<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 23, 1995
SECURITIES ACT REGISTRATION NO. 33-
INVESTMENT COMPANY ACT REGISTRATION NO. 811-5238
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
(Check Appropriate Box or Boxes)
[_] Pre-Effective Amendment No.
[_] Post-Effective Amendment No.
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
333 West Wacker Drive, Chicago, Illinois 60606
(Address of Principal Executive Offices: Number, Street, City, State, Zip Code)
Registrant's Telephone Number, Including Area Code: (312) 917-7700
James J. Wesolowski, Esq.--Vice President and Secretary
333 West Wacker Drive
Chicago, Illinois 60606
(Name and Address of Agent For Service)
With a copy to:
Cathy G. O'Kelly
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601
Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement becomes effective
----------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
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--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES BEING OFFERING PRICE AGGREGATE REGISTRATION
BEING REGISTERED REGISTERED (1) PER UNIT OFFERING PRICE FEE
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 Par
Value Per Share........ 3,500,000 $8.09 $28,327,691(2) $9,769
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(1) Represents the maximum additional number of shares to be issued in exchange
for substantially all of the assets of Nuveen New York Municipal Income
Fund, Inc. (the "Acquired Fund"), pursuant to the Agreement and Plan of
Reorganization and Liquidation dated as of August 1, 1995, between the
Registrant and the Acquired Fund (the "Agreement").
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933 based on $11.25,
the average of the high and low prices, as reported in the consolidated
reporting system on August 17, 1995, of the shares of the Acquired Fund to
be cancelled in the transaction contemplated by the Agreement and 2,518,017
outstanding shares of the Acquired Fund.
----------------
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 THAT 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 DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 481(A))
PART A
<TABLE>
<CAPTION>
ITEM CAPTION OF FORM N-
ITEM NO. 14 LOCATION IN JOINT PROXY STATEMENT--PROSPECTUS
-------- ----------------------- ---------------------------------------------
<C> <S> <C>
Item 1. Beginning of
Registration Statement
and Outside Front Cover
Page of Prospectus..... Cover Page
Item 2. Beginning and Outside
Back Cover Page of
Prospectus............. Cover Page; Table of Contents
Item 3. Synopsis Information and Summary; Risks and Special Considerations Regarding
Risk Factors........... the Reorganization
Item 4. Information about the
Transaction............ Proposal No. 1--The Reorganization
Item 5. Information about the Available Information; Proposal No. 1--The
Registrant............. Reorganization; Proposal No. 2--Election of
Directors of Each Fund; Management of the Funds;
Additional Information About the Funds
Item 6. Information about the
Company being Acquired. Available Information; Proposal No. 1--The
Reorganization; Proposal No. 2--Election of
Directors of Each Fund; Management of the Funds;
Additional Information About the Funds
Item 7. Voting Information...... The Annual Meetings; Proposal No. 1--The
Reorganization; Proposal No. 2--Election of
Directors of Each Fund
Item 8. Interest of Certain
Persons and Experts.... Legal Opinions; Experts
Item 9. Additional Information
Required for Reoffering
by Persons Deemed to be
Underwriters........... Not Applicable
PART B
<CAPTION>
LOCATION IN JOINT PROXY STATEMENT--PROSPECTUS
("PROSPECTUS") OR STATEMENT OF ADDITIONAL INFORMATION
("SAI")/1/
-----------------------------------------------------
<C> <S> <C>
Item 10. Cover Page.............. SAI--Cover Page
Item 11. Table of Contents....... SAI--Cover Page
Item 12. Additional Information Prospectus--Proposal No. 2--Election of Directors of
about the Registrant... Each Fund; Management of the Funds; Additional
Information About the Funds; Experts; SAI--All
Sections
Item 13. Additional Information
about the Company being Prospectus--Proposal No. 2--Election of Directors of
Acquired............... Each Fund; Management of the Funds; Additional
Information About the Funds; Experts; SAI--All
Sections
Item 14. Financial Statements.... SAI--Index to Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
--------
(/1/)Some of the information to be included in Part B is contained in the
Prospectus.
