UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No. )
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UBS Global Asset Management | |
| (Americas) Inc. | ||
| 51 West 52nd Street | ||
| New York, NY 10019 | ||
| Tel. 888-793 8637 | ||
| Closed-End Funds Desk | ||
| www.ubs.com |
Media release
For immediate release
Investment Grade Municipal Income Fund Inc. Announces Reduction in Management Fee
Contact: UBS Global Asset Management Closed-End Funds Desk, 888-793 8637
New York, July 18, 2008—Investment Grade Municipal Income Fund Inc. (the “Fund”) (NYSE: PPM), a closed-end management investment company normally investing substantially all of its assets in a diversified portfolio of tax-exempt municipal obligations, with common and preferred shares outstanding, today announced that the Fund’s Board of Directors has approved a proposal by UBS Global Asset Management (Americas) Inc. (“UBS Global AM”) to waive a significant portion of the Fund’s management fee.
In accordance with the advisory contract for the Fund, the Fund is obligated to pay UBS Global AM an investment advisory and administration fee at the annual rate of 0.90% of the Fund’s average weekly net assets attributable to holders of common and auction preferred shares. UBS Global AM had previously agreed to waive a portion of the advisory and administration fee, so that the Fund’s effective fee was 0.90% of average weekly net assets attributable only to holders of common shares. On July 16, 2008, UBS Global AM agreed to reduce its fee further via an increased waiver arrangement so that beginning August 1, 2008, its effective fee is reduced to 0.60% of average weekly net assets attributable only to holders of common shares. This further fee reduction cannot be modified without the approval of the Fund’s Board of Directors.
|
UBS Global Asset Management | |
| (Americas) Inc. | ||
| 51 West 52nd Street | ||
| New York, NY 10019 | ||
| Tel. 888-793 8637 | ||
| Closed-End Funds Desk | ||
| www.ubs.com |
Media release
For immediate release
Investment Grade Municipal Income Fund Inc. and Insured Municipal Income Fund Inc. Announce Board Approval to Implement a Tender Option Bond Program and the Intention to Partially Redeem Auction Preferred Shares
Contact: UBS Global Asset Management Closed-End Funds Desk, 888-793 8637
New York, July 23, 2008—The Boards of Directors of Investment Grade Municipal Income Fund Inc. (NYSE: PPM) and Insured Municipal Income Fund Inc. (NYSE: PIF) (the “Funds”), each a registered closed-end management investment company, have approved the implementation of a tender option bond (TOB) program to partially restructure each Fund’s leverage, while currently maintaining the overall amount of leverage for the Fund. It is intended that the proceeds from the program will be used to finance a partial redemption of each Fund’s auction preferred shares (APS). In light of the continuing failures of APS auctions that have resulted in a loss of liquidity for APS holders and the resulting increased cost of leverage for the Funds, each Board has discussed with the Funds’ investment adviser, UBS Global Asset Management (Americas) Inc. (the “Investment Adviser”), possible actions and concluded that the implementation of a TOB program could help partially resolve the situation in a manner that is in the best interests of the Funds.
In June, the Boards authorized the Investment Adviser to enter into discussions with one or more investment banks or other firms to explore the terms on which the Funds could use TOBs as a source of leverage. Based on the outcome of those discussions and with the Investment Adviser’s recommendation, each Board authorized the TOB program, which would permit each Fund to invest up to 15% of its total assets into such a program. The proceeds from the TOB program would be used to redeem a portion of each Fund’s APS in order to provide partial liquidity to APS holders. It is expected that the TOB program would provide a lower relative cost of leverage over time (based on a comparison of the anticipated costs of the TOB program with the maximum rates payable due to the failed APS auctions) and future increased flexibility in managing the extent to which a Fund is leveraged.
|
Closed-End Funds Desk | |
| July [22], 2008 | ||
| Page 2 of 2 |
A TOB program typically would be structured as follows: a Fund would transfer high quality municipal bonds from its portfolio to a special purpose trust or a similar vehicle. The trust would then issue two tranches of securities—short-term floating rate notes, or “floaters,” and inverse floating rate certificates, or “inverse floaters.“ The interest on the floaters and the inverse floaters, as well as costs incurred by the trust (such as the costs associated with establishing the trust and providing a facility to assure liquidity to the holders of the floaters), would normally be paid by the trust from the interest it receives on the underlying municipal bond.
Floaters would be issued at par and pay tax-free variable rates, typically reset weekly (either through a remarketing or by some spread over a reference rate or index), and the holders of the floaters typically have the option to tender their floaters to the issuing trust for redemption at par at each reset date. The interest rates payable on inverse floaters would move in the opposite direction from the rates payable on the floaters. For the municipal bonds transferred, a Fund would receive the inverse floaters and an amount of cash that would be used to redeem a portion of one or more series of the Fund’s APS and be used for investment purposes. By holding the inverse floaters, a Fund would continue to receive the interest paid by the underlying municipal bond in excess of the interest paid by the trust on the floaters and other costs associated with the transaction.
The use of TOBs by a Fund for investment purposes presents certain risks, including leverage risk, interest rate risk (a rise in short-term rates could result in an increase of the interest payable on the floaters and a corresponding decrease in the interest payable on the inverse floaters held by the Fund), both of which are in many ways comparable to the risks presented by the current use of APS, as well as market risk (the risk that participants may not be interested in purchasing or continuing to hold the floaters issued by the trust).
While each Board has approved the implementation of a TOB program and intends to authorize the redemption of a portion of each Fund’s APS, it will take time to institute the program. Furthermore, any future partial redemption of each Fund’s APS would occur only after the Board has approved the specifics of the redemption and a notice containing details about the redemption has been issued by the Fund. Such redemption would be effected in accordance with the Fund’s governing documents.
We recognize shareholders’ continuing concerns regarding the ongoing issues relating to the failed APS auctions and the resulting loss of liquidity for preferred shareholders. While the use of TOBs in the Funds could provide a partial solution towards restoring liquidity, each Board and the Investment Adviser will continue to evaluate other alternatives that may be in the best interest of the Funds, including the possibility of restructuring remaining APS in a manner that would make the APS eligible for investment by money market funds. The implementation of a TOB program is subject to certain conditions, including market conditions under which TOBs will result in leverage at a reasonable price and the use of TOBs remaining appropriate in light of other sources of possible leverage.
|
Closed-End Funds Desk | |
| July [22], 2008 | ||
| Page 3 of 3 |
FORWARD LOOKING STATEMENTS
Certain statements made above may be forward-looking statements. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements due to numerous factors. The Investment Adviser and the Funds, and their affiliates, undertake no responsibility to update publicly or revise any forward-looking statements. The inclusion of any statement in this release does not constitute an admission that the events or circumstances described in such statement are material.
|
UBS Global Asset Management | |
| (Americas) Inc. | ||
| 51 West 52nd Street | ||
| New York, NY 10019 | ||
| Tel. 888-793 8637 | ||
| Closed-End Funds Desk | ||
| www.ubs.com |
Media release
For immediate release
Investment Grade Municipal Income Fund Inc. and Insured Municipal Income Fund Inc. Announce Board Approval to Partially Redeem Auction Preferred Shares
Contact: UBS Global Asset Management Closed-End Funds Desk, 888-793 8637
New York, September 11, 2008—The Boards of Directors of Insured Municipal Income Fund Inc. (NYSE: PIF) and Investment Grade Municipal Income Fund Inc. (NYSE: PPM) (the “Funds”), each a registered closed-end management investment company, have approved the partial redemption of each Fund’s auction preferred shares (APS).
In total, the Boards approved the redemption of $40 million (800 shares) of Insured Municipal Income Fund Inc.’s APS and $20 million (400 shares) of Investment Grade Municipal Income Fund Inc.’s APS, which represent approximately 19% and 18%, respectively, of the Funds’ total outstanding APS. In order to finance these partial redemptions and to diversify sources of portfolio leverage, each Fund is implementing a tender option bond (TOB) program to partially restructure each Fund’s leverage, yet still maintain the same level of each Fund’s leverage.
Redemptions will be allocated pro rata within the various series of the APS for each Fund. The Depository Trust Company (DTC), the APS holder of record, will determine by a random lottery process how a partial redemption will be allocated among each participant broker-dealer. Each participant broker-dealer will then determine how to allocate redemptions among the relevant APS holders in its account. The Funds have been informed that under the pronouncements and recommendations made by the New York Stock Exchange and Financial Industry Regulatory Authority, UBS proprietary accounts held at UBS Financial Services Inc. will not receive any partial redemption unless all UBS client accounts are redeemed. Additionally, the Funds have been informed that for UBS proprietary positions not held at UBS Financial Services Inc., UBS Investment Bank will transfer the benefit of any redemption it might be allocated to clients of UBS Financial Services Inc. first.
The partial redemption of APS is subject to certain notice requirements. The necessary amounts to cover the partial redemption have been deposited with the auction agent today. As a result, the APS that are being redeemed will cease to accumulate dividends as of today. The APS will be redeemed on a redemption date that is two business days before
|
Closed-End Funds Desk | |
| September 11, 2008 | ||
| Page 2 of 2 |
the next dividend payment date for each series of the APS based on the following schedule:
Insured Municipal Income Fund Inc.
Series of APS |
CUSIP Number |
Redemption |
Number of Shares |
Redemption |
Series A |
69574F206 |
$50,000 |
153 |
September 19, 2008 |
Series B |
69574F305 |
$50,000 |
153 |
September 22, 2008 |
Series C |
69574F404 |
$50,000 |
152 |
September 23, 2008 |
Series D |
69574F503 |
$50,000 |
114 |
September 24, 2008 |
Series E |
45809F203 |
$50,000 |
114 |
September 18, 2008 |
Series F |
45809F302 |
$50,000 |
114 |
September 19, 2008 |
Investment Grade Municipal Income Fund Inc.
Series of APS |
CUSIP Number |
Redemption |
Number of Shares |
Redemption |
Series A |
695931204 |
$50,000 |
145 |
September 19, 2008 |
Series B |
695931303 |
$50,000 |
145 |
September 22, 2008 |
Series C |
461368201 |
$50,000 |
110 |
September 23, 2008 |
| In July, the Boards authorized a TOB program, which would permit each Fund to invest up to 15% of its total assets into such a program. It is expected that the TOB program will provide a lower relative cost of leverage over time than the total cost of the APS based on the maximum rates payable due to the failed APS auctions. The TOB program is also expected to provide increased flexibility in managing the extent to which a Fund is leveraged. |
| The TOB program is structured as follows: a Fund will transfer high quality municipal bonds from its portfolio to a special purpose trust or a similar vehicle. The trust will then issue two tranches of securities—short-term floating rate notes, or “floaters,” and inverse floating rate certificates, or “inverse floaters.” The yield on the floaters and the inverse floaters, as well as costs incurred by the trust (such as the costs associated with establishing the trust and providing a facility to assure liquidity to the holders of the floaters), will be paid by the trust from the interest it receives on the underlying municipal bond. |
| Floaters will be issued at par and pay tax-free variable rates, typically reset weekly (either through a remarketing or by some spread over a reference rate or index), and the holders of the floaters typically will have the option to tender their floaters to the remarketing agent of the issuing trust for redemption at par at each reset date. The interest rates payable on inverse floaters will move in the opposite direction from the rates payable on the floaters. For the municipal bonds transferred, a Fund will receive the inverse floaters and an amount |
|
Closed-End Funds Desk | |
| September 11, 2008 | ||
| Page 3 of 3 |
of cash that would be used to redeem a portion of one or more series of the Fund’s APS and be used for investment purposes. By holding the inverse floaters, a Fund would continue to receive the interest paid by the underlying municipal bond in excess of the interest paid by the trust on the floaters and other costs associated with the transaction.
The use of TOBs by a Fund for investment purposes presents certain risks, including leverage risk, interest rate risk (a rise in short-term rates could result in an increase of the interest payable on the floaters and a corresponding decrease in the interest payable on the inverse floaters held by the Fund), both of which are in many ways comparable to the risks presented by the current use of APS, as well as market risk (the risk that participants may not be interested in purchasing or continuing to hold the floaters issued by the trust).
We recognize shareholders’ continuing concerns regarding the ongoing issues relating to the failed APS auctions and the resulting loss of liquidity for preferred shareholders. While the use of TOBs in the Funds and partial redemption of APS will provide a partial solution towards restoring liquidity, each Fund’s Board and UBS Global Asset Management (America) Inc. (the “Investment Adviser”), will continue to evaluate other alternatives that may be in the best interest of the Funds, including the possibility of restructuring the remaining APS in a manner that would make the APS eligible for investment by money market funds.
FORWARD LOOKING STATEMENTS
Certain statements made above may be forward-looking statements. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements due to numerous factors. The Investment Adviser and the Funds, and their affiliates, undertake no responsibility to update publicly or revise any forward-looking statements. The inclusion of any statement in this release does not constitute an admission that the events or circumstances described in such statement are material.
|
UBS Global Asset Management | |
| (Americas) Inc. | ||
| 51 West 52nd Street | ||
| New York, NY 10019 | ||
| Tel. 888-793 8637 | ||
| Closed-End Funds Desk | ||
| www.ubs.com |
Media release
For immediate release
Investment Grade Municipal Income Fund Inc. and Insured Municipal Income Fund Inc. Announce Board Approval to Partially Redeem Auction Preferred Shares
Contact: UBS Global Asset Management Closed-End Funds Desk, 888-793 8637
New York, December 12, 2008—The Boards of Directors of Insured Municipal Income Fund Inc. (NYSE: PIF) and Investment Grade Municipal Income Fund Inc. (NYSE: PPM) (the “Funds”), each a registered closed-end management investment company, have approved the partial redemption of each Fund’s auction preferred shares (APS).
In total, the Boards approved the redemption of $15 million (300 shares) of Insured Municipal Income Fund Inc.’s APS and $10 million (200 shares) of Investment Grade Municipal Income Fund Inc.’s APS, which represent approximately 8.8% and 11.1%, respectively, of the Funds’ total outstanding APS. These partial redemptions will have the effect of decreasing the level of each Fund’s leverage.
Redemptions will be allocated pro rata within the various series of the APS for each Fund. The Depository Trust Company (DTC), the APS holder of record, will determine by a random lottery process how a partial redemption will be allocated among each participant broker-dealer. Each participant broker-dealer will then determine how to allocate redemptions among the relevant APS holders in its account. The Funds have been informed that under the pronouncements and recommendations made by the New York Stock Exchange and Financial Industry Regulatory Authority, UBS proprietary accounts held at UBS Financial Services Inc. will not receive any partial redemption unless all UBS client accounts are redeemed. Additionally, the Funds have been informed that for UBS proprietary positions not held at UBS Financial Services Inc., UBS Investment Bank will transfer the benefit of any redemption it might be allocated to clients of UBS Financial Services Inc. first.
The partial redemption of APS is subject to certain notice requirements. The necessary amounts to cover the partial redemption have been deposited with the auction agent today. As a result, the APS that are being redeemed will cease to accumulate dividends as of today. The APS will be redeemed on a redemption payment date that is two business days
|
Closed-End Funds Desk | |
| December 12, 2008 | ||
| Page 2 of 2 |
before the next dividend payment date for each series of the APS based on the following schedule:
Insured Municipal Income Fund Inc.
Series of APS |
CUSIP Number |
Redemption |
Number of Shares |
Redemption |
Series A |
69574F206 |
$50,000 |
57 |
December 19, 2008 |
Series B |
69574F305 |
$50,000 |
57 |
December 22, 2008 |
Series C |
69574F404 |
$50,000 |
57 |
December 22, 2008 |
Series D |
69574F503 |
$50,000 |
43 |
December 23, 2008 |
Series E |
45809F203 |
$50,000 |
43 |
December 24, 2008 |
Series F |
45809F302 |
$50,000 |
43 |
December 19, 2008 |
Investment Grade Municipal Income Fund Inc.
Series of APS |
CUSIP Number |
Redemption |
Number of Shares |
Redemption |
Series A |
695931204 |
$50,000 |
73 |
December 19, 2008 |
Series B |
695931303 |
$50,000 |
73 |
December 22, 2008 |
Series C |
461368201 |
$50,000 |
54 |
December 23, 2008 |
We recognize shareholders’ concerns regarding the ongoing issues relating to the failed APS auctions. While the partial redemption of APS will provide a partial solution towards restoring liquidity, each Fund’s Board and UBS Global Asset Management (Americas) Inc. (the “Investment Adviser”), will continue to evaluate other alternatives that may be in the best interest of the Funds.
FORWARD LOOKING STATEMENTS
Certain statements made above may be forward-looking statements. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements due to numerous factors. The Investment Adviser and the Funds, and their affiliates, undertake no responsibility to update publicly or revise any forward-looking statements. The inclusion of any statement in this release does not constitute an admission that the events or circumstances described in such statement are material.
Please find attached data points requested by ISS during this morning’s presentation. Lipper, an independent third-party, placed Investment Grade Muni (“PPM”) in the peer group classification indicated, namely Lipper’s General Muni Debt Funds (Leveraged) peer group.
The Fund is being compared to its Lipper Peer Group - General Muni Debt Funds (Leveraged). Here are the requested data points for the respective presentation slides indicated:
| Information for slide 16: |
NAV returns (annualized): |
PPM 5 Year Total NAV Return: 0.02% |
PPM 5 Year Total NAV Standard Deviation: 8.42% |
Lipper Peer Group Median 5-Year Total NAV Return: -0.01% |
Lipper Peer Group Median 5-Year Total NAV Standard Deviation: 8.25% |
Market price returns (annualized): |
PPM 5-Year Total Market Price Return: -0.74% |
PPM 5-Year Total Market Price Standard Deviation: 12.09% |
Lipper Peer Group Median 5-Year Total Market Price Return: -1.69% |
Lipper Peer Group Median 5-Year Total Market Price Standard Deviation: 13.88% |
| Information for slide 18: |
NAV returns (annualized): |
PPM 3-Year Total NAV Return: -3.08% |
PPM 3-Year Total NAV Standard Deviation: 9.93% |
Lipper Peer Group Median 3-Year Total NAV Return: -4.17% |
Lipper Peer Group Median 3-Year Total NAV Standard Deviation: 9.55% |
Market price returns (annualized): |
PPM 3-Year Total Market Price Return: -2.42% |
PPM 3-Year Total Market Price Standard Deviation: 12.08% |
Lipper Peer Group Median 3-Year Total Market Price Return: -6.99% |
Lipper Peer Group Median 3-Year Total Market Price Standard Deviation: 15.11% |
| Information for slide 21: |
NAV return (annualized): |
PPM 1-Year Total NAV Return: -16.23% |
PPM 3-Year Total NAV Return: -3.08% |
PPM 5-Year Total NAV Return: 0.02% |
PPM 10-Year Total NAV Return: 2.68% |
Lipper Peer Group Median 1-Year Total NAV Return: -18.77% |
Lipper Peer Group Median 3-Year Total NAV Return: -4.17% |
Lipper Peer Group Median 5-Year Total NAV Return: -0.01% |
Lipper Peer Group Median 10-Year Total NAV Return: 2.82% |
Market price returns (annualized): |
PPM 1-Year Total Market Price Return: -16.87% |
PPM 3-Year Total Market Price Return: -2.42% |
PPM 5-Year Total Market Price Return: -0.74% |
PPM 10-Year Total Market Price Return: 2.34% |
Lipper Peer Group Median 1-Year Total Market Price Return: -24.84% |
Lipper Peer Group Median 3-Year Total Market Price Return: -6.99% |
Lipper Peer Group Median 5-Year Total Market Price Return: -1.69% |
Lipper Peer Group Median 10-Year Total Market Price Return: 1.72% |