<PAGE>
As filed with the Securities and Exchange Commission on May 25, 1999
================================================================================
1933 Act File No. 333-68539
1940 Act File No. 811-09135
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-2
(Check appropriate box or boxes)
[_] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[X] Pre-Effective Amendment No. 3
[_] Post-Effective Amendment No. __________
and
[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X] Amendment No. 3
Nuveen New York Dividend Advantage Municipal Fund
(previously 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
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 Thomas A. DeCapo
Bell, Boyd & Lloyd Morgan, Lewis & Bockius LLP Skadden, Arps, Slate,
70 W. Madison St. 1800 M Street, N.W. Meagher & Flom LLP
Chicago, IL 60602 Washington, D.C. 20036 One Beacon Street
Boston, MA 02108
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(2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares, $.01 par value 9,000,000 $15.00 $135,000,000 $37,530
======================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) $16,680 of which has been previously paid.
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 DIVIDEND ADVANTAGE MUNICIPAL 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; Risks; How the Fund Manages Risk; Description
of Shares; Certain Provisions in the Declaration of Trust
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........................ Other Matters
Item 13. Table of Contents of the Statement of
Additional Information.................. Table of Contents of 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....... Investment Objectives and Policies;
Investment Policies and Techniques;
Portfolio Transactions
Item 18. Management.............................. Management of the Fund; Portfolio
Transactions
Item 19. Control Persons and Principal Holders of
Securities............................. Management of the Fund
Item 20. Investment Advisory and Other Services.. Management of the Fund;
Investment Adviser;
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
</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. No +
+person may 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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUBJECT TO COMPLETION--DATED MAY 25, 1999
NUVEEN LOGO
Shares
Nuveen New York Dividend Advantage Municipal Fund
Common Shares
$15.00 per share
---------
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 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, New York
State and New York City income taxes. Under normal market conditions, the Fund
expects to be fully invested in such tax-exempt municipal bonds. The Fund will
invest at
(continued on following page)
---------
These securities involve certain risks. See "Risks" beginning on page 16.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
---------
<TABLE>
<CAPTION>
Per Share Total
--------- --------
<S> <C> <C>
Public Offering Price $15.00 $
Sales Load $ 0.675 $
Proceeds to the Fund $14.325 $
</TABLE>
The underwriters are offering the common shares subject to various
conditions. The underwriters expect to deliver the common shares to purchasers
on or about May 28, 1999.
---------
Salomon Smith Barney John Nuveen & Co.
Incorporated
BT Alex. Brown A.G. Edwards & Sons, Inc.
PaineWebber Incorporated Prudential Securities
Gruntal & Co. Raymond James & Associates, Inc.
May , 1999
<PAGE>
(continued from previous page)
least 80% of its net assets in investment grade quality municipal bonds.
Investment grade quality bonds are those rated by national rating agencies
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 of below investment grade
quality are regarded as having predominately speculative characteristics with
respect to capacity to pay interest and repay principal, 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. A substantial
portion of the Fund's income may be subject to the federal alternative minimum
tax. In addition, capital gains distributions will be subject to capital gains
taxes. The Fund is designed to provide tax benefits to investors who are
residents of New York. 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. This risk may be
greater for investors expecting to sell their shares in a relatively short
period after completion of the public offering. The common shares have been
approved for listing on the New York Stock Exchange, subject to notice of
issuance. The trading or "ticker" symbol of the common shares is expected to
be "NAN".
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 35% 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 received
without the issuance of the MuniPreferred Shares. Leverage involves special
risks, but also affords an opportunity for greater return. There is no
assurance that the Fund's leveraging strategy will be successful. See
"MuniPreferred Shares and Leverage" and "Description of Shares."
The underwriters named in this prospectus may purchase up to
additional common shares from the Fund under certain circumstances.
John Nuveen & Co. Incorporated has agreed to pay (i) all organizational
expenses and (ii) offering costs (other than sales load) that exceed $0.02 per
common share.
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 34 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).
The Fund's common shares do not represent a deposit or obligation of, and
are not guaranteed or endorsed by, any bank or other insured depository
institution, and are not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other government agency.
2
<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 Dividend Advantage Municipal Fund (the
"Fund") is a newly organized, closed-end, diversified
management investment company. The Fund is designed
to provide tax benefits to investors who are
residents of New York State. See "The Fund."
The Offering........... The Fund is offering common shares of
beneficial interest at $15.00 per share through a
group of underwriters (the "Underwriters") led by
Salomon Smith Barney Inc., John Nuveen & Co.
Incorporated, BT Alex. Brown Incorporated, A.G.
Edwards & Sons, Inc., PaineWebber Incorporated,
Prudential Securities, Gruntal & Co., L.L.C. and
Raymond James & Associates, Inc. The common shares of
beneficial interest are 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
Common Shares. See "Underwriting."
Investment Objectives.. The Fund's investment objectives are 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 municipal bonds
that at the time of investment are investment grade
quality. Investment grade quality bonds are bonds
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 IBCA,
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, at the time of
investment are rated Ba/BB or B by Moody's, S&P or
Fitch or unrated but judged to be of comparable
quality by the Fund's investment adviser. Bonds of
below investment grade quality are regarded as having
predominately speculative characteristics with
respect to capacity to pay interest and repay
principal, 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."
3
<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, or
as a result of investment in the Fund would become,
subject to the federal alternative minimum tax, the
Fund may not be a suitable investment for you. In
addition, capital gains distributions will be subject
to capital gains taxes. See "Tax Matters."
Proposed Offering of
MuniPreferred(R)
Shares................
Approximately one to three months after completion of
this offering (subject to market conditions), the
Fund intends to offer preferred shares of beneficial
interest ("MuniPreferred Shares") representing
approximately 35% of the Fund's capital after their
issuance. The issuance of MuniPreferred Shares will
leverage your shares. Leverage involves special
risks. There is no assurance that the Fund's
leveraging strategy will be successful. See "Risks."
The money the Fund obtains by selling the
MuniPreferred Shares will be invested in long-term
municipal bonds, which will generally pay fixed rates
of interest over the life of the bond. The
MuniPreferred Shares will pay dividends based on
shorter-term rates, but will be reset frequently. So
long as the rate of return, net of applicable Fund
expenses, on the long-term bonds purchased by the
Fund exceeds MuniPreferred Share dividend rates as
reset periodically, 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 Common 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 .65% of the Fund's average daily
total net assets (including assets attributable to
any MuniPreferred Shares that may be outstanding),
with lower fee levels for assets that exceed $125
million. Nuveen Advisory has agreed to reimburse the
Fund for fees and expenses in the amount of .30% of
average daily total net assets of the Fund for the
first five years of the Fund's operations (through
July 31, 2004), and for a declining amount for an
additional five years (through July 31, 2009). Nuveen
Advisory is a wholly-owned subsidiary of John Nuveen
& Co. Incorporated ("Nuveen"). See "Management of the
Fund."
4
<PAGE>
Distributions.......... Commencing with the Fund's first dividend, the Fund
intends to make regular monthly cash distributions to
you at a level rate based on the projected
performance of the Fund. The Fund's ability to
maintain a level dividend rate will depend on a
number of factors, including dividends payable on the
MuniPreferred Shares. As portfolio and market
conditions change, the rate of dividends on the
Common Shares and the Fund's dividend policy could
change. Over time, the Fund will 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 realized capital gains and taxable
ordinary income, if any, to you so long as the net
realized 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 45 days, and paid approximately 60 to
90 days, from the completion of this offering,
depending on market conditions. 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 Common Shares have been approved for listing on
the New York Stock Exchange, subject to notice of
issuance. See "Description of Shares--Common Shares."
The trading or "ticker" symbol of the Common Shares
is expected to be "NAN."
Custodian.............. The Chase Manhattan Bank will serve as custodian of
the Fund's assets. See "Custodian and Transfer
Agent."
Market Price of Shares of closed-end investment companies frequently
Shares................. 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 sales load and the amount of
organization and offering expenses paid by the Fund.
See "Use of Proceeds." In addition to net asset
value, market price may be affected by such factors
as dividend levels (which are in turn affected by
expenses), call protection, dividend stability,
portfolio credit quality and liquidity and market
supply and demand. 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." The Common Shares are designed primarily
for long-term investors, and you should not view the
Fund as a vehicle for trading purposes.
5
<PAGE>
Special Risk
Considerations........
No Operating History. The Fund is a newly organized
closed-end investment company with no history of
operations.
Interest Rate Risk. When market interest rates
fall, bond prices rise, and vice versa. Interest
rate risk is the risk that the municipal bonds in
the Fund's portfolio will decline in value because
of increases in market interest rates. The prices
of longer-term bonds fluctuate more than prices of
shorter-term bonds as interest rates change.
Because the Fund will invest primarily in long-term
bonds, the Common Share net asset value and market
price per share will fluctuate more in response to
changes in market interest rates than if the Fund
invested primarily in shorter-term bonds. The
Fund's use of leverage, as described below, will
tend to increase Common Share interest rate risk.
Credit Risk. Credit risk is the risk that one or
more municipal bonds in the Fund's portfolio will
decline in price, or fail to pay interest or
principal when due, because the issuer of the bond
experiences a decline in its financial status. The
Fund may invest up to 20% (measured at the time of
investment) 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 Nuveen
Advisory. The prices of these lower grade bonds are
more sensitive to negative developments, such as a
decline in the issuer's revenues or a general
economic downturn, than are the prices of higher
grade securities.
Concentration in New York Issuers. The Fund's policy
of investing primarily in municipal obligations of
issuers located in New York makes the Fund more
susceptible to adverse economic, political or
regulatory occurrences affecting such issuers.
Leverage Risk. The use of leverage through the
issuance of MuniPreferred Shares creates an
opportunity for increased Common Share net income,
but also creates special risks for Common
Shareholders. There is no assurance that the Fund's
leveraging strategy will be successful. It is
anticipated that MuniPreferred dividends will be
based on shorter-term municipal bond rates of
return (which would be redetermined periodically,
pursuant to an auction process), and that the Fund
will invest the proceeds of the MuniPreferred
Shares offering in long-term, typically fixed rate,
municipal bonds. So long as the Fund's municipal
bond portfolio provides a higher rate of return
(net of Fund expenses) than the MuniPreferred
dividend rate, as reset periodically, the leverage
will cause Common Shareholders to receive a higher
current rate of return than if the Fund were not
leveraged. If, however, long and/or short-term
rates rise, the MuniPreferred dividend rate could
exceed the rate of return on long-term bonds held
by the Fund that were
6
<PAGE>
acquired during periods of generally lower interest
rates, reducing return to Common Shareholders.
Leverage creates two major types of risks for Common
Shareholders:
. the likelihood of greater volatility of net
asset value and market price of Common Shares,
because changes in the value of the Fund's bond
portfolio (including bonds bought with the
proceeds of the MuniPreferred Shares offering)
are borne entirely by the Common Shareholders;
and
. the possibility either that Common Share income
will fall if the MuniPreferred dividend rate
rises, or that Common Share income will
fluctuate because the MuniPreferred dividend
rate varies.
Municipal Bond Market Risk. The amount of public
information available about the municipal bonds in
the Fund's portfolio is generally less than that for
corporate equities or bonds, and the investment
performance of the Fund may therefore be more
dependent on the analytical abilities of Nuveen
Advisory than would be a stock fund or taxable bond
fund. The secondary market for municipal bonds,
particularly the below investment grade bonds in
which the Fund may invest, also tends to be less
well-developed or liquid than many other securities
markets, which may adversely affect the Fund's
ability to sell its bonds at attractive prices.
Anti-takeover Provisions. The Declaration of Trust
includes provisions that could limit the ability of
other entities or persons to acquire control of the
Fund or convert the Fund to open-end status. 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 the then current market price of the
Common Shares.
7
<PAGE>
SUMMARY OF FUND EXPENSES
The following table assumes the issuance of MuniPreferred Shares in an
amount equal to 35% of the Fund's capital (after their issuance), 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
Total Net Assets
----------------
<S> <C> <C>
Shareholder Transaction Expenses
Sales Load Paid by You (as a
percentage of offering price)....... 4.50%
Dividend Reinvestment Plan Fees...... None*
<CAPTION>
Percentage of Net
Assets Attributable Percentage of
to Common Shares Total Net Assets
------------------- ----------------
<S> <C> <C>
Annual Expenses
Management Fees...................... 1.00% .65%
Fee and Expense Reimbursement (Years
1-5)................................ (.46%)** (.30%)**
---- ----
Net Management Fees.................... .54%** .35%**
Other Expenses......................... .31% .20%
---- ----
Total Net Annual Expenses.............. .85%** .55%**
---- ----
</TABLE>
- --------
*You will be charged a $2.50 service charge and pay brokerage charges if you
direct the Plan Agent to sell your Common Shares held in a dividend
reinvestment account.
** Nuveen Advisory has agreed to reimburse the Fund for fees and expenses in
the amount of .30% of average daily total net assets for the first 5 years
of the Fund's operations, .25% of average daily total net assets in year 6,
.20% in year 7, .15% in year 8, .10% in year 9 and .05% in year 10. Without
the reimbursement, "Total Net Annual Expenses" would be estimated to be .85%
of average daily total net assets and 1.31% of average daily total net
assets attributable to Common Shares. Nuveen has agreed to pay (i) all
organizational expenses and (ii) offering costs (other than sales load) that
exceed $0.02 per Common Share (.13% of offering price).
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 issues 7,000,000 Common
Shares. See "Management of the Fund" and "Dividend Reinvestment Plan."
The following example illustrates the expenses (including the sales load of
$45) that you would pay on a $1,000 investment in Common Shares, assuming (1)
total net annual expenses of .85% of net assets attributable to Common Shares
and .55% of total net assets in years 1 through 5, increasing to 1.23% and
.80%, respectively, in year 10 and (2) a 5% annual return:(/1/)
<TABLE>
<CAPTION>
Expenses Based on Percentage of 1 Year 3 Years 5 Years 10 Years(/2/)
------------------------------- ------ ------- ------- -------------
<S> <C> <C> <C> <C>
Net Assets Attributable to Common
Shares.............................. $53 $71 $90 $160
Total Net Assets..................... $50 $62 $74 $121
</TABLE>
- --------
(1) The example should not be considered a representation of future expenses.
The example assumes that the estimated Other Expenses set forth in the
Annual Expenses table are accurate, that fees and expenses increase as
described in note 2 below and that all dividends and distributions are
reinvested at net asset value. Actual expenses may be greater or less than
those assumed. Moreover, the Fund's actual rate of return may be greater or
less than the hypothetical 5% return shown in the example.
(2) Assumes reimbursement of fees and expenses of .25% of average daily total
net assets in year 6, .20% in year 7, .15% in year 8, .10% in year 9 and
.05% in year 10. Nuveen Advisory has not agreed to reimburse the Fund for
any portion of its fees and expenses beyond July 31, 2009.
8
<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. The Fund is designed to provide tax
benefits to investors who are residents of New York State.
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. Nuveen has agreed to pay (i) all organizational expenses and (ii)
offering costs (other than sales load) that exceed $0.02 per Common Share. 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 credit worthiness. 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 appears to be
consistent with the value of similar bonds. Municipal bonds of particular
types (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 yield is higher than that available on
bonds bearing equivalent levels of interest rate risk, credit risk and other
forms of risk, and that their prices will ultimately rise (relative to the
market) 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.
9
<PAGE>
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 (at least 95% of its assets) in such tax-exempt municipal bonds. The
Fund will invest at least 80% of its net assets in investment grade quality
municipal bonds. Investment grade quality means that such bonds are rated, at
the time of investment, 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, at the time of investment, 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 of below investment grade quality (Ba/BB or
below) are commonly referred to as junk bonds. Bonds of below investment grade
quality are regarded as having predominately speculative characteristics with
respect to capacity to pay interest and repay principal. The foregoing credit
quality policies apply only at the time a security is purchased, and the Fund
is not required to dispose of a security in the event that a rating agency
downgrades its assessment of the credit characteristics of a particular issue.
In determining whether to retain or sell such a security, Nuveen Advisory may
consider such factors as Nuveen Advisory's assessment of the credit quality of
the issuer of such security, the price at which such security could be sold
and the rating, if any, assigned to such security by other rating agencies. 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
"Municipal Bonds--Special Considerations Relating to New York Municipal Bonds"
below for a general description of the economic and credit characteristics of
municipal issuers in New York. The Fund may also invest in securities of other
open- or closed-end investment companies that invest primarily in municipal
bonds of the types in which the Fund may invest directly. See "--Other
Investment Companies" and "--Initial Portfolio Composition."
The Fund may purchase municipal bonds that are additionally secured by
insurance, bank credit agreements, or escrow accounts. The credit quality of
companies which provide such credit enhancements will affect the value of
those securities. Although the insurance feature reduces certain financial
risks, the premiums for insurance and the higher market price paid for insured
obligations may reduce the Fund's income. Insurance generally will be obtained
from insurers with a claims-paying ability rated Aaa by Moody's or AAA by S&P
or Fitch. The insurance feature does not guarantee the market value of the
insured obligations or the net asset value of the Common Shares.
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. Investment in taxable short-term investments
would result in a portion of your dividends being subject to regular federal
and New York income taxes. 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
10
<PAGE>
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, or as a result of investment in the Fund would become, 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. In addition, capital
gains distributions will be subject to capital gains taxes. See "Tax Matters."
Municipal Bonds
General. 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 (or on the basis of other authority believed by Nuveen Advisory to
be reliable), is exempt from regular 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.
When-Issued and 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 trade date. 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.
11
<PAGE>
Other Investment Companies
The Fund may invest up to 10% of its net assets in securities of other
open- or closed-end investment companies that invest primarily in municipal
bonds of the types in which the Fund may invest directly. The Fund generally
expects to invest in other investment companies either during periods when it
has large amounts of uninvested cash, such as the period shortly after the
Fund receives the proceeds of the offering of its Common Shares or
MuniPreferred Shares, or during periods when there is a shortage of
attractive, high-yielding municipal bonds available in the market. As a
stockholder in an investment company, the Fund will bear its ratable share of
that investment company's expenses, and would remain subject to payment of the
Fund's management, advisory and administrative fees with respect to assets so
invested. Common Shareholders would therefore be subject to duplicative
expenses to the extent the Fund invests in other investment companies. Nuveen
Advisory will take expenses into account when evaluating the investment merits
of an investment in the investment company relative to available municipal
bond investments. In addition, the securities of other investment companies
may also be leveraged and will therefore be subject to the same leverage risks
described herein. As described in the Prospectus in the section entitled
"Risks", the net asset value and market value of leveraged shares will be more
volatile and the yield to shareholders will tend to fluctuate more than the
yield generated by unleveraged shares.
Initial Portfolio Composition
If current market conditions persist, the Fund expects that approximately
85% of its initial portfolio will consist of investment grade quality
municipal bonds, rated as such at the time of investment, meaning that such
bonds are rated by national rating agencies within the four highest grades of
the investment grade category or are unrated but judged to be of comparable
quality by Nuveen Advisory (approximately 50% in Aaa/AAA; 15% in A; and 20% in
Baa/BBB). The Fund will generally select obligations which may not be redeemed
at the option of the issuer for approximately seven to nine 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 15% of its initial portfolio in municipal bonds that are, at the
time of investment, either rated below investment grade or that are unrated
but judged to be of comparable quality by Nuveen Advisory. See "The Fund's
Investments--Investment Objectives and Policies."
MUNIPREFERRED SHARES AND LEVERAGE
Approximately one to three months after the completion of the offering of
the Common Shares (subject to market conditions), the Fund intends to offer
MuniPreferred Shares representing approximately 35% of the Fund's capital
immediately after the issuance of the MuniPreferred Shares. The MuniPreferred
Shares have complete priority upon distribution of assets over the Common
Shares. The issuance of MuniPreferred Shares will leverage the Common Shares.
Leverage involves special risks. There is no assurance that the Fund's
leveraging strategy will be successful. 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. 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.
12
<PAGE>
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. During periods in which the Fund is using leverage,
the fees paid to Nuveen Advisory for advisory services will be higher than if
the Fund did not use leverage because the fees paid will be calculated on the
basis of the Fund's total net assets, including the proceeds from the issuance
of MuniPreferred Shares.
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 or other taxable income is 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.
Under the Investment Company Act of 1940, as amended (the "Investment
Company Act" or the "1940 Act"), the Fund is not permitted to issue preferred
shares unless immediately after such issuance the value of the Fund's total net
assets is at least 200% of the liquidation value of the outstanding preferred
shares (i.e., such liquidation value may not exceed 50% of the Fund's total net
assets). In addition, the Fund is not permitted to declare any cash dividend or
other distribution on its Common Shares unless, at the time of such
declaration, the value of the Fund's total net assets is at least 200% of such
liquidation value. If MuniPreferred Shares are issued, the Fund intends, to the
extent possible, to purchase or redeem MuniPreferred Shares from time to time
to the extent necessary in order to maintain coverage of any MuniPreferred
Shares of at least 200%. If the Fund has MuniPreferred Shares outstanding, two
of the Fund's trustees will be elected by the holders of MuniPreferred Shares,
voting separately as a class. The remaining trustees of the Fund will be
elected by holders of Common Shares and MuniPreferred Shares voting together as
a single class. In the event the Fund failed to pay dividends on MuniPreferred
Shares for two years, MuniPreferred Shareholders would be entitled to elect a
majority of the trustees of the Fund.
The Fund may be subject to certain restrictions imposed by guidelines of one
or more rating agencies which may issue ratings for MuniPreferred Shares issued
by the Fund. These guidelines may impose asset coverage or Fund composition
requirements that are more stringent than those imposed on the Fund by the
Investment Company Act. It is not anticipated that these covenants or
guidelines will impede Nuveen Advisory from managing the Fund's portfolio in
accordance with the Fund's investment objectives and policies.
13
<PAGE>
The Fund may also borrow money as a temporary measure for extraordinary or
emergency purposes, including the payment of dividends and the settlement of
securities transactions which otherwise might require untimely dispositions of
Fund securities.
Assuming that the MuniPreferred Shares will represent approximately 35% of
the Fund's capital and pay dividends at an annual average rate of 2.70%, the
income generated by the Fund's portfolio (net of estimated expenses) must
exceed .945% 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 35% of the Fund's total capital, a 4.80% yield on the Fund's
investment portfolio, net of expenses, and the Fund's currently projected
annual MuniPreferred Share dividend rate of 2.70%. See "Risks" and
"MuniPreferred Shares and Leverage."
<TABLE>
<S> <C> <C> <C> <C> <C>
Components of Portfolio Return
Net Income.......................... 4.80 % 4.80 % 4.80 % 4.80% 4.80%
Capital (Loss) or Gain.............. (14.80)% (9.80)% (4.80)% 0.20% 5.20%
Assumed Portfolio Total Return........ (10.00)% (5.00)% (0.00)% 5.00% 10.00%
Common Share Dividends.............. 5.93 % 5.93 % 5.93 % 5.93% 5.93%
Common Share Capital Gain/(Loss).... (22.77)% (15.08)% (7.38)% 0.31% 8.00%
Common Share Total Return............. (16.84)% (9.15)% (1.45)% 6.24% 13.93%
</TABLE>
Common Share total return is composed of two elements--the Common Share
dividends paid by the Fund (the amount of which is largely determined by the
net investment income of the Fund after paying dividends on MuniPreferred
Shares) 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
appreciation. For example, 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.
RISKS
The net asset value of the Common Shares will fluctuate with and be
affected by, among other things, interest rate risk, credit risk, reinvestment
risk and leverage risk, and an investment in Common Shares will be subject to
market discount risk, inflation risk, municipal bond market risk and "Year
2000" risk, each of which is more fully described below.
Newly Organized. The Fund is a newly organized, diversified, closed-end
management investment company and has no operating history.
14
<PAGE>
Market Discount Risk. Shares of closed-end management investment companies
frequently trade at a discount from their net asset value.
Interest Rate Risk. Interest rate risk is the risk that bonds (and the
Fund's net assets) 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. This means that the net asset
value of the Common Shares will fluctuate with interest rate changes and the
corresponding changes in the value of the Fund's municipal bond holdings. The
value of the longer-term bonds in which the Fund generally invests fluctuate
more in response to changes in interest rates than does the value of shorter-
term bonds. Because the Fund will invest primarily in long-term bonds, the
Common Share net asset value and market price per share will fluctuate more in
response to changes in market interest rates than if the Fund invested
primarily in shorter-term bonds. The Fund's use of leverage, as described
below, will tend to increase Common Share interest rate risk.
Credit Risk. Credit risk is the risk that an issuer of a municipal bond
will become unable to meet its obligation to make interest and principal
payments. In general, lower rated municipal bonds carry a greater degree of
risk that the issuer will lose its ability to make interest and principal
payments, which could have a negative impact to the Fund's net asset value or
dividends. 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 Ba/BB or B are regarded as having predominately speculative
characteristics with respect to capacity to pay interest and repay principal,
and these bonds are commonly referred to as junk bonds. The prices of these
lower grade bonds are more sensitive to negative developments, such as a
decline in the issuer's revenues or a general economic downturn, than are the
prices of higher grade securities.
Concentration Risk. 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 disclocation, 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 1999 and 2000. Personal income is expected to have grown by 4.9% in
1998, largely due to increases in financial sector bonus payments at the
beginning of the year, and is expected to grow by 4.2% in 1999 and 4.0% in
2000.
The State expects to end its 1998-99 fiscal year with an operating surplus
of approximately $1.42 billion. The State legislature enacted the State's
1998-99 fiscal year budget on April 18, 1998, eighteen days after the start of
that fiscal year.
15
<PAGE>
As of April 1, 1999, the updated 1998-99 State Financial Plan (the "Plan")
projected total general fund receipts of $37.56 billion and disbursements of
$36.78 billion, representing increases in receipts and disbursements of $3.01
billion and $2.43 billion, respectively, over the 1997-98 fiscal year. The
Plan projected a General Fund balance of approximately $1.42 billion at the
close of the 1998-99 fiscal year.
The Governor issued a proposed State budget for the 1999-2000 fiscal year
on January 27, 1999, which projected a balanced general fund, and receipts and
disbursements of $38.81 billion and $37.10 billion, respectively. As of April
22, 1999, the State legislature had not yet enacted, nor had the Governor and
the legislature reached an agreement on the budget for the 1999-2000 fiscal
year commencing on April 1, 1999. 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 November 17, 1998, more than five months after the start of the City's
fiscal year, New York adopted a 1999 fiscal year (July 1, 1998 to June 30,
1999) budget, which provided for $34.7 billion in spending. For fiscal year
1999 an operating surplus of $2.0 billion is projected. On May 24, 1999, the
Mayor outlined his proposed $35.3 billion Executive Budget for fiscal year
2000, (July 1, 1999 to June 30, 2000). The 1999-2000 budget proposal includes
several tax reductions including residential estate and property tax relief
aggregating an estimated $180 million, sales tax reductions aggregating an
estimated $123 million and business tax relief aggregating an estimated $98
million. On May 17, 1999, the New York State Legislature enacted legislation
repealing the New York City income tax on New York State residents who work,
but do not reside, in New York City. Governor George Pataki has stated that he
would sign the legislation. It is estimated that the repeal would reduce
revenues to New York City by approximately $210 million. If the effect of the
legislation is to invalidate the income tax as it remains applicable to out of
state residents who work in New York City through subsequent judicial
determination that the income tax in its revised form discriminates against
out of state residents, the reduction in revenues to New York City would then
aggregate an estimated $360 million. The Mayor of the City of New York and the
Speaker of the City Council have stated that they will commence litigation to
challenge the legislation.
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 decrease in real estate values within the City. The
first issuance of TFA debt occurred in October 1997.
Municipal Bond Market Risk. Investing in the municipal bond market involves
certain risks. The amount of public information available about the municipal
bonds in the Fund's portfolio is generally
16
<PAGE>
less than that for corporate equities or bonds, and the investment performance
of the Fund may therefore be more dependent on the analytical abilities of
Nuveen Advisory than would be a stock fund or taxable bond fund. The secondary
market for municipal bonds, particularly the below investment grade bonds in
which the Fund may invest, also tends to be less well-developed or liquid than
many other securities markets, which may adversely affect the Fund's ability
to sell its bonds at attractive prices.
Reinvestment Risk. 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. A decline in income could affect the
Common Share's market price or their overall returns.
Leverage Risk. Leverage risk is the risk associated with the issuance of
the MuniPreferred Shares to leverage the Common Shares. There can be no
assurance that the Fund's leveraging strategy will be successful. 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. Because the long-term bonds
included in the Fund's portfolio will typically pay fixed rates of interest
while the dividend rate on the MuniPreferred Shares will be adjusted
periodically, this could occur even when both long-term and short-term
municipal rates rise. 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 declines, the leverage will result in a greater
decrease in net asset value to Common 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. The Fund might be
in danger of failing to maintain the required 200% asset coverage or of losing
its expected AAA/aaa ratings on the MuniPreferred Shares or, in an extreme
case, the Fund's current investment income might not be sufficient to meet the
dividend requirements 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 may result in capital loss and may reduce returns to
Common Shareholders.
While the Fund may from time to time consider reducing leverage in response
to actual or anticipated changes in interest rates in an effort to mitigate
the increased volatility of current income and net asset value associated with
leverage, there can be no assurance that the Fund will actually reduce
leverage in the future or that any reduction, if undertaken, will benefit the
Common Shareholders. Changes in the future direction of interest rates are
very difficult to predict accurately. If the Fund were to reduce leverage
based on a prediction about future changes to interest rates, and that
prediction turns out to be incorrect, the reduction in leverage would likely
operate to reduce the income
17
<PAGE>
and/or total returns to Common Shareholders relative to the circumstance where
the Fund had not reduced leverage. The Fund may decide that this risk outweighs
the likelihood of achieving the desired reduction to volatility in income and
share price if the prediction were to turn out to be correct, and determine not
to reduce leverage as described above.
The Fund may invest in the securities of other investment companies. Such
securities may also be leveraged and will therefore be subject to the leverage
risks described above. Such additional leverage may in certain market
conditions serve to reduce the net asset value of the Fund's Common Shares and
the returns to Common Shareholders.
Inflation Risk. 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. "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.
In addition, it is possible that the markets for municipal securities in
which the Fund invests may be detrimentally affected by computer failures
throughout the financial services industry beginning on or before January 1,
2000. Improperly functioning trading systems may result in settlement problems
and liquidity issues. In addition, corporate and governmental data processing
errors may result in production problems for individual issuers and overall
economic uncertainties. Earnings of individual issuers will be affected by
remediation costs, which may be substantial and may be reported inconsistently
in financial statements. Accordingly, the Fund's investments may be adversely
affected. The statements above are subject to the Year 2000 Information and
Readiness Disclosure Act, which may limit the legal rights regarding the use of
such statements in the case of a dispute.
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.
18
<PAGE>
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 and non-fundamental investment
policies of the Fund.
Quality Investments
The Fund will invest at least 80% of its net assets in bonds of investment
grade quality at the time of investment. Investment grade quality means that
such bonds are rated by national rating agencies 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.
Limited Issuance of MuniPreferred Shares
Under the 1940 Act, the Fund could issue MuniPreferred Shares having a total
liquidation value (original purchase price of the shares being liquidated plus
any accrued and unpaid dividends) of up to one-half of the value of the total
net assets of the Fund. If the total liquidation value of the MuniPreferred
Shares was ever more than one-half of the value of the Fund's total net 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 35% of the Fund's
total capital at the time of issuance, 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 will subject Common
Shareholders to less income and net asset value volatility than if the Fund
were more leveraged. The Fund intends to purchase or redeem MuniPreferred
Shares, if necessary, to keep the liquidation value of the MuniPreferred Shares
below one-half of the value of the Fund's total 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 (or is expected) to adversely affect
Common Shareholders. In order to attempt to offset such a negative impact of
leverage on Common Shareholders, the Fund may shorten the average maturity of
its investment portfolio (by investing 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. As explained above under "Risks--Leverage Risk", the
success of any such attempt to limit leverage risk depends on Nuveen Advisory's
ability to accurately predict interest rate or other market changes. Because of
the difficulty of making such predictions, the Fund may never attempt to manage
its capital structure in the manner described above.
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.