<PAGE>
LOGO
September , 1995
Dear Shareholder:
We are pleased to invite you to the Annual Meetings of Shareholders of Nuveen
New York Municipal Value Fund, Inc. and Nuveen New York Municipal Income Fund,
Inc. The meetings are scheduled for Tuesday, November 14, 1995 at 10:00 a.m.,
Central Time, in the 31st Floor conference room of John Nuveen & Co.
Incorporated, 333 West Wacker Drive in Chicago.
At the Annual Meetings, you will be asked to consider and approve a very
important proposal. Subject to shareholder approval, Nuveen New York Municipal
Value Fund, Inc. (the "Acquiring Fund") will acquire substantially all of the
assets and assume substantially all of the liabilities of Nuveen New York
Municipal Income Fund, Inc. (the "Acquired Fund") in exchange for newly issued
shares of the Acquiring Fund, which will be distributed to the shareholders of
the Acquired Fund.
The reorganization should lead to efficiencies of scale, providing benefits
such as:
. Lower administrative expenses
. Greater efficiency and flexibility in portfolio management
. A more liquid trading market for shares of the combined fund
You will also be asked to elect directors and ratify the selection of
independent auditors.
The attached Joint Proxy Statement--Prospectus has been prepared to give you
information about these proposals.
WHETHER OR NOT YOU PLAN TO JOIN US, PLEASE COMPLETE, DATE AND SIGN YOUR PROXY
CARD AND RETURN IT IN THE ENCLOSED ENVELOPE SO THAT YOUR VOTE WILL BE COUNTED.
We appreciate your continued support and confidence in Nuveen and our family of
tax-free investments.
Very truly yours,
LOGO
Richard J. Franke
Chairman of the Board
<PAGE>
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
NUVEEN NEW YORK MUNICIPAL INCOME FUND, INC.
333 WEST WACKER DRIVE, CHICAGO, ILLINOIS 60606
TELEPHONE (312) 917-7700
NOTICE OF ANNUAL MEETINGS OF SHAREHOLDERS
NOVEMBER 14, 1995
September , 1995
TO THE SHAREHOLDERS:
Notice is hereby given that the Annual Meeting of Shareholders of each of
Nuveen New York Municipal Value Fund, Inc. (the "Acquiring Fund") and Nuveen
New York Municipal Income Fund, Inc. (the "Acquired Fund" and, together with
the Acquiring Fund, the "Funds"), will be held in the 31st Floor conference
room of John Nuveen & Co. Incorporated, 333 West Wacker Drive, Chicago,
Illinois, on Tuesday, November 14, 1995, at 10:00 a.m., Central Time, for the
following purposes:
1. To approve or disapprove, in the case of the Acquiring Fund, the issuance
of additional shares pursuant to an Agreement and Plan of Reorganization and
Liquidation (the "Agreement") between the Acquiring Fund and the Acquired Fund,
whereby the Acquiring Fund would acquire substantially all of the assets of the
Acquired Fund in exchange for up to 3,500,000 shares of the Acquiring Fund and
the Acquiring Fund's assumption of substantially all of the liabilities of the
Acquired Fund, and, to approve or disapprove, in the case of the Acquired Fund,
the Agreement.
2. To elect three (3) directors.
3. To ratify or reject the selection of Ernst & Young LLP as independent
auditors for the fiscal year ending September 30, 1996.
4. To transact such other business as may properly come before the Annual
Meeting.
As more fully described in the accompanying Joint Proxy Statement--Prospectus
shareholders of the Acquired Fund who do not vote to approve the Agreement and
who comply with certain other requirements of Minnesota law may, as an
alternative to receiving the consideration specified in the Agreement, dissent
from the transactions provided for therein and obtain the payment in cash of
the "fair value" of their shares, as defined under Minnesota law. The full text
of Minnesota Statutes, Sections 302A.471 and 302A.473, which set forth the
procedures to be followed by shareholders who choose to dissent under Minnesota
law, is included as Annex B to the Joint Proxy Statement--Prospectus and should
be read in its entirety.
Shareholders of record at the close of business on September 18, 1995 are
entitled to notice of and to vote at that Fund's Annual Meeting.
