NUVEEN NEW YORK MUNICIPAL ADVANTAGE FUND, N-2, 1998-12-08

NUVEEN NEW YORK MUNICIPAL ADVANTAGE FUND
N-2, 1998-12-08

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<PAGE>

As filed with the Securities and Exchange Commission on December 8, 1998
================================================================================
1933 Act File No. 333-,
1940 Act File No. 811-
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-2
(Check appropriate box or boxes)

[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

[_] Pre-Effective Amendment No. __________

[_] Post-Effective Amendment No. __________

and

[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

[_] Amendment No. __________

Nuveen New York Municipal Advantage Fund
Exact Name of Registrant as Specified in Declaration of Trust

333 West Wacker Drive, Chicago, Illinois 60606
Address of Principal Executive Offices (Number, Street, City, State, Zip Code)

(800) 257-8787
Registrant's Telephone Number, including Area Code

Gifford R. Zimmerman, Esq.
Vice President and Secretary
333 West Wacker Drive
Chicago, Illinois 60606
Name and Address (Number, Street, City, State, Zip Code) of Agent for Service

Copies of Communications to:
Janet D. Olsen Thomas S. Harman
Bell, Boyd & Lloyd Morgan, Lewis & Bockius LLP
70 W. Madison St. 1800 M Street, N.W.
Chicago, IL 60602 Washington, D.C. 20036
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement
_________________

If any of the securities being registered on this form are offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. [_]

It is proposed that this filing will become effective (check appropriate
box)

[X] when declared effective pursuant to section 8(c)
_________________
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
====================================================================================================================
Proposed Maximum Amount of
Title of Securities Being Amount Being Proposed Maximum Aggregate Offering Registration
Registered Registered Offering Price Per Unit Price(1) Fee
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares, $.01 par value 100,000 Shares $15.00 $1,500,000 $417
====================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such dates as the Commission, acting pursuant to said Section 8(a),
may determine.

================================================================================
<PAGE>

NUVEEN NEW YORK MUNICIPAL ADVANTAGE FUND

_______________

CROSS REFERENCE SHEET

Part A - Prospectus

<TABLE>
<CAPTION>
Items in Part A of Form N-2 Location in Prospectus
--------------------------- ----------------------
<S> <C> <C>
Item 1. Outside Front cover...................... Cover Page

Item 2. Cover Pages; Other Offering Information.. Cover Page

Item 3. Fee Table and Synopsis................... Prospectus Summary; Summary of Fund Expenses

Item 4. Financial Highlights..................... Not Applicable

Item 5. Plan of Distribution..................... Cover Page; Prospectus Summary; Underwriting

Item 6. Selling Shareholders..................... Not Applicable

Item 7. Use of Proceeds.......................... Use of Proceeds; The Fund's Investments

Item 8. General Description of the Registrant.... The Fund; The Fund's Investments; MuniPreferred(R) Shares
and Leverage; Description of Shares

Item 9. Management............................... Management of the Fund; Custodian and Transfer Agent

Item 10. Capital Stock, Long-Term Debt, and Other
Securities.............................. Description of Shares; MuniPreferred Shares and Leverage;
Distributions; Dividend Reinvestment Plan; Certain
Provisions in the Declaration of Trust; Tax Matters

Item 11. Defaults and Arrears on Senior Securities Not Applicable

Item 12. Legal Proceedings........................ Not Applicable

Item 13. Table of Contents of the Statement of
Additional Information.................. Table of Contents for the Statement of
Additional Information
</TABLE>
<PAGE>

Part B - Statement of Additional Information

<TABLE>
<CAPTION>
Location in Statement of
Items in Part A of Form N-2 Additional Information
--------------------------- ------------------------
<S> <C> <C>
Item 14. Cover Page.............................. Cover Page

Item 15. Table of Contents....................... Cover Page

Item 16. General Information and History......... Not Applicable

Item 17. Investment Objective and Policies....... The Fund's Investments; Certain
Trading Strategies of the Fund;
Portfolio Transactions

Item 18. Management.............................. Management of the Fund; Portfolio
Transactions

Item 19. Control Persons and Principal Holders of
Securities............................. Management of the Fund;
Statement of Net Assets

Item 20. Investment Advisory and Other Services.. Management of the Fund;
Custodian and Transfer Agent;
Experts

Item 21. Brokerage Allocation and Other Practices Portfolio Transactions

Item 22. Tax Status.............................. Tax Matters; Distributions

Item 23. Financial Statements.................... Report of Independent Auditors;
Statement of Net Assets
</TABLE>
Part C - Other Information

Items 24-33 have been answered in Part C of this Registration Statement.

2
<PAGE>

The information in this Prospectus is not complete and may be changed. The
Underwriters may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This Prospectus
is not an offer to sell these securities and is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
<PAGE>

NUVEEN
PROSPECTUS Subject to Completion
- ---------- December __, 1998

100,000 Shares
Nuveen New York Municipal Advantage Fund
Common Shares of Beneficial Interest
------------------------------------

Investment Objectives. The Fund is a newly organized, closed-end,
diversified management investment company. The Fund's investment objectives
are:

. to provide current income exempt from regular Federal, New York State and
New York City income tax; and

. to enhance portfolio value relative to the municipal bond market by
investing in tax-exempt municipal bonds that the Fund's investment adviser
believes are underrated or undervalued or that they represent municipal
market sectors that are undervalued.

Portfolio Contents. The Fund will invest its net assets in a diversified
portfolio of municipal bonds that are exempt from regular Federal and New York
State and New York City income tax. Under normal market conditions, the Fund
expects to be fully invested in such tax-exempt municipal bonds. The Fund will
invest at least 80% of its net assets in investment grade municipal bonds.
Investment grade bonds are those rated within the four highest grades (Baa or
BBB) or better, or bonds that are unrated but judged to be of comparable quality
by the Fund's investment adviser. The Fund may invest up to 20% of its net
assets in municipal bonds that are rated Ba/BB or B or that are unrated but
judged to be of comparable quality by the Fund's investment adviser. Bonds
rated below investment grade are more speculative and are commonly referred to
as "junk bonds." See "The Fund's Investments." The Fund cannot assure you that
it will achieve its investment objectives. You may have to pay Federal
alternative minimum tax on some of the Fund's dividends. See "Tax Matters."

No Prior History. Because the Fund is newly organized, its common shares
have no history of public trading. Shares of closed-end investment companies
frequently trade at a discount from their net asset value.

MuniPreferred(R) Shares. The Fund intends to offer preferred shares,
called "MuniPreferred Shares" in this Prospectus. The Fund expects that the
MuniPreferred Shares will represent about one-third of the Fund's capital. The
issuance of MuniPreferred Shares will "leverage" your common shares, meaning
that the issuance of the MuniPreferred Shares may cause you to receive a larger
return or loss on your common shares than you would have gotten without the
issuance of the MuniPreferred Shares. Leverage provides special risks, but also
affords an opportunity for greater return. See "MuniPreferred Shares and
Leverage" and "Description of Shares."

-----------

The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation
to the contrary is a criminal offense.

<TABLE>
<CAPTION>
======================================================================================================================
Price to Public Sales Load(1) Proceeds to the
Fund(2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.................................................. $15.00 None $15.00
- ----------------------------------------------------------------------------------------------------------------------
Total(3)................................................... $1,500,000 None $_____
======================================================================================================================
</TABLE>
(1) John Nuveen & Co. Incorporated, or an affiliate, will pay the Underwriters
a commission in the amount of ___________% of the Price to Public Per
Share in connection with the sale of common shares offered hereby. See
"Underwriting."
(2) Before deduction of expenses payable by the Fund, estimated at $_________.
(3) The Fund has granted the Underwriters an option, exercisable for 45 days
from the date of this Prospectus, to purchase up to ___________ additional
common shares to cover over-allotments, if any. To the extent that such
option is exercised in full, the Total Price to Public will be $___________
and Total Proceeds to the Fund will be $___________. See "Underwriting."

The Underwriters are offering the common shares as they receive them and
retain the right to reject any order. The Underwriters expect to deliver your
common shares at the offices of _________________________ on or about__________.

JOHN NUVEEN & CO.
INCORPORATED

The date of this Prospectus is _________________

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON SHARES,
INCLUDING OVER-ALLOTMENT AND SHORT-COVERING TRANSACTIONS IN THE COMMON SHARES. A
PENALTY BID MAY BE IMPOSED IN CONNECTION WITH THE OFFERING. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."

This Prospectus contains important information about the Fund. You should
read the Prospectus before deciding whether to invest and retain it for future
reference. A Statement of Additional Information, dated ___________, containing
additional information about the Fund, has been filed with the Securities and
Exchange Commission and is hereby incorporated by reference in its entirety into
this Prospectus. You can review the table of contents of the Statement of
Additional Information on page 21 of this Prospectus. You may request a free
copy of the Statement of Additional Information by calling (800) 257-8787. You
may also obtain the Statement of Additional Information on the Securities and
Exchange Commission web site (http://www.sec.gov).

No public market for the common shares currently exists. The Fund will
apply to list the common shares on the New York Stock Exchange. The trading or
"ticker" symbol of the common shares is expected to be "___________".
<PAGE>

PROSPECTUS SUMMARY

This is only a summary. You should review the more detailed information
contained in the Prospectus and in the Statement of Additional Information.

The Fund.......................... Nuveen New York Municipal Advantage Fund
(the "Fund") is a newly organized, closed-
end, diversified management investment
company. See "The Fund."

The Offering...................... The Fund is offering 100,000 common shares
of beneficial interest at $15.00 per share.
The common shares of beneficial interest
will be called "Common Shares" in the rest
of this Prospectus. You must purchase at
least 100 Common Shares. The Fund has given
the Underwriters an option to purchase up
to ___________ additional Common Shares to
cover orders in excess of 100,000 Common
Shares. See "Underwriting."

Investment Objectives............. The Fund's investment objective is to
provide current income exempt from regular
Federal, New York State and New York City
income tax and enhance portfolio value
relative to the municipal bond market by
investing in tax-exempt municipal bonds
that the Fund's investment adviser believes
are underrated or undervalued or that
represent municipal markets that are
undervalued. The Fund will invest its net
assets in a diversified portfolio of
municipal bonds that are exempt from
regular Federal, New York State and New
York City income tax. Under normal market
conditions, the Fund expects to be fully
invested in such tax-exempt municipal
bonds. The Fund will invest at least 80% of
its net assets in investment grade
municipal bonds. Investment grade bonds are
those rated within the four highest grades
(Baa or BBB or better by Moody's Investor
Service, Inc. ("Moody's"), Standard & Poors
Corporation ("S&P") or Fitch Investors
Services, Inc. ("Fitch")), or bonds that
are unrated but judged to be of comparable
quality by the Fund's investment adviser.
The Fund may invest up to 20% of its net
assets in municipal bonds that are rated
Ba/BB or B by Moody's, S&P or Fitch or that
are unrated but judged to be of comparable
quality by the Fund's investment adviser.
Bonds rated below investment grade are more
speculative and are commonly referred to as
"junk bonds." The Fund cannot assure you
that it will attain its investment
objectives. See "The Fund's Investments."

i
<PAGE>

Special Considerations............ The Fund expects that a substantial portion
of its investments will pay interest that
is taxable under the Federal alternative
minimum tax. If you are subject to the
Federal alternative minimum tax, the Fund
may not be a suitable investment for you.
See "Tax Matters."

Proposed Offering of Approximately three to six months after
MuniPreferred(R) Shares.......... completion of this offering, the Fund
intends to offer preferred shares of
beneficial interest ("MuniPreferred
Shares") representing approximately one-
third of the Fund's capital after their
issuance. The issuance of MuniPreferred
Shares will leverage your shares. The money
the Fund obtains by selling the
MuniPreferred Shares will be invested in
long-term municipal bonds. Long-term
municipal bond yields are typically,
although not always, higher than shorter-
term yields. The MuniPreferred Shares will
pay dividends based on shorter-term rates.
So long as long-term bond yields, net of
applicable Fund expenses, exceed
MuniPreferred Share dividend rates, the
investment of the proceeds of the
MuniPreferred Shares will generate more
income than will be needed to pay dividends
on the MuniPreferred Shares. If so, the
excess will be used to pay higher dividends
to holders of Common Shares ("Common
Shareholders"). However, the Fund cannot
assure you that the issuance of
MuniPreferred Shares will result in a
higher yield on your shares. There are
risks associated with the leveraging of
your shares. Once MuniPreferred Shares are
issued, the net asset value and market
price of the Common Shares and the yield to
Common Shareholders will be more volatile.
See "MuniPreferred Shares and Leverage" and
"Description of Shares-MuniPreferred
Shares."

Investment Adviser................ Nuveen Advisory Corp. ("Nuveen Advisory")
will be the Fund's investment adviser.
Nuveen Advisory will receive an annual fee,
payable monthly, in a maximum amount equal
to __% of the Fund's average daily net
asset value (including assets attributable
to any MuniPreferred Shares that may be
outstanding). Nuveen Advisory is a wholly-
owned subsidiary of John Nuveen & Co.
Incorporated ("Nuveen"). See "Management of
the Fund" and "Underwriting."

Distributions..................... The Fund intends to make regular monthly
cash distributions to you at a level rate
based on the projected performance of the
Fund. Over time, the Fund will

ii
<PAGE>

distribute all of its net investment income
(after it pays accrued dividends on any
outstanding MuniPreferred Shares). In
addition, at least annually, the Fund
intends to distribute net capital gains and
taxable ordinary income, if any, to you so
long as the net capital gains and taxable
ordinary income are not necessary to pay
accrued dividends on, or redeem or
liquidate, any MuniPreferred Shares. Your
initial distribution is expected to be
declared approximately 60 days, and paid
approximately 90 days, from the completion
of this offering. You may elect to
automatically reinvest some or all of your
distributions in additional Common Shares
under the Fund's Dividend Reinvestment
Plan. See "Distributions" and "Dividend
Reinvestment Plan."

Listing........................... The Fund will apply to list the Common
Shares on the New York Stock Exchange. See
"Description of Shares Common Shares." The
trading or "ticker" symbol of the Common
Shares is expected to be "____."

Custodian......................... The Chase Manhattan Bank will serve as
custodian of the Fund's assets. See
"Custodian and Transfer Agent."

Market Price of Shares............ Shares of closed-end investment companies
may frequently trade at prices lower than
net asset value. Shares of closed-end
investment companies like the Fund that
invest predominately in investment grade
municipal bonds have during some periods
traded at prices higher than net asset
value and during other periods have traded
at prices lower than net asset value. The
Fund cannot assure you that Common Shares
will trade at a price higher than net asset
value in the future. Net asset value will
be reduced immediately following the
offering by the amount of the organization
and offering expenses paid by the Fund. See
"Use of Proceeds." The Common Shares are
designed primarily for long-term investors,
and you should not view the Fund as a
vehicle for trading purposes. See
"MuniPreferred Shares and Leverage,"
"Risks," "Description of Shares,"
"Repurchase of Fund Shares; Conversion to
Open-End Fund" and the Statement of
Additional Information under "Repurchase of
Fund Shares; Conversion to Open-End Fund."

iii
<PAGE>

SUMMARY OF FUND EXPENSES

The following table assumes the issuance of MuniPreferred Shares in an
amount equal to one-third of the Fund's capital, and shows Fund expenses both as
a percentage of net assets attributable to Common Shares and as a percentage of
total net assets.

<TABLE>
<CAPTION>
Percentage of Net
Assets Attributable Percentage of
to Common Shares Total Net Assets
---------------- ----------------
<S> <C> <C>
Shareholder Transaction Expenses
Sales Load Paid by You (as a percentage of offering price)................ None+ None+
Dividend Reinvestment Plan Fees........................................... None* None*

Annual Expenses
Management Fees........................................................... ______% [ %]
Other Expenses............................................................ ______% [.20%]
------- ------
Total Annual Expenses..................................................... ______% [ %]
</TABLE>
-----
+ Nuveen will pay the underwriters a commission in the amount of
___________ % of the Price to Public per Share in connection with the
sale of Common Shares.

* You will be charged a $2.50 service charge and pay brokerage charges
if you direct the Plan Agent to sell your Common Shares.

The purpose of the table above is to help you understand all fees and
expenses that you, as a Common Shareholder, would bear directly or indirectly.
The expenses shown in the table are based on estimated amounts for the Fund's
first year of operations and assume that the Fund issued 100,000 Common Shares.
See "Management of the Fund" and "Dividend Reinvestment Plan."

The following example illustrates the expenses that you would pay on a
$1,000 investment in Common Shares, assuming (1) total annual expenses of
___________% of net assets attributable to Common Shares and ___________ % of
total net assets and (2) a 5% annual return:*

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Percentage of $_________ $_________ $_________ $_________
Net Assets
Attributable to
Common Shares

Percentage of $_________ $_________ $_________ $_________
Total Net
Assets
</TABLE>
-----
* The example should not be considered a representation of future
expenses. The example assumes that the fees remain unchanged over 10
years and that all dividends and distributions are reinvested. Actual
expenses may be greater or less than those shown. Moreover, the Fund's
actual rate of return may be greater or less than the hypothetical 5%
return shown in the example.

iv
<PAGE>

THE FUND

The Fund is a recently organized, closed-end, diversified management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Fund was organized as a Massachusetts business
trust on December 1, 1998, pursuant to a Declaration of Trust governed by the
laws of the Commonwealth of Massachusetts (the "Declaration"). As a newly
organized entity, the Fund has no operating history. The Fund's principal office
is located at 333 West Wacker Drive, Chicago, Illinois 60606, and its telephone
number is (800) 257-8787.

USE OF PROCEEDS

The net proceeds of the offering of Common Shares will be approximately
$______ ($______ if the Underwriters exercise the over-allotment option in full)
after payment of the estimated organization and offering costs. The Fund will
invest the net proceeds of the offering in accordance with the Fund's investment
objectives and policies as stated below. It is presently anticipated that the
Fund will be able to invest substantially all of the net proceeds in municipal
bonds that meet those investment objectives and policies within three months
after the completion of the offering. Pending such investment, it is anticipated
that the proceeds will be invested in short-term, tax-exempt securities.

THE FUND'S INVESTMENTS

Investment Objectives and Policies

The Fund's investment objectives are

. to provide current income exempt from regular Federal, New York State
and New York City income tax; and

. to enhance portfolio value relative to the municipal bond market by
investing in tax-exempt municipal bonds that Nuveen Advisory believes are
underrated or undervalued or that represent municipal market sectors that are
undervalued.

Underrated municipal bonds are those whose ratings do not, in Nuveen
Advisory's opinion, reflect their true value. Undervalued municipal bonds are
bonds that, in Nuveen Advisory's opinion, are worth more than the value assigned
to them in the marketplace. Nuveen Advisory may at times believe that bonds
associated with a particular municipal market sector (for example, electric
utilities), or issued by a particular municipal issuer, are undervalued. Nuveen
Advisory may purchase such a bond for the Fund's portfolio because it represents
a market sector or issuer that Nuveen Advisory considers undervalued, even if
the value of the particular bond is consistent with the value of similar bonds.
Municipal bonds of particular types or purposes (e.g., hospital bonds,
industrial revenue bonds or bonds issued by a particular municipal issuer) may
be undervalued because there is a temporary excess of supply in that market
sector, or because of a general decline in the market price of municipal bonds
of the market sector for reasons that do not apply to the particular municipal
bonds that are considered undervalued. The Fund's investment in underrated or
undervalued municipal bonds will be based on Nuveen Advisory's belief that their
prices should ultimately rise (relative to the market)

1
<PAGE>

to reflect their true value. The Fund attempts to increase its portfolio value
relative to the municipal bond market by prudent selection of municipal bonds
regardless of the direction the market may move. Any capital appreciation
realized by the Fund will generally result in the distribution of taxable
capital gains to Common Shareholders.

The Fund will invest its net assets in a diversified portfolio of municipal
bonds that are exempt from regular Federal, New York State and New York City
income tax. Under normal market conditions, the Fund expects to be fully
invested in such tax-exempt municipal bonds. The Fund will invest at least 80%
of its net assets in investment grade municipal bonds, meaning that such bonds
are rated within the four highest grades (Baa or BBB or better by Moody's, S&P
or Fitch) or are unrated but judged to be of comparable quality by Nuveen
Advisory. The Fund may invest up to 20% of its net assets in municipal bonds
that are rated Ba/BB or B by Moody's, S&P or Fitch or that are unrated but
judged to be of comparable quality by Nuveen Advisory. Bonds rated below
investment grade (BBB/Baa) are commonly referred to as "junk bonds." Issuers of
bonds rated Ba/BB or B are regarded as having current capacity to make principal
and interest payments but are subject to business, financial or economic
conditions which could adversely affect such payment capacity. A general
description of Moody's, S&P's and Fitch's ratings of municipal bonds is set
forth in Appendix A to the Statement of Additional Information. See "Appendix A
Special Considerations Relating to New York" below for a general description of
the economic and credit characteristics of municipal issuers in New York.

Upon Nuveen Advisory's recommendation, during temporary defensive periods
and in order to keep the Fund's cash fully invested, including the period during
which the net proceeds of the offering are being invested, the Fund may invest
up to 100% of its net assets in short-term investments including high quality,
short-term securities that may be either tax-exempt or taxable. The Fund intends
to invest in taxable short-term investments only in the event that suitable tax-
exempt short-term investments are not available at reasonable prices and yields.
For more information, see the Statement of Additional Information.

The Fund cannot change its investment objectives without the approval of
the holders of a "majority of the outstanding" Common Shares and MuniPreferred
Shares voting together as a single class, and of the holders of a "majority of
the outstanding" MuniPreferred Shares voting as a separate class. A "majority of
the outstanding," means (i) 67% or more of the shares present at a meeting, if
the holders of more than 50% of the shares are present or represented by proxy,
or (ii) more than 50% of the shares, whichever is less. See "Description of
Shares-MuniPreferred Shares-Voting Rights" and the Statement of Additional
Information under "Description of Shares-MuniPreferred Shares-Voting Rights" for
additional information with respect to the voting rights of holders of
MuniPreferred Shares.

If you are subject to the Federal alternative minimum tax, the Fund may not
be a suitable investment for you because the Fund expects that a substantial
portion of its investments will pay interest that is taxable under the Federal
alternative minimum tax. Special rules apply to corporate holders. See "Tax
Matters."

2
<PAGE>

Municipal Bonds

Municipal bonds are either general obligation or revenue bonds and
typically are issued to finance public projects (such as roads or public
buildings), to pay general operating expenses, or to refinance outstanding debt.
Municipal bonds may also be issued for private activities, such as housing,
medical and educational facility construction, or for privately owned industrial
development and pollution control projects. General obligation bonds are backed
by the full faith and credit, or taxing authority of the issuer and may be
repaid from any revenue source; revenue bonds may be repaid only from the
revenues of a specific facility or source. The Fund also may purchase municipal
bonds that represent lease obligations. These carry special risks because the
issuer of the bonds may not be obligated to appropriate money annually to make
payments under the lease. In order to reduce this risk, the Fund will only
purchase municipal bonds representing lease obligations where Nuveen Advisory
believes the issuer has a strong incentive to continue making appropriations
until maturity.

The municipal bonds in which the Fund will invest are generally issued by
the State of New York, a city in New York State, or a political subdivision of
such State or City, and pay interest that, in the opinion of bond counsel to the
issuer, is exempt from Federal, New York State and New York City income tax,
although the interest may be subject to the Federal alternative minimum tax. The
Fund may also invest in municipal bonds issued by United States territories
(such as Puerto Rico or Guam) that are exempt from regular Federal, New York
State and New York City income taxes.

The yields on municipal bonds are dependent on a variety of factors,
including prevailing interest rates and the condition of the general money
market and the municipal bond market, the size of a particular offering, the
maturity of the obligation and the rating of the issue. The market value of
municipal bonds will vary with changes in interest rate levels and as a result
of changing evaluations of the ability of their issuers to meet interest and
principal payments.

The Fund will primarily invest in municipal bonds with long-term maturities
in order to maintain a weighted average maturity of 15-30 years, but the
weighted average maturity of obligations held by the Fund may be shortened,
depending on market conditions.

Delayed Delivery Transactions

The Fund may buy and sell municipal bonds on a when-issued or delayed
delivery basis, making payment or taking delivery at a later date, normally
within 15 to 45 days of the tradedate. This type of transaction may involve an
element of risk because no interest accrues on the bonds prior to settlement
and, since bonds are subject to market fluctuations, the value of the bonds at
time of delivery may be less (or more) than cost. A separate account of the Fund
will be established with its custodian consisting of cash, cash equivalents, or
liquid securities having a market value at all times at least equal to the
amount of the commitment.

Initial Portfolio Composition

If current market conditions persist, the Fund expects that approximately
80% of its initial portfolio will consist of investment grade municipal bonds,
meaning that such bonds are

3
<PAGE>

rated within the four highest grades of the investment grade category or are
unrated but judged to be of comparable quality by Nuveen Advisory (approximately
40% in Aaa/AAA; 10% in Aa/AA; 15% in A and 15% in Baa/BBB). The Fund will
generally select obligations which may not be redeemed at the option of the
issuer for approximately seven to eight years from the date of purchase by the
Fund. See the Statement of Additional Information under "Certain Trading
Strategies of The Fund-Portfolio Trading and Turnover Rate." Subject to market
availability, the Fund would likely seek to invest approximately 20% of its
initial portfolio in municipal bonds that are either rated below investment
grade or that are unrated but judged to be of comparable quality by Nuveen
Advisory.

MUNIPREFERRED SHARES AND LEVERAGE

Approximately three to six months after the completion of the offering of
the Common Shares, the Fund intends to offer MuniPreferred Shares representing
approximately one-third of the Fund's capital immediately after the issuance of
the MuniPreferred Shares. The issuance of MuniPreferred Shares will leverage
the Common Shares. Although the timing and other terms of the offering and the
terms of the MuniPreferred Shares will be determined by the Fund's Board of
Trustees, the Fund expects to invest the proceeds of the MuniPreferred Shares
offering in long-term municipal bonds. Long-term municipal bond yields are
typically, although not always, higher than shorter-term yields. The
MuniPreferred Shares will pay dividends based on shorter-term rates (which would
be redetermined periodically, by an auction process). So long as the Fund's
portfolio is invested in securities that provide a higher rate of return than
the dividend rate of the MuniPreferred Shares (after taking expenses into
consideration), the leverage will cause you to receive a higher current rate of
return than if the Fund were not leveraged.

Changes in the value of the Fund's bond portfolio (including bonds bought
with the proceeds of the MuniPreferred Shares offering) will be borne entirely
by the Common Shareholders. If there is a net decrease (or increase) in the
value of the Fund's investment portfolio, the leverage will decrease (or
increase) the net asset value per Common Share to a greater extent than if the
Fund were not leveraged.

For tax purposes, the Fund is currently required to allocate net capital
gains and other taxable income, if any, between the Common Shares and
MuniPreferred Shares in proportion to total distributions paid to each class for
the year in which the net capital gains or other taxable income is realized. If
net capital gains and other taxable income are allocated to MuniPreferred Shares
(instead of solely tax-exempt income), the Fund will likely have to pay higher
total dividends to MuniPreferred Shareholders or make special payments to
MuniPreferred Shareholders to compensate them for the increased tax liability.
This would reduce the total amount of dividends paid to the Common Shareholders,
but would increase the portion of the dividend that is tax-exempt. On an after-
tax basis, Common Shareholders may still be better off than if they had been
allocated all of the Fund's net capital gains or other taxable income (resulting
in a higher amount of total dividends), but received a lower amount of tax-
exempt income. If the increase in dividend payments or the special payments to
MuniPreferred Shareholders are not entirely offset by a reduction in the tax
liability of and an increase in the tax-exempt dividends received by the Common
Shareholders, the advantage of the Fund's leveraged structure to Common
Shareholders will be reduced.

4
<PAGE>

Assuming that the MuniPreferred Shares will represent approximately one-
third of the Fund's capital and pay dividends at an annual average rate of
3.20%, the income generated by the Fund's portfolio (net of estimated expenses)
must exceed 1.06% in order to cover such dividend payments and other expenses
specifically related to the MuniPreferred Shares. Of course, these numbers are
merely estimates, used for illustration. Actual MuniPreferred Share dividend
rates will vary frequently and may be significantly higher or lower than the
rate estimated above.

The following table is furnished in response to requirements of the
Securities and Exchange Commission. It is designed to illustrate the effect of
leverage on Common Share total return, assuming investment portfolio total
returns (comprised of income and changes in the value of bonds held in the
Fund's portfolio) of 10%, -5%, 0%, 5% and 10%. These assumed investment
portfolio returns are hypothetical figures and are not necessarily indicative of
the investment portfolio returns experienced or expected to be experienced by
the Fund. The table further reflects the issuance of MuniPreferred Shares
representing one-third of the Fund's total capital, a 4.25% yield on the Fund's
investment portfolio, net of expenses, and the Fund's currently projected annual
MuniPreferred Share dividend rate of 3.20%. The table also assumes no
adjustments to investment portfolio or capital structure in response to actual
or anticipated changes in interest rates, although in fact the Fund expects to
manage its investment portfolio and may manage its capital structure to mitigate
the increased volatility in current income and net asset value associated with
leverage. See "MuniPreferred Shares and Leverage."

<TABLE>
<S> <C> <C> <C> <C> <C>
Components of Portfolio Return
Income...................................... 4.25% 4.25% 4.25% 4.25% 4.25%
Capital (Loss) or Gain...................... (14.25)% (9.25)% (4.25)% 0.75% 5.75%
Assumed Portfolio Total Return................... (10.00)% (5.00)% (0.00)% 5.00% 10.00%
Common Share Dividends...................... 4.77% 4.77% 4.77% 4.77% 4.77%
Common Share Capital Gain/(Loss)............ (21.37)% (13.87)% (6.37)% 1.12% 8.62%
Common Share Total Return........................ (16.60)% (9.10)% (1.60)% 5.90% 13.40%
</TABLE>

The Fund's total return is composed of two elements the dividends paid by
the Fund (the amount of which is largely determined by the tax-exempt interest
received by the Fund) and gains or losses on the value of the securities the
Fund owns. As required by the Securities and Exchange Commission rules, the
table assumes that the Fund is more likely to suffer capital losses than to
enjoy capital gains. So, to assume a total return of 0%, the Fund must assume
that the tax-exempt interest it receives on its municipal bond investments is
entirely offset by losses in the value of those bonds.

Unless and until MuniPreferred Shares are issued, the Common Shares will
not be leveraged and this section will not apply.

5
<PAGE>

RISKS

In pursuit of its investment objective, the Fund assumes risks, chiefly in
the form of interest rate risk, credit risk, reinvestment risk, leverage risk,
inflation risk, and "Year 2000" risk.

Interest rate risk is the risk that bonds will decline in value because of
changes in interest rates. Generally, municipal bonds will decrease in value
when interest rates rise and increase in value when interest rates decline.

Credit risk is the risk that an issuer of a municipal bond becomes unable
to meet its obligation to make interest and principal payments. In general,
lower rated municipal bonds are perceived to carry a greater degree of risk that
the issuer will lose its ability to make interest and principal payments. The
Fund may invest up to 20% of its net assets in municipal bonds that are rated
Ba/BB or B by Moody's, S&P or Fitch or that are unrated but judged to be of
comparable quality by the Fund's investment adviser. Issuers of bonds rated
Ba/BB or B are regarded as having current capacity to make principal and
interest payments but are subject to business, financial or economic conditions
which could adversely affect such payment capacity. Bonds rated below investment
grade (BBB/Baa) are commonly referred to as "junk bonds."

The Fund intends to invest substantially all its assets in municipal bonds
issued by the State of New York or a municipality therein and by other issuers
located in New York. As a result, the Fund bears the investment risk that
economic, political or regulatory changes could hurt many municipal bond issuers
in New York, which would likely reduce the value of the Fund's bond portfolio.
For a discussion of economic and other conditions in the State of New York, see
Appendix A to this Prospectus.

Reinvestment risk is the risk that income from the Fund's bond portfolio
will decline if and when the Fund invests the proceeds from matured, traded or
called bonds at market interest rates that are below the portfolio's current
earnings rate.

Leverage risk is the risk associated with the issuance of the MuniPreferred
Shares to leverage the Common Shares. Once the MuniPreferred Shares are issued,
the net asset value and market value of Common Shares will be more volatile, and
the yield to Common Shareholders will tend to fluctuate with changes in the
shorter-term dividend rates on the MuniPreferred Shares. If the dividend rate
on the MuniPreferred Shares approaches the net rate of return on the Fund's
investment portfolio, the benefit of leverage to Common Shareholders would be
reduced. If the dividend rate on the MuniPreferred Shares exceeds the net rate
of return on the Fund's portfolio, the leverage will result in a lower rate of
return to Common Shareholders than if the Fund were not leveraged. In addition,
the Fund will pay (and Common Shareholders will bear) any costs and expenses
relating to the issuance and ongoing maintenance of the MuniPreferred Shares.
Accordingly, the Fund cannot assure you that the issuance of MuniPreferred
Shares will result in a higher yield or return to Common Shareholders.