19
<PAGE>
Currently, the Fund may not invest in inverse floating rate securities,
which are securities that pay interest at rates that vary inversely with
changes in prevailing short-term tax-exempt interest rates and which represent
a leveraged investment in an underlying municipal bond. This restriction is a
non-fundamental policy of the Fund that may be changed by vote of the Fund's
Board of Trustees.
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 municipal securities or on
taxable 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.
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 there can be no 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
seven trustees of the Fund, one of whom is an "interested person" (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
$35 billion in 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 John Nuveen & Co.
Incorporated ("Nuveen"), subject to the ultimate oversight and supervision of
the Board of Trustees. The Investment Management Committee is
20
<PAGE>
comprised of the several principal executive officers and portfolio managers
of Nuveen and Nuveen Advisory. Day to day operations and execution of specific
investment strategies is the responsibility of Nuveen Advisory. Nuveen
Advisory manages the Fund using a team of analysts and portfolio managers that
focus on a specific group of funds. Stephen S. Peterson is the portfolio
manager of the Fund and will provide daily oversight for, and execution of,
the Fund's investment activities. Mr. Peterson currently manages nine
municipal bond funds for Nuveen Advisory with assets aggregating more than
$2.8 billion. He is a Chartered Financial Analyst and a Vice President of
Nuveen Advisory.
Nuveen Advisory is a wholly-owned subsidiary of 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., a publicly-traded company which is
principally engaged in providing property-liability insurance through
subsidiaries.
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:
<TABLE>
<CAPTION>
Daily Total Net Assets* Management Fee
----------------------- --------------
<S> <C>
For the first $125 million................................. .6500%
For the next $125 million.................................. .6375%
For the next $250 million.................................. .6250%
For the next $500 million.................................. .6125%
For the next $1 billion.................................... .6000%
For assets over $2 billion................................. .5750%
</TABLE>
- --------
*Including net assets attributable to MuniPreferred Shares.
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.
For the first ten years of the Fund's operation, Nuveen Advisory has agreed
to reimburse the Fund for fees and expenses in the amounts, and for the time
periods, set forth below:
<TABLE>
<CAPTION>
Percentage
Reimbursed
(as a percentage
Year Ending of average daily
July 31, net assets)
----------- ----------------
<S> <C>
1999*........... 0.30%
2000............ 0.30%
2001............ 0.30%
2002............ 0.30%
2003............ 0.30%
2004............ 0.30%
</TABLE>
<TABLE>
<CAPTION>
Percentage
Reimbursed
(as a percentage
Year Ending of average daily
July 31, net assets)
----------- ----------------
<S> <C>
2005............ 0.25%
2006............ 0.20%
2007............ 0.15%
2008............ 0.10%
2009............ 0.05%
</TABLE>
- --------
*From the commencement of operations.
21
<PAGE>
Nuveen Advisory has not agreed to reimburse the Fund for any portion of its
fees and expenses beyond July 31, 2009.
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.
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 a fair market value based on prices of
comparable municipal bonds. All valuations are subject to review by the Fund's
Board of Trustees or its delegate, Nuveen Advisory.
DISTRIBUTIONS
Commencing with the first dividend, the Fund intends to make regular monthly
cash distributions to Common Shareholders at a 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 Fund's ability to maintain a level dividend rate will depend
on a number of factors, including dividends payable on the MuniPreferred
Shares. 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 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
45 days, and paid approximately 60 to 90 days, from the completion of this
offering, depending on market conditions. Although it does not now intend to do
so, the Board of Trustees may change the Fund's dividend policy and the amount
or timing of the distributions, 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 permit the Fund to maintain a more stable monthly distribution, 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.
22
<PAGE>
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 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 courier), (800) 257-8787.
23
<PAGE>
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 Common Shares have been approved for listing on the New York Stock
Exchange, subject to notice of issuance. 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.
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 because the Fund intends to have a leveraged capital
structure. Net asset value will be reduced immediately following the offering
by the amount of the sales load and organization and offering expenses paid by
the Fund. Nuveen has agreed to pay (i) all organizational expenses and (ii)
offering costs (other than sales load) that exceed $0.02 per Common Share. See
"Use of Proceeds."
Unlike open-end funds, closed-end funds like the Fund do not continuously
offer shares and do not provide daily redemptions. Rather, if a shareholder
determines to buy additional Common Shares or sell shares already held, the
shareholder may conveniently do so by trading on the exchange through a broker
or otherwise. Shares of closed-end investment companies may frequently trade
on an exchange 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 Common Shares may be influenced
by such factors as dividend levels (which are in turn affected by expenses),
call protection, dividend stability, portfolio credit quality, net asset
value, 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
equal to or 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.
24
<PAGE>
The Fund's Board of Trustees has indicated its intention to authorize an
offering of MuniPreferred Shares (representing approximately 35% of the Fund's
capital immediately after the time the MuniPreferred Shares are issued)
approximately one to three 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 determined that the MuniPreferred
Shares, at least initially, 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 preference
on distribution, 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 value of the Fund's total net assets, 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 MuniPreferred shares is less than one-half of the value of the
Fund's total net assets (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 35% of the value of the Fund's total net assets. The Fund
intends to purchase or redeem MuniPreferred Shares, if necessary, to keep that
fraction below one-half.
Distribution Preference. The MuniPreferred Shares have complete priority
over the Common Shares as to distribution of assets.
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.
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 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. In order for the Fund to take
certain actions or enter into certain transactions, a separate class vote of
holders of
25
<PAGE>
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
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 very remote.
The Declaration includes provisions that could limit the ability of other
entities or persons to acquire control of the Fund or to convert the Fund to
open-end status. 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),
(4) in certain circumstances, a termination of the Fund, or a series or class
of the Fund, or (5) a removal of trustees, and then only for cause, unless,
with respect to (1) through (4), 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 (or, in the case of removing a trustee, when the trustee
has been elected by only one class), only the required vote by the applicable
class or series will be required. None of the foregoing provisions may be
amended except by the vote of at least two-thirds of the Common Shares and
MuniPreferred Shares, voting together as a single class. 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
26
<PAGE>
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 the then current market price of the Common Shares 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.
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
Common Shares will trade in the open market at a price that will be a function
of several factors, including dividend levels (which are in turn affected by
expenses), net asset value, call protection, price, dividend stability,
relative demand for and supply of such shares in the market, general market
and economic conditions and other factors. 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 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.
27
<PAGE>
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.
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 Common
Shares. 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.
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.
Distributions of net short-term gains are taxable as ordinary income.
Distributions of 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 the federal alternative minimum tax. You will receive this statement from
the firm where you purchased your Common 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. In
particular, in order for the Fund to pay tax-free dividends, at least 50% of
the value of the Fund's total assets must consist of tax-exempt obligations.
The Fund intends to meet this requirement. If the Fund failed to do so, it
would not be able to pay tax-free dividends and your distributions
attributable to interest received by the Fund from any source would be taxable
as ordinary income.
28
<PAGE>
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.
If you are subject to the federal alternative minimum tax, a portion of
your regular monthly dividends may be taxable.
New York 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 obligations that, when held by individuals, pay interest that
is exempt from tax under New York and New York City law (e.g., obligations of
New York and its political subdivisions), so long as at the close of each
quarter of the Fund's taxable year at least 50 percent of the value of the
Fund's total assets consists of such obligations. 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. Common Shares will not be subject
to property taxes imposed by New York State and City. Interest on indebtedness
incurred to purchase, or continued to carry, Common Shares will not be
deductible for New York State personal income tax purposes.
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
omissions 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 fees to Nuveen Advisory
and Nuveen. Plaintiffs also filed a motion to certify defendant and plaintiff
classes.
The defendants are vigorously defending the case and filed motions to
dismiss the entire lawsuit asserting that the claims are without merit and to
oppose certification of any classes. By opinion dated March 30, 1999, the
court granted most of the defendants' motion to dismiss and denied plaintiffs'
29
<PAGE>
motion to certify defendant and plaintiff classes. The court dismissed all
claims against the funds, the funds' directors and Nuveen. The court dismissed
these claims without prejudice (which means that the plaintiffs can re-file
the claims if they can correct the defect that led to the claim being
dismissed) on the ground that the claims should have been brought as
derivative claims on behalf of the funds. The only remaining claim is brought
under Section 36(b) of the 1940 Act against Nuveen Advisory, and relates
solely to advisory fees Nuveen Advisory received from the six relevant funds.
While the Fund cannot assure you that the litigation will be decided in Nuveen
Advisory's favor, Nuveen Advisory believes a decision, if any, against the
defendants would have no material effect on the Fund, its Common Shares, or
the ability of Nuveen Advisory to perform its duties under the investment
management agreement.
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each Underwriter named below has severally agreed to
purchase, and the Fund has agreed to sell to such Underwriter, the number of
Common Shares set forth opposite the name of such Underwriter.
<TABLE>
<CAPTION>
Number of
Name Shares
- ---- ---------
<S> <C>
Salomon Smith Barney Inc..............................................
John Nuveen & Co. Incorporated........................................
BT Alex. Brown Incorporated...........................................
A.G. Edwards & Sons, Inc..............................................
PaineWebber Incorporated..............................................
Prudential Securities Incorporated....................................
Gruntal & Co., L.L.C..................................................
Raymond James & Associates, Inc.......................................
---------
Total............................................................... 9,000,000
---------
</TABLE>
The underwriting agreement provides that the obligations of the several
Underwriters to purchase the Common Shares included in this offering are
subject to approval of certain legal matters by counsel and to certain other
conditions. The Underwriters are obligated to purchase all the Common Shares
(other than those covered by the over-allotment option described below) if
they purchase any of the Common Shares. The representatives have advised the
Fund that the Underwriters do not intend to confirm any sales to any accounts
over which they exercise discretionary authority.
The Underwriters, for whom Salomon Smith Barney Inc., John Nuveen & Co.
Incorporated, BT Alex. Brown Incorporated, A.G. Edwards & Sons, Inc.,
PaineWebber Incorporated, Prudential Securities Incorporated, Gruntal & Co.,
L.L.C., and Raymond James & Associates, Inc. are acting as representatives,
propose to offer some of the Common Shares directly to the public at the
public offering price set forth on the cover page of this Prospectus and some
of the Common Shares to certain dealers at the public offering price less a
concession not in excess of $0.45 per Common Share. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of per
Common Share on sales to certain other dealers. If all of the Common Shares
are not sold at the initial offering price, the representatives may change the
public offering price and other selling terms.
30
<PAGE>
Investors must pay for any Common Shares purchased on or before May 28, 1999.
In connection with this offering, Nuveen may perform clearing services without
charge for brokers and dealers for whom it regularly provides clearing
services that are participating in the offering as members of the selling
group.
The Fund has granted to the Underwriters an option, exercisable for 45 days
from the date of this Prospectus, to purchase up to additional Common
Shares at the public offering price less the underwriting discount. The
Underwriters may exercise such option solely for the purpose of covering over-
allotments, if any, in connection with this offering. To the extent such
option is exercised, each Underwriter will be obligated, subject to certain
conditions, to purchase a number of additional Common Shares approximately
proportionate to such Underwriter's initial purchase commitment.
The Fund and Nuveen Advisory have agreed that, for a period of 180 days
from the date of this Prospectus, they will not, without the prior written
consent of Salomon Smith Barney Inc., on behalf of the Underwriters, dispose
of or hedge any Common Shares or any securities convertible into or
exchangeable for Common Shares. Salomon Smith Barney Inc. in its sole
discretion may release any of the securities subject to these agreements at
any time without notice.
Prior to the offering, there has been no public market for the Common
Shares. Consequently, the initial public offering price for the Common Shares
was determined by negotiation among the Fund, Nuveen Advisory and the
representatives. There can be no assurance, however, that the price at which
the Common Shares will sell in the public market after this offering will not
be lower than the price at which they are sold by the Underwriters or that an
active trading market in the Common Shares will develop and continue after
this offering. The Common Shares have been approved for listing on the New
York Stock Exchange, subject to official notice of issuance.
The Fund and Nuveen Advisory have each agreed to indemnify the several
Underwriters or contribute to losses arising out of certain liabilities,
including liabilities under the Securities Act.
The Fund has agreed to pay the Underwriters $75,000 as partial
reimbursement of expenses incurred in connection with the offering. Nuveen has
agreed to pay (i) all organizational expenses and (ii) offering costs (other
than sales load) that exceed $0.02 per share.
In connection with the requirements for listing the Fund's Common Shares on
the New York Stock Exchange, the Underwriters have undertaken to sell lots of
100 or more Common Shares to a minimum of 2,000 beneficial owners in the
United States. The minimum investment requirement is 100 Common Shares.
Certain Underwriters may make a market in the Common Shares after trading
in the Common Shares has commenced on the New York Stock Exchange. No
Underwriter is, however, obligated to conduct market-making activities and any
such activities may be discontinued at any time without notice, at the sole
discretion of the Underwriter. No assurance can be given as to the liquidity
of, or the trading market for, the Common Shares as a result of any market-
making activities undertaken by any Underwriter. This Prospectus is to be used
by any Underwriter in connection with the offering and, during the period in
which a prospectus must be delivered, with offers and sales of the Common
Shares in market-making transactions in the over-the-counter market at
negotiated prices related to prevailing market prices at the time of the sale.
The Underwriters have advised the Fund that, pursuant to Regulation M under
the Securities Exchange Act of 1934, as amended, certain persons participating
in the offering may engage in
31
<PAGE>
transactions, including stabilizing bids, covering transactions or the
imposition of penalty bids, which may have the effect of stabilizing or
maintaining the market price of the Common Shares at a level above that which
might otherwise prevail in the open market. A "stabilizing bid" is a bid for
or the purchase of the Common Shares on behalf of an Underwriter for the
purpose of fixing or maintaining the price of the Common Shares. A "covering
transaction" is a bid for or purchase of the Common Shares on behalf of an
Underwriter to reduce a short position incurred by the Underwriters in
connection with the offering. A "penalty bid" is a contractual arrangement
whereby if, during a specified period after the issuance of the Common Shares,
the Underwriters purchase Common Shares in the open market for the account of
the underwriting syndicate and the Common Shares purchased can be traced to a
particular Underwriter or member of the selling group, the underwriting
syndicate may require the Underwriter or selling group member in question to
purchase the Common Shares in question at the cost price to the syndicate or
may recover from (or decline to pay to) the Underwriter or selling group
member in question any or all compensation (including, with respect to a
representative, the applicable syndicate management fee) applicable to the
Common Shares in question. As a result, an Underwriter or selling group member
and, in turn, brokers may lose the fees that they otherwise would have earned
from a sale of the Common Shares if their customer resells the Common Shares
while the penalty bid is in effect. The Underwriters are not required to
engage in any of these activities, and any such activities, if commenced, may
be discontinued at any time.
The underwriting agreement provides that it may be terminated in the
absolute discretion of the representatives without liability on the part of
any Underwriter to the Fund or Nuveen Advisory if, prior to delivery of and
payment for the Common Shares, (i) trading in securities generally on the New
York Stock Exchange, American Stock Exchange, Nasdaq National Market or the
Nasdaq Stock Market shall have been suspended or materially limited, (ii)
additional material governmental restrictions not in force on the date of the
Underwriting Agreement have been imposed upon trading in securities generally
or a general moratorium on commercial banking activities in New York shall
have been declared by either federal or state authorities or (iii) any
outbreak or material escalation of hostilities or other international or
domestic calamity, crisis or change in political, financial or economic
conditions, occurs, the effect of which is such as to make it, in the judgment
of the representatives, impracticable or inadvisable to commence or continue
the offering of the Common Shares at the offering price to the public set
forth on the cover page of the Prospectus or to enforce contracts for the
resale of the Common Shares by the Underwriters.
Representatives that sell at least a specified number of Common Shares will
share in the syndicate management fee based on the respective number of shares
sold by them.
The Fund anticipates that from time to time the representatives of the
Underwriters and certain other Underwriters may act as brokers or dealers in
connection with the execution of the Fund's portfolio transactions after they
have ceased to be Underwriters and, subject to certain restrictions, may act
as brokers while they are Underwriters.
John Nuveen & Co. Incorporated, one of the representatives of the
Underwriters, is the parent company of Nuveen Advisory.
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
32
<PAGE>
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 courier).
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 Skadden, Arps, Slate, Meagher & Flom LLP, Boston,
Massachusetts. Bell, Boyd & Lloyd and Skadden, Arps, Slate, Meagher & Flom LLP
may rely as to certain matters of Massachusetts law on the opinion of Bingham
Dana LLP, Boston, Massachusetts, and as to certain matters of New York law on
the opinion of Edwards & Angell, New York, New York.
33
<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-21
Management of the Fund............................................... B-23
Investment Adviser................................................... B-27
Portfolio Transactions............................................... B-28
Distributions........................................................ B-29
Description of Shares................................................ B-30
Certain Provisions in the Declaration of Trust....................... B-33
Repurchase of Fund Shares; Conversion to Open-End Fund............... B-34
Tax Matters.......................................................... B-36
Performance Related and Comparative Information...................... B-40
Experts.............................................................. B-40
Additional Information............................................... B-40
Report of Independent Auditors....................................... B-41
Financial Statements................................................. B-42
Ratings of Investments (Appendix A).................................. A-1
Taxable Equivalent Yield Table (Appendix B).......................... B-1
Hedging Strategies and Risks (Appendix C)............................ C-1
</TABLE>
34
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You should rely only on the information contained in this Prospectus. The Fund
has not authorized anyone to provide you with different information. The Fund
is not making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information provided by this Prospec-
tus is accurate as of any date other than the date on the front of this Pro-
spectus.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary......................................................... 3
Summary of Fund Expenses................................................... 8
The Fund................................................................... 9
Use of Proceeds............................................................ 9
The Fund's Investments..................................................... 9
MuniPreferred Shares and Leverage.......................................... 12
Risks...................................................................... 14
How the Fund Manages Risk.................................................. 18
Management of the Fund..................................................... 20
Net Asset Value............................................................ 22
Distributions.............................................................. 22
Dividend Reinvestment Plan................................................. 23
Description of Shares...................................................... 24
Certain Provisions in the Declaration of Trust............................. 26
Repurchase of Common Shares; Conversion to Open-End Fund................... 27
Tax Matters................................................................ 28
Other Matters.............................................................. 29
Underwriting............................................................... 30
Custodian and Transfer Agent............................................... 32
Legal Opinions............................................................. 33
Table of Contents for the Statement of Additional Information.............. 34
</TABLE>
------------
Until 1999 (25 days after the date of this Prospectus), all dealers
that buy, sell or trade the Common Shares, 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
Nuveen New York
Dividend Advantage
Municipal Fund
Common Shares
--------
PROSPECTUS
May , 1999
--------
Salomon Smith Barney
John Nuveen & Co.
Incorporated
BT Alex. Brown
A.G. Edwards & Sons, Inc.
PaineWebber Incorporated
Prudential Securities
Gruntal & Co.
Raymond James & Associates, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FRH-ANY-4-99
<PAGE>
The information in this Statement of Additional Information is not
complete and may be changed. No person may 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-DATED May 25, 1999
Nuveen New York Dividend Advantage Municipal Fund
STATEMENT OF ADDITIONAL INFORMATION
Nuveen New York Dividend Advantage Municipal Fund (the "Fund") is a newly
organized, closed-end, diversified management investment company. On April 9,
1999, the name of the Fund was changed from Nuveen New York Municipal Advantage
Fund to Nuveen New York Dividend Advantage Municipal Fund. The Fund's investment
objective is 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
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 May __, 1999 (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 ascribed 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-21
Management of the Fund.................................. B-23
Investment Adviser...................................... B-27
Portfolio Transactions.................................. B-28
Distributions........................................... B-29
Description of Shares................................... B-30
Certain Provisions in the Declaration of Trust.......... B-33
Repurchase of Common Shares; Conversion to Open-End Fund B-34
Tax Matters............................................. B-36
Performance Related and Comparative Information......... B-40
Experts................................................. B-40
Additional Information.................................. B-40
Report of Independent Auditors.......................... B-41
Financial Statements.................................... B-42
Ratings of Investments (Appendix A)..................... A-1
Taxable Equivalent Yield Table (Appendix B)............. B-1
Hedging Strategies and Risks (Appendix C)............... C-1
</TABLE>
This Statement of Additional Information is dated May __, 1999
<PAGE>
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 organizational and offering costs. Nuveen has agreed to
pay (i) all organizational expenses and (ii) offering costs (other than sales
load) that exceed $0.02 per Common Share.
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--Portfolio
Investments," the income on which is subject to regular Federal income tax and
securities of other open or closed-end investment companies that invest
primarily in municipal bonds of the type in which the Fund may invest
directly.
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 creditworthiness. 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 appears to be
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 yield is higher then that available
on bonds bearing equivalent levels of interest rate risk, credit risk and other
forms of risk, and that their prices will ultimately reflect their true
creditworthiness. 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
holders of Common Shares. 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 or who
would become subject to such tax by purchasing Common Shares. 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 and except as otherwise
described in the Prospectus;
(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 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 (8)
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 issuer, 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 issuer, then such non-governmental issuer 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.
Under the Investment Company Act of 1940, the Fund may invest only up to
10% of its total assets in the aggregate in shares of other investment companies
and only up to 5% of its total assets in any one investment company, provided
the investment does not represent more than 3% of the voting stock of the
acquired investment company at the time such shares are purchased. As a
stockholder in any investment company, the Fund will bear its ratable share of
that investment company's expenses, and would remain subject to payment of the
Fund's management, advisory and administrative fees with respect to assets so
invested. Holders of Common Shares would therefore be subject to duplicative
expenses to the extent the Fund invests in other investment companies. In
addition, the securities of other investment companies may also be leveraged and
will therefore be subject to the same leverage risks described herein. As
described in the Prospectus in the section entitled "Risks", the net asset value
and market value of leveraged shares will be more volatile and the yield to
shareholders will tend to fluctuate more than the yield generated by unleveraged
shares.
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:
B-4
<PAGE>
(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.
(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.
(6) Invest in inverse floating rate securities (which are
securities that pay interest at rates that vary inversely with changes in
prevailing short-term tax-exempt interest rates and which represent a leveraged
investment in an underlying municipal bond).
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.
B-5
<PAGE>
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 (at least 95%
of its assets) in such tax-exempt municipal bonds. The Fund will invest at least
80% of its net assets in investment grade quality municipal bonds rated as such
at the time of investment. Investment grade quality means 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, at
the time of investment, 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 of
below investment grade quality (Ba/BB or below) 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 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. 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. The Fund will be more dependent on
Nuveen Advisory's research and analysis when investing in these 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
B-6
<PAGE>
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 and securities of other open or closed-end
investment companies that invest primarily in municipal bonds of the type in
which the Fund may invest directly. 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 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 creditworthiness. 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 yield is higher than that available on bonds
bearing equivalent levels of interest rate risk, credit risk and other forms of
risk, and that their prices will ultimately reflect their true value.
B-7
<PAGE>
The Fund has not established any limit on the percentage of its portfolio
investments that may be invested in municipal bonds subject to the federal
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
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.
The Fund may also invest in securities of other open or closed-end
investment companies that invest primarily in municipal bonds of the type in
which the Fund may invest directly. The Fund will generally select obligations
which may not be redeemed at the option of the issuer for approximately seven to
nine years.
B-8
<PAGE>
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 date
specified thereon. Under current FDIC regulations, the maximum insurance
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
B-9
<PAGE>
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:
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.
B-10
<PAGE>
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
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.
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.
B-11
<PAGE>
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. Successful implementation of most
hedging strategies would generate taxable income, and the Fund has no present
intention to use these strategies. For further information regarding these
investment strategies and risks presented thereby, see Appendix C to this
Statement of Additional Information.
Factors Pertaining to New York
The following information is a brief summary of factors affecting the
economy of New York City (the "City') or New York State (the "State" or "New
York"). Other factors will affect issuers. The summary is based primarily upon
one or more of the most recently publicly available offering statements relating
to debt offerings of State issuers, however, it has not been updated. The Fund
has not independently verified this information.
The State, some of its agencies, instrumentalities and public authorities
and certain of its municipalities have sometimes faced serious financial
difficulties that could have an adverse effect on the sources of payment for or
the market value of the New York Municipal Bonds in which the Fund invests.
New York City
General. More than any other municipality, the fiscal health of the City
has a significant effect on the fiscal health of the State. The City's current
financial plan assumes that after noticeable improvements in the City's economy
during calendar years 1997 and 1998, economic growth will slow, with local
employment increasing modestly through fiscal year 2002.
For each of the 1981 through 1998 fiscal years, the City had an operating
surplus, before discretionary transfers, and achieved balanced operating results
as reported in accordance with generally accepted accounting principles ("GAAP")
after discretionary transfers. The City has been required to close substantial
gaps between forecast revenues and forecast expenditures in order to maintain
balanced operating results. There can be no assurance that the City will
continue to maintain balanced operating results as required by State law without
reductions in City services or entitlement programs or tax or other revenue
increases that could adversely affect the City's economic base.
B-12
<PAGE>
On November 17, 1998, more than five months after the start of the City's
fiscal year, New York City adopted a 1999 fiscal year (July 1, 1998 to June 30,
1999) budget, which provided for $34.7 billion in spending. For fiscal year 1999
an operating surplus of $2.0 billion is projected. On April 22, 1999, the Mayor
outlined his proposed $35.3 billion Executive Budget for fiscal year 2000, (July
1, 1999 to June 30, 2000). The 1999-2000 budget proposal includes several tax
reductions including residential estate and property tax relief aggregating an
estimated $180 million, sales tax reductions aggregating an estimated $123
million and business tax relief aggregating an estimated $98 million. On May 17,
1999, the New York State Legislature enacted legislation repealing the New York
City income tax on New York State residents who work, but do not reside, in New
York City. Governor George Pataki has stated that he would sign the legislation.
It is estimated that the repeal would reduce revenues to New York City by
approximately $210 million. If the effect of the legislation is to invalidate
the income tax as it remains applicable to out of state residents who work in
New York City through subsequent judicial determination that the income tax in
its revised form discriminates against out of state residents, the reduction in
revenues to New York City would then aggregate an estimated $360 million. The
Mayor of the City of New York and the Speaker of the City Council have stated
that they will commence litigation to challenge the legislation.
Pursuant to the laws of the State, the Mayor is responsible for preparing
the City's financial plan, including the City's current financial plan for the
1999 through 2003 fiscal years (the "1999-2003 Financial Plan", "Financial Plan"
or "City Financial Plan"). The City's projections set forth in the City
Financial Plan are based on various assumptions and contingencies that are
uncertain and 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 annual cash flow and financing requirements.
City's Financing Program. Implementation of the City Financial Plan is also
dependent upon the City's ability to market its securities successfully in the
public credit markets. The City's financing program for fiscal years 1999
through 2003 contemplates the issuance of $7.3 billion of general obligation
bonds, $5.4 billion of bonds to be issued by the New York City Transitional
Finance Authority (the "Transitional Finance Authority") and $2.5 billion of
bonds to be issued by a new entity and paid from revenues pursuant to a
settlement of litigation with the four leading cigarette companies. In 1997, the
State enacted the New York City Transitional Finance Authority Act (the "Finance
Authority Act"), which created the Transitional Finance Authority, to assist the
City in keeping the City's indebtedness within the forecast level of the
constitutional restrictions on the amount of debt the City is authorized to
incur. A challenge to the constitutionality of the Finance Authority Act was
unsuccessful with Plaintiff's motion for leave to appeal with the Court of
Appeals adverse judgments in lower trial and appellate courts being was denied
on December 22, 1998. Even with the capacity of the Transitional Finance
Authority, the City may be required temporarily to delay entering into new
contractual commitments at the end of fiscal year 1999 and, without additional
legally authorized borrowing capacity, under projections (current as
B-13
<PAGE>
of December 19, 1998), would reach the limit of its capacity to enter into new
contractual commitments in fiscal year 2000. In addition, the City issues
revenue notes and tax anticipation notes to finance seasonal working capital
requirements. The success of projected public sales of City bonds and notes, New
York City Municipal Water Finance Authority (the "Water Authority") bonds and
Transitional Finance Authority bonds will be subject to prevailing market
conditions. The City's planned capital and operating expenditures are dependent
upon the sale of its general obligation bonds and notes, and the Water Authority
and Transitional Finance Authority bonds.
1998 Fiscal Year. For the 1998 fiscal year (July 1, 1997 - June 30, 1998)
the City had an operating surplus, before discretionary and other transfers, and
achieved balanced operating results, after discretionary and other transfers, in
accordance with GAAP. The 1998 fiscal year is the eighteenth year that the City
has achieved an operating surplus, before discretionary and other transfers, and
balanced operating results, after discretionary and other transfers.
1999-2003 Financial Plan. On January 28, 1999, the City released the
Financial Plan, which relates to the City and certain entities which receive
funds from the City. The City Financial Plan is a modification to the financial
plan submitted to the New York State Financial Control Board (the "Control
Board") on June 26, 1998. The City Financial Plan projects revenues and
expenditures for the 1999 fiscal year balanced in accordance with GAAP, and
projects budget gaps of $1.4 billion, $1.6 billion and $1.2 billion for the 2001
through 2003 fiscal years, respectively.
The City's projected budget gaps for the 2002 and 2003 fiscal years do not
reflect the savings expected to result from prior years' programs to close the
gaps set forth in the City Financial Plan. Thus, for example, recurring savings
anticipated from the actions which the City proposes to take to balance the
fiscal year 2001 budget are not taken into account in projecting the budget gaps
for the 2001 and 2003 fiscal years.
The 1999-2003 Financial Plan includes a proposed discretionary transfer in
the 1999 fiscal year of $1.6 billion to pay debt service due in the fiscal year
2000, for budget stabilization purposes, and a proposed discretionary transfer
in fiscal year 2000 to pay debt service due in fiscal year 2001 totaling $345
million. In addition, the Financial Plan reflects enacted and proposed tax
reduction programs totaling $338 million, $410 million, $461 million and $473
million in fiscal years 2000 through 2003, respectively, including the
elimination of the City sales tax on all clothing as of December 1, 1999, and
the extension of current tax reductions for owners of cooperative and
condominium apartments starting in fiscal year 2000, which are subject to State
legislative approval, reduction of the commercial rent tax commencing in fiscal
year 2000, and a $100 million annual tax reduction program, to be based on the
advice of a tax reform task force, starting in fiscal year 2000.
Assumptions. The 1999-2003 Financial Plan is based on numerous assumptions,
including the condition of the City's and the regions' economies and a modest
employment recovery and the concomitant receipt of economically sensitive tax
revenues in the amount projected. The 1999-2003 Financial Plan is subject to
various other uncertainties and contingencies relating to, among other factors,
the extent, if any, to which wage increases for City employees exceed the annual
wage costs assumed for the 1999 through 2003 fiscal years; continuation of
projected interest earnings assumptions for pension fund assets and current
assumptions with respect to wages for City employees affecting the City's
B-14
<PAGE>
required pension fund contributions; the willingness and ability of the State to
provide the aid contemplated by the Financial Plan and to take various other
actions to assist the City; the ability of Health and Hospitals Corporation, the
Board of Education and other such agencies to maintain balanced budgets; the
willingness of the Federal government to provide the amount of federal aid
contemplated in the Financial Plan; the impact on City revenues and expenditures
of Federal and State welfare reform and any future legislation affecting
Medicare or other entitlement programs; the ability of the City to implement
cost reduction initiatives; the success with which the City controls
expenditures; the impact of conditions in the real estate market on real estate
tax revenues and unanticipated expenditures that may be incurred as a result of
the need to maintain the City's infrastructure. Certain of these assumptions
have been questioned by the City Comptroller and other public officials.
The Financial Plan assumes (i) approval by the Governor and the State
Legislature of the extension of 14% personal income surcharge, which is
scheduled to expire on December 31, 1999, and which is projected to provide
revenue of $175 million, $536 million, $540 million and $548 million in the 2000
through 2003 fiscal years, respectively; (ii) collection of the projected rent
payments for the City's airports, totaling $365 million, $185 million and $155
million in the 2001 through 2003 fiscal years, respectively, a substantial
portion of which depend on the successful completion of negotiations with The
Port Authority of New York and New Jersey or the enforcement of the City's
rights under the existing leases through pending legal actions; (iii) State and
Federal approval of the State and Federal gap-closing actions proposed by the
City in the Financial Plan; and (iv) receipt of the tobacco settlement finds
providing revenues or expenditure offsets in annual amounts ranging between $250
million and $300 million. In addition, the economic and financial condition of
the City may be affected by various financial, social, economic and political
factors which could have a material adverse affect on the City.