IN ORDER TO AVOID DELAY AND ADDITIONAL EXPENSE FOR YOUR FUND, AND TO ASSURE
THAT YOUR SHARES ARE REPRESENTED, IF YOU DO NOT EXPECT TO BE PRESENT IN PERSON
AT THE ANNUAL MEETING, YOU ARE REQUESTED TO FILL IN, SIGN AND MAIL THE ENCLOSED
PROXY AS PROMPTLY AS POSSIBLE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
James J. Wesolowski
Secretary
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION--DATED AUGUST 23, 1995
NUVEEN NEW YORK
MUNICIPAL VALUE FUND, INC.
NUVEEN NEW YORK
MUNICIPAL INCOME FUND, INC.
JOINT PROXY STATEMENT
MEETINGS OF SHAREHOLDERS TO BE HELD NOVEMBER 14, 1995
-----------
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
PROSPECTUS
-----------
This Joint Proxy Statement--Prospectus is being furnished to the shareholders
of Nuveen New York Municipal Value Fund, Inc. (the "Acquiring Fund") and Nuveen
New York Municipal Income Fund, Inc. (the "Acquired Fund" and, together with
the Acquiring Fund, the "Funds") in connection with the solicitation of proxies
by the Acquiring Fund's Board of Directors and the Acquired Fund's Board of
Directors for use at each Fund's Annual Meeting of Shareholders to be held on
Tuesday, November 14, 1995, at 10:00 a.m., Central Time, and at any and all
adjournments thereof. At the Acquiring Fund's Annual Meeting, shareholders of
the Acquiring Fund will be asked to approve the issuance of up to 3,500,000
shares of common stock of the Acquiring Fund pursuant to an Agreement and Plan
of Reorganization and Liquidation dated as of August 1, 1995 by and between the
Acquiring Fund and the Acquired Fund (the "Agreement"). At the Acquired Fund's
Annual Meeting, shareholders of the Acquired Fund will also be asked to approve
the Agreement. The Agreement provides for (a) the Acquiring Fund's acquisition
of substantially all of the assets of the Acquired Fund in exchange for newly
issued shares of common stock (hereinafter referred to as "shares") and the
Acquiring Fund's assumption of substantially all of the liabilities of the
Acquired Fund and (b) the liquidation of the Acquired Fund and the distribution
of the Acquiring Fund shares held by the Acquired Fund to its shareholders. The
transactions contemplated by the Agreement are referred to herein as the
"Reorganization." The number of Acquiring Fund shares to be issued to the
Acquired Fund would be that number having an aggregate per share net asset
value equal to the aggregate value of the net assets of the Acquired Fund
transferred to the Acquiring Fund.
In addition, at the Annual Meetings, shareholders of each Fund will be asked
to consider and vote upon the election of three (3) directors and the
ratification of the selection of independent auditors for their respective
Funds. Shareholders of the Acquired Fund are being asked to vote on these
additional matters in case the Reorganization is not consummated and the
Acquired Fund remains a separate entity.
The Funds are both closed-end, diversified management investment companies,
with substantially similar investment objectives and policies. The primary
investment objective of the Acquiring Fund is to provide current interest
income exempt from both regular Federal and New York and New York City personal
income taxes; its secondary objective is to enhance portfolio value relative to
the New York municipal bond market. The principal executive office of each Fund
is located at 333 West Wacker Drive, Chicago, Illinois 60606, and the telephone
number of each Fund is (312) 917-7700. The shares of the Acquiring Fund are
listed on the New York Stock Exchange ("NYSE") and the shares of the Acquired
Fund and listed on the American Stock Exchange ("AMEX"); reports, proxy
statements and other information concerning the Acquiring Fund and the Acquired
Fund can be inspected at the offices of the NYSE and the AMEX, respectively.
See "Additional Information."