Similarly, any decline in the net asset value of the Fund's investments
will be borne entirely by Common Shareholders. Therefore, if the market value
of the Fund's portfolio bonds declined, the leverage will result in a greater
decrease in net asset value to Common

6
<PAGE>

Shareholders than if the Fund were not leveraged. Such greater net asset value
decrease will also tend to cause a greater decline in the market price for the
Common Shares. In an extreme case, the Fund's current investment income might
not be sufficient to meet the dividend requirements on the MuniPreferred Shares;
or the Fund might be in danger of failing to maintain the required 200% asset
coverage or of losing its AAA/aaa ratings on the MuniPreferred Shares. In order
to counteract such an event, the Fund might need to liquidate investments in
order to fund a redemption of some or all of the MuniPreferred Shares.
Liquidation at times of low municipal bond prices will tend to reduce the net
asset value of the Fund's Common Shares and to reduce returns to Common
Shareholders.

Inflation risk is the risk that the value of assets or income from
investment will be worth less in the future as inflation decreases the value of
money. As inflation increases, the real value of the Common Shares and
distributions can decline. In addition, during any periods of rising inflation,
MuniPreferred Share dividend rates would likely increase, which would tend to
further reduce returns to Common Shareholders.

"Year 2000" risk is the risk that the computer systems used by Nuveen
Advisory, its service providers and industry wide information and transaction
clearinghouses to manage the Fund's investments and process shareholder
transactions may not be able to correctly process activity occurring in the year
2000 because of the way computers historically have stored dates. In addition,
Year 2000 issues may affect the ability of municipal issuers to meet their
interest and principal payment obligations to their bond holders, and may
adversely affect their credit ratings.

HOW THE FUND MANAGES RISK
Investment Limitations

The Fund has adopted certain investment limitations designed to limit
investment risk and maintain portfolio diversification. These limitations are
fundamental and may not be changed without the approval of the holders of a
majority of the outstanding Common Shares and MuniPreferred Shares voting
together as a single class, and the approval of the holders of a majority of the
MuniPreferred Shares voting as a separate class. The Fund may not:

. Invest more than 25% of total fund assets in securities of issuers in any
one industry; except that this limitation does not apply to municipal bonds
backed by the assets and revenues of governments or political subdivisions
of governments; and

. Invest more than 5% of total fund assets in securities of any one issuer,
except that this limitation does not apply to bonds issued by the United
States Government, its agencies and instrumentalities or to the investment
of 25% of its total assets.

The Fund may become subject to guidelines which are more limiting than the
investment restrictions set forth above in order to obtain and maintain ratings
from Moody's or S&P on the MuniPreferred Shares that it intends to issue. The
Fund does not anticipate that such guidelines would have a material adverse
effect on the Fund's Common Shareholders or the Fund's ability to achieve its
investment objectives. See "Investment Objectives and Policies Investment
Restrictions" in the Statement of Additional Information for information about
these guidelines and additional fundamental investment policies of the Fund.

7
<PAGE>

Quality Investments

The Fund will invest at least 80% of its net assets in investment grade
municipal bonds, meaning that such bonds are rated within the four highest
grades (Baa or BBB or better by Moody's, S&P or Fitch) or are unrated but judged
to be of comparable quality by Nuveen Advisory.

Hedging Strategies

The Fund may use various investment strategies designed to limit the risk
of bond price fluctuations and to preserve capital. These hedging strategies
include using financial futures contracts, options on financial futures or
options based on either an index of long-term tax-free securities or on debt
securities whose prices, in the opinion of Nuveen Advisory, correlate with the
prices of the Fund's investments. Successful implementation of most hedging
strategies would generate taxable income and the Fund has no present intention
to use these strategies.

Limited Issuance of MuniPreferred Shares

Under the 1940 Act, the Fund could issue MuniPreferred Shares having a
total liquidation value of up to one-half of the net asset value of the Fund's
portfolio. If the total liquidation value of the MuniPreferred Shares was ever
more than one-half the value of the Fund's assets, the Fund would not be able to
declare dividends on the Common Shares until the liquidation value, as a
percentage of the Fund's assets, was reduced. The Fund intends to issue
MuniPreferred Shares representing about one-third of the Fund's total capital,
if the Fund sells all the Common Shares and MuniPreferred Shares discussed in
this Prospectus. This higher than required margin of net asset value provides a
cushion against later fluctuations in the value of the Fund's portfolio and
helps to protect the Common Shareholders from the negative effects of leverage
discussed above. The Fund intends to purchase or redeem MuniPreferred Shares, if
necessary, to keep the liquidation value of the MuniPreferred Shares below one-
half the Fund's net assets.

Management of Investment Portfolio and Capital Structure to Limit Leverage Risk

The Fund may take certain actions if short-term rates increase or market
conditions otherwise change (or the Fund anticipates such an increase or change)
and the Fund's leverage begins to adversely affect Common Shareholders. In order
to offset such a negative impact of leverage on Common Shareholders, the Fund
may shorten the average maturity of its long-term bond portfolio or invest in
short-term, high quality securities, or may extend the maturity of outstanding
MuniPreferred Shares. The Fund may also attempt to reduce the leverage by
redeeming or otherwise purchasing MuniPreferred Shares. If market conditions
suggest that additional leverage would be beneficial, the Fund may sell
previously unissued MuniPreferred Shares or MuniPreferred Shares that the Fund
previously issued but later repurchased.

Year 2000 Issues

Nuveen Advisory is working with the Fund's service providers and
clearinghouses to adapt their systems to address the Year 2000 issue. Nuveen
Advisory and the Fund expect, but

8
<PAGE>

there can be no absolute assurance, that the necessary work will be completed on
a timely basis. Nuveen Advisory is also requesting information from municipal
issuers so that issuers' Year 2000 readiness, if made available, can be taken
into account in making investment decisions. However, there can be no assurance
that the requested information will be provided to Nuveen Advisory, or that
issuers of municipal bonds in the Fund's portfolio will begin or complete the
work necessary to address any Year 2000 issues on a timely basis.

MANAGEMENT OF THE FUND

Trustees and Officers

The Board of Trustees is responsible for the management of the Fund,
including supervision of the duties performed by Nuveen Advisory. There are
eight trustees of the Fund, two of whom are "interested persons" (as defined in
the 1940 Act) and six of whom are not "interested persons." The names and
business addresses of the trustees and officers of the Fund and their principal
occupations and other affiliations during the past five years are set forth
under "Management of the Fund" in the Statement of Additional Information.

Investment Adviser

Nuveen Advisory, 333 West Wacker Drive, Chicago, Illinois 60606, serves as
the investment adviser to the Fund. In this capacity, Nuveen Advisory is
responsible for the selection and on-going monitoring of the municipal bonds in
the Fund's investment portfolio, managing the Fund's business affairs and
providing certain clerical, bookkeeping and administrative services. Nuveen
Advisory serves as investment adviser to investment portfolios with more than
$36 billion in municipal assets under management. See the Statement of
Additional Information under "Management of the Fund-Investment Adviser."

Overall investment management strategy and operating policies for the Fund
are set by the Investment Management Committee of Nuveen Advisory. The
Investment Management Committee is comprised of the principal executive officers
and portfolio managers of Nuveen Advisory and meets regularly to review economic
conditions, the outlook for the financial markets in general and the status of
the municipal markets in particular. Day to day operations of the Fund and the
execution of its specific investment strategies is the responsibility of the
Fund's portfolio manager. David S. Solender is the portfolio manager of the
Fund. Mr. Solender has managed the Nuveen Flagship New York Municipal Bond Fund
and the Nuveen New York Insured Municipal Bond Fund since September 1994 and the
Nuveen Flagship Connecticut Municipal Bond Fund since July 1, 1998. He is an
Assistant Vice President of Nuveen Advisory.

Nuveen Advisory is a wholly-owned subsidiary of John Nuveen & Co.
Incorporated ("Nuveen"), 333 West Wacker Drive, Chicago, Illinois 60606. Founded
in 1898, Nuveen and its affiliates have over $60 billion of net assets under
management or surveillance. Nuveen is a subsidiary of The John Nuveen Company
which, in turn, is a majority-owned subsidiary of The St. Paul Companies, Inc.,
which is principally engaged in providing property-liability insurance through
subsidiaries.

9
<PAGE>

Investment Management Agreement

Pursuant to an investment management agreement between Nuveen Advisory and
the Fund, the Fund has agreed to pay for the services and facilities provided by
Nuveen Advisory an annual management fee, payable on a monthly basis, according
to the following schedule:

Average Daily Net Asset Value Management Fee
----------------------------- --------------
For the first $125 million %
For the next $125 million %
For the next $250 million %
For the next $500 million %
For the next $1 billion %
For assets over $2 billion %

In addition to the fee of Nuveen Advisory, the Fund pays all other costs
and expenses of its operations, including compensation of its trustees (other
than those affiliated with Nuveen Advisory), custodian, transfer and dividend
disbursing expenses, legal fees, expenses of independent auditors, expenses of
repurchasing shares, expenses of preparing, printing and distributing
shareholder reports, notices, proxy statements and reports to governmental
agencies, and taxes, if any.

NET ASSET VALUE

The Fund's net asset value per share is determined as of the close of
trading (normally 4:00 p.m. eastern time) on each day the New York Stock
Exchange is open for business. Net asset value is calculated by taking the fair
value of the Fund's total assets, including interest or dividends accrued but
not yet collected, less all liabilities, and dividing by the total number of
shares outstanding. The result, rounded to the nearest cent, is the net asset
value per share. All valuations are subject to review by the Fund's Board of
Trustees or its delegate, Nuveen Advisory.

In determining net asset value, expenses are accrued and applied daily and
securities and other assets for which market quotations are available are valued
at market value. The prices of municipal bonds are provided by a pricing service
and based on the mean between the bid and asked price. When price quotes are not
readily available (which is usually the case for municipal bonds), the pricing
service establishes fair market value based on prices of comparable municipal
bonds.

DISTRIBUTIONS

The Fund intends to make regular monthly cash distributions to Common
Shareholders at a level rate that reflects the past and projected performance of
the Fund. Distributions can only be made from net investment income after paying
any accrued dividends to MuniPreferred Shareholders. The net income of the Fund
consists of all interest income accrued on portfolio assets less all expenses of
the Fund. Expenses of the Fund are accrued each day. Over time, all

10
<PAGE>

the net investment income of the Fund will be distributed. At least annually,
the Fund also intends to distribute net capital gains and ordinary taxable
income, if any, after paying any accrued dividends or making any liquidation
payments to MuniPreferred Shareholders. Initial distributions to Common
Shareholders are expected to be declared approximately 60 days, and paid
approximately 90 days, from the completion of this offering. Although it does
not now intend to do so, the Board of Trustees may change the amount or timing
of the distributions at any time based on a number of factors, including the
amount of the Fund's undistributed net investment income and historical and
projected investment income and the amount of the expenses and dividend rates on
the outstanding MuniPreferred Shares.

To make the amount of each monthly distribution roughly the same, the Fund
will initially distribute less than the entire amount of net investment income
earned in a particular period. The undistributed net investment income would be
available to supplement future distributions. As a result, the distributions
paid by the Fund for any particular monthly period may be more or less than the
amount of net investment income actually earned by the Fund during the period.
Undistributed net investment income will be added to the Fund's net asset value
and, correspondingly, distributions from undistributed net investment income
will be deducted from the Fund's net asset value.

DIVIDEND REINVESTMENT PLAN

You may elect to have all dividends or capital gains distributions on your
Common Shares, or both, automatically reinvested by Chase Global Funds Services
Company, as agent for the Common Shareholders (the "Plan Agent"), in additional
Common Shares under the Dividend Reinvestment Plan (the "Plan"). You may elect
to participate in the Plan by completing the Dividend Reinvestment Plan
Application Form. If you do not participate, you will receive all distributions
in cash paid by check mailed directly to you by Chase Global Funds Services
Company as dividend paying agent.

If you decide to participate in the Plan, the number of Common Shares you
will receive will be determined as follows:

(1) If Common Shares are trading at or above net asset value at the
time of valuation, the Fund will issue new shares at the then current
market price; or

(2) If Common Shares are trading below net asset value at the time of
valuation, the Plan Agent will receive the dividend or distribution in cash
and will purchase Common Shares in the open market, on the New York Stock
Exchange or elsewhere, for the participants' accounts. It is possible that
the market price for the Common Shares may increase before the Plan Agent
has completed its purchases. Therefore, the average purchase price per
share paid by the Plan Agent may exceed the market price at the time of
valuation, resulting in the purchase of fewer shares than if the dividend
or distribution had been paid in Common Shares issued by the Fund. The Plan
Agent will use all dividends and distributions received in cash to purchase
Common Shares in the open market

11
<PAGE>

within 30 days of the dividend payment date. Interest will not be paid on
any uninvested cash payments.

You may withdraw from the Plan at any time by giving written notice to the
Plan Agent. If you withdraw or the Plan is terminated, you will receive a
certificate for each whole share in your account under the Plan and you will
receive a cash payment for any fraction of a share in your account. If you wish,
the Plan Agent will sell your shares and send you the proceeds, minus brokerage
commissions and a $2.50 service fee.

The Plan Agent maintains all shareholders' accounts in the Plan and gives
written confirmation of all transactions in the accounts, including information
you may need for tax records. Common Shares in your account will be held by the
Plan Agent in non-certificated form. Any proxy you receive will include all
Common Shares you have received under the Plan.

There is no brokerage charge for reinvestment of your dividends or
distributions in Common Shares. However, all participants will pay a pro rata
share of brokerage commissions incurred by the Plan Agent when it makes open
market purchases.

Automatically reinvesting dividends and distributions does not mean that
you do not have to pay income taxes due upon receiving dividends and
distributions.

The Fund reserves the right to amend or terminate the Plan if change seems
desirable to the Board of Trustees. There is no direct service charge to
participants in the Plan; however, the Fund reserves the right to amend the Plan
to include a service charge payable by the participants. Additional information
about the Plan may be obtained from Chase Global Funds Services Company, P.O.
Box 5186, Bowling Green Station, New York, NY 10275-0672 (regular mail) or 4 New
York Plaza, 6th Floor, New York, NY 10004 (for overnight carriers), (800) 257-
8787.

DESCRIPTION OF SHARES

Common Shares

The Declaration authorizes the issuance of an unlimited number of Common
Shares, par value $.01 per share. All Common Shares have equal rights to the
payment of dividends and the distribution of assets upon liquidation. Common
Shares will, when issued, be fully paid and, subject to matters discussed in
"Certain Provisions in the Declaration of Trust," non-assessable, and will have
no pre-emptive or conversion rights or rights to cumulative voting. Whenever
MuniPreferred Shares are outstanding, Common Shareholders will not be entitled
to receive any distributions from the Fund unless all accrued dividends on
MuniPreferred Shares have been paid, and unless asset coverage (as defined in
the 1940 Act) with respect to MuniPreferred Shares would be at least 200% after
giving effect to the distributions. See "MuniPreferred Shares" below.

The Fund will apply to list the Common Shares on the New York Stock
Exchange. The Fund intends to hold annual meetings of shareholders so long as
the Common Shares are listed on a national securities exchange and such meetings
are required as a condition to such listing.

12
<PAGE>

The Fund's net asset value per share generally increases when interest
rates decline, and decreases when interest rates rise, and these changes are
likely to be greater in the case of a fund having a leveraged capital structure.
Net asset value will be reduced immediately following the offering by the amount
of the organization and offering expenses paid by the Fund. See "Use of
Proceeds."

Shares of closed-end investment companies may frequently trade at prices
lower than net asset value. Shares of closed-end investment companies like the
Fund that invest predominately in investment grade municipal bonds have during
some periods traded at prices higher than net asset value and during other
periods have traded at prices lower than net asset value. Because the market
value of the Fund's Common Shares will be determined by such factors as relative
demand for and supply of such shares in the market, general market and economic
conditions and other factors beyond the control of the Fund, the Fund cannot
assure you that Common Shares will trade at a price higher than net asset value
in the future. The Common Shares are designed primarily for long-term investors,
and investors in the Common Shares should not view the Fund as a vehicle for
trading purposes. See "MuniPreferred Shares and Leverage" and the Statement of
Additional Information under "Repurchase of Fund Shares; Conversion to Open-End
Fund."

MuniPreferred Shares

The Declaration authorizes the issuance of an unlimited number of
MuniPreferred Shares, par value $.01 per share, in one or more classes or
series, with rights as determined by the Board of Trustees, by action of the
Board of Trustees without the approval of the Common Shareholders.

The Fund's Board of Trustees has indicated its intention to authorize an
offering of MuniPreferred Shares (representing approximately one-third of the
Fund's capital immediately after the time the MuniPreferred Shares are issued)
approximately three to six months after completion of the offering of Common
Shares. Any such decision is subject to market conditions and to the Board's
continuing belief that leveraging the Fund's capital structure through the
issuance of MuniPreferred Shares is likely to achieve the benefits to the Common
Shareholders described in this Prospectus. Although the terms of the
MuniPreferred Shares will be determined by the Board of Trustees (subject to
applicable law and the Fund's Declaration) if and when it authorizes a
MuniPreferred Shares offering, the Board has stated that the initial series of
MuniPreferred Shares would likely pay cumulative dividends at rates determined
over relatively shorter-term periods (such as 7 days), by providing for the
periodic redetermination of the dividend rate through an auction or remarketing
procedure. The Board of Trustees has indicated that the liquidation preference,
voting rights and redemption provisions of the MuniPreferred Shares will likely
be as stated below.

Limited Issuance of MuniPreferred Shares. Under the 1940 Act, the Fund
could issue MuniPreferred Shares with an aggregate liquidation value of up to
one-half of the net asset value of the Fund's portfolio, measured immediately
after issuance of the MuniPreferred Shares. "Liquidation value" means the
original purchase price of the shares being liquidated plus any accrued and
unpaid dividends. In addition, the Fund is not permitted to declare any cash
dividend or other distribution on its Common Shares unless the liquidation value
of the

13
<PAGE>

MuniPreferred shares is more than one-half of the net asset value of the Fund's
portfolio (determined after deducting the amount of such dividend or
distribution) immediately after the distribution. If the Fund sells all the
Common Shares and MuniPreferred Shares discussed in this Prospectus, the
liquidation value of the MuniPreferred Shares is expected to be approximately
one-third of the net asset value of the Fund's portfolio. The Fund intends to
purchase or redeem MuniPreferred Shares, if necessary, to keep that fraction
below one-half.

Voting Rights. MuniPreferred Shares are required to be voting shares and to
have equal voting rights with Common Shares. Except as otherwise indicated in
this Prospectus or the Statement of Additional Information and except as
otherwise required by applicable law, holders of MuniPreferred Shares will vote
together with Common Shareholders as a single class.

Holders of MuniPreferred Shares, voting as a separate class, will be
entitled to elect two of the Fund's trustees. The remaining trustees will be
elected by Common Shareholders and holders of MuniPreferred Shares, voting
together as a single class. In the unlikely event that two full years of accrued
dividends are unpaid on the MuniPreferred Shares, the holders of MuniPreferred
Shares, voting as a separate class, will be entitled to elect a majority of the
Fund's trustees until all dividends in arrears have been paid or declared and
set apart for payment. In order for the Fund to take certain actions or enter
into certain transactions, a separate class vote of holders of MuniPreferred
Shares will be required, in addition to the single class vote of the holders of
MuniPreferred Shares and Common Shares. See the Statement of Additional
Information under "Description of Shares-MuniPreferred Shares-Voting Rights."

Redemption, Purchase and Sale of MuniPreferred Shares. The terms of the
MuniPreferred Shares may provide that they are redeemable at certain times, in
whole or in part, at the original purchase price per share plus accumulated
dividends. The terms may also state that the Fund may tender for or purchase
MuniPreferred Shares and resell any shares so tendered. Any redemption or
purchase of MuniPreferred Shares by the Fund will reduce the leverage applicable
to Common Shares, while any resale of shares by the Fund will increase such
leverage. See "MuniPreferred Shares and Leverage."

The discussion above describes the Board of Trustees' present intention
with respect to a possible offering of MuniPreferred Shares. If the Board of
Trustees determines to authorize such an offering, the terms of the
MuniPreferred Shares may be the same as, or different from, the terms described
above, subject to applicable law and the Fund's Declaration.

CERTAIN PROVISIONS IN THE DECLARATION OF TRUST

14
<PAGE>

such limited liability be given in each agreement, obligation or instrument
entered into or executed by the Fund or the trustees. The Declaration further
provides for indemnification out of the assets and property of the Fund for all
loss and expense of any shareholder held personally liable for the obligations
of the Fund. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which the Fund would be
unable to meet its obligations. The Fund believes that the likelihood of such
circumstances is very remote.

The Declaration includes provisions that could limit the ability of other
entities or persons to acquire control of the Fund. Specifically, the
Declaration requires a vote by holders of at least two-thirds of the Common
Shares and MuniPreferred Shares, voting together as a single class, except as
described below, to authorize (1) a conversion of the Fund from a closed-end to
an open-end investment company, (2) a merger or consolidation of the Fund, or a
series or class of the Fund, with any corporation, association, trust or other
organization or a reorganization or recapitalization of the Fund, or a series or
class of the Fund, (3) a sale, lease or transfer of all or substantially all of
the Fund's assets (other than in the regular course of the Fund's investment
activities) or (4) a termination of the Fund, or a series or class of the Fund,
unless such transaction has already been authorized by the affirmative vote of
two-thirds of the total number of trustees fixed in accordance with the
Declaration or the By-laws, in which case the affirmative vote of the holders of
at least a majority of the Fund's Common Shares and MuniPreferred Shares
outstanding at the time, voting together as a single class, is required,
provided, however, that where only a particular class or series is affected,
only the required vote by the applicable class or series will be required. In
the case of the conversion of the Fund to an open-end investment company, or in
the case of any of the foregoing transactions constituting a plan of
reorganization which adversely affects the holders of MuniPreferred Shares, the
action in question will also require the affirmative vote of the holders of at
least two-thirds of the Fund's MuniPreferred Shares outstanding at the time,
voting as a separate class, or, if such action has been authorized by the
affirmative vote of two-thirds of the total number of trustees fixed in
accordance with the Declaration or the By-laws, the affirmative vote of the
holders of at least a majority of the Fund's MuniPreferred Shares outstanding at
the time, voting as a separate class. The votes required to approve the
conversion of the Fund from a closed-end to an open-end investment company or to
approve transactions constituting a plan of reorganization which adversely
affects the holders of MuniPreferred Shares are higher than those required by
the 1940 Act. The Board of Trustees believes that the provisions of the
Declaration relating to such higher votes are in the best interest of the Fund
and its shareholders. See the Statement of Additional Information under "Certain
Provisions in the Declaration of Trust."

The provisions of the Declaration described above could have the effect of
depriving the Common Shareholders of opportunities to sell their Common Shares
at a premium over net asset value by discouraging a third party from seeking to
obtain control of the Fund in a tender offer or similar transaction. The overall
effect of these provisions is to render more difficult the accomplishment of a
merger or the assumption of control by a third party. They provide, however, the
advantage of potentially requiring persons seeking control of the Fund to
negotiate with its management regarding the price to be paid and facilitating
the continuity of the Fund's investment objectives and policies. The Board of
Trustees of the Fund has considered the foregoing anti-takeover provisions and
concluded that they are in the best interests of the Fund and its Common
Shareholders.

15
<PAGE>

Reference should be made to the Declaration on file with the Securities and
Exchange Commission for the full text of these provisions.

REPURCHASE OF COMMON SHARES; CONVERSION TO OPEN-END FUND

The Fund is a closed-end investment company and as such its shareholders
will not have the right to cause the Fund to redeem their shares. Instead, the
Fund's Common Shares will trade in the open market at a price that will be a
function of several factors, including net asset value and yield. Because shares
of closed-end investment companies may frequently trade at prices lower than net
asset value, the Fund's Board of Trustees has currently determined that, at
least annually, it will consider action that might be taken to reduce or
eliminate any material discount from net asset value in respect of Common
Shares, which may include the repurchase of such shares in the open market or in
private transactions, the making of a tender offer for such shares at net asset
value, or the conversion of the Fund to an open-end investment company. The Fund
cannot assure you that its Board of Trustees will decide to take any of these
actions, or that share repurchases or tender offers will actually reduce market
discount.

If the Fund converted to an open-end company, it would be required to
redeem all MuniPreferred Shares then outstanding (requiring in turn that it
liquidate a portion of its investment portfolio), and the Fund's Common Shares
would no longer be listed on the New York Stock Exchange. In contrast to a
closed-end investment company, shareholders of an open-end investment company
may require the company to redeem their shares at any time (except in certain
circumstances as authorized by or under the 1940 Act) at their net asset value,
less any redemption charge that is in effect at the time of redemption. See the
Statement of Additional Information under "Certain Provisions in the Declaration
of Trust" for a discussion of the voting requirements applicable to the
conversion of the Fund to an open-end company.

Before deciding whether to take any action if the Common Shares trade below
net asset value, the Board would consider all relevant factors, including the
extent and duration of the discount, the liquidity of the Fund's portfolio, the
impact of any action that might be taken on the Fund or its shareholders, and
market considerations. Based on these considerations, even if the Fund's shares
should trade at a discount, the Board of Trustees may determine that, in the
interest of the Fund and its shareholders, no action should be taken. See the
Statement of Additional Information under "Repurchase of Fund Shares; Conversion
to Open-End Fund" for a further discussion of possible action to reduce or
eliminate such discount to net asset value.

16
<PAGE>

TAX MATTERS

Federal Income Tax Matters

The discussion below and in the statement of additional information
provides general tax information related to an investment in the Fund. Because
tax laws are complex and often change, you should consult your tax adviser about
the tax consequences of an investment in the Fund.

The Fund primarily invests in municipal bonds from issuers located in New
York or in municipal bonds whose income is otherwise exempt from regular
Federal, New York State and New York City income taxes. Consequently, the
regular monthly dividends you receive will be exempt from regular federal, New
York State and, in some cases, New York City income taxes. A portion of these
dividends, however, will likely be subject to the federal alternative minimum
tax (AMT).

Although the Fund does not seek to realize taxable income or capital gains,
the Fund may realize and distribute taxable income or capital gains from time to
time as a result of the Fund's normal investment activities. The Fund will
distribute at least annually any taxable income or realized capital gains
realized. Net short-term gains are taxable as ordinary income. Net long-term
capital gains are taxable as long-term capital gains regardless of how long you
have owned your investment. Taxable dividends do not qualify for a dividends
received deduction if you are a corporate shareholder.

Each year, you will receive a year-end statement that describes the tax
status of dividends paid to you during the preceding year, including the source
of investment income by state and the portion of income that is subject to AMT.
You will receive this statement from the firm where you purchased your Fund
shares if you hold your investment in street name; the Fund will send you this
statement if you hold your shares in registered form.

The tax status of your dividends is not affected by whether you reinvest
your dividends or receive them in cash.

In order to avoid corporate taxation of its earnings and to pay tax-free
dividends, the Fund must meet certain I.R.S. requirements that govern the Fund's
sources of income, diversification of assets and distribution of earnings to
shareholders. The Fund intends to meet these requirements. If the Fund failed to
do so, the Fund would be required to pay corporate taxes on its earnings and all
your distributions would be taxable as ordinary income.

The Fund may be required to withhold 31% of certain of your dividends if
you have not provided the Fund with your correct taxpayer identification number
(normally your Social Security number), or if you are otherwise subject to back-
up withholding. If you receive Social Security benefits, you should be aware
that tax-free income is taken into account in calculating the amount of these
benefits that may be subject to Federal income tax. If you borrow money to buy
Fund shares, you may not deduct the interest on that loan. Under I.R.S. rules,
Fund shares may be treated as having been bought with borrowed money even if the
purchase of the Fund shares cannot be traced directly to borrowed money.

17
<PAGE>

If you are subject to the alternative minimum tax, a portion of your
regular monthly dividends may be taxable.

State and Local Tax Matters

The Fund's regular monthly dividends will not be subject to New York State
or New York City personal income taxes to the extent they are paid out of income
earned on New York municipal bonds or out of income earned on obligations of
U.S. territories and possessions that is exempt from federal taxation. The
portion of the Fund's monthly dividends that is attributable to income earned on
other obligations will be subject to the New York State or New York City
personal income taxes. The Fund expects to earn no or only a minimal amount of
such non-exempt income. Gain from the sale, exchange or other distribution of
Common Shares will be subject to the New York State personal income and
franchise taxes and the New York City personal income, unincorporated business
and general corporation taxes. You also will be subject to New York State and
New York City personal income taxes to the extent the Fund distributes any
taxable income or realized capital gains, or if you sell or exchange Common
Shares and realize a capital gain on the transaction.

Please refer to the statement of additional information for more detailed
information. You are urged to consult your tax adviser.

OTHER MATTERS

A lawsuit brought in June 1996 (Green et al. v. Nuveen Advisory Corp., et
al.) by certain individual common shareholders of six leveraged closed-end funds
sponsored by Nuveen is currently pending in Federal district court. The
plaintiffs allege that the leveraged closed-end funds engaged in certain
practices that violated various provisions of the 1940 Act and common law. The
plaintiffs also alleged, among other things, breaches of fiduciary duty by the
funds' directors and Nuveen Advisory and various misrepresentations and omission
in prospectuses and shareholder reports relating to the use of leverage through
the issuance and periodic auctioning of preferred stock and the basis of the
calculation and payment of management and fees to Nuveen Advisory and Nuveen.
The defendants are vigorously defending the case and have filed motions to
dismiss the entire lawsuit asserting that the claims are without merit, which
motions are pending. The Fund cannot assure you that the litigation will be
decided in Nuveen's or those funds' favor. Fund management believes a decision
against Nuveen will have no material effect on the Fund or its Common Shares.

UNDERWRITING

The Underwriters named below, through their Representative, John Nuveen &
Co. Incorporated, 333 West Wacker Drive, Chicago, Illinois 60606, have agreed,
severally, under the Underwriting Agreement to purchase from the Fund the
following numbers of Common Shares. The Representative advised the Fund that the
Underwriters propose to offer the Common Shares to the public at the initial
offering price set forth on the cover page of this Prospectus and to certain
dealers at the initial offering price less a concession not in excess of
$_______ per Common Share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $_______ per Common Share to certain
other dealers. There is no sales charge or

18
<PAGE>

underwriting discount charged to investors on purchases of Common Shares in the
offering. Nuveen or an affiliate has agreed to pay the Underwriters from its own
assets the amount of this concession in connection with the sale of Common
Shares. The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions, and that the Underwriters must
purchase all the Common Shares offered hereby if they purchase any Common
Shares. In connection with this offering, Nuveen may perform clearing services
without charge for brokers and dealers for whom it regularly provides clearing
services.

<TABLE>
<CAPTION>
Number of
Underwriter Common Shares
----------- -------------
<S> <C>
John Nuveen & Co. Incorporated.........................

-------
Total............................................. 100,000
=======
</TABLE>

The Fund has granted the Underwriters an overallotment option, which they
must exercise within 45 days after the date of this Prospectus, to purchase up
to _______ additional Common Shares at the same price per share as the Fund will
receive for the 100,000 Common Shares. If the Underwriters exercise their
overallotment option, each of the Underwriters will commit to purchase
approximately the same percentage of Common Shares they purchased in the first
offering. The Underwriters can exercise the overallotment option only to cover
sales they made but could not fill in connection with the sale of the 100,000
Common Shares. The Underwriters will sell such additional Common Shares on the
same terms as those on which the 100,000 Common Shares are being offered.

If the Underwriters create a short position in the Common Shares in
connection with the offering, i.e., if they sell more Common Shares than are set
forth on the cover page of this Prospectus, the Underwriters may reduce that
short position by purchasing Common Shares in the open market. The Underwriters
also may elect to reduce any short position by exercising all or part of the
over-allotment option described above.

The Underwriters also may impose a penalty bid on certain selling group
members. This means that if the Underwriters purchase Common Shares in the open
market to reduce the Underwriters' short position or to stabilize the price of
the Common Shares, the Underwriters may reclaim the amount of the selling
concession from the selling group members who sold those Common Shares as part
of the offering.

Currently, there is no market for the Fund's Common Shares. Consequently,
the initial offering price has been determined by negotiation among the Fund,
Nuveen Advisory and the Representative. The Fund will apply to list the Common
Shares on the New York Stock Exchange. In order to meet the requirements for
listing, the Underwriters have undertaken to sell

19
<PAGE>

lots of ___ or more Common Shares to a minimum of ________ beneficial owners in
the United States.

The Representative has informed the Fund that the Underwriters do not
intend to confirm sales to accounts over which they exercise discretionary
authority.

The Fund anticipates that the Representative and certain other Underwriters
may act as brokers or dealers in connection with the portfolio transactions of
the Fund after they have ceased to be Underwriters.