The Financial Plan assumes that after noticeable improvements in the City's
economy during calendar years 1997 and 1998, economic growth will slow, with
local employment increasing modestly during fiscal years 2000 through 2003. This
assumption is based on a slow recovery in the Asian and Latin American economies
starting in fiscal year 2000 and continuing restrictive monetary policy.
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 will be received in the amounts anticipated.
Municipal Unions. The Financial Plan reflects the costs of the settlements
and arbitration awards with certain municipal unions and other bargaining units,
which together represent approximately 98% of the City's workforce, and assumes
that the City will reach agreement with its remaining municipal unions under
terms which are generally consistent with such settlements and arbitration
awards. These contracts are approximately five years in length and have a total
cumulative net increase of 13%. Assuming the City reaches similar settlements
with its remaining municipal unions, the cost of all settlements for all City-
funded employees, as reflected in the Financial Plan, would total $1.2 billion
in the 1999 fiscal year and exceed $2 billion thereafter. The Financial Plan
provides no additional wage increases for City employees after their contracts
expire in fiscal years 2000 and 2001.
B-15
<PAGE>
Intergovernmental Aid. The City depends on the State for aid both to enable
the City to balance its budget and to meet its cash requirements. There can be
no assurance that there will not be reductions in State aid to the City from
amounts currently projected; or interim appropriations enacted; or that any such
reductions or delays will not have adverse effects on the City's cash flow or
expenditures. In addition, the Federal budget negotiation process could result
in reductions or delays in the receipt of Federal grants which would have
additional adverse effects on the City's cash flow or revenues.
Y2K. The year 2000 presents potential operational problems for computerized
data files and computer programs which may recognize the year 2000 as 1900,
resulting in possible system failures or miscalculations. In November 1996, the
City's Year 2000 Project Office was established to develop a project
methodology, coordinate the City's agencies, review plans and oversee
implementation of year 2000 projects. At that time, the City also evaluated the
capabilities of the City's Integrated Financial Management System and Capital
Projects Information System, which are the City's central accounting, budgeting
and payroll systems, identified the potential impact of the year 2000 on these
systems and developed a plan to replace these systems with a new system which is
expected to be year 2000 compliant prior to December 31, 1999. The City has also
performed an assessment of its other mission-critical and high priority computer
systems in connection with making them year 2000 compliant, and the City's
agencies have developed and begun to implement both strategic and operational
plans for non-compliant application systems. In addition, the City Comptroller
is conducting audits of the progress of the City agencies in achieving year 2000
compliance. While these efforts may involve additional costs beyond those
assumed in the Financial Plan, the City believes, based on currently available
information, that such additional costs will not be material.
The Mayor's Office of Operations has stated that work has been completed,
and all or part of the necessary testing has been performed, on approximately
54% of the mission-critical and high priority systems of Mayoral agencies. The
City's computer systems may not all be year 2000 compliant in a timely manner
and there could be an adverse impact on City operations or revenues as a result.
The City is in the process of developing contingency plans for all mission-
critical and high priority systems, if such systems are not year 2000 compliant
by pre-determined dates. The City is also in the process of contacting its
significant third party vendors regarding the status of their compliance. Such
compliance is not within the City's control, and therefore the City cannot
assure that there will not be any adverse effects on the City resulting from any
failure of these third parties.
Ratings. As of March 15, 1999, Moody's rated the City's outstanding general
obligation A3, Standard and Poor's rated such bonds A- and Fitch rated such
bonds A. In July 1995, Standard and Poor's revised downwards its ratings on
outstanding general obligations bonds of the City from A- to BBB+. In July 1998,
Standard and Poor's revised its rating of City bonds upward to A-. Moody's
rating of City bonds was revised in February 1998 to A3 from Baa1. Such ratings
reflect only the view of Moody's, Standard and Poor's and Fitch, from which an
explanation of the significance of such ratings may be obtained. There is no
assurance that such ratings will continue for any given period of time or that
they will not be revised downward or withdrawn entirely. Any such downward
revision or withdrawal could have an adverse effect on the market prices of City
bonds.
B-16
<PAGE>
Outstanding Indebtedness. As of March 15, 1999, the City and the Municipal
Assistance Corporation for the City of New York had respectively approximately
$25.8 and $3.8 billion of outstanding long-term debt. As of March 15, 1999, the
Water Authority had approximately $8.6 billion aggregate principal amount of
outstanding bonds, inclusive of subordinate second resolution bonds, and $600
million aggregate principal amount of outstanding commercial paper notes.
Water, Sewer and Waste. Debt service on Water Authority obligations is
secured by fees and charges collected from the users of the City's water and
sewer system. State and Federal regulations require the City's water supply to
meet certain standards to avoid filtration. The City's water supply now meets
all technical standards and the City has taken the position that increased
regulatory, enforcement and other efforts to protect its water supply will
prevent the need for filtration. On May 6, 1997, the U.S. Environmental
Protection Agency granted the City a filtration avoidance waiver through April
15, 2002 in response to the City's adoption of certain watershed regulations.
The estimated incremental costs to the City of implementing this Watershed
Memorandum of Agreement, beyond investments in the watershed which are planned
independently, is approximately $400 million. The City has estimated that if
filtration of the upstate water supply system is ultimately required, the
construction expenditures required could be between $4 billion and $5 billion.
Legislation has been passed which prohibits the disposal of solid waste in
any landfill located within the City after December 31, 2001. The Financial Plan
includes the estimated costs of phasing out the use of landfills located within
the City. A suit has been commenced against the City by private individuals
under the Resources Conservation and Recovery Act seeking to compel the City to
take certain measures, or alternatively, to close the Fresh Kills landfill. If
as a result of such litigation, the City is required to close the landfill
earlier than required by State legislation, the City could incur additional
costs during the Financial Plan period. Pursuant to Court order, the City is
currently required to recycle 2,100 tons per day of solid waste and is required
to recycle 3,400 tons per day by July 1999 and 4,250 tons per day by July 2001.
The City is currently recycling slightly over 2,100 tons per day of solid waste.
The City may seek to obtain amendments to Local Law No. 19 to modify this
requirement. If the City is unable to obtain such amendment and is required to
fully implement Local Law No. 19, the City may incur substantial costs.
Litigation. The City is currently a defendant in a significant number of
lawsuits. Such litigation includes, but is not limited to, routine litigation
incidental to the performance of its governmental and other functions, actions
commenced and claims asserted against the City arising out of constitutional
violations, allege torts, alleged breaches of contracts and other alleged
violations of law and condemnation proceedings and other tax and miscellaneous
actions. While the ultimate outcome and fiscal impact, if any, on the
proceedings and claims are not currently predictable, adverse determination in
certain of them might have a material adverse effect upon the City's ability to
carry out the City Financial Plan. As of June 30, 1998, the City estimated that
its potential future liability on account of outstanding claims amounted to
approximately $3.5 billion.
B-17
<PAGE>
New York State
1999-2000 Fiscal Year. The Governor presented his 1999-2000 Executive
Budget to the Legislature on January 27, 1999. The Executive Budget contains
financial projections for the State's 1998-99 through 2001-02 fiscal years, and
a proposed Capital Program and Financing Plan for the 1999-2000 through 2003-04
fiscal years. The Governor will prepare amendments to his Executive Budget, as
permitted by law. There can be no assurance that the Legislature will enact into
law the Executive Budget as proposed by the Governor, or that the State's budget
projections will not differ materially and adversely from the projections set
forth herein.
The 1999-2000 State financial plan (the "State Financial Plan") is
projected to have receipts in excess of disbursements on a cash basis in the
General Fund, after accounting for the transfer of available receipts from 1998-
99 to 1999-2000. Total General Fund receipts, including transfers from other
funds, are projected to be $38.81 billion, and increase of $2.03 billion over
projected receipts in the current fiscal year. General Fund disbursements,
including transfer to other funds, are recommended to grow by 1.4% to $37.14
billion, an increase of $528 million over 1998-99. State Funds spending is
projected to total $49.33 billion, an increase of over $867 million or 1.8% from
the current year. Under the Governor's recommendations, spending from All
Governmental Funds is also expected to grow by 1.8%, increasing by $1.3 billion
to $72.7 billion.
The State is expected to close the 1999-2000 fiscal year with a balance in
the General Fund of $2.36 billion. The balance is comprised of $1.79 billion in
tax reduction reserves, $473 million in the Tax Stabilization Reserve Fund and
$100 million in the Contingency Reserve Fund.
The State economic forecast has been modified for 1999 and 2000 from the
one used in earlier updates of the State Financial Plan. Continued growth is
expected in 1999 and 2000 for employment, wages, and personal income, although
the growth is expected to moderate from the 1998 pace. However, a continuation
of international financial and economic turmoil may result in a sharper slowdown
than currently projected. Personal income is estimated to have grown by 4.9% in
1998, fueled in part by a continued large increase in financial sector bonus
payments at the beginning of the year, and is projected to grow by 4.2% in 1999
and 4.0% in 2000. Increases in bonus payments in 1999 and 2000 are projected to
be modest, a distinct shift from the torrid rate of the last few years. Overall
employment growth is anticipated to grow at a modest rate, reflecting the
slowing growth in the national economy, continued spending restraint in
government, and restructuring in the manufacturing, health care, social service
and banking sectors.
Many uncertainties exist in any forecast of the State economy. Given the
recent volatility in the international economy and domestic financial markets,
such uncertainties are particularly present at this time. The timing and impact
of changes in economic conditions are difficult to estimate with a high degree
of accuracy. Unforeseeable events may occur. The actual rate of change, if any,
of the categories that form the basis of these forecasts may differ
substantially and adversely from the outlook described herein.
B-18
<PAGE>
Special Considerations. On July 23, 1998, the New York State Comptroller
issued a report which noted that a significant cause for concern is the budget
gaps in the 1999-2000 and 2000-2001 fiscal years, which the State Comptroller
projected at $1.8 billion and $5.5 billion, respectively, after excluding the
uncertain receipt of $250 million of funds from the tobacco settlement assumed
in the State's projections. The State Comptroller also stated that if the
securities industry or economy slows, the size of the gaps would increase.
According to the State Division of the Budget, uncertainties with regard to
the economy present the largest potential risk to budget balance in New York
State. The Executive Budget identified various risks, including either a
financial market or broader economic correction during the State's financial
plan period, which risks are heightened by the relatively lengthy expansion
currently underway, and the financial turmoil in Asia. In addition, the
Executive Budget noted that a normal forecast error of one percentage point in
the expected growth rate could raise or lower receipts by over $1 billion by the
last year of projection period, and that funding is not included for any costs
associated with new collective bargaining agreements after the expiration of the
current contracts at the end of the 1998-1999 fiscal year. Furthermore, the
securities industry is more important to the New York economy than the national
economy, and a significant deterioration in stock market performance could
ultimately produce adverse changes in wage and employment levels.
Owing to these and other factors, the State may face substantial potential
budget gaps in future years resulting from a significant disparity between tax
revenues from a lower recurring receipts base and the spending required to
maintain State programs at mandated levels. Any such recurring imbalance would
be exacerbated by the use by the State of nonreccurring resources to achieve
budgetary balance in a particular fiscal year. To correct any recurring
budgetary imbalance, the State would need to take significant actions to align
recurring receipts and disbursements in future fiscal years.
Y2K. New York State is currently addressing "Year 2000" data processing
compliance issues. In 1996, the State created the Office of Technology to help
address the statewide technology issues, including the Year 2000 issue. OFT has
estimated that investments of at least $140 million will be required to bring
approximately 350 State mission-critical and high-priority computer systems not
otherwise scheduled for replacement into Year 2000 compliance. In fiscal year
1998-99, the State allocated over $117 million in centralized Year 2000 funding,
and in fiscal year 1999-2000 the State is planning to spend an additional $19
million for this purpose. As of December 1998, the State had completed 93% of
overall compliance effort for its mission-critical systems. As of December 1998,
the State had completed 70% of overall compliance effort on the high-priority
systems. Compliance testing is expected to be completed by the end of calendar
year 1999.
Ratings. As of March 15, 1999, Moody's had given the State's general
obligation bonds a rating of A2, Standard and Poor's had given the bonds a
rating of A and Fitch had rated such bonds A+. Such ratings reflect only the
view of Moody's, Standard and Poor's and Fitch from which an explanation of the
significance of such ratings may be obtained. There is no assurance that such
ratings will continue for any given period of time or that they will not be
revised downward or withdrawn entirely. Any such downward revision or withdrawal
could have an adverse effect on the market prices of State bonds.
B-19
<PAGE>
Litigation. The State is currently a defendant in a significant number of
lawsuits. 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.
State programs are frequently challenged on State and Federal constitutional
grounds. Adverse developments in legal proceedings or the initiation of new
proceedings could affect the ability of the State to maintain a balanced State
Financial Plan in any given fiscal year. There can be no assurance that an
adverse decision in one or more legal proceedings would not exceed the amount
the State reserves for the payment of judgments or materially impair the State's
financial operations. With respect to pending and threatened litigation, the
State has reported liabilities of $872 million for awarded and anticipated
unfavorable judgments, of which $90 million is expected to be paid within the
1998-99 fiscal year. The remainder, $782 million, is reported as a long-term
obligation of the State and represents an increase of $552 million from the
prior year.
Other Localities. Certain localities in addition to the City could have
financial problems leading to requests for additional State assistance during
the State's 1998-1999 fiscal year and thereafter. The potential impact on the
State of such actions by localities is not included in the projections of the
State receipts and disbursements in the State's 1998-1999 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers") resulted
in the creation of the Financial Control Board for 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.
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
B-20
<PAGE>
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 100%. 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.
Other Investment Companies
The Fund may invest in securities of other open or closed-end investment
companies that invest primarily in municipal bonds of the types in which the
Fund may invest directly. The Fund generally expects to invest in other
investment companies either during periods when it has large amounts of
uninvested cash, such as the period shortly after the Fund receives the proceeds
of the offering of its Common Shares or MuniPreferred Shares, or during periods
when there is a shortage of attractive, high-yielding municipal bonds available
in the market. As a stockholder in an investment company, the Fund will bear its
ratable share of that investment company's expenses and would remain subject to
payment of the Fund's management, advisory and administrative fees with respect
to assets so invested. Common Shareholders would therefore be subject to
duplicative expenses to the extent the Fund invests in other investment
companies. Nuveen Advisory will take expenses into account when evaluating the
investment merits of an investment in the investment company relative to
available municipal bond investments. In addition, the securities of other
investment companies may also be leveraged and will therefore be subject to the
same leverage risks described herein. As described in the Prospectus in the
section entitled "Risks," the net asset value and market value of leveraged
shares will be more volatile and the yield to shareholders will tend to
fluctuate more than the yield generated by unleveraged shares.
When-Issued and 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 15-45 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-21
<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 Fund may enter into
contracts to purchase municipal bonds on a forward basis (i.e., where settlement
will occur more than 60 days from the date of the transaction) only to the
extent that the Fund specifically collateralizes such obligations with a
security that is expected to be called or mature within sixty days before or
after the settlement date of the forward transaction. The commitment to purchase
securities on a when-issued, delayed delivery or forward basis may involve an
element of risk because no interest accrues on the bonds prior to settlement 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.
Zero Coupon Bonds
The Fund may invest in zero coupon bonds. A zero coupon bond is a bond that
does not pay interest for its entire life. The market prices of zero coupon
bonds are affected to a greater extent by changes in prevailing levels of
interest rates and thereby tend to be more volatile in price than securities
that pay interest periodically. In addition, because the Fund accrues income
with respect to these securities prior to the receipt of such interest, it may
have to dispose of portfolio securities under disadvantageous circumstances in
order to obtain cash needed to pay income dividends in amounts necessary to
avoid unfavorable tax consequences.
B-22
<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
seven, one of whom is an "interested person" (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* 50 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.
- ------------------------------------------------------------------------------------------------------------------------------
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 66 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-23
<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 66 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 51 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 38 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.
- ------------------------------------------------------------------------------------------------------------------------------
Peter H. D'Arrigo 31 Vice President Vice President of John Nuveen & Co. Incorporated (January 1999), prior
333 W. Wacker Drive and Treasurer thereto, Assistant Vice President (January 1997); formerly, Associate of
Chicago, IL 60606 John Nuveen & Co. Incorporated; Chartered Financial Analyst.
- ------------------------------------------------------------------------------------------------------------------------------------
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 35 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.
Corp.; Chartered Financial Analyst.
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen D. Foy 44 Vice President and Vice President of John Nuveen & Co. Incorporated; Certified Public
333 W. Wacker Drive Controller Accountant
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
J. Thomas Futrell 43 Vice President Vice President of Nuveen Advisory Corp.; Chartered Financial Analyst.
333 W. Wacker Drive
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-24
<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 36 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.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
B-25
<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, Assistant Secretary and Associate
333 W. Wacker Drive Secretary General Counsel of John Nuveen & Co. Incorporated;
Chicago, IL 60606 Vice President and Assistant Secretary of Nuveen
Advisory Corp., Vice President and Assistant
Secretary of Nuveen Institutional Advisory Corp.;
Assistant Secretary, The John Nuveen Company (since
May 1994); Chartered Financial Analyst.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Peter R. 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. Schwertfeger is also a director or trustee, as the case may be, of 100
Nuveen open-end and closed-end funds advised by Nuveen Advisory and Nuveen
Institutional Advisory Corp.
The other 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 - 26
<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>
Estimated Aggregate Estimated Total
Compensation From Compensation From Fund
Name of Trustee Fund* and Fund Complex**
--------------- ------------------- ----------------------
<S> <C> <C>
Robert P. Bremner $132 $68,000(1)
Lawrence H. Brown $132 $74,000
Anne E. Impellizzeri $132 $68,000(2)
Peter R. Sawers $132 $68,000(2)
William J. Schneider $132 $68,000(2)
Judith M. Stockdale $132 $68,000(3)
</TABLE>
___________________
* Based on the estimated compensation to be earned by the independent
trustees for the period from inception to the fiscal year ending 10/31/99 for
services to the Fund.
** Based on the estimated compensation paid to the trustees for the one
year period ending 12/31/99 for services to the open-end and closed-end funds
advised by Nuveen Advisory.
(1) Includes $7,871 in estimated deferred compensation.
(2) Includes $52,470 in estimated deferred compensation.
(3) Includes $13,118 in estimated deferred compensation.
The Fund has no employees. Its officers 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.
B-27
<PAGE>
Nuveen Advisory is a wholly-owned subsidiary of Nuveen, which is also a 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 brings over a century of expertise to the municipal bond market.
According to data from Strategic Insight, Nuveen is the leading sponsor of
exchange-traded municipal bond funds as measured by number of funds (57) and
fund assets under management ($26 billion). Overall, Nuveen and its affiliates
manage more than $55 billion in assets in a variety of products. 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 a publicly-traded
company located in St. Paul, Minnesota, and is principally engaged in providing
property-liability insurance through subsidiaries.
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:
<TABLE>
<CAPTION>
Average Daily Net Asset Value Management Fee
----------------------------- --------------
<S> <C>
For the first $125 million .6500%
For the next $125 million .6375%
For the next $250 million .6250%
For the next $500 million .6125%
For the next $1 billion .6000%
For assets over $2 billion .5750%
</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.
B-28
<PAGE>
For the first ten years of the Fund's operation, Nuveen Advisory has agreed
to reimburse the Fund for fees and expenses in the amounts, and for the time
periods, set forth below:
<TABLE>
<CAPTION>
Percentage Percentage
Reimbursed Reimbursed
(as a percentage (as a percentage
of average of average
Year Ending daily net Year Ending daily net
July 31, assets) July 31, assets)
----------- ---------------- ----------- ----------------
<S> <C> <C> <C>
1999* .30% 2005 0.25%
2000 .30% 2006 0.20%
2001 .30% 2007 0.15%
2002 .30% 2008 0.10%
2003 .30% 2009 0.05%
2004 .30%
</TABLE>
-------------
*From the commencement of operations.
Reducing Fund expenses in this manner will tend to increase the amount of
income available for the Common Shareholders. Nuveen Advisory has not agreed to
reimburse the Fund for any portion of its fees and expenses beyond July 31,
2009.
PORTFOLIO TRANSACTIONS
Nuveen Advisory is responsible for decisions to buy and sell securities for
the Fund and for the placement of the Fund's securities business, the
negotiation of the prices to be paid for principal trades and the allocation of
its transactions among various dealer firms. 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 through other means. Portfolio securities will not
be purchased from Nuveen or its affiliates except in compliance with the 1940
Act.
The Fund expects that substantially 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.
It is the policy of Nuveen Advisory to seek the best execution under the
circumstances of each trade. Nuveen Advisory evaluates price as the primary
consideration, with the financial condition, reputation and responsiveness of
the dealer considered secondary in determining best execution. Given the best
execution obtainable, it will be Nuveen Advisory's practice to select dealers
which, in addition, furnish research information (primarily credit analyses
of issuers and general economic reports) and statistical and other services to
Nuveen Advisory. It is not possible to place a dollar value on information and
B-29
<PAGE>
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.
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.
Nuveen Advisory may manage other investment accounts and investment
companies for other clients which have investment objectives similar to those of
the Fund. Subject to applicable laws and regulations. Nuveen Advisory seeks to
allocate portfolio transactions equitably whenever concurrent decisions are made
to purchase or sell securities by the Fund and another advisory account. In
making such allocations the main factors to be considered will be the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment and the size of
investment commitments generally held. 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 Board of trustees that the
benefits available from Nuveen Advisory's organization will outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
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 that may be invested in a particular issue. In
addition, purchases of securities made pursuant to the terms of the Rule must be
approved at least quarterly by the board of Trustees, 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 45 days, and paid
approximately 60 to 90 days, from the completion of the offering, depending on
market conditions. 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 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-30
<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 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.
The Common Shares have been approved for listing on the New York Stock
Exchange, subject to notice of issuance. 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 the sales load and
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 factors
B-31
<PAGE>
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 "MuniPreferred Shares and
Leverage" and "The Fund's Investments--Municipal Bonds."
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 35% of the Fund's
capital immediately after the time the MuniPreferred Shares are issued) within
approximately one to three 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 their 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 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 preference on
distribution, liquidation preference, voting rights and redemption provisions of
the MuniPreferred Shares will likely be as stated below.
Preference on Distribution. The MuniPreferred Shares have complete priority
over the Common Shares as to distribution of assets.
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-32
<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, will 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 a majority 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) authorize or issue any class or series ranking prior to the MuniPreferred
Shares. 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 of 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 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 they are 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 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."
B-33
<PAGE>
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
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
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), (4) in certain circumstances, a termination of the Fund, or a
series or class of the Fund or (5) removal of trustees, and then only for cause,
unless, with respect to (1) through (4), 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 (or, in the case of removing a trustee, when the trustee
has been elected by only one class), only the required vote by the applicable
class or series will be required. None of the foregoing provisions may be
amended except by the vote of at least two-thirds of the Common Shares and
MuniPreferred Shares, voting together as a single class. 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.
B-34
<PAGE>
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 market 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.
Reference should be made to the Declaration on file with the Securities and
Exchange Commission for the full text of these provisions.
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 dividend levels (which are in turn
affected by expenses), net asset value, call protection, price, dividend
stability, relative demand for and supply of such shares in the market, general
market and economic conditionss and other factors. Because shares of a closed-
end investment company 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. 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-35
<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, 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 the Declaration or By-laws.
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
B-36
<PAGE>
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 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 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.
TAX MATTERS
Federal Income Tax Matters
The following discussion of federal income tax matters is based upon the
advice of Bell, Boyd & Lloyd, special counsel to the Fund.
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 or 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, securities or currencies (the "90% gross income test").
B-37
<PAGE>
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 Common 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 Common Shareholder's
gross income and the tax deemed paid by the Common 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-38
<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
B-39
<PAGE>
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 Common
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 Common 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.
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 Common
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
Common Shareholder purchases other shares of the Fund (whether through
reinvestment of distributions or otherwise) or the Common 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.
B - 40
<PAGE>
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.
New York 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 New York 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 received 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
B - 41
<PAGE>
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 Corporation 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. Common Shares will not be subject to property taxes imposed by New
York State or City. Interest on indebtedness incurred to purchase, or continued
to carry, Common Shares generally will not be deductible for New York personal
income tax purposes.
PERFORMANCE RELATED AND COMPARATIVE INFORMATION
The Fund may be a suitable investment for a shareholder that is thinking of
adding bond investments to his portfolio to balance the appreciated stocks that
the shareholder is holding. New York municipal bonds can provide double, or even
triple, tax-free income (exempt from regular federal and New York City and State
income taxes) for New York residents. Because the Fund expects that a
substantial portion of its investments will pay interest that is taxable under
the federal alternative minimum tax, the Fund may not be a suitable investment
for shareholders that are subject to the federal alternative minimum tax.
The Fund may quote certain performance-related information and may compare
certain aspects of its portfolio and structure to other substantially similar
closed-end funds as categorized by Lipper, Inc. ("Lipper"), Morningstar or other
independent services. Comparison of the Fund to an alternative investment should
be made with consideration of differences in features and expected performance.
The Fund may obtain data from sources or reporting services, such as Bloomberg
Financial ("Bloomberg") and Lipper, that the Fund believes to be generally
accurate.
B - 42
<PAGE>
Past performance is not indicative of future results. At the time Common
Shareholders sell their shares, they may be worth more or less than their
original investment.
Share Prices and Dividends of Similar Funds
(as of March 31, 1999)
<TABLE>
<CAPTION>
Adjusted Not Adjusted
----------------------- -----------------------
Ticker sym Div Close price Div Close price
<S> <C> <C> <C> <C>
NNY $0.7830 $15.09 $0.0435 $10.06
DNM $0.8100 $14.91 $0.0450 $ 9.94
NNP $1.0380 $17.25 $0.0865 $17.25
VNM $0.9000 $16.31 $0.0750 $16.31
VTN $0.9480 $17.31 $0.0790 $17.31
PMN $0.8100 $14.31 $0.0675 $14.31
RNY $0.8175 $15.63 $0.0681 $15.63
VNV $0.7800 $15.13 $0.0650 $15.13
IQN $0.7500 $14.19 $0.0625 $14.19
MUN $0.7562 $14.88 $0.0630 $14.88
</TABLE>
An analysis of New York closed-end municipal fun ds represented in the
Lipper New York Municipal Debt Funds category show the positive correlation
between higher dividends and higher market prices. For comparative purposes, the
prices and dividends for each fund noted under the heading "Adjusted" have been
normalized as necessary to calibrate each fund's initial offering price with the
Fund's $15 initial offering price.
Market price is affected by many factors, including market interest rates,
income tax rates, the common shares' net asset value and dividend stability, the
portfolio's duration, call protection and credit quality, analyst
recommendations, and other market factors. Any of these factors individually or
collectively may, at any given time, be as or more important to market price
than annualized dividend rates. A positive correlation does not necessarily mean
that higher dividends cause or result in higher market prices, and you should
not assume that any particular level of dividends will result in any particular
market price. In addition, the positive correlation between dividends and market
price of this group of funds does not necessarily mean that every fund in the
group exhibits a positive correlation between dividend and market price, and it
is possible that the Fund may not exhibit such a correlation. There can be no
assurance that the correlation suggested by the above data will continue in the
future.
B - 43
<PAGE>
EXPERTS
The Statement of Net Assets of the Fund as of May 21, 1999 appearing in
this Statement of Additional Information has been audited by Ernst & Young LLP,
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. Ernst & Young LLP, located at
223 South Wacker Drive, Chicago, Illinois 60606 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, 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 - 44
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholder
Nuveen New York Dividend Advantage Municipal Fund
We have audited the accompanying statement of net assets of the Nuveen New York
Dividend Advantage Municipal Fund (the Fund) as of May 21, 1999. This statement
of net assets is the responsibility of the Fund's management. Our responsibility
is to express an opinion on this statement of net assets based on our audit.
We conducted our audit in accordance with generally accepted accounting
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of net assets is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of net assets. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as the overall statement of net assets presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statement of net assets referred to above presents fairly,
in all material respects, the financial position of the Fund at May 21, 1999, in
conformity with generally accepted accounting principles.
ERNST & YOUNG
Chicago, Illinois
May 21, 1999
B - 45
<PAGE>
NUVEEN NEW YORK DIVIDEND ADVANTAGE MUNICIPAL FUND
Statement of Net Assets
May 21, 1999
<TABLE>
<CAPTION>
ASSETS:
- ------
<S> <C>
Cash................................................................ $100,021
--------
NET ASSETS............................................................ $100,021
========
NET ASSETS REPRESENTS:
Cumulative preferred shares, $.01 par value; unlimited number
of shares authorized, no shares outstanding.................... $ -
Common Shares, $.01 par value; unlimited number of shares
authorized, shares outstanding................................. 70
Paid-in surplus.................................................. 99,951
--------
$100,021
========
Net asset value per Common Share outstanding ($100,021 divided
by 6,982.238 Common Shares outstanding)............................. $ 14.325
========
</TABLE>
- --------
NOTES--
The Fund was organized as a Massachusetts business trust on December 1, 1998
and has been inactive since that date except for matters relating to its
organization and registration as a closed-end, diversified management
investment company under the Investment Company Act of 1940, as amended, and
the Securities Act of 1933, as amended, and the sale of 6,982.238 Common
Shares to Nuveen Advisory Corp. (the Adviser), the Fund's investment adviser.
All organization costs (approximately $10,000) and offering costs, limited to
$0.02 per common share, incurred by the Fund in connection with the initial
seeding will be absorbed by Nuveen. All other offering costs relating to the
Fund's offering of Common Shares, limited to $0.02 per Common Share, will be
reflected as a reduction of net assets at the time of the public offering of
Common Shares. All offering costs (other than sales load) that exceed $0.02
per Common Share will be absorbed by Nuveen.
The Fund is authorized by its Declaration of Trust to issue an unlimited
number of preferred shares having a par value of $.01 per share in one or more
classes or series, with dividend, liquidation preference and other rights as
determined by the Fund's Board of Trustees, by action of the Board of Trustees
without the approval of the Common Shareholders.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
Actual results may differ from these estimates.
B - 46
<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: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
category from Aa to B in the public finance sectors. The modifier 1
indicates that the issuer is in the higher end of its letter rating
category; the modifier 2 indicates a mid-range ranking; the modifier 3
indicates that the issuer is in the lower end of the letter ranking
category.
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 IBCA, Inc.--A brief description of the applicable Fitch IBCA, Inc.
("Fitch") ratings symbols and meanings (as published by Fitch) follows:
Long-Term Credit Ratings
Investment Grade
AAA Highest credit quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is
highly unlikely to be adversely affected by foreseeable events.
AA Very high credit quality. "AA" ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A High credit quality. "A" ratings denote a low expectation of credit risk.
The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher
ratings.
BBB Good credit quality. "BBB" ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances
and in economic conditions are more likely to impair this capacity. This
is the lowest investment-grade category.
A-7
<PAGE>
Speculative Grade
BB Speculative. "BB" ratings indicate that there is a possibility
of credit risk developing, particularly as the result of
adverse economic change over time; however, business or
financial alternatives may be available to allow financial
commitments to be met. Securities rated in this category are
not investment grade.
B Highly speculative. "B" ratings indicate that significant
credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however,
capacity for continued payment is contingent upon a sustained,
favorable business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained,
favorable business or economic developments. A "CC" rating
indicates that default of some kind appears probable. "C"
ratings signal imminent default.
DDD, DD, and D Default. The ratings of obligations in this category are based
on their prospects for achieving partial or full recovery in a
reorganization or liquidation of the obligor. While expected
recovery values are highly speculative and cannot be estimated
with any precision, the following serve as general guidelines.
"DDD" obligations have the highest potential for recovery,
around 90%-100% of outstanding amounts and accrued interest.
"DD" indicates potential recoveries in the range of 50%-90%,
and "D" the lowest recovery potential, i.e., below 50%.
Entities rated in this category have defaulted on some or all
of their obligations. Entities rated "DDD" have the highest
prospect for resumption of performance or continued operation
with or without a formal reorganization process. Entities rated
"DD" and "D" are generally undergoing a formal reorganization
or liquidation process; those rated "DD" are likely to satisfy
a higher portion of their outstanding obligations, while
entities rated "D" have a poor prospect for repaying all
obligations.
Short-Term Credit Ratings
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and thus
places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.
F1 Highest credit quality. Indicates the strongest capacity for timely
payment of financial commitments; may have an added "+" to denote any
exceptionally strong credit feature.
A-8
<PAGE>
F2 Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as in the
case of the higher ratings.
F3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could result
in a reduction to non-investment grade.
B Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.
C High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable
business and economic environment.
D Default. Denotes actual or imminent payment default.
Notes:
"+" or "-" may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to the "AAA" long-term rating
category, to categories below "CCC", or to short-term ratings other than "F1".
"NR" indicates that Fitch IBCA does not rate the issuer or issue in question.
"Withdrawn": A rating is withdrawn when Fitch IBCA deems the amount of
information available to be inadequate for rating purposes, or when an
obligation matures, is called, or refinanced.
RatingAlert: Ratings are placed on RatingAlert to notify investors that there is
a reasonable probability of a rating change and the likely direction of such
change. These are designated as "Positive", indicating a potential upgrade,
"Negative", for a potential downgrade, or "Evolving", if ratings may be raised,
lowered or maintained. RatingAlert is typically resolved over a relatively short
period.
A-9
<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
<TABLE>
<CAPTION>
Tax Rate 4.00% 4.50% 5.00% 5.50% 6.00%
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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%
In the table above, the taxable equivalent yields are calculated assuming that
the Fund's income dividends are 100% federally tax-free. To the extent that the
Fund were to invest in federally taxable investments (which it does not expect
to do), its taxable equivalent yield would be lower.
</TABLE>
<TABLE>
<CAPTION>
New York
(State Only)
Single Joint Federal Tax State Tax Combined Tax
Return Bracket Return Bracket Rate Rate Rate*
- ---------------- --------------- ------------- ---------- --------------
<S> <C> <C> <C> <C>
$0-25,750 $0-43,050 15.00% 6.850% 20.80%
25,750-62,450 43,050-104,050 28.00% 6.850% 32.90%
62,450-130,250 104,050-158,550 31.00% 6.850% 35.70%
130,250-283,150 158,550-283,150 36.00% 6.850% 40.40%
Over 283,150 Over 283,150 39.60% 6.850% 43.70%
</TABLE>
- ------------------
* Please note that the table does not reflect (i) any federal or state
limitations on the amounts of allowable itemized deductions, phase-outs of
personal or dependent exemption credits or other allowable credits, (ii) any
local taxes imposed, or (iii) any taxes other than personal income taxes. The
table assumes that federal taxable income is equal to state income subject to
tax, and in cases where more than one state rate falls within a federal bracket,
the highest state rate corresponding to the highest income within that federal
bracket is used. The numbers in the Combined Tax Rate are rounded down to the
nearest tenth. Further, the table does not reflect the New York State
supplemental income tax based upon a taxpayer's New York State taxable income
and New York State adjusted gross income. This supplemental tax results in an
increased marginal State income tax rate to the extent a taxpayer's New York
State adjusted gross income ranges between $100,000 and $150,000.
B-1
<PAGE>
<TABLE>
<CAPTION>
New York
(State and City)
Single Joint Federal Tax State Tax Combined Tax
Return Bracket Return Bracket Rate Rate Rate*
-------------- -------------- ----------- --------- ------------
<S> <C> <C> <C> <C>
$0-25,750 15.00% 10.621% 24.00%
$0-43,050 15.00% 10.564% 24.00%
25,750-62,450 43,050-104,050 28.00% 10.678% 35.50%
62,450-130,250 104,050-158,550 31.00% 10.678% 38.50%
130,250-283,150 158,550-283,150 36.00% 10.678% 43.00%
Over 283,150 Over 283,150 39.60% 10.678% 46.00%
</TABLE>
- ----------------
* Combined Tax Rate includes Federal, State and New York City income
taxes. Please note that the table does not reflect (i) any federal or state
limitations on the amounts of allowable itemized deductions, phase-outs of
personal or dependent exemption credits or other allowable credits, (ii) any
local taxes imposed (other than New York City), or (iii) any taxes other than
personal income taxes. The table assumes that federal taxable income is equal to
state income subject to tax, and in cases where more than one state rate falls
within a federal bracket, the highest state rate corresponding to the highest
income within that federal bracket is used. The numbers in the Combined Tax
Rate are rounded down to the nearest tenth. Further, the table does not
reflect the New York State supplemental income tax based upon a taxpayer's New
York State taxable income and New York State adjusted gross income. This
supplemental tax results in an increased marginal State income tax rate to the
extent a taxpayer's New York State adjusted gross income ranges between $100,000
and $150,000.
B-2
<PAGE>
APPENDIX C
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.
C-1
<PAGE>
The market prices of financial futures may also be affected by factors
other than interest rates. One of these factors is the possibility that rapid
changes in the volume of closing transactions, whether due to volatile markets
or movements by speculators, would temporarily distort the normal relationship
between the markets in the financial future and the chosen debt securities. In
these circumstances as well as in periods of rapid and large price movements,
the Fund might find it difficult or impossible to close out a particular
transaction.
Options on Financial Futures
The Fund may also purchase put or call options on financial futures which
are traded on a U.S. Exchange or board of trade and enter into closing
transactions with respect to such options to terminate an existing position.
Currently, options can be purchased with respect to financial futures on U.S.
Treasury Bonds on The Chicago Board of Trade. The purchase of put options on
financial futures is analogous to the purchase of put options by a Fund on its
portfolio securities to hedge against the risk of rising interest rates. As
with options on debt securities, the holder of an option may terminate his
position by selling an option of the same Fund. There is no guarantee that such
closing transactions can be effected.
Index Contracts
Index Futures
A tax-exempt bond index which assigns relative values to the tax-exempt
bonds included in the index is traded on the Chicago Board of Trade. The index
fluctuates with changes in the market values of all tax-exempt bonds included
rather than a single bond. An index future is a bilateral agreement pursuant to
which two parties agree to take or make delivery of an amount of cash-rather
than any security-equal to specified dollar amount times the difference between
the index value at the close of the last trading day of the contract and the
price at which the index future was originally written. Thus, an index future
is similar to traditional financial futures except that settlement is made in
cash.
Index Options
The Fund may also purchase put or call options on U.S. Government or tax-
exempt bond index futures and enter into closing transactions with respect to
such options to terminate an existing position. Options on index futures are
similar to options on debt instruments except that an option on an index future
gives the purchaser the right, in return for the premium paid, to assume a
position in an index contract rather than an underlying security at a specified
exercise price at any time during the period of the option. Upon exercise of
the option, the delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the accumulated
balance of the writer's futures margin account which represents the amount by
which the market price of the index futures contract, at exercise, is less than
the exercise price of the option on the index future.
Bond index futures and options transactions would be subject to risks
similar to transactions in financial futures and options thereon as described
above. No series will enter into transactions in index or financial futures or
related options unless and until, in the Adviser's opinion, the market for such
instruments has developed sufficiently.
C-2
<PAGE>
Nuveen New York Dividend
Advantage Municipal Fund
__________ Common Shares
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
May __, 1999
<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.1 Agreement and Declaration of Trust dated December 1, 1998. Filed as
Exhibit a.1 to Registrant's Registration Statement on Form N-2 (File
No. 333-68539) and incorporated by reference thereto.
a.2 Certificate of Amendment to Declaration of Trust dated April 9, 1999.
Filed as Exhibit a.2 to Pre-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-2 (File No. 333-68539) and
incorporated herein by reference.
b. By-laws of Registrant. Filed as Exhibit b to Registrant's Registration
Statement on Form N-2 (File No. 333-68539) and incorporated herein by
reference.
c. None.
d. Form of Share Certificate.
e. Dividend Investment Plan.
f. None.
g. Form of Investment Management Agreement between Registrant and Nuveen
Advisory Corp. Filed as Exhibit g to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-2 (File No. 333-68539)
and incorporated herein by reference.
h.1 Form of Underwriting Agreement.
h.2 Form of Master Selected Dealer Agreement.
h.3 Form of Letter Agreement between Nuveen and the Underwriters.
h.4 Form of Master Agreement Among Underwriters.
h.5 Form of Salomon Smith Barney Inc. Dealer Letter Agreement.
i. Deferred Compensation Plan for Non-Employee Trustees. Filed as Exhibit
i to Pre-Effective Amendment No. 1 to Registrant's Registration
Statement on Form N-2 (File No. 333-68539) and incorporated herein by
reference.
j. Exchange Traded Fund Custody Agreement between Registrant and The Chase
Manhattan Bank. Filed as Exhibit j to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-2 (File No. 333-68539)
and incorporated herein by reference.
k.1 Transfer Agency Agreement between Registrant and Chase Global Funds
Services Company. Filed as Exhibit k.1 to Pre-Effective Amendment No. 1
to Registrant's Registration Statement on Form N-2 (File No. 333-68539)
and incorporated herein by reference.
k.2 Form of Expense Reimbursement Agreement between Registrant and Nuveen
Advisory, Corp. Filed as Exhibit k.2 to Pre-Effective Amendment No. 1
to Registrant's Registration Statement on Form N-2 (File No. 333-68539)
and incorporated herein by reference.
1.1 Opinion and consent of Bell, Boyd & Lloyd.
1.2 Opinion and consent of Bingham Dana LLP.
m. None.
n. Consent of Ernst & Young LLP.
o. None.
p. Subscription Agreement of Nuveen Advisory Corp. dated April 12, 1999.
Filed as Exhibit p to Pre-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-2 (File No. 333-68539) and
incorporated herein by reference.
q. None.
r. None.
s. Powers of Attorney. Filed as Exhibit s to Pre-Effective Amendment No. 1
to Registrant's Registration Statement on Form N-2 (File No. 333-68539)
and incorporated herein by reference.
___________________
Item 25: Marketing Arrangements
See Section 2 and 3 of the Underwriting Agreement filed as Exhibit h.1 to
this Registration Statement;
See Section 5(n) of the Form of Underwriting Agreement filed as Exhibit h.1
to this Registration Statement;
See the Introductory Paragraph of the Form of Master Selected Dealer
Agreement filed as Exhibit h.2 to this Registration Statement;
See Paragraph e of the Form of Letter Agreement between Nuveen and the
Underwriters filed as Exhibit h.3 of this Registration Statement; and
See Sections 1, 5, 6 and 7 of the Form of Master Agreement Among
Underwriters filed as Exhibit h.4 to this Registration Statement.
Part C - 1
<PAGE>
Item 26: Other Expenses of Issuance and Distribution
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission fees.................... $ 37,530
National Association of Securities Dealers, Inc. fees...... 14,000
Printing and engraving expenses............................ 167,000
Legal fees................................................. 80,000
New York Stock Exchange listing fees....................... 98,600
Accounting expenses........................................ 7,500
Blue Sky filing fees and expenses.......................... 500
Underwriter Reimbursement................................. 75,000
Miscellaneous expenses..................................... 9,870
--------
Total.............................................. $490,000*
========
</TABLE>
- -----------
*May be reduced pursuant to the agreement of John Nuveen & Co.
Incorporated to pay (i) all Registrant's organizational expenses and (ii)
offering costs (other than the sales load) that exceed $.02 per Common
Share.
Item 27: Persons Controlled by or under Common Control with Registrant
Not applicable.
Item 28: Number of Holders of Securities
At May 24, 1999
Number of
Title of Class Record Holders
-------------- --------------
Common Shares, $.01 par value........... 1
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., Nuveen Tax-Free Reserves, Inc. and Nuveen Taxable Funds
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 Additional 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 24th day of
May, 1999.
NUVEEN NEW YORK
DIVIDEND ADVANTAGE MUNICIPAL 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 May 24, 1999
- --------------------------- Controller (Principal
Stephen D. Foy Financial and Accounting
Officer)
Timothy R. Schwertfeger Chairman of the Board
and Trustee (Principal
Executive Officer) By /s/ Gifford R. Zimmerman
------------------------
Gifford R. Zimmerman
Attorney-in-Fact
Robert P. Bremner Trustee
Lawrence H. Brown Trustee
Anne E. Impellizzeri Trustee
Peter R. Sawers Trustee
William J. Schneider Trustee
Judith M. Stockdale Trustee
May 24, 1999
</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, have been executed and filed as an exhibit.
<PAGE>
INDEX TO EXHIBITS
a.1 Agreement and Declaration of Trust dated December 1, 1998*
a.2 Certificate of Amendment to Declaration of Trust dated April 9, 1999.*
b. By-laws of Registrant.*
c. None.
d. None.
e. Dividend Investment Plan.
f. None.
g. Form of Investment Management Agreement between Registrant and Nuveen
Advisory Corp.*
h.1 Form of Underwriting Agreement.
h.2 Form of Master Selected Dealer Agreement.
h.3 Form of Letter Agreement between Nuveen and the Underwriters.
h.4 Form of Master Agreement among Underwriters.
h.5 Form of Salomon Smith Barney Inc. Dealer Letter Agreement.
i. Deferred Compensation Plan for Non-Employee Trustees.*
j. Exchange Traded Fund Custody Agreement between Registrant and The Chase
Manhattan Bank.*
k.1 Transfer Agency Agreement between Registrant and Chase Global Funds
Services Company.*
k.2 Form of Expense Reimbursement Agreement between Registrant and Nuveen
Advisory Corp.*
l.1 Opinion and consent of Bell, Boyd & Lloyd.
l.2 Opinion and consent of Bingham Dana LLP.
m. None.
n. Consent of Ernst & Young LLP.
o. None.
p. Subscription Agreement of Nuveen Advisory Corp. dated April 12, 1999.*
q. None.
r. None.
s. Powers of Attorney.*
___________________
* Previously filed.
<PAGE>
COMMON SHARES [INSERT PICTURE] COMMON SHARES
- ------------ -----------------
NUMBER ORGANIZED UNDER THE LAWS SHARES
OF THE COMMONWEALTH
U- OF MASSACHUSETTS
- ------------ -----------------
THIS CERTIFICATE IS TRANSFERABLE SEE REVERSE FOR
IN NEW YORK CITY CERTAIN DEFINITIONS
CUSIP 67066X 10 7
Nuveen New York Dividend Advantage Municipal Fund
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE COMMON SHARES OF BENEFICIAL INTEREST $.01 PAR
VALUE OF
Nuveen New York Dividend Advantage Municipal Fund (herein called the "Fund")
transferable on the books of the Fund by the holder hereof in person or by duly
authorized attorney, upon surrender of this Certificate properly endorsed. This
Certificate and the shares represented hereby are issued and shall be held
subject to all of the provisions of the Declaration of Trust of the Fund
establishing the Fund as a Massachusetts business trust, and all amendments
thereto (copies of which are on file with the Secretary of the Commonwealth of
Massachusetts) and the Fund's By-Laws, as amended (copies of which are on file
at the principal office of the Fund), to all of which the holder by acceptance
hereof expressly assents. This Certificate is executed on behalf of the Fund by
the officers as officers and not individually and the obligations hereof are not
binding upon any of the Trustees, officers or shareholders individually but are
binding only upon the assets and property of the Fund. This Certificate is not
valid until countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile signatures of the duly authorized officers of the
Fund.
Dated Nuveen New York Dividend Advantage Municipal Fund
COUNTERSIGNED AND REGISTERED:
THE CHASE MANHATTAN BANK
TRANSFER AGENT
AND REGISTRAR
BY /s/ G. R. Zimmerman /s/ Timothy R. Schwertfeger
AUTHORIZED OFFICER SECRETARY CHAIRMAN OF THE BOARD
<PAGE>
Nuveen New York Dividend Advantage Municipal Fund
Nuveen New York Dividend Advantage Municipal Fund (the "Fund") will furnish to
any shareholder, upon request and without charge, a full statement of the
designations, preferences, limitations and relative rights of the shares of
beneficial interest of each class or series of the Fund authorized to be issued,
so far as they have been determined, and the authority of the Board of Trustees
to determine the relative rights and preferences of subsequent classes or
series. Any such request should be addressed to the Secretary of the Fund.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - .......Custodian.......
TEN ENT - as tenants by the (Cust) (Minor)
entireties under Uniform Gifts to
JT TEN - as joint tenants with Minors Act.............
right of survivorship and (State)
not as tenants in common
Additional abbreviations may also be used though not in the above list.
For value Received _________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(NAME AND ADDRESS OF TRANSFEREE SHOULD BE PRINTED OR TYPEWRITTEN)
- --------------------------------------------------------------------------------
Common Shares
- -------------------------------------------------------------------
of the Beneficial Interest represented by the within Certificate and do hereby
irrevocably constitute and appoint
Attorney
- ------------------------------------------------------------------------
to transfer the said shares on the books of the within-named Fund, with full
power of substitution in the premises.
Dated
-------------------------------
X
----------------------------------------
X
----------------------------------------
SIGNATURE(S) TO THIS ASSIGNMENT MUST
NOTICE: CORRESPOND WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By
--------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS,
SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE>
Exhibit E
NUVEEN EXCHANGE-TRADED FUNDS
(except Nuveen Municipal Value Fund, Inc.)
Terms and Conditions of the Dividend Reinvestment Plan
------------------------------------------------------
This Dividend Reinvestment Plan for the Nuveen Exchange-Traded Funds advised by
Nuveen Advisory Corp. (except for Nuveen Municipal Value Fund) (each, a "Fund")
provides for reinvestment of Fund distributions, consisting of income dividends,
returns of capital and capital gain distributions paid by the Fund, on behalf of
Fund shareholders electing to participate in the Plan ("Participants") by The
Chase Manhattan Bank ("Chase"), the Plan Agent, in accordance with the following
terms:
1. Chase will act as Agent for Participants and will open an account for each
Participant under the Dividend Reinvestment Plan in the same name as the
Participant's shares are registered, and will put into effect for each
Participant the distribution reinvestment option of the Plan as of the first
record date for a distribution to shareholders after Chase receives the
Participant's authorization so to do, either in writing duly executed by the
Participant or by telephone notice satisfying such reasonable requirements as
Chase and the Fund may agree. In the case of shareholders who hold shares for
others who are the beneficial owners, Chase will administer the Plan on the
basis of the number of Shares certified from time to time by the record
shareholder as representing the total amount registered in the record
shareholder's name and held for the account of beneficial owners who are
Participants.
2. Whenever the Fund declares a distribution payable in shares or cash at the
option of the shareholders, each Participant shall take such distribution
entirely in shares and Chase shall automatically receive such shares, including
fractions, for the Participant's account, except in circumstances described in
Paragraph 3 below. Except in such circumstances, the number of additional shares
to be credited to each Participant's account shall be determined by dividing the
dollar amount of the distribution payable on the Participant's shares by the
current market price per share on the payable date for such distribution.
3. Should the net asset value per Fund share exceed the market price per share
on the day for which trades will settle on the payment date for such
distribution (the "Valuation Date") for a distribution payable in shares or in
cash at the option of the shareholder, or should the Fund declare a distribution
payable only in cash, each Participant shall take such distribution in cash and
Chase shall apply the amount of such distribution to the purchase on the open
market of shares of the Fund for the Participant's account. Such Plan purchases
shall be made as early as the Valuation Date, under the supervision of the
investment adviser. Chase shall complete such Plan purchases no more than 30
days after the Valuation Date, except where temporary curtailment or suspension
of purchases is necessary to comply with applicable provisions of federal
securities law.
<PAGE>
4. For the purpose of this Plan, the market price of the Fund's shares on a
particular date shall be the last sale price on the Exchange where it is traded
on that date, or if there is no sale on such Exchange on that date, then the
mean between the closing bid and asked quotations for such shares on such
Exchange on such date.
5. Open-market purchases provided for above may be made on any securities
exchange where the Fund's shares are traded, in the over-the-counter market or
in negotiated transactions and may be on such terms as to price, delivery and
otherwise as Chase shall determine. Participants' funds held uninvested by Chase
will not bear interest, and it is understood that, in any event, Chase shall
have no liability in connection with any inability to purchase shares within 30
days after the Valuation Date as herein provided, or with the timing of any
purchases affected. Chase shall have no responsibility as to the value of the
Fund's shares acquired for Participants' accounts. Chase may commingle all
Participants' amounts to be used for open-market purchases of Fund shares and
the price per share allocable to each Participant in connection with such
purchases shall be the average price (including brokerage commissions and other
related costs) of all Fund shares purchased by Chase as Agent.
6. Chase may hold each Participant's shares acquired pursuant to this Plan,
together with the shares of other Participants, in non-certificated form in
Chase's name or that of its nominee. Chase will forward to each Participant any
proxy solicitation material and will vote any shares so held only in accordance
with proxies returned to the Fund.
7. Chase will confirm to each Participant each acquisition made for the
Participant's account as soon as practicable but not later than 60 days after
the date thereof. Chase will deliver to any Participant upon request, without
charge, a certificate or certificates for his full shares. Although a
Participant may from time to time have an undivided fractional interest
(computed to three decimal places) in a share of the Fund, and distributions on
fractional shares will be credited to the Participant's account, no certificates
for a fractional share will be issued. In the event of termination of a
Participant's account under the Plan, Chase will adjust for any such undivided
fractional interest at the market value of the Fund's shares at the time of
termination.
8. Any stock dividends or split shares distributed by the Fund on full and
fractional shares held by Chase for a Participant will be credited to the
Participant's account. In the event that the Fund makes available to its
shareholders rights to purchase additional shares or other securities, the
shares held for each Participant under the Plan will be added to other shares
held by the Participant in calculating the number of rights to be issued to that
Participant.
9. Chase's service fee for handling reinvestment of distributions pursuant
hereto will be paid by the Fund. Participants will be charged their pro rata
shares of brokerage commissions on all open market purchases.
2
<PAGE>
10. Each Participant may terminate his account under the Plan by notifying
Chase of his intent so to do, such notice to be provided either in writing duly
executed by the Participant or by telephone in accordance with such reasonable
requirements as Chase and the Fund may agree. Such termination will be effective
immediately if notice is received by Chase not less than ten days prior to any
distribution record date for the next succeeding distribution; otherwise such
termination will be effective shortly after the investment of such distribution
with respect to all subsequent distributions. The Plan may be terminated by the
Fund or Chase upon at least 90 days prior notice. Upon any termination, Chase
will cause a certificate or certificates for the full shares held for each
Participant under the Plan and cash adjustment for any fraction to be delivered
to the Participant without charge. If any Participant elects in advance of such
termination to have Chase sell part or all of his shares, Chase is authorized to
deduct from the proceeds a $2.50 fee plus the brokerage commissions incurred for
the transaction.
11. These terms and conditions may be amended or supplemented by Chase or the
Fund at any time or times but, except when necessary or appropriate to comply
with applicable law or the rules or policies of the Securities and Exchange
Commission or any other regulatory authority, only by mailing to each
Participant appropriate written notice at least 90 days prior to the effective
date thereof. The amendment or supplement shall be deemed to be accepted by each
Participant unless, prior to the effective date thereof, Chase receives notice
of the termination of such Participant's account under the Plan in accordance
with the terms hereof. Any such amendment may include an appointment by Chase in
its place and stead of a successor Agent under these terms and conditions. Upon
any such appointment of any Agent for the purpose of receiving distributions,
the Fund will be authorized to pay to such successor Agent, for each
Participant's account, all dividends and distributions payable on shares of the
Fund held in the Participant's name or under the Plan for retention or
application by such successor Agent as provided in these terms and conditions.
12. Chase shall at all times act in good faith and agree to use its best
efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement and to comply with applicable law, but assumes no
responsibility and shall not be liable for loss or damage due to errors unless
such error is caused by its negligence, bad faith or willful misconduct or that
of its employees.
13. These terms and conditions shall be governed by the laws of the State of
New York.
3
<PAGE>
EXHIBIT H.1
____________ Shares
NUVEEN NEW YORK DIVIDEND ADVANTAGE MUNICIPAL FUND
Common Stock
UNDERWRITING AGREEMENT
----------------------
May ___, 1999
Salomon Smith Barney Inc.
John Nuveen & Co. Incorporated
BT Alex. Brown Incorporated
A.G. Edwards & Sons, Inc.
PaineWebber Incorporated
Prudential Securities Incorporated
Gruntal & Co., L.L.C.
Raymond James & Associates, Inc.
As Representatives of the Several Underwriters
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
The undersigned, Nuveen New York Dividend Advantage Municipal Fund, a
Massachusetts business trust (the "Fund") and Nuveen Advisory Corp., a Delaware
corporation (the "Manager"), address you as Underwriters and as the
representatives (the "Representatives") of each of the other persons, firms and
corporations, if any, listed in Schedule I hereto (herein collectively called
"Underwriters"). The Fund proposes to issue and sell an aggregate of
____________ shares (the "Firm Shares") of its common shares of beneficial
interest, $.01 par value per share (the "Common Shares"), to the several
Underwriters. The Fund also proposes to sell to the Underwriters, upon the terms
and conditions set forth in Section 2 hereof, up to an additional ____________
Common Shares (the "Additional Shares"). The Firm Shares and Additional Shares
are hereinafter collectively referred to as the "Shares."
<PAGE>
The Fund and the Manager wish to confirm as follows their agreements with
you and the other several Underwriters on whose behalf you are acting in
connection with the several purchases of the Shares by the Underwriters.
The Fund is entering into an investment management agreement with the
Manager dated May _____, 1999, an exchange traded fund Custody Agreement with
The Chase Manhattan Bank dated May _____, 1999 and a transfer agency agreement
with Chase Global Funds Services Company dated May _____, 1999 and such
agreements are herein referred to as the "Management Agreement", the "Custodian
Agreement" and the "Transfer Agency Agreement", respectively. Collectively, the
Management Agreement, the Custodian Agreement and the Transfer Agency Agreement
are herein referred to as the "Fund Agreements". This Underwriting Agreement is
herein referred to as the "Agreement".
1. Registration Statement and Prospectus. The Fund has prepared and filed
with the Securities and Exchange Commission (the "Commission") in accordance
with the provisions of the Securities Act of 1933, as amended (the "1933 Act"),
the Investment Company Act of 1940, as amended (the "1940 Act") and the rules
and regulations of the Commission under the 1933 Act (the "1933 Act Rules and
Regulations") and the 1940 Act (the "1940 Act Rules and Regulations" and
together with the 1933 Act Rules and Regulations, the "Rules and Regulations") a
registration statement on Form N-2 (File No. 333-68539) under the 1933 Act and
the 1940 Act and may pursuant to the Rules and Regulations prepare and file an
additional registration statement relating to a portion of the Shares pursuant
to Rule 462(b) of the 1933 Act Rules and Regulations (collectively, the
"registration statement"), including a prospectus (including any statement of
additional information) relating to the Shares and a notification of
registration of the Fund as an investment company under the 1940 Act on Form N-
8A (the "1940 Act Notification"). The term "Registration Statement" as used in
this Agreement means the registration statement (including all financial
schedules and exhibits), as amended at the time it becomes effective under the
1933 Act or, if the registration statement became effective under the 1933 Act
prior to the execution of this Agreement, as amended or supplemented thereto,
prior to the execution of this Agreement and includes any information deemed to
be included by Rule 430A under the 1933 Act Rules and Regulations. If it is
contemplated, at the time this Agreement is executed, that a post-effective
amendment to the registration statement will be filed under the 1933 Act and
must be declared effective before the offering of the Shares may commence, the
term "Registration Statement" as used in this Agreement means the registration
statement as amended by said
2
<PAGE>
post-effective amendment. The term "Prospectus" as used in this Agreement means
the prospectus (including the statement of additional information) in the form
included in the Registration Statement or, if the prospectus (including the
statement of additional information) included in the Registration Statement
omits information in reliance on Rule 430A and such information is included in a
prospectus (including the statement of additional information) filed with the
Commission pursuant to Rule 497(h) under the 1933 Act Rules and Regulations, the
term "Prospectus" as used in this Agreement means the prospectus (including the
statement of additional information) in the form included in the Registration
Statement as supplemented by the addition of the information contained in the
prospectus (including the statement of additional information) filed with the
Commission pursuant to Rule 497(h). The term "Prepricing Prospectus" as used in
this Agreement means the prospectus (including the statement of additional
information) subject to completion in the form included in the registration
statement at the time of the initial filing of the registration statement with
the Commission and as such prospectus (including the statement of additional
information) shall have been amended from time to time prior to the date of the
Prospectus, together with any other prospectus (including any other statement of
additional information) relating to the Fund other than the Prospectus.
The Fund has furnished the Representatives with copies of such registration
statement, each amendment to such registration statement filed with the
Commission and each Prepricing Prospectus.
2. Agreements to Sell, Purchase and Compensate. The Fund hereby agrees,
subject to all the terms and conditions set forth herein, to issue and to sell
to each Underwriter and, upon the basis of the representations, warranties and
agreements of the Fund and the Manager herein contained and subject to all of
the other terms and conditions set forth herein, each Underwriter agrees,
severally and not jointly, to purchase from the Fund at a purchase price per
share of $[ ] per Share (the "purchase price per share"), the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule I hereto (or
such number of Firm Shares increased as set forth in Section 10 hereof).
The Fund also agrees, subject to all the terms and conditions set forth
herein, to issue and to sell to the Underwriters and, upon the basis of the
representations,
3
<PAGE>
warranties and agreements of the Fund and the Manager herein contained and
subject to all the terms and conditions set forth herein, the Underwriters shall
have the right to purchase from the Fund, at the purchase price per share,
pursuant to an option (the "over-allotment option") which may be exercised at
any time and from time to time prior to 9:00 P.M., New York City time, on the
45th day after the date of the Prospectus (or if such 45th day shall be a
Saturday or a Sunday or a holiday, on the next business day thereafter when the
New York Stock Exchange (the "NYSE") is open for trading), up to an aggregate of
____________ Additional Shares. Additional Shares may be purchased solely for
the purpose of covering over-allotments made in connection with the offering of
the Firm Shares. Upon any exercise of the over-allotment option, upon the basis
of the representations, warranties and agreements of the Fund and the Manager
herein contained and subject to all of the other terms and conditions set forth
herein, each Underwriter agrees, severally and not jointly, to purchase from the
Fund the number of Additional Shares (subject to such adjustments as you may
determine to avoid fractional shares) which bears the same proportion to the
number of Additional Shares to be purchased by the Underwriters as the number of
Firm Shares set forth opposite the name of such Underwriter in Schedule I (or
such number of Firm Shares increased as set forth in Section 10 hereof) bears to
the aggregate number of Firm Shares.
3. Terms of Public Offering. The Fund and the Manager have been advised
by you that the Underwriters propose to make a public offering of their
respective portions of the Firm Shares as soon after the Registration Statement
and this Agreement have become effective as in your judgment is advisable and
initially to offer the Firm Shares upon the terms set forth in the Prospectus.
4. Delivery of Shares and Payments Therefor.
(a) Delivery to the Underwriters of and payment to the Fund for the
Firm Shares and compensation of the Underwriters with respect thereto shall
be made at the office of Salomon Smith Barney Inc., 388 Greenwich Street,
New York, New York 10013 or through the facilities of the Depository Trust
Company or another mutually agreeable facility, at 9:00 A.M., New York City
time, on May 28, 1999 (the "Closing Date"). The place of closing for the
Firm Shares and the Closing Date may be varied by agreement between you and
the Fund.
4
<PAGE>
(b) Delivery to the Underwriters of and payment to the Fund for any
Additional Shares to be purchased by the Underwriters and compensation of
the Underwriters with respect thereto shall be made at the aforementioned
office of Salomon Smith Barney Inc. at such time on such date (an "Option
Closing Date"), which may be the same as the Closing Date, but shall in no
event be earlier than the Closing Date nor earlier than two nor later than
three business days after the giving of the notice hereinafter referred to,
as shall be specified in a written notice from you on behalf of the
Underwriters to the Fund of the Underwriters determination to purchase a
number, specified in said notice, of Additional Shares. The place of
closing for any Additional Shares and the Option Closing Date for such
Additional Shares may be varied by agreement between you and the Fund.
(c) Certificates for the Firm Shares and for any Additional Shares
shall be registered in such names and in such denominations as you shall
request prior to 1:00 P.M., New York City time, (i) in respect of the Firm
Shares, on the second business day preceding the Closing Date and (ii) in
respect of Additional Shares, on the day of the giving of the written
notice in respect of such Additional Shares. Such certificates will be made
available to you in New York City for inspection and packaging not later
than 9:00 A.M., New York City time, on the business day next preceding the
Closing Date or any Option Closing Date, as the case may be. The
certificates evidencing the Firm Shares and any Additional Shares to be
purchased hereunder shall be delivered to you on the Closing Date or the
Option Closing Date, as the case may be, against payment of the purchase
price therefor by certified or official bank check or checks payable in New
York Clearing House (same-day) funds to the order of the Fund.
5. Agreements of the Fund and the Manager. The Fund and the Manager,
jointly and severally, agree with the several Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment
thereto to be declared effective under the 1933 Act before the offering of
the Firm Shares may commence, the Fund will use its reasonable best efforts
to cause the Registration Statement or
5
<PAGE>
such post-effective amendment to become effective under the 1933 Act as
soon as possible. If the Registration Statement has become effective and
the Prospectus contained therein omits certain information at the time of
effectiveness pursuant to Rule 430A of the 1933 Act Rules and Regulations,
the Fund will file a prospectus including such information pursuant to Rule
497(h) of the 1933 Act Rules and Regulations, as promptly as practicable,
but no later than the second business day following the earlier of the date
of the determination of the offering price of the Shares or the date the
Prospectus is first used after the effective date of the Registration
Statement. If the Registration Statement has become effective and the
Prospectus contained therein does not so omit such information, the Fund
will file a Prospectus pursuant to Rule 497(c) or (j) of the 1933 Act Rules
and Regulations as promptly as practicable, but no later than the fifth
business day following the date of the later of the effective date of the
Registration Statement or the commencement of the public offering of the
Shares after the effective date of the Registration Statement. The Fund
will advise you promptly and, if requested by you, will confirm such advice
in writing (i) when the Registration Statement or such post-effective
amendment has become effective, (ii) when the Prospectus has been timely
filed pursuant to Rule 497(c) or Rule 497(h) of the 1933 Act Rules and
Regulations or the certification permitted pursuant to Rule 497(j) of the
1933 Act Rules and Regulations has been timely filed, whichever is
applicable.
(b) The Fund will advise you promptly and, if requested by you, will
confirm such advice in writing: (i) of any request made by the Commission
for amendment of or a supplement to the Registration Statement, the
Prospectus or any Prepricing Prospectus or the Prospectus (or any amendment
or supplement to any of the foregoing) or for additional information, (ii)
of the issuance by the Commission, the NASD, any state securities
commission, any national securities exchange, any arbitrator, any court or
any other governmental, regulatory, self-regulatory or administrative
agency or any official suspending the effectiveness of the Registration
Statement, prohibiting or suspending the use of the Prospectus, any
Prepricing Prospectus or any sales material (as hereinafter defined), of
any notice pursuant to Section 8(e) of the 1940 Act, of the suspension of
qualification
6
<PAGE>
of the Shares for offering or sale in any jurisdiction, or the initiation
or contemplated initiation of any proceeding for any such purposes, (iii)
of receipt by the Fund, the Manager, any affiliate of the Fund or the
Manager or any representative or attorney of the Fund or the Manager of any
other material communication from the Commission, the NASD, any state
securities commission, any national securities exchange, any arbitrator,
any court or any other governmental, regulatory, self-regulatory or
administrative agency or any official relating to the Fund (if such
communication relating to the Fund is received by such person within three
years after the date of this Agreement), the Registration Statement, the
1940 Act Notification, the Prospectus, any Prepricing Prospectus, any sales
material (as hereinafter defined) (or any amendment or supplement to any of
the foregoing) by this Agreement or any of the Fund Agreements and (iv)
within the period of time referred to in paragraph (f) below, of any
material, adverse change in the condition (financial or other), business,
prospects, properties, net assets or results of operations of the Fund or
the Manager or of the happening of any event which makes any statement of a
material fact made in the Registration Statement, the Prospectus, any
Prepricing Prospectus or any sales material (as herein defined) (or any
amendment or supplement to any of the foregoing) untrue or which requires
the making of any additions to or changes in the Registration Statement,
the Prospectus, any Prepricing Prospectus or any sales materials (as herein
defined) (or any amendment or supplement to any of the foregoing) in order
to state a material fact required by the 1933 Act, the 1940 Act or the
Rules and Regulations to be stated therein or necessary in order to make
the statements therein (in the case of a prospectus, in light of the
circumstances under which they were made) not misleading or of the
necessity to amend or supplement the Registration Statement, the
Prospectus, any Prepricing Prospectus or any sales material (as herein
defined) (or any amendment or supplement to any of the foregoing) to comply
with the 1933 Act, the 1940 Act, the Rules and Regulations or any other law
or order of any court or regulatory body. If at any time the Commission,
the NASD, any state securities commission, any national securities
exchange, any arbitrator, any court or any other governmental, regulatory,
self-regulatory or administrative agency or any official shall issue any
order suspending the effectiveness of the Registration Statement,
prohibiting or suspending the use
7
<PAGE>
of the Prospectus, any Prepricing Prospectus or any sales material (as
hereinafter defined) (or any amendment or supplement to any of the
foregoing) or suspending the qualification of the Shares for offering or
sale in any jurisdiction, the Fund will use its reasonable best efforts to
obtain the withdrawal of such order at the earliest possible time.
(c) The Fund will furnish to you, without charge, three signed copies
of the registration statement and the 1940 Act Notification as originally
filed with the Commission and of each amendment thereto, including
financial statements and all exhibits thereto (except any post-effective
amendment required by Rule 8b-16 of the 1940 Act Rules and Regulations
which is filed with the Commission after the later of (x) one year from the
date of this Agreement and (y) the date on which the distribution of the
Shares is completed) and will also furnish to you, without charge, such
number of conformed copies of the registration statement as originally
filed and of each amendment thereto (except any post-effective amendment
required by Rule 8b-16 of the 1940 Act Rules and Regulations which is filed
with the Commission after the later of (x) one year from the date of this
Agreement and (y) the date on which the distribution of the Shares is
completed), with or without exhibits, as you may reasonably request.
(d) The Fund will not (i) file any amendment to the registration
statement or make any amendment or supplement to the Prospectus, any
Prepricing Prospectus or any sales material (as hereinafter defined) (or
any amendment or supplement to any of the foregoing) of which you shall not
previously have been advised or to which you shall reasonably object within
a reasonable time after being so advised or (ii) so long as, in the opinion
of counsel for the Underwriters, a Prospectus is required to be delivered
in connection with sales by any Underwriter or dealer, file any
information, documents or reports pursuant to the Securities Exchange Act
of 1934, as amended (the "1934 Act"), without delivering a copy of such
information, documents or reports to you, as Representatives of the
Underwriters, prior to or concurrently with such filing.
(e) Prior to the execution and delivery of this Agreement, the Fund
has delivered to you, without charge,
8
<PAGE>
in such quantities as you have reasonably requested, copies of each form of
any Prepricing Prospectus. The Fund consents to the use, in accordance with
the provisions of the 1933 Act and with the securities or Blue Sky laws of
the jurisdictions in which the Shares are offered by the several
Underwriters and by dealers, prior to the date of the Prospectus, of each
Prepricing Prospectus so furnished by the Fund.
(f) As soon after the execution and delivery of this Agreement as
possible and thereafter from time to time, for such period as in the
opinion of counsel for the Underwriters a prospectus is required by the
1933 Act to be delivered in connection with sales of Shares by any
Underwriter or dealer, the Fund will expeditiously deliver to each
Underwriter and each dealer, without charge, as many copies of the
Prospectus (and of any amendment or supplement thereto) as you may
reasonably request. The Fund consents to the use of the Prospectus (and of
any amendments or supplements thereto) in accordance with the provisions
of the 1933 Act and with the securities or Blue Sky laws of the
jurisdictions in which the Shares are offered by the several Underwriters
and by all dealers to whom Shares may be sold, both in connection with the
offering or sale of the Shares and for such period of time thereafter as
the Prospectus is required by law to be delivered in connection with sales
of Shares by any Underwriter or dealer. If during such period of time any
event shall occur that in the judgment of the Fund or in the opinion of
counsel for the Underwriters is required to be set forth in the Prospectus
(as then amended or supplemented) or should be set forth therein in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading or if it is necessary to supplement or amend
the Prospectus to comply with the 1933 Act, the 1940 Act, the Rules and
Regulations or any other law, rule or regulation, the Fund will forthwith
prepare and, subject to the provisions of paragraph (d) above, file with
the Commission an appropriate amendment or supplement thereto and will
expeditiously furnish to the Underwriters and dealers, without charge, such
number of copies thereof as they shall reasonably request. In the event
that the Prospectus is to be amended or supplemented, the Fund, if
requested by you, will promptly issue a press release announcing or
disclosing the matters to be covered by the proposed amendment or
supplement.
9
<PAGE>
(g) The Fund will cooperate with you and with counsel for the
Underwriters in connection with the registration or qualification of the
Shares for offering and sale by the several Underwriters and by dealers
under the securities or Blue Sky laws of such jurisdictions as you may
designate and will file such consents to service of process or other
documents necessary or appropriate in order to effect such registration or
qualification; provided that in no event shall the Fund be obligated to
qualify to do business in any jurisdiction where it is not now so qualified
or to take any action which would subject it to service of process in
suits, other than those arising out of the offering or sale of the Shares,
in any jurisdiction where it is not now so subject.
(h) The Fund will make generally available to its security holders an
earnings statement, which need not be audited, covering a twelve-month
period commencing after the effective date of the Registration Statement
and ending not later than 15 months thereafter, as soon as practicable
after the end of such period, which earnings statement shall satisfy the
provisions of Section 11(a) of the 1933 Act and Rule 158 of the 1933 Act
Rules and Regulations.
(i) The Fund will comply with the undertaking set forth in paragraph 6
of Item 33 of Part C of the Registration Statement.
(j) During the period of five years hereafter, the Fund will furnish
to you (i) as soon as available, a copy of each report of the Fund mailed
to shareholders or filed with the Commission and (ii) from time to time
such other information concerning the Fund as you may reasonably request.
(k) If this Agreement shall terminate or shall be terminated after
execution pursuant to any provisions hereof (otherwise than pursuant to the
second paragraph of Section 10 hereof or by notice given by you terminating
this Agreement pursuant to Section 10 or Section 11 hereof) or if this
Agreement shall be terminated by the Underwriters because of any failure or
refusal on the part of the Fund or the Manager to comply with the terms or
fulfill any of the conditions of this Agreement, the Fund and the Manager,
jointly and severally, agree to reimburse the Representatives for all out-
of-pocket
10
<PAGE>
expenses (including fees and expenses of counsel for the Underwriters)
incurred by you in connection herewith, but the Fund and the Manager shall
in no event be liable for any internal cost of the Underwriters or any loss
of anticipated profits or speculative, consequential or similar damages for
such termination.
(l) The Fund will direct the investment of the net proceeds of the
offering of the Shares in such a manner as to comply with the investment
objectives, policies and restrictions of the Fund as described in the
Prospectus.
(m) The Fund will file the requisite copies of the Prospectus with the
Commission in a timely fashion pursuant to Rule 497(c) or Rule 497(h) of
the 1933 Act Rules and Regulations, whichever is applicable or, if
applicable, will file in a timely fashion the certification permitted by
Rule 497(j) of the 1933 Act Rules and Regulations and will advise you of
the time and manner of such filing.
(n) Except as provided in this Agreement or pursuant to any dividend
reinvestment plan of the Fund in effect on the date hereof, the Fund will
not sell, contract to sell or otherwise dispose of, any Common Shares or
any securities convertible into or exercisable or exchangeable for Common
Shares or grant any options or warrants to purchase Common Shares, for a
period of 180 days after the date of the Prospectus, without the prior
written consent of Salomon Smith Barney Inc.
(o) Except as stated in this Agreement and in the Prospectus, neither
the Fund nor the Manager has taken, nor will it take, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Shares.
(p) The Fund will use its reasonable best efforts to have the Common
Shares listed, subject to notice of issuance, on the New York Stock
Exchange concurrently with the effectiveness of the registration statement
and to comply with the rules and regulations of such exchange.
11
<PAGE>
6. Representations and Warranties of the Fund and the Manager. The Fund and
the Manager, jointly and severally, represent and warrant to each Underwriter
that:
(a) Each Prepricing Prospectus included as part of the registration
statement as originally filed or as part of any amendment or supplement
thereto or filed pursuant to Rule 497 of the 1933 Act Rules and
Regulations, complied when so filed in all material respects with the
provisions of the 1933 Act, the 1940 Act and the Rules and Regulations.
(b) The Registration Statement, in the form in which it became or
becomes effective and also in such form as it may be when any post-
effective amendment thereto shall become effective and the Prospectus and
any amendment or supplement thereto when filed with the Commission under
Rule 497 of the 1933 Act Rules and Regulations and the 1940 Act
Notification when originally filed with the Commission and any amendment or
supplement thereto when filed with the Commission complied or will comply
in all material respects with the provisions of the 1933 Act, the 1940 Act
and the Rules and Regulations and did not or will not at any such times
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein (in the case of a prospectus, in light of the circumstances under
which they were made) not misleading; except that this representation and
warranty does not apply to statements in or omissions from the Registration
Statement or the Prospectus (or any amendment or supplement thereto) made
in reliance upon and in conformity with information relating to any
Underwriter furnished to the Fund in writing by or on behalf of any
Underwriter through you expressly for use therein.
(c) All the outstanding Common Shares of the Fund have been duly
authorized and validly issued, are fully paid and, except as described in
the Registration Statement, nonassessable and are free of any preemptive
or similar rights; the Shares have been duly authorized and, when issued
and delivered to the Underwriters against payment therefor in accordance
with the terms hereof, will be validly issued, fully paid and, except as
described in the Registration Statement, nonassessable and free of any
preemptive or similar rights and the capital stock of the Fund conforms to
the description thereof in
12
<PAGE>
the Registration Statement and the Prospectus (and any amendment or supplement
to either of them).
(d) The Fund has been duly formed and is validly existing in good standing
as a business trust under the laws of the Commonwealth of Massachusetts, with
full power and authority to own, lease and operate its properties and to conduct
its business as described in the Registration Statement and the Prospectus (and
any amendment or supplement to either of them) and is duly registered and
qualified to conduct business and is in good standing in each jurisdiction or
place where the nature of its properties or the conduct of its business requires
such registration or qualification, except where the failure so to register or
to qualify does not have a material, adverse effect on the condition (financial
or other), business, properties, net assets or results of operations of the
Fund. The Fund has no subsidiaries.
(e) There are no legal or governmental proceedings pending or, to the
knowledge of the Fund, threatened, against the Fund or to which the Fund or any
of its properties is subject, that are required to be described in the Statement
or the Prospectus (or any amendment or supplement to either of them) but are not
described as required and there are no agreements, contracts, indentures, leases
or other instruments that are required to be described in the Registration
Statement or the Prospectus (or any amendment or supplement to either of them)
or to be filed as an exhibit to the Registration Statement that are not
described or filed as required by the 1933 Act, the 1940 Act or the Rules and
Regulations.
(f) The Fund is not in violation of its Declaration of Trust or By-Laws or
in material violation of any material law, ordinance, administrative or
governmental rule or regulation applicable to the Fund or of any material decree
of the Commission, the NASD, any state securities commission, any national
securities exchange, any arbitrator, any court or any other governmental,
regulatory, self-regulatory or administrative agency or any official having
jurisdiction over the Fund or in breach or default in any material respect in
the performance of any obligation, agreement or condition contained in any
material bond, debenture, note or any other evidence of indebtedness or in any
agreement, indenture,
13
<PAGE>
lease or other instrument to which the Fund is a party or by which it or any of
its properties may be bound.
(g) Neither the issuance and sale of the Shares, the execution, delivery or
performance of this Agreement nor any of the Fund Agreements by the Fund, nor
the consummation by the Fund of the transactions contemplated hereby or thereby
(A) requires any consent, approval, authorization or other order of or
registration or filing with the Commission, the NASD, any national securities
exchange, any arbitrator, any court or any other governmental, regulatory, self-
regulatory or administrative agency or any official (except compliance with the
securities or Blue Sky laws of various jurisdictions which have been or will be
effected in accordance with this Agreement and except for compliance with the
filing requirements of the NASD Division of Corporate Finance) or conflicts or
will conflict with or constitutes or will constitute a breach of the Declaration
of Trust or By-Laws of the Fund or (B) conflicts or will conflict with or
constitutes or will constitute a breach of or a default under, any material
agreement, indenture, lease or other instrument to which the Fund is a party or
by which it or any of its properties may be bound or materially violates or will
materially violate any material statute, law, regulation or filing or judgment,
injunction, order or decree applicable to the Fund or any of its properties or
will result in the creation or imposition of any material lien, charge or
encumbrance upon any property or assets of the Fund pursuant to the terms of any
agreement or instrument to which it is a party or by which it may be bound or to
which any of the property or assets of the Fund is subject.
(h) Since the date as of which information is given in the Registration
Statement and the Prospectus (and any amendment or supplement to either of
them), except as otherwise stated therein, (A) there has been no material,
adverse change in the condition (financial or other), business, properties, net
assets or results of operations of the Fund or business prospects (other than as
a result of a change in the financial markets generally) of the Fund, whether or
not arising in the ordinary course of business, (B) there have been no
transactions entered into by the Fund which are material to the Fund other than
those in the ordinary course of its business as described in the Prospectus (and
any amendment or supple-
14
<PAGE>
ment thereto) and (C) there has been no dividend or distribution of any kind
declared, paid or made by the Fund on any class of its common stock.
(i) The accountants, Ernst & Young, LLP who have audited or shall audit the
Statement of Assets and Liabilities included in the Registration Statement and
the Prospectus (and any amendment or supplement to either of them), are an
independent public accounting firm as required by the 1933 Act, the 1940 Act and
the Rules and Regulations.
(j) The financial statements, together with related schedules and notes,
included in the Registration Statement or the Prospectus (or any amendment or
supplement to either of them) present fairly the financial position of the Fund
on the basis stated in the Registration Statement at the respective dates or
for the respective periods to which they apply; such statements and related
schedules and notes have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved
except as disclosed therein; and the other financial and statistical
information and data included in the Registration Statement or the Prospectus
(or any amendment or supplement thereto) are accurately derived from such
financial statements and the books and records of the Fund.
(k) The Fund, subject to the Registration Statement having been declared
effective and the filing of the Prospectus under Rule 497 under the Rules and
Regulations, has taken all required action under the 1933 Act, the 1940 Act and
the Rules and Regulations to make the public offering and consummate the sale of
the Shares as contemplated by this Agreement.
(l) The execution and delivery of and the performance by the Fund of its
obligations under this Agreement and the Fund Agreements have been duly and
validly authorized by the Fund and this Agreement and the Fund Agreements have
been duly executed and delivered by the Fund and constitute the valid and
legally binding agreements of the Fund, enforceable against the Fund in
accordance with their terms, except as rights to indemnity and contribution
hereunder may be limited by federal or state securities laws and subject to the
qualification that the enforceability of the Fund's obligations hereunder and
15
<PAGE>
thereunder may be limited by bankruptcy, insolvency, reorganization, moratorium
and other laws relating to or affecting creditors' rights generally and by
general equitable principles.
(m) Except as disclosed in the Registration Statement and the Prospectus
(or and any amendment or supplement to either of them), subsequent to the
respective dates as of which such information is given in the Registration
Statement and the Prospectus (and any amendment or supplement to either of
them), the Fund has not incurred any liability or obligation, direct or
contingent or entered into any transaction, not in the ordinary course of
business, that is material to the Fund and there has not been any change in the
capital stock or material increase in the short-term debt or long-term debt of
the Fund or any material, adverse change or any development involving or which
should reasonably be expected to involve a prospective material, adverse change
in the condition (financial or other), business, properties, net assets or
results of operations of the Fund.
(n) The Fund has not distributed and, prior to the later to occur of (i)
the Closing Date and (ii) completion of the distribution of the Shares, will not
distribute to the public any offering material in connection with the offering
and sale of the Shares other than the Registration Statement, the Prepricing
Prospectus included in Pre-Effective Amendment No. _____ to the Registration
Statement, the Prospectus and the advertisements/sales literature filed by John
Nuveen & Co. Incorporated with the NASD on __________, 1999.
(o) The Fund has such licenses, permits, and authorizations of governmental
or regulatory authorities ("permits") as are necessary to own its property and
to conduct its business in the manner described in the Prospectus (and any
amendment or supplement thereto); the Fund has fulfilled and performed all its
material obligations with respect to such permits and no event has occurred
which allows or, after notice or lapse of time, would allow, revocation or
termination thereof or results in any other material impairment of the rights of
the Fund under any such permit, subject in each case to such qualification as
may be set forth in the Prospectus (and any amendment or supplement thereto);
and, except as
16
<PAGE>
described in the Prospectus (and any amendment or supplement thereto), none of
such permits contains any restriction that is materially burdensome to the Fund.
(p) The Fund maintains and will maintain a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization and
with the investment policies and restrictions of the Fund and the applicable
requirements of the 1940 Act, the 1940 Act Rules and Regulations and the
Internal Revenue Code; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles, to calculate net asset value, to maintain accountability
for assets and to maintain material compliance with the books and records
requirements under the 1940 Act and the 1940 Act Rules and Regulations; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded account for assets is compared
with existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(q) The conduct by the Fund of its business (as described in the
Prospectus) does not require it to be the owner, possessor or licensee of any
patents, patent licenses, trademarks, service marks or trade names which it does
not own, possess or license.
(r) Except as stated in this Agreement and in the Prospectus (and any
amendment or supplement thereto), the Fund has not taken and will not take,
directly or indirectly, any action designed to or which should reasonably be
expected to cause or result in or which will constitute stabilization or
manipulation of the price of the Common Shares in violation of federal
securities laws and the Fund is not aware of any such action taken or to be
taken by any affiliates of the Fund.
(s) The Fund is duly registered under the 1940 Act as a closed-end,
diversified management investment company and the 1940 Act Notification has been
duly filed with the Commission and, at the time of filing thereof and at the
time of filing any amendment or supplement thereto, conformed in all material
respects with all applicable provisions of the 1940 Act and the Rules and
17
<PAGE>
Regulations. The Fund has not received any notice from the Commission pursuant
to Section 8(e) of the 1940 Act with respect to the 1940 Act Notification or the
Registration Statement (or any amendment or supplement to either of them).
(t) All advertising, sales literature or other promotional material
(including "prospectus wrappers," "broker kits," "road show slides" and "road
show scripts"), whether in printed or electronic form, authorized in writing by
or prepared by the Fund or the Manager for use in connection with the offering
and sale of the Shares (collectively, "sales material") complied and comply in
all material respects with the applicable requirements of the 1933 Act, the 1933
Act Rules and Regulations and the rules and interpretations of the NASD and if
required to be filed with the NASD under the NASD's conduct were so filed. No
sales material contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(u) This Agreement and each of the Fund Agreements complies in all material
respects with all applicable provisions of the 1940 Act, the 1940 Act Rules and
Regulations, the Investment Advisers Act of 1940 (the "Advisers Act") and the
rules and regulations adopted by the Commission under the Advisers Act (the
"Advisers Act Rules and Regulations").
(v) No holder of any security of the Fund has any right to require
registration of Common Shares or any other security of the Fund because of the
filing of the registration statement or consummation of the transactions
contemplated by this Agreement.
(w) The Shares have been duly approved for listing upon notice of issuance
on the NYSE and the Fund's registration statement on Form 8-A, under the 1934
Act, has become effective.
(x) The Fund intends to direct the investment of the proceeds of the
offering of the Shares in such a manner as to comply with the requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended.
18
<PAGE>
7. Representations and Warranties of the Manager. The Manager represents
and warrants to each Underwriter as follows:
(a) The Manager is a corporation duly organized and validly existing
in good standing under the laws of the State of Delaware, with full
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Registration Statement and
the Prospectus (and any amendment or supplement to either of them) and is
duly registered and qualified to conduct business and is in good standing
in each jurisdiction or place where the nature of its properties or
conduct of its business requires such registration or qualification,
except where the failure so to register or to qualify would not have a
material, adverse effect on the condition (financial or other), business,
properties, net assets or results of operations of the Fund.
(b) The Manager is duly registered as an investment adviser under the
Advisers Act and is not prohibited by the Advisers Act, the 1940 Act, the
Advisers Act Rules and Regulations or the 1940 Act Rules and Regulations
from acting under the Management Agreement for the Fund as contemplated by
the Registration Statement and the Prospectus (or any amendment or
supplement thereto).
(c) The Manager has full power and authority to enter into this
Agreement and the Management Agreement, the execution and delivery of, and
the performance by the Manager of its obligations under, this Agreement and
the Management Agreement have been duly and validly authorized by the
Manager and this Agreement and the Management Agreement have been duly
executed and delivered by the Manager and constitute the valid and legally
binding agreements of the Manager, enforceable against the Manager in
accordance with their terms, except as rights to indemnity and contribution
hereunder may be limited by federal or state securities laws and subject to
the qualification that the enforceability of the Manager's obligations
hereunder and thereunder may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting
creditors' rights generally and by general equitable principles.
19
<PAGE>
(d) The Manager has the financial resources available to it necessary
for the performance of its services and obligations as contemplated in the
Registration Statement, the Prospectus (or any amendment or supplement
thereto) and under this Agreement and the Management Agreement.
(e) The description of the Manager and its business, and the
statements attributable to the Manager, in the Registration Statement and
the Prospectus (and any amendment or supplement thereto) complied and
comply in all material respects with the provisions of the 1933 Act, the
1940 Act, the Advisors Act, the Rules and Regulations and the Advisers Act
Rules and Regulations and did not and will not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein (in the case of a
prospectus, in light of the circumstances under which they were made) not
misleading.
(f) There are no legal or governmental proceedings pending or, to the
knowledge of the Manager, threatened against the Manager or to which any of
its properties is subject, that are required to be described in the
Registration Statement or the Prospectus (or any amendment or supplement to
either of them) but are not described as required or that reasonably should
result in any material, adverse change in the condition (financial or
other), business, properties, net assets or results of operations of the
Manager or that reasonably should have a material, adverse effect on the
ability of the Manager to fulfill its obligations hereunder or under the
Management Agreement.
(g) Since the date as of which information is given in the
Registration Statement and the Prospectus (and any amendment or supplement
to either of them), except as otherwise stated therein, (A) there has been
no material, adverse change in the condition (financial or other),
business, properties, net assets or results of operations or business
prospects of the Manager, whether or not arising from the ordinary course
of business and (B) there have been no transactions entered into by the
Manager which are material to the Manager other than those in the ordinary
course of its business as described in the Prospectus.
20
<PAGE>
(h) The Manager has such licenses, permits and authorizations of
governmental or regulatory authorities ("permits") as are necessary to own
its property and to conduct its business in the manner described in the
Prospectus; the Manager has fulfilled and performed all its material
obligations with respect to such permits and no event has occurred which
allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of the
rights of the Manager under any such permit.
(i) This Agreement and the Management Agreement comply in all material
respects with all applicable provisions of the 1940 Act, the 1940 Act Rules
and Regulations, the Advisers Act and the Advisers Act Rules and
Regulations.
(j) Neither the execution, delivery or performance of this Agreement
or the Management Agreement by the Manager, nor the consummation by the
Manager of the transactions contemplated hereby or thereby (A) requires any
consent, approval, authorization or other order of or registration or
filing with the Commission, the NASD, any state securities commission, any
national securities exchange, any arbitrator, any court or any other
governmental, regulatory, self-regulatory or administrative agency or any
official (except compliance with the securities or Blue Sky laws of various
jurisdictions which have been or will be effected in accordance with this
Agreement and except for compliance with the filing requirements of the
NASD Division of Corporate Finance) or conflicts or will conflict with or
constitutes or will constitute a breach of or a default under, the
Certificate of Incorporation or By-Laws of the Manager or (B) conflicts or
will conflict with or constitutes or will constitute a breach of or a
default under, any material agreement, indenture, lease or other instrument
to which the Manager is a party or by which it or any of its properties may
be bound or materially violates or will materially violate any material
statute, law, regulation or filing or judgment, injunction, order or decree
applicable to the Manager or any of its properties or will result in the
creation or imposition of any material lien, charge or encumbrance upon any
property or assets of the Manager pursuant to the terms of any agreement or
instrument to which it is a party or by which it may be
21
<PAGE>
bound or to which any of the property or assets of the Manager is subject.
(k) Except as stated in this Agreement and in the Prospectus (and in
any amendment or supplement thereto), the Manager has not taken and will
not take, directly or indirectly, any action designed to or which should
reasonably be expected to cause or result in or which will constitute,
stabilization or manipulation of the price of the Common Shares in
violation of federal securities laws and the Manager is not aware of any
such action taken or to be taken by any affiliates of the Manager.
(l) In the event that the Fund or the Manager makes available any
promotional materials intended for use only by qualified broker-dealers and
registered representatives thereof by means of an Internet web site or
similar electronic means, the Manager will install and maintain pre-
qualification and password-protection or similar procedures which are
reasonably designed to effectively prohibit access to such promotional
materials by persons other than qualified broker-dealers and registered
representatives thereof.
8. Indemnification and Contribution.
--------------------------------
(a) The Fund and the Manager, jointly and severally, agree to
indemnify and hold harmless each of you and each other Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act, from and against any and
all losses, claims, damages, liabilities and expenses, joint or several
(including reasonable costs of investigation) arising out of or based upon
any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, the Prospectus, any Prepricing
Prospectus, any sales material (or any amendment or supplement to any of
the foregoing) or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of a prospectus, in
light of the circumstances under which they were made) not misleading,
except insofar as such losses, claims, damages, liabilities or expenses
arise out of or are based upon any untrue statement or omission or alleged
untrue statement
22
<PAGE>
or omission which has been made therein or omitted therefrom in reliance
upon and in conformity with the information relating to such Underwriters
furnished in writing to the Fund by or on behalf of any Underwriter through
you expressly for use in connection therewith; provided, however, that the
foregoing indemnity with respect to the Registration Statement, the
Prospectus or any Prepricing Prospectuses (or any amendment or supplement
to any of the foregoing) shall not inure to the benefit of any Underwriter
from whom the person asserting any loss, claim, damage, liability or
expense purchased Shares, if it is shown that a copy of the Prospectus, as
then amended or supplemented, which would have cured any defect giving rise
to such loss, claim, damage, liability or expense was not sent or delivered
to such person by or on behalf of such Underwriter, if required by law to
be so delivered, at or prior to the confirmation of the sale of such Shares
to such person and such Prospectus, amendments and supplements had been
provided by the Fund to the Underwriters in the requisite quantity and on a
timely basis to permit proper delivery. The foregoing indemnity agreement
shall be in addition to any liability which the Fund or the Manager may
otherwise have.
(b) If any action, suit or proceeding shall be brought against any
Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Fund or the Manager, such Underwriter
or such controlling person shall promptly notify the Fund or the Manager
and the Fund or the Manager shall assume the defense thereof, including the
employment of counsel and the payment of all fees and expenses. Such
Underwriter or any such controlling person shall have the right to employ
separate counsel in any such action, suit or proceeding and to participate
in the defense thereof, but the fees and expenses of such counsel shall be
at the expense of such Underwriter or controlling person unless (i) the
Fund or the Manager have agreed in writing to pay such fees and expenses,
(ii) the Fund and the Manager have failed within a reasonable time to
assume the defense and employ counsel or (iii) the named parties to any
such action, suit or proceeding (including any impleaded parties) include
both such Underwriter or such controlling person and the Fund or the
Manager and such Underwriter or such controlling person shall have been
advised by its counsel that representation of such indemnified party and
the Fund or the Manager by the same
23
<PAGE>
counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in
which case the Fund and the Manager shall not have the right to assume the
defense of such action, suit or proceeding on behalf of such Underwriter or
such controlling person). It is understood, however, that the Fund and the
Manager shall, in connection with any one such action, suit or proceeding
or separate but substantially similar or related actions, suits or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances be liable for the reasonable fees and expenses
of only one separate firm of attorneys (in addition to any local counsel if
there is any action, suit or proceeding in more than one jurisdiction) at
any time for all such Underwriters and controlling persons not having
actual or potential differing interests with you or among themselves, which
firm shall be designated in writing by Salomon Smith Barney Inc. and that,
subject to the requirements of 1940 Act Release No. 11330, all such fees
and expenses shall be reimbursed promptly as they are incurred. The Fund
and the Manager shall not be liable for any settlement of any such action,
suit or proceeding effected without the written consent of the Fund or the
Manager, but if settled with such written consent or if there be a final
judgment for the plaintiff in any such action, suit or proceeding, the Fund
and the Manager agree to indemnify and hold harmless any Underwriter, to
the extent provided in the preceding paragraph and any such controlling
person from and against any loss, liability, damage or expense by reason by
such settlement or judgment.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Fund and the Manager, their directors, any officers
of the Fund who sign the Registration Statement and any person who controls
the Fund or the Manager within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, to the same extent as the foregoing indemnity
from the Fund and the Manager to each Underwriter, but only with respect to
information relating to such Underwriter furnished in writing by or on
behalf of such Underwriter through you expressly for use in the
Registration Statement or the Prospectus (or any amendment or supplement or
to either of them). If any action, suit or proceeding
24
<PAGE>
shall be brought against the Fund or the Manager, any of their directors,
any such officer or any such controlling person, based on the Registration
Statement or the Prospectus (or any amendment or supplement to either of
them) and in respect of which indemnity may be sought against any
Underwriter pursuant to this paragraph (c), such Underwriter shall have the
rights and duties given to the Fund by paragraph (b) above (except that if
the Fund or the Manager shall have assumed the defense thereof such
Underwriter shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof, but the fees and expenses
of such counsel shall be at such Underwriter's expense) and the Fund and
the Manager, their directors, any such officer and any such controlling
person shall have the rights and duties given to the Underwriters by
paragraph (b) above. The foregoing indemnity agreement shall be in addition
to any liability which the Underwriters may otherwise have.
(d) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities
or expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by the Fund and the Manager on the one hand
(treated jointly for this purpose as one person) and the Underwriters on
the other hand from the offering of the Shares or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Fund and
the Manager on the one hand (treated jointly for this purpose as one
person) and of the Underwriters on the other hand in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Fund and the Manager
on the one hand (treated jointly for this purpose as one person) and the
Underwriters on the other hand shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses)
received by the Fund as set forth in
25
<PAGE>
the table on the cover page of the Prospectus bear to the total payments
received by the Underwriters with respect to the Firm Shares as set forth
in the table on the cover page of the Prospectus. The relative fault of the
Fund and the Manager on the one hand (treated jointly for this purpose as
one person) and of the Underwriters on the other hand shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Fund and the Manager
on the one hand (treated jointly for this purpose as one person) or by the
Underwriters on the other hand and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission.
(e) The Fund, the Manager and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this Section 8 were
determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation that does
not take account of the equitable considerations referred to in paragraph
(d) above. The amount paid or payable by an indemnified party as a result
of the losses, claims, damages, liabilities and expenses referred to in
paragraph (d) above shall be deemed to include, subject to the limitations
set forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 8, no
Underwriter shall be required to contribute any amount in excess of the
amount by which the total price of the Shares underwritten by it and
distributed to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
1933 Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations
to contribute pursuant to this Section 8 are several in proportion to the
respective number of Firm Shares set forth opposite their names in Schedule
I (or such numbers of Firm Shares increased as set forth in Section 10
hereof) and not joint.
26
<PAGE>
(f) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability from claimants on
claims that are the subject matter of such action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Fund and the Manager set forth in
this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Underwriter
or any person controlling any Underwriter, the Fund, the Manager or their
directors or officers or any person controlling the Fund or the Manager,
(ii) acceptance of any Shares and payment therefor hereunder and (iii) any
termination of this Agreement. A successor to any Underwriter or to the
Fund, the Manager or their directors or officers or any person controlling
the Fund or the Manager shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
9. Conditions of Underwriters' Obligations. The several obligations of
the Underwriters to purchase any Shares hereunder are subject to, in the good
faith judgment of the Underwriters, the accuracy of and compliance with the
representations, warranties and agreements of and by the Fund and the Manager
contained herein on and as of the date hereof, the date on which the
Registration Statement becomes or became effective, the date of the Prospectus
(and of any amendment or supplement thereto), the Closing Date and, with respect
to any Additional Shares, any Option Closing Date; to the accuracy and
completeness of all statements made by the Fund, the Manager or any of their
officers in any certificate delivered to the Representatives or their counsel
pursuant to this Agreement and to the following conditions:
27
<PAGE>
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment
thereto to be declared effective before the offering of the Shares may
commence, the Registration Statement or such post-effective amendment shall
have become effective not later than 5:30 p.m., New York City time, on the
date hereof or at such later date and time as shall be consented to in
writing by you and all filings, if any, required by Rules 497 and 430A
under the 1933 Act Rules and Regulations shall have been timely made; no
order suspending the effectiveness of the Registration Statement shall have
been issued and no proceeding for that purpose shall have been instituted
or, to the knowledge of the Fund, the Manager or any Underwriter,
threatened by the Commission and any request of the Commission for
additional information (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to your
satisfaction.
(b) You shall have received on the Closing Date an opinion of Bell,
Boyd & Lloyd, counsel for the Fund, dated the Closing Date and addressed to
you, as Representatives of the several Underwriters to the effect that:
(i) The Fund is a business trust duly organized, validly existing
and in good standing under the laws of the Commonwealth of
Massachusetts with full power and authority to own, lease and operate
its properties and to conduct its business as described in the
Registration Statement and the Prospectus (and any amendment or
supplement thereto through the date of the opinion) and is duly
registered and qualified to conduct its business and is in good
standing in each jurisdiction where the nature of its properties or
the conduct of its business requires such registration or
qualification, except where the failure so to register or to qualify
does not have a material, adverse effect on the condition (financial
or other), business, properties, net assets or results of operations
of the Fund;
(ii) The authorized and outstanding capital stock of the Fund is
as set forth in the Registration Statement and Prospectus (or
28
<PAGE>
any amendment or supplement thereto through the date of the opinion);
and the description of the authorized capital stock of the Fund
contained in the Prospectus (or any amendment or supplement thereto
through the date of the opinion) under the caption "Description of
Shares" conforms in all material respects as to legal matters to the
terms thereof contained in the Fund's Declaration of Trust;
(iii) All the shares of capital stock of the Fund outstanding
prior to the issuance of the Shares have been duly authorized and
validly issued and are fully paid and nonassessable, except that, as
described in the Prospectus under the heading, "Certain Provisions in
the Declaration of Trust," shareholders of the Fund may under certain
circumstances be held personally liable for its obligations;
(iv) The Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor in accordance
with the terms hereof, will be validly issued, fully paid and
nonassessable not subject to any preemptive, or to the best knowledge
of such counsel after reasonable inquiry, similar rights that entitle
or will entitle any person to acquire any Shares upon the issuance
thereof by the Fund, except that, as described in the Prospectus under
the heading, "Certain Provisions in the Declaration of Trust,"
shareholders of the Fund may under certain circumstances be held
personally liable for its obligations;
(v) The form of certificates for the Shares is in due and proper
form and complies with the requirements of all applicable laws and the
NYSE;
(vi) The Fund has the power and authority to enter into this
Agreement and the Fund Agreements and to issue, sell and deliver the
Shares to the Underwriters as provided herein and this Agreement and
each of the Fund Agreements have been duly authorized, executed and
29
<PAGE>
delivered by the Fund and assuming due authorization, execution and
delivery by the other parties thereto, constitute the valid, legal and
binding agreements of the Fund, enforceable against the Fund in
accordance with their terms, except as enforcement of rights to
indemnity hereunder may be limited by Federal or state securities laws
or principles of public policy and subject to the qualification that
the enforceability of the Fund's obligations hereunder and thereunder
may be limited by bankruptcy, insolvency, reorganization, moratorium
and other laws relating to or affecting creditors' rights generally
and by general equitable principles whether enforcement is considered
in a proceeding in equity or at law;
(vii) This Agreement constitutes a valid, legal and binding
agreement of the Manager, enforceable against the Manager in
accordance with its terms, except as enforcement of rights to
indemnity hereunder may be limited by Federal or state securities laws
or principles of public policy and subject to the qualification that
the enforceability of the Manager's obligations hereunder and
thereunder may be limited by bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights
generally and by general equitable principles whether enforcement is
considered in a proceeding in equity or at law;
(viii) The Fund Agreements comply in all material respects with
all applicable provisions of the 1933 Act, the 1940 Act, the Advisers
Act, the Rules and Regulations and the Advisers Act Rules and
Regulations.
(ix) The Fund is not in violation of its Declaration of Trust or
By-Laws or to the best knowledge of such counsel after reasonable
inquiry, is not in material default in the performance of any material
obligation, agreement or condition contained in any bond, debenture,
note or other evidence of indebtedness, except as may be disclosed in
the Prospectus (and any amendment or supplement thereto);
30
<PAGE>
(x) No consent, approval, authorization or order of or
registration or filing with the Commission, the NASD, any state
securities commission, any national securities exchange, any
arbitrator, any court or any other governmental body, agency or
regulatory, self-regulatory or administrative agency or any official
is required on the part of the Fund (except as have been obtained
under the 1933 Act and the 1934 Act or such as may be required under
state securities or Blue Sky laws governing the purchase and
distribution of the Shares) for the valid issuance and sale of the
Shares to the Underwriters as contemplated by this Agreement,
performance of the Fund Agreements or this Agreement by the Fund, the
consummation by the Fund of the transactions contemplated thereby or
hereby or the adoption of the Fund's Dividend Reinvestment Plan;
(xi) Neither the offer, sale or delivery of the Shares, the
execution, delivery or performance of this Agreement or the Fund
Agreements, compliance by the Fund with the provisions hereof or
thereof, consummation by the Fund of the transactions contemplated
hereby or thereby nor the adoption of the Fund's Dividend Reinvestment
Plan conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the Declaration of Trust or By-Laws
of the Fund or any material agreement, indenture, lease or other
instrument to which the Fund is a party or by which it or any of its
properties is bound that is an exhibit to the Registration Statement
or that is known to such counsel after reasonable inquiry or, to the
best of such counsel's knowledge after reasonable inquiry will result
in the creation or imposition of any material lien, charge or
encumbrance upon any property or assets of the Fund, nor, to the best
of such counsel's knowledge after reasonable inquiry will any such
action result in any violation of any existing material law,
regulation, ruling (assuming compliance with all applicable state
securities and Blue Sky laws), judgment, injunction, order or decree
known to such counsel after reason-
31
<PAGE>
able inquiry, applicable to the Fund or any of its properties, except
that, in the published opinion of the Commission, the indemnification
provisions in the Agreement and the Fund Agreements, insofar as they
relate to indemnification for liabilities arising under the 1933 Act,
are against public policy as expressed in the 1933 Act and therefore
unenforceable;
(xii) The Registration Statement and all post-effective
amendments, if any, have become effective under the 1933 Act and, to
the best knowledge of such counsel after reasonable inquiry, no order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose are pending before or
contemplated by the Commission; and any filing of the Prospectus and
any amendments or supplements thereto required pursuant to Rule 497 of
the 1933 Act Rules and Regulations prior to the date of such opinion
have been made in accordance with Rule 497;
(xiii) The Fund is duly registered with the Commission under the
1940 Act as a closed-end, diversified management investment company
and all action has been taken by the Fund as required by the 1933 Act
and the 1940 Act and the Rules and Regulations in connection with the
issuance and sale of the Shares to make the public offering and
consummate the sale of the Shares as contemplated by this Agreement;
(xiv) The statements made in the Registration Statement and the
Prospectus (and any amendment or supplement to either of them through
the date of the opinion) under the caption "Taxation" have been
reviewed by such counsel and to the extent they describe or summarize
tax laws, doctrines or practices of the United States, present a fair
and accurate description or summary thereof as of the date of the
opinion;
(xv) The statements in the Registration Statement and Prospectus
(and any amendment or supplement to either of them through the date
32
<PAGE>
of the opinion), insofar as they are descriptions of contracts,
agreements or other legal documents or refer to statements of law or
legal conclusions, are accurate and present fairly the information
required to be shown;
(xvi) The Registration Statement and the Prospectus (and any
amendment or supplement to either of them through the date of the
opinion) comply as to form in all material respects with the
requirements of the 1933 Act, the 1940 Act and the Rules and
Regulations (except that no opinion need be expressed as to the
financial statements and the notes thereto and the schedules and other
financial and statistical data included therein as to which such
counsel need not express any opinion);
(xvii) To the best knowledge of such counsel after reasonable
inquiry, (A) other than as described or contemplated in the Prospectus
(or any amendment or supplement thereto through the date of the
opinion), there are no actions, suits or other legal or governmental
proceedings pending or expressly threatened against the Fund to either
of them through the date of the opinion) and (B) there are no material
agreements, contracts, indentures, leases or other instruments, that
are required to be described in the Registration Statement or the
Prospectus (or any amendment or supplement to either of them through
the date of the opinion) or to be filed as an exhibit to the
Registration Statement that are not described or filed as required, as
the case may be;
(xviii) To the best knowledge of such counsel after reasonable
inquiry, the Fund is not in violation of any law, ordinance,
administrative or governmental rule or regulation applicable to the
Fund or of any decree of the Commission, the NASD, any state
securities commission, any national securities exchange, any
arbitrator, any court or any other governmental, regulatory, self-
regulatory or administrative agency or any official having
jurisdiction over the Fund; and
33
<PAGE>
(xix) The Shares are duly authorized for listing, subject to
official notice of issuance, on The New York Stock Exchange and the
Fund's registration statement on Form 8-A under the 1934 Act is
effective.
Although counsel has not undertaken, except as otherwise indicated in
their opinion, to determine independently and does not assume any
responsibility for, the accuracy or completeness of the statements in
the Registration Statement, such counsel has participated in the
preparation of the Registration Statement and the Prospectus,
including review and discussion of the contents thereof and nothing
has come to the attention of such counsel that has caused it to
believe that the Registration Statement, at the time the Registration
Statement became effective or the Prospectus, as of its date and as of
the Closing Date, as the case may be, or the Option Closing Date
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein (in the case of a prospectus, in light of the
circumstances under which they were made) not misleading or that any
amendment or supplement to the Prospectus, as of the Closing Date or
the Option Closing Date, contained an untrue statement of a material
fact or omitted to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they
were made, not misleading (it being understood that such counsel need
express no view with respect to the financial statements and the notes
thereto and the schedules and other financial and statistical data
included in the Registration Statement or the Prospectus).
In rendering such opinion, such counsel may limit such opinion to
matters involving the application of the laws of the State of New
York, the Commonwealth of Massachusetts and the United States and may
rely, as to matters involving the application of laws of the
Commonwealth of Massachusetts, to the extent they deem proper and
specified in such opinion, upon the opinion of Bingham Dana LLP or
other counsel of good standing whom they believe to be reliable and
who are satisfactory to the Representatives; pro-
34
<PAGE>
vided that (X) such reliance is expressly authorized by the opinion so
relied upon and a copy of each such opinion is delivered to the
Representatives and is, in form and substance satisfactory to them and
their counsel and (Y) Bell, Boyd & Lloyd states in their opinion that
they believe that they and the Underwriters are justified in relying
thereon.
(c) You shall have received on the Closing Date an opinion of Alan G.
Berkshire, Vice President, Secretary and General Counsel for the Manager,
or Gifford R. Zimmerman, Vice President, Assistant Secretary and Associate
General Counsel for the Manager, dated the Closing Date and addressed to
you, as Representatives of the several Underwriters, to the effect that:
(i) The Manager is a corporation duly incorporated and validly
existing in good standing under the laws of the State of Delaware with
full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the
Registration Statement and the Prospectus (and any amendment or
supplement to either of them) and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction or
place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the
failure so to register or to qualify does not have a material, adverse
effect on the condition (financial or other), business, properties,
net assets or results of operations of the Manager;
(ii) The Manager is duly registered with the Commission under the
Advisers Act as an investment adviser and is not prohibited by the
Advisers Act, the 1940 Act or the Rules and Regulations under such
acts, from acting for the Fund under the Management Agreement as
contemplated by the Prospectus (and any amendment or supplement
thereto);
(iii) The Manager has corporate power and authority to enter into
this Agreement and the Management Agreement and this Agreement and
35
<PAGE>
the Management Agreement have been duly authorized, executed and
delivered by the Manager and the Management Agreement is a valid,
legal and binding agreement of the Manager, enforceable against the
Manager in accordance with its terms, except as enforcement of rights
to indemnity and contribution hereunder may be limited by Federal or
state securities laws or principles of public policy and subject to
the qualification that the enforceability of the Manager's obligations
hereunder and thereunder may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting
creditors' rights generally and by general equitable principles;
(iv) The Management Agreement complies in all material respects
with all applicable provisions of the Advisers Act, the 1940 Act and
the Advisers Act Rules and Regulations and the 1940 Act Rules and
Regulations.
(v) Neither the execution and delivery by the Manager of this
Agreement or the Management Agreement nor the consummation by the
Manager of the transactions contemplated hereunder or thereunder
constitutes or will constitute a breach of or a default under the
Certificate of Incorporation or By-Laws of the Manager or any material
agreement, indenture, lease or other instrument to which the Manager
is a party or by which it or any of its properties is bound that is
known to such counsel after reasonable inquiry, or will result in the
creation or imposition of any material lien, charge or encumbrance
upon any property or assets of the Manager, nor will any such action
result if any violation of any existing material law, regulation,
ruling (assuming compliance with all applicable state securities and
Blue Sky laws), judgment, injunction, order or decree known to such
counsel after reasonable inquiry, applicable to the Fund or any of its
properties;
(vi) The description of the Manager and its business in the
Prospectus (and any amend-
36
<PAGE>
ment or supplement thereto) complies in all material respects with all
requirements of the 1933 Act, the 1940 Act and the Rules and
Regulations;
(vii) To the best knowledge of such counsel after reasonable
inquiry, (A) other than as described or contemplated in the Prospectus
(or (and any amendment or supplement thereto), there are no actions,
suits or other legal or governmental proceedings pending or threatened
against the Manager or to which the Manager or any of its property, is
subject, which are required to be described in the Registration
Statement or Prospectus (or any amendment or supplement to either of
them);
(viii) The Manager owns, possesses or has obtained and currently
maintains all governmental licenses, permits, consents, orders,
approvals and other authorizations as are necessary for the Manager to
carry on its business as contemplated in the Prospectus (and any
amendment or supplement thereto); and
(ix) No material consent, approval, authorization or order of or
registration or filing with any court, regulatory body, administrative
or other governmental body, agency or official is required on the part
of the Manager for the performance of this Agreement or the Management
Agreement by the Manager or for the consummation by the Manager of the
transactions contemplated hereby or thereby.
Although counsel has not undertaken, except as otherwise indicated in
its opinion, to determine independently and does not assume any
responsibility for, the accuracy or completeness of the statements in
the Registration Statement, such counsel has participated in the
preparation of the Registration Statement and the Prospectus,
including review and discussion of the contents thereof and nothing
has come to its attention that has caused it to believe that the
Registration Statement became effective or the Prospectus, as of its
date and as of the Closing Date or the Option Closing Date, as the
case may be,
37
<PAGE>
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein (in the case of a prospectus, in light of the
circumstances under which they were made) not misleading or that any
amendment or supplement to the Prospectus, as of the Closing Date or
the Option Closing Date, contained an untrue statement of a material
fact or omitted to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they
were made, not misleading (it being understood that such counsel need
express no opinion with respect to the financial statements and the
notes thereto and the schedules and other financial and statistical
data included in the Registration Statement or the Prospectus).
In rendering such opinion, counsel may limit such opinion to matters
involving the application of the laws of the State of Illinois, the
Delaware General Corporation Law statute and the laws of the United
States and may rely upon an opinion or opinions, each dated the
Closing Date, of other counsel retained by the Manager as to laws of
any jurisdiction other than the United States, the State of Illinois
and the Delaware General Corporation Law statute, provided that (1)
each such local counsel is acceptable to the Representatives, (2)
such reliance is expressly authorized by each opinion so relied upon
and a copy of each such opinion is delivered to the Representatives
and is, in form and substance satisfactory to them and their counsel
and (3) counsel shall state in their view that they believe that they
and the Underwriters are justified in relying thereon.
(d) You shall have received on the Closing Date an opinion of Edwards
& Angell, LLP, special counsel for the Fund, dated the Closing Date and
addressed to you, as Representatives of the several Underwriters to the effect
that:
(i) The statements contained in the Prospectus under the headings
"Risks - Concentration Risk" and "Tax Matters - New York Tax Matters,"
in the statement of additional information under the head-
38
<PAGE>
ings "Investment Policies and Techniques - Factors Pertaining to New
York" and "Tax Matters - New York Tax Matters" and in Appendix B to
the statement of additional information under the heading "Taxable
Equivalent Yield Table - New York (State and City)" to the extent that
such statements constitute matters of law or legal conclusions,
provide a fair and accurate summary of such law or conclusions. Such
statements are based on current law and special counsel's
understanding of the Fund's proposed operations, as disclosed in the
Prospectus.
Although special counsel does not pass upon or assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus
(other than to the extent set forth above), and have not made any
independent check or verification thereof, no facts have come to the
attention of such special counsel which would lead it to believe that
the material contained in the Prospectus under the headings "Risks -
Concentration Risk" and "Tax Matters - New York Tax Matters," in the
statement of additional information under the headings "Investment
Policies and Techniques -Factors Pertaining to New York" and "Tax
Matters - New York Tax Matters" and in Appendix B to the statement of
additional information under the heading "Taxable Equivalent Yield
Table - New York (State and City)" as of their respective dates or the
Closing Date or the Option Closing Date, contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading or that any statement contained in any amendment or
supplement to the Prospectus or statement of additional information
under such headings, as of its respective date, and as of the Closing
Date or the Option Closing Date, contained any untrue statement of a
material fact or omitted or omits to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
39
<PAGE>
In rendering such opinion, such special counsel may rely as to matters
of fact, to the extent such special counsel deems proper, on
certificates of responsible officers of the Fund and of the Manager,
and of public officials.
(e) That you shall have received on the Closing Date, an opinion,
dated the Closing Date, of Skadden, Arps, Slate, Meagher & Flom, counsel
for the Underwriters, dated the Closing Date and addressed to you, as
Representatives of the several Underwriters, with respect to such matters
as the Underwriters may require and the Fund, the Manager and their
respective counsels shall have furnished to such counsel such documents as
they may request for the purpose of enabling them to pass upon such
matters.
(f) That you shall have received letters addressed to you, as
Representatives of the several Underwriters and dated the date hereof and
the Closing Date from Ernst & Young, LLP, independent certified public
accountants, substantially in the forms heretofore approved by you.
(g) (i) No order suspending the effectiveness of the registration
statement or the Registration Statement or prohibiting or suspending the
use of the Prospectus (or any amendment or supplement thereto) or any
Prepricing Prospectus or any sales material shall have been issued and no
proceedings for such purpose or for the purpose of commencing an
enforcement action against the Fund, the Manager or, with respect to the
transactions contemplated by the Prospectus (or any amendment or
supplement thereto) and this Agreement, any Underwriter, may be pending
before or, to the knowledge of the Fund, the Manager or any Underwriter or
in the reasonable view of counsel to the Underwriters, shall be threatened
or contemplated by the Commission at or prior to the Closing Date and that
any request for additional information on the part of the Commission (to be
included in the Registration Statement, the Prospectus or otherwise) be
complied with to the satisfaction of the Representatives, (ii) there shall
not have been any change in the capital stock of the Fund nor any material
increase in debt of the Fund from that set forth in the Prospectus (and any
amendment or supplement thereto) and the Fund shall not have sustained any
material liabilities or obligations,
40
<PAGE>
direct or contingent, other than those reflected in the Prospectus (and any
amendment or supplement thereto); (iii) since the date of the Prospectus
there shall not have been any material, adverse change in the condition
(financial or other), business, prospects, properties, net assets or
results of operations of the Fund or the Manager; (iv) the Fund and the
Manager must not have sustained any material loss or interference with its
business from any court or from legislative or other governmental action,
order or decree or from any other occurrence not described in the
Registration Statement and the Prospectus (and any amendment or supplement
to either of them); and (v) all of the representations and warranties of
the Fund and the Manager contained in this Agreement shall be true and
correct on and as of the date hereof and as of the Closing Date as if made
on and as of the Closing Date.
(h) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any change or any development involving a prospective
change, in or affecting the condition (financial or other), business,
prospects, properties, net assets or results of operations of the Fund or
the Manager not contemplated by the Prospectus (and any amendment or
supplement thereto), which in your opinion, as Representatives of the
several Underwriters, would materially, adversely affect the market for
the Shares or (ii) any event or development relating to or involving the
Fund, the Manager or any officer or director of the Fund or the Manager
which makes any statement of a material fact made in the Prospectus (or any
amendment or supplement thereto) untrue or which, in the opinion of the
Fund and its counsel or the Underwriters and their counsel, requires the
making of any addition to or change in the Prospectus (or any amendment or
supplement thereto) in order to state a material fact required by the Act,
the 1940 Act, the Rules and Regulations or any other law to be stated
therein or necessary in order to make the statements therein (in the case
of a prospectus, in light of the circumstances under which they were made)
not misleading, if amending or supplementing the Prospectus (or any
amendment or supplement thereto) to reflect such event or development
would, in your opinion, as Representatives of the several Underwriters,
materially, adversely affect the market for the Shares.
41
<PAGE>
(i) That neither the Fund nor the Manager shall have failed at or
prior to the Closing Date to have performed or complied with any of the
agreements herein contained and required to be performed or complied with
by them at or prior to the Closing Date.
(j) That you shall have received on the Closing Date a certificate,
dated such date, of the president or any vice president and of the
controller or treasurer of each of the Fund and the Manager certifying that
(i) the signers have carefully examined the Registration Statement, the
Prospectus (and any amendments or supplements to either of them) and this
Agreement, (ii) the representations and warranties of the Fund (with
respect to the certificates from such Fund officers) and the
representations of the Manager (with respect to the certificates from such
officers of the Manager) in this Agreement are true and correct on and as
of the date of the certificate as if made on such date, (iii) since the
date of the Prospectus (and any amendment or supplement thereto) there has
not been any material, adverse change in the condition (financial or
other), business, prospects (other than as a result of a change in the
financial markets generally), properties, net assets or results of
operations of the Fund (with respect to the certificates from such Fund
officers) or the Manager (with respect to the certificates from such
officers of the Manager), (iv) to the knowledge of such officers after
reasonable investigation, no order suspending the effectiveness of the
Registration Statement or prohibiting the sale of any of the Shares or
having a material, adverse effect on the Fund (with respect to the
certificates from such Fund officers) or the Manager (with respect to the
certificates from such officers of the Manager) has been issued and no
proceedings for any such purpose are pending before or threatened by the
Commission or any court or other regulatory body, the NASD, any state
securities commission, any national securities exchange, any arbitrator,
any court or any other governmental, regulatory, self-regulatory or
administrative agency or any official, (v) each of the Fund (with respect
to certificates from such Fund officers) and the Manager (with respect to
certificates from such officers of the Manager) has performed and complied
with all agreements that this Agreement require it to perform by such
Closing Date, (vi) neither the Fund (with respect to the certificate from
such officers of the Fund) nor the Manager (with
42
<PAGE>
respect to the certificate from such officers of the Manager) has sustained
any material loss or interference with its business from any court or from
legislative or other governmental action order or decree or from any other
occurrence not described in the Registration Statement and the Prospectus
and any amendment or supplement to either of them and (vii) with respect to
the certificate from such officers of the Fund, there has not been any
change in the capital stock of the Fund nor any material increase in the
debt of the Fund from that set forth in the Prospectus (and any amendment
or supplement thereto) and the Fund has not sustained any material
liabilities or obligations, direct or contingent, other than those
reflected in the Prospectus (and any amendment or supplement thereto).
(k) That the Fund and the Manager shall have furnished to you such
further certificates, documents and opinions of counsel as you shall
reasonably request (including certificates of officers of the Fund and the
Manager).
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are satisfactory in
form and substance to you and your counsel acting in good faith.
Any certificate or document signed by any officer of the Fund or the
Manager and delivered to you, as Representatives of the Underwriters or to
Underwriters' counsel, shall be deemed a representation and warranty by
the Fund or the Manager to each Underwriter as to the statements made
therein.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to (i) the accuracy of and compliance with the
representations and warranties of the Fund and the Manager contained herein
on and as of the Option Closing Date as though made on any Option Closing
Date, (ii) satisfaction on and as of any Option Closing Date of the
conditions set forth in this Section 9 except that, if any Option Closing
Date is other than the Closing Date, the certificates, opinions and
letters referred to in paragraphs (b), (c), (d), (e), (f), (j) and this
paragraph shall be dated the Option Closing Date in question and the
opinions called for by paragraphs (b), (c), (d) and (e) shall be revised
43
<PAGE>
to reflect the sale of Additional Shares and (iii) the absence of
circumstances on or prior to the Option Closing Date which would permit
termination of this Agreement pursuant to Section 11 hereof if they existed
on or prior to the Closing Date.
10. Effective Date of Agreement. This Agreement shall become effective:
(i) upon the execution and delivery hereof by the parties hereto; or (ii) if, at
the time this Agreement is executed and delivered, it is necessary for the
Registration Statement or a post-effective amendment thereto to be declared
effective before the offering of the Shares may commence, when notification of
the effectiveness of the Registration Statement or such post-effective amendment
has been released by the Commission. Until such time as this Agreement shall
have become effective, it may be terminated by the Fund by notifying you or by
you, as Representatives of the several Underwriters, by notifying the Fund.
If any one or more of the Underwriters shall fail or refuse to purchase
Firm Shares which it or they have agreed to purchase hereunder and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters agreed
but failed or refused to purchase is not more than one-tenth of the aggregate
number of the Firm Shares, each non-defaulting Underwriter shall be obligated,
severally, in the proportion which the aggregate number of Firm Shares set forth
opposite its name in Schedule I hereby bears to the aggregate number of Firm
Shares set forth opposite the names of all non-defaulting Underwriters or in
such other proportion as you may specify in accordance with Section 20 of the
Salomon Smith Barney Master Agreement Among Underwriters, to purchase Firm
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase. If any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of Firm
Shares and arrangements satisfactory to you and the Fund for the purchase of
such Firm Shares by one or more non-defaulting Underwriters or other party or
parties approved by you and the Fund are not made within 36 hours after such
default, this Agreement will terminate without liability on the part of any non-
defaulting Underwriter or the Fund. In any such case which does not result in
termination of this Agreement, either you or the Fund shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Registration State-
44
<PAGE>
ment and the Prospectus or any other documents or arrangements may be effected.
Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect to any such default of any such
Underwriter under this Agreement. The term "Underwriter" as used in this
Agreement includes, for all purposes of this Agreement, any party not listed in
Schedule I hereto who, with your approval and the approval of the Fund,
purchases Firm Shares which a defaulting Underwriter agreed, but failed or
refused, to purchase.
Any notice under this Section 10 may be made by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
11. Termination of Agreement. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Fund or the Manager by notice to the Fund or the Manager if
prior to the Closing Date or any Option Closing Date (if different from the
Closing Date and then only as to the Additional Shares), as the case may be, (i)
trading in securities generally on the NYSE, American Stock Exchange, Nasdaq
National Market or the Nasdaq Stock Market shall have been suspended or
materially limited, (ii) additional material governmental restrictions not in
force on the date of this Agreement have been imposed upon trading in securities
generally or a general moratorium on commercial banking activities in New York
shall have been declared by either Federal or state authorities or (iii) any
outbreak or material escalation of hostilities or other international or
domestic calamity, crisis or change in political, financial or economic
conditions, occurs, the effect of which is such as to make it, in your judgment,
impracticable or inadvisable to commence or continue the offering of the Shares
at the offering price to the public set forth on the cover page of the
Prospectus or to enforce contracts for the resale of the Shares by the
Underwriters. Notice of such termination may be given to the Fund or the Manager
by telegram, telecopy or telephone but shall be subsequently confirmed by
letter.
12. Expenses. The Fund agrees to pay the following costs and expenses and
all other costs and expenses incident to the performance by the Fund of its
obligations hereunder: (a) the preparation, printing or reproduction, filing
(including, without limitation, the filing fees prescribed by the 1933 Act, the
1940 Act and the Rules and Regulations) and distribution of the Registration
Statement (including exhibits
45
<PAGE>
thereto), the Prospectus, each Prepricing Prospectus and the 1940 Act
Notification and all amendments or supplements to any of them, (b) the printing
(or reproduction) and delivery (including postage, air freight charges and
charges for counting and packaging) of such copies of the Registration
Statement, the Prospectus, each Prepricing Prospectus, any sales material and
all amendments or supplements to any of them as may be reasonably requested for
use in connection with the offering and sale of the Shares, (c) the preparation,
printing, authentication, issuance and delivery of certificates for the Shares,
including any stamp taxes and transfer agent and registrar fees payable in
connection with the original issuance and sale of such Shares, (d) the
registrations or qualifications of the Shares for offer and sale under the
securities or Blue Sky laws of the several states as provided in Section 5(g)
hereof (including the reasonable fees, expenses and disbursements of counsel for
the Underwriters relating to the preparation, printing or reproduction and
delivery of the preliminary and supplemental Blue Sky Memoranda and such
registration and qualification), (e) the fees and expenses of the Fund's
independent accountants, counsel for the Fund and of the transfer agent, (f) the
expenses of delivery to the Underwriters and dealers (including postage, air
freight and the cost of counting and packaging) of copies of the Prospectus, the
Prepricing Prospectus, any sales material and all amendments or supplements to
the Prospectus as may be requested for use in connection with the offering and
sale of the Shares, (g) the printing (or reproduction) and delivery of this
Agreement, any dealer agreements, the preliminary and supplemental Blue Sky
Memoranda and all other company-authorized agreements or other documents printed
(or reproduced) and delivered in connection with the offering of the Shares, (h)
the filing fees and the fees and expenses of counsel for the Underwriters in
connection with any filings required to be made with the NASD and incurred with
respect to the review of the offering of the Shares by the NASD, (i) the
registration of the Shares under the 1934 Act and the listing of the Shares on
the NYSE, and (j) an amount not to exceed $75,000 payable on the Closing Date to
the Underwriters in partial reimbursement of their expenses (but not including
reimbursement for the cost of one tombstone advertisement in a newspaper that is
one-quarter of a newspaper page or less in size) in connection with the
offering.
Notwithstanding the foregoing, in the event that the sale of the Firm
Shares is not consummated pursuant to Section 2 hereof, the Manager will pay the
costs and expenses of the
46
<PAGE>
Fund set forth above in this Section 12, and reimbursements of Underwriter
expenses in connection with the offering shall be made in accordance with
Section 5(k) hereof.
13. Information Furnished by the Underwriters. The statements set forth in
the last sentence of the last paragraph of the front cover page in the
Prospectus, as well as, under the caption "Underwriting" in the Prospectus, the
names of the underwriters and numbers of Shares listed opposite such names in
the first paragraph, the last sentence of the second paragraph, the first
sentence of the ninth paragraph, the first sentence of the eleventh paragraph
and the thirteenth paragraph constitute the only information relating to any
Underwriter furnished to the Fund in writing by or on behalf of the Underwriters
through you as such information is referred to herein, expressly for use in the
Prospectus.
14. Miscellaneous. Except as otherwise provided in Sections 5, 10 and 11
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (a) if to the Fund or the Manager, c/o John
Nuveen & Co. Incorporated at 333 West Wacker Drive, Chicago, Illinois 60606,
Attention: Alan G. Berkshire, (b) if to you, as Representatives of the
Underwriters, at the office of Salomon Smith Barney Inc. at 388 Greenwich
Street, New York, New York 10013, Attention: Counsel or (c) if to special
counsel, at the office of Edwards & Angell, LLP at 750 Lexington Ave., New York,
New York 10022-1200, Attention: James Frangos.
This Agreement has been and is made solely for the benefit of the several
Underwriters, the Fund, the Manager, their directors and officers and the other
controlling persons referred to in Section 8 hereof and their respective succes-
sors and assigns, to the extent provided herein and no other person shall
acquire or have any right under or by virtue of this Agreement. Neither the term
"successor" or the term "successors and assigns" as used in this Agreement shall
include a purchaser from any Underwriter of any of the Shares in his status as
such purchaser.
A copy of the Declaration of Trust of the Fund is on file with the
Secretary of State of the Commonwealth of Massachusetts. This Agreement has been
executed on behalf of the Fund by the vice-president and secretary of the Fund
in such capacity and not individually and the obligations of this Agreement are
not binding upon such officer, any of the
47
<PAGE>
trustees or the shareholders individually but are binding only upon the assets
and property of the Fund.
15. Applicable Law; Counterparts. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
48
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement among
the Fund and the Manager and the several Underwriters.
Very truly yours,
NUVEEN NEW YORK DIVIDEND
ADVANTAGE MUNICIPAL FUND
By: ______________________
Title:
NUVEEN ADVISORY CORP.
By: ______________________
Title:
49
<PAGE>
Confirmed as of the date
first above written on
behalf of themselves and
the other several Under-
writers named in Schedule
1 hereto.
By: SALOMON SMITH BARNEY INC.
AS REPRESENTATIVES OF THE SEVERAL UNDERWRITERS
By: SALOMON SMITH BARNEY INC.
By: _________________________
Title: Managing Director
50
<PAGE>
SCHEDULE I
Number of
Name of Underwriter Common Shares
- ------------------- -------------
Salomon Smith Barney Inc.............................
John Nuveen & Co. Incorporated.......................
BT Alex. Brown Incorporated..........................
A.G. Edwards & Sons, Inc.............................
PaineWebber Incorporated.............................
Prudential Securities Incorporated...................
Gruntal & Co., L.L.C.................................
Raymond James & Associates, Inc......................
Total................................................ _____________
51
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
--------
MASTER SELECTED DEALER AGREEMENT
--------------------------------
May 2, 1999
Dear Ladies and Gentlemen:
In connection with public offerings of securities ("Securities") of
registered investment companies sponsored by John Nuveen & Co. Incorporated
("Nuveen") which are underwritten by a group of underwriters ("Underwriters")
which are represented by Nuveen alone or in conjunction with other firms (the
"Representatives"), you (a "Dealer") may be offered from time to time the
opportunity to purchase a portion of such securities, as a principal, at a
discount from the public offering price representing a selling concession or
reallowance granted as consideration for services rendered in the distribution
of such securities, subject to the terms and conditions of this Agreement.
1. General. (a) This Agreement sets forth the general terms, conditions
and representations applicable to any such purchase. These general terms,
conditions and representations may be modified, amended or supplemented in
connection with an offering of Securities by telegram, telex, facsimile
transmission or other written form (electronic or otherwise) of communication of
Nuveen or other Representative of the Underwriters of such offering (any
communication in any such form being herein referred to as a "written
communication") to you in connection with such offering. This Agreement shall
become effective with respect to your participation in an offering of Securities
upon your acceptance of any reservation of any such Securities, as a Dealer.
Such acceptance shall constitute your acceptance of this Agreement as modified,
amended or supplemented by any such written communication.
(b) As used herein, the term "Agreement" shall mean this Agreement
and, after receipt by you of written notice thereof, any amendment or supplement
hereto, plus any additional or supplementary terms, conditions and
representations contained in the prospectus relating to the offering of
Securities or any other written communication to you from Nuveen or any other
Representative of the Underwriters of any offering of securities. This Agreement
shall
1
<PAGE>
constitute a binding agreement between you and Nuveen, individually, and, in
respect of a public offering of Securities, Nuveen and the other Representatives
of the Underwriters of such offering on whose behalf Nuveen is acting.
(c) This Agreement supersedes any prior understanding you have with
Nuveen with respect to the subject matter hereof.
2. Sales to Selected Dealers. For any specific offering, we will advise
you by telegram of the method and terms of offering, the time of the release of
the Securities for sale to the public, the initial offering price, the selling
concession, the portion of the selling concession allowable to certain dealers
(the "reallowance"), the time at which subscription books will be opened, the
amount, if any, of Securities reserved for purchase by Dealers and the period of
reservation. Subscription books may be closed by us at any time in our
discretion without notice, and the right is reserved to reject any subscription
in whole or in part. Notification of allotments against the rejections of
subscriptions will be made as promptly as practicable. In purchasing Securities,
you must rely only on the prospectus, and on no other statements whatsoever,
written or oral.
3. Offering Provisions. Upon receipt of the telegram or letter referred
to in Section 2 hereof, promptly on the date set forth in such telegram for
release of the Securities for sale to the public, you will reoffer the
Securities purchased by you hereunder, subject to receipt and acceptance of the
Securities by the Underwriters, and upon the other terms, conditions and
representations set forth herein and in the prospectus relating to such
Securities. Securities purchased hereunder are to be offered to the public at
the initial public offering price set forth in the prospectus, except that if a
reallowance is in effect, a reallowance from the public offering price not in
excess of such reallowance may be allowed by you but only to dealers who are
actually engaged in the investment banking or securities business, who execute
the written agreement prescribed by Rule 2740(c) of the Rules of Conduct of the
National Association of Securities Dealers, Inc. ("NASD") and who are members in
good standing of the NASD or are foreign dealers, not eligible for membership in
the NASD, who, in each case, represent to you that they will promptly reoffer
such Securities to the public at the initial public offering price set forth in
the prospectus and will abide by the conditions with respect to foreign brokers
and dealers set forth in the first paragraph of Section 6 hereof.
If prior to the completion of a distribution of the Securities in an
offering, directly or indirectly in connection with their activities under this
agreement, Nuveen or an Underwriter of the offering purchases on the open market
any Securities purchased by you under this Agreement as part of the offering,
you agree to pay Nuveen or the lead Representative of the Underwriters of the
offering on demand an amount equal to the concession with respect to the
Securities, plus, as applicable, transfer taxes, broker's commission, or
dealer's markups, if any, paid in connection with such transactions.
Alternatively, Nuveen or the Representatives of the Underwriters of the offering
may withhold payment for a period of time of, or determine not to pay, all or
any part of
2
<PAGE>
the concession with respect to the Securities so received. You will advise
Nuveen or any other Representative from time to time at our request, of the
number of Securities purchased by you hereunder remaining unsold and you agree
to sell to us, at our request, for the account of one or more of the
Underwriters, such number of such unsold Securities as we may designate, at the
initial offering price less an amount to be determined by us, not in excess of
the full concession.
4. Delivery and Payment. Payment for and delivery of Securities purchased
by you hereunder will be made through the facilities of the Depository Trust
Company, if you are a member, or, if you are not a member, settlement may be
made through a correspondent who is a member pursuant to instructions which you
will send to us prior to such specified date. At the discretion of Nuveen or a
Representative of the Underwriters of the offering, we may require you to pay
the full public offering price for any offering of Securities. If you are called
upon to pay the full public offering price for the Securities purchased by you
the concession will be paid to you, less any amounts charged to your account
pursuant to Section 3 above, after termination of this Agreement.
5. Termination. This Agreement shall continue in full force and effect
until terminated by either party by five days' written notice to the other;
provided, that if this Agreement has become effective with respect to any
offering of Securities, this Agreement may not be terminated by you with respect
to such offering. It shall remain in full force and effect as to such offering.
Notwithstanding any distribution and settlement of accounts, you shall be liable
for the proper proportion of any transfer tax or other liability which may be
asserted against the Representatives or any of the Underwriters or Dealers based
upon the claim that the Dealers, or any of them, constitute a partnership, an
association, an unincorporated business or other separate entity.
6. Position of Selected Dealers and Underwriters. You represent that you
are actually engaged in the investment banking or securities business and are a
member in good standing of the NASD or that you are a foreign dealer, not
eligible for membership in the NASD, which agrees not to offer or sell any
Securities in, or to persons who are nationals or residents of, the United
States of America. In making sales of Securities, if you are such a member, you
agree to comply with all applicable rules of the NASD, including, without
limitation, IM 2110-1 (the NASD's Interpretation with Respect to Free-Riding and
Withholding) and Rules 2740 and 2750 of the NASD's Rules of Conduct, or, if you
are a foreign dealer, you agree to comply with such Interpretation and Rules
2730, 2740 and 2750 of such Rules of Conduct as though you were such a member,
and with Rule 2420 as that Rule applies to a non-member broker or dealer in a
foreign country. You also confirm that you have complied and will comply with
the prospectus delivery requirements of Rule 15c2-8 under the Securities
Exchange Act of 1934, as amended including Rule 15c2-8(b) which requires all
participating dealers to distribute a copy of the preliminary prospectus
relating to the offering of Securities to each person to whom they expect to
confirm a sale of the Securities not less than 48 hours prior to the time they
expect to mail such confirmation. You are not authorized to give any information
or make any representations with
3
<PAGE>
respect to an offering of Securities other than those contained in the
prospectus for the offering, or to act as agent for the issuer, any Underwriter,
Representative or Nuveen.
Neither Nuveen, individually or as Representative of the Underwriters, nor
any of the Representatives or Underwriters shall be under any liability to you,
except for obligations expressly assumed in this Agreement and any liabilities
under the Securities Act of 1933, as amended. No obligations on the part of
Nuveen will be implied or inferred herefrom. All communications to Nuveen
relating to the subject matter of this Agreement should be addressed to John
Nuveen & Co. Incorporated, 333 W. Wacker Drive, Chicago, Illinois 60606
(Attention: Tom Muntz), and any notices to you shall be deemed to have been duly
given if mailed or telegraphed to you at such address as you shall indicate on
the last page of this Agreement.
7. Blue Sky Matters. Neither Nuveen, individually or as a Representative
of the Underwriters, nor any of the Representatives or Underwriters will have
any responsibility with respect to the right of any Dealer to sell Securities in
any jurisdiction, notwithstanding any information we may furnish in that
connection.
8. Indemnification. You agree to indemnify and hold harmless Nuveen and
each Representative and Underwriter of an offering of Securities and each
person, if any, who controls Nuveen or any such Representative or Underwriter
within the meaning of Section 15 of the Securities Act of 1933, as amended or
Section 20 of the Securities Exchange Act of 1934, as amended, from and against
any and all losses, claims, damages, liabilities and expenses, joint or several
(including reasonable costs of investigation) (any of the foregoing being
hereinafter referred to individually as a "Loss" and collectively, as "Losses")
suffered or incurred by any such indemnified person arising out of or in
connection with such offering for or on account of or arising from or in
connection with (i) any violation of any law, rule or regulation (including any
rule of any self-regulatory organization) or (ii) any breach of any
representation, warranty, covenant or agreement contained in this Agreement. The
foregoing indemnity agreement shall be in addition to any liability which you
may otherwise have.
9. Procedures Relating to Indemnification. (a) An indemnified person
under Section 8 of this Agreement (the "Indemnified Party") shall give written
notice to you of any Loss in respect of which you have a duty to indemnify such
Indemnified Party under Section 8 of this Agreement (a "Claim"), specifying in
reasonable detail the nature of the Loss for which indemnification is sought,
except that any delay or failure so to notify you shall only relieve you of your
obligations hereunder to the extent, if at all, that you are actually prejudiced
by reason of such delay or failure.
(b) If a Claim results from any action, suit or proceeding brought or
asserted against an Indemnified Party, you shall assume the defense thereof,
including the employment of
4
<PAGE>
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses. The Indemnified Party shall have the right to employ separate
counsel in such action, suit or proceeding and participate in such defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the Indemnified Party unless (i) you have agreed in writing to pay such fees and
expenses, (ii) you have failed within a reasonable time to assume the defense
and employ counsel or (iii) the named parties to any such action, suit or
proceeding (including any impleaded parties) include both such Indemnified Party
and you and such Indemnified Party shall have been advised by its counsel that
representation of such Indemnified Party and you by the same counsel would be
inappropriate under applicable standards of professional conduct (whether or not
such representation by the same counsel has been proposed) due to actual or
potential differing interests between you and the Indemnified Party (in which
case you shall not have the right to assume the defense of such action, suit or
proceeding on behalf of such Indemnified Party). It is understood, however, that
you shall, in connection with any one action, suit or proceeding or separate but
substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances be
liable for the reasonable fees and expenses of only one separate firm of
attorneys (in addition to any local counsel) at any time for all such
Indemnified Parties not having actual or potential differing interests with you
or among themselves, which firm shall be designated in writing by the
Representatives of the offering and that all such fees and expenses shall be
reimbursed promptly as they are incurred. You shall not be liable for any
settlement of any such action, suit or proceeding effected without your written
consent, but if settled with such written consent or if there be a final
judgment for the plaintiff in any such action, suit or proceeding, you agree to
indemnify and hold harmless any Indemnified Party from and against any loss,
liability, damage or expense by reason by such settlement or judgment.
(c) With respect to any Claim not within Paragraph (b) of Section 9
hereof, you shall have 20 days from receipt of notice from the Indemnified Party
of such Claim within which to respond thereto. If you do not respond within such
twenty-day period, you shall be deemed to have accepted responsibility to make
payment and shall have no further right to contest the validity of such Claim.
If you notify the Indemnified Party within such twenty-day period that you
reject such Claim in whole or in part, the Indemnified Party shall be free to
pursue such remedies as may be available to the Indemnified Party under
applicable law.
10. Survival. The representations, warranties, covenants and agreements of
the undersigned contained in this Agreement, including, without limitation, the
indemnity agreements contained in Sections 8 and 9 hereof, shall remain
operative and in full force and effect, regardless of (i) any investigation made
by or on behalf of any Representative or Underwriter or any person controlling
any Representative or Underwriter, or their directors or officers, (ii)
acceptance of any Shares and payment therefor and (iii) any termination of this
Agreement.
5
<PAGE>
11. This Agreement shall be governed by the laws of the State of New York
or the laws of such other state as indicated in a written communication to you
by Nuveen with respect to any particular securities offering.
Please confirm your agreement to the foregoing by signing in the space
provided below and returning to us the enclosed counterpart of this Agreement.
JOHN NUVEEN & CO. INCORPORATED
By:
------------------------------
Managing Director
Confirmed as of
-------------.
[Date]
- -----------------------------
By:
--------------------------
Title:
----------------------
Address:
- -----------------------------
- -----------------------------
- -----------------------------
6
<PAGE>
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606
April 27, 1999
Mr. William G. McCoy
Managing Director, Equity Capital Markets
Salomon Smith Barney Inc.
388 Greenwich Street
New York, NY 10013
Dear Mr. McCoy:
Reference is made to Nuveen Dividend Advantage Municipal Fund, Nuveen
New York Dividend Advantage Municipal Fund and Nuveen California Dividend
Advantage Municipal Fund. Each such fund currently is making an initial public
offering of its common shares of beneficial interest (the "Shares") through
several underwriters. Such offerings are referred to herein, collectively, as
the "Offerings" and, individually, as an "Offering". You are acting as lead
manager and representative (the "Representative") of the underwriters of each
Offering and we are participating as a manager and underwriter of each Offering.
We have requested that we be able to offer certain broker-dealers the
opportunity to participate as selling dealers in one or more of the Offerings.
This letter is to confirm our agreement with you as to the terms and conditions
on which we may offer to sell, and sell, Shares to broker-dealers with whom we
regularly transact business (collectively, the "Nuveen Selected Dealers" and,
individually, a "Nuveen Selected Dealer"):
a. each Nuveen Selected Dealer to whom we offer to sell, or sell, Shares
shall have entered into a master selected dealer agreement ("Selected Dealer
Agreement") with Nuveen, the form of which is attached hereto as Exhibit A;
b. before offering to sell, or selling, Shares to a Nuveen Selected
Dealer, Nuveen will carry out such independent investigations as it deems
necessary to
<PAGE>
determine that such dealer satisfies the criteria set forth in Section 6 of the
Selected Dealer Agreement;
c. we will act under and enforce each Selected Dealer Agreement only with
your consent (which shall not be unreasonably withheld) or upon your
instruction;
d. we shall not allow to any Nuveen Selected Dealer purchasing Shares in
an Offering a selling concession that is in an amount in excess of the maximum
selling concession set by you for selected dealers for that Offering; and
e. we agree upon instruction from you, subject to the other terms of the
Offerings, to pay for and purchase all Shares that we reserve in the Offerings,
whether such Shares are reserved by us for our own account or for the account of
one or more Nuveen Selected Dealers, and we agree to make all purchases of
Shares in accordance with Master Agreement among Underwriters dated May 18, 1985
between the Representatives and Nuveen and the underwriting agreement for the
Offering of such Shares.
If the foregoing correctly sets forth our understanding regarding the
matters described herein, please so indicate by signing a copy of this letter
where indicated below and returning the signed copy of this letter to us. For
your convenience, a duplicate copy of this letter has been included.
JOHN NUVEEN & CO. INCORPORATED
By____________________________
Name:
Title:
2
<PAGE>
Acknowledged and agreed to as of this
27th day of April, 1999 on behalf of themselves
and, in respect of an Offering, the other
underwriters of the Offering.
by: SALOMON SMITH BARNEY INC.
SALOMON SMITH BARNEY INC.,
as Representative of the Underwriters
By___________________________________
Name: William McCoy
Title: Managing Director, Equity Capital Markets
3
<PAGE>
Exhibit h.4
MASTER AGREEMENT AMONG UNDERWRITERS
-----------------------------------
July 18, 1985
Smith Barney, Harris Upham & Co. Incorporated
1345 Avenue of the Americas
New York, N.Y. 10105
Dear Sirs:
We understand that from time to time you may act as Representative or
as one of the Representatives of the several underwriters of offerings of
securities of various issuers. This Agreement shall apply to any offering of
securities handled by your Corporate Syndicate Department in which we elect to
act as an underwriter after receipt of an invitation from your Corporate
Syndicate Department which shall identify the issuer, contain information
regarding certain terms of the securities to be offered and specify the amount
of our proposed participation and the names of the other Representatives, if
any, and that our participation as an underwriter in the offering shall be
subject to the provisions of this Agreement. Your invitation will include
instructions for our acceptance of such invitation. At or prior to the time of
an offering, you will advise us, to the extent applicable, as to the expected
offering date, the expected closing date, the initial public offering price, the
interest or dividend rate (or the method by which such rate is to be
determined), the conversion price, the underwriting discount, the management
fee, the selling concession and the reallowance, except that if the public
offering price of the securities is to be determined by a formula based upon the
market price of certain securities (such procedure being hereinafter referred to
as "Formula Pricing"), you shall so advise us and shall specify the maximum
underwriting discount, management fee and selling concession. Such information
may be conveyed by you in one or more communications (such communications
received by us with respect to the offering are hereinafter collectively
referred to as the "Invitation"). If the Underwriting Agreement (as hereinafter
defined) provides for the granting of an option to purchase additional
securities to cover over-allotments, you will notify us, in the Invitation, of
such option.
This Agreement, as amended or supplemented by the Invitation, shall
become effective with respect to our participation in an offering of securities
if your Corporate Syndicate Department receives our oral or written acceptance
and does not subsequently receive a written communication revoking our
acceptance prior to the time and date specified in the Invitation (our unrevoked
acceptance after expiration of such time and date being hereinafter referred to
as our "Acceptance"). Our Acceptance will constitute our confirmation that,
except as otherwise stated in such Acceptance, each statement included in the
Master Underwriters' Questionnaire set forth as Exhibit A
<PAGE>
2
hereto (or otherwise furnished to us) is correct. The issuer of the securities
in any offering of securities made pursuant to this Agreement is hereinafter
referred to as the "Issuer". If the Underwriting Agreement does not provide for
an over-allotment option, the securities to be purchased are hereinafter
referred to as the "Securities"; if the Underwriting Agreement provides for an
over-allotment option, the securities the Underwriters (as hereinafter defined)
are initially obligated to purchase pursuant to the Underwriting Agreement are
hereinafter called the "Firm Securities" and any additional securities which may
be purchased upon exercise of the over-allotment option are hereinafter called
the "Additional Securities", with the Firm Securities and all or any part of the
Additional Securities being hereinafter collectively referred to as the
"Securities". Any underwriters of Securities under this Agreement, including
the Representatives (as hereinafter defined), are hereinafter collectively
referred to as the "Underwriters". All references herein to "you" or to the
"Representatives" shall mean Smith Barney, Harris Upham & Co. Incorporated and
the other firms, if any, which are named as Representatives in the Invitation.
The Securities to be offered may, but need not, be registered for a delayed or
continuous offering pursuant to Rule 415 under the Securities Act of 1933 (the
"1933 Act").
The following provisions of this Agreement shall apply separately to
each individual offering of Securities. This Agreement may be supplemented or
amended by you by written notice to us and, except for supplements or amendments
set forth in an Invitation relating to a particular offering of Securities, any
such supplement or amendment to this Agreement shall be effective with respect
to any offering of Securities to which this Agreement applies after this
Agreement is so amended or supplemented.
1. UNDERWRITING AGREEMENT; AUTHORITY OF REPRESENTATIVES. We
----------------------------------------------------
authorize you to execute and deliver an underwriting or purchase agreement and
any amendment or supplement thereto and any associated Terms Agreement or other
similar agreement (collectively, the "Underwriting Agreement") on our behalf
with the Issuer and/or any selling securityholder with respect to the Securities
in such form as you determine. We will be bound by all terms of the
Underwriting Agreement as executed. We understand that changes may be made in
those who are to be Underwriters and in the amount of Securities to be purchased
by them, but the amount of Securities to be purchased by us in accordance with
the terms of this Agreement and the Underwriting Agreement, including the amount
of Additional Securities, if any, which we may become obligated to purchase by
reason of the exercise of any over-allotment option provided in the Underwriting
Agreement, shall not be changed without our consent.
As Representatives of the Underwriters, you are authorized to take
such action as you deem necessary or advisable to carry out this Agreement, the
Underwriting Agreement, and the
<PAGE>
3
purchase, sale and distribution of the Securities, and to agree to any waiver or
modification of any provision of the Underwriting Agreement. To the extent
applicable, you are also authorized to determine (i) the amount of Additional
Securities, if any, to be purchased by the Underwriters pursuant to any over-
allotment option and (ii) with respect to offerings using Formula Pricing, the
initial public offering price and the price at which the Securities are to be
purchased in accordance with the Underwriting Agreement. It is understood and
agreed that Smith Barney, Harris Upham & Co. Incorporated may act on behalf of
all Representatives.
It is understood that, if so specified in the Invitation, arrangements
may be made for the sale of Securities by the Issuer pursuant to delayed
delivery contracts (hereinafter referred to as "Delayed Delivery Contracts").
References herein to delayed delivery and Delayed Delivery Contracts apply only
to offerings to which delayed delivery is applicable. The term "underwriting
obligation", as used in this Agreement with respect to any Underwriter, shall
refer to the amount of Securities, including any Additional Securities (plus
such additional Securities as may be required by the Underwriting Agreement in
the event of a default by one or more of the Underwriters) which such
Underwriter is obligated to purchase pursuant to the provisions of the
Underwriting Agreement, without regard to any reduction in such obligation as a
result of Delayed Delivery Contracts which may be entered into by the Issuer.
If the Securities consist in whole or in part of debt obligations
maturing serially, the serial Securities being purchased by each Underwriter
pursuant to the Underwriting Agreement will consist, subject to adjustment as
provided in the Underwriting Agreement, of serial Securities of each maturity in
a principal amount which bears the same proportion to the aggregate principal
amount of the serial Securities of such maturity to be purchased by all the
Underwriters as the principal amount of serial Securities set forth opposite
such Underwriter's name in the Underwriting Agreement bears to the aggregate
principal amount of the serial Securities to be purchased by all the
Underwriters.
2. REGISTRATION STATEMENT PROSPECTUS; OFFERING CIRCULAR. In the case
----------------------------------------------------
of an Invitation regarding an offer of Securities registered under the 1933 Act
(a "Registered Offering"), you will furnish to us, to the extent made available
to you by the Issuer, copies of any registration statement or registration
statements relating to the Securities which may be filed with the Securities and
Exchange Commission (the "Commission") pursuant to the 1933 Act and of each
amendment thereto (excluding exhibits but including any documents incorporated
by reference therein). Such registration statement(s) as amended, and the
prospectus(es) relating to the sale of Securities by the Issuer constituting a
part thereof, including all documents incorporated therein by reference, as
<PAGE>
4
from time to time amended or supplemented by the filing of documents pursuant to
the Securities Exchange Act of 1934 (the "1934 Act"), the 1933 Act or otherwise,
are referred to herein as the "Registration Statement" and "Prospectus",
respectively; provided, however, that a supplement to the Prospectus filed with
the Commission pursuant to Rule 424 under the 1933 Act with respect to an
offering of Securities (a "Prospectus Supplement") shall be deemed to have
supplemented the Prospectus only with respect to the offering of Securities to
which it relates.
With respect to Securities for which no Registration Statement is
filed with the Commission, you will furnish to us, to the extent made available
to you by the Issuer, copies of any offering circular or other offering
materials to be used in connection with the offering of the Securities and of
each amendment thereto (the "Offering Circular").
3. PUBLIC OFFERING. The sale of the Securities to the public shall
---------------
commence as soon as you deem advisable. We will not sell any Securities until
they are released by you for that purpose. When notified by you that the
Securities are released for sale, we will offer to the public in conformity with
the terms of offering set forth in the Prospectus or Offering Circular, such of
the Securities to be purchased by us ("our Securities") as are not reserved for
our account for sale to Selected Dealers and others pursuant to Section 5.
After the initial public offering, the public offering price and the concession
and discount therefrom may be changed by you by notice to the Underwriters, and
we agree to be bound by any such change.
If, in accordance with the terms of offering set forth in the
Prospectus or Offering Circular, the offering of the Securities is not at a
fixed price but at varying prices set by individual Underwriters based on market
prices or at negotiated prices, the provisions above relating to your right to
change the public offering price and concession and discount to dealers shall
not apply, and other references in this Section and elsewhere in this Agreement
to the public offering price or Selected Dealers' concession shall be deemed to
mean the prices and concessions determined by you from time to time in your
discretion.
If so directed in the Invitation, we will not sell any Securities to
any account over which we have discretionary authority. We will also comply
with any other restrictions which may be set forth in the Invitation.
The initial public advertisement with respect to the Securities shall
appear on such date, and shall include the names of such of the Underwriters, as
you may determine. Thereafter, any Underwriter may advertise at its own
expense.
4. DELAYED DELIVERY ARRANGEMENTS. We authorize you to act on our
-----------------------------
behalf in making all arrangements for the solicitation
<PAGE>
5
of offers to purchase Securities from the Issuer pursuant to Delayed Delivery
Contracts, and we agree that all such arrangements will be made only through you
(directly or through Underwriters or Selected Dealers). You may allow to
Selected Dealers in respect of such Securities a commission equal to the
concession allowed to Selected Dealers pursuant to Section 5.
The obligations of the Underwriters shall be reduced in the aggregate
by the principal amount of Securities covered by Delayed Delivery Contracts made
by the Issuer, the obligation of each Underwriter to be reduced by the principal
amount of such Securities, if any, allocated by you to such Underwriter. Your
determination of the allocation of Securities covered by Delayed Delivery
Contracts among the several Underwriters shall be final and conclusive, and we
agree to be bound by any notice delivered by you to the Issuer setting forth the
amount of the reduction in our obligation as a result of Delayed Delivery
Contracts.
Upon receiving payment from the Issuer of the fee for arranging
Delayed Delivery Contracts, you will credit our account with the portion of such
fee applicable to the Securities covered by Delayed Delivery Contracts allocated
to us. You will charge our account with any commission allocated to Selected
Dealers in respect of Securities covered by Delayed Delivery Contracts allocated
to us.
5. OFFERING TO SELECTED DEALERS AND OTHERS; MANAGEMENT OF OFFERING.
---------------------------------------------------------------
We authorize you, for our account, to reserve for sale and to sell to dealers
("Selected Dealers"), among whom any of the Underwriters may be included, such
amount of our Securities as you shall determine. Reservations for sales to
Selected Dealers for our account need not be in proportion to our underwriting
obligation, but sales of Securities reserved for our account for sale to
Selected Dealers shall be made as nearly as practicable in the ratio which the
amount of Securities reserved for our account bears to the aggregate amount of
Securities reserved for the account of all Underwriters, as calculated from day
to day. The price to Selected Dealers initially shall be in the public offering
price less a concession not in excess of the Selected Dealers concession set
forth in the Invitation. Selected Dealers shall be actually engaged in the
investment banking or securities business and shall be either members in good
standing of the National Association of Securities Dealers, Inc. (the "NASD") or
dealers with their principal place of business located outside the United
States, its territories and its possessions and not registered under the 1934
Act who agree to make no sales within the United States, its territories or its
possessions or to persons who are nationals thereof or residents therein. Each
Selected Dealer shall agree to comply with the provisions of Section 24 of
Article III of the Rules of Fair Practice of the NASD, and each foreign Selected
Dealer who is not a member of the NASD also shall agree to comply with the
NASD's interpretation with respect to free-riding and withholding, to comply, as
though it were a member of the NASD, with the provisions of Sections 8
<PAGE>
6
and 36 of Article III of such Rules of Fair Practice, and to comply with Section
25 of Article III thereof as that Section applies to a non-member foreign
dealer.
With your consent, the Underwriters may allow, and Selected Dealers
may reallow, a discount on sales to any dealer who meets the above NASD
requirements in an amount not in excess of the amount set forth in the
Invitation. Upon your request, we will advise you of the identity of any dealer
to whom we allow such a discount and any Underwriter or Selected Dealer from
whom we receive such a discount.
We also authorize you, for our account, to reserve for sale and to
sell our Securities at the public offering price to others, including
institutions and retail purchasers. Except for such sales which are designated
by a purchaser to be for the account of a particular Underwriter, such
reservations and sales shall be made as nearly as practicable in proportion to
our underwriting obligation, unless you agree to a smaller proportion at our
request.
At or before the time the Securities are released for sale, you shall
notify us of the amount of our Securities which have not been reserved for our
account for sale to Selected Dealers and others and which is to be retained by
us for direct sale.
We will from time to time, upon your request, report to you the amount
of Securities retained by us for direct sale which remains unsold and, upon your
request, deliver to you for our account, or sell to you for the account of one
or more of the Underwriters, such amount of our unsold Securities as you may
designate at the public offering price less an amount determined by you not in
excess of the concession to Selected Dealers. You may also repurchase
Securities from other Underwriters and Selected Dealers, for the account of one
or more of the Underwriters, at prices determined by you not in excess of the
public offering price less the concession to Selected Dealers.
You may from time to time deliver to any Underwriter, for carrying
purposes or for sale by such Underwriter, any of the Securities then reserved
for sale to, but not purchased and paid for by, Selected Dealers or others as
above provided, but to the extent that Securities are so delivered for sale by
such Underwriter, the amount of Securities then reserved for the account of such
Underwriter shall be correspondingly reduced. Securities delivered for carrying
purposes only shall be redelivered to you upon demand.
The Underwriters and Selected Dealers may, with your consent, purchase
Securities from and sell Securities to each other at the public offering price
less a concession not in excess of the concession to Selected Dealers.
<PAGE>
7
6. REPURCHASE OF SECURITIES NOT EFFECTIVELY PLACED. In recognition
-----------------------------------------------
of the importance of distributing the Securities to bona fide investors, we
agree to repurchase on demand any Securities sold by us, except through you,
which are purchased by you in the open market or otherwise during a period
terminating as provided in Section 16, at a price equal to the cost of such
purchase, including accrued interest, amortization of original issue discount or
dividends, commissions and transfer and other taxes, if any, on redelivery. The
certificates delivered to us need not be the identical certificates delivered to
you in respect of the Securities purchased. In lieu of requiring repurchase,
you may, in your discretion, sell such Securities for our account at such
prices, upon such terms and to such persons, including any of the other
Underwriters, as you may determine, charging the amount of any loss and expense,
or crediting the amount of any net profit, resulting from such sale, to our
account, or you may charge our account with an amount determined by you not in
excess of the concession to Selected Dealers.
7. STABILIZATION AND OVER-ALLOTMENT. In order to facilitate the
--------------------------------
distribution of the Securities, we authorize you, in your discretion, to
purchase and sell Securities, any securities into which the Securities are
convertible or for which the Securities are exchangeable, and any other
securities of the Issuer or any guarantor of the Securities specified in the
Invitation, in the open market or otherwise, for long or short account, at such
prices as you may determine, and, in arranging for sales to Selected Dealers or
others, to over-allot. You may liquidate any long position or cover any short
position incurred pursuant to this Section at such prices as you may determine.
You shall make such purchases and sales (including over-allotments) for the
accounts of the Underwriters as nearly as practicable in proportion to their
respective underwriting obligations. It is understood that, in connection with
any particular offering of Securities to which this Agreement applies, you may
have made purchases of any such securities for stabilizing purposes prior to the
time when we became one of the Underwriters, and we agree that any such
securities so purchased shall be treated as having been purchased for the
respective accounts of the Underwriters pursuant to the foregoing authorization.
At the close of business on any day our net commitment, either for long or short
account, resulting from such purchases or sales (including over-allotments)
shall not exceed 15% (or such other amount as may be specified in the
Invitation) of our underwriting obligation, except that such percentage may be
increased with the approval of a majority in interest of the Underwriters. We
will take up at cost on demand any Securities or any such other securities so
sold or over-allotted for our account, including accrued interest, amortization
of original issue discount or dividends, and we will pay to you on demand the
amount of any losses or expenses incurred for our account pursuant to this
Section. In the event of default by any Underwriter in respect of its
obligations under this Section, each non-defaulting Underwriter shall assume its
share of the
<PAGE>
8
obligations of such defaulting Underwriter in the proportion that its
underwriting obligation bears to the underwriting obligations of all non-
defaulting Underwriters without relieving such defaulting Underwriter of its
liability hereunder.
If you effect any stabilizing purchase pursuant to this Section, you
shall promptly notify us of the date and time of the first stabilizing purchase
and the date and time when stabilizing was terminated. You shall prepare and
maintain such records as are required to be maintained by you as manager
pursuant to Rule 17a-2 under the 1934 Act.
8. RULE 10B-6. We represent and agree that in connection with the
----------
offering of Securities we have complied and will comply with the provisions of
Rule 10b-6 under the 1934 Act as they apply to the offering of the Securities.
9. PAYMENT AND DELIVERY. At or before such time, on such dates and
--------------------
at such places as you may specify in the Invitation, we will deliver to you a
certified or official bank check in such funds as are specified in the
Invitation, payable to the order of Smith Barney, Harris Upham & Co.
Incorporated (unless otherwise specified in the Invitation) in an amount equal
to, as you direct, either (i) the public offering price or prices plus accrued
interest, amortization or original issue discount or dividends, if any, set
forth in the Prospectus or Offering Circular less the concession to Selected
Dealers in respect of the amount of Securities to be purchased by us in
accordance with the terms of this Agreement, or (ii) the amount set forth in the
Invitation with respect to the Securities to be purchased by us. We authorize
you to make payment for our account of the purchase price for the Securities to
be purchased by us against delivery to you of such Securities (which, in the
case of Securities which are debt obligations, may be in temporary form), and
the difference between such purchase price of the Securities and the amount of
our funds delivered to you therefor shall be credited to our account.
Delivery to us of Securities retained by us for direct sale shall be
made by you as soon as practicable after your receipt of the Securities. Upon
termination of the provisions of this Agreement as provided in Section 16, you
shall deliver to us any Securities reserved for our account for sale to Selected
Dealers and others which remain unsold at that time. If, upon termination of
the provisions of this Agreement specified in Section 16 hereof, an aggregate of
not more than 10% of the Securities remains unsold, you may, in your discretion,
sell such Securities at such prices as you may determine.
If we are a member of The Depository Trust Company or any other
depository or similar facility, you are authorized to make appropriate
arrangements for payment for and/or delivery through its facilities of the
Securities to be purchased by us, or, if we are not a member, settlement may be
made through a
<PAGE>
9
correspondent that is a member pursuant to our timely instructions to you.
Upon receiving payment for Securities sold for our account to Selected
Dealers and others, you shall remit to us an amount equal to the amount paid by
us to you in respect of such Securities and credit or charge our account with
the difference, if any, between such amount and the price at which such
Securities were sold.
In the event that the Underwriting Agreement for an offering provides
for the payment of a commission or other compensation to the Underwriters, we
authorize you to receive such commission or other compensation for our account.
10. MANAGEMENT COMPENSATION. As compensation for your services in
-----------------------
the management of the offering, we will pay you an amount equal to the
management fee specified in the Invitation in respect of the Securities to be
purchased by us pursuant to the Underwriting Agreement, and we authorize you to
charge our account with such amount. If there is more than one Representative,
such compensation shall be divided among the Representatives in such proportions
as they may determine.
11. AUTHORITY TO BORROW. We authorize you to advance your own funds
-------------------
for our account, charging current interest rates, or to arrange loans for our
account or the account of the Underwriters, as you may deem necessary or
advisable for the purchase, carrying, sale and distribution of the Securities.
You may execute and deliver any notes or other instruments required in
connection therewith and may hold or pledge as security therefor all or any part
of the Securities which we or such Underwriters have agreed to purchase. The
obligations of the Underwriters under loans arranged on their behalf shall be
several in proportion to their respective participations in such loans, and not
joint. Any lender is authorized to accept your instructions as to the
disposition of the proceeds of any such loans. You shall credit each
Underwriter with the proceeds of any loans made for its account.
12. BLUE SKY QUALIFICATION. You shall inform us, upon request, of
----------------------
the states and other jurisdictions of the United States in which it is believed
that the Securities are qualified for sale under, or are exempt from the
requirements of, their respective securities laws, but you assume no
responsibility with respect to our right to sell Securities in any jurisdiction.
You are authorized to file with the Department of State of the State of New York
a Further State Notice with respect to the Securities, if necessary.
If we propose to offer Securities outside the United States, its
territories or its possessions, we will take, at our own expense, such action,
if any, as may be necessary to comply
<PAGE>
10
with the laws of each foreign jurisdiction in which we propose to offer
Securities.
13. MEMBERSHIP IN NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.;
---------------------------------------------------------------
FOREIGN UNDERWRITERS. We understand that you are a member in good standing of
- --------------------
the NASD. We confirm that we are actually engaged in the investment banking or
securities business and are either (i) a member in good standing of the NASD or
(ii) a dealer with its principal place of business located outside the United
States, its territories and its possessions and not registered under the 1934
Act who hereby agrees to make no sales within the United States, its territories
or its possessions or to persons who are nationals thereof or residents therein
(except that we may participate in sales to Selected Dealers and others under
Section 5 of this Agreement). We hereby agree to comply with Section 24 of
Article III of the Rules of Fair Practice of the NASD, and if we are a foreign
dealer and not a member of the NASD we also hereby agree to comply with the
NASD's interpretation with respect to free-riding and withholding, to comply, as
though we were a member of the NASD, with the provisions of Sections 8 and 36 of
Article III of such Rules of Fair Practice, and to comply with Section 25 of
Article III thereof as that Section applies to a non-member foreign dealer.
14. DISTRIBUTION OF PROSPECTUSES; OFFERING CIRCULARS. We are
------------------------------------------------
familiar with Securities Act of 1933 Release No. 4968 and Rule 15c2-8 under the
1934 Act, relating to the distribution of preliminary and final prospectuses,
and we confirm that we will comply therewith, to the extent applicable, in
connection with any sale of Securities. You shall cause to be made available to
us, to the extent made available to you by the Issuer, such number of copies of
the Prospectus as we may reasonably request for purposes contemplated by the
1933 Act, the 1934 Act and the rules and regulations thereunder.
If an Invitation states that the offering is subject to the 48-hour
prospectus delivery requirement set forth in Rule 15c2-8(b), our Acceptance of
the Invitation shall be deemed to constitute confirmation that we have delivered
(or we will deliver) a copy of the preliminary prospectus to all persons to whom
we expect to confirm a sale of Securities and that such delivery was effected
(or will be effected) at least 48 hours prior to the mailing of such
confirmations of sale.
Our Acceptance of an Invitation relating to an offering made pursuant
to an Offering Circular shall constitute our agreement that, if requested by
you, we will furnish a copy of any amendment to a preliminary or final Offering
Circular to each person to whom we shall have furnished a previous preliminary
or final Offering Circular. Our Acceptance shall constitute our confirmation
that we have delivered and our agreement that we will deliver all preliminary
and final Offering Circulars required for compliance with the applicable federal
and state laws and the applicable rules and regulations of any regulatory
<PAGE>
11
body promulgated thereunder governing the use and distribution of offering
circulars by underwriters and, to the extent consistent with such laws, rules
and regulations, our Acceptance shall constitute our confirmation that we have
delivered and our agreement that we will deliver all preliminary and final
Offering Circulars which would be required if the provisions of Rule 15c2-8 (or
any successor provision) under the 1934 Act applied to such offering.
15. NET CAPITAL. The incurrence by us of our obligations hereunder
-----------
and under the Underwriting Agreement in connection with the offering of the
Securities will not place us in violation of the capital requirements of Rule
15c3-1 under the 1934 Act.
16. TERMINATION. With respect to each offering of Securities to
-----------
which this Agreement applies, all limitations in this Agreement on the price at
which the Securities may be sold, the period of time referred to in Section 6,
the authority granted by the first sentence of Section 7, and the restrictions
contained in Section 8 shall terminate at the close of business on the 45th day
after the commencement of the offering of such Securities. You may terminate
nay or all of such provisions at any time prior thereto by notice to the
Underwriters. All other provisions of this Agreement shall remain operative and
in full force and effect with respect to such offering.
17. EXPENSES AND SETTLEMENT. You may charge our account with any
-----------------------
transfer taxes on sales of Securities made for our account and with our
proportionate share (based upon our underwriting obligation) of all other
expenses incurred by you under this Agreement or otherwise in connection with
the purchase, carrying, sale or distribution of the Securities. With respect to
each offering of Securities to which this Agreement applies, the respective
accounts of the Underwriters shall be settled as promptly as practicable after
the termination of all the provisions of this Agreement as provided in Section
16, but you may reserve such amount as you may deem advisable for additional
expenses. Your determination of the amount to be paid to or by us shall be
conclusive. You may at any time make partial distributions of credit balances
or call for payment of debit balances. Any of our funds in your hands may be
held with your general funds without accountability for interest.
Notwithstanding any settlement, we will remain liable for any taxes on transfers
for our account and for our proportionate share (based upon our underwriting
obligation) of all expenses and liabilities which may be incurred by or for the
accounts of the Underwriters with respect to each offering of Securities to
which this Agreement applies.
18. INDEMNIFICATION. With respect to each offering of Securities
---------------
pursuant to this Agreement, we will indemnify and hold harmless each other
Underwriter and each person, if any, who controls each other Underwriter within
the meaning of Section 15
<PAGE>
12
of the 1933 Act, to the extent that and on the terms upon which we agree to
indemnify and hold harmless the Issuer and other specified persons as set forth
in the Underwriting Agreement.
19. CLAIMS AGAINST UNDERWRITERS. With respect to each offering of
---------------------------
Securities to which this Agreement applies, if at any time any person other than
an Underwriter asserts a claim (including any commenced or threatened
investigation or proceeding by any government agency or body) against one or
more of the Underwriters or against you as Representative(s) of the Underwriters
arising out of an alleged untrue statement or omission in the Registration
Statement (or any amendment thereto) or in any preliminary prospectus or the
Prospectus or any amendment or supplement thereto, or in any preliminary or
final Offering Circular, or relating to any transaction contemplated by this
Agreement, we authorize you to make such investigation, to retain such counsel
for the Underwriters and to take such action in the defense of such claim as you
may deem necessary or advisable. You may settle such claim with the approval of
a majority in interest of the Underwriters. We will pay our proportionate share
(based upon our underwriting obligation) of all expenses incurred by you
(including the fees and expenses of counsel for the Underwriters) in
investigating and defending against such claim and our proportionate share of
the aggregate liability incurred by all Underwriters in respect of such claim
(after deducting any contribution indemnification obtained pursuant to the
Underwriting Agreement, or otherwise, from persons other than Underwriters),
whether such liability is the result of a judgment against one or more of the
Underwriters or the result of any settlement. Any Underwriter may retain
separate counsel at its own expense. A claim against or liability incurred by a
person who controls an Underwriter shall be deemed to have been made against or
incurred by such Underwriter. In the event of default by any Underwriter in
respect of its obligations under this Section, the non-defaulting Underwriters
shall be obligated to pay the full amount thereof in the proportions that their
respective underwriting obligations bear to the underwriting obligations of all
non-defaulting Underwriters without relieving such defaulting Underwriter of its
liability hereunder.
20. DEFAULT BY UNDERWRITERS. Default by any Underwriter in respect
-----------------------
of its obligations hereunder or under the Underwriting Agreement shall not
release us from any of our obligations or in any way affect the liability of
such defaulting Underwriter to the other Underwriters for damages resulting from
such default. If one or more Underwriters default under the Underwriting
Agreement, if provided in the Underwriting Agreement you may (but shall not be
obligated to) arrange for the purchase by others, which may include yourselves
or other non-defaulting Underwriters, of all or a portion of the Securities not
taken up by the defaulting Underwriters.
<PAGE>
13
In the event that such arrangements are made, the respective
underwriting obligations of the non-defaulting Underwriters and the amounts of
the Securities to be purchased by others, if any, shall be taken as the basis
for all rights and obligations hereunder, but this shall not in any way affect
the liability of any defaulting Underwriter to the other Underwriters for
damages resulting from its default, nor shall any such default relieve any other
Underwriter of any of its obligations hereunder or under the Underwriting
Agreement except as herein or therein provided. In addition, in the event of
default by one or more Underwriters in respect of their obligations under the
Underwriting Agreement to purchase the Securities agreed to be purchased by them
thereunder and, to the extent that arrangements shall not have been made by you
for any person to assume the obligations of such defaulting Underwriter or
Underwriters, we agree, if provided in the Underwriting Agreement, to assume our
proportionate share, based upon our underwriting obligation, of the obligations
of each such defaulting Underwriter (subject to the limitations contained in the
Underwriting Agreement) without relieving such defaulting Underwriter of its
liability therefor.
In the event of default by one or more Underwriters in respect of
their obligations under this Agreement to take up and pay for any securities
purchased, or to deliver any securities sold or over-allotted, by you for the
respective accounts of the Underwriters, or to bear their proportion of expenses
or liabilities pursuant to this Agreement, and to the extent that arrangements
shall not have been made by you for any persons to assume the obligations of
such defaulting Underwriter or Underwriters, we agree to assume our
proportionate share, based upon our underwriting obligation, of the obligations
of each defaulting Underwriter without relieving any such defaulting Underwriter
of its liability therefor.
21. LEGAL RESPONSIBILITY. As Representative(s) of the Underwriters,
--------------------
you shall have no liability to us, except for your lack of good faith and for
obligations assumed by you in this Agreement and except that we do not waive any
rights that we may have under the 1933 Act or the 1934 Act or the rules and
regulations thereunder. No obligations not expressly assumed by you in this
Agreement shall be implied herefrom.
Nothing herein contained shall constitute the Underwriters an
association, or partners, with you, or with each other, or, except as otherwise
provided herein or in the Underwriting Agreement, render any Underwriter liable
for the obligations of any other Underwriter, and the rights, obligations and
liabilities of the Underwriters are several in accordance with their respective
underwriting obligations, and not joint.
If the Underwriters are deemed to constitute a partnership for federal
income tax purposes, we elect to be excluded from the application of Subchapter
K, Chapter 1, Subtitle A, of the Internal Revenue Code of 1954, as amended, and
<PAGE>
14
agree not to take any position inconsistent with such election, and you, as
Representative(s), are authorized, in your discretion, to execute on behalf of
the Underwriters such evidence of such election as may be required by the
Internal Revenue Service.
Unless we have promptly notified you in writing otherwise, our name as
it should appear in the Prospectus or Offering Circular and our address are set
forth below.
22. NOTICES. Any notice from you shall be deemed to have been duly
-------
given if mailed or transmitted to us at our address appearing below.
23. GOVERNING LAW. This Agreement shall be governed by the laws of
-------------
the State of New York applicable to agreements made and to be performed in said
State.
Please confirm this Agreement and deliver a copy to us.
Very truly yours,
Name of Firm:
By _________________________________
Authorized Officer or Partner
Address:
---------------------------------
---------------------------------
---------------------------------
Confirmed as of the date
first above written.
Smith Barney, Harris Upham & Co. Incorporated
By ______________________________
Managing Director
<PAGE>
EXHIBIT A
---------
MASTER UNDERWRITERS' QUESTIONNAIRE
----------------------------------
In connection with each offering of Securities pursuant to the Smith
Barney, Harris Upham & Co. Incorporated Master Agreement Among Underwriters,
dated July 18, 1985 (the "Agreement"), each Underwriter confirms the following
information, except as indicated in such Underwriter's Acceptance or other
written communication furnished to Smith Barney, Harris Upham & Co.
Incorporated. Defined terms used herein have the same meaning as defined terms
in the Master Agreement Among Underwriters.
(a) Neither such Underwriter nor any of its directors, officers or
partners have any material (as defined in Regulation C under the 1933 Act)
relationship with the Issuer, its parent (if any), any other seller of the
Securities or any guarantor of the Securities.
(b) Except as described or to be described in the Agreement, the
Underwriting Agreement or the Invitation, such Underwriter does not know: (i)
of any discounts or commissions to be allowed or paid to dealers, including all
cash, securities, contracts, or other consideration to be received by any dealer
in connection with the sale of the Securities, or of any other discounts or
commissions to be allowed or paid to the Underwriters or of any other items that
would be deemed by the NASD to constitute underwriting compensation for purposes
of the NASD's Rules of Fair Practice, (ii) of any intention to over-allot, or
(iii) that the price of any security may be stabilized to facilitate the
offering of the Securities.
(c) No report or memorandum has been prepared for external use (i.e.,
outside such Underwriter's organization) by such Underwriter in connection with
the proposed offering of Securities and, in the case of a Registered Offering,
where the Registration Statement is on Form S-1, such Underwriter has not
prepared or had prepared for it any engineering, management or similar report or
memorandum relating to the broad aspects of the business, operations or products
of the Issuer, its parent (if any) or any guarantor of the Securities within the
past twelve months. If any such report or memorandum has been prepared, furnish
to Smith Barney, Harris Upham & Co. Incorporated three copies thereof, together
with a statement as to the distribution of the report or memorandum, identifying
each class of persons to whom the report or memorandum was distributed, the
number of copies distributed to each class and the period of distribution.
(d) If the Securities are debt securities to be issued under an
indenture to be qualified under the Trust Indenture Act of 1939, neither such
Underwriter nor any of its directors, officers or partners is an "affiliate", as
that term is defined under the Trust Indenture Act of 1939, of the Trustee for
the
<PAGE>
2
Securities as specified in the Invitation, or of its parent (if any); neither
the Trustee nor its parent (if any) nor any of their directors or executive
officers is a director, officer, partner, employee, appointee or representative
of such Underwriter as those terms are defined in the Trust Indenture Act of
1939 or in the relevant instructions to Form T-1; neither such Underwriter nor
any of its directors, partners or executive officers, separately or as a group,
owns beneficially 1% or more of the shares of any class of voting securities of
the Trustee or of its parent (if any); and if such Underwriter is a corporation,
it does not have outstanding nor has it assumed or guaranteed any securities
issued otherwise than in its present corporate name, and neither the Trustee nor
its parent (if any) is a holder of any such securities.
(e) If the Issuer is a public utility, such Underwriter is not a
"holding company" or a "subsidiary company" or an "affiliate" of a "holding
company" or of a "public utility company", each as defined in the Public Utility
Holding Company Act of 1935.
(f) Neither such Underwriter nor any "group" (as that term is defined
in Section 13(d)(3) of the 1934 Act) of which it is a member is the beneficial
owner (determined in accordance with Rule 13d-3 under the 1934 Act) of more than
5% of any class of voting securities of the Issuer, its parent (if any), any
other seller of the Securities or any guarantor of the Securities nor does it
have any knowledge that more than 5% of any class of voting securities of the
Issuer is held or to be held subject to any voting trust or other similar
agreement.
<PAGE>
Salomon Smith Barney Inc.
388 Greenwich Street
New York, N.Y. 10013
Attention: Dominic J. Lepore, IBD - Transactions Structuring Group
Dear Sirs:
We are a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD") or a foreign bank or dealer not eligible for such
membership.
We hereby agree that, in connection with any purchase or sale by us of
securities which are part of a fixed price offering in which Salomon Smith
Barney Inc. ("Salomon Smith Barney") is an underwriter and as to which we
receive a selling concession, discount or other allowance, we will (a) if we are
a member of the NASD, comply with all applicable Conduct Rules of the NASD,
including, without limitation, IM 2110-1 (relating to Free-Riding and
Withholding) and Conduct Rule 2740 (relating to Selling Concessions, Discounts
and Other Allowances) or (b) if we are a foreign bank or dealer, not eligible
for such membership, comply with said IM 2110-1 and with Conduct Rules 2730
(relating to Securities Taken in Trade), 2740 (relating to Selling Concessions)
and 2750 (relating to Transactions with Related Persons) as it applies to a
non-member broker or dealer in a foreign country.
This letter agreement shall remain in full force and effect until Salomon
Smith Barney receives written notice at the above address of its termination.
Please confirm that the foregoing correctly sets forth our agreement with
Salomon Smith Barney.
Very truly yours,
NAME OF INSTITUTION
By:
---------------------------
Title:
Confirmed:
SALOMON SMITH BARNEY INC.
By:
----------------------
Dominic J. Lepore
Vice President
<PAGE>
May 24, 1999
Nuveen New York Dividend Advantage Municipal Fund
333 West Wacker Drive
Chicago, Illinois 60606
Ladies and Gentlemen:
Nuveen New York Dividend Advantage Municipal Fund
We have acted as counsel for Nuveen New York Dividend Advantage Municipal
Fund (the "Fund") in connection with the registration under the Securities Act
of 1933 (the "Act") of certain of its common shares of beneficial interest (the
"Shares") in registration statement no. 333-68539 on form N-2 as amended by pre-
effective amendment no. 1 and pre-effective amendment no. 2, and as it is
proposed to be amended by pre-effective amendment no. 3 (as amended and as
proposed to be amended, the "Registration Statement").
In this connection we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate and other
records, certificates and other papers as we deemed it necessary to examine for
the purpose of this opinion, including the agreement and declaration of trust
(the "Trust Agreement") and by-laws of the Fund, actions of the board of
trustees of the Fund authorizing the issuance of shares of the Fund and the
Registration Statement.
We assume that, upon sale of the Shares, the Fund will receive the
authorized consideration therefor, which will at least equal the net asset value
of the Shares.
Based upon the foregoing, we are of the opinion that the Fund is authorized
to issue the Shares, and that, when the Shares are issued and sold after the
Registration Statement has been declared effective and the authorized
consideration therefor is received by the Fund, they will be validly issued,
fully paid and nonassessable by the Fund, except that, as set forth in the
Registration Statement, shareholders of the Fund may under certain circumstances
be held personally liable for its obligations.
In rendering the foregoing opinion, we have relied upon the opinion of
Bingham Dana LLP expressed in their letter to us dated May 25, 1999.
<PAGE>
Nuveen New York Dividend Advantage Municipal Fund
May 24, 1999
Page two
We consent to the filing of this opinion as an exhibit to the Registration
Statement. In giving this consent, we do not admit that we are in the category
of persons whose consent is required under section 7 of the Act.
Very truly yours,
<PAGE>
May 25, 1999
Bell Boyd & Lloyd
Three First National Plaza
Suite 3300
Chicago, Illinois 60602
RE: Nuveen New York Dividend Advantage Municipal Fund
--------------------------------------------------
Dear Sirs:
We have acted as special Massachusetts counsel to Nuveen New York Dividend
Advantage Municipal Fund, a Massachusetts business trust (the "Fund"), in
connection with the Fund's Registration Statement on Form N-2 filed with the
Securities and Exchange Commission on December 8, 1998 (the "Original Filing"),
as such Registration Statement has been subsequently amended by Pre-Effective
Amendment No. 1 filed with the Securities and Exchange Commission on April 16,
1999 ("Amendment No. 1") and by Pre-Effective Amendment No. 2 filed with the
Securities and Exchange Commission on April 27, 1999 ("Amendment No. 2") and is
proposed to be amended by Pre-Effective Amendment No. 3 (as amended and proposed
to be amended, the "Registration Statement"), with respect to certain of its
Common Shares of Beneficial Interest, par value of $.01 per share (the
"Shares"). You have requested that we deliver this opinion to you, as special
counsel to the Fund, for use by you in connection with your opinion to the Fund
with respect to the Shares.
In connection with the furnishing of this opinion, we have examined the
following documents:
(a) a certificate of the Secretary of State of the Commonwealth of
Massachusetts as to the existence of the Fund;
(b) copies, certified by the Secretary of State of the Commonwealth of
Massachusetts, of the Fund's Declaration of Trust and of all amendments
thereto on file in the office of the Secretary of State;
(c) a Certificate executed by Gifford R. Zimmerman, the Secretary of
the Fund, certifying as to, and attaching copies of, the Fund's Declaration
of Trust and By-Laws, and certain resolutions adopted by the Trustees of
the Fund;
(d) conformed copies of the Original Filing and Amendments No. 1 and
No. 2;
(e) a draft dated May 11, 1999 of the Underwriting Agreement to be
entered into by the Fund and Salomon Smith Barney, Inc., John Nuveen & Co.
Incorporated, BT Alex. Brown Incorporated, A.G. Edwards & Sons, Inc.,
PaineWebber Incorporated,
<PAGE>
Bell, Boyd
May 25, 1999
Page 2
Prudential Securities Incorporated, Gruntal & Co., L.L.C., and Raymond
James & Associates, Inc., as representatives of the several underwriters,
providing for the purchase and sale of the Shares (the "Underwriting
Agreement"); and
(f) a printer's proof dated May 19, 1999 of Pre-Effective Amendment
No. 3.
In such examination, we have assumed the genuineness of all signatures, the
conformity to the originals of all of the documents reviewed by us as copies,
the authenticity and completeness of all original documents reviewed by us in
original or copy form and the legal competence of each individual executing any
document.
This opinion is based entirely on our review of the documents listed above
and such investigation of law as we have deemed necessary or appropriate. We
have made no other review or investigation of any kind whatsoever, and we have
assumed, without independent inquiry, the accuracy of the information set forth
in such documents. As to our opinion below relating to the due organization and
existence of the Fund, our opinion relies entirely upon and is limited by the
certificate referenced in paragraph (a) above.
This opinion is limited solely to the laws of the Commonwealth of
Massachusetts as applied by courts located in such Commonwealth.
We understand that all of the foregoing assumptions and limitations are
acceptable to you.
Based upon and subject to the foregoing, please be advised that it is our
opinion that:
1. The Fund is duly organized and existing under the Fund's Declaration
of Trust and the laws of the Commonwealth of Massachusetts as a voluntary
association with transferable shares of beneficial interest commonly referred to
as a "Massachusetts business trust."
2. The Shares, when issued and sold in accordance with the Fund's
Declaration of Trust and By-Laws and for the consideration described in the
Underwriting Agreement, will be legally issued, fully paid and non-assessable,
except that, as set forth in the Registration Statement, shareholders of the
Fund may under certain circumstances be held personally liable for its
obligations.
We hereby consent to your reliance on this opinion in connection with your
opinion to the Fund with respect to the Shares, to the reference to our name in
the Registration Statement under the heading "Legal Opinions" and to the filing
of this opinion as an exhibit to the Registration Statement.
Very truly yours,
BINGHAM DANA LLP
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to out firm under the caption "Experts" and to the
use of our report dated May 21, 1999 in the Registration Statement (Form N-2) of
the Nuveen New York Dividend Advantage Municipal Fund filed with the Securities
and Exchange Commission in this Pre-Effective Amendment No. 3 to the
Registration Statement under the Securities Act of 1933 (File No. 33-68539) and
in this Amendment No. 3 to the Registration Statement under the Investment
Company Act of 1940 (File No. 811-09135).
ERNST & YOUNG LLP
Chicago, Illinois
May 21, 1999