This Joint Proxy Statement--Prospectus sets forth concisely the information
that shareholders of the Funds should know before voting on the proposals
described above. It should be read and retained for future reference. A
Statement of Additional Information dated September , 1995 containing
additional information about the Funds has been filed with the Securities and
Exchange Commission (the "Commission") and is hereby incorporated by reference
in its entirety into this Joint Proxy Statement--Prospectus. A copy of the
Statement of Additional Information may be obtained without charge by mailing a
written request to either of the Funds, Attention: Administration, 333 West
Wacker Drive, Chicago, Illinois 60606, or by calling (800) 257-8787.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
ON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT--PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS JOINT PROXY STATEMENT--PROSPECTUS IS SEPTEMBER , 1995.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY................................................................... 1
The Annual Meetings...................................................... 1
The Reorganization....................................................... 1
Reasons for the Reorganization........................................... 1
Dissenting Shareholders' Rights of Appraisal............................. 2
Tax Consequences of the Reorganization................................... 2
Comparison of the Acquiring Fund and the Acquired Fund................... 2
General................................................................ 2
Investment Objectives and Policies..................................... 3
Management of the Funds................................................ 3
Dividends and Distributions............................................ 3
Comparative Fee Table.................................................. 4
RISKS AND SPECIAL CONSIDERATIONS REGARDING THE REORGANIZATION............. 5
THE ANNUAL MEETINGS....................................................... 6
General.................................................................. 6
Voting; Proxies.......................................................... 6
AVAILABLE INFORMATION..................................................... 7
PROPOSAL NO. 1--THE REORGANIZATION........................................ 7
General.................................................................. 7
Terms of the Reorganization.............................................. 8
Reasons for the Reorganization........................................... 9
Votes Required........................................................... 10
Description of Shares Issued by the Acquiring Fund....................... 10
General................................................................ 10
Distributions.......................................................... 10
Dividend Reinvestment Plan............................................. 11
Odd Lot Holdings....................................................... 12
Comparison of Rights of Holders of Shares of the Acquiring Fund and the
Acquired Fund........................................................... 12
Comparison of the Investment Objectives and Policies of the Acquiring
Fund and the Acquired Fund.............................................. 13
General................................................................ 13
Municipal Obligations.................................................. 14
Special Considerations Relating to New York Municipal Obligations...... 15
Investment Restrictions................................................ 15
Surrender and Exchange of Acquired Fund Share Certificates............... 16
Expenses Associated with the Reorganization.............................. 16
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Dissenting Shareholders' Rights of Appraisal............................. 17
General................................................................ 17
Procedure.............................................................. 17
Tax Consequences of the Reorganization................................... 18
Exchange of Acquired Fund Shares Solely for Acquiring Fund Shares...... 18
Fractional Share Interests............................................. 19
Dissenting Shareholders................................................ 19
Capitalization........................................................... 19
Comparative Performance Information...................................... 20
PROPOSAL NO. 2--ELECTION OF DIRECTORS OF EACH FUND........................ 20
PROPOSAL NO. 3--SELECTION OF INDEPENDENT AUDITORS FOR THE FUNDS........... 24
MANAGEMENT OF THE FUNDS................................................... 24
Directors and Officers................................................... 24
Investment Adviser....................................................... 24
Portfolio Management..................................................... 25
ADDITIONAL INFORMATION ABOUT THE FUNDS.................................... 26
Financial Highlights..................................................... 26
General Information and History.......................................... 27
Repurchase of Fund Shares; Conversion to Open-End Fund................... 27
Custodian, Transfer Agent, and Dividend Disbursing Agent................. 28
Tax Matters Associated With Investment in the Funds...................... 28
Federal Income Tax Matters............................................. 28
New York State and Local Tax Matters................................... 29
LEGAL OPINIONS............................................................ 29
EXPERTS................................................................... 29
SHAREHOLDER PROPOSALS..................................................... 29
GENERAL................................................................... 29
Agreement and Plan of Reorganization and Liquidation (ANNEX A)........... A-1
Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act
Relating to the Acquired Fund Dissenting Shareholders' Rights of
Appraisal (ANNEX B)..................................................... B-1
</TABLE>
ii
<PAGE>
SUMMARY
The following is a summary of certain information contained in this Joint
Proxy Statement--Prospectus. This summary is qualified in its entirety by the
more detailed information contained herein and in the attached Annexes.
Shareholders should read the entire Joint Proxy Statement--Prospectus. Certain
capitalized terms used but not defined in this summary are defined elsewhere in
the text of this Joint Proxy Statement--Prospectus.
