio managers as the Target Funds?
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11
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How do the distribution policies of the Funds compare?
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11
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Will there be any tax consequences resulting from the Mergers?
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11
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When are the Mergers expected to occur?
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12
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What will happen if shareholders of a Fund do not approve a Merger?
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12
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Where can I find more information about the Funds and the Mergers?
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12
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ADDITIONAL INFORMATION ABOUT THE FUNDS AND THE MERGERS
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12
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Principal Investment Strategies
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12
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Principal Risks of an Investment in the Funds
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16
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Portfolio Managers
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24
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Trading of VMTP Shares
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25
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Capital Structures of the Funds
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25
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Description of Securities to be Issued
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25
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Portfolio Turnover
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28
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Terms and Conditions of the Mergers
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29
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Additional Information About the Funds
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29
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Federal Income Tax Matters Associated with Investment in the Funds
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30
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State Income Tax Matters Associated with Investment in the Funds
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33
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Board Considerations in Approving the Mergers
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33
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Federal Income Tax Considerations of the Mergers
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36
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Tax Treatment of the VMTP Shares of the Acquiring Fund
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38
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Where to Find More Information
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39
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PROPOSAL 3: ELECTION OF TRUSTEES BY THE TARGET FUNDS
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39
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PROPOSAL 4: ELECTION OF TRUSTEES BY THE ACQUIRING FUND
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43
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VOTING INFORMATION
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45
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How to Vote Your Shares
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45
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Why are you sending me the Proxy Statement?
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46
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About the Proxy Statement and the Meeting
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46
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Quorum Requirement and Adjournment
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46
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Votes Necessary to Approve the Proposals
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47
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Proxy Solicitation
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48
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OTHER MATTERS
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48
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Share Ownership by Large Shareholders, Management and Trustees
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48
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Annual Meetings of the Funds
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48
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Shareholder Proposals
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48
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Shareholder Communications
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48
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Section 16(a) Beneficial Ownership Reporting Compliance
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49
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Other Meeting Matters
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49
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WHERE TO FIND ADDITIONAL INFORMATION
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49
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Exhibits
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EXHIBIT A Form of Agreement and Plan of Redomestication
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A-1
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EXHIBIT B Comparison of State Laws
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B-1
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EXHIBIT C Comparison of Governing Documents
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C-1
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EXHIBIT D Form of Agreement and Plan of Merger
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D-1
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EXHIBIT E Executive Officers of the Funds
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E-1
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EXHIBIT F Information Regarding the Trustees of the Target Funds
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F-1
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EXHIBIT G Board Leadership Structure for the Target Funds
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G-1
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EXHIBIT H Remuneration of Trustees for the Target Funds
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H-1
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EXHIBIT I Independent Auditor Information
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I-1
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EXHIBIT J Information Regarding the Trustees of the Acquiring Fund
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J-1
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EXHIBIT K Acquiring Fund Board Leadership Structure, Role in Risk
Oversight and Committees and Meetings
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K-1
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EXHIBIT L Remuneration of Trustees for the Acquiring Fund
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L-1
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EXHIBIT M Outstanding Shares of the Funds
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M-1
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EXHIBIT N Ownership of the Funds
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N-1
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EXHIBIT O Form of Statement of Preferences of VMTP Shares of the Acquiring
Fund
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O-1
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No dealer, salesperson or any other person has been authorized to give any information or to
make any representations other than those contained in this Proxy Statement or related solicitation
materials on file with the Securities and Exchange Commission, and you should not rely on such
other information or representations.
ii
PROPOSAL 1: APPROVAL OF REDOMESTICATION
On what am I being asked to vote?
Shareholders of IIC, IQC and the Acquiring Fund are being asked to approve an Agreement and
Plan of Redomestication (a Plan of Redomestication) providing for the reorganization of each Fund
as a Delaware statutory trust (referred to herein as a DE Fund). (Common Shareholders of ICS are
also being asked via a separate proxy statement to approve a Plan of Redomestication providing for
the reorganization of ICS as a Delaware statutory trust.) Each Fund is currently a Massachusetts
business trust. Each Funds Plan of Redomestication provides for the Fund to transfer all of its
assets and liabilities to a newly formed Delaware statutory trust whose capital structure will be
substantially the same as the Funds current structure, after which Fund shareholders will own
shares of the Delaware statutory trust and the Massachusetts business trust will be liquidated and
terminated. The Redomestication is only a change to your Funds legal form of organization and
there will be no change to the Funds investments, management, fee levels, or federal income tax
status as a result of the Redomestication.
Each Funds Redomestication may proceed even if other Redomestications are not approved by
shareholders or are for any other reason not completed. A form of the Plan of Redomestication is
available in Exhibit A.
By voting for this Proposal 1, you will be voting to become a shareholder of a fund organized
as a Delaware statutory trust with portfolio characteristics, investment objective(s), strategies,
risks, trustees, advisory agreements, subadvisory arrangements and other arrangements that are
substantially the same as those currently in place for your Fund.
Has my Funds Board of Trustees approved the Redomestication?
Yes. Each Funds Board has reviewed and unanimously approved the Plan of Redomestication and
this Proposal 1.
The Board of each Fund recommends that shareholders vote FOR Proposal 1.
Will VMTP Shares issued in connection with a Redomestication be the same as my current VMTP
Shares?
Yes. In connection with each Redomestication, the applicable DE Fund will issue VMTP Shares
with terms that are substantially identical to the terms of IICs, IQCs and the Acquiring Funds
currently outstanding VMTP Shares. Important information regarding the VMTP Shares to be issued in
connection with each Redomestication is set forth below.
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(1)
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It is a condition of closing of each Redomestication that the Fund will have
satisfied all of its obligations set forth in certain documents related to the VMTP
Shares immediately prior to the Redomestication and that the DE Fund will satisfy all
of the obligations of the corresponding documents related to the VMTP Shares to be
issued by the DE Fund immediately after the Redomestication.
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(2)
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Certain representations and warranties made by each Fund to the initial
purchaser of VMTP Shares will be true with respect to the DE Fund immediately after the
closing of the Redomestication.
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(3)
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The terms of the Declaration of Trust of a DE Fund are substantially identical
to those terms agreed upon by the initial purchaser of VMTP Shares of the Fund.
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(4)
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The terms of the bylaws of a DE Fund are substantially identical to those terms
agreed upon by the initial purchaser of VMTP Shares of the Fund.
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(5)
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The terms of the VMTP Shares issued by a DE Fund, as set forth in the Statement
of Preferences of VMTP Shares of the DE Fund, are substantially identical to those
terms agreed upon by the initial purchaser of VMTP Shares of the Fund.
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1
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(6)
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In the Redomestication, VMTP Shareholders of a Fund will receive VMTP Shares of
the DE Fund and no VMTP Shares of the DE Fund will be issued to persons who are not
holders of VMTP Shares of a Fund.
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(7)
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It is a condition of closing of each Redomestication that upon closing of such
Redomestication the VMTP Shares of the DE Fund be rated at least AA-/Aa3 by each rating
agency that is rating, at the request of the DE Fund, such VMTP Shares.
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(8)
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The Redomestications are scheduled to occur on or prior to December 31, 2012.
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A form of the Statement of Preferences of VMTP Shares of the Acquiring Fund is attached hereto
as Exhibit O. The Statement of Preferences of VMTP Shares of the DE Fund for each of IIC, IQC and
the Acquiring Fund will be identical in all material respects. The description of VMTP Shares of
the DE Funds included herein is subject to and qualified in its entirety by reference to the more
detailed description of the VMTP Shares set forth in such form of Statement of Preferences.
What are the reasons for the proposed Redomestications?
The Redomestications will serve to standardize the governing documents and certain agreements
of the Funds with each other and with other funds managed by Invesco Advisers, Inc. (the
Adviser). This standardization is expected to streamline the administration of the Funds, which
may result in cost savings and more effective administration by eliminating differences in
governing documents or controlling law. In addition, the legal requirements governing business
trusts under Massachusetts law are less certain and less developed than those under Delaware law,
which sometimes necessitates the Funds bearing the cost to engage counsel to advise on the
interpretation of such law.
The Redomestications are also a necessary step for the completion of the Mergers described in
Proposal 2 because, as Delaware statutory trusts, the Funds may merge with no delay in transactions
that are expected to qualify as tax-free reorganizations. However, the Redomestications may
proceed even if the Mergers described in Proposal 2 are not approved.
What effect will a Redomestication have on me as a shareholder?
A Redomestication will have no direct economic effect on Fund shareholders investments, other
than the cost savings described herein. Each redomesticated Fund will have investment advisory
agreements, subadvisory arrangements, administration agreements, custodian agreements, transfer
agency agreements, and other service provider arrangements that are identical in all material
respects to those in place immediately before the Redomestication, with certain non-substantive
revisions to standardize such agreements across the Funds. For example, after the
Redomestications, the investment advisory agreements of the Funds will contain standardized
language describing how investment advisory fees are calculated, but there will be no change to the
actual calculation methodology. Each Fund will continue to be served by the same individuals as
trustees and officers, and each Fund will continue to retain the same independent registered public
accounting firm. The portfolio characteristics, investment objective(s), strategies and risks of
each Fund will not change as a result of the Redomestications. Each Funds new governing documents
will be similar to its current governing documents, but will contain certain material differences.
These changes are intended to benefit shareholders by streamlining and promoting the efficient
administration and operation of the Funds. However, as a result of these changes, shareholders
will have fewer rights to vote on certain matters affecting the Fund and, therefore, less control
over the operations of the Fund. These changes to shareholder voting rights, and the benefits that
management believes will result from these changes, are described below.
Each of IIC, IQC and the Acquiring Fund will distribute to VMTP Shareholders all accrued but
unpaid dividends on the VMTP Shares through the closing date for its Redomestication. Dividends
will begin accruing on the VMTP Shares issued by the DE Fund as of the closing date for the
Redomestication at the same rate that was in effect immediately prior to the Redomestication.
Agreements of each of IIC, IQC and the Acquiring Fund related to the VMTP Shares, including the
purchase agreement, the redemption and paying agent agreement and the registration rights
agreement, will be assigned to the corresponding DE Fund.
2
In addition, each Funds capital structure will be substantially the same as its current
capital structure. The Common Shares of each Fund will continue to have equal rights to the
payment of dividends and the distribution of assets upon liquidation, and, for the Acquiring Fund,
IIC and IQC, may not declare distributions on Common Shares unless all accrued dividends on such
Funds preferred shares have been paid, and unless asset coverage with respect to such Funds VMTP
Shares would be at least 200% after giving effect to the distributions. In addition, under the
terms of such Funds VMTP Shares, the Fund will continue to be required to maintain minimum asset
coverage of 225%.
Shareholder approval of a Redomestication will be deemed to constitute approval of the
advisory and subadvisory agreements, as well as a vote for the election of the trustees, of the
Delaware statutory trust. Accordingly, each Plan of Redomestication provides that the sole initial
shareholder of each Delaware statutory trust will vote to approve the advisory and subadvisory
agreements (which, as noted above, will be identical in all material respects to the Funds current
agreements) and to elect the trustees of the Delaware statutory trust (which, as noted above, will
be the same as the Funds current Trustees) after shareholder approval of the Redomestication but
prior to the closing of the Redomestication.
How do the laws governing each Fund pre- and post-Redomestication compare?
After the Redomestications, each Fund will be a Delaware statutory trust governed by the
Delaware Statutory Trust Act (DE Statute). The DE Statute is similar in many respects to the
laws governing the Funds current structure, a Massachusetts business trust, but they differ in
certain respects. Both the Massachusetts business trust law (MA Statute) and the DE Statute
permit a trusts governing instrument to contain provisions relating to shareholder rights and
removal of trustees, and provide trusts with the ability to amend or restate the trusts governing
instruments. However, the MA Statute is silent on many of the salient features of a Massachusetts
business trust whereas the DE Statute provides guidance and offers a significant amount of
operational flexibility to Delaware statutory trusts. The DE Statute provides explicitly that the
shareholders and trustees of a Delaware statutory trust are not liable for obligations of the trust
to the same extent as under corporate law. While the governing documents of each Fund contain an
express disclaimer of liability of shareholders, certain Massachusetts judicial decisions have
determined that shareholders of a Massachusetts business trust may, in certain circumstances, be
assessed or held personally liable as partners for the obligations of a Massachusetts business
trust. Therefore, the Funds believe that shareholders will benefit from the express statutory
protections of the DE Statute. The DE Statute authorizes the trustees to take various actions
without requiring shareholder approval if permitted by a Funds governing instruments. For
example, trustees of a Delaware statutory trust may have the power to amend the trusts governing
instrument, merge or consolidate a Fund with another entity, and to change the Delaware statutory
trusts domicile, in each case without a shareholder vote. The Funds believe that the guidance and
flexibility afforded by the DE Statute and the explicit limitation on liability contained in the DE
Statute will benefit the Funds and shareholders. A more detailed comparison of certain provisions
of the DE Statute and the MA Statute is included in Exhibit B.
How do the governing documents of each Fund pre- and post-Redomestication compare?
The governing documents of each Fund before and after its Redomestication will be similar, but
will contain certain material differences. In general, these changes to each Funds new governing
documents are intended to benefit shareholders by streamlining the administration and operation of
each Fund to save shareholders money and by making it more difficult for short-term speculative
investors to engage in practices that benefit such short-term investors at the expense of the Fund
and to the detriment of its long-term investors. For example, the new governing documents permit
termination of the Fund without shareholder approval, provided that at least 75% of the Trustees
have approved such termination, thereby avoiding the expense of a shareholder meeting in connection
with a termination of the Fund, which expense would reduce the amount of assets available for
distribution to shareholders. The current governing documents require shareholder approval to
terminate the Fund regardless of whether the Trustees have approved such termination. Also, each
Funds new bylaws may be altered, amended, or repealed by the Trustees, without the vote or
approval of shareholders. Each Funds current bylaws may be altered, amended, or repealed by the
Trustees, provided that bylaws adopted by the shareholders may only be altered, amended, or
repealed by the shareholders. None of the Funds currently have any bylaws that were adopted by
shareholders. As a result of these changes, shareholders will generally have fewer rights to vote
on certain matters affecting the Fund and, therefore, less control over the operations of the Fund.
3
The new governing documents include new procedures intended to provide the Board the
opportunity to better evaluate proposals submitted by shareholders and provide additional
information to shareholders for their consideration in connection with such proposals. For
example, the new governing documents require shareholders to provide additional information with
respect to shareholder proposals, including nominations, brought before a meeting of shareholders.
These additional procedures include, among others, deadlines for providing advance notice of
shareholder proposals, certain required information that must be included with such advance notice
and a requirement that the proposing shareholder appear before the annual or special meeting of
shareholders to present about the nomination or proposed business. Trustees of the Funds will be
elected by a majority vote (i.e., nominees must receive the vote of a majority of the outstanding
shares present and entitled to vote at a shareholder meeting at which a quorum is present). Under
the current governing documents, Trustees of the Acquiring Fund are generally elected by a
plurality vote (i.e., the nominees receiving the greatest number of votes are elected), while
Trustees of the Target Funds are elected by a majority vote. The new governing documents will not
provide shareholders the ability to remove Trustees or to call special meetings of shareholders,
which powers are provided under the current governing documents.
The new governing documents contain provisions the Trustees believe will benefit shareholders
by deterring frivolous lawsuits and actions by short-term, speculative investors that are contrary
to the long-term best interests of the Fund and long-term shareholders and limiting the extent to
which Fund assets will be expended defending against such lawsuits. These provisions include a
different shareholder voting standard with respect to the Acquiring Funds merger, consolidation,
or conversion to an open-end company that, in certain circumstances, may be a lower voting standard
than under the current governing documents. The new governing documents also impose certain
obligations on shareholders seeking to initiate a derivative action on behalf of the Acquiring Fund
that are not imposed under the current governing documents, which may make it more difficult for
shareholders to initiate derivative actions and are intended to save the Fund money by requiring
reimbursement of the Fund for frivolous lawsuits brought by shareholders. To further protect the
Fund and its shareholders from frivolous lawsuits, the new governing documents also provide that
shareholders will indemnify the Acquiring Fund for all costs, expenses, penalties, fines or other
amounts arising from any action against the Acquiring Fund to the extent that the shareholder is
not the prevailing party and that the Acquiring Fund is permitted to redeem shares of and/or set
off against any distributions due to the shareholder for such amounts.
A comparison of the current and proposed governing documents of the Funds is available in
Exhibit C and a form of the Statement of Preferences of VMTP Shares of the Acquiring Fund is
available in Exhibit O.
Will there be any tax consequences resulting from a Redomestication?
The following is a general summary of the material U.S. federal income tax considerations of
the Redomestications and is based upon the current provisions of the Internal Revenue Code of 1986,
as amended (the Code), the existing U.S. Treasury Regulations thereunder, current administrative
rulings of the Internal Revenue Service (IRS) and published judicial decisions, all of which are
subject to change. These considerations are general in nature and individual shareholders should
consult their own tax advisors as to the federal, state, local, and foreign tax considerations
applicable to them and their individual circumstances. These same considerations generally do not
apply to shareholders who hold their shares in a tax-deferred account.
Each Redomestication is intended to be a tax-free reorganization pursuant to Section 368(a) of
the Code. Each Fund is currently a Massachusetts business trust. Each Redomestication will be
completed pursuant to a Plan of Redomestication that provides for the applicable Fund to transfer
all of its assets and liabilities to a newly formed Delaware statutory trust (DE-Fund), after
which Fund shareholders will own shares of the Delaware statutory trust and the Massachusetts
business trust will be liquidated. Even though the Redomestication of a Fund is part of an overall
plan to effect the Merger of each Target Fund with the Acquiring Fund, the Redomestications will be
treated as separate transactions for U.S. federal income tax purposes. The principal federal income
tax considerations that are expected to result from the Redomestication of an applicable Fund are
as follows:
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no gain or loss will be recognized by the Fund or the shareholders of the Fund as a result
of the Redomestication;
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no gain or loss will be recognized by the DE-Fund as a result of the Redomestication;
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the aggregate tax basis of the shares of the DE-Fund to be received by a shareholder of the
Fund will be the same as the shareholders aggregate tax basis of the shares of the Fund; and
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4
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the holding period of the shares of the DE-Fund received by a shareholder of the Fund will
include the period that a shareholder held the shares of the Fund (provided that such shares
of the Fund are capital assets in the hands of such shareholder as of the Closing (as defined
herein)).
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Neither the Funds nor the DE-Funds have requested or will request an advance ruling from the
IRS as to the federal tax consequences of the Redomestications. As a condition to Closing, Stradley
Ronon Stevens & Young, LLP will render a favorable opinion to each Fund and DE-Fund as to the
foregoing federal income tax consequences of each Redomestication, which opinion will be
conditioned upon, among other things, the accuracy, as of the Closing Date (as defined herein), of
certain representations of each Fund and DE-Fund upon which Stradley Ronon Stevens & Young, LLP
will rely in rendering its opinion. A copy of the opinion will be filed with the SEC and will be
available for public inspection. See Where to Find Additional Information. Opinions of counsel
are not binding upon the IRS or the courts. If a Redomestication is consummated but the IRS or the
courts determine that the Redomestication does not qualify as a tax-free reorganization under the
Code, and thus is taxable, each Fund would recognize gain or loss on the transfer of its assets to
its corresponding DE-Fund and each shareholder of the Fund would recognize a taxable gain or loss
equal to the difference between its tax basis in its Fund shares and the fair market value of the
shares of the DE-Fund it receives. The failure of one Redomestication to qualify as a tax-free
reorganization would not adversely affect any other Redomestication.
What is the Tax Treatment of the VMTP Shares of the DE Fund?
Each of IIC, IQC and the Acquiring Fund expects that the VMTP Shares issued by the DE Fund in
connection with its Redomestication will be treated as equity of the DE Fund for U.S. federal
income tax purposes. Each of IIC, IQC and the Acquiring Fund has received a private letter ruling
from the IRS to the effect that VMTP Shares issued by it prior to its Redomestication will be
treated as equity of such Fund for U.S. federal income tax purposes. Skadden, Arps, Slate, Meagher
& Flom LLP (Special VMTP Federal Income Tax Counsel) is of the opinion that, and as a condition
to the closing of the Redomestications will deliver to IIC, IQC and the Acquiring Fund an opinion
that, the VMTP Shares issued by the DE Fund in connection with a Redomestication will be treated as
equity of the DE Fund for U.S. federal income tax purposes. An opinion of counsel is not binding
on the IRS or any court. Thus, no assurance can be given that the IRS would not assert, or that a
court would not sustain, a position contrary to Special VMTP Federal Income Tax Counsels opinion.
The discussion herein assumes that the VMTP Shares issued by the DE Fund in connection with
Redomestication will be treated as equity of the DE Fund for U.S. federal income tax purposes.
When are the Redomestications expected to occur?
If shareholders of a Fund approve Proposal 1, it is anticipated that such Funds
Redomestication will occur in the third quarter of 2012.
What will happen if shareholders of a Fund do not approve Proposal 1?
If Proposal 1 is not approved by a Funds shareholders or if a Redomestication is for other
reasons not able to be completed, that Fund would not be redomesticated. In addition, that Fund
would not participate in a Merger, even if that Funds shareholders approve the Merger under
Proposal 2. If Acquiring Fund Shareholders do not approve Proposal 1 or if the Acquiring Funds
Redomestication is for any other reason not completed, no Mergers would be completed. If Proposal
1 is not approved by shareholders, the applicable Funds Board will consider other possible courses
of action for that Fund, including continuing to operate as a Massachusetts business trust.
THE
BOARDS UNANIMOUSLY RECOMMEND THAT YOU VOTE
FOR
THE APPROVAL OF PROPOSAL 1.
PROPOSAL 2: APPROVAL OF MERGERS
On what am I being asked to vote?
Shareholders of IIC and IQC are being asked to consider and approve a Merger of their Fund
with and into the Acquiring Fund, as summarized below. Shareholders of the Acquiring Fund are also
being asked to consider and approve each such Merger, which involves the issuance of new Common
Shares and VMTP Shares by the Acquiring Fund. Acquiring Fund shareholders are also being asked to
approve the Merger of ICS with an into the
5
Acquiring Fund, which involves the issuance of new
Common Shares by the Acquiring Fund. If a Merger is approved, VMTP Shares of IIC and IQC will be
exchanged on a one-for-one basis for newly issued Acquiring Fund VMTP Shares with substantially
identical terms, including equal aggregate liquidation preferences; and Common Shares of the Target
Fund will be exchanged for newly issued Acquiring Fund Common Shares of equal aggregate net asset
value. VMTP Shareholders are not expected to bear any costs of the Mergers.
Each Merger will be completed pursuant to an Agreement and Plan of Merger (Merger Agreement)
that provides for the applicable Target Fund to merge with and into the Acquiring Fund pursuant to
the Delaware Statutory Trust Act. A form of the Merger Agreement is attached hereto as Exhibit D.
Each Merger Agreement is substantially the same. The merger of one Target Fund and the Acquiring
Fund may proceed even if the merger of one or both of the other Target Funds is not approved by
shareholders or is for any other reason not completed. A Merger can proceed only if both the
Target Fund and the Acquiring Fund have also approved their respective Redomestications.
SUMMARY OF KEY INFORMATION REGARDING THE MERGERS
The following is a summary of certain information contained elsewhere in this Proxy Statement
and in the Merger Agreement. Shareholders should read the entire Proxy Statement carefully for
more complete information.
Has my Funds Board of Trustees approved the Merger(s)?
Yes. Each Funds Board has reviewed and unanimously approved the Merger Agreement and this
Proposal 2. Each Funds Board determined that the Mergers are in the best interest of each Fund
and will not dilute the interests of the existing shareholders of any Fund.
Each Funds Board
recommends that shareholders vote FOR Proposal 2.
Will VMTP Shares issued in connection with the Mergers be the same as my current VMTP Shares?
Yes. In connection with the Mergers, the Acquiring Fund will issue VMTP Shares in exchange
for VMTP Shares of IIC and IQC. The terms of the Acquiring Fund VMTP Shares will be substantially
identical to the terms of such Target Funds VMTP Shares outstanding immediately prior to the
closing of a Merger. Important information regarding the Acquiring Fund VMTP Shares to be issued
in connection with the Mergers is set forth below.
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(1)
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It is a condition of closing of each Merger that each of IIC, IQC and the
Acquiring Fund will have satisfied all of its obligations set forth in certain
documents related to its respective VMTP Shares immediately prior to the Merger and
that the Acquiring Fund will satisfy all of the obligations of such documents related
to the VMTP Shares immediately after giving effect to a Merger.
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(2)
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Certain representations and warranties made by the Acquiring Fund to the
initial purchaser of VMTP Shares will be true immediately after the closing of each
Merger.
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(3)
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The terms of the Declaration of Trust of the Acquiring Fund (after giving
effect to the Merger) are identical to those terms agreed upon by the initial purchaser
of VMTP Shares of the Fund.
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(4)
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The terms of the bylaws of the Acquiring Fund (after giving effect to the
Merger) are substantially identical to those terms agreed upon by the initial purchaser
of VMTP Shares of the Fund.
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(5)
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The terms of the VMTP Shares issued by the Acquiring Fund, as set forth in the
Statement of Preferences of VMTP Shares of the DE Fund, are substantially identical to
those terms agreed upon by the initial purchaser of VMTP Shares of the Fund.
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(6)
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In each Merger, VMTP Shares of IIC or IQC will be exchanged for VMTP Shares of
the Acquiring Fund and, after giving effect to all Mergers, all VMTP Shares of the
Acquiring Fund will be held by the current holders of the VMTP Shares of IIC, IQC and
the Acquiring Fund.
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(7)
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It is a condition of closing of each Merger that upon the closing of such
Merger the VMTP Shares of the Acquiring Fund be rated at least AA-/Aa3 by each rating
agency that is rating, at the request of the Acquiring Fund, such VMTP Shares.
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(8)
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The Mergers are scheduled to occur on or prior to December 31, 2012.
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A form of the Statement of Preferences of VMTP Shares of the Acquiring Fund (after giving
effect to its Redomestication) is attached hereto as Exhibit O. The description of VMTP Shares of
the Acquiring Fund included herein is subject to and qualified in its entirety by reference to the
more detailed description of the VMTP Shares set forth in such form of Statement of Preferences.
What are the reasons for the proposed Mergers?
The Mergers proposed in this Proxy Statement are part of a larger group of transactions across
the Advisers fund platform that began in early 2011. The Mergers are being proposed to reduce the
number of closed-end funds with similar investment processes and investment philosophies managed by
the Adviser. VMTP Shareholders are expected to benefit from the larger size of the combined fund
due to a larger funds ability to invest in a larger pool of securities.
The Mergers seek to combine Funds with investment objectives, strategies and related risks
that are substantially the same and that are managed by the same portfolio management team.
In considering the Mergers and the Merger Agreements, the Board of each Fund considered that
the Common Shareholders of each Fund may benefit from the Mergers by becoming shareholders of a
larger fund that may have a more diversified investment portfolio, greater market liquidity, more
analyst coverage, smaller spreads and trading discounts, improved purchasing power and lower
transaction costs.
The Board of the Acquiring Fund also considered that, in addition to the benefits mentioned
above, the combined fund is anticipated to have a lower total expense ratio than is currently the
case for the Acquiring Fund.
The Board of each Target Fund also considered that, in addition to the benefits mentioned
above:
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the combined fund on a
pro forma
basis had a more than 0.50% higher Common Share
distribution yield (as a percentage of net asset value) than each Target Fund, even after
giving effect to the higher management fees and total expense ratio that will apply to the
combined fund before and after the expiration of fee waivers;
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as of July 31, 2011, the Acquiring Funds Common Shares had traded at an average premium of
3.0% to its net asset value over the preceding 52 week period and, over the same period, the
Target Funds Common Shares had traded at average discounts of
-6.6% (IIC),
-7.15% (IQC) and
-8.48% (ICS);
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as of July 31, 2011, the Acquiring Funds Common Shares traded at an average discount of
-2.2% to its net asset value for the preceding month and, over the same period, the Target
Funds Common Shares had traded at average discounts of -10.20% (IIC), -8.9% (IQC) and
-10.10%
(ICS);
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the average daily trading volume for the Acquiring Funds Common Shares was approximately
twice the highest average daily trading volumes of the Target Funds Common Shares; and
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as of July 31, 2011, the Acquiring Fund owned 192 different municipal bonds and the Target
Funds owned 122 (IIC), 109 (IQC) and 97 (ICS), which means that the combined fund would
provide shareholders with a more diverse investment portfolio.
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In addition, each Board considered the Advisers agreement to limit the Acquiring Funds total
expenses if a Merger is completed through at least two years from the closing date of the Mergers
and the allocation of expenses of the Mergers, including the Adviser paying all of the Merger
costs.
The Board of each Fund considered these and other factors in concluding that the Mergers would
be in the best interest of the Funds and would not dilute the interests of the existing
shareholders of any Fund. The Boards considerations are described in more detail below in the
section entitled Additional Information About the Funds and the Mergers Board Considerations in
Approving the Mergers.
What effect will a Merger have on me as a VMTP Shareholder?
If you own VMTP Shares of IIC or IQC, you will, after the Merger, own VMTP Shares of the
Acquiring Fund with an aggregate liquidation preference equal to, and other terms that are
substantially identical to, the Target Fund VMTP Shares you held immediately before the Merger.
7
As discussed under Proposal 1, before the closing of the Mergers, IIC, IQC and the Acquiring
Fund will be reorganized as Delaware statutory trusts, each of which will have substantially
identical Statements of Preferences of VMTP Shares. A form of the Statement of Preferences of VMTP
Shares of the Acquiring Fund (after giving effect to its Redomestication) is attached hereto as
Exhibit O. The Statement of Preferences of VMTP Shares of each of IIC, IQC and the Acquiring Fund
(after giving effect to each Funds Redomestication) will be identical in all material respects.
If you are a VMTP Shareholder of the Acquiring Fund, your VMTP Shares of the Acquiring Fund
will not be changed by a Merger.
The principal differences between the Target Funds and the Acquiring Fund are described in the
following sections.
How do the Funds investment objectives and principal investment strategies compare?
The investment objective of the Acquiring Fund is substantially the same as the investment
objectives of the Target Funds. For each Fund, the investment objective may be changed only with
shareholder approval.
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Acquiring Fund (VCV)
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Target Funds
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To seek to provide a high level of
current income exempt from federal
and California income taxes,
consistent with preservation of
capital.
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To provide current income which is
exempt from federal and California
income taxes.
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The principal investment strategies of the Acquiring Fund are substantially the same as the
principal investment strategies of the Target Funds. However, the principal investment strategies
of the Acquiring Fund and the Target Funds are not identical, and certain of their investment
policies and limitations are different. The material differences in the Funds principal investment
strategies are that the Acquiring Fund, IIC and ICS, but not IQC, may invest in swaps; and that
each Target Fund but not the Acquiring Fund may use futures and, for IIC and ICS, swaps to earn
income. In addition, each of the Acquiring Fund, IIC, and IQC employs leverage by investing the
proceeds of its issuance of VMTP Shares. ICS does not employ this type of leverage and has no
outstanding VMTP Shares.
The section below entitled Additional Information About the Funds and the Mergers Principal
Investment Strategies provides more information on the principal investment strategies of the
Target Funds and the Acquiring Fund and highlights certain key differences.
How do the Funds principal risks compare?
The principal risks that may affect each Funds investment portfolio are substantially the
same. The material differences in the principal risks of the Funds are that Preferred Shares Risk
does not apply to ICS and Swaps Risk does not apply to IQC.
Investment in any of the Funds involves risks, including the risk that shareholders may
receive little or no return on their investment, and the risk that shareholders may lose part or
all of the money they invest. There can be no guarantee against losses resulting from an
investment in a Fund, nor can there be any assurance that a Fund will achieve its investment
objective(s). Whether a Fund achieves its investment objective(s) depends on market conditions
generally and on the Advisers analytical and portfolio management skills. As with any managed
fund, the Adviser may not be successful in selecting the best-performing securities or investment
techniques, and a Funds performance may lag behind that of similar funds. The risks associated
with an investment in a Fund can increase during times of significant market volatility. An
investment in a Fund is not a deposit in a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Before investing in a Fund,
potential shareholders should carefully evaluate the risks.
The risks associated with an investment in VMTP Shares are substantially the same for IIC, IQC
and the Acquiring Fund. ICS has no outstanding VMTP Shares.
Additional information on the principal risks of each Fund is included in such Funds
shareholder reports.
8
How do the Funds expenses compare?
The table below provides a summary comparison of the expenses of the Funds. The table also
shows estimated expenses on a
pro forma
basis giving effect to the proposed Merger with ICS and
giving effect to all of the Mergers. The
pro forma
expense ratios show projected estimated
expenses, but actual expenses may be greater or less than those shown. Note that
pro forma
total
expenses of the Acquiring Fund are expected to be
higher
than the current total expenses of
each Target Fund. The Board of each Target Fund concluded that the higher management and total
expenses that will apply to the combined fund were justified in light of the anticipated benefits
of the Mergers noted above, including that the combined fund would have a more than 0.50% higher
distribution yield (as a percentage of net asset value) on a
pro forma
basis than each Target Fund.
It is anticipated that the lowest expense ratio will be achieved for the Acquiring Fund if all
of the Mergers are completed and that the highest expense ratio will result if ICS is the only
Target Fund that participates in a Merger with the Acquiring Fund. The range of impact to
Acquiring Fund expenses after the Mergers is reflected in the following table. VMTP Shareholders
are not expected to bear any of the costs of the Mergers.
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Current
(a)
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Pro Forma
(b)
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Pro Forma
(b)
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ICS
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IIC, IQC, ICS
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Invesco Van Kampen
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+
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+
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California Value
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Acquiring Fund
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Acquiring Fund
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Invesco California
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Invesco California
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Invesco California
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Municipal Income
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(assumes only
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(assumes all of the
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Municipal Income
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Quality Municipal
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Municipal
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Trust (Acquiring
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Merger with ICS is
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Mergers are
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Trust (IIC)
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Securities (IQC)
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Securities (ICS)
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Fund)
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completed)
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completed)
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Shareholder Fees
(Fees paid
directly from your investment)
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Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)
(c)
|
|
None
|
|
|
None
|
|
|
None
|
|
|
None
|
|
|
None
|
|
|
None
|
|
Dividend Reinvestment Plan (d)
|
|
None
|
|
|
None
|
|
|
None
|
|
|
None
|
|
|
None
|
|
|
None
|
|
Annual Fund Operating Expenses
(expenses that you pay each year
as a percentage of the value of
your investment)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management Fees
|
|
|
0.38
|
%
|
|
|
0.40
|
%
|
|
|
0.27
|
%
|
|
|
0.97
|
%
|
|
|
0.97
|
%
|
|
|
0.97
|
%
|
Interest and Related Expenses (e)
|
|
|
0.56
|
%
|
|
|
0.59
|
%
|
|
|
0.08
|
%
|
|
|
0.88
|
%
|
|
|
0.83
|
%
|
|
|
0.82
|
%
|
Other Expenses
|
|
|
0.14
|
%
|
|
|
0.17
|
%
|
|
|
0.37
|
%
|
|
|
0.14
|
%
|
|
|
0.15
|
%
|
|
|
0.13
|
%
|
Total Annual Fund Operating
Expenses
|
|
|
1.08
|
%
|
|
|
1.16
|
%
|
|
|
0.72
|
%
|
|
|
1.99
|
%
|
|
|
1.95
|
%
|
|
|
1.92
|
%
|
Fee Waiver and/or Expense
Reimbursement
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.48
|
%(f)
|
|
|
0.58
|
%(g)
|
Total Annual Fund Operating
Expenses after Fee Waiver and/or
Expense Reimbursement
|
|
|
1.08
|
%
|
|
|
1.16
|
%
|
|
|
0.72
|
%
|
|
|
1.99
|
%
|
|
|
1.47
|
%
|
|
|
1.34
|
%
|
|
|
|
(a)
|
|
Expense ratios reflect estimated amounts for the current fiscal year. VMTP Shares do not bear
any transaction or operating expenses of the Funds.
|
|
(b)
|
|
Pro forma
numbers are estimated as if the Merger had been completed as of March 1, 2011 and
do not include estimated Merger costs. The Funds are not bearing any Merger costs.
|
|
(c)
|
|
Common Shares of each Fund purchased on the secondary market are not subject to sales
charges, but may be subject to brokerage commissions or other charges.
|
|
(d)
|
|
Each participant in a Funds dividend reinvestment plan pays a proportionate share of the
brokerage commissions incurred with respect to open market purchases in connection with such
plan. For each Funds last fiscal year, participants in the plan incurred brokerage
commissions representing $0.03 per Common Share.
|
|
(e)
|
|
Interest and Related Expenses includes interest and other costs of providing leverage to the
Funds, such as the costs to maintain lines of credit, issue and administer preferred shares,
and establish and administer floating rate note obligations.
|
|
(f)
|
|
If the Merger with ICS is the only Merger to close, the Adviser has contractually agreed, for
two years following the closing of the Merger, to waive advisory fees and/or reimburse
expenses to the extent necessary to limit the Acquiring Funds Total Annual Fund Operating
Expenses After Fee Waiver and/or Expense Reimbursement (which excludes certain items discussed
below) to 0.64% of average daily net assets. In determining the Advisers obligation to waive
advisory fees and/or reimburse expenses, the following expenses are not taken into account,
and could cause Total Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement to exceed the limit reflected above: (i) interest; (ii) taxes; (iii) dividend
expense on short sales; (iv) extraordinary or non-routine items, such as litigation,
reorganizations and mergers; and (v) expenses that the Fund has incurred but did not actually
pay because of an expense offset arrangement. Unless the Board and the Adviser mutually agree
to amend or continue the fee waiver agreement, it will terminate two years from the closing
date of the Merger.
|
9
|
|
|
(g)
|
|
If the Merger with IIC (alone or in combination with any other Mergers) is completed, the
Adviser has contractually agreed, for at least two years from the closing date of the Mergers,
to waive advisory fees and/or reimburse expenses to the extent necessary to limit the
Acquiring Funds Total Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement (which excludes certain items discussed below) to 0.52% of average daily net
assets. In determining the Advisers obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause Total Annual Fund
Operating Expenses After Fee Waiver and/or Expense Reimbursement to exceed the limit reflected
above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary or
non-routine items, including litigation expenses; and (v) expenses that the Fund has incurred
but did not actually pay because of an expense offset arrangement. Unless the Board and the
Adviser mutually agree to amend or continue the fee waiver agreement, it will terminate two
years from the closing date of the Mergers.
|
How do the management, investment adviser and other service providers of the Funds
compare?
Each Fund is overseen by a Board that includes many of the same individuals (described in
Proposals 3 and 4) and each Funds affairs are managed by the same officers with minor exceptions,
as described in Exhibit E. The Adviser, a registered investment adviser, serves as investment
adviser for each Fund pursuant to an investment advisory agreement that contains substantially
identical terms (except for fees) for each Fund. The Adviser oversees the management of each
Funds portfolio, manages each Funds business affairs and provides certain clerical, bookkeeping
and other administrative services. The Adviser has acted as an investment adviser since its
organization in 1976. As of March 31, 2012, the Adviser had $309.2 billion in assets under
management. The Adviser is located at 1555 Peachtree Street, N.E., Atlanta, Georgia 30309.
The Adviser is an indirect, wholly-owned subsidiary of Invesco Ltd. (Invesco). Invesco is a
leading independent global investment management company, dedicated to helping people worldwide
build their financial security. Invesco provides a comprehensive array of enduring solutions for
retail, institutional and high-net-worth clients around the world. Invesco had $672.8 billion in
assets under management as of March 31, 2012. Invesco is organized under the laws of Bermuda, and
its common shares are listed and traded on the New York Stock Exchange under the symbol IVZ.
Invesco is located at 1555 Peachtree Street, N.E., Atlanta, Georgia 30309.
All of the ordinary business expenses incurred in the operations of a Fund are borne by the
Fund unless specifically provided otherwise in the advisory agreement. Expenses borne by the Funds
include but are not limited to brokerage commissions, taxes, legal, accounting, auditing, or
governmental fees, the cost of preparing share certificates, custodian, transfer and shareholder
service agent costs, expenses of registering and qualifying shares for sale, expenses relating to
Trustee and shareholder meetings, the cost of preparing and distributing reports and notices to
shareholders, and the fees and other expenses incurred by the Funds in connection with membership
in investment company organizations.
A discussion of the basis for each Boards 2011 approval of each Funds investment advisory
agreements is included in the Funds semiannual report for the six months ended August 31, 2011. A
discussion of the basis for each Boards most recent approval of each Funds investment advisory
agreements will be included in the Funds semiannual report for the six months ending August 31,
2012, if any.
The contractual advisory fee rate of the Acquiring Fund is higher than the contractual
advisory fee rate of each of the Target Funds. The following table compares the advisory fee rates
of the Funds.
|
|
|
|
|
|
|
|
|
|
|
IIC
|
|
IQC
|
|
ICS
|
|
Acquiring Fund (VCV)
|
Contractual Fee Rate
|
|
0.27% of managed
assets
|
|
0.27% of managed
assets
|
|
0.27% of net assets
|
|
0.55% of managed
assets
|
Net Effective Fee Rate*
|
|
0.38%
|
|
0.40%
|
|
0.27%
|
|
0.97%
|
|
|
|
*
|
|
Varies based on the amount of financial leverage used by the Fund.
|
Contractual fee rates and net effective fee rates differ because of differences in how the
contractual rate is applied. ICS, which has no outstanding preferred shares, calculates its
advisory fee as a percentage of the Funds net assets, which generally means the Funds assets
minus its liabilities. Each of IIC, IQC and the Acquiring Fund calculates its advisory fee as a
percentage of its managed assets, which for this purpose means the Funds net assets, plus assets
attributable to outstanding preferred shares and the amount of any borrowings incurred for the
purpose of leverage (whether or not such borrowed amounts are reflected in the Funds financial
statements for purposes of generally accepted accounting principles). Because managed assets
exceed net assets for a Fund that has outstanding preferred shares, even if the Funds
contractual advisory fee rates were the same, the advisory fees paid by the Acquiring Fund as a
percentage of NAV will exceed the advisory fees as a percentage of NAV paid
10
by ICS, and the actual
amount paid by IIC, IQC, and the Acquiring Fund, as a percentage of NAV, will typically exceed the
contractual rate. For more information, see the table above under How do the Funds expenses
compare?
If the Merger with IIC (alone or in combination with any other Mergers) is completed, the
Adviser has contractually agreed for at least two years from the closing date of the Mergers to
waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual
operating expenses of the Acquiring Fund to 0.52%, subject to certain exclusions.
Each Funds advisory agreement provides that the Adviser may delegate any and all of its
rights, duties, and obligations to one or more wholly-owned affiliates of Invesco as sub-advisers
(the Invesco Sub-Advisers). Pursuant to each Funds Master Intergroup Sub-Advisory Contract, the
Invesco Sub-Advisers may be appointed by the Adviser from time to time to provide discretionary
investment management services, investment advice, and/or order execution services. Each Invesco
Sub-Adviser is registered with the SEC as an investment adviser.
Other key service providers to the Target Funds, including the administrator, transfer agent,
custodian, and auditor, provide substantially the same services to the Acquiring Fund. Each Fund
has entered into a master administrative services agreement with the Adviser, pursuant to which the
Adviser performs or arranges for the provision of accounting and other administrative services to
the Funds that are not required to be performed by the Adviser under its investment advisory
agreements with the Funds. The custodian for the Funds is State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110-2801. The transfer agent and dividend paying agent
for the Funds is Computershare Trust Company, N.A., P.O. Box 43078, Providence, Rhode Island
02940-3078.
Does the Acquiring Fund have the same portfolio managers as the Target Funds?
Yes. The portfolio management team for the Target Funds is the same as the portfolio
management team for the Acquiring Fund. Information on the portfolio managers of the Funds is
included below under Additional Information About the Funds and the Mergers Portfolio Managers.
How do the distribution policies of the Funds compare?
Each Fund declares and pays monthly dividends from net investment income to holders of Common
Shares (Common Shareholders). The Acquiring Fund, IIC and IQC declare and pay monthly dividends
from net investment income to the holders of VMTP Shares. Distributions from net realized capital
gain, if any, are generally paid annually and are distributed on a pro rata basis to Common
Shareholders and, for the Acquiring Fund, IIC and IQC, to VMTP Shareholders. Each Fund may also
declare and pay capital gains distributions more frequently, if necessary, in order to reduce or
eliminate federal excise or income taxes on the Fund. Each Fund offers a dividend reinvestment
plan for Common Shareholders, which is more fully described in the Funds shareholder reports.
Will there be any tax consequences resulting from the Mergers?
Each Merger is designed to qualify as a tax-free reorganization for federal income tax
purposes and each Fund anticipates receiving a legal opinion to that effect (although there can be
no assurance that the Internal Revenue Service will adopt a similar position). This means that the
shareholders of each Target Fund will recognize no gain or loss for federal income tax purposes
upon the exchange of all of their shares in such Target Fund for shares in the Acquiring Fund.
Shareholders should consult their tax advisor about state and local tax consequences of the
Mergers, if any, because the information about tax consequences in this Proxy Statement relates
only to the federal income tax consequences of the Mergers.
Prior to the closing of each Merger, each Target Fund will declare to its Common Shareholders
one or more dividends, and the Acquiring Fund may, but is not required to, declare to its Common
Shareholders a dividend, payable at or near the time of closing to their respective shareholders to
the extent necessary to avoid entity level tax or as otherwise deemed desirable. Such
distributions, if made, are anticipated to be made in the 2012 calendar year and, to the extent a
distribution is not an exempt-interest dividend (as defined in the Code), the distribution may be
taxable to shareholders in such year for federal income tax purposes. It is anticipated that Fund
distributions will be primarily dividends that are exempt from regular federal income tax, although
a portion of such dividends may be taxable to shareholders as ordinary income or capital gains. To
the extent the distribution is attributable to ordinary income or capital gains, such ordinary
income and capital gains will be allocated to Common Shareholders and
11
VMTP Shareholders in
accordance with each classs proportionate share of the total dividends paid by the Fund during the
year. In certain circumstances, each of IIC, IQC and the Acquiring Fund will make additional
payments to VMTP Shareholders to offset the tax effects of such taxable distributions.
In addition, Skadden, Arps, Slate, Meagher & Flom LLP, as counsel to IIC, IQC and the
Acquiring Fund, will deliver an opinion to IIC, IQC and the Acquiring Fund, subject to certain
representations, assumptions and conditions, to the effect that the Acquiring Fund VMTP Shares
received in the Mergers by holders of VMTP Shares of IIC or IQC will qualify as equity of the
Acquiring Fund for federal income tax purposes.
When are the Mergers expected to occur?
If shareholders of a Target Fund and the Acquiring Fund approve the Merger and the
Redomestication (Proposal 1), it is anticipated that the Merger will occur in the third quarter of
2012.
What will happen if shareholders of a Fund do not approve a Merger?
If a Merger is not approved by shareholders or is for other reasons unable to be completed,
the applicable Fund will continue to operate without merging and the Funds Board will consider other possible
courses of action for the Fund.
Where can I find more information about the Funds and the Mergers?
The remainder of this Proxy Statement contains additional information about the Funds and the
Mergers, as well as information on the other proposals to be voted on at the Meeting. You are
encouraged to read the entire document. Additional information about each Fund can be found in the
statement of additional information (SAI) to the registration statement for the Acquiring Funds
Common Shares on Form N-14, dated June 8, 2012 (which is not part of this Proxy Statement and is
not incorporated by reference herein), and in each Funds shareholder reports. If you need any
assistance, or have any questions regarding the Mergers or how to vote, please call Invesco Client
Services at (800) 341-2929.
ADDITIONAL INFORMATION ABOUT THE FUNDS AND THE MERGERS
Principal Investment Strategies
The following section compares the principal investment strategies of the Target Funds with
the principal investment strategies of the Acquiring Fund and highlights any key differences. In
addition to the principal investment strategies described below, each Fund may use other investment
strategies and is also subject to certain additional investment policies and limitations, which are
described in the SAI and in each Funds shareholder reports. The cover page of this Proxy
Statement describes how you can obtain copies of these documents.
Investment Strategies
. Except during temporary defensive periods, at least 80% of the
Acquiring Funds net assets will be invested in municipal securities. Similarly, except during
temporary defensive periods, at least 80% of each Target Funds net assets will be invested in
municipal obligations, the interest on which, in the opinion of bond counsel to the issuer, is
exempt from federal and California income taxes (California municipal securities). Each policy
stated in the foregoing sentences with respect to the Acquiring Fund, IIC and ICS is a fundamental
policy of each Fund, respectively, and may not be changed without approval of a majority of such
Funds outstanding voting securities as defined in the 1940 Act. Under normal market conditions,
the Adviser seeks to achieve each Funds investment objective by investing at least 80% of the
Funds net assets in investment grade California municipal securities. Investment grade securities
are: (i) securities rated BBB- or higher by Standard & Poors Financial Services LLC, a subsidiary
of The McGraw-Hill Companies, Inc. (S&P) or Baa3 or higher by Moodys Investors Service, Inc.
(Moodys) or an equivalent rating by another nationally recognized statistical rating
organization (NRSRO), (ii) comparably rated short term securities, or (iii) unrated municipal
securities determined by the Adviser to be of comparable quality at the time of purchase.
Under normal market conditions, the Acquiring Fund may invest up to 20% of its net assets in
municipal securities that are rated below investment grade or that are unrated but determined by
the Adviser to be of comparable quality at the time of purchase. Similarly, under normal market
conditions, each Target Fund may invest up to 20% of its net assets in taxable or tax-exempt fixed
income securities rated, at the time of investment, at least B- or higher by S&P or B3 or higher by
Moodys or an equivalent rating by another NRSRO, or if not rated, determined by the Adviser to be
of comparable quality, including municipal obligations the interest on which, in the opinion of
bond counsel to the issuer, is exempt from federal but not California income taxes, obligations of
the U.S.
12
government, its respective agencies or instrumentalities, and other fixed income
obligations. Lower-grade securities are commonly referred to as junk bonds, and involve greater
risks than investments in higher-grade securities.
The Acquiring Fund does not purchase securities that are in default or rated in categories
lower than B- by S&P or B3 by Moodys or unrated securities of comparable quality. During periods
in which the Adviser believes that changes in economic, financial or political conditions make it
advisable to do so, each Target Fund, for temporary defensive purposes, may invest to an unlimited
extent in taxable or tax-exempt fixed income securities rated at least investment grade by a NRSRO
or if not rated, determined by the Adviser to be of comparable quality.
The foregoing percentage and rating limitations apply at the time of acquisition of a security
based on the last previous determination of each Funds net asset value. Any subsequent change in
any rating by a rating service or change in percentages resulting from market fluctuations or other
changes in a Funds total assets will not require elimination of any security from the Funds
portfolio.
Each Fund may invest all or a substantial portion of its net assets in California municipal
securities that may subject certain investors to the federal alternative minimum tax and,
therefore, a substantial portion of the income produced by each Fund may be taxable for such
investors under the federal alternative minimum tax. Accordingly, a Fund may not be a suitable
investment for investors who are already subject to the federal alternative minimum tax or could
become subject to the federal alternative minimum tax as a result of an investment in the Fund.
The Adviser buys and sells securities for each Fund with a view towards seeking a high level
of current income exempt from federal and California income taxes, subject to reasonable credit
risk. As a result, each Fund will not necessarily invest in the highest yielding municipal
securities permitted by its investment policies if the Adviser determines that market risks or
credit risks associated with such investments would subject a Funds portfolio to undue risk. The
potential realization of capital gains or losses resulting from possible changes in interest rates
will not be a major consideration and frequency of portfolio turnover generally will not be a
limiting factor if the Adviser considers it advantageous to purchase or sell securities.
Although each Funds policy is to emphasize investments in municipal obligations with
longer-term maturities because generally longer-term obligations, while more susceptible to market
fluctuations resulting from changes in interest rates, produce higher yields than short-term
obligations, each Fund does not maintain a specific average weighted maturity of its portfolio, and
a Funds average portfolio maturity will vary depending upon market conditions and other factors.
The Adviser employs a bottom-up, research-driven approach to identify securities that have
attractive risk/reward characteristics for the sectors in which each Fund invests. The Adviser also
integrates macroeconomic analysis and forecasting into its evaluation and ranking of various
sectors and individual securities. Finally, each Fund employs leverage in an effort to enhance
each Funds income and total return. Sell decisions are based on: (i) a deterioration or likely
deterioration of an individual issuers capacity to meet its debt obligations on a timely basis;
(ii) a deterioration or likely deterioration of the broader fundamentals of a particular industry
or sector; and (iii) opportunities in the secondary or primary market to purchase a security with
better relative value.
Municipal Securities.
Municipal securities are obligations issued by or on behalf of states,
territories or possessions of the United States, the District of Columbia and their cities,
counties, political subdivisions, agencies and instrumentalities, the interest on which, in the
opinion of bond counsel or other counsel to the issuers of such securities, is, at the time of
issuance, exempt from federal income tax. California municipal securities are municipal
obligations, the interest on which, in the opinion of bond counsel to the issuer, is exempt from
federal and California income taxes. The Adviser does not conduct its own analysis of the tax
status of the interest paid by municipal securities held by each Fund, but will rely on the opinion
of counsel to the issuer of each such instrument.
The issuers of municipal securities obtain funds for various public purposes, including the
construction of a wide range of public facilities such as airports, highways, bridges, schools,
hospitals, housing, mass transportation, streets and water and sewer works. Other public purposes
for which municipal securities may be issued include refunding outstanding obligations, obtaining
funds for general operating expenses and obtaining funds to lend to other public institutions and
facilities. Certain types of municipal securities are issued to obtain funding for privately
operated facilities.
The yields of municipal securities depend on, among other things, general money market
conditions, general conditions of the municipal securities market, size of a particular offering,
the maturity of the obligation and rating of the issue. There is no limitation as to the maturity
of the municipal securities in which a Fund may invest.
13
The ratings of S&P and Moodys represent
their opinions of the quality of the municipal securities they undertake to rate. These ratings
are general and are not absolute standards of quality. Consequently, municipal securities with the
same maturity, coupon and rating may have different yields while municipal securities of the same
maturity and coupon with different ratings may have the same yield.
The two principal classifications of municipal securities are general obligation and revenue
or special delegation securities. General obligation securities are secured by the issuers pledge
of its faith, credit and taxing power for the payment of principal and interest. Revenue
securities are usually 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 bonds are usually revenue securities, the credit quality of
which is normally directly related to the credit standing of the industrial user involved.
Within these principal classifications of municipal securities, there are a variety of types
of municipal securities, including:
|
|
Variable rate securities, which bear rates of interest that are adjusted periodically
according to formulae intended to reflect market rates of interest.
|
|
|
|
Municipal notes, including tax, revenue and bond anticipation notes of short maturity,
generally less than three years, which are issued to obtain temporary funds for various public
purposes.
|
|
|
|
Variable rate demand notes, which are obligations that contain a floating or variable
interest rate adjustment formula and which are subject to a right of demand for payment of the
principal balance plus accrued interest either at any time or at specified intervals. The
interest rate on a variable rate demand note may be based on a known lending rate, such as a
banks prime rate, and may be adjusted when such rate changes, or the interest rate may be a
market rate that is adjusted at specified intervals. The adjustment formula maintains the
value of the variable rate demand note at approximately the par value of such note at the
adjustment date.
|
|
|
|
Municipal leases, which are obligations issued by state and local governments or
authorities to finance the acquisition of equipment and facilities. Certain municipal lease
obligations may include 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.
|
|
|
|
Private activity bonds, which are issued by, or on behalf of, public authorities to finance
privately operated facilities.
|
|
|
|
Participation certificates, which are obligations issued by state or local governments or
authorities to finance the acquisition of equipment and facilities. They may represent
participations in a lease, an installment purchase contract or a conditional sales contract.
|
|
|
|
Municipal securities that may not be backed by the faith, credit and taxing power of the
issuer.
|
|
|
|
Municipal securities that are privately placed and that may have restrictions on a Funds
ability to resell, such as timing restrictions or requirements that the securities only be
sold to qualified institutional investors.
|
|
|
|
Municipal securities that are insured by financial insurance companies.
|
Derivatives
. Each Fund principally may use derivative instruments for a variety of purposes,
including hedging, risk management, portfolio management or to earn income (except that the
Acquiring Fund may not use futures and swaps to earn income). Derivatives are financial
instruments whose value is based on the value of another underlying asset, interest rate, index or
financial instrument. Derivative instruments and techniques that each Fund principally uses
include:
Futures
.
A futures contract is a standardized agreement between two parties to buy or
sell a specific quantity of an underlying instrument at a specific price at a specific future time.
The value of a futures contract tends to increase and decrease in tandem with the value of the
underlying instrument. Futures contracts are bilateral agreements, with both the purchaser and the
seller equally obligated to complete the transaction. Depending on the terms of the particular
contract, futures contracts are settled through either physical delivery of the underlying
instrument on the settlement date or by payment of a cash settlement amount on the settlement date.
Each Target Fund, but not the Acquiring Fund, may use futures to earn income.
Swaps
.
A swap contract is an agreement between two parties pursuant to which the
parties exchange payments at specified dates on the basis of a specified notional amount, with the
payments calculated by reference to
14
specified securities, indexes, reference rates, currencies or
other instruments. Most swap agreements provide that when the period payment dates for both
parties are the same, the payments are made on a net basis (i.e., the two payment streams are
netted out, with only the net amount paid by one party to the other). Each Funds obligations or
rights under a swap contract entered into on a net basis will generally be equal only to the net
amount to be paid or received under the agreement, based on the relative values of the positions
held by each counterparty. IQC may not invest in swaps. IIC and ICS, but not the Acquiring Fund,
may use swaps to earn income.
Inverse Floating Rate Obligations.
Each Fund may invest in inverse floating rate obligations.
Inverse floating rate obligations are variable debt instruments that pay interest at rates that
move in the opposite direction of prevailing interest rates. Because the interest rate paid to
holders of such obligations is generally determined by subtracting a variable or floating rate from
a predetermined amount, the interest rate paid to holders of such obligations will decrease as such
variable or floating rate increases and increase as such variable or floating rate decreases. The
inverse floating rate obligations in which each Fund may invest include derivative instruments such
as residual interest bonds (RIBs) or tender option bonds (TOBs). Such instruments are
typically created by a special purpose trust that holds long-term fixed rate bonds and sells two
classes of beneficial interests: short-term floating rate interests, which are sold to third party
investors, and inverse floating residual interests, which are purchased by each Fund. The
short-term floating rate interests have first priority on the cash flow from the bond held by the
special purpose trust and each Fund (as holder of the inverse floating residual interests) is paid
the residual cash flow from the bond held by the special purpose trust.
When-Issued and Delayed Delivery Transactions
. Each Fund may purchase and sell securities on
a when-issued and delayed delivery basis, which means that a Fund buys or sells a security with
payment and delivery taking place in the future. The payment obligation and the interest rate are
fixed at the time a Fund enters into the commitment. No income accrues on such securities until
the date a Fund actually takes delivery of the securities.
Preferred Shares
. The Acquiring Fund, IIC and IQC, but not ICS, use leverage in the form of
preferred shares. Dividends on the preferred shares will typically be comparable to the yields on
investment grade short-term municipal securities, although the assets attributable to the preferred
shares will generally be invested in longer-term municipal securities, which typically have higher
yields than short-term municipal securities. Assuming such a yield differential, this leveraged
capital structure enables a Fund to pay a potentially higher yield on the Common Shares than
similar investment companies that do not use leverage.
As required by the 1940 Act, the Acquiring Fund, IIC and IQC and will generally maintain an
asset coverage of the value of the respective Funds total assets, less all liabilities and
indebtedness of the Fund not represented by its preferred shares, of 200% of the aggregate
liquidation value of its preferred shares. In addition, under the terms of each Funds outstanding
VMTP Shares, the Fund is required to maintain minimum asset coverage of 225%.
Portfolio Turnover
. The Acquiring Fund generally will not engage in the trading of securities
for the purpose of realizing short-term profits, but it will adjust its portfolio as it deems
advisable in view of prevailing or anticipated market conditions to accomplish the Acquiring Funds
investment objective. For example, the Acquiring Fund may sell portfolio securities in
anticipation of a movement in interest rates. Other than for tax purposes, frequency of portfolio
turnover will not be a limiting factor if the Acquiring Fund considers it advantageous to purchase
or sell securities. The Acquiring Fund does not anticipate that the annual portfolio turnover rate
of the Acquiring Fund will be in excess of 100%. A high rate of portfolio turnover involves
correspondingly greater brokerage commission and transaction expenses than a lower rate, which
expenses must be borne by the Acquiring Fund and its Common Shareholders. High portfolio turnover
may also result in the realization of substantial net short-term capital gains, and any
distributions resulting from such gains will be taxable at ordinary income rates for federal income
tax purposes.
The Target Funds may sell securities without regard to the length of time they have been held
to take advantage of new investment opportunities, yield differentials, or for other reasons. Each
Target Funds portfolio turnover rate may vary from year to year. A high portfolio turnover rate
(100% or more) would increase a Target Funds transaction costs (including brokerage commissions
and dealer costs), which would adversely impact a Target Funds performance. Higher portfolio
turnover may result in the realization of more short-term capital gains than if a Target Fund had
lower portfolio turnover. Additionally, in a declining market, portfolio turnover may create
realized capital losses. The turnover rate will not be a limiting factor, however, if the Adviser
considers portfolio changes appropriate.
15
Temporary Defensive Strategy
. When market conditions dictate a more defensive investment
strategy, the Acquiring Fund may, on a temporary basis, hold cash or invest a portion or all of its
assets in high-quality, short-term municipal securities
.
If such municipal securities are not
available or, in the judgment of the Adviser, do not afford sufficient protection against adverse
market conditions, the Acquiring Fund may invest in taxable instruments. Such taxable securities
may include securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities, other investment grade quality fixed income securities, prime commercial paper,
certificates of deposit, bankers acceptances and other obligations of domestic banks, repurchase
agreements and money market funds (including money market funds affiliated with Invesco).
Similarly, when market conditions dictate a more defensive investment strategy, the Target Funds
may, on a temporary basis, hold cash or invest to an unlimited extent in taxable or tax-exempt
fixed income securities rated at least investment grade by a NRSRO or if not rated, determined by
the Adviser to be of comparable quality, including municipal obligations the interest on which in
the opinion of bond counsel to the issuer is exempt from federal but not California income taxes,
obligations of the U.S. government, its respective agencies or instrumentalities, other investment
grade quality fixed income securities, prime commercial paper, certificates of deposit, bankers
acceptances and other obligations of domestic banks, repurchase agreements, and money market funds
(including money market funds affiliated with Invesco). In taking a defensive position, each Fund
would temporarily not be pursuing its principal investment strategies and may not achieve its
investment objective.
Zero Coupon / PIK Bonds
. Each Fund may invest in securities not producing immediate cash
income, including zero coupon securities or pay-in-kind (PIK) securities, when their effective
yield over comparable instruments producing cash income makes these investments attractive. PIK
securities are debt securities that pay interest through the issuance of additional securities.
Zero coupon securities are debt securities that do not entitle the holder to any periodic payment
of interest prior to maturity or a specified date when the securities begin paying current
interest. They are issued and traded at a discount from their face amounts or par value, which
discount varies depending on the time remaining until cash payments begin, prevailing interest
rates, liquidity of the security and the perceived credit quality of the issuer. The securities do
not entitle the holder to any periodic payments of interest prior to maturity, which prevents any
reinvestment of interest payments at prevailing interest rates if prevailing interest rates rise.
On the other hand, because there are no periodic interest payments to be reinvested prior to
maturity, zero coupon securities eliminate the reinvestment risk and may lock in a favorable rate
of return to maturity if interest rates drop. In addition, each Fund would be required to
distribute the income on these instruments as it accrues, even though the Fund will not receive all
of the income on a current basis or in cash. Thus, the Fund may have to sell other investments,
including when it may not be advisable to do so, to make income distributions to the Common
Shareholders.
As required by Rule 35d-1 under the 1940 Act, in addition to the investment strategies and
policies discussed above, each Fund has a fundamental policy to invest, under normal circumstances,
at least 80% of its total assets in investments the income from which is exempt from federal and
California income tax.
Principal Risks of an Investment in the Funds
A comparison of the principal risks associated with the Funds investment strategies is
included above under How do the Funds principal risks compare? The following table provides
further information on the principal risks that apply to the Funds investment portfolios.
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Principal Risk
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Funds Subject to Risk
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Municipal Securities Risk
.
Under normal market conditions,
longer-term municipal securities
generally provide a higher yield
than shorter-term municipal
securities. The Adviser may adjust
the average maturity of each Funds
portfolio from time to time
depending on its assessment of the
relative yields available on
securities of different maturities
and its expectations of future
changes in interest rates. The
yields of municipal securities may
move differently and adversely
compared to the yields of the
overall debt securities markets.
Certain kinds of municipal
securities are subject to specific
risks that could cause a decline in
the value of those securities:
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All Funds
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Lease Obligations
. Certain lease
obligations contain
non-appropriation clauses that
provide that the governmental
issuer has no obligation to make
future payments under the lease or
contract unless money is
appropriated for that purpose by
the appropriate legislative body on
an annual or other periodic basis.
Consequently, continued lease
payments on those lease obligations
containing non-appropriation
clauses are dependent on future legislative actions. If these
legislative actions do not occur,
the holders of the lease obligation
may experience difficulty in
exercising their rights, including
disposition of the property.
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16
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Principal Risk
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Funds Subject to Risk
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Private Activity Bonds
. The issuers
of private activity bonds in which
each Fund may invest may be
negatively impacted by conditions
affecting either the general credit
of the user of the private activity
project or the project itself.
Conditions such as regulatory and
environmental restrictions and
economic downturns may lower the
need for these facilities and the
ability of users of the project to
pay for the facilities. Private
activity bonds may also pay
interest subject to the alternative
minimum tax.
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In 2011, S&P lowered its long-term
sovereign credit rating on the U.S.
to AA+ from AAA with a negative
outlook. Following S&Ps downgrade
of the long-term sovereign credit
rating on the U.S., the major
rating agencies have also placed
many municipalities on review for
potential downgrades, which could
impact the market price, liquidity
and volatility of the municipal
securities held by each Fund in its
portfolio. If the universe of
municipal securities meeting a
Funds ratings and credit quality
requirements shrinks, it may be
more difficult for the Fund to meet
its investment objective and the
Funds investments may become more
concentrated in fewer issues.
Future downgrades by other rating
agencies could have significant
adverse effects on the economy
generally and could result in
significant adverse impacts on
municipal issuers and each Fund.
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Many state and municipal
governments that issue securities
are under significant economic and
financial stress and may not be
able to satisfy their obligations.
In response to the national
economic downturn, governmental
cost burdens have been and may
continue to be reallocated among
federal, state and local
governments. 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. Also, as a
result of the downturn and related
unemployment, declining income and
loss of property values, many state
and local governments have
experienced significant reductions
in revenues and consequently
difficulties meeting ongoing
expenses. As a result, certain of
these state and local governments
may have difficulty paying or
default in the payment of principal
or interest on their outstanding
debt, may experience ratings
downgrades of their debt. The
taxing power of any governmental
entity may be limited by provisions
of state constitutions or laws and
an entitys credit will depend on
many factors, including the
entitys tax base, the extent to
which the entity relies on federal
or state aid, and other factors
which are beyond the entitys
control. 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.
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In addition, municipalities might
seek protection under the
bankruptcy laws, thereby affecting
the repayment of their outstanding
debt. Issuers of municipal
securities might seek protection
under the bankruptcy laws. In the
event of bankruptcy of such an
issuer, holders of municipal
securities could experience delays
in collecting principal and
interest and such holders may not
be able to collect all principal
and interest to which they are
entitled. Certain provisions of
the U.S. Bankruptcy Code governing
such bankruptcies are unclear.
Further, the application of state
law to municipal securities issuers
could produce varying results among
the states or among municipal
securities issuers within a state.
These uncertainties could have a
significant impact on the prices of
the municipal securities in which
each Fund invests. The value of
municipal securities generally may
be affected by uncertainties in the
municipal markets as a result of
legislation or litigation,
including legislation or litigation
that changes the taxation of
municipal securities or the rights
of municipal securities holders in
the event of a bankruptcy. To
enforce its rights in the event of
a default in the payment of
interest or repayment of principal,
or both, each Fund may take
possession of and manage the assets
securing the issuers obligations
on such securities, which may
increase the Funds operating
expenses. Any income derived from
a Funds ownership or operation of
such assets may not be tax-exempt
and could jeopardize the Funds
status as a regulated investment
company under the Code.
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17
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Principal Risk
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Funds Subject to Risk
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The U.S. economy may be in the
process of deleveraging, with
individuals, companies and
municipalities reducing
expenditures and paying down
borrowings. In such event, the
number of municipal borrowers and
the amount of outstanding municipal
securities may contract,
potentially without corresponding
reductions in investor demand for
municipal securities. As a result,
each Fund may have fewer investment
alternatives, may invest in
securities that it previously would
have declined and may concentrate
its investments in a smaller number
of issuers.
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Insurance Risk
. Financial
insurance guarantees that interest
payments on a bond will be made on
time and that principal will be
repaid when the bond matures.
Insured municipal obligations would
generally be assigned a lower
rating if the rating were based
primarily on the credit quality of
the issuer without regard to the
insurance feature. If the
claims-paying ability of the
insurer were downgraded, the
ratings on the municipal
obligations it insures may also be
downgraded. Insurance does not
protect each Fund against losses
caused by declines in a bonds
value due to a change in market
conditions.
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All Funds
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Market Risk
. Market risk is the
possibility that the market values
of securities owned by each Fund
will decline. The net asset value
of a Fund will change with changes
in the value of its portfolio
securities, and the value of the
Funds investments can be expected
to fluctuate over time. The
financial markets in general are
subject to volatility and may at
times experience extreme volatility
and uncertainty, which may affect
all investment securities,
including debt securities and
derivative instruments. Volatility
may be greater during periods of
general economic uncertainty.
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All Funds
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Interest Rate Risk
. Because each
Fund invests primarily in fixed
income municipal securities, the
net asset value of a Fund can be
expected to change as general
levels of interest rates fluctuate.
When interest rates decline, the
value of a portfolio invested in
fixed income securities generally
can be expected to rise.
Conversely, when interest rates
rise, the value of a portfolio
invested in fixed income securities
generally can be expected to
decline. The prices of longer term
municipal securities generally are
more volatile with respect to
changes in interest rates than the
prices of shorter term municipal
securities. These risks may be
greater in the current market
environment because certain
interest rates are near
historically low levels.
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All Funds
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Credit Risk
. Credit risk refers to
an issuers ability to make timely
payments of interest and principal
when due. Municipal securities,
like other debt obligations, are
subject to the credit risk of
nonpayment. The ability of issuers
of municipal securities to make
timely payments of interest and
principal may be adversely affected
by general economic downturns and
as relative governmental cost
burdens are allocated and
reallocated among federal, state
and local governmental units.
Private activity bonds used to
finance projects, such as
industrial development and
pollution control, may also be
negatively impacted by the general
credit of the user of the project.
Nonpayment would result in a
reduction of income to a Fund, and
a potential decrease in the net
asset value of the Fund. The
Adviser continuously monitors the
issuers of securities held in each
Fund.
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All Funds
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Each Fund will rely on the
Advisers judgment, analysis and
experience in evaluating the
creditworthiness of an issuer. In
its analysis, the Adviser may
consider the credit ratings of
NRSROs in evaluating securities,
although the Adviser does not rely
primarily on these ratings. Credit
ratings of NRSROs evaluate only the
safety of principal and interest
payments, not the market risk. In
addition, ratings are general and
not absolute standards of quality,
and the creditworthiness of an
issuer may decline significantly
before an NRSRO lowers the issuers
rating. A rating downgrade does
not require a Fund to dispose of a
security.
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Medium-grade obligations (for
example, bonds rated BBB by S&P)
possess speculative characteristics
so that changes in economic
conditions or other circumstances
are more likely to lead to a
weakened capacity of the issuer to
make principal and interest
payments than in the case of
higher-rated securities. Securities
rated below investment grade are
considered speculative by NRSROs
with respect to the issuers
continuing ability to pay interest
and principal.
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18
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Principal Risk
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Funds Subject to Risk
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Income Risk
. The income received
from each Fund is based primarily
on prevailing interest rates, which
can vary widely over the short and
long term. If interest rates
decrease, income from a Fund may
decrease as well.
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All Funds
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Call Risk
. If interest rates fall,
it is possible that issuers of
securities with high interest rates
will prepay or call their
securities before their maturity
dates. In this event, the proceeds
from the called securities would
likely be reinvested by each Fund
in securities bearing the new,
lower interest rates, resulting in
a possible decline in a Funds
income and distributions to
shareholders.
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All Funds
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Market Segment Risk
. Each Fund
generally considers investments in
municipal securities issued by
governments or political
subdivisions not to be subject to
industry concentration policies
(because such issuers are not in
any industry). Each Fund may,
however, invest in municipal
securities issued by entities
having similar characteristics. For
example, the issuers may be located
in the same geographic area or may
pay their interest obligations from
revenue of similar projects, such
as hospitals, airports, utility
systems and housing finance
agencies. This may make a Funds
investments more susceptible to
similar economic, political or
regulatory occurrences, which could
increase the volatility of the
Funds net asset value. Each Fund
may invest more than 25% of its
total assets in a segment of the
municipal securities market with
similar characteristics if the
Adviser determines that the yields
available from obligations in a
particular segment justify the
additional risks of a larger
investment in that segment. Each
Fund may not, however, invest more
than 25% of its total assets in
municipal securities, such as many
private activity bonds or
industrial development revenue
bonds, issued for non-governmental
entities that are in the same
industry.
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All Funds
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Tax Risk
. To qualify for the
favorable U.S. federal income tax
treatment generally accorded to
regulated investment companies,
among other things, each Fund must
derive in each taxable year at
least 90% of its gross income from
certain prescribed sources. If for
any taxable year a Fund does not
qualify as a regulated investment
company, all of its taxable income
(including its net capital gain)
would be subject to federal income
tax at regular corporate rates
without any deduction for
distributions to shareholders, and
all distributions from the Fund
(including underlying distributions
attributable to tax-exempt interest
income) would be taxable to
shareholders as ordinary dividends
to the extent of the Funds current
and accumulated earnings and
profits.
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All Funds
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The value of each Funds
investments and its net asset value
may be adversely affected by
changes in tax rates and policies.
Because interest income from
municipal securities is normally
not subject to regular federal
income taxation, the attractiveness
of municipal securities in relation
to other investment alternatives is
affected by changes in federal
income tax rates or changes in the
tax-exempt status of interest
income from municipal securities.
Any proposed or actual changes in
such rates or exempt status,
therefore, can significantly affect
the demand for and supply,
liquidity and marketability of
municipal securities. This could,
in turn, affect a Funds net asset
value and ability to acquire and
dispose of municipal securities at
desirable yield and price levels.
Additionally, each Fund may not be
a suitable investment for
individual retirement accounts, for
other tax-exempt or tax-deferred
accounts or for investors who are
not sensitive to the federal income
tax consequences of their
investments.
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Each Fund may invest all or a
substantial portion of its total
assets in municipal securities
subject to the federal alternative
minimum tax. Accordingly, an
investment in a Fund could cause
shareholders to be subject to (or
result in an increased liability
under) the federal alternative
minimum tax. As a result, each
Fund may not be a suitable
investment for investors who are
already subject to the federal
alternative minimum tax or who
could become subject to the federal
alternative minimum tax as a result
of an investment in a Fund.
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Subsequent to a Funds acquisition
of a municipal security, the
security may be determined to pay,
or to have paid, taxable income. As
a result, the treatment of
dividends previously paid or to be
paid by a Fund as exempt-interest
dividends could be adversely
affected, subjecting the Funds
shareholders to increased federal
income tax liabilities.
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19
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Principal Risk
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Funds Subject to Risk
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For federal income tax purposes,
distributions of ordinary taxable
income (including any net
short-term capital gain) will be
taxable to shareholders as ordinary
income (and not eligible for
favorable taxation as qualified
dividend income), and capital gain
dividends will be taxed at
long-term capital gain rates. In
certain circumstances, each Fund
will make payments to holders of
VMTP Shares, if applicable, to
offset the tax effects of a taxable
distribution.
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Generally, to the extent each
Funds distributions are derived
from interest on municipal
securities of a particular state
(and, in some cases qualifying
obligations of U.S. territories and
possessions), its distributions are
exempt from the personal income tax
of that state. In some cases, each
Funds shares may (to the extent
applicable) also be exempt from
personal property taxes of such
state. However, some states
require that a Fund meet certain
thresholds with respect to the
portion of its portfolio consisting
of municipal securities of such
state in order for such exemption
to apply.
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Risks of Using Derivative
Instruments
. A derivative
instrument often has risks similar
to its underlying instrument and
may have additional risks,
including imperfect correlation
between the value of the derivative
and the underlying instrument or
instrument being hedged, risks of
default by the other party to
certain transactions, magnification
of losses incurred due to changes
in the market value of the
securities, instruments, indices or
interest rates to which they
relate, and risks that the
derivatives may not be liquid. The
use of derivatives involves risks
that are different from, and
potentially greater than, the risks
associated with other portfolio
investments. Derivatives may
involve the use of highly
specialized instruments that
require investment techniques and
risk analyses different from those
associated with other portfolio
investments. Certain derivative
transactions may give rise to a
form of leverage. Leverage
associated with derivative
transactions may cause a Fund to
liquidate portfolio positions when
it may not be advantageous to do so
to satisfy its obligations or to
meet earmarking or segregation
requirements, pursuant to
applicable SEC rules and
regulations, or may cause the Fund
to be more volatile than if the
Fund had not been leveraged. Each
Fund could suffer losses related to
its derivative positions as a
result of unanticipated market
movements, which losses may
potentially be unlimited. Although
the Adviser may seek to use
derivatives to further a Funds
investment objective, the Fund is
not required to do so and there is
no assurance that the use of
derivatives will achieve this
result.
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All Funds (except that Swaps Risk
does not apply to IQC)
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Counterparty Risk
. Each Fund will
be subject to credit risk with
respect to the counterparties to
the derivative transactions entered
into by the Fund. If a counterparty
becomes bankrupt or otherwise fails
to perform its obligations under a
derivative contract due to
financial difficulties, a Fund may
experience significant delays in
obtaining any recovery under the
derivative contract in bankruptcy
or other reorganization proceeding.
A Fund may obtain only a limited
recovery or may obtain no recovery
in such circumstances.
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Futures Risk
. A decision as to
whether, when and how to use
futures involves the exercise of
skill and judgment and even a
well-conceived futures transaction
may be unsuccessful because of
market behavior or unexpected
events. In addition to the
derivatives risks discussed above,
the prices of futures can be highly
volatile, using futures can lower
total return, and the potential
loss from futures can exceed a
Funds initial investment in such
contracts.
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Swaps Risk
. Swap agreements are
not entered into or traded on
exchanges and there is no central
clearing or guaranty function for
swaps. Therefore, swaps are subject
to credit risk or the risk of
default or non-performance by the
counterparty. Swaps could result in
losses if interest rate or credit
quality changes are not correctly
anticipated by a Fund or if the
reference index, security or
investments do not perform as
expected.
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Tax Risk
. The use of derivatives
may generate taxable income. In
addition, each Funds use of
derivatives may be limited by the
requirements for taxation as a
regulated investment company or a
Funds intention to pay dividends
that are exempt from federal and
California income taxes. The tax
treatment of derivatives may be
adversely affected by changes in
legislation, regulations or other
legal authority, subjecting a
Funds shareholders to increased
federal income tax liabilities.
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20
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Principal Risk
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Funds Subject to Risk
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Inverse Floating Rate Obligations
Risk
. Like most other fixed-income
securities, the value of inverse
floating rate obligations will
decrease as interest rates
increase. They are more volatile,
however, than most other
fixed-income securities because the
coupon rate on an inverse floating
rate obligation typically changes
at a multiple of the change in the
relevant index rate. Thus, any rise
in the index rate (as a consequence
of an increase in interest rates)
causes a correspondingly greater
drop in the coupon rate of an
inverse floating rate obligation
while a drop in the index rate
causes a correspondingly greater
increase in the coupon of an
inverse floating rate obligation.
Some inverse floating rate
obligations may also increase or
decrease substantially because of
changes in the rate of prepayments.
Inverse floating rate obligations
tend to underperform the market for
fixed rate bonds in a rising
interest rate environment, but tend
to outperform the market for fixed
rate bonds when interest rates
decline or remain relatively
stable. Inverse floating rate
obligations have varying degrees of
liquidity.
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All Funds
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Each Fund generally invests in
inverse floating rate obligations
that include embedded leverage,
thus exposing the Fund to greater
risks and increased costs. The
market value of a leveraged
inverse floating rate obligation
generally will fluctuate in
response to changes in market rates
of interest to a greater extent
than the value of an unleveraged
investment. The extent of increases
and decreases in the value of
inverse floating rate obligations
generally will be larger than
changes in an equal principal
amount of a fixed rate security
having similar credit quality,
redemption provisions and maturity,
which may cause the Funds net
asset value to be more volatile
than if it had not invested in
inverse floating rate obligations.
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In certain instances, the
short-term floating rate interests
created by a special purpose trust
may not be able to be sold to third
parties or, in the case of holders
tendering (or putting) such
interests for repayment of
principal, may not be able to be
remarketed to third parties. In
such cases, the special purpose
trust holding the long-term fixed
rate bonds may be collapsed. In the
case of inverse floating rate
obligations created by ae Fund, the
Fund would then be required to
repay the principal amount of the
tendered securities. During times
of market volatility, illiquidity
or uncertainty, the Fund could be
required to sell other portfolio
holdings at a disadvantageous time
to raise cash to meet that
obligation.
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The use of short-term floating rate
obligations may require a Fund to
segregate or earmark cash or liquid
assets to cover its obligations.
Securities so segregated or
earmarked will be unavailable for
sale by a Fund (unless replaced by
other securities qualifying for
segregation requirements), which
may limit the Funds flexibility
and may require that the Fund sell
other portfolio investments at a
time when it may be disadvantageous
to sell such assets.
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Risks of Investing in Lower-Grade
Securities
. Securities that are in
the lower-grade categories
generally offer higher yields than
are offered by higher-grade
securities of similar maturities,
but they also generally involve
greater risks, such as greater
credit risk, market risk,
volatility and liquidity risk. In
addition, the amount of available
information about the financial
condition of certain lower-grade
issuers may be less extensive than
other issuers, making each Fund
more dependent on the Advisers
credit analysis than a fund
investing only in higher-grade
securities. To minimize the risks
involved in investing in
lower-grade securities, each Fund
does not purchase securities that
are in default or rated in
categories lower than B- by S&P or
B3 by Moodys or unrated securities
of comparable quality.
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All Funds
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Secondary market prices of
lower-grade securities generally
are less sensitive than
higher-grade securities to changes
in interest rates and are more
sensitive to general adverse
economic changes or specific
developments with respect to the
particular issuers. A significant
increase in interest rates or a
general economic downturn may
significantly affect the ability of
municipal issuers of lower-grade
securities to pay interest and to
repay principal, or to obtain
additional financing, any of which
could severely disrupt the market
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Principal Risk
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Funds Subject to Risk
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for lower-grade municipal
securities and adversely affect the
market value of such securities.
Such events also could lead to a
higher incidence of default by
issuers of lower-grade securities.
In addition, changes in credit
risks, interest rates, the credit
markets or periods of general
economic uncertainty can be
expected to result in increased
volatility in the price of the
lower-grade securities and the net
asset value of a Fund. Adverse
publicity and investor perceptions,
whether or not based on rational
analysis, may affect the value,
volatility and liquidity of
lower-grade securities.
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In the event that an issuer of
securities held by a Fund
experiences difficulties in the
timely payment of principal and
interest and such issuer seeks to
restructure the terms of its
borrowings, the Fund may incur
additional expenses and may
determine to invest additional
assets with respect to such issuer
or the project or projects to which
the Funds securities relate.
Further, each Fund may incur
additional expenses to the extent
that it is required to seek
recovery upon a default in the
payment of interest or the
repayment of principal on its
portfolio holdings and the Fund may
be unable to obtain full recovery
on such amounts.
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Investments in debt obligations
that are at risk of or in default
present special tax issues for each
Fund. Federal income tax rules are
not entirely clear about issues
such as when a Fund may cease to
accrue interest, original issue
discount or market discount, when
and to what extent deductions may
be taken for bad debts or worthless
securities, how payments received
on obligations in default should be
allocated between principal and
interest and whether certain
exchanges of debt obligations in a
workout context are taxable. These
and other issues will be addressed
by a Fund, in the event it invests
in or holds such securities, in
order to seek to ensure that it
distributes sufficient income to
preserve its status as a regulated
investment company.
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Liquidity Risk
. Liquidity relates
to the ability of each Fund to sell
a security in a timely manner at a
price which reflects the value of
that security. The amount of
available information about the
financial condition of municipal
securities issuers is generally
less extensive than that for
corporate issuers with publicly
traded securities, and the market
for municipal securities is
generally considered to be less
liquid than the market for
corporate debt obligations. Certain
municipal securities in which a
Fund may invest, such as special
obligation bonds, lease
obligations, participation
certificates and variable rate
instruments, may be particularly
less liquid. To the extent a Fund
owns or may acquire illiquid or
restricted securities, these
securities may involve special
registration requirements,
liabilities and costs, and
liquidity and valuation
difficulties.
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All Funds
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The effects of adverse publicity
and investor perceptions may be
more pronounced for securities for
which no established retail market
exists as compared with the effects
on securities for which such a
market does exist. An economic
downturn or an increase in interest
rates could severely disrupt the
market for such securities and
adversely affect the value of
outstanding securities or the
ability of the issuers to repay
principal and interest. Further, a
Fund may have more difficulty
selling such securities in a timely
manner and at their stated value
than would be the case for
securities for which an established
retail market does exist.
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The markets for lower-grade
securities may be less liquid than
the markets for higher-grade
securities. To the extent that
there is no established retail
market for some of the lower-grade
securities in which a Fund may
invest, trading in such securities
may be relatively inactive. Prices
of lower-grade securities may
decline rapidly in the event a
significant number of holders
decide to sell. Changes in
expectations regarding an
individual issuer of lower-grade
securities generally could reduce
market liquidity for such
securities and make their sale by a
Fund at their current valuation
more difficult.
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From time to time, each Funds
investments may include securities
as to which the Fund, by itself or
together with other funds or
accounts managed by the Adviser,
holds a major portion or all of an
issue of municipal securities.
Because there may be relatively few
potential purchasers for such
investments and, in some cases,
there may be contractual
restrictions on resales, the Fund
may find it more difficult to sell
such securities at a time when the
Adviser believes it is advisable to
do so.
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Principal Risk
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Funds Subject to Risk
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Preferred Shares Risk
. A Funds
use of leverage through preferred
shares may result in higher
volatility of the net asset value
of the Common Shares, and
fluctuations in the dividend rates
on the preferred shares (which are
expected to reflect yields on
short-term municipal securities)
may affect the yield to the Common
Shareholders. So long as a Fund is
able to realize a higher net return
on its investment portfolio than
the then current dividend rate of
the preferred shares, the effect of
the leverage provided by the
preferred shares will be to cause
the Common Shareholders to realize
a higher current rate of return
than if the Fund were not so
leveraged. On the other hand, to
the extent that the then current
dividend rate on the preferred
shares approaches the net return on
a Funds investment portfolio, the
benefit of leverage to the Common
Shareholders will be reduced, and
if the then current dividend rate
on the preferred shares were to
exceed the net return on the Funds
portfolio, the Funds leveraged
capital structure would result in a
lower rate of return to the Common
Shareholders than if the Fund were
not so structured.
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Acquiring Fund, IIC and IQC
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Similarly, because any decline in
the net asset value of a Funds
investments will be borne entirely
by the Common Shareholders, the
effect of leverage in a declining
market would result in a greater
decrease in net asset value to the
Common Shareholders than if the
Fund were not so leveraged. Any
such decrease would likely be
reflected in a decline in the
market price for Common Shares. If
a Funds current investment income
were not sufficient to meet
dividend requirements on the
preferred shares, the Fund might
have to liquidate certain of its
investments in order to meet
required dividend payments, thereby
reducing the net asset value
attributable to the Funds Common
Shares.
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The amount of preferred shares
outstanding from time to time may
vary, depending on the Advisers
analysis of conditions in the
municipal securities market and
interest rate movements. Management
of the amount of outstanding
preferred shares places greater
reliance on the ability of the
Adviser to predict trends in
interest rates than if a Fund did
not use leverage. In the event the
Adviser later determines that all
or a portion of such preferred
shares should be reissued so as to
increase the amount of leverage, no
assurance can be given that a Fund
will subsequently be able to
reissue preferred shares on terms
and/or with dividend rates that are
beneficial to the Common
Shareholders. Further, redemption
and reissuance of the preferred
shares, and any related trading of
a Funds portfolio securities,
results in increased transaction
costs to the Fund and its Common
Shareholders. Because the Common
Shareholders bear these expenses,
changes to the Funds outstanding
leverage and any losses resulting
from related portfolio trading will
have a proportionately larger
impact on the Common Shares net
asset value and market price.
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In addition, a Fund is not
permitted to declare any cash
dividend or other distribution on
its Common Shares unless, at the
time of such declaration, the Fund
has an asset coverage of at least
200%, as required by the 1940 Act
(determined after deducting the
amount of such dividend or
distribution). In addition, under
the terms of each Funds
outstanding VMTP Shares, the Fund
is required to maintain minimum
asset coverage of 225%. This
prohibition on the payment of
dividends or other distributions
might impair the ability of a Fund
to maintain its qualification as a
regulated investment company for
federal income tax purposes. Each
Fund intends, however, to the
extent possible, to purchase or
redeem VMTP Shares from time to
time to maintain an asset coverage
of the VMTP Shares of at least
225%.
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If a determination were made by the
IRS to treat the Funds preferred
shares as debt rather than equity
for U.S. federal income tax
purposes, the Common Shareholders
might be subject to increased
federal income tax liabilities.
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Unrated Securities Risk.
Many
lower-grade securities are not
listed for trading on any national
securities exchange, and many
issuers of lower-grade securities
choose not to have a rating
assigned to their obligations by
any NRSRO. As a result, each
Funds portfolio may consist of a
higher portion of unlisted or
unrated securities as compared with
an investment company that invests
solely in higher-grade, listed
securities. Unrated securities are
usually not as attractive to as
many buyers as are rated
securities, a factor which may
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All Funds
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Principal Risk
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Funds Subject to Risk
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make
unrated securities less marketable.
These factors may limit the
ability of a Fund to sell such
securities at their fair value.
Each Fund may be more reliant on
the Advisers judgment and analysis
in evaluating the creditworthiness
of an issuer of unrated securities.
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When-Issued and Delayed Delivery
Risks.
When-issued and delayed
delivery transactions are subject
to market risk as the value or
yield of a security at delivery may
be more or less than the purchase
price or the yield generally
available on securities when
delivery occurs. In addition, each
Fund is subject to counterparty
risk because it relies on the buyer
or seller, as the case may be, to
consummate the transaction, and
failure by the other party to
complete the transaction may result
in a Fund missing the opportunity
of obtaining a price or yield
considered to be advantageous.
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All Funds
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Zero Coupon / PIK Bond Risk
.
Prices on non-cash-paying
instruments may be more sensitive
to changes in the issuers
financial condition, fluctuations
in interest rates and market
demand/supply imbalances than
cash-paying securities with similar
credit ratings, and thus may be
more speculative than are
securities that pay interest
periodically in cash. These
securities are also subject to the
risk of default. These securities
may subject the Fund to greater
market risk than a fund that does
not own these types of securities.
Special tax considerations are
associated with investing in
non-cash-paying instruments, such
as zero coupon or PIK securities.
The Adviser will weigh these
concerns against the expected total
returns from such instruments.
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All Funds
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Special Risk Considerations
Regarding California Municipal
Securities
. Each Fund invests
substantially all of its assets in
a portfolio of California municipal
securities. Because the Fund
invests substantially all of its
assets in a portfolio of California
municipal securities, the Fund is
more susceptible to political,
economic, regulatory or other
factors affecting issuers of
California municipal securities
than a fund which does not limit
its investments to such issuers.
These risks include possible
legislative, state constitutional
or regulatory amendments that may
affect the ability of state and
local governments or regional
governmental authorities to raise
money to pay principal and interest
on their municipal securities.
Economic, fiscal and budgetary
conditions throughout the state may
also influence the Funds
performance.
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All Funds
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The risks associated with an investment in VMTP Shares are substantially the same for IIC, IQC
and the Acquiring Fund.
Portfolio Managers
Thomas Byron, Robert Stryker, Julius Williams and Robert Wimmel are the portfolio managers for
the Funds.
Mr. Byron, Portfolio Manager, has been associated with Invesco and/or its affiliates since
2010. Mr. Byron was associated with the Funds previous investment adviser or its investment
advisory affiliates in an investment management capacity from 1981 to 2010 and began managing the
Funds in 2009. Mr. Byron earned a B.S. in finance from Marquette University and an M.B.A. in
finance from DePaul University.
Mr. Stryker, Portfolio Manager, has been associated with Invesco and/or its affiliates since
2010. Mr. Stryker was associated with the Funds previous investment adviser or its investment
advisory affiliates in an investment management capacity from 1994 to 2010 and began managing the
Funds in 2009. Mr. Stryker earned a B.S. in finance from the University of Illinois, Chicago.
Mr. Williams, Portfolio Manager, has been associated with Invesco and/or its affiliates since
2010. Mr. Williams was associated with the Funds previous investment adviser or its investment
advisory affiliates in an investment management capacity from 2000 to 2010 and began managing the
Funds in 2011. Mr. Williams earned a B.A. in economics and sociology, and a Master of Education
degree in educational psychology from the University of Virginia.
Mr. Wimmel, Portfolio Manager, has been associated with Invesco and/or its affiliates since
2010. Mr. Wimmel was associated with the Funds previous investment adviser or its investment
advisory affiliates in an
24
investment management capacity from 1996 to 2010 and began managing the
Acquiring Fund in 2001 and the Target Funds in 2009. Mr. Wimmel earned a B.A. in anthropology from
the University of Cincinnati and an M.A. in economics from the University of Illinois, Chicago.
The SAI provides additional information about the portfolio managers compensation, other
accounts managed by the portfolio managers, and the portfolio managers ownership of securities in
each Fund.
Trading of VMTP Shares
VMTP Shares are a new issue of securities and there is currently no established trading market
for such shares. No Fund intends to apply for a listing of the VMTP Shares on a securities
exchange or an automated dealer quotation system or to seek to facilitate transfers by retaining a
remarketing or other similar agent with respect to the VMTP Shares. Accordingly, there can be no
assurance as to the development or liquidity of any market for the VMTP Shares. The VMTP Shares
are not registered under the Securities Act or any other applicable securities law. Accordingly,
the VMTP Shares are subject to restrictions on transferability and resale. The VMTP Shares are
offered for sale only pursuant to Rule 144A under the Securities Act, and may not be offered, sold
or otherwise transferred except in compliance with the registration requirements of the Securities
Act or any other applicable securities law, pursuant to an exemption therefrom or in a transaction
not subject thereto and in each case in compliance with contractual conditions applicable to
transfers of VMTP Shares.
Capital Structures of the Funds
Each Fund is currently organized as a Massachusetts business trust. The Acquiring Fund was
organized on December 21, 1992, IIC was organized on October 30, 1992, IQC was organized on March
3, 1993 and ICS was organized on October 14, 1993. As discussed under Proposal 1, before the
closing of the Mergers, the Funds will be reorganized as Delaware statutory trusts, which will all
have identical governing documents and capital structures, except that ICS has no outstanding VMTP
Shares. (Proposal 1 discusses the material differences between each Funds current Massachusetts
business trust structure and its proposed Delaware statutory trust structure.) The Funds
governing documents will therefore be substantially identical immediately prior to the Mergers with
the exception of any provisions governing outstanding VMTP Shares, which will be substantially
identical among the Acquiring Fund, IIC and IQC but will not apply to ICS. Each such Delaware
statutory trust will have the same structure, except that ICS has no outstanding VMTP Shares while
the Acquiring Fund, IIC and IQC have outstanding VMTP Shares.
Description of Securities to be Issued
Before any Merger can be completed, each merging Fund must have completed a redomestication to
a Delaware statutory trust, as discussed in Proposal 1. Accordingly, the following discussion
reflects that each Fund would be a Delaware statutory trust as of the time of its Merger. A
discussion of the changes a Fund would undergo as part of a Redomestication is included under
Proposal 1.
VMTP Shares
. Each of IIC, IQC and the Acquiring Fund has outstanding a class of VMTP Shares.
The terms of the VMTP Shares of IIC, IQC and the Acquiring Fund are identical. As of the closing
of a Merger, the Acquiring Fund will be authorized by its Amended and Restated Agreement and
Declaration of Trust to issue an unlimited number of preferred shares. In a Merger, VMTP Shares of
IIC or IQC will be exchanged for VMTP Shares of the Acquiring Fund.
The Funds have entered into a Redemption and Paying Agent Agreement with Deutsche Bank Trust
Company Americas. The Redemption and Paying Agent serves as the Funds transfer agent, registrar,
dividend disbursing agent, paying agent and redemption price disbursing agent and calculation agent
in connection with the payment of dividends with respect to VMTP Shares, and carry out certain
other procedures provided in the Redemption and Paying Agent Agreement.
The currently outstanding VMTP Shares of IIC, IQC and the Acquiring Fund have a long-term
issue credit rating of Aa2 from Moodys and AAA from Fitch Ratings, a part of the Fitch Group,
which is a majority-owned subsidiary of Fimalac, S.A. (Fitch), and it is a condition of closing
of each Merger that the VMTP Shares of the Acquiring Fund be rated at least AA-/Aa3 by each rating
agency that is rating, at the request of the Acquiring Fund, such VMTP Shares. An explanation of
the significance of ratings may be obtained from the rating agencies.
25
Generally, rating agencies
base their ratings on such material and information, and such of their own investigations, studies
and assumptions, as they deem appropriate. The ratings of the VMTP Shares should be evaluated
independently from similar ratings of other securities. A rating of a security is not a
recommendation to buy, sell or hold securities and may be subject to review, revision, suspension,
reduction or withdrawal at any time by the assigning rating agency.
Dividends on the VMTP Shares are declared daily and generally paid monthly on the first (1st)
business day of each month. For each rate period, the dividend rate on VMTP Shares will, except as
otherwise provided in the Statement of Preferences, be equal to the rate per annum that results
from the sum of the (1) Securities Industry and Financial Markets Association (SIFMA) Municipal
Swap Index and (2) the ratings spread as determined pursuant to the rate determination process set
forth in the Statement of Preferences. VMTP Shares rank on a parity with each other, with shares
of any other Series of VMTP Shares and with shares of any other series of preferred shares as to
the payment of dividends by a Fund.
Each of IIC, IQC and the Acquiring Fund does not intend to apply for a listing of the VMTP
Shares on a securities exchange or an automated dealer quotation system or to seek to facilitate
transfers by retaining a remarketing or other similar agent with respect to the VMTP Shares.
Accordingly, there can be no assurance as to the development or liquidity of any market for the
VMTP Shares. The VMTP Shares are not registered under the Securities Act. Accordingly, the VMTP
Shares are subject to restrictions on transferability and resale.
Unless otherwise approved in writing by a Fund, VMTP Shareholders may sell, transfer or
otherwise dispose of VMTP Shares only in whole shares and only to (i) Persons that such Beneficial
Owner or Holder reasonably believes are QIBs that are either registered closed-end management
investment companies, the common shares of which are traded on a national securities exchange
(Closed-End Funds), banks, insurance companies, companies that are included in the S&P 500 Index
(and their direct or indirect wholly-owned subsidiaries) or registered open-end management
investment companies or (ii) tender option bond trusts (whether tax-exempt or taxable) in which all
investors are Persons that such Beneficial Owner or Holder reasonably believes are QIBs that are
Closed-End Funds, banks, insurance companies, companies that are included in the S&P 500 Index (and
their direct or indirect wholly-owned subsidiaries) or registered open-end management investment
companies (or, in the case of a tender option bond trust in which an affiliate of such Holder or
Beneficial Owner retains a residual interest, such affiliate of such Holder or Beneficial Owner,
but only to the extent expressly provided for in any applicable Purchase Agreement), in each case,
in accordance with Rule 144A of the U.S. Securities Act of 1933, as amended (the Securities Act),
or another available exemption from registration under the Securities Act, in a manner not
involving any public offering within the meaning of Section 4(2) of the Securities Act. Any
transfer in violation of the foregoing restrictions will be void
ab initio
and any transferee of
VMTP Shares transferred in violation of the foregoing restrictions shall be deemed to agree to hold
all payments it received on any such improperly transferred VMTP Shares in trust for the benefit of
the transferor of such VMTP Shares. The foregoing restrictions on transfer will not apply to any
VMTP Shares registered under the Securities Act pursuant to the registration rights agreement
entered into by a Fund or any subsequent transfer of such VMTP Shares thereafter.
Each of IIC, IQC and the Acquiring Fund is required to redeem, out of funds legally available
therefor under applicable law and otherwise in accordance with applicable law, all outstanding VMTP
Shares on June 1, 2015 or such later date to which it may be extended, if any, in accordance with
the provisions of the Statement of Preferences.
Subject to certain conditions, VMTP Shares may be redeemed at any time, at the option of a
Fund (as a whole or from time to time, in part), out of funds legally available therefor under
applicable law and otherwise in accordance with applicable law, at a redemption price equal to the
sum of (i) the liquidation preference, (ii) accumulated but unpaid dividends thereon (whether or
not earned or declared) to, but not including, the date fixed for redemption and (iii) the
redemption premium, if any, in respect of such VMTP Share.
VMTP Shares will rank on a parity with each other and with shares of any other series of
preferred shares as to the distribution of assets upon the dissolution, liquidation or winding up
of the affairs of a Fund, whether voluntary or involuntary. After the payment of the full
preferential amounts, VMTP Shareholders as such will have no right or claim to any of the remaining
assets of a Fund.
26
Except as otherwise provided in the Declaration of Trust or as otherwise required by law, (i)
each VMTP Shareholder is entitled to one vote for each VMTP Share held by such VMTP Shareholder on
each matter submitted to a vote of shareholders of a Fund, and (ii) the holders of outstanding
preferred shares, including each VMTP Share, and Common Shares will vote together as a single
class; provided, however, that the holders of outstanding preferred shares, including VMTP Shares,
voting as a class, to the exclusion of the holders of all other securities and classes of shares of
beneficial interests of the Fund, will be entitled to elect two trustees of the Fund at all times,
each preferred share, including each VMTP Share, entitled to one vote. Subject to the rights of
the holders of preferred shares during a Voting Period (as defined in the Statement of
Preferences), the holders of outstanding preferred shares, including VMTP Shares, and outstanding
Common Shares, voting together as a single class, will elect the balance of the trustees.
The VMTP Shares, including the Acquiring Fund VMTP Shares to be issued in the Mergers, are
issued in book-entry form, as global securities. The global securities will be deposited with, or
on behalf of, The Depository Trust Company (DTC) and registered in the name of Cede & Co., the
nominee of DTC. Beneficial interests in the global securities will be held only through DTC and
any of its participants.
The foregoing is a brief description of the terms of the VMTP Shares. This description does
not purport to be complete and is subject to and qualified in its entirety by reference to the more
detailed description of the VMTP Shares in the Statement of Preferences of each of IIC, IQC and the
Acquiring Fund, which is available upon request by any VMTP Shareholder, and the form of Statement
of Preferences of VMTP Shares of the Acquiring Fund (after giving effect to its Redomestication)
attached hereto as Exhibit O.
Common Shares.
Each Common Share represents an equal proportionate interest with each other
Common Share of the Fund, with each such share entitled to equal dividend, liquidation, redemption
and voting rights. The Acquiring Fund, IIC and IQC also have outstanding VMTP Shares that vote
separately from Common Shares in some circumstances. Each Funds Common Shares have no preemptive,
conversion or exchange rights, nor any right to cumulative voting.
As of the closing of a Merger, the Acquiring Fund will be authorized by its Amended and
Restated Agreement and Declaration of Trust to issue an unlimited number of Acquiring Fund Common
Shares, with no par value.
Dividends and Distributions from the Acquiring Fund, IIC and IQC
. The dividend and
distribution policies of IIC and IQC are identical to those of the Acquiring Fund. The Acquiring
Fund intends to make regular monthly distributions of all or a portion of its net investment income
after payment of dividends on the Acquiring Funds preferred shares outstanding to holders of the
Acquiring Funds Common Shares. The Acquiring Funds net investment income consists of all interest
income accrued on portfolio assets less all expenses of the Acquiring Fund. The Acquiring Fund is
required to allocate net capital gains and other taxable income, if any, received by the Fund among
its shareholders on a pro rata basis in the year for which such capital gains and other income is
realized. In certain circumstances, the Acquiring Fund will make additional payments to preferred
shareholders to offset the tax effects of such taxable distributions.
While there are any preferred shares of the Acquiring Fund outstanding, the Acquiring Fund may
not declare any cash dividend or other distribution on its Common Shares, unless at the time of
such declaration, (i) all accrued preferred shares dividends have been paid, (ii) to the extent
necessary, the Fund has redeemed all of the preferred shares subject to mandatory redemption under
the terms of the VMTP Shares, and (iii) the value of the Acquiring Funds total assets (determined
after deducting the amount of such dividend or other distribution), less all liabilities and
indebtedness of the Fund, is at least 200% of the liquidation preference of the outstanding
preferred shares (expected to equal the aggregate original purchase price of the outstanding
preferred shares plus any accrued and unpaid dividends thereon, whether or not earned or declared
on a cumulative basis), as required by the 1940 Act. This limitation on the Acquiring Funds
ability to make distributions on its Common Shares could in certain circumstances impair the
ability of the Acquiring Fund to maintain its qualification for taxation as a regulated investment
company under the Code. The Acquiring Fund intends, however, to the extent possible, to purchase or
redeem preferred shares from time to time to maintain compliance with such asset coverage
requirements and may pay special dividends to the holders of the preferred shares in certain
circumstances in connection with any such impairment of the Acquiring Funds status as a regulated
investment company under the Code.
27
The tax treatment and characterization of the Acquiring Funds distributions may vary
significantly from time to time because of the varied nature of its investments. The Acquiring Fund
will indicate the proportion of its capital gains distributions that constitute long-term and
short-term gains annually. The ultimate tax characterization of the Acquiring Funds distributions
made in a calendar or fiscal year cannot finally be determined until after the end of that fiscal
year. As a result, there is a possibility that the Acquiring Fund may make total distributions
during a calendar or fiscal year in an amount that exceeds the Acquiring Funds net investment
income and net capital gains for the relevant fiscal year and its previously undistributed earnings
and profits from prior years. In such situations, the amount by which the Acquiring Funds total
distributions exceed its net investment income and net capital gains generally will be treated as a
tax-free return of capital reducing the amount of a shareholders tax basis in such shareholders
shares, with any amounts exceeding such basis treated as gain from the sale of shares.
Various factors will affect the level of the Acquiring Funds net investment income, such as
the rate at which dividends are payable on outstanding VMTP Shares, the Acquiring Funds asset mix,
its level of retained earnings, the amount of leverage utilized by it and the effects thereof and
the movement of interest rates for municipal bonds. These factors, among others, may result in the
Acquiring Funds level of net investment income being different from the level of net investment
income for IIC and IQC if the Mergers were not completed. To permit the Acquiring Fund to maintain
more stable monthly distributions, it may from time to time distribute less than the entire amount
earned in a particular period. The income would be available to supplement future distributions. As
a result, the distributions paid by the Acquiring Fund for any particular month may be more or less
than the amount actually earned by the Fund during that month. Undistributed earnings will add to
the Acquiring Funds net asset value and, correspondingly, distributions from undistributed
earnings and from capital, if any, will deduct from the Funds net asset value. Although it does
not now intend to do so, the Board may change the Acquiring Funds dividend policy and the amount
or timing of the distributions based on a number of factors, including the amount of the Funds
undistributed net investment income and historical and projected investment income and the amount
of the expenses and dividend rates on the outstanding VMTP Shares.
Dividends and Distributions from ICS
. ICS declares and pays dividends of net investment
income, if any, monthly, and capital gains distributions, if any, at least annually. ICS may also
declare and pay capital gains distributions more than once per year as permitted by law. ICS
Common Shareholders who own certificated shares will not receive their Acquiring Fund Common Shares
or any dividend payments from the Acquiring Fund until their certificates are tendered. ICS Common
Shareholders will, shortly after the closing of their Funds Merger, receive instructions on how to
tender any outstanding share certificates.
Provisions for Delaying or Preventing Changes in Control.
Each Funds governing documents
contain provisions designed to prevent or delay changes in control of that Fund. As of the time of
the Mergers, each Funds governing documents will provide that such Funds Board of Trustees may
cause the Fund to merge or consolidate with or into other entities; cause the Fund to sell, convey
and transfer all or substantially all of the assets of the Fund; cause the Fund to convert to a
different type of entity; or cause the Fund to convert from a closed-end fund to an open-end fund,
each only so long as such action has previously received the approval of either (i) the Board,
followed by the affirmative vote of the holders of not less than 75% of the outstanding shares
entitled to vote; or (ii) the affirmative vote of at least two thirds (66 2/3%) of the Board and an
affirmative Majority Shareholder Vote (which generally means the vote of a majority of the
outstanding voting securities as defined in the 1940 Act of the Fund, with each class and series
of shares voting together as a single class, except to the extent otherwise required by the 1940
Act). Under each Funds governing documents that will be applicable as of the time of the Merger,
shareholders will have no right to call special meetings of shareholders or to remove Trustees. In
addition, each Funds Board is divided into three classes, each of which stands for election only
once in three years. As a result of this system, only those Trustees in one class may be changed
in any one year, and it would require two years or more to change a majority of the Trustees.
Portfolio Turnover
The Funds historical portfolio turnover rates are similar. Because the Funds have similar
investment policies, management does not expect to dispose of a material amount of portfolio
securities of any Fund in connection with the Mergers. No securities of the Target Funds need be
sold in order for the Acquiring Fund to comply with its investment restrictions or policies. The
Funds will continue to buy and sell securities in the normal course of their operations.
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Terms and Conditions of the Mergers
The terms and conditions under which a Merger may be consummated are set forth in the Merger
Agreement. Significant provisions of the Merger Agreement are summarized below; however, this
summary is qualified in its entirety by reference to the Merger Agreement, a form of which is
attached as Exhibit D.
In each Merger, a Target Fund will merge with and into the Acquiring Fund pursuant to the
Merger Agreement and in accordance with the Delaware Statutory Trust Act. As a result of each
Merger, all of the assets and liabilities of the merging Target Fund will become assets and
liabilities of the Acquiring Fund, and the Target Funds shareholders will become shareholders of
the Acquiring Fund.
Under the terms of the Merger Agreement, the Acquiring Fund will issue new Acquiring Fund
Common Shares in exchange for Target Fund Common Shares. The number of Acquiring Fund Common
Shares issued will be based on the relative NAVs and shares outstanding of the Acquiring Fund and
the applicable Target Fund as of the business day immediately preceding the Mergers closing date.
All Acquiring Fund Common Shares issued pursuant to the Merger Agreement will be fully paid and
non-assessable, and will be listed for trading on the Exchanges. The terms of the Acquiring Fund
Common Shares to be issued in each Merger will be identical to the terms of the Acquiring Fund
Common Shares already outstanding.
Under the terms of the Merger Agreement, the Acquiring Fund will also issue new Acquiring Fund
VMTP Shares in exchange for VMTP Shares of IIC and IQC. The number of additional Acquiring Fund
VMTP Shares issued for the Mergers with IIC and IQC will equal the number of outstanding VMTP
Shares of IIC and IQC, and such Acquiring Fund VMTP Shares will have liquidation preferences,
rights, and privileges substantially identical to those of the then outstanding VMTP Shares for the
merging Target Fund.
Prior to the closing of each Merger, each Target Fund will declare to its Common Shareholders
one or more dividends, and the Acquiring Fund may, but is not required to, declare to its Common
Shareholders a dividend, payable at or near the time of closing to their respective shareholders to
the extent necessary to avoid entity level tax or as otherwise deemed desirable. Such
distributions, if made, are anticipated to be made in the 2012 calendar year and, to the extent a
distribution is not an exempt-interest dividend (as defined in the Code), the distribution may be
taxable to shareholders in such year for federal income tax purposes. It is anticipated that Fund
distributions will be primarily dividends that are exempt from regular federal income tax, although
a portion of such dividends may be taxable to shareholders as ordinary income or capital gains. To
the extent the distribution is attributable to ordinary income or capital gains, such ordinary
income and capital gains will be allocated to Common Shareholders and VMTP Shareholders in
accordance with each classs proportionate share of the total dividends paid by the Fund during the
year. In certain circumstances, each of IIC, IQC and the Acquiring Fund will make additional
payments to VMTP Shareholders to offset the tax effects of such taxable distributions.
If shareholders approve the Mergers and if all of the closing conditions set forth in the
Merger Agreement are satisfied or waived, including the condition that each Fund complete its
Redomestication (Proposal 1), consummation of the Mergers (the Closing) is expected to occur in
the third quarter of 2012 on a date mutually agreed upon by the Funds (the Closing Date).
Each Fund will be required to make representations and warranties in the Merger Agreement that
are customary in matters such as the Mergers.
If shareholders of a Fund do not approve a Merger or if a Merger does not otherwise close, the
Board will consider what additional action to take, including allowing the Fund to continue
operating as it currently does. The Merger Agreement may be terminated and the Merger may be
abandoned at any time by mutual agreement of the parties. The Merger Agreement may be amended or
modified in a writing signed by the parties.
Additional Information About the Funds
As of the time of the Mergers, each Fund will be a newly organized Delaware statutory trust,
as discussed in Proposal 1. Each Fund is registered under the 1940 Act as a diversified,
closed-end management investment company. Diversified means that the Fund is limited in the
amount it can invest in a single issuer. A closed-end fund (unlike an open-end or mutual fund)
does not continuously sell and redeem its shares; in the case of the
29
Funds, Common Shares are
bought and sold on the Exchanges. A management investment company is managed by an investment
adviser the Adviser in the case of the Funds that buys and sells portfolio securities on behalf
of the investment company.
Federal Income Tax Matters Associated with Investment in the Funds
The following information is meant as a general summary of certain federal income tax matters
for U.S. shareholders. Investors should rely on their own tax advisor for advice about the
particular federal, state and local tax consequences to them of investing in the Funds (for
purposes of this section, the Fund).
The Fund has elected to be treated and intends to qualify each year (including the taxable
year in which the Merger occurs) as a regulated investment company (RIC) under Subchapter M of
the Code. In order to qualify as a RIC, the Fund must satisfy certain requirements regarding the
sources of its income, the diversification of its assets and the distribution of its income. As a
RIC, the Fund is not expected to be subject to federal income tax on the income and gains it
distributes to its shareholders. If, for any taxable year, the Fund does not qualify for taxation
as a RIC, it will be treated as a U.S. corporation subject to U.S. federal income tax, thereby
subjecting any income earned by the Fund to tax at the corporate level and to a further tax at the
shareholder level when such income is distributed. In lieu of losing its status as a RIC, the Fund
is permitted to pay a tax for certain failures to satisfy the asset diversification test or income
requirement, which, in general, are limited to those due to reasonable cause and not willful
neglect, for taxable years of the Fund with respect to which the extended due date of the return is
after December 22, 2010.
The Code imposes a 4% nondeductible excise tax on the Fund to the extent it does not
distribute by the end of any calendar year at least the sum of (i) 98% of its taxable ordinary
income for that year, and (ii) 98.2% of its capital gain net income (both long-term and short-term)
for the one-year period ending, as a general rule, on October 31 of that year. For this purpose,
however, any ordinary income or capital gain net income retained by the Fund that is subject to
corporate income tax will be considered to have been distributed by year-end. In addition, the
minimum amounts that must be distributed in any year to avoid the excise tax will be increased or
decreased to reflect any underdistribution or overdistribution, as the case may be, from the
previous year. The Fund anticipates that it will pay such dividends and will make such
distributions as are necessary in order to avoid or minimize the application of this excise tax.
The Fund primarily invests in municipal securities. Thus, substantially all of the Funds
dividends paid to you from net investment income should qualify as exempt-interest dividends. A
shareholder treats an exempt-interest dividend as interest on state and local bonds exempt from
regular federal income tax. Exempt-interest dividends from interest earned on municipal securities
of a state, or its political subdivisions, generally are exempt from that states personal income
tax. Most states, however, do not grant tax-free treatment to interest from municipal securities
of other states.
Federal income tax law imposes an alternative minimum tax with respect to corporations,
individuals, trusts and estates. Interest on certain municipal obligations, such as certain private
activity bonds, is included as an item of tax preference in determining the amount of a taxpayers
alternative minimum taxable income. To the extent that the Fund receives income from such municipal
obligations, a portion of the dividends paid by the Fund, although exempt from regular federal
income tax, will be taxable to shareholders to the extent that their tax liability is determined
under the federal alternative minimum tax. The Fund will annually provide a report indicating the
percentage of the Funds income attributable to municipal obligations subject to the federal
alternative minimum tax. Corporations are subject to special rules in calculating their federal
alternative minimum taxable income with respect to interest from such municipal obligations.
In addition to exempt-interest dividends, the Fund may also distribute to its shareholders
amounts that are treated as long-term capital gain or ordinary income (which may include short-term
capital gains). These distributions may be subject to federal, state and local taxation, depending
on a shareholders situation. If so, they are taxable whether or not such distributions are
reinvested. Net capital gain distributions (the excess of net long-term capital gain over net
short-term capital loss) are generally taxable at rates applicable to long-term capital gains
regardless of how long a shareholder has held its shares. Long-term capital gains are currently
taxable to noncorporate shareholders at a maximum federal income tax rate of 15%. Absent further
legislation, the maximum 15% rate on long-term capital gains will cease to apply to taxable years
beginning after December 31, 2012. The
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Fund does not expect that any part of its distributions to
shareholders from its investments will qualify for the dividends-received deduction available to
corporate shareholders or as qualified dividend income available to noncorporate shareholders.
Distributions by the Fund in excess of the Funds current and accumulated earnings and profits
will be treated as a return of capital to the extent of the shareholders tax basis in its shares
and will reduce such basis. Any such amount in excess of that basis will be treated as gain from
the sale of shares, as discussed below.
As a RIC, the Fund will not be subject to federal income tax in any taxable year on the income
and gains it distributes to shareholders provided that it meets certain distribution requirements.
The Fund may retain for investment some (or all) of its net capital gain. If the Fund retains any
net capital gain or investment company taxable income, it will be subject to tax at regular
corporate rates on the amount retained. If the Fund retains any net capital gain, it may designate
the retained amount as undistributed capital gains in a notice to its shareholders who, if subject
to federal income tax on long-term capital gains, (i) will be required to include in income for
federal income tax purposes, as long-term capital gain, their share of such undistributed amount;
(ii) will be entitled to credit their proportionate shares of the federal income tax paid by the
Fund on such undistributed amount against their federal income tax liabilities, if any; and (iii)
may claim refunds to the extent the credit exceeds such liabilities. For federal income tax
purposes, the basis of shares owned by a shareholder of the Fund will be increased by an amount
equal to the difference between the amount of undistributed capital gains included in the
shareholders gross income and the tax deemed paid by the shareholder under clause (ii) of the
preceding sentence.
The IRS currently requires that a RIC that has two or more classes of stock allocate to each
such class proportionate amounts of each type of its income (such as exempt interest, ordinary
income and capital gains). Accordingly, the Fund designates dividends made with respect to the
Common Shares and, if applicable, the VMTP Shares as consisting of particular types of income
(e.g., exempt interest, net capital gain and ordinary income) in accordance with each classs
proportionate share of the total dividends paid by the Fund during the year. A classs
proportionate share of a particular type of income is determined according to the percentage of
total dividends paid by the regulated investment company to such class.
Dividends declared by the Fund to shareholders of record in October, November or December and
paid during the following January may be treated as having been received by shareholders in the
year the distributions were declared.
At the time of an investors purchase of Fund shares, a portion of the purchase price may be
attributable to realized or unrealized appreciation in the Funds portfolio or to undistributed
ordinary income or capital gains of the Fund. Consequently, subsequent distributions by the Fund
with respect to these shares from such appreciation, income or gains may be taxable to such
investor even if the net asset value of the investors shares is, as a result of the
distributions, reduced below the investors cost for such shares and the distributions economically
represent a return of a portion of the investment.
Each shareholder will receive an annual statement summarizing the shareholders dividend and
capital gains distributions.
The redemption, sale or exchange of shares normally will result in capital gain or loss to
shareholders who hold their shares as capital assets. Generally, a shareholders gain or loss will
be long-term capital gain or loss if the shares have been held for more than one year. The gain or
loss on shares held for one year or less will generally be treated as short-term capital gain or
loss. Present law taxes both long-term and short-term capital gains of corporations at the same
rates applicable to ordinary income. Long-term capital gains are currently taxable to noncorporate
shareholders at a maximum federal income tax rate of 15%. As noted above, absent further
legislation, the maximum 15% rate on long-term capital gains will cease to apply to taxable years
beginning after December 31, 2012. Any loss on the sale of shares that have been held for six
months or less will be disallowed to the extent of any distribution of exempt-interest dividends
received with respect to such shares and any remaining loss will be treated as a long-term capital
loss to the extent of any long-term capital gain distributed to you by the Fund on those shares.
Any loss realized on a sale or exchange of shares of a Fund will be disallowed to the extent those
shares of the Fund are replaced by other substantially identical shares of the Fund or other
substantially identical stock or securities (including through reinvestment of dividends) 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 Fund will be adjusted to
reflect the disallowed loss.
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Under Treasury regulations, if a shareholder recognizes a loss with respect to Fund shares of
$2 million or more for an individual shareholder, or $10 million or more for a corporate
shareholder, in any single taxable year (or of certain greater amounts over a combination of
years), generally the shareholder must file with the IRS a disclosure statement on Form 8886.
Shareholders that are exempt from U.S. federal income tax, such as retirement plans that are
qualified under Section 401 of the Code, generally are not subject to U.S. federal income tax on
otherwise-taxable Fund dividends or distributions, or on sales or exchanges of Fund shares unless
the Fund shares are debt-financed property within the meaning of the Code.
Any interest on indebtedness incurred or continued to purchase or carry the Funds shares to
which exempt-interest dividends are allocated is not deductible. Under certain applicable rules,
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 the shares. In addition,
if you receive Social Security or certain railroad retirement benefits, you may be subject to U.S.
federal income tax on a portion of such benefits as a result of receiving investment income,
including exempt-interest dividends and other distributions paid by the Fund.
Investments in debt obligations that are at risk of or in default present special tax issues
for the Fund. Federal income tax rules are not entirely clear about issues such as when the Fund
may cease to accrue interest, original issue discount or market discount, when and to what extent
deductions may be taken for bad debts or worthless securities, how payments received on obligations
in default should be allocated between principal and interest and whether certain exchanges of debt
obligations in a workout context are taxable. These and other issues will be addressed by the Fund,
in the event it invests in or holds such securities, in order to seek to ensure that it distributes
sufficient income to preserve its status as a RIC.
If the Fund invests in certain pay-in-kind securities, zero coupon securities, deferred
interest securities or, in general, any other securities with original issue discount (or with
market discount if the Fund elects to include market discount in income currently), the Fund must
accrue income on such investments for each taxable year, which generally will be prior to the
receipt of the corresponding cash payments. However, the Fund must distribute to shareholders, at
least annually, all or substantially all of its investment company taxable income (determined
without regard to the deduction for dividends paid), including such accrued income, to qualify as a
RIC and to avoid federal income and excise taxes. Therefore, the Fund may have to dispose of its
portfolio securities under disadvantageous circumstances to generate cash, or may have to leverage
itself by borrowing the cash, to satisfy these distribution requirements.
The Fund may hold or acquire municipal obligations that are market discount bonds. A market
discount bond is a security acquired in the secondary market at a price below its redemption value
(or its adjusted issue price if it is also an original issue discount bond). If the Fund invests in
a market discount bond, it will be required to treat any gain recognized on the disposition of such
market discount bond as ordinary taxable income to the extent of the accrued market discount.
By law, if you do not provide the Fund with your proper taxpayer identification number and
certain required certifications, you may be subject to backup withholding on any distributions of
income, capital gains, or proceeds from the sale of your shares. The Fund also must withhold if the
IRS instructs it to do so. When withholding is required, the amount will be 28% of any
distributions or proceeds paid, including exempt interest dividends (for distributions and proceeds
paid after December 31, 2012, the rate is scheduled to rise to 31% unless the 28% rate is extended
or made permanent).
For taxable years beginning after December 31, 2012, an additional 3.8% Medicare tax will be
imposed on certain net investment income (including ordinary dividends and capital gain
distributions received from the Fund and net gains from redemptions or other taxable dispositions
of Fund shares) of US individuals, estates and trusts to the extent that such persons modified
adjusted gross income (in the case of an individual) or adjusted gross income (in the case of an
estate or trust) exceeds a threshold amount.
The description of certain federal tax provisions above relates only to U.S. federal income
tax consequences for shareholders who are U.S. persons, i.e., generally, U.S. citizens or residents
or U.S. corporations, partnerships, trusts or estates, and who are subject to U.S. federal income
tax and hold their shares as capital assets. Except as otherwise provided, this description does
not address the special tax rules that may be applicable to
32
particular types of investors, such as
financial institutions, insurance companies, securities dealers, other regulated investment
companies, or tax-exempt or tax-deferred plans, accounts or entities. Investors other than U.S.
persons may be subject to different U.S. federal income tax treatment, including a non-resident
alien U.S. withholding tax at the rate of 30% or any lower applicable treaty rate on amounts
treated as ordinary dividends from the Fund, special certification requirements to avoid U.S.
backup withholding and claim any treaty benefits and U.S. estate tax. Shareholders should consult
their own tax advisors on these matters and on state, local, foreign and other applicable tax laws.
Under recently enacted legislation and administrative guidance, the relevant withholding agent
may be required to withhold 30% of any (a) income dividends paid after December 31, 2013 and (b)
certain capital gains distributions and the proceeds of a sale of shares paid after December 31,
2014 to (i) a foreign financial institution unless such foreign financial institution agrees to
verify, report and disclose certain of its U.S. accountholders and meets certain other specified
requirements or (ii) a non-financial foreign entity that is the beneficial owner of the payment
unless such entity certifies that it does not have any substantial U.S. owners or provides the
name, address and taxpayer identification number of each substantial U.S. owner and such entity
meets certain other specified requirements.
State Income Tax Matters Associated with Investment in the Funds
Shareholders of the Fund may exclude any exempt interest dividends paid to you by the Fund
from your California taxable income for purposes of the California personal income tax if:
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the Fund qualifies as a regulated investment company under the Code and at the close of
each quarter of its taxable year, at least 50 percent of the value of its total assets
consists of obligations the interest on which is exempt from taxation by the State of
California when held by an individual;
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the dividends are derived from interest on obligations of the State of California and its
political subdivisions or qualifying obligations of U.S. territories and possessions that are
exempt from state taxation under federal law;
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the dividends paid do not exceed the amount of interest (minus certain non-deductible
expenses) the Fund receives, during its taxable year, on obligations that, when held by an
individual, pay interest exempt from taxation by California; and
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the Fund properly identifies the dividends as California exempt interest dividends in a
written notice mailed to the investor.
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Any distributions of net short-term and long-term capital gain earned by the Fund and any gain
from the sale of shares of the Fund by a shareholder are included in a shareholders taxable income
for purposes of the California personal income tax. Residents of California may be subject to
backup withholding at 7% on the proceeds from the sale of Fund shares.
Distributions from the Fund, including exempt-interest dividends, may be taxable to
shareholders that are subject to certain provisions of the California Corporation Tax Law.
Board Considerations in Approving the Mergers
On June 1, 2010, Invesco acquired the retail fund management business of Morgan Stanley, which
included 32 Morgan Stanley and Van Kampen branded closed-end funds. This transaction filled gaps
in Invescos product line and has enabled Invesco to expand its investment offerings to retail
customers. The transaction also resulted in product overlap. The Mergers proposed in this Proxy
Statement are part of a larger group of mergers across Invescos fund platform that began in early
2011. The larger group of mergers is designed to put forth Invescos most compelling investment
processes and strategies, reduce product overlap and create scale in the resulting funds.
Considerations of the Board of the Acquiring Fund
The Board of the Acquiring Fund (the Acquiring Fund Board) considered the Mergers over a
series of meetings. The Nominating Committee of the Acquiring Fund Board, which consists solely
of trustees who are not interested persons, as that term is defined in the 1940 Act, of the
Acquiring Fund (the Independent Trustees), met on November 1, 2011 to consider the Mergers and to
assist the Acquiring Fund Board in its consideration of the Mergers. The Nominating Committee
considered presentations from the Adviser on the proposed Mergers and
33
identified to the Adviser
certain supplemental information to be prepared in connection with the presentation of the proposed
Mergers to the full Acquiring Fund Board. Prior to the November 15, 2011 meeting of the full
Acquiring Fund Board, the Acquiring Fund Board met in executive session with the Nominating
Committee to discuss the Committees consideration and review of the proposed Mergers. The full
Acquiring Fund Board met twice, on November 15, 2011 and November 28, 2011, to review and consider
the Mergers. The Acquiring Fund Board requested and received from the Adviser written materials
containing relevant information about the Funds and the proposed Mergers, including fee and expense
information on an actual and
pro forma
estimated basis, and comparative portfolio composition and
performance data.
The Acquiring Fund Board reviewed, among other information they deemed relevant, information
comparing the following for each Fund on a current and
pro forma
basis: (1) investment objective,
policies and restrictions; (2) portfolio management; (3) portfolio composition; (4) comparative
short-term and long-term investment performance and distribution yields; (5) expense ratios and
expense structures, including contractual investment advisory fees and fee waiver agreements; (6)
expected federal income tax consequences to the Funds, including any impact on capital loss carry
forwards; (7) relative asset size; (8) trading information such as trading premiums/discounts for
the Funds Common Shares; and (9) use of leverage and outstanding VMTP Shares. The Acquiring Fund
Board discussed with the Adviser the Advisers process for selecting and analyzing the Funds that
had been proposed to participate in the Mergers and possible alternatives to the Mergers, including
liquidation and maintaining stand alone funds, among other alternatives. The Acquiring Fund Board
also discussed with the Adviser the Mergers in the context of the larger group of completed and
proposed reorganizations of funds in the fund complex, which were designed to rationalize the
Invesco funds to seek to enhance visibility in the market place.
The potential benefits to the Acquiring Fund of the Mergers considered by the Acquiring Fund
Board, included (1) potential benefits resulting from the larger size of the combined fund,
including the potential for (i) increased attention from the investment community, (ii) increased
trading volume and tighter spreads and improved premium/discount levels for the combined funds
Common Shares, (iii) improved purchasing power and more efficient transaction costs, and (iv)
increased diversification of portfolio investments; (2) maintaining consistent portfolio management
teams, processes and investment objectives and (3) reducing market confusion caused by similar
product offerings.
The Acquiring Fund Board also considered the anticipated economic effects of the Mergers on
the combined funds fees and expenses, earnings, distribution rates, undistributed net investment
company income and market price of Common Shares. The Board considered that (1) the Acquiring
Funds management fee schedule will apply to the combined fund and, due to the larger size of the
combined fund, the Mergers are anticipated to result in the combined fund having a lower total
expense ratio that the Acquiring Fund; (2) the investment objective, strategies and related risks
of the Target Fund and the Acquiring Fund are substantially the same; (3) the Funds have the same
portfolio management teams; (4) shareholders would become shareholders of the larger combined fund;
and (5) the allocation of expenses of the Mergers, including the Advisers paying all of the Merger
costs. The Acquiring Fund Board also considered the expected tax free nature of the Mergers for
each Fund and its shareholders for federal income tax purposes.
Based upon the information and considerations summarized above, the Acquiring Fund Board
concluded that each Merger is in the best interests of the Acquiring Fund and the shareholders of
the Acquiring Fund and that no dilution of net asset value would result to the shareholders of the
Acquiring Fund from each Merger. Consequently, on November 28, 2011, the Acquiring Fund Board,
including the Independent Trustees voting separately, unanimously approved the Merger Agreement and
each Merger and unanimously recommended that the shareholders of Acquiring Fund vote in favor of
each Merger.
Considerations of the Board of each of the Target Funds
Each Target Funds Board created an ad hoc committee (the Ad Hoc Merger Committee) to
consider each Merger and to assist each Target Fund Board in its consideration of such Merger. The
Ad Hoc Merger Committee met separately two times, on October 17, 2011 and November 18, 2011 to
discuss each proposed Merger. Two separate meetings of each Target Funds Board were also held to
review and consider each Merger, including presentations by the Ad Hoc Merger Committee on its
deliberations and, ultimately, recommendations. The trustees who are not interested persons, as
that term is defined in the 1940 Act, of the Target Funds (the Independent Trustees) held a
separate meeting in conjunction with the November 29-30, 2011 meeting of the full
34
Target Fund
Boards to consider these matters. The Independent Trustees have been advised on this matter by
independent legal counsel to the Independent Trustees. The Target Fund Boards requested and
received from the Adviser written materials containing relevant information about the Target Funds
and the proposed Mergers, including fee and expense information on an actual and
pro forma
estimated basis, and comparative portfolio composition and performance data.
The Target Fund Boards reviewed, among other information they deemed relevant, information
comparing the following for each Target Fund: (1) investment objective, policies and restrictions;
(2) portfolio management; (3) portfolio composition; (4) comparative short-term and long-term
investment performance and distribution yields; (5) current expense ratios and expense structures,
including contractual investment advisory fees on a net asset basis and on a managed assets basis;
(6) expected federal income tax consequences to the Funds, including any impact on capital loss
carry forwards; (7) relative asset size; and (8) trading information such as trading
premiums/discounts and bid/ask spreads.
The Target Fund Boards considered the benefits to each Target Fund of (i) combining with a
similar fund to create a larger fund, (ii) the Advisers paying all of the Merger costs, and (iii)
the expected tax free nature of the Merger for each Target Fund and its shareholders for federal
income tax purposes. The Target Fund Boards also considered that the potential benefits to the
Target Funds of the Mergers might include (1) benefits resulting from the larger size of the
combined fund, including the potential for (i) increased attention from the investment community,
(ii) increased trading volume and tighter spreads and improved premium/discount levels for the
combined funds Common Shares, (iii) improved purchasing power and more efficient transaction
costs, and (iv) increased diversification of portfolio investments; (2) maintaining consistent
portfolio management teams, processes and investment objectives; and (3) reducing market confusion
caused by similar product offerings. In addition, each Target Funds Board considered the
Acquiring Funds higher contractual advisory fee rate in light of the benefits of retaining the
Adviser as the Acquiring Funds investment adviser, the feasibility of the Advisers continued
service to the Target Funds at current fee levels, the services provided, and those expected to be
provided, to the Acquiring Fund by the Adviser, and the terms and conditions of the Acquiring
Funds advisory agreement.
After considering the foregoing, the Board of each Target Fund noted that:
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the combined fund on a
pro forma
basis had a more than 0.50% higher Common Share
distribution yield (as a percentage of net asset value) than each Target Fund, even after
giving effect to the higher management fees and total expense ratio that will apply to the
combined fund before and after the expiration of fee waivers;
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as of July 31, 2011, the Acquiring Funds Common Shares had traded at an average premium of
3.0% to its net asset value over the preceding 52 week period and, over the same period, the
Target Funds Common Shares had traded at average discounts of -6.6% (IIC),
-7.15% (IQC) and
-8.48% (ICS);
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as of July 31, 2011, the Acquiring Funds Common Shares had traded at an average discount
of -2.2% to its net asset value for the preceding month and, over the same period, the Target
Funds Common Shares had traded at average discounts of -10.20% (IIC), -8.9% (IQC) and -10.10%
(ICS);
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the average daily trading volume for the Acquiring Funds Common Shares was approximately
twice the highest average daily trading volumes of the Target Funds Common shares; and
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as of July 31, 2011, the Acquiring Fund owned 192 different municipal bonds and the Target
Funds owned 122 (IIC), 109 (IQC) and 97 (ICS), which means that the combined fund would
provide shareholders with a more diverse investment portfolio.
|
The Target Fund Boards also considered the Mergers in the context of the larger group of
mergers, which were designed to rationalize the Invesco funds in a way that can enhance visibility
in the market place. The Target Fund Boards discussed with the Adviser the possible alternatives
to the Mergers, including liquidation and maintaining the status quo, among other alternatives.
The Target Fund Boards further considered that (i) the investment objective, strategies and
related risks of each Target Fund and the Acquiring Fund are substantially the same; (ii) the Funds
have the same portfolio management team; (iii) shareholders would become shareholders of a single
larger Fund; and (iv) the Advisers representation that, because of the similarity between the
Funds investment objectives and strategies, the costs associated with repositioning each Target
Funds investment portfolio in connection with a Merger would be minimal. The Target Fund Boards
also considered that the impact to Target Fund shareholders of the Acquiring
35
Funds significantly
higher advisory fee rate would be mitigated by the Advisers agreement to limit the Acquiring
Funds total expenses if a Merger is completed, as disclosed above on a
pro forma
basis, through at
least two years from the closing date of the Mergers.
Based upon the information and considerations described above, the Target Fund Boards
unanimously concluded that the Mergers are in the best interests of the Target Funds and that no
dilution of net asset value would result to the shareholders of the Target Funds from the Mergers.
Consequently, the Target Fund Boards unanimously approved the Merger Agreement and each Merger on
November 29, 2011.
The discussion above summarizes certain information regarding the Funds considered by the
Boards of the Acquiring Fund and the Target Funds, respectively, which was accurate as of the time
of the Boards consideration of the Mergers. There can be no assurance that the information
considered by the Boards, including with respect to the Funds trading at a premium or discount,
remains accurate as of the date hereof or at the closing of the Mergers.
Federal Income Tax Considerations of the Mergers
The following is a general summary of the material U.S. federal income tax considerations of
the Mergers and is based upon the current provisions of the Code, the existing U.S. Treasury
Regulations thereunder, current administrative rulings of the IRS and published judicial decisions,
all of which are subject to change. These considerations are general in nature and individual
shareholders should consult their own tax advisors as to the federal, state, local, and foreign tax
considerations applicable to them and their individual circumstances. These same considerations
generally do not apply to shareholders who hold their shares in a tax-deferred account.
Each Merger is intended to be a tax-free reorganization pursuant to Section 368(a) of the
Code. As described above, the Mergers will occur following the Redomestication of each Target Fund
and the Acquiring Fund. The principal federal income tax considerations that are expected to result
from the Merger of each Target Fund into the Acquiring Fund are as follows:
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no gain or loss will be recognized by the Target Fund or the shareholders of the
Target Fund as a result of the Merger;
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no gain or loss will be recognized by the Acquiring Fund as a result of the Merger;
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the aggregate tax basis of the shares of the Acquiring Fund to be received by a
shareholder of the Target Fund will be the same as the shareholders aggregate tax basis of the
shares of the Target Fund; and
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the holding period of the shares of the Acquiring Fund received by a shareholder of
the Target Fund will include the period that a shareholder held the shares of the Target Fund
(provided that such shares of the Target Fund are capital assets in the hands of such shareholder
as of the Closing).
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Neither the Target Funds nor the Acquiring Fund have requested or will request an advance
ruling from the IRS as to the federal tax consequences of the Mergers. As a condition to Closing,
Stradley Ronon Stevens & Young, LLP will render a favorable opinion to each Target Fund and the
Acquiring Fund as to the foregoing federal income tax consequences of each Merger, which opinion
will be conditioned upon, among other things, the accuracy, as of the Closing Date, of certain
representations of each Target Fund and the Acquiring Fund upon which Stradley Ronon Stevens &
Young, LLP will rely in rendering its opinion. Such opinion of counsel may state that no opinion
is expressed as to the effect of the Mergers on the Target Funds, the Acquiring Fund, or any Target
Fund shareholder with respect to any transferred asset as to which any unrealized gain or loss is
required to be recognized for federal income tax purposes at the end of a taxable year (or on the
termination or transfer thereof) under a mark-to-market system of accounting. A copy of the
opinion will be filed with the SEC and will be available for public inspection. See Where to Find
Additional Information. In addition, Skadden, Arps, Slate, Meagher & Flom LLP will deliver an
opinion to IIC, IQC and the Acquiring Fund, subject to certain representations, assumptions and
conditions, to the effect that the Acquiring Fund VMTP Shares received in the Mergers by holders of
VMTP Shares of IIC or IQC will qualify as equity in the Acquiring Fund for federal income tax
purposes.
Opinions of counsel are not binding upon the IRS or the courts. If a Merger is consummated
but the IRS or the courts determine that the Merger does not qualify as a tax-free reorganization
under the Code, and thus is taxable, the Target Fund would recognize gain or loss on the transfer
of its assets to the Acquiring Fund and each shareholder of the Target Fund would recognize a
taxable gain or loss equal to the difference between its tax basis
in its Target Fund shares and
the fair market value of the shares of the Acquiring Fund it receives. The failure of one Merger to
qualify as a tax-free reorganization would not adversely affect any other Merger.
36
Prior to the closing of each Merger, each Target Fund will declare to its Common Shareholders
one or more dividends, and the Acquiring Fund may, but is not required to, declare to its Common
Shareholders a dividend, payable at or near the time of closing to their respective shareholders to
the extent necessary to avoid entity level tax or as otherwise deemed desirable. Such
distributions, if made, are anticipated to be made in the 2012 calendar year and, to the extent a
distribution is not an exempt-interest dividend (as defined in the Code), the distribution may be
taxable to shareholders in such year for federal income tax purposes. It is anticipated that Fund
distributions will be primarily dividends that are exempt from regular federal income tax, although
a portion of such dividends may be taxable to shareholders as ordinary income or capital gains. To
the extent the distribution is attributable to ordinary income or capital gains, such ordinary
income and capital gains will be allocated to Common Shareholders and VMTP Shareholders in
accordance with each classs proportionate share of the total dividends paid by the Fund during the
year. In certain circumstances, each of IIC, IQC and the Acquiring Fund will make additional
payments to VMTP Shareholders to offset the tax effects of such taxable distributions.
Each Fund may invest all or a substantial portion of its total assets in municipal securities
that may subject certain investors to the federal alternative minimum tax (AMT bonds) and,
therefore, a substantial portion of the income produced by each Fund may be taxable for such
investors under the federal alternative minimum tax. If the Acquiring Fund following the Mergers
has a greater portion of its portfolio investments in AMT bonds than a Target Fund, a greater
portion of the dividends paid by the Acquiring Fund to shareholders of the Target Fund,
post-Closing, may be taxable under the federal alternative minimum tax. However, the portion of a
Funds total assets invested in AMT Bonds on the Closing Date or in the future and the portion of
income subject to federal alternative minimum tax cannot be known in advance. See the Schedule of
Investments available in each Funds Annual Report for the portion of a Funds total assets that
are invested in AMT Bonds at February 29, 2012.
The tax attributes, including capital loss carryovers, of the Target Funds move to the
Acquiring Fund in the Mergers. The capital loss carryovers of the Target Funds and the Acquiring
Fund are available to offset future gains recognized by the combined Fund, subject to limitations
under the Code. Where these limitations apply, all or a portion of a Funds capital loss
carryovers may become unavailable, the effect of which may be to accelerate the recognition of
taxable gain to the combined Fund and its shareholders post-Closing. First, the capital loss
carryovers of each Fund that experiences a more than 50% ownership change in a Merger (e.g., in a
reorganization of two Funds, the smaller Fund), increased by any current year loss or decreased by
any current year gain, together with any net unrealized depreciation in the value of its portfolio
investments (collectively, its aggregate capital loss carryovers), are expected to become subject
to an annual limitation. Losses in excess of that limitation may be carried forward to succeeding
tax years, subject, in the case of net capital losses that arise in taxable years beginning on or
before December 22, 2010 as discussed below, to an overall eight-year carryover period. The annual
limitation will generally equal the net asset value of a Fund on the Closing Date multiplied by the
long-term tax-exempt rate published by the IRS. In the case of a Fund with net unrealized
built-in gains at the time of Closing of a Merger (i.e., unrealized appreciation in value of the
Funds investments), the annual limitation for a taxable year will be increased by the amount of
such built-in gains that are recognized in the taxable year. Second, if a Fund has built-in gains
at the time of Closing that are realized by the combined Fund in the five-year period following a
Merger, such built-in gains, when realized, may not be offset by the losses (including any capital
loss carryovers and built in losses) of another Fund. Third, the capital losses of a Target Fund
that may be used by the Acquiring Fund (including to offset any built-in gains of a Target Fund
itself) for the first taxable year ending after the Closing Date will be limited to an amount equal
to the capital gain net income of the Acquiring Fund for such taxable year (excluding capital loss
carryovers) treated as realized post-Closing based on the number of days remaining in such year.
Fourth, a Merger may result in an earlier expiration of a Funds capital loss carryovers because a
Merger may cause a Target Funds tax year to close early in the year of the Merger.
The Regulated Investment Company Modernization Act of 2010 eliminated the eight-year carryover
period for capital losses that arise in taxable years beginning after its enactment date (December
22, 2010) for regulated investment companies regardless of whether such regulated investment
company is a party to a reorganization. Consequently, these capital losses can be carried forward
indefinitely. However, capital losses incurred in pre-enactment taxable years may not be used to
offset capital gains until all net capital losses arising in post-enactment taxable years have been
utilized. As a result, some net capital loss carryovers incurred in pre-enactment taxable years
which otherwise would have been utilized under prior law may expire.
37
The aggregate capital loss carryovers of the Funds and the approximate annual limitation on
the use by the Acquiring Fund, post-Closing, of each Funds aggregate capital loss carryovers
following the Mergers are as follows:
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IIC
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IQC
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ICS
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VCV
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(Target Fund)
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(Target Fund)
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(Target Fund)
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(Acquiring Fund)
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(000,000s)
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(000,000s)
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(000,000s)
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(000,000s)
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at 2/29/2012
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at 2/29/2012
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at 2/29/2012
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at 2/29/2012
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Aggregate Capital Loss
Carryovers on a Tax
Basis
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$
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(2.3
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)
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$
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(12.9
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)
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$
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(0.5
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)
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$
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(71.8
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)
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Unrealized Net
Appreciation
(Depreciation) in
Investments on a Tax
Basis
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$
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16.2
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$
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12.8
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$
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4.3
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$
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29.3
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Aggregate Net Asset Value
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$
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167.3
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$
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129.1
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$
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52.7
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$
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293.0
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Approximate Annual
Limitation (1)
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$
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5.5
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$
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4.2
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$
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1.7
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$
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9.6
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(1)
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Based on the long-term tax-exempt rate for ownership changes during May 2012 of
3.26%.
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Based upon each Target Funds capital loss position at February 29, 2012, the annual
limitations on the use of each Target Funds aggregate capital loss carryovers may not prevent the
combined Fund from utilizing such losses, albeit over a period of time. Based upon the Acquiring
Funds capital loss position at February 29, 2012, the annual limitation on the use of the
Acquiring Funds aggregate capital loss carryovers will likely limit the use of such losses by the
Acquiring Fund, post-Closing, to offset capital gains, if any, it realizes. The effect of these
annual limitations may be to cause the combined Fund, post-Closing, to distribute more capital
gains in a taxable year than might otherwise have been the case if no such limitation had applied.
The ability of the Acquiring Fund to absorb its own aggregate capital loss carryovers and those of
the Target Funds post-Closing depends upon a variety of factors that cannot be known in advance.
For more information with respect to each Funds capital loss carryovers, please refer to the
Funds shareholder report.
Shareholders of a Target Fund will receive a proportionate share of any taxable income and
gains realized by the Acquiring Fund and not distributed to its shareholders prior to the Merger
when such income and gains are eventually distributed by the Acquiring Fund. As a result,
shareholders of a Target Fund may receive a greater amount of taxable distributions than they would
have had the Merger not occurred. In addition, if the Acquiring Fund following the Mergers has
proportionately greater unrealized appreciation in its portfolio investments as a percentage of its
net asset value than a Target Fund, shareholders of the Target Fund, post-Closing, may receive
greater amounts of taxable gain as such portfolio investments are sold than they otherwise might
have if the Mergers had not occurred. At February 29, 2012, the unrealized appreciation
(depreciation) in value of the portfolio investments of each Target Fund on a tax basis as a
percentage of its net asset value is 10% for IIC, 10% for IQC, and 8% for ICS, compared to that of
the Acquiring Fund of 10%, and 10% on a combined basis.
After the Mergers, shareholders will continue to be responsible for tracking the adjusted tax
basis and holding period of their shares for federal income tax purposes.
Tax Treatment of the VMTP Shares of the Acquiring Fund
The Acquiring Fund expects that the VMTP Shares issued by the Acquiring Fund in a Merger in
exchange for VMTP Shares of IIC or IQC will be treated as equity of the Acquiring Fund for U.S.
federal income tax purposes. Each of IIC, IQC and the Acquiring Fund has received a private letter
ruling from the IRS to the effect that VMTP Shares issued by it prior to its Redomestication and
Merger will be treated as equity of such Fund for U.S. federal income tax purposes. Skadden, Arps,
Slate, Meagher & Flom LLP (Special VMTP Federal Income Tax Counsel) is of the opinion that, and
as a condition to the closing of the Mergers will deliver to the IIC, IQC and the Acquiring Fund an
opinion that, the VMTP Shares issued by the Acquiring Fund in a Merger in exchange for VMTP Shares
of IIC or IQC will be treated as equity of the Acquiring Fund for U.S. federal income tax purposes.
An opinion of counsel is not binding on the IRS or any court. Thus, no assurance can be given
that the IRS would not assert, or that a court would not sustain, a position contrary to Special
VMTP Federal Income Tax Counsels opinion.
38
The discussion herein assumes that the VMTP Shares issued by the Acquiring Fund in a Merger in
exchange for VMTP Shares of IIC or IQC will be treated as equity of the Acquiring Fund for U.S.
federal income tax purposes.
Where to Find More Information
The SAI and each Funds shareholder reports contain further information on the Funds,
including their investment policies, strategies and risks.
THE BOARDS UNANIMOUSLY RECOMMEND THAT YOU VOTE
FOR
THE APPROVAL OF PROPOSAL 2.
PROPOSAL 3: ELECTION OF TRUSTEES BY THE TARGET FUNDS
At the Meeting, VMTP Shareholders and Common Shareholders of the Target Funds, voting together
as a single class, will vote on the election of the following six nominees for election as
Trustees: James T. Bunch, Bruce L. Crockett, Rodney F. Dammeyer, Jack M. Fields, Martin L. Flanagan
and Carl Frischling. All nominees have consented to being named in this Proxy Statement and have
agreed to serve if elected.
The group of Trustees standing for election in any given year is the same for each Target
Fund. The following table indicates the Trustees in each such group and the period for which each
group currently serves:
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Group I*
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Group II**
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Group III***
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Albert R. Dowden
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David C. Arch
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James T. Bunch
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Prema Mathai-Davis
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Frank S. Bayley
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Bruce L. Crockett
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Hugo F. Sonnenschein
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Larry Soll
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Rodney F. Dammeyer
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Raymond Stickel, Jr.
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Philip A. Taylor
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Jack M. Fields
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Wayne W. Whalen
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Martin L. Flanagan
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Carl Frischling
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*
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Currently serving until the year 2013 Annual Meeting or until their successors have been
duly elected and qualified.
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**
|
|
Currently serving until the year 2014 Annual Meeting or until their successors have been duly
elected and qualified.
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***
|
|
If elected, to serve until the year 2015 Annual Meeting or until their successors have been
duly elected and qualified.
|
If elected, each nominee will serve until the later of the Target Funds annual meeting
of shareholders in 2015 or until his or her successor has been duly elected and qualified, or his
or her earlier retirement, resignation or removal. As in the past, only one class of Trustees is
being submitted to shareholders of each Target Fund for election at the Meeting. The Declaration
of Trust of each Target Fund provides that the Board shall be divided into three classes, which
must be as nearly equal in number as possible. For each Target Fund, the Trustees of only one
class are elected at each annual meeting, so that the regular term of only one class of Trustees
will expire annually and any particular Trustee stands for election only once in each three-year
period. This type of classification may prevent replacement of a majority of Trustees of a Target
Fund for up to a two-year period. The foregoing is subject to the provisions of the 1940 Act,
applicable state law, each Target Funds Declaration of Trust, and each Target Funds bylaws.
Prema Mathai-Davis and Frank S. Bayley, who are not part of the group of Trustees standing for
election at the Meeting, have been designated to be elected solely by the holders of the VMTP
Shares of the applicable Fund.
Common Shares of each Fund are also expected to vote on the election of the Trustee nominees
and their votes will be counted together as a single class with the VMTP Shares.
The business and affairs of the Target Funds are managed under the direction of their Boards
of Trustees. Below is information on the Trustees qualifications and experience.
39
Interested Trustees.
Martin L. Flanagan
. Mr. Flanagan is president and chief executive officer of Invesco Ltd., a
position he has held since August 2005. He is also a member of the Board of Directors of Invesco
Ltd. Mr. Flanagan joined Invesco Ltd. from Franklin Resources, Inc., where he was president and
co-chief executive officer from January 2004 to July 2005. Previously he had been Franklins
co-president from May 2003 to January 2004, chief operating officer and chief financial officer
from November 1999 to May 2003, and senior vice president and chief financial officer from 1993
until November 1999. Mr. Flanagan served as director, executive vice president and chief operating
officer of Templeton, Galbraith & Hansberger, Ltd. before its acquisition by Franklin in 1992.
Before joining Templeton in 1983, he worked with Arthur Anderson & Co. Mr. Flanagan is a chartered
financial analyst and a certified public accountant. He serves as vice chairman of the Investment
Company Institute and is a member of the executive board at the SMU Cox School of Business. The
Board believes that Mr. Flanagans long experience as an executive in the investment management
area benefits the Target Funds.
Philip A. Taylor
. Mr. Taylor has been the head of Invescos North American retail business as
Senior Managing Director since April 2006. He previously served as chief executive officer of
Invesco Trimark Investments since January 2002. Mr. Taylor joined Invesco in 1999 as senior vice
president of operations and client services and later became executive vice president and chief
operating officer. Mr. Taylor was president of Canadian retail broker Investors Group Securities
from 1994 to 1997 and managing partner of Meridian Securities, an execution and clearing broker,
from 1989 to 1994. He held various management positions with Royal Trust, now part of Royal Bank of
Canada, from 1982 to 1989. He began his career in consumer brand management in the U.S. and Canada
with Richardson-Vicks, now part of Procter & Gamble. The Board believes that Mr. Taylors long
experience in the investment management business benefits the Target Funds.
Wayne W. Whalen
. Mr. Whalen is Of Counsel and, prior to 2010, was a partner in the law firm
of Skadden, Arps, Slate, Meagher & Flom LLP. Mr. Whalen is a Director of the Mutual Fund Directors
Forum, a nonprofit membership organization for investment company directors, Chairman and Director
of the Abraham Lincoln Presidential Library Foundation and Director of the Stevenson Center for
Democracy. From 1995 to 2010, Mr. Whalen served as Director and Trustee of investment companies in
the Van Kampen Funds complex. The Board believes that Mr. Whalens experience as a law firm
partner and his experience as a director of investment companies benefits the Target Funds.
Independent Trustees.
David C. Arch
. Formerly, Mr. Arch was the Chairman and Chief Executive Officer of Blistex,
Inc., a consumer health care products manufacturer. Mr. Arch is a member of the Heartland Alliance
Advisory Board, a nonprofit organization serving human needs based in Chicago and member of the
Board of the Illinois Manufacturers Association. Mr. Arch is also a member of the Board of
Visitors, Institute for the Humanities, University of Michigan. From 1984 to 2010, Mr. Arch served
as Director or Trustee of investment companies in the Van Kampen Funds complex. The Board believes
that Mr. Archs experience as the CEO of a public company and his experience with investment
companies benefits the Target Funds.
Frank S. Bayley
. Mr. Bayley is a business consultant in San Francisco. He is Chairman and a
Director of the C. D. Stimson Company, a private investment company in Seattle. Mr. Bayley serves
as a Trustee of the Seattle Art Museum, a Trustee of San Francisco Performances, and a Trustee and
Overseer of The Curtis Institute of Music in Philadelphia. He also serves on the East Asian Art
Committee of the Philadelphia Museum of Art and the Visiting Committee for Art of Asia, Oceana and
Africa of the Museum of Fine Arts, Boston. Mr. Bayley is a retired partner of the international law
firm of Baker & McKenzie LLP, where his practice focused on business acquisitions and venture
capital transactions. Prior to joining Baker & McKenzie LLP in 1986, he was a partner of the San
Francisco law firm of Chickering & Gregory. He received his A.B. from Harvard College in 1961, his
LL.B. from Harvard Law School in 1964, and his LL.M. from Boalt Hall at the University of
California, Berkeley, in 1965. Mr. Bayley served as a Trustee of the Badgley Funds from inception
in 1998 until dissolution in 2007. The Board believes that Mr. Bayleys experience as a business
consultant and a lawyer benefits the Target Funds.
James T. Bunch
. From 1988 to 2010, Mr. Bunch was Founding Partner of Green Manning & Bunch,
Ltd., a leading investment banking firm located in Denver, Colorado. Green Manning & Bunch is a
FINRA-registered investment bank specializing in mergers and acquisitions, private financing of
middle-market companies and corporate finance advisory services. Immediately prior to forming Green
Manning & Bunch, Mr. Bunch was
40
Executive Vice President, General Counsel, and a Director of
Boettcher & Company, then the leading investment banking firm in the Rocky Mountain region. Mr.
Bunch began his professional career as a practicing attorney. He joined the prominent Denver-based
law firm of Davis Graham & Stubbs in 1970 and later rose to the position of Chairman and Managing
Partner of the firm. At various other times during his career, Mr. Bunch has served as Chair of the
NASD Business District Conduct Committee, and Chair of the Colorado Bar Association Ethics
Committee. In June 2010, Mr. Bunch became the Managing Member of Grumman Hill Group LLC, a family
office private equity investment manager. The Board believes that Mr. Bunchs experience as an
investment banker and investment management lawyer benefits the Target Funds.
Bruce L. Crockett
. Mr. Crockett has more than 30 years of experience in finance and general
management in the banking, aerospace and telecommunications industries. From 1992 to 1996, he
served as president, chief executive officer and a director of COMSAT Corporation, an international
satellite and wireless telecommunications company. Mr. Crockett has also served, since 1996, as
chairman of Crockett Technologies Associates, a strategic consulting firm that provides services to
the information technology and communications industries. Mr. Crockett also serves on the Board of
Directors of ACE Limited, a Zurich-based insurance company. He is a life trustee of the University
of Rochester Board of Directors. The Board elected Mr. Crockett to serve as its Independent Chair
because of his extensive experience in managing public companies and familiarity with investment
companies.
Rodney F. Dammeyer
. Since 2001, Mr. Dammeyer has been Chairman of CAC, LLC, a private company
offering capital investment and management advisory services. Previously, Mr. Dammeyer served as
Managing Partner at Equity Group Corporate Investments; Chief Executive Officer of Anixter
International; Senior Vice President and Chief Financial Officer of Household International, Inc.;
and Executive Vice President and Chief Financial Officer of Northwest Industries, Inc. Mr. Dammeyer
was a Partner of Arthur Andersen & Co., an international accounting firm. Mr. Dammeyer currently
serves as a Director of Quidel Corporation and Stericycle, Inc. Previously, Mr. Dammeyer served as
a Trustee of The Scripps Research Institute; and a Director of Ventana Medical Systems, Inc.; GATX
Corporation; TheraSense, Inc.; TeleTech Holdings Inc.; and Arris Group, Inc. From 1987 to 2010, Mr.
Dammeyer served as Director or Trustee of investment companies in the Van Kampen Funds complex.
The Board believes that Mr. Dammeyers experience in executive positions at a number of public
companies, his accounting experience and his experience serving as a director of investment
companies benefits the Target Funds.
Albert R. Dowden
. Mr. Dowden retired at the end of 1998 after a 24-year career with Volvo
Group North America, Inc. and Volvo Cars of North America, Inc. Mr. Dowden joined Volvo as general
counsel in 1974 and was promoted to increasingly senior positions until 1991 when he was appointed
president, chief executive officer and director of Volvo Group North America and senior vice
president of Swedish parent company AB Volvo. Since retiring, Mr. Dowden continues to serve on the
board of the Reich & Tang Funds and also serves on the boards of Homeowners of America Insurance
Company and its parent company, as well as Natures Sunshine Products, Inc. and The Boss Group. Mr.
Dowdens charitable endeavors currently focus on Boys & Girls Clubs where he has been active for
many years, as well as several other not-for-profit organizations. Mr. Dowden began his career as
an attorney with a major international law firm, Rogers & Wells (1967-1976), which is now Clifford
Chance. The Board believes that Mr. Dowdens extensive experience as a corporate executive
benefits the Target Funds.
Jack M. Fields
. Mr. Fields served as a member of Congress, representing the 8th Congressional
District of Texas from 1980 to 1997. As a member of Congress, Mr. Fields served as Chairman of the
House Telecommunications and Finance Subcommittee, which has jurisdiction and oversight of the
Federal Communications Commission and the Securities and Exchange Commission. Mr. Fields
co-sponsored the National Securities Markets Improvements Act of 1996, and played a leadership role
in enactment of the Private Securities Litigation Reform Act of 1995. Mr. Fields currently serves
as Chief Executive Officer of the Twenty-First Century Group in Washington, D.C., a bipartisan
Washington consulting firm specializing in Federal government affairs. Mr. Fields also serves as a
Director of Insperity (formerly known as Administaff) (NYSE: ASF), a premier professional employer
organization with clients nationwide. In addition, Mr. Fields sits on the Board of the Discovery
Channel Global Education Fund, a nonprofit organization dedicated to providing educational
resources to people in need around the world through the use of technology. The Board believes
that Mr. Fields experience in the House of Representatives, especially concerning regulation of
the securities markets, benefits the Target Funds.
Carl Frischling
. Mr. Frischling is senior partner of the Financial Services Group of Kramer
Levin. He is a pioneer in the field of bank-related mutual funds and has counseled clients in
developing and structuring
41
comprehensive mutual fund complexes. Mr. Frischling also advises mutual
funds and their independent trustees/directors on their fiduciary obligations under federal
securities laws. Prior to his practicing law, he was chief administrative officer and general
counsel of a large mutual fund complex that included a retail and institutional sales force,
investment counseling and an internal transfer agent. During his ten years with the organization,
he developed business expertise in a number of areas within the financial services complex. He
served on the Investment Company Institute board and was involved in ongoing matters with all of
the regulatory areas overseeing this industry. Mr. Frischling is a board member of the Mutual Fund
Directors Forum. He also serves as a Trustee of the Reich & Tang Funds, a registered investment
company. Mr. Frischling serves as a Trustee of the Yorkville Youth Athletic Association and is a
member of the Advisory Board of Columbia University Medical Center. The Board believes that Mr.
Frischlings experience as an investment management lawyer and his long involvement with investment
companies benefits the Target Funds.
Dr. Prema Mathai-Davis
. Prior to her retirement in 2000, Dr. Mathai-Davis served as Chief
Executive Officer of the YWCA of the USA. Prior to joining the YWCA, Dr. Mathai-Davis served as the
Commissioner of the New York City Department for the Aging. She was a Commissioner of the New York
Metropolitan Transportation Authority of New York, the largest regional transportation network in
the U.S. Dr. Mathai-Davis also serves as a Trustee of the YWCA Retirement Fund, the first and
oldest pension fund for women, and on the advisory board of the Johns Hopkins Bioethics Institute.
Dr. Mathai-Davis was the president and chief executive officer of the Community Agency for Senior
Citizens, a non-profit social service agency that she established in 1981. She also directed the
Mt. Sinai School of Medicine-Hunter College Long-Term Care Gerontology Center, one of the first of
its kind. The Board believes that Dr. Mathai-Davis extensive experience in running public and
charitable institutions benefits the Target Funds.
Dr. Larry Soll
. Formerly, Dr. Soll was chairman of the board (1987 to 1994), chief executive
officer (1982 to 1989; 1993 to 1994), and president (1982 to 1989) of Synergen Corp., a
biotechnology company, in Boulder, Colorado. He was also a faculty member at the University of
Colorado (1974-1980). The Board believes that Dr. Solls experience as a chairman of a public
company and in academia benefits the Target Funds.
Hugo F. Sonnenschein
. Mr. Sonnenschein is the Distinguished Service Professor and President
Emeritus of the University of Chicago and the Adam Smith Distinguished Service Professor in the
Department of Economics at the University of Chicago. Until July 2000, Mr. Sonnenschein served as
President of the University of Chicago. Mr. Sonnenschein is a Trustee of the University of
Rochester and a member of its investment committee. He is also a member of the National Academy of
Sciences and the American Philosophical Society, and a Fellow of the American Academy of Arts and
Sciences. From 1994 to 2010, Mr. Sonnenschein served as Director or Trustee of investment companies
in the Van Kampen Funds complex. The Board believes that Mr. Sonnenscheins experiences in
academia and in running a university, and his experience as a director of investment companies
benefits the Target Funds.
Raymond Stickel, Jr.
Mr. Stickel retired after a 35-year career with Deloitte & Touche. For
the last five years of his career, he was the managing partner of the investment management
practice for the New York, New Jersey and Connecticut region. In addition to his management role,
he directed audit and tax services to several mutual fund clients. Mr. Stickel began his career
with Touche Ross & Co. in Dayton, Ohio, became a partner in 1976 and managing partner of the office
in 1985. He also started and developed an investment management practice in the Dayton office that
grew to become a significant source of investment management talent for Touche Ross & Co. In Ohio,
he served as the audit partner on numerous mutual funds and on public and privately held companies
in other industries. Mr. Stickel has also served on Touche Ross & Co.s Accounting and Auditing
Executive Committee. The Board believes that Mr. Stickels experience as a partner in a large
accounting firm working with investment managers and investment companies, and his status as an
Audit Committee Financial Expert, benefits the Target Funds.
Additional biographical information regarding the Trustees of the Target Funds can be found in
Exhibit F. Information on the Boards leadership structure, role in risk oversight, and committees
and meetings can be found in Exhibit G. Information on the remuneration of Trustees can be found
in Exhibit H. Information on the executive officers of the Funds is available in Exhibit E.
Information on the Funds independent registered public accounting firm is available in Exhibit I.
42
THE BOARDS OF THE TARGET FUNDS UNANIMOUSLY RECOMMEND A VOTE
FOR ALL
OF THE NOMINEES.
PROPOSAL 4: ELECTION OF TRUSTEES BY THE ACQUIRING FUND
At the Meeting, VMTP Shareholders and Common Shareholders of the Acquiring Fund, voting
together as a single class, will vote to elect three Class I Trustees (David C. Arch, Jerry D.
Choate and Suzanne H. Woolsey are the nominees).
If elected, each nominee will serve until the later of the Acquiring Funds annual meeting of
shareholders in 2015 or until his or her successor has been duly elected and qualified, or his or
her earlier retirement, resignation or removal. As in the past, only one class of Trustees is
being submitted to shareholders of the Acquiring Fund for election at the Meeting. The Declaration
of Trust of the Acquiring Fund provides that the Board shall be divided into three classes, which
must be as nearly equal in number as possible. For the Acquiring Fund, the Trustees of only one
class are elected at each annual meeting, so that the regular term of only one class of Trustees
will expire annually and any particular Trustee stands for election only once in each three-year
period. This type of classification may prevent replacement of a majority of Trustees of the
Acquiring Fund for up to a two-year period. The foregoing is subject to the provisions of the 1940
Act, applicable state law, the Acquiring Funds Declaration of Trust, and the Acquiring Funds
bylaws.
The Trustees who make up the various classes of the Board of the Acquiring Fund are shown in
the chart below:
|
|
|
|
|
Class I
|
|
Class II
|
|
Class III
|
David C. Arch
|
|
Wayne W. Whalen
|
|
Colin D. Meadows
|
Jerry D. Choate
|
|
Rodney Dammeyer (2)
|
|
R. Craig Kennedy
|
Howard J Kerr (2)
|
|
Linda Hutton Heagy (1)
|
|
Jack E. Nelson (2)
|
Suzanne H. Woolsey, Ph.D.
|
|
|
|
Hugo F. Sonnenschein (1)
|
|
|
|
(1)
|
|
Linda Hutton Heagy and Hugo F. Sonnenschein are designated to be elected solely
by the VMTP Shareholders voting as a separate class.
|
|
(2)
|
|
Pursuant to the Acquiring Funds Trustee retirement policy, Howard J Kerr and
Jack E. Nelson are retiring from the Board effective as of the Meeting. Rodney
Dammeyer is not standing for reelection with respect to certain funds overseen by a
Board comprised of the same individuals as the Acquiring Funds Board for which his
term of office expires in 2012. Therefore, Mr. Dammeyer is also stepping down from the
Board of the Acquiring Fund effective as of the Meeting. The Acquiring Funds Board
has reduced the size of the Board to eight Trustees effective as of the Meeting.
|
The business and affairs of the Acquiring Fund are managed under the direction of its Board of
Trustees. The Board overseeing the Acquiring Fund seeks to provide shareholders with a highly
qualified, highly capable and diverse group of Board members reflecting the diversity of investor
interests underlying the Acquiring Fund and with a diversity of backgrounds, experience and skills
that the Board considers desirable and necessary to its primary goal protecting and promoting
shareholders interests. While the Board does not require that its members meet specific
qualifications, the Board has historically sought to recruit and continues to value individual
Board members that add to the overall diversity of the Board the objective is to bring varied
backgrounds, experience and skills reflective of the wide range of the shareholder base and provide
both contrasting and complementary skills relative to the other Board members to best protect and
promote shareholders interests. Board diversity means bringing together different viewpoints,
professional experience, investment experience, education, and other skills. As can be seen in the
individual biographies below, the Board brings together a wide variety of business experience
(including chairman/chief executive officer-level and director-level experience, including board
committee experience, of several different types of organizations); varied public and private
investment-related experience; not-for-profit experience; customer service and other back office
operations experience; a wide variety of accounting, finance, legal, and marketing experience;
academic experience; consulting experience; and government, political and military service
experience. All of this experience together results in important leadership and management
knowledge, skills and perspective that provide the Board understanding and insight into the
operations of the
43
Acquiring Fund and add range and depth to the Board. As part of its governance
oversight, the Board conducts an annual self-effectiveness survey which includes, among other
things, evaluating the Boards (and each committees) agendas, meetings and materials, conduct of
the meetings, committee structures, interaction with management, strategic planning, etc., and also
includes evaluating the Boards (and each committees) size, composition, qualifications (including
diversity of characteristics, experience and subject matter expertise) and overall performance.
The Board evaluates all of the foregoing and does not believe any single factor or group of
factors controls or dominates the qualifications of any individual trustee or the qualifications of
the trustees as a group. After considering all factors together, the Board believes that each
Trustee is qualified to serve as a Trustee.
Independent Trustees.
David C. Arch
. Formerly, Mr. Arch was the Chairman and Chief Executive Officer of Blistex,
Inc., a consumer health care products manufacturer. Mr. Arch is a member of the Heartland Alliance
Advisory Board, a nonprofit organization serving human needs based in Chicago and member of the
Board of the Illinois Manufacturers Association. Mr. Arch is also a member of the Board of
Visitors, Institute for the Humanities, University of Michigan. From 1984 to 2010, Mr. Arch served
as Director or Trustee of investment companies in the Van Kampen Funds complex. The Board believes
that Mr. Archs experience as the CEO of a public company and his experience with investment
companies benefits the Acquiring Fund.
Jerry D. Choate
. Mr. Choate has been a member of the Board of one or more funds in the
Invesco fund complex since 2003. The Board believes that Mr. Choates experience as the chairman
and chief executive officer of a public company and a director of several public companies, his
service as a Trustee of funds in the Invesco fund complex and his experience as a director of other
investment companies benefits the Acquiring Fund.
Rodney F. Dammeyer
. Since 2001, Mr. Dammeyer has been Chairman of CAC, LLC, a private company
offering capital investment and management advisory services. Previously, Mr. Dammeyer served as
Managing Partner at Equity Group Corporate Investments; Chief Executive Officer of Anixter
International; Senior Vice President and Chief Financial Officer of Household International, Inc.;
and Executive Vice President and Chief Financial Officer of Northwest Industries, Inc. Mr. Dammeyer
was a Partner of Arthur Andersen & Co., an international accounting firm. Mr. Dammeyer currently
serves as a Director of Quidel Corporation and Stericycle, Inc. Previously, Mr. Dammeyer served as
a Trustee of The Scripps Research Institute; and a Director of Ventana Medical Systems, Inc.; GATX
Corporation; TheraSense, Inc.; TeleTech Holdings Inc.; and Arris Group, Inc. From 1987 to 2010, Mr.
Dammeyer served as Director or Trustee of investment companies in the Van Kampen Funds complex.
The Board believes that Mr. Dammeyers experience in executive positions at a number of public
companies, his accounting experience and his experience serving as a director of investment
companies benefits the Acquiring Fund. Mr. Dammeyer is not standing for reelection with respect to
certain funds overseen by the Invesco Van Kampen Board for which his term of office expires in
2012. Therefore, Mr. Dammeyer is also stepping down from the Board of the Acquiring Fund effective
as of the Meeting.
Linda Hutton Heagy
. Ms. Heagy has been a member of the Board of one or more funds in the
Invesco fund complex since 2003. The Board believes that Ms. Heagys experience in executive
positions at a number of bank and trust companies and as a member of the board of several
organizations, her service as a Trustee of funds in the Invesco fund complex and her experience
serving as a director of other investment companies benefits the Acquiring Fund.
R. Craig Kennedy
. Mr. Kennedy has been a member of the Board of one or more funds in the
Invesco fund complex since 2003. The Board believes that Mr. Kennedys experience in executive
positions at a number of foundations, his investment experience, his service as a Trustee of funds
in the Invesco fund complex and his experience serving as a director of other investment companies
benefits the Acquiring Fund.
Howard J Kerr
. Mr. Kerr has been a member of the Board of one or more funds in the Invesco
fund complex since 1992. The Board believes that Mr. Kerrs experience in executive positions at a
number of companies, his experience in public service, his service as a Trustee of funds in the
Invesco fund complex and his experience serving as a director of other investment companies
benefits the Acquiring Fund. Pursuant to the Boards Trustee retirement policy, Mr. Kerr is
retiring from the Board effective as of the Meeting.
44
Jack E. Nelson
. Mr. Nelson has been a member of the Board of one or more funds in the Invesco
fund complex 2003. The Board believes that Mr. Nelsons experience in executive positions at a
number of companies and as a member of several financial and investment industry organizations, his
service as a Trustee of funds in the Invesco fund complex and his experience serving as a director
of other investment companies benefits the Acquiring Fund. Pursuant to the Boards Trustee
retirement policy, Mr. Nelson is retiring from the Board effective as of the Meeting.
Hugo F. Sonnenschein
. Mr. Sonnenschein is the Distinguished Service Professor and President
Emeritus of the University of Chicago and the Adam Smith Distinguished Service Professor in the
Department of Economics at the University of Chicago. Until July 2000, Mr. Sonnenschein served as
President of the University of Chicago. Mr. Sonnenschein is a Trustee of the University of
Rochester and a member of its investment committee. He is also a member of the National Academy of
Sciences and the American Philosophical Society, and a Fellow of the American Academy of Arts and
Sciences. From 1994 to 2010, Mr. Sonnenschein served as Director or Trustee of investment companies
in the Van Kampen Funds complex. The Board believes that Mr. Sonnenscheins experiences in
academia and in running a university, and his experience as a director of investment companies
benefits the Acquiring Fund.
Suzanne H. Woolsey
. Ms. Woolsey has been a member of the Board of one or more funds in the
Invesco fund complex since 2003. The Board believes that Ms. Woolseys experience as a director of
numerous organizations, her service as a Trustee of funds in the Invesco fund complex and her
experience as a director of other investment companies benefits the Acquiring Fund.
Interested Trustees.
Colin D. Meadows
. Mr. Meadows has been a member of the Board of one or more funds in the
Invesco fund complex since 2010. The Board believes that Mr. Meadows financial services and asset
management experience benefits the Acquiring Fund.
Wayne W. Whalen
. Mr. Whalen is Of Counsel and, prior to 2010, was a partner in the law firm
of Skadden, Arps, Slate, Meagher & Flom LLP. Mr. Whalen is a Director of the Mutual Fund Directors
Forum, a nonprofit membership organization for investment company directors, Chairman and Director
of the Abraham Lincoln Presidential Library Foundation and Director of the Stevenson Center for
Democracy. From 1995 to 2010, Mr. Whalen served as Director and Trustee of investment companies in
the Van Kampen Funds complex. The Board believes that Mr. Whalens experience as a law firm
partner and his experience as a director of investment companies benefits the Acquiring Fund.
Additional biographical information regarding the Trustees can be found in Exhibit J.
Information on the Boards leadership structure, role in risk oversight, and committees and
meetings can be found in Exhibit K. Information on the remuneration of Trustees can be found in
Exhibit L. Information on the executive officers of the Funds is available in Exhibit E.
Information on the Funds independent registered public accounting firm is available in Exhibit I.
THE BOARD OF THE ACQUIRING FUND RECOMMENDS A VOTE
FOR ALL
OF THE NOMINEES.
VOTING INFORMATION
How to Vote Your Shares
There are several ways you can vote your shares, including in person at the Meeting, by mail,
by telephone, or via the Internet. The proxy card that accompanies this Proxy Statement provides
detailed instructions on how you may vote your shares.
If you properly fill in and sign your proxy card and send it to us in time to vote at the
Meeting, your proxy (the individuals named on your proxy card) will vote your shares as you have
directed. If you sign your proxy card but do not make specific choices, your proxy will vote your
shares
FOR
each Proposal and
FOR
45
ALL
of the Trustee nominees, in accordance with the
recommendations of the Board of your Fund, and in the proxys best judgment on other matters.
Why are you sending me the Proxy Statement?
You are receiving this Proxy Statement because you own VMTP Shares of a Fund as of the Record
Date and have the right to vote on the very important proposals described herein concerning your
Fund. This Proxy Statement contains information that shareholders of the Funds should know before
voting on the proposals.
About the Proxy Statement and the Meeting
We are sending you this Proxy Statement and the enclosed proxy card because the Board is
soliciting your proxy to vote at the Meeting and at any adjournments or postponements of the
Meeting. This Proxy Statement gives you information about the business to be conducted at the
Meeting. Fund shareholders may vote by appearing in person at the Meeting and following the
instructions below. You do not need to attend the Meeting to vote, however. Instead, you may
simply complete, sign, and return the enclosed proxy card or vote by following the instructions on
the enclosed proxy card to vote via telephone or the Internet.
Shareholders of record of the Funds as of the close of business on the Record Date are
entitled to vote at the Meeting. The number of outstanding shares of each class of each Fund on
the Record Date can be found at Exhibit M. Each shareholder is entitled to one vote for each full
share held and a proportionate fractional vote for each fractional share held. The Funds expect
that Common Shares will also be voted at the Meeting. This Proxy Statement is not a solicitation
for any votes of the Common Shares of any Fund.
Attendance at the Meeting is generally limited to shareholders and their authorized
representatives. All shareholders must bring an acceptable form of identification in order to
attend the Meeting in person.
Proxies will have the authority to vote and act on behalf of shareholders at any adjournment
of the Meeting. It is the intention of the persons named in the enclosed proxy card to vote the
shares represented by them for each proposal and for all of the Trustee nominees, unless the proxy
card is marked otherwise. If a shareholder gives a proxy, the shareholder may revoke the
authorization at any time before it is exercised by sending in another proxy card with a later date
or by notifying the Secretary of the Fund in writing at the address of the Fund set forth on the
cover page of this Proxy Statement before the Meeting that the shareholder has revoked its proxy.
In addition, although merely attending the Meeting will not revoke your proxy, if a shareholder is
present at the Meeting, the shareholder may withdraw the proxy and vote in person.
Quorum Requirement and Adjournment
A quorum of shareholders is necessary to hold a valid shareholder meeting of each Fund. Under
the governing documents of each Target Fund, the holders of a majority of the Target Funds shares
issued and outstanding and entitled to vote thereat, present in person or represented by proxy,
shall be requisite and shall constitute a quorum for the transaction of business. Under the
governing documents of the Acquiring Fund, the holders of a majority of outstanding shares of each
class or series or combined class entitled to vote thereat of the Acquiring Fund present in person
or by proxy shall constitute a quorum at the Meeting.
For the Target Funds, if a quorum is not present at the Meeting, the chairman of the Meeting
or the shareholders present or represented by proxy and entitled to vote at the Meeting shall have
the power to adjourn the Meeting from time to time. The shareholders present in person or
represented by proxy at the Meeting and entitled to vote at the Meeting also shall have the power
to adjourn the Meeting from time to time if the vote required to approve or reject any proposal
described herein is not obtained (with proxies being voted for or against adjournment consistent
with the votes for and against the proposal for which the required vote has not been obtained).
The affirmative vote of the holders of a majority of a Target Funds shares then present in person
or represented by proxy shall be required to adjourn the Meeting.
For the Acquiring Fund, if a quorum is not present at the Meeting, it may be adjourned, with
the vote of the majority of the votes present or represented by proxy, to allow additional
solicitations of proxies in order to attain a quorum. The shareholders present in person or
represented by proxy and entitled to vote at the Meeting will also have the power to adjourn the
Meeting from time to time if the vote required to approve or reject any proposal
46
described herein is not obtained, with proxies, including abstentions and broker non-votes, being voted for
adjournment, provided the proxies determine that such an adjournment and additional solicitation is
reasonable and in the interest of shareholders based on a consideration of all relevant factors,
including the nature of the relevant proposal, the percentage of votes then cast, the percentage of
negative votes then cast, the nature of the proposed solicitation activities and the nature of the
reasons for such further solicitation. The affirmative vote of the holders of a majority of the
Acquiring Funds shares then present in person or represented by proxy shall be required to so
adjourn the Meeting.
In the event that a shareholder of a Fund present at the Meeting objects to the holding of a
joint meeting and moves for an adjournment of the meeting of such Fund to a time immediately after
the Meeting so that such Funds meeting may be held separately, the persons named as proxies will
vote in favor of such adjournment.
Abstentions and broker non-votes (described below) are counted as present and will be included
for purposes of determining whether a quorum is present for each Fund at the Meeting, but are not
considered votes cast at the Meeting. Abstentions and broker non-votes will have the same effect as
a vote against Proposal 1, 2, or 3, because their approval requires the affirmative vote of a
percentage of the outstanding shares of the applicable Fund or of a certain proportion of the
shares present at the Meeting, as opposed to a percentage of votes cast. For Proposal 4,
abstentions and broker non-votes will have no effect because only a plurality of votes is required
to elect a Trustee nominee. A proxy card marked withhold with respect to the election of
Trustees would have the same effect as an abstention.
Broker non-votes occur when a proposal that is routine (such as the election of trustees) is
voted on at a meeting alongside a proposal that is non-routine (such as the Redomestication or
Merger proposals). Under New York Stock Exchange rules, brokers may generally vote in their
discretion on routine proposals, but are generally not able to vote on a non-routine proposal in
the absence of express voting instructions from beneficial owners. As a result, where both routine
and non-routine proposals are voted on at the same meeting, proxies voted by brokers on the routine
proposals are considered votes present but are not votes on any non-routine proposals. Because
both routine and non-routine proposals will be voted on at the Meeting, the Funds anticipate
receiving broker non-votes with respect to Proposals 1 and 2. No broker non-votes are anticipated
with respect to Proposals 3 and 4 because they are considered routine proposals on which brokers
typically may vote in their discretion.
Votes Necessary to Approve the Proposals
Common Shares of each Fund and VMTP Shares of the Acquiring Fund, IIC and IQC are entitled to
vote at the Meeting. This Proxy Statement is not a solicitation for any votes of the Common Shares
of any Fund. Each Fund will solicit the vote of its Common Shares via a separate proxy statement.
VMTP Shares are subject to a voting trust requiring that certain voting rights of the VMTP Shares
must be exercised as directed by an unaffiliated third party. Votes by VMTP Shares to elect
Trustees are subject to the voting trust, but votes regarding the Redomestications and the Mergers
are not subject to the voting trust.
Each Funds Board has unanimously approved the Funds Plan of Redomestication discussed in
Proposal 1. Shareholder approval of each Funds Plan of Redomestication requires the affirmative
vote of the holders of a majority of the Common Shares and the VMTP Shares, if applicable,
outstanding and entitled to vote, voting as separate classes, of such Fund. Proposal 1 may be
approved and implemented for a Fund regardless of whether shareholders approve any other Proposal
applicable to the Fund.
Each Funds Board has unanimously approved the Funds Plan of Merger discussed in Proposal 2.
Shareholder approval of the Plan of Merger for each Merger requires the affirmative vote of the
holders of a majority of the Common Shares and VMTP Shares, if applicable, outstanding and entitled
to vote, voting as separate classes, of the applicable Target Fund and the Acquiring Fund.
Proposal 2 may be approved and implemented for a Target Fund only if Proposal 1 is also approved by
both the Target Fund and the Acquiring Fund and regardless of whether shareholders approve any
other Proposal applicable to such Funds.
With respect to Proposal 3, the affirmative vote of a majority of the shares of a Target Fund
(with Common Shares and VMTP Shares, if applicable, voting as a single class) represented in person
or by proxy and entitled to vote at the Meeting at which a quorum is present is required to elect
each nominee for Trustee of such Target Fund. Proposal 3 may be approved and implemented for a
Fund regardless of whether shareholders approve any other Proposal applicable to the Fund.
47
With respect to Proposal 4, the affirmative vote of a plurality of the Common Shares and VMTP
Shares, voting as a single class, of the Acquiring Fund present at the Meeting in person or by
proxy is required to elect each nominee for Trustee for the Acquiring Fund. Proposal 4 may be
approved and implemented for the Fund regardless of whether shareholders approve any other Proposal
applicable to the Fund.
Proxy Solicitation
The Funds have engaged the services of Computershare Fund Services (the Solicitor) to assist
in the solicitation of proxies for the Meeting. The costs of this proxy solicitation are estimated
to be $10,000 for each of IIC, ICS and IQC, and $20,000 for the Acquiring Fund. The VMTP
Shareholders are not expected to bear any of these costs. The Funds officers may also solicit
proxies but will not receive any additional or special compensation for any such solicitation.
Under the agreement with the Solicitor, the Solicitor will be paid a project management fee as
well as telephone solicitation expenses incurred for reminder calls, outbound telephone voting,
confirmation of telephone votes, inbound telephone contact, obtaining shareholders telephone
numbers, and providing additional materials upon shareholder request. The agreement also provides
that the Solicitor shall be indemnified against certain liabilities and expenses, including
liabilities under the federal securities laws.
OTHER MATTERS
Share Ownership by Large Shareholders, Management and Trustees
Information on each person who as of the Record Date, to the knowledge of each Fund, owned 5%
or more of the outstanding shares of a class of such Fund can be found at Exhibit N. Information
regarding Target Fund Trustee ownership of shares of Target Funds and of shares of all registered
investment companies in the Fund Complex overseen by such Trustee can be found at Exhibit F.
Information regarding Acquiring Fund Trustee ownership of shares of the Acquiring Fund and of
shares of all registered investment companies in the Fund Complex overseen by such Trustee can be
found at Exhibit J. To the best knowledge of each Fund, the ownership of shares of such Fund by
executive officers and Trustees of such Fund as a group constituted less than 1% of each
outstanding class of shares of such Fund as of the Record Date.
Annual Meetings of the Funds
If a Merger is completed, the merged Target Fund will not hold an annual meeting in 2013. If
a Merger does not take place, that Target Funds Board will announce the date of such Target Funds
2013 annual meeting. The Acquiring Fund will hold an annual meeting in 2013 regardless of whether
a Merger is consummated.
Shareholder Proposals
Shareholder proposals intended to be presented at the year 2013 annual meeting of shareholders
for a Fund pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the
Exchange Act), must be received by the Funds Secretary at the Funds principal executive offices
by February 18, 2013 in order to be considered for inclusion in the Funds proxy statement and
proxy card relating to that meeting. Timely submission of a proposal does not necessarily mean
that such proposal will be included in the Funds proxy statement. Pursuant to each Funds
governing documents as anticipated to be in effect before the 2013 annual meeting, if a shareholder
wishes to make a proposal at the year 2013 annual meeting of shareholders without having the
proposal included in a Funds proxy statement, then such proposal must be received by the Funds
Secretary at the Funds principal executive offices not earlier than March 19, 2013 and not later
than April 18, 2013. If a shareholder fails to provide timely notice, then the persons named as
proxies in the proxies solicited by the Board for the 2013 annual meeting of shareholders may
exercise discretionary voting power with respect to any such proposal. Any shareholder who wishes
to submit a proposal for consideration at a meeting of such shareholders Fund should send such
proposal to the Funds Secretary at 1555 Peachtree Street, N.E., Atlanta, Georgia 30309, Attn:
Secretary.
Shareholder Communications
Shareholders may send communications to each Funds Board. Shareholders should send
communications intended for a Board or for a Trustee by addressing the communication directly to
the Board or individual Trustee
48
and/or otherwise clearly indicating that the communication is for
the Board or individual Trustee and by sending the communication to either the office of the
Secretary of the applicable Fund or directly to such Trustee at the address specified for such
Trustee in Exhibits F and J. Other shareholder communications received by any Fund not directly
addressed and sent to the Board will be reviewed and generally responded to by management, and will
be forwarded to the Board only at managements discretion based on the matters contained therein.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 30(h) of the 1940 Act and Section 16(a) of the Exchange Act require each of the Funds
Trustees, officers, and investment advisers, affiliated persons of the investment advisers, and
persons who own more than 10% of a registered class of a Funds equity securities to file forms
with the SEC and the Exchanges reporting their affiliation with the Fund and reports of ownership
and changes in ownership of such securities. These persons and entities are required by SEC
regulations to furnish such Fund with copies of all such forms they file. Based on a review of
these forms furnished to each Fund, each Fund believes that during its last fiscal year, its
Trustees, its officers, the Adviser and affiliated persons of the Adviser complied with the
applicable filing requirements.
Other Meeting Matters
Management of each Fund does not intend to present, and does not have reason to believe that
others will present, any other items of business at the Meeting. The Funds know of no business
other than the proposals described in this Proxy Statement that will, or are proposed to, be
presented for consideration at the Meeting. If any other matters are properly presented, the
persons named on the enclosed proxy cards shall vote proxies in accordance with their best
judgment.
WHERE TO FIND ADDITIONAL INFORMATION
This Proxy Statement does not contain all the information set forth in the annual and
semi-annual reports filed by the Funds as such documents have been filed with the SEC. The
financial highlights of each Fund for the year ended February 29, 2012 are available in the Funds
annual report for the year ended February 29, 2012 on Form N-CSR. The SAI (which is part of the
registration statement for the Acquiring Funds Common Shares and is not incorporated herein by
reference or deemed to be part of this Proxy Statement) includes additional information about the
Funds. The SEC file number of each Fund, which contains the Funds shareholder reports and other
filings with the SEC, is 811-07404 for the Acquiring Fund, 811-07344 for IIC, 811-07564 for IQC,
and 811-07111 for ICS.
Each Fund is subject to the informational requirements of the Exchange Act and the 1940 Act
and in accordance therewith, each Fund files reports and other information with the SEC. Reports,
proxy materials, registration statements and other information filed may be inspected without
charge and copied at the public reference facilities maintained by the SEC at Room 1580, 100 F
Street, N.E., Washington, D.C. 20549. Copies of such material may also be obtained from the Public
Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549, at the prescribed
rates. The SEC maintains a website at www.sec.gov that contains information regarding the Funds
and other registrants that file electronically with the SEC. Reports, proxy materials and other
information concerning the Funds can also be inspected at the Exchanges.
49
EXHIBIT A
FORM OF
AGREEMENT AND PLAN OF REDOMESTICATION
THIS AGREEMENT AND PLAN OF REDOMESTICATION
(Agreement) is made as of the day
of ,
2012 by and among (i) each of the Invesco closed-end
registered investment companies identified as a Predecessor Fund
on Exhibit A hereto (each a Predecessor Fund);
(ii) each of the Invesco closed-end investment companies
identified as a Successor Fund on Exhibit A hereto (each a
Successor Fund); and (iii) Invesco Advisers,
Inc. (IAI).
This Agreement contemplates a redomestication of each
Predecessor Fund from a Massachusetts Business Trust, Maryland
corporation or Pennsylvania business trust to a Delaware
Statutory Trust, as applicable. For certain Predecessor Funds,
such redomestication is the only corporate action contemplated
(referred to herein and identified on Exhibit A as a
Redomesticating Fund and, together, as the
Redomesticating Funds). For other Predecessor Funds,
the redomestication is the first step in a two-step transaction
that will, subject to approval by shareholders, also involve the
merger of the Successor Fund with another closed-end registered
investment company in the Invesco Fund complex (each such
Predecessor Fund whose Successor Fund will participate in such a
merger being referred to herein and identified on Exhibit A
as a Merging Fund and, together, as the
Merging Funds) pursuant to a separate Agreement and
Plan of Merger (the Merger Agreement).
This Agreement is intended to be and is adopted as a plan
of reorganization with respect to each Reorganization (as
defined below) within the meaning of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the
Code), and Treasury Regulations
Sections 1.368-2(g)
and 1.368-3(a), and is intended to effect the reorganization of
each Predecessor Fund as a Successor Fund (each such
transaction, a Reorganization and collectively, the
Reorganizations). Each Reorganization will include
the transfer of all of the assets of a Predecessor Fund to the
Successor Fund solely in exchange for (1) the assumption by
the Successor Fund of all liabilities of the Predecessor Fund,
(2) the issuance by the Successor Fund to the Predecessor
Fund of shares of beneficial interest of the Successor Fund,
(3) the distribution of the shares of beneficial interest
of the Successor Fund to the holders of shares of beneficial
interest of the Predecessor Fund according to their respective
interests in complete liquidation of the Predecessor Fund; and
(4) the dissolution of the Predecessor Fund as soon as
practicable after the Closing provided for in
paragraph 3.1, all upon and subject to the terms and
conditions of this Agreement hereinafter set forth.
In consideration of the promises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant
and agree as follows.
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1.
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TRANSFER
OF ASSETS OF THE PREDECESSOR FUNDS IN EXCHANGE FOR ASSUMPTION OF
LIABILITIES AND ISSUANCE OF SUCCESSOR FUND SHARES
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1.1. It is the intention of the parties hereto that
each Reorganization described herein shall be conducted
separately from the others, and a party that is not a party to a
Reorganization shall incur no obligations, duties or
liabilities, and makes no representations, warranties, or
covenants with respect to such Reorganization by reason of being
a party to this Agreement. If any one or more Reorganizations
should fail to be consummated, such failure shall not affect the
other Reorganizations in any way.
1.2. Subject to the terms and conditions set forth
herein and on the basis of the representations and warranties
contained herein, each Predecessor Fund agrees to transfer all
of its Assets (as defined in paragraph 1.3) and to assign
and transfer all of its liabilities, debts, obligations,
restrictions and duties (whether known or unknown, absolute or
contingent, accrued or unaccrued and including, without
limitation, any liabilities of the Predecessor Fund to indemnify
the trustees or officers of the Predecessor Fund or any other
persons under the Predecessor Funds Declaration of Trust
or otherwise, and including, without limitation, any liabilities
of the Predecessor Fund under the Merger Agreement) to the
corresponding Successor Fund, organized solely for the purpose
of acquiring all of the assets and assuming all of the
liabilities of that Predecessor Fund. Each Successor Fund agrees
that in exchange for all of the assets of the corresponding
Predecessor Fund: (1) the Successor Fund shall assume all
of the liabilities of such Predecessor Fund, whether contingent
or otherwise and (2) the Successor Fund shall issue common
shares of beneficial interest (together, the Successor
Fund Common Shares) and preferred shares of
beneficial interest (together, the Successor
Fund Preferred Shares and, together with the
Successor Fund Preferred Shares, the Successor
Fund Shares) to the Predecessor Fund. The number of
Successor Fund Common Shares issued by the Successor Fund
to holders of common shares of the Predecessor Fund will be
identical to the number of shares of common stock of the
Predecessor Fund (together, the Predecessor
Fund Common Shares) outstanding on the Valuation Date
provided for in paragraph 3.1. The Successor Fund shall
issue Successor Fund Preferred Shares to holders of
preferred shares of the Predecessor Fund (together, Predecessor
Fund Preferred Shares and, together with the
Predecessor Fund Common Shares, the Predecessor
Fund Shares), if any, having an aggregate liquidation
preference equal to the aggregate liquidation preference of the
outstanding Predecessor Fund Preferred Shares. The terms of
the Predecessor Fund Preferred Shares shall be
substantially the same as the terms of the Successor
Fund Preferred Shares. Such transactions shall take place
at the Closing provided for in paragraph 3.1.
1.3. The assets of each Predecessor Fund to be
acquired by the corresponding Successor Fund
(Assets) shall include all assets, property and
goodwill, including, without limitation, all cash, securities,
commodities and futures interests, claims (whether absolute or
contingent, known or unknown, accrued or unaccrued and
including, without limitation, any interest in pending or future
legal claims in connection with past or present portfolio
holdings, whether in the form of class action claims, opt-out or
other direct litigation claims, or
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regulator or government-established investor recovery fund
claims, and any and all resulting recoveries), dividends or
interest receivable, and any deferred or prepaid expense shown
as an asset on the books of the Predecessor Fund on the Closing
Date.
1.4 On the Closing Date each Predecessor Fund will
distribute, in complete liquidation, the Successor
Fund Shares to each Predecessor Fund shareholder,
determined as of the close of business on the Valuation Date, of
the corresponding class of the Predecessor Fund pro rata in
proportion to such shareholders beneficial interest in
that class and in exchange for that shareholders
Predecessor Fund shares. Such distribution will be accomplished
by recording on the books of the Successor Fund, in the name of
each Predecessor Fund shareholder, the number of Successor
Fund Shares representing the pro rata number of Successor
Fund Shares received from the Successor Fund which is due
to such Predecessor Fund shareholder. Fractional Successor
Fund Shares shall be rounded to the third place after the
decimal point.
1.5. At the Closing, any outstanding certificates
representing Predecessor Fund Shares will be cancelled. The
Successor Fund shall not issue certificates representing
Successor Fund Common Shares in connection with such
exchange, irrespective of whether Predecessor Fund shareholders
hold their Predecessor Fund Common Shares in certificated
form. Ownership of the Successor Fund Common Shares by each
Successor Fund shareholder shall be recorded separately on the
books of the Successor Funds transfer agent.
1.6. The legal existence of each Predecessor Fund
shall be terminated as promptly as reasonably practicable after
the Closing Date. After the Closing Date, each Predecessor Fund
shall not conduct any business except in connection with its
termination and dissolution and except as provided in
paragraph 1.7 of this Agreement.
1.7. Subject to approval of this Agreement by the
requisite vote of the applicable Predecessor Funds
shareholders but before the Closing Date, a duly authorized
officer of such Predecessor Fund shall cause such Predecessor
Fund, as the sole shareholder of the corresponding Successor
Fund, to (i) elect the Trustees of the Successor Fund;
(ii) ratify the selection of the Successor Funds
independent auditors; (iii) approve the investment advisory
and
sub-advisory
agreements for the Successor Fund in substantially the same form
as the investment advisory and
sub-advisory
agreements in effect with respect to the Predecessor Fund
immediately prior to the Closing; and (iv) implement any
actions approved by the shareholders of the Predecessor Fund at
a meeting of shareholders scheduled
for ,
2012 (the Shareholder Meeting) including, without
limitation, if applicable, a merger with another closed-end fund
in the Invesco Fund complex.
2.1. The value of each Predecessor Funds Assets
shall be the value of such Assets computed as of immediately
after the close of regular trading on the New York Stock
Exchange (NYSE) on the business day immediately
preceding the Closing Date (the Valuation Date),
using the Predecessor Funds valuation procedures
established by the Predecessor Funds Board of
Directors/Trustees.
2.2. The net asset value per share of Successor
Fund Common Shares, and the liquidation preference of
Successor Fund Preferred Shares, together issued in
exchange for the Assets of the corresponding Predecessor Fund,
shall be equal to the net asset value per share of the Successor
Fund Common Shares and the liquidation preference per share
of the Successor Fund Preferred Shares, respectively, on
the Closing Date, and the number of such Successor
Fund Shares of each class shall equal the number of full
and fractional Predecessor Fund Shares outstanding on the
Closing Date.
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3.
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CLOSING
AND CLOSING DATE
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3.1. Each Reorganization shall close
on ,
2012 or such other date as the parties may agree with respect to
any or all Reorganizations (the Closing Date). All
acts taking place at the closing of a Reorganization (the
Closing) shall be deemed to take place
simultaneously as of 9:00 a.m., Eastern Time on the Closing
Date of that Reorganization unless otherwise agreed to by the
parties (the Closing Time).
3.2. At the Closing each party shall deliver to the
other such bills of sale, checks, assignments, stock
certificates, receipts or other documents as such other party or
its counsel may reasonably request.
3.3. Immediately prior to the Closing the Predecessor
Fund shall pay all accumulated but unpaid dividends on the
Predecessor Fund Preferred Shares through the date thereof.
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4.
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REPRESENTATIONS
AND WARRANTIES
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4.1. Each Predecessor Fund represents and warrants to
the corresponding Successor Fund as follows:
4.1.1. At the Closing Date, each Predecessor Fund
will have good and marketable title to the Assets to be
transferred to the Successor Fund pursuant to
paragraph 1.2, and will have full right, power and
authority to sell, assign, transfer and deliver such Assets
hereunder. Upon delivery and in payment for such Assets, the
Successor Fund will acquire good and marketable title thereto
subject to no restrictions on the full transfer thereof,
including, without limitation, such restrictions as might arise
under the Securities Act of 1933, as amended (the
1933 Act), provided that the Successor Fund
will acquire Assets that are segregated as collateral for the
Predecessor Funds derivative positions, including, without
limitation, as collateral for swap positions and as margin for
futures positions, subject to such segregation and liens that
apply to such Assets;
A-2
4.1.2. The execution, delivery and performance of
this Agreement will have been duly authorized prior to the
Closing Date by all necessary action on the part of the
Predecessor Fund and, subject to the approval of the Predecessor
Funds shareholders and the due authorization, execution
and delivery of this Agreement by the Successor Fund and IAI,
this Agreement will constitute a valid and binding obligation of
the Predecessor Fund enforceable in accordance with its terms,
except as such enforceability may be limited by applicable
bankruptcy laws and any other similar laws affecting the rights
and remedies of creditors generally and by equitable principles;
4.1.3. No consent, approval, authorization, or order
of any court, governmental authority, the Financial Industry
Regulatory Authority (FINRA) or any stock exchange
on which shares of the Predecessor Fund are listed is required
for the consummation by the Predecessor Fund of the transactions
contemplated herein, except such as have been or will be
obtained (at or prior to the Closing Date); and
4.1.4. The Predecessor Fund will have filed with the
Securities and Exchange Commission (SEC) proxy
materials, which, for the Merging Funds, may be in the form of a
proxy statement/prospectus on
Form N-14
(the Proxy Statement), complying in all material
respects with the requirements of the Securities Exchange Act of
1934, as amended, the Investment Company Act of 1940, as amended
(the 1940 Act), the 1933 Act (if applicable)
and applicable rules and regulations thereunder, relating to a
meeting of its shareholders to be called to consider and act
upon the Reorganization contemplated herein.
4.2. Each Successor Fund represents and warrants to
the corresponding Predecessor Fund as follows:
4.2.1. At the Closing Time, the Successor Fund will
be duly formed as a statutory trust, validly existing, and in
good standing under the laws of the State of Delaware;
4.2.2 The Successor Fund Shares to be issued and
delivered to the Predecessor Fund pursuant to the terms of this
Agreement will, at the Closing Time, have been duly authorized
and, when so issued and delivered, will be duly and validly
issued and outstanding and fully paid and non-assessable by the
Successor Fund;
4.2.3 At the Closing Time, the Successor Fund shall
succeed to the Predecessor Funds registration statement
filed under the 1940 Act with the SEC and thus will become duly
registered under the 1940 Act as a closed-end management
investment company;
4.2.4 Prior to the Closing Time, the Successor Fund
shall not have commenced operations and there will be no issued
and outstanding shares in the Successor Fund, except shares
issued by the Successor Fund to an initial sole shareholder for
the purpose of enabling the sole shareholder to take such
actions as are required to be taken by shareholders under the
1940 Act in connection with establishing a new fund;
4.2.5. The execution, delivery and performance of
this Agreement will have been duly authorized prior to the
Closing Date by all necessary action on the part of the
Successor Fund, and, subject to the approval of the Predecessor
Funds shareholders and the due authorization, execution
and delivery of this Agreement by the Predecessor Fund and IAI,
this Agreement will constitute a valid and binding obligation of
the Successor Fund enforceable in accordance with its terms,
except as such enforceability may be limited by applicable
bankruptcy laws and any other similar laws affecting the rights
and remedies of creditors generally and by equitable principles;
4.2.6. No consent, approval, authorization, or order
of any court, governmental authority, FINRA or stock exchange on
which shares of the Successor Fund are listed is required for
the consummation by the Successor Fund of the transactions
contemplated herein, except such as have been or will be
obtained (at or prior to the Closing Date);
4.2.7. The Successor Fund shall use all reasonable
efforts to obtain the approvals and authorizations required by
the 1933 Act, the 1940 Act and such state or District of
Columbia securities laws as it may deem appropriate in order to
operate after the Closing Date; and
4.2.8 The Successor Fund is, and will be at the
Closing Time, a newly created Delaware statutory trust, without
assets (other than seed capital) or liabilities, formed for the
purpose of receiving the Assets of the Predecessor Fund in
connection with the Reorganization.
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5.
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CONDITIONS
PRECEDENT TO OBLIGATIONS OF THE PREDECESSOR FUNDS AND THE
SUCCESSOR FUNDS
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With respect to each Reorganization, the obligations of the
Predecessor Fund and the corresponding Successor Fund are each
subject to the conditions that on or before the Closing Date:
5.1. This Agreement and the transactions contemplated
herein shall have been approved by the Board of
Directors/Trustees of each of the Predecessor Fund and the
Successor Fund and by the requisite vote of the Predecessor
Funds shareholders;
5.2. All consents of other parties and all other
consents, orders and permits of federal, state and local
regulatory authorities (including those of the SEC and of state
or District of Columbia securities authorities) and stock
exchanges on which shares of the Funds are, or will be, listed
in accordance with this Agreement deemed necessary by the
Predecessor Fund or the Successor Fund to permit consummation,
in all material respects, of the transactions contemplated
hereby shall have been obtained, except where
A-3
failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or
properties of the Predecessor Fund or the Successor Fund,
provided that either party hereto may waive any of such
conditions for itself;
5.3. Prior to or at the Closing, the Successor Fund
shall enter into or adopt such agreements as are necessary for
the Successor Funds operation as a closed-end investment
company and such agreements shall be substantially similar to
any corresponding agreement of the Predecessor Fund; and
5.4. The Predecessor Fund and the Successor Fund
shall have received on or before the Closing Date an opinion of
Stradley Ronon Stevens & Young, LLP (Stradley
Ronon), in form and substance reasonably acceptable to the
Predecessor Fund and the Successor Fund, as to the matters set
forth on Schedule 5.4. In rendering such opinion, Stradley
Ronon may request and rely upon representations contained in
certificates of officers of the Predecessor Fund and the
Successor Fund and others, and the officers of the Predecessor
Fund and the Successor Fund shall use their best efforts to make
available such truthful certificates.
5.5. If the Predecessor Fund has outstanding
Predecessor Fund Preferred Shares designated as
variable rate muni term preferred shares (VMTP
Shares), the Predecessor Fund and the Successor Fund shall
have received on or before the Closing Date an opinion of
Skadden, Arps, Slate, Meagher & Flom LLP
(Skadden) in form and substance reasonably
acceptable to the Predecessor Fund and the Successor Fund, as to
the matters set forth on Schedule 5.5. In rendering such
opinion, Skadden may request and rely upon representations
contained in certificates of officers of the Predecessor Fund
and the Successor Fund and others, and the officers of the
Predecessor Fund and the Successor Fund shall use their best
efforts to make available such truthful certificates.
5.6. If the Predecessor Fund has outstanding
Predecessor Fund Preferred Shares designated as VMTP
Shares, immediately prior to Closing the Predecessor Fund shall
have satisfied all of its obligations set forth in its
declaration of trust, certificate of designation of the
Predecessor Fund Preferred Shares, registration rights
agreement relating to the Predecessor Fund Preferred Shares
and the Predecessor Fund Preferred Shares certificate
(including, without limitation, satisfaction of the effective
leverage ratio and minimum asset coverage covenants set forth in
its statement of preferences).
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6.
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POST-CLOSING
COVENANTS
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6.1. If the Predecessor Fund has outstanding
Predecessor Fund Preferred Shares designated as VMTP
Shares, immediately after Closing, the Successor Fund shall
satisfy all of its obligations set forth in its declaration of
trust, statement of preferences of the Successor
Fund Preferred Shares, registration rights agreement
relating to the Successor Fund Preferred Shares (including,
without limitation, satisfaction of the effective leverage ratio
and minimum asset coverage covenants set forth in its statement
of preferences).
6.2. If the Predecessor Fund has outstanding
Predecessor Fund Preferred Shares designated as VMTP
Shares, immediately after Closing, the Successor
Fund Preferred Shares shall be rated at least AA-/Aa3 by
each rating agency rating, at the request of the Successor Fund,
the Successor Fund Preferred Shares.
Each Fund will bear its expenses relating to its Reorganization
to the extent that the Funds total annual fund operating
expenses did not exceed the expense limit under the expense
limitation arrangement in place with IAI at the time such
expenses were discussed with the Board (the Expense
Cap). The Fund will bear these expenses regardless of
whether its Reorganization is consummated. IAI will bear the
Reorganization costs of any Fund that had total annual fund
operating expenses which exceeded the Expense Cap at the time
such expenses were discussed with the Board.
Each Successor Fund and corresponding Predecessor Fund
represents and warrants to the other that there are no
brokers or finders fees payable in connection with
the transactions contemplated hereby.
With respect to each Reorganization, this Agreement may be
terminated by the mutual agreement of the Predecessor Fund and
the corresponding Successor Fund, notwithstanding approval
thereof by the shareholders of the Predecessor Fund, at any time
prior to Closing, if circumstances should develop that, in such
parties judgment, make proceeding with this Agreement
inadvisable.
This Agreement may be amended, modified or supplemented in such
manner as may be mutually agreed upon in writing by the parties;
provided, however, that following the approval of this Agreement
by any Predecessor Funds shareholders, no such amendment
may have the effect of changing the provisions for determining
the number of Successor Fund Shares to be distributed to
that Predecessor Funds shareholders under this Agreement
to the detriment of such Predecessor Fund shareholders without
their further approval.
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10.
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HEADINGS;
COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; SURVIVAL;
WAIVER
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10.1. The article and paragraph headings contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement.
10.2. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
A-4
10.3. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware,
without regard to its principles of conflicts of laws.
10.4. This Agreement shall be binding upon and inure
to the benefit of the parties hereto with respect to each
Predecessor Fund and its corresponding Successor Fund, as
applicable, and their respective successors and assigns. Nothing
herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm or corporation other than
the applicable Predecessor Fund and its corresponding Successor
Fund and their respective successors and assigns any rights or
remedies under or by reason of this Agreement.
10.5. It is expressly agreed that the obligations of
the parties hereunder shall not be binding upon any of their
respective directors, trustees, shareholders, nominees,
officers, agents, or employees personally, but shall bind only
the property of the applicable Predecessor Fund or the
applicable Successor Fund as provided in the governing documents
of such Funds. The execution and delivery by such officers shall
not be deemed to have been made by any of them individually or
to impose any liability on any of them personally, but shall
bind only the property of such party.
10.6. The representations, warranties, covenants and
agreements of the parties contained herein shall not survive the
Closing Date; provided that the covenants to be performed after
the Closing shall survive the Closing.
10.7. Each of the Predecessor Funds and the Successor
Funds, after consultation with their respective counsel and by
consent of their respective Board of Directors/Trustees or any
officer, may waive any condition to its obligations hereunder
if, in its or such officers judgment, such waiver will not
have a material adverse effect on the interests of the
shareholders of the applicable Predecessor Fund.
Any notice, report, statement or demand required or permitted by
any provisions of this Agreement shall be in writing and shall
be given by fax or certified mail addressed to the Predecessor
Fund and the Successor Fund, each at 1555 Peachtree Street, N.E.
Atlanta, GA 30309, Attention: Secretary, fax
number .
A-5
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer.
[ ],
a [Massachusetts business trust] [Maryland corporation]
[Pennsylvania business trust]
Invesco Advisers, Inc.
Name:
Title:
[ ]
a Delaware statutory trust
A-6
EXHIBIT A
CHART OF
REDOMESTICATIONS
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Predecessor
Funds
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Successor
Funds
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Redomesticating
Fund
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(and Share
Classes)
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(and Share
Classes)
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or Merging
Fund
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A-7
SCHEDULE 5.4
TAX
OPINION
(i) The acquisition by the Successor Fund of all of the
Assets of the Predecessor Fund, as provided for in the
Agreement, in exchange solely for Successor Fund Shares and
the assumption by the Successor Fund of all of the liabilities
of the Predecessor Fund, followed by the distribution by the
Predecessor Fund to its shareholders of the Successor
Fund Shares in complete liquidation of the Predecessor
Fund, will qualify as a reorganization within the meaning of
Section 368(a)(1)(F) of the Code, and the Predecessor Fund
and the Successor Fund each will be a party to the
reorganization within the meaning of Section 368(b)
of the Code.
(ii) No gain or loss will be recognized by the Predecessor
Fund upon the transfer of all of its Assets to, and assumption
of its liabilities by, the Successor Fund in exchange solely for
Successor Fund Shares pursuant to Section 361(a) and
Section 357(a) of the Code.
(iii) No gain or loss will be recognized by the Successor
Fund upon the receipt by it of all of the Assets of the
Predecessor Fund in exchange solely for the assumption of the
liabilities of the Predecessor Fund and issuance of the
Successor Fund Shares pursuant to Section 1032(a) of
the Code.
(iv) No gain or loss will be recognized by the Predecessor
Fund upon the distribution of the Successor Fund Shares by
the Predecessor Fund to its shareholders in complete liquidation
(in pursuance of the Agreement) pursuant to
Section 361(c)(1) of the Code.
(v) The tax basis of the Assets of the Predecessor Fund
received by the Successor Fund will be the same as the tax basis
of such Assets in the hands of the Predecessor Fund immediately
prior to the transfer pursuant to Section 362(b) of the
Code.
(vi) The holding periods of the Assets of the Predecessor
Fund in the hands of the Successor Fund will include the periods
during which such Assets were held by the Predecessor Fund
pursuant to Section 1223(2) of the Code.
(vii) No gain or loss will be recognized by the
shareholders of the Predecessor Fund upon the exchange of all of
their Predecessor Fund shares solely for the Successor
Fund Shares pursuant to Section 354(a) of the Code.
(viii) The aggregate tax basis of the Successor
Fund Shares to be received by each shareholder of the
Predecessor Fund will be the same as the aggregate tax basis of
Predecessor Fund shares exchanged therefor pursuant to
Section 358(a)(1) of the Code.
(ix) The holding period of Successor Fund Shares
received by a shareholder of the Predecessor Fund will include
the holding period of the Predecessor Fund shares exchanged
therefor, provided that the shareholder held Predecessor Fund
shares as a capital asset on the Closing Date pursuant to
Section 1223(1) of the Code.
(x) For purposes of Section 381 of the Code, the
Successor Fund will succeed to and take into account, as of the
date of the transfer as defined in
Section 1.381(b)-1(b)
of the income tax regulations issued by the United States
Department of the Treasury (the Income Tax
Regulations), the items of the Predecessor Fund described
in Section 381(c) of the Code as if there had been no
Reorganization.
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SCHEDULE 5.5
PREFERRED
SHARE OPINION
The VMTP Shares issued by the Successor Fund in the
Redomestication in exchange for Predecessor Fund VMTP
Shares will be treated as equity of the Successor Fund for
U.S. federal income tax purposes.
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EXHIBIT B
Comparison of State Laws
The laws governing Massachusetts business trusts and Delaware statutory trusts have similar
effect, but they differ in certain respects. Both the Massachusetts business trust law (MA
Statute) and the Delaware statutory trust act (DE Statute) permit a trusts governing instrument
to contain provisions relating to shareholder rights and removal of trustees, and provide trusts
with the ability to amend or restate the trusts governing instruments. However, the MA Statute is
silent on many of the salient features of a Massachusetts business trust (a MA Trust) whereas the
DE Statute provides guidance and offers a significant amount of operational flexibility to Delaware
statutory trusts (a DE Trust). The DE Statute provides explicitly that the shareholders and
trustees of a Delaware Trust are not liable for obligations of the trust to the same extent as
under corporate law, while under the MA Statute, shareholders and trustees could potentially be
liable for trust obligations. The DE Statute authorizes the trustees to take various actions
without requiring shareholder approval if permitted by a Funds governing instruments. For
example, trustees may have the power to amend the Delaware trust instrument, merge or consolidate a
Fund with another entity, and to change the Delaware trusts domicile, in each case without a
shareholder vote.
The following is a discussion of only certain material differences between the DE Statute and
MA Statute, as applicable, and is not a complete description of them. Further information about
each Funds current trust structure is contained in such Funds organizational documents and in
relevant state law.
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Delaware Statutory Trust
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Massachusetts Business Trust
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Governing Documents/Governing Body
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A DE Trust is formed by the filing of a
certificate of trust with the Delaware
Secretary of State. A DE Trust is an
unincorporated association organized
under the DE Statute whose operations are
governed by its governing document (which
may consist of one or more documents).
Its business and affairs are managed by
or under the direction of one or more
trustees. As described in this chart, DE
Trusts are granted a significant amount
of organizational and operational
flexibility. Delaware law makes it easy
to obtain needed shareholder approvals,
and also permits the management of a DE
Trust to take various actions without
being required to make state filings or
obtain shareholder approval.
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A MA Trust is created by the trustees
execution of a written declaration of
trust. A MA Trust is required to file
the declaration of trust with the
Secretary of the Commonwealth of
Massachusetts and with the clerk of every
city or town in Massachusetts where the
trust has a usual place of business. A
MA Trust is a voluntary association with
transferable shares of beneficial
interests, organized under the MA
Statute. A MA Trust is considered to be
a hybrid, having characteristics of both
corporations and common law trusts. A MA
Trusts operations are governed by a
trust document and bylaws. The business
and affairs of a MA Trust are managed by
or under the direction of a board of
trustees.
MA Trusts are also granted a significant
amount of organizational and operational
flexibility. The MA Statute is silent on
most of the salient features of MA
Trusts, thereby allowing trustees to
freely structure the MA Trust. The MA
Statute does not specify what information
must be contained in the declaration of
trust, nor does it require a registered
officer or agent for service of process.
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Ownership Shares of
Interest
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Under both the DE Statute and the MA Statute, the ownership interests in a DE Trust and
MA Trust are denominated as beneficial interests and are held by beneficial owners.
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B-1
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Delaware Statutory Trust
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Massachusetts Business Trust
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Series and Classes
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Under the DE Statute, the governing
document may provide for classes, groups
or series of shares, having such relative
rights, powers and duties as shareholders
set forth in the governing document.
Such classes, groups or series may be
described in a DE Trusts governing
document or in resolutions adopted by its
trustees.
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The MA Statute is silent as to any
requirements for the creation of such
series or classes.
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Shareholder Voting
Rights
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Under the DE Statute, the governing
document may set forth any provision
relating to trustee and shareholder
voting rights, including the withholding
of such rights from certain trustees or
shareholders. If voting rights are
granted, the governing document may
contain any provision relating to the
exercise of voting rights. No state
filing is necessary and, unless required
by the governing document, shareholder
approval is not needed.
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There is no provision in the MA Statute
addressing voting by the shareholders of
a MA Trust.
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Quorum
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Under the DE Statute, the governing
document may set forth any provision
relating to quorum requirements at
meetings of shareholders.
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There is no provision in the MA Statute
addressing quorum requirements at
meetings of shareholders of a MA Trust.
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Shareholder Meetings
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Neither the DE Statute nor the MA Statute mandates an annual shareholders meeting.
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Organization of
Meetings
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Neither the DE Statute nor the MA Statute contain provisions relating to the organization
of shareholder meetings.
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Record Date
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Under the DE Statute, the governing
document may provide for record dates.
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There is no record date provision in the
MA Statute.
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Qualification and
Election of
Trustees
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Under the DE Statute, the governing
documents may set forth the manner in
which trustees are elected and qualified.
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The MA Statute does not contain
provisions relating to the election and
qualification of trustees of a MA Trust.
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Removal of Trustees
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Under the DE Statute, the governing
documents of a DE Trust may contain any
provision relating to the removal of
trustees; provided, however, that there
shall at all times be at least one
trustee of a DE Trust.
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The MA Statute does not contain
provisions relating to the removal of
trustees.
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Restrictions on
Transfer
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Neither the DE Statute nor the MA Statute contain provisions relating to the ability of a
DE Trust or MA Trust, as applicable, to restrict transfers of beneficial interests.
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Preemptive Rights
and Redemption of
Shares
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Under each of the DE Statute and the MA Statute, a governing document may contain any
provision relating to the rights, duties and obligations of the shareholders.
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Liquidation Upon
Dissolution or
Termination Events
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Under the DE Statute, a DE Trust that has
dissolved shall first pay or make
reasonable provision to pay all known
claims and obligations, including those
that are contingent, conditional and
unmatured, and all known claims and
obligations for which the claimant is
unknown. Any remaining assets shall be
distributed to the shareholders or as
otherwise provided in the governing
document.
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The MA Statute has no provisions
pertaining to the liquidation of a MA
Trust.
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B-2
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Delaware Statutory Trust
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Massachusetts Business Trust
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Shareholder
Liability
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Under the DE Statute, except to the
extent otherwise provided in the
governing document of a DE Trust,
shareholders of a DE Trust are entitled
to the same limitation of personal
liability extended to shareholders of a
private corporation organized for profit
under the General Corporation Law of the
State of Delaware.
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The MA Statute does not include an
express provision relating to the
limitation of liability of the
shareholders of a MA Trust. The
shareholders of a MA Trust could
potentially be held personally liable for
the obligations of the trust,
notwithstanding an express provision in
the governing document stating that the
shareholders are not personally liable in
connection with trust property or the
acts, obligations or affairs of the MA
Trust.
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Trustee/Director
Liability
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Subject to the provisions in the
governing document, the DE Statute
provides that a trustee or any other
person managing the DE Trust, when acting
in such capacity, will not be personally
liable to any person other than the DE
Trust or a shareholder of the DE Trust
for any act, omission or obligation of
the DE Trust or any trustee. To the
extent that at law or in equity a trustee
has duties (including fiduciary duties)
and liabilities to the DE Trust and its
shareholders, such duties and liabilities
may be expanded or restricted by the
governing document.
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The MA Statute does not include an
express provision limiting the liability
of the trustee of a MA Trust. The
trustees of a MA Trust could potentially
be held personally liable for the
obligations of the trust.
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Indemnification
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Subject to such standards and
restrictions as may be contained in the
governing document of a DE Trust, the DE
Statute authorizes a DE Trust to
indemnify and hold harmless any trustee,
shareholder or other person from and
against any and all claims and demands.
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The MA Statute is silent as to the
indemnification of trustees, officers and
shareholders.
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Insurance
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Neither the DE Statute nor the MA Statute contain provisions regarding insurance.
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Shareholder Right
of Inspection
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Under the DE Statute, except to the
extent otherwise provided in the
governing document of a DE Trust and
subject to reasonable standards
established by the trustees, each
shareholder has the right, upon
reasonable demand for any purpose
reasonably related to the shareholders
interest as a shareholder, to obtain from
the DE Trust certain information
regarding the governance and affairs of
the DE Trust, including a current list of
the name and last known address of each
beneficial owner and trustee. In
addition, the DE Statute permits the
trustees of a DE Trust to keep
confidential from shareholders for such
period of time as deemed reasonable any
information that the trustees in good
faith believe would not be in the best
interest of the DE Trust to disclose or
that could damage the DE Trust or that
the DE Trust is required by law or by
agreement with a third party to keep
confidential.
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There is no provision in the MA Statute
relating to shareholder inspection
rights.
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B-3
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Delaware Statutory Trust
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Massachusetts Business Trust
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Derivative Actions
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Under the DE Statute, a shareholder may
bring a derivative action if trustees
with authority to do so have refused to
bring the action or if a demand upon the
trustees to bring the action is not
likely to succeed. A shareholder may
bring a derivative action only if the
shareholder is a shareholder at the time
the action is brought and: (a) was a
shareholder at the time of the
transaction complained about or (b)
acquired the status of shareholder by
operation of law or pursuant to the
governing document from a person who was
a shareholder at the time of the
transaction. A shareholders right to
bring a derivative action may be subject
to such additional standards and
restrictions, if any, as are set forth in
the governing document.
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There is no provision under the MA
Statute regarding derivative actions.
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Arbitration of
Claims
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The DE Statute provides flexibility as to
providing for arbitration pursuant to the
governing documents of a DE Trust.
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There is no provision under the MA
Statute regarding arbitration.
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Amendments to
Governing Documents
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The DE Statute provides broad flexibility
as to the manner of amending and/or
restating the governing document of a DE
Trust. Amendments to the declaration
that do not change the information in the
DE Trusts certificate of trust are not
required to be filed with the Delaware
Secretary of State.
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The MA Statute provides broad flexibility
as to the manner of amending and/or
restating the governing document of a MA
Trust. The MA Statute provides that the
trustees shall, within thirty days after
the adoption of any amendment to the
declaration of trust, file a copy with
the Secretary of the Commonwealth of
Massachusetts and with the clerk of every
city or town in Massachusetts where the
trust has a usual place of business.
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B-4
EXHIBIT C
Comparison of Governing Documents
The Target Funds
Each of the Target Funds is a Massachusetts business trust (each a MA Trust and together,
the MA Trusts). Under Proposal 1, if approved, each MA Trust will reorganize into a newly formed
Delaware statutory trust (a DE Trust). The following is a discussion of certain provisions of
the governing instruments and governing laws of each MA Trust and its corresponding DE Trust, but
is not a complete description thereof. Further information about each Funds governance structure
is contained in the Funds shareholder reports and its governing documents.
Shares.
The Trustees of the MA Trusts have the power to issue shares, including preferred
shares, without shareholder approval. The governing documents of the MA Trusts indicate that the
amount of common shares that a MA Trust may issue is unlimited. Preferred shares are limited to
the amount set forth in the Declarations (defined below). Shares of the MA Trusts have no
preemptive rights.
The Trustees of the DE Trusts have the power to issue shares, including preferred shares,
without shareholder approval. The governing documents of the DE Trusts indicate that the amount of
common and preferred shares that a DE Trust may issue is unlimited. Shares of the DE Trusts have
no preemptive rights.
Organization
. The MA Trusts are organized as Massachusetts business trusts, under the laws of
the Commonwealth of Massachusetts. Each MA Trust is governed by its Declaration of Trust (a
Declaration) and its bylaws, each as may be amended, and its business and affairs are managed
under the supervision of its Board of Trustees.
Each DE Trust is organized as a Delaware statutory trust pursuant to the Delaware Statutory
Trust Act (Delaware Act). Each DE Trust is governed by its Amended and Restated Agreement and
Declaration of Trust (also, a Declaration and together with the Declaration of each MA Trust, the
Declarations) and its bylaws, and its business and affairs are managed under the supervision of
its Board of Trustees.
Composition of the Board of Trustees.
The Boards of Trustees of both the MA Trusts and the DE
Trusts are divided into three classes, with the election of each class staggered so that each class
is only up for election once every three years.
Shareholder Meetings and Rights of Shareholders to Call a Meeting
. The stock exchanges on
which a MA Trust shares are currently, and DE Trusts shares will be, listed require annual
meetings to elect trustees.
The governing instruments for each MA Trust provide that special meetings of shareholders may
be called by the Chair or a majority of the Trustees. In addition, special meetings of
shareholders may also be called by the Secretary of a MA Trust upon written request of shareholders
holding and entitled to vote not less than a majority of all the votes entitled to be cast at such
meeting for matters that do not require a separate vote by each class of shares.
The bylaws of the DE Trusts authorize the Trustees to call a meeting of the shareholders for
the election of Trustees. The bylaws of the DE Trusts also authorize a meeting of shareholders
held for any purpose determined by the Trustees. The bylaws of the DE Trusts state that
shareholders have no power to call a special meeting of shareholders.
Submission of Shareholder Proposals
. The federal securities laws, which apply to all of the
MA Trusts and the DE Trusts, require that certain conditions be met to present any proposal at a
shareholder meeting. The matters to be considered and brought before an annual or special meeting
of shareholders of the MA Trusts and the DE Trusts are limited to only those matters, including the
nomination and election of Trustees, that are properly brought before the meeting. For proposals
submitted by shareholders, the bylaws of the MA Trusts and the DE Trusts contain provisions which
require that notice be given to the DE Trust or MA Trust, respectively, by an otherwise eligible
shareholder in advance of the annual or special shareholder meeting in order for the shareholder to
present a
C-1
proposal at any such meeting and requires shareholders to provide certain information in
connection with the proposal. These requirements are intended to provide the Board the opportunity
to better evaluate the proposal and provide additional information to shareholders for their
consideration in connection with the proposal. Failure to satisfy the requirements of these
advance notice provisions means that a shareholder may not be able to present a proposal at the
annual or special shareholder meeting.
In general, for nominations and any other proposals to be properly brought before an annual
meeting of shareholders by a shareholder of a MA Trust, written notice must be delivered to the
Secretary of the MA Trust not less than 60 days, nor more than 90 days, prior to the first
anniversary of the preceding years annual meeting. If the annual meeting is not scheduled to be
held within a period that commences 30 days before such anniversary and ends 30 days after such
anniversary, the written notice must be delivered by the later of the 60
th
day prior to
the meeting or the 10
th
day following the public announcement or disclosure of the
meeting date. If the number of Trustees to be elected to the Board is increased and either all of
the nominees for Trustee or the size of the increased Board are not publicly announced or disclosed
at least 70 days prior to the first anniversary of the preceding years annual meeting, written
notice will be considered timely if delivered to the Secretary of the MA Trust no later than the
10
th
date after such public announcement or disclosure. With respect to the nomination
of individuals for election to the Board of Trustees at a special shareholder meeting, written
notice must be delivered by a shareholder of the MA Trust to the Secretary of the MA Trust no later
than the 10
th
date after such meeting is publicly announced or disclosed.
For nominations and any other proposals to be properly brought before an annual meeting of
shareholders by a shareholder of a DE Trust, written notice must be delivered to the Secretary of
the DE Trust not less than 90 days, nor more than 120 days, prior to the first anniversary of the
preceding years annual meeting. If the annual meeting is not scheduled to be held within a period
that commences 30 days before such anniversary and ends 30 days after such anniversary (an Other
Annual Meeting Date), the written notice must be delivered by the later of the 90
th
day
prior to the meeting or the 10
th
day following the public announcement or disclosure of
the meeting date provided, however, that if the Other Annual Meeting Date was disclosed in the
proxy statement for the prior years annual meeting, the dates for receipt of the written notice
shall be calculated based on the Other Annual Meeting Date and disclosed in the proxy statement for
the prior years annual meeting. If the number of Trustees to be elected to the Board is increased
and either all of the nominees for Trustee or the size of the increased Board are not publicly
announced or disclosed at least 70 days prior to the first anniversary of the preceding years
annual meeting, written notice will be considered timely if delivered to the Secretary of the DE
Trust no later than the 10
th
date after such public announcement or disclosure. With
respect to the nomination of individuals for election to the Board of Trustees at a special
shareholder meeting, written notice must be delivered by a shareholder of the DE Trust to the
Secretary of the DE Trust no later than the 10
th
date after such meeting is publicly
announced or disclosed. Specific information, as set forth in the bylaws, about the nominee, the
shareholder making the nomination, and the proposal must also be delivered, and updated as
necessary if proposed at an annual meeting, by the shareholder of the DE Trust. The shareholder or
a qualified representative must also appear at the annual or special meeting of shareholders to
present about the nomination or proposed business.
Quorum
. The governing instruments of the MA Trusts provide that a quorum will exist if
shareholders representing a majority of the issued and outstanding shares entitled to vote at a
shareholder meeting are present in person or represented by proxy.
The bylaws of each DE Trust provide that a quorum will exist if shareholders representing a
majority of the outstanding shares entitled to vote are present or represented by proxy, except
when a larger quorum is required by applicable law or the requirements of any securities exchange
on which shares are listed for trading, in which case the quorum must comply with such
requirements.
Number of Votes; Aggregate Voting.
The governing instruments of the MA Trusts and the
Declaration and bylaws of the DE Trusts provide that each shareholder is entitled to one vote for
each whole share held as to any matter on which the shareholder is entitled to vote, and a
proportionate fractional vote for each fractional share held. The MA Trusts and the DE Trusts do
not provide for cumulative voting for the election or removal of Trustees.
C-2
The governing instruments of the MA Trusts generally provide that all share classes vote by
class or series of the MA Trust, except as otherwise provided by applicable law, the governing
instruments or resolution of the Trustees.
The Declarations for the DE Trusts generally provide that all shares are voted as a single
class, except when required by applicable law, the governing instruments, or when the Trustees have
determined that the matter affects the interests of one or more classes, in which case only the
shareholders of all such affected classes are entitled to vote on the matter.
Derivative Actions.
Shareholders of each MA Trust have the power to vote 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 MA Trust or its shareholders.
The Declarations for the DE Trusts state that a shareholder may bring a derivative action on
behalf of a DE Trust only if several conditions are met. These conditions include, among other
things, a pre-suit demand upon the Board of Trustees and, unless a demand is not required,
shareholders who hold at least a majority of the outstanding shares must join in the demand for the
Board of Trustees to commence an action, and the Board of Trustees must be afforded a reasonable
amount of time to consider such shareholder request and to investigate the basis of the claim.
Right to Vote
. The 1940 Act provides that shareholders of a fund have the power to vote with
respect to certain matters: specifically, for the election of trustees, the selection of auditors
(under certain circumstances), approval of investment advisory agreements and plans of
distribution, and amendments to policies, goals or restrictions deemed to be fundamental.
Shareholders also have the right to vote on certain matters affecting a fund or a particular share
class thereof under their respective governing instruments and applicable state law. The following
summarizes the matters on which shareholders have the right to vote as well as the minimum
shareholder vote required to approve the matter. For matters on which shareholders of a MA Trust
or DE Trust do not have the right to vote, the Trustees may nonetheless determine to submit the
matter to shareholders for approval. Where referenced below, the phrase Majority Shareholder
Vote means the vote required by the 1940 Act, which is the lesser of (a) 67% or more of the shares
present at the meeting, if the holders of more than 50% of a funds outstanding shares are present
or represented by proxy; or (b) more than 50% of a funds outstanding shares.
Election and Removal of Trustees.
The shareholders of the MA Trusts are entitled to
vote, under certain circumstances, for the election and the removal of Trustees. Subject to the
rights of the preferred shareholders, if any, the Trustees of the MA Trusts are elected by an
affirmative vote of a majority of the outstanding shares present in person or represented by proxy.
However, the preferred shareholders, if any, voting as a class elect at least two Trustees at all
times. Preferred shareholders, if any, may also elect a majority of Trustees if dividends on the
preferred shares have been unpaid for an amount equal to two full years of dividends. Any Trustees
of the MA Trusts may be removed at any meeting of shareholders by a vote of 80% of the outstanding
shares of the class or classes of shares of beneficial interest that elected such Trustee.
With regard to the DE Trusts, Trustees are elected by the affirmative vote of a majority of
the outstanding shares of the DE Trust present in person or by proxy and entitled to vote at a
meeting of the shareholders at which a quorum is present. Preferred shareholders, voting as a
separate class, solely elect at least two Trustees by the affirmative vote of a majority of the
outstanding preferred shares. Under certain circumstances as set forth by the Trustees in
accordance with the Declaration, holders of preferred shares may elect at least a majority of the
Boards Trustees. The Declaration and bylaws of the DE Trusts do not provide shareholders with the
ability to remove Trustees.
Amendment of Governing Instruments.
Except as described below, the Trustees of the MA
Trusts and DE Trusts have the right to amend, from time to time, the governing instruments. For
the MA Trusts, the Trustees have the power to alter, amend or repeal the bylaws or adopt new
bylaws, provided that bylaws adopted by shareholders may only be altered, amended or repealed by
the shareholders, or by a majority of shares represented in person or by proxy. For the DE Trusts,
the bylaws may be altered, amended, or repealed by the Trustees, without the vote or approval of
shareholders.
C-3
For the MA Trusts, shareholder approval is required to amend the Declaration, except that
the Trustees may make changes necessary to comply with applicable law and to effect provisions
regarding preferred shares, and may make certain other non-material changes, such as to correct a
mistake, without shareholder approval. When shareholder approval is required, the vote needed to
effect an amendment is a majority of the common shares and preferred shares outstanding and
entitled to vote, 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 such common shares and preferred shares. Notwithstanding the foregoing, any amendment to
the Declaration that would reduce the amount payable upon liquidation of the MA Trusts or
diminishing or eliminating shareholder voting rights pertaining thereto requires the approval of
two-thirds of the class or classes of shareholders so affected. In addition, any amendment that
would change or repeal the sections in the Declaration governing merger of the MA Trusts or
conversion of the MA Trusts to open-end funds requires the affirmative vote of 80% of each of the
common shares and preferred shares, voting as separate classes.
For the DE Trusts the Board generally may amend the Declaration without shareholder approval,
except (i): any amendment to the Declaration approved by the Board that would reduce the
shareholders rights to indemnification requires the vote of shareholders owning at least 75% of
the outstanding shares; (ii) any amendments to the Declaration that would change shareholder voting
rights, declassify the Board or change the minimum or maximum number of Trustees permitted require
the affirmative vote or consent by the Board of Trustees followed by the affirmative vote or
consent of shareholders owning at least 75% of the outstanding shares, unless such amendments have
been previously approved, adopted or authorized by the affirmative vote of at least 66 2/3% of the
Board of Trustees, in which case an affirmative Majority Shareholder Vote is required (the DE
Trusts Voting Standard).
Mergers, Reorganizations, and Conversions.
The governing instruments of the MA Trusts
provide that a merger, consolidation, conversion to an open-end company, or sale of assets requires
the affirmative vote of not less than 80% of the common shares and preferred shares, if any,
outstanding and entitled to vote, voting as separate classes. Reorganization or incorporation
requires the approval of the holders of a majority of each of the common shares and preferred
shares, if any, outstanding and entitled to vote, voting as separate classes. If the 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 preferred shares, if any, outstanding and
entitled to vote, voting as separate classes, is sufficient authorization.
For the DE Trusts, any such merger, consolidation, conversion, reorganization, or
reclassification requires approval pursuant to the DE Trusts Voting Standard. The vote required
is in addition to the vote or consent of shareholders otherwise required by law or by the terms of
any class of preferred shares or any agreement between the Trust and any national securities
exchange.
Principal Shareholder Transactions.
The MA Trusts require a vote or consent of 80% of
the common shares or preferred shares, if any, outstanding and entitled to vote, voting as separate
classes, where a principal shareholder of a fund (i.e., any corporation, person or other entity
which is the beneficial owner, directly or indirectly, of more than 5% of the funds outstanding
shares) is the party to certain transactions.
The DE Trusts require a vote pursuant to the DE Trusts Voting Standard for certain principal
shareholder transactions. The vote required is in addition to the vote or consent of shareholders
otherwise required by law or by the terms of any class of preferred shares or any agreement between
the Trust and any national securities exchange.
Termination of the Trust.
With respect to the MA Trusts, the termination of a MA
Trust requires the affirmative vote of not less than 80% of the common shares and preferred shares,
if any, outstanding and entitled to vote, voting as separate classes, at any meeting of
shareholders, or an instrument in writing, without a meeting, signed by a majority of the Trustees
and consented to by an affirmative vote of a majority of the outstanding shares of the MA Trust.
The DE Trusts may be dissolved upon a vote pursuant to the DE Trusts Voting Standard. The
vote required is in addition to the vote or consent of shareholders otherwise required by law or by
the terms of any class of preferred shares or any agreement between a DE Trust and any national
securities exchange. In addition, to spare shareholders the expense of a shareholder meeting in
connection with the dissolution of a Fund, if the affirmative vote of at least 75% of the Board
approves the dissolution, shareholder approval is not required.
C-4
Liability of Shareholders.
The Massachusetts statute governing business trusts does not
include an express provision relating to the limitation of liability of the shareholders of a
Massachusetts business trust. However, the Declarations for the MA Trusts provide that no
shareholder will be personally liable in connection with the acts, obligations or affairs of the
Target Trusts. Consistent with Section 3803 of the Delaware Act, the Declarations of the DE Trusts
generally provide that shareholders will not be subject to personal liability for the acts or
obligations of the DE Trust.
Liability of Trustees and Officers.
Consistent with the 1940 Act, the governing instruments
for both the DE Trusts and the MA Trusts generally provide that no Trustee or officer of a DE Trust
and no Trustee, officer, employee or agent of a MA Trust is subject to any personal liability in
connection with the assets or affairs of the DE Trust and the MA Trust, respectively, except for
liability arising from his or her own willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office (Disabling Conduct).
Indemnification
. The MA Trusts generally indemnify every person who is or has been a Trustee
or officer of the Trust to the fullest extent permitted by law against all liability and against
all expenses reasonably incurred or paid by them in connection with any claim, action, suit or
proceeding in which they becomes involved as a party or otherwise by virtue of their being or
having been a Trustee or officer and against amounts paid or incurred by them in the settlement
thereof.
The Trustees, officers, employees or agents of a DE Trust (Covered Persons) are indemnified
by the DE Trust to the fullest extent permitted by the Delaware Act, the bylaws and other
applicable law. The bylaws provide that every Covered Person is indemnified by the DE Trust for
expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred in any
proceeding to which such Covered Person is made a party or is threatened to be made a party, or is
involved as a witness in, by reason of the fact that such person is a Covered Person. For
proceedings not by or in the right of the DE Trust (
i.e.
, derivative lawsuits), every Covered
Person is indemnified by the DE Trust for expenses actually and reasonably incurred in the
investigation, defense or settlement in any proceeding to which such Covered Person is made a party
or is threatened to be made a party, or is involved as a witness in, by reason of the fact that
such person is a Covered Person. No Covered Person is indemnified for any expenses, judgments,
fines, amounts paid in settlement, or other liability or loss arising by reason of disabling
conduct or for any proceedings by such Covered Person against the Trust. The termination of any
proceeding by conviction, or a plea of nolo contendere or its equivalent, or an entry of an order
of probation prior to judgment, creates a rebuttable presumption that the person engaged in
Disabling Conduct.
A DE Trust is indemnified by any common shareholder who brings an action against the Trust for
all costs, expenses, penalties, fines or other amounts arising from such action to the extent that
the shareholder is not the prevailing party. The DE Trust is permitted to redeem shares of and set
off against any distributions to the shareholder for such amounts liable by the shareholder to the
DE Trust.
The Acquiring Fund
The Acquiring Fund is a Massachusetts business trust. Under Proposal 1, if approved, the
Acquiring Fund will reorganize into a newly formed Delaware statutory trust (the DE Trust). The
following is a discussion of certain provisions of the governing instruments and governing laws of
the Acquiring Fund and the corresponding DE Trust, but is not a complete description thereof.
Further information about the Acquiring Funds governance structure is contained in the Acquiring
Funds shareholder reports and its governing documents.
Shares.
The Trustees of the Acquiring Fund have the power to issue shares, including preferred
shares, without shareholder approval. The governing documents of the Acquiring Fund indicate that
the amount of common shares that the Acquiring Fund may issue is unlimited. Preferred shares are
limited to the amount set forth in the Declarations (defined below). Shares of the Acquiring Fund
have no preemptive rights.
C-5
The Trustees of the DE Trust have the power to issue shares, including preferred shares,
without shareholder approval. The governing documents of the DE Trust indicate that the amount of
common and preferred shares that the DE Trust may issue is unlimited. Shares of the DE Trust have
no preemptive rights.
Organization
. The Acquiring Fund is organized as a Massachusetts business trust, under the
laws of the Commonwealth of Massachusetts. The Acquiring Fund is governed by its Declaration of
Trust (a Declaration) and its bylaws, each as may be amended, and its business and affairs are
managed under the supervision of its Board of Trustees.
The DE Trust is organized as a Delaware statutory trust pursuant to the Delaware Statutory
Trust Act (Delaware Act). The DE Trust is governed by its Amended and Restated Agreement and
Declaration of Trust (also, a Declaration and, together with the Declaration of the Acquiring
Fund, the Declarations) and its bylaws, and its business and affairs are managed under the
supervision of its Board of Trustees.
Composition of the Board of Trustees.
The Boards of Trustees of both the Acquiring Fund and
the DE Trust are divided into three classes, with the election of each class staggered so that each
class is only up for election once every three years.
Shareholder Meetings and Rights of Shareholders to Call a Meeting
. The stock exchanges on
which the Acquiring Fund shares are currently, and the DE Trusts shares will be, listed require
annual meetings to elect trustees.
The governing instruments for the Acquiring Fund provide that special meetings of shareholders
may be called by a majority of the Trustees. In addition, special meetings of shareholders may
also be called by any Trustee upon written request from shareholders holding in the aggregate not
less than 51% of the outstanding common and/or preferred shares, if any (depending on whether they
are voting as a single class or separately).
The bylaws of the DE Trust authorize the Trustees to call a meeting of the shareholders for
the election of Trustees. The bylaws of the DE Trust also authorize a meeting of shareholders for
any purpose determined by the Trustees. The bylaws of the DE Trust state that shareholders have no
power to call a special meeting of shareholders.
Submission of Shareholder Proposals
. The Acquiring Fund does not have provisions in its
governing instruments that require shareholders to provide advance notice to the Acquiring Fund in
order to present a proposal at a shareholder meeting. Nonetheless, the federal securities laws,
which apply to the Acquiring Fund and the DE Trust, require that certain conditions be met to
present any proposal at a shareholder meeting.
The matters to be considered and brought before an annual or special meeting of shareholders
of the DE Trust are limited to only those matters, including the nomination and election of
Trustees, that are properly brought before the meeting. For proposals submitted by shareholders,
the bylaws of the DE Trust contain provisions which require that notice be given to the DE Trust by
an otherwise eligible shareholder in advance of the annual or special shareholder meeting in order
for the shareholder to present a proposal at any such meeting and requires shareholders to provide
certain information in connection with the proposal. These requirements are intended to provide
the Board the opportunity to better evaluate the proposal and provide additional information to
shareholders for their consideration in connection with the proposal. Failure to satisfy the
requirements of these advance notice provisions means that a shareholder may not be able to present
a proposal at the annual or special shareholder meeting.
In general, for nominations and any other proposals to be properly brought before an annual
meeting of shareholders by a shareholder of the DE Trust, written notice must be delivered to the
Secretary of the DE Trust not less than 90 days, nor more than 120 days, prior to the first
anniversary of the preceding years annual meeting. If the annual meeting is not scheduled to be
held within a period that commences 30 days before such anniversary and ends 30 days after such
anniversary (an Other Annual Meeting Date), the written notice must be delivered by the later of
the 90
th
day prior to the meeting or the 10
th
day following the public
announcement or disclosure of the meeting date provided, however, that if the Other Annual Meeting
Date was disclosed in the proxy statement for the prior years annual meeting, the dates for
receipt of the written notice shall be calculated based on the Other Annual Meeting Date and
disclosed in the proxy statement for the prior years annual meeting. If the number of Trustees to
C-6
be elected to the Board is increased and either all of the nominees for Trustee or the size of the
increased Board are not publicly announced or disclosed at least 70 days prior to the first
anniversary of the preceding years annual meeting, written notice will be considered timely if
delivered to the Secretary of the DE Trust no later than the 10
th
date after such public
announcement or disclosure. With respect to the nomination of individuals for election to the
Board of Trustees at a special shareholder meeting, written notice must be delivered by a
shareholder of the DE Trust to the Secretary of the DE Trust no later than the 10
th
date
after such meeting is publicly announced or disclosed. Specific information, as set forth in the
bylaws, about the nominee, the shareholder making the nomination, and the proposal must also be
delivered, and updated as necessary if proposed at an annual meeting, by the shareholder of the DE
Trust. The shareholder or a qualified representative must also appear at the annual or special
meeting of shareholders to present about the nomination or proposed business.
Quorum
. The governing instruments of the Acquiring Fund provide that a quorum will exist if
shareholders representing a majority of the outstanding shares of each class or series or combined
class entitled to vote are present at the meeting in person or by proxy.
The bylaws of the DE Trust provide that a quorum will exist if shareholders representing a
majority of the outstanding shares entitled to vote are present or represented by proxy, except
when a larger quorum is required by applicable law or the requirements of any securities exchange
on which shares are listed for trading, in which case the quorum must comply with such
requirements.
Number of Votes; Aggregate Voting.
The governing instruments of the Acquiring Fund and the
Declaration and bylaws of the DE Trust provide that each shareholder is entitled to one vote for
each whole share held as to any matter on which the shareholder is entitled to vote, and a
proportionate fractional vote for each fractional share held. The Acquiring Fund and the DE Trust
do not provide for cumulative voting for the election or removal of Trustees.
The governing instruments of the Acquiring Fund generally provide that all share classes vote
by class or series of the Acquiring Fund, except as otherwise provided by applicable law, the
governing instruments or resolution of the Trustees.
The Declaration for the DE Trust generally provides that all shares are voted as a single
class, except when required by applicable law, the governing instruments, or when the Trustees have
determined that the matter affects the interests of one or more classes, in which case only the
shareholders of all such affected classes are entitled to vote on the matter.
Derivative Actions.
Shareholders of the Acquiring Fund have the power to vote 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 Acquiring Fund or its shareholders. Such
shareholders have the power to vote to the same extent as the stockholders of a Massachusetts
corporation.
The Declaration for the DE Trust states that a shareholder may bring a derivative action on
behalf of the DE Trust only if several conditions are met. These conditions include, among other
things, a pre-suit demand upon the Board of Trustees and, unless a demand is not required,
shareholders who hold at least a majority of the outstanding shares must join in the demand request
for the Board of Trustees to commence an action, and the Board of Trustees must be afforded a
reasonable amount of time to consider such shareholder request and to investigate the basis of the
claim.
Right to Vote
. The 1940 Act provides that shareholders of a fund have the power to vote with
respect to certain matters: specifically, for the election of trustees, the selection of auditors
(under certain circumstances), approval of investment advisory agreements and plans of
distribution, and amendments to policies, goals or restrictions deemed to be fundamental.
Shareholders also have the right to vote on certain matters affecting a fund or a particular share
class thereof under their respective governing instruments and applicable state law. The following
summarizes the matters on which shareholders have the right to vote as well as the minimum
shareholder vote required to approve the matter. For matters on which shareholders of the
Acquiring Fund or DE Trust do not have the right to vote, the Trustees may nonetheless determine to
submit the matter to shareholders for approval. Where referenced below, the phrase Majority
Shareholder Vote means the vote required by the 1940 Act, which is the lesser of (a) 67% or more
of the shares present at the meeting, if the holders of more than 50% of a funds outstanding
shares are present or represented by proxy; or (b) more than 50% of a funds outstanding shares.
C-7
Election and Removal of Trustees
.
The shareholders of the Acquiring Fund are entitled
to vote, under certain circumstances, for the election and the removal of Trustees. Subject to the
rights of the preferred shareholders, if any, the Trustees of the Acquiring Fund are elected by a
plurality vote (
i.e.
, the nominees receiving the greatest number of votes are elected). Any
Trustee of the Acquiring Fund may be removed at any meeting of shareholders by a vote of two-thirds
of the outstanding shares of the class or classes of shares of beneficial interest that elected
such Trustee.
With regard to the DE Trust, Trustees are elected by the affirmative vote of a majority of the
outstanding shares of the DE Trust present in person or by proxy and entitled to vote at a meeting
of the shareholders at which a quorum is present. Preferred shareholders, voting as a separate
class, solely elect at least two Trustees by the affirmative vote of a majority of the outstanding
preferred shares. Under certain circumstances as set forth by the Trustees in accordance with the
Declaration, holders of preferred shares may elect at least a majority of the Boards Trustees.
The Declaration and bylaws of the DE Trust do not provide shareholders with the ability to remove
Trustees.
Amendment of Governing Instruments
.
Except as described below, the Trustees of the
Acquiring Fund and DE Trust have the right to amend, from time to time, the governing instruments.
For the Acquiring Fund, the Trustees have the power to alter, amend or repeal the bylaws or adopt
new bylaws, provided that bylaws adopted by shareholders may only be altered, amended or repealed
by the shareholders. For the DE Trust, the bylaws may be altered, amended, or repealed by the
Trustees, without the vote or approval of shareholders.
For the Acquiring Fund, shareholder approval is required to amend the Declaration, except that
the Trustees may make changes necessary to comply with applicable law and to effect the provisions
regarding preferred shares, and may make certain other non-material changes, such as to correct a
mistake, without shareholder approval. When shareholder approval is required, the vote needed to
effect an amendment is a Majority Shareholder Vote of the common shares and the preferred shares,
if any, outstanding and entitled to vote, 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 such common shares and preferred shares. Notwithstanding the
foregoing, any amendment to the Declaration that would reduce the amount payable upon liquidation
of the Acquiring Fund or diminishing or eliminating shareholder voting rights pertaining thereto
requires the approval of two-thirds of the class or classes of shareholders so affected. In
addition, any amendment that would change or repeal the sections in the Declaration governing
termination or merger of the Acquiring Fund or conversion of the Acquiring Fund to an open-end fund
requires the affirmative vote of 75% of each of the common shares and preferred shares, voting as
separate classes.
For the DE Trust, the Board generally may amend the Declaration without shareholder approval,
except (i): any amendment to the Declaration approved by the Board that would reduce the
shareholders rights to indemnification requires the vote of shareholders owning at least 75% of
the outstanding shares; (ii) any amendments to the Declaration that would change shareholder voting
rights, declassify the Board or change the minimum or maximum number of Trustees permitted require
the affirmative vote or consent by the Board of Trustees followed by the affirmative vote or
consent of shareholders owning at least 75% of the outstanding shares, unless such amendments have
been previously approved, adopted or authorized by the affirmative vote of at least 66 2/3% of the
Board of Trustees, in which case an affirmative Majority Shareholder Vote is required (the DE
Trusts Voting Standard).
Mergers, Reorganizations, and Conversions
.
The governing instruments of the Acquiring
Fund provide that a merger, consolidation, sale, lease or exchange requires the affirmative vote of
not less than 66 2/3% of the common shares and the preferred shares, if any, outstanding and
entitled to vote, voting as separate classes. If the 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 preferred shares, if any, outstanding and entitled to vote, voting as
separate classes, is sufficient authorization. Conversion to an open-end company is required to be
approved by at least a majority of the Trustees, including those who are not interested persons as
defined in the 1940 Act, and a Majority Shareholder Vote of each of the common shares and preferred
shareholders, if any, voting as separate classes. An incorporation or reorganization requires the
approval of a majority of the common shares and preferred shares, if any, outstanding and entitled
to vote, voting as separate classes.
C-8
For the DE Trust, any such merger, consolidation, conversion, reorganization, or
reclassification requires approval pursuant to the DE Trusts Voting Standard. The vote required
is in addition to the vote or consent of shareholders otherwise required by law or by the terms of
any class of preferred shares or any agreement between the Trust and any national securities
exchange.
Principal Shareholder Transactions
. The Acquiring Fund requires a vote or consent of
66 2/3% of the common or preferred shares outstanding and entitled to vote, voting as separate
classes, where a principal shareholder (
i.e
., any corporation, person or other entity which is the
beneficial owner, directly or indirectly, of more than 5% of the outstanding shares) is the party
to certain transactions.
The DE Trust requires a vote pursuant to the DE Trusts Voting Standard for certain principal
shareholder transactions. The vote required is in addition to the vote or consent of shareholders
otherwise required by law or by the terms of any class of preferred shares or any agreement between
the Trust and any national securities exchange.
Termination of a Trust
.
With respect to the Acquiring Fund, the affirmative vote of
not less than 75% of the common shares and preferred shares, if any, outstanding and entitled to
vote, voting as separate classes, at any meeting of shareholders, 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 75% of each of such common shares and preferred shares, is required for termination of the
Acquiring Fund.
The DE Trust may be dissolved upon a vote pursuant to the DE Trusts Voting Standard. The
vote required is in addition to the vote or consent of shareholders otherwise required by law or by
the terms of any class of preferred shares or any agreement between the DE Trust and any national
securities exchange. In addition, to spare shareholders the expense of a shareholder meeting in
connection with the dissolution of a Fund, if the affirmative vote of at least 75% of the Board
approves the dissolution, shareholder approval is not required.
Liability of Shareholders.
The Massachusetts statute governing business trusts does not
include an express provision relating to the limitation of liability of the shareholders of a
Massachusetts business trust. However, the Declaration for the Acquiring Fund provides that no
shareholder will be personally liable in connection with the acts, obligations or affairs of the
Acquiring Fund. Consistent with Section 3803 of the Delaware Act, the Declaration of the DE Trust
generally provides that shareholders will not be subject to personal liability for the acts or
obligations of the DE Trust.
Liability of Trustees and Officers.
Consistent with the 1940 Act, the governing instruments
for both the DE Trust and the Acquiring Fund generally provide that no Trustee or officer of the DE
Trust and no Trustee, officer, employee or agent of the Acquiring Fund is subject to any personal
liability in connection with the assets or affairs of the DE Trust and the Acquiring Fund,
respectively, except for liability arising from his or her own willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of the office
(Disabling Conduct).
Indemnification
. The Acquiring Fund generally indemnifies every person who is or has been a
Trustee or officer of the Trust to the fullest extent permitted by law against all liability and
against all expenses reasonably incurred or paid by them in connection with any claim, action, suit
or proceeding in which they becomes involved as a party or otherwise by virtue of their being or
having been a Trustee or officer and against amounts paid or incurred by them in the settlement
thereof, except otherwise for Disabling Conduct.
The Trustees, officers, employees or agents of the DE Trust (Covered Persons) are
indemnified by the DE Trust to the fullest extent permitted by the Delaware Act, the bylaws and
other applicable law. The bylaws provide that every Covered Person is indemnified by the DE Trust
for expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred in
any proceeding to which such Covered Person is made a party or is threatened to be made a party, or
is involved as a witness in, by reason of the fact that such person is a Covered Person. For
proceedings not by or in the right of the DE Trust (
i.e.
, derivative lawsuits), every Covered
Person is indemnified by the DE Trust for expenses actually and reasonably incurred in the
investigation, defense or
C-9
settlement in any proceeding to which such Covered Person is made a party
or is threatened to be made a party, or is involved as a witness in, by reason of the fact that
such person is a Covered Person. No Covered Person is indemnified for any expenses, judgments,
fines, amounts paid in settlement, or other liability or loss arising by reason of Disabling
Conduct or for any proceedings by such Covered Person against the Trust. The termination of any
proceeding by conviction, or a plea of nolo contendere or its equivalent, or an entry of an order
of probation prior to judgment, creates a rebuttable presumption that the person engaged in
Disabling Conduct.
A DE Trust is indemnified by any common shareholder who brings an action against the Trust for
all costs, expenses, penalties, fines or other amounts arising from such action to the extent that
the shareholder is not the prevailing party. The DE Trust is permitted to redeem shares of and set
off against any distributions to the shareholder for such amounts liable by the shareholder to the
DE Trust.
C-10
EXHIBIT D
FORM OF
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (
Agreement
)
is adopted as of this day
of ,
2012 by and among (i) each of the Invesco closed-end
registered investment companies identified as a Merging Fund on
Exhibit A hereto, each a Delaware statutory trust (each a
Merging Fund
); (ii) each of the Invesco
closed-end registered investment companies identified as a
Surviving Fund on Exhibit A hereto, each a Delaware
statutory trust (each a
Surviving Fund
); and
(iii) Invesco Advisers, Inc. (
IAI
). The
predecessor to each Merging Fund, each a Massachusetts business
trust except the predecessor to the Invesco High Yield
Investment Fund, Inc., which is a Maryland corporation (each a
Predecessor Merging Fund
), and the
predecessor to each Surviving Fund, each a Massachusetts
business trust (each a
Predecessor Surviving
Fund
), joins this agreement solely for the purposes of
making the representations in paragraph 4.1 or 4.2, as
applicable, and agreeing to be bound by paragraphs 5.1(a),
5.1(b), 5.1(d) and 5.1(i). Each Merging Fund and Surviving Fund
are together referred to herein as the
Funds
and each Predecessor Merging Fund and Predecessor Surviving Fund
are referred to individually as a
Predecessor
Fund.
WHEREAS, each Merging Fund and each Surviving Fund is a
closed-end, registered investment company of the management
type; and
WHEREAS, this Agreement is intended to be and is adopted as a
plan of reorganization with respect to each Merger
(as defined below) within the meaning of Section 368(a) of
the United States Internal Revenue Code of 1986, as amended (the
Code
), and Treasury Regulations
Sections 1.368-2(g)
and 1.368-3(a); and
WHEREAS, each merger will consist of the merger of a Merging
Fund into its corresponding Surviving Fund, as set forth on
Exhibit A, pursuant to the provisions of the Delaware
Statutory Trust Act, 12 Del. C. Section 3801, et seq.
(the
DSTA
), and will have the consequences
described in Section 1.2 below (each such transaction, a
Merger
and collectively, the
Mergers
); and
WHEREAS, a condition precedent to each Merger is the
redomestication of the Predecessor Merging Fund and the
Predecessor Surviving Fund from a Massachusetts business trust
or Maryland corporation, as applicable, to a Delaware statutory
trust, which will include the transfer of all of the Predecessor
Funds assets and assumption of all of the Predecessor
Funds liabilities by the applicable Fund in exchange for
the issuance by such Fund to the Predecessor Fund of shares of
beneficial interest of the Fund and the distribution of those
shares to the Predecessor Funds shareholders (each a
Redomestication
);
WHEREAS, the Boards of Trustees of each Surviving Fund and of
each Merging Fund have determined that the Merger is in the best
interests of the Surviving Fund and the Merging Fund,
respectively, and the interests of the shareholders of the
Surviving Fund and the Merging Fund will not be diluted as a
result of the Merger;
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, and intending to
be legally bound, the parties hereto covenant and agree as
follows:
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|
1.
|
DESCRIPTION
OF THE MERGERS
|
1.1. It is the intention of the parties hereto that
each Merger described herein shall be conducted separately from
the others, and a party that is not a party to a Merger shall
incur no obligations, duties or liabilities, nor make any
representations, warranties or covenants, with respect to such
Merger by reason of being a party to this Agreement. If any one
or more Mergers should fail to be consummated, such failure
shall not affect the other Mergers in any way.
1.2. Subject to the terms and conditions herein set
forth and on the basis of the representations and warranties
contained herein, with respect to each Merging Fund and its
corresponding Surviving Fund, at the Closing Time (as defined
below), the Merging Fund shall be merged with and into the
Surviving Fund, the separate existence of the Merging Fund as a
Delaware Statutory Trust and registered investment company shall
cease, and the Surviving Fund will be the surviving entity for
all purposes, including accounting purposes and for purposes of
presenting investment performance history.
1.3. Upon the terms and subject to the conditions of
this Agreement, on the Closing Date (as defined below), the
applicable parties shall cause the Merger to be consummated by
filing a certificate of merger (a
Certificate of
Merger
) with the Secretary of State of the State of
Delaware in accordance with Section 3815 of the DSTA. The
Merger shall become effective at 9:15 a.m. Eastern
Time, as shall be specified in a Certificate of Merger duly
filed with the Secretary of the State of Delaware, or at such
later date or time as the parties shall agree and specify in the
Certificate of Merger (the
Closing Time
).
1.4. As a result of operation of the applicable
provisions of the DSTA, the following events occur
simultaneously at the Closing Time, except as otherwise provided
herein:
(a) all of the assets, property, goodwill, rights,
privileges, powers and franchises of the Merging Fund,
including, without limitation, all cash, securities, commodities
and futures interests, claims (whether absolute or contingent,
known or unknown, accrued or unaccrued and including, without
limitation, any interest in pending or future legal claims in
connection with past or present portfolio holdings, whether in
the form of class action claims, opt-out or other direct
litigation claims, or regulator or government-established
investor recovery fund claims, and any and all resulting
recoveries), dividends or interest receivable,
D-1
deferred or prepaid expenses shown as an asset on the books of
the Merging Fund on the Closing Date, goodwill, contractual
rights, originals or copies of all books and records of the
Merging Fund and all intangible property that is owned by the
Merging Fund (collectively, the
Merging
Fund Assets
) shall vest in the Surviving Fund,
and all of the liabilities, debts, obligations, restrictions and
duties of the Merging Fund (whether known or unknown, absolute
or contingent, accrued or unaccrued and including, without
limitation, any liabilities of the Merging Fund to indemnify the
trustees or officers of the Merging Fund or any other persons
under the Merging Funds Declaration of Trust or otherwise,
and including all liabilities, debts, obligations, restrictions
and duties of the Predecessor Fund assumed by the Merging Fund
pursuant to the Redomestication) (collectively, the
Merging Fund Liabilities
) shall become
the liabilities, debts, obligations, restrictions and duties of
the Surviving Fund;
(b) Merging Fund common shares of beneficial interest (the
Merging Fund Common Shares
) shall be
converted into Surviving Fund common shares of beneficial
interest (the
Surviving Fund Common
Shares
) and Merging Fund preferred shares of
beneficial interest, if any (the
Merging
Fund Preferred Shares
), shall be converted into
Surviving Fund preferred shares of beneficial interest (the
Surviving Fund Preferred Shares
). Prior
to the Closing Time or as soon as practicable thereafter, the
Surviving Fund will open shareholder accounts on the share
ledger records of the Surviving Fund in the names of and in the
amounts due to the shareholders of the Merging Fund Common
Shares and Merging Fund Preferred Shares (if any) based on
their respective holdings in the Merging Fund as of the close of
business on the Valuation Date, as more fully described in
Section 3 below;
(c) At the Closing Time, the agreement and declaration of
trust and bylaws of the Surviving Fund in effect immediately
prior to the Closing Time shall continue to be the agreement and
declaration of trust and bylaws of the Surviving Fund, until and
unless thereafter amended in accordance with their respective
terms;
(d) From and after the Closing Time, the trustees and
officers of the Surviving Fund shall continue to be the trustees
and officers of the combined Merging Fund and Surviving Fund,
and such trustees and officers shall serve for such terms as are
provided in the agreement and declaration of trust and the
bylaws of the Surviving Fund; and
(e) From and after the Closing Time, the Surviving
Funds investment objectives, strategies, policies and
restrictions shall continue to be the investment objectives,
strategies, policies and restrictions of the combined Merging
Fund and Surviving Fund.
2.1. Computations of value in connection with the
Closing (as defined below) of each Merger shall be as of
immediately after the close of regular trading on the New York
Stock Exchange (
NYSE
), which shall reflect
the declaration of any dividends, on the business day
immediately preceding the Closing Date (the
Valuation
Date
).
2.2. All computations of value of the Merging Fund,
the Merging Fund Common Shares, the Merging
Fund Preferred Shares (if any), the Merging
Fund Assets and the Merging Fund Liabilities shall be
made using the Merging Funds valuation procedures
established by the Merging Funds Board of Trustees. All
computations of value of the Surviving Fund, the Surviving
Fund Common Shares, the Surviving Fund Preferred
Shares (if any) and the Surviving Funds assets and
liabilities shall be made using the Surviving Funds
valuation procedures established by the Surviving Funds
Board of Trustees.
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|
3.
|
CLOSING
AND CLOSING DATE
|
3.1. Each Merger shall close
on ,
2012 or such other date as the parties may agree with respect to
any or all Mergers (the
Closing Date
). All
acts taking place at the closing of a Merger (the
Closing
) shall be deemed to take place
simultaneously as of the Closing Time unless otherwise agreed to
by the parties. In the event that on the Valuation Date or the
Closing Date (a) the NYSE or another primary trading market
for portfolio securities of the Merging Fund (each, an
Exchange
) shall be closed to trading or
trading thereupon shall be restricted, or (b) trading or
the reporting of trading on such Exchange or elsewhere shall be
disrupted so that, in the judgment of the Board of Trustees of
the Merging Fund or the corresponding Surviving Fund or the
authorized officers of either of such entities, accurate
appraisal of the value of the net assets of the Surviving Fund
or the Merging Fund, respectively, is impracticable, the Closing
Date shall be postponed until the first business day after the
day when trading shall have been fully resumed and reporting
shall have been restored.
3.2. With respect to each Merger:
(a) The Merging Funds portfolio securities,
investments or other assets that are represented by a
certificate or other written instrument shall be transferred and
delivered by the Merging Fund as of the Closing Date, or as soon
as reasonably practicable thereafter, to the Surviving
Funds custodian for the account of the Surviving Fund,
duly endorsed in proper form for transfer and in such condition
as to constitute good delivery thereof.
(b) No later than the Closing, the Merging Fund shall
provide the Surviving Fund or its transfer agent with the names,
addresses, dividend reinvestment elections and tax withholding
status of the Merging Fund shareholders as of the Valuation Date
and the information and documentation maintained by the Merging
Fund or its agents relating to the identification and
verification of the Merging Fund shareholders under the USA
PATRIOT Act and other applicable anti-money laundering laws,
rules and regulations and such other information as the
Surviving Fund may reasonably request. The Surviving Fund and
its transfer agent
D-2
shall have no obligation to inquire as to the validity,
propriety or correctness of any such instruction, information or
documentation, but shall, in each case, assume that such
instruction, information or documentation is valid, proper,
correct and complete.
(c) The Surviving Fund shall issue and deliver to the
Merging Fund a confirmation evidencing the Surviving
Fund Common Shares and Surviving Fund Preferred
Shares, if any, to be credited on the Closing Date, or provide
other evidence satisfactory to the Merging Fund that such shares
have been credited to the Merging Fund shareholders
accounts on the books of the Surviving Fund.
(d) Surviving Fund Common Shares of an aggregate net
asset value equal to the aggregate net asset value of the
Merging Fund Common Shares shall be issued by the Surviving
Fund to the holders of the Merging Fund Common Shares in
exchange for all of the Merging Fund Common Shares. The
aggregate net asset value of such shares shall be determined as
set forth in Section 2 above.
(e) Surviving Fund Preferred Shares of an aggregate
liquidation preference equal to the aggregate liquidation
preference of the Merging Fund Preferred Shares shall be
issued by the Surviving Fund to the holders of the Merging
Fund Preferred Shares, if any, in exchange for all of the
Merging Fund Preferred Shares. The terms of the Surviving
Fund Preferred Shares shall be substantially the same as
the terms of the Merging Fund Preferred Shares.
(f) The Surviving Fund shall not issue certificates
representing Surviving Fund Common Shares in connection
with the Merger. Any certificates representing ownership of
Merging Fund Common Shares that remain outstanding at the
Closing Time shall be deemed to be cancelled by operation of law
and shall no longer evidence ownership of the Merging Fund or
its shares.
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4.
|
REPRESENTATIONS
AND WARRANTIES
|
4.1. Each Merging Fund and Predecessor Merging Fund
represents and warrants to the corresponding Surviving Fund as
follows:
(a) The Merging Fund is duly formed as a statutory trust,
validly existing, and in good standing under the laws of the
State of Delaware with power under its agreement and declaration
of trust and bylaws (
Governing Documents
), to
own all of its Merging Fund Assets, to carry on its
business as it is now being conducted and to enter into this
Agreement and perform its obligations hereunder;
(b) The Merging Fund is registered under the Investment
Company Act of 1940, as amended (
1940 Act
),
as a closed-end management investment company, and such
registration has not been revoked or rescinded and is in full
force and effect;
(c) No consent, approval, authorization, or order of any
court, governmental authority, the Financial Industry Regulatory
Authority (
FINRA
) or any stock exchange on
which shares of the Merging Fund are listed is required for the
consummation by the Merging Fund of the transactions
contemplated herein, except such as have been or will be
obtained (at or prior to the Closing Time);
(d) The Merging Fund is not obligated under any provision
of its Governing Documents and is not a party to any contract or
other commitment or obligation, and is not subject to any order
or decree, which would be violated by its execution or
performance under this Agreement, except insofar as the Funds
have mutually agreed to amend such contract or other commitment
or obligation to cure any potential violation as a condition
precedent to the Merger;
(e) The Merging Fund is authorized to issue an unlimited
number of Common Shares and an unlimited number of Preferred
Shares and all of the issued and outstanding shares of
beneficial interest of the Merging Fund are, and on the Closing
Date will be, duly authorized and validly issued and
outstanding, fully paid and non-assessable by the Merging Fund
and no shareholder of the Merging Fund will have any preemptive
right of subscription or purchase in respect thereof and, in
every state where offered or sold, such offers and sales by the
Merging Fund have been in compliance in all material respects
with applicable registration
and/or
notice requirements of the Securities Act of 1933, as amended
(the 1933 Act) and state and District of
Columbia securities laws;
(f) Except as otherwise disclosed to and accepted by or on
behalf of the Surviving Fund, the Merging Fund will on the
Closing Date have good title to the Merging Fund Assets and
have full right, power and authority to sell, assign, transfer
and deliver such Merging Fund Assets free of adverse
claims, including any liens or other encumbrances, and upon
delivery and payment for such Merging Fund Assets, the
Surviving Fund will acquire good title thereto, free of adverse
claims and subject to no restrictions on the full transfer
thereof, including, without limitation, such restrictions as
might arise under the 1933 Act, provided that the Surviving
Fund will acquire Merging Fund Assets that are segregated
as collateral for the Merging Funds derivative positions,
including, without limitation, as collateral for swap positions
and as margin for futures positions, subject to such segregation
and liens that apply to such Merging Fund Assets;
(g) The financial statements of the Merging Fund for the
Merging Funds most recently completed fiscal year have
been audited by the independent registered public accounting
firm appointed by the Merging Funds Board of Trustees.
Such statements, as well as the unaudited, semi-annual financial
statements for the semi-annual period next succeeding the
Merging Funds most recently completed fiscal year, if any,
were prepared in accordance with accounting principles generally
accepted in the United States of America
(
GAAP
) consistently applied, and such
statements present fairly, in all material respects, the
financial condition of the Merging Fund as of such date in
accordance with GAAP;
D-3
(h) The Merging Fund has no known liabilities of a material
nature, contingent or otherwise, other than those shown as
belonging to it on its statement of assets and liabilities as of
the Merging Funds most recently completed fiscal year or
half-year and those incurred in the ordinary course of the
Merging Funds business as an investment company since such
date;
(i) There are no material legal, administrative or other
proceedings pending or, to the knowledge of the Merging Fund,
threatened against the Merging Fund which assert liability or
which may, if successfully prosecuted to their conclusion,
result in liability on the part of the Merging Fund, other than
as have been disclosed to the Surviving Fund;
(j) The registration statement filed by the Surviving Fund
on
Form N-14,
which includes, among other things, a proxy statement of the
Merging Fund and a prospectus of the Surviving Fund with respect
to the transactions contemplated herein (including the statement
of additional information incorporated by reference therein, the
Joint Proxy Statement/Prospectus
), and any
supplement or amendment thereto or to the documents included or
incorporated by reference therein (collectively, as so amended
or supplemented, the
N-14 Registration
Statement
), on its effective date, at the time of the
shareholders meeting called to vote on the proposals set forth
in the Joint Proxy Statement/Prospectus and on the Closing Date,
insofar as it relates to the Merging Fund, (i) complied or
will comply in all material respects with the 1933 Act, the
Securities Exchange Act of 1934, as amended (the
1934 Act), and the 1940 Act and the rules and
regulations thereunder (ii) did not or will not contain any
untrue statement of a material fact or omit any material fact
required to be stated therein or necessary to make the
statements therein not misleading; and the Joint Proxy
Statement/Prospectus, as of its date, at the time of the
shareholders meeting called to vote on the proposals set forth
therein and on the Closing Date, insofar as it relates to the
Merging Fund, (i) complied or will comply in all material
respects with the 1933 Act, the 1934 Act and the 1940
Act and the rules and regulations thereunder and (ii) did
not or will not contain any untrue statement of a material fact
or omit any material fact required to be stated therein or
necessary to make the statements therein in light of the
circumstances under which they were made, not misleading;
provided, however, that the representations and warranties in
this subsection shall apply only to statements in or omissions
from the N-14 Registration Statement or the Joint Proxy
Statement/Prospectus made in reliance upon and in conformity
with information furnished by the Merging Fund for use in the
N-14 Registration Statement or the Joint Proxy
Statement/Prospectus.
(k) On the Closing Date, all material Returns (as defined
below) of the Merging Fund required by law to have been filed by
such date (including any extensions) shall have been filed and
are or will be true, correct and complete in all material
respects, and all Taxes (as defined below) shown as due or
claimed to be due by any government entity shall have been paid
or provision has been made for the payment thereof. To the
Merging Funds knowledge, no such Return is currently under
audit by any federal, state, local or foreign Tax authority; no
assessment has been asserted with respect to such Returns; there
are no levies, liens or other encumbrances on the Merging Fund
or its assets resulting from the non-payment of any Taxes; no
waivers of the time to assess any such Taxes are outstanding nor
are any written requests for such waivers pending; and adequate
provision has been made in the Merging Fund financial statements
for all Taxes in respect of all periods ended on or before the
date of such financial statements. As used in this Agreement,
Tax
or
Taxes
means any
tax, governmental fee or other like assessment or charge of any
kind whatsoever (including, but not limited to, withholding on
amounts paid to or by any person), together with any interest,
penalty, addition to tax or additional amount imposed by any
governmental authority (domestic or foreign) responsible for the
imposition of any such tax.
Return
means
reports, returns, information returns, elections, agreements,
declarations, or other documents of any nature or kind
(including any attached schedules, supplements and additional or
supporting material) filed or required to be filed with respect
to Taxes, including any claim for refund, amended return or
declaration of estimated Taxes (and including any amendments
with respect thereto);
(l) The Merging Fund has elected to be a regulated
investment company under Subchapter M of the Code and is a
fund that is treated as a separate corporation under
Section 851(g) of the Code. The Merging Fund has qualified
for treatment as a regulated investment company for each taxable
year since inception that has ended prior to the Closing Date
and will have satisfied the requirements of Part I of
Subchapter M of the Code to maintain such qualification for the
period beginning on the first day of its current taxable year
and ending on the Closing Date. The Merging Fund has no earnings
or profits accumulated in any taxable year in which the
provisions of Subchapter M of the Code did not apply to it. In
order to (A) ensure continued qualification of the Merging
Fund for treatment as a regulated investment company for tax
purposes and (B) eliminate any tax liability of the Merging
Fund arising by reason of undistributed investment company
taxable income or net capital gain, the Merging Fund, before the
Closing Date, will declare on or prior to the Valuation Date to
the shareholders of the Merging Fund a dividend or dividends
that, together with all previous such dividends, shall have the
effect of distributing (i) all of Merging Funds
investment company taxable income for the taxable year ended
prior to the Closing Date and substantially all of such
investment company taxable income for the final taxable year
ending on the Closing Date (in each case determined without
regard to any deductions for dividends paid); (ii) all of
Merging Funds net capital gain recognized in its taxable
year ended prior to the Closing Date and substantially all of
any such net capital gain recognized in such final taxable year
(in each case after reduction for any capital loss carryover);
and (iii) at least 90 percent of the excess, if any,
of the Merging Funds interest income excludible from gross
income under Section 103(a) of the Code over its deductions
disallowed under Sections 265 and 171(a)(2) of the Code for
the taxable year prior to the Closing Date and at least
90 percent of such net tax-exempt income for such final
taxable year;
D-4
(m) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing
Date by all necessary action, if any, on the part of the Board
of Trustees of the Merging Fund and, subject to the approval of
the shareholders of the Funds and the due authorization,
execution and delivery of this Agreement by IAI, this Agreement
will constitute a valid and binding obligation of the Merging
Fund enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting
creditors rights and to general equity principles;
(n) All of the issued and outstanding Merging
Fund Common Shares were offered for sale and sold in
conformity with all applicable federal and state securities laws.
(o) The books and records of the Merging Fund are true and
correct in all material respects and contain no material
omissions with respect to information required to be maintained
under the laws, rules and regulations applicable to the Merging
Fund;
(p) The Merging Fund is not under the jurisdiction of a
court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code;
(q) The Merging Fund has no unamortized or unpaid
organizational fees or expenses; and
(r) There are no material contracts outstanding to which
the Merging Fund is a party that have not been disclosed in the
N-14 Registration Statement or that will not otherwise be
disclosed to the Surviving Fund prior to the Closing Time.
4.2. Each Surviving Fund and Predecessor Surviving
Fund represents and warrants to the corresponding Merging Fund
as follows:
(a) The Surviving Fund is duly formed as a statutory trust,
validly existing, and in good standing under the laws of the
State of Delaware, with power under its agreement and
declaration of trust, as amended (the
Agreement and
Declaration of Trust
), to own all of its properties
and assets and to carry on its business as it is now being, and
as it is contemplated to be, conducted, and to enter into this
Agreement and perform its obligations hereunder;
(b) The Surviving Fund is registered under the 1940 Act as
a closed-end management investment company, and such
registration has not been revoked or rescinded and is in full
force and effect;
(c) No consent, approval, authorization, or order of any
court, governmental authority, FINRA or any stock exchange on
which shares of the Surviving Fund are listed is required for
the consummation by the Surviving Fund of the transactions
contemplated herein, except such as have been or will be
obtained (at or prior to the Closing Time);
(d) The financial statements of the Surviving Fund for the
Surviving Funds most recently completed fiscal year have
been audited by the independent registered public accounting
firm appointed by the Surviving Funds Board of Trustees.
Such statements, as well as the unaudited, semi-annual financial
statements for the semi-annual period next succeeding the
Surviving Funds most recently completed fiscal year, if
any, were prepared in accordance with GAAP consistently applied,
and such statements present fairly, in all material respects,
the financial condition of the Surviving Fund as of such date in
accordance with GAAP;
(e) The Surviving Fund has no known liabilities of a
material nature, contingent or otherwise, other than those shown
as belonging to it on its statement of assets and liabilities as
of the Surviving Funds most recently completed fiscal year
or half-year and those incurred in the ordinary course of the
Surviving Funds business as an investment company since
such date;
(f) There are no material legal, administrative or other
proceedings pending or, to the knowledge of Surviving Fund,
threatened against Surviving Fund which assert liability or
which may, if successfully prosecuted to their conclusion,
result in liability on the part of Surviving Fund, other than as
have been disclosed to the Merging Fund;
(g) The N-14 Registration Statement, on its effective date,
at the time of the shareholders meeting called to vote on the
proposals set forth in the Joint Proxy Statement/Prospectus and
on the Closing Date, (i) complied or will comply in all
material respects with the 1933 Act, the 1934 Act and
the 1940 Act and the rules and regulations thereunder and
(ii) did not or will not contain any untrue statement of a
material fact or omit any material fact required to be stated
therein or necessary to make the statements therein not
misleading; and the Joint Proxy Statement/Prospectus, as of its
date, at the time of the shareholders meeting called to vote on
the proposals set forth therein and on the Closing Date
(i) complied or will comply in all material respects with
the 1933 Act, the 1934 Act and the 1940 Act and
regulations thereunder and (ii) did not or will not contain
any untrue statement of a material fact or omit any material
fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under which
they were made, not misleading; provided, however, that the
representations and warranties in this subsection shall not
apply to statements in or omissions from the N-14 Registration
Statement or the Joint Proxy Statement/Prospectus made in
reliance upon and in conformity with information furnished by
the Merging Fund for use in the N-14 Registration Statement or
the Joint Proxy Statement/Prospectus;
(h) On the Closing Date, all material Returns of the
Surviving Fund required by law to have been filed by such date
(including any extensions) shall have been filed and are or will
be true, correct and complete in all material respects, and all
Taxes shown as due or claimed to be due by any government entity
shall have been paid or provision has been made for the payment
thereof. To the Surviving Funds knowledge, no such Return
is currently under audit by any federal, state, local or foreign
Tax authority; no assessment has been asserted with respect to
such Returns; there are no levies, liens or other encumbrances
on the Surviving Fund or its assets resulting from the
non-payment of any Taxes; and no waivers of the time to assess
any such Taxes are outstanding nor are
D-5
any written requests for such waivers pending; and adequate
provision has been made in the Surviving Fund financial
statements for all Taxes in respect of all periods ended on or
before the date of such financial statements;
(i) The Surviving Fund has elected to be a regulated
investment company under Subchapter M of the Code and is a fund
that is treated as a separate corporation under
Section 851(g) of the Code. The Surviving Fund has
qualified for treatment as a regulated investment company for
each taxable year since inception that has ended prior to the
Closing Date and will have satisfied the requirements of
Part I of Subchapter M of the Code to maintain such
qualification for the period beginning on the first day of its
current taxable year and ending on the Closing Date. The
Surviving Fund has no earnings or profits accumulated in any
taxable year in which the provisions of Subchapter M of the Code
did not apply to it;
(j) All issued and outstanding Surviving Fund shares are,
and on the Closing Date will be, duly authorized and validly
issued and outstanding, fully paid and non-assessable by the
Surviving Fund and, in every state where offered or sold, such
offers and sales by the Surviving Fund have been in compliance
in all material respects with applicable registration
and/or
notice requirements of the 1933 Act and state and District
of Columbia securities laws or exemptions therefrom, and there
will be a sufficient number of such shares registered under the
1933 Act or exempt from such registration and, as may be
necessary, with applicable state securities commissions, to
permit the issuances contemplated by this Agreement to be
consummated;
(k) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing
Date by all necessary action, if any, on the part of the Board
of Trustees of the Surviving Fund and subject to the approval of
the shareholders of the Funds and the due authorization,
execution and delivery of this Agreement by IAI, this Agreement
will constitute a valid and binding obligation of the Surviving
Fund enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting
creditors rights and to general equity principles;
(l) The Surviving Fund Common Shares and Surviving
Fund Preferred Shares (if any) to be issued and delivered
to the Merging Fund, for the account of the Merging Fund
shareholders, pursuant to the terms of this Agreement, will on
the Closing Date have been duly authorized and, when so issued
and delivered, will be duly and validly issued shares of the
Surviving Fund, and will be fully paid and non-assessable by the
Surviving Fund and no shareholder of the Surviving Fund will
have any preemptive right of subscription or purchase in respect
thereof;
(m) The books and records of the Surviving Fund are true
and correct in all material respects and contain no material
omissions with respect to information required to be maintained
under the laws, rules and regulations applicable to the
Surviving Fund;
(n) The Surviving Fund is not under the jurisdiction of a
court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code; and
(o) The Surviving Fund has no unamortized or unpaid
organizational fees or expenses for which it does not expect to
be reimbursed by Invesco or its affiliates.
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5.
|
COVENANTS
OF THE SURVIVING FUND AND THE MERGING FUND
|
5.1. With respect to each Merger:
(a) The Surviving Fund, the Merging Fund and the
corresponding Predecessor Funds each: (i) will operate its
business in the ordinary course and substantially in accordance
with past practices between the date hereof and the Closing Date
for the Merger, it being understood that such ordinary course of
business may include the declaration and payment of customary
dividends and distributions, and any other distribution that may
be advisable, and (ii) shall use its reasonable best
efforts to preserve intact its business organization and
material assets and maintain the rights, franchises and business
and customer relations necessary to conduct the business
operations of the Surviving Fund, the Merging Fund or the
corresponding Predecessor Fund, as appropriate, in the ordinary
course in all material respects.
(b) Each Fund and Predecessor Fund agrees to mail to its
shareholders of record entitled to vote at the meeting of
shareholders at which action is to be considered regarding this
Agreement, in sufficient time to comply with requirements as to
notice thereof, the Joint Proxy Statement/Prospectus applicable
to such Fund, to call a meeting of such shareholders and to take
all other action necessary to obtain approval of the
transactions contemplated herein.
(c) The Merging Fund will provide the Surviving Fund with
(1) a statement of the respective tax basis and holding
period of all investments to be transferred by the Merging Fund
to the Surviving Fund, (2) a copy (which may be in
electronic form) of the shareholder ledger accounts including,
without limitation, the name, address and taxpayer
identification number of each shareholder of record, the number
of shares of beneficial interest held by each shareholder, the
dividend reinvestment elections applicable to each shareholder,
and the backup withholding and nonresident alien withholding
certifications, notices or records on file with the Merging Fund
with respect to each shareholder, for all of the shareholders of
record of the Merging Fund as of the close of business on the
Valuation Date, who are to become holders of the Surviving Fund
as a result of the transfer of Merging Fund Assets,
certified by its transfer agent or its President or
Vice-President to the best of their knowledge and belief,
(3) the tax books and records of the Merging Fund for
purposes of preparing any Returns required by law to be filed
for tax periods ending after the Closing Date, and (4) if
reasonably requested by the Surviving Fund in writing, all FASB
ASC 740-10-25
(formerly FIN 48) work papers and
D-6
supporting statements pertaining to the Merging Fund. The
foregoing information to be provided within such timeframes as
is mutually agreed by the parties. The Merging Fund agrees to
cooperate with the Surviving Fund in filing any Return, amended
return or claim for refund, determining a liability for taxes or
a right to a refund of taxes or participating in or conducting
any audit or other proceeding in respect of taxes. The Merging
Fund agrees to retain for a period of seven (7) years
following the Closing Date all Returns and work papers and all
material records or other documents relating to tax matters for
taxable periods ending on or before the Closing Date.
(d) Subject to the provisions of this Agreement, the
Surviving Fund, the Merging Fund and the corresponding
Predecessor Funds will each take, or cause to be taken, all
action, and do or cause to be done all things, reasonably
necessary, proper or advisable to consummate and make effective
the transactions contemplated by this Agreement.
(e) It is the intention of the parties that each Merger
will qualify as a reorganization with the meaning of
Section 368(a)(1)(A) of the Code. None of the parties to a
Merger shall take any action or cause any action to be taken
(including, without limitation the filing of any tax Return)
that is inconsistent with such treatment or results in the
failure of such Merger to qualify as a reorganization within the
meaning of Section 368(a)(1)(A) of the Code.
(f) Any reporting responsibility of the Merging Fund,
including, but not limited to, the responsibility for filing
regulatory reports, tax Returns relating to tax periods ending
on or prior to the Closing Date (whether due before or after the
Closing Date), or other documents with the SEC, any state
securities commission, and any federal, state or local tax
authorities or any other relevant regulatory authority, is and
shall remain the responsibility of the Merging Fund, except as
otherwise is mutually agreed by the parties.
(g) The Merging Fund undertakes that if the Merger is
consummated, it will file an application pursuant to
Section 8(f) of the 1940 Act for an order declaring that
the Merging Fund has ceased to be a registered investment
company.
(h) The Surviving Fund and Predecessor Surviving Fund shall
use their reasonable best efforts to cause the Surviving
Fund Common Shares to be issued in the Merger to be
approved for listing on each of the stock exchanges on which the
corresponding Merging Fund Common Shares are listed.
(i) If the Merging Fund has outstanding Merging
Fund Preferred Shares, the Surviving Fund shall use its
reasonable best efforts to obtain a rating on the Surviving
Fund Preferred Shares from at least one nationally
recognized statistical rating organization (NRSRO)
and include in its governing documents terms relating to the
Surviving Fund Preferred Shares that are either
substantially the same as such terms included in the Governing
Documents of the Merging Fund in respect of the Merging
Fund Preferred Shares or substantially the same as such
terms included in the Merging Fund Governing Documents
except for such changes as required by any NRSRO rating the
Surviving Fund Preferred Shares, prior to the Closing.
(j) If the Merging Fund has outstanding Merging
Fund Preferred Shares or the Surviving Fund has outstanding
Surviving Fund Preferred Shares, the combined Merging Fund
and Surviving Fund will satisfy all of its obligations set forth
in the Surviving Funds declaration of trust, statement of
preferences of the Surviving Fund Preferred Shares,
registration rights agreement relating to the Surviving
Fund Preferred Shares and the Surviving Fund Preferred
Shares certificate (including, without limitation, satisfaction
of the effective leverage ratio and minimum asset coverage
covenants set forth in its statement of preferences) immediately
after Closing.
(k) If the Merging Fund has outstanding Merging
Fund Preferred Shares or the Surviving Fund has outstanding
Surviving Fund Preferred Shares, immediately after closing
the Surviving Fund Preferred Shares shall be rated at least
AA-/Aa3 by each rating agency rating, at the request of the
Surviving Fund, the Surviving Fund Preferred Shares.
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6.
|
CONDITIONS
PRECEDENT TO OBLIGATIONS OF THE MERGING FUND
|
6.1. With respect to each Merger, the obligations of
the Merging Fund to consummate the transactions provided for
herein shall be subject, at the Merging Funds election, to
the performance by the Surviving Fund of all of the obligations
to be performed by it hereunder on or before the Closing Time,
and, in addition thereto, the following conditions:
(a) All representations and warranties of the Surviving
Fund and the Predecessor Surviving Fund contained in this
Agreement shall be true and correct in all material respects as
of the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing
Date, with the same force and effect as if made on and as of the
Closing Date;
(b) The Surviving Fund shall have delivered to the Merging
Fund on the Closing Date a certificate executed in its name by
its President or Vice President and Treasurer, in form and
substance reasonably satisfactory to the Merging Fund and dated
as of the Closing Date, to the effect that the representations
and warranties of or with respect to the Surviving Fund and the
Predecessor Surviving Fund made in this Agreement are true and
correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement;
(c) The Surviving Fund and the Predecessor Surviving Fund
shall have performed all of the covenants and complied with all
of the provisions required by this Agreement to be performed or
complied with by the Surviving Fund and the Predecessor
Surviving Fund, on or before the Closing Date;
D-7
(d) If the Merging Fund has outstanding Merging
Fund Preferred Shares, the Surviving Fund shall have
amended its governing documents to include terms relating to the
Surviving Fund Preferred Shares that are either
substantially identical to such terms included in the Governing
Documents of the Merging Fund in respect of the Merging
Fund Preferred Shares or substantially identical to such
terms included in the Merging Fund Governing Documents
except for such changes as required by any NRSRO rating the
Surviving Fund Preferred Shares, and shall have obtained a
rating on the Surviving Fund Preferred Shares from at least
one NRSRO;
(e) If the Surviving Fund has outstanding Surviving
Fund Preferred Shares, immediately prior to Closing, the
Surviving Fund Preferred Shares shall be rated at least
AA-/Aa3 by each rating agency rating, at the request of the
Surviving Fund; the Surviving Fund Preferred
Shares; and
(f) If the Surviving Fund has outstanding Surviving
Fund Preferred Shares, the Surviving Fund shall have
satisfied all of its obligations set forth in its declaration of
trust, statement of preferences of the Surviving
Fund Preferred Shares, registration rights agreement
relating to the Surviving Fund Preferred Shares and the
Surviving Fund Preferred Shares certificate (including,
without limitation, satisfaction of the effective leverage ratio
and minimum asset coverage covenants set forth in its statement
of preferences) immediately prior to Closing.
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7.
|
CONDITIONS
PRECEDENT TO OBLIGATIONS OF THE SURVIVING FUND
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7.1. With respect to each Merger, the obligations of
the Surviving Fund to consummate the transactions provided for
herein shall be subject, at the Surviving Funds election,
to the performance by the Merging Fund of all of the obligations
to be performed by it hereunder on or before the Closing Date
and, in addition thereto, the following conditions:
(a) All representations and warranties of the Merging Fund
and the Predecessor Merging Fund contained in this Agreement
shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing
Date, with the same force and effect as if made on and as of the
Closing Date;
(b) The Merging Fund shall have delivered an unaudited
statement of assets and liabilities and an unaudited schedule of
investments as of the Valuation Date (together the
Closing Financial Statements
) for the purpose
of determining the number of Surviving Fund Common Shares
and the number of Surviving Fund Preferred Shares, if any,
to be issued to the Merging Funds common shareholders and
preferred shareholders, if any, and the Closing Financial
Statements will fairly present the financial position of the
Merging Fund as of the Valuation Date in conformity with GAAP
applied on a consistent basis;
(c) The Merging Fund shall have delivered to the Surviving
Fund on the Closing Date a certificate executed in its name by
its President or Vice President and Treasurer, in form and
substance reasonably satisfactory to the Surviving Fund and
dated as of the Closing Date, to the effect that the
representations and warranties of or with respect to the Merging
Fund and the Predecessor Merging Fund made in this Agreement are
true and correct at and as of the Closing Date, except as they
may be affected by the transactions contemplated by this
Agreement;
(d) The Merging Fund and the Predecessor Merging Fund shall
have performed all of the covenants and complied with all of the
provisions required by this Agreement to be performed or
complied with by the Merging Fund and the Predecessor Merging
Fund, on or before the Closing Date;
(e) The Merging Fund shall have declared and paid or cause
to be paid a distribution or distributions prior to the Closing
that, together with all previous distributions, shall have the
effect of distributing to its shareholders (i) all of
Merging Funds investment company taxable income for the
taxable year ended prior to the Closing Date and substantially
all of such investment company taxable income for the final
taxable year ending on the Closing Date (in each case determined
without regard to any deductions for dividends paid);
(ii) all of Merging Funds net capital gain recognized
in its taxable year ended prior to the Closing Date and
substantially all of any such net capital gain recognized in
such final taxable year (in each case after reduction for any
capital loss carryover); and (iii) at least 90 percent
of the excess, if any, of the Merging Funds interest
income excludible from gross income under Section 103(a) of
the Code over its deductions disallowed under Sections 265
and 171(a)(2) of the Code for the taxable year prior to the
Closing Date and at least 90 percent of such net tax-exempt
income for such final taxable year; and
(f) If the Merging Fund has outstanding Merging
Fund Preferred Shares, the Merging Fund shall have
satisfied all of its obligations set forth in its declaration of
trust, statement of preferences of the Merging
Fund Preferred Shares, registration rights agreement
relating to the Merging Fund Preferred Shares and the
Merging Fund Preferred Shares certificate (including,
without limitation, satisfaction of the effective leverage ratio
and minimum asset coverage covenants set forth in its statement
of preferences) immediately prior to Closing.
D-8
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8.
|
FURTHER
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SURVIVING
FUND AND THE MERGING FUND
|
With respect to each Merger, if any of the conditions set forth
below have not been satisfied on or before the Closing Date with
respect to the Merging Fund or the Surviving Fund, the Merging
Fund or the Surviving Fund, respectively, shall, at its option,
not be required to consummate the transactions contemplated for
such Merger by this Agreement:
8.1. The Agreement shall have been approved by the
requisite vote of the holders of the outstanding Common Shares
and Preferred Shares of each Fund, as set forth in the N-14
Registration Statement. Notwithstanding anything herein to the
contrary, neither the Merging Fund nor the Surviving Fund may
waive the conditions set forth in this Section 8.1;
8.2. On the Closing Date, no action, suit or other
proceeding shall be pending or, to the Merging Funds or
the Surviving Funds knowledge, threatened before any court
or governmental agency in which it is sought to restrain or
prohibit, or obtain damages or other relief in connection with,
this Agreement, the transactions contemplated herein;
8.3. All consents of other parties and all other
consents, orders and permits of federal, state and local
regulatory authorities and national securities exchanges for
purposes of listing shares of the Funds, deemed necessary by the
Surviving Fund or the Merging Fund to permit consummation, in
all material respects, of the transactions contemplated hereby
shall have been obtained, except where failure to obtain any
such consent, order or permit would not involve a risk of a
material adverse effect on the assets or properties of the
Surviving Fund or the Merging Fund, provided that either party
hereto may for itself waive any of such conditions;
8.4. The N-14 Registration Statement shall have
become effective under the 1933 Act and no stop orders
suspending the effectiveness thereof shall have been issued and,
to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be
pending, threatened or known to be contemplated under the
1933 Act; and
8.5. The Merging Fund and the Surviving Fund shall
have received on or before the Closing Date an opinion of
Stradley Ronon Stevens & Young, LLP (
Stradley
Ronon
) in form and substance reasonably acceptable to
the Merging Fund and the Surviving Fund, as to the matters set
forth on Schedule 8.5. In rendering such opinion, Stradley
Ronon may request and rely upon representations contained in
certificates of officers of the Merging Fund, the Surviving
Fund, IAI and others, and the officers of the Merging Fund, the
Surviving Fund and IAI shall use their best efforts to make
available such truthful certificates.
8.6. If the Merging Fund has outstanding Merging
Fund Preferred Shares, the Merging Fund and the Surviving
Fund shall have received on or before the Closing Date an
opinion of Skadden, Arps, Slate, Meagher & Flom LLP
(Skadden) in form and substance reasonably
acceptable to the Merging Fund and the Surviving Fund, as to the
matters set forth on Schedule 8.6. In rendering such
opinion, Skadden may request and rely upon representations
contained in certificates of officers of the Merging Fund, the
Surviving Fund, IAI and others, and the officers of the Merging
Fund, the Surviving Fund and IAI shall use their best efforts to
make available such truthful certificates.
8.7. The shareholders of each of the Merging Fund and
the Surviving Fund shall have approved the Redomestication of
such fund to a Delaware statutory trust, as described in the
proxy materials related to such Redomestication (including the
N-14 Registration Statement), and each such Redomestication
shall have been consummated.
9.1. Each Fund will bear its expenses relating to its
Merger provided that 1) the Fund is expected to recoup
those costs within 24 months following the Merger as a
result of reduced total annual fund operating expenses based on
estimates prepared by the Adviser and discussed with the Board
and 2) the Funds total annual fund operating expenses
did not exceed the expense limit under the expense limitation
arrangement in place with IAI at the time such expenses were
discussed with the Board. The Fund will bear these expenses
regardless of whether its Merger is consummated, subject to any
expense limitation arrangement in place with IAI. IAI will bear
the Merger costs of any Fund that does not meet the foregoing
threshold.
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10.
|
FINAL TAX
RETURNS AND FORMS 1099 OF MERGING FUND
|
10.1. After the Closing Date, except as otherwise
agreed to by the parties, the Merging Fund shall or shall cause
its agents to prepare any federal, state or local tax Returns,
including any Forms 1099, required to be filed by the
Merging Fund with respect to its final taxable year ending on
the Closing Date and for any prior periods or taxable years and
shall further cause such tax Returns and Forms 1099 to be
duly filed with the appropriate taxing authorities.
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11.
|
ENTIRE
AGREEMENT; SURVIVAL OF WARRANTIES AND COVENANTS
|
11.1. The representations, warranties and covenants
of the Funds and IAI contained in this Agreement or in any
document delivered pursuant hereto or in connection herewith
shall not survive the consummation of the transactions
contemplated hereunder; provided that the covenants to be
performed after the Closing shall survive the Closing. The
representations, warranties and covenants of each Predecessor
Fund contained in this Agreement or in any document delivered
pursuant hereto or in connection herewith shall not survive the
consummation of the Redomestication of such Predecessor Fund.
D-9
With respect to each Merger, this Agreement may be terminated
and the transactions contemplated hereby may be abandoned
(i) by mutual agreement of the Merging Fund and the
corresponding Surviving Fund, (ii) by the Merging Fund if
any condition of the Surviving Funds obligations set forth
in this Agreement has not been fulfilled or waived by the
Merging Fund, or (iii) by the Surviving Fund if any
condition of the Merging Funds obligations set forth in
this Agreement has not been fulfilled or waived by the Surviving
Fund, notwithstanding approval thereof by such Funds
shareholders, if circumstances should develop that, in such
parties judgment, make proceeding with this Agreement
inadvisable.
This Agreement may be amended, modified or supplemented in such
manner as may be mutually agreed upon in writing by the parties;
provided, however, that following the approval of this Agreement
by shareholders of a Merging Fund
and/or
its
corresponding Surviving Fund, no such amendment may have the
effect of changing the provisions for determining the number of
Surviving Fund shares to be paid to that Merging Funds
shareholders under this Agreement to the detriment of such
Merging Fund shareholders or shall otherwise materially amend
the terms of this agreement without their further approval.
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14.
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HEADINGS;
GOVERNING LAW; COUNTERPARTS; ASSIGNMENT; LIMITATION OF
LIABILITY
|
14.1. The Article and Section headings contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement.
14.2. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware
and applicable federal law, without regard to its principles of
conflicts of laws.
14.3. This Agreement shall bind and inure with
respect to each Merger to the benefit of the parties to the
Merger and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any such party without the written
consent of the other parties to such Merger. Nothing herein
expressed or implied is intended or shall be construed to confer
upon or give any person, firm or corporation, other than the
parties with respect to such Merger and their respective
successors and assigns, any rights or remedies under or by
reason of this Agreement.
14.4. This agreement may be executed in any number of
counterparts, each of which shall be considered an original.
14.5. It is expressly agreed that the obligations of
the parties hereunder shall not be binding upon any of their
respective directors or trustees, shareholders, nominees,
officers, agents, or employees personally, but shall bind only
the property of the applicable Merging Fund or the applicable
Surviving Fund as provided in the Governing Documents of the
Merging Fund or the Agreement and Declaration of Trust of the
Surviving Fund, respectively. The execution and delivery by such
officers shall not be deemed to have been made by any of them
individually or to impose any liability on any of them
personally, but shall bind only the property of such party.
14.6. Any notice, report, statement or demand
required or permitted by any provisions of this Agreement shall
be in writing and shall be given by fax or certified mail
addressed to the Merging Fund and the Surviving Fund, each at
1555 Peachtree Street, N.E. Atlanta, GA 30309, Attention:
Secretary, fax
number .
D-10
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be approved on behalf of the Surviving Fund and
Merging Fund.
Invesco Advisers, Inc.
Name:
Title:
[CLOSED-END FUNDS]
Name:
Title:
D-11
EXHIBIT A
CHART OF MERGERS
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Surviving Fund (and share classes)
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Corresponding Merging Fund (and share classes)
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D-12
SCHEDULE 8.5
TAX
OPINION
(i) The acquisition by Surviving Fund of all of the assets
of Merging Fund in exchange for Surviving Fund shares and the
assumption of the liabilities of Merging Fund through a
statutory merger will qualify as a reorganization within the
meaning of Section 368(a)(1)(A) of the Code and the
Surviving Fund and Merging Fund will each be a party to a
reorganization within the meaning of Section 368(b)
of the Code.
(ii) No gain or loss will be recognized by Merging Fund on
the transfer of its assets to, and the assumption of Merging
Fund liabilities by, Surviving Fund in exchange for Surviving
Fund shares pursuant to Sections 361(a) and 357(a) of the
Code.
(iii) No gain or loss will be recognized by Surviving Fund
on the receipt of the Merging Fund assets in exchange for
Surviving Fund shares and the assumption by Surviving Fund of
any liabilities of Merging Fund pursuant to Section 1032(a)
of the Code.
(iv) No gain or loss will be recognized by Merging Fund
upon the distribution of Surviving Fund shares to the
shareholders of Merging Fund pursuant to Section 361(c) of
the Code.
(v) The tax basis of the Merging Fund assets received by
the Surviving Fund will be the same as the tax basis of such
assets in the hands of the Merging Fund immediately prior to the
transfer pursuant to Section 362(b) of the Code.
(vi) The holding periods of the Merging Fund assets in the
hands of the Surviving Fund will include the periods during
which such assets were held by the Merging Fund pursuant to
Section 1223(2) of the Code.
(vii) No gain or loss will be recognized by the
shareholders of Merging Fund on the receipt of Surviving Fund
shares solely in exchange for Surviving Fund shares pursuant to
Section 354(a)(1) of the Code.
(viii) The aggregate tax basis in Surviving Fund shares
received by a shareholder of the Merging Fund will be the same
as the aggregate tax basis of Merging Fund shares surrendered in
exchange therefor pursuant to Section 358(a)(1) of the Code.
(ix) The holding period of Surviving Fund shares received
by a shareholder of the Merging Fund will include the holding
period of the Merging Fund shares surrendered in exchange
therefor, provided that the shareholder held Merging Fund shares
as a capital asset on the Closing Date pursuant to
Section 1223(1) of the Code.
(x) For purposes of Section 381 of the Code, the
Surviving Fund will succeed to and take into account, as of the
date of the transfer as defined in
Section 1.381(b)-1(b)
of the income tax regulations issued by the United States
Department of the Treasury (the Income Tax
Regulations), the items of the Merging Fund described in
Section 381(c) of the Code, subject to the conditions and
limitations specified in Sections 381, 382, 383 and 384 of
the Code and the Income Tax Regulations thereunder.
The foregoing opinion may state that no opinion is expressed as
to the effect of the Merger on a Merging Fund, Surviving Fund or
any Merging Fund Shareholder with respect to any asset as
to which unrealized gain or loss is required to be recognized
for federal income tax purposes at the end of a taxable year (or
on the termination or transfer thereof) under a
mark-to-market
system of accounting.
D-13
SCHEDULE 8.6
PREFERRED
SHARE OPINION
The VMTP Shares issued by the Surviving Fund in the Merger in
exchange for Merging Fund VMTP Shares will be treated as
equity of the Surviving Fund for U.S. federal income tax
purposes.
D-14
EXHIBIT E
Executive Officers of the Funds
The following information relates to the executive officers of the Funds. Each officer also
serves in the same capacity for all or a number of the other investment companies advised by the
Adviser or affiliates of the Adviser. The officers of the Funds are appointed annually by the
Trustees and serve for one year or until their respective successors are chosen and qualified. The
address of each officer is 1555 Peachtree Street, N.E., Atlanta, Georgia 30309.
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Name, Year of Birth and
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Position(s) Held with the Fund
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Officer Since
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Principal Occupation(s) During Past 5 Years
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Russell C. Burk 1958
Senior Vice President and
Senior Officer
(with respect
only to the Target Funds)
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2010
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Senior Vice President and Senior Officer, The Invesco Funds.
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John M. Zerr 1962
Senior Vice President, Chief
Legal Officer and Secretary
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2010
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Director, Senior Vice President, Secretary and General
Counsel, Invesco Management Group, Inc. (formerly known as
Invesco Aim Management Group, Inc.) and Van Kampen Exchange
Corp.; Senior Vice President, Invesco Advisers, Inc.
(formerly known as Invesco Institutional (N.A.), Inc.)
(registered investment adviser); Senior Vice President and
Secretary, Invesco Distributors, Inc. (formerly known as
Invesco Aim Distributors, Inc.); Director, Vice President and
Secretary, Invesco Investment Services, Inc. (formerly known
as Invesco Aim Investment Services, Inc.) and IVZ
Distributors, Inc. (formerly known as INVESCO Distributors,
Inc.); Director and Vice President, INVESCO Funds Group,
Inc.; Senior Vice President, Chief Legal Officer and
Secretary, The Invesco Funds; Manager, Invesco PowerShares
Capital Management LLC; Director, Secretary and General
Counsel, Invesco Investment Advisers LLC (formerly known as
Van Kampen Asset Management); Secretary and General Counsel,
Van Kampen Funds Inc. and Chief Legal Officer, PowerShares
Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund
Trust II, PowerShares India Exchange-Traded Fund Trust and
PowerShares Actively Managed Exchange-Traded Fund Trust.
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Formerly: Director and Secretary, Van Kampen Advisors Inc.;
Director Vice President, Secretary and General Counsel Van
Kampen Investor Services Inc.; Director, Invesco
Distributors, Inc. (formerly known as Invesco Aim
Distributors, Inc.); Director, Senior Vice President, General
Counsel and Secretary, Invesco Advisers, Inc.; and Van Kampen
Investments Inc.; Director, Vice President and Secretary,
Fund Management Company; Director, Senior Vice President,
Secretary, General Counsel and Vice President, Invesco Aim
Capital Management, Inc.; Chief Operating Officer and General
Counsel, Liberty Ridge Capital, Inc. (an investment adviser);
Vice President and Secretary, PBHG Funds (an investment
company) and PBHG Insurance Series Fund (an investment
company); Chief Operating Officer, General Counsel and
Secretary, Old Mutual Investment Partners (a broker-dealer);
General Counsel and Secretary, Old Mutual Fund Services (an
administrator) and Old Mutual Shareholder Services (a
shareholder servicing center); Executive Vice President,
General Counsel and Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President and Secretary, Old
Mutual Advisors Funds (an investment company).
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Sheri Morris 1964
Vice President, Treasurer and
Principal Financial Officer
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2010
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Vice President, Treasurer and Principal Financial Officer,
The Invesco Funds; Vice President, Invesco Advisers, Inc.
(formerly known as Invesco Institutional (N.A.), Inc.)
(registered investment adviser); Treasurer, PowerShares
Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund
Trust II, PowerShares India Exchange-Traded Fund Trust and
PowerShares Actively Managed Exchange-Traded Fund Trust.
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E-1
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Name, Year of Birth and
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Position(s) Held with the Fund
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Officer Since
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Principal Occupation(s) During Past 5 Years
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Formerly: Vice President, Invesco Advisers, Inc., Invesco Aim
Capital Management, Inc. and Invesco Aim Private Asset
Management, Inc.; Assistant Vice President and Assistant
Treasurer, The Invesco Funds and Assistant Vice President,
Invesco Advisers, Inc., Invesco Aim Capital Management, Inc.
and Invesco Aim Private Asset Management, Inc.
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Karen Dunn Kelley 1960
Vice President
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2010
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Head of Invescos World Wide Fixed Income and Cash Management
Group; Senior Vice President, Invesco Management Group, Inc.
(formerly known as Invesco Aim Management Group, Inc.) and
Invesco Advisers, Inc. (formerly known as Invesco
Institutional (N.A.), Inc.) (registered investment adviser);
Executive Vice President, Invesco Distributors, Inc.
(formerly known as Invesco Aim Distributors, Inc.); Director,
Invesco Mortgage Capital Inc.; Vice President, The Invesco
Funds (other than AIM Treasurers Series Trust (Invesco
Treasurers Series Trust) and Short-Term Investments Trust);
and President and Principal Executive Officer, The Invesco
Funds (AIM Treasurers Series Trust (Invesco Treasurers
Series Trust) and Short-Term Investments Trust only).
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Formerly: Senior Vice President, Van Kampen Investments
Inc.; Vice President, Invesco Advisers, Inc. (formerly known
as Invesco Institutional (N.A.), Inc.); Director of Cash
Management and Senior Vice President, Invesco Advisers, Inc.
and Invesco Aim Capital Management, Inc.; President and
Principal Executive Officer, Tax-Free Investments Trust;
Director and President, Fund Management Company; Chief Cash
Management Officer, Director of Cash Management, Senior Vice
President, and Managing Director, Invesco Aim Capital
Management, Inc.; Director of Cash Management, Senior Vice
President, and Vice President, Invesco Advisers, Inc. and The
Invesco Funds (AIM Treasurers Series Trust (Invesco
Treasurers Series Trust), Short-Term Investments Trust and
Tax-Free Investments Trust only).
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Yinka Akinsola 1977
Anti-Money Laundering
Compliance Officer
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2011
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Anti-Money Laundering Compliance Officer, Invesco Advisers,
Inc. (formerly known as Invesco Institutional (N.A.), Inc.)
(registered investment adviser); Invesco Distributors, Inc.
(formerly known as Invesco Aim Distributors, Inc.), Invesco
Investment Services, Inc. (formerly known as Invesco Aim
Investment Services, Inc.), Invesco Management Group, Inc.,
The Invesco Funds, Invesco Van Kampen Closed-End Funds, Van
Kampen Exchange Corp. and Van Kampen Funds Inc.
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Formerly: Regulatory Analyst III, Financial Industry
Regulatory Authority (FINRA).
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Todd L. Spillane 1958
Chief Compliance Officer
(with respect only to the
Target Funds)
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2010
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Senior Vice President, Invesco Management Group, Inc.
(formerly known as Invesco Aim Management Group, Inc.) and
Van Kampen Exchange Corp.; Senior Vice President and Chief
Compliance Officer, Invesco Advisers, Inc. (registered
investment adviser) (formerly known as Invesco Institutional
(N.A.), Inc.); Chief Compliance Officer, The Invesco Funds,
Vice President, Invesco Distributors, Inc. (formerly known as
Invesco Aim Distributors, Inc.) and Invesco Investment
Services, Inc. (formerly known as Invesco Aim Investment
Services, Inc.).
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Formerly: Chief Compliance Officer, Invesco Van Kampen
Closed-End Funds, PowerShares Exchange-Traded Fund Trust,
PowerShares Exchange-Traded Fund Trust II, PowerShares India
Exchange-Traded Fund Trust, and PowerShares Actively Managed
Exchange-Traded Fund Trust; Senior Vice President, Van Kampen
Investments Inc.; Senior Vice President and Chief Compliance
Officer, Invesco Advisers, Inc. and Invesco Aim Capital
Management, Inc.; Chief Compliance Officer, INVESCO Private
Capital Investments, Inc. (holding company) and
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E-2
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Name, Year of Birth and
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Position(s) Held with the Fund
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Officer Since
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Principal Occupation(s) During Past 5 Years
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Invesco
Private Capital, Inc. (registered investment adviser);
Invesco Global Asset Management (N.A.), Inc., Invesco Senior
Secured Management, Inc. (registered investment adviser) and
Van Kampen Investor Services Inc.; Vice President, Invesco
Aim Capital Management, Inc. and Fund Management Company.
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Valinda Arnett-Patton 1959
Chief Compliance Officer
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2011
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Chief Compliance Officer, Invesco Van Kampen Closed-End Funds.
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Formerly: Compliance Director, Invesco Fixed Income,
Invesco; Deputy Compliance Officer, AIG Sun America Asset
Management Corp.
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E-3
EXHIBIT F
Information Regarding the Trustees of the Target Funds
The following information pertains to the Target Funds. Not all of the funds advised by the
Adviser are overseen by the same board of trustees. The Target Funds are overseen by the Board of
Trustees discussed below (the Invesco Board). References to the Board in this Exhibit F refer
solely to the Invesco Board and references to Funds in this Exhibit F refer solely to those funds
advised by the Adviser, including the Target Funds, overseen by the Invesco Board.
The business and affairs of the Funds are managed under the direction of the Board. The tables
below list the incumbent Trustees and nominees for Trustee, their principal occupations, other
directorships held by them during the past five years, and any affiliations with the Adviser or its
affiliates. The term Fund Complex includes each of the investment companies advised by the
Adviser as of the Record Date. Trustees of the Funds generally serve three-year terms or until
their successors are duly elected and qualified. The address of each Trustee is 1555 Peachtree
Street, N.E., Atlanta, Georgia 30309.
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Number of
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Portfolios in
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Name, Year of Birth
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Fund Complex
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Other Trusteeship(s)
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and Position(s) Held
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Trustee
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Principal Occupation(s) During Past
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Overseen by
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Held by Trustee over
|
with the Funds
|
|
Since
|
|
5 Years
|
|
Trustee
|
|
Past 5 Years
|
Interested Trustees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin L.
Flanagan
(1)
1960
Trustee
|
|
|
2010
|
|
|
Executive Director, Chief
Executive Officer and President,
Invesco Ltd. (ultimate parent of
Invesco and a global investment
management firm); Advisor to the
Board, Invesco Advisers, Inc.
(formerly known as Invesco
Institutional (N.A.), Inc.);
Trustee, The Invesco Funds; Vice
Chair, Investment Company
Institute; and Member of Executive
Board, SMU Cox School of Business.
|
|
|
133
|
|
|
None.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Formerly: Chairman, Invesco
Advisers, Inc. (registered
investment adviser); Director,
Chairman, Chief Executive Officer
and President, IVZ Inc. (holding
company), INVESCO Group Services,
Inc. (service provider) and
Invesco North American Holdings,
Inc. (holding company); Director,
Chief Executive Officer and
President, Invesco Holding Company
Limited (parent of Invesco and a
global investment management
firm); Director, Invesco Ltd.;
Chairman, Investment Company
Institute and President, Co-Chief
Executive Officer, Co-President,
Chief Operating Officer and Chief
Financial Officer, Franklin
Resources, Inc. (global investment
management organization).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philip A.
Taylor
(2)
1954
Trustee, President and
Principal Executive
Officer
|
|
|
2010
|
|
|
Head of North American Retail and
Senior Managing Director, Invesco
Ltd.; Director, Co-Chairman,
Co-President and Co-Chief
Executive Officer, Invesco
Advisers, Inc. (formerly known as
Invesco Institutional (N.A.),
Inc.) (registered investment
adviser); Director, Chairman,
Chief Executive Officer and
President, Invesco Management
Group,
|
|
|
133
|
|
|
None.
|
F-1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Portfolios in
|
|
|
Name, Year of Birth
|
|
|
|
|
|
Fund Complex
|
|
Other Trusteeship(s)
|
and Position(s) Held
|
|
Trustee
|
|
Principal Occupation(s) During Past
|
|
Overseen by
|
|
Held by Trustee over
|
with the Funds
|
|
Since
|
|
5 Years
|
|
Trustee
|
|
Past 5 Years
|
|
|
|
|
Inc. (formerly Invesco Aim
Management Group, Inc.) (financial
services holding company);
Director and President, INVESCO
Funds Group, Inc. (registered
investment adviser and registered
transfer agent); Director and
Chairman, Invesco Investment
Services, Inc. (formerly known as
Invesco Aim Investment Services,
Inc.) (registered transfer agent)
and IVZ Distributors, Inc.
(formerly known as INVESCO
Distributors, Inc.) (registered
broker dealer); Director,
President and Chairman, Invesco
Inc. (holding company) and Invesco
Canada Holdings Inc. (holding
company); Chief Executive Officer,
Invesco Corporate Class Inc.
(corporate mutual fund company)
and Invesco Canada Fund Inc.
(corporate mutual fund company);
Director, Chairman and Chief
Executive Officer, Invesco Canada
Ltd. (formerly known as Invesco
Trimark Ltd./Invesco Trimark Ltèe)
(registered investment adviser and
registered transfer agent);
Trustee, President and Principal
Executive Officer, The Invesco
Funds (other than AIM Treasurers
Series Trust (Invesco Treasurers
Series Trust) and Short-Term
Investments Trust); Trustee and
Executive Vice President, The
Invesco Funds (AIM Treasurers
Series Trust (Invesco Treasurers
Series Trust) and Short-Term
Investments Trust only); Director,
Invesco Investment Advisers LLC
(formerly known as Van Kampen
Asset Management); Director, Chief
Executive Officer and President,
Van Kampen Exchange Corp.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Formerly: Director and Chairman,
Van Kampen Investor Services Inc.; Director, Chief Executive Officer
and President, 1371 Preferred Inc.
(holding company); and Van Kampen
Investments Inc.; Director and
President, AIM GP Canada Inc.
(general partner for limited
partnerships); and Van Kampen
Advisors, Inc.; Director and Chief
Executive Officer, Invesco Trimark
Dealer Inc. (registered broker
dealer); Director, Invesco
Distributors, Inc. (formerly known
as Invesco Aim Distributors, Inc.)
(registered broker dealer);
Manager, Invesco PowerShares
Capital Management LLC; Director,
Chief Executive Officer and
President, Invesco Advisers, Inc.;
Director, Chairman, Chief
Executive Officer and President,
Invesco Aim Capital Management,
Inc.; President, Invesco Trimark
Dealer Inc. and Invesco Trimark
Ltd./Invesco Trimark Ltèe;
Director and President, AIM
Trimark Corporate Class Inc. and
AIM Trimark Canada Fund Inc.;
Senior Managing Director, Invesco
Holding Company Limited; Trustee
and Executive Vice President,
Tax-Free Investments Trust;
Director and Chairman, Fund
Management Company (former
registered broker dealer);
President
|
|
|
|
|
F-2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
Portfolios in
|
|
|
Name, Year of Birth
|
|
|
|
|
|
|
|
Fund Complex
|
|
Other Trusteeship(s)
|
and Position(s) Held
|
|
Trustee
|
|
Principal Occupation(s) During Past
|
|
Overseen by
|
|
Held by Trustee over
|
with the Funds
|
|
Since
|
|
5 Years
|
|
Trustee
|
|
Past 5 Years
|
|
|
|
|
|
|
and Principal Executive
Officer, The Invesco Funds (AIM
Treasurers Series Trust (Invesco
Treasurers Series Trust),
Short-Term Investments Trust and
Tax-Free Investments Trust only);
President, AIM Trimark Global Fund
Inc. and AIM Trimark Canada Fund
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wayne W.
Whalen
(3)
1939
Trustee
|
|
|
2010
|
|
|
Of Counsel, and prior to 2010,
partner in the law firm of
Skadden, Arps, Slate, Meagher &
Flom LLP, legal counsel to certain
funds in the Fund Complex.
|
|
|
151
|
|
|
Trustee/Managing
General Partner of
funds in the Fund
Complex. Director
of the Mutual Fund
Directors Forum, a
nonprofit
membership
organization for
investment company
directors.
Chairman and
Director for the
Abraham Lincoln
Presidential
Library Foundation
and Director of the
Stevenson Center
for Democracy.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Independent Trustees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce L. Crockett
1944
Trustee and Chair
|
|
|
2010
|
|
|
Chairman, Crockett Technology
Associates (technology consulting
company).
|
|
|
133
|
|
|
ACE Limited
(insurance company); and Investment Company Institute.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Formerly: Director, Captaris
(unified messaging provider);
Director, President and Chief
Executive Officer COMSAT
Corporation; and Chairman, Board
of Governors of INTELSAT
(international communications
company).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
C. Arch 1945
Trustee
|
|
|
2010
|
|
|
Retired. Chairman and Chief
Executive Officer of Blistex Inc.,
a consumer health care products
manufacturer.
|
|
|
151
|
|
|
Member of the
Heartland Alliance
Advisory Board, a
nonprofit
organization
serving human needs
based in Chicago.
Board member of the
Illinois
Manufacturers
Association. Member
of the Board of
Visitors, Institute
for the Humanities,
University of
Michigan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank S. Bayley 1939
Trustee
|
|
|
2010
|
|
|
Retired.
Formerly: Director, Badgley Funds,
Inc. (registered investment
company) (2 portfolios) and
Partner, law firm of Baker &
McKenzie.
|
|
|
133
|
|
|
Director and
Chairman, C.D.
Stimson Company (a
real estate
investment
company).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James T. Bunch 1942
Trustee
|
|
|
2010
|
|
|
Managing Member, Grumman Hill
Group LLC (family office private
equity management).
Formerly: Founder, Green, Manning
& Bunch Ltd. (investment banking
firm) (1988-2010); Executive
Committee, United States Golf
Association; and Director, Policy
Studies, Inc. and Van Gilder
Insurance Corporation.
|
|
|
133
|
|
|
Vice Chairman of
Board of Governors,
Western Golf
Association; Chair
Elect of Evans
Scholars Foundation
and Director,
Denver Film
Society.
|
F-3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
Portfolios in
|
|
|
Name, Year of Birth
|
|
|
|
|
|
|
|
Fund Complex
|
|
Other Trusteeship(s)
|
and Position(s) Held
|
|
Trustee
|
|
Principal Occupation(s) During Past
|
|
Overseen by
|
|
Held by Trustee over
|
with the Funds
|
|
Since
|
|
5 Years
|
|
Trustee
|
|
Past 5 Years
|
Rodney F. Dammeyer
1940
Trustee
|
|
|
2010
|
|
|
Chairman of CAC, LLC, a private
company offering capital
investment and management advisory
services.
Formerly: Prior to January 2004,
Director of TeleTech Holdings
Inc.; Prior to 2002, Director of
Arris Group, Inc.; Prior to 2001,
Managing Partner at Equity Group
Corporate Investments. Prior to
1995, Vice Chairman of Anixter
International. Prior to 1985,
experience includes Senior Vice
President and Chief Financial
Officer of Household
International, Inc, Executive Vice
President and Chief Financial
Officer of Northwest Industries,
Inc. and Partner of Arthur
Andersen & Co.
|
|
|
151
|
|
|
Director of Quidel
Corporation and
Stericycle, Inc.
Prior to May 2008,
Trustee of The
Scripps Research
Institute. Prior to
February 2008,
Director of Ventana
Medical Systems,
Inc. Prior to April
2007, Director of
GATX Corporation.
Prior to April
2004, Director of
TheraSense, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Albert R. Dowden 1941
Trustee
|
|
|
2010
|
|
|
Director of a number of public and
private business corporations,
including the Boss Group, Ltd.
(private investment and
management); Reich & Tang Funds (5
portfolios) (registered investment
company); and Homeowners of
America Holding Corporation/Homeowners
of America Insurance
Company (property casualty
company).
|
|
|
133
|
|
|
Board of Natures
Sunshine Products,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Formerly: Director, Continental
Energy Services, LLC (oil and gas
pipeline service); Director,
CompuDyne Corporation (provider of
product and services to the public
security market) and Director,
Annuity and Life Re (Holdings),
Ltd. (reinsurance company);
Director, President and Chief
Executive Officer, Volvo Group
North America, Inc.; Senior Vice
President, AB Volvo; Director of
various public and private
corporations; Chairman, DHJ Media,
Inc.; Director Magellan Insurance
Company; and Director, The Hertz
Corporation, Genmar Corporation
(boat manufacturer), National
Media Corporation; Advisory Board
of Rotary Power International
(designer, manufacturer, and
seller of rotary power engines);
and Chairman, Cortland Trust, Inc.
(registered investment company).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jack M. Fields 1952
Trustee
|
|
|
2010
|
|
|
Chief Executive Officer, Twenty
First Century Group, Inc.
(government affairs company); and
Owner and Chief Executive Officer,
Dos Angelos Ranch, L.P. (cattle,
hunting, corporate entertainment),
Discovery Global Education Fund
(non-profit) and Cross Timbers
Quail Research Ranch (non-profit).
|
|
|
133
|
|
|
Insperity (formerly
known as
Administaff).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable
forestry company) and member of
the U.S. House of Representatives.
|
|
|
|
|
|
|
F-4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
Portfolios in
|
|
|
Name, Year of Birth
|
|
|
|
|
|
|
|
Fund Complex
|
|
Other Trusteeship(s)
|
and Position(s) Held
|
|
Trustee
|
|
Principal Occupation(s) During Past
|
|
Overseen by
|
|
Held by Trustee over
|
with the Funds
|
|
Since
|
|
5 Years
|
|
Trustee
|
|
Past 5 Years
|
Carl Frischling 1937
Trustee
|
|
|
2010
|
|
|
Partner, law firm of Kramer Levin
Naftalis and Frankel LLP.
|
|
|
133
|
|
|
Director, Reich &
Tang Funds (6
portfolios).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prema Mathai-Davis
1950
Trustee
|
|
|
2010
|
|
|
Retired.
Formerly: Chief Executive Officer,
YWCA of the U.S.A.
|
|
|
133
|
|
|
None.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Larry Soll 1942
Trustee
|
|
|
2010
|
|
|
Retired.
Formerly, Chairman, Chief
Executive Officer and President,
Synergen Corp. (a biotechnology
company).
|
|
|
133
|
|
|
None.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hugo F. Sonnenschein
1940
Trustee
|
|
|
2010
|
|
|
Distinguished Service Professor
and President Emeritus of the
University of Chicago and the Adam
Smith Distinguished Service
Professor in the Department of
Economics at the University of
Chicago. Prior to July 2000,
President of the University of
Chicago.
|
|
|
151
|
|
|
Trustee of the
University of
Rochester and a
member of its
investment
committee. Member
of the National
Academy of
Sciences, the
American
Philosophical
Society and a
fellow of the
American Academy of
Arts and Sciences.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond Stickel, Jr.
1944
Trustee
|
|
|
2010
|
|
|
Retired.
Formerly, Director, Mainstay VP
Series Funds, Inc. (25 portfolios)
and Partner, Deloitte & Touche.
|
|
|
133
|
|
|
None.
|
|
|
|
(1)
|
|
Mr. Flanagan is considered an interested person of the Funds because he is an adviser to
the board of directors of the Adviser, and an officer and a director of Invesco Ltd., the
ultimate parent company of the Adviser.
|
|
(2)
|
|
Mr. Taylor is considered an interested person of the Funds because he is an officer and a
director of the Adviser.
|
|
(3)
|
|
Mr. Whalen is considered an interested person of the Funds because he is Of Counsel at the
law firm that serves as legal counsel to the Invesco Van Kampen closed-end funds, for which
the Adviser also serves as investment adviser.
|
Trustee Ownership of Fund Shares
The following table shows each Board members ownership of shares of the Funds and of shares
of all registered investment companies overseen by such Board member in the Fund Complex as of
December 31, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Dollar
|
|
|
|
|
|
|
|
|
Range of Equity
|
|
|
|
|
|
|
|
|
Securities in All
|
|
|
|
|
|
|
|
|
Registered Investment
|
|
|
|
|
|
|
|
|
Companies Overseen
|
|
|
Dollar Range
|
|
Dollar Range
|
|
Dollar Range
|
|
by Board Member in
|
|
|
of Equity Securities
|
|
of Equity Securities
|
|
of Equity Securities
|
|
Family of Investment
|
Name
|
|
in IIC
|
|
in IQC
|
|
in ICS
|
|
Companies
|
Interested Trustees
|
|
|
|
|
|
|
|
|
Martin L. Flanagan
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
Philip A. Taylor
|
|
None
|
|
None
|
|
None
|
|
None
|
Wayne W. Whalen
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
F-5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Dollar
|
|
|
|
|
|
|
|
|
Range of Equity
|
|
|
|
|
|
|
|
|
Securities in All
|
|
|
|
|
|
|
|
|
Registered Investment
|
|
|
|
|
|
|
|
|
Companies Overseen
|
|
|
Dollar Range
|
|
Dollar Range
|
|
Dollar Range
|
|
by Board Member in
|
|
|
of Equity Securities
|
|
of Equity Securities
|
|
of Equity Securities
|
|
Family of Investment
|
Name
|
|
in IIC
|
|
in IQC
|
|
in ICS
|
|
Companies
|
Independent Trustees
|
|
|
|
|
|
|
|
|
Bruce L. Crockett
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
David C. Arch
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
Frank S. Bayley
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
James T. Bunch
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
Rodney Dammeyer
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
Albert R. Dowden
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
Jack M. Fields
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
Carl Frischling
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
Prema Mathai-Davis
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
Larry Soll
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
Hugo F. Sonnenschein
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
Raymond Stickel, Jr.
|
|
None
|
|
None
|
|
None
|
|
Over $100,000
|
F-6
EXHIBIT G
Board Leadership Structure for the Target Funds
The following information pertains to the Target Funds. Not all funds advised by the Adviser
are overseen by the same board of trustees. The Target Funds are overseen by the Board of Trustees
discussed below (the Invesco Board). References to the Board in this Exhibit G refer solely to
the Invesco Board and references to Funds in this Exhibit G refer solely to those funds advised
by the Adviser, including the Target Funds, overseen by the Invesco Board.
The Board will be composed of fifteen Trustees, including twelve Trustees who are not
interested persons of the Funds, as that term is defined in the 1940 Act (collectively, the
Independent Trustees and each an Independent Trustee). In addition to eight regularly scheduled
meetings per year, the Board holds special meetings or informal conference calls to discuss
specific matters that may require action prior to the next regular meeting. The Board met twelve
times during the twelve months ended February 29, 2012. As discussed below, the Board has
established committees to assist the Board in performing its oversight responsibilities.
The Board has appointed an Independent Trustee to serve in the role of Chairman. The
Chairmans primary role is to participate in the preparation of the agenda for meetings of the
Board and the identification of information to be presented to the Board and matters to be acted
upon by the Board. The Chairman also presides at all meetings of the Board and acts as a liaison
with service providers, officers, attorneys, and other Trustees generally between meetings. The
Chairman may perform such other functions as may be requested by the Board from time to time.
Except for any duties specified herein or pursuant to a Funds charter documents, the designation
of Chairman does not impose on such Independent Trustee any duties, obligations or liability that
is greater than the duties, obligations or liability otherwise imposed on such person as a member
of the Board.
The Board believes that its leadership structure, which includes an Independent Trustee as
Chairman, allows for effective communication between the Trustees and fund management, among the
Boards Trustees and among its Independent Trustees. The existing Board structure, including its
committee structure, provides the Independent Trustees with effective control over Board governance
while also providing insight from the two non-Independent Trustees who are active officers of the
Funds investment adviser. The Boards leadership structure promotes dialogue and debate, which
the Board believes will allow for the proper consideration of matters deemed important to the Funds
and their shareholders and result in effective decision-making.
Board Role in Risk Oversight
The Board considers risk management issues as part of its general oversight responsibilities
throughout the year at regular meetings of the Investments Committee, Audit Committee, Compliance
Committee, and Valuation, Distribution and Proxy Oversight Committee (each as defined and further
described below). These committees in turn report to the full Board and recommend actions and
approvals for the full Board to take.
Invesco prepares regular reports that address certain investment, valuation and compliance
matters, and the Board as a whole or the committees may also receive special written reports or
presentations on a variety of risk issues at the request of the Board, a committee or the Senior
Officer. In addition, the Audit Committee of the Board meets regularly with Invesco Ltd.s internal
audit group to review reports on their examinations of functions and processes within the Adviser
that affect the Funds.
The Investments Committee and its sub-committees receive regular written reports describing
and analyzing the investment performance of the Funds. In addition, the portfolio managers of the
Funds meet regularly with the sub-committees of the Investments Committee to discuss portfolio
performance, including investment risk, such as the impact on the Funds of the investment in
particular securities or instruments, such as derivatives. To the extent that a Fund changes a
particular investment strategy that could have a material impact on the Funds risk profile, the
Board generally is consulted in advance with respect to such change.
The Adviser provides regular written reports to the Valuation, Distribution and Proxy
Oversight Committee that enable the Valuation, Distribution and Proxy Oversight Committee to
monitor the number of fair valued
G-1
securities in a particular portfolio, the reasons for the fair
valuation and the methodology used to arrive at the fair value. Such reports also include
information concerning illiquid securities within a Funds portfolio. In addition, the Audit
Committee reviews valuation procedures and pricing results with the Funds independent auditors in
connection with the Audit Committees review of the results of the audit of the Funds year-end
financial statement.
The Compliance Committee receives regular compliance reports prepared by the Advisers
compliance group and meets regularly with the Funds Chief Compliance Officer (CCO) to discuss
compliance issues, including compliance risks. As required under U.S. Securities and Exchange
Commission (SEC) rules, the Independent Trustees meet at least quarterly in executive session with
the CCO, and the Funds CCO prepares and presents an annual written compliance report to the Board.
The Compliance Committee recommends and the Board adopts compliance policies and procedures for the
Funds and approves such procedures for the Funds service providers. The compliance policies and
procedures are specifically designed to detect, prevent and correct violations of the federal
securities laws.
Board Committees and Meetings
The standing committees of the Board are the Audit Committee, the Compliance Committee, the
Governance Committee, the Investments Committee, and the Valuation, Distribution and Proxy Voting
Oversight Committee (the Committees).
The members of the Audit Committee are Messrs. David C. Arch, Frank S. Bayley, James T. Bunch,
Bruce L. Crockett, Rodney Dammeyer (Vice Chair), Raymond Stickel, Jr. (Chair) and Dr. Larry Soll.
The Audit Committees primary purposes are to: (i) oversee qualifications, independence and
performance of the independent registered public accountants; (ii) appoint independent registered
public accountants for the Funds; (iii) pre-approve all permissible audit and non-audit services
that are provided to Funds by their independent registered public accountants to the extent
required by Section 10A(h) and (i) of the Exchange Act; (iv) pre-approve, in accordance with Rule
2-01(c)(7)(ii) of Regulation S-X, certain non-audit services provided by the Funds independent
registered public accountants to the Adviser and certain affiliates of the Adviser; (v) review the
audit and tax plans prepared by the independent registered public accountants; (vi) review the
Funds audited financial statements; (vii) review the process that management uses to evaluate and
certify disclosure controls and procedures in Form N-CSR; (viii) review the process for preparation
and review of the Funds shareholder reports; (ix) review certain tax procedures maintained by the
Funds; (x) review modified or omitted officer certifications and disclosures; (xi) review any
internal audits of the Funds; (xii) establish procedures regarding questionable accounting or
auditing matters and other alleged violations; (xiii) set hiring policies for employees and
proposed employees of the Funds who are employees or former employees of the independent registered
public accountants; and (xiv) remain informed of (a) the Funds accounting systems and controls,
(b) regulatory changes and new accounting pronouncements that affect the Funds net asset value
calculations and financial statement reporting requirements, and (c) communications with regulators
regarding accounting and financial reporting matters that pertain to the Funds. Each member of the
Audit Committee is an Independent Trustee and each meets the additional independence requirements
for audit committee members as defined by Exchange listing standards. The Audit Committee held
eight meetings during the twelve months ended February 29, 2012.
The members of the Compliance Committee are Messrs. Bayley, Bunch, Dammeyer (Vice Chair),
Stickel and Dr. Soll (Chair). The Compliance Committee is responsible for: (i) recommending to the
Board and the Independent Trustees the appointment, compensation and removal of the Funds CCO;
(ii) recommending to the Independent Trustees the appointment, compensation and removal of the
Funds Senior Officer appointed pursuant to the terms of the Assurances of Discontinuance entered
into by the New York Attorney General, Invesco and INVESCO Funds Group, Inc.; (iii) reviewing any
report prepared by a third party who is not an interested person of the Adviser, upon the
conclusion by such third party of a compliance review of the Adviser; (iv) reviewing all reports on
compliance matters from the Funds CCO, (v) reviewing all recommendations made by the Senior
Officer regarding the Advisers compliance procedures, (vi) reviewing all reports from the Senior
Officer of any violations of state and federal securities laws, the Colorado Consumer Protection
Act, or breaches of the Advisers fiduciary duties to Fund shareholders and of the Advisers Code
of Ethics; (vii) overseeing all of the compliance policies and procedures of the Funds and their
service providers adopted pursuant to Rule 38a-1 of the 1940 Act; (viii) from time to time,
reviewing certain matters related to redemption fee waivers and recommending to the Board whether
or not to approve such matters; (ix) receiving and reviewing quarterly reports on the activities of
the Advisers Internal
G-2
Compliance Controls Committee; (x) reviewing all reports made by the
Advisers CCO; (xi) reviewing and recommending to the Independent Trustees whether to approve
procedures to investigate matters brought to the attention of the Advisers ombudsman; (xii) risk
management oversight with respect to the Funds and, in connection therewith, receiving and
overseeing risk management reports from Invesco Ltd. that are applicable to the Funds or their
service providers; and (xiii) overseeing potential conflicts of interest that are reported to the
Compliance Committee by the Adviser, the CCO, the Senior Officer and/or the Compliance Consultant.
The Compliance Committee held six meetings during the twelve months ended February 29, 2012.
The members of the Governance Committee are Messrs. Arch, Crockett, Albert R. Dowden (Chair),
Jack M. Fields (Vice Chair), Carl Frischling, Hugo F. Sonnenschein and Dr. Prema Mathai-Davis. The
Governance Committee is responsible for: (i) nominating persons who will qualify as Independent
Trustees for (a) election as Trustees in connection with meetings of shareholders of the Funds that
are called to vote on the election of Trustees, and (b) appointment by the Board as Trustees in
connection with filling vacancies that arise in between meetings of shareholders; (ii) reviewing
the size of the Board, and recommending to the Board whether the size of the Board shall be
increased or decreased; (iii) nominating the Chair of the Board; (iv) monitoring the composition of
the Board and each committee of the Board, and monitoring the qualifications of all Trustees; (v)
recommending persons to serve as members of each committee of the Board (other than the Compliance
Committee), as well as persons who shall serve as the chair and vice chair of each such committee;
(vi) reviewing and recommending the amount of compensation payable to the Independent Trustees;
(vii) overseeing the selection of independent legal counsel to the Independent Trustees; (viii)
reviewing and approving the compensation paid to independent legal counsel to the Independent
Trustees; (ix) reviewing and approving the compensation paid to counsel and other advisers, if any,
to the Committees of the Board; and (x) reviewing as they deem appropriate administrative and/or
logistical matters pertaining to the operations of the Board. Each member of the Governance
Committee is an Independent Trustee and each meets the additional independence requirements for
nominating committee members as defined by Exchange listing standards. The Governance Committees
charter is available at www.invesco.com/us.
The Governance Committee will consider nominees recommended by a shareholder to serve as
Trustee, provided: (i) that such person is a shareholder of record at the time he or she submits
such names and is entitled to vote at the meeting of shareholders at which Trustees will be
elected; and (ii) that the Governance Committee or the Board, as applicable, shall make the final
determination of persons to be nominated. Notice procedures set forth in each Funds bylaws require
that any shareholder of a Fund desiring to nominate a Trustee for election at a shareholder meeting
must submit to the Funds Secretary the nomination in writing not later than the close of business
on the later of the 60th day prior to such shareholder meeting or the tenth day following the day
on which public announcement is made of the shareholder meeting and not earlier than the close of
business on the 90th day prior to the shareholder meeting. The Governance Committee held six
meetings during the twelve months ended February 29, 2012.
The members of the Investments Committee are Messrs. Arch, Bayley (Chair), Bunch (Vice Chair),
Crockett, Dammeyer, Dowden, Fields, Martin L. Flanagan, Frischling, Sonnenschein (Vice Chair),
Stickel, Philip A. Taylor, Wayne W. Whalen, and Drs. Mathai-Davis (Vice Chair) and Soll. The
Investments Committees primary purposes are to: (i) assist the Board in its oversight of the
investment management services provided by the Adviser and the Sub-Advisers; and (ii) review all
proposed and existing advisory and sub-advisory arrangements for the Funds, and to recommend what
action the full Boards and the Independent Trustees take regarding the approval of all such
proposed arrangements and the continuance of all such existing arrangements.
The Investments Committee has established three sub-committees (the Sub-Committees). The
Sub-Committees are responsible for: (i) reviewing the performance, fees and expenses of the Funds
that have been assigned to a particular Sub-Committee (for each Sub-Committee, the Designated
Funds), unless the Investments Committee takes such action directly; (ii) reviewing with the
applicable portfolio managers from time to time the investment objective(s), policies, strategies
and limitations of the Designated Funds; (iii) evaluating the investment advisory, sub-advisory and
distribution arrangements in effect or proposed for the Designated Funds, unless the Investments
Committee takes such action directly; (iv) being familiar with the registration statements and
periodic shareholder reports applicable to their Designated Funds; and (v) such other
investment-related matters as the Investments Committee may delegate to the Sub-Committees from
time to time. The Investments Committee held six meetings during the twelve months ended February
29, 2012.
G-3
The members of the Valuation, Distribution and Proxy Oversight Committee are Messrs. Dowden,
Fields, Frischling (Chair), Sonnenschein (Vice Chair), Whalen and Dr. Mathai-Davis. The primary
purposes of the Valuation, Distribution and Proxy Oversight Committee are: (a) to address issues
requiring action or oversight by the Board (i) in the valuation of the Funds portfolio securities
consistent with the Pricing Procedures, (ii) in oversight of the creation and maintenance by the
principal underwriters of the Funds of an effective distribution and marketing system to build and
maintain an adequate asset base and to create and maintain economies of scale for the Funds, (iii)
in the review of existing distribution arrangements for the Funds under Rule 12b-1 and Section 15
of the 1940 Act, and (iv) in the oversight of proxy voting on portfolio securities of the Funds;
and (b) to make regular reports to the full Board.
The Valuation, Distribution and Proxy Oversight Committee is responsible for: (a) with regard
to valuation, (i) developing an understanding of the valuation process and the Pricing Procedures,
(ii) reviewing the Pricing Procedures and making recommendations to the full Board with respect
thereto, (iii) reviewing the reports described in the Pricing Procedures and other information from
the Adviser regarding fair value determinations made pursuant to the Pricing Procedures by the
Advisers internal valuation committee and making reports and recommendations to the full Board
with respect thereto, (iv) receiving the reports of the Advisers internal valuation committee
requesting approval of any changes to pricing vendors or pricing methodologies as required by the
Pricing Procedures and the annual report of the Adviser evaluating the pricing vendors, approving
changes to pricing vendors and pricing methodologies as provided in the Pricing Procedures, and
recommending annually the pricing vendors for approval by the full Board; (v) upon request of the
Adviser, assisting the Advisers internal valuation committee or the full Board in resolving
particular fair valuation issues; (vi) reviewing the reports described in the Procedures for
Determining the Liquidity of Securities (the Liquidity Procedures) and other information from the
Adviser regarding liquidity determinations made pursuant to the Liquidity Procedures by the Adviser
and making reports and recommendations to the full Board with respect thereto, and (vii) overseeing
actual or potential conflicts of interest by investment personnel or others that could affect their
input or recommendations regarding pricing or liquidity issues; (b) with regard to distribution and
marketing, (i) developing an understanding of mutual fund distribution and marketing channels and
legal, regulatory and market developments regarding distribution, (ii) reviewing periodic
distribution and marketing determinations and annual approval of distribution arrangements and
making reports and recommendations to the full Board with respect thereto, and (iii) reviewing
other information from the principal underwriters to the Funds regarding distribution and marketing
of the Funds and making recommendations to the full Board with respect thereto; and (c) with regard
to proxy voting, (i) overseeing the implementation of the Proxy Voting Guidelines (the
Guidelines) and the Proxy Policies and Procedures (the Proxy Procedures) by the Adviser and the
Sub-Advisers, reviewing the Quarterly Proxy Voting Report and making recommendations to the full
Board with respect thereto, (ii) reviewing the Guidelines and the Proxy Procedures and information
provided by the Adviser and the Sub-Advisers regarding industry developments and best practices in
connection with proxy voting and making recommendations to the full Board with respect thereto, and
(iii) in implementing its responsibilities in this area, assisting the Adviser in resolving
particular proxy voting issues. The Valuation, Distribution and Proxy Oversight Committee was
formed effective January 1, 2008. It succeeded the Valuation Committee, which existed prior to
2008. The Valuation, Distribution and Proxy Oversight Committee held six meetings during the
twelve months ended February 29, 2012.
Trustees are encouraged to attend shareholder meetings, but the Board has no set policy
requiring Board member attendance at meetings. During each Funds last fiscal year, each of the
Trustees during the period such Trustee served as a Trustee attended at least 75% of the meetings
of the Board and all committee meetings thereof of which such Trustee was a member.
G-4
EXHIBIT H
Remuneration of Trustees for the Target Funds
The following information pertains to the Target Funds. Some of the Funds in the Fund Complex
are overseen by different boards of trustees. The Target Funds are overseen by the Board of
Trustees discussed below (the Invesco Board). References to the Board in this Exhibit H refer
solely to the Invesco Board and references to Funds in this Exhibit H refer solely to those funds
in the Fund Complex, including the Target Funds, overseen by the Invesco Board
Each Trustee who is not affiliated with the Adviser is compensated for his or her services
according to a fee schedule that recognizes the fact that such Trustee also serves as a Trustee of
other Invesco Funds. Each such Trustee receives a fee, allocated among the Invesco Funds for which
he or she serves as a Trustee, that consists of an annual retainer component and a meeting fee
component. The Chair of the Board and Chairs and Vice Chairs of certain committees receive
additional compensation for their services.
The Trustees have adopted a retirement plan funded by the Funds for the Trustees who are not
affiliated with the Adviser. The Trustees also have adopted a retirement policy that permits each
non-Invesco-affiliated Trustee to serve until December 31 of the year in which the Trustee turns
75. A majority of the Trustees may extend from time to time the retirement date of a Trustee.
Annual retirement benefits are available from the Funds and/or the other Invesco Funds for
which a Trustee serves (each, a Covered Fund), for each Trustee who is not an employee or officer
of the Adviser, who either (a) became a Trustee prior to December 1, 2008, and who has at least
five years of credited service as a Trustee (including service to a predecessor fund) of a Covered
Fund, or (b) was a member of the Board of Trustees of a Van Kampen Fund immediately prior to June
1, 2010 (Former Van Kampen Trustee), and has at least one year of credited service as a Trustee
of a Covered Fund after June 1, 2010.
For Trustees other than Former Van Kampen Trustees, effective January 1, 2006, for
retirements after December 31, 2005, the retirement benefits will equal 75% of the Trustees annual
retainer paid to or accrued by any Covered Fund with respect to such Trustee during the
twelve-month period prior to retirement, including the amount of any retainer deferred under a
separate deferred compensation agreement between the Covered Fund and the Trustee. The amount of
the annual retirement benefit does not include additional compensation paid for Board meeting fees
or compensation paid to the Chair of the Board and the Chairs and Vice Chairs of certain Board
committees, whether such amounts are paid directly to the Trustee or deferred. The annual
retirement benefit is payable in quarterly installments for a number of years equal to the lesser
of (i) sixteen years or (ii) the number of such Trustees credited years of service. If a Trustee
dies prior to receiving the full amount of retirement benefits, the remaining payments will be made
to the deceased Trustees designated beneficiary for the same length of time that the Trustee would
have received the payments based on his or her service or, if the Trustee has elected, in a
discounted lump sum payment. A Trustee must have attained the age of 65 (60 in the event of death
or disability) to receive any retirement benefit. A Trustee may make an irrevocable election to
commence payment of retirement benefits upon retirement from the Board before age 72; in such a
case, the annual retirement benefit is subject to a reduction for early payment.
If the Former Van Kampen Trustee completes at least 10 years of credited service after June 1,
2010, the retirement benefit will equal 75% of the Former Van Kampen Trustees annual retainer paid
to or accrued by any Covered Fund with respect to such Trustee during the twelve-month period prior
to retirement, including the amount of any retainer deferred under a separate deferred compensation
agreement between the Covered Fund and such Trustee. The amount of the annual retirement benefit
does not include additional compensation paid for Board meeting fees or compensation paid to the
Chair of the Board and the Chairs and Vice Chairs of certain Board committees, whether such amounts
are paid directly to the Trustee or deferred. The annual retirement benefit is payable in quarterly
installments for 10 years beginning after the later of the Former Van Kampen Trustees termination
of service or attainment of age 72 (or age 60 in the event of disability or immediately in the
event of death). If a Former Van Kampen Trustee dies prior to receiving the full amount of
retirement benefits, the remaining payments will be made to the deceased Trustees designated
beneficiary or, if the Trustee has elected, in a discounted lump sum payment.
H-1
If the Former Van Kampen Trustee completes less than 10 years of credited service after June
1, 2010, the retirement benefit will be payable at the applicable time described in the preceding
paragraph, but will be paid in two components successively. For the period of time equal to the
Former Van Kampen Trustees years of credited service after June 1, 2010, the first component of
the annual retirement benefit will equal 75% of the compensation amount described in the preceding
paragraph. Thereafter, for the period of time equal to the Former Van Kampen Trustees years of
credited service after June 1, 2010, the second component of the annual retirement benefit will
equal the excess of (x) 75% of the compensation amount described in the preceding paragraph, over
(y) $68,041 plus an interest factor of 4% per year compounded annually measured from June 1, 2010
through the first day of each year for which payments under this second component are to be made.
In no event, however, will the retirement benefits under the two components be made for a period of
time greater than 10 years. For example, if the Former Van Kampen Trustee completes 7 years of
credited service after June 1, 2010, he or she will receive 7 years of payments under the first
component and thereafter 3 years of payments under the second component, and if the Former Van
Kampen Trustee completes 4 years of credited service after June 1, 2010, he or she will receive 4
years of payments under the first component and thereafter 4 years of payments under the second
component.
Deferred Compensation Agreements
. Edward K. Dunn (a former Trustee of funds in the Invesco Funds
complex), Messrs. Crockett, Fields, Frischling and Whalen, and Drs. Mathai-Davis and Soll (for
purposes of this paragraph only, the Deferring Trustees) have each executed a Deferred
Compensation Agreement (collectively, the Compensation Agreements). Pursuant to the Compensation
Agreements, the Deferring Trustees have the option to elect to defer receipt of up to 100% of their
compensation payable by the Funds, and such amounts are placed into a deferral account and deemed
to be invested in one or more Invesco Funds selected by the Deferring Trustees.
Distributions from these deferral accounts will be paid in cash, generally in equal quarterly
installments over a period of up to ten (10) years (depending on the Compensation Agreement)
beginning on the date selected under the Compensation Agreement. If a Deferring Trustee dies prior
to the distribution of amounts in his or her deferral account, the balance of the deferral account
will be distributed to his or her designated beneficiary. The Compensation Agreements are not
funded and, with respect to the payments of amounts held in the deferral accounts, the Deferring
Trustees have the status of unsecured creditors of the Funds and of each other Invesco Fund from
which they are deferring compensation.
Set forth below is information regarding compensation paid or accrued for each Trustee of the
Target Funds.
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Pension or
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Retirement
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Estimated
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Total
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Benefits
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Annual
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Compensation
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Accrued
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Benefits from
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Before
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Aggregate
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Aggregate
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Aggregate
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by All
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Invesco
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Deferral from
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Compensation
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Compensation
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Compensation
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Invesco
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Funds Upon
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Invesco
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Name of Trustee
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from IIC
(1)
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from IQC
(1)
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from ICS
(1)
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Funds
(2)
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Retirement
(3)
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Funds
(4)
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Interested Trustees
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Wayne W. Whalen
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$
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1,152
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$
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1,118
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$
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1,042
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$
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304,730
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$
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195,000
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$
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399,000
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Independent Trustees
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David C. Arch
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1,212
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1,176
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1,097
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164,973
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195,000
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412,250
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Frank S. Bayley
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1,770
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1,689
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1,254
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236,053
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195,000
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420,000
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James T. Bunch
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1,268
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1,230
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1,147
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302,877
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195,693
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385,000
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Bruce L. Crockett
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2,966
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2,839
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2,198
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227,797
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195,000
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693,500
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Rodney F. Dammeyer
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1,201
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1,166
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1,087
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290,404
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195,000
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412,250
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Albert R. Dowden
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2,199
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2,071
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1,231
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296,156
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195,000
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415,000
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Jack M. Fields
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1,162
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1,128
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1,052
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313,488
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195,000
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307,250
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Carl Frischling
(5)
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1,340
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1,300
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1,212
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233,415
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195,000
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356,000
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Prema Mathai-Davis
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1,238
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1,202
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1,120
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302,911
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195,000
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330,000
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Larry Soll
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1,928
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1,831
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1,260
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342,675
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216,742
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375,750
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Hugo F. Sonnenschein
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1,232
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1,196
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1,115
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290,404
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195,000
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412,200
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Raymond Stickel, Jr.
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2,304
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2,173
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1,326
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230,451
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195,000
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399,250
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H-2
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(1)
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For the fiscal year ended February 29, 2012. The total amount of compensation
from IIC, IQC, and ICS deferred by all Trustees during the fiscal year ended February 29,
2012, including earnings, was $4,615, $4,470, and $4,070, respectively.
|
|
(2)
|
|
For the fiscal year ended December 31, 2011. During the fiscal year ended February
29, 2012, the total amount of expenses allocated to IIC, IQC, and ICS in respect of such
retirement benefits was $4,444, $8,559, and $1,290, respectively.
|
|
(3)
|
|
For the fiscal year ended December 31, 2011. These amounts represent the estimated
annual benefits payable by the Invesco Funds upon the trustees retirement and assumes each
trustee serves until his or her normal retirement date.
|
|
(4)
|
|
For the fiscal year ended December 31, 2011. All trustees except Arch, Dammeyer,
Sonnenschein and Whalen currently serve as trustee of 133 portfolios in the Fund Complex
advised by the Adviser. Messrs. Arch, Dammeyer, Sonnenschein and Whalen currently serve as
trustee of 151 portfolios in the Fund Complex advised by the Adviser.
|
|
(5)
|
|
During the fiscal year ended February 29, 2012, IIC paid $1,151, IQC paid $1,098,
and ICS paid $996 in legal fees to Kramer Levin Naftalis & Frankel LLP for services rendered
by such firm as counsel to the independent trustees of the Trust. Mr. Frischling is a partner
of such firm.
|
H-3
EXHIBIT I
Independent Auditor Information
The Audit Committee of the Board of Trustees of each Fund appointed, and the Board of Trustees
ratified and approved, PricewaterhouseCoopers LLP (PwC) as the independent registered public
accounting firm of the Fund for fiscal years ending after May 31, 2010. Prior to May 31, 2010, each
Fund was audited by a different independent registered public accounting firm (the Prior
Auditor). The Board of Trustees selected a new independent auditor in connection with the
appointment of Invesco Advisers as investment adviser to the Fund (New Advisory Agreement).
Effective June 1, 2010, the Prior Auditor resigned as the independent registered public accounting
firm of the Fund.
The Prior Auditors report on the financial statements of each Fund for the prior two years
did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as
to uncertainty, audit scope or accounting principles. During the period the Prior Auditor was
engaged, there were no disagreements with the Prior Auditor on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedures which, if not
resolved to the Prior Auditors satisfaction, would have caused it to make reference to that matter
in connection with its report.
Audit and Other Fees
The Funds and the Covered Entities (the Adviser, excluding sub-advisers unaffiliated with
the Adviser, and any entity controlling, controlled by or under common control with the Adviser
that provides ongoing services to the Funds) were billed the amounts listed below by PwC during
each Funds last two fiscal years. Effective February 28, 2011, the fiscal year end of each Fund
was changed to the last day in February.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Audit Fees
|
|
|
|
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|
|
|
|
|
|
Audit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit
|
|
Related
|
|
|
|
|
|
All Other
|
|
Total Non-Audit
|
|
|
|
|
|
|
Fiscal Year End
|
|
Fees
|
|
Fees
(1)
|
|
Tax Fees
(2)
|
|
Fees
|
|
Fees
|
|
Total
|
IIC
|
|
2/29/12
|
|
$
|
36,300
|
|
|
$
|
5,000
|
|
|
$
|
4,100
|
|
|
$
|
0
|
|
|
$
|
9,100
|
|
|
$
|
45,400
|
|
|
|
11/1/10 to 2/28/11
|
|
|
19,250
|
|
|
|
4,000
|
|
|
|
2,300
|
|
|
|
0
|
|
|
|
6,300
|
|
|
|
25,550
|
|
IQC
|
|
2/29/12
|
|
|
36,300
|
|
|
|
5,000
|
|
|
|
4,300
|
|
|
|
0
|
|
|
|
9,300
|
|
|
|
45,600
|
|
|
|
11/1/10 to 2/28/11
|
|
|
19,250
|
|
|
|
4,000
|
|
|
|
2,300
|
|
|
|
0
|
|
|
|
6,300
|
|
|
|
25,550
|
|
ICS
|
|
2/29/12
|
|
|
31,200
|
|
|
|
0
|
|
|
|
4,100
|
|
|
|
0
|
|
|
|
4,100
|
|
|
|
35,300
|
|
|
|
11/1/10 to 2/28/11
|
|
|
16,445
|
|
|
|
0
|
|
|
|
2,300
|
|
|
|
0
|
|
|
|
2,300
|
|
|
|
18,745
|
|
Acquiring Fund (VCV)
|
|
02/29/12
|
|
|
36,300
|
|
|
|
5,000
|
|
|
|
5,700
|
|
|
|
0
|
|
|
$
|
10,700
|
|
|
|
47,000
|
|
|
|
11/1/10 to 2/28/11
|
|
|
19,250
|
|
|
|
4,000
|
|
|
|
2,300
|
|
|
|
1,667
|
(3)
|
|
|
7,967
|
|
|
|
27,217
|
|
Covered Entities
|
|
2/29/12
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
11/1/10 to 2/28/11
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
(1)
|
|
Includes fees billed for agreed upon procedures related to auction rate preferred
securities.
|
|
(2)
|
|
Includes fees billed for reviewing tax returns.
|
|
(3)
|
|
All Other Fees for the fiscal year end February 28, 2011 includes fees billed for completing
professional services related to benchmark analysis.
|
The Audit Committee of each Board has considered whether the provision of non-audit
services performed by PwC to such Funds and Covered Entities is compatible with maintaining PwCs
independence in performing audit services. Each Funds Audit Committee also is required to
pre-approve services to Covered Entities to the extent that the services are determined to have a
direct impact on the operations or financial reporting of such Fund. 100% of such services were
pre-approved by the Audit Committee pursuant to the Audit Committees pre-approval policies and
procedures. Each Boards pre-approval policies and procedures are included as part of the Boards
Audit Committee charter, which is available at www.invesco.com/us. The members of the Audit
Committee for the Target Funds are David C. Arch, Frank S. Bayley, James T. Bunch, Bruce L.
Crockett, Rodney Dammeyer,
I-1
Raymond Stickel, Jr., and Dr. Larry Soll. The members of the Audit Committee for the Acquiring
Fund are Jerry D. Choate, Linda Hutton Heagy and R. Craig Kennedy.
The Audit Committee of each Fund reviewed and discussed the last audited financial statements
of each Fund with management and with PwC. In the course of its discussions, each Funds Audit
Committee has discussed with PwC its judgments as to the quality, not just the acceptability, of
such Funds accounting principles and such other matters as are required to be discussed with the
Audit Committee by Statement on Auditing Standards No. 114 (The Auditors Communication With Those
Charged With Governance). Each Funds Audit Committee received the written disclosures and the
letter from PwC required under Public Company Accounting Oversight Boards Ethics & Independence
Rule 3526 and has discussed with PwC its independence with respect to such Fund. Each Fund knows
of no direct financial or material indirect financial interest of PwC in such Fund. Based on this
review, the Audit Committee recommended to the Board of each Fund that such Funds audited
financial statements be included in such Funds Annual Report to Shareholders for the most recent
fiscal year for filing with the SEC.
It is not expected that representatives of PwC will attend the Meeting. In the event
representatives of PwC do attend the Meeting, they will have the opportunity to make a statement if
they desire to do so and will be available to answer appropriate questions.
I-2
EXHIBIT J
Information Regarding the Trustees of the Acquiring Fund
The following information pertains to the Acquiring Fund. Not all funds advised by the
Adviser are overseen by the same board of trustees. The Acquiring Fund is overseen by the Board of
Trustees discussed below (the IVK Board). References to the Board in this Exhibit J refer
solely to the IVK Board and references to Funds in this Exhibit J refer solely to those funds
advised by the Adviser, including the Acquiring Fund, overseen by the IVK Board.
The tables below list the incumbent Trustees, their principal occupations, other directorships
held by them and their affiliations, if any, with the Adviser or its affiliates. The term Fund
Complex includes each of the investment companies advised by the Adviser as of the Record Date.
Trustees of the Funds generally serve three year terms or until their successors are duly elected
and qualified.
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|
|
|
|
|
|
|
|
Term of
|
|
|
|
Number of
|
|
|
|
|
|
|
Office
|
|
|
|
Portfolios in
|
|
|
|
|
|
|
and
|
|
|
|
Fund
|
|
|
Name, Year of Birth,
|
|
Position(s)
|
|
Length of
|
|
|
|
Complex
|
|
|
and Address of
|
|
Held with
|
|
Time
|
|
Principal Occupation(s) During the
|
|
Overseen by
|
|
Other Directorships Held by
|
Trustee
|
|
Funds
|
|
Served
|
|
Past Five Years
|
|
Trustee
|
|
Trustee During the Past Five Years
|
|
Independent Trustees:
|
|
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|
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|
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|
|
David C. Arch
1
1945
Blistex Inc.
1800 Swift Drive
Oak Brook, IL 60523
|
|
Trustee
|
|
|
1993
|
|
|
Retired. Chairman and Chief
Executive Officer of Blistex
Inc., a consumer health care
products manufacturer.
|
|
|
151
|
|
|
Trustee/Managing General Partner
of funds in the Fund Complex.
Member of the Heartland Alliance
Advisory Board, a nonprofit
organization serving human needs
based in Chicago. Board member of
the Illinois Manufacturers
Association. Member of the Board
of Visitors, Institute for the
Humanities, University of
Michigan.
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|
|
|
|
|
|
|
|
|
|
|
|
|
Jerry D. Choate
1
1938
33971 Selva Road
Suite 130
Dana Point, CA 92629
|
|
Trustee
|
|
|
2003
|
|
|
From 1995 to 1999, Chairman and
Chief Executive Officer of the
Allstate Corporation (Allstate)
and Allstate Insurance Company.
From 1994 to 1995, President and
Chief Executive Officer of
Allstate. Prior to 1994, various
management positions at Allstate.
|
|
|
18
|
|
|
Trustee/Managing General Partner
of funds in the Fund Complex.
Director since 1998 and member of
the governance and nominating
committee, executive committee,
compensation and management
development committee and equity
award committee, of Amgen Inc., a
biotechnological company.
Director since 1999 and member of
the nominating and governance
committee and compensation and
executive committee, of Valero
Energy Corporation, a crude oil
refining and marketing company.
Previously, from 2006 to 2007,
Director and member of the
compensation committee and audit
committee, of H&R Block, a tax
preparation services company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rodney F.
Dammeyer***
2,4
1940
|
|
Trustee
|
|
|
1993
|
|
|
President of CAC, LLC, a private
company offering capital
investment and management
advisory services. Prior to
January 2004, Director of
TeleTech
|
|
|
151
|
|
|
Trustee/Managing General Partner
of funds in the Fund Complex.
Director of Quidel Corporation
and Stericycle, Inc. Prior to May
2008, Trustee of The
|
J-1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term of
|
|
|
|
Number of
|
|
|
|
|
|
|
Office
|
|
|
|
Portfolios in
|
|
|
|
|
|
|
and
|
|
|
|
Fund
|
|
|
Name, Year of Birth,
|
|
Position(s)
|
|
Length of
|
|
|
|
Complex
|
|
|
and Address of
|
|
Held with
|
|
Time
|
|
Principal Occupation(s) During the
|
|
Overseen by
|
|
Other Directorships Held by
|
Trustee
|
|
Funds
|
|
Served
|
|
Past Five Years
|
|
Trustee
|
|
Trustee During the Past Five Years
|
CAC, LLC
4370 La Jolla
Village
Drive
Suite 685
San Diego, CA
92122-1249
|
|
|
|
|
|
|
|
Holdings, Inc. Prior to
2002, Director of Arris Group,
Inc. Prior to 2001, Managing
Partner at Equity Group Corporate
Investments. Prior to 1995, Vice
Chairman of Anixter
International. Prior to 1985,
experience includes Senior Vice
President and Chief Financial
Officer of Household
International, Inc, Executive
Vice President and Chief
Financial Officer of Northwest
Industries, Inc. and Partner of
Arthur Andersen & Co.
|
|
|
|
|
|
Scripps Research Institute. Prior to
February 2008, Director of
Ventana Medical Systems, Inc.
Prior to April 2007, Director of
GATX Corporation. Prior to April
2004, Director of TheraSense,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Linda Hutton Heagy
2,4
1948
4939 South
Greenwood
Chicago, IL
60615
|
|
Trustee
|
|
|
2003
|
|
|
Retired. Prior to June 2008,
Managing Partner of Heidrick &
Struggles, the second largest
global executive search firm, and
from 2001-2004, Regional Managing
Director of U.S. operations at
Heidrick & Struggles. Prior to
1997, Managing Partner of Ray &
Berndtson, Inc., an executive
recruiting firm. Prior to 1995,
Executive Vice President of ABN
AMRO, N.A., a bank holding
company, with oversight for
treasury management operations
including all non-credit product
pricing. Prior to 1990,
experience includes Executive
Vice President of The Exchange
National Bank with oversight of
treasury management including
capital markets operations, Vice
President of Northern Trust
Company and a trainee at Price
Waterhouse.
|
|
|
18
|
|
|
Trustee/Managing General Partner
of funds in the Fund Complex.
Prior to 2010, Trustee on the
University of Chicago Medical
Center Board, Vice Chair of the
Board of the YMCA of Metropolitan
Chicago and a member of the
Womens Board of the University
of Chicago.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. Craig Kennedy
3
1952
1744 R Street,
N.W.
Washington,
D.C.
20009
|
|
Trustee
|
|
|
2003
|
|
|
Director and President of the
German Marshall Fund of the
United States, an independent
U.S. foundation created to deepen
understanding, promote
collaboration and stimulate
exchanges of practical experience
between Americans and Europeans.
Formerly, advisor to the Dennis
Trading Group Inc., a managed
futures and option company that
invests money for individuals and
institutions. Prior to 1992,
President and Chief Executive
Officer, Director and member of
the Investment Committee of the
Joyce Foundation, a private
foundation.
|
|
|
18
|
|
|
Trustee/Managing General Partner
of funds in the Fund Complex.
Director of First Solar, Inc.
Advisory Board, True North
Ventures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Howard J Kerr***
1
1935
14 Huron Trace
Galena, IL 61036
|
|
Trustee
|
|
|
1993
|
|
|
Retired. Previous member of the
City Council and Mayor of Lake
Forest, Illinois from 1988
through 2002. Previous business
experience from 1981 through 1996
includes President and Chief
Executive Officer of Pocklington
Corporation, Inc., an investment
holding company, President and
Chief Executive Officer of
Grabill Aerospace, and President
of Custom Technologies
Corporation. United States Naval
Officer from 1960 through 1981,
with responsibilities including
Commanding
|
|
|
18
|
|
|
Trustee/Managing General Partner
of funds in the Fund Complex.
Director of the Lake Forest Bank
& Trust. Director of the Marrow
Foundation.
|
J-2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term of
|
|
|
|
Number of
|
|
|
|
|
|
|
Office
|
|
|
|
Portfolios in
|
|
|
|
|
|
|
and
|
|
|
|
Fund
|
|
|
Name, Year of Birth,
|
|
Position(s)
|
|
Length of
|
|
|
|
Complex
|
|
|
and Address of
|
|
Held with
|
|
Time
|
|
Principal Occupation(s) During the
|
|
Overseen by
|
|
Other Directorships Held by
|
Trustee
|
|
Funds
|
|
Served
|
|
Past Five Years
|
|
Trustee
|
|
Trustee During the Past Five Years
|
|
|
|
|
|
|
|
|
Officer of United
States Navy destroyers and
Commander of United States Navy
Destroyer Squadron Thirty-Three,
White House experience in 1973
through 1975 as military aide to
Vice Presidents Agnew and Ford
and Naval Aid to President Ford,
and Military Fellow on the
Council of Foreign Relations in
1978 through 1979.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jack E. Nelson***
3
1936
423 Country Club Drive
Winter Park, FL 32789
|
|
Trustee
|
|
|
2003
|
|
|
President of Nelson Investment
Planning Services, Inc., a
financial planning company and
registered investment adviser in
the State of Florida. President
of Nelson Ivest Brokerage
Services Inc., a member of the
Financial Industry Regulatory
Authority (FINRA), Securities
Investors Protection Corp. and
the Municipal Securities
Rulemaking Board. President of
Nelson Sales and Services
Corporation, a marketing and
services company to support
affiliated companies.
|
|
|
18
|
|
|
Trustee/Managing General Partner
of funds in the Fund Complex.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hugo F.
Sonnenschein
3,4
1940
1126 E. 59th Street
Chicago, IL 60637
|
|
Trustee
|
|
|
1994
|
|
|
Distinguished Service Professor
and President Emeritus of the
University of Chicago and the
Adam Smith Distinguished Service
Professor in the Department of
Economics at the University of
Chicago. Prior to July 2000,
President of the University of
Chicago.
|
|
|
151
|
|
|
Trustee/Managing General Partner
of funds in the Fund Complex.
Trustee of the University of
Rochester and a member of its
investment committee. Member of
the National Academy of Sciences,
the American Philosophical
Society and a fellow of the
American Academy of Arts and
Sciences.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suzanne H. Woolsey,
Ph.D.
1
1941
815 Cumberstone Road
Harwood, MD 20776
|
|
Trustee
|
|
|
2003
|
|
|
Chief Executive Officer of
Woolsey Partners LLC. Chief
Communications Officer of the
National Academy of Sciences and
Engineering and Institute of
Medicine/National Research
Council, an independent,
federally chartered policy
institution, from 2001 to
November 2003 and Chief Operating
Officer from 1993 to 2001.
Executive Director of the
Commission on Behavioral and
Social Sciences and Education at
the National Academy of
Sciences/National Research
Council from 1989 to 1993. Prior
to 1980, experience includes
Partner of Coopers & Lybrand
(from 1980 to 1989), Associate
Director of the US Office of
Management and Budget (from 1977
to 1980) and Program Director of
the Urban Institute (from 1975 to
1977).
|
|
|
18
|
|
|
Trustee/Managing General Partner
of funds in the Fund Complex.
Independent Director and audit
committee chairperson of Changing
World Technologies, Inc., an
energy manufacturing company,
since July 2008. Independent
Director and member of audit and
governance committees of Fluor
Corp., a global engineering,
construction and management
company, since January 2004.
Director of Intelligent Medical
Devices, Inc., a private company
which develops symptom-based
diagnostic tools for viral
respiratory infections. Advisory
Board member of ExactCost LLC, a
private company providing
activity-based costing for
hospitals, laboratories, clinics,
and physicians, since 2008.
Chairperson of the Board of
Trustees of the Institute for
Defense Analyses, a federally
funded research and development
center, since 2000. Trustee from
1992 to 2000 and 2002 to present,
current chairperson of the
finance committee, current member
of the audit committee, strategic
growth committee and executive
committee,
|
J-3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term of
|
|
|
|
Number of
|
|
|
|
|
|
|
Office
|
|
|
|
Portfolios in
|
|
|
|
|
|
|
and
|
|
|
|
Fund
|
|
|
Name, Year of Birth,
|
|
Position(s)
|
|
Length of
|
|
|
|
Complex
|
|
|
and Address of
|
|
Held with
|
|
Time
|
|
Principal Occupation(s) During the
|
|
Overseen by
|
|
Other Directorships Held by
|
Trustee
|
|
Funds
|
|
Served
|
|
Past Five Years
|
|
Trustee
|
|
Trustee During the Past Five Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and former Chairperson
of the Board of Trustees (from
1997 to 1999), of the German
Marshall Fund of the United
States, a public foundation. Lead
Independent Trustee of the Rocky
Mountain Institute, a non-profit
energy and environmental
institute; Trustee since 2004.
Chairperson of the Board of
Trustees of the Colorado College;
Trustee since 1995. Trustee of
California Institute of
Technology. Previously,
Independent Director and member
of audit committee and governance
committee of Neurogen Corporation
from 1998 to 2006; and
Independent Director of Arbros
Communications from 2000 to 2002.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interested Trustees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Colin D. Meadows*
3
1971
1555 Peachtree Street,
N.E.
Atlanta, GA 30309
|
|
Trustee;
President
and
Principal
Executive Officer
|
|
|
2010
|
|
|
Chief Administrative Officer of
Invesco Advisers, Inc. since
2006. Senior Managing Director
and Chief Administrative Officer
of Invesco, Ltd. since 2006.
Prior to 2006, Senior Vice
President of business development
and mergers and acquisitions at
GE Consumer Finance. Prior to
2005, Senior Vice President of
strategic planning and technology
at Wells Fargo Bank. From 1996 to
2003, associate principal with
McKinsey & Company, focusing on
the financial services and
venture capital industries, with
emphasis in the banking and asset
management sectors.
|
|
|
18
|
|
|
None.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wayne W. Whalen**
2
1939
155 North Wacker Drive
Chicago, IL 60606
|
|
Trustee
|
|
|
1993
|
|
|
Of Counsel, and prior to 2010,
partner in the law firm of
Skadden, Arps, Slate, Meagher &
Flom LLP, legal counsel to
certain funds in the Fund
Complex.
|
|
|
151
|
|
|
Trustee/Managing General Partner
of funds in the Fund Complex.
Director of the Mutual Fund
Directors Forum, a nonprofit
membership organization for
investment company directors.
Chairman and Director for the
Abraham Lincoln Presidential
Library Foundation and Director
of the Stevenson Center for
Democracy.
|
1
|
|
Designated as a Class I trustee.
|
|
2
|
|
Designated as a Class II trustee.
|
|
3
|
|
Designated as a Class III trustee.
|
|
4
|
|
With respect to Funds with VMTP Shares outstanding, Mr. Sonnenschein and Ms. Heagy are elected by the VMTP Shareholders.
|
|
*
|
|
Mr. Meadows is an interested person (within the meaning of Section 2(a)(19) of the 1940 Act)
of the funds in the Fund Complex because he is an officer of the Adviser. The Board of
Trustees of the Acquiring Fund appointed Mr. Meadows as Trustee of the Acquiring Fund
effective June 1, 2010.
|
|
**
|
|
Mr. Whalen is an interested person (within the meaning of Section 2(a)(19) of the
1940 Act) of certain funds in the Fund Complex because he and his firm currently provide legal
services as legal counsel to such funds in the Fund Complex.
|
|
***
|
|
Pursuant to the Boards Trustee retirement policy, Howard J Kerr and Jack E. Nelson are
retiring from the Board effective as of the Meeting. Rodney Dammeyer is not standing for
reelection with respect to certain funds overseen by the Invesco Van Kampen Board for which
his term of office expires in 2012. Therefore, Mr. Dammeyer is also stepping down from the
Board of the Acquiring Fund effective as of the Meeting.
|
J-4
|
|
|
Each Trustee generally serves a three-year term from the date of election. Each Trustee has
served as a Trustee of the Acquiring Fund since the year shown in the table.
|
Trustee Ownership of Fund Shares
The following table shows each Board members ownership of shares of the Acquiring Fund and of
shares of all registered investment companies overseen by such Board member in the Fund Complex as
of December 31, 2011.
|
|
|
|
|
|
|
Dollar Range of Equity
|
|
Aggregate Dollar Range of Equity Securities in All
|
|
|
Securities in the Acquiring
|
|
Registered Investment Companies Overseen by
|
Name
|
|
Fund
|
|
Board Member in Family of Investment Companies
|
Independent Trustees
|
|
|
|
|
David C. Arch
|
|
None
|
|
Over $100,000
|
Jerry D. Choate
|
|
$10,001 $50,000
(2,700 Common Shares)
|
|
Over $100,000
|
Rodney F. Dammeyer
|
|
Over $100,000
(41,614.05 Common Shares)
|
|
Over $100,000
|
Linda Hutton Heagy
|
|
None
|
|
$50,001 $100,000
|
R. Craig Kennedy
|
|
None
|
|
$10,001 $50,000
|
Howard J Kerr
|
|
None
|
|
$1 $10,000
|
Jack E. Nelson
|
|
None
|
|
$1 $10,000
|
Hugo F. Sonnenschein
|
|
None
|
|
Over $100,000
|
Suzanne H. Woolsey
|
|
None
|
|
$10,001 $50,000
|
Interested Trustees
|
|
|
|
|
Colin D. Meadows
|
|
None
|
|
$1 $10,000
|
Wayne W. Whalen
|
|
None
|
|
Over $100,000
|
J-5
EXHIBIT K
Acquiring Fund Board Leadership Structure, Role in Risk Oversight and Committees and Meetings
The following information pertains to the Acquiring Fund. Not all funds advised by the
Adviser are overseen by the same board of trustees. The Acquiring Fund is overseen by the Board of
Trustees discussed below (the IVK Board). References to the Board in this Exhibit K refer
solely to the IVK Board and references to Funds in this Exhibit K refer solely to those funds
advised by the Adviser, including the Acquiring Fund, overseen by the IVK Board.
Board Leadership Structure
The Boards leadership structure consists of a Chairman of the Board and two standing
committees, each described below (and ad hoc committees when necessary), with each committee
staffed by Independent Trustees and an Independent Trustee as Committee Chairman. The Chairman of
the Board is not the principal executive officer of the Funds. The Chairman of the Board is not an
interested person (as that term is defined by the 1940 Act) of the Adviser. However, the Chairman
of the Board is an interested person (as that term is defined by the 1940 Act) of the Funds for
the reasons described in the Trustee biographies in Exhibit J. The Board, including the independent
trustees, periodically reviews the Boards leadership structure for the Invesco Van Kampen Funds,
including the interested person status of the Chairman, and has concluded the leadership structure
is appropriate for the Funds. In considering the chairman position, the Board has considered and/or
reviewed (i) the Funds organizational documents, (ii) the role of a chairman (including, among
other things, setting the agenda and managing information flow, running the meeting and setting the
proper tone), (iii) the background, experience and skills of the Chairman (including his
independence from the Adviser), (iv) alternative structures (including combined principal executive
officer/chairman, selecting one of the Independent Trustees as chairman and/or appointing an
independent lead trustee), (v) rule proposals in recent years that would have required all fund
complexes to have an independent chairman, (vi) the Chairmans past and current performance, and
(vii) the potential conflicts of interest of the Chairman (and noted their periodic review as part
of their annual self-effectiveness survey and as part of an independent annual review by the Funds
Audit Committee of fund legal fees related to such potential conflict). In conclusion, the Board
and the Independent Trustees have expressed their continuing support of Mr. Whalen as Chairman.
Board Committees and Meetings
Each Funds Board of Trustees has two standing committees (an Audit Committee and a Governance
Committee). Each committee is comprised solely of Independent Trustees, which is defined for
purposes herein as trustees who: (1) are not interested persons of the Fund as defined by the
1940 Act and (2) are independent of the respective Fund as defined by Exchange listing standards.
Each Boards Audit Committee consists of Jerry D. Choate, Linda Hutton Heagy and R. Craig
Kennedy. In addition to being Independent Trustees as defined above, each of these Trustees also
meets the additional independence requirements for audit committee members as defined by Exchange
listing standards. The Audit Committee makes recommendations to the Board of Trustees concerning
the selection of each Funds independent registered public accounting firm, reviews with such
independent registered public accounting firm the scope and results of each Funds annual audit and
considers any comments which the independent registered public accounting firm may have regarding
each Funds financial statements, accounting records or internal controls. Each Board of Trustees
has adopted a formal written charter for the Audit Committee which sets forth the Audit Committees
responsibilities. The Audit Committees charter is available at www.invesco.com/us. Each member of
the Audit Committee is deemed an audit committee financial expert.
Each Boards Governance Committee consists of David C. Arch, Rodney Dammeyer, Howard J Kerr,
Jack E. Nelson, Hugo F. Sonnenschein and Suzanne H. Woolsey. In addition to being Independent
Trustees as defined above, each of these Trustees also meets the additional independence
requirements for nominating committee members as defined by Exchange listing standards. The
Governance Committee identifies individuals qualified to serve as Independent Trustees on the Board
and on committees of the Board, advises the Board with respect to
K-1
Board composition, procedures and committees, develops and recommends to the Board a set of
corporate governance principles applicable to the respective Fund, monitors corporate governance
matters and makes recommendations to the Board, and acts as the administrative committee with
respect to Board policies and procedures, committee policies and procedures and codes of ethics.
The governance Committee charter for each of the Funds, which includes each Funds nominating
policies, is available at www.invesco.com/us. The Independent Trustees of the respective Fund
select and nominate nominee Independent Trustees for the respective Fund. While the Independent
Trustees of the respective Fund expect to be able to continue to identify from their own resources
an ample number of qualified candidates for the Board of Trustees as they deem appropriate, they
will consider nominations from shareholders to the Board. Nominations from shareholders should be
in writing and sent to the Independent Trustees as described herein.
During the Funds last fiscal year, the Board held seven meetings, the Boards Audit Committee
held seven meetings, and the Boards Governance Committee met five times. The Board previously had
a brokerage and services committee, which met two times during the Funds last fiscal year. During
the Funds last completed fiscal year, each of the Trustees of such Funds during the period such
Trustee served as a Trustee attended at least 75% of the meetings of the respective Board of
Trustees and all committee meetings thereof of which such Trustee was a member.
Board Role in Risk Oversight
The management of the fund complex seeks to provide investors with disciplined investment
teams, a research-driven culture, careful long-term perspective and a legacy of experience. The
goal for each Fund is attractive long-term performance consistent with the objectives and
investment policies and risks for such Fund, which in turn means, among other things, good security
selection, reasonable costs and quality shareholder services. An important sub-component of
delivering this goal is risk management understanding, monitoring and controlling the various
risks in making investment decisions at the individual security level as well as portfolio
management decisions at the overall fund level. The key participants in the risk management process
of the Funds are each Funds portfolio managers, the Advisers senior management, the Advisers
risk management group, the Advisers compliance group, the Funds chief compliance officer, and the
various support functions (i.e. the custodian, the Funds accountants (internal and external), and
legal counsel). While Funds are subject to other risks such as valuation, custodial, accounting,
shareholder servicing, etc., a Funds primary risk is understanding, monitoring and controlling the
various risks in making portfolio management decisions consistent with the Funds objective and
policies. The Boards role is oversight of managements risk management process. At regular
quarterly meetings, the Board reviews Fund performance and factors, including risks, affecting such
performance by Fund with the Advisers senior management, and the Board typically meets at least
once a year with the portfolio managers of each Fund. At regular quarterly meetings, the Board
reviews reports showing monitoring done by the Advisers risk management group, by the Advisers
compliance group, the Funds chief compliance officer and reports from the Funds support
functions.
K-2
EXHIBIT L
Remuneration of Trustees for the Acquiring Fund
The following information pertains to the Acquiring Fund. Not all funds advised by the
Adviser are overseen by the same board of trustees. The Acquiring Fund is overseen by the Board of
Trustees discussed below (the IVK Board). References to the Board in this Exhibit L refer
solely to the IVK Board and references to Funds in this Exhibit L refer solely to those funds
advised by the Adviser, including the Acquiring Fund, overseen by the IVK Board.
The table below shows compensation for Trustees during the Funds most recently completed
fiscal year. The compensation of Trustees that are affiliated persons (as defined in 1940 Act) of
the Adviser is paid by the respective affiliated entity. The Funds pay the non-affiliated Trustees
an annual retainer and meeting fees for services to such Funds. The Funds do not accrue or pay
retirement or pension benefits to Trustees as of the date of this Proxy Statement.
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Compensation
|
|
Number of Portfolios
|
|
|
Aggregate Compensation
|
|
from Portfolios
|
|
in Fund Complex
|
Name
|
|
from the Acquiring Fund
(1)
|
|
in the Fund Complex
(2)
|
|
Overseen by Trustee
|
Interested Trustee
|
|
|
|
|
|
|
|
|
|
|
|
|
Wayne W. Whalen
|
|
$
|
4,361
|
|
|
$
|
399,000
|
|
|
|
151
|
|
Colin D. Meadows
|
|
|
0
|
|
|
|
0
|
|
|
|
18
|
|
|
Independent Trustees
|
|
|
|
|
|
|
|
|
|
|
|
|
David C. Arch
|
|
|
4,361
|
|
|
|
412,250
|
|
|
|
151
|
|
Jerry D. Choate
|
|
|
3,811
|
|
|
|
83,000
|
|
|
|
18
|
|
Rodney F. Dammeyer
|
|
|
4,361
|
|
|
|
412,250
|
|
|
|
151
|
|
Linda Hutton Heagy
|
|
|
4,361
|
|
|
|
95,000
|
|
|
|
18
|
|
R. Craig Kennedy
|
|
|
4,095
|
|
|
|
89,000
|
|
|
|
18
|
|
Howard J Kerr
|
|
|
4,361
|
|
|
|
95,000
|
|
|
|
18
|
|
Jack E. Nelson
|
|
|
4,361
|
|
|
|
95,000
|
|
|
|
18
|
|
Hugo F. Sonnenschein
|
|
|
4,361
|
|
|
|
412,200
|
|
|
|
151
|
|
Suzanne H. Woolsey
|
|
|
4,361
|
|
|
|
95,000
|
|
|
|
18
|
|
|
|
|
(1)
|
|
For the fiscal year ended February 29, 2012.
|
|
(2)
|
|
For the fiscal year ended December 31, 2011.
|
L-1
EXHIBIT M
Outstanding Shares of the Funds
As of the Record Date, there were the following number of shares outstanding of each Fund:
|
|
|
|
|
|
|
|
|
Fund
|
|
Share Class
|
|
Number of Shares Outstanding
|
|
IIC
|
|
Common Shares
|
|
|
10,467,280
|
|
IIC
|
|
VMTP Shares
|
|
|
414
|
|
IQC
|
|
Common Shares
|
|
|
8,787,475
|
|
IQC
|
|
VMTP Shares
|
|
|
309
|
|
ICS
|
|
Common Shares
|
|
|
3,399,954
|
|
Acquiring Fund (VCV)
|
|
Common Shares
|
|
|
22,148,618
|
|
VCV
|
|
VMTP Shares
|
|
|
1,160
|
|
M-1
EXHIBIT N
Ownership of the Funds
Significant Holders
Listed below are the name, address and percent ownership of each person who as of the Record
Date to the best knowledge of the Funds owned 5% or more of the outstanding shares of a class of a
Fund.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
Name and Address
|
|
Fund
|
|
Class of Shares
|
|
Shares Owned
|
|
Percent Owned*
|
First Trust Portfolios
L.P., First Trust
Advisors L.P.,
The Charger Corporation
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
|
|
IIC
|
|
Common Shares
|
|
|
2,213,898
|
|
|
|
21.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Citibank, N.A.
390 Greenwich St., 2nd Floor
New York, NY 10013
|
|
IIC
|
|
VMTP Shares
|
|
|
414**
|
|
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Trust Portfolios L.P.,
First Trust
Advisors L.P.,
The Charger Corporation
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
|
|
IQC
|
|
Common Shares
|
|
|
957,281
|
|
|
|
10.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Citibank, N.A.
390 Greenwich St., 2nd Floor
New York, NY 10013
|
|
IQC
|
|
VMTP Shares
|
|
|
309**
|
|
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Trust Portfolios L.P.,
First Trust
Advisors L.P.,
The Charger Corporation
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
|
|
ICS
|
|
Common Shares
|
|
|
235,611
|
|
|
|
5.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Trust Portfolios L.P.,
First Trust
Advisors L.P.,
The Charger Corporation
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
|
|
Acquiring
Fund (VCV)
|
|
Common Shares
|
|
|
2,866,638
|
|
|
|
13.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Citibank, N.A.
390 Greenwich St., 2nd Floor
New York, NY 10013
|
|
VCV
|
|
VMTP Shares
|
|
|
1,160**
|
|
|
|
100%
|
|
|
|
|
*
|
|
Based on filings made by such owners with the SEC. Each Fund has no knowledge of whether all
or any portion of the shares reported or owned of record are also owned beneficially.
|
|
**
|
|
VMTP Shares are subject to a voting trust requiring that certain voting rights of the VMTP
Shares must be exercised as directed by an unaffiliated third party.
|
N-1
EXHIBIT O
Form of Statement of Preferences of VMTP Shares of the Acquiring Fund
O-1
Table of Contents
|
|
|
|
|
|
|
Page
|
|
DESIGNATION
|
|
|
O-4
|
|
|
|
|
|
|
DEFINITIONS
|
|
|
O-4
|
|
|
|
|
|
|
TERMS
|
|
|
O-18
|
|
|
|
|
|
|
1.
Number of Authorized Shares
|
|
|
O-18
|
|
(a) Authorized Shares
|
|
|
O-18
|
|
(b) Capitalization
|
|
|
O-18
|
|
(c) Capital and Surplus
|
|
|
O-18
|
|
(d) Reduction of Capital
|
|
|
O-18
|
|
|
|
|
|
|
2.
Dividends
|
|
|
O-19
|
|
(a) Ranking
|
|
|
O-19
|
|
(b) Cumulative Cash Dividends
|
|
|
O-19
|
|
(c) Dividends Cumulative from Date of Original Issue
|
|
|
O-19
|
|
(d) Dividend Payment Dates
|
|
|
O-19
|
|
(e) Applicable Rates and Calculation of Dividends
|
|
|
O-19
|
|
(f) Curing a Failure to Deposit
|
|
|
O-20
|
|
(g) Dividend Payments by the Trust to Redemption and
Paying Agent
|
|
|
O-20
|
|
(h) Redemption and Paying Agent to Hold Dividend Payments
by Trust in Trust
|
|
|
O-20
|
|
(i) Dividends Paid to Holders
|
|
|
O-20
|
|
(j) Dividends Credited Against Earliest Accumulated But
Unpaid Dividends
|
|
|
O-20
|
|
(k) Dividends Designated as Exempt-Interest Dividends
|
|
|
O-21
|
|
|
|
|
|
|
3.
Gross-Up Payments and Notice of Allocations
|
|
|
O-21
|
|
|
|
|
|
|
4.
Voting Rights
|
|
|
O-21
|
|
(a) One Vote Per VMTP Share
|
|
|
O-21
|
|
(b) Voting for Additional Trustees
|
|
|
O-21
|
|
(c) 1940 Act Matters
|
|
|
O-23
|
|
(d) Exclusive Right to Vote on Certain Matters
|
|
|
O-23
|
|
(e) Rights Set Forth Herein are Sole Rights
|
|
|
O-23
|
|
(f) No Preemptive Rights or Cumulative Voting
|
|
|
O-23
|
|
(g) Voting for Trustees Sole Remedy for Trusts Failure
to Pay Dividends
|
|
|
O-23
|
|
(h) Holders Entitled to Vote
|
|
|
O-23
|
|
(i) Grant of Irrevocable Proxy
|
|
|
O-23
|
|
|
|
|
|
|
5.
Amendments and Rating Agencies
|
|
|
O-24
|
|
|
|
|
|
|
6.
Minimum Asset Coverage and Other Financial
Requirements
|
|
|
O-26
|
|
(a) Minimum Asset Coverage
|
|
|
O-26
|
|
(b) Effective Leverage Ratio
|
|
|
O-26
|
|
(c) Eligible Assets
|
|
|
O-26
|
|
(d) Credit Quality
|
|
|
O-26
|
|
(e) Liens
|
|
|
O-26
|
|
(f) Tender Option Bond Trust
|
|
|
O-27
|
|
|
|
|
|
|
7.
Basic Maintenance Amount
|
|
|
O-27
|
|
|
|
|
|
|
8.
Restrictions on Dividends and Other Distributions
|
|
|
O-27
|
|
O-2
|
|
|
|
|
|
|
Page
|
|
(a) Dividends on Preferred Shares Other Than VMTP Shares
|
|
|
O-27
|
|
(b) Dividends and Other Distributions With Respect to Common Shares Under the 1940 Act
|
|
|
O-27
|
|
(c) Other Restrictions on Dividends and Other
Distributions
|
|
|
O-28
|
|
(d) Sources of Dividends
|
|
|
O-28
|
|
|
|
|
|
|
9.
Rating Agency Restrictions
|
|
|
O-28
|
|
|
|
|
|
|
10.
Redemption
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|
|
O-29
|
|
(a) Optional Redemption
|
|
|
O-29
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|
(b) Term/Mandatory Redemption
|
|
|
O-29
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|
(c) Notice of Redemption
|
|
|
O-32
|
|
(d) No Redemption Under Certain Circumstances
|
|
|
O-33
|
|
(e) Absence of Funds Available for Redemption
|
|
|
O-33
|
|
(f) Redemption and Paying Agent to Hold Redemption Payments by Trust in Trust
|
|
|
O-33
|
|
(g) Shares for Which Deposit Securities Have Been
Deposited and Notice of Redemption Has Been Given Are
No Longer Outstanding
|
|
|
O-33
|
|
(h) Compliance With Applicable Law
|
|
|
O-34
|
|
(i) Only Whole VMTP Shares May Be Redeemed
|
|
|
O-34
|
|
(j) Modification of Redemption Procedures
|
|
|
O-34
|
|
(k) Capital Limitations on Purchases and Redemptions
|
|
|
O-34
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|
|
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|
11.
Liquidation Rights
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|
|
O-35
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|
(a) Ranking
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|
|
O-35
|
|
(b) Distributions Upon Liquidation
|
|
|
O-35
|
|
(c) Pro Rata Distributions
|
|
|
O-35
|
|
(d) Rights of Junior Shares
|
|
|
O-35
|
|
(e) Certain Events Not Constituting Liquidation
|
|
|
O-35
|
|
|
|
|
|
|
12.
Transfers
|
|
|
O-35
|
|
|
|
|
|
|
13.
Miscellaneous
|
|
|
O-36
|
|
(a) No Fractional Shares
|
|
|
O-36
|
|
(b) Status of VMTP Shares Redeemed, Exchanged or
Otherwise Acquired by the Trust
|
|
|
O-36
|
|
(c) Treatment of VMTP Shares as Equity
|
|
|
O-36
|
|
(d) Board May Resolve Ambiguities
|
|
|
O-36
|
|
(e) Headings Not Determinative
|
|
|
O-36
|
|
(f) Notices
|
|
|
O-36
|
|
(g) Redemption and Paying Agent
|
|
|
O-36
|
|
(h) Securities Depository
|
|
|
O-37
|
|
(i) Voluntary Bankruptcy
|
|
|
O-37
|
|
(j) Applicable Law Restrictions and Requirements
|
|
|
O-37
|
|
(k) Information
|
|
|
O-37
|
|
(l) Tax Status of the Trust
|
|
|
O-38
|
|
(m) Maintenance of Existence
|
|
|
O-38
|
|
(n) Compliance with Law
|
|
|
O-38
|
|
(o) Maintenance of Approvals: Filings, Etc.
|
|
|
O-38
|
|
(p) 1940 Act Registration
|
|
|
O-39
|
|
(s) Purchase by Affiliates
|
|
|
O-39
|
|
(t) Audits
|
|
|
O-39
|
|
(u) Termination
|
|
|
O-39
|
|
(v) Actions on Other than Business Days
|
|
|
O-39
|
|
(w) Liability
|
|
|
O-39
|
|
|
|
|
|
|
14.
Global Certificate
|
|
|
O-39
|
|
|
Appendix A: Eligible Assets
|
|
|
O-42
|
|
O-3
[FUND]
STATEMENT OF PREFERENCES OF
VARIABLE RATE MUNI TERM PREFERRED SHARES
[FUND], a Delaware Statutory Trust (the
Fund
), hereby certifies that:
FIRST: Pursuant to authority expressly vested in the Board of Trustees of the Fund by Article
[II] of the Declaration of Trust, the Board of Trustees of the Fund approved the issuance of
[
] preferred shares of beneficial interest of the Fund in one or more series as Variable
Rate Muni Term Preferred Shares (the
VMTP Shares
) on [August [
], 2012].
1
The
VMTP Shares may be issued in one or more series, as designated and authorized by the Board of
Trustees or a duly authorized committee thereof from time to time (each series of VMTP Shares that
may be authorized and issued, a
Series
).
SECOND: The preferences (including liquidation preference), voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of redemption, of the shares
of each Series of VMTP Shares are as follows or as set forth in an amendment to this Statement of
Preferences or otherwise in the Declaration of Trust (each such Series being referred to herein as
a
Series of VMTP Shares
):
DESIGNATION
Series 2015/6[
]: A series of [
] preferred shares of beneficial interest of the Trust, par
value $0.01 per share, liquidation preference $100,000 per share, is hereby authorized and
designated Series 2015/6[
] VMTP Shares. Each Series 2015/6[
] VMTP Share shall be issued on a
date determined by the Board of Trustees of the Trust or pursuant to their delegated authority;
have an Applicable Rate for the Initial Rate Period equal to the sum of 1.05%
per annum plus
the
Securities Industry and Financial Markets Association (
SIFMA
) Municipal Swap Index, published at
approximately 3:00 p.m., New York City time, on Wednesday, [August [
], 2012]
2
;
have an initial Dividend Payment Date of June 1, 2012; and have such other preferences, voting
powers, restrictions, limitations as to dividends and distributions, qualifications and terms and
conditions of redemption, including as are required by Applicable Law, that are expressly set forth
in this Statement of Preferences and the Declaration of Trust. The Series 2015/6[
] VMTP Shares
shall constitute a separate series of preferred shares of beneficial interest of the Trust and each
Series 2015/6[
] VMTP Share shall be identical to each other Series 2015/6[
] VMTP Share. Except
as otherwise provided with respect to any additional Series of VMTP Shares, the terms and
conditions of this Statement of Preferences apply to each Series of VMTP Shares.
DEFINITIONS
The following terms shall have the following meanings (with terms defined in the singular
having comparable meanings when used in the plural and vice versa), unless the context otherwise
requires:
1940 Act
means the Investment Company Act of 1940, as amended from time to time, and the
rules promulgated thereunder.
Affected Series
shall have the meaning set forth in Section 5(d) of this Statement of
Preferences.
Agent Member
means a Person with an account at the Securities Depository that holds one or
more VMTP Shares through the Securities Depository, directly or indirectly, for a Beneficial Owner
and that will be
|
|
|
1
|
|
Assumes the redomestication/merger closes in
August.
|
|
2
|
|
Assumes the redomestication/merger closes in
August.
|
O-4
authorized and instructed, directly or indirectly, by a Beneficial Owner to
disclose information to the Redemption and Paying Agent with respect to such Beneficial Owner.
Applicable Base Rate
means the SIFMA Municipal Swap Index.
Applicable Law
means Delaware state law and the federal law of the United States of America
(including, without limitation, the 1940 Act).
Applicable Rate
shall have the meaning set forth in Section 2(e)(i) of this Statement of
Preferences and shall in no event exceed the Maximum Rate.
Applicable Rate Determination
means each periodic operation of the process of determining
the Applicable Rate for the VMTP Shares for a Subsequent Rate Period.
Basic Maintenance Amount
, as of any Valuation Date, shall have the meaning set forth in the
Rating Agency Guidelines.
Basic Maintenance Cure Date
, with respect to the failure by the Trust to satisfy the Basic
Maintenance Amount (as required by Section 7(a) of this Statement of Preferences) as of a given
Valuation Date, shall have the meaning set forth in the Rating Agency Guidelines, but in no event
shall it be longer than 10 Business Days following such Valuation Date.
Beneficial Owner
means a Person in whose name VMTP Shares are recorded as beneficial owner
of such VMTP Shares by the Securities Depository, an Agent Member or other securities intermediary
on the records of such Securities Depository, Agent Member or securities intermediary, as the case
may be, or, if applicable, such Persons subrogee.
Board of Trustees
means the Board of Trustees of the Trust or any duly authorized committee
thereof.
Business Day
means a day (a) other than a day on which commercial banks in The City of New
York, New York are required or authorized by law or executive order to close and (b) on which the
New York Stock Exchange is not closed.
Closed-End Funds
shall have the meaning set forth in Section 12(a) of this Statement of
Preferences.
Closing Date
means May 15, 2012.
Code
means the U.S. Internal Revenue Code of 1986, as amended.
Common Shares
has the meaning set forth in the Declaration of Trust.
Conditional Acceptance
shall have the meaning set forth in Section 10(b)(i) of this
Statement of Preferences.
Cure Date
means the Basic Maintenance Cure Date, the Minimum Asset Coverage Cure Date or the
last day of the Effective Leverage Ratio Cure Period, as the case may be.
Custodian
for purposes of this Statement of Preferences, means a bank, as defined in Section
2(a)(5) of the 1940 Act, that has the qualifications prescribed in paragraph 1 of Section 26(a) of
the 1940 Act, or such other entity as shall be providing custodian services to the Trust as
permitted by the 1940 Act or any order thereunder, and shall include, as appropriate, any similarly
qualified sub-custodian duly appointed by the Custodian.
O-5
Date of Original Issue
means [August [
], 2012.]
3
Declaration of Trust
means the Amended and Restated Agreement and Declaration of Trust of
the Trust, as amended and supplemented (including by this Statement of Preferences).
Defeased Securities
means a security for which cash, cash equivalents or other eligible
property has been pledged in an amount sufficient to make all required payments on such security to
and including maturity (including any accelerated maturity pursuant to a permitted redemption), in
accordance with the instrument governing the issuance of such security.
Deferred Compensation Hedge Assets
shall have the meaning specified in Appendix A of this
Statement of Preferences.
Deposit Securities
means, as of any date, any United States dollar-denominated security or
other investment of a type described below that either (i) is a demand obligation payable to the
holder thereof on any Business Day or (ii) has a maturity date, mandatory redemption date or
mandatory payment date, on its face or at the option of the holder, preceding the relevant payment
date in respect of which such security or other investment has been deposited or set aside as a
Deposit Security:
|
(1)
|
|
cash or any cash equivalent;
|
|
|
(2)
|
|
any U.S. Government Security;
|
|
|
(3)
|
|
any Municipal Security that has a credit rating from at least one NRSRO that is
the highest applicable rating generally ascribed by such NRSRO to Municipal Securities
as of the date of this Statement of Preferences (or such ratings future equivalent),
including (A) any such Municipal Security that has been pre-refunded by the issuer
thereof with the proceeds of such refunding having been irrevocably deposited in trust
or escrow for the repayment thereof and (B) any such fixed or variable rate Municipal
Security that qualifies as an eligible security under Rule 2a-7 under the 1940 Act as
in effect on the Date of Original Issue;
|
|
|
(4)
|
|
any investment in any money market fund registered under the 1940 Act that
qualifies under Rule 2a-7 under the 1940 Act, or in any similar investment vehicle
described in Rule 12d1-1(b)(2) under the 1940 Act, in each case, that invests
principally in Municipal Securities or U.S. Government Securities or any combination
thereof; or
|
|
|
(5)
|
|
any letter of credit from a bank or other financial institution that has a
credit rating from at least one NRSRO that is the highest applicable rating generally
ascribed by such NRSRO to bank deposits or short-term debt of banks or other financial
institutions as of the date of this Statement of Preferences (or such ratings future
equivalent).
|
Derivative Contract
means (a) any and all rate swap transactions, basis swaps, credit
derivative transactions, forward rate transactions, commodity swaps, commodity options, forward
commodity contracts, forward swap transactions, equity or equity index swaps or options, bond or
bond price or bond index swaps or options or forward bond or forward bond price or forward bond
index transactions, futures contracts, repurchase transactions, interest rate options, forward
foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency
swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any
other similar transactions or any combination of any of the foregoing (including any options to
enter into any of the foregoing), whether or not any such transaction is governed by or subject to
any master agreement or cleared on an exchange or other clearing organization, and (b) any and all
transactions of any kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any form of master agreement
|
|
|
3
|
|
Assumes the redomestication/merger closes in
August.
|
O-6
published by the International Swaps
and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any
other master agreement (any such master agreement, together with any related schedules, a
Master
Agreement
), including any obligations or liabilities under any such Master Agreement.
Derivative Termination Value
means, in respect of any one or more Derivative Contracts,
after taking into account the effect of any legally enforceable netting agreement relating to such
Derivative Contracts, (a) for any date on or after the date such Derivative Contracts have been
closed out and termination value(s) determined in accordance therewith, such termination value(s),
(b) for any date prior to the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Derivative Contracts, as determined based upon one or more
mid-market or other readily available quotations provided by any recognized dealer in such
Derivative Contracts (which may include a Holder or Beneficial Owner or an affiliate of a Holder or
Beneficial Owner) or (c) the last reported sale price, if applicable, to the extent such Derivative
Contracts are traded on an exchange.
Discounted Value
, as of any Valuation Date, shall have the respective meanings set forth in
the Rating Agency Guidelines.
Dividend Payment Date
means the date that is the first Business Day of each calendar month.
Dividend Period
means, with respect to the Series 2015/6-[
] VMTP Shares, in the case of the
first Dividend Period, the period beginning on the Date of Original Issue for such Series and
ending on and including [August 31, 2012]
4
and for each subsequent Dividend Period, the
period beginning on and including the first calendar day of the month following the month in which
the previous Dividend Period ended and ending on and including the last calendar day of such month.
Effective Leverage Ratio
means the quotient of:
(A) the sum of (i) the aggregate liquidation preference of the Trusts senior securities (as
that term is defined in the 1940 Act) that are stock for purposes of Section 18 of the 1940 Act,
plus any accumulated but unpaid dividends thereon, excluding, without duplication, (x) any such
senior securities for which the Trust has issued a notice of redemption (in accordance with the
terms of such senior securities) and either has delivered Deposit Securities or sufficient funds
(in accordance with the terms of such senior securities) to the paying agent for such senior
securities or otherwise has adequate Deposit Securities on hand and segregated on the books and
records of the Custodian for the purpose of such redemption and (y) the Trusts outstanding
Preferred Shares to be redeemed with the gross proceeds from the sale of VMTP Shares or other
replacement securities, for which the Trust either has delivered Deposit Securities or sufficient
funds (in accordance with the terms of such Preferred Shares) to the paying agent for such
Preferred Shares or otherwise has adequate Deposit Securities on hand and segregated on the books
and records of the Custodian for the purpose of such redemption; (ii) the aggregate principal
amount of the Trusts senior securities representing indebtedness (as that term is defined in the
1940 Act), plus any accrued but unpaid interest thereon; (iii) the aggregate principal amount of
floating rate trust certificates corresponding to the associated residual floating rate trust
certificates owned by the Trust (less the aggregate principal amount of any such floating rate
trust certificates owned by the Trust and corresponding to the associated residual floating rate
trust certificates owned by the Trust); and (iv) the aggregate amount of the Trusts repurchase
obligations under repurchase agreements;
divided by
(B) the sum of (i) the Market Value of the Trusts total assets (including amounts
attributable to senior securities but excluding, any assets consisting of Deposit Securities or
funds referred to in clauses (A)(i)(x) and (y) above), less the sum of (A) the amount of the
Trusts accrued liabilities (which accrued liabilities shall include net obligations of the Trust
under each Derivative Contract in an amount equal to the Derivative Termination Value thereof
payable by the Trust to the related counterparty), other than liabilities for the aggregate
principal amount of senior securities representing indebtedness, and (B) the Overconcentration
Amount; and (ii) the aggregate principal
|
|
|
4
|
|
Assumes the redomestication/merger closes in
August.
|
O-7
amount of floating rate trust certificates corresponding
to the associated residual floating rate trust certificates owned by the Trust (less the aggregate
principal amount of any such floating rate trust certificates owned by the Trust and corresponding
to the associated residual floating rate trust certificates owned by the Trust).
Effective Leverage Ratio Cure Period
shall have the meaning specified in Section 6(b) of
this Statement of Preferences.
Electronic Means
means email transmission, facsimile transmission or other similar
electronic means of communication providing evidence of transmission (but excluding online
communications systems covered by a separate agreement) acceptable to the sending party and the
receiving party, in any case if operative as between any two parties, or, if not operative, by
telephone (promptly confirmed by any other method set forth in this definition), which, in the case
of notices to the Redemption and Paying Agent, shall be sent by such means as set forth in the
Redemption and Paying Agent Agreement.
Eligible Assets
means the instruments listed on Appendix A hereto.
Exchange Act
means the U.S. Securities Exchange Act of 1934, as amended.
Excluded Redemption
means a redemption of 10% or less of the Outstanding VMTP Shares
utilizing redemption proceeds derived from the issuance of tender option bond securities.
Exposure Period
shall have the meaning set forth in the Moodys Guidelines.
Failure to Deposit
means, with respect to a Series of VMTP Shares, a failure by the Trust
to pay to the Redemption and Paying Agent, not later than 12:00 noon, New York City time, (A) on
the Business Day immediately preceding any Dividend Payment Date for such Series of VMTP Shares, in
funds available on such Dividend Payment Date in The City of New York, New York, the full amount of
any dividend to be paid on such Dividend Payment Date on any share of such Series or (B) on the
Business Day immediately preceding any Redemption Date for such Series of VMTP Shares in funds
available on such Redemption Date in The City of New York, New York, the Redemption Price to be
paid on such Redemption Date for any share of such Series after Notice of Redemption is provided
pursuant to Section 10(c) of this Statement of Preferences;
provided
,
however
, that, notwithstanding anything expressed or implied herein to the contrary, (i)
the foregoing clause (B) shall not apply to the Trusts failure to pay the Redemption Price in
respect of VMTP Shares when the related Notice of Redemption provides that redemption of such
shares is subject to one or more conditions precedent and any such condition precedent shall not
have been satisfied at the time or times and in the manner specified in such Notice of Redemption,
and (ii) a Failure to Deposit shall not be deemed to have occurred if the Trust is unable to make
the payments in clause (A) or clause (B) solely due to the lack of legally available funds under
Applicable Law.
Fitch
means Fitch Ratings, a part of the Fitch Group, which is a majority-owned subsidiary
of Fimalac, S.A, or any successor thereto.
Fitch Eligible Assets
means assets of the Trust set forth in the Fitch Guidelines as
eligible for inclusion in calculating the Discounted Value of the Trusts assets in connection with
Fitchs ratings of a Series of VMTP Shares at the request of the Trust.
Fitch Guidelines
means the guidelines applicable to Fitchs then current ratings of VMTP
Shares provided by Fitch in connection with Fitchs ratings of a Series of VMTP Shares at the
request of the Trust (a copy of which is available to Holders on request to the Trust), in effect
on the date hereof and as may be amended from time to time, provided, however that any such
amendment will not be effective for thirty (30) days from the date that Fitch provides final notice
of such amendment to the Trust or such earlier date as the Trust may elect.
Fitch Provisions
means Sections 7, 8(c)(B) and 9 of this Statement of Preferences with
respect to Fitch, and any other provisions hereof with respect to Fitchs ratings of a Series of
VMTP Shares at the request of the Trust, including any provisions with respect to obtaining and
maintaining a rating on such VMTP Shares from Fitch. The
O-8
Trust is required to comply with the
Fitch Provisions only if Fitch is then rating a Series of VMTP Shares at the request of the Trust.
Gross-up Payment
means payment to a Beneficial Owner of an amount which, when taken together
with the aggregate amount of Taxable Allocations made to such Beneficial Owner to which such
Gross-up Payment relates, would cause such Beneficial Owners dividends in dollars (after giving
effect to regular federal income tax consequences) from the aggregate of such Taxable Allocations
and the related Gross-up Payment to be equal to the dollar amount of the dividends which would have
been received by such Beneficial Owner if the amount of such aggregate Taxable Allocations would
have been excludable from the gross income of such Beneficial Owner. Such Gross-up Payment shall
be calculated (i) without consideration being given to the time value of money; (ii) assuming that
no Beneficial Owner of VMTP Shares is subject to the federal alternative minimum tax with respect
to dividends received from the Trust; (iii) assuming that each Taxable Allocation and each Gross-up
Payment (except to the extent such Gross-up Payment is properly designated as an exempt-interest
dividend under Section 852(b)(5) of the Code or successor provisions) would be taxable in the hands
of each Beneficial Owner of VMTP Shares at the maximum marginal regular federal corporate income
tax rate applicable to ordinary income or net capital gains in effect at the time such Gross-up
Payment is made; and (iv) assuming that each Taxable Allocation and each Gross-up Payment would not
be subject to the tax imposed by Section 1411 of the Code or any similar Medicare or other surtax.
Holder
means a Person in whose name a VMTP Share is registered in the registration books of
the Trust maintained by the Redemption and Paying Agent.
Increased Rate Event
with respect to the VMTP Shares of any Series, means the occurrence of
any of the following events:
(a) a Failure to Deposit has occurred with respect to the VMTP Shares of such Series. This
Increased Rate Event shall be considered cured on the date such Failure to Deposit is cured in
accordance with Section 2(f) of this Statement of Preferences;
(b) any Rating Agency then rating the VMTP Shares of such Series at the request of the Trust
has (i) withdrawn its long-term credit rating of such VMTP Shares other than due to the Rating
Agency ceasing to rate tax-exempt closed-end management investment companies generally or (ii) been
terminated other than in accordance with Section 5(g) of this Statement of Preferences and, in the
case of clause (i) above, such withdrawal has not been cured in 60 days (provided the VMTP Shares
are rated by at least one Rating Agency). This Increased Rate Event shall be considered cured, in
the case of clause (i) above, on the date such withdrawal is no longer continuing and, in the case
of clause (ii) above, on the date the VMTP Shares of such Series are rated by at least two Rating
Agencies and the Trust is in compliance with the Rating Agency Provisions of such Rating Agencies;
(c) any determination is made by the Trust or the Internal Revenue Service that the VMTP
Shares of such Series are not equity in a regulated investment company for federal income tax
purposes. This Increased Rate Event will be considered cured on the date such determination is
reversed, revoked or rescinded;
(d) failure by the Trust to have cured on or before the applicable Minimum Asset Coverage Cure
Date any failure to maintain Minimum Asset Coverage as required by Section 6(a). This Increased
Rate Event shall be considered cured on the date the Trust next achieves Minimum Asset Coverage,
provided that, to the extent the Trust seeks to achieve Minimum Asset Coverage through the
redemption of Preferred Shares or other senior securities, Minimum Asset Coverage shall not be
deemed achieved until the Trust has delivered Deposit Securities or sufficient funds to the paying
agent for such Preferred Shares or other senior securities in connection with such redemption;
(e) failure by the Trust on the last day of an applicable Effective Leverage Ratio Cure Period
to have an Effective Leverage Ratio of not greater than 45%. This Increased Rate Event shall be
considered cured on the date the Trust next has an Effective Leverage Ratio of not greater than
45%, provided that, to the extent the Trust seeks to attain an Effective Leverage Ratio of not
greater than 45% through the redemption of Preferred Shares or other senior securities, the Trust
shall not be deemed to have such an Effective Leverage Ratio until the Trust has
O-9
delivered Deposit
Securities or sufficient funds to the paying agent for such Preferred Shares or other senior
securities in connection with such redemption;
(f) failure by the Trust to provide the information required by Section 13(k)(xi) and (xii)
and such failure is not cured by the 14th day following written request. This Increased Rate Event
shall be considered cured on the date the Trust furnishes the information specified in the
foregoing sentence; and
(g) failure by the Trust to pay when due the full amount of any Gross-Up Payment pursuant to
Section 3(b). This Increased Rate Event shall be considered cured on the date the Trust pays the
full amount of such Gross-Up Payment.
Initial Rate Period
means, with respect to the VMTP Shares of any Series, the period
commencing on and including the Date of Original Issue thereof and ending on, and including the
next succeeding Wednesday or, if such day is not a Business Day, the next succeeding Business Day.
Investment Adviser
for purposes of this Statement of Preferences, means Invesco Advisers,
Inc., or any successor investment advisor to the Trust.
LIBOR Dealer
means [
] and such other dealer or dealers as the Trust from time to time may
appoint or in lieu of any thereof, their respective affiliates and successors.
LIBOR Rate
means, on any Rate Determination Date, (i) the rate for deposits in U.S. dollars
for the designated Rate Period, which appears on Reuters display page LIBOR01 (
Page LIBOR01
) (or
such other page as may replace that page on that service, or such other service as may be selected
by the LIBOR Dealer or its successors that are LIBOR Dealers) as of 11:00 a.m. London time, on the
day that is the London Business Day preceding the Rate Determination Date (the
LIBOR Determination
Date
), or (ii) if such rate does not appear on Page LIBOR01 or such other page as may replace such
Page LIBOR01, (A) the LIBOR Dealer shall determine the arithmetic mean of the offered quotations of
the Reference Banks to leading banks in the London interbank market for deposits in U.S. dollars
for the designated Rate Period in an amount determined by such LIBOR Dealer by reference to
requests for quotations as of approximately 11:00 a.m. (London time) on such date made by such
LIBOR Dealer to the Reference Banks, (B) if at least two of the Reference Banks provide such
quotations, the LIBOR Rate shall equal such arithmetic mean of such quotations, (C) if only one or
none of the Reference Banks provide such quotations, the LIBOR Rate shall be deemed to be the
arithmetic mean of the offered quotations that leading banks in The City of New York selected by
the LIBOR Dealer (after obtaining the Trusts approval) are quoting on the relevant LIBOR
Determination Date for deposits in U.S. dollars for the designated Rate Period in an amount
determined by the LIBOR Dealer (after obtaining the Trusts approval) that is representative of a
single transaction in such market at such time by reference to the principal London offices of
leading banks in the London interbank market;
provided
,
however
, that if one of the
LIBOR Dealers does not quote a rate required to determine the LIBOR Rate, the LIBOR Rate will be
determined on the basis of the quotation or quotations furnished by any Substitute LIBOR Dealer or
Substitute LIBOR Dealers selected by the Trust to provide such rate or rates not being supplied by
the LIBOR Dealer;
provided
further
, that if the LIBOR Dealer and Substitute LIBOR
Dealers are required but unable to determine a rate in accordance with at least one of the
procedures provided above, the LIBOR Rate shall be the LIBOR Rate as determined on the previous
Rate Determination Date.
Liquidation Preference
, means $100,000 per share.
Liquidity Account
shall have the meaning specified in Section 10(b)(ii)(A) of this Statement
of Preferences.
Liquidity Account Initial Date
means the date which is six-months prior to the Term
Redemption Date.
Liquidity Account Investments
means (i) Deposit Securities or (ii) any other security or
investment owned by the Trust that is rated not less than A-1 by Fitch, A3 by Moodys or the
equivalent rating (or any such ratings future equivalent) by each NRSRO then rating such security
or investment (or, if rated by only one NRSRO,
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by such NRSRO) or, if no NRSRO is then rating such
security, deemed to be of an equivalent rating by the Investment Adviser on the Trusts books and
records.
Liquidity Requirement
shall have the meaning specified in Section 10(b)(ii)(B) of this
Statement of Preferences.
London Business Day
means any day on which commercial banks are generally open for business
in London.
Majority
means the Holders or Beneficial Owners, as applicable, of more than 50% of the
aggregate Outstanding amount of the VMTP Shares.
Managed Assets
means the Trusts total assets (including any assets attributable to money
borrowed for investment purposes) minus the sum of the Trusts accrued liabilities (other than
money borrowed for investment purposes). For the avoidance of doubt, assets attributable to money
borrowed for investment purposes includes the portion of the Trusts assets in a tender option bond
trust of which the Trust owns the residual interest (without regard to the value of the residual
interest to avoid double counting).
Market Value
of any asset of the Trust means the indication of value thereof determined by
an independent third-party pricing service designated pursuant to the Trusts valuation policies
and procedures approved from time to time by the Board of Trustees for use in connection with the
determination of the Trusts net asset value. The pricing service values portfolio securities at
the mean between the quoted bid and asked price or the yield equivalent when quotations are readily
available. Securities for which quotations are not readily available are valued at fair value as
determined by the pricing service using methods which include consideration of: yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and rating; indications as
to value from dealers; and general market conditions. The pricing service may employ electronic
data processing techniques or a matrix system, or both, to determine valuations.
Maximum Rate
means 15%
per annum
, increased by any applicable Gross-up Payment due and
payable in accordance with Section 3 of this Statement of Preferences.
Minimum Asset Coverage
means asset coverage, as defined in Section 18(h) of the 1940 Act as
in effect on the Date of Original Issue (excluding from (1) the denominator of such asset coverage
test (i) any senior securities (as defined in the 1940 Act) for which the Trust has issued a notice
of redemption and either has delivered Deposit Securities or sufficient funds (in accordance with
the terms of such senior securities) to the paying agent for such senior securities or otherwise
has adequate Deposit Securities on hand and segregated on the books and records of the Custodian
for the purpose of such redemption and (ii) the Trusts outstanding Preferred Shares to be redeemed
with the gross proceeds from the sale of VMTP Shares or other replacement securities, for which the
Trust either has delivered Deposit Securities or sufficient funds (in accordance with the terms of
such Preferred Shares) to the paying agent for such Preferred Shares or otherwise has adequate
Deposit Securities on hand and segregated on the books and records of the Custodian for the purpose
of such redemption and (2) from the numerator of such asset coverage test, any Deposit Securities
referred to in the previous clause (1)(i) and (ii)) of at least 225% with respect to all
outstanding senior securities of the Trust which are stock for purposes of Section 18 of the 1940
Act, including all Outstanding VMTP Shares (or, if higher, such other asset coverage as may be
specified in or under the 1940 Act as in effect from time to time as the minimum asset coverage for
senior securities which are stock of a closed-end investment company as a condition of declaring
dividends on its common shares or stock).
Minimum Asset Coverage Cure Date,
with respect to the failure by the Trust to maintain the
Minimum Asset Coverage (as required by Section 6 of this Statement of Preferences), means the tenth
Business Day following such failure.
Moodys
means Moodys Investors Service, Inc., a Delaware corporation, or any successor
thereto.
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Moodys Discount Factor
means the discount factors set forth in the Moodys Guidelines for
use in calculating the Discounted Value of the Trusts assets in connection with Moodys ratings of
a Series of VMTP Shares at the request of the Trust.
Moodys Eligible Assets
means assets of the Trust set forth in the Moodys Guidelines as
eligible for inclusion in calculating the Discounted Value of the Trusts assets in connection with
Moodys ratings of a Series of VMTP Shares at the request of the Trust.
Moodys Guidelines
means the guidelines applicable to Moodys then current ratings of VMTP
Shares provided by Moodys in connection with Moodys ratings of a Series of VMTP Shares at the
request of the Trust (a copy of which is available to Holders on request to the Trust), in effect
on the date hereof and as may be amended from time to time, provided, however that any such
amendment will not be effective for thirty (30) days from the date that Moodys provides final
notice of such amendment to the Trust or such earlier date as the Trust may elect.
Moodys Provisions
means Sections 7, 8(c)(B) and 9 of this Statement of Preferences with
respect to Moodys, and any other provisions hereof with respect to Moodys ratings of a Series of
VMTP Shares at the request of the Trust, including any provisions with respect to obtaining and
maintaining a rating on such VMTP Shares from Moodys. The Trust is required to comply with the
Moodys Provisions only if Moodys is then rating a Series of VMTP Shares at the request of the
Trust.
Municipal Securities
mean municipal bonds or municipal securities (including, without
limitation, municipal notes and municipal commercial paper), including short-term floating rate
trust certificates and residual trust certificates issued by a tender option bond trust that holds
municipal bonds or municipal securities.
Net Tax-Exempt Income
means the excess of the amount of interest excludable from gross
income under Section 103(a) of the Code over the amounts disallowed as deductions under Sections
265 and 171(a)(2) of the Code.
Notice of Redemption
means any notice with respect to the redemption of VMTP Shares pursuant
to Section 10(c) of this Statement of Preferences.
NRSRO
means a nationally recognized statistical rating organization within the meaning of
Section 3(a)(62) of the Exchange Act that is not an affiliated person (as defined in Section
2(a)(3) of the 1940 Act) of the Trust, including, at the date hereof, Moodys and Fitch.
Other Rating Agency
means each NRSRO, if any, other than Fitch or Moodys then providing a
rating for a Series of VMTP Shares at the request of the Trust.
Other Rating Agency Eligible Assets
means assets of the Trust set forth in the Other Rating
Agency Guidelines as eligible for inclusion in calculating the Discounted Value of the Trusts
assets in connection with an Other Rating Agencys ratings of a Series of VMTP Shares at the
request of the Trust.
Other Rating Agency Guidelines
means the guidelines applicable to each Other Rating Agencys
ratings of a VMTP Shares provided by such Other Rating Agency in connection with such Other Rating
Agencys ratings of a Series of VMTP Shares at the request of the Trust (a copy of which is
available on request to the Trust), as may be amended from time to time, provided, however that any
such amendment will not be effective except as agreed between such Other Rating Agency and the
Trust or such earlier date as the Trust may elect.
Other Rating Agency Provisions
means Sections 7, 8(c)(B) and 9 of this Statement of
Preferences with respect to any Other Rating Agency then rating a Series of VMTP Shares at the
request of the Trust, and any other provisions hereof with respect to such Other Rating Agencys
ratings of VMTP Shares, including any provisions with respect to obtaining and maintaining a rating
on such VMTP Shares from such Other Rating Agency. The Trust is required to comply with the Other
Rating Agency Provisions of an Other Rating Agency only if such Other Rating Agency is then rating
a Series of VMTP Shares at the request of the Trust.
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Outstanding
means, as of any date with respect to the VMTP Shares of any Series, the number
of VMTP Shares of such Series theretofore issued by the Trust except, without duplication, (i) any
VMTP Shares of such Series theretofore cancelled or redeemed or delivered to the Redemption and
Paying Agent for cancellation or redemption by the Trust, (ii) any VMTP Shares of such Series with
respect to which the Trust has given a Notice of Redemption and irrevocably deposited with the
Redemption and Paying Agent Deposit Securities with a Market Value sufficient to redeem such VMTP
Shares pursuant to Section 10 of this Statement of Preferences, (iii) any VMTP Shares of such
Series as to which the Trust shall be a Holder or Beneficial Owner, and (iv) any VMTP Shares of
such Series represented by any certificate in lieu of which a new certificate has been executed and
delivered by the Trust.
Overconcentration Amount
means as of any date of calculation of the Effective Leverage
Ratio, an amount equal to the sum of: (i) the Market Value of the Trusts assets that are rated
below A-/A3 in excess of 50% of the Market Value of the Trusts Managed Assets; (ii) the Market
Value of the Trusts assets that are rated below investment grade in excess of 20% of the Market
Value of the Trusts Managed Assets; (iii) [the Market Value of the Trusts assets that are in a
single state or territory in excess of 20% of the Market Value of the Trusts Managed
Assets]
5
; (iv) the Market Value of the Trusts assets that are from a single issuer in
excess of 12% of the Market Value of the Trusts Managed Assets; (v) the Market Value of the
Trusts assets that constitute tobacco obligations in excess of 10% of the Market Value of the
Trusts Managed Assets; and (vi) the Market Value of all Deferred Compensation Hedge Assets, if
any.
Permitted Issuer
shall have the meaning set forth in Appendix A of this Statement of
Preferences.
Person
means and includes an individual, a partnership, a corporation, a trust, an
unincorporated association, a joint venture or other entity or a government or any agency or
political subdivision thereof.
Preferred Shares
has the meaning set forth in the Declaration Trust, and includes the VMTP
Shares.
Purchase Agreement
means the VMTP Shares Purchase Agreement, dated as of the Closing Date,
between the Trust and the Purchaser, as amended, modified or supplemented from time to time.
Purchaser
means the purchaser on the Closing Date as set forth in the Purchase Agreement.
QIB
means a qualified institutional buyer as defined in Rule 144A under the Securities
Act.
Rate Determination Date
means, with respect to any Series of VMTP Shares, (i) with respect
to the Initial Rate Period for any Series of VMTP Shares, the Business Day immediately preceding
the Date of Original Issue of such Series and (ii) with respect to any Subsequent Rate Period for
any Series of VMTP Shares, the last day of the immediately preceding Rate Period for such Series;
provided, however, that the next succeeding Rate Determination Date will be determined without
regard to any prior extension of a Rate Determination Date to a Business Day.
Rate Period
means with respect to VMTP Shares, the Initial Rate Period and any Subsequent
Rate Period.
Rating Agency
means each of Fitch (if Fitch is then rating VMTP Shares at the request of the
Trust), Moodys (if Moodys is then rating VMTP Shares at the request of the Trust) and any Other
Rating Agency (if such Other Rating Agency is then rating VMTP Shares at the request of the Trust).
Rating Agency Certificate
has the meaning specified in Section 7(b) of this Statement of
Preferences.
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5
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Only applicable for national muni funds
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O-13
Rating Agency Guidelines
means Moodys Guidelines (if Moodys is then rating VMTP Shares at
the request of the Trust), Fitch Guidelines (if Fitch is then rating VMTP Shares at the request of
the Trust) and any Other Rating Agency Guidelines (if such Other Rating Agency is then rating VMTP
Shares at the request of the Trust).
Rating Agency Provisions
means the Moodys Provisions (if Moodys is then rating VMTP Shares
at the request of the Trust), the Fitch Provisions (if Fitch is then rating VMTP Shares at the
request of the Trust) and any Other Rating Agency Provisions (if such Other Rating Agency is then
rating VMTP Shares at the request of the Trust). The Trust is required to comply with the Rating
Agency Provisions of a Rating Agency only if such Rating Agency is then rating VMTP Shares at the
request of the Trust.
Ratings Spread
means, with respect to any Rate Period for any Series of VMTP Shares, the
percentage per annum set forth opposite the lowest applicable credit rating assigned to such Series
by any Rating Agency in the table set forth directly below on the Rate Determination Date for such
Rate Period;
provided
,
however
, that, if such Series of VMTP Shares is not assigned
a credit rating by any Rating Agency on the Rate Determination Date for any Rate Period for such
Series of VMTP Shares as a result of each Rating Agency ceasing to rate tax-exempt closed-end
investment companies generally, Ratings Spread means, with respect to such Rate Period, the
percentage per annum in such table directly below the percentage per annum set forth opposite the
lowest applicable credit rating most recently assigned to such Series by any Rating Agency in such
table prior to such Rate Determination Date.
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Long-Term Ratings*
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Moodys
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Fitch
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Applicable Percentage
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Aaa to Aa3
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AAA to AA-
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1.05%
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A1
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A+
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1.30%
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A2
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A
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1.50%
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A3
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A-
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1.70%
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Baa1
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BBB+
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2.60%
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Baa2
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BBB
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2.75%
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Baa3
|
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BBB-
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2.90%
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Below Baa3
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Below BBB-
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4.00%
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*
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And/or the equivalent long-term rating of an Other
Rating Agency then rating such Series of VMTP
Shares, in all cases utilizing the lowest of the
ratings of the Rating Agencies then rating such
Series of VMTP Shares.
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Redemption and Paying Agent
means Deutsche Bank Trust Company Americas or any successor
Person, which has entered into an agreement with the Trust to act in such capacity as the Trusts
transfer agent, registrar, dividend disbursing agent, paying agent, redemption price disbursing
agent and calculation agent in connection with the payment of regularly scheduled dividends with
respect to each Series of VMTP Shares.
Redemption and Paying Agent Agreement
means the redemption and paying agent agreement, dated
as of May 8, 2012, by and between the Trust and the Redemption and Paying Agent pursuant to which
Deutsche Bank
O-14
Trust Company Americas, or any successor, acts as Redemption and Paying Agent, as
amended, modified or supplemented from time to time.
Redemption Date
has the meaning specified in paragraph (c) of Section 10 of this Statement
of Preferences.
Redemption Premium
means with respect to any VMTP Share rated above A1/A+ and its equivalent
by all Rating Agencies then rating such VMTP Share at the request of the Trust as of the relevant
Redemption Date and subject to any redemption on such Redemption Date, other than redemptions
required to comply with the Minimum Asset Coverage requirements or in connection with any
redemption to comply with the Minimum Asset Coverage requirements that results in Minimum Asset
Coverage of up to 240%, an amount equal to:
(A) if such Redemption Date is greater than or equal to two years from the Term Redemption
Date, the product of 3% and the Liquidation Preference of the VMTP Shares subject to redemption;
(B) if such Redemption Date is less than two years but greater than or equal to 18 months from
the Term Redemption Date, the product of 2% and the Liquidation Preference of the VMTP Shares
subject to redemption; and
(C) if such Redemption Date is less than 18 months but greater than or equal to one year from
the Term Redemption Date, the product of 1% and the Liquidation Preference of the VMTP Shares
subject to redemption.
Any VMTP Share exchanged for a preferred share of an acquiring entity or successor entity in
connection with a reorganization, merger or redomestication of the Trust in another state that had
been previously approved by the Holders of VMTP Shares or that otherwise does not require the vote
or consent of the Holders of VMTP Shares shall not be subject to the Redemption Premium solely as a
result of such exchange of shares.
Redemption Price
means, with respect to any VMTP Share, the sum of (i) the Liquidation
Preference, (ii) accumulated but unpaid dividends thereon (whether or not earned or declared) to,
but not including, the date fixed for redemption (subject to Section 10(e)) and (iii) the
Redemption Premium, if any, in respect of such VMTP Share.
Reference Banks
means four major banks in the London interbank market selected by the [LIBOR
Dealer] or its affiliates or successors or such other party as the Trust may from time to time
appoint.
Registration Rights Agreement
means the registration rights agreement entered into between
the Trust and the Purchaser dated as of the Closing Date and as amended from time to time.
Registration Rights Failure
means any failure by the Trust to (i) use its commercially
reasonable efforts to make effective a VMTP Registration Statement with the Securities and Exchange
Commission in violation of the Trusts obligations under the Registration Rights Agreement, or (ii)
comply in any material respect with any other material provision of the Registration Rights
Agreement necessary to effect the VMTP Registration Statement which has not been cured within 30
Business Days of the date of such violation.
Registration Rights Failure Event
shall have the meaning specified in Section 2(e)(i) of
this Statement of Preferences.
Registration Rights Failure Rate
means 0.25% per annum, which rate shall be subject to a
cumulative increase of an additional 0.25% per annum for each additional Week in respect of which
any Registration Rights Failure has occurred and is continuing up to a maximum of 2.00%.
Related Documents
means this Statement of Preferences, the Declaration of Trust, the
Purchase Agreement, the Registration Rights Agreement and the VMTP Shares.
Rule 2a-7
means Rule 2a-7 under the 1940 Act.
O-15
S&P
shall mean Standard & Poors Ratings Services, a Standard & Poors Financial Services
LLC business, and any successor or successors thereto
SEC
means the Securities and Exchange Commission.
Securities Act
means the U.S. Securities Act of 1933, as amended.
Securities Depository
means The Depository Trust Company, New York, New York, and any
substitute for or successor to such securities depository that shall maintain a book-entry system
with respect to the VMTP Shares.
Series
shall have the meaning as set forth in the Recitals of this Statement of Preferences.
Series of VMTP Shares
shall have the meaning as set forth in the Recitals of this Statement
of Preferences.
SIFMA
shall have the meaning as set forth in the Recitals of this Statement of Preferences.
SIFMA Municipal Swap Index
means the Securities Industry and Financial Markets Association
Municipal Swap Index, or such other weekly, high-grade index comprised of seven-day, tax-exempt
variable rate demand notes produced by Municipal Market Data, Inc. or its successor, or as
otherwise designated by the Securities Industry and Financial Markets Association as of 3:00 p.m.,
New York City time, on the applicable Rate Determination Date;
provided
,
however
,
that if such index is no longer produced by Municipal Market Data, Inc. or its successor, then
SIFMA Municipal Swap Index shall mean (i) the S&P Weekly High Grade Municipal Index produced by
Standard & Poors Financial Services LLC or its successors on the applicable Rate Determination
Date or (ii) if the S&P Weekly High Grade Municipal Index is no longer produced, one-week LIBOR on
the applicable Rate Determination Date.
Statement of Preferences
means this Statement of Preferences of the VMTP Shares, as amended
from time to time in accordance with the provisions hereof.
Subsequent Rate Period
, with respect to VMTP Shares, means the period from, and including,
the first day following a Rate Period of such VMTP Shares to, and including, the next succeeding
Wednesday, or, if such day is not a Business Day, the next succeeding Business Day.
Substitute LIBOR Dealer
means any LIBOR Dealer selected by the Trust;
provided
that
none of such entities shall be an existing LIBOR Dealer.
Taxable Allocation
means any payment or portion of a payment of a dividend that is not
designated by the Trust as an exempt-interest dividend (as defined in Section 852(b)(5) of the
Code).
Term Redemption Amount
shall have the meaning specified in Section 10(b)(ii)(A) of this
Statement of Preferences.
Term Redemption Date
means June 1, 2015 or such later date to which the Term Redemption Date
may be extended in accordance with Section 10(b)(i)(A) of this Statement of Preferences.
Total Holders
means, with respect to any Series of VMTP Shares, the Holders of 100% of the
aggregate Outstanding amount of the VMTP Shares of such Series.
Trust
shall have the meaning as set forth in the Recitals of this Statement of Preferences.
U.S. Government Securities
means direct obligations of the United States or of its agencies
or instrumentalities that are entitled to the full faith and credit of the United States and that,
except in the case of
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United States Treasury Bills, provide for the periodic payment of interest
and the full payment of principal at maturity or call for redemption.
Valuation Date
means (i) each Friday occurring after the Date of Original Issue that is a
Business Day, or for any such Friday that is not a Business Day, the immediately preceding Business
Day, and (ii) the Date of Original Issue.
VMTP Registration Statement
means a registration statement prepared on Form N-2 under the
Securities Act, including the related final prospectus or prospectuses, related to the VMTP Shares.
VMTP Shares
shall have the meaning as set forth in the Recitals of this Statement of
Preferences.
Voting Period
shall have the meaning specified in Section 4(b)(i) of this Statement of
Preferences.
Week
means a period of seven consecutive calendar days.
The headings preceding the text of Sections included in this Statement of Preferences are for
convenience only and shall not be deemed part of this Statement of Preferences or be given any
effect in interpreting this Statement of Preferences. The use of the masculine, feminine or neuter
gender or the singular or plural form of words herein shall not limit any provision of this
Statement of Preferences. The use of the terms including or include shall in all cases herein
mean including, without limitation or include, without limitation, respectively. Reference to
any Person includes such Persons successors and assigns to the extent such successors and assigns
are permitted by the terms of any applicable agreement, and reference to a Person in a particular
capacity excludes such Person in any other capacity or individually. Reference to any agreement
(including this Statement of Preferences), document or instrument means such agreement, document or
instrument as amended or modified and in effect from time to time in accordance with the terms
thereof and, if applicable, the terms hereof. Except as otherwise expressly set forth herein,
reference to any law means such law as amended, modified, codified, replaced or re-enacted, in
whole or in part, including rules, regulations and enforcement procedures.
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TERMS
1.
Number of Authorized Shares.
(a)
Authorized Shares
. The initial number of authorized VMTP Shares is [
].
(b)
Capitalization
. So long as any VMTP Shares are Outstanding, the Trust shall not
issue (i) any class or series of shares ranking prior to or on a parity with the VMTP Shares with
respect to the payment of dividends or the distribution of assets upon dissolution, liquidation or
winding up of the affairs of the Trust or (ii) any other senior security (as defined in the 1940
Act as of the Date of Original Issue) of the Trust other than the Trusts use of tender option
bonds, futures, forwards, swaps and other derivative transactions, except as may be issued in
connection with any issuance of preferred shares or other senior securities some or all of the
proceeds from which issuance are used to redeem all of the Outstanding VMTP Shares (provided that
the Trust delivers the proceeds from such issuance necessary to redeem all of the Outstanding VMTP
Shares to the Redemption and Paying Agent for investment in Deposit Securities for the purpose of
redeeming such VMTP Shares and issues a Notice of Redemption and redeems such VMTP Shares as soon
as practicable in accordance with the terms of this Statement of Preferences).
(c)
Capital and Surplus
. For so long as any VMTP Shares are outstanding, (i) for any
of the Trusts shares of beneficial interest having a par value, the portion of any consideration
received by the Trust for such shares equal to the aggregate par value of such shares shall be
deemed to be capital of the Trust, and (ii) for any of the Trusts shares of beneficial interest
having no par value, the portion of any consideration received by the Trust for such shares that
shall be deemed to be capital of the Trust shall equal [$0.01] per share multiplied by the number
of such shares issued by the Trust, unless in either or each case the Board of Trustees by
resolution determines that a greater portion of such consideration shall be capital of the Trust.
The capital of the Trust may be increased from time to time by resolution of the Board of Trustees
directing that a portion of the net assets of the Trust in excess of the amount so determined to be
capital be transferred to the capital account. The excess, if any, at any given time, of the net
assets of the Trust over the amount determined to be capital shall be surplus. Solely for purposes
of determining the capital and surplus of the Trust in accordance with this Section 1(c), the
Trusts net assets means the amount by which total assets of the Trust exceed its total
liabilities. Capital and surplus are not liabilities for this purpose.
(d)
Reduction of Capital
. The Trust may reduce its capital by a resolution of the
Board of Trustees in any of the following ways:
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(i)
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by reducing or eliminating the capital represented by shares of
beneficial interest which have been retired;
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(ii)
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by applying to an otherwise authorized purchase or redemption
of outstanding shares of beneficial interest some or all of the capital
represented by the shares being purchased or redeemed, or any capital that has
not been allocated to any particular class of beneficial interest;
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(iii)
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by applying to an otherwise authorized conversion or exchange
of its outstanding shares of beneficial interest some or all of the capital
represented by the shares being converted or exchanged, or some or all of any
capital that has not been allocated to any particular class or series of its
shares of beneficial interest, or both, to the extent that such capital in the
aggregate exceeds the total aggregate par value or the stated capital of any
previously unissued shares issuable upon such conversion or exchange; or
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O-18
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(iv)
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by transferring to surplus (A) some or all of the capital not
represented by any particular class or series of its beneficial interests, (B)
some or all of the capital represented by its issued shares of beneficial
interests having a par value, which capital is in excess of the aggregate par
value of such shares, or (C) some of the capital represented by issued shares
of its beneficial interests without par value.
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Notwithstanding the other provisions of Section (d), no reduction of capital shall be made or
effected unless the assets of the Trust remaining after such reduction shall be sufficient to pay
any debts of the Trust for which payment has not been otherwise provided.
2.
Dividends.
(a)
Ranking
. The shares of any Series of VMTP Shares shall rank on a parity with each
other, with shares of any other Series of VMTP Shares and with shares of any other Series of
Preferred Shares as to the payment of dividends by the Trust.
(b)
Cumulative Cash Dividends
. The Holders of VMTP Shares of any Series shall be entitled
to receive, when, as and if declared by the Board of Trustees, out of funds legally available
therefor under Applicable Law and otherwise in accordance with the Declaration of Trust and
Applicable Law, cumulative cash dividends at the Applicable Rate for such VMTP Shares, determined
as set forth in Section 2(e), and no more (except to the extent set forth in Section 3 of this
Statement of Preferences), payable on the Dividend Payment Dates with respect to such VMTP Shares.
Holders of VMTP Shares shall not be entitled to any dividend, whether payable in cash, property or
shares, in excess of full cumulative dividends, as herein provided, on VMTP Shares. No interest,
or sum of money in lieu of interest, shall be payable in respect of any dividend payment or
payments on VMTP Shares which may be in arrears, and no additional sum of money shall be payable in
respect of such arrearage, provided that nothing in this Section 2(b) shall be deemed to affect the
obligation of the Trust to accumulate and pay dividends at the rate applicable on Increased Rate
Days as contemplated by Section 2(e) hereof.
(c)
Dividends Cumulative from Date of Original Issue
. Dividends on VMTP Shares of any
Series shall be declared daily and accumulate at the Applicable Rate until paid for such VMTP
Shares from the Date of Original Issue thereof.
(d)
Dividend Payment Dates
. The Dividend Payment Date with respect to VMTP Shares shall
be the first Business Day of each calendar month.
(e)
Applicable Rates and Calculation of Dividends
.
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(i)
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Applicable Rates
. The dividend rate on VMTP Shares of any Series during the
period from and after the Date of Original Issue of such VMTP Shares to and including
the last day of the Initial Rate Period for such VMTP Shares shall be calculated by the
Redemption and Paying Agent and shall equal the rate
per annum
set forth with respect
to the shares of such Series under Designation above. For each Subsequent Rate
Period for VMTP Shares thereafter, the dividend rate on such VMTP Shares shall be
calculated by the Redemption and Paying Agent and shall be equal to the rate
per annum
that results from the Applicable Rate Determination for such VMTP Shares on the Rate
Determination Date immediately preceding such Subsequent Rate Period which shall be the
sum of the (1) Applicable Base Rate and (2) Ratings Spread (the Applicable Rate);
provided
,
however
, that (A) upon the occurrence of an Increased Rate
Event, for each day from (and including) the day the Increased Rate Event first occurs
to (and excluding) the day the Increased Rate Event is cured (the Increased Rate
Days), the Applicable Rate shall be a rate equal to the sum of (1) the Applicable Base
Rate, (2) the Ratings Spread and (3) 2.00%, and (B) in the event of a Registration
Rights Failure that is not cured within three (3) Business Days after written
notification to the Trust by a Holder of such failure (the Registration Rights Failure
Event), for each day from (and including) the day the Registration Rights Failure
Event first occurs to (and excluding) the day the Registration Rights Failure is cured,
which days are not Increased Rate Days, the Applicable Rate shall be a rate equal to
the sum of (1) the Applicable
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Base Rate, (2) the Ratings Spread and (3) the
Registration Rights Failure Rate. The Applicable Rate for any Rate Period (or portion
thereof) shall in no event exceed the Maximum Rate.
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(ii)
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Calculation of Dividends
. The amount of dividends per share payable on VMTP
Shares of a Series on any Dividend Payment Date shall be calculated by the Redemption
and Paying Agent and shall equal the sum of the dividends accumulated but not yet paid
for each Rate Period (or part thereof) in the related Dividend Period or Dividend
Periods. The amount of dividends accumulated for each such Rate Period (or part
thereof) shall be computed by multiplying the Applicable Rate in effect for VMTP Shares
of such Series for such Rate Period (or part thereof) by a fraction, the numerator of
which shall be the number of days in such Rate Period (or part thereof) and the
denominator of which shall be the actual number of days in the year (365 or 366), and
multiplying such product by $100,000.
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(f)
Curing a Failure to Deposit
. A Failure to Deposit in respect of a Series of VMTP
Shares shall end on the Business Day on which, by 12:00 noon, New York City time, an amount of
funds available on such day shall have been deposited irrevocably in trust with the Redemption and
Paying Agent equal to all unpaid dividends on such Series and any unpaid Redemption Price for
shares, if any, of such Series for which Notice of Redemption has been provided by the Trust
pursuant to Section 10(c) of this Statement of Preferences.
(g)
Dividend Payments by the Trust to Redemption and Paying Agent
. In connection with each
Dividend Payment Date for VMTP Shares, the Trust shall pay to the Redemption and Paying Agent, not
later than 12:00 noon, New York City time, on the Business Day immediately preceding the Dividend
Payment Date, an aggregate amount of Deposit Securities equal to the dividends to be paid to all
Holders of VMTP Shares on such Dividend Payment Date as determined in accordance with Section
2(e)(ii) of this Statement of Preferences or as otherwise provided for. If an aggregate amount of
funds equal to the dividends to be paid to all Holders of VMTP Shares on such Dividend Payment Date
are not available in New York, New York, by 12:00 noon, New York City time, on the Business Day
immediately preceding such Dividend Payment Date, the Redemption and Paying Agent will notify the
Holders by Electronic Means of such fact prior to the close of business on such day.
(h)
Redemption and Paying Agent to Hold Dividend Payments by Trust in Trust
. All Deposit
Securities paid to the Redemption and Paying Agent for the payment of dividends shall be held in
trust for the payment of such dividends by the Redemption and Paying Agent for the benefit of the
Holders specified in Section 2(i). The Redemption and Paying Agent shall notify the Trust by
Electronic Means of the amount of any funds deposited with the Redemption and Paying Agent by the
Trust for any reason under the Redemption and Paying Agent Agreement, including for the payment of
dividends or the redemption of VMTP Shares, that remain with the Redemption and Paying Agent after
ninety (90) days from the date of such deposit and such amount shall, to the extent permitted by
law, be repaid to the Trust by the Redemption and Paying Agent upon request by Electronic Means of
the Trust. The Trusts obligation to pay dividends to Holders in accordance with the provisions of
this Statement of Preferences shall be satisfied upon payment by the Redemption and Paying Agent of
such Dividends to the Securities Depository on the relevant Dividend Payment Date.
(i)
Dividends Paid to Holders
. Each dividend on VMTP Shares shall be declared daily to the
Holders thereof at the close of business on each such day and paid on each Dividend Payment Date to
the Holders thereof at the close of business on the day immediately preceding such Dividend Payment
Date. In connection with any transfer of VMTP Shares, the transferor as Beneficial Owner of VMTP
Shares shall be deemed to have agreed pursuant to the terms of the VMTP Shares to transfer to the
transferee the right to receive from the Trust any dividends declared and unpaid for each day prior
to the transferee becoming the Beneficial Owner of the VMTP Shares in exchange for payment of the
purchase price for such VMTP Shares by the transferee. In connection with any transfer of VMTP
Shares, the transferee as Beneficial Owner of VMTP Shares shall be deemed to have agreed pursuant
to the terms of the VMTP Shares to transfer to the transferor (or prior Beneficial Owner) the right
to receive from the Trust any dividends in the nature of Gross-up Payments that relate to dividends
paid during the transferors (or prior Beneficial Owners) holding period.
(j)
Dividends Credited Against Earliest Accumulated But Unpaid Dividends
. Any dividend
payment made on VMTP Shares that is insufficient to cover the entire amount of dividends payable
shall first be credited against the earliest accumulated but unpaid dividends due with respect to
such VMTP Shares. Dividends in
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arrears for any past Dividend Period may be declared and paid on
any date, without reference to any regular Dividend Payment Date, to the Holders on the record
books of the Trust as of a record date to be fixed by the Board of Trustees, such record date not
to exceed 15 days preceding the payment date of such dividends.
(k)
Dividends Designated as Exempt-Interest Dividends
. Dividends on VMTP Shares shall be
designated as exempt-interest dividends up to the amount of the Net Tax-Exempt Income of the Trust,
to the extent permitted by, and for purposes of, Section 852 of the Code.
3.
Gross-Up Payments and Notice of Allocations
. Holders of VMTP Shares shall be entitled to
receive, when, as and if declared by the Board of Trustees, out of funds legally available therefor
under Applicable Law and otherwise in accordance with Applicable Law, dividends in an amount equal
to the aggregate Gross-up Payments as follows:
(a) Whenever the Trust intends or expects to include any net capital gains or ordinary income
taxable for regular federal income tax purposes in any dividend on VMTP Shares, the Trust shall
notify the Redemption and Paying Agent of the amount to be so included (i) not later than 8
calendar days preceding the first Rate Determination Date on which the Applicable Rate for such
dividend is to be established, and (ii) for any successive Rate Determination Date on which the
Applicable Rate for such dividend is to be established, not later than the close of business on the
immediately preceding Rate Determination Date. Whenever such advance notice is received from the
Trust, the Redemption and Paying Agent will notify each Holder and each Beneficial Owner or its
Agent Member identified to the Redemption and Paying Agent. With respect to a Rate Period for
which such advance notice was given and whose dividends are comprised partly of such ordinary
income or capital gains and partly of exempt-interest income, the different types of income will be
paid in the same relative proportions for each day during the Rate Period.
(b) (i) If the Trust allocates, under Subchapter M of Chapter 1 of the Code, any net capital
gains or ordinary income taxable for regular federal income tax purposes to a dividend paid on VMTP
Shares the Trust shall to the extent practical simultaneously increase such dividend payment by an
additional amount equal to the Gross-up Payment and direct the Redemption and Paying Agent to send
notice with such dividend describing the Gross-up Payment and (ii) if the Trust allocates, under
Subchapter M of Chapter 1 of the Code, any net capital gains or ordinary income taxable for regular
federal income tax purposes to a dividend paid on VMTP Shares without simultaneously increasing
such dividend as describe in clause (i) above the Trust shall, prior to the end of the calendar
year in which such dividend was paid, direct the Redemption and Paying Agent to send notice with a
Gross-up Payment to the Holder that was entitled to such dividend payment during such calendar year
at such Holders address as the same appears or last appeared on the record books of the Trust.
(c) The Trust shall not be required to make Gross-up Payments with respect to any net capital
gains or ordinary income determined by the Internal Revenue Service to be allocable in a manner
different from the manner used by the Trust.
4.
Voting Rights.
(a)
One Vote Per VMTP Share
. Except as otherwise provided in the Declaration of Trust or
as otherwise required by law, (i) each Holder of VMTP Shares shall be entitled to one vote for each
VMTP Share held by such Holder on each matter submitted to a vote of shareholders of the Trust, and
(ii) the holders of outstanding Preferred Shares, including each VMTP Share, and of Common Shares
shall vote together as a single class;
provided
,
however
, that the holders of
outstanding Preferred Shares, including VMTP Shares, voting together as a class, to the exclusion
of the holders of all other securities and classes of shares of beneficial interest of the Trust,
shall be entitled to elect two trustees of the Trust at all times, each Preferred Share, including
each VMTP Share, entitling the holder thereof to one vote. Subject to Section 4(b), the holders of
outstanding Common Shares and Preferred Shares, including VMTP Shares, voting together as a single
class, shall elect the balance of the trustees.
(b)
Voting for Additional Trustees
.
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(i)
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Voting Period
. During any period in which any one or more of the conditions
described in subparagraphs (A) or (B) of this Section 4(b)(i) shall exist (such period
being referred to herein as a
Voting Period
), the number of trustees constituting the
Board of Trustees shall be automatically increased by the smallest number that, when
added to the two trustees elected exclusively by the holders of Preferred Shares,
including VMTP Shares, would constitute a majority of the Board of Trustees as so
increased by such smallest number; and the holders of Preferred Shares, including VMTP
Shares, shall be entitled, voting together as a single class on a one-vote-per-share
basis (to the exclusion of the holders of all other securities and classes of shares of
beneficial interest of the Trust), to elect such smallest number of additional
trustees, together with the two trustees that such holders are in any event entitled to
elect. A Voting Period shall commence:
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(A)
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if at the close of business on any Dividend Payment Date
accumulated dividends (whether or not earned or declared) on any outstanding
Preferred Shares, including VMTP 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 Redemption and Paying Agent (or other
redemption and paying agent for Preferred Shares other than VMTP Shares, if
applicable) for the payment of such accumulated dividends; or
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(B)
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if at any time holders of Preferred Shares are entitled under
the 1940 Act to elect a majority of the trustees of the Trust.
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Upon the termination of a Voting Period, the voting rights described in this Section
4(b)(i) shall cease, subject always, however, to the revesting of such voting rights
in the holders of Preferred Shares upon the further occurrence of any of the events
described in this Section 4(b)(i).
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(ii)
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Notice of Special Meeting
. As soon as reasonably practicable after the accrual
of any right of the holders of Preferred Shares to elect additional trustees as
described in Section 4(b)(i) of this Section 4, the Trust may call a special meeting of
such holders, such call to be made by notice as provided in the bylaws of the Trust,
such meeting to be held not less than ten (10) nor more than sixty (60) days after the
date of mailing of such notice. If a special meeting is not called by the Trust, it
may be called by any such holder on like notice. The record date for determining the
holders entitled to notice of and to vote at such special meeting shall be not less
than ten (10) days nor more than sixty (60) prior to the date of such special meeting.
At any such special meeting and at each meeting of holders of Preferred Shares held
during a Voting Period at which trustees are to be elected, such holders, voting
together as a class (to the exclusion of the holders of all other securities and
classes of shares of beneficial interest of the Trust), shall be entitled to elect the
number of trustees prescribed in Section 4(b)(i) on a one-vote-per-share basis.
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(iii)
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Terms of Office of Existing Trustees
. The terms of office of all persons who
are trustees of the Trust at the time of a special meeting of Holders and holders of
other Preferred Shares to elect trustees shall continue, notwithstanding the election
at such meeting by the Holders and such other holders of other Preferred Shares of the
number of trustees that they are entitled to elect, and the persons so elected by the
Holders and such other holders of other Preferred Shares, together with the two
incumbent trustees elected by the Holders and such other holders of other Preferred
Shares and the remaining incumbent trustees elected by the holders of the Common Shares
and Preferred Shares, shall constitute the duly elected trustees of the Trust.
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(iv)
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Terms of Office of Certain Trustees to Terminate Upon Termination of Voting
Period
. Simultaneously with the termination of a Voting Period, the terms of office of
the additional trustees elected by the Holders and holders of other Preferred Shares
pursuant to Section 4(b)(i) shall terminate, the remaining trustees shall constitute
the trustees of the Trust and the voting rights of the Holders and such other holders
to elect additional trustees pursuant to Section 4(b)(i) shall cease, subject to the
provisions of the last sentence of Section 4(b)(i).
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(c)
1940 Act Matters
. The affirmative vote of the holders of a majority of the
outstanding Preferred Shares, including the VMTP Shares Outstanding at the time, voting as a
separate class, shall be required to approve (A) any conversion of the Trust from a closed-end to
an open-end investment company, (B) any plan of reorganization (as such term is used in the 1940
Act) adversely affecting such shares and (C) any action requiring a vote of security holders of the
Trust under Section 13(a) of the 1940 Act.
For purposes of the foregoing, majority of the outstanding Preferred Shares means (i) 67% or
more of such shares present at a meeting, if the holders of more than 50% of such shares are
present or represented by proxy, or (ii) more than 50% of such shares, whichever is less. In the
event a vote of Holders of VMTP Shares is required pursuant to the provisions of Section 13(a) of
the 1940 Act, the Trust shall, not later than 10 Business Days prior to the date on which such vote
is to be taken, notify Moodys (if Moodys is then rating the VMTP Shares at the request of the
Trust), Fitch (if Fitch is then rating the VMTP Shares at the request of the Trust) and Other
Rating Agency (if any Other Rating Agency is then rating the VMTP Shares at the request of the
Trust) that such vote is to be taken and the nature of the action with respect to which such vote
is to be taken.
(d)
Exclusive Right to Vote on Certain Matters
. Notwithstanding the foregoing, and except
as otherwise required by the Declaration of Trust or Applicable Law, (i) Holders of Outstanding
VMTP Shares will be entitled as a Series, to the exclusion of the holders of all other securities,
including other Preferred Shares, Common Shares and other classes of shares of beneficial interest
of the Trust, to vote on matters adversely affecting the VMTP Shares that do not adversely affect
any of the rights of holders of such other securities, including other Preferred Shares, Common
Shares and other classes of shares of beneficial interest of the Trust and (ii) Holders of
Outstanding VMTP Shares will not be entitled to vote on matters adversely affecting any other
Preferred Shares, Common Shares and other classes of shares of beneficial interest of the Trust
that do not adversely affect any of the rights of Holders of the VMTP Shares.
(e)
Rights Set Forth Herein are Sole Rights
. Unless otherwise required by law, the Holders
of VMTP Shares shall not have any relative rights or preferences or other special rights other than
those specifically set forth herein.
(f)
No Preemptive Rights or Cumulative Voting
. The Holders of VMTP Shares shall have no
preemptive rights or rights to cumulative voting.
(g)
Voting for Trustees Sole Remedy for Trusts Failure to Pay Dividends
. In the event
that the Trust fails to pay any dividends on the VMTP Shares, the exclusive remedy of the Holders
shall be the right to vote for trustees pursuant to the provisions of this Section 4;
provided
that nothing in this Section 4(g) shall be deemed to affect the obligation of the
Trust to accumulate and pay dividends at the Applicable Rate in the circumstances contemplated by
Section 2(e)(i) hereof.
(h)
Holders Entitled to Vote
. For purposes of determining any rights of the Holders to
vote on any matter, whether such right is created by this Statement of Preferences, by the other
provisions of the Declaration of Trust, by statute or otherwise by Applicable Law, no Holder shall
be entitled to vote any VMTP Shares and no VMTP Shares shall be deemed to be Outstanding for the
purpose of voting or determining the number of VMTP Shares required to constitute a quorum if,
prior to or concurrently with the time of determination of VMTP Shares entitled to vote or VMTP
Shares deemed Outstanding for quorum purposes, as the case may be, the requisite Notice of
Redemption with respect to such VMTP Shares shall have been provided as set forth in Section 10(c)
of this Statement of Preferences and Deposit Securities with a Market Value equal to the Redemption
Price for the redemption of such VMTP Shares shall have been deposited in trust with the Redemption
and Paying Agent for that purpose. VMTP Shares held (legally or beneficially) by the Trust or any
affiliate of the Trust or otherwise controlled by the Trust or any affiliate of the Trust shall not
have any voting rights or be deemed to be Outstanding for voting or for calculating the voting
percentage required on any other matter or other purposes.
(i)
Grant of Irrevocable Proxy
. To the fullest extent permitted by Applicable Law, each
Holder and Beneficial Owner may in its discretion grant an irrevocable proxy.
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5.
Amendments and Rating Agencies
.
(a) Except as may be otherwise expressly provided in respect of a particular provision of this
Statement of Preferences or as otherwise required by Applicable Law, this Statement of Preferences
may be amended only upon the affirmative vote or written consent of (1) a majority of the Board of
Trustees and (2) the Holders of a majority of the Outstanding VMTP Shares.
(b) Notwithstanding Section 5(a) of this Statement of Preferences, except as may be otherwise
expressly provided by Sections 5(f), 5(g) or 5(h) of this Statement of Preferences or as otherwise
required by Applicable Law, so long as any VMTP Shares are Outstanding, (x) the definitions of
Eligible Assets (including Appendix A hereto) and Minimum Asset Coverage and (y) Sections 1(b),
6(a), 6(b), 6(c), 6(d), paragraphs (A) through (D) of Section 10(b)(ii), Section 13(h) and Section
13(i) of this Statement of Preferences may be amended only upon the affirmative vote or written
consent of (1) a majority of the Board of Trustees and (2) the Holders of 66 2/3% of the
Outstanding VMTP Shares. No amendment to paragraphs (A) through (D) of Section 10(b)(ii) of this
Statement of Preferences shall be effective unless the Trust has received written confirmation from
each Rating Agency, as applicable, then rating the VMTP Shares at the request of the Trust, that
such amendment will not adversely affect the rating then assigned by such Rating Agency to the VMTP
Shares.
(c) Notwithstanding Sections 5(a) and 5(b) of this Statement of Preferences, except as may be
otherwise expressly provided by Sections 5(f), 5(g) or 5(h) of this Statement of Preferences or as
otherwise required by Applicable Law, (i)(A) the provisions of this Statement of Preferences set
forth under (x) the caption Designation (but only with respect to any VMTP Shares already issued
and Outstanding), (y) Sections 1(a) (but only with respect to any VMTP Shares already issued and
Outstanding), 2(a), 2(b), 2(c), 2(d), 2(e)(i), 2(e)(ii), 2(k), 3(b), 8, 10(a)(i), 10(b)(i), 10(h),
11(a), 11(b) or 11(c) of this Statement of Preferences and (z) the definitions Additional Amount,
Applicable Base Rate, Applicable Rate, Dividend Payment Date, Dividend Period, Effective
Leverage Ratio, Failure to Deposit, Gross-up Payment, Increased Rate Event, Liquidation
Preference, Maximum Rate, Outstanding, Rate Determination Date, Ratings Spread,
Redemption Premium, Redemption Price, Subsequent Rate Period or Term Redemption Date may be
amended so as to adversely affect the amount, timing, priority or taxability of any dividend,
redemption or other payment or distribution due to the Holders and (B) the definition of Effective
Leverage Ratio or the provisions of this Statement of Preferences specifying the calculation
thereof may be amended, in each case, only upon the affirmative vote or written consent of (1) a
majority of the Board of Trustees and (2) the Total Holders and (ii) the provisions listed in
clause (i)(A) above may otherwise be amended upon the affirmative vote or written consent of (1) a
majority of the Board of Trustees and (2) the holders of 66 2/3% of the Outstanding VMTP Shares.
(d) If any action set forth above in Section 5(b) would affect, or in Section 5(a) or 5(c)
would adversely affect, the rights of one or more Series (the
Affected Series
) of VMTP Shares in
a manner different from any other Series of VMTP Shares, except as may be otherwise expressly
provided as to a particular provision of this Statement of Preferences or as otherwise required by
Applicable Law, the affirmative vote or consent of Holders of the corresponding percentage of the
Affected Series Outstanding (as set forth in Section 5(a), (b) or (c)), shall also be required.
(e) Any amendment that amends a provision of this Statement of Preferences, the Declaration of
Trust or the VMTP Shares that requires the vote or consent of Holders of a percentage greater than
a Majority shall require such specified percentage to approve any such proposed amendment.
(f) Notwithstanding paragraphs (a) through (e) above or anything expressed or implied to the
contrary in this Statement of Preferences, but subject to Applicable Law, a majority of the Board
of Trustees may, by resolution duly adopted, without shareholder approval, but with at least 20
Business Days prior written notice to the Holders, amend or supplement this Statement of
Preferences (1) to the extent not adverse to any Holder or Beneficial Owner, to supply any
omission, or cure, correct or supplement any ambiguous, defective or inconsistent provision hereof;
provided that if Holders of at least 66 2/3% of the VMTP Shares Outstanding, indicate in writing
that they are adversely affected thereby not later than five (5) Business Days prior to the
effective date of any such amendment or supplement, the Trust either shall not make any such
amendment or supplement or may seek arbitration with respect to such matter (at the expense of the
Trust), or (2) to reflect any amendments or supplements
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hereto which the Board of Trustees is
expressly entitled to adopt pursuant to the terms of this Statement of Preferences without
shareholder approval, including without limitation, (i) amendments pursuant to Section 5(g) of this
Statement of Preferences, (ii) amendments the Board of Trustees deem necessary to conform this
Statement of Preferences to the requirements of Applicable Law or the requirements of the Code,
(iii) amendments to effect or implement any plan of reorganization among the Trust and any
registered investment companies under the 1940 Act that has been approved by the requisite vote of
the Trusts shareholders or (iv) to designate additional Series of VMTP Shares (and terms relating
thereto) to the extent permitted by this Statement of Preferences, the VMTP Shares and the
Declaration of Trust. Any arbitration commenced pursuant to clause 1 of the immediately preceding
sentence shall be conducted in New York, New York and in accordance with the American Arbitration
Association rules.
(a) (g) Notwithstanding anything expressed or implied to the contrary in this Statement of
Preferences, the Board of Trustees may, subject to this Section 5(g), at any time, terminate the
services of a Rating Agency then providing a rating for VMTP Shares of such Series with or without
replacement, in either case, without the approval of Holders of VMTP Shares of such Series or other
shareholders of the Trust,
provided
that, subject to clauses (ii) and (iii) below the Trust
shall use commercially reasonable efforts to cause at least two Rating Agencies to issue long-term
credit ratings with respect to each Series of VMTP Shares for so long as such Series is
Outstanding.
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(i)
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The Board of Trustees, without the approval of the Holders of
any Series of VMTP Shares or other shareholders of the Trust, may terminate the
services of any Rating Agency then providing a rating for a Series of VMTP
Shares and replace it with another NRSRO, provided that the Trust provides
seven (7) days notice by Electronic Means to the Holders of VMTP Shares of
such Series prior to terminating the services of a Rating Agency and replacing
it with another NRSRO that, at the time of such replacement has (i) published a
rating for the VMTP Shares of such Series and (ii) entered into an agreement
with the Trust to continue to publish such rating subject to such NRSROs
customary conditions.
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(ii)
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(A) The Board of Trustees, without the approval of Holders of
VMTP Shares or other shareholders of the Trust, may terminate the services of
any Rating Agency then providing a rating for a Series of VMTP Shares without
replacement, provided that (I) the Trust has given the Redemption and Paying
Agent, and such terminated Rating Agency and Holders of VMTP Shares of such
Series at least 45 calendar days advance written notice of such termination of
services, (II) the Trust is in compliance with the Rating Agency Provisions of
such terminated Rating Agency at the time the notice required in clause (I)
hereof is given and at the time of the termination of such Rating Agencys
services, and (III) the VMTP Shares of such Series continue to be rated by at
least two Rating Agencies at and after the time of the termination of such
Rating Agencys services.
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(B) On the date that the notice is given as described in the preceding
clause (A) and on the date that the services of the applicable Rating Agency
are terminated, the Trust shall provide the Redemption and Paying Agent and
such terminated Rating Agency with an officers certificate as to the
compliance with the provisions of the preceding clause (A).
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(iii)
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In the event a Rating Agency ceases to furnish a preferred
share rating or the Trust terminates a Rating Agency in accordance with Section
5(g)(i) or Section 5(g)(ii) of this Statement of Preferences, the Trust shall
no longer be required to comply with the applicable Rating Agency Provisions of
the Rating Agency so ceasing to furnish a preferred share rating or so
terminated and, as applicable, the Trust shall be required to thereafter comply
only with the Rating Agency Provisions of each Rating Agency then providing a
rating for the VMTP Shares of such Series at the request of the Trust, and any
credit rating of such terminated Rating Agency, to the extent it would have
been taken into account in any of the provisions hereof for such Series, shall
be disregarded, and
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only the credit ratings of the Rating Agencies then
providing a rating for the VMTP Shares of such Series shall be taken into
account for purposes hereof, provided that, for purposes of determining the
Applicable Rate applicable to a Rate Period, any designation of a Rating Agency
after the Rate Determination Date for such Rate Period will take effect on or
as of the next succeeding Rate Determination Date.
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(iv)
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Notwithstanding anything herein to the contrary, but subject to
this Section 5(g), the Rating Agency Guidelines, as they may be amended from
time to time by the respective Rating Agency, will be reflected in a written
document and may be amended by the respective Rating Agency without the vote,
consent or approval of the Trust, the Board of Trustees or any holder of
Preferred Shares, including any Series of VMTP Shares, or any other shareholder
of the Trust. Subject to this Section 5(g), the Board of Trustees, without the
vote or consent of any holder of Preferred Shares, including any Series of VMTP
Shares, or any other shareholder of the Trust, may from time to time take such
actions as may be reasonably required in connection with obtaining, maintaining
or changing the rating of any Rating Agency that is then rating the VMTP Shares
at the request of the Trust, and any such action will not be deemed to affect
the preferences, rights or powers of Preferred Shares, including VMTP Shares,
or the Holders thereof, provided that the Board of Trustees receives written
confirmation from such Rating Agency then rating the VMTP Shares at the request
of the Trust (with such confirmation in no event being required to be obtained
from a particular Rating Agency with respect to definitions or other provisions
relevant only to and adopted in connection with another Rating Agencys rating
of any Series of VMTP Shares) that any such action would not adversely affect
the rating then assigned by such Rating Agency.
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(h) Notwithstanding the foregoing, nothing in this Section 5 is intended in any way to limit
the ability of the Board of Trustees to, subject to Applicable Law, amend or alter any provisions
of this Statement of Preferences at any time that there are no VMTP Shares Outstanding.
6.
Minimum Asset Coverage and Other Financial Requirements
.
(a)
Minimum Asset Coverage
. The Trust shall maintain, as of the last Business Day of each
week in which any VMTP Share is Outstanding, the Minimum Asset Coverage.
(b)
Effective Leverage Ratio
. The Trust shall maintain an Effective Leverage Ratio of not
greater than 45% (other than solely by reason of fluctuations in the market value of its portfolio
securities). In the event that the Trusts Effective Leverage Ratio exceeds 45% (whether by reason
of fluctuations in the market value of its portfolio securities or otherwise) as of the close
business on any Business Day, the Trust shall cause the Effective Leverage Ratio to be 45% or lower
within 10 Business Days (
Effective Leverage Ratio Cure Period
).
(c)
Eligible Assets
. The Trust shall make investments only in the Eligible Assets in
accordance with the Trusts investment objectives and investment policies.
(d)
Credit Quality
. [Under normal market conditions, the Fund shall invest at least 80% of
its net assets in Municipal Securities rated, at the time of investment, in one of the four highest
rating categories by at least one NRSRO or, if unrated, determined to be of comparable quality by
the Investment Adviser.]
(e)
Liens
. The Trust shall not (i) create or incur or suffer to be incurred or to exist
any lien on any funds, accounts or other property held under the Declaration of Trust, except as
permitted by the Declaration of Trust and the Statement of Preferences or (ii) except for any lien
for the benefit of the Custodian of the Trust on the assets of the Trust held by such Custodian or
any lien arising by operation of law, pledge or otherwise enter into a security arrangement in
respect of any portfolio security or other asset to secure any senior securities or other
liabilities to be incurred by the Trust unless the securities and other assets pledged pursuant to
all such pledge or other security arrangements are valued, for purposes of determining the value of
the collateral required to be posted or otherwise provided under all such security arrangements, in
an aggregate amount not less than 70% of their
O-26
aggregate market value from time to time (by
reference to prices determined by an independent pricing service), provided that the required
collateral value (determined in accordance with this clause (ii)) under such pledge or other
security arrangements shall not exceed the market value of the exposure of each secured party to
the credit of the Trust. The Trust shall not be deemed to have breached this Section 6(e) if any
pledge or security interest in violation of the preceding sentence is created or incurred by the
Trust and the Trust cures such violation within five (5) Business Days of receiving notice of the
existence thereof.
(f)
Tender Option Bond Trust
. The Trust shall not sell or otherwise transfer assets of
the Trust to any tender option bond trust if the Trust will own any or all of the related residual
trust certificates unless the aggregate principal amount of the non-residual trust certificates
issued by such tender option bond trust is at least 50% of the aggregate Market Value of such
assets at the time of inception of such tender option bond trust.
7.
Basic Maintenance Amount.
(a) So long as VMTP Shares are Outstanding, the Trust shall maintain, on each Valuation Date,
and shall verify to its satisfaction that it is maintaining on such Valuation Date, (i) Moodys
Eligible Assets having an aggregate Discounted Value equal to or greater than the Basic Maintenance
Amount (if Moodys is then rating the VMTP Shares at the request of the Trust), (ii) Fitch Eligible
Assets having an aggregate Discounted Value equal to or greater than the Basic Maintenance Amount
(if Fitch is then rating the VMTP Shares at the request of the Trust), and (iii) Other Rating
Agency Eligible Assets having an aggregate Discounted Value equal to or greater than the Basic
Maintenance Amount (if any Other Rating Agency is then rating the VMTP Shares at the request of the
Trust).
(b) The Trust shall deliver to each Rating Agency which is then rating VMTP Shares at the
request of the Trust and any other party specified in the Rating Agency Guidelines all certificates
that are set forth in the respective Rating Agency Guidelines regarding Minimum Asset Coverage, the
Basic Maintenance Amount and/or related calculations at such times and containing such information
as set forth in the respective Rating Agency Guidelines (each, a
Rating Agency Certificate
). A
failure by the Trust to deliver a Rating Agency Certificate with respect to the Basic Maintenance
Amount shall be deemed to be delivery of a Rating Agency Certificate indicating the Discounted
Value for all assets of the Trust is less than the Basic Maintenance Amount, as of the relevant
Valuation Date;
provided
,
however
, that the Trust shall have the ability to cure
such failure to deliver a Rating Agency Certificate within one day of receipt of notice from such
Rating Agency that the Trust failed to deliver such Rating Agency Certificate.
8.
Restrictions on Dividends and Other Distributions.
(a)
Dividends on Preferred Shares Other Than VMTP Shares
. Except as set forth in the next
sentence, no dividends shall be declared or paid or set apart for payment on the shares of any
class or series of shares of beneficial interest of the Trust ranking, as to the payment of
dividends, on a parity with VMTP Shares for any period unless full cumulative dividends have been
or contemporaneously are declared and paid on the shares of each Series of VMTP Shares through
their most recent Dividend Payment Date. When dividends are not paid in full upon the shares of
each Series of VMTP Shares through their most recent Dividend Payment Date or upon the shares of
any other class or series of shares of beneficial interest of the Trust ranking on a parity as to
the payment of dividends with VMTP Shares through their most recent respective dividend payment
dates, all dividends declared upon VMTP Shares and any other such class or series of shares of
beneficial interest of the Trust ranking on a parity as to the payment of dividends with VMTP
Shares shall be declared
pro rata
so that the amount of dividends declared per share on VMTP Shares
and such other class or series of shares of beneficial interest of the Trust shall in all cases
bear to each other the same ratio that accumulated dividends per share on the VMTP Shares and such
other class or series of shares of beneficial interest of the Trust bear to each other (for
purposes of this sentence, the amount of dividends declared per VMTP Share shall be based on the
Applicable Rate for such VMTP Share effective during the Dividend Periods during which dividends
were not paid in full).
(b)
Dividends and Other Distributions With Respect to Common Shares Under the 1940 Act
. The
Board of Trustees shall not declare any dividend (except a dividend payable in Common Shares), or
declare any other distribution, upon the Common Shares, or purchase or otherwise acquire for
consideration Common Shares, unless in every such case the Preferred Shares have, at the time of
any such declaration or such purchase or other acquisition an asset coverage (as defined in and
determined pursuant to the 1940 Act) of at least 200% (or such other
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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 shares of stock of a closed-end investment company as a condition of declaring dividends
on its common shares or stock) after deducting the amount of such dividend or distribution or the
price or other amount paid in respect of such purchase or acquisition, as the case may be.
(c)
Other Restrictions on Dividends and Other Distributions
. For so long as any VMTP Share
is Outstanding, and except as set forth in Section 8(a) and Section 11(c) of this Statement of
Preferences, (A) 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 in options, warrants or
rights to subscribe for or purchase, Common Shares or other shares, if any, ranking junior to the
VMTP Shares as to the payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up) in respect of the Common Shares or any other shares of the Trust ranking
junior to or on a parity with the VMTP Shares as to the payment of dividends or the distribution of
assets upon dissolution, liquidation or winding up, or call for redemption, redeem, purchase or
otherwise acquire for consideration any Common Shares or any other such junior shares (except by
conversion into or exchange for shares of the Trust ranking junior to the VMTP Shares as to the
payment of dividends and the distribution of assets upon dissolution, liquidation or winding up),
or any such parity shares (except by conversion into or exchange for shares of the Trust ranking
junior to or on a parity with VMTP Shares as to the payment of dividends and the distribution of
assets upon dissolution, liquidation or winding up), unless (i) full cumulative dividends on shares
of each Series of VMTP Shares through its most recently ended Dividend Period shall have been paid
or shall have been declared and sufficient funds for the payment thereof deposited with the
Redemption and Paying Agent and (ii) the Trust has redeemed the full number of VMTP Shares required
to be redeemed by any provision for mandatory redemption pertaining thereto, and (B) 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 in options, warrants or rights to subscribe for or
purchase, Common Shares or other shares, if any, ranking junior to VMTP Shares as to the payment of
dividends and the distribution of assets upon dissolution, liquidation or winding up) in respect of
Common Shares or any other shares of the Trust ranking junior to VMTP Shares as to the payment of
dividends or the distribution of assets upon dissolution, liquidation or winding up, or call for
redemption, redeem, purchase or otherwise acquire for consideration any Common Shares or any other
such junior shares (except by conversion into or exchange for shares of the Trust ranking junior to
VMTP Shares as to the payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up), unless immediately after such transaction the Discounted Value of
Moodys Eligible Assets (if Moodys is then rating the VMTP Shares at the request of the Trust),
Fitch Eligible Assets (if Fitch is then rating the VMTP Shares at the request of the Trust) and
Other Rating Agency Eligible Assets (if any Other Rating Agency is then rating the VMTP Shares at
the request of the Trust) would each at least equal the Basic Maintenance Amount.
(d)
Sources of Dividends
. Notwithstanding anything expressed or implied herein to the
contrary, the Board of Trustees may declare and pay dividends (including any Gross-up Payments)
upon the VMTP Shares either (i) out of the Trusts surplus, as defined in and computed in
accordance with Sections 1(c) and 1(d) hereof; or (ii) in case there shall be no such surplus, out
of its net profits for the fiscal year in which the dividend is declared and/or the preceding
fiscal year. If the capital of the Trust, computed in accordance with Sections 1(c) and 1(d)
hereof, shall have been diminished by depreciation in the value of its property, or by losses, or
otherwise, to an amount less than the aggregate amount of the capital represented by issued and
outstanding shares of beneficial interest of all classes having a preference upon the distribution
of assets, the Board of Trustees shall not declare and pay out of such net profits any dividends
upon any shares of beneficial interest of any class until the deficiency in the amount of capital
represented by the issued and outstanding shares of beneficial interest of all classes having a
preference upon the distribution of assets shall have been repaired. Nothing is this Section 8(d)
shall invalidate or otherwise affect a note, debenture or other obligation of the Trust paid by it
as a dividend on its shares of beneficial interest, or any payment made thereon, if at the time
such note, debenture or obligation was delivered by the Trust, the Trust had either surplus or net
profits as provided in Sections 8(d)(i) or (ii) from which the dividend could lawfully have been
paid.
9.
Rating Agency Restrictions.
For so long as any VMTP Shares are Outstanding and any Rating
Agency is then rating the VMTP Shares at the request of the Trust, the Trust will not engage in
certain proscribed transactions set forth in the Rating Agency Guidelines, unless it has received
written confirmation from each such Rating Agency that proscribes the applicable transaction in its
Rating Agency Guidelines that any such action would not impair the rating then assigned by such
Rating Agency to a Series of VMTP Shares.
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10.
Redemption.
(a)
Optional Redemption.
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(i)
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Subject to the provisions of Section 10(a)(iii), (x) VMTP Shares of any Series
may be redeemed, at the option of the Trust, at any time, as a whole or from time to
time in part, out of funds legally available therefor under Applicable Law and
otherwise in accordance with Applicable Law, at the Redemption Price or (y) if (i) the
Board of Trustees determines it is necessary to modify this Statement of Preferences as
a result of changes in the Rating Agency Guidelines to prevent any downgrade of the
VMTP Shares by a Rating Agency then rating the VMTP Shares at the request of the Trust,
(ii) the Holders have not approved such proposed modifications in accordance with
Section 5 of this Statement of Preferences and (iii) at least nine months have elapsed
since the Closing Date, then the Trust shall have the right to send a Notice of
Redemption and set a Redemption Date for a redemption of all or a portion of the
Outstanding VMTP Shares within 30 days of the occurrence of the non-approval under
clause (ii) and upon such occurrence, the Trust shall be entitled to redeem the VMTP
Shares, out of funds legally available therefor under Applicable Law and otherwise in
accordance with Applicable Law at the Redemption Price exclusive of the Redemption
Premium;
provided
,
however
, that (A) VMTP Shares may not be redeemed in
part if after such partial redemption fewer than 50 VMTP Shares of such Series would
remain Outstanding; and (B) VMTP Shares are not redeemable by the Trust during the
Initial Rate Period.
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(ii)
|
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If fewer than all of the Outstanding VMTP Shares of a Series are to be redeemed
pursuant to Section 10(a)(i), the number of VMTP Shares of such Series to be redeemed
shall be selected
pro rata
from the Holders of VMTP Shares of such Series in proportion
to the number of VMTP Shares of such Series held by such Holders or by lot or other
fair method as determined by the Trusts Board of Trustees, in accordance with the
rules and regulations of the Securities Depository, if applicable. Subject to the
provisions of this Statement of Preferences and Applicable Law, the Trusts Board of
Trustees will have the full power and authority to prescribe the terms and conditions
upon which VMTP Shares will be redeemed from time to time.
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(iii)
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The Trust may not on any date send a Notice of Redemption pursuant to Section
10(c) in respect of a redemption contemplated to be effected pursuant to this Section
10(a) unless on such date (A) to the extent such redemption is not an Excluded
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 Market
Value not less than the amount (including any applicable Redemption Premium) due to
Holders of VMTP Shares by reason of the redemption of such VMTP Shares on such
Redemption Date and (B) the Discounted Value of Moodys Eligible Assets (if Moodys is
then rating the VMTP Shares at the request of the Trust), the Discounted Value of Fitch
Eligible Assets (if Fitch is then rating the VMTP Shares at the request of the Trust)
and the Discounted Value of Other Rating Agency Eligible Assets (if any Other Rating
Agency is then rating the VMTP Shares at the request of the Trust) would at least equal
the Basic Maintenance Amount immediately subsequent to such redemption if such
redemption were to occur on such date. For purposes of determining in clause (B) of the
preceding sentence whether the Discounted Value of Moodys Eligible Assets at least
equals the Basic Maintenance Amount, the Moodys Discount Factors applicable to Moodys
Eligible Assets shall be determined by reference to the first Exposure Period longer
than the Exposure Period then applicable to the Trust, as described in the definition
of Moodys Discount Factor herein.
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(b)
Term/Mandatory Redemption
.
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(i)
|
(A)
|
Term Redemption
. The Trust shall redeem, out of funds legally available
therefor and otherwise in accordance with Applicable Law, all Outstanding VMTP Shares
of a Series on the Term Redemption Date for such Series at the Redemption Price;
provided
,
however
, the Trust shall have the right, exercisable not more
than 180 days nor less than 60 days prior to the Liquidity Account Initial Date, to
request that the Total Holders of
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such Series extend the term of the Term Redemption
Date for such Series for an additional 364-day period (the
Term Extension Request
),
which request may be conditioned upon terms and conditions that are different from the
terms and conditions herein. Each Holder of such Series of VMTP Shares shall, no later
than 30 days after receiving such request, notify the Trust and the Redemption and
Paying Agent of its acceptance or rejection of such request, which acceptance by any
such Holder may be conditioned upon terms and conditions which are different from the
terms and conditions herein or the terms and conditions proposed by the Trust in making
an extension request (a
Conditional Acceptance
). If any Holder of such Series of
VMTP Shares fails to notify the Trust and the Redemption and Paying Agent of its
acceptance or rejection of the Trusts request for extension within such 30-day period,
such failure to respond shall constitute a rejection of such request. If the Total
Holders provide a Conditional Acceptance, then the Trust shall have 30 days thereafter
to notify the Total Holders and the Redemption and Paying Agent of its acceptance or
rejection of the terms and conditions specified in the Total Holders Conditional
Acceptance. The Trusts failure to notify the Total Holders and the Redemption and
Paying Agent within such 30-day period will be deemed a rejection of the terms and
conditions specified in the Total Holders Conditional Acceptance. The Total Holders
of a Series of VMTP Shares may grant or deny any request for extension of the Term
Redemption Date for such Series in their sole and absolute discretion.
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(B)
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Basic Maintenance Amount, Minimum Asset Coverage and Effective
Leverage Ratio Mandatory Redemption.
The Trust also shall redeem, out of funds
legally available therefor under Applicable Law and otherwise in accordance
with Applicable Law, at the Redemption Price, certain of the VMTP Shares, if
the Trust (i) fails to have either Moodys Eligible Assets (if Moodys is then
rating the VMTP Shares at the request of the Trust) with a Discounted Value,
Fitch Eligible Assets (if Fitch is then rating the VMTP Shares at the request
of the Trust) with a Discounted Value, or Other Rating Agency Eligible Assets
(if any Other Rating Agency is then rating the VMTP Shares at the request of
the Trust) with a Discounted Value greater than or equal to the Basic
Maintenance Amount, (ii) fails to maintain the Minimum Asset Coverage in
accordance with this Statement of Preferences or (iii) fails to maintain the
Effective Leverage Ratio in accordance with this Statement of Preferences, and
such failure is not cured on or before the applicable Cure Date. If a
redemption pursuant to this Section 10(b)(i)(B) is to occur, the Trust shall
cause a Notice of Redemption to be sent to Holders in accordance with Section
10(c) and cause to be deposited Deposit Securities or other sufficient funds,
out of funds legally available therefor under Applicable Law and otherwise in
accordance with Applicable Law, in trust with the Redemption and Paying Agent
in accordance with the terms of this Statement of Preferences or other
applicable paying agent in accordance with the terms of any other Preferred
Shares to be redeemed. The number of VMTP Shares to be redeemed shall be equal
to the lesser of (A) the sum of (x) the minimum number of VMTP Shares, together
with all other
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O-30
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Preferred Shares subject to redemption, the redemption of which,
if deemed to have occurred immediately prior to the opening of business on the
applicable Cure Date, would result in the Trusts (I) having each of Moodys
Eligible Assets (if Moodys is then rating the VMTP Shares at the request of
the Trust) with a Discounted Value, Fitch Eligible Assets (if Fitch is then
rating the VMTP Shares at the request of the Trust) with a Discounted Value and
Other Rating Agency Eligible Assets (if any Other Rating Agency is then rating
the VMTP Shares at the request of the Trust) with a Discounted Value greater
than or equal to the Basic Maintenance Amount, (II) satisfying and maintaining
the Minimum Asset Coverage or (III) satisfying and maintaining the Effective
Leverage Ratio, as the case may be, as of the applicable Cure Date and (y) the
number of additional VMTP Shares that the Trust may elect to simultaneously
redeem in accordance with Section 10(a) (
provided
,
however
,
that if there is no such minimum number of VMTP Shares and other Preferred
Shares the redemption of which would have such result, all Preferred Shares
then outstanding shall be redeemed), and (B) the maximum number of VMTP Shares,
together with all other Preferred Shares subject to redemption, that can be
redeemed out of funds legally available therefor under Applicable Law and
otherwise in accordance with the Declaration of Trust and Applicable Law. In
determining the VMTP Shares required to be redeemed in accordance with the
foregoing, the Trust shall allocate the number required to be redeemed to
maintain and satisfy the Basic Maintenance Amount, the Minimum Asset Coverage
or the Effective Leverage Ratio, as the case may be,
pro rata
, by lot or other
fair method as determined by the Trusts Board of Trustees, in accordance with
the rules and regulations of the Securities Depository, if applicable, and
Applicable Law, among the VMTP Shares and other Preferred Shares (and, then,
pro rata
, by lot or other fair method as determined by the Trusts Board of
Trustees, in accordance with the rules and regulations of the Securities
Depository, if applicable, and Applicable Law, among each Series of VMTP
Shares) subject to redemption . The Trust shall effect such redemption on the
date fixed by the Trust therefor, which date shall not be earlier than 10
Business Days nor later than 60 days after the applicable Cure Date, except
that if the Trust does not have funds legally available under Applicable Law
for the redemption of all of the required number of VMTP Shares and other
Preferred Shares which are subject to redemption or the Trust otherwise is
unable as a result of Applicable Law to effect such redemption on or prior to
60 days after the applicable Cure Date, the Trust shall redeem those VMTP
Shares and other Preferred Shares which it was unable to redeem on the earliest
practicable date on which it is able to effect such redemption. If fewer than
all of the Outstanding VMTP Shares are to be redeemed pursuant to this Section
10(b), the number of VMTP Shares to be redeemed shall be redeemed pro rata, by
lot or other fair method as determined by the Trusts Board of Trustees, in
accordance with the rules and regulations of the Securities Depository, if
applicable, and Applicable Law, from the Holders of the VMTP Shares in
proportion to the number of VMTP Shares held by such Holders.
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(ii)
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(A)
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On or prior to the Liquidity Account Initial Date with respect to any
Series of VMTP Shares, the Trust shall cause the Custodian to segregate, by means of
appropriate identification on its books and records or otherwise in accordance with the
Custodians normal procedures, from the other assets of the Trust (a
Liquidity
Account
) Liquidity Account Investments with a Market Value equal to at least 110% of
the Term Redemption Amount with respect to such Series. The
Term Redemption Amount
for any Series of VMTP Shares shall be equal to the Redemption Price to be paid on the
Term Redemption Date for such Series, based on the number of shares of such Series then
Outstanding, assuming for this purpose that the Applicable Rate for such Series in
effect at the time of the creation of the Liquidity Account for such Series will be the
Applicable Rate as in effect at such time of creation until the Term Redemption Date
for such Series. If, on any date after the Liquidity Account Initial Date, the
aggregate Market Value of the Liquidity Account Investments included in the Liquidity
Account for a Series of VMTP Shares as of the close of business on any Business Day is
less than 110% of the Term Redemption Amount with respect to such Series, then the
Trust shall cause the Custodian and the Investment Adviser to segregate additional or
substitute assets of the Trust as Liquidity Account Investments, so that the aggregate
Market Value of the Liquidity Account Investments included in the Liquidity Account for
such Series is equal to at least 110% of the Term Redemption Amount with respect to
such Series not later than the close of business on the next succeeding Business Day.
With respect to assets of the Trust segregated as Liquidity Account Investments, the
Investment Adviser, on behalf of the Trust, shall be entitled to instruct the Custodian
on any date to release any Liquidity Account Investments from such segregation and to
substitute therefor other Liquidity Account Investments (including, for the avoidance
of doubt, Liquidity Account Investments constituting Deposit Securities), so long as
(x) the assets of the Trust segregated as Liquidity Account Investments at the close of
business on such date have a Market Value equal to at least 110% of the Term Redemption
Amount with respect to such Series and (y) the assets of the Trust designated and
segregated as Deposit Securities at the close of business on such date have a Market
Value equal to at least the Liquidity
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O-31
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Requirement (if any) determined in accordance
with paragraph (B) below with respect to such Series for such date. The Trust shall
cause the Custodian not to permit any lien, security interest or encumbrance to be
created or permitted to exist on or in respect of any Liquidity Account Investments
included in the Liquidity Account for any Series of VMTP Shares, other than liens,
security interests or encumbrances arising by operation of law and any lien of the
Custodian with respect to the payment of its fees or repayment for its advances.
Notwithstanding anything expressed or implied herein to the contrary, the assets of the
Liquidity Account shall continue to be assets of the Trust subject to the interests of
all creditors and shareholders of the Trust.
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(B)
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The Market Value of the Deposit Securities held in the
Liquidity Account for a Series of VMTP Shares, from and after the
15
th
day of the calendar month (or, if such day is not a Business
Day, the next succeeding Business Day) that is the number of months preceding
the calendar month in which the Term Redemption Date for such Series occurs, as
specified in the table set forth below, shall not be less than the percentage
of the Term Redemption Amount for such Series set forth below opposite such
number of months (the
Liquidity Requirement
), but in all cases subject to the
cure provisions of paragraph (C) below:
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Number of Months
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Value of Deposit Securities
|
Preceding Month of Term Redemption Date
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as Percentage of Term Redemption Amount
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5
|
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20%
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4
|
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40%
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3
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60%
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2
|
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80%
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1
|
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100%
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(C)
|
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If the aggregate Market Value of the Deposit Securities
included in the Liquidity Account for a Series of VMTP Shares as of the close
of business on any Business Day is less than the Liquidity Requirement in
respect of such Series for such Business Day, then the Trust shall cause the
segregation of additional or substitute Deposit Securities in respect of the
Liquidity Account for such Series, so that the aggregate Market Value of the
Deposit Securities included in the Liquidity Account for such Series is at
least equal to the Liquidity Requirement for such Series not later than the
close of business on the next succeeding Business Day.
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(D)
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The Deposit Securities included in the Liquidity Account for a
Series of VMTP Shares may be liquidated by the Trust, in its discretion, and
the proceeds applied towards payment of the Term Redemption Amount for such
Series. Upon the deposit by the Trust on the Term Redemption Date with the
Redemption and Paying Agent of Deposit Securities constituting cash and of the
cash proceeds from the liquidation of other Deposit Securities having an
initial combined Market Value sufficient to effect the redemption of the VMTP
Shares of a Series on the Term Redemption Date for such Series, the requirement
of the Trust to maintain a Liquidity Account for such Series as contemplated by
this Section 10(b)(ii) shall lapse and be of no further force and effect.
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(c)
Notice of Redemption
. If the Trust shall determine or be required to redeem, in whole
or in part, VMTP Shares pursuant to Section 10(a) or Section 10(b)(i), the Trust will send a notice
of redemption (a Notice of Redemption), by Electronic Means (or by first class mail, postage
prepaid, in the case where the VMTP Shares are in physical form outside the book-entry system of
the Securities Depository), to Holders thereof, or request the Redemption and Paying Agent, on
behalf of the Trust, to promptly do so by Electronic Means (or by first class mail, postage
prepaid, in the case where the VMTP Shares are in physical form outside the book-entry system of
the Securities Depository), so long as the Notice of Redemption is furnished by the Trust to the
Redemption and
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Paying Agent in electronic format at least five (5) Business Days prior to the date
a Notice of Redemption is required to be delivered to the Holders, unless a shorter period of time
shall be acceptable to the Redemption and Paying Agent. A Notice of Redemption shall be sent to
Holders not less than fifteen (15) days prior to the date, which shall be a Business Day, fixed for
redemption in such Notice of Redemption (the Redemption Date). Each such Notice of Redemption
shall state: (i) the Redemption Date; (ii) the number of VMTP Shares to be redeemed and the Series
thereof; (iii) the CUSIP number for VMTP Shares of such Series; (iv) the Redemption Price; (v) the
place or places where the certificate(s), if any, for such VMTP Shares (properly endorsed or
assigned for transfer, if the Board of Trustees requires and the Notice of Redemption states) are
to be surrendered for payment of the Redemption Price; (vi) that, except as expressly provided in
this Statement of Preferences, dividends on the VMTP Shares to be redeemed will cease to accumulate
from and after such Redemption Date; and (vii) the provisions of this Statement of Preferences
under which such redemption is made. If fewer than all VMTP Shares held by any Holder are to be
redeemed, the Notice of Redemption delivered to such Holder shall also specify the number of VMTP
Shares to be redeemed from such Holder. The Trust may provide in any Notice of Redemption relating
to an optional redemption contemplated to be effected pursuant to Section 10(a) of this Statement
of Preferences, including any redemption of VMTP Shares to be optionally redeemed under Section
10(a) as contemplated in Section 10(b)(i) of this Statement of Preferences, that such redemption is
subject to one or more conditions precedent not otherwise expressly stated herein and that the
Trust shall not be required to effect such redemption unless each such condition has been satisfied
at the time or times and in the manner specified in such Notice of Redemption. No defect in the
Notice of Redemption or delivery thereof shall affect the validity of redemption proceedings,
except as required by Applicable Law.
(d)
No Redemption Under Certain Circumstances
. Notwithstanding the provisions of
paragraphs (a) or (b) of this Section 10, if any dividends on VMTP Shares of a Series (whether or
not earned or declared) are in arrears, no VMTP Shares of such Series shall be redeemed unless all
Outstanding VMTP Shares of such Series are simultaneously redeemed, and the Trust shall not
otherwise purchase or acquire any VMTP Shares of such Series;
provided
,
however
,
that the foregoing shall not prevent the purchase or acquisition of Outstanding VMTP Shares of such
Series pursuant to the successful completion of an otherwise lawful purchase or exchange offer made
on the same terms to Holders of all Outstanding VMTP Shares of such Series.
(e)
Absence of Funds Available for Redemption
. To the extent that any redemption for which
Notice of Redemption has been provided is not made by reason of the absence of legally available
funds therefor in accordance with the Declaration of Trust and Applicable Law, such redemption
shall be made as soon as practicable to the extent such funds become available. A failure to
redeem VMTP Shares shall be deemed to exist at any time after the date specified for redemption in
a Notice of Redemption when the Trust shall have failed, for any reason whatsoever, to deposit in
trust with the Redemption and Paying Agent, in accordance with the terms hereof, the Redemption
Price with respect to any shares for which such Notice of Redemption has been sent; provided,
however, that the foregoing shall not apply in the case of the Trusts failure to deposit in trust
with the Redemption and Paying Agent the Redemption Price with respect to any shares where (1) the
Notice of Redemption relating to such redemption provided, that such redemption was subject to one
or more conditions precedent permitted pursuant to Section 10(c) and (2) any such condition
precedent shall not have been satisfied at the time or times and in the manner specified in such
Notice of Redemption. Notwithstanding anything to the contrary herein or in any Notice of
Redemption, if the Trust shall not have redeemed VMTP Shares for which a Notice of Redemption has
been provided, dividends shall continue to be declared and paid on such VMTP Shares at the
Applicable Rate for the period through, but excluding, the date on which such VMTP Shares are
actually redeemed and such dividends shall be deemed included in the Redemption Price for such VMTP
Shares.
(f)
Redemption and Paying Agent to Hold Redemption Payments by Trust in Trust
. All moneys
and, if applicable, other Deposit Securities paid or otherwise delivered to or deposited with the
Redemption and Paying Agent for payment of the Redemption Price of VMTP Shares called for
redemption shall be held in trust by the Redemption and Paying Agent for the benefit of Holders of
shares so to be redeemed. The Trusts obligation to pay the Redemption Price of VMTP Shares called
for redemption in accordance with this Statement of Preferences shall be satisfied upon payment of
such Redemption Price by the Redemption and Paying Agent to the Securities Depository on the
relevant Redemption Date.
(g)
Shares for Which Deposit Securities Have Been Deposited and Notice of Redemption Has Been
Given Are No Longer Outstanding
. Without limiting Section 10(b)(ii) hereof and subject to
Section 6(b) hereof, if a
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Notice of Redemption has been provided pursuant to Section 10(c), the
Trust shall irrevocably (except to the extent set forth below in this Section 10(g)) deposit with
the Redemption and Paying Agent no later than 12:00 noon, New York City time, on a Business Day not
less than ten (10) Business Days preceding the Redemption Date specified in such notice, Deposit
Securities with an aggregate Market Value equal to the Redemption Price to be paid on the
Redemption Date in respect of any VMTP Shares that are subject to such Notice of Redemption. If a
Notice of Redemption has been provided pursuant to Section 10(c), upon the deposit with the
Redemption and Paying Agent of Deposit Securities with a Market Value sufficient to redeem the VMTP
Shares that are the subject of such notice, dividends on such VMTP Shares shall cease to accumulate
as of the Redemption Date (subject to Section 10(e)) and such VMTP Shares shall no longer be deemed
to be Outstanding for any purpose (other than the transfer thereof prior to the applicable
Redemption Date and the accumulation of dividends thereon in accordance with the terms hereof), and
all rights of the Holders of the VMTP Shares so called for redemption shall cease and terminate,
except the right of such Holders to receive the Redemption Price, but without any interest or other
additional amount, except as provided in Section 3 and subject to Section 10(e) of this Statement
of Preferences. Upon surrender in accordance with the Notice of Redemption of the certificates for
any VMTP Shares so redeemed (properly endorsed or assigned for transfer, if the Board of Trustees
shall so require and the Notice of Redemption shall so state), the Redemption Price shall be paid
by the Redemption and Paying Agent to the Holders of VMTP Shares subject to redemption. In the
case that fewer than all of the shares represented by any such certificate are redeemed, a new
certificate shall be issued, representing the unredeemed shares, without cost to the Holder
thereof. The Trust shall be entitled to receive from the Redemption and Paying Agent, promptly
after the redemption of the VMTP Shares called for redemption on a Redemption Date, any cash or
other Deposit Securities deposited with the Redemption and Paying Agent in excess of (i) the
aggregate Redemption Price of such VMTP Shares and (ii) all other amounts to which Holders of VMTP
Shares called for redemption may be entitled pursuant to this Statement of Preferences. Any funds
so deposited that are unclaimed at the end of 90 days from the date of such redemption shall, to
the extent permitted by law, be repaid to the Trust, after which time the Holders of VMTP Shares so
called for redemption may look only to the Trust for payment of the Redemption Price and all other
amounts to which they may be entitled pursuant to this Statement of Preferences. The Trust shall
be entitled to receive, from time to time after the date fixed for redemption, any interest on the
funds so deposited.
(h)
Compliance With Applicable Law
. In effecting any redemption pursuant to this Section
10, the Trust shall use its best efforts to comply with all applicable conditions precedent to
effecting such redemption under any Applicable Law, and shall effect no redemption except in
accordance with Applicable Law.
(i)
Only Whole VMTP Shares May Be Redeemed
. In the case of any redemption pursuant to this
Section 10, only whole VMTP Shares shall be redeemed.
(j)
Modification of Redemption Procedures
. Notwithstanding the foregoing provisions of
this Section 10 or Section 5 hereof, the Trust may, in its sole discretion, modify the procedures
set forth above (other than the 15-day period for delivery of a Notice of Redemption) with respect
to notification of redemption for the VMTP Shares, provided that such modification does not
materially and adversely affect the Holders or Beneficial Owners of the VMTP Shares or cause the
Trust to violate any law, rule or regulation, and does not in any way alter the obligations of the
Redemption and Paying Agent without the Redemption and Paying Agents prior written consent.
Furthermore, if in the sole discretion of the Board of Trustees, after consultation with counsel,
modification of the foregoing redemption provisions (x) are permissible under the rules and
regulations or interpretations of the SEC and under other Applicable Law and (y) would not cause a
material risk as to the treatment of the VMTP Shares as equity for U.S. federal income tax
purposes, the Board of Trustees, without shareholder approval, by resolution may modify such
redemption procedures, provided that such modification does not materially and adversely affect the
Holders or Beneficial Owner of the VMTP Shares and does not in any way alter the obligations of the
Redemption and Paying Agent without the Redemption and Paying Agents prior written consent.
(k)
Capital Limitations on Purchases and Redemptions
. Notwithstanding anything
expressed or implied to the contrary herein, for so long as any VMTP Shares are outstanding, the
Trust shall not purchase or redeem its own shares of beneficial interest, including without
limitation the VMTP Shares, for cash or other property when its capital is impaired or when such
purchase or redemption would cause any impairment of its capital, except that it may purchase or
redeem out of capital any of its own shares of beneficial interest, including without limitation
the VMTP Shares, which are entitled upon any distribution of its assets, whether by dividend or in
O-34
liquidation, to a preference over another class or series of its shares of beneficial interest, or,
if no shares entitled to such a preference are outstanding, any of its own shares of beneficial
interest, if such shares will be retired upon their acquisition and the capital of the Trust
reduced in accordance with Section 1(d) hereof. Nothing in this Section 10(k) shall invalidate or
otherwise affect a note, debenture or other obligation of the Trust given by it as consideration
for its acquisition by purchase, redemption or exchange of its shares of beneficial interest if at
the time such note, debenture or obligation was delivered by the Trust its capital was not then
impaired or did not thereby become impaired. The Trust shall not redeem any of its shares of
beneficial interest, unless their redemption is authorized by the Board of Trustees, and then only
in accordance with the Declaration of Trust.
11.
Liquidation Rights.
(a)
Ranking
. The shares of a Series of VMTP Shares shall rank on a parity with each other,
with shares of any other Series of VMTP Shares and with shares of any other series of Preferred
Shares as to the distribution of assets upon dissolution, liquidation or winding up of the affairs
of the Trust.
(b)
Distributions Upon Liquidation
. Upon the dissolution, liquidation or winding up of the
affairs of the Trust, whether voluntary or involuntary, the Holders of VMTP Shares then Outstanding
shall be entitled to receive and to be paid out of the assets of the Trust legally available for
distribution to its shareholders under the Declaration of Trust and Applicable Law and otherwise in
accordance with the Declaration of Trust and Applicable Law, before any payment or distribution
shall be made on the Common Shares or on any other class of shares of the Trust ranking junior to
the VMTP Shares upon dissolution, liquidation or winding up, an amount equal to the Liquidation
Preference with respect to such shares
plus
an amount equal to all dividends thereon (whether or
not earned or declared) accumulated but unpaid to (but not including) the date of final
distribution in same day funds, together with any payments required to be made pursuant to Section
3 of this Statement of Preferences in connection with the liquidation of the Trust. After the
payment to the Holders of the VMTP Shares of the full preferential amounts provided for in this
Section 11(b), the Holders of VMTP Shares as such shall have no right or claim to any of the
remaining assets of the Trust.
(c)
Pro Rata Distributions
. In the event the assets of the Trust available for
distribution to the Holders of the VMTP Shares upon any dissolution, liquidation or winding up of
the affairs of the Trust, whether voluntary or involuntary, shall be insufficient to pay in full
all amounts to which such Holders are entitled pursuant to Section 11(b), no such distribution
shall be made on account of any shares of any other class or series of Preferred Shares ranking on
a parity with the VMTP Shares with respect to the distribution of assets upon such dissolution,
liquidation or winding up unless proportionate distributive amounts shall be paid on account of the
VMTP Shares, ratably, in proportion to the full distributable amounts for which holders of all such
parity shares are respectively entitled upon such dissolution, liquidation or winding up.
(d)
Rights of Junior Shares
. Subject to the rights of the holders of shares of any series
or class or classes of shares ranking on a parity with the VMTP Shares with respect to the
distribution of assets upon dissolution, liquidation or winding up of the affairs of the Trust,
after payment shall have been made in full to the Holders of the VMTP Shares as provided in Section
11(b), but not prior thereto, any other series or class or classes of shares ranking junior to the
VMTP Shares with respect to the distribution of assets upon dissolution, liquidation or winding up
of the affairs of the Trust shall, subject to the respective terms and provisions (if any) applying
thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the
Holders of the VMTP Shares shall not be entitled to share therein.
(e)
Certain Events Not Constituting Liquidation
. Neither the sale of all or substantially
all the property or business of the Trust, nor the merger, consolidation or reorganization of the
Trust into or with any business or statutory trust, corporation or other entity nor the merger,
consolidation or reorganization of any business or statutory trust, corporation or other entity
into or with the Trust shall be a dissolution, liquidation or winding up, whether voluntary or
involuntary, for the purposes of this Section 11.
12.
Transfers.
(a) Unless otherwise approved in writing by the Trust, a Beneficial Owner or Holder may sell,
transfer or otherwise dispose of VMTP Shares only in whole shares and only to (i) Persons that such
Beneficial
O-35
Owner or Holder reasonably believes are QIBs that are either registered closed-end
management investment companies, the common shares of which are traded on a national securities
exchange (Closed-End Funds), banks, insurance companies, companies that are included in the S&P
500 Index (and their direct or indirect wholly-owned subsidiaries) or registered open-end
management investment companies or (ii) tender option bond trusts (whether tax-exempt or taxable)
in which all investors are Persons that such Beneficial Owner or Holder reasonably believes are
QIBs that are Closed-End Funds, banks, insurance companies, companies that are included in the S&P
500 Index (and their direct or indirect wholly-owned subsidiaries) or registered open-end
management investment companies (or, in the case of a tender option bond trust in which an
affiliate of such Holder or Beneficial Owner retains a residual interest, such affiliate of such
Holder or Beneficial Owner, but only to the extent expressly provided for in any applicable
Purchase Agreement), in each case, pursuant to Rule 144A of the Securities Act or another available
exemption from registration under the Securities Act, in a manner not involving any public offering
within the meaning of Section 4(2) of the Securities Act. Any transfer in violation of the
foregoing restrictions shall be void ab initio and any transferee of VMTP Shares transferred in
violation of the foregoing restrictions shall be deemed to agree to hold all payments it received
on any such improperly transferred VMTP Shares in trust for the benefit of the transferor of such
VMTP Shares. The foregoing restrictions on transfer shall not apply to any VMTP Shares registered
under the Securities Act or any subsequent transfer of such VMTP Shares thereafter.
(b) If at any time the Trust is not furnishing information to the SEC pursuant to Section 13
or 15(d) of the Exchange Act, in order to preserve the exemption for resales and transfers under
Rule 144A of the Securities Act, the Trust shall furnish, or cause to be furnished, upon request,
to Holders and Beneficial Owners of VMTP Shares and prospective purchasers of VMTP Shares,
information with respect to the Trust satisfying the requirements of subsection (d)(4) of Rule 144A
of the Securities Act.
13.
Miscellaneous
.
(a)
No Fractional Shares
. No fractional VMTP Shares shall be issued.
(b)
Status of VMTP Shares Redeemed, Exchanged or Otherwise Acquired by the Trust
. VMTP
Shares which are redeemed, exchanged or otherwise acquired by the Trust shall return to the status
of authorized and unissued Preferred Shares without designation as to series. Any VMTP Shares
which are provisionally delivered by the Trust to or for the account of an agent of the Trust or to
or for the account of a purchaser of the VMTP Shares, but for which final payment is not received
by the Trust as agreed, shall return to the status of authorized and unissued VMTP Shares.
(c)
Treatment of VMTP Shares as Equity
. The Trust shall, and each Holder and Beneficial
Owner, by virtue of acquiring VMTP Shares, is deemed to have agreed to, treat the VMTP Shares as
equity in the Trust for U.S. federal, state, local income and other tax purposes.
(d)
Board May Resolve Ambiguities
. Subject to Section 5 of this Statement of Preferences
and to the extent permitted by Applicable Law, the Board of Trustees may interpret and give effect
to the provisions of this Statement of Preferences in good faith so as to resolve any inconsistency
or ambiguity or to remedy any formal defect. Notwithstanding anything expressed or implied to the
contrary in this Statement of Preferences, but subject to Section 5, the Board of Trustees may
amend this Statement of Preferences with respect to any Series of VMTP Shares prior to the issuance
of VMTP Shares of such Series.
(e)
Headings Not Determinative
. The headings contained in this Statement of Preferences
are for convenience of reference only and shall not affect the meaning or interpretation of this
Statement of Preferences.
(f)
Notices
. All notices or communications, unless otherwise specified in the By-laws of
the Trust or this Statement of Preferences, shall be sufficiently given if in writing and delivered
in person, by Electronic Means or mailed by first-class mail, postage prepaid.
(g)
Redemption and Paying Agent
. The Trust shall use its commercially reasonable efforts
to engage at all times a Redemption and Paying Agent to perform the duties specified in this
Statement of Preferences.
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(h)
Securities Depository
. The Trust shall maintain settlement of VMTP Shares in global
book-entry form through the Securities Depository.
(i)
Voluntary Bankruptcy
. The Trust shall not file a voluntary application for relief
under federal bankruptcy law or any similar application under state law for so long as the Trust is
solvent and does not reasonably foresee becoming insolvent.
(j)
Applicable Law Restrictions and Requirements
. Notwithstanding anything expressed or
implied to the contrary in this Statement of Preferences, all dividends, redemptions and other
payments by the Trust on or in respect of the VMTP Shares shall be paid only out of funds legally
available therefor under Applicable Law and otherwise in accordance with Applicable Law.
(k)
Information
. Without limitation of other provisions of this Statement of Preferences,
the Trust shall deliver, or cause to be delivered by the Redemption and Paying Agent, to each
Holder:
(i) as promptly as practicable after the preparation and filing thereof with the
Securities and Exchange Commission, each annual and semi-annual report prepared with respect
to the Trust, which delivery may be made by providing notice of the electronic availability
of any such document on a public website;
(ii) notice of any change (including being put on Credit Watch or Watchlist),
suspension or termination in or of the ratings on any Series of VMTP Shares by any Rating
Agency then rating the VMTP Shares at the request of the Trust as promptly as practicable
upon the occurrence thereof, to the extent such information is publicly available;
(iii) notice of any failure to pay in full when due any dividend required to be paid by
Section 2 of this Statement of Preferences that remains uncured for more than three Business
Days as soon as reasonably practicable, but in no event later than one Business Day after
expiration of the foregoing grace period;
(iv) notice of the failure to make any deposit provided for under Section 10 of this
Statement of Preferences in respect of a properly noticed redemption or liquidation as soon
as reasonably practicable, but in no event, later than two Business Days after discovery of
such failure to make such deposit, to the extent such information is publicly available;
(v) notice of any failure to comply with (A) a provision of the Rating Agency
Guidelines when failure continues for more than five consecutive Business Days or (B) the
Minimum Asset Coverage that continues for more than five consecutive Business Days as soon
as reasonably practicable after discovery of such failure, but in no event, later than one
Business Day after the later of (x) the expiration of the foregoing grace period or (y) the
earlier of (1) the discovery of such failure and (2) information confirming such failure
becomes publicly available;
(vi) notice of any change to any investment adviser or sub-adviser of the Trust within
two Business Days after a resignation or a notice of removal has been received from or sent
to any investment adviser or sub-adviser; provided, however, that this clause shall not
apply to personnel changes of the investment adviser or sub-adviser, to the extent such
information is publicly available or not involving any personnel listed as a portfolio
manager of the Trust in public disclosure of the Trust;
(vii) notice of any proxy solicitation as soon as reasonably practicable, but in no
event, later than five Business Days after mailing thereof by the Trusts proxy agent;
(viii) notice one Business Day after the occurrence thereof of (A) the failure of the
Trust to pay the amount due on any senior securities or other debt at the time outstanding,
and any period of grace or cure with respect thereto shall have expired; (B) the failure of
the Trust to pay, or admitting in writing its inability to pay, its debts generally as they
become due; or (C) the failure of the Trust to pay accumulated
O-37
dividends on any additional
preferred shares of beneficial interest of the Trust ranking
pari
passu
with
the VMTP Shares, and any period of grace or cure with respect thereto shall have expired, in
each case, to the extent such information is publicly available;
(ix) notice of the occurrence of any Increased Rate Event and any subsequent cure
thereof as soon as reasonably practicable, but in no event, later than five days after
knowledge of senior management of the Trust thereof; provided that the Trust shall not be
required to disclose the reason for such Increased Rate Event unless such information is
otherwise publicly available;
(x) notice of any action, suit, proceeding or investigation formally commenced or
threatened in writing against the Trust or the Investment Adviser in any court or before any
governmental authority concerning this Statement of Preferences, the Declaration of Trust,
the VMTP Shares or any Related Document, as promptly as practicable, but in no event, later
than 10 Business Days after knowledge of senior management of the Trust thereof, in each
case, to the extent such information is publicly available;
(xi) notice not later than three Business Days after each Valuation Date if such
Valuation Date occurs on or prior to December 31, 2012, and notice one Business Day after
each Valuation Date if such Valuation Date occurs after December 31, 2012, of the Trusts
Effective Leverage Ratio, Minimum Asset Coverage and balances in the Liquidity Account, in
each case, as of the close of business on such Valuation Date, which delivery may be made by
means of posting on a publicly available section of the Trusts website; the Trust shall
also provide to each Holder a schedule in the form of
Appendix B
hereto not later
than three Business Days after each Valuation Date;
(xii) a report of portfolio holdings of the Trust as of the end of each month delivered
no later than 15 days after the end of each month; and
(xiii) when available, publicly available financial statements of the Trusts most
recent fiscal year-end and the auditors report with respect thereto, which shall present
fairly, in all material respects, the financial position of the Trust at such date and for
such period, in conformity with accounting principles generally accepted in the United
States of America.
The Trust shall require the Investment Adviser to inform the Trust as soon as reasonably
practicable after the Investment Advisers knowledge or discovery of the occurrence of any of the
items set forth in Sections 13(k)(ix) and 13(k)(x) of this Statement of Preferences.
(l)
Tax Status of the Trust
. The Trust will maintain its qualification as a regulated
investment company within the meaning of Section 851(a) of the Code and to qualify the dividends
made with respect to the VMTP Shares as tax-exempt dividends to the extent designated by the Trust.
(m)
Maintenance of Existence
. At any time the VMTP Shares are outstanding, the Trust shall
maintain its existence as a business trust or statutory trust under the laws of the state in which
it is organized or formed, with requisite power to issue the VMTP Shares and to perform its
obligations under this Statement of Preferences and each other Related Document to which it is a
party.
(n)
Compliance with Law
. At any time the VMTP Shares are outstanding, the Trust shall
comply with all laws, ordinances, orders, rules and regulations that are applicable to it if the
failure to comply could reasonably be expected to have a material adverse effect on the Trusts
ability to comply with its obligations under this Statement of Preferences, any of the VMTP Shares,
and the other Related Documents to which it is a party.
(o)
Maintenance of Approvals: Filings, Etc
. At any time the VMTP Shares are outstanding,
the Trust shall at all times maintain in effect, renew and comply with all the terms and conditions
of all consents, filings, licenses, approvals and authorizations as are required under any
Applicable Law for its performance of its obligations under this Statement of Preferences and the
other Related Documents to which it is a party, except those as to which the failure to do so could
not reasonably be expected to have a material adverse effect on the Trusts
O-38
ability to comply with
its obligations under this Statement of Preferences, the VMTP Shares, and the other Related
Documents to which it is a party.
(p)
1940 Act Registration
. At any time the VMTP Shares are outstanding, the Trust shall
maintain its registration as a closed-end management investment company under the 1940 Act.
(q)
Compliance with Eligible Assets Definition
. At any time the VMTP Shares are
outstanding, the Trust shall maintain policies and procedures that it believes are reasonably
designed to ensure compliance with Section 6(c) of this Statement of Preferences.
(r)
Access to Information Relating to Compliance with Eligible Assets Definition
. The
Trust shall, upon request, provide a Beneficial Owner and such of its internal and external
auditors and inspectors as a Beneficial Owner may from time to time designate, with reasonable
access to publicly available information and records of the Trust relevant to the Trusts
compliance with Section 6(c) of this Statement of Preferences, but only for the purposes of
internal and external audit.
(s)
Purchase by Affiliates
. The Trust shall not, nor shall it permit, or cause to be
permitted, the Investment Adviser, or any account or entity over which the Trust or the Investment
Adviser exercises discretionary authority or control or any of their respective affiliates (other
than by the Trust, in the case of a redemption permitted by this Statement of Preferences, in
connection with which the VMTP Shares subject to such redemption are to be cancelled by the Trust
upon such redemption) to purchase in the aggregate more than 25% of the Outstanding VMTP Shares
without the prior written consent of a Majority of the Holders of the VMTP Shares Outstanding, and
any such purchases shall be void
ab initio
. For the avoidance of doubt, such prior written consent
shall be deemed to have been obtained with respect to any purchase of VMTP Shares pursuant to a
right of first refusal to purchase VMTP Shares granted by a Beneficial Owner.
(t)
Audits
. The audits of the Trusts financial statements shall be conducted in
accordance with the standards of the Public Company Accounting Oversight Board (United States).
(u)
Termination
. In the event that no VMTP Shares of a Series are Outstanding, all rights
and preferences of the VMTP Shares of such Series established and designated hereunder shall cease
and terminate, and all obligations of the Trust under this Statement of Preferences with respect to
such Series shall terminate, other than in respect of the payment of and the right to receive the
Redemption Price in accordance with Section 10 of this Statement of Preferences.
(v)
Actions on Other than Business Days
. Unless otherwise provided herein, if the date for
making any payment, performing any act or exercising any right, in each case as provided for in
this Statement of Preferences, is not a Business Day, such payment shall be made, act performed or
right exercised on the next succeeding Business Day, with the same force and effect as if made or
done on the nominal date provided therefor, and, with respect to any payment so made, no dividends,
interest or other amount shall accrue for the period between such nominal date and the date of
payment.
(w)
Liability
. Notwithstanding Section 8.5 of the Declaration of Trust, no VMTP
Share, nor any owner (whether beneficially or of record) of any VMTP Share, shall be subject to, or
in any way liable to the Fund under, Section 8.5 of the Declaration of Trust in its capacity as an
owner of VMTP Shares, and for the avoidance of doubt the Fund shall not set off or retain any
distributions owed to the owners (whether beneficially or of record) of VMTP Shares or be entitled
to any indemnification under Section 8.5 of the Declaration of Trust.
14.
Global Certificate.
At any time prior to the commencement of a Voting Period, (i) all of the VMTP Shares
Outstanding from time to time shall be represented by one or more global certificates registered in
the name of the Securities Depository or its nominee and countersigned by the Redemption and Paying
Agent and (ii) no registration of transfer of VMTP Shares shall be made on the books of the Trust
to any Person other than the Securities Depository or its nominee.
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The foregoing restriction on registration of transfer shall be conspicuously noted on the face
or back of the certificates of VMTP Shares in such a manner as to comply with the requirements of
Section 8-204 of the Uniform Commercial Code as in effect in the Commonwealth of Delaware, or any
successor provisions.
O-40
IN WITNESS WHEREOF, [FUND] has caused these presents to be signed as of [August [
],
2012] in its name and on its behalf by its [
] and attested by its [
]. Said officers of the Fund
have executed this Statement as officers and not individually, and the obligations and rights set
forth in this Statement are not binding upon any such officers, or the trustees or shareholders of
the Fund, individually, but are binding only upon the assets and property of the Fund.
ATTEST:
O-41
Appendix A
ELIGIBLE ASSETS
On the Date of Original Issue and at all times thereafter that the VMTP Shares are Outstanding:
1.
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|
Eligible Assets are defined to consist only of assets that conform to the following
requirements as of the time of investment:
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A.
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Debt obligations. The following debt obligations which are not in payment
default at the time of investment:
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i.
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Debt obligations issued by a State, the District of Columbia or
political subdivision thereof, including, but not limited to, limited
obligation bonds, revenue bonds, and obligations that satisfy the requirements
of Section 142(b)(1) of the Code issued by or on behalf of one or more States,
or any public agency or authority of any State, or political subdivision of a
State.
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ii.
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Debt obligations issued by a U.S. Territory or political
subdivision thereof, including limited obligation bonds, revenue bonds, and
obligations that satisfy the requirements of section 142(b)(1) of the Code
issued by or on behalf of one or more U.S. Territories, or any public agency or
authority of any U.S. Territory, or political subdivision of a U.S. Territory,
which are rated in one of the four highest rating categories (investment
grade) by two or more NRSROs, or by one NRSRO if rated by only one NRSRO, or
by one NRSRO, in the case of debt obligations that are Defeased Securities, or
are determined by the Investment Adviser in good faith application of its
internal credit rating standards to be the credit equivalent of investment
grade.
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iii.
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Debt obligations of the United States.
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iv.
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Debt obligations issued, insured, or guaranteed by a department
or an agency of the U.S. Government, if the obligation, insurance, or guarantee
commits the full faith and credit of the United States for the repayment of the
obligation.
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v.
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Debt obligations of the Washington Metropolitan Area Transit
Authority guaranteed by the Secretary of Transportation under Section 9 of the
National Capital Transportation Act of 1969.
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vi.
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Debt obligations of the Federal Home Loan Banks.
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vii.
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Debt obligations, participations or other instruments of or
issued by the Federal National Mortgage Association or the Government National
Mortgage Association.
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viii.
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Debt obligations which are or ever have been sold by the
Federal Home Loan Mortgage Corporation pursuant to sections 305 or 306 of the
Federal Home Loan Mortgage Corporation Act.
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ix.
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Debt obligations of any agency named in 12 U.S.C. § 24(Seventh)
as eligible to issue obligations that a national bank may underwrite, deal in,
purchase and sell for the banks own account, including qualified Canadian
government obligations.
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x.
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Debt obligations of issuers other than those specified in (i)
through (ix) above that are rated in one of the three highest rating categories
by two or more NRSROs, or by one NRSRO if the security has been rated by only
one NRSRO and that are marketable. For these purposes, an obligation is
marketable if:
|
O-42
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it is registered under the Securities Act;
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it is offered and sold pursuant to Securities
and Exchange Commission Rule 144A; 17 CFR 230.144A; or
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it can be sold with reasonable promptness at a
price that corresponds reasonably to its fair value.
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xi.
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Certificates or other securities evidencing ownership interests
in a municipal bond trust structure (generally referred to as a tender option
bond structure) that invests in (a) debt obligations of the types described in
(i) or (ii) above or (b) depository receipts reflecting ownership interests in
accounts holding debt obligations of the types described in (i) or (ii) above
which with respect to both a and b are rated, or credit enhanced by a third
party that is rated, in one of the three highest rating categories by two or
more NRSROs, or by one NRSRO if such debt obligations or depository receipts or
third party credit enhancement providers have been rated by only one NRSRO.
|
An asset shall not fail to qualify as an Eligible Asset solely by virtue of the fact that:
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it provides for repayment of principal and
interest in any form including fixed and floating rate, zero interest,
capital appreciation, discount, leases, and payment in kind; or
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it is for long-term or short-term financing
purposes.
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i.
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Interest rate derivatives;
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ii.
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Swaps, futures, forwards, structured notes, options and
swaptions related to Eligible Assets or on an index related to Eligible Assets;
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iii.
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Credit default swaps; or
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iv.
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Common shares issued by open-end investment companies
registered under the 1940 Act, swaps, futures, forwards, structured notes,
options, swaptions, or other derivatives contracts that are designed solely to
hedge the Trusts obligations under its deferred compensation plan, provided,
that any such swap, future, forward, structured note, option, swaption, or
other derivatives contract is not itself an equity security or a derivative
based on a commodity, and may only be settled in cash (any asset under this
clause iv, a
Deferred Compensation Hedge Asset
); provided that the Deferred
Compensation Hedge Assets so acquired do not constitute more than 0.05% of the
Trusts Managed Assets as of the time of investment.
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i.
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Securities issued by other investment companies (open- or
closed-end funds and ETFs) that invest exclusively in Eligible Assets.
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ii.
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Cash.
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iii.
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Repurchase agreements on assets described in A above.
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iv.
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Taxable fixed-income securities issued by an issuer described
in Section 1(A) (a Permitted Issuer) that are not in default at the time of
acquisition and that are acquired
|
O-43
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for the purpose of influencing control over
such Permitted Issuer (or over a creditor group of such Permitted Issuer) the
municipal bonds of such Permitted Issuer (a) the Trust already owns and (b)
which have deteriorated or are expected shortly to deteriorate, with the
expectation that such investment should enable the Trust to better maximize the
value of its existing investment in the municipal bonds of such Permitted
Issuer, provided that the taxable fixed-income securities of such issuer so
acquired do not constitute more than 0.5% of the Trusts Managed Assets as of
the time of investment.
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v.
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Any assets received by the Trust from a Permitted Issuer as the
result of a default by the Permitted Issuer of its obligations under a debt
obligation of such issuer described in Section 1(A) or of the bankruptcy or
restructuring of the Permitted Issuer.
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2.
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At any time that VMTP Shares are outstanding, for any investment company the securities of
which are held by the Trust, other than shares of any money market fund, the Trust will
provide or make available the following information to the Holders within 10 days after the
public quarterly release of such information:
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i.
|
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the identity of the investment company and the CUSIP Number, the number of
shares owned, as of the end of the prior quarter, and the percentage of the investment
companys equity represented by the Trusts investment, as of the end of the prior
quarter;
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ii.
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a representation that each such investment company invests solely in
Eligible Assets, which representation may be based upon the affirmative
representation of the underlying investment companys investment adviser; and
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iii.
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the information contained in the most recently released financial statements
of each such underlying investment company relating to the portfolio holdings of each
such investment company.
|
O-44
Appendix B
Date:
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Total Preferred
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Deposit Securities/
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Debt Senior
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Derivative
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Shares Outstanding
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Other Assets for
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Securities, Other
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Termination Value
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and Accumulated
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Redemption of
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Obligations and
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Market Value of
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Over-concentration
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of Derivatives
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Pass /
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Pass /
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Fund
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Dividends
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Shares
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Accrued Interest
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Trust Floaters
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Total Assets
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Amount
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Contracts
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ELR
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Fail
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ACR
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Fail
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O-45
EVERY SHAREHOLDERS VOTE IS IMPORTANT!
VOTE THIS PROXY CARD TODAY!
|
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|
|
EASY
VOTING OPTIONS:
|
|
|
|
|
|
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|
VOTE ON THE INTERNET
Log on to:
www.proxy-direct.com
Follow the on-screen instructions
available 24 hours
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VOTE BY TELEPHONE
Call 1-800-337-3503
Follow the recorded instructions
available 24 hours
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|
VOTE BY MAIL
Vote, sign and date your
Proxy Card and return it in the
postage-paid envelope
|
Please detach at perforation before mailing.
|
|
|
|
|
INVESCO VAN KAMPEN CALIFORNIA VALUE MUNICIPAL INCOME TRUST (the Fund)
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES (the Board)
PROXY FOR THE JOINT ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JULY 17, 2012
|
|
PREFERRED SHARES
|
|
|
The
undersigned holder of Preferred Shares of the Fund hereby appoints
Colin D. Meadows, John M. Zerr, Sheri S. Morris, Peter A. Davidson, and Stephen R. Rimes,
and any one of them separately, proxies with full power of substitution in each, and hereby authorizes them to represent and to vote, as designated on the reverse of
this proxy card, at the Joint Annual Meeting of Shareholders on July
17, 2012, at 2:00 p.m., Eastern Time, and at any adjournment or postponement thereof, all of the
Preferred Shares of the Fund which the undersigned would be entitled to vote if personally present.
IF THIS PROXY IS SIGNED AND RETURNED WITH NO
CHOICE INDICATED, THE SHARES WILL BE VOTED FOR THE APPROVAL OF EACH PROPOSAL, FOR ALL OF THE NOMINEES, AND IN THE
DISCRETION OF THE PROXIES UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
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VOTE VIA THE INTERNET:
www.proxy-direct.com
VOTE VIA THE TELEPHONE: 1-800-337-3503
|
|
|
|
|
|
|
|
NOTE
:
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS PROXY CARD
.
When signing as executor, administrator, attorney, trustee
or guardian or as custodian for a minor, please give full title as such. If a corporation, limited liability
company, or partnership, please sign in full entity name and indicate the signers position with the entity.
|
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Signature
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2012
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Date
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|
PLEASE VOTE VIA INTERNET OR TELEPHONE OR MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.
EVERY SHAREHOLDERS VOTE IS IMPORTANT
VOTE THIS PROXY CARD TODAY!
Important Notice Regarding the Availability of Proxy Materials for the Joint Annual
Meeting of Shareholders to Be Held on July 17, 2012.
The Proxy Statement for this meeting is available at:
[
]
Please detach at perforation before mailing.
This proxy is solicited on behalf of the Board. The Board recommends
voting FOR each proposal and FOR ALL of the nominees.
TO VOTE, MARK A BOX BELOW IN BLUE OR BLACK INK. Example:
n
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FOR
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AGAINST
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ABSTAIN
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Proposal 1: Approval of an Agreement and Plan of Redomestication that provides for the
reorganization of the Fund as a Delaware statutory trust.
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Proposal 2(b)(i): Approval of an Agreement and Plan of Merger that provides
for Invesco California Municipal Income Trust to merge with and into the Fund.
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Proposal 2(b)(ii): Approval of an Agreement and Plan of Merger that provides
for Invesco California Quality Municipal Securities to merge with and into the Fund.
|
|
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|
Proposal 2(b)(iii): Approval of an Agreement and Plan of Merger that
provides for Invesco California Municipal Securities to merge with and into the Fund.
|
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FOR
ALL
|
|
|
WITHHOLD
ALL
|
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|
FOR ALL
EXCEPT
|
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|
|
Proposal 4: Election of
Trustees The Board recommends a vote
FOR ALL
of the nominees listed:
|
|
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|
01. David C. Arch 03. Suzanne H. Woolsey
|
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02. Jerry D. Choate
|
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|
|
INSTRUCTIONS:
To withhold authority to vote for any individual nominee(s), mark the
box FOR ALL EXCEPT
and write each nominees number on the line provided below.
|
|
|
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|
|
PROXIES ARE AUTHORIZED TO VOTE, IN THEIR DISCRETION, UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME
BEFORE THE MEETING AND IN ACCORDANCE WITH THE VOTING STANDARDS SET FORTH IN THE PROXY STATEMENT
WITH RESPECT TO ANY ADJOURNMENT OR POSTPONEMENT OF THE MEETING.
PLEASE SIGN AND DATE ON THE REVERSE SIDE
EVERY SHAREHOLDERS VOTE IS IMPORTANT!
VOTE THIS PROXY CARD TODAY!
|
|
|
|
|
|
|
EASY
VOTING OPTIONS:
|
|
|
|
|
|
|
|
|
|
VOTE ON THE INTERNET
Log on to:
www.proxy-direct.com
Follow the on-screen instructions
available 24 hours
|
|
|
|
|
|
|
|
|
|
VOTE BY TELEPHONE
Call 1-800-337-3503
Follow the recorded instructions
available 24 hours
|
|
|
|
|
|
|
|
|
|
VOTE BY MAIL
Vote, sign and date your
Proxy Card and return it in the
postage-paid envelope
|
Please detach at perforation before mailing.
|
|
|
|
|
INVESCO CALIFORNIA MUNICIPAL INCOME TRUST (the Fund)
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES (the Board)
PROXY FOR THE JOINT ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JULY 17, 2012
|
|
PREFERRED SHARES
|
|
|
The undersigned holder of Preferred Shares of the Fund hereby appoints Philip A. Taylor, John M. Zerr, Sheri S. Morris, Peter A. Davidson, and Stephen R. Rimes,
and any one of them separately, proxies with full power of substitution in each, and hereby authorizes them to represent and to vote, as designated on the reverse of
this proxy card, at the Joint Annual Meeting of Shareholders on July 17, 2012, at 1:00 p.m., Eastern Time, and at any adjournment or postponement thereof, all of the
Preferred Shares of the Fund which the undersigned would be entitled to vote if personally present.
IF THIS PROXY IS SIGNED AND RETURNED WITH NO
CHOICE INDICATED, THE SHARES WILL BE VOTED FOR THE APPROVAL OF EACH PROPOSAL, FOR ALL OF THE NOMINEES, AND IN THE
DISCRETION OF THE PROXIES UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
|
|
|
|
|
|
|
|
|
VOTE VIA THE INTERNET:
www.proxy-direct.com
VOTE VIA THE TELEPHONE: 1-800-337-3503
|
|
|
|
|
|
|
|
NOTE
:
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS PROXY CARD
.
When signing as executor, administrator, attorney, trustee
or guardian or as custodian for a minor, please give full title as such. If a corporation, limited liability
company, or partnership, please sign in full entity name and indicate the signers position with the entity.
|
|
|
|
|
|
|
Signature
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
|
|
|
Date
|
|
|
|
|
PLEASE VOTE VIA INTERNET OR TELEPHONE OR MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.
EVERY SHAREHOLDERS VOTE IS IMPORTANT
VOTE THIS PROXY CARD TODAY!
Important Notice Regarding the Availability of Proxy Materials for the Joint Annual
Meeting of Shareholders to Be Held on July 17, 2012.
The Proxy Statement for this meeting is available at:
[
]
Please detach at perforation before mailing.
This proxy is solicited on behalf of the Board. The Board recommends
voting FOR each proposal and FOR ALL of the nominees.
TO VOTE, MARK A BOX BELOW IN BLUE OR BLACK INK. Example:
n
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
FOR
|
|
|
AGAINST
|
|
|
ABSTAIN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proposal 1: Approval of an Agreement and Plan of Redomestication that
provides for the reorganization of the Fund as a Delaware statutory trust.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proposal 2(a): Approval of an Agreement and Plan of Merger that
provides for the Fund to merge with and into Invesco Van Kampen California Value Municipal Income Trust.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR
ALL
|
|
|
WITHHOLD
ALL
|
|
|
FOR ALL
EXCEPT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proposal 3: Election of
Trustees The Board recommends a vote
FOR ALL
of the nominees listed:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
01. James T. Bunch 03. Rodney F. Dammeyer 05. Martin L. Flanagan
|
|
|
|
|
|
|
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|
|
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|
|
02. Bruce L. Crockett 04. Jack M. Fields
06. Carl Frischling
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INSTRUCTIONS:
To withhold authority to vote for any individual nominee(s), mark the
box FOR ALL EXCEPT
and write each nominees number on the line provided below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROXIES ARE AUTHORIZED TO VOTE, IN THEIR DISCRETION, UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME
BEFORE THE MEETING AND IN ACCORDANCE WITH THE VOTING STANDARDS SET FORTH IN THE PROXY STATEMENT
WITH RESPECT TO ANY ADJOURNMENT OR POSTPONEMENT OF THE MEETING.
PLEASE SIGN AND DATE ON THE REVERSE SIDE
EVERY SHAREHOLDERS VOTE IS IMPORTANT!
VOTE THIS PROXY CARD TODAY!
|
|
|
|
|
|
|
EASY
VOTING OPTIONS:
|
|
|
|
|
|
|
|
|
|
VOTE ON THE INTERNET
Log on to:
www.proxy-direct.com
Follow the on-screen instructions
available 24 hours
|
|
|
|
|
|
|
|
|
|
VOTE BY TELEPHONE
Call 1-800-337-3503
Follow the recorded instructions
available 24 hours
|
|
|
|
|
|
|
|
|
|
VOTE BY MAIL
Vote, sign and date your
Proxy Card and return it in the
postage-paid envelope
|
Please detach at perforation before mailing.
|
|
|
|
|
INVESCO CALIFORNIA QUALITY MUNICIPAL SECURITIES (the Fund)
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES (the Board)
PROXY FOR THE JOINT ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JULY 17, 2012
|
|
PREFERRED SHARES
|
|
|
The undersigned holder of Preferred Shares of the Fund hereby appoints Philip A. Taylor, John M. Zerr, Sheri S. Morris, Peter A. Davidson, and Stephen R. Rimes,
and any one of them separately, proxies with full power of substitution in each, and hereby authorizes them to represent and to vote, as designated on the reverse of
this proxy card, at the Joint Annual Meeting of Shareholders on July 17, 2012, at 1:00 p.m., Eastern Time, and at any adjournment or postponement thereof, all of the
Preferred Shares of the Fund which the undersigned would be entitled to vote if personally present.
IF THIS PROXY IS SIGNED AND RETURNED WITH NO
CHOICE INDICATED, THE SHARES WILL BE VOTED FOR THE APPROVAL OF EACH PROPOSAL, FOR ALL OF THE NOMINEES, AND IN THE
DISCRETION OF THE PROXIES UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
|
|
|
|
|
|
|
|
|
VOTE VIA THE INTERNET:
www.proxy-direct.com
VOTE VIA THE TELEPHONE: 1-800-337-3503
|
|
|
|
|
|
|
|
NOTE
:
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS PROXY CARD
.
When signing as executor, administrator, attorney, trustee
or guardian or as custodian for a minor, please give full title as such. If a corporation, limited liability
company, or partnership, please sign in full entity name and indicate the signers position with the entity.
|
|
|
|
|
|
|
Signature
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
|
|
|
Date
|
|
|
|
|
PLEASE VOTE VIA INTERNET OR TELEPHONE OR MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.
EVERY SHAREHOLDERS VOTE IS IMPORTANT
VOTE THIS PROXY CARD TODAY!
Important Notice Regarding the Availability of Proxy Materials for the Joint Annual
Meeting of Shareholders to Be Held on July 17, 2012.
The Proxy Statement for this meeting is available at:
[
]
Please detach at perforation before mailing.
This proxy is solicited on behalf of the Board. The Board recommends
voting FOR each proposal and FOR ALL of the nominees.
TO VOTE, MARK A BOX BELOW IN BLUE OR BLACK INK. Example:
n
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FOR
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AGAINST
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ABSTAIN
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Proposal 1: Approval of an Agreement and Plan of Redomestication that
provides for the reorganization of the Fund as a Delaware statutory trust.
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Proposal 2(a): Approval of an Agreement and Plan of Merger that
provides for the Fund to merge with and into Invesco Van Kampen California Value Municipal Income Trust.
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FOR
ALL
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WITHHOLD
ALL
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FOR ALL
EXCEPT
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Proposal 3: Election of
Trustees The Board recommends a vote
FOR ALL
of the nominees listed:
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01. James T. Bunch 03. Rodney F. Dammeyer 05. Martin L. Flanagan
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02. Bruce L. Crockett 04. Jack M. Fields
06. Carl Frischling
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INSTRUCTIONS:
To withhold authority to vote for any individual nominee(s), mark the
box FOR ALL EXCEPT
and write each nominees number on the line provided below.
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PROXIES ARE AUTHORIZED TO VOTE, IN THEIR DISCRETION, UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME
BEFORE THE MEETING AND IN ACCORDANCE WITH THE VOTING STANDARDS SET FORTH IN THE PROXY STATEMENT
WITH RESPECT TO ANY ADJOURNMENT OR POSTPONEMENT OF THE MEETING.
PLEASE SIGN AND DATE ON THE REVERSE SIDE
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