John Nuveen & Co. Incorporated, the Representative of the Underwriters, is
the parent company of Nuveen Advisory.

The Fund and Nuveen Advisory have agreed to indemnify the Underwriters
against certain liabilities, including certain liabilities under the Securities
Act of 1933, as amended.

CUSTODIAN AND TRANSFER AGENT

The custodian of the assets of the Fund is The Chase Manhattan Bank, 4 New
York Plaza, New York, NY 10004-2413. The Custodian performs custodial, fund
accounting and portfolio accounting services. The Fund's transfer, shareholder
services and dividend paying agent is Chase Global Funds Services Company, P.O.
Box 5186, Bowling Green Station, New York, NY 10275-0672 (regular mail) or 4 New
York Plaza, 6th Floor, New York, NY 10004.

LEGAL OPINIONS

Certain legal matters in connection with the Common Shares will be passed
upon for the Fund by Bell, Boyd & Lloyd, Chicago, Illinois, and for the
Underwriters by ___________, __________, ________. Bell, Boyd & Lloyd and
________________ will rely as to certain matters of Massachusetts law on the
opinion of Bingham Dana LLP, Boston, Massachusetts.

20
<PAGE>

TABLE OF CONTENTS FOR THE
STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
Page
----
<S> <C>
Use of Proceeds......................................... B-2
Investment Objectives and Policies...................... B-2
Investment Policies and Techniques...................... B-5
Other Investment Policies and Techniques................ B-19
Management of the Fund.................................. B-21
Investment Adviser...................................... B-25
Portfolio Transactions.................................. B-26
Distributions........................................... B-27
Description of Shares................................... B-28
Certain Provisions in the Declaration of Trust.......... B-31
Repurchase of Fund Shares; Conversion to Open-End Fund.. B-32
Tax Matters............................................. B-35
Experts................................................. B-38
Additional Information.................................. B-38
Report of Independent Auditors.......................... B-40
Financial Statements.................................... B-41
Ratings of Investments (Appendix A)..................... A-1
Taxable Equivalent Yield Table (Appendix B)............. B-1
Historical Yields (Appendix C).......................... C-1
Hedging Strategies and Risks (Appendix D)............... D-1
</TABLE>

21
<PAGE>

Appendix A

Special Consideration Relating to New York
New York

New York State has historically been one of the wealthiest states in the
nation. For decades, however, the State's economy has grown more slowly than
that of the nation as a whole, gradually eroding the State's relative economic
affluence. Statewide, urban centers have experienced significant changes
involving migration of the more affluent to the suburbs and an influx of
generally less affluent residents. Regionally, the older Northeast cities have
suffered because of the relative success that the South and the West have had in
attracting people and business. The State has for many years had a very high
state and local tax burden relative to other states. The burden of state and
local taxation, in combination with the many other causes of regional economic
dislocation, has contributed to the decisions of some businesses and individuals
to relocate outside, or not locate within, the State.

The State's economy remains more reliant on the securities industry than is
the national economy. As a result, the State remains susceptible to downturns
in that industry, which could cause adverse changes in wage and employment
levels. 1997 per capita personal income was $30,752 and the 1997 unemployment
rate was 6.4%.

The State has projected continued moderate economic growth within New York
during 1998 and 99, although growth rates will lessen gradually during the
course of the two years. Personal income growth is expected to be modest but
below 1997 levels largely because increases in 1998 year-end bonuses are
expected to be lower.

The State expect to end its 1997-98 fiscal year with an operating surplus
of approximately $1.8 billion. The State legislature enacted the State's 1997-
98 fiscal year budget on August 4, 1997, more than four months after the start
of that fiscal year.

As of January 20, 1998, the updated 1997-98 State Financial Plan (the
"Plan") projected total general fund receipts of $35.2 billion and disbursements
of $35.2 billion, representing increases in receipts and disbursements of $2.15
billion and $2.27 billion over 1996-97 fiscal year. The Plan projected a
General Fund balance of approximately $465 million at the close of the 1997-98
fiscal year.

The Governor issued a proposed State budget for the 1998-99 fiscal year on
January 20, 1998, which projected a balanced general fund and receipts and
disbursements of $36.22 billion and $36.18 billion, respectively. As of May 11,
1998, the State legislature had not yet enacted, nor had the Governor and the
legislature reached an agreement on the budget for the 1998-99 fiscal year
commencing on April 1, 1998. The Governor and the State's legislature have
agreed on or proposed a series of short-term stopgap spending measures to fund
State payrolls and advances to certain municipalities and certain State
programs. The delay in the enactment of the budget may negatively affect
certain proposed actions and reduce projected savings.

On June 4, 1997, New York City adopted a 1998 fiscal year budget, which
provided for $33.4 billion in spending. Due to increased tax revenues resulting
from increased Wall Street

22
<PAGE>

profits and tourism, New York City has estimated that it may end the 1998 fiscal
year with a surplus of $2.0 billion. On April 24, 1998, the Mayor outlined his
proposed $34.1 billion Executive Budget. The Mayor's proposed budget called for
$595 million in additional spending cuts at City agencies and a continuation of
the personal income tax surcharge which is due to expire. The 1998-99 budget
proposal includes several tax reductions including the elimination of the City's
sales tax on all clothing and shoe purchases under $110.

The Governor and the legislature have not agreed upon the level of State
aid to the City during the 1999 fiscal year and there can be no assurances that
further cuts will not be necessary to close additional budget gaps once a State
budget is adopted. If State or federal aid in later years is less than the
level projected in the Mayor's proposal, projected savings may be negatively
impacted and the Mayor may be required to propose significant additional
spending reductions or tax increases to balance the City's budget for the 1999
and later fiscal years. If the State, the State agencies, New York City, other
municipalities or school districts were to suffer serious financial difficulties
jeopardizing their respective access to the public credit markets, or increasing
the risk of a default, the market price of municipal bonds issued by such
entities could be adversely affected.

On March 5, 1997, New York Governor George Pataki signed legislation
creating The New York City Transitional Finance Authority, which is authorized
to issue up to $7.5 billion in bonds for capital spending by New York City. The
City had faced limitations on its borrowing capacity after 1998 under the
State's constitution that would have prevented it from borrowing additional
funds, as a result of the decreased in real estate values within the City. The
first issuance of TFA debt occurred in October 1997.

23
<PAGE>

================================================================================

No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Fund or any Underwriter. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction.

_____________

TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary........................ i
Summary of Fund Expenses.................. iv
The Fund.................................. 1
Use of Proceeds........................... 1
The Fund's Investments.................... 1
MuniPreferred Shares and Leverage......... 4
Risks..................................... 6
How the Fund Manages Risks................ 7
Management of the Fund.................... 9
Net Asset Value........................... 10
Distributions............................. 10
Dividend Reinvestment Plan................ 11
Description of Shares..................... 12
Certain Provisions in the Declaration
of Trust............................... 14
Repurchase of Fund Shares; Conversion to
Open-End Fund.......................... 16
Tax Matters............................... 17
Other Matters............................. 18
Underwriting.............................. 18
Custodian and Transfer Agent.............. 20
Legal Opinions............................ 20
Table of Contents for the Statement of
Additional Information................. 21
Special Considerations Relating to
New York (Appendix A)..................... 22
</TABLE>
- -------------

Until _______ (25 days from the date of this Prospectus), all dealers that
effect transactions in these securities, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to the
dealers' obligation to deliver a Prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
================================================================================

100,000 Shares

Nuveen New York
Municipal Advantage
Fund

Common Shares

______________________

P R O S P E C T U S
______________________

John Nuveen & Co.
Incorporated

____________, 19______

================================================================================
<PAGE>

The information in this Statement of Additional Information is not complete
and may be changed. The Underwriters may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This Statement of Additional Information is not an offer to sell
these securities and is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.

<PAGE>

Subject to Completion
December __, 1998

Nuveen New York Municipal Advantage Fund

STATEMENT OF ADDITIONAL INFORMATION

Nuveen New York Municipal Advantage Fund (the "Fund") is a newly organized,
closed-end, diversified management investment company. The Fund's investment
objective is to provide current income exempt from regular Federal, New York
State and New York City income tax, and enhance portfolio value relative to the
municipal bond market by investing in tax-exempt municipal bonds that, in the
opinion of the Fund's investment adviser, are underrated or undervalued or that
represent municipal market sectors that are undervalued. This Statement of
Additional Information relating to Common Shares does not constitute a
prospectus, but should be read in conjunction with the Prospectus relating
thereto dated _______________ (the "Prospectus"). This Statement of Additional
Information does not include all information that a prospective investor should
consider before purchasing Common Shares, and investors should obtain and read
the Prospectus prior to purchasing such shares. A copy of the Prospectus may be
obtained without charge by calling (800) 257-8787. You may also obtain a copy of
the Prospectus on the Securities and Exchange Commission's web site
(http://www.sec.gov). Capitalized terms used but not defined in this Statement
of Additional Information have the meanings ascr ibed to them in the Prospectus.

TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Use of Proceeds......................................... B-2
Investment Objectives and Policies...................... B-2
Investment Policies and Techniques...................... B-5
Other Investment Policies and Techniques................ B-19
Management of the Fund.................................. B-21
Investment Adviser...................................... B-25
Portfolio Transactions.................................. B-26
Distributions........................................... B-27
Description of Shares................................... B-28
Certain Provisions in the Declaration of Trust.......... B-31
Repurchase of Fund Shares; Conversion to Open-End Fund.. B-32
Tax Matters............................................. B-35
Experts................................................. B-38
Additional Information.................................. B-38
Report of Independent Auditors.......................... B-40
Financial Statements.................................... B-41
Ratings of Investments (Appendix A)..................... A-1
Taxable Equivalent Yield Table (Appendix B)............. B-1
Historical Yields (Appendix C).......................... C-1
Hedging Strategies and Risks (Appendix D)............... D-1
</TABLE>
<PAGE>

This Statement of Additional Information is dated __________________, 19______

USE OF PROCEEDS

The net proceeds of the offering of Common Shares will be approximately
$_______ ($_______ if the Underwriters exercise the over-allotment option in
full) after payment of organization and offering costs. There is no sales charge
or underwriting discount charged to investors on purchases of Common Shares.
Nuveen or an affiliate has agreed to pay the Underwriters from its own assets a
commission in connection with the sales of Common Shares.

Pending investment in municipal bonds that meet the Fund's investment
objectives and policies, the net proceeds of the offering will be invested in
high quality, short-term tax-exempt money market securities or in high quality
municipal bonds with relatively low volatility (such as pre-refunded and
intermediate-term bonds), to the extent such securities are available. If
necessary to invest fully the net proceeds of the offering immediately, the Fund
may also purchase, as temporary investments, short-term taxable investments of
the type described under "Investment Objectives and Policies--Portfolios
Investments," the income on which is subject to regular Federal income tax.

INVESTMENT OBJECTIVES AND POLICIES

The Fund's investment objective is to provide current income exempt from
regular Federal, New York State and New York City income tax and enhance
portfolio value relative to the municipal bond market by investing in tax-exempt
municipal bonds that Nuveen Advisory Corp. ("Nuveen Advisory") believes are
underrated or undervalued or that represent municipal market sectors that are
undervalued. Underrated municipal bonds are those whose ratings do not, in
Nuveen Advisory's opinion, reflect their true value. Municipal bonds may be
underrated because of the time that has elapsed since their rating was assigned
or reviewed, or because of positive factors that may not have been fully taken
into account by rating agencies, or for other similar reasons. Undervalued
municipal bonds are bonds that, in Nuveen Advisory's opinion, are worth more
than the value assigned to them in the marketplace. Nuveen Advisory may at times
believe that bonds associated with a particular municipal market sector (for
example, electric utilities), or issued by a particular municipal issuer, are
undervalued. Nuveen Advisory may purchase such a bond for the Fund's portfolio
because it represents a market sector or issuer that Nuveen Advisory considers
undervalued, even if the value of the particular bond is consistent with the
value of similar bonds. Municipal bonds of particular types or purposes (e.g.,
hospital bonds, industrial revenue bonds or bonds issued by a particular
municipal issuer) may be undervalued because there is a temporary excess of
supply in that market sector, or because of a general decline in the market
price of municipal bonds of the market sector for reasons that do not apply to
the particular municipal bonds that are considered undervalued.

The Fund's investment in underrated or undervalued municipal bonds will be
based on Nuveen Advisory's belief that their prices should ultimately reflect
their true value. The Fund attempts to increase its portfolio value relative to
the municipal bond market by prudent selection of municipal bonds, regardless of
which direction the market may move. Any capital appreciation realized by the
Fund will generally result in the distribution of taxable capital gains to Fund
shareholders. The Fund's investment objectives are fundamental policies of the
Fund.

B-2
<PAGE>

The Fund has not established any limit on the percentage of its portfolio
that may be invested in municipal bonds subject to the alternative minimum tax
provisions of Federal tax law, and the Fund expects that a substantial portion
of the income it produces will be includable in alternative minimum taxable
income. Common Shares therefore would not ordinarily be a suitable investment
for investors who are subject to the Federal alternative minimum tax. The
suitability of an investment in Common Shares will depend upon a comparison of
the after-tax yield likely to be provided from the Fund with that from
comparable tax-exempt investments not subject to the alternative minimum tax,
and from comparable fully taxable investments, in light of each such investor's
tax position. Special considerations apply to corporate investors. See "Tax
Matters."

Investment Restrictions

Except as described below, the Fund, as a fundamental policy, may not,
without the approval of the holders of a majority of the outstanding Common
Shares and MuniPreferred Shares voting together as a single class, and of the
holders of a majority of the outstanding MuniPreferred Shares voting as a
separate class:

(1) Issue senior securities, as defined in the Investment
Company Act of 1940, other than MuniPreferred Shares, except to the extent
permitted under the Investment Company Act of 1940, see "Financial Futures
and Options Transactions";

(2) Borrow money, except from banks for temporary or emergency
purposes or for repurchase of its shares, and then only in an amount not
exceeding one-third of the value of the Fund's total assets (including the
amount borrowed) less the Fund's liabilities (other than borrowings);

(3) Act as underwriter of another issuer's securities, except to
the extent that the Fund may be deemed to be an underwriter within the
meaning of the Securities Act of 1933 in connection with the purchase and
sale of portfolio securities;

(4) Invest more than 25% of its total assets in securities of
issuers in any one industry; provided, however, that such limitation shall
not apply to municipal bonds other than those municipal bonds backed only
by the assets and revenues of non-governmental users;

(5) Purchase or sell real estate, but this shall not prevent the
Fund from investing in municipal bonds secured by real estate or interests
therein or foreclosing upon and selling such security;

(6) Purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments (but this shall not
prevent the Fund from purchasing or selling options, futures contracts,
derivative instruments or from investing in securities or other instruments
backed by physical commodities);

(7) Make loans, other than by entering into repurchase
agreements and through the purchase of municipal bonds or short-term
investments in accordance with its investment objectives, policies and
limitations;

B-3
<PAGE>

(8) Invest in securities other than municipal bonds and short-
term investments, as described in the Prospectus; and

(9) Invest more than 5% of its total assets in securities of any
one issuer, except that this limitation shall not apply to bonds issued by
the United States Government, its agencies and instrumentalities or to the
investment of 25% of its total assets.

For purposes of the foregoing and "Description of Shares--MuniPreferred
Shares--Voting Rights" below, "majority of the outstanding," when used with
respect to particular shares of the Fund, means (i) 67% or more of the shares
present at a meeting, if the holders of more than 50% of the shares are present
or represented by proxy, or (ii) more than 50% of the shares, whichever is less.

For the purpose of applying the limitation set forth in subparagraph (9)
above, an issuer shall be deemed the sole issuer of a security when its assets
and revenues are separate from other governmental entities and its securities
are backed only by its assets and revenues. Similarly, in the case of a non-
governmental user, such as an industrial corporation or a privately owned or
operated hospital, if the security is backed only by the assets and revenues of
the non-governmental user, then such non-governmental user would be deemed to be
the sole issuer. Where a security is also backed by the enforceable obligation
of a superior or unrelated governmental or other entity (other than a bond
insurer), it shall also be included in the computation of securities owned that
are issued by such governmental or other entity. Where a security is guaranteed
by a governmental entity or some other facility, such as a bank guarantee or
letter of credit, such a guarantee or letter of credit would be considered a
separate security and would be treated as an issue of such government, other
entity or bank. When a municipal bond is insured by bond insurance, it shall not
be considered a security that is issued or guaranteed by the insurer; instead,
the issuer of such municipal bond will be determined in accordance with the
principles set forth above. The foregoing restrictions do not limit the
percentage of the Fund's assets that may be invested in municipal bonds insured
by any given insurer.

In addition to the foregoing fundamental investment policies, the Fund is
also subject to the following non-fundamental restrictions and policies, which
may be changed by the Board of Trustees. The Fund may not:

(1) Sell securities short, unless the Fund owns or has the right
to obtain securities equivalent in kind and amount to the securities sold
at no added cost, and provided that transactions in options, futures
contracts, options on futures contracts, or other derivative instruments
are not deemed to constitute selling securities short.

(2) Purchase securities of open-end or closed-end investment
companies except in compliance with the Investment Company Act of 1940 or
any exemptive relief obtained thereunder.

(3) Enter into futures contracts or related options or forward
contracts, if more than 30% of the Fund's net assets would be represented
by futures contracts or more than 5% of the Fund's net assets would be
committed to initial margin deposits and premiums on futures contracts and
related options.

B-4
<PAGE>

(4) Purchase securities when borrowings exceed 5% of its total
assets if and so long as MuniPreferred Shares are outstanding.

(5) Purchase securities of companies for the purpose of
exercising control.

The restrictions and other limitations set forth above will apply only at
the time of purchase of securities and will not be considered violated unless an
excess or deficiency occurs or exists immediately after and as a result of an
acquisition of securities.

The Fund intends to apply for ratings for the MuniPreferred Shares from
Moody's and/or S&P. In order to obtain and maintain the required ratings, the
Fund may be required to comply with investment quality, diversification and
other guidelines established by Moody's or S&P. Such guidelines will likely be
more restrictive than the restrictions set forth above. The Fund does not
anticipate that such guidelines would have a material adverse effect on the
Fund's Common Shareholders or its ability to achieve its investment objectives.
The Fund presently anticipates that any MuniPreferred Shares that it intends to
issue would be initially given the highest ratings by Moody's ("Aaa") or by S&P
("AAA"), but no assurance can be given that such ratings will be obtained. No
minimum rating is required for the issuance of MuniPreferred Shares by the Fund.
Moody's and S&P receive fees in connection with their ratings issuances.

INVESTMENT POLICIES AND TECHNIQUES

The following information supplements the discussion of the Fund's
investment objectives, policies, and techniques that are described in the
Prospectus.

Investment in Municipal Bonds

Portfolio Investments

The Fund will invest its net assets in a diversified portfolio of municipal
bonds that are exempt from regular Federal and New York State and New York City
income tax. Under normal market conditions, and except for the temporary
investments described below, the Fund expects to be fully invested in such tax-
exempt municipal bonds. The Fund will invest at least 80% of its net assets in
investment grade municipal bonds, meaning that such bonds are rated within the
four highest grades (Baa or BBB or better) by Moody's, S&P or Fitch or are
unrated but judged to be of comparable quality by Nuveen Advisory. The Fund may
invest up to 20% of its net assets in municipal bonds that are rated Ba/BB or B
by Moody's, S&P or Fitch or that are unrated but judged to be of comparable
quality by Nuveen Advisory. Bonds rated below investment grade (BBB/Baa) are
commonly referred to as "junk bonds." Issuers of bonds rated Ba/BB or B
are regarded as having current capacity to make principal and interest payments
but are subject to business, financial or economic conditions which could
adversely affect such payment capacity. The foregoing policies are fundamental
policies of the Fund. Municipal bonds rated Baa or BBB are considered
"investment grade" securities; municipal bonds rated Baa are considered medium
grade obligations which lack outstanding investment characteristics and have
speculative characteristics, while municipal bonds rated BBB are regarded as
having adequate capacity to pay principal and interest. Municipal bonds rated
AAA in which the Fund may invest may have been so rated on the basis of the
existence of insurance guaranteeing the timely payment, when

B-5
<PAGE>

due, of all principal and interest. Municipal bonds rated below investment grade
are obligations of issuers that are considered predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal according
to the terms of the obligation and, therefore, carry greater investment risk,
including the possibility of issuer default and bankruptcy and increased market
price volatility, and are commonly referred to as "high yield," "high risk" or
"junk bonds". Municipal bonds rated below investment grade tend to be less
marketable than higher-quality bonds because the market for them is less broad.
The market for unrated municipal bonds is even narrower. During periods of thin
trading in these markets, the spread between bid and asked prices is likely to
increase significantly and the Fund may have greater difficulty selling its
portfolio securities.

A general description of Moody's, S&P's and Fitch's ratings of municipal
bonds is set forth in Appendix A hereto. The ratings of Moody's, S&P and Fitch
represent their opinions as to the quality of the municipal bonds they rate. It
should be emphasized, however, that ratings are general and are not absolute
standards of quality. Consequently, municipal bonds with the same maturity,
coupon and rating may have different yields while obligations of the same
maturity and coupon with different ratings may have the same yield.

The Fund will primarily invest in municipal bonds with long-term maturities
in order to maintain a weighted average maturity of 15-30 years, but the average
weighted maturity may be shortened from time to time depending on market
conditions. As a result, the Fund's portfolio at any given time may include both
long-term and intermediate-term municipal bonds. Moreover, during temporary
defensive periods (e.g., times when, in Nuveen Advisory's opinion, temporary
imbalances of supply and demand or other temporary dislocations in the tax-
exempt bond market adversely affect the price at which long-term or
intermediate-term municipal bonds are available), and in order to keep cash on
hand fully invested, including the period during which the net proceeds of the
offering are being invested, the Fund may invest any percentage of its assets in
short-term investments including high quality, short-term securities which may
be either tax-exempt or taxable. The Fund intends to invest in taxable short-
term investments only in the event that suitable tax-exempt temporary
investments are not available at reasonable prices and yields. Tax-exempt
temporary investments include various obligations issued by state and local
governmental issuers, such as tax-exempt notes (bond anticipation notes, tax
anticipation notes and revenue anticipation notes or other such municipal bonds
maturing in three years or less from the date of issuance) and municipal
commercial paper. The Fund will invest only in taxable temporary investments
which are U.S. Government securities or securities rated within the highest
grade by Moody's, S&P or Fitch, and which mature within one year from the date
of purchase or carry a variable or floating rate of interest. See Appendix A for
a general description of Moody's, S&P's and Fitch's ratings of securities in
such categories. Taxable temporary investments of the Fund may include
certificates of deposit issued by U.S. banks with assets of at least $1 billion,
or commercial paper or corporate notes, bonds or debentures with a remaining
maturity of one year or less, or repurchase agreements. See "Certain Trading
Strategies of The Fund--Repurchase Agreements." To the extent the Fund invests
in taxable investments, the Fund will not at such times be in a position to
achieve its investment objective of tax-exempt income.

The foregoing policies as to ratings of portfolio investments will apply
only at the time of the purchase of a security, and the Fund will not be
required to dispose of securities in the event

B-6
<PAGE>

Moody's, S&P or Fitch downgrades its assessment of the credit characteristics of
a particular issuer.

Nuveen Advisory seeks to enhance portfolio value relative to the municipal
bond market by investing in tax-exempt municipal bonds that it believes are
underrated or undervalued or that represent municipal market sectors that are
undervalued. Underrated municipal bonds are those whose ratings do not, in
Nuveen Advisory's opinion, reflect their true value. Undervalued municipal bonds
are bonds that, in Nuveen Advisory's opinion, are worth more than the value
assigned to them in the marketplace. Nuveen Advisory may at times believe that
bonds associated with a particular municipal market sector (for example,
electric utilities), or issued by a particular municipal issuer, are
undervalued. Nuveen Advisory may purchase such a bond for the Fund's portfolio
because it represents a market sector or issuer that Nuveen Advisory considers
undervalued, even if the value of the particular bond is consistent with the
value of similar bonds. Municipal bonds of particular types or purposes (e.g.,
hospital bonds, industrial revenue bonds or bonds issued by a particular
municipal issuer) may be undervalued because there is a temporary excess of
supply in that market sector, or because of a general decline in the market
price of municipal bonds of the market sector for reasons that do not apply to
the particular municipal bonds that are considered undervalued. The Fund's
investment in underrated or undervalued municipal bonds will be based on Nuveen
Advisory's belief that their prices should ultimately reflect their true value.

The Fund has not established any limit on the percentage of its portfolio
investments that may be invested in municipal bonds subject to the alternative
minimum tax provisions of Federal tax law. The Fund expects that a substantial
portion of the current income it produces will be included in alternative
minimum taxable income. Special considerations apply to corporate investors. See
"Tax Matters."

Also included within the general category of municipal bonds described in
the Prospectus are participations in lease obligations or installment purchase
contract obligations (hereinafter collectively called "Municipal Lease
Obligations") of municipal authorities or entities. Although a Municipal Lease
Obligation does not constitute a general obligation of the municipality for
which the municipality's taxing power is pledged, a Municipal Lease Obligation
is ordinarily backed by the municipality's covenant to budget for, appropriate
and make the payments due under the Municipal Lease Obligation. However, certain
Municipal Lease Obligations contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on a
yearly basis. In the case of a "non-appropriation" lease, the Fund's ability to
recover under the lease in the event of non-appropriation or default will be
limited solely to the repossession of the leased property, without recourse to
the general credit of the lessee, and disposition or releasing of the property
might prove difficult. In order to reduce this risk, the Fund will only purchase
Municipal Lease Obligations where Nuveen Advisory believes the issuer has a
strong incentive to continue making appropriations until maturity.

During temporary defensive periods and in order to keep the Fund's cash
fully invested, including the period during which the net proceeds of the
offering are being invested, the Fund may invest up to 100% of its net assets in
short-term investments including high quality, short-term securities that may be
either tax-exempt or taxable. To the extent the Fund invests in

B-7
<PAGE>

taxable short-term investments, the Fund will not at such times be in a position
to achieve that portion of its investment objective of seeking current income
exempt from Federal income tax. For further information, see, "Short-Term
Investments" below.

Obligations of issuers of municipal bonds are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the Bankruptcy Reform Act of 1978. In addition, the
obligations of such issuers may become subject to the laws enacted in the future
by Congress, state legislatures or referenda extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations or upon municipalities to levy taxes. There is also the
possibility that, as a result of legislation or other conditions, the power or
ability of any issuer to pay, when due, the principal of and interest on its
municipal bonds may be materially affected.

Short-Term Investments

Short-Term Taxable Fixed Income Securities

For temporary defensive purposes or to keep cash on hand fully invested,
the Fund may invest up to 100% of its total assets in cash equivalents and
short-term taxable fixed-income securities, although the Fund intends to invest
in taxable short-term investments only in the event that suitable tax-exempt
short-term investments are not available at reasonable prices and yields. Short-
term taxable fixed income investments are defined to include, without
limitation, the following:

(1) U.S. government securities, including bills, notes and bonds
differing as to maturity and rates of interest that are either issued or
guaranteed by the U.S. Treasury or by U.S. government agencies or
instrumentalities. U.S. government agency securities include securities
issued by (a) the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, and the Government National Mortgage Association, whose
securities are supported by the full faith and credit of the United States;
(b) the Federal Home Loan Banks, Federal Intermediate Credit Banks, and the
Tennessee Valley Authority, whose securities are supported by the right of
the agency to borrow from the U.S. Treasury; (c) the Federal National
Mortgage Association, whose securities are supported by the discretionary
authority of the U.S. government to purchase certain obligations of the
agency or instrumentality; and (d) the Student Loan Marketing Association,
whose securities are supported only by its credit. While the U.S.
government provides financial support to such U.S. government-sponsored
agencies or instrumentalities, no assurance can be given that it always
will do so since it is not so obligated by law. The U.S. government, its
agencies, and instrumentalities do not guarantee the market value of their
securities. Consequently, the value of such securities may fluctuate.

(2) Certificates of Deposit issued against funds deposited in a
bank or a savings and loan association. Such certificates are for a
definite period of time, earn a specified rate of return, and are normally
negotiable. The issuer of a certificate of deposit agrees to pay the amount
deposited plus interest to the bearer of the certificate on the dated
specified thereon. Under current FDIC regulations, the maximum insurance

B-8
<PAGE>

payable as to any one certificate of deposit is $100,000; therefore,
certificates of deposit purchased by the Fund may not be fully insured.

(3) Repurchase agreements, which involve purchases of debt
securities. At the time the Fund purchases securities pursuant to a
repurchase agreement, it simultaneously agrees to resell and redeliver such
securities to the seller, who also simultaneously agrees to buy back the
securities at a fixed price and time. This assures a predetermined yield
for the Fund during its holding period, since the resale price is always
greater than the purchase price and reflects an agreed-upon market rate.
Such actions afford an opportunity for the Fund to invest temporarily
available cash. The Fund may enter into repurchase agreements only with
respect to obligations of the U.S. government, its agencies or
instrumentalities; certificates of deposit; or bankers' acceptances in
which the Fund may invest. Repurchase agreements may be considered loans to
the seller, collateralized by the underlying securities. The risk to the
Fund is limited to the ability of the seller to pay the agreed-upon sum on
the repurchase date; in the event of default, the repurchase agreement
provides that the Fund is entitled to sell the underlying collateral. If
the value of the collateral declines after the agreement is entered into,
and if the seller defaults under a repurchase agreement when the value of
the underlying collateral is less than the repurchase price, the Fund could
incur a loss of both principal and interest. The investment adviser
monitors the value of the collateral at the time the action is entered into
and at all times during the term of the repurchase agreement. The
investment adviser does so in an effort to determine that the value of the
collateral always equals or exceeds the agreed-upon repurchase price to be
paid to the Fund. If the seller were to be subject to a federal bankruptcy
proceeding, the ability of the Fund to liquidate the collateral could be
delayed or impaired because of certain provisions of the bankruptcy laws.

(4) Commercial paper, which consists of short-term unsecured
promissory notes, including variable rate master demand notes issued by
corporations to finance their current operations. Master demand notes are
direct lending arrangements between the Fund and a corporation. There is no
secondary market for such notes. However, they are redeemable by the Fund
at any time. The investment adviser will consider the financial condition
of the corporation (e.g., earning power, cash flow, and other liquidity
ratios) and will continuously monitor the corporation's ability to meet all
of its financial obligations, because the Fund's liquidity might be
impaired if the corporation were unable to pay principal and interest on
demand. Investments in commercial paper will be limited to commercial paper
rated in the highest categories by a major rating agency and which mature
within one year of the date of purchase or carry a variable or floating
rate of interest.

Short-Term Tax-Exempt Fixed Income Securities

Short-term tax-exempt fixed-income securities are securities that are
exempt from regular federal income tax and mature within three years or less
from the date of issuance. Short-term tax-exempt fixed income securities are
defined to include, without limitation, the following:

B-9
<PAGE>

Bond Anticipation Notes ("BANs") are usually general obligations of state
and local governmental issuers which are sold to obtain interim financing for
projects that will eventually be funded through the sale of long-term debt
obligations or bonds. The ability of an issuer to meet its obligations on its
BANs is primarily dependent on the issuer's access to the long-term municipal
bond market and the likelihood that the proceeds of such bond sales will be used
to pay the principal and interest on the BANs.

Tax Anticipation Notes ("TANs") are issued by state and local governments
to finance the current operations of such governments. Repayment is generally to
be derived from specific future tax revenues. TANs are usually general
obligations of the issuer. A weakness in an issuer's capacity to raise taxes due
to, among other things, a decline in its tax base or a rise in delinquencies,
could adversely affect the issuer's ability to meet its obligations on
outstanding TANs.

Revenue Anticipation Notes ("RANs") are issued by governments or
governmental bodies with the expectation that future revenues from a designated
source will be used to repay the notes. In general, they also constitute general
obligations of the issuer. A decline in the receipt of projected revenues, such
as anticipated revenues from another level of government, could adversely affect
an issuer's ability to meet its obligations on outstanding RANs. In addition,
the possibility that the revenues would, when received, be used to meet other
obligations could affect the ability of the issuer to pay the principal and
interest on RANs.

Construction Loan Notes are issued to provide construction financing for
specific projects. Frequently, these notes are redeemed with funds obtained from
the Federal Housing Administration.

Bank Notes are notes issued by local government bodies and agencies as
those described above to commercial banks as evidence of borrowings. The
purposes for which the notes are issued are varied but they are frequently
issued to meet short-term working capital or capital-project needs. These notes
may have risks similar to the risks associated with TANs and RANs.

Tax-Exempt Commercial Paper ("Municipal Paper") represents very short-term
unsecured, negotiable promissory notes, issued by states, municipalities and
their agencies. Payment of principal and interest on issues of municipal paper
may be made from various sources, to the extent the funds are available
therefrom. Maturities or municipal paper generally will be shorter than the
maturities of TANs, BANs or RANs. There is a limited secondary market for issues
of Municipal Paper.

Certain municipal bonds may carry variable or floating rates of interest
whereby the rate of interest is not fixed but varies with changes in specified
market rates or indices, such as a bank prime rate or a tax-exempt money market
indexes.

While the various types of notes described above as a group represent the
major portion of the tax-exempt note market, other types of notes are
occasionally available in the marketplace and the Fund may invest in such other
types of notes to the extent permitted under its investment objectives, policies
and limitations. Such notes may be issued for different purposes and may be
secured differently from those mentioned above.

B-10
<PAGE>

Hedging Strategies

The Fund may periodically engage in hedging transactions. Hedging is a term
used for various methods of seeking to preserve portfolio capital value of
offsetting price changes in one investment through making another investment
whose price should tend to move in the opposite direction. It may be desirable
and possible in various market environments to partially hedge the portfolio
against fluctuations in market value due to interest rate fluctuations by
investment in financial futures and index futures as well as related put and
call options on such instruments. Both parties entering into an index or
financial futures contract are required to post an initial deposit of 1% to 5%
of the total contract price. Typically, option holders enter into offsetting
closing transactions to enable settlement in cash rather than take delivery of
the position in the future of the underlying security. The Fund will only sell
covered futures contracts, which means that the Fund segregates assets equal to
the amount of the obligations.

These transactions present certain risks. In particular, the imperfect
correlation between price movements in the futures contract and price movements
in the securities being hedged creates the possibility that losses on the hedge
by the Fund may be greater than gains in the value of the securities in the
Fund's portfolio. In addition, futures and options markets may not be liquid in
all circumstances. As a result, in volatile markets, the Fund may not be able to
close out the transaction without incurring losses substantially greater than
the initial deposit. Finally, the potential deposit requirements in futures
contracts create an ongoing greater potential financial risk than do options
transactions, where the exposure is limited to the cost of the initial premium.
Losses due to hedging transactions will reduce yield. Net gains, if any, from
hedging and other portfolio transactions will be distributed as taxable
distributions to shareholders. The Fund will not make any investment (whether an
initial premium or deposit or a subsequent deposit) other than as necessary to
close a prior investment if, immediately after such investment, the sum of the
amount of its premiums and deposits would exceed 5% of the Fund's net assets.
The Fund will invest in these instruments only in markets believed by Nuveen
Advisory to be active and sufficiently liquid. For further information regarding
these investment strategies and risks presented thereby, see Appendix D to this
Statement of Additional Information.

Factors Pertaining to New York

Except to the extent the Fund invests in temporary investments, the Fund
will invest substantially all of its assets in New York municipal bonds. The
Fund is therefore susceptible to political, economic or regulatory factors
affecting New York State and governmental bodies within New York State. Some of
the more significant events and conditions relating to the financial situation
in New York are summarized below. The following information provides only a
brief summary of the complex factors affecting the financial situation in New
York, is derived from sources that are generally available to investors and is
believed to be accurate. It is based on information drawn from official
statements and prospectuses issued by, and other information reported by, the
State of New York (the "State"), by its various public bodies (the "Agencies"),
and by other entities located within the State, including the City of New York
(the "City"), in connection with the issuance of their respective securities.

There can be no assurance that current or future statewide or regional
economic difficulties, and the resulting impact on State or local government
finances generally, will not

B-11
<PAGE>

adversely affect the market value of municipal bonds held in the portfolio of
the Fund or the ability of particular obligors to make timely payments of debt
service on (or relating to) those obligations.

(1) The State: The State has historically been one of the wealthiest
states in the nation. For decades, however, the State economy has grown more
slowly than that of the nation as a whole, gradually eroding the State's
relative economic affluence. Statewide, urban centers have experienced
significant changes involving migration of the more affluent to the suburbs and
an influx of generally less affluent residents. Regionally, the older Northeast
cities have suffered because of the relative success that the South and West
have had in attracting people and business. The State has for many years had a
very high State and local tax burden relative to other states. The burden of
State and local taxation, in combination with the many other causes of regional
economic dislocation, has contributed to the decisions of some businesses and
individuals to relocate outside, or not locate within, the State.

Slowdown of Regional Economy. A national recession commenced in mid-1990.
The downturn continued throughout the State's 1990-91 fiscal year and was
followed by a period of weak economic growth during the 1991 and 1992 calendar
years. For calendar year 1993, the economy grew faster than in 1992, but still
at a very moderate rate as compared to other recoveries. Moderate economic
growth continued in calendar year 1994. Economic growth slowed within New York
during 1995 and 1996. Personal income and employment growth in the State
improved in 1997, although at lower levels than in the national economy. The
State has forecasted continued moderate growth in 1998 and 1999, although growth
rates are expected to lessen gradually during the course of two years. The
State's economic growth continues to lag behind the nation's, due in part to
restructuring in the healthcare, social service and banking sectors and
continued spending restraint in government. Many uncertainties exist in
forecasts of both the national and State economies and there can be no assurance
that the State's economy will perform at a level sufficient to meet the State's
projections of receipts and disbursements.

1998-99 Fiscal Year. The Governor issued a proposed Executive Budget for
the 1998-99 fiscal year (The "Proposed Budget") on January 20, 1998, which
projected a balanced general fund and receipts and disbursements of $36.22
billion and $36.18 billion, respectively. As of May 11, 1998, the State
legislature had not yet enacted, nor had the Governor and the legislature
reached an agreement on, the budget for the 1998-99 fiscal year, which commenced
on April 1, 1998. The Governor and the State's legislature have agreed on or
proposed a series of short-term stopgap spending measures to fund state payrolls
and advances to certain municipalities and certain state programs. The delay in
the enactment of the budget may negatively affect certain proposed actions and
reduce projected savings.

As compared to the 1997-98 Financial Plan, the governor's budget proposes
year-to-year in general fund spending of 2.89 percent. Current law and
programmatic requirements are primarily responsible for the year-to-year growth
in general fund spending. New spending is partially offset by reductions in
capital projects transfers due to the financing of a certain program from
resources available in 1997-98, welfare assistance savings, lower spending in
certain areas and lower transfers.

B-12
<PAGE>

The Proposed Budget and the 1998-99 Financial Plan may be impacted
negatively by uncertainties relating to the economy and tax collections. In
particular, should the national economy grow more slowly than forecasted by the
State, revenues received by the State would be adversely affected. In addition,
proposed retroactive changes to the federal tax treatment of capital gains would
flow through to the State and could significantly reduce tax receipts.

1997-98 Fiscal Year. The State is projecting that it will end the 1997-98
fiscal year with a $1.8 billion cash surplus. Almost all of the surplus was
derived from higher-than expected tax receipts, reflecting continued growth in
the State's economy and another strong year in the financial markets.

Future Fiscal Years. There can be no assurance that the State will not
face substantial potential budget gaps in the future resulting from a
significant disparity between tax revenues projected from a lower recurring
receipts base and the spending required to maintain State programs at current
levels. To address any potential budgetary imbalance, the State may need to take
significant actions to align recurring receipts and disbursements. The
Governor's budget for fiscal year 1998-99 projects that the State will end 1998-
99 with a closing balance in the general fund of $500 million and faces budget
gaps of $1.5 billion and $3.75 billion that may need to be closed for fiscal
years 1999-2000 and 2000-01, respectively.

Indebtedness. As of March 31, 1997, the total amount of State general
obligation debt stood at $4.7 billion.

The Governor's budget for fiscal year 1998-99 projects approximately $2.5
billion of borrowings by the state for capital purposes. The projections of the
Sate regarding its borrowings for any fiscal year are subject to change if
actual receipts fall short of State projections or if other circumstances
require.

In June 1990, legislation was enacted creating the New York Local
Government Assistance Corporation ("LGAC"), a public benefit corporation
empowered to issue long-term obligations to fund certain payments to local
governments traditionally funded through the State's annual seasonal borrowing.
The Corporation is authorized to issue up to $4.7 billion in bonds plus amounts
necessary to fund a capital reserve, costs of issuance and, in certain cases,
capitalized interest. As of March 31, 1996, LGAC had issued all of its
authorization. Any issuance of bonds by the Corporation in the future will be
for refunding purposes only.

Financing of capital programs by other public authorities of the State is
also obtained from lease-purchase and contractual-obligation financing
arrangements (nonvoter approved), the debt service for which is paid from State
appropriations. As of March 31, 1997, there were $20.8 billion of such other
financing arrangements outstanding and additional financings of this nature by
public authorities including LGAC. In addition, certain agencies had issued and
have outstanding approximately $3.3 billion of "moral obligation financings" as
of March 31, 1997, which are to be repaid from project revenues. There has never
been a default on moral obligation debt of the State.

Ratings. In connection with the March 1998 State issuance of general
obligation bonds, Moody's rating of the State's general obligation bonds stood
at A2, S&P's rating stood at A and

B-13
<PAGE>

Fitch's rating was _____. On August 28, 1997, S&P upgraded its rating on the
State's general obligation bonds from A- to A.

Previously, Moody's lowered its rating to A on June 6, 1990, its rating
having been A1 since May 27, 1986. S&P lowered its rating from A to A- on
January 13, 1992. S&P's previous ratings were A from March 1990 to January 1992,
AA- from August 1987 to March 1990 and A+ from November 1982 to August 1987.

(2) The City and the Municipal Assistance Corporation ("MAC"): The City
accounts for approximately 40% of the State's population and personal income,
and the City's financial health affects the State in numerous ways.

In response to the City's fiscal crisis in 1975, the State took a number of
steps to assist the City in returning to fiscal stability. Among other actions,
the State Legislature (i) created MAC to assist with long-term financing for the
City's short-term debt and other cash requirements and (ii) created the State
Financial Control Board (the "Control Board") to review and approve the City's
budgets and four-year financial plans (the financial plans also apply to certain
City-related public agencies).

Economic activity in the City has experienced periods of growth and
recession and can be expected to experience periods of growth and recession in
the future. Changes in the economic activity in the City, particularly
employment, per capita personal income and retail sales, may have an impact on
the City. Overall, the City's economic improvement accelerated significantly in
fiscal year 1997. Much of the increase can be traced to the performance of the
securities industry, but the City's economy also produced gains in the retail
trade sector, the hotel and tourism industry, and business services, with
private sector employment higher than previously forecasted. The City's current
Financial Plan assumes that, after strong growth in 1997-98, moderate economic
growth will exist through calendar year 2002, with moderating job growth and
wage increases. However, there can be no assurance that the economic projections
assumed in the Financial Plan will occur or that the tax revenues projected in
the Financial Plan to be received in the amounts anticipated.

Fiscal year 1999 and the 1998-2002 Financial Plan. On January 29, 1998, the
Mayor released his preliminary $34.3 billion budget for fiscal year 1999. The
Mayor announced on April 24, 1998, that the preliminary budget for the 1999
fiscal year will be modified to utilize the incurred surplus from the 1998
fiscal year to reduce sales taxes, increasing spending on certain programs and
to repay a portion of the City's debt.

On April 24, 1998, the Mayor also announced revisions to the proposed 1998-
2002 Financial Plan (the "Plan"), which now projects budget gaps of $1.5
billion, $2.1 billion and $1.6 billion for fiscal years 2000, 2001 and 2002,
respectively. The City Comptroller and State Comptroller have each stated that
the fiscal year 1999 budget includes moderate revenue risks. The State
Comptroller has projected budget gaps for fiscal years 2000, 2001 and 2002 that
are each in excess of the City's estimate.

B-14
<PAGE>

An extended delay by the State in adopting its 1998-99 fiscal year budget
or the failure of the State legislature to extend the income tax surcharge would
negatively impact upon the City's financial condition and ability to close
budget gaps for fiscal years 1999 and thereafter.

Given the foregoing, there can be no assurance that the City will continue
to maintain a balanced budget during fiscal year 1999 or thereafter, or that it
can maintain a balanced budget without additional tax or other revenue increases
or reductions in City services, which could adversely affect the City's economic
base.

Pursuant to State law, the City prepares a four-year financial plan, which
is reviewed and revised on a quarterly basis and which includes the City's
capital, revenue and expense projections. The City is required to submit its
financial plans to review bodies, including the Control Board. If the City were
to experience certain adverse financial circumstances, including the occurrence
or the substantial likelihood and the imminence of the occurrence of an annual
operating deficit of more than $100 million or the loss of access to the public
credit markets to satisfy the City's capital and seasonal financial
requirements, the Control Board would be required by State law to exercise
certain powers, including prior approval of City financial plans, proposed
borrowings and certain contracts.

The City depends on the State for State aid both to enable the City to
balance its budget and to meet its cash requirements. If the State experiences
revenue shortfalls or spending increases beyond its projections during its 1998-
99 fiscal year or subsequent years, such developments could result in reductions
in projected State aid to the City. In addition, there can be no assurance that
State budgets for the 1999-2000 or future fiscal years will be adopted by the
April 1 statutory deadline and that there will not be adverse effects on the
City's cash flow and additional City expenditures as a result of such delays.

The City projections set forth in the Plan are based on various assumptions
and contingencies which are uncertain and which may not materialize. Changes in
major assumptions could significantly affect the City's ability to balance its
budget as required by State law and to meet its annual cash flow and financing
requirements. Such assumptions and contingencies include the timing of any
regional and local economic recovery, the absence of wage increases in excess of
the increases assumed in its financial plan, employment growth, provision of
State and Federal aid and mandate relief, State legislative approval of future
State budgets, levels of education expenditures as may be required by State law,
adoption of future City budgets by the New York Council, approval by the
Governor or the State Legislature and the cooperation of MAC with respect to
various other actions proposed in the Plan and changes in federal tax law.

The City's ability to maintain a balanced operating budget is dependent on
whether it can identify additional expenditure reductions and action by the
State legislature to achieve balanced operating budgets for fiscal year 1999 and
thereafter. Any such proposed expenditure reductions will be difficult to
implement because of their size and the substantial expenditure reductions
already imposed on City operations in recent years.

Attaining a balanced budget is also dependent upon the City's ability to
market its securities successfully in the public credit markets. The City's
four-year capital plan

B-15
<PAGE>

contemplates capital spending of $25.5 billion through the 2002 fiscal year,
which will be financed through issuance of general obligation bonds,
Transitional Finance Authority Bonds, Water Authority Revenue Bonds and Covered
Organization obligations, and will be used primarily to reconstruct and
rehabilitate the City's infrastructure and physical assets and to make capital
investments. A significant portion of such bond financing is used to reimburse
the City's general fund for capital expenditures already incurred. In addition,
the City issues revenue and tax anticipation notes to finance its seasonal
working capital requirements. The terms and success of project public sales of
City general obligation bonds and notes will be subject to prevailing market
conditions at the time of the sale, and no assurance can be given that the
credit markets will absorb the projected amounts of public bond and note sales.
In addition, future developments concerning the City and public discussion of
such developments, the City's future financial needs and other issues may affect
the market for outstanding City general obligation bonds and notes. If the City
were unable to sell its general obligation bonds and notes, it would be
prevented from meeting its planned operating and capital expenditures.

On March 5, 1997, New York Governor George Pataki signed legislation
creating The New York City Transitional Finance Authority, which beginning in
fiscal year 1998 is authorized to issue up to $7.5 billion in bonds for capital
spending by the City. Absent creation of this authority, the City would have
faced limitations on its borrowing capacity after 1998 under the State's
Constitution. As of May 11, 1998, the Authority had issued $2.15 billion in
bonds. The bonds are secured by a primary lien on the City's personal income tax
receipts as well as a secondary lien on sales tax receipts.

The City is a defendant in a significant number of lawsuits and is subject
to numerous claims and investigations, including, but no limited to, actions
commenced and claims asserted against the City arising out of alleged
constitutional violations, torts, breaches of contracts, and other violations of
law and condemnation proceedings. While the ultimate outcome and fiscal impact,
if any, on the proceedings and claims are not currently predictable, adverse
determinations in certain of them might have a material adverse effect upon the
City's ability to carry out its financial plan. As of June 30, 1997, the City
estimated it potential future liability on outstanding claims to be $3.5
billion.

In April 1996, certain unions, elected officials and others filed an action
in the Supreme Court of the State of New York, County of New York, against the
Mayor which asserted that the City failed to subsidize HHC at the minimum
funding levels required for 1994 through 1997 fiscal years. On July 15, 1997,
the Court permitted the plaintiffs to amend the complaint and seek an order
requiring the City to pay to HHC at least $949 million, $931 million and $831
million for the 1994, 1995 and 1996 fiscal years, respectively, and an amount to
be determined by the Court for the 1997 fiscal year. The Court denied
plaintiff's motion to preliminary enjoin the defendant from further reducing the
City's subsidy to HHC for the 1996 and 1997 fiscal years from the amount
originally budgeted for the 1996 fiscal year.

Fiscal Year 1998. New York City adopted its 1998 fiscal year budget in June
1997, which provided for spending $33.4 billion. Due to increased tax revenue
resulting from increased profits on Wall Street and tourism, the City expects to
end fiscal year 1998 with a surplus of $2.0 billion.

B-16
<PAGE>

Fiscal Years 1991 through 1997. The City achieved balanced operating
results in accordance with generally accepted accounting principles for fiscal
years 1991 through 1997. The City was required to close substantial budget gaps
in these fiscal years in order to maintain balanced operating results.

Ratings. As of May 11, 1998, Moody's S&P, and Fitch rate the City's
outstanding general obligation bonds A3, BBB+, and A-, respectively. On February
3, 1998, S&P placed its BBB+ rating of City bonds on Creditwatch with positive
implications. Moody's rating of City bonds was revised in February 1998 to A3
form Baal.

As of December 31, 1997, the City MAC and TFA had, respectively, $26.6
billion and $3.6 billion and $2.15 billion of outstanding net long-term and
short-term indebtedness.

(3) The State Agencies. Certain Agencies of the State have faced
substantial financial difficulties which could adversely affect the ability of
such Agencies to make payments of interest on, and principal amounts of, their
respective bonds. The difficulties have in certain instances caused the State
(under so-called "moral obligation" provisions, which are non-binding statutory
provisions for State appropriations to maintain various debt service reserve
funds) to appropriate funds on behalf of the Agencies. Moreover, it is expected
that the problems faced by these Agencies will continue and will require
increasing amounts of State assistance in future years. Failure of the State to
appropriate necessary amounts or to take other action to permit those Agencies
having financial difficulties to meet their obligations could result in a
default by one or more of the Agencies. Such default, it were to occur, would be
likely to have a significant adverse affect on investor confidence in, and
therefore the market price of, obligations of defaulting Agencies. In addition,
any default in payment on any general obligation of any Agency whose bonds
contain a moral obligation provision could constitute a failure of certain
conditions that must be satisfied in connection with Federal guarantees of City
and MAC obligations and could thus jeopardize the City's long-term financing
plans.

As of March 31, 1997, the State reported that its public benefit
corporations had an aggregate of $36.9 billion of outstanding debt, some of
which was State-supported and State-related debt.

(4) State Litigation: The State is a defendant in numerous legal
proceedings pertaining to matters incidental to the performance of routine
governmental operations. Such litigation includes, but is not limited to, claims
asserted against the State arising from alleged torts, alleged breaches of
contracts, condemnation proceedings and other alleged violations of State and
Federal laws. Included in the State's outstanding litigation are a number of
cases challenging the constitutionality or the adequacy and effectiveness of a
variety of significant social welfare programs primarily involving the State's
mental hygiene programs. Adverse judgments in these matters generally could
result in injunctive relief coupled with prospective changes in patient care
which could require substantial increased financing of the litigated programs in
the future.

The State is also engaged in a variety of claims wherein significant
monetary damages are sought. Actions commenced by several Indian nations claim
that significant amounts of land were unconstitutionally taken from the Indians
in violation of various treaties and agreements

B-17

<PAGE>

during the eighteenth and nineteenth centuries. The claimants seek recovery of
approximately six million acres of land, as well as compensatory and punitive
damages.

(5) Other Municipalities: Certain localities in addition to New York City
could have financial problems leading to requests for additional State
assistance. The potential impact on the State of such actions by localities is
not included in projections of State receipts and expenditures in the State's
1998-99 fiscal year.

Fiscal difficulties experienced by the City of Yonkers ("Yonkers") resulted
in the creation of the Financial Control Board for the City of Yonkers (the
"Yonkers Board") by the State in 1984. The Yonkers Board is charged with
oversight of the fiscal affairs of Yonkers. Future actions taken by the Governor
or the State Legislature to assist Yonkers could result in allocation of State
resources in amounts that cannot yet be determined.

Municipalities and school districts have engaged in substantial short-term
and long-term borrowings. State law requires the Comptroller to review and make
recommendations concerning the budgets of those local government units other
than New York City authorized by State law to issue debt to finance deficits
during the period that such deficit financing is outstanding. In December 1995,
in reaction to continuing financial problems, the Troy Municipal Assistance
Corp., which was created in 1995, imposed a 1996 budget plan upon Troy, New
York. Such revenue bonds have not to date been refinanced. A similar municipal
assistance corporation has also been established for Newburgh. In addition,
several other New York cities, including Utica, Rome, Schenectady, Syracuse and
Niagara Falls have faced continuing budget deficits, as federal and state aid
and local tax revenues have declined while government expenses have increased.
The financial problems being experienced by the State's smaller urban centers
place additional strains upon the State's financial condition.

Certain proposed Federal expenditure reductions could reduce, or in some
cases eliminate, Federal funding of some local programs and accordingly might
impose substantial increased expenditure requirements on affected localities to
increase local revenues to sustain those expenditures. Federal welfare reform
legislation may increase the local burden for welfare benefits. In addition,
proposed changes in the treatment of capital gains for federal income tax
purposes could reduce the receipts of the State and the City. If the State, New
York City or any of the Agencies were to suffer serious financial difficulties
jeopardizing their respective access to the public credit markets, the
marketability of notes and bonds issued by localities within the State,
including notes or bonds in the Fund, could be adversely affected. Localities
also face anticipated and potential problems resulting from certain pending
litigation, judicial decisions, and long-range economic trends. The longer-range
potential problems of declining urban population, increasing expenditures, and
other economic trends could adversely affect certain localities and require
increasing State assistance in the future.

(6) Other Issuers of New York Municipal Bonds. There are a number of other
state agencies, instrumentalities and political subdivisions of the State that
issue municipal bonds, some of which may be conduit revenue obligations payable
from payments from private borrowers. These entities are subject to various
economic risks and uncertainties, and the credit quality of the securities
issued by them may vary considerably from the credit quality of obligations
backed by the full faith and credit of the State.

B-18
<PAGE>

OTHER INVESTMENT POLICIES AND TECHNIQUES

Illiquid Securities

The Fund may invest in illiquid securities (i.e., securities that are not
readily marketable), including, but not limited to, restricted securities
(securities the disposition of which is restricted under the federal securities
laws), securities that may only be resold pursuant to Rule 144A under the
Securities Act of 1933, as amended (the "Securities Act"); and repurchase
agreements with maturities in excess of seven days.

Restricted securities may be sold only in privately negotiated transactions
or in a public offering with respect to which a registration statement is in
effect under the Securities Act. Where registration is required, the Fund may be
obligated to pay all or part of the registration expenses and a considerable
period may elapse between the time of the decision to sell and the time the Fund
may be permitted to sell a security under an effective registration statement.
If, during such a period, adverse market conditions were to develop, the Fund
might obtain a less favorable price than that which prevailed when it decided to
sell. Illiquid securities will be priced at a fair value as determined in good
faith by the Board of Trustees or its delegate.

Portfolio Trading and Turnover Rate

Portfolio trading may be undertaken to accomplish the investment objectives
of the Fund in relation to actual and anticipated movements in interest rates.
In addition, a security may be sold and another of comparable quality purchased
at approximately the same time to take advantage of what Nuveen Advisory
believes to be a temporary price disparity between the two securities. Temporary
price disparities between two comparable securities may result from supply and
demand imbalances where, for example, a temporary oversupply of certain bonds
may cause a temporarily low price for such bonds, as compared with other bonds
of like quality and characteristics. The Fund may also engage to a limited
extent in short-term trading consistent with its investment objectives.
Securities may be sold in anticipation of a market decline (a rise in interest
rates) or purchased in anticipation of a market rise (a decline in interest
rates) and later sold, but the Fund will not engage in trading solely to
recognize a gain.

Subject to the foregoing, the Fund will attempt to achieve its investment
objectives by prudent selection of municipal bonds with a view to holding them
for investment. While there can be no assurance thereof, the Fund anticipates
that its annual portfolio turnover rate will generally not exceed 10%. However,
the rate of turnover will not be a limiting factor when the Fund deems it
desirable to sell or purchase securities. Therefore, depending upon market
conditions, the annual portfolio turnover rate of the Fund may exceed 100% in
particular years.

When-Issued and Delayed Delivery

The Fund may buy and sell municipal bonds on a when-issued or delayed
delivery basis, making payment or taking delivery at a later date, normally
within 15-45 days of the trade date. On such transactions the payment obligation
and the interest rate are fixed at the time the buyer enters into the
commitment. Beginning on the date the Fund enters into a commitment to purchase
securities on a when-issued or delayed delivery basis, the Fund is required
under rules of the Securities and Exchange Commission to maintain in a separate
account liquid assets,

B-19

<PAGE>

consisting of cash, cash equivalents or liquid securities having a market value
at all times of at least equal to the amount of the commitment. Income generated
by any such assets which provide taxable income for Federal income tax purposes
is includable in the taxable income of the Fund. The commitment to purchase
securities on a when-issued or delayed delivery basis may involve an element of
risk because no interest accrues on the bonds prior to settlement and since
securities are subject to market fluctuations, to the purchaser prior to
settlement of the transaction, and at the time of delivery the market value may
be less than cost.

Repurchase Agreements

As temporary investments, the Fund may invest in repurchase agreements. A
repurchase agreement is a contractual agreement whereby the seller of securities
(U.S. Government securities or municipal bonds) agrees to repurchase the same
security at a specified price on a future date agreed upon by the parties. The
agreed-upon repurchase price determines the yield during the Fund's holding
period. Repurchase agreements are considered to be loans collateralized by the
underlying security that is the subject of the repurchase contract. Income
generated from transactions in repurchase agreements will be taxable. See "Tax
Matters" for information relating to the allocation of taxable income between
Common Shares and MuniPreferred Shares, if any. The Fund will only enter into
repurchase agreements with registered securities dealers or domestic banks that,
in the opinion of Nuveen Advisory, present minimal credit risk. The risk to the
Fund is limited to the ability of the issuer to pay the agreed-upon repurchase
price on the delivery date; however, although the value of the underlying
collateral at the time the transaction is entered into always equals or exceeds
the agreed-upon repurchase price, if the value of the collateral declines there
is a risk of loss of both principal and interest. In the event of default, the
collateral may be sold but the Fund might incur a loss if the value of the
collateral declines, and might incur disposition costs or experience delays in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization upon the collateral by the Fund may be delayed or limited. Nuveen
Advisory will monitor the value of the collateral at the time the transaction is
entered into and at all times subsequent during the term of the repurchase
agreement in an effort to determine that such value always equals or exceeds the
agreed-upon repurchase price. In the event the value of the collateral declines
below the repurchase price, Nuveen Advisory will demand additional collateral
from the issuer to increase the value of the collateral to at least that of the
repurchase price, including interest.

B-20

<PAGE>

MANAGEMENT OF THE FUND

Trustees and Officers

The management of the Fund, including general supervision of the duties
performed for the Fund under the Management Agreement, is the responsibility of
the Board of Trustees. The number of trustees of the Fund is currently set at
eight, two of whom are "interested persons" (as the term "interested persons" is
defined in the Investment Company Act of 1940) and six of whom are not
"interested persons." The names and business addresses of the trustees and
officers of the Fund and their principal occupations and other affiliations
during the past five years are set forth below, with those trustees who are
"interested persons" of the Fund indicated by an asterisk.

<TABLE>
<CAPTION>
==============================================================================================================================
Positions and Principal Occupations
Name and Address Age Offices with the Fund During Past Five Years
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Timothy R. Schwertfeger* 49 Chairman and Chairman since July 1, 1996 of The John Nuveen
333 W. Wacker Drive Trustee Company, John Nuveen & Co. Incorporated, Nuveen
Chicago, IL 60606 Advisory Corp. and Nuveen Institutional Advisory
Corp.; prior thereto, Executive Vice President and
Director of The John Nuveen Company, John Nuveen &
Co. Incorporated, Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.; Chairman and Director
(since January 1997) of Nuveen Asset Management,
Inc.; Director (since 1996) of Institutional Capital
Corporation.

- ------------------------------------------------------------------------------------------------------------------------------
Anthony T. Dean* 53 President President since July 1, 1996 of The John Nuveen
333 W. Wacker Drive and Trustee Company, John Nuveen & Co. Incorporated, Nuveen
Chicago, IL 60606 Advisory Corp. and Nuveen Institutional Advisory
Corp.; prior thereto, Executive Vice President and
Director of The John Nuveen Company, John Nuveen &
Co. Incorporated, Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.; President and Director
(since January 1997) of Nuveen Asset Management,
Inc.; Chairman and Director (since 1997) of
Rittenhouse Financial Services, Inc.

- ------------------------------------------------------------------------------------------------------------------------------
Robert P. Bremner 58 Trustee Private Investor and Management Consultant.
3725 Huntington Street, N.W.
Washington, D.C. 20015

- ------------------------------------------------------------------------------------------------------------------------------
Lawrence H. Brown 64 Trustee Retired (August 1989) as Senior Vice President of
201 Michigan Avenue The Northern Trust Company.
Highwood, IL 60040

- ------------------------------------------------------------------------------------------------------------------------------
Anne E. Impellizzeri 65 Trustee Executive Director of Manitoga (Center for Russel
5 Peter Cooper Rd. Wright's Design with Nature); formerly President and
New York, NY 10010 Chief Executive Officer of Blanton-Peale Institute.

- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

B-21
<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================================
Positions and Principal Occupations
Name and Address Age Offices with the During Past Five Years
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Peter R. Sawers 65 Trustee Adjunct Professor of Business and Economics, University of Dubuque, Iowa;
22 The Landmark Adjunct Professor, Lake Forest Graduate School of Management, Lake Forest,
Northfield, IL 60093 Illinois; Chartered Financial Analyst; Certified Management Consultant.
- ------------------------------------------------------------------------------------------------------------------------------------
William J. Schneider 54 Trustee Senior Partner, Miller-Valentine Partners, Vice President, Miller-
4000 Miller-Valentine Ct. Valentine Group.
P.O. Box 744
Dayton, OH 45401
- ------------------------------------------------------------------------------------------------------------------------------------
Judith M. Stockdale 50 Trustee Executive Director, Gaylord and Dorothy Donnelley Foundation (since 1994);
35 E. Wacker Drive prior thereto, Executive Director, Great Lakes Protection Fund (from 1990
Suite 2600 to 1994).
Chicago, IL 60601
- ------------------------------------------------------------------------------------------------------------------------------------
Alan G. Berkshire 37 Vice President and Vice President and General Counsel (since September 1997) and Secretary
333 W. Wacker Drive Assistant Secretary (since May 1998) of The John Nuveen Company, John Nuveen & Co.
Chicago, IL 60606 Incorporated, Nuveen Advisory Corp. and Nuveen Institutional Advisory
Corp., prior thereto, Partner in the law firm of Kirkland & Ellis.
- ------------------------------------------------------------------------------------------------------------------------------------
Michael S. Davern 41 Vice President Vice President of Nuveen Advisory Corp. (since January 1997); prior
333 W. Wacker Drive thereto, Vice President and Portfolio Manager of Flagship Financial.
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
Lorna C. Ferguson 53 Vice President Vice President of John Nuveen & Co. Incorporated; Vice President (since
333 W. Wacker Drive January 1998) of Nuveen Advisory Corp. and Nuveen Institutional Advisory
Chicago, IL 60606 Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
William M. Fitzgerald 34 Vice President Vice President of Nuveen Advisory Corp. (since December 1995); Assistant
333 W. Wacker Drive Vice President of Nuveen Advisory Corp. (from September 1992 to December
Chicago, IL 60606 1995), prior thereto, Assistant Portfolio Manager of Nuveen Advisory Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen D. Foy 44 Vice President and Vice President of John Nuveen & Co. Incorporated.
333 W. Wacker Drive Controller
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
J. Thomas Futrell 43 Vice President Vice President of Nuveen Advisory Corp.
333 W. Wacker Drive
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

B-22

<PAGE>

<TABLE>
<CAPTION>
=====================================================================================================================
Positions and Principal Occupations
Name and Address Age Offices with the Fund During Past Five Years
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Richard A. Huber 35 Vice President Vice President of Nuveen Institutional Advisory
333 W. Wacker Drive Corp. (since March 1998) and Nuveen Advisory Corp.
Chicago, IL 60606 (since January 1997); prior thereto, Vice President
and Portfolio Manager of Flagship Financial.
- ---------------------------------------------------------------------------------------------------------------------
Steven J. Krupa 41 Vice President Vice President of Nuveen Advisory Corp.
333 W. Wacker Drive
Chicago, IL 60606
- ---------------------------------------------------------------------------------------------------------------------
Larry W. Martin 47 Vice President and Vice President, Assistant Secretary and Assistant
333 W. Wacker Drive Assistant Secretary General Counsel of John Nuveen & Co. Incorporated;
Chicago, IL 60606 Vice President and Assistant Secretary of Nuveen
Advisory Corp. and Nuveen Institutional Advisory
Corp.; Vice President and Assistant Secretary (since
January 1997) of Nuveen Asset Management, Inc.;
Assistant Secretary of The John Nuveen Company.
- ---------------------------------------------------------------------------------------------------------------------
Edward F. Neild, IV 33 Vice President Vice President (since September 1996), previously
333 W. Wacker Drive Assistant Vice President (since December 1993) of
Chicago, IL 60606 Nuveen Advisory Corp., Portfolio Manager prior
thereto; Vice President (since September 1996),
previously Assistant Vice President (since May
1995), of Nuveen Institutional Advisory Corp.,
Portfolio Manager prior thereto; Chartered Financial
Analyst.
- ---------------------------------------------------------------------------------------------------------------------
Stephen S. Peterson 41 Vice President Vice President (since September 1997), previously
333 W. Wacker Drive Assistant Vice President (since September 1996) of
Chicago, IL 60606 Nuveen Advisory Corp., Portfolio Manager prior
thereto.
- ---------------------------------------------------------------------------------------------------------------------
Stuart W. Rogers 42 Vice President Vice President of John Nuveen & Co. Incorporated.
333 W. Wacker Drive
Chicago, IL 60606
- ---------------------------------------------------------------------------------------------------------------------
Thomas C. Spalding, Jr. 47 Vice President Vice President of Nuveen Advisory Corp. and Nuveen
333 W. Wacker Drive Institutional Advisory Corp.; Chartered Financial
Chicago, IL 60606 Analyst.
- ---------------------------------------------------------------------------------------------------------------------
H. William Stabenow 64 Vice President and Vice President and Treasurer of The John Nuveen
333 W. Wacker Drive Treasurer Company, John Nuveen & Co. Incorporated, Nuveen
Chicago, IL 60606 Advisory Corp., Nuveen Asset Management, Inc. (since
January 1997) and Nuveen Institutional Advisory Corp.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

B-23
<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================
Positions and Principal Occupations
Name and Address Age Offices with the Fund During Past Five Years
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>

William S. Swanson 33 Vice President Vice President of John Nuveen & Co. Incorporated
333 W. Wacker Drive (since October 1997), prior thereto, Assistant Vice
Chicago, IL 60606 President (since September 1996); formerly,
Associate of John Nuveen & Co. Incorporated;
Chartered Financial Analyst.
- --------------------------------------------------------------------------------------------------------------------
Gifford R. Zimmerman 42 Vice President and Vice President, Secretary and Associate General
333 W. Wacker Drive Secretary Counsel of John Nuveen & Co. Incorporated; Vice
Chicago, IL 60606 President and Assistant Secretary of Nuveen Advisory
Corp., Vice President and Assistant Secretary of
Nuveen Institutional Advisory Corp.; Chartered
Financial Analyst.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

Anthony T. Dean, Peter Sawers and Timothy R. Schwertfeger serve as members
of the Executive Committee of the Board of Trustees. The Executive Committee,
which meets between regular meetings of the Board of Trustees, is authorized to
exercise all of the powers of the Board of Trustees.

Mr. Dean and Mr. Schwertfeger are also directors or trustees, as the case
of may be, of 100 Nuveen open-end and closed-end funds advised by Nuveen
Advisory and Nuveen Institutional Advisory Corp.

The trustees of the Fund are directors or trustees, as the case may be, of
36 open-end funds and 53 Nuveen closed-end funds advised by Nuveen Advisory.

The Common Shareholders will elect trustees at the next annual meeting of
Common Shareholders, unless any MuniPreferred Shares are outstanding at that
time, in which event holders of MuniPreferred Shares, voting as a separate
class, will elect two trustees and the remaining trustees shall be elected by
Common Shareholders and holders of MuniPreferred Shares, voting together as a
single class. Holders of MuniPreferred Shares will be entitled to elect a
majority of the Fund's trustees under certain circumstances. See "Description of
Shares-MuniPreferred Shares-Voting Rights."

B-24
<PAGE>

The following table sets forth compensation to be paid by the Fund
projected through the end of the Fund's first full fiscal year. The Fund has no
retirement or pension plans. The officers and trustees affiliated with Nuveen
serve without any compensation from the Fund.

<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation From
Name of Trustee From Fund Fund and Fund Complex
--------------- ---------------------- -----------------------
<S> <C> <C>
Timothy R. Schwertfeger
Anthony T. Dean
Robert P. Bremner
Lawrence H. Brown
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Judith M. Stockdale
</TABLE>

Each Trustee who is not affiliated with Nuveen or Nuveen Advisory receives
a $20,000 annual retainer for serving as a director or trustee of all funds for
which Nuveen Advisory serves as investment adviser or manager, and a $1,000 fee
per day plus expenses for attendance at all meetings held on a day on which a
regularly scheduled Board meeting is held, a $500 fee per day plus expenses for
attendance in person or a $500 fee per day plus expenses for attendance by
telephone at a meeting held on a day in which no regularly scheduled Board
meeting is held and a $100 fee per day plus expenses for attendance in person or
by telephone at a meeting of the Executive Committee. The annual retainer, fees
and expenses will be allocated among the funds for which Nuveen Advisory serves
as investment adviser or manager on the basis of relative net asset sizes. The
Fund has no employees other than its officers, all of whom are compensated by
Nuveen Advisory or Nuveen.

Investment Adviser

Nuveen Advisory acts as investment adviser to the Fund, with responsibility
for the overall management of the Fund. Its address is 333 West Wacker Drive,
Chicago, Illinois 60606. Nuveen Advisory is also responsible for managing the
Fund's business affairs and providing day-to-day administrative services to the
Fund. For additional information regarding the management services performed by
Nuveen Advisory, see "Management of the Fund" in the Prospectus.

Nuveen Advisory is a wholly-owned subsidiary of Nuveen, which is also the
co-managing underwriter of the Fund's shares. Nuveen is sponsor of the Nuveen
Defined Portfolios, registered unit investment trusts, is the principal
underwriter for the Nuveen Mutual Funds, and has served as co-managing
underwriter for the shares of the Nuveen Exchange-Traded Funds. Over 1,300,000
individuals have invested to date in Nuveen's funds and trusts. Founded in 1898,
Nuveen and its affiliates have over $60 billion of net assets under management
or surveillance. Nuveen is a subsidiary of The John Nuveen Company which, in
turn, is approximately 78% owned by The St. Paul Companies, Inc. ("St. Paul").
St. Paul is located in

B-25
<PAGE>

St. Paul Minnesota, and is principally engaged in providing property-liability
insurance through subsidiaries.

<TABLE>
<CAPTION>
Average Daily Net Asset Value Management Fee
----------------------------- --------------
<S> <C>
For the first $125 million %
For the next $125 million %
For the next $250 million %
For the next $500 million %
For the next $1 billion %
For assets over $2 billion %
</TABLE>

All fees and expenses are accrued daily and deducted before payment of
dividends to investors. The investment management agreement has been approved by
a majority of the disinterested trustees of the Fund and the sole shareholder of
the Fund.

PORTFOLIO TRANSACTIONS

Nuveen Advisory, in effecting purchases and sales of portfolio securities
for the account of the Fund, will place orders in such manner as, in the opinion
of management, will offer the best price and market for the execution of each
transaction. Portfolio securities will normally be purchased directly from an
underwriter or in the over-the-counter market from the principal dealers in such
securities, unless it appears that a better price or execution may be obtained
elsewhere. Portfolio securities will not be purchased from Nuveen or its
affiliates except in compliance with the 1940 Act.

The Fund expects that all portfolio transactions will be effected on a
principal (as opposed to an agency) basis and, accordingly, does not expect to
pay any brokerage commissions. Purchases from underwriters will include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers will include the spread between the bid and asked price. Given the
best price and execution obtainable, it will be the practice of the Fund to
select dealers which, in addition, furnish research information (primarily
credit analyses of issuers) and statistical and other services to Nuveen
Advisory. It is not possible to place a dollar value on information and
statistical and other services received from dealers. Since it is only
supplementary to Nuveen Advisory's own research efforts, the receipt of research
information is not expected to reduce significantly Nuveen Advisory's expenses.
Any research benefits obtained are available to all of Nuveen Advisory's other
clients. While Nuveen Advisory will be primarily responsible for the placement
of the business of the Fund, the policies and practices of Nuveen Advisory in
this regard must be consistent with the foregoing and will at all times be
subject to review by the Board of Trustees of the Fund.

B-26
<PAGE>

Nuveen Advisory reserves the right to, and does, manage other investment
accounts and investment companies for other clients which may have investment
objectives similar or identical to those of the Fund. Subject to applicable laws
and regulations, Nuveen Advisory will attempt to allocate equitably portfolio
transactions among the Fund and the portfolios of its other clients purchasing
or selling securities whenever decisions are made to purchase or sell securities
by the Fund and one or more of such other clients simultaneously. In making such
allocations the main factors to be considered will be the respective investment
objectives of the Fund and such other clients, the relative size of portfolio
holdings of the same or comparable securities, the availability of cash for
investment by the Fund and such other clients, the size of investment
commitments generally held by the Fund and such other clients and opinions of
the persons responsible for recommending investments to the Fund and such other
clients. While this procedure could have a detrimental effect on the price or
amount of the securities available to the Fund from time to time, it is the
opinion of the Fund's Board of Trustees that the benefits available from Nuveen
Advisory's organization will outweigh any disadvantage that may arise from
exposure to simultaneous transactions. Notwithstanding the similarity of the
investment objectives of the Fund with those of other funds managed by Nuveen
Advisory, each of these funds will be separately managed and the composition of
their investment portfolios will differ. Accordingly, the investment performance
of each of these funds will likely not be the same.

Under the 1940 Act, the Fund may not purchase portfolio securities from any
underwriting syndicate of which Nuveen is a member except under certain limited
conditions set forth in Rule 10f-3. The Rule sets forth requirements relating
to, among other things, the terms of an issue of municipal bonds purchased by
the Fund, the amount of municipal bonds which may be purchased in any one issue
and the assets of the Fund which may be invested in a particular issue. In
addition, purchases of securities made pursuant to the terms of the Rule must be
reviewed at least quarterly by the Board of Trustees of the Fund, including a
majority of the members thereof who are not interested persons of the Fund.

DISTRIBUTIONS

As described in the Prospectus, initial distributions to Common
Shareholders are expected to be declared approximately 60 days, and paid
approximately 90 days, from the completion of the offering. To permit the Fund
to maintain a more stable monthly distribution, the Fund will initially (prior
to its first distribution) and may from time to time thereafter, distribute less
than the entire amount of net investment income earned in a particular period.
Such undistributed net investment income would be available to supplement future
distributions, including distributions which might otherwise have been reduced
by a decrease in the Fund's monthly net income due to fluctuations in investment
income or expenses, or due to an increase in the dividend rate on the Fund's
outstanding MuniPreferred Shares. As a result, the distributions paid by the
Fund for any particular monthly period may be more or less than the amount of
net investment income actually earned by the Fund during such period.
Undistributed net investment income will be added to the Fund's net asset value
and, correspondingly, distributions from undistributed net investment income
will be deducted from the Fund's net asset value.

For tax purposes, the Fund is currently required to allocate net capital
gains and other taxable income, if any, between Common Shares and MuniPreferred
Shares in proportion to total

B-27
<PAGE>

distributions paid to each class for the year in which such net capital gains or
other taxable income is realized. For information relating to the impact of the
issuance of MuniPreferred Shares on the distributions made by the Fund to Common
Shareholders, see the Prospectus under "MuniPreferred Shares and Leverage."

While any MuniPreferred Shares are outstanding, the Fund may not declare
any cash dividend or other distribution on its Common Shares unless at the time
of such declaration (1) all accumulated dividends on the MuniPreferred Shares
have been paid and (2) the net asset value of the Fund's portfolio (determined
after deducting the amount of such dividend or other distribution) is at least
200% of the liquidation value of any outstanding MuniPreferred Shares. This
latter limitation on the Fund's ability to make distributions on its Common
Shares could under certain circumstances impair the ability of the Fund to
maintain its qualification for taxation as a regulated investment company. See
"Tax Matters."

DESCRIPTION OF SHARES

Common Shares

The Declaration authorizes the issuance of an unlimited number of Common
Shares, par value $.01 per share. All Common Shares have equal rights as to the
payment of dividends and the distribution of assets upon liquidation. Common
Shares will, when issued, be fully paid and, subject to matters discussed in
"Certain Provisions in the Declaration of Trust," non-assessable, and will have
no pre-emptive or conversion rights or rights to cumulative voting. At any time
when the Fund's MuniPreferred Shares are outstanding, Common Shareholders will
not be entitled to receive any net income of or other distributions from the
Fund unless all accrued dividends on MuniPreferred Shares have been paid, and
unless asset coverage (as defined in the 1940 Act) with respect to MuniPreferred
Shares would be at least 200% after giving effect to such distributions. See
"MuniPreferred Shares" below.

Application will be made to list the Common Shares on the New York Stock
Exchange. The Fund intends to hold annual meetings of shareholders so long as
the Common Shares are listed on a national securities exchange and such meetings
are required as a condition to such listing.

Shares of closed-end investment companies may frequently trade at prices
lower than net asset value. Shares of closed-end investment companies like the
Fund that invest predominately in investment grade municipal bonds have during
some periods traded at prices higher than net asset value and during other
periods have traded at prices lower than net asset value. There can be no
assurance that Common Shares or shares of other municipal funds will trade at a
price higher than net asset value in the future. Net asset value will be reduced
immediately following the offering after payment of organization and offering
expenses. Net asset value generally increases when interest rates decline, and
decreases when interest rates rise, and these changes are likely to be greater
in the case of a fund having a leveraged capital structure. Whether investors
will realize gains or losses upon the sale of Common Shares will not depend upon
the Fund's net asset value but will depend entirely upon whether the market
price of the Common Shares at the time of sale is above or below the original
purchase price for the shares. Since the market price of the Fund's Common
Shares will be determined by such factors as relative

B-28
<PAGE>

demand for and supply of such shares in the market, general market and economic
conditions and other factors beyond the control of the Fund, the Fund cannot
predict whether the Common Shares will trade at, below, or above net asset value
or at, below or above the initial public offering price. Accordingly, the Common
Shares are designed primarily for long-term investors, and investors in the
Common Shares should not view the Fund as a vehicle for trading purposes. See
"Repurchase of Fund Shares; Conversion to Open-End Fund" and the Prospectus
under "Special Considerations Relating to New York Municipal Bonds and
Leverage."

MuniPreferred Shares

The Fund's Board of Trustees has indicated its intention to authorize an
offering of MuniPreferred Shares (representing approximately one-third of the
Fund's capital immediately after the time the MuniPreferred Shares are issued)
approximately three to six months after completion of the offering of Common
Shares, subject to market conditions and to the Board's continuing belief that
leveraging the Fund's capital structure through the issuance of MuniPreferred
Shares is likely to achieve the benefits to the Common Shareholders described in
this Statement of Additional Information. Although the terms of the
MuniPreferred Shares, including its dividend rate, voting rights, liquidation
preference and redemption provisions, will be determined by the Board of
Trustees (subject to applicable law and the Fund's Declaration) if and when it
authorizes a MuniPreferred Shares offering, the Board has stated that the
initial series of MuniPreferred Shares would likely pay cumulative dividends at
relatively shorter-term rates, by providing for the periodic redetermination of
the dividend rate through an auction or remarketing procedure. The Board of
Trustees has indicated that the liquidation preference, voting rights and
redemption provisions of the MuniPreferred Shares will likely be as stated
below.

Liquidation Preference. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Fund, holders of
MuniPreferred Shares will be entitled to receive a preferential liquidating
distribution (expected to equal the original purchase price per share plus
accumulated and unpaid dividends thereon, whether or not earned or declared)
before any distribution of assets is made to holders of Common Shares. After
payment of the full amount of the liquidating distribution to which they are
entitled, holders of MuniPreferred Shares will not be entitled to any further
participation in any distribution of assets by the Fund. A consolidation or
merger of the Fund with or into any Massachusetts business trust or corporation
or a sale of all or substantially all of the assets of the Fund shall not be
deemed to be a liquidation, dissolution or winding up of the Fund.

Voting Rights. In connection with any issuance of MuniPreferred Shares,
the Fund must comply with Section 18(i) of the 1940 Act which requires, among
other things, that MuniPreferred Shares be voting shares and have equal voting
rights with Common Shares. Except as otherwise indicated in this Statement of
Additional Information and except as

B-29
<PAGE>

otherwise required by applicable law, holders of MuniPreferred Shares will vote
together with Common Shareholders as a single class.

In connection with the election of the Fund's trustees, holders of
MuniPreferred Shares, voting as a separate class, shall be entitled to elect two
of the Fund's trustees, and the remaining trustees shall be elected by Common
Shareholders and holders of MuniPreferred Shares, voting together as a single
class. In addition, if at any time dividends on the Fund's outstanding
MuniPreferred Shares shall be unpaid in an amount equal to two full years'
dividends thereon, the holders of all outstanding MuniPreferred Shares, voting
as a separate class, will be entitled to elect a majority of the Fund's trustees
until all dividends in arrears have been paid or declared and set apart for
payment.

The affirmative vote of the holders of at least two-thirds of the
outstanding MuniPreferred Shares of any class or series, as the case may be,
voting as a separate class, will be required to, among other things (1) take
certain actions which would affect the preferences, rights, or powers of such
class or series or (2) increase the authorized number of such class or series,
provided however, that that such separate class vote shall be a majority vote if
the action in question has previously been approved, adopted or authorized by
the affirmative vote of two-thirds of the total number of Trustees fixed in
accordance with the Declaration or the By-laws. Except as may otherwise be
required by law (1) the affirmative vote of the holders of at least two-thirds
of the MuniPreferred Shares outstanding at the time, voting as a separate class,
will be required to approve any conversion of the Fund from a closed-end to an
open-end investment company and (2) the affirmative vote of the holders at least
two-thirds of the outstanding MuniPreferred Shares, voting as a separate class,
shall be required to approve any plan of reorganization (as such term is used in
the 1940 Act) adversely affecting such shares, provided however, that that such
separate class vote shall be a majority vote if the action in question has
previously been approved, adopted or authorized by the affirmative vote of two-
thirds of the total number of Trustees fixed in accordance with the Declaration
or the By-laws. The affirmative vote of the holders of a majority of the
outstanding MuniPreferred Shares, voting as a separate class, shall be required
to approve any action not described in the preceding sentence requiring a vote
of security holders under Section 13(a) of the 1940 Act including, among other
things, changes in the Fund's investment objectives or changes in the investment
restrictions described as fundamental policies under "Investment Objectives and
Policies--Investment Restrictions." The class or series vote of holders of
MuniPreferred Shares described above shall in each case be in addition to any
separate vote of the requisite percentage of Common Shares and MuniPreferred
Shares necessary to authorize the action in question.

The foregoing voting provisions will not apply with respect to the Fund's
MuniPreferred Shares if, at or prior to the time when a vote is required, such
shares shall have been (1) redeemed or (2) called for redemption and sufficient
funds shall have been deposited in trust to effect such redemption.

Redemption, Purchase and Sale of MuniPreferred Shares by the Fund. The
terms of the MuniPreferred Shares may provide that it is redeemable at certain
times, in whole or in part, at the original purchase price per share plus
accumulated dividends, that the Fund may tender for or purchase MuniPreferred
Shares and that the Fund may subsequently resell any shares so tendered for or
purchased. Any redemption or purchase of MuniPreferred Shares by the Fund will
reduce

B-30
<PAGE>

the leverage applicable to Common Shares, while any resale of shares by the Fund
will increase such leverage. See "Special Considerations Relating to New York
Municipal Bonds and Leverage."

CERTAIN PROVISIONS IN THE DECLARATION OF TRUST

Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund. However, the
Declaration contains an express disclaimer of shareholder liability for debts or
obligations of the Fund and requires that notice of such limited liability be
given in each agreement, obligation or instrument entered into or executed by
the Fund or the trustees. The Declaration further provides for indemnification
out of the assets and property of the Fund for all loss and expense of any
shareholder held personally liable for the obligations of the Fund. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund would be unable to meet
its obligations. The Fund believes that the likelihood of such circumstances is
remote.

B-31
<PAGE>

higher votes are in the best interest of the Fund and its shareholders. See the
Statement of Additional Information under "Certain Provisions in the Declaration
of Trust."

Reference should be made to the Declaration on file with the Securities and
Exchange Commission for the full text of these provisions, which could have the
effect of depriving shareholders of an opportunity to sell their shares at a
premium over prevailing market prices by discouraging a third party from seeking
to obtain control of the Fund.

The Declaration provides that the obligations of the Fund are not binding
upon the trustees of the Fund individually, but only upon the assets and
property of the Fund, and that the trustees shall not be liable for errors of
judgment or mistakes of fact or law. Nothing in the Declaration, however,
protects a trustee against any liability to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.

REPURCHASE OF COMMON SHARES; CONVERSION TO OPEN-END FUND

The Fund is a closed-end investment company and as such its shareholders
will not have the right to cause the Fund to redeem their shares. Instead, the
Fund's Common Shares will trade in the open market at a price that will be a
function of several factors, including net asset value and yield. Because
shares of a closed-end investment company may frequently trade a prices lower
than net asset value, the Fund's Board of Trustees has currently determined
that, at least annually, it will consider action that might be taken to reduce
or eliminate any material discount from net asset value in respect of Common
Shares, which may include the repurchase of such shares in the open market or in
private transactions, the making of a tender offer for such shares at net asset
value, or the conversion of the Fund to an open-end investment company. There
can be no assurance, however, that the Board of Trustees will decide to take any
of these actions, or that share repurchases or tender offers, if undertaken,
will reduce market discount.

Notwithstanding the foregoing, at any time when the Fund's MuniPreferred
Shares are outstanding, the Fund may not purchase, redeem or otherwise acquire
any of its Common Shares unless (1) all accrued MuniPreferred Shares dividends
have been paid and (2) at the time of such purchase, redemption or acquisition,
the net asset value of the Fund's portfolio (determined after deducting the
acquisition price of the Common Shares) is at least 200% of the liquidation
value of the outstanding MuniPreferred Shares (expected to equal the original
purchase price per share plus any accrued and unpaid dividends thereon). The
staff of the Securities and Exchange

B-32
<PAGE>

Commission currently requires that any tender offer made by a closed-end
investment company for its shares must be at a price equal to the net asset
value of such shares on the close of business on the last day of the tender
offer. Any service fees incurred in connection with any tender offer made by the
Fund will be borne by the Fund and will not reduce the stated consideration to
be paid to tendering shareholders.

Subject to its investment limitations, the Fund may borrow to finance the
repurchase of shares or to make a tender offer. Interest on any borrowings to
finance share repurchase transactions or the accumulation of cash by the Fund in
anticipation of share repurchases or tenders will reduce the Fund's net income.
Any share repurchase, tender offer or borrowing that might be approved by the
Board of Trustees would have to comply with the Securities Exchange Act of 1934,
as amended, and the 1940 Act and the rules and regulations thereunder.

Although the decision to take action in response to a discount from net
asset value will be made by the Board at the time it considers such issue, it is
the Board's present policy, which may be changed by the Board, not to authorize
repurchases of Common Shares or a tender offer for such shares if (1) such
transactions, if consummated, would (a) result in the delisting of the Common
Shares from the New York Stock Exchange, or (b) impair the Fund's status as a
regulated investment company under the Code (which would make the Fund a taxable
entity, causing the Fund's income to be taxed at the corporate level in addition
to the taxation of shareholders who receive dividends from the Fund) or as a
registered closed-end investment company under the 1940 Act; (2) the Fund would
not be able to liquidate portfolio securities in an orderly manner and
consistent with the Fund's investment objectives and policies in order to
repurchase shares; or (3) there is, in the Board's judgment, any (a) material
legal action or proceeding instituted or threatened challenging such
transactions or otherwise materially adversely affecting the Fund, (b) general
suspension of or limitation on prices for trading securities on the New York
Stock Exchange, (c) declaration of a banking moratorium by Federal or state
authorities or any suspension of payment by United States or New York State
banks in which the Fund invests, (d) material limitation affecting the Fund or
the issuers of its portfolio securities by Federal or state authorities on the
extension of credit by lending institutions or on the exchange of foreign
currency, (e) commencement of war, armed hostilities or other international or
national calamity directly or indirectly involving the United States, or (f)
other event or condition which would have a material adverse effect (including
any adverse tax effect) on the Fund or its shareholders if shares were
repurchased. The Board of Trustees may in the future modify these conditions in
light of experience.

Conversion to an open-end company would require the approval of the holders
of at least two-thirds of the Fund's Common Shares and MuniPreferred Shares
outstanding at the time, voting together as a single class, and of the holders
of at least two-thirds of the Fund's MuniPreferred Shares outstanding at the
time, voting as a separate class. See the Prospectus under "Description of
Shares--Certain Provisions in the Declaration of Trust" for a discussion of
voting requirements applicable to conversion of the Fund to an open-end company.
If the Fund converted to an open-end company, it would be required to redeem all
MuniPreferred Shares then outstanding, and the Fund's Common Shares would no
longer be listed on the New York Stock Exchange. Shareholders of an open-end
investment company may require the company to redeem their shares at any time
(except in certain circumstances as authorized by or under the 1940 Act) at
their net asset value, less such redemption charge, if any, as might be in
effect at the

B-33
<PAGE>

time of redemption. In order to avoid maintaining large cash positions or
liquidating favorable investments to meet redemptions, open-end companies
typically engage in a continuous offering of their shares. Open-end companies
are thus subject to periodic asset in-flows and out-flows that can complicate
portfolio management. The Board of Trustees may at any time propose conversion
of the Fund to an open-end company depending upon their judgment as to the
advisability of such action in light of circumstances then prevailing.

The repurchase by the Fund of its shares at prices below net asset value
will result in an increase in the net asset value of those shares that remain
outstanding. However, there can be no assurance that share repurchases or
tenders at or below net asset value will result in the Fund's shares trading at
a price equal to their net asset value. Nevertheless, the fact that the Fund's
shares may be the subject of repurchase or tender offers at net asset value from
time to time, or that the Fund may be converted to an open-end company, may
reduce any spread between market price and net asset value that might otherwise
exist.

In addition, a purchase by the Fund of its Common Shares will decrease the
Fund's total assets which would likely have the effect of increasing the Fund's
expense ratio. Any purchase by the Fund of its Common Shares at a time when
MuniPreferred Shares are outstanding will increase the leverage applicable to
the outstanding Common Shares then remaining. See the Prospectus and this
Statement of Additional Information under "Special Considerations Relating to
New York Municipal Bonds and Leverage."

Before deciding whether to take any action in response to a discount from
net asset value, the Board would consider all relevant factors, including the
extent and duration of the discount, the liquidity of the Fund's portfolio, the
impact of any action that might be taken on the Fund or its shareholders and
market considerations. Based on these considerations, even if the Fund's shares
should trade at a discount, the Board of Trustees may determine that, in the
interest of the Fund and its shareholders, no action should be taken.

B-34
<PAGE>

TAX MATTERS

Federal Income Tax Matters

The following discussion of federal income tax matter is based upon the
advice of Bell, Boyd & Lloyd, counsel to the Trust.

The Fund intends to qualify under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), for tax treatment as a regulated investment
company. In order to qualify as a regulated investment company, the Fund must
satisfy certain requirements relating to the source of its income,
diversification of its assets, and distributions of its income to Common
Shareholders. First, the Fund must derive at least 90% of its annual gross
income (including tax-exempt interest) from dividends, interest, payments with
respect to securities loans, gains from the sale or other disposition of stock
or securities, foreign currencies or other income (including but not limited to
gains from options and futures) derived with respect to its business of
investing in such stock or securities (the "90% gross income test"). Second, the
Fund must diversify its holdings so that, at the close of each quarter of its
taxable year, (i) at least 50% of the value of its total assets is comprised of
cash, cash items, United States Government securities, securities of other
regulated investment companies and other securities limited in respect of any
one issuer to an amount not greater in value than 5% of the value of the Fund's
total assets and to not more than 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of the total assets is
invested in the securities of any one issuer (other than United States
Government securities and securities of other regulated investment companies) or
two or more issuers controlled by the Fund and engaged in the same, similar or
related trades or business.

As a regulated investment company, the Fund will not be subject to federal
income tax in any taxable year for which it distributes at least 90% of the sum
of (i) its "investment company taxable income" (which includes dividends,
taxable interest, taxable original issue discount and market discount income,
income from securities lending, net short-term capital gain in excess of long-
term capital loss, and any other taxable income other than "net capital gain"
(as defined below) and is reduced by deductible expenses) and (ii) its net tax-
exempt interest (the excess of its gross tax-exempt interest income over certain
disallowed deductions). The Fund may retain for investment its net capital gain
(which consists of the excess of its net long-term capital gain over its short-
term capital loss). However, if the Fund retains any net capital gain or any
investment company taxable income, it will be subject to tax at regular
corporate rates on the amount retained. If the Fund retains any capital gain, it
may designate the retained amount as undistributed capital gains in a notice to
its Common Shareholders who, if subject to federal income tax on long-term
capital gains, (i) will be required to include in income for federal income tax
purposes, as long-term capital gain, their share of such undistributed amount,
and (ii) will be entitled to credit their proportionate shares of the tax paid
by the Fund against their federal income tax liabilities, if any, and to claim
refunds to the extent the credit exceeds such liabilities. For federal income
tax purposes, the tax basis of shares owned by a shareholder of the Fund will be
increased by an amount equal under current law to the difference between the
amount of undistributed capital gains included in the shareholder's gross income
and the tax deemed paid by the Shareholder under clause (ii) of the preceding
sentence. The Fund intends to distribute at least annually to its Common
Shareholders all or substantially all of its net tax-exempt interest and any
investment company taxable income and net capital gain.

B-35
<PAGE>

Treasury regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain, i.e., the excess of
net long-term capital gain over net short-term capital loss for any taxable
year, to elect (unless it has made a taxable year election for excise tax
purposes as discussed below) to treat all or part of any net capital loss, any
net long-term capital loss or any net foreign currency loss incurred after
October 31 as if it had been incurred in the succeeding year.

Distributions by the Fund of net interest received from certain taxable
temporary investments (such as certificates of deposit, commercial paper and
obligations of the U.S. Government, its agencies and instrumentalities) and net
short-term capital gains realized by the Fund, if any, will be taxable to Common
Shareholders as ordinary income whether received in cash or additional shares.
Any net long-term capital gains realized by the Fund and distributed to Common
Shareholders in cash or additional shares, will be taxable to Common
Shareholders as long-term capital gains regardless of the length of time
investors have owned shares of the Fund. Distributions by the Fund that do not
constitute ordinary income dividends or capital gain dividends will be treated
as a return of capital to the extent of (and in reduction of) the shareholder's
tax basis in his or her shares. Any excess will be treated as gain from the sale
of his or her shares, as discussed below.

If the Fund engages in hedging transactions involving financial futures and
options, these transactions will be subject to special tax rules, the effect of
which may be to accelerate income to the Fund, defer the Fund's losses, cause
adjustments in the holding periods of the Fund's securities, convert long-term
capital gains into short-term capital gains and convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to Common Shareholders.

Prior to purchasing shares in the Fund, an investor should carefully
consider the impact of dividends or distributions which are expected to be or
have been declared, but not paid. Any dividend or distribution declared shortly
after a purchase of such shares prior to the record date will have the effect of
reducing the per share net asset value by the per share amount of the dividend
or distribution.

Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to Common
Shareholders of record on a specified date in one of those months and paid
during the following January, will be treated as having been distributed by the
Fund (and received by the Common Shareholders) on December 31.

The redemption or exchange of Common Shares normally will result in capital
gain or loss to the Common Shareholders. Generally, a shareholder's gain or
loss will be long-term gain or loss if the shares have been held for more than
one year. Present law taxes both long- and short-term capital gains of
corporations at the rates applicable to ordinary income. For non-corporate
taxpayers, however, net capital gains (i.e., the excess of net long-term capital
gain over net short-term capital loss) with respect to securities will be taxed
at a maximum rate of 20%, while short-term capital gains and other ordinary
income will be taxed at a maximum rate of 39.6%. Because of the limitations on
itemized deductions and the deduction for personal exemptions applicable to
higher income taxpayers, the effective tax rate may be higher in certain
circumstances.

B-36
<PAGE>

All or a portion of a sales charge paid in purchasing Common Shares cannot
be taken into account for purposes of determining gain or loss on the redemption
or exchange of such shares within 90 days after their purchase to the extent
Common Shares or shares of another fund are subsequently acquired without
payment of a sales charge pursuant to the reinvestment or exchange privilege.
Any disregarded portion of such charge will result in an increase in the
shareholder's tax basis in the shares subsequently acquired. In addition, no
loss will be allowed on the redemption or exchange of Common Shares if the
shareholder purchases other shares of the Fund (whether through reinvestment of
distributions or otherwise) or the shareholder acquires or enters into a
contract or option to acquire securities that are substantially identical to
shares of the Fund within a period of 61 days beginning 30 days before and
ending 30 days after such redemption or exchange. If disallowed, the loss will
be reflected in an adjustment to the basis of the shares acquired.

In order to avoid a 4% federal excise tax, the Fund must distribute or be
deemed to have distributed by December 31 of each calendar year at least 98% of
its taxable ordinary income for such year, at least 98% of the excess of its
realized capital gains over its realized capital losses (generally computed on
the basis of the one-year period ending on October 31 of such year) and 100% of
any taxable ordinary income and any excess of realized capital gains over
realized capital losses for the prior year that was not distributed during such
year and on which the Fund paid no federal income tax. For purposes of the
excise tax, a regulated investment company may reduce its capital gain net
income (but not below its net capital gain) by the amount of any net ordinary
loss for the calendar year. The Fund intends to make timely distributions in
compliance with these requirements and consequently it is anticipated that it
generally will not be required to pay the excise tax.

If in any year the Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its income for that year, and distributions to
its Common Shareholders would be taxable to Common Shareholders as ordinary
dividend income for federal income tax purposes to the extent of the Fund's
earnings and profits.

The Fund is required in certain circumstances to withhold 31% of taxable
dividends and certain other payments paid to non-corporate holders of shares who
have not furnished to the Fund their correct taxpayer identification number (in
the case of individuals, their Social Security number) and certain
certifications, or who are otherwise subject to backup withholding.

The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
taxation of the Fund and its Common Shareholders. For complete provisions,
reference should be made to the pertinent Code sections and Treasury
Regulations. The Code and Treasury Regulations are subject to change by
legislative or administrative action, and any such change may be retroactive
with respect to Fund transactions. Common Shareholders are advised to consult
their own tax Advisers for more detailed information concerning the federal
taxation of the Fund and the income tax consequences to its Common Shareholders.

B-37
<PAGE>

State Tax Matters

The following is a general, abbreviated summary of certain provisions of
the applicable New York tax law as presently in effect as it directly governs
the taxation of resident individual, corporate, and unincorporated business
shareholders of the Fund. This summary does not address the taxation of other
shareholders nor does it discuss any local taxes, other than New York City
taxes, that may be applicable. These provisions are subject to change by
legislative or administrative action, and any such change may be retroactive
with respect to Fund transactions. The following is based on the assumptions
that the Fund will qualify under Subchapter M of the Code as a regulated
investment company, that it will satisfy the conditions which will cause the
Fund's distributions to qualify as exempt-interest dividends to shareholders,
and that it will distribute all interest and dividends they receive to the
Fund's shareholders. The Fund will be subject to the New York State franchise
tax and the New York City general corporation tax only if it has a sufficient
nexus with New York State or New York City. If it is subject to such taxes, it
does not expect to pay a material amount of either tax. Distributions by the
Fund that are attributable to interest on any obligation of New York and its
political subdivisions or to interest on obligations of U.S. territories and
possessions that are exempt from state taxation under federal law will not be
subject to the New York State personal income tax or the New York City personal
income or unincorporated business taxes. All other distributions, including
distributions attributable to interest on obligations of the United States or
its instrumentalities and distributions attributable to capital gains, will be
subject to the New York State personal income tax and the New York City personal
income and unincorporated business taxes.

All distributions from the Fund, regardless of source, will increase the
taxable base of shareholders subject to the New York State franchise tax or the
New York City general corporation tax. Gain from the sale, exchange, or other
disposition of Common Shares will be subject to the New York State personal
income and franchise taxes and the New York City personal income, unincorporated
business, and general corporation taxes. Common Shares may be subject to New
York State estate tax if owned by a New York decedent a the time of death.

EXPERTS

The Statement of Net Assets of the Fund as of _________________________
[and Statement of Operations for period ____________] appearing in this
Statement of Additional Information has been audited by ______________,
__________________, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and is included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
_______________ , located at ______________ provides accounting and auditing
services to the Fund.

ADDITIONAL INFORMATION

A Registration Statement on Form N-2, including amendments thereto,
relating to the shares offered hereby, has been filed by the Fund with the
Securities and Exchange Commission (the "Commission"), Washington, D.C. The
Prospectus and this Statement of Additional Information do not contain all of
the information set forth in the Registration Statement,

B-38
<PAGE>

including any exhibits and schedules thereto. For further information with
respect to the Fund and the shares offered hereby, reference is made to the
Registration Statement. Statements contained in the Prospectus and this
Statement of Additional Information as to the contents of any contract or other
document referred to are not necessarily complete and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference. A copy of the Registration Statement may be inspected without
charge at the Commission's principal office in Washington, D.C., and copies of
all or any part thereof may be obtained from the Commission upon the payment of
certain fees prescribed by the Commission.

B-39
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Trustees and Shareholder
Nuveen New York Municipal Advantage Fund

[To Come]
<PAGE>

NUVEEN NEW YORK MUNICIPAL ADVANTAGE FUND

FINANCIAL STATEMENTS

[TO COME]
<PAGE>

APPENDIX A

Ratings of Investments

Standard & Poor's Corporation--A brief description of the applicable Standard &
Poor's Corporation ("S&P") rating symbols and their meanings (as published by
S&P) follows:

Long Term Debt

An S&P corporate or municipal debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers,
or lessees.

The debt rating is not a recommendation to purchase, sell, or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.

The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not
perform an audit in connection with any rating and may, on occasion, rely on
unaudited financial information. The ratings may be changed, suspended, or
withdrawn as a result of changes in, or unavailability of, such information,
or based on other circumstances.

The ratings are based, in varying degrees, on the following considerations:

1. Likelihood of default--capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;

2. Nature of and provisions of the obligation;

3. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization, or other arrangement under
the laws of bankruptcy and other laws affecting creditors' rights.

Investment Grade

AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.

A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.

BBB Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse

A-1
<PAGE>

economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.

Speculative Grade Rating

Debt rated "BB", "B", "CCC", "CC" and "C" is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. "BB" indicates the least degree of speculation and "C" the highest.
While such debt will likely have some quality and protective characteristics
these are outweighed by major uncertainties or major exposures to adverse
conditions.

BB Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The "BB" rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied "BBB--" rating.

B Debt rated "B" has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.

The "B" rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BB" or "BB--" rating.

CCC Debt rated "CCC" has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event
of adverse business, financial, or economic conditions, it is not likely to
have the capacity to pay interest and repay principal.

The "CCC" rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "B" or "B--" rating.

CC The rating "CC" typically is applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" debt rating.

C The rating "C" typically is applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC--" debt rating. The "C" rating
may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.

CI The rating "CI" is reserved for income bonds on which no interest is being
paid.

D Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such

A-2
<PAGE>

grace period. The "D" rating also will be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.

Plus (+) or Minus (--): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

Provisional Ratings: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project financed by
the debt being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of, or the risk of
default upon failure of, such completion. The investor should exercise judgment
with respect to such likelihood and risk.

L The letter "L" indicates that the rating pertains to the principal amount
of those bonds to the extent that the underlying deposit collateral is
federally insured by the Federal Savings & Loan Insurance Corp. or the
Federal Deposit Insurance Corp.* and interest is adequately collateralized.
In the case of certificates of deposit the letter "L" indicates that the
deposit, combined with other deposits being held in the same right and
capacity will be honored for principal and accrued pre-default interest up
to the federal insurance limits within 30 days after closing of the insured
institution or, in the event that the deposit is assumed by a successor
insured institution, upon maturity.

* Continuance of the rating is contingent upon S&P's receipt of an executed copy
of the escrow agreement or closing documentation confirming investments and
cash flow.

NR Indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.

Municipal Notes

An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in 3 years or less will likely receive a note
rating. Notes maturing beyond 3 years will most likely receive a long-term debt
rating. The following criteria will be used in making that assessment:

-- Amortization schedule (the larger the final maturity relative to other
maturities, the more likely it will be treated as a note).

-- Source of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).

Note rating symbols are as follows:

SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.

A-3
<PAGE>

SP-2 Satisfactory capacity to pay principal and interest.

SP-3 Speculative capacity to pay principal and interest.

A note rating is not a recommendation to purchase, sell, or hold a security
inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such
information or based on other circumstances.

Commercial Paper

An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.

Ratings are graded into several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. These categories are as follows:

A-1 This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.

A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."

A-3 Issues carrying this designation have adequate capacity for timely payment.
They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.

B Issues rated "B" are regarded as having only speculative capacity for
timely payment.

C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.

D Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period.

A commercial rating is not a recommendation to purchase, sell, or hold a
security inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such
information or based on other

A-4
<PAGE>

circumstances.

Moody's Investors Service, Inc.--A brief description of the applicable Moody's
Investors Service, Inc. ("Moody's") rating symbols and their meanings (as
published by Moody's) follows:

Municipal Bonds

Aaa Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally strong
position of such issues.

Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-
term risks appear somewhat larger than in Aaa securities.

A Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.

Baa Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.

Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.

B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.

Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.

A-5
<PAGE>

Ca Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked shortcomings.

C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.

Con(...) Bonds for which the security depends upon the completion of some act
or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b)
earnings of projects unseasoned in operation experience, (c) rentals
which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes
probable credit stature upon completion of construction or elimination
of basis of condition.

Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the
symbols Aa1, A1, Baa1, Ba1, and B1.

Short-Term Loans

MIG 1/VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broadbased access to the market for refinancing.

MIG 2/VMIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.

MIG 3/VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less
well-established.

MIG 4/VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.

S.G. This designation denotes speculative quality. Debt instruments in
this category lack margins of protection.

Commercial Paper

Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:

-- Leading market positions in well-established industries.

A-6
<PAGE>

-- High rates of return on funds employed.

-- Conservative capitalization structures with moderate reliance on debt
and ample asset protection.

-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.

-- Well-established access to a range of financial markets and assured
sources of alternate liquidity.

Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Issuers rated Prime-3 (or related supporting institutions) have an acceptable
capacity for repayment of short-term promissory obligations. The effect of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.

Issuers rated Not Prime do not fall within any of the Prime rating categories.

Fitch Investors Service, Inc.--A brief description of the applicable Fitch
Investors Service, Inc. ("Fitch") ratings symbols and meanings (as published by
Fitch) follows:

Long Term Debt

Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.

The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.

Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guaranties unless otherwise indicated.

Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.

Fitch ratings are not recommendations to buy, sell, or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor,

A-7
<PAGE>

or the tax-exempt nature or taxability of payments made in respect of any
security.

Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.

AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.

AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA".
Because bonds rated in the "AAA" and "AA" categories are not
significantly vulnerable to foreseeable future developments, short-
term debt of the issuers is generally rated "F-1+".

A Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is
considered to be strong but may be more vulnerable to adverse changes
in economic conditions and circumstances than bonds with higher
ratings.

BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on
these bonds and, therefore, impair timely payment. The likelihood that
the ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.

Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
("BB" to "C") represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ("DDD" to "D") is an
assessment of the ultimate recovery value through reorganization or liquidation.

Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories can not fully reflect the
differences in the degrees of credit risk.

BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor

A-8
<PAGE>

in satisfying its debt service requirements.

B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable
business and economic activity throughout the life of the issue.

CCC Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business economic environment.

CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C Bonds are in imminent default in payment of interest or principal.

DDD, Bonds are in default on interest and/or principal payments. Such bonds
DD are extremely speculative and should be valued on the basis of their
and D ultimate recovery value in liquidation or reorganization of the
obligor. "DDD" represents the highest potential for recovery of these
bonds, and "D" represents the lowest potential for recovery.

Short-Term Ratings

Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificate of deposit, medium-term notes, and municipal and
investment notes.

The short-term rating places greater emphasis than a long-term rating on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.

F-1+ Exceptionally Strong Credit Quality Issues assigned this rating are
regarded as having the strongest degree of assurance for timely
payment.

F-1 Very Strong Credit Quality Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues
rated "F-1+".

F-2 Good Credit Quality Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is
not as great as for issues assigned "F-1+" and "F-1" ratings.

F-3 Fair Credit Quality Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is
adequate; however, near-term adverse changes could cause these
securities to be rated below investment grade.

F-S Weak Credit Quality Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are
vulnerable to near-term

A-9
<PAGE>

adverse changes in financial and economic conditions.

D Default Issues assigned this rating are in actual or imminent payment
default.

LOC The symbol LOC indicates that the rating is based on a letter of
credit issued by a commercial bank.

A-10
<PAGE>

APPENDIX B

TAXABLE EQUIVALENT YIELD TABLE

The taxable equivalent yield is the current yield you would need to earn on
a taxable investment in order to equal a stated tax-free yield on a municipal
investment. To assist you to more easily compare municipal investments like the
Fund with taxable alternative investments, the table below presents the taxable
equivalent yields for a range of hypothetical tax-free yields and tax rates:

Taxable Equivalent of Tax-Free Yields

Tax Free Yield
<S> <C> <C> <C> <C> <C>
Tax Rate 4.00% 4.50% 5.00% 5.50% 6.00%
- ------------------------------------------------------------------------
28.0% 5.56% 6.25% 6.94% 7.64% 8.33%
31.0% 5.80% 6.52% 7.25% 7.97% 8.70%
36.0% 6.25% 7.03% 7.81% 8.59% 9.38%
39.6% 6.62% 7.45% 8.28% 9.11% 9.93%
</TABLE>

B-1
<PAGE>

APPENDIX C

HISTORICAL YIELDS

[To Come]

C-1
<PAGE>

APPENDIX D

HEDGING STRATEGIES AND RISKS

Set forth below is additional information regarding the various defensive
hedging techniques.

Futures and Index Transactions

Financial Futures

A financial future is an agreement between two parties to buy and sell a
security for a set price on a future date. They have been designed by boards of
trade which have been designated "contracts markets" by the Commodity Futures
Trading Commission ("CFTC").

The purchase of financial futures is for the purpose of hedging a Fund's
existing or anticipated holdings of long-term debt securities. When a Fund
purchases a financial future, it deposits in cash or securities an "initial
margin" of between 1% and 5% of the contract amount. Thereafter, the Fund's
account is either credited or debited on a daily basis in correlation with the
fluctuation in price of the underlying future or other requirements imposed by
the exchange in order to maintain an orderly market. The Fund must make
additional payments to cover debits to its account and has the right to withdraw
credits in excess of the liquidity, the Fund may close out its position at any
time prior to expiration of the financial future by taking an opposite position.
At closing a final determination of debits and credits is made, additional cash
is paid by or to the Fund to settle the final determination and the Fund
realizes a loss or gain depending on whether on a net basis it made or received
such payments.

The sale of financial futures is for the purpose of hedging a Fund's
existing or anticipated holdings of long-term debt securities. For example, if a
Fund owns long-term bonds and interest rates were expected to increase, it might
sell financial futures. If interest rates did increase, the value of long-term
bonds in the Fund's portfolio would decline, but the value of the Fund's
financial futures would be expected to increase at approximately the same rate
thereby keeping the net asset value of the Fund from declining as much as it
otherwise would have.

Among the risks associated with the use of financial futures by the Funds
as a hedging device, perhaps the most significant is the imperfect correlation
between movements in the price of the financial futures and movements in the
price of the debt securities which are the subject of the hedge.

Thus, if the price of the financial future moves less or more than the
price of the securities which are the subject of the hedge, the hedge will not
be fully effective. To compensate for this imperfect correlation, the Fund may
enter into financial futures in a greater dollar amount than the dollar amount
of the securities being hedged if the historical volatility of the prices of
such securities has been greater than the historical volatility of the financial
futures. Conversely, the Fund may enter into fewer financial futures if the
historical volatility of the price of the securities being hedged is less than
the historical volatility of the financial futures.

D-1
<PAGE>

PART C - OTHER INFORMATION

Item 24: Financial Statements and Exhibits

1. Financial Statements:

Registrant has not conducted any business as of the date of this filing,
other than in connection with its organization. Financial Statements indicating
that the Registrant has met the net worth requirements of Section 14(a) of the
1940 Act are filed herewith.

2. Exhibits:

a. Agreement and Declaration of Trust dated December 1, 1998.
b. By-laws of Registrant dated __________.
c. None.
d. None.
e. Dividend Investment Plan.*
f. None.
g. Investment Management Agreement between Registrant and Nuveen Advisory
Corp. dated _________.*
h. Form of Underwriting Agreement.*
i. Deferred Compensation Plan for Non-Employee Trustees*
j. Exchange Traded Fund Custody Agreement between Registrant and The Chase
Manhattan Bank dated _______.*
k. Transfer Agency Agreement between Registrant and Chase Global Funds
Services Company dated ________.*
l.1 Opinion and consent of Bell, Boyd & Lloyd.*
1.2 Opinion and consent of Bingham Dana LLP.*
m. None.
n. Consent of [auditors].*
o. None.
p. Subscription Agreement of Nuveen Advisory Corp. dated ________.*
q. None.
r. None.
s. Powers of Attorney.*
___________________
* To be filed by amendment.

Item 25: Marketing Arrangements

See Section 3 of the Underwriting Agreement filed as Exhibit h to this
Registration Statement.

Part C - 1
<PAGE>

Item 26: Other Expenses of Issuance and Distribution

Securities and Exchange Commission fees.................... $ 417.00
National Association of Securities Dealers, Inc. fees...... *
Printing and engraving expenses............................ *
Legal fees................................................. *
New York Stock Exchange listing fees....................... *
Accounting expenses........................................ *
Blue Sky filing fees and expenses.......................... *
Transfer agent fees........................................ *
Miscellaneous expenses..................................... *
----------
Total.............................................. $ *
==========
- -----------
*To be filed by amendment.

Item 27: Persons Controlled by or under Common Control with Registrant

Not applicable.

Item 28: Number of Holders of Securities

At December 7, 1998

Number of
Title of Class Record Holders
-------------- --------------
Common Shares, $.01 par value........... 0

Item 29: Indemnification

Section 4 of Article XII of the Registrant's Declaration of Trust provides
as follows:

Subject to the exceptions and limitations contained in this Section 4,
every person who is, or has been, a Trustee, officer, employee or agent of the
Trust, including persons who serve at the request of the Trust as directors,
trustees, officers, employees or agents of another organization in which the
Trust has an interest as a shareholder, creditor or otherwise (hereinafter
referred to as a "Covered Person"), shall be indemnified by the Trust to the
fullest extent permitted by law against liability and against all expenses
reasonably incurred or paid by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or otherwise by virtue of his
being or having been such a Trustee, director, officer, employee or agent and
against amounts paid or incurred by him in settlement thereof.

No indemnification shall be provided hereunder to a Covered Person:

(a) against any liability to the Trust or its Shareholders by reason of a final
adjudication by the court or other body before which the proceeding was brought
that he engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the

Part C - 2
<PAGE>

conduct of his office;

(b) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Trust; or

(c) in the event of a settlement or other disposition not involving a final
adjudication (as provided in paragraph (a) or (b)) and resulting in a payment
by a Covered Person, unless there has been either a determination that such
Covered Person did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office by the court or other body approving the settlement or other disposition
or a reasonable determination, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that he did not engage in such conduct:

(i) by a vote of a majority of the Disinterested Trustees
acting on the matter (provided that a majority of the Disinterested
Trustees then in office act on the matter); or

(ii) by written opinion of independent legal counsel.

The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be such a Covered Person and shall
inure to the benefit of the heirs, executors and administrators of such a
person. Nothing contained herein shall affect any rights to indemnification to
which Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law.

Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:

(a) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against losses arising
out of any such advances; or

(b) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act
on the matter) or independent legal counsel in a written opinion shall
determine, based upon a review of the readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that the
recipient ultimately will be found entitled to indemnification.

As used in this Section 4, a "Disinterested Trustee" is one (x) who is not
an Interested Person of the Trust (including, as such Disinterested Trustee,
anyone who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (y) against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.

Part C-3
<PAGE>

As used in this Section 4, the words "claim," "action," "suit" or
"proceeding" shall apply to all claims, actions, suits, proceedings (civil,
criminal, administrative or other, including appeals), actual or threatened; and
the words "liability" and "expenses" shall include without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties
and other liabilities.

The trustees and officers of the Registrant are covered by Investment Trust
Errors and Omission policies in the aggregate amount of $20,000,000 (with a
maximum deductible of $500,000) against liability and expenses of claims of
wrongful acts arising out of their position with the Registrant, except for
matters which involve willful acts, bad faith, gross negligence and willful
disregard of duty (i.e., where the insured did not act in good faith for a
purpose he or she reasonably believed to be in the best interest of Registrant
or where he or she had reasonable cause to believe this conduct was unlawful).

Section 8 of the Underwriting Agreement filed as Exhibit h to this
Registration Statement provides for each of the parties thereto, including the
Registrant and the Underwriters, to indemnify the others, their trustees,
directors, certain of their officers, trustees, directors and persons who
control them against certain liabilities in connection with the offering
described herein, including liabilities under the federal securities laws.

Item 30: Business and Other Connections of Investment Adviser

Nuveen Advisory Corp. serves as investment adviser to the following open-
end management type investment companies: Nuveen Flagship Multistate Trust I,
Nuveen Flagship Multistate II, Nuveen Flagship Multistate Trust III, Nuveen
Flagship Multistate Trust IV, Nuveen Flagship Municipal Trust, Nuveen California
Tax Free Fund, Inc., Nuveen Tax-Free Money Market Fund, Inc., Nuveen Tax-Exempt
Money Market Fund, Inc. and Nuveen Tax-Free Reserves, Inc. Nuveen Advisory Corp.
also serves as investment adviser to the following closed-end management type
investment companies other than the Registrant: Nuveen Municipal Value Fund,
Inc., Nuveen California Municipal Value Fund, Inc., Nuveen New York Municipal
Value Fund, Inc., Nuveen Municipal Income Fund, Inc., Nuveen Premium Income
Municipal Fund, Inc., Nuveen Performance Plus Municipal Fund, Inc., Nuveen
California Performance Plus Municipal Fund, Inc., Nuveen New York Performance
Plus Municipal Fund, Inc., Nuveen Municipal Advantage Fund, Inc., Nuveen
Municipal Market Opportunity Fund, Inc., Nuveen California Municipal Market
Opportunity Fund, Inc., Nuveen New York Municipal Market Opportunity Fund, Inc.,
Nuveen Investment Quality Municipal Fund, Inc., Nuveen California Investment
Quality Municipal Fund, Inc., Nuveen New York Investment Quality Municipal Fund,
Inc., Nuveen Insured Quality Municipal Fund, Inc., Nuveen Florida Investment
Quality Municipal Fund, Nuveen New Jersey Investment Quality Municipal Fund,
Inc., Nuveen Pennsylvania Investment Quality Municipal Fund, Nuveen Select
Quality Municipal Fund, Inc., Nuveen California Select Quality Municipal Fund,
Inc., Nuveen New York Select Quality Municipal Fund, Inc., Nuveen Quality Income
Municipal Fund, Inc., Nuveen Insured Municipal Opportunity Fund, Inc., Nuveen
Florida Quality Income Municipal Fund, Nuveen Michigan Quality Income Municipal
Fund, Inc., Nuveen Ohio Quality Income Municipal Fund, Inc., Nuveen Texas
Quality Income Municipal Fund, Nuveen California Quality Income Municipal Fund,
Inc., Nuveen New York Quality Income Municipal Fund, Inc., Nuveen Premier
Municipal Income Fund, Inc., Nuveen Premier Insured Municipal Income Fund, Inc.,
Nuveen Insured California Premium

Part C-4
<PAGE>

Income Municipal Fund, Inc., Nuveen Insured New York Premium Income Municipal
Fund, Inc., Nuveen Premium Income Municipal Fund 2, Inc., Nuveen Select
Maturities Municipal Fund, Nuveen Arizona Premium Income Municipal Fund, Inc.,
Nuveen Insured Florida Premium Income Municipal Fund, Nuveen Michigan Premium
Income Municipal Fund, Inc., Nuveen New Jersey Premium Income Municipal Fund,
Inc., Nuveen Premium Income Municipal Fund 4, Inc., Nuveen Insured California
Premium Income Municipal Fund 2, Inc., Nuveen Insured New York Premium Income
Municipal Fund 2, Nuveen New Jersey Premium Income Municipal Fund 2, Nuveen
Pennsylvania Premium Income Municipal Fund 2, Nuveen Maryland Premium Income
Municipal Fund, Nuveen Massachusetts Premium Income Municipal Fund, Nuveen
Virginia Premium Income Municipal Fund, Nuveen Washington Premium Income
Municipal Fund, Nuveen Connecticut Premium Income Municipal Fund, Nuveen Georgia
Premium Income Municipal Fund, Nuveen Missouri Premium Income Municipal Fund,
Nuveen North Carolina Premium Income Municipal Fund, Nuveen California Premium
Income Municipal Fund and Nuveen Insured Premium Income Municipal Fund 2. Nuveen
Advisory Corp. has no other clients or business at the present time. For a
description of other business, profession, vocation or employment of a
substantial nature in which any director or officer of the investment adviser
has engaged during the last two years for his account or in the capacity of
director, officer, employee, partner or trustee, see the descriptions under
"Management of the Fund" in Part A of this Registration Statement.

Item 31: Location of Accounts and Records

Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, Illinois 60606,
maintains the Declaration of Trust, By-Laws, minutes of trustees and
shareholders meetings and contracts of the Registrant and all Advisery material
of the investment adviser.

The Chase Manhattan Bank, 4 New York Plaza, New York, New York 10004-2413
maintains all general and subsidiary ledgers, journals, trial balances, records
of all portfolio purchases and sales, and all other required records not
maintained by Nuveen Advisory Corp. or Chase Global Funds Services Company.

Part C-5
<PAGE>

Chase Global Funds Services Company, P.O. Box 5186, Bowling Green Station,
New York, NY 10275-0672 (regular mail) or 4 New York Plaza, 6th Floor, New York,
NY 10004, maintains all the required records in its capacity as transfer and
dividend paying agent for the Registrant.

Item 32: Management Services

Not applicable.

Item 33: Undertakings

1. Registrant undertakes to suspend the offering of its shares until it
amends its prospectus if (1) subsequent to the effective date of its
Registration Statement, the net asset value declines more than 10 percent from
its net asset value as of the effective date of the Registration Statement, or
(2) the net asset value increases to an amount greater than its net proceeds as
stated in the prospectus.

2. Not applicable.

3. Not applicable.

4. Not applicable.

5. The Registrant undertakes that:

a. For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of a registration statement in reliance upon Rule 430A and contained
in the form of prospectus filed by the Registrant under Rule 497(h) under
the Securities Act of 1933 shall be deemed to be part of the Registration
Statement as of the time it was declared effective.

b. For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of the securities at
that time shall be deemed to be the initial bona fide offering thereof.

6. The Registrant undertakes to send by first class mail or other means
designed to ensure equally prompt delivery within two business days of receipt
of a written or oral request, any Statement of Addition Information.

Part C-6
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Chicago, and State of Illinois, on the 8th day of
December, 1998.

NUVEEN NEW YORK MUNICIPAL ADVANTAGE FUND

/s/ Gifford R. Zimmerman
--------------------------------------------------
Gifford R. Zimmerman, Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>

/s/ Stephen D. Foy Vice President and December 8, 1998
- --------------------------- Controller (Principal
Stephen D. Foy Financial and Accounting
Officer)

/s/ Timothy R. Schwertfeger Chairman of the Board
- --------------------------- and Trustee (Principal
Timothy R. Schwertfeger Executive Officer) By /s/ Gifford R. Zimmerman
------------------------
/s/ Anthony T. Dean President and Trustee Gifford R. Zimmerman
- --------------------------- Attorney-in-Fact
Anthony T. Dean

December 8, 1998
</TABLE>

Original powers of attorney authorizing Alan G. Berkshire and Gifford R.
Zimmerman, among others, to execute this Registration Statement, and Amendments
thereto, for each of the trustees of Registrant on whose behalf this
Registration Statement is filed, will be executed and filed as an exhibit.

<PAGE>

INDEX TO EXHIBITS

a. Agreement and Declaration of Trust dated December 1, 1998
b. By-laws of Registrant dated________________.
c. None.
d. None.
e. Dividend Investment Plan.*
f. None.
g. Investment Management Agreement between Registrant and Nuveen Advisory
Corp. dated _________.*
h. Form of Underwriting Agreement.*
i. Deferred Compensation Plan for Non-Employee Trustees*
j. Exchange Traded Fund Custody Agreement between Registrant and The Chase
Manhattan Bank dated _______.*
k. Transfer Agency Agreement between Registrant and Chase Global Funds
Services Company dated ________.*
l.1 Opinion and consent of Bell, Boyd & Lloyd.*
1.2 Opinion and consent of Bingham Dana LLP.*
m. None.
n. Consent of [auditors].*
o. None.
p. Subscription Agreement of Nuveen Advisory Corp. dated ________.*
q. None.
r. None.
s. Powers of Attorney.*
___________________
*To be filed by amendment.

<PAGE>

DECLARATION OF TRUST
--------------------
OF
--
NUVEEN NEW YORK MUNICIPAL ADVANTAGE FUND
----------------------------------------

DECLARATION OF TRUST made this 1st day of December 1998 by the Trustees
hereunder.

WHEREAS, the Trustees desire to establish a trust fund for the purposes of
carrying on the business of a management investment company; and

WHEREAS, in furtherance of such purposes, the Trustees and any successor
Trustees elected in accordance with Article V hereof are acquiring and may
hereafter acquire assets and properties which they will hold and manage as
trustees of a Massachusetts business trust with transferable shares in
accordance with the provisions hereinafter set forth;

NOW, THEREFORE, the Trustees and any successor Trustees elected in
accordance with Article V hereof hereby declare that they will hold all cash,
securities and other assets and properties, which they may from time to time
acquire in any manner as Trustees hereunder, IN TRUST, that they will manage and
dispose of the same upon the following terms and conditions for the pro rata
benefit of the holders from time to time of shares of beneficial interest in
this Trust as hereinafter set forth.

ARTICLE I
---------

NAME AND DEFINITIONS
--------------------

Section 1. Name. This Trust shall be known as the "Nuveen New York Municipal
Advantage Fund," and the Trustees shall conduct the business of the Trust under
that name or any other name as they may from time to time determine.

Section 2. Definitions. Whenever used herein, unless otherwise required by the
context or specifically provided:

(a) The "Trust" refers to the Massachusetts voluntary association
established by this Declaration of Trust, as amended from time to time, pursuant
to Massachusetts General Laws, Chapter 182;

(b) "Trustee" or "Trustees" refers to each signatory to this
Declaration of Trust so long as such signatory shall continue in office in
<PAGE>

-2-

accordance with the terms hereof, and all other individuals who at the time in
question have been duly elected or appointed and qualified in accordance with
Article V hereof and are then in office;

(c) "Shares" mean the shares of beneficial interest described in
Article IV hereof and include fractions of Shares as well as whole Shares;

(d) "Shareholder" means a record owner of Shares;

(e) The "1940 Act" refers to the Investment Company Act of 1940 (and
any successor statute) and the Rules and Regulations thereunder, all as amended
from time to time;

(f) The terms "Affiliated Person," "Assignment," "Commission,"
"Interested Person," "Principal Underwriter" and "vote of a majority of the
outstanding voting securities" shall have the meanings given them in the 1940
Act;

(g) "Declaration of Trust" or "Declaration" shall mean this
Declaration of Trust as amended or restated from time to time; and

(h) "By-Laws" shall mean the By-laws of the Trust as amended from time
to time.

ARTICLE II
----------

NATURE AND PURPOSE OF TRUST
---------------------------

The Trust is a voluntary association (commonly known as a business trust)
of the type referred to in Chapter 182 of the General Laws of the Commonwealth
of Massachusetts. The Trust is not intended to be, shall not be deemed to be,
and shall not be treated as, a general or a limited partnership, joint venture,
corporation or joint stock company, nor shall the Trustees or Shareholders or
any of them for any purpose be deemed to be, or be treated in any way whatsoever
as though they were, liable or responsible hereunder as partners or joint
venturers. The purpose of the Trust is to engage in, operate and carry on the
business of a closed-end management investment company and to do any and all
acts or things as are necessary, convenient, appropriate incidental or customary
in connection therewith, including, without limitation, the following:

to hold, invest, and reinvest its funds, and in connection therewith
to hold part of all of its funds in cash, and to purchase or otherwise
sell, assign, negotiate, transfer, exchange or otherwise dispose of or turn
to account or realize upon securities and other
<PAGE>

-3-

negotiable or non-negotiable instruments, obligations and evidences of
indebtedness created or issued by any person, firms, associations,
corporations, syndicates, combinations, and other negotiable or non-
negotiable instruments, obligation and evidences of indebtedness; and to
exercise, as owner or holder of any securities or other instruments, all
rights, powers, and privileges in respect thereof; and to do any and all
acts and things for the preservation, protection and improvement of any and
all such securities or other instruments, and, in general, to conduct the
business of a closed-end investment company as that term is defined in the
1940 Act; and

To engage in any lawful act or activity for which business trusts may
be organized under Massachusetts law.

The Trust set forth in this instrument shall be deemed made in the
Commonwealth of Massachusetts, and it is created under and is to be
governed by and construed and administered according to the laws of said
Commonwealth. The Trust shall be of the type commonly called a business
trust, and without limiting the provisions hereof, the Trust may exercise
all powers which are ordinarily exercised by such a trust. No provision of
this Declaration shall be effective to require a waiver of compliance with
any provision of the Securities Act of 1933, as amended, or the 1940 Act,
or of any valid rule, regulation or order of the Commission thereunder.

The enumeration herewith of the objects and purposes of the Trust
shall be construed as powers as well as objects and purposes and shall not
be deemed to exclude by inference any powers, objects or purposes which the
Trust may lawfully pursue or exercise.

ARTICLE III
-----------

REGISTERED AGENT; PRINCIPAL PLACE OF BUSINESS
---------------------------------------------

The name of the registered agent of the Trust is CT Corporation System at 2
Oliver Street, Boston, Massachusetts. The principal place of business of the
Trust is 333 West Wacker Drive, Chicago, Illinois 60606. The Trustees may,
without the approval of Shareholders, change the registered agent of the Trust
and the principal place of business of the Trust.
<PAGE>

-4-

ARTICLE IV
----------

BENEFICIAL INTEREST
-------------------

Section 1. Shares of Beneficial Interest. The beneficial interest in the Trust
shall be divided into such transferable Shares of beneficial interest, of such
classes or series, and of such designations and par values (if any), and with
such rights, preferences, privileges and restrictions as shall be determined by
the Trustees in their sole discretion, without Shareholder approval, from time
to time. The number of Shares is unlimited and each Share shall be fully paid
and nonassessable. There shall be no cumulative voting. Subject to any
provision in a Statement (as defined in Section 2 below) to the contrary, the
Trustees shall have full power and authority, in their sole discretion and
without obtaining any prior authorization or vote of the Shareholders of the
Trust or of the Shareholders of any series or class of Shares, to create and
establish (and to change in any manner) Shares or any series or classes thereof
with such preferences, voting powers, rights and privileges as the Trustees may
from time to time determine; to divide or combine the Shares or the Shares of
any series or classes thereof into a greater or lesser number including, without
limitation, such a division or combination accomplished by means of a stock
split or a reverse stock split, without thereby changing their proportionate
beneficial interest in the Trust; to classify or reclassify any issued Shares
into one or more series or classes of Shares; to abolish any one or more series
or classes of Shares; and to take such other action with respect to the Shares
as the Trustees may deem desirable. The Shares shall initially be divided into
two classes, a class of an unlimited number of common Shares, $0.1 par value
(the "Common Shares"), and a class of an unlimited number of preferred Shares,
$0.01 par value (the "Preferred Shares"), each having the powers, preferences,
rights, qualifications, limitations and restrictions described below:

(a) Preferred Shares. The Preferred Shares shall be issued from time to
time in one or more classes or series with such distinctive serial designations
and (i) may have such voting powers, full or limited; (ii) may be subject to
redemption at such time or times and at such price or prices; (iii) may be
entitled to receive dividends (which may be cumulative or noncumulative) at such
rate or rates, on such conditions, and at such times, and payable in preference
to, or in such relation to, the dividends payable on any other class or classes
of Shares; (iv) may have such rights upon the termination of, or upon any
distribution of the assets of, the Trust; (v) may be made convertible into, or
exchangeable for, Shares of any other class or classes or of any other series of
the same or any other class or classes of Shares of the Trust, at such price or
prices or at such rates of exchange and
<PAGE>

-5-

with such adjustments; and (vi) shall have such other relative, participating,
optional or other special rights, qualifications, limitations or restrictions
thereof, all as shall hereafter be stated and expressed in the resolution or
resolutions providing for the issue of such Preferred Shares from time to time
adopted by the Trustees (or a Committee thereof) in accordance with Section 2 of
this Article IV. Any of such matters may be made dependent upon facts
ascertainable outside this Declaration of Trust, or outside the resolution or
resolutions providing for the issue of such Preferred Shares.

(b) Common Shares.

(i) Subject to the rights of the holders of the Preferred Shares, in
the event of the termination of the Trust the holders of the Common Shares
shall be entitled to receive pro rata the net distributable assets of the
Trust.

(ii) The holders of the Common Shares shall not, as such holders, have
any right to acquire, purchase or subscribe for any Common Shares or
securities of the Trust which it may hereafter issue or sell, other than
such right, if any, as the Trustees in their discretion may determine.

(iii) Subject to the rights of the holders of the Preferred Shares,
dividends or other distributions, when, as and if declared by the Trustees,
shall be shared equally by the holders of Common Shares on a share for
share basis. The Trustees may direct that any dividends or other
distributions or any portion thereof as declared and distributed shall be
paid in cash to the holder, or, alternatively, may direct that any such
dividends be reinvested in full and fractional Shares of the Trust [if such
holder elects to have them reinvested.]

(iv) The Trustees may hold as treasury shares (of the same or some
other series), reissue for such consideration and on such terms as they may
determine, or cancel any Common Shares of any series reacquired by the
Trust at their discretion from time to time. Shares shall not entitle the
Shareholder to any title in or to the whole or any part of the Trust.

(v) Common Shares may be issued from time to time, without the vote of
the Shareholders (or, if the Trustees in their sole discretion deem
advisable, with a vote of Shareholders), either for cash or for such other
consideration (which may be in any one or more instances a certain
specified consideration or certain specified considerations) and on such
terms as the Trustees, from time to time, may deem advisable, and the Trust
may in such manner acquire other assets (including the
<PAGE>

-6-

acquisition of assets subject to, and in connection with the assumption of
liabilities).

(vi) The Trust may issue Common Shares in fractional denominations to
the same extent as its whole Shares, and Shares in fractional denominations
shall be Common Shares having proportionately to the respective fractions
represented thereby all the rights of whole Shares, including, without
limitation, the right to vote, the right to receive dividends and
distributions and the right to participate upon termination of the Trust,
but excluding the right to receive a certificate representing fractional
Shares.

Section 2. Establishment of Class or Series of Shares. The establishment and
designation of any class or series of Shares, including any Preferred Shares
issued hereunder, shall be effective upon the adoption of a resolution by a
majority of the then Trustees (or a Committee thereof) setting forth such
establishment and designation and the relative rights and preferences of the
Shares of such class or series as set forth in a written statement either
executed by the President or a Vice President of the Trust, or executed by a
majority of the Trustees then in office (the "Statement"). At any time that
there are no Shares outstanding of any particular class or series previously
established and designated, the Trustees (or a Committee thereof) may by a
majority vote abolish that class or series and the establishment and designation
thereof. Notwithstanding any provision of this Declaration of Trust to the
contrary, no such Statement establishing and designating any class or series of
Shares shall constitute an amendment to or a part of this Declaration of Trust.

Section 3. Ownership Of Shares. The ownership and transfer of Shares shall be
recorded on the books of the Trust or its transfer or similar agent. No
certificates certifying the ownership of Preferred Shares shall be issued except
as the Trustees may otherwise determine from time to time. The Trustees may
make such rules as they consider appropriate for the issuance of Share
certificates, transfer of Shares and similar matters. The record books of the
Trust, as kept by the Trust or any transfer or similar agent of the Trust, shall
be conclusive as to who are the holders of the Shares and as to the number of
Shares held from time to time by each Shareholder.

Section 4. No Preemptive Rights, Etc. The holders of Shares of any class or
series shall not, as such holders, have any right to acquire, purchase or
subscribe for any Shares or securities of the Trust which it may hereafter issue
or sell, other than such right, if any, as the Trustees in their discretion may
determine. The holders of Shares of any class or series shall have no appraisal
rights with respect to their Shares and, except as otherwise
<PAGE>

-7-

determined by resolution of the Trustees in their sole discretion, shall have no
exchange or conversion rights with respect to their Shares.

Section 5. Status of Shares and Limitation of Personal Liability. Shares shall
be deemed to be personal property giving only the rights provided in this
instrument. Every Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms of this Declaration of
Trust and to have become a party thereto. The death of a Shareholder during the
continuance of the Trust shall not operate to terminate the same nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Trust. Ownership of Shares shall not entitle
the Shareholder to any title in or to the whole or any part of the Trust
property or right to call or a partition or division of the same or for an
accounting. Neither the Trustees, nor any officer, employee or agent of the
Trust shall have any power to bind any Shareholder personally or to call upon
any Shareholder for the payment of any sum of money or assessment whatsoever
other than such as the Shareholder may at any time personally agree to pay by
way of subscription for any Shares or otherwise.

ARTICLE V
---------

THE TRUSTEES
------------

Section 1. Management of the Trust. The business and affairs of the Trust
shall be managed by the Trustees, and they shall have all powers necessary and
desirable to carry out that responsibility.

Section 2. Qualification and Number. Each Trustee shall be a natural person.
A Trustee need not be a shareholder, a citizen of the United States, or a
resident of the Commonwealth of Massachusetts. By the vote or consent of a
majority of the Trustees then in office, the Trustees may fix the number of
Trustees at a number not less than two (2) nor more than twelve (12) and may
fill the vacancies created by any such increase in the number of Trustees.
Except as determined from time to time by resolution of the Trustees, no
decrease in the number of Trustees shall have the effect of removing any Trustee
from office prior to the expiration of his term, but the number of Trustees may
be decreased in conjunction with the removal of a Trustee pursuant to Section 4
of Article V.

Section 3. Term and Election. Each Trustee shall hold office until the next
meeting of Shareholders called for the purpose of considering the election or
re-election of such Trustee or of a successor to such Trustee, and until his
successor is elected and qualified, and any Trustee who is appointed
<PAGE>

-8-

by the Trustees in the interim to fill a vacancy as provided hereunder shall
have the same remaining term as that of his predecessor, if any, or such term as
the Trustees may determine. Any vacancy resulting from a newly created
Trusteeship or the death, resignation, retirement, removal, or incapacity of a
Trustee may be filled by the affirmative vote or consent of a majority of the
Trustees then in office.

Section 4. Resignation and Removal. Any Trustee may resign his trust or retire
as a Trustee (without need for prior or subsequent accounting except in the
event of removal) by an instrument in writing signed by him and delivered or
mailed to the Chairman, if any, the President or the Secretary and such
resignation or retirement shall be effective upon such delivery, or at a later
date according to the terms of the instrument. Any Trustee may be removed from
office only for "Cause" (as hereinafter defined) and only (i) by action of at
least sixty-six and two-thirds percent (66 2/3%) of the outstanding Shares of
the class or classes of Shares that elected such Trustee, or (ii) by written
instrument, signed by at least sixty-six and two-thirds percent (66 2/3%) of the
remaining Trustees, specifying the date when such removal shall become
effective. "Cause" shall require willful misconduct, dishonesty, fraud or a
felony conviction.

Section 5. Vacancies. The death, declination, resignation, retirement,
removal, or incapacity, of the Trustees, or any one of them, shall not operate
to annul the Trust or to revoke any existing agency created pursuant to the
terms of this Declaration of Trust. Whenever a vacancy in the number of
Trustees shall occur, until such vacancy is filled as provided herein, or the
number of Trustees as fixed is reduced, the Trustees in office, regardless of
their number, shall have all the powers granted to the Trustees, and during the
period during which any such vacancy shall occur, only the Trustees then in
office shall be counted for the purposes of the existence of a quorum or any
action to be taken by such Trustees.

Section 6. Ownership of Assets of the Trust. The assets of the Trust shall be
held separate and apart from any assets now or hereafter held in any capacity
other than as Trustee hereunder by the Trustees or any successor Trustees. All
of the assets of the Trust shall at all times be considered as automatically
vested in the Trustees as shall be from time to time in office. Upon the
resignation, retirement, removal, incapacity or death of a Trustee, such Trustee
shall automatically cease to have any right, title or interest in any of the
Trust property, and the right, title and interest of such Trustee in the Trust
property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective without the execution or delivery of any
conveyancing or other instruments. No Shareholder shall be
<PAGE>

-9-

deemed to have a severable ownership in any individual asset of the Trust or any
right of partition or possession thereof.

Section 7. Voting Requirements. In addition to the voting requirements imposed
by law or by any other provision of this Declaration of Trust, the provisions
set forth in this Article V may not be amended, altered or repealed in any
respect, nor may any provision inconsistent with this Article V be adopted,
unless such action is approved by the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66 2/3%) of the outstanding Common
Shares and outstanding Preferred Shares, voting together as a single class. In
the event the holders of Common Shares or the holders of Preferred Shares, as
the case may be, are required by law or by any other provision of this
Declaration of Trust to approve such an action by a class vote of such holders,
such action must be approved by the holders of at least sixty-six and two-thirds
percent (66 2/3%) of such holders or such lower percentage as may be required by
law or by any other provision of this Declaration of Trust.

ARTICLE VI
----------

POWERS OF TRUSTEES
------------------

Section 1. Powers. The Trustees in all instances shall have full, absolute and
exclusive power, control and authority over the Trust assets and the business
and affairs of the Trust to the same extent as if the Trustees were the sole and
absolute owners thereof in their own right. The Trustees shall have full power
and authority to do any and all acts and to make and execute any and all
contracts and instruments that they may consider necessary or appropriate in
connection with the management of the Trust. The enumeration of any specific
power herein shall not be construed as limiting the aforesaid powers. In
construing the provisions of this Declaration of Trust, there shall be a
presumption in favor of the grant of power and authority to the Trustees.
Subject to any applicable limitation in this Declaration or any Statement
relating to the issuance of Preferred Shares, the Trustees shall have power and
authority:

(a) To invest and reinvest in, to buy or otherwise acquire, to hold, for
investment or otherwise, to sell or otherwise dispose of, to lend or to pledge,
to trade in or deal in securities or interests of all kinds, however evidenced,
or obligations of all kinds, however evidenced, or rights, warrants, or
contracts to acquire such securities, interests, or obligations, of any private
or public company, corporation, association, general or limited partnership,
trust or other enterprise or organization, foreign or domestic, or issued or
guaranteed by any national or state government, foreign or domestic, or their
agencies, instrumentalities or subdivisions (including but not limited to,
<PAGE>

-10-

bonds, debentures, bills, time notes and all other evidences of indebtedness);
negotiable or non-negotiable instruments; any and all options and futures
contracts; derivatives or structured securities; government securities and money
market instruments (including but not limited to, bank certificates of deposit,
finance paper, commercial paper, bankers acceptances, and all kinds of
repurchase agreements) and, without limitation, all kinds and types of financial
instruments;

(b) To adopt By-Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve that right to the Shareholders;

(d) To employ one or more banks or trust companies as custodian of any
assets of the Trust subject to any conditions set forth in this Declaration of
Trust or in the By-Laws;

(e) To retain one or more transfer agents and shareholder servicing
agents;

(f) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereinafter provided for or by the
Trust itself or both;

(g) To set record dates for any purposes;

(h) To delegate such authority as they consider desirable to any officers
of the Trust and to any investment adviser, investment subadviser, transfer
agent, custodian or underwriter or other independent contractor of agent;

(i) Subject to Article IX, Section 1 hereof, to merge, or consolidate the
Trust with any other corporation, association, trust or other organization; or
to sell, convey, transfer, or lease all or substantially all of the assets of
the Trust;

(j) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
<PAGE>

-11-

(k) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;

(l) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form; or either in their or
the Trust's name or in the name of a custodian or a nominee or nominees;

(m) To authorize the issuance from time to time of one or more classes or
series of Shares, and to issue, sell, repurchase, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer and otherwise deal in Shares and in any
options, warrants or other rights to purchase Shares or any other interests in
the Trust other than Shares;

(n) To set apart, from time to time, out of any funds of the Trust a
reserve or reserves for any proper purpose, and to abolish any such reserve;

(o) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer, any security or property
of which is held in the Trust; to consent to any contract, lease, mortgage,
purchase, or sale of property by such corporation or issuer, and to pay calls or
subscriptions with respect to any security held in the Trust;

(p) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes;

(q) To make distributions of income and of capital gains to shareholders;

(r) To borrow money and to pledge, mortgage, or hypothecate the assets of
the Trust;

(s) To establish, from time to time, a minimum total investment for
shareholders, and to require the redemption of the Shares of any shareholders
whose investment is less than such minimum upon such terms as shall be
established by the Trustees;

(t) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit any
security with, or transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority with relation to any
security (whether or not so deposited or transferred) as the Trustees shall deem
proper, and to agree to pay, and to pay, such portion of
<PAGE>

-12-

the expenses and compensation of such committee, depositary or trustee as the
Trustees shall deem proper;

(u) To purchase and pay for out of Trust property such insurance as they
may deem necessary or appropriate for the conduct of the business of the Trust,
including, without limitation, insurance policies insuring the assets of the
Trust and payment of distributions and principal on its portfolio investments,
and insurance policies insuring the Shareholders, Trustees, officers, employees,
agents, investment advisers or managers, principal underwriters, or independent
contractors of the Trust individually against all claims and liabilities of
every nature arising by reason of holding, being or having held any such office
or position, or by reason of any action alleged to have been taken or omitted by
any such person as Shareholder, Trustee, officer, employee, agent, investment
adviser or manager, principal underwriter, or independent contractor, whether or
not any such action may be determined to constitute negligence, and whether or
not the Trust would have the power to indemnify such person against such
liability; and

(v) To pay pensions for faithful service, as deemed appropriate by the
Trustees, and to adopt, establish and carry out pension, profit-sharing, share
bonus, share purchase, savings, thrift and other retirement, incentive and
benefit plans, trusts and provisions, including the purchasing of life insurance
and annuity contracts as a means of providing such retirement and other
benefits, for any or all of the Trustees, officers, employees and agents of the
Trust.

Any determination made by or pursuant to the direction of the Trustees in
good faith and consistent with the provisions of this Declaration of Trust shall
be final and conclusive and shall be binding upon the Trust and every holder at
any time of Shares, including, but not limited to the following matters: the
amount of the assets, obligations, liabilities and expenses of the Trust; the
amount of the net income of the Trust from dividends, capital gains, interest or
other sources for any period and the amount of assets at any time legally
available for the payment of dividends or distributions; the amount, purpose,
time of creation, increase or decrease, alteration or cancellation of any
reserves or charges and the propriety thereof (whether or not any obligation or
liability for which such reserves or charges were created shall have been paid
or discharged); the market value, or any quoted price to be applied in
determining the market value, of any security or any other asset owned or held
by the Trust; the fair value of any security for which quoted prices are not
readily available, or of any other asset owned or held by the Trust; the number
of Shares of the Trust issued or issuable; the net asset value per Share; any
matter relating to the acquisition, holding and depositing of securities and
other assets by the Trust; any question as to
<PAGE>

-13-

whether any transaction constitutes a purchase of securities on margin, a short
sale of securities, a borrowing, or an underwriting of the sale of, or
participation in any underwriting or selling group in connection with the public
distribution of, any securities, and any matter relating to the issue, sale,
redemption, repurchase, and/or other acquisition or disposition of Shares of the
Trust. No provision of this Declaration of Trust shall be effective to protect
or purport to protect any Trustee or officer of the Trust against any liability
to the Trust or to its security holders to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.

Section 2. Manner of Acting, By-Laws. The By-Laws shall make provision from
time to time for the manner in which the Trustees may take action, including,
without limitation, at meetings within or without Massachusetts, including
meetings held by means of a conference telephone or other communications
equipment, or by written consents, the quorum and notice, if any, that shall be
required for any meeting or other action, and the delegation of some or all of
the power and authority of the Trustees to any one or more committees which they
may appoint from their own number, and terminate, from time to time.

ARTICLE VII
-----------

EXPENSES OF THE TRUST
---------------------

The Trustees shall have the power to reimburse themselves from the Trust
property for their expenses and disbursements, to pay reasonable compensation to
themselves from the Trust property, and to incur and pay out of the Trust
property any other expenses which in the opinion of the Trustees are necessary
or incidental to carry out any of the purposes of this Declaration of Trust, or
to exercise any of the powers of the Trustees hereunder.

ARTICLE VIII
------------

INVESTMENT ADVISER, PRINCIPAL UNDERWRITERS AND
----------------------------------------------
TRANSFER AGE
------------

Section 1. Investment Adviser. The Trust may enter into a written contract
with one or more persons (which term shall include any firm corporation, trust
or association), hereinafter referred to as the "Investment Adviser", to act as
investment adviser to the Trust and as such to perform
<PAGE>

-14-

such functions as the Trustees may deem reasonable and proper, including,
without limitation, investment advisory, management, research, valuation of
assets, clerical and administrative functions. Any such contract shall be
subject to the approval of those persons required by the 1940 Act to approve
such contract, and shall be terminable at any time upon not more than 60 days'
notice by resolution of the Trustees or by vote of a majority of the outstanding
voting securities.

Subject to the provisions of Section 4 of this Article VIII, any such
contract may be made with any firm or corporation in which any Trustee of the
Trust may be interested. The compensation of the Investment Adviser may be
based upon a percentage of the net proceeds of the initial public offering of
the Shares after payment of underwriting discounts and organization and offering
costs, a percentage of the income or gross realized or unrealized gain of the
Trust, or a combination thereof, or otherwise, as may be provided in such
contract.

Upon the termination of any contract with Nuveen Advisory Corp., or any
corporation affiliated with John Nuveen & Co. Incorporated, acting as investment
adviser or manager, the Trustees are hereby authorized to promptly change the
name of the Trust to a name which does not include "Nuveen" or any approximation
or abbreviation thereof.

The Trustees may, subject to applicable requirements of the 1940 Act,
including those relating to shareholder approval, authorize the investment
adviser to employ one or more subadvisers from time to time to perform such of
the acts and services of the investment adviser, and upon such terms and
conditions, as may be agreed upon between the investment adviser and subadviser.

Section 2. Principal Underwriter. The Trust may enter into a written contract
or contracts with an underwriter or underwriters or distributor or distributors
whereby the Trust may either agree to sell Shares to the other party or parties
to the contract or appoint such other party or parties its sales agent or agents
for such Shares. Any such contract may provide that the Trust shall pay such
other party or parties such amounts as the Trustees may in their discretion deem
reasonable and proper, and may also provide that such other party or parties may
enter into selected dealer agreements with registered securities dealers to
further the purpose of the distribution of the Shares. Subject to the
provisions of Section 4 of this Article VIII, any such contract may be made with
any firm or corporation, including, without limitation, the Investment Adviser
or an affiliate of the Investment Advisor, or any firm or corporation in which
any Trustee of the Trust or the Investment Adviser may be interested.
<PAGE>

-15-

Section 3. Transfer Agent. The Trustees may in their discretion from time to
time enter into one or more transfer agency and shareholder service contract(s),
whereby the other party shall undertake, to furnish the Trustees with transfer
agency and shareholder services. The contract shall be on such terms and
conditions as the Trustees may in their discretion determine not inconsistent
with the provisions of this Declaration or Trust or of the By-Laws. Such
services may be provided by one or more entities.

Section 4. Parties To Contract. Any contract of the character described in
Sections 1 and 2 of this Article VIII or in Article X hereof may be entered into
with any corporation, firm, partnership, trust or association, including,
without limitation, the investment adviser, any investment subadviser or an
affiliate of the investment adviser or investment subadviser, although one or
more of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or member of such other party to the contract, or
otherwise interested in such contract and no such contract shall be invalidated
or rendered voidable by reason of the existence of any such relationship, nor
shall any person holding such relationship be liable merely by reason of such
relationship for any loss or expense to the Trust under or by reason of said
contract or accountable for any profit realized directly or indirectly
therefrom, provided that the contract when entered into was not inconsistent
with the provisions of this Article VIII, Article X, or the By-Laws. The same
person (including a firm, corporation, partnership, trust or association) may be
the other party to contracts entered into pursuant to Sections 1, 2 and 3 above
or Article X, and any individual may be financially interested or otherwise
affiliated with persons who are parties to any or all of the contracts mentioned
in this Section 4.

ARTICLE IX
----------

SHAREHOLDERS' VOTING POWERS AND MEETINGS
----------------------------------------

Section 1. Voting Powers. The Shareholders shall have power to vote only: (a)
for the election or removal of Trustees as provided in Article V, (b) with
respect to any investment advisory or management contract as provided in Article
VIII, Sections 1 and 5, (c) with respect to any termination of the Trust or any
series or class thereof to the extent and as provided in Article XIII, Section
1, (d) with respect to any amendment of this Declaration of Trust to the extent
and as provided in Article XIII, Section 4, (e) with respect to a merger or
consolidation of the Trust or any series or class thereof with any corporation,
association, trust or other organization or a reorganization or recapitalization
of the Trust or class or series thereof, or a sale, lease or transfer of all or
substantially all of the assets of the Trust or any series thereof (other than
in the regular course of the Trust's investment activities)
<PAGE>

-16-

to the extent and as provided in this Article IX, Section 1, (f) to the same
extent as the shareholders of a Massachusetts business corporation as to whether
or not a court action, proceeding or claim should be brought or maintained
derivatively or as a class action on behalf of the Trust or the shareholders,
provided, however, that a shareholder of a particular class or series shall not
be entitled to bring any derivative or class action on behalf of any other class
or series of the Trust, and (g) with respect to such additional matters relating
to the Trust as may be required by law, the 1940 Act, this Declaration of Trust,
the By-Laws of the Trust, any Statement relating to the issuance of classes or
series of shares, or any registration of the Trust with the Commission or any
State, or otherwise as the Trustees may consider necessary or desirable.

The affirmative vote of the holders of at least sixty-six and two-thirds
percent (66-2/3%) of the outstanding Common Shares and outstanding Preferred
Shares, voting as a single class, shall be required to approve, adopt or
authorize (i) a conversion of the Trust from a closed-end investment company to
an open-end investment company, (ii) a merger or consolidation of the Trust or a
series or class of the Trust with any corporation, association, Trust or other
organization or a reorganization or recapitalization of the Trust or a series of
class of the Trust, (iii) a sale, lease or transfer of all or substantially all
of the assets of the Trust (other than in the regular course of the Trust's
investment activities), or (iv) a termination of the Trust or a class or a
series of the Trust (other than a termination by the Trustees as provided for in
Section 1 of Article XIII hereof), unless in each and every case such action
has previously been approved, adopted or authorized by the affirmative vote of
two-thirds of the total number of Trustees fixed in accordance with this
Declaration of Trust or the By-Laws, in which case the affirmative vote of the
holders of at least a majority of the outstanding Common Shares and outstanding
Preferred Shares, voting as a single class, shall be required, provided however,
that where only a particular class or series is effected, only the required vote
by the applicable class or series shall be required, and provided further that
except as may otherwise be required by law, in the case of the conversion of the
Trust from a closed-end investment company to an open-end investment company, or
in the case of any of the foregoing transactions constituting a plan or
reorganization (as such term is used in the 1940 Act) which adversely affects
the Preferred Shares within the meaning of Section 18(a)(2)(D) of the 1940 Act,
approval, adoption or authorization of the action in question will also require
the affirmative vote of the holders of sixty-six and two-thirds percent (66-
2/3%) of the Preferred Shares voting as a separate class; provided, however,
that such separate class vote shall be a majority vote if the action in question
has previously been approved, adopted or authorized by the affirmative vote of
two-thirds of the total number of Trustees fixed in accordance with this
<PAGE>

-17-

Declaration of Trust or the By-Laws. Nothing contained herein shall be construed
as requiring approval of Shareholders for any transaction, whether deemed a
merger, consolidation, reorganization or otherwise whereby the Trust issues
Shares in connection with the acquisition of assets (including those subject to
liabilities) from any other investment company or similar entity).

In addition to the voting requirements imposed by law or by any other
provision of this Declaration of Trust, the provisions set forth in this Article
IX may not be amended, altered or repealed in any respect, nor may any provision
inconsistent with this Article IX be adopted, unless such action is approved by
the affirmative vote of the holders or at least sixty-six and two-thirds percent
(66-2/3%) of the outstanding Common Shares and outstanding Preferred Shares,
voting as a single class. In the event the holders of Common Shares or the
holders of Shares of Preferred Shares, as the case may be, are required by law
to approve such an action by a class vote of such holders, such action must be
approved by the, holders of at least sixty-six and two-thirds percent (66-2/3%)
of such holders or such lower percentage as may be required by law. Any series
of a class which is adversely affected in a manner different from other series
of the same class shall together with any other series of the same class
adversely affected in the same manner, be treated as a separate class under this
Section 1.

Section 2. Meetings. Meetings of the Shareholders may be called and held from
time to time for the purpose of taking action upon any matter requiring the vote
or authority of the Shareholders as herein provided or upon any other matter
deemed by the Trustees to be necessary or desirable. Meetings of the
Shareholders shall be held at such place within the United States as shall be
fixed by the Trustees, and stated in the notice of the meeting. Meetings of the
Shareholders may be called by the Trustees and shall be called by the Trustees
upon the written request of Shareholders owning at least one-tenth of the
outstanding Shares entitled to vote. Shareholders shall be entitled to at least
ten days' written notice of any meeting, except where the meeting is an
adjourned meeting and the date, time and place of the meeting were announced at
the time of the adjournment.

Section 3. Quorum and Action. (a) The Trustees shall set in the By-Laws the
quorum required for the transaction of business by the Shareholders at a
meeting, which quorum shall in no event be less than thirty percent (30%) of the
Shares entitled to vote at such meeting. If a quorum is present when a duly
called or held meeting is convened, the Shareholders present may continue to
transact business until adjournment, even though the withdrawal of a number of
Shareholders originally present
<PAGE>

-18-

leaves less than the proportion or number otherwise required for a quorum.
Notwithstanding the foregoing, when holders of Preferred Shares are entitled to
elect any of the Trustees by class vote of such holders, the holders of 33 1/3%
of such Shares entitled to vote at a meeting shall constitute a quorum for the
purpose of such an election.

(b) The Shareholders shall take action by the affirmative vote of the
holders of a majority, except in the case of the election of Trustees which
shall only require a plurality, of the Shares present in person or by proxy and
entitled to vote at a meeting of Shareholders at which a quorum is present,
except as may be otherwise required by, any provision of this Declaration of
Trust, any resolution of the Trustees which authorizes the issuance of Preferred
Shares, or the By-Laws.

Section 4. Voting. Each whole Share shall be entitled to one vote as to any
matter on which it is entitled to vote and each fractional Share shall be
entitled to a proportionate fractional vote, except that Shares held in the
treasury of the Trust shall not be voted. There shall be no cumulative voting
in the election of Trustees or on any other matter submitted to a vote of the
Shareholders. Shares may be voted in person or by proxy. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may take any
action required or permitted by law, this Declaration of Trust or the By-Laws of
the Trust to be taken by Shareholders.

Section 5. Action by Written Consent in Lieu of Meeting of Shareholders. Any
action required or permitted to be taken at a meeting of the Shareholders may be
taken without a meeting by written action signed by all of the Shareholders
entitled to vote on that action. The written action is effective when it has
been signed by all of those Shareholders, unless a different effective time is
provided in the written action.

ARTICLE X
---------

CUSTODIAN
---------

All securities and cash of the Trust shall be held by one or more
custodians and subcustodians, each meeting the requirements for a custodian
contained in the 1940 Act, or shall otherwise be held in accordance with the
1940 Act. The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodians, and approved by the Trustees, provided that
in every case such sub-custodian shall meet the requirements for a custodian
contained in the 1940 Act and the rules and
<PAGE>

-19-

regulations thereunder and in any applicable state Securities or blue sky laws.

ARTICLE XI
----------

DISTRIBUTIONS
-------------

The Trustees may in their sole discretion from time to time declare and pay
such dividends and distributions to shareholders as they may deem necessary or
desirable, after providing for actual and accrued expenses and liabilities
(including such reserves as the Trustees may establish) determined in accordance
with this Declaration of Trust and good accounting practices.

ARTICLE XII
-----------

LIMITATION OF LIABILITY AND INDEMNIFICATION

Section 1. Limitation of Liability. No personal liability for any debt or
obligation of the Trust shall attach to any Trustee of the Trust. Without
limiting the foregoing, a Trustee shall not be responsible for or liable in any
event for any neglect or wrongdoing of any officer, agent, employee, investment
adviser, subadviser, principal underwriter or custodian of the Trust, nor shall
any Trustee be responsible or liable for the act or omission of any other
Trustee. Nothing contained herein shall protect any Trustee against any
liability to which such Trustee would otherwise be subject by reason of willful
misfeasance, bad faith, gross, negligence or reckless disregard of the duties
involved in the conduct of his office.

Every note, bond, contract, instrument, certificate, Share or undertaking
and every other act or thing whatsoever executed or done by or on behalf of the
Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only in or with respect to
their or his capacity as Trustees or Trustee and neither such Trustees or
Trustee nor the Shareholders shall be personally liable thereon.

Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall give notice that this
Declaration of Trust is on file with the Secretary of State of the Commonwealth
of Massachusetts, shall recite that the same was executed or made by or on
behalf of the Trust by them as Trustees or Trustee or as officers or officer and
not individually and that the obligations of such instrument are not binding
upon any of them or the Shareholders individually but are binding only upon the
assets and property of the Trust, and may contain such further recitals as they
or he may deem appropriate,
<PAGE>

-20-

but the omission thereof shall not operate to bind any Trustees or Trustee or
officers or officer or Shareholders or Shareholder individually.

All persons extending credit to, contracting with or having any claim
against the Trust shall look only to the assets of the Trust for payment under
such credit, contract or claim; and neither the Shareholders nor the Trustees,
nor any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor.

Section 2. Trustees' Good Faith Action, Expert Advice, No Bond or Surety. The
exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. A Trustee shall be liable only for his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees may take advice of counsel or other experts with respect to the meaning
and operation of this Declaration of Trust and their duties as Trustees
hereunder, and shall be under no liability for any act or omission in accordance
with such advice or for failing to follow such advice. In discharging their
duties, the Trustees, when acting in good faith, shall be entitled to rely upon
the books of account of the Trust and upon written reports made to the Trustees
by any officer appointed by them, any independent public accountant and (with
respect to the subject matter of the contract involved) any officer, partner or
responsible employee of any other party to any contract entered into hereunder.
The Trustees shall not be required to give any bond as such, nor any surety if a
bond is required.

Section 3. Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.

Section 4. Indemnification. Subject to the exceptions and limitations
contained in this Section 4, every person who is, or has been, a Trustee,
officer, employee or agent of the Trust, including persons who serve at the
request of the Trust as directors, trustees, officers, employees or agents of
another organization in which the Trust has an interest as a shareholder,
creditor or otherwise (hereinafter referred to as a "Covered Person"), shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been such a
<PAGE>

-21-

Trustee, director, officer, employee or agent and against amounts paid or
incurred by him in settlement thereof.

No indemnification shall be provided hereunder to a Covered Person:

(a) against any liability to the Trust or its Shareholders by reason of a
final adjudication by the court or other body before which the proceeding was
brought that he engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office;

(b) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Trust; or

(c) in the event of a settlement or other disposition not involving a
final adjudication (as provided in paragraph (a) or (b)) and resulting in a
payment by a Covered Person, unless there has been either a determination that
such Covered Person did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office by the court or other body approving the settlement or other disposition
or a reasonable determination, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that he did not engage in such conduct:

(i) by a vote of a majority of the Disinterested Trustees acting on
the matter (provided that a majority of the Disinterested Trustees then in
office act on the matter); or

(ii) by written opinion of independent legal counsel.

-22-

amount if it is ultimately determined that he is not entitled to indemnification
under this Section 4, provided that either:

(a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any such
advances; or

(b) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act on
the matter) or independent legal counsel in a written opinion shall determine,
based upon a review of the readily available facts (as opposed to a full trial-
type inquiry), that there is reason to believe that the recipient ultimately
will be found entitled to indemnification.

As used in this Section 4, a "Disinterested Trustee" is one (x) who is not
an Interested Person of the Trust (including anyone, as such Disinterested
Trustee, who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (y) against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.

Section 5. Shareholders. No personal liability for any debt or obligation of
the Trust shall attach to any Shareholder or former Shareholder of the Trust.
In case any Shareholder or former Shareholder of the Trust shall be held to be
personally liable solely by reason of his being or having been a Shareholder and
not because of his acts or omissions, or for some other reason, the Shareholder
or former Shareholder (or his heirs, executors, administrators or other legal
representatives or in the case of a corporation or other entity, its corporate
or other general successor) shall be entitled out of the assets of the Trust to
be held harmless from and indemnified against all loss and expense arising from
such liability; provided, however, there shall be no liability or obligation of
the Trust arising hereunder to reimburse any Shareholder for taxes paid by
reason of such Shareholder's ownership of any Share or for losses suffered by
reason of any changes in value of any Trust assets. The Trust shall, upon
request by the Shareholder or former Shareholder, assume the defense of any
claim made against the Shareholder for any act or obligation of the Trust and
satisfy any judgment thereon.
<PAGE>

-23-

ARTICLE XIII
------------

MISCELLANEOUS
-------------

Section 1. Termination of Trust. (a) Unless terminated as provided herein, the
Trust shall continue, without limitation of time. Except as may be set forth in
any Statement relating to the issuance of Shares, the Trust, or any class or
series thereof may be terminated at any time by the Trustees by written notice
to the Shareholders without a vote of the shareholders of the Trust, or the
class or series as the case may be, or by the affirmative vote of the
shareholders entitled to vote at least sixty-six and two-thirds percent (66
2/3%) of the outstanding Common Shares and Preferred Shares, voting as a single
class, in the case of the termination of the Trust, or by the effected class or
series as the case may be in the event of the termination of a class or series,
unless such action has previously been approved, adopted or authorized by the
affirmative vote of two-thirds of the total number of Trustees fixed in
accordance with this Declaration of Trust or the By-Laws, in which case the
affirmative vote of the holders of at least a majority of the outstanding Common
Shares and Preferred Shares, voting as a single class or the applicable class or
series as the case may be, shall be required.

Upon termination of the Trust or any series or class thereof, after paying
or otherwise providing for all charges, taxes, expenses and liabilities, whether
due or accrued or anticipated, as may be determined by the Trustees, the Trust
shall, in accordance with such procedures as the Trustees consider appropriate,
reduce the remaining assets of the Trust or the applicable series or class to
distributable form in cash or other securities, or any combination thereof, and
distribute the proceeds to the holders of Preferred Shares in the manner set
forth by resolution of the Trustees, and to the holders of Common Shares held by
such holders on the date of termination in the event of a termination of the
Trust, or to Shareholders of the applicable series or class, as the case may be.

Section 2. Filing of Copies, References, Headings. The original or a copy of
this instrument, each amendment hereto and any Statement authorized by Article
III, Section 2 hereof shall be kept in the office of the Trust where it may be
inspected by any Shareholder. A copy of this Declaration and of each amendment
and Statement shall be filed by the Trustees with the Secretary of State of the
Commonwealth of Massachusetts, as well as any other governmental office where
such filing may from time to time be required, provided, however, that the
failure to so file will not invalidate this Declaration or an properly
authorized amendment or Statement. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as to whether or not any such
amendments
<PAGE>

-24-

have been made or Statements authorized and as to any matters in connection with
the Trust hereunder, and with the same effect as if it were the original, may
rely on a copy certified by an officer or Trustee of the Trust to be a copy of
this instrument or of any such amendments or Statements. In this instrument or
in any such amendment, references to this instrument, and all expressions like
"herein," "hereof" and "hereunder," shall be deemed to refer to this instrument
as a whole and as amended or affected by any such amendment. Headings are placed
herein for convenience of reference only, and in case of any conflict, the text
of this instrument, rather than the headings, shall control. This instrument may
be executed in any number of counterparts, each of which shall be deemed an
original.

Section 3. Trustees May Resolve Ambiguities. The Trustees may construe any of
the provisions of this Declaration insofar as the same may appear to be
ambiguous or inconsistent with any other provisions hereof, and any such
construction hereof by the Trustees in good faith shall be conclusive as to the
meaning to be given to such provisions.

Section 4. Amendments. Except as otherwise specifically provided in this
Declaration of Trust, this Declaration of Trust may be amended at any time by an
instrument in writing signed by a majority of the then Trustees with the consent
of shareholders holding more than fifty percent (50%) of Shares entitled to
vote. In addition, notwithstanding any other provision to the contrary
contained in this Declaration of Trust, the Trustees may amend this Declaration
of Trust without the vote or consent of shareholders (i) at any time if the
Trustees deem it necessary in order for the Trust or any series or class thereby
to meet the requirements of applicable Federal or State laws or regulations, or
the requirements of the regulated investment company provisions of the Internal
Revenue Code, (ii) change the name of the Trust or to supply any omission, cure
any ambiguity or cure, correct or supplement any defective or inconsistent
provision contained herein, or (iii) for any reason at any time before a
registration statement under the Securities Act of 1933, as amended, covering
the initial public offering of Shares has become effective.
<PAGE>

-25-

IN WITNESS WHEREOF, the undersigned, being the Trustees of the Trust, have,
executed this instrument as of the date first written above.

/s/Anthony T. Dean
-------------------------------------
Anthony T. Dean, Trustee
333 West Wacker Drive
Chicago, IL 60606

/s/Timothy R. Schwertfeger
-------------------------------------
Timothy R. Schwertfeger, Trustee
333 West Wacker Drive
Chicago, IL 60606
<PAGE>

-26-

STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )

Then personally appeared the above-named Anthony T. Dean and Timothy R.
Schwertfeger known to me to be the Trustees of the Trust, who each acknowledged
the foregoing instrument to be his free act and deed, before me this 1st day of
December 1998.

/s/ Karen L. Healy
--------------------
-------- Notary Public
| SEAL |
-------- My Commission Expires: 12/30/99
--------

<PAGE>

BY-LAWS
OF
NUVEEN NEW YORK MUNICIPAL ADVANTAGE FUND

ARTICLE I

DECLARATION OF TRUST
AND
OFFICES

Section 1.1. Declaration of Trust. These By-Laws shall be subject to the
Declaration of Trust, as from time to time in effect (the "Declaration of
Trust"), of Nuveen New York Municipal Advantage Fund, the Massachusetts business
trust established by the Declaration of Trust (the "Trust").

Section 1.2. Registered Agent. The registered agent of the Trust in the
Commonwealth of Massachusetts shall be CT Corporation System, 2 Oliver Street,
Boston, Massachusetts, or such other agent as may be fixed by the Board of
Trustees.

Section 1.3. Other Offices. The Trust may have such other offices and
places of business within or without the Commonwealth of Massachusetts as the
Board of Trustees shall determine.

ARTICLE II

SHAREHOLDERS

Section 2.1. Place of Meetings. Meetings of the Shareholders may be held
at such place or places within or without the Commonwealth of Massachusetts as
shall be fixed by the Board of Trustees and stated in the notice of the meeting.

Section 2.2. Regular Meeting. Regular meetings of the Shareholders for
the election of Trustees and the transaction of such other business as may
properly come before the meeting shall be held on an annual or other less
frequent periodic basis at such date and time as the Board of Trustees by
resolution shall designate, except as otherwise required by applicable law.
<PAGE>

-2-

Section 2.3. Special Meeting. Special meetings of the Shareholders for
any purpose or purposes may be called by the Chairman of the Board, the
President or two or more Trustees, and must be called at the written request
stating the purpose or purposes of the meeting, of Shareholders entitled to cast
at least l0 percent of all the votes entitled to be cast at the meeting.

Section 2.4. Notice of Meetings. Notice stating the time and place of the
meeting and in the case of a special meeting the purpose or purposes thereof and
by whom called, shall be delivered to each Shareholder not less than ten nor
more than sixty days prior to the meeting, except where the meeting is an
adjourned meeting and the date, time and place of the meeting were announced at
the time of the adjournment.

Section 2.5. Quorum and Action. (a) The holders of a majority of the
voting power of the shares of beneficial interest of the Trust (the "Shares")
entitled to vote at a meeting are a quorum for the transaction of business. If
a quorum is present when a duly called or held meeting is convened, the
Shareholders present may continue to transact business until adjournment, even
though the withdrawal of a number of Shareholders originally present leaves less
than the proportion or number otherwise required for a quorum. Notwithstanding
the foregoing, when the holders of Preferred Shares are entitled to elect any of
the Trust's Trustees by class vote of such holders, the holders of 33 1/3% of
the Shares entitled to vote at a meeting shall constitute a quorum for the
purpose of such an election.

(b) The Shareholders shall take action by the affirmative vote of the
holders of a majority, except in the case of the election of Trustees which
shall only require a plurality, of the voting power of the Shares present and
entitled to vote at a meeting of Shareholders at which a quorum is present,
except as may be otherwise required by the Investment Company Act of 1940, as
amended (the "1940 Act"), the Declaration of Trust or any resolution of the
Trustees which authorizes the issuance of Preferred Shares.

Section 2.6. Voting. At each meeting of the Shareholders, every holder
of Shares then entitled to vote may vote in person or by proxy and, except as
otherwise provided by the 1940 Act, the Declaration of Trust or any resolution
of the Trustees which authorizes the issuance of Preferred Shares, shall have
one vote for each Share registered in his name.

Section 2.7. Proxy Representation. A Shareholder may cast or authorize
the casting of a vote by filing a written appointment of a proxy
<PAGE>

-3-

with an officer of the Trust at or before the meeting at which the appointment
is to be effective. The placing of a Shareholder's name on a proxy pursuant to
telephonic or electronically transmitted instructions obtained pursuant to
procedures which are reasonably designed to verify that such instructions have
been authorized by such Shareholder, shall constitute execution of such proxy by
or on behalf of such Shareholder. The appointment of a proxy is valid for eleven
months, unless a longer period is expressly provided in the appointment. No
appointment is irrevocable unless the appointment is coupled with an interest in
the Shares or in the Trust. Any copy, facsimile telecommunication or other
reliable reproduction of a proxy may be substituted for or used in lieu of the
original proxy for any and all purposes for which the original proxy could be
used, provided that such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original proxy.

Section 2.8. Adjourned Meetings. Any meeting of Shareholders may, by
announcement thereat, be adjourned to a designated time and place by the vote of
the holders of a majority of the Shares present and entitled to vote thereat
even though less than a quorum is so present. An adjourned meeting may
reconvene as designed, and when a quorum is present any business may be
transacted which might have been transacted at the meeting as originally called.

Section 2.9. Action by Written Consent in Lieu of Meeting of Shareholders.
See Section 6.3 of these By-Laws.

ARTICLE III

TRUSTEES

Section 3.1. Qualifications and Number: Vacancies. Each Trustee shall be
a natural person. A Trustee need not be a Shareholder, a citizen of the United
States, or a resident of the Commonwealth of Massachusetts. The number of
Trustees of the Trust, their term and election and the filling of vacancies,
shall be as provided in the Declaration of Trust.

Section 3.2. Powers. The business and affairs of the Trust shall be
managed under the direction of the Board of Trustees. All powers of the Trust
may be exercised by or under the authority of the Board of Trustees, except
those conferred on or reserved to the Shareholders by statute, the Declaration
of Trust or these By-Laws.
<PAGE>

-4-

Section 3.3. Investment Policies. It shall be the duty of the Board of
Trustees to ensure that the purchase, sale, retention and disposal of portfolio
securities and the other investment practices of the Trust are at all times
consistent with the investment objectives, policies and restrictions with
respect to securities investments and otherwise of the Trust filed from time to
time with the Securities and Exchange Commission and as required by the 1940
Act, unless such duty is delegated to an investment adviser pursuant to a
written contract, as provided in the Declaration of Trust. The Trustees,
however, may delegate the duty of management of the assets of the Trust and may
delegate such other of their powers and duties to the Executive Committee or any
other committee, or to an individual or corporate investment adviser to act as
investment adviser or subadviser pursuant to a written contract.

Section 3.4. Meetings. Regular meetings of the Trustees may be held
without notice at such times as the Trustees shall fix. Special meetings of the
Trustees may be called by the Chairman of the Board or the President, and shall
be called at the written request of two or more Trustees. Unless waived by each
Trustee, three days' notice of special meetings shall be given to each Trustee
in person, by mail, by telephone, or by telegram or cable, or by any other means
that reasonably may be expected to provide similar notice. Notice of special
meetings need not state the purpose or purposes thereof. Meetings of the
Trustees may be held at any place within or outside the Commonwealth of
Massachusetts. A conference among Trustees by any means of communication through
which the Trustees may simultaneously hear each other during the conference
constitutes a meeting of the Trustees or of a committee of the Trustees, if the
notice requirements have been met (or waived) and if the number of Trustees
participating in the conference would be sufficient to constitute a quorum at
such meeting. Participation in such meeting by that means constitutes presence
in person at the meeting.

Section 3.5. Quorum and Action. A majority of the Trustees currently
holding office, or in the case of a meeting of a committee of the Trustees, a
majority of the members of such committee, shall constitute a quorum for the
transaction of business at any meeting. If a quorum is present when a duly
called or held meeting is convened, the Trustees present may continue to
transact business until adjournment, even though the withdrawal of a number of
Trustees originally present leaves less than the proportion or number otherwise
required for a quorum. At any duly held meeting at which a quorum is present,
the affirmative vote of the majority of the Trustees present shall be the act of
the Trustees or the committee, as the case may be, on any question, except where
the act
<PAGE>

-5-

of a greater number is required by these By-Laws or by the Declaration
of Trust.

Section 3.6. Action by Written Consent in Lieu of Meetings of Trustees.
See Section 6.3 of these By-Laws.

Section 3.7. Committees. The Trustees, by resolution adopted by the
affirmative vote of a majority of the Trustees, may designate from their members
an Executive Committee, an Audit Committee (whose function shall be to advise
the Trustees as to the selection of and review of the work of the independent
public accountants of the Trust) and any other committee or committees, each
such committee to consist of two or more Trustees and to have such powers and
authority (to the extent permitted by law) as may be provided in such
resolution. Any such committee may be terminated at any time by the affirmative
vote of a majority of the Trustees.

ARTICLE IV

OFFICERS

Section 4.1. Number and Qualifications. The officers of the Trust shall
include a Chairman of the Board, a President, a Controller, one or more Vice
Presidents (one of whom may be designated Executive Vice President), a
Treasurer, and a Secretary. Any two or more offices may be held by the same
person. Unless otherwise determined by the Trustees, each officer shall be
appointed by the Trustees for a term which shall continue until the meeting of
the Trustees following the next regular meeting of Shareholders and until his
successor shall have been duly elected and qualified, or until his death, or
until he shall have resigned or have been removed, as hereinafter provided in
these By-Laws. The Trustees may from time to time elect, or delegate to the
Chairman of the Board or the President, or both, the power to appoint, such
officers (including one or more Assistant Vice Presidents, one or more Assistant
Treasurers and one or more Assistant Secretaries) and such agents as may be
necessary or desirable for the business of the Trust. Such other officers shall
hold office for such terms as may be prescribed by the Trustees or by the
appointing authority.

Section 4.2. Resignations. Any officer of the Trust may resign at any
time by giving written notice of his resignation to the Trustees, the Chairman
of the Board, the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately
<PAGE>

-6-

upon its receipt, and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.

Section 4.3. Removal. An officer may be removed at any time, with or
without cause, by a resolution approved by the affirmative vote of a majority of
the Trustees present at a duly convened meeting of the Trustees.

Section 4.4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause, may be filled for the
unexpired portion of the term by the Trustees, or in the manner determined by
the Trustees.

Section 4.5. The Chairman of the Board. The Chairman of the Board shall
be elected from among the Trustees. He shall be the chief executive officer of
the Trust and shall:

(a) have general active management of the business of the Trust;

(b) when present, preside at all meetings of the Trustees and of the
Shareholders;

(d) sign and deliver in the name of the Trust any deeds, mortgages,
bonds, contracts or other instruments pertaining to the business of the
Trust, except in cases in which the authority to sign and deliver is
required by law to be exercised by another person or is expressly delegated
by the Declaration of Trust or By-Laws or by the Trustees to some other
officer or agent of the Trust; and

(e) maintain records of and, whenever necessary, certify all
proceedings of the Trustees and the Shareholders.

The Chairman of the Board shall be authorized to do or cause to be done all
things necessary or appropriate, including preparation, execution and filing of
any documents, to effectuate the registration from time to time of the Common
Shares or Preferred Shares of the Trust with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended. He shall perform
all duties incident to the office of Chairman of the Board and such other duties
as from time to time may be assigned to him by the Trustees or by these By-Laws.
<PAGE>

-7-

Section 4.6. The President. The President shall be the chief operating
officer of the Trust and, subject to the Chairman of the Board, he shall have
general authority over and general management and control of the business and
affairs of the Trust. In general, he shall discharge all duties incident to the
office of the chief operating officer of the Trust and such other duties as may
be prescribed by the Trustees and the Chairman of the Board from time to time.
In the absence of the Chairman of the Board or in the event of his disability,
or inability to act or to continue to act, the President shall perform the
duties of the Chairman of the Board and when so acting shall have all the powers
of, and be subject to all the restrictions upon, the Chairman of the Board.

Section 4.7. Executive Vice-President. In the case of the absence or
inability to act of the President and the Chairman of the Board, the Executive
Vice-President shall perform the duties of the President and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
President. The Executive Vice-President shall perform all duties incident to
the office of Executive Vice-President and such other duties as from time to
time may be assigned to him by the Trustees, the President or these By-Laws.

Section 4.8. Vice Presidents. Each Vice-President shall perform all such
duties as from time to time may be assigned to him by the Trustees, the Chairman
of the Board or the President.

Section 4.9. Controller. The Controller shall:

(a) keep accurate financial records for the Trust;

(b) render to the Chairman of the Board, the President and the
Trustees, whenever requested, an account of all transactions by and of the
financial condition of the Trust; and

(c) in general, perform all the duties incident to the office of
Controller and such other duties as from time to time may be assigned to
him by the Trustees, the Chairman of the Board or the President.

Section 4.10. Treasurer. The Treasurer shall:

(a) have charge and custody of, and be responsible for, all the funds
and securities of the Trust, except those which the Trust has placed in the
custody of a bank or trust company pursuant to a
<PAGE>

-8-

written agreement designating such bank or trust company as custodian of
the property of the Trust, as required by Section 6.6 of these By-Laws;

(b) deposit all money, drafts, and checks in the name of and to the
credit of the Trust in the banks and depositories designated by the
Trustees;

(d) disburse corporate funds and issue checks and drafts in the name
of the Trust, as ordered by the Trustees; and

(e) in general, perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him
by the Trustees, the Chairman of the Board or the President.

Section 4.11. Secretary. The Secretary shall:

(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Trustees, the committees of the
Trustees and the Shareholders;

(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by statute;

(d) see that the books, reports, statements, certificates and other
documents and records required by statute to be kept and filed are properly
kept and filed; and

(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him
by the Trustees, the Chairman of the Board or the President.

Section 4.12. Salaries. The salaries of all officers shall be fixed by the
Trustees and the Trustees have the authority by majority vote to reimburse
expenses and to establish reasonable compensation of all Trustees for services
to the Trust as Trustees, officers, or otherwise.
<PAGE>

-9-

ARTICLE V

Section 5.1. Share Certificates. Each owner of Common Shares of the Trust
shall be entitled upon request to have a certificate, in such form as shall be
approved by the Trustees, representing the number of Common Shares of the Trust
owned by him. Certificates representing fractional Common Shares shall not be
issued. The certificates representing Common Shares shall be signed in the name
of the Trust by the Chairman of the Board, the President, the Executive Vice
President or a Vice President and by the Secretary, an Assistant Secretary, the
Treasurer or an Assistant Treasurer (which signatures may be either manual or
facsimile, engraved or printed). In case any officer who shall have signed such
certificate shall have ceased to be such officer before such certificates shall
be issued, they may nevertheless be issued by the Trust with the same effect as
if such officer were still in office at the date of their issuance. No
certificates representing Preferred Shares shall be issued except as the
Trustees may otherwise authorize.

Section 5.2. Books and Records; Inspection. The Trust shall keep at its
principal executive office, or at another place or places within the United
States determined by the Trustees, a share register not more than one year old,
containing the names and addresses of the shareholders and the number of Shares
held by each Shareholder. The Trust shall also keep, at its principal executive
office, or at another place or places within the United States determined by the
Trustees, a record of the dates on which certificates representing Shares were
issued.

Section 5.3. Share Transfers. Upon compliance with any provisions
restricting the transferability of Shares that may be set forth in the
Declaration of Trust, these By-Laws, or any resolution or written agreement in
respect thereof, transfers of Shares of the Trust shall be made only on the
books of the Trust by the registered holder thereof, or by his attorney
thereunto authorized by power of attorney duly executed and filed with an
officer of the Trust, or with a transfer agent or a registrar and on surrender
of any certificate or certificates for such Shares properly endorsed and the
payment of all taxes thereon. Except as may be otherwise provided by law or
these By-Laws, the person in whose name Shares stand on the books of the Trust
shall be deemed the owner thereof for all purposes as regards the Trust;
provided that whenever any transfer of Shares shall be made for collateral
security, and not absolutely, such fact, if known to an officer of the Trust,
shall be so expressed in the entry of transfer.
<PAGE>

-10-

Section 5.4. Regulations. The Trustees may make such additional rules and
regulations, not inconsistent with these By-Laws, as they may deem expedient
concerning the issue, certification, transfer and registration of Shares of the
Trust. They may appoint, or authorize any officer or officers to appoint, one
or more transfer agents or one or more transfer clerks and one or more
registrars and may require all certificates for Shares to bear the signature or
signatures of any of them.

Section 5.5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificate representing Shares of the Trust shall immediately notify the Trust
of any loss, destruction or mutilation of such certificate, and the Trust may
issue a new certificate in the place of any certificate theretofore issued by it
which the owner thereof shall allege to have been lost or destroyed or which
shall have been mutilated, and the Trustees may, in their discretion, require
such owner or his legal representatives to give to the Trust a bond in such sum,
limited or unlimited, and in such form and with such surety or sureties as the
Trustees in their absolute discretion shall determine, to indemnify the Trust
against any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or the issuance of a new certificate.
Anything herein to the contrary notwithstanding, the Trustees, in their absolute
discretion, may refuse to issue any such new certificate, except as otherwise
required by law.

Section 5.6. Record Date; Certification of Beneficial Owner. (a) The
Trustees may fix a date not more than sixty (60) days before the date of a
meeting of Shareholders as the date for the determination of the holders of
Shares entitled to notice of and entitled to vote at the meeting or any
adjournment thereof.

(b) The Trustees may fix a date for determining Shareholders entitled to
receive payment of any dividend or distribution or allotment of any rights or
entitled to exercise any rights in respect of any change, conversion or exchange
of Shares.

(c) In the absence of such fixed record date, (i) the date for
determination of Shareholders entitled to notice of and entitled to vote at a
meeting of Shareholders shall be the later of the close of business on the day
on which notice of the meeting is mailed or the thirtieth day before the
meeting, and (ii) the date for determining Shareholders entitled to receive
payment of any dividend or distribution or an allotment of any rights or
entitled to exercise any rights in respect of any change,
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conversion or exchange of Shares shall be the close of business on the day on
which the resolution of the Trustees is adopted.

(c) A resolution approved by the affirmative vote of a majority of the
Trustees present may establish a procedure whereby a Shareholder may certify in
writing to the Trust that all or a portion of the Shares registered in the name
of the Shareholder are held for the account of one or more beneficial owners.
Upon receipt by the Trust of the writing, the persons specified as beneficial
owners, rather than the actual Shareholders, are deemed the Shareholders for the
purposes specified in the writing.

ARTICLE VI

MISCELLANEOUS

Section 6.1. Fiscal Year. The fiscal year of the Trust shall be as fixed
by the Trustees of the Trust.

Section 6.2. Notice and Waiver of Notice. (a) Any notice of a meeting
required to be given under these By-Laws to Shareholders or Trustees, or both,
may be waived by any such person (i) orally or in writing signed by such person
before, at or after the meeting or (ii) by attendance at the meeting in person
or, in the case of a Shareholder, by proxy.

(b) Except as otherwise specifically provided herein, all notices required
by these By-Laws shall be printed or written, and shall be delivered either
personally, by telecopy, telegraph or cable, or by mail or courier or delivery
service, and, if mailed, shall be deemed to be delivered when deposited in the
United States mail, postage prepaid, addressed to the Shareholder or Trustee at
his address as it appears on the records of the Trust.

Section 6.3. Action by Written Consent in Lieu of Meeting. (a) An action
required or permitted to be taken at a meeting of the Shareholders may be taken
without a meeting by written action signed by all of the Shareholders entitled
to vote on that action. The written action is effective when it has been signed
by all of those Shareholders, unless a different effective time is provided in
the written action.

(b) An action which requires Shareholder approval and which is required or
permitted to be taken at a meeting of Trustees may be taken by written action
signed by all of the Trustees. An action which does not
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require Shareholder approval and which is required or permitted to be taken at a
meeting of the Trustees or a Committee of the Trustees may be taken by written
action signed by the number of Trustees that would be required to take the same
action at a meeting of the Trustees or Committee, as the case may be, at which
all Trustees were present. The written action is effective when signed by the
required number of Trustees, unless a different effective time is provided in
the written action. When written action is taken by less than all Trustees, all
Trustees shall be notified immediately of this text and effective date.

Section 6.4. Reports to Shareholders. The books of account of the Trust
shall be examined by an independent firm of public accountants at the close of
each annual period of the Trust and at such other times, if any, as may be
directed by the Trustees. A report to the Shareholders based upon such
examination shall be mailed to each Shareholder of the Trust of record at his
address as the same appears on the books of the Trust. Each such report shall
show the assets and liabilities of the Trust as of the annual or other period
covered by the report and the securities in which the funds of the Trust were
then invested; such report shall also show the Trust's income and expenses for
the period from the end of the Trust's preceding fiscal year to the close of the
annual or other period covered by the report and any other information required
by the 1940 Act, and shall set forth such other matters as the Trustees or such
independent firm of public accountants shall determine.

Section 6.5. Approval of Firm of Independent Public Accountants. At any
regular meeting of the Shareholders of the Trust there may be submitted, for
ratification or rejection, the name of the firm of independent public
accountants which has been selected for the fiscal year in which such meeting is
held by a majority of those members of the Trustees who are not investment
advisers of, or affiliated persons of an investment adviser of, or officers or
employees of, the Trust, as such terms are defined in the 1940 Act.

Section 6.6. Custodian. All securities and cash of the Trust shall be
held by a custodian meeting the requirements for a custodian contained in the
1940 Act and the rules and regulations thereunder and in any applicable state
securities or blue sky laws. The Trust shall enter into a written contract with
the custodian regarding the powers, duties and compensation of the custodian
with respect to the cash and securities of the Trust held by the custodian. Said
contract and all amendments thereto shall be approved by the Trustees of the
Trust. The Trust shall upon the resignation or inability to serve of the
custodian obtain a
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successor custodian and require that the cash and securities owned by the Trust
be delivered to the successor custodian.

Section 6.7. Prohibited Transactions. No officer or Trustee of the Trust
or of its investment adviser shall deal for or on behalf of the Trust with
himself, as principal or agent, or with any corporation or partnership in which
he has a financial interest. This prohibition shall not prevent: (a) officers
or Trustees of the Trust from having a financial interest in the Trust, its
principal underwriter or its investment adviser; (b) the purchase of securities
for the portfolio of the Trust or the sale of securities owned by the Trust
through a securities dealer, one or more of whose partners, officers or
directors is an officer or Trustee of the Trust, provided such transactions are
handled in the capacity of broker only and provided commission charged do not
exceed customary brokerage charges for such service; (c) the purchase or sale of
securities for the portfolio of the Trust pursuant to a rule under the 1940 Act
or pursuant to an exemptive order of the Securities and Exchange Commission; or
(d) the employment of legal counsel, registrar, transfer agent, dividend
disbursing agent, or custodian having a partner, officer or director who is an
officer or Trustee of the Trust, provided only customary fees are charged for
services rendered to or for the benefit of the Trust.

Section 6.8. Bonds. The Trustees may require any officer, agent or
employee of the Trust to give a bond to the Trust, conditioned upon the faithful
discharge of his duties, with one or more sureties and in such amount as may be
satisfactory to the Trustee. The Trustees shall, in any event, require the
Trust to provide and maintain a bond issued by a reputable fidelity insurance
company, authorized to do business in the place where the bond is issued,
against larceny and embezzlement, covering each officer and employee of the
Trust, who may singly, or jointly with others, have access to securities or
funds of the Trust, either directly or through authority to draw upon such funds
or to direct generally the disposition of such securities, such bond or bonds to
be in such reasonable form and amount as a majority of the Trustees who are not
"interested persons" of the Trust as defined in the 1940 Act shall approve not
less than once every twelve months, with due consideration to all relevant
factors including, but not limited to, the value of the aggregate assets of the
Trust to which any such officer or employee may have access, the type and terms
of the arrangements made for the custody and safekeeping of such assets, and the
nature of the securities in the Trust's portfolio, and as meet all requirements
which the Securities and Exchange Commission may prescribe by order, rule or
regulation.
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ARTICLE VII

AMENDMENTS

Section 7.1. These By-Laws may be amended or repealed, or new By-Laws may
be adopted, by the Trustees at any meeting thereof provided that notice of such
meeting shall have been given if required by these By-Laws, which notice, if
required, shall state that amendment or repeal of the By-Laws or adoption of
new By-Laws, is one of the purposes of such meeting, or by action of the
Trustees by written consent in lieu of a meeting.