<DOCUMENT>
<TYPE>EX-99.77Q1 OTHR EXHB
<SEQUENCE>10
<FILENAME>nrk77q1avmtp.txt
<TEXT>
<PAGE>


                                                                  EXECUTION COPY

                 NUVEEN NEW YORK AMT-FREE MUNICIPAL INCOME FUND

          STATEMENT ESTABLISHING AND FIXING THE RIGHTS AND PREFERENCES
                 OF VARIABLE RATE MUNIFUND TERM PREFERRED SHARES

<PAGE>


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                          PAGE
<S>                                                                                        <C>
1.   Definitions.............................................................................1

     1.1     Definitions.....................................................................1
     1.2     Interpretation.................................................................11

2.   Terms Applicable to All Series of Variable Rate Munifund Term Preferred Shares.........12

     2.1     Number of Shares; Ranking......................................................12
     2.2     Dividends and Distributions....................................................13
     2.3     Liquidation Rights.............................................................16
     2.4     Coverage & Leverage Tests......................................................17
     2.5     Redemption.....................................................................18
     2.6     Voting Rights..................................................................24
     2.7     Rating Agencies................................................................29
     2.8     Issuance of Additional Preferred Shares........................................29
     2.9     Status of Redeemed or Repurchased VMTP Shares..................................29
     2.10    Distributions with respect to Taxable Allocations..............................29
     2.11    Term Redemption Liquidity Account and Liquidity Requirement....................31
     2.12    Global Certificate.............................................................32
     2.13    Notice.........................................................................33
     2.14    Termination....................................................................33
     2.15    Appendices.....................................................................33
     2.16    Actions on Other than Business Days............................................33
     2.17    Modification...................................................................33
     2.18    Transfers......................................................................33
     2.19    No Additional Rights...........................................................34
</TABLE>

                                        i

<PAGE>


                 NUVEEN NEW YORK AMT-FREE MUNICIPAL INCOME FUND

          STATEMENT ESTABLISHING AND FIXING THE RIGHTS AND PREFERENCES
                 OF VARIABLE RATE MUNIFUND TERM PREFERRED SHARES

         Nuveen  New  York  AMT-Free  Municipal  Income  Fund  (the  "Fund"),  a
Massachusetts business trust, certifies that:

                                    RECITALS

         FIRST:   The  Fund  is  authorized  under  Article  IV  of  the  Fund's
Declaration of Trust (which, as hereafter  restated or amended from time to time
is herein called the  "Declaration"),  to issue an unlimited number of Preferred
Shares (as defined below), par value $.01 per share.

         SECOND:  Pursuant  to the  authority  expressly  vested in the Board of
Trustees  of the Fund by Article IV of the  Declaration,  the Board of  Trustees
has, by resolution, authorized the issuance of a class of Preferred Shares, $.01
par value per share,  of the Fund, such shares to be classified as Variable Rate
MuniFund Term Preferred  Shares  ("VMTP"),  and such VMTP to be issued in one or
more series. The terms related to a series may be set forth in this Statement as
modified,  amended  or  supplemented  in an  Appendix  (each an  "Appendix"  and
collectively the "Appendices") attached hereto or in a separate Statement.

         THIRD: The number of shares, preferences,  voting powers, restrictions,
limitations  as to  dividends,  qualifications,  and  terms  and  conditions  of
redemption,  of each series of VMTP issued  pursuant to this  Statement  are set
forth in this Statement, as modified, amended or supplemented in the Appendix to
this Statement specifically relating to such series as now or hereafter filed by
the Fund with the Secretary of State of the Commonwealth of Massachusetts  (each
such series being issued  pursuant to this Statement being referred to herein as
a "Series of VMTP Shares," "VMTP Shares of a Series" or a "Series"),  and shares
of all such Series being referred to herein  individually  as a "VMTP Share" and
collectively as the "VMTP Shares").

         1.       Definitions.

                  1.1      Definitions.  Unless  the  context  or use  indicates
another or different  meaning or intent and except with respect to any Series as
specifically  provided in the Appendix  applicable  to such Series,  each of the
following terms when used in this Statement  shall have the meaning  ascribed to
it below,  whether such term is used in the singular or plural and regardless of
tense:

                  "1940  Act"  means  the  Investment  Company  Act of 1940,  as
amended, or any successor statute.

                  "1940 Act Asset Coverage"  means "asset  coverage," as defined
for purposes of Section  18(h) of the 1940 Act, of at least 200% with respect to
all  outstanding  senior  securities  of the Fund  which are shares of stock for
purposes of the 1940 Act,  including all outstanding  VMTP Shares (or such other
asset  coverage as may in the future be specified in or under the 1940 Act or by
rule, regulation or order of United States Securities and Exchange Commission as

<PAGE>


the minimum asset coverage for senior  securities which are shares of stock of a
closed-end investment company).

                  "Additional Amount Payment" means a payment to a Holder (other
than a New York Holder) of VMTP Shares of an amount which,  when taken  together
with the aggregate  amount of Taxable  Allocations  made to such Holder to which
such Additional Amount Payment relates,  would cause such Holder's  dividends in
dollars  (after  federal  income tax  consequences)  from the  aggregate of such
Taxable Allocations and the related Additional Amount Payment to be equal to the
dollar amount of the  dividends  that would have been received by such Holder if
the amount of such aggregate Taxable Allocations would have been excludable (for
federal  income  tax  purposes)  from the  gross  income  of such  Holder.  Such
Additional  Amount Payment shall be calculated (i) without  consideration  being
given to the time value of money; (ii) assuming that no Holder of VMTP Shares is
subject  to the  federal  alternative  minimum  tax with  respect  to  dividends
received from the Fund; and (iii) assuming that each Taxable Allocation and each
Additional  Amount Payment (except to the extent such Additional  Amount Payment
is reported as an exempt-interest  dividend for purposes of Section 852(b)(5) of
the Code)  would be  taxable in the hands of each  Holder of VMTP  Shares at the
maximum marginal regular federal  individual  income tax rate (taking account of
the tax  imposed  under  Section  1411 of the Code or any  successor  provision)
applicable to ordinary income or net capital gain, as applicable, or the maximum
marginal regular federal corporate income tax rate applicable to ordinary income
or net capital gain, as applicable,  whichever is greater, in effect at the time
such Additional Amount Payment is paid.

                  "Additional  New York Amount Payment" means a payment to a New
York  Holder of VMTP Shares of an amount  which,  when taken  together  with the
aggregate  amount of Taxable  Allocations  made to such New York Holder to which
such  Additional  New York  Amount  Payment  relates,  would cause such New York
Holder's  dividends in dollars (after federal,  New York State and New York City
income tax consequences) from the aggregate of such Taxable  Allocations and the
related  Additional  New York Amount Payment to be equal to the dollar amount of
the  dividends  that would  have been  received  by such New York  Holder if the
amount of such aggregate  Taxable  Allocations  would have been  excludable (for
federal  income tax  purposes,  and New York State and New York City  individual
income  tax  purposes)  from the  gross  income  of such New York  Holder.  Such
Additional New York Amount Payment shall be calculated (i) without consideration
being given to the time value of money; (ii) assuming that no New York Holder of
VMTP Shares is subject to the federal  alternative  minimum tax with  respect to
dividends  received  from the Fund;  (iii) only taking into  account the regular
federal  income tax (and the tax imposed  under  Section 1411 of the Code or any
successor  provision) and New York State and New York City individual income tax
with respect to dividends received from the Fund (that is, without giving effect
to any other New York  State  tax,  New York City tax or any other  federal  tax
based on  income);  and (iv)  assuming  that each  Taxable  Allocation  and each
Additional  New York Amount  Payment  (except to the extent such  Additional New
York Amount Payment is reported as an  exempt-interest  dividend for purposes of
Section  852(b)(5)  of the Code)  would be taxable in the hands of each New York
Holder of VMTP Shares at the maximum marginal combined regular federal, New York
State  and New York City  individual  income  tax rate  (taking  account  of the
federal income tax  deductibility  of state and local taxes paid or incurred and
the tax  imposed  under  Section  1411 of the Code or any  successor  provision)
applicable  to  ordinary  income or net capital  gains,  as  applicable,  or the

                                        2

<PAGE>


maximum  marginal  regular  federal  corporate  income  tax rate  applicable  to
ordinary  income or net capital gains, as applicable,  whichever is greater,  in
effect at the time such Additional New York Amount Payment is paid.

                  "Adviser" means Nuveen Fund Advisors,  LLC, a Delaware limited
liability  company,  or such  other  entity  as  shall  be then  serving  as the
investment  adviser  of  the  Fund,  and  shall  include,  as  appropriate,  any
sub-adviser duly appointed by the Adviser.

                  "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  Designated  Owner and that will be
authorized  and  instructed,  directly or indirectly,  by a Designated  Owner to
disclose  information  to the  Redemption  and Paying Agent with respect to such
Designated Owner.

                  "Appendices" and "Appendix" shall have the respective meanings
as set forth in the Recitals of this Statement.

                  "Applicable Spread" means, with respect to any Rate Period for
any Series of VMTP  Shares,  the  percentage  per annum set forth  opposite  the
highest  applicable  credit rating most recently  assigned to such Series by any
Rating Agency in the table set forth  directly  below on the Rate  Determination
Date for such Rate Period:

                               LONG-TERM RATINGS*

           MOODY'S                     FITCH              APPLICABLE PERCENTAGE
---------------------------  -------------------------  ------------------------
         Aaa to Aa2                  AAA to AA                    1.05%
             Aa3                        AA-                       1.25%
             A1                         A+                        1.45%
             A2                          A                        1.65%
             A3                         A-                        1.85%
            Baa1                       BBB+                       2.75%
            Baa2                        BBB                       2.90%
            Baa3                       BBB-                      3.05%**
*And/or the equivalent ratings of an Other Rating Agency then rating the VMTP
Shares utilizing the highest of the ratings of the Rating Agencies then rating
the VMTP Shares.
*Unless an Increased Rate Period is in effect or the Increased Rate otherwise
applies to any portion of a Rate Period, in which case the Applicable Spread
shall be 6.05% for such period or portion thereof, as the case may be.

                  "Asset  Coverage" means "asset  coverage" of a class of senior
security which is a stock,  as defined for purposes of Section 18(h) of the 1940
Act  as in  effect  on the  date  hereof,  determined  on the  basis  of  values
calculated  as of a time within 48 hours  (only  including  Business  Days) next
preceding the time of such determination.

                                        3

<PAGE>


                  "Asset Coverage Cure Date" means,  with respect to the failure
by the Fund to  maintain  Asset  Coverage  of at least  225% as of the  close of
business on a Business  Day (as  required by Section  2.4(a)),  the date that is
thirty (30) calendar days following such Business Day.

                  "Below  Investment  Grade"  means,  with respect any Series of
VMTP  Shares and as of any date,  the  following  ratings  with  respect to each
Rating Agency (to the extent it is a Rating Agency on such date):

                                    (i)     lower  than  BBB-,  in the  case  of
                  Fitch;

                                    (ii)    lower  than  Baa3,  in the  case  of
                  Moody's; and

                                    (iii)   lower than an  equivalent  long-term
                  credit  rating to those set forth in clauses (i) and (ii),  in
                  the case of any Other Rating Agency.

                  "Board of Trustees" means the Board of Trustees of the Fund or
any duly authorized committee thereof as permitted by applicable law.

                  "Business  Day"  means any 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.

                  "By-Laws"  means the By-Laws of the Fund as amended  from time
to time.

                  "Closed-End  Funds"  shall  have the  meaning  as set forth in
Section 2.18(a).

                  "Code" means the Internal Revenue Code of 1986, as amended.

                  "Common   Shares"   means  the  common  shares  of  beneficial
interest, par value $.01 per share, of the Fund.

                  "Custodian" 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  Fund as  permitted  by the 1940 Act or any  rule,  regulation,  or order
thereunder,   and  shall  include,  as  appropriate,   any  similarly  qualified
sub-custodian duly appointed by the Custodian.

                  "Custodian  Agreement" means, with respect to any Series,  the
Custodian  Agreement by and between the  Custodian  and the Fund with respect to
such Series.

                  "Date of Original  Issue"  means,  with respect to any Series,
the date specified as the Date of Original Issue for such Series in the Appendix
for such Series.

                  "Declaration"  shall  have  the  meaning  as set  forth in the
Recitals of this Statement.

                  "Default"  shall  mean  a  Dividend  Default  or a  Redemption
Default.

                                        4

<PAGE>


                  "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
Redemption Date, Dividend Payment Date or other 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 Obligation;

                  (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  with  substantially
         similar terms as of the date of this Statement (or such rating's 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;

                  (4)      any  investment  in any money market fund  registered
         under the 1940 Act that  qualifies  under Rule 2a-7 under the 1940 Act,
         or similar  investment vehicle described in Rule 12d1-1(b)(2) under the
         1940 Act,  that invests  principally  in Municipal  Securities  or U.S.
         Government Obligations 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  similar  banks  or  other  financial
         institutions  as of the date of this Statement (or such rating's future
         equivalent).

                  "Designated Owner" means a Person in whose name VMTP Shares of
any  Series  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.

                  "Dividend  Default"  shall  have the  meaning  as set forth in
Section 2.2(g)(i).

                  "Dividend Payment Date" means, with respect to any Series, the
first  Business  Day of each  calendar  month that any shares of such Series are
outstanding;  provided,  however,  that with respect to any Series for which the
first Dividend Period,  as specified in the Appendix relating to such Series, is
longer than one month,  the first Dividend Payment Date for such Series shall be
the first  Business Day of the calendar month  immediately  following the end of
such Dividend Period.

                  "Dividend  Period"  means,  with  respect to any  Series,  the
Dividend Period for such Series set forth in the Appendix for such Series.

                                        5

<PAGE>


                  "Dividend  Rate" means,  with respect to any Rate Period for a
Series of VMTP  Shares  and  subject  to the  adjustment  described  in  Section
2.10(a), the Index Rate for such Rate Period plus the Applicable Spread for such
Rate Period; provided,  however, that with respect to any Increased Rate Period,
the Dividend Rate shall mean the Increased  Rate for such Increased Rate Period;
and  provided  further  that the  Dividend  Rate for any Rate Period shall in no
event exceed the Maximum Rate.

                  "Effective Leverage Ratio" shall have the meaning as set forth
in Section 2.4(d).

                  "Effective Leverage Ratio Cure Date" shall have the meaning as
set forth in Section 2.5(b)(ii)(A).

                  "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  and the
Custodian,  shall be sent by such means to each of its representatives set forth
in the  Redemption  and Paying  Agent  Agreement  and the  Custodian  Agreement,
respectively.

                  "Exchange Act" means the U.S. Securities Exchange Act of 1934,
as amended.

                  "Fitch" means Fitch Ratings,  a part of the Fitch Group, which
is jointly owned by Fimalac,  S.A. and Hearst Corporation,  and any successor or
successors thereto.

                  "Fund"  shall have the meaning as set forth in the Preamble to
this Statement.

                  "Holder" means,  with respect to the VMTP Shares of any Series
or any other  security  issued by the Fund, a Person in whose name such security
is registered in the registration books of the Fund maintained by the Redemption
and Paying Agent or otherwise.

                  "Increased  Rate" means,  with respect to any  Increased  Rate
Period for a Series of VMTP Shares,  the Index Rate for such Rate Period plus an
Applicable Spread of 6.05%.

                  "Increased Rate Period" shall have the meaning as set forth in
Section 2.2(g)(i).

                  "Index  Rate"  means,  with  respect to any Rate  Period for a
Series of VMTP Shares,  the SIFMA  Municipal  Swap Index made  available by 3:00
p.m., New York City time, on the Rate Determination Date for such Rate Period.

                  "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 calendar day that is a
Wednesday  (or if such  Wednesday  is not a Business  Day,  the next  succeeding
Business Day).

                  "Liquidation  Preference"  means,  with respect to any Series,
the amount specified as the liquidation  preference per share for that Series in
the Appendix for such Series.

                                        6

<PAGE>


                  "Liquidity  Account  Initial Date" means,  with respect to any
Series,  the  date  designated  as the  Liquidity  Account  Initial  Date in the
Appendix for such Series.

                  "Liquidity  Account  Investments"  means Deposit Securities or
any other  security or investment  owned by the Fund that is rated not less than
A3 by Moody's,  A- by Standard & Poor's,  A- by Fitch or an equivalent rating by
any other NRSRO (or any such rating's future equivalent).

                  "Liquidity Requirement" shall have the meaning as set forth in
Section 2.11(b).

                  "Mandatory  Redemption  Price"  shall have the  meaning as set
forth in Section 2.5(b)(i)(A).

                  "Market Value" of any asset of the Fund means,  for securities
for which market  quotations  are readily  available,  the market value  thereof
determined by an independent third-party pricing service designated from time to
time by the Board of Trustees,  which pricing service shall be Standard & Poor's
Securities  Evaluations,  Inc./J. J. Kenny Co., Inc. (or any successor thereto),
International  Data  Corporation  (or  any  successor  thereto)  or  such  other
independent  third-party  pricing service  broadly  recognized in the tax-exempt
fund  market.  Market  Value of any asset  shall  include any  interest  accrued
thereon. 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 that include
consideration  of:  yields or  prices  of  Municipal  Securities  of  comparable
quality,  type of  issue,  coupon,  maturity  and  rating;  state  of  issuance;
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 recommended valuations.

                  "Maximum Rate" means 15% per annum.

                  "Moody's"  means  Moody's  Investors  Service,  Inc.  and  any
successor or successors thereto.

                  "Municipal   Securities"   means  "municipal   securities"  as
described under the heading  "Portfolio  Investments" in the prospectus or other
offering document for a Series of VMTP Shares.

                  "New York Holder" means, solely for purposes of the definition
of "Additional  New York Amount  Payment" and Section 2.10 hereof,  (i) a Holder
who is a natural  person  subject to New York State or New York City taxation on
his or her income; or (ii) a Holder,  other than a natural person, that seeks to
pay dividends (or make other  distributions  or  allocations of income) that are
exempt from New York State or New York City income tax. For all other  purposes,
a "New York Holder" means a "Holder."

                  "Notice of Redemption"  shall have the meaning as set forth in
Section 2.5(d).

                  "Notice of Taxable  Allocation"  shall have the meaning as set
forth in Section 2.10(a).

                                        7

<PAGE>


                  "NRSRO" means (a) each of Fitch, Moody's and Standard & Poor's
so  long  as  such  Person  is  a  nationally   recognized   statistical  rating
organization  within the meaning of Section 3(a)(62) of the Exchange Act and (b)
any other  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 Fund.

                  "Optional Redemption Date" shall have the meaning as set forth
in Section 2.5(c)(i).

                  "Optional  Redemption  Premium"  means,  with  respect  to any
Series,  the premium  payable by the Fund upon the  redemption of VMTP Shares of
such  Series at the option of the Fund,  as set forth in the  Appendix  for such
Series.

                  "Optional  Redemption  Price"  shall  have the  meaning as set
forth in Section 2.5(c)(i).

                  "Other Rating Agency" means each Rating Agency,  if any, other
than  Moody's or Fitch then  providing a rating for the VMTP Shares  pursuant to
the request of the Fund.

                  "Outstanding"  means,  as of any  date  with  respect  to VMTP
Shares of any  Series,  the  number of VMTP  Shares of such  Series  theretofore
issued by the Fund except (without duplication):

                           (a)      any VMTP Shares of such  Series  theretofore
         cancelled or redeemed or delivered to the  Redemption  and Paying Agent
         for cancellation or redemption in accordance with the terms hereof;

                           (b)      any VMTP  Shares of such  Series as to which
         the Fund  shall  have  given a Notice  of  Redemption  and  irrevocably
         deposited  with the  Redemption  and Paying  Agent  sufficient  Deposit
         Securities to redeem such shares in accordance with Section 2.5 hereof;

                           (c)      any VMTP  Shares of such  Series as to which
         the Fund shall be the Holder or the Designated Owner; and

                           (d)      any VMTP Shares of such  Series  represented
         by any  certificate  in lieu of  which  any new  certificate  has  been
         executed and delivered by the Fund.

                  "Person"  means  and  includes  the  Fund,  an  individual,  a
partnership,   a  trust,  a  corporation,   a  limited  liability  company,   an
unincorporated  association,  a joint venture or other entity or a government or
any agency or political subdivision thereof.

                  "Preferred  Shares" means the authorized  preferred  shares of
beneficial  interest,  par value $.01 per  share,  of the Fund,  including  VMTP
Shares  of each  Series,  shares  of any other  series  of  preferred  shares of
beneficial interest now or hereafter issued by the Fund, and shares of any other
stock  hereafter  authorized  and issued by the Fund of a class having  priority
over any other class as to distribution of assets or payments of dividends.

                                        8

<PAGE>


                  "Purchase  Agreement"  means (i) with  respect to the  initial
Series of VMTP Shares  issued  pursuant  to this  Statement,  the VMTP  Purchase
Agreement  to be dated as of March 11,  2013  between  the Fund and Wells  Fargo
Bank,  National  Association  and (ii) with respect to any subsequent  Series of
VMTP Shares,  the purchase  agreement or other  similar  agreement  for the VMTP
Shares of such Series (if any) specified in the Appendix for such Series.

                  "Rate  Determination  Date" means, with respect to the Initial
Rate Period for any Series of VMTP Shares,  the day  immediately  preceding  the
Date of Original Issue of such Series,  and 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 or, if such day is not a  Business  Day,  the next
succeeding  Business  Day;  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 any  Series  of VMTP
Shares,  the  Initial  Rate  Period and any  Subsequent  Rate Period of the VMTP
Shares of such Series.

                  "Rating  Agencies"  means,  as of any date and in respect of a
Series of VMTP  Shares,  (i) each of Moody's  and Fitch and (ii) any other NRSRO
designated as a Rating  Agency on such date in  accordance  with Section 2.7, in
each case (i) or (ii)  above,  to the extent it  maintains  a rating on the VMTP
Shares of such Series on such date and the Board of Trustees has not  terminated
its designation as a Rating Agency in accordance  with Section 2.7.  Moody's and
Fitch have initially been  designated as the Rating Agencies for purposes of the
VMTP Shares.  In the event that at any time any Rating Agency (i) ceases to be a
Rating  Agency for purposes of any Series of VMTP Shares and such Rating  Agency
has been replaced by an Other Rating Agency in accordance  with Section 2.7, any
references to any credit rating of such replaced Rating Agency in this Statement
or any Appendix shall be deleted for purposes hereof as provided below and shall
be deemed instead to be references to the equivalent  credit rating of the Other
Rating Agency that has replaced such Rating Agency as of the most recent date on
which such  replacement  Other Rating Agency  published  credit ratings for such
Series of VMTP Shares or (ii) designates a new rating  definition for any credit
rating of such Rating Agency with a corresponding  replacement rating definition
for such credit rating of such Rating  Agency,  any  references to such replaced
rating  definition  of such Rating  Agency  contained  in this  Statement or any
Appendix  shall  instead  be  deemed  to be  references  to  such  corresponding
replacement rating definition.  In the event that at any time the designation of
any Rating  Agency as a Rating  Agency for purposes of any Series of VMTP Shares
is  terminated  in  accordance  with Section 2.7, any rating of such  terminated
Rating Agency, to the extent it would have been taken into account in any of the
provisions  of  this  Statement  or the  Appendix  for  such  Series,  shall  be
disregarded,  and only the ratings of the  then-designated  Rating  Agencies for
such Series shall be taken into account for purposes of this  Statement and such
Appendix.

                  "Rating Agency  Guidelines" means the guidelines of any Rating
Agency,  as they may be amended or modified from time to time,  compliance  with
which is required to cause such Rating Agency to continue to issue a rating with
respect to a Series of VMTP Shares for so long as such Series is Outstanding.

                                        9

<PAGE>


                  "Ratings  Event"  shall have the  meaning set forth in Section
2.2(g)(i).

                  "Redemption  and  Paying  Agent"  means,  with  respect to any
Series,  State  Street Bank and Trust  Company and its  successors  or any other
redemption and paying agent appointed by the Fund with respect to such Series.

                  "Redemption and Paying Agent Agreement" means, with respect to
any Series,  the Transfer Agency and Service Agreement dated October 7, 2002, as
amended,  by and among the  Redemption  and Paying  Agent,  the Fund and certain
other  Persons,  as further  amended by an Amendment  thereto dated February 24,
2011  relating to the VMTP Shares,  and as the same may be amended,  restated or
modified  from time to time, or any similar  agreement  between the Fund and any
other redemption and paying agent appointed by the Fund.

                  "Redemption  Date"  shall  have the  meaning  as set  forth in
Section 2.5(d).

                  "Redemption  Default"  shall have the  meaning as set forth in
Section 2.2(g)(i).

                  "Redemption  Price" shall mean the Term Redemption  Price, the
Mandatory Redemption Price or the Optional Redemption Price, as applicable.

                  "Securities  Act" means the U.S.  Securities  Act of 1933,  as
amended.

                  "Securities   Depository"  shall  mean  The  Depository  Trust
Company  and its  successors  and  assigns  or any other  securities  depository
selected  by the Fund that  agrees  to  follow  the  procedures  required  to be
followed  by such  securities  depository  as set forth in this  Statement  with
respect to the VMTP Shares.

                  "Series" and "Series of VMTP  Shares"  shall have the meanings
as set forth in the Recitals of this Statement.

                  "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;
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  Municipal  Bond 7 Day High Grade Rate Index  produced  by Standard & Poor's
Financial Services LLC or its successors or (ii) if the S&P Municipal Bond 7 Day
High Grade Rate Index is no longer produced,  such other  reasonably  comparable
index selected in good faith by the Board of Trustees of the Fund.

                  "Standard & Poor's" means Standard & Poor's Ratings  Services,
a Standard & Poor's  Financial  Services  LLC  business,  and any  successor  or
successors thereto.

                  "Statement"  means this Statement  Establishing and Fixing the
Rights and  Preferences of Variable Rate MuniFund Term Preferred  Shares,  as it
may be amended from time to time in accordance with its terms.

                                       10

<PAGE>


                  "Subsequent Rate Period" means,  with respect to any Series of
VMTP Shares,  the period  consisting of seven days, but adjusted in each case to
reflect any changes  when the regular day that is a Rate  Determination  Date is
not a Business Day,  from,  and  including,  the first day following the Initial
Rate Period of such Series to, and including,  the next Rate  Determination Date
for such Series and any period  thereafter  from, and  including,  the first day
following a Rate Determination Date for shares of such Series to, and including,
the next succeeding Rate Determination Date for shares of such Series.

                  "Tax  Event"  shall  have the  meaning as set forth in Section
2.2(g)(i).

                  "Taxable  Allocation"  means, with respect to any Series,  the
allocation of any net capital gain or other income taxable for regular  federal,
New York State,  or New York City  individual  income tax purposes to a dividend
paid in respect of such Series.

                  "Term  Redemption  Amount" shall have the meaning as set forth
in Section 2.11(a).

                  "Term Redemption Date" means, with respect to any Series,  the
date specified as the Term Redemption Date in the Appendix for such Series.

                  "Term Redemption  Liquidity Account" shall have the meaning as
set forth in Section 2.11(a).

                  "Term Redemption Price" shall have the meaning as set forth in
Section 2.5(a).

                  "U.S. Government  Obligations" 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,  other than United  States
Treasury  Bills,  provide  for the  periodic  payment of  interest  and the full
payment of principal at maturity or call for redemption.

                  "VMTP"  shall have the meaning as set forth in the Recitals of
this Statement.

                  "VMTP  Shares"  shall  have the  meaning  as set  forth in the
Recitals of this Statement.

                  "VMTP Shares of a Series"  shall have the meaning as set forth
in the Recitals of this Statement.

                  "Voting Period" shall have the meaning as set forth in Section
2.6(b)(i).

                  With  respect  to  any  Series,  any  additional   definitions
specifically  set  forth  in the  Appendix  relating  to  such  Series  and  any
amendments to any definitions specifically set forth in the Appendix relating to
such  Series,  as such  Appendix  may be  amended  from  time to time,  shall be
incorporated  herein and made part hereof by  reference  thereto,  but only with
respect to such Series.

                  1.2      Interpretation.  The headings  preceding  the text of
Sections  included in this Statement are for  convenience  only and shall not be
deemed part of this Statement or be

                                       11

<PAGE>


given any  effect in  interpreting  this  Statement.  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.  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 Person's  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), 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,  enforcement
procedures  and  any   interpretations   promulgated   thereunder.   Underscored
references to Sections shall refer to those portions of this Statement.  The use
of the terms  "hereunder,"  "hereof," "hereto" and words of similar import shall
refer to this Statement as a whole and not to any particular Article, Section or
clause of this Statement.

         2.       Terms  Applicable to All Series of Variable Rate Munifund Term
Preferred Shares

         Except for such changes and amendments  hereto with respect to a Series
of VMTP Shares that are  specifically  contemplated by the Appendix  relating to
such Series, each Series of VMTP Shares shall have the following terms:

                  2.1      Number of Shares; Ranking.

                           (a)      The number of authorized shares constituting
         any Series of VMTP  Shares  shall be as set forth with  respect to such
         Series in the Appendix  hereto  relating to such Series.  No fractional
         VMTP Shares shall be issued.

                           (b)      The VMTP Shares of each Series shall rank on
         a parity with VMTP  Shares of each other  Series and with shares of any
         other series of Preferred Shares as to the payment of dividends and the
         distribution of assets upon  dissolution,  liquidation or winding up of
         the  affairs of the Fund.  The VMTP  Shares of each  Series  shall have
         preference  with  respect  to  the  payment  of  dividends  and  as  to
         distribution of assets upon  dissolution,  liquidation or winding up of
         the affairs of the Fund over the Common Shares as set forth herein.

                           (c)      No Holder of VMTP Shares shall have,  solely
         by reason of being  such a Holder,  any  preemptive  or other  right to
         acquire,  purchase or subscribe for any VMTP Shares or Common Shares or
         other securities of the Fund which it may hereafter issue or sell.

                  2.2      Dividends and Distributions.

                           (a)      The  Holders  of VMTP  Shares of any  Series
         shall be  entitled to receive,  when,  as and if declared  by, or under
         authority  granted  by,  the Board of  Trustees,  out of funds  legally
         available   therefor  and  in   preference   to  dividends   and  other
         distributions  on Common  Shares,  cumulative  cash dividends and other
         distributions  on

                                       12

<PAGE>


         each  share of such  Series  at the  Dividend  Rate  for  such  Series,
         calculated  as set  forth  herein,  and no more.  Dividends  and  other
         distributions  on the VMTP Shares of any Series shall  accumulate  from
         the Date of Original  Issue with respect to such Series.  The amount of
         dividends  per share payable on VMTP Shares of a Series on any Dividend
         Payment Date shall equal the sum of the dividends  accumulated  but not
         yet paid for each Rate Period (or part thereof) in the related Dividend
         Period.  The amount of dividends per share of a Series  accumulated for
         each  such Rate  Period  (or part  thereof)  shall be  computed  by (i)
         multiplying  the Dividend 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 actual  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 in which  such  Rate  Period  (or such  part  thereof)
         occurs  (365  or 366)  and  (ii)  multiplying  the  product  determined
         pursuant  to clause (i) by the  Liquidation  Preference  for a share of
         such Series.

                           (b)      Dividends on VMTP Shares of each Series with
         respect to any  Dividend  Period  shall be  declared  to the Holders of
         record of such shares as their names shall  appear on the  registration
         books of the Fund at the close of business on each day in such Dividend
         Period and shall be paid as provided in Section 2.2(f) hereof.

                           (c)      (i)     No   full    dividends   and   other
         distributions  shall be  declared or paid on shares of a Series of VMTP
         Shares for any Dividend  Period or part thereof unless full  cumulative
         dividends and other  distributions due through the most recent dividend
         payment dates therefor for all outstanding  Preferred Shares (including
         shares of other  Series of VMTP  Shares)  ranking on a parity with such
         Series of VMTP Shares have been or  contemporaneously  are declared and
         paid through the most recent dividend  payment dates therefor.  If full
         cumulative dividends and other distributions due have not been declared
         and paid on all such outstanding  Preferred  Shares of any series,  any
         dividends  and  other  distributions  being  declared  and paid on VMTP
         Shares of a Series  will be  declared  and paid as  nearly  pro rata as
         possible in proportion to the respective amounts of dividends and other
         distributions  accumulated but unpaid on the shares of each such series
         of  Preferred  Shares on the  relevant  dividend  payment date for such
         series.  Subject to  Section  2.10,  and  Section  2.4 of the  Purchase
         Agreement, no Holders of VMTP Shares shall be entitled to any dividends
         and other  distributions,  whether payable in cash, property or shares,
         in excess of full  cumulative  dividends  and  other  distributions  as
         provided in this Section 2.2(c)(i) on such VMTP Shares.

                                    (ii)    For so long as any VMTP  Shares  are
                  Outstanding,  the Fund shall not:  (x) declare any dividend or
                  other distribution (other than a dividend or distribution paid
                  in Common  Shares) in respect of the Common  Shares,  (y) call
                  for  redemption,  redeem,  purchase or  otherwise  acquire for
                  consideration  any Common  Shares,  or (z) pay any proceeds of
                  the  liquidation  of the Fund in respect of the Common Shares,
                  unless,  in each case, (A)  immediately  thereafter,  the Fund
                  shall have 1940 Act Asset Coverage after  deducting the amount
                  of such  dividend or  distribution  or  redemption or purchase
                  price or liquidation  proceeds,  (B) all cumulative  dividends
                  and  other  distributions  on all VMTP  Shares  and all  other
                  series of Preferred  Shares  ranking on a parity with the VMTP
                  Shares due on or prior to the date of the applicable dividend,
                  distribution,  redemption,  purchase or

                                       13

<PAGE>


                  acquisition  shall have been  declared and paid (or shall have
                  been declared and Deposit  Securities or sufficient  funds (in
                  accordance  with the terms of such  Preferred  Shares) for the
                  payment thereof shall have been deposited irrevocably with the
                  paying agent for such Preferred Shares) and (C) the Fund shall
                  have  deposited   Deposit   Securities   pursuant  to  and  in
                  accordance with the requirements of Section  2.5(d)(ii) hereof
                  with  respect to  Outstanding  VMTP Shares of any Series to be
                  redeemed  pursuant to Section  2.5(a) or Section 2.5(b) hereof
                  for  which a Notice of  Redemption  shall  have been  given or
                  shall have been  required to be given in  accordance  with the
                  terms  hereof  on or  prior  to the  date  of  the  applicable
                  dividend, distribution, redemption, purchase or acquisition.

                                    (iii)   Any  dividend  payment  made on VMTP
                  Shares  of a  Series  shall  first  be  credited  against  the
                  dividends and other distributions  accumulated with respect to
                  the  earliest  Dividend  Period  for  such  Series  for  which
                  dividends and other distributions have not been paid.

                           (d)      Not later  than  12:00  noon,  New York City
         time,  on the Dividend  Payment  Date for a Series of VMTP Shares,  the
         Fund  shall  deposit  with the  Redemption  and  Paying  Agent  Deposit
         Securities  having an aggregate Market Value on such date sufficient to
         pay the dividends and  distributions  that are payable on such Dividend
         Payment  Date in  respect  of such  Series.  The  Fund may  direct  the
         Redemption   and  Paying  Agent  with  respect  to  the  investment  or
         reinvestment  of any such Deposit  Securities so deposited prior to the
         Dividend   Payment  Date,   provided  that  such  investment   consists
         exclusively  of  Deposit  Securities  and  provided  further  that  the
         proceeds of any such  investment will be available as same day funds at
         the opening of business on such Dividend Payment Date.

                           (e)      All   Deposit   Securities   paid   to   the
         Redemption  and Paying Agent for the payment of dividends  payable on a
         Series of VMTP  Shares  shall be held in trust for the  payment of such
         dividends  by the  Redemption  and Paying  Agent for the benefit of the
         Holders  of such  Series  entitled  to the  payment  of such  dividends
         pursuant  to Section  2.2(f).  Any moneys  paid to the  Redemption  and
         Paying Agent in  accordance  with the  foregoing but not applied by the
         Redemption  and Paying  Agent to the  payment of  dividends,  including
         interest  earned on such  moneys  while so held,  will,  to the  extent
         permitted  by law, be repaid to the Fund as soon as possible  after the
         date on which such moneys were to have been so applied, upon request of
         the Fund.

                           (f)      Dividends  on VMTP Shares of a Series  shall
         be paid on each Dividend Payment Date for such Series to the Holders of
         shares of such Series as their names appear on the  registration  books
         of the Fund at the close of business on the day  immediately  preceding
         such  Dividend  Payment Date (or if such day is not a Business Day, the
         next preceding Business Day).  Dividends in arrears on VMTP Shares of a
         Series for any past  Dividend  Period may be  declared  and paid at any
         time,  without  reference to any regular  Dividend Payment Date, to the
         Holders  of  shares  of  such  Series  as  their  names  appear  on the
         registration books of the Fund on such date, not exceeding fifteen (15)
         calendar days  preceding  the payment date thereof,  as may be fixed by
         the Board of Trustees.  No interest or sum of money in lieu of interest
         will be payable in

                                       14

<PAGE>


         respect of any  dividend  payment  or  payments  on VMTP  Shares of any
         Series which may be in arrears.

                           (g)      (i)     The  Dividend   Rate  on a Series of
         VMTP Shares shall be adjusted to the Increased  Rate for each Increased
         Rate Period (as hereinafter defined). Subject to the cure provisions of
         Section  2.2(g)(iii),  a Rate Period  with  respect to a Series of VMTP
         Shares shall be deemed to be an "Increased Rate Period" if on the first
         day of such Rate  Period,  (A) the Fund has failed to deposit  with the
         Redemption  and Paying  Agent by 12:00 noon,  New York City time,  on a
         Dividend Payment Date for such Series,  Deposit Securities (as a result
         of complying with Section 2.2(c) or otherwise)  that will provide funds
         available to the Redemption  and Paying Agent on such Dividend  Payment
         Date  sufficient  to pay the full amount of any dividend on such Series
         payable on such Dividend  Payment Date (a "Dividend  Default") and such
         Dividend Default has not ended as contemplated by Section 2.2(g)(ii) on
         or prior to such first day; (B) the Fund has failed to deposit with the
         Redemption  and Paying Agent by 12:00 noon,  New York City time,  on an
         applicable  Redemption  Date for such Series,  Deposit  Securities that
         will provide funds available to the Redemption and Paying Agent on such
         Redemption  Date  sufficient  to pay the full amount of the  Redemption
         Price  payable  in respect of such  Series on such  Redemption  Date (a
         "Redemption  Default")  and such  Redemption  Default  has not ended as
         contemplated  by Section  2.2(g)(ii) on or prior to such first day; (C)
         any  Rating  Agency has  withdrawn  the credit  rating  required  to be
         maintained  with  respect to such Series  pursuant to Section 2.7 other
         than due to the Rating  Agency  ceasing to rate  tax-exempt  closed-end
         management  investment  companies  generally  and  such  withdrawal  is
         continuing;  (D) a Ratings Event (as defined below) has occurred and is
         continuing  with  respect to such  Series;  or (E) (i) a court or other
         applicable  governmental  authority has made a final determination that
         for  federal tax  purposes  the VMTP Shares do not qualify as equity in
         the Fund and (ii) such determination  results from an act or failure to
         act on the part of the Fund (a "Tax Event"). A "Ratings Event" shall be
         deemed to exist with  respect to any Series of VMTP  Shares at any time
         such VMTP Shares have a long-term  credit rating from at least one-half
         of the Rating Agencies designated at such time that is Below Investment
         Grade.  For the avoidance of doubt,  no  determination  by any court or
         other applicable  governmental authority that requires the Fund to make
         an Additional  Amount Payment in respect of a Taxable  Allocation shall
         be deemed to be a Tax Event hereunder.

                                    (ii)    Subject  to the cure  provisions  of
                  Section  2.2(g)(iii),  a  Dividend  Default  or  a  Redemption
                  Default on a Series of VMTP Shares  shall end on the  Business
                  Day on which,  by 12:00  noon,  New York City time,  an amount
                  equal to all unpaid  dividends  on such  Series and any unpaid
                  Redemption  Price on such  Series  shall  have been  deposited
                  irrevocably in trust in same-day funds with the Redemption and
                  Paying Agent.

                                    (iii)   No  Increased   Rate  Period  for  a
                  Series of VMTP Shares with respect to any Dividend  Default or
                  Redemption  Default  on such  Series  shall be  deemed to have
                  commenced  if the  amount of any  dividend  or any  Redemption
                  Price due in  respect of such  Series (if such  Default is not
                  solely due to the  willful  failure of the Fund) is  deposited
                  irrevocably in trust, in same-day  funds,  with the

                                       15

<PAGE>


                  Redemption and Paying Agent by 12:00 noon, New York City time,
                  on a Business  Day that is not later  than three (3)  Business
                  Days after the applicable  Dividend Payment Date or Redemption
                  Date for such  Series  with  respect  to  which  such  Default
                  occurred,  together with an amount equal to the Increased Rate
                  on such  Series  applied  to the  amount  and  period  of such
                  non-payment on such Series,  determined as provided in Section
                  2.2(a).

                  2.3      Liquidation Rights.

                           (a)      In the event of any liquidation, dissolution
         or  winding  up of  the  affairs  of the  Fund,  whether  voluntary  or
         involuntary,  the Holders of VMTP  Shares  shall be entitled to receive
         out  of  the  assets  of  the  Fund  available  for   distribution   to
         shareholders,  after  satisfying  claims of  creditors  but  before any
         distribution  or payment shall be made in respect of the Common Shares,
         a liquidation distribution equal to the Liquidation Preference for such
         shares,  plus  an  amount  equal  to all  unpaid  dividends  and  other
         distributions  on such shares  accumulated to (but  excluding) the date
         fixed for such  distribution  or payment on such shares (whether or not
         earned or declared by the Fund, but excluding  interest  thereon),  and
         such  Holders  shall be  entitled  to no further  participation  in any
         distribution  or  payment  in  connection  with any  such  liquidation,
         dissolution or winding up.

                           (b)      lf,  upon any  liquidation,  dissolution  or
         winding  up  of  the  affairs  of  the  Fund,   whether   voluntary  or
         involuntary,  the assets of the Fund available for  distribution  among
         the Holders of all  Outstanding  VMTP Shares and any other  outstanding
         Preferred  Shares  ranking on a parity  with the VMTP  Shares  shall be
         insufficient  to permit  the  payment  in full to such  Holders  of the
         Liquidation  Preference of such VMTP Shares plus accumulated and unpaid
         dividends and other distributions on such shares as provided in Section
         2.3(a)  above and the  amounts  due upon  liquidation  with  respect to
         shares of such other Preferred Shares, then such available assets shall
         be distributed among the Holders of such VMTP Shares and shares of such
         other  Preferred   Shares  ratably  in  proportion  to  the  respective
         preferential  liquidation  amounts  to  which  they  are  entitled.  In
         connection  with any  liquidation,  dissolution  or  winding  up of the
         affairs of the Fund, whether voluntary or involuntary, unless and until
         the  Liquidation   Preference  on  each  Outstanding  VMTP  Share  plus
         accumulated and unpaid dividends and other distributions on such shares
         as  provided  in  Section  2.3(a)  above  have been paid in full to the
         Holders of such shares,  no dividends,  distributions or other payments
         will be made on, and no  redemption,  purchase or other  acquisition by
         the Fund will be made by the Fund in respect of, the Common Shares.

                           (c)      Neither the sale of all or substantially all
         of the property or business of the Fund, nor the merger,  consolidation
         or  reorganization  of the Fund  into or with  any  other  business  or
         statutory  trust,   corporation  or  other  entity,   nor  the  merger,
         consolidation  or  reorganization  of any other  business or  statutory
         trust,  corporation  or other  entity  into or with the Fund shall be a
         dissolution,   liquidation   or  winding  up,   whether   voluntary  or
         involuntary, for the purpose of this Section 2.3.

                                       16

<PAGE>


                  2.4      Coverage & Leverage Tests.

                           (a)      Asset Coverage  Requirement.  For so long as
         any VMTP  Shares of any  Series  are  Outstanding,  the Fund shall have
         Asset  Coverage  of at least 225% as of the close of  business  on each
         Business Day. If the Fund shall fail to maintain such Asset Coverage as
         of any time as of which such compliance is required to be determined as
         aforesaid,  the  provisions of Section  2.5(b)(i)  shall be applicable,
         which  provisions to the extent complied with shall constitute the sole
         remedy for the Fund's  failure to comply  with the  provisions  of this
         Section 2.4(a).

                           (b)      Calculation of Asset Coverage.  For purposes
         of  determining   whether  the   requirements  of  Section  2.4(a)  are
         satisfied,  (i) no VMTP Shares of any Series or other Preferred  Shares
         shall be deemed  to be  Outstanding  for  purposes  of any  computation
         required  by Section  2.4(a)  if,  prior to or  concurrently  with such
         determination,  sufficient Deposit Securities or other sufficient funds
         (in accordance with the terms of such Series or other Preferred Shares)
         to pay the full  redemption  price for such  Series or other  Preferred
         Shares  (or  the  portion  thereof  to be  redeemed)  shall  have  been
         deposited  in trust  with the  paying  agent  for such  Series or other
         Preferred Shares and the requisite notice of redemption for such Series
         or other Preferred Shares (or the portion thereof to be redeemed) shall
         have been given,  and (ii) the Deposit  Securities or other  sufficient
         funds that  shall have been so  deposited  with the  applicable  paying
         agent shall not be included as assets of the Fund for  purposes of such
         computation.

                           (c)      Effective Leverage Ratio Requirement. For so
         long as VMTP  Shares  of any  Series  are  Outstanding,  the  Effective
         Leverage  Ratio shall not exceed 45% as of the close of business on any
         Business Day; provided, however, in the event that the Fund's Effective
         Leverage  Ratio  exceeds  45% on any  Business  Day solely by reason of
         fluctuations  in the market value of the Fund's  portfolio  securities,
         the Effective Leverage Ratio shall not exceed 46% on such Business Day.
         If the Effective Leverage Ratio shall exceed the applicable  percentage
         provided  in the  preceding  sentence  as of any time as of which  such
         compliance is required to be determined as aforesaid, the provisions of
         Section 2.5(b)(ii) shall be applicable,  which provisions to the extent
         complied with shall  constitute  the sole remedy for the Fund's failure
         to comply with the provisions of this Section 2.4(c).

                           (d)      Calculation of Effective Leverage Ratio. For
         purposes of determining  whether the requirements of Section 2.4(c) are
         satisfied,  the "Effective  Leverage  Ratio" on any date shall mean the
         quotient of:

                                    (i)     The   sum  of  (A)   the   aggregate
                  liquidation  preference of the Fund's "senior  securities" (as
                  that  term is  defined  in the 1940  Act)  that are  stock for
                  purposes of the 1940 Act, excluding,  without duplication, (1)
                  any such  senior  securities  for which the Fund 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 or
                  sufficient  funds on hand for the  purpose of such  redemption
                  and (2) any such  senior  securities  that are to be  redeemed
                  with

                                       17

<PAGE>


                  net proceeds  from the sale of the VMTP Shares,  for which the
                  Fund 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 or sufficient  funds on hand for
                  the purpose of such  redemption;  (B) the aggregate  principal
                  amount  of  the   Fund's   "senior   securities   representing
                  indebtedness"  (as that term is defined in the 1940 Act);  and
                  (C) the aggregate principal amount of floating rate securities
                  not  owned  by the  Fund  that  correspond  to the  associated
                  inverse floating rate securities owned by the Fund; divided by

                                    (ii)    The sum of (A) the  Market  Value of
                  the Fund's total assets  (including  amounts  attributable  to
                  senior  securities,  but  excluding  any assets  consisting of
                  Deposit  Securities or funds referred to in clauses (A)(1) and
                  (A)(2) of  Section  2.4(d)(i)  above),  less the amount of the
                  Fund's accrued  liabilities  (other than  liabilities  for the
                  aggregate  principal amount of senior securities  representing
                  indebtedness,  including  floating rate securities),  and (B),
                  the aggregate principal amount of floating rate securities not
                  owned by the Fund that  correspond to the  associated  inverse
                  floating rate securities owned by the Fund.

                  2.5      Redemption.  Each  Series  of VMTP  Shares  shall  be
subject to redemption by the Fund as provided below:

                           (a)      Term  Redemption.  The Fund shall redeem all
         VMTP Shares of a Series on the Term Redemption Date for such Series, at
         a price per share equal to the Liquidation Preference per share of such
         Series  plus  an  amount  equal  to  all  unpaid  dividends  and  other
         distributions  on  such  share  of such  Series  accumulated  from  and
         including  the  Date of  Original  Issue  to (but  excluding)  the Term
         Redemption  Date for such Series  (whether or not earned or declared by
         the  Fund,  but  excluding  interest  thereon)  (the  "Term  Redemption
         Price").

                           (b)      Asset Coverage and Effective  Leverage Ratio
         Mandatory Redemption.

                                    (i)     Asset Coverage Mandatory Redemption.
                  (A) If the  Fund  fails to  comply  with  the  Asset  Coverage
                  requirement as provided in Section 2.4(a) as of any time as of
                  which  such   compliance  is  required  to  be  determined  in
                  accordance  with Section  2.4(a) and such failure is not cured
                  as of the Asset  Coverage  Cure Date other than as a result of
                  the redemption  required by this Section  2.5(b)(i),  the Fund
                  shall,   to  the  extent   permitted   by  the  1940  Act  and
                  Massachusetts  law, by the close of  business on the  Business
                  Day next  following  such Asset  Coverage  Cure Date,  cause a
                  notice of redemption  to be issued,  and cause to be deposited
                  Deposit Securities or other sufficient funds in trust with the
                  Redemption and Paying Agent or other applicable  paying agent,
                  in each case in  accordance  with the  terms of the  Preferred
                  Shares to be  redeemed,  for the  redemption  of a  sufficient
                  number of  Preferred  Shares,  which at the Fund's sole option
                  (to the  extent  permitted  by the 1940 Act and  Massachusetts
                  law) may  include any number or  proportion  of VMTP Shares of
                  any Series,  to enable it to meet the  requirements of Section
                  2.5(b)(i)(B).  In the event  that any VMTP

                                       18

<PAGE>


                  Shares  of a  Series  then  Outstanding  are  to  be  redeemed
                  pursuant to this Section 2.5(b)(i), the Fund shall redeem such
                  shares  at  a  price  per  share  equal  to  the   Liquidation
                  Preference  per share of such Series  plus an amount  equal to
                  all unpaid dividends and other  distributions on such share of
                  such  Series  accumulated  from  and  including  the  Date  of
                  Original  Issue to (but  excluding)  the date  fixed  for such
                  redemption by the Board of Trustees  (whether or not earned or
                  declared by the Fund,  but  excluding  interest  thereon) (the
                  "Mandatory Redemption Price").

                                            (B)      On the Redemption  Date for
                           a redemption  contemplated  by Section  2.5(b)(i)(A),
                           the Fund  shall  redeem at the  Mandatory  Redemption
                           Price, out of funds legally available therefor,  such
                           number of Preferred  Shares (which may include at the
                           sole option of the Fund any number or  proportion  of
                           VMTP  Shares of any  Series) as shall be equal to the
                           lesser of (x) the minimum number of Preferred Shares,
                           the  redemption of which,  if deemed to have occurred
                           immediately  prior to the  opening of business on the
                           Asset  Coverage  Cure Date,  would result in the Fund
                           having  Asset  Coverage on such Asset  Coverage  Cure
                           Date of at least  225%  (provided,  however,  that if
                           there is no such  minimum  number of VMTP  Shares and
                           other  Preferred  Shares the redemption or retirement
                           of which would have such result,  all VMTP Shares and
                           other  Preferred  Shares  then  outstanding  shall be
                           redeemed),  and (y) the maximum  number of  Preferred
                           Shares that can be redeemed out of funds  expected to
                           be legally available  therefor in accordance with the
                           Declaration and applicable law.  Notwithstanding  the
                           foregoing,  in the event  that  Preferred  Shares are
                           redeemed pursuant to this Section 2.5(b)(i), the Fund
                           may at its  sole  option,  but  is not  required  to,
                           redeem a  sufficient  number  of VMTP  Shares  of any
                           Series pursuant to this Section  2.5(b)(i) that, when
                           aggregated  with other  Preferred  Shares redeemed by
                           the Fund,  would  result,  if deemed to have occurred
                           immediately  prior to the  opening of business on the
                           Asset  Coverage  Cure Date,  in the Fund having Asset
                           Coverage  on such Asset  Coverage  Cure Date of up to
                           and  including  250%.  The  Fund  shall  effect  such
                           redemption  on the date  fixed by the Fund  therefor,
                           which  date  shall  not be  later  than  thirty  (30)
                           calendar  days after such Asset  Coverage  Cure Date,
                           except  that if the Fund does not have funds  legally
                           available  for the  redemption of all of the required
                           number  of VMTP  Shares  and other  Preferred  Shares
                           which have been designated to be redeemed or the Fund
                           otherwise is unable to effect such  redemption  on or
                           prior to thirty (30)  calendar  days after such Asset
                           Coverage Cure Date,  the Fund 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 of a Series are to
                           be redeemed pursuant to this Section  2.5(b)(i),  the
                           number of VMTP  Shares of such  Series to be redeemed
                           shall be redeemed (A) pro rata among the  Outstanding
                           shares  of  such  Series,  (B) by lot or (C) in  such
                           other manner as the Board of Trustees  may  determine
                           to be fair and equitable.

                                       19

<PAGE>


                                    (ii)    Effective  Leverage Ratio  Mandatory
                  Redemption.  (A) If (x) the  Fund  fails  to  comply  with the
                  Effective  Leverage  Ratio  requirement as provided in Section
                  2.4(c) as of any time as of which such  compliance is required
                  to be determined in accordance with Section 2.4(c) or (y) with
                  respect to the initial  Series of VMTP Shares issued  pursuant
                  to this Statement, the Fund fails to comply with the Effective
                  Leverage Ratio requirement  determined as set forth in Section
                  6.13 of the Purchase  Agreement  applicable  to such Series if
                  such  requirement  shall still be in effect in accordance with
                  the terms of such Purchase  Agreement,  and, in any such case,
                  such  failure is not cured as of the close of  business on the
                  date that is seven Business Days following the Business Day on
                  which such  non-compliance is first determined (the "Effective
                  Leverage  Ratio  Cure  Date")  other  than as a result  of the
                  redemption required by this Section 2.5(b)(ii), the Fund shall
                  not later than the close of business on the  Business Day next
                  following  the  Effective  Leverage  Ratio Cure Date cause the
                  Effective  Leverage Ratio  (determined in accordance  with the
                  requirements  applicable to the determination of the Effective
                  Leverage  Ratio under this  Statement,  and under the Appendix
                  and  Purchase  Agreement  for any  applicable  Series  of VMTP
                  Shares in respect  of which the  Effective  Leverage  Ratio is
                  being  determined) to not exceed the Effective  Leverage Ratio
                  required  under Section 2.4(c)  (without  giving effect to the
                  parenthetical  provision  in the  first  sentence  of  Section
                  2.4(c)) as so  determined,  by (x)  engaging  in  transactions
                  involving  or relating to the  floating  rate  securities  not
                  owned by the Fund and/or the inverse  floating rate securities
                  owned by the Fund, including the purchase,  sale or retirement
                  thereof,  (y) to the  extent  permitted  by the  1940  Act and
                  Massachusetts  law, cause a notice of redemption to be issued,
                  and  cause  to  be  deposited  Deposit   Securities  or  other
                  sufficient funds in trust with the Redemption and Paying Agent
                  or other  applicable  paying agent, in each case in accordance
                  with the terms of the Preferred Shares to be redeemed, for the
                  redemption of a sufficient number of Preferred  Shares,  which
                  at the Fund's sole option (to the extent permitted by the 1940
                  Act  and   Massachusetts   law)  may  include  any  number  or
                  proportion  of VMTP Shares of any Series,  or (z)  engaging in
                  any combination of the actions contemplated by clauses (x) and
                  (y) of this  sentence of Section  2.5(b)(ii)(A).  In the event
                  that any VMTP Shares of a Series are to be  redeemed  pursuant
                  to clause  (y) of the  penultimate  sentence  of this  Section
                  2.5(b)(ii)(A),  the Fund shall  redeem  such VMTP  Shares at a
                  price per VMTP Share equal to the Mandatory Redemption Price.

                                            (B)      On the Redemption  Date for
                           a  redemption  contemplated  by  clause  (y)  of  the
                           penultimate  sentence of Section  2.5(b)(ii)(A),  the
                           Fund shall not redeem more than the maximum number of
                           Preferred  Shares that can be  redeemed  out of funds
                           expected   to  be  legally   available   therefor  in
                           accordance  with the  Declaration and applicable law.
                           If the Fund is unable to redeem the  required  number
                           of VMTP Shares and other Preferred  Shares which have
                           been  designated  to be redeemed in  accordance  with
                           clause  (y) of the  penultimate  sentence  of Section
                           2.5(b)(ii)(A)  due to the  unavailability  of legally
                           available  funds,  the Fund shall  redeem  those VMTP
                           Shares and other Preferred Shares

                                       20

<PAGE>


                           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 of a Series  are to be  redeemed  pursuant  to
                           clause  (y) of the  penultimate  sentence  of Section
                           2.5(b)(ii)(A),  the  number  of VMTP  Shares  of such
                           Series to be redeemed  shall be redeemed (A) pro rata
                           among the Outstanding  shares of such Series,  (B) by
                           lot or (C) in  such  other  manner  as the  Board  of
                           Trustees may determine to be fair and equitable.

                           (c)      Optional Redemption.

                                    (i)     Subject to the provisions of Section
                  2.5(c)(ii), the Fund may at its option on any Business Day (an
                  "Optional  Redemption  Date")  redeem in whole or from time to
                  time in part the Outstanding  VMTP Shares of any Series,  at a
                  redemption  price per VMTP  Share  (the  "Optional  Redemption
                  Price") equal to (x) the Liquidation Preference per VMTP Share
                  of  such  Series  plus  (y) an  amount  equal  to  all  unpaid
                  dividends and other  distributions  on such VMTP Share of such
                  Series  accumulated  from and  including  the Date of Original
                  Issue to (but excluding) the Optional Redemption Date (whether
                  or not earned or declared by the Fund, but excluding  interest
                  thereon)  plus (z) the Optional  Redemption  Premium per share
                  (if any) that is applicable to an optional  redemption of VMTP
                  Shares  of such  Series  that  is  effected  on such  Optional
                  Redemption Date as set forth in the Appendix  relating to such
                  Series.

                                    (ii)    If fewer than all of the outstanding
                  VMTP Shares of a Series are to be redeemed pursuant to Section
                  2.5(c)(i),  the shares of such Series to be redeemed  shall be
                  selected either (A) pro rata among the Holders of such Series,
                  (B) by  lot  or (C) in  such  other  manner  as the  Board  of
                  Trustees may  determine to be fair and  equitable.  Subject to
                  the provisions of this Statement and applicable law, the Board
                  of  Trustees  will  have  the  full  power  and  authority  to
                  prescribe the terms and conditions upon which VMTP Shares will
                  be redeemed pursuant to this Section 2.5(c) from time to time.

                                    (iii)   The Fund may not on any date deliver
                  a Notice of Redemption  pursuant to Section  2.5(d) in respect
                  of a redemption  contemplated to be effected  pursuant to this
                  Section  2.5(c)  unless  on such  date the Fund has  available
                  Deposit   Securities   for  the   Optional   Redemption   Date
                  contemplated  by such  Notice  of  Redemption  having a Market
                  Value  not less  than the  amount  (including  any  applicable
                  premium)  due to  Holders  of VMTP  Shares  by  reason  of the
                  redemption  of such VMTP  Shares on such  Optional  Redemption
                  Date.

                           (d)      Procedures for Redemption.

                                    (i)     If the Fund  shall  determine  or be
                  required  to  redeem,  in whole or in part,  VMTP  Shares of a
                  Series pursuant to Section 2.5(a),  (b) or (c), the Fund shall
                  deliver a notice of redemption  (the "Notice of  Redemption"),
                  by overnight delivery, by first class mail, postage prepaid or
                  by  Electronic  Means  to

                                       21

<PAGE>


                  Holders  thereof,  or request the Redemption and Paying Agent,
                  on  behalf  of  the  Fund,  to  promptly  do so  by  overnight
                  delivery,   by  first  class  mail,   postage  prepaid  or  by
                  Electronic Means. A Notice of Redemption shall be provided not
                  more than  forty-five  (45)  calendar  days  prior to the date
                  fixed  for  redemption  in  such  Notice  of  Redemption  (the
                  "Redemption  Date").  Each  such  Notice of  Redemption  shall
                  state:  (A) the Redemption  Date; (B) the Series and number of
                  VMTP  Shares to be  redeemed;  (C) the CUSIP  number  for VMTP
                  Shares of such Series; (D) the applicable  Redemption Price on
                  a per  share  basis;  (E) if  applicable,  the place or places
                  where the certificate(s) for such 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;  (F) that  dividends on the
                  VMTP Shares to be redeemed will cease to  accumulate  from and
                  after such  Redemption  Date;  and (G) the  provisions of this
                  Statement  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  and, if  applicable,  the method of  determining  such
                  number.  The Fund may  provide  in any  Notice  of  Redemption
                  relating to a redemption  contemplated to be effected pursuant
                  to this  Statement  that such  redemption is subject to one or
                  more  conditions  precedent  and that the  Fund  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.

                                    (ii)    If the Fund  shall  give a Notice of
                  Redemption, then at any time from and after the giving of such
                  Notice of  Redemption  and prior to 12:00 noon,  New York City
                  time,  on the  Redemption  Date  (so  long  as any  conditions
                  precedent  to such  redemption  have been met or waived by the
                  Fund),  the Fund shall (A)  deposit  with the  Redemption  and
                  Paying Agent  Deposit  Securities  having an aggregate  Market
                  Value on the date thereof no less than the Redemption Price of
                  the VMTP Shares to be redeemed on the Redemption  Date and (B)
                  give the Redemption and Paying Agent irrevocable  instructions
                  and authority to pay the  applicable  Redemption  Price to the
                  Holders  of the  VMTP  Shares  called  for  redemption  on the
                  Redemption Date. The Fund may direct the Redemption and Paying
                  Agent with respect to the investment of any Deposit Securities
                  consisting of cash so deposited prior to the Redemption  Date,
                  provided  that the  proceeds of any such  investment  shall be
                  available at the opening of business on the Redemption Date as
                  same day funds.  Notwithstanding  the provisions of clause (A)
                  of the preceding sentence,  if the Redemption Date is the Term
                  Redemption  Date,  then such  deposit  of  Deposit  Securities
                  (which  may come in whole or in part from the Term  Redemption
                  Liquidity  Account)  shall be made no later than  fifteen (15)
                  calendar days prior to the Term Redemption Date.

                                    (iii)   Upon the date of the deposit of such
                  Deposit  Securities,  all  rights of the  Holders  of the VMTP
                  Shares so called  for  redemption  shall  cease and  terminate
                  except  the  right  of the  Holders  thereof  to  receive  the
                  Redemption  Price

                                       22

<PAGE>


                  thereof  and such  VMTP  Shares  shall  no  longer  be  deemed
                  Outstanding  for any  purpose  whatsoever  (other than (A) the
                  transfer  thereof prior to the applicable  Redemption Date and
                  (B) the  accumulation of dividends  thereon in accordance with
                  the  terms  hereof  up  to  (but   excluding)  the  applicable
                  Redemption   Date,   which   accumulated   dividends,   unless
                  previously  declared  and  paid as  contemplated  by the  last
                  sentence of Section 2.5(d)(vi) below, shall be payable only as
                  part of the  applicable  Redemption  Price  on the  Redemption
                  Date).  The Fund shall be entitled to receive,  promptly after
                  the Redemption  Date, any Deposit  Securities in excess of the
                  aggregate  Redemption  Price of the  VMTP  Shares  called  for
                  redemption on the Redemption  Date. Any Deposit  Securities so
                  deposited that are unclaimed at the end of three hundred sixty
                  five (365)  calendar days from the Redemption  Date shall,  to
                  the  extent  permitted  by law,  be repaid to the Fund,  after
                  which the Holders of the VMTP Shares so called for  redemption
                  shall  look  only to the Fund for  payment  of the  Redemption
                  Price  thereof.  The Fund shall be entitled  to receive,  from
                  time to time after the  Redemption  Date,  any interest on the
                  Deposit Securities so deposited.

                                    (iv)    On or  after  the  Redemption  Date,
                  each Holder of VMTP Shares in certificated  form (if any) that
                  are subject to redemption  shall surrender the  certificate(s)
                  evidencing   such  VMTP  Shares  to  the  Fund  at  the  place
                  designated  in the  Notice of  Redemption  and  shall  then be
                  entitled to receive the Redemption Price for such VMTP Shares,
                  without  interest,  and, in the case of a redemption  of fewer
                  than all the VMTP Shares represented by such certificate(s), a
                  new  certificate  representing  the VMTP  Shares that were not
                  redeemed.

                                    (v)     Notwithstanding the other provisions
                  of this Section 2.5, except as otherwise  required by law, the
                  Fund  shall not  redeem  any VMTP  Shares  or other  series of
                  Preferred Shares ranking on a parity with the VMTP Shares with
                  respect  to  dividends  and  other  distributions  unless  all
                  accumulated and unpaid  dividends and other  distributions  on
                  all  Outstanding  VMTP  Shares and  shares of other  series of
                  Preferred Shares ranking on a parity with the VMTP Shares with
                  respect  to  dividends   and  other   distributions   for  all
                  applicable  past  dividend  periods  (whether or not earned or
                  declared   by  the   Fund)   (x)   shall   have  been  or  are
                  contemporaneously   paid  or  (y)  shall   have  been  or  are
                  contemporaneously   declared   and   Deposit   Securities   or
                  sufficient  funds (in  accordance  with the terms of such VMTP
                  Shares or other  Preferred  Shares)  for the  payment  of such
                  dividends  and  other  distributions  shall  have  been or are
                  contemporaneously  deposited  with the  Redemption  and Paying
                  Agent or other applicable paying agent for such VMTP Shares or
                  other  Preferred  Shares in accordance  with the terms of such
                  VMTP Shares or other Preferred Shares, provided, however, that
                  the foregoing shall not prevent the purchase or acquisition of
                  Outstanding  VMTP  Shares  pursuant  to  an  otherwise  lawful
                  purchase or  exchange  offer made on the same terms to Holders
                  of all  Outstanding  VMTP Shares and any such other  series of
                  Preferred   Shares  for  which  all   accumulated  and  unpaid
                  dividends and other distributions have not been paid.

                                       23

<PAGE>


                                    (vi)    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  and applicable law, such
                  redemption  shall be made as soon as practicable to the extent
                  such funds  become  available.  In the case of any  redemption
                  pursuant to Section  2.5(c),  no  Redemption  Default shall be
                  deemed to have  occurred  if the Fund shall fail 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 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  the fact that a Notice
                  of  Redemption  has been  provided  with  respect  to any VMTP
                  Shares, dividends may be declared and paid on such VMTP Shares
                  in accordance  with their terms if Deposit  Securities for the
                  payment of the Redemption  Price of such VMTP Shares shall not
                  have been  deposited in trust with the  Redemption  and Paying
                  Agent for that purpose.

                           (e)      Redemption  and  Paying  Agent as Trustee of
         Redemption Payments by Fund. All Deposit Securities  transferred to 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 VMTP  Shares so to be
         redeemed until paid to such Holders in accordance with the terms hereof
         or returned to the Fund in  accordance  with the  provisions of Section
         2.5(d)(iii) above.

                           (f)      Compliance With Applicable Law. In effecting
         any  redemption  pursuant to this  Section  2.5, the Fund shall use its
         best  efforts to comply with all  applicable  conditions  precedent  to
         effecting  such  redemption  under  the  1940  Act and  any  applicable
         Massachusetts  law, but shall effect no redemption except in accordance
         with the 1940 Act and any applicable Massachusetts law.

                           (g)      Modification   of   Redemption   Procedures.
         Notwithstanding the foregoing  provisions of this Section 2.5, the Fund
         may, in its sole discretion and without a shareholder  vote, modify the
         procedures set forth above with respect to  notification  of redemption
         for  the  VMTP  Shares,   provided  that  such  modification  does  not
         materially and adversely affect the Holders of the VMTP Shares or cause
         the  Fund to  violate  any  applicable  law,  rule or  regulation;  and
         provided further that no such  modification  shall in any way alter the
         rights or  obligations  of the  Redemption and Paying Agent without its
         prior consent.

                  2.6      Voting Rights.

                           (a)      One Vote Per VMTP Share. Except as otherwise
         provided in the  Declaration 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 Fund,  and (ii) the  holders of  outstanding  Preferred  Shares,
         including  Outstanding  VMTP  Shares,  and  Common  Shares  shall  vote
         together  as a single  class;  provided,  however,  that the holders of
         outstanding Preferred Shares,  including

                                       24

<PAGE>


         Outstanding  VMTP  Shares,  shall  be  entitled,  as a  class,  to  the
         exclusion of the Holders of all other  securities  and Common Shares of
         the Fund,  to elect two  trustees of the Fund at all times.  Subject to
         Section 2.6(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.

                                    (i)     Voting Period.  During any period in
                  which any one or more of the  conditions  described in clauses
                  (A) or (B) of this Section  2.6(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 as a class on
                  a one-vote-per-share basis (to the exclusion of the Holders of
                  all other  securities  and  classes  of  capital  stock of the
                  Fund), 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:

                                            (A)      if,   at   the   close   of
                           business  on  any  dividend   payment  date  for  any
                           outstanding  share of Preferred  Shares including any
                           Outstanding   VMTP   Share,   accumulated   dividends
                           (whether   or  not  earned  or   declared)   on  such
                           outstanding  share of  Preferred  Shares  equal to at
                           least two (2) 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 applicable paying agent for the
                           payment of such accumulated dividends; or

                                            (B)      if at any time  Holders  of
                           Preferred  Shares are  otherwise  entitled  under the
                           1940  Act  to  elect  a  majority  of  the  Board  of
                           Trustees.

                           Upon the  termination of a Voting Period,  the voting
         rights described in this Section 2.6(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 2.6(b)(i).

                                    (ii)    Notice of Special  Meeting.  As soon
                  as  practicable  after the accrual of any right of the Holders
                  of Preferred Shares to elect additional  trustees as described
                  in Section 2.6(b)(i), the Fund shall call a special meeting of
                  such Holders and notify the Redemption and Paying Agent and/or
                  such  other  Person  as is  specified  in the  terms  of  such
                  Preferred  Shares to receive notice (i) by mailing or delivery
                  by  Electronic  Means or (ii) in such other manner and by such
                  other means as are  specified  in the terms of such  Preferred
                  Shares, a notice of such special meeting to such Holders, such
                  meeting to be held not less than ten (10) nor

                                       25

<PAGE>


                  more than  thirty  (30)  calendar  days  after the date of the
                  delivery by Electronic  Means or mailing of such notice or the
                  delivery of such  notice by such other means as are  described
                  above.  If the Fund fails to call such a special  meeting,  it
                  may be called at the expense of the Fund by any such Holder on
                  like notice.  The record date for  determining  the Holders of
                  Preferred  Shares  entitled  to  notice of and to vote at such
                  special  meeting  shall be the close of  business on the fifth
                  (5th)  Business Day  preceding  the calendar day on which such
                  notice is mailed or otherwise  delivered.  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 capital stock of the Fund),  shall be entitled to elect the
                  number  of  trustees  prescribed  in  Section  2.6(b)(i)  on a
                  one-vote-per-share basis.

                                    (iii)   Terms   of   Office   of    Existing
                  Trustees. The terms of office of the incumbent trustees of the
                  Fund at the time of a special  meeting of Holders of Preferred
                  Shares to elect additional trustees in accordance with Section
                  2.6(b)(i)  shall  not be  affected  by the  election  at  such
                  meeting by the Holders of VMTP  Shares and such other  Holders
                  of  Preferred  Shares of the number of trustees  that they are
                  entitled to elect,  and the trustees so elected by the Holders
                  of VMTP  Shares and such other  Holders of  Preferred  Shares,
                  together  with the two (2) trustees  elected by the Holders of
                  Preferred  Shares in accordance with Section 2.6(a) hereof and
                  the  remaining  trustees  elected by the holders of the Common
                  Shares and Preferred Shares, shall constitute the duly elected
                  trustees of the Fund.

                                    (iv)    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  of the
                  Preferred   Shares   pursuant  to  Section   2.6(b)(i)   shall
                  terminate,   the  remaining   trustees  shall  constitute  the
                  trustees  of the Fund and the voting  rights of the Holders of
                  Preferred  Shares to elect  additional  trustees  pursuant  to
                  Section  2.6(b)(i)  shall cease,  subject to the provisions of
                  the last sentence of Section 2.6(b)(i).

                           (c)      Holders  of VMTP  Shares to Vote on  Certain
         Matters.

                                    (i)     Certain     Amendments     Requiring
                  Approval of VMTP Shares.  Except as otherwise permitted by the
                  terms  of  this  Statement,  so long as any  VMTP  Shares  are
                  Outstanding,  the Fund shall not, without the affirmative vote
                  or consent of the  Holders of at least a majority  of the VMTP
                  Shares of all Series  Outstanding at the time, voting together
                  as a separate class,  amend, alter or repeal the provisions of
                  the Declaration,  including this Statement, whether by merger,
                  consolidation  or  otherwise,  so as to  adversely  affect any
                  preference,  right or power of such VMTP Shares or the Holders
                  thereof;   provided,   however,  that  (i)  a  change  in  the
                  capitalization  of the Fund in  accordance  with  Section  2.8
                  hereof shall not be considered to adversely  affect the rights
                  and  preferences of the

                                       26

<PAGE>


                  VMTP  Shares,  and (ii) a division  of a VMTP  Share  shall be
                  deemed to adversely affect such preferences,  rights or powers
                  only  if the  terms  of such  division  adversely  affect  the
                  Holders of the VMTP Shares. For purposes of the foregoing,  no
                  matter  shall be deemed to  adversely  affect any  preference,
                  right or power of a VMTP  Share of any  Series  or the  Holder
                  thereof  unless  such  matter  (i)  alters  or  abolishes  any
                  preferential right of such VMTP Share, or (ii) creates, alters
                  or abolishes  any right in respect of  redemption of such VMTP
                  Share  (other than as a result of a division of a VMTP Share).
                  So long as any VMTP  Shares  are  Outstanding,  the Fund shall
                  not, without the affirmative vote or consent of the Holders of
                  at least 66 2/3% of the VMTP Shares  Outstanding  at the time,
                  voting as a separate class,  file a voluntary  application for
                  relief under Federal bankruptcy law or any similar application
                  under  state law for so long as the Fund is  solvent  and does
                  not foresee becoming insolvent.

                                    (ii)    1940  Act  Matters.  Unless a higher
                  percentage is provided for in the Declaration, the affirmative
                  vote of the Holders of at least "a majority of the outstanding
                  Preferred  Shares,"  including VMTP Shares  Outstanding at the
                  time,  voting as a separate  class,  shall be required  (A) to
                  approve any  conversion  of the Fund from a  closed-end  to an
                  open-end  investment  company,  (B) to  approve  any  plan  of
                  reorganization  (as  such  term  is  used  in  the  1940  Act)
                  adversely  affecting such shares,  or (C) to approve any other
                  action  requiring a vote of security holders of the Fund under
                  Section 13(a) of the 1940 Act. For purposes of the  foregoing,
                  the vote of a "majority of the outstanding  Preferred  Shares"
                  means the vote at an annual or special  meeting duly called of
                  (i)  sixty-seven  percent (67%) or more of such shares present
                  at a meeting,  if the Holders of more than fifty percent (50%)
                  of such  shares are  present or  represented  by proxy at such
                  meeting, or (ii) more than fifty percent (50%) of such shares,
                  whichever is less.

                                    (iii)   Certain     Amendments     Requiring
                  Approval  of  Specific  Series  of  VMTP  Shares.   Except  as
                  otherwise permitted by the terms of this Statement, so long as
                  any VMTP  Shares of a Series are  Outstanding,  the Fund shall
                  not, without the affirmative vote or consent of the Holders of
                  at  least a  majority  of the  VMTP  Shares  of  such  Series,
                  Outstanding at the time,  voting as a separate  class,  amend,
                  alter or repeal the  provisions  of the  Appendix  relating to
                  such Series, whether by merger, consolidation or otherwise, so
                  as to  adversely  affect  any  preference,  right or power set
                  forth in such  Appendix  of the VMTP  Shares of such Series or
                  the Holders thereof;  provided,  however, that (i) a change in
                  the  capitalization of the Fund in accordance with Section 2.8
                  hereof shall not be considered to adversely  affect the rights
                  and preferences of the VMTP Shares of such Series,  and (ii) a
                  division  of a VMTP  Share  shall be  deemed  to  affect  such
                  preferences,  rights  or  powers  only  if the  terms  of such
                  division  adversely  affect the  Holders of the VMTP Shares of
                  such  Series;  and  provided,   further,  that  no  amendment,
                  alteration or repeal of the  obligation of the Fund to (x) pay
                  the Term  Redemption  Price on the Term  Redemption Date for a
                  Series,  or (y) accumulate  dividends at the Dividend Rate (as
                  set  forth  in  this  Statement  and the  applicable  Appendix
                  hereto) for a Series shall be effected without,  in each case,
                  the prior

                                       27

<PAGE>


                  unanimous  vote or  consent of the  Holders of such  Series of
                  VMTP Shares. For purposes of the foregoing, no matter shall be
                  deemed to adversely affect any preference, right or power of a
                  VMTP  Share of a Series  or the  Holder  thereof  unless  such
                  matter (i) alters or abolishes any preferential  right of such
                  VMTP Share, or (ii) creates,  alters or abolishes any right in
                  respect of redemption of such VMTP Share.

                           (d)      Voting  Rights  Set  Forth  Herein  Are Sole
         Voting Rights. Unless otherwise required by law or the Declaration, the
         Holders  of  VMTP  Shares  shall  not  have  any  relative   rights  or
         preferences  or other  special  rights with respect to voting such VMTP
         Shares other than those  specifically set forth in this Section 2.6(d);
         provided,  however,  that nothing in this Statement  shall be deemed to
         preclude  or limit the right of the Fund (to the  extent  permitted  by
         applicable  law) to  contractually  agree with any Holder or Designated
         Owner of VMTP  Shares of any Series  that any action or inaction by the
         Fund shall require the consent or approval of such Holder or Designated
         Owner.

                           (e)      No  Cumulative  Voting.  The Holders of VMTP
         Shares shall have no rights to cumulative voting.

                           (f)      Voting for  Trustees  Sole Remedy for Fund's
         Failure to Declare or Pay  Dividends.  In the event that the Fund fails
         to declare  or pay any  dividends  on any Series of VMTP  Shares on the
         Dividend Payment Date therefor,  the exclusive remedy of the Holders of
         the VMTP Shares shall be the right to vote for trustees pursuant to the
         provisions of this Section 2.6(f). Nothing in this Section 2.6(f) shall
         be deemed to affect the  obligation of the Fund to  accumulate  and, if
         permitted by applicable law, the  Declaration  and this Statement,  pay
         dividends at the Increased Rate in the  circumstances  contemplated  by
         Section 2.2(g) hereof.

                           (g)      Holders  Entitled to Vote.  For  purposes of
         determining  any rights of the  Holders  of VMTP  Shares to vote on any
         matter,  whether such right is created by this Statement,  by the other
         provisions of the  Declaration,  by statute or otherwise,  no Holder of
         VMTP Shares  shall be entitled to vote any VMTP Share and no VMTP Share
         shall be  deemed  to be  "Outstanding"  for the  purpose  of  voting or
         determining  the number of shares  required to  constitute a quorum if,
         prior  to or  concurrently  with the time of  determination  of  shares
         entitled to vote or the time of the actual  vote on the matter,  as the
         case may be, the requisite  Notice of  Redemption  with respect to such
         VMTP Share shall have been given in accordance  with this Statement and
         Deposit Securities for the payment of the Redemption Price of such VMTP
         Share shall have been deposited in trust with the Redemption and Paying
         Agent for that  purpose.  No VMTP Share held by the Fund shall 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.

                  2.7      Rating  Agencies.  The Fund  shall  use  commercially
reasonable  efforts  to cause the  Rating  Agencies  to issue  long-term  credit
ratings with respect to each Series of VMTP Shares for so long as such Series is
Outstanding.  The Fund shall use commercially  reasonable efforts to comply with
any applicable Rating Agency Guidelines.  If a Rating Agency shall cease to rate
the  securities  of  tax-exempt   closed-end   management  investment  companies
generally, the

                                       28

<PAGE>


Board of Trustees  shall  terminate the  designation  of such Rating Agency as a
Rating  Agency  hereunder.  The Board of  Trustees  may elect to  terminate  the
designation of any Rating Agency as a Rating Agency  hereunder with respect to a
Series  of  VMTP  Shares  so long  as  either  (i)  immediately  following  such
termination,  there would be at least two Rating  Agencies  with respect to such
Series or (ii) it replaces the  terminated  Rating Agency with another NRSRO and
provides  notice  thereof to the  Holders  of such  Series;  provided  that such
replacement  shall not occur unless such  replacement  Other Rating Agency shall
have at the time of such  replacement (i) published a rating for the VMTP Shares
of such Series and (ii) entered  into an agreement  with the Fund to continue to
publish such rating subject to the Rating  Agency's  customary  conditions.  The
Board of Trustees may also elect to designate  one or more other NRSROs as Other
Rating  Agencies  hereunder with respect to a Series of VMTP Shares by notice to
the  Holders of the VMTP  Shares.  The Rating  Agency  Guidelines  of any Rating
Agency  may be  amended  by such  Rating  Agency  without  the vote,  consent or
approval of the Fund,  the Board of Trustees or any Holder of Preferred  Shares,
including any VMTP Shares, or Common Shares.

                  2.8      Issuance of Additional  Preferred  Shares. So long as
any VMTP Shares are  Outstanding,  the Fund may,  without the vote or consent of
the Holders thereof,  authorize,  establish and create and issue and sell shares
of one or more series of a class of senior  securities of the Fund  representing
stock under Section 18 of the 1940 Act,  ranking on a parity with VMTP Shares as
to the payment of dividends  and the  distribution  of assets upon  dissolution,
liquidation  or the winding up of the  affairs of the Fund,  in addition to then
Outstanding Series of VMTP Shares,  including  additional Series of VMTP Shares,
in each case in accordance with  applicable  law,  provided that the Fund shall,
immediately  after giving effect to the issuance of such Preferred Shares and to
its receipt and application of the proceeds thereof, including to the redemption
of Preferred Shares with such proceeds,  have Asset Coverage  (calculated in the
same manner as is contemplated by Section 2.4(b) hereof) of at least 225%.

                  2.9      Status of Redeemed or Repurchased  VMTP Shares.  VMTP
Shares that at any time have been redeemed or purchased by the Fund shall, after
such  redemption  or  purchase,  have the  status  of  authorized  but  unissued
Preferred Shares.

                  2.10     Distributions  with  respect to Taxable  Allocations.
Whenever a Taxable Allocation is to be paid by the Fund with respect to the VMTP
Shares of a Series with respect to any Dividend  Period and either the Increased
Rate or the Maximum Rate is not in effect during such Dividend Period,  the Fund
shall  comply with one of clause (a),  clause (b) or clause (c) of this  Section
2.10:

                           (a)      The  Fund   may   provide   notice   to  the
         Redemption and Paying Agent prior to the  commencement  of any Dividend
         Period  for a  Series  of VMTP  Shares  of the  amount  of the  Taxable
         Allocation  that will be made in respect  of shares of such  Series for
         such Dividend Period (a "Notice of Taxable Allocation"). Such Notice of
         the Taxable  Allocation will state the amount of the dividends  payable
         in  respect  of each  VMTP  Share  of the  applicable  Series  for such
         Dividend  Period that will be treated as a Taxable  Allocation  and the
         adjustment  to the  Dividend  Rate for each  Rate  Period  (or  portion
         thereof)  included in such Dividend Period that will be required to pay
         the Additional  Amount Payment,  or Additional New York Amount Payment,
         as applicable,  in respect of the Taxable  Allocation paid on such VMTP
         Share for such Dividend Period. In lieu of

                                       29

<PAGE>


         adjusting the Dividend  Rate,  the Fund may make, in addition to and in
         conjunction  with the payment of regular  dividends  for such  Dividend
         Period,  a supplemental  distribution  in respect of each share of such
         series for such Dividend Period equal to the Additional  Amount Payment
         or  Additional  New York  Amount  Payment,  as  applicable,  payable in
         respect of the Taxable  Allocation paid on such share for such Dividend
         Period. The Fund will use commercially reasonable efforts to effect the
         distribution  of Taxable  Allocations in respect of VMTP Shares of each
         Series as provided in this Section  2.10(a),  and shall only effect the
         distribution of Taxable  Allocation  pursuant to Section 2.10(b) and/or
         Section  2.10(c)  if  such  commercially   reasonable  efforts  do  not
         reasonably  permit  the Fund to effect  the  distribution  of a Taxable
         Allocation as contemplated by this Section 2.10(a).

                           (b)      If the Fund  does not  provide  a Notice  of
         Taxable  Allocation  as provided in Section  2.10(a)  with respect to a
         Taxable  Allocation that is made in respect of VMTP Shares of a Series,
         the Fund may make one or more  supplemental  distributions on shares of
         such Series  equal to the amount of such Taxable  Allocation.  Any such
         supplemental  distribution in respect of VMTP Shares of a Series may be
         declared  and  paid  on any  date,  without  reference  to any  regular
         Dividend  Payment  Date,  to the  Holders,  or  New  York  Holders,  as
         applicable,  of shares  of such  Series  as their  names  appear on the
         registration books of the Fund on such date, not exceeding fifteen (15)
         calendar  days   preceding  the  payment  date  of  such   supplemental
         distribution, as may be fixed by the Board of Trustees.

                           (c)      If in  connection  with a redemption of VMTP
         Shares, the Fund makes a Taxable Allocation without having either given
         advance notice thereof  pursuant to Section 2.10(a) or made one or more
         supplemental  distributions pursuant to Section 2.10(b), the Fund shall
         direct the  Redemption  and Paying Agent to send an  Additional  Amount
         Payment or  Additional  New York  Amount  Payment,  as  applicable,  in
         respect of such  Taxable  Allocation  to each  Holder and each New York
         Holder,  as applicable,  of such shares at such person's address as the
         same appears or last appeared on the record books of the Fund.

                           (d)      The  Fund  shall  not  be  required  to  pay
         Additional  Amount Payments or Additional New York Amount Payments,  as
         applicable,  with  respect to VMTP Shares of any Series with respect to
         any net capital gain or other taxable income determined by the Internal
         Revenue  Service to be allocable in a manner  different from the manner
         used by the Fund.

                           (e)      With  respect  to each  Holder  and each New
         York Holder, the Fund shall only be required,  pursuant to this Section
         2.10, to pay either an Additional  Amount  Payment or an Additional New
         York Amount Payment, but not both.

                           (f)      No  Additional  New York  Amount  Payment as
         described  in this  Section 2.10 shall apply or be payable with respect
         to any VMTP Shares that are being  registered  and sold  pursuant to an
         effective  registration  statement  under the  Securities Act or to any
         subsequent transfer of such registered VMTP Shares.

                                       30

<PAGE>


                  2.11     Term  Redemption   Liquidity  Account  and  Liquidity
Requirement.


                           (a)      On or prior to the Liquidity Account Initial
         Date with  respect to any Series of VMTP  Shares,  the Fund shall cause
         the Custodian to segregate,  by means of appropriate  identification on
         its books and records or otherwise in accordance  with the  Custodian's
         normal  procedures,  from  the  other  assets  of the Fund  (the  "Term
         Redemption  Liquidity  Account")  Liquidity Account  Investments with a
         Market  Value equal to at least One  Hundred Ten Percent  (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
         Term  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  Dividend  Rate for such Series in
         effect at the time of the  creation  of the Term  Redemption  Liquidity
         Account for such Series  will be the  Dividend  Rate in effect for such
         Series 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 Term  Redemption
         Liquidity  Account  for a  Series  of VMTP  Shares  as of the  close of
         business  on any  Business  Day is less than One  Hundred  Ten  Percent
         (110%) of the Term Redemption Amount with respect to such Series,  then
         the Fund shall  cause the  Custodian  and the  Adviser to take all such
         necessary actions,  including segregating additional assets of the Fund
         as Liquidity Account Investments, so that the aggregate Market Value of
         the  Liquidity  Account  Investments  included  in the Term  Redemption
         Liquidity  Account for such Series is at least equal to One Hundred Ten
         Percent  (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  Fund  segregated  as
         Liquidity Account  Investments with respect to a Series of VMTP Shares,
         the Adviser,  on behalf of the Fund,  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,  so long as (i)  the  assets  of the  Fund  segregated  as
         Liquidity  Account  Investments  at the close of  business on such date
         have a Market Value equal to at least One Hundred Ten Percent (110%) of
         the Term  Redemption  Amount  with  respect to such Series and (ii) the
         assets of the Fund  designated and segregated as Deposit  Securities at
         the close of  business  on such date  have a Market  Value  equal to at
         least the Liquidity  Requirement (if any) determined in accordance with
         Section  2.11(b)  below with respect to such Series for such date.  The
         Fund  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 Term
         Redemption  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.

                           (b)      The Market  Value of the Deposit  Securities
         held in the Term  Redemption  Liquidity  Account  for a Series  of VMTP
         Shares,  from and after the 15th 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,  in each case as specified in
         the table set forth below, shall not be less than the percentage of the
         Term  Redemption  Amount for such

                                       31

<PAGE>


         Series set forth below  opposite such number of months (the  "Liquidity
         Requirement"),  but in all cases  subject to the  provisions of Section
         2.11(c) below:

         ----------------------------------------------------------------------
                Number of Months                 Value of Deposit Securities
               Preceding Month of                   as Percentage of Term
              Term Redemption Date:                   Redemption Amount
         ----------------------------------------------------------------------
                        5                                    20%
         ----------------------------------------------------------------------
                        4                                    40%
         ----------------------------------------------------------------------
                        3                                    60%
         ----------------------------------------------------------------------
                        2                                    80%
         ----------------------------------------------------------------------
                        1                                   100%
         ----------------------------------------------------------------------

                           (c)      If the aggregate Market Value of the Deposit
         Securities  included  in the Term  Redemption  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 Fund  shall  cause  the  segregation  of
         additional  or  substitute  Deposit  Securities  in respect of the Term
         Redemption  Liquidity  Account for such Series,  so that the  aggregate
         Market Value of the Deposit Securities  included in the Term Redemption
         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.

                           (d)      The Deposit Securities  included in the Term
         Redemption Liquidity Account for a Series of VMTP Shares may be applied
         by the Fund, in its discretion,  towards payment of the Term Redemption
         Price for such  Series as  contemplated  by  Section  2.5(d).  Upon the
         deposit by the Fund with the  Redemption  and  Paying  Agent of 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  in  accordance  with  Section  2.5(d)(ii),  the
         requirement  of the  Fund to  maintain  the Term  Redemption  Liquidity
         Account as  contemplated  by this Section 2.11 shall lapse and be of no
         further force and effect.

                  2.12     Global  Certificate.  Prior to the  commencement of a
Voting Period,  (i) all VMTP Shares of any Series  Outstanding from time to time
shall be represented by one global certificate for such Series registered in the
name of the  Securities  Depository or its nominee and (ii) no  registration  of
transfer of shares of such  Series of VMTP Shares  shall be made on the books of
the Fund to any Person other than the  Securities  Depository  or its nominee or
transferee.  The foregoing  restriction  on  registration  of transfer  shall be
conspicuously  noted on the  face or back of the  global  certificates  for such
Series of VMTP Shares.

                  2.13     Notice.  All  notices  or  communications  hereunder,
unless otherwise specified in this Statement,  shall be sufficiently given if in
writing and  delivered  in person,  by  telecopier,  by  Electronic  Means or by
overnight  delivery.  Notices  delivered  pursuant to this Section 2.13 shall be
deemed given on the date received.

                  2.14     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

                                       32

<PAGE>


designated hereunder shall cease and terminate,  and all obligations of the Fund
under this Statement with respect to such Series shall terminate.

                  2.15     Appendices.  The  designation  of each Series of VMTP
Shares may be set forth in this Statement through an Appendix attached hereto or
in a separate Statement.  The Board of Trustees may, by resolution duly adopted,
without shareholder  approval (except as otherwise provided by this Statement or
required by applicable law) (1) amend the Appendix to this Statement relating to
a Series so as to reflect any amendments to the terms  applicable to such Series
including an increase in the number of authorized  shares of such Series and (2)
add  additional  Series  of VMTP  Shares by  including  a new  Appendix  to this
Statement relating to such Series.

                  2.16     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,  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.

                  2.17     Modification.  To the extent  permitted by applicable
law and Section 2.6(c),  the Board of Trustees,  without the vote of the Holders
of VMTP  Shares,  may  interpret,  supplement  or amend the  provisions  of this
Statement  or  any  Appendix   hereto  to  supply  any  omission,   resolve  any
inconsistency  or ambiguity or to cure,  correct or supplement  any defective or
inconsistent provision, including any provision that becomes defective after the
date hereof  because of  impossibility  of  performance or any provision that is
inconsistent with any provision of any other Preferred Shares of the Fund.

                  2.18     Transfers.

                           (a)      A  Designated  Owner or  Holder  of any VMTP
Shares of any Series may sell, transfer or otherwise dispose of VMTP Shares only
in whole  shares and only to (i) Persons  that such  Designated  Owner or Holder
reasonably  believes are  "qualified  institutional  buyers" (as defined in Rule
144A under the  Securities  Act or any successor  provision) in accordance  with
Rule  144A  under  the  Securities  Act  or any  successor  provision  that  are
registered closed-end  management investment companies,  the shares of which are
traded on a national securities exchange ("Closed-End Funds"),  banks, insurance
companies or registered open-end management investment companies, or (ii) tender
option bond trusts in which all investors are Persons that such Designated Owner
or Holder reasonably believes are "qualified  institutional  buyers" (as defined
in Rule 144A  under the  Securities  Act or any  successor  provision)  that are
Closed-End Funds, banks, insurance companies,  or registered open-end management
investment companies, or (iii) other investors with the prior written consent of
the Fund. The  restrictions on transfer  contained in this Section 2.18(a) shall
not apply to any VMTP Shares that are being  registered  and sold pursuant to an
effective  registration  statement under the Securities Act or to any subsequent
transfer of such VMTP Shares.

                                       33

<PAGE>


                           (b)      If at any time  the  Fund is not  furnishing
information  pursuant  to Section 13 or 15(d) of the  Exchange  Act, in order to
preserve the exemption for resales and transfers under Rule 144A, the Fund shall
furnish,  or cause to be  furnished,  to holders of VMTP Shares and  prospective
purchasers of VMTP Shares,  upon request,  information  with respect to the Fund
satisfying the requirements of subsection (d)(4) of Rule 144A.

                           (c)      Each Holder of VMTP  Shares  shall be deemed
         to have agreed that, in connection with any transfer of VMTP Shares, it
         is  transferring  to the  transferee the right to receive from the Fund
         any dividends  declared and unpaid for each day prior to the transferee
         becoming the beneficial owner of VMTP Shares in exchange for payment of
         the purchase price for such VMTP Shares by the transferee.

                  2.19     No Additional  Rights.  Unless otherwise  required by
law or the  Declaration,  the Holders of VMTP Shares shall not have any relative
rights or  preferences  or other special rights with respect to such VMTP Shares
other than those  specifically set forth in this Statement;  provided,  however,
that nothing in this Statement shall be deemed to preclude or limit the right of
the Fund (to the extent permitted by applicable law) to contractually agree with
any Holder or  Designated  Owner of VMTP Shares of any Series with regard to any
special rights of such Holder or Designated Owner with respect to its investment
in the Fund.

                  [Signature Page Begins on the Following Page]

                                       34

<PAGE>


     (Signature Page to the Statement Establishing and Fixing the Rights and
          Preferences of Variable Rate MuniFund Term Preferred Shares)


         IN WITNESS WHEREOF,  Nuveen New York AMT-Free Municipal Income Fund has
caused  this  Statement  to be  signed  in its name and on its  behalf by a duly
authorized officer,  who acknowledges said instrument to be the corporate act of
the Fund, and states that to the best of such officer's  knowledge,  information
and belief the matters and facts  herein set forth with  respect to approval are
true in all material respects, all as of ______________.


                                            NUVEEN NEW YORK AMT-FREE
                                            MUNICIPAL INCOME FUND

                                            By:
                                               ---------------------------------
                                            Name: Gifford R. Zimmerman
                                            Title: Chief Administrative Officer

<PAGE>


                                                                      APPENDIX A

                 NUVEEN NEW YORK AMT-FREE MUNICIPAL INCOME FUND

            VARIABLE RATE MUNIFUND TERM PREFERRED SHARES, SERIES 2014

              Preliminary Statement and Incorporation By Reference

         This  Appendix  establishes  a Series of Variable  Rate  MuniFund  Term
Preferred Shares of Nuveen New York AMT-Free  Municipal  Income Fund.  Except as
set forth below,  this  Appendix  incorporates  by reference the terms set forth
with respect to all Series of such Variable Rate Municipal Term Preferred Shares
in that  "Statement  Establishing  and  Fixing the  Rights  and  Preferences  of
Variable Rate MuniFund Term Preferred  Shares" filed with the Secretary of State
of the State of  Massachusetts  on March 8, 2013 (the  "VMTP  Statement").  This
Appendix has been adopted by  resolution  of the Board of Trustees of Nuveen New
York  AMT-Free  Municipal  Income  Fund.  Capitalized  terms used herein but not
defined  herein  have the  respective  meanings  therefor  set forth in the VMTP
Statement.

         Section 1.   Designation  as to Series.  Variable  Rate  MuniFund  Term
Preferred  Shares,  Series 2014: A series of Five Hundred Seven (507)  Preferred
Shares  classified as Variable Rate  MuniFund  Term  Preferred  Shares is hereby
designated as the "Variable  Rate MuniFund Term Preferred  Shares,  Series 2014"
(the  "Series  2014 VMTP  Shares").  Each share of such  Series  shall have such
preferences, voting powers, restrictions,  limitations as to dividends and other
distributions,  qualifications  and  terms  and  conditions  of  redemption,  in
addition to those  required by  applicable  law and those that are expressly set
forth in the  Declaration  and the VMTP Statement  (except as the VMTP Statement
may be expressly  modified by this Appendix),  as are set forth in this Appendix
A. The Series 2014 VMTP Shares shall  constitute a separate  series of Preferred
Shares and of the Variable Rate MuniFund Term  Preferred  Shares and each Series
2014 VMTP Share shall be identical.  The following  terms and  conditions  shall
apply solely to the Series 2014 VMTP Shares:

         Section 2.   Number of   Authorized   Shares  of Series.  The number of
authorized shares is Five Hundred Seven (507).

         Section 3.   Date of Original Issue with respect to Series. The Date of
Original Issue is March 11, 2013.

         Section 4.   Liquidation   Preference   Applicable   to   Series.   The
Liquidation Preference is $100,000.00 per share.

         Section 5.   Term   Redemption   Date  Applicable  to Series.  The Term
Redemption Date is October 1, 2014.

         Section 6.   Dividend   Payment   Dates   Applicable   to  Series.  The
Dividend  Payment Dates are the first  Business Day of the month next  following
each Dividend Period.

         Section 7.   Liquidity   Account  Initial  Date  Applicable  to Series.
The Liquidity Account Initial Date is April 1, 2014.

                               Appendix A - Page 1

<PAGE>


         Section 8.   Exceptions  to  Certain   Definitions   Applicable  to the
Series. The following  definitions  contained under the heading "Definitions" in
the VMTP Statement are hereby amended as follows:

         Not applicable.

         Section 9.   Additional  Definitions  Applicable  to  the Series.  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:

         "Dividend  Period" means,  with respect to the Series 2014 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 the last calendar day
of the  month  in  which  the  Date of  Original  Issue  occurred  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.

         "Optional  Redemption  Premium"  means with respect to each Series 2014
VMTP Share to be redeemed an amount equal to

                  Not applicable.

         Section 10.  Amendments  to  Terms  of  VMTP  Shares  Applicable to the
Series. The following  provisions contained under the heading "Terms of the VMTP
Shares" in the VMTP Statement are hereby amended as follows:

         Not applicable.

                               Appendix A - Page 2

<PAGE>


   (Signature Page to the Appendix A to Statement Establishing and Fixing the
     Rights and Preferences of Variable Rate MuniFund Term Preferred Shares)

         IN WITNESS WHEREOF,  Nuveen New York AMT-Free Municipal Income Fund has
caused  this  Appendix  to be  signed  in its name and on its  behalf  by a duly
authorized officer,  who acknowledges said instrument to be the corporate act of
the Fund, and states that to the best of such officer's  knowledge,  information
and belief the matters and facts  herein set forth with  respect to approval are
true in all material respects, all as of March 7, 2013.

                                            NUVEEN NEW YORK AMT-FREE
                                            MUNICIPAL INCOME FUND

                                            By: /s/ Gifford R. Zimmerman
                                                -------------------------
                                            Name: Gifford R. Zimmerman
                                            Title: Chief Administrative Officer

</TEXT>
</DOCUMENT>