THE ANNUAL MEETINGS
This Joint Proxy Statement--Prospectus is being furnished to the shareholders
of each of the Funds in connection with the solicitation by the Boards of the
Funds of proxies to be voted at the Annual Meetings. Holders of record of
shares of each Fund as of the close of business on September 18, 1995 will be
entitled to notice of and to vote at their Fund's Annual Meeting, as described
elsewhere in this Joint Proxy Statement--Prospectus. Holders of outstanding
shares of the Acquiring Fund will be asked to approve the issuance of
additional Acquiring Fund shares pursuant to the Agreement and holders of
outstanding shares of the Acquired Fund will be asked to approve the Agreement.
Shareholders of each Fund also will be asked to consider and vote upon the
election of three (3) directors and the ratification of the selection of
independent auditors for their respective Funds. Shareholders of the Acquired
Fund are being asked to vote on these additional matters in case the
Reorganization is not consummated and the Acquired Fund remains a separate
entity. The details of each proposal to be voted on by the shareholders of each
Fund and the vote required for approval of each proposal are set forth under
the description of each proposal in this Joint Proxy Statement--Prospectus.
THE REORGANIZATION
The Agreement provides that, subject to the satisfaction of certain
conditions, including shareholder approval, (a) the Acquiring Fund would
acquire substantially all of the assets of the Acquired Fund in exchange for
newly issued shares of the Acquiring Fund and the Acquiring Fund's assumption
of substantially all of the liabilities of the Acquired Fund, and (b) the
Acquired Fund would liquidate and distribute to its shareholders pro rata the
Acquiring Fund shares received. The number of Acquiring Fund shares to be
issued to the Acquired Fund would be that number having an aggregate per share
net asset value equal to the aggregate value of the assets of the Acquired Fund
transferred to, net of the Acquired Fund's liabilities assumed by, the
Acquiring Fund as of the time such assets and liabilities are transferred and
assumed (the "Effective Time"). As a result of the Reorganization, the assets
of the Acquiring Fund and the Acquired Fund would be combined and the
shareholders of the Acquired Fund would become shareholders of the Acquiring
Fund. The investment objectives and policies of each Fund are substantially
similar. The portfolio characteristics of the larger combined entity would
reflect the blended characteristics and certain differences of the constituent
Funds.
The Board of each Fund, including the directors of that Fund who are not
"interested persons," as that term is defined by the 1940 Act, has approved the
Reorganization based on its conclusion that the Reorganization is in the best
interests of the shareholders of that Fund and that the interests of those
shareholders would not be diluted as a result of the Reorganization.
ACCORDINGLY, THE BOARD OF EACH FUND RECOMMENDS THAT THE SHAREHOLDERS OF THAT
FUND VOTE FOR THE APPROVAL OF THE PROPOSAL RELATING TO THE AGREEMENT. See
"Proposal No. 1--The Reorganization" and "Additional Information About the
Funds."
REASONS FOR THE REORGANIZATION
In approving the Reorganization, the respective Boards of the Funds, which
consist of the same individuals, identified certain benefits that are likely to
result from the Reorganization, including lower administrative expenses,
greater efficiency and flexibility in portfolio management and a more liquid
trading market for shares of the combined Fund. The larger combined Fund that
would result from the Reorganization would have a significantly larger asset
base than either individual Fund has currently. Based
1
<PAGE>
on data presented by management of the Funds, the Boards believe that
administrative expenses of a larger combined Fund comprised of the assets of
both Funds would be less than the aggregate expenses of the individual Funds,
resulting in a lower expense ratio for the combined Fund and corresponding
higher earnings for its shareholders. Based on the ten-month period ending July
31, 1995, the annualized expense ratios for the Acquiring Fund and the Acquired
Fund were 0.80% and 0.97%, respectively. The annualized expense ratio for the
combined Fund based upon the ten-month period ended July 31, 1995 would have
been .76%.
The Boards also considered the possible adverse effects and estimated costs
of combining the Funds and determined that the Reorganization is likely to
provide benefits to the shareholders of each Fund that outweigh any possible
adverse effects and the costs presented by the Reorganization. See "Risks and
Special Considerations Regarding the Reorganization" and "Proposal No. 1--The
Reorganization--Reasons for the Reorganization."
DISSENTING SHAREHOLDERS' RIGHTS OF APPRAISAL
Shareholders of the Acquiring Fund have no dissenters' rights of appraisal
with respect to the Reorganization under Minnesota law. However, under
Minnesota law, shareholders of the Acquired Fund who do not vote to approve the
Agreement may elect to have the "fair value" of their shares (determined in
accordance with Minnesota law) judicially appraised and paid to them, provided
that (a) the Acquired Fund participates in the Reorganization and (b) such
Acquired Fund shareholders comply with the provisions of Sections 302A.471 and
302A.473 of the Minnesota Business Corporation Act, which are attached hereto
as Annex B. Any deviation from such requirements may result in the loss of
dissenters' rights. See "Proposal No. 1--The Reorganization--Dissenting
Shareholders' Rights of Appraisal" and Annex B.
TAX CONSEQUENCES OF THE REORGANIZATION
The Funds have received an opinion of Vedder, Price, Kaufman & Kammholz to
the effect that the Reorganization will qualify as a tax-free reorganization
under Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended
(the "Code"). Accordingly, neither Fund will recognize gain or loss for Federal
income tax purposes as a result of the Reorganization. In addition,
shareholders of the Acquired Fund who receive Acquiring Fund shares pursuant to
the Reorganization will recognize no gain or loss for Federal income tax
purposes, except with respect to the cash received for a fractional Acquiring
Fund share interest, if any. Provided that the proposed Reorganization
qualifies as a tax-free reorganization under the Code, neither Fund will
recognize any gain or loss for New York income tax purposes as a result of the
Reorganization and shareholders of the Acquired Fund who receive Acquiring Fund
shares pursuant to the Reorganization will recognize no gain or loss for New
York and New York City personal income tax purposes, except with respect to
cash received for a fractional Acquiring Fund share interest. See "Proposal No.
1--The Reorganization--Tax Consequences of the Reorganization."
COMPARISON OF THE ACQUIRING FUND AND THE ACQUIRED FUND
GENERAL
The Acquiring Fund and the Acquired Fund are both closed-end, diversified
management investment companies. The Acquiring Fund shares are listed and trade
on the NYSE under the symbol NNY and the Acquired Fund shares are listed and
trade on the AMEX under the symbol NNM. Each Fund is organized as a corporation
under the laws of the State of Minnesota. The shares of each Fund have similar
voting rights and equal rights with respect to the payment of dividends and
distribution of assets upon liquidation and have no preemptive, conversion or
exchange rights or rights to cumulative voting. See "Proposal No. 1--The
Reorganization." For more detailed information about the general business and
management of the Funds, see "Additional Information About the Funds."
2
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Funds are substantially similar. The
Acquiring Fund's primary investment objective is current interest income exempt
from both regular Federal and New York income taxes, and its secondary
investment objective is the enhancement of portfolio value relative to the New
York municipal bond market through investments in tax-exempt New York Municipal
Obligations that, in the opinion of Nuveen Advisory Corp. (the "Adviser"), are
underrated or that represent municipal markets that are undervalued. The
Acquired Fund's investment objective is to provide a high level of current
income exempt from both Federal and New York income taxes.
The investment policies of the Funds are substantially similar. Each Fund, as
a fundamental policy, invests substantially all of its assets in a diversified
portfolio of long-term investment-grade quality New York Municipal Obligations.
The Acquired Fund may invest no more than 25% of its net assets in below
investment-grade or unrated equivalent obligations and the Acquiring Fund may
invest no more than 20% of its net assets in below investment-grade and unrated
obligations. Both Funds limit investment in obligations with specified ratings
below investment-grade and/or unrated equivalents as more fully described
herein. See "Risks and Special Considerations Regarding the Reorganization" for
a credit rating breakdown of the Funds' portfolio investments. As of July 31,
1995, the dollar-weighted average portfolio maturities of the Funds were 21.6
years for the Acquiring Fund and 21.3 years for the Acquired Fund and the
durations were 4.3 years for each Fund. See "Proposal No. 1--The
Reorganization--Comparison of the Investment Objectives and Policies of the
Acquiring Fund and the Acquired Fund."
MANAGEMENT OF THE FUNDS
The Acquiring Fund and the Acquired Fund have the same directors and
officers. In addition, the Adviser acts as the investment adviser for, and
manages the investment and reinvestment of the assets of, each Fund. Pursuant
to an Investment Management Agreement between the Adviser and each Fund, each
Fund pays an annual management fee for the services and facilities furnished by
the Adviser on a monthly basis. The Acquiring Fund pays an annual management
fee of .35% of the average weekly net assets of the Fund. The Acquiring Fund
also pays a fee of 4.125% of gross interest income. The Acquired Fund pays an
annual management fee of .65% of average daily net assets for net assets of up
to $125 million, .6375% in excess of $125 million (but less than $250 million),
.625% in excess of $250 million (but less than $500 million), .6125% in excess
of $500 million (but less than $1 billion), .60% in excess of $1 billion (but
less than $2 billion), and .5875% in excess of $2 billion. For the fiscal year
ended September 30, 1994, the effective management fee rate for the Acquiring
and Acquired Funds, respectively, was 0.64% and 0.65%.
DIVIDENDS AND DISTRIBUTIONS
The Funds have identical dividend policies with respect to the payment of
dividends on their shares. Each Fund's present policy, which may be changed by
its Board, is to make monthly cash distributions to holders of its shares at a
level rate that reflects the past and projected performance of such Fund, which
over time will result in the distribution of all net investment income of such
Fund. The Adviser expects the level of monthly distributions to the
shareholders of the Acquiring Fund and the Acquired Fund to be unaffected by
the Reorganization. There can be no assurance, however, that a stable level of
distributions may be maintained over the life of a Fund. Holders of shares of
each Fund may elect to have all distributions automatically reinvested in
shares of that Fund at the prevailing market price, plus customary brokerage
charges, pursuant to that Fund's Dividend Reinvestment Plan. See "Proposal No.
1--The Reorganization--Description of Shares Issued by the Acquiring Fund--
Distributions" and "--Dividend Reinvestment Plan" and "Additional Information
About the Funds--Tax Matters Associated with Investment in the Funds."
3
<PAGE>
COMPARATIVE FEE TABLE
<TABLE>
<CAPTION>
PRO-FORMA
ACQUIRING ACQUIRED ACQUIRING
FUND FUND FUND
--------- -------- ---------
<S> <C> <C> <C>
ANNUAL EXPENSES
(as a percentage of net assets)
Management Fees.................................... 0.65% 0.65% 0.65%
Other Expenses..................................... 0.15 0.32 0.11
Total Annual Expenses.............................. 0.80 0.97 0.76
</TABLE>
EXAMPLE:
The following table illustrates the expenses on a $1,000 investment based upon
the fees and expenses shown above and assuming a 5% annual return.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Acquiring Fund.................................. $ 8 $26 $44 $ 99
Acquired Fund................................... 10 31 54 119
Pro-Forma Acquiring Fund........................ 8 24 42 94
</TABLE>
The purpose of the comparative fee table is to assist you in understanding the
various costs and expenses of investing in shares of the Funds. The information
in the table is based upon annualized expenses for the ten-month period ending
July 31, 1995. The figures in the Examples are not necessarily indicative of
past or future expenses, and actual expenses may be greater or less than those
shown. The Funds' actual rate of return may be greater or less than the
hypothetical 5% annual return shown in the Example.
4
<PAGE>
RISKS AND SPECIAL CONSIDERATIONS REGARDING THE REORGANIZATION
The Boards of each of the Acquiring Fund and the Acquired Fund have
identified certain benefits to the respective shareholders of each Fund as a
result of the Reorganization. Nevertheless, the following risks and special
considerations should be considered by shareholders of each Fund in their
evaluation of the Reorganization:
1. Each of the Fund's portfolios of Municipal Obligations has different
maturity and yield characteristics, due in part to the different market
conditions existing at the time each Fund was organized. As of July 31,
1995 the yield for the Acquiring Fund's portfolio was 5.24% and for the
Acquired Fund's portfolio was 5.95%. The yield provided for each Fund
represents the average yield of the bonds in the portfolio derived by
weighing each bond's "yield to worst" by the market value of the bond. The
"yield to worst" of a bond is the lower of the yield to maturity and the
yield to call of that bond. Additionally, as of July 31, 1995, the dollar-
weighted average portfolio maturