SEC Division of Corporation Finance no-action letter: Bank of America Corporation and Affiliates (BAC)

Investment Company Act of 1940 Section 30(h)
SULLIVAN & CROMWELL LLP
TELEPHONE: 1-2' 2-558-4000
FACSIMILE: 1-212-558-3588
WWW.SULLCROM.COM
Anne M. Krauskopf, Esq.,
Senior Special Counsel,
Office ofChiefCounsel,
Division ofCorporation Finance,
Securities and Exchange Commission,
100 F Street, N.E.,
Washington, D.C. 20549
Douglas J. Scheidt, Esq.,
ChiefCounsel,
Office ofChiefCounsel,
Division ofInvestment Management,
Securities and Exchange Commission,
100 F Street, N.E.,
Washington, D.C. 20549
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L.OS ANGEL.IES • PALO ALTO. WASHINGTON, D.C.
FRANKFURT· LONDON. PARIS
BEIJING· HONG KONG -TOKYO
MELBOURNE. SYDNEY
April 27, 2011
Re: Variable Rate Demand Preferred Securities Issued by Closed-End Funds Dear Ms. Krauskopf and Mr. Scheidt:
On behalf ofBank ofAmerica Corporation and its affiliates ("BAC"), we respectfully request that the Staff ofthe Division ofCorporation Finance and the Staffof the Division ofInvestment Management, as applicable (together, the "Staff') ofthe Securities and Exchange Commission (the "Commission") grant no-action reliefwith regard to Section 30(h) ofthe Investment Company Act of 1940, as amended (the "1940 Act"), to the extent that it would apply the reporting requirements under Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") to BAC while BAC is subject to Section 30(h) as a result ofits owning more than 10% of a class of preferred stock of a closed-end fund (a "Fund") in respect ofpurchases and sales by BAC of variable rate demand preferred shares (or other securities with substantially the same features as those described below, whether or not using the same acronym) ("VRDPS") SC1:2369811.17

Anne M. Krauskopf, Esq.,
Douglas J. Scheidt, Esq. ofthe Fund in BAC's capacity as a "Liquidity Provider" (as defined below) for the VRDPS. 1
I. Background
-2-
Beginning in 2008, capital market conditions led to systemic failures in the auctions for auction rate securities generally, including auction rate securities that were preferred securities issued by certain Funds ("ARS"). As a result ofthese failed auctions, many investors have been unable to sell their ARS or otherwise obtain liquidity for their holdings ofARS. Following the failures in the ARS markets, a number of financial industry participants entered into settlement agreements with federal and state governmental authorities to repurchase outstanding ARS sold to and/or held by certain of their current and former customers. Other financial industry participants that were not required to enter into such settlement agreements with respect to ARS made voluntary offers to purchase some or all ofthe ARS held by customers. In 2008, these financial industry participants and their affiliates, "Participating Firms,,,2 requested and received global exemptive or no-action relieffrom the Staff ofthe Commission, to facilitate the repurchases ofthe ARS and to protect the interests ofinvestors by restoring liquidity to the ARS markets.3 The purchases and sales ofVRDPS by a Liquidity Provider for which reliefis requested are purchases ofVRDPS pursuant to the Purchase Obligation, and sales ofVRDPS pursuant to the remarketing process for the VRDPS or in connection with the redemption ofVRDPS by the Fund (in requesting reliefin respect ofredemptions ofVRDPS by the Fund, BAC is not agreeing that a redemption involves a "sale" ofVRDPS for purposes of Section 16). BAC does not request no action reliefin respect of any other purchases and sales of VRDPS, including sales by the Liquidity Provider outside ofthe remarketing process, or purchases and sales by BAC that may be made in connection with market making activities in VRDPS. 2 3 Under the terms ofthe Global Exemptive Relief, a Participating Firm is a financial industry participant and any affiliate ofsuch participant that pursuant to settlements or on a voluntary basis made offers to acquire ARS from customers and their affiliates. Auction Rate Securities -- Global Exemptive Relief, SEC No-Action Letter (available September 22,2008) (the "Global Exemptive Relief'). The Global Exemptive Reliefprovided, among other things, reliefin respect ofthe reporting requirements ofParticipating Firms under Section 16 ofthe Exchange Act. In SCl:2369811.17

Anne M. Krauskopf, Esq.,
Douglas J. Scheidt, Esq. -3-
BAC, through several ofits affiliates, including Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") and Banc ofAmerica Securities LLC (which recently merged with and into MLPF&S), repurchased ARS of certain Funds from its customers pursuant to the terms ofsettlements with certain federal and state governmental authorities and in connection with agreements to provide liquidity to certain holders ofARS. As a result, BAC is a significant holder ofARS ofnumerous Funds, and a holder of 10% or more of a class ofpreferred stock of a number ofsuch Funds. As a Participating Firm, BAC relied on the Global Exemptive Relief prior to its expiration in respect ofBAC on December 31, 2010. Some ofthe Funds that have outstanding ARS have issued or are considering issuing VRDPS and using the proceeds ofthe offerings to retire their ARS in whole or in part.4 Thus, successful offerings ofVRDPS are in the best interests of holders ofARS in that such offerings will provide liquidity to such persons. particular, once a Participating Firm or its affiliate had filed a Form 3 in respect of ARS of an issuer, subsequent purchases and sales ofARS ofthe issuer at par (plus dividends, if any) were not required to be reported pursuant to Section 16(a). The Global Exemptive Reliefstated that all other purchases and sales ofARS would be reported in accordance with Section 16(a). The September 22, 2008 letter provided that the reliefprovided thereby will terminate on the later of(i) December 31, 2010 and (ii) with respect to each Settling Firm, the completion of its obligations to purchase certain ARS pursuant to any applicable settlement agreements with federal or state governmental authorities. The Global Exemptive Relief expired in respect ofBAC in accordance with its terms on December 31, 2010. 4 Section 18(c) ofthe 1940 Act provides, subject to certain exceptions, that "it shall be unlawful for any registered closed-end investment company to issue and sell any senior security ... which is a stock ifimmediately thereafter such company will have outstanding more than one class ofsenior security which is a stock". Accordingly, any Fund that issues preferred stock and does not effect a full redemption ofits outstanding ARS would normally need to be satisfied that both the newly issued preferred stock and its outstanding ARS constitute one "class of senior security which is a stock".
Section 18(e) provides in part that "[t]he provisions ofthis Section 18 shall not
apply to any senior securities issued or sold by any registered closed-end company ... for the purpose ofrefunding through ... redemption ... any senior SCI :2369811.17

Anne M. Krauskopf, Esq.,
Douglas J. Scheidt, Esq.
II. Features of Variable Rate Demand Preferred Securities
-4-
The VRDPS will have a liquidation preference expected to be $100,000 per share. The VRDPS will receive a long-term preferred stock rating and a short-term debt rating and as with the ARS, the VRDPS will be issued in one or more separate series in order to facilitate the remarketing process, as described below. The VRDPS will be offered and sold together with an unconditional demand feature pursuant to a purchase obligation (the "Purchase Obligation") of a liquidity provider (a "Liquidity Provider"). The Purchase Obligation will be transferable only in connection with a transfer of VRDPS; it will not be separately transferable. The VRDPS will not be listed on a national securities exchange or authorized to be quoted in an inter-dealer quotation system of a registered securities association. In addition, the VRDPS will not be subject to Section 12(g) ofthe Exchange Act nor will a Fund that issues VRDPS have reporting obligations with respect thereto under Section 15(d) ofthe Exchange Act. The VRDPS are expected to be eligible money market fund investments under Rule 2a-7. Contractual Arrangements Relating to VRDPS

Statement ofPreferences. The terms and conditions ofthe VRDPS will be set
forth in an appropriate document pursuant to the Fund's organizational documents (e.g., Articles Supplementary, Certificate ofDesignation, Statement Establishing and Fixing Rights, etc.). Such document is referred to herein as the "Statement of Preferences".
II. VRDP Purchase Agreement. The Statement ofPreferences will provide that so
long as any VRDPS are outstanding, the Fund shall maintain a VRDP Purchase Agreement providing for a Purchase Obligation with a Liquidity Provider that satisfies specific ratings criteria, and in connection with an initial offering of VRDPS by a Fund, the Liquidity Provider and the tender and paying agent, as described below (a "Tender and Paying Agent"), will enter into a purchase agreement that will set out the Purchase Obligation ofthe Liquidity Provider to the holders ofthe VRDPS (the "VRDP Purchase Agreement"). Pursuant to the security". Thus, even if a Fund's VRDPS are considered to be a different "class ofstock" than its outstanding ARS for purposes of Section 18(c), and even ifthe issuance ofthe VRDPS causes the Fund to exceed the leverage limitations of
Section 18(a)(2) pending the redemption ofthe ARS, the Fund will not be in
violation of Section 18 to the extent the proceeds ofthe issuance are used to redeem in full the outstanding ARS and the leverage ratio ofthe Fund after the redemption is within the limits of Section 18(a)(2). SC1:2369811.17

Anne M. Krauskopf, Esq.,
Douglas 1. Scheidt, Esq. -5-
Purchase Obligation, the Liquidity Provider will have an unconditional and irrevocable obligation during the tenn ofthe VRDP Purchase Agreement, to purchase outstanding VRDPS tendered to it pursuant to a final notice ofpurchase delivered by the Tender and Paying Agent to the Liquidity Provider following an optional or mandatory tender ofVRDPS, as described below, or in the event of a mandatory purchase, as described below, pursuant to a notice delivered by the Fund (or the Tender and Paying Agent on behalfofthe Fund) to the Liquidity Provider. The VRDP Purchase Agreement stipulates that the obligation ofthe Liquidity Provider to purchase VRDPS in accordance with the tenns and conditions ofsuch agreement is made for the benefit ofthe holders and beneficial owners from time to time ofthe VRDPS and shall be directly enforceable by such persons against the Liquidity Provider.
III. Tender and Paying Agent Agreement. The Fund will enter into a Tender and
Paying Agent Agreement with the Tender and Paying Agent, who will typically serve as the Fund's tender agent, transfer agent and registrar, dividend disbursing agent, and paying agent and redemption price disbursing agent with respect to VRDPS.
IV. Remarketing Agreement. The Fund will enter into a Remarketing Agreement
with the Fund's investment adviser (the "Fund Manager"), the remarketing agent, as described below (the "Remarketing Agent") and the Liquidity Provider, which will govern the engagement ofthe Remarketing Agent to remarket the VRDPS and the VRDPS remarketing process (the "Remarketing Agreement).
V. VRDP Fee Agreement. The Fund or the Fund Manager will enter into a fee
agreement with the Liquidity Provider governing the fees payable to the Liquidity Provider, as well as the representations, warranties and covenants between the parties (the "VRDP Fee Agreement"). Under the VRDP Fee Agreement, the Fund (or the Fund Manager) will pay the Fund's Liquidity Provider a periodic fee equal to a percentage ofthe daily average aggregate liquidation preference ofthe outstanding VRDPS covered by the VRDP Purchase Agreement, in consideration ofthe Liquidity Provider's agreement to provide the Purchase Obligation under the VRDP Purchase Agreement, plus an additional fee for those VRDPS, if any, purchased and held by the Liquidity Providers pursuant to the VRDP Purchase Agreement (the "Liquidity Fees"). In addition, under the tenns ofthe VRDP Fee Agreement, the Fund (or the Fund Manager) might be obligated to pay the Liquidity Provider additional fees prior to or upon the issuance ofVRDPS (the "Structuring Fees") and/or a make-whole fee in connection with an optional SC1:2369811.17

Anne M. Krauskopf, Esq.,
Douglas J. Scheidt, Esq. -6- redemption5 by the Fund ofVRDPS (the "Make-Whole Fee"). The Structuring Fees would be a one-time upfront fee at the time ofthe initial offer and sale ofthe VRDPS to compensate the Liquidity Provider for its involvement in the preparation for the offering ofVRDPS, including any capital charges incurred by the Liquidity Provider for making a commitment to provide liquidity before the VRDPS are issued. The Make-Whole Fee would require the Fund (or the Fund Manager) to pay the Liquidity Provider a fee equal to the Liquidity Fees that would otherwise have been payable with respect to the redeemed VRDPS under the terms ofthe VRDP Fee Agreement. The VRDP Fee Agreement will also provide that the Fund will redeem any VRDPS acquired by the Liquidity Provider pursuant to the Purchase Obligation and held for more than the Specified Period (as defined below). Ofthe above, the holders ofVRDPS are direct beneficiaries ofI, named third-party beneficiaries ofII, and have no rights with respect to III-V. D)feringandRemarketing The VRDPS would be offered by a Fund, and the Purchase Obligation would be offered by a liquidity provider (such as Bank of America, N.A. ("BANA") or another affiliate ofBAC) , in transactions that do not involve a public offering and are therefore exempt from the registration requirements ofthe Securities Act of 1933, as amended (the "Securities Act"). Such offerings may be made by the Fund by way of a direct private placement in reliance on Section 4(2) ofthe Securities Act through a placement agent or VRDPS may be sold by a Fund to an initial purchaser in reliance on the exemption from registration provided by Section 4(2) ofthe Securities Act, and such 5 VRDPS may be redeemed at any time, at the option ofthe Fund (in whole or from time to time, in part), at the redemption price of $1 00,000 plus an amount equal to accumulated but unpaid dividends, except that VRDPS may not be redeemed in
part: if, after such partial redemption, fewer than 50 shares remain outstanding;
during the initial rate period; or during a special rate period designated pursuant to the Statement ofPreferences. A Make-Whole Fee would be payable only in respect of voluntary redemptions by the Fund - thus such a fee would not be payable in the event of a redemption by the Fund ofVRDPS required by the Fund's agreements with the Liquidity Provider relating to the VRDPS. In particular, no Make-Whole Fee would be required in respect ofVRDPS acquired by a Liquidity Provider pursuant to the VRDP Purchase Agreement and held by the Liquidity Provider for the Specified Period as discussed under "Mandatory Purchase" below. SCl:2369811.17

Anne M. Krauskopf, Esq.,
Douglas J. Scheidt, Esq. -7- initial purchaser would then re-offer and sell the VRDPS to "qualified institutional buyers" in reliance on the exemption from registration provided by Rule 144A under the Securities Act. The placement agent or initial purchaser may be a broker-dealer such as MLPF&S and may also be an affiliate ofthe Fund. As a result, there will not be a public offering ofthe VRDPS. It is anticipated that some secondary market transactions might occur through broker-dealers such as MLPF&S or otherwise. BAC is not requesting reliefin respect ofpurchases and sales ofVRDPS in respect ofsuch market making transactions. In connection with each remarketing ofthe VRDPS, both the Fund and the Liquidity Provider will rely upon an available exemption from the registration requirements ofthe Securities Act. The Fund or the Remarketing Agent will deliver an offering memorandum describing the VRDPS and the Purchase Obligation to any purchasers ofVRDPS, whether in an initial placement or a remarketing. 6 VRDPS may only be offered and sold in their initial placement and in subsequent remarketings to qualified institutional buyers. A Fund will not file "shelf' registration statements with the Commission to permit sales ofVRDPS to other types ofinvestors, nor will the VRDPS be listed on a national securities exchange or authorized to be quoted in an interdealer quotation system of a registered securities association. Remarketing Procedures - Optional and Mandatory Tenders Remarketing is expected to be the primary means by which VRDPS may be bought or sold, and a broker-dealer such as MLPF&S will serve as Remarketing Agent for the VRDPS.7 Pursuant to the VRDP Purchase Agreement, holders ofVRDPS will have the option to tender (an "Optional Tender") their VRDPS for remarketing on any day upon a certain number of days' notice, typically not less than seven calendar days' 6 7 Under a no-action letter issued to Eaton Vance Management, SEC No-Action Letter (available Jun. 13,2008) (the "Eaton Vance Letter"), the purchase by BANA ofVRDPS in the case of a failed remarketing will not be considered a "tender offer" for purposes of Sections 13(e), 14(d) and 14(e) ofthe Exchange Act, and Rule 13e-4 and Regulations 14D and 14E under the Exchange Act. Pursuant to the Eaton Vance Letter, an offering memorandum will be delivered to the buyers on each remarketing date that will describe the operation ofthe liquidity event feature and explain in detail how a failed remarketing will impact the dividend rate. The Remarketing Agent will not be an affiliate ofthe Funds for purposes ofthe Securities Act. SC1:2369811.17

Anne M. Krauskopf, Esq.,
Douglas 1. Scheidt, Esq. -8- notice (each, a "Purchase Date") after delivery of a notice oftender to the Tender and Paying Agent, at a price equal to the liquidation preference thereofplus any accumulated and unpaid dividends thereon (the "Purchase Price"). The Remarketing Agent will use at least commercially reasonable efforts to remarket any VRDPS so tendered. In the event no remarketing occurs on or before the relevant Purchase Date, or VRDPS remain unsold pursuant to an attempted remarketing, the Tender and Paying Agent will deliver all unsold VRDPS that have been delivered to the Tender and Paying Agent to the Liquidity Provider for purchase on such Purchase Date pursuant to the VRDP Purchase Agreement. The VRDP Purchase Agreement also provides that the VRDPS will be subject to mandatory tender at the Purchase Price and potentially for remarketing by the Remarketing Agent at the Purchase Price in the following circumstances (a "Mandatory Tender"): in the event the issuer ofthe VRDPS fails to make a scheduled payment of dividends or fees payable to the Liquidity Provider (subject to the Liquidity Provider's consent to the classification ofsuch non-payment offees as a mandatory tender event) or breaches a leverage ratio that was agreed upon with the Liquidity Provider and does not cure the breach within a specified period; certain changes to the credit rating ofthe Liquidity Provider; in connection with certain extraordinary corporate events relating to the Liquidity Provider; a change of Liquidity Provider; or the proposal by the Fund of a special rate period which would involve an increase in the number of days prior to a Purchase Date in the event of an optional tender. Mandatory Purchase The VRDP Purchase Agreement will provide that all outstanding VRDPS will be subject to mandatory purchase (a "Mandatory Purchase") by the Liquidity Provider at the Purchase Price in the event oftermination ofthe Purchase Obligation in situations where the Fund has not obtained an extension ofthe Purchase Obligation or obtained an alternate Liquidity Provider prior to such termination. In the event of a Mandatory Purchase, all outstanding VRDPS will automatically be purchased by the Liquidity Provider at the Purchase Price, including any VRDPS tendered pursuant to an Optional Tender or Mandatory Tender for which the Purchase Date has not yet occurred. In addition, the VRDP Fee Agreement will require the Fund to redeem VRDPS held by the Liquidity Provider pursuant to the Purchase Obligation and held by the Liquidity Provider continuously for a specified period (the "Specified Period"), during which such purchased VRDPS cannot be successfully remarketed. Any such redemption would be at the Purchase Price. The Specified Period is expected to be no less than the minimum SC1:2369811.17

Anne M. Krauskopf, Esq.,
Douglas 1. Scheidt, Esq. period in order for the Fund to be satisfied that the VRDPS will be characterized as "equity" for Federal income tax purposes.8 -9- Dividends and Rate Periods The applicable rate for the initial rate period for VRDPS will be specified in the offering memorandum for such securities. For each subsequent rate period, the applicable rate will be detennined by the Remarketing Agent on each rate determination date as the lowest rate under then-existing market conditions that in the Remarketing Agent's sole judgment would result in the VRDPS on the first day ofthe rate period immediately following the rate determination date having a market value equal to the liquidation preference ofthe VRDPS plus accumulated and unpaid dividends thereon. Generally, the dividend rate will be reset weekly by the Remarketing Agent and dividends on the VRDPS will be declared daily and paid monthly on the first business day of each month to holders thereof at the close ofbusiness on the day immediately preceding such dividend payment date. VRDPS in any remarketing will be subject to a maximum dividend rate (the "Maximum Rate"), which will be a specified reference interest rate (e.g., the greater of(a) the SIFMA Municipal Swap Index or (b) the LIBOR Rate) plus a specified number ofbasis points. The specified number ofbasis points may vary depending on the ratings ofthe VRDPS. Accordingly, the Maximum Rate will automatically adjust over time with movements in the reference interest rate. In the event one ofseveral failed remarketing conditions occurs (ifthe Liquidity Provider acquires and continues to be the beneficial holder of any VRDPS, or ifthe Liquidity Provider fails to purchase VRDPS on any Purchase Date), the applicable rate on the VRDPS will be the Maximum Rate. Following a failed remarketing and in the event of continual failed remarketings, the specified number ofbasis points ofthe Maximum Rate is expected to increase periodically (but subject to the quantitative limits specified in the Maximum Rate), until all unpurchased VRDPS have been successfully remarketed. 8 A major Fund group recently announced that a Fund advised by it had received a private letter ruling from the Internal Revenue Service ("IRS") providing assurances that, although IRS Notice 2008-55 (administrative guidance that clarified the treatment ofVRDPS as equity for income tax purposes) expired at the end oflast year, the IRS would follow its conclusions in the case ofsimilar issuances. Please note that IRS Notice 2008-55 required, among other things, a Specified Period of at least six months. SC1:236981 I.I7

Anne M. Krauskopf, Esq.,
Douglas 1. Scheidt, Esq. -10-
Voting Rights and Preferences ofVRDPS
Under the Statement ofPreferences, each VRDPS will have one vote on matters that VRDPS can be voted and, except as otherwise provided by law, will have equal voting rights with holders of common shares and any other preferred shares. Generally, VRDPS holders will vote together with holders of common shares and any preferred shares as a single class. However, in accordance with the 1940 Act, the VRDPS (and any other preferred shares of a Fund, including ARS) will be entitled to elect two of a Fund's trustees/directors at all times voting as a single separate class from a Fund's common shares. The remaining trustees/directors will be elected by holders of common shares and preferred shares, including VRDPS and ARS, voting together as a single class. In accordance with the 1940 Act, if at any time dividends (whether or not earned or declared) on outstanding preferred shares of a Fund, including VRDPS and ARS, are due and unpaid in an amount equal to two full years of dividends, and sufficient cash or specified securities have not been set aside for the payment ofsuch dividends, then preferred shareholders, including VRDPS holders and ARS holders, voting separately as a class, will be entitled to elect a majority ofthe trustees/directors of a Fund. If a Fund thereafter pays, or declares and sets apart for payment, in full, all dividends payable on all outstanding preferred shares, including VRDPS and ARS, the right of preferred shareholders to elect a majority ofthe trustees/directors will cease, and the terms of office ofthe additional trustees/director selected by the holders of preferred shares will automatically terminate. Under the terms ofthe VRDPS, as long as a Fund has any VRDPS outstanding, typically the Fund may not, without the affirmative vote ofthe holders of at least a majority ofthe VRDPS and any other senior securities that are stock that are outstanding at the time, voting together as a separate class:

authorize, create or issue, or increase the authorized or issued amount of, any
class or series ofshares ranking prior to the VRDPS with respect to payment of dividends or the distribution of assets on liquidation;
amend, alter or repeal the provisions of a Fund's charter, by merger, consolidation
or otherwise, so as to materially and adversely affect any preference, right or power ofthe VRDPS or holders ofVRDPS; and
approve any reorganization (as such term is used in the 1940 Act) materially and
adversely affecting the VRDPS.
The consent ofthe Liquidity Provider would also be required for any ofItems 1, 2 or 3. SC1:2369811.17

Anne M. Krauskopf, Esq.,
Douglas J. Scheidt, Esq. -11-
So long as a Fund has any VRDPS outstanding, the Fund will typically be restricted, without the affirmative vote or consent ofthe holders ofthe VRDPS, from filing a voluntary application for reliefunder Federal bankruptcy law or any similar application under state law for so long as such Fund is solvent and does not foresee becoming insolvent. In addition, the approval of any merger, consolidation, sale of all or substantially all of a Fund's assets or the conversion of a Fund from a closed-end investment company to an open-end investment company will typically be restricted or require a vote ofthe common and preferred shareholders. The VRDPS of each series will rank on parity with any other series of VRDPS and any other series ofpreferred shares of a Fund, including AR.s, as to the payment ofdividends and the distribution of assets upon liquidation. While the VRDPS are outstanding and a dividend has not been paid on the VRDPS, a Fund generally may not declare, payor set apart for payment any dividend or other distribution in respect of its common shares. In addition, a Fund generally will not declare, payor set apart for payment any dividend on any class or series ofshares ofsuch Fund, ranking, as to the payment of dividends, on a parity with the VRDPS, unless such Fund has declared and paid or contemporaneously declares and pays full cumulative dividends on each series of the VRDPS through its most recent dividend payment date. If a Fund that has issued VRDPS is liquidated, the holders of any series of outstanding VRDPS will receive the liquidation preference per share on such series, plus all accumulated but unpaid dividends, plus any applicable additional dividends payable to holders ofVRDPS, as provided for in any agreement governing the rights ofVRDPS, before any payment is made to the common shareholders. The holders ofVRDPS will be entitled to receive these amounts from the assets ofthe Fund available for distribution to its shareholders. In addition, the rights ofholders ofVRDPS to receive these amounts are subject to the rights ofholders of any series or class ofshares, including other series of preferred shares, such as the ARS, ranking on parity with the VRDPS with respect to the distribution of assets upon liquidation ofthe Fund. After the payment to the holders ofVRDPS ofthe full preferential amounts as described, the holders ofVRDPS will have no right or claim to any ofthe remaining assets of a Fund. A Fund that has issued VRDPS is typically required to maintain asset coverage amounts. Ifthe Fund fails to maintain the asset coverage amounts and does not timely cure such failure in accordance with the requirements ofthe rating agency that rates the VRDPS, the Fund will be required to redeem all or a portion ofits VRDPS. In addition, pursuant to the terms ofthe VRDPS, a Fund will be required to redeem VRDPS ifit fails to satisfy the asset coverage requirements of Section 18 ofthe 1940 Act. These mandatory redemptions will take place
on a date that the trustees/directors specify out of SCI:2369811.17

Anne M. Krauskopf, Esq.,
Douglas 1. Scheidt, Esq. -12- legally available funds at a redemption price equal to the liquidation preference per share plus accumulated but unpaid dividends (whether or not earned or declared) to the date fixed for redemption. The mandatory redemption may be limited to the number of preferred shares necessary to restore the asset coverage required by the tenns ofthe VRDPS. In the event of a partial redemption ofVRDPS and shares of other series or classes ofpreferred stock of a Fund, including ARS, to be redeemed will be detennined by lot, on a pro rata basis, or in another nondiscriminatory manner as required by Rule 23c-2 under the 1940 Act. A Fund that has issued VRDPS, at its option, will be able to redeem the shares of any series ofVRDPS, in whole or in part, out offunds legally available therefor. Any optional redemption will be at a redemption price equal to the liquidation preference per share ofthe VRDPS, plus accumulated but unpaid dividends to the date fixed for redemption. No shares of a series ofVRDPS may be redeemed ifthe redemption would cause a Fund to violate the tenns of a Fund's charter, the 1940 Act or applicable law. The Funds may redeem the VRDPS for any reason. Purchase Obligation After a current holder has decided to sell its VRDPS, the Remarketing Agent will attempt to successfully remarket any such VRDPS (at a price equal to their liquidation preference plus accumulated and unpaid dividends) before the purchase has settled. Ifthe remarketing is unsuccessful, the Liquidity Provider will be required to purchase such unsuccessfully remarketed shares tendered to it pursuant to an Optional or Mandatory Tender, or in the event the VRDPS are subject to Mandatory Purchase, as described above. Therefore, the VRDP Purchase Agreement will provide continuing liquidity to holders ofVRDPS. The VRDP Fee Agreement will provide that the Liquidity Provider shall make available to the Remarketing Agent those VRDPS held by it pursuant to the VRDP Purchase Agreement for sale at the rate set by the Remarketing Agent through participation in each subsequent remarketing, and it is expected to do so to the extent it holds VRDPS from time to time. However, the VRDP Fee Agreement will expressly reserve the right ofthe Liquidity Provider to make sales ofVRDPS held by it otherwise than through the Remarketing Agent. BAC does not believe that such sales by the Liquidity Provider ofVRDPS outside the remarketing process are likely to occur (except in the case ofredemptions ofVRDPS by the Fund), and does not request no action relief in respect of any such sales. The Fund will be obligated pursuant to VRDP Fee Agreement to repurchase at the stated liquidation preference (plus accumulated but unpaid dividends) VRDPS purchased by the Liquidity Provider that were continuously held by the Liquidity Provider for the Specified Period on a first-in, first-out basis. The Liquidity Provider would be required to sell any such VRDPS to the Fund within a SCI:23698
I1.17

Anne M. Krauskopf, Esq.,
Douglas J. Scheidt, Esq. predetermined time period after the end ofsuch holding period, typically within three business days ofthe expiration ofthe Specified Period. -13- Each VRDP Purchase Agreement is expected to have an initial tenn of one to two years, and it will be renewable by mutual consent ofthe Fund, the Liquidity Provider and the Tender and Paying Agent for additional periods oftime. At the time of the renewal, the Fund may contract with a different Liquidity Provider and the rates of compensation may change in light ofmarket conditions at the time ofthe renewal, whether or not the renewal is effected with a different Liquidity Provider. However, the basis of compensation ofthe Liquidity Provider is not expected to change. In the event that the VRDP Purchase Agreement will not be renewed or will be terminated,9 the tenns ofthe VRDPS will require a Mandatory Purchase by the Liquidity Provider of all ofthe outstanding VRDPS on or prior to the date ofthe expiration or tenmnation ofthe VRDP Purchase Agreement at a price equal to the Purchase Price. As a result, VRDPS holders will always have the opportunity to sell their VRDPS pursuant to the VRDP Purchase Agreement, ifnecessary, subsequent to the receipt ofnotice of a change in or termination ofthe VRDP Purchase Agreement. The Liquidity Provider will be obligated to adhere to the Mandatory Purchase even in the event the Fund is in default or has not otherwise perfonned obligations to the Liquidity Provider, including, without limitation, the failure to pay fees owed to the Liquidity Provider, and/or the failure to honor the exercise by the Liquidity Provider ofits right to sell VRDPS to the Fund pursuant to the VRDP Purchase Agreement. All purchases and sales ofthe VRDPS by BAC as Liquidity Provider will be made in compliance with the registration requirements ofthe Securities Act or in reliance on an available exemption from such requirements. We note that BAC would be required to comply with its reporting obligations as a holder ofVRDPS under Section 13(d) and (g) ofthe Exchange Act and the rules thereunder, to the extent required as a result ofthe operation ofthe VRDP Purchase Agreement 9 The VRDP Purchase Agreement will tenninate: (i) in the event that the Liquidity Provider becomes a related party ofthe Fund, under Section 267(b) or Section 707(b) ofthe Internal Revenue Code, other than through the acquisition of VRDPS pursuant to the tenns ofthe VRDP Purchase Agreement, and (ii) upon instruction by the Fund, ifthe Liquidity Provider has failed to maintain, at any time, short-tenn debt ratings in one ofthe two highest ratings categories or such other short-term debt ratings as may be required for the VRDPS to satisfy the eligibility criteria under Rule 2a-7 under the 1940 Act. se1:2369811.17

Anne M. Krauskopf, Esq.,
Douglas J. Scheidt, Esq.
III. Legal Analysis
-14-
BAC requests no-action reliefwith regard to Section 30(h) ofthe 1940 Act, to the extent that it would apply the reporting requirements under Section 16(a) to BAC while it is subject to Section 30(h) as a result ofit owning more than ten percent of any class ofpreferred securities of a Fund in respect ofpurchases and sales by BAC in BAC's capacity as the Liquidity Provider for VRDPS issued by the Fund.
Section 30(h) ofthe 1940 Act mandates that every person who is the
beneficial owner ofmore than ten percent of any class of outstanding securities ofwhich a registered closed-end company is the issuer shall be subject to the same duties and liabilities as are imposed by Section 16 ofthe Exchange Act. Similarly, Rule 30h-1 (b) under the 1940 Act provides that the rules under Section 16 ofthe Exchange Act apply to any "duty, liability, or prohibition imposed with respect to a transaction involving any security ofa registered closed-end company under Section 30(h) ofthe [1940 Act]."
Section 16(a) requires certain insiders of an issuer to file reports with the Commission on
Forms 3, 4 and 5.
Absent the requested relief, BAC as a Liquidity Provider may become subject to the reporting requirements of Section 30(h) ofthe 1940 Act. Specifically, the Liquidity Providers may be required to purchase VRDPS under one or more VRDP Purchase Agreements as described above, causing them to beneficially own more than 10 percent ofVRDPS constituting a class ofoutstanding securities. The exemption from beneficial ownership provided by Rule 16a-1(a)(1) may not apply to the Liquidity Providers because one or more ofsuch Liquidity Providers may be entities other than those that Rule 16a-1(a)(1)(i)-(xi) enumerates as being exempt and because it is anticipated the VRDPS will be held in accounts other than "for the benefit ofthird parties or in customer or fiduciary accounts" as that Rule requires. 10 We believe that the granting ofthe requested reliefwith regard to Section 30(h) ofthe 1940 Act, to the extent that it would apply the reporting requirements under
Section 16(a) ofthe Exchange Act to BAC, is appropriate because, (a) requiring such
reporting would impose an unreasonable and unproductive burden on BAC as Liquidity Provider of numerous purchases (pursuant to the Purchase Obligation) and sales (pursuant to the remarketing process) by the Liquidity Provider at the Purchase Price, (b) there is no opportunity for a Liquidity Provider to engage in speculative abuse ofthe sort 10 Preferred securities acquired by BAC pursuant to regulatory settlements, offers of liquidity to holders of ARS, and purchases as Liquidity Provider would be held for the firm's own account rather than in customer or fiduciary accounts. SC1:2369811.17

Anne M. Krauskopf, Esq.,
Douglas J. Scheidt, Esq. -15- that Section 16 and Section 30(h) were designed to deter, and (c) the liquidity provided by a Liquidity Provider serves the same policy goals as those recognized by Congress in enacting the exemption from Section 16(b) liability provided by Section 16(d) and by the Staffin its no-action letters to Prudential-Bache Securities, Inc. 11
Section 16(a) Reporting Would Impose an Unreasonable Burden
Section 16(a) requires certain insiders of an issuer to file reports with the
Commission on Forms 3, 4 and 5. Requiring such reporting ofthe VRDPS trades by BAC as the Liquidity Provider would impose an unreasonable and unproductive burden on BAC. As described above, the Liquidity Providers will be required to purchase VRDPS in connection with any failed remarketing and will be required to submit to the Remarketing Agent for sale any VRDPS so acquired on each subsequent remarketing date. Ifrequired to report these transactions under Section 16(a), the Liquidity Providers would be obligated to file a Form 4 for each purchase, with respect to each Fund within two business days after each trade date. The result would be a nearly continuous reporting obligation with respect to each separate Fund covered by the Liquidity Provider. The Commission has stated in the analogous situation ofwhether market makers should be required to report transactions under Section 16(a), that although the statute does not provide an express exemption from section 16(a) for market makers, "[t]here appears to be little utility in requiring market maker reports where positions change constantly and the burden would be overwhelming.,,12 Furthermore, because VRDPS have been designed to trade at the same price (i.e., liquidation preference plus accumulated but unpaid dividends), and because, as discussed below, there would be no potential for speculative abuse, there is no benefit to the public ofrequiring the Liquidity Providers to file Forms 4 on each Fund that they support. Liquidity Providers Have No Opportunity to Engage in Speculative Abuse that Section 30(h) and Section 16 Seek to Prevent As described above, the Liquidity Providers may engage in purchasing VRDPS pursuant to the VRDP Purchase Agreement; selling VRDPS so acquired in 11 12 Prudential-Bache Securities, Inc., SEC No-Action Letter, 1985 WL 55643 (Dec. 2, 1985) Securities Exchange Act Release No. 26333, Ownership Reports and Trading by Officers, Directors and Principal Stockholders, [1988-1989 Transfer Binder] Fed. Sec. L. Rep. (CCH),-r 84,343, at 89,623 (Dec. 2, 1988) SC1:2369811.17

Anne M. Krauskopf, Esq.,
Douglas J. Scheidt, Esq. -16- subsequent remarketings as provided by the VRDP Purchase Agreement; 13 and having VRDPS redeemed by the Fund pursuant to the VRDP Fee Agreement ifsuch shares have been continuously held by the Liquidity Provider for the Specified Period. While MLPF&S may engage in secondary market transactions in VRDPS from time to time, BAC is not requesting reliefin respect ofpurchases and sales ofVRDPS in marketmaking transactions. Furthermore, the Liquidity Providers will have no opportunity to make use of confidential corporate information, as they will be obligated to purchase VRDPS at times and prices outside oftheir control pursuant to the terms ofthe VRDP Purchase Agreement. Because ofthe pricing on VRDPS, it is not possible for the Liquidity Providers' trades to generate short-swing "profits" based on fluctuations in the market price ofthe VRDPS. All purchases ofVRDPS under the VRDP Purchase Agreement will occur at the Purchase Price, any purchases or sales at remarketings will occur at the Purchase Price and any sales ofVRDPS by the Liquidity Provider to the Fund will occur at the Purchase Price, so the only possible difference in the purchase price and the sale price for any ofthe transactions for which reliefis requested is the amount ofthese dividends. The only other amounts that the Liquidity Providers will earn as a result ofthese transactions are the fees specified in the VRDP Fee Agreement. We also believe that neither the dividend amounts nor the fees to be paid to the Liquidity Providers under the VRDP Purchase Agreement constitute "profits" within the meaning of Section 16(b). Dividends have been considered by the courts and, where payment is a matter ofpublic knowledge and is not the result ofmanipulation, have been held not to constitute "profits" under Section 16(b). 14 As discussed above, the fees to be paid by the Fund to the Liquidity Providers, including the Liquidity Fees, the Structuring Fees, and the Make-Whole Fee, will be set forth in the VRDP Purchase 13 14 As noted in II, under "Purchase Obligation", the Liquidity Provider is expected to make available to the Remarketing Agent those VRDPS held by it pursuant to the VRDP Purchase Agreement for sale at the rate set by the Remarketing Agent through participation in each subsequent remarketing. However, the VRDP Fee Agreement will expressly reserve the right ofthe Liquidity Provider to make sales ofVRDPS held by it otherwise than through the Remarketing Agent. BAC does not believe that such sales by the Liquidity Provider ofVRDPS outside the remarketing process (except in the case ofredemptions ofVRDPS by the Fund) are likely to occur, and does not request no action reliefin respect of any such sales. See, e.g., Steel Partners IL L.P. v. Bell Indus., Inc., 315 F.3d 120, 126 (2d Cir. 2002). SCl :2369811.17

Anne M. Krauskopf, Esq.,
Douglas J. Scheidt, Esq. -17-
Agreement. Such fees will be negotiated in each VRDP Fee Agreement and thus may vary, but will be based on the term ofthe particular VRDP Purchase Agreement, and the quantity ofVRDPS that may be acquired and held by the Liquidity Provider, as compensation for the credit costs and market risk borne by the Liquidity Providers. Therefore, none ofthese fees is open to the sort ofspeculative abuse that
Section 30(h) seeks to prevent, because the fees do not rise or fall based on market prices
and are thus not open to manipulation based on inside information. Since the fees are based on the liquidation preference ofthe VRDPS, they simply do not provide the "opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the VRDPS within the meaning ofRule 16a-l(a)(2)(i) under the Exchange Act. Therefore, we believe that these fees should not be deemed "profits" under Section 30(h). In analogous situations, courts have excluded from the calculation ofprofits amounts not directly paid as consideration for the "purchases" and "sales" at issue. For example, the Second Circuit has held that amounts paid for a standstill agreement related to a sale ofstock were not part ofthe sale price and should not be included in the calculation ofshort-swing profits. IS The present facts are analogous because the fees due under the VRDP Fee Agreement are properly attributable to the obligations undertaken under the VRDP Purchase Agreement, rather than resulting from any "purchase" or "sale," and for that reason, are not properly considered Section 16(b) "profits." Liquidity Providers are Analogous to Market Makers Finally, we note that Congress exempted certain market-makers from
Section 16(b) by enacting Section 16(d), thereby encouraging those market-makers to
increase the liquidity of otherwise illiquid markets without being constrained to hold positions of 10% or less of any registered class ofsecurities. In a no-action request, Prudential-Bache asserted that a similar exemption from the reporting requirements of
Section 16(a) would be in accord with the policy behind the Section 16(b) exemption.
The Staffgranted the requested relief and stated that purchases and sales effected by broker-dealers in the ordinary course ofmarket making are not required to be reported pursuant to Section 16(a).16 Providing the requested reliefto the Liquidity Providers would be analogous to, and serve the same purpose as, that underlying the Staffs noaction reliefin Prudential-Bache and that granted by Section 16(d) ofthe Exchange Act. IS 16 Mayer v. Chesapeake Ins. Co., Ltd., 877 F.2d 1154, 1163-64 (2d Cir. 1989), cert. denied, 493 U.S. 1021 (1990). Prudential-Bache Securities, Inc., SEC No-Action Letter, 1985 WL 55643 (Dec. 2, 1985) SC1:2369811.17

Anne M. Krauskopf, Esq.,
Douglas J. Scheidt, Esq. -18-
Here, in the event of a failed remarketing, the Liquidity Providers will be obligated to purchase VRDPS not sold in the remarketing, and will be obligated to submit all VRDPS so purchased to the Remarketing Agent for sale at subsequent remarketings, thereby providing a source ofliquidity for other market participants at that time. As with market makers in the case ofPrudential-Bache, the Liquidity Providers are serving the same vital function ofproviding liquidity at a time when the market is otherwise illiquid and therefore should not be subject to Section 16(a) reporting obligations for their purchases and sales. ReliefPreviously Provided by the BlackRock Letter is Too Limited The Staffhas provided no-action relieffor Section 16 reporting requirements to Liquidity Providers that become subject to Section 30(h) as a result of purchasing more than ten percent of a class ofsecurities similar to VRDPS pursuant to one or more VRDP Purchase Agreements in BlackRock Advisors, LLC, SEC No-Action Letter (available November 4,2008) ("BlackRock,,).17 Under BlackRock, the Staff provided relieffrom Section 16(a) filing requirements to Liquidity Providers ofVRDPS in respect of: (i) purchases by the Liquidity Provider ofVRDPS in "[failed] remarketings," (ii) sales ofVRDPS by the Liquidity Provider in subsequent remarketings, and (iii) sales to a Fund ofVRDPS that have been held by the Liquidity Provider for at least six months. In all cases, the relief covers transactions effected pursuant to the VRDP Purchase Agreement between the closed-end fund issuer ofthe VRDPS and the Liquidity Provider at prices equal to the liquidation preference (plus accrued dividends, if any) ofthe VRDPS. The reliefprovided by BlackRock applies on its face only to "Ten Percent Owner Liquidity Providers," which BlackRock defines as "Liquidity Providers that become more than 10% beneficial owners of[VRDPS] solely as a result of purchases under VRDP Purchase Agreements." BlackRock does not on its face cover entities that are 10% beneficial owners of a class of a Fund's equity securities for other reasons, such as acquisitions ofARS ofthe Fund pursuant to regulatory settlements, agreements to provide liquidity to certain holders ofARS or market making transactions in preferred securities, or partly because ofsuch acquisitions and market making and partly (rather than "solely") because of purchases under VRDP Purchase Agreements. Therefore, it is unclear whether the reliefprovided under BlackRock would apply to Liquidity Providers that are or become greater than 10% beneficial owners of a Fund's preferred securities for reasons in addition to purchases under VRDP Purchase Agreements. BAC respectfully 17 The variable rate demand preferred securities in BlackRock were called Liquidity Enhanced Adjustable Rate Securities ("LEARS"). SC1:2369811.17

Anne M. Krauskopf, Esq.,
Douglas 1. Scheidt, Esq. -19- submits that it would be in the best interests ofinvestors for BAC to be able to act as the Liquidity Provider for issuances ofVRDPS by a Fund regardless ofwhether it is, or how it became, a greater than 10% beneficial owner of preferred securities ofthe Fund. ReliefShould be Available to BAe as a Liquidity Provider Regardless ofHow it Becomes a 10% Beneficial Owner Since BAC, while BANA (or another affiliate ofBANA) is serving as the Liquidity Provider for VRDPS of a Fund may be or may become a beneficial owner of more than 10% of a Fund's outstanding preferred securities because of a combination of acquisitions ofVRDPS by BANA (or another affiliate ofBAC) pursuant to VRDP Purchase Agreements, because ofmarket making transactions, or because pursuant to regulatory settlements or on a voluntary basis it has made offers to acquire ARS from customers and their affiliates or otherwise agreed to provide liquidity to certain holders of ARS, we request that the Commission Staffgrant BAC no-action reliefwith regard to
Section 30(h) ofthe 1940 Act, to the extent that it would apply the reporting requirements
under Section 16(a) ofthe Exchange Act as a result ofBAC owning more than 10 percent of a class ofpreferred stock of a Fund, in respect ofpurchases and sales by BAC of VRDPS issued by the Fund in BAC's capacity as Liquidity Provider; provided, that noaction reliefis not requested for any sales ofVRDPS that may be made by BAC as Liquidity Provider outside the remarketing process (except in the case ofredemptions of VRDPS by the Fund). In this regard, we do not believe that the status ofBAC as an entity that has offered to provide liquidity to certain holders ofARS, or as a market maker, is relevant to the analysis; neither BAC nor the market should be "penalized" or otherwise disadvantaged because BAC has complied with settlement agreements, offered to provide liquidity to certain holders ofARS, or served as a market maker for preferred securities. BAC does not believe that it is in the best interests ofinvestors for concerns about Section 16 to preclude BANA or any other affiliate ofBAC, from acting as a Liquidity Provider for any Fund in which it owns ARS. 18 As under the Global Exemptive Relief, BANA (or any other affiliateofBAC), as Liquidity Provider for VRDPS, would be helping Funds provide liquidity to holders ofARS at a time when the auction rate security market is otherwise illiquid, by using the proceeds ofthe issuances ofVRDPS to finance the redemption of outstanding ARS. As noted above, successful 18 BAC notes that it may become a 10% holder ofpreferred securities of any Fund that has outstanding ARS as a result of acting as the Liquidity Provider for VRDPS, and therefore asks that the requested reliefnot be limited to any specified list ofFunds. SCl:2369811.l7

Anne M. Krauskopf, Esq.,
Douglas J. Scheidt, Esq. -20- offerings by Funds of VRDPS will pennit the Funds to refinance all or a portion oftheir outstanding ARS, which would benefit the holders ofARS by providing them liquidity. We respectfully suggest that providing the requested relief would facilitate offerings of VRDPS, and thus liquidity for holders ofARS, by facilitating the ability ofBAC to serve as the Liquidity Provider. Based on the foregoing, we respectfully request that the Staffprovide noaction reliefto BAC in serving as the Liquidity Provider for VRDPS to the extent BAC is or becomes a 10% holder ofpreferred securities in any Fund with outstanding preferred securities, because of acquisitions in addition to or separate from acquisitions pursuant to VRDP Purchase Agreements. Ifthe Staffhas any questions or comments concerning this request, please communicate them to the undersigned at (212) 558-4016 or Robert W. Reeder III at (212) 558-3755. We very much appreciate the Staffs consideration ofthis request. Donald R. Crawshaw SCI:2369811.17

Incoming Letter

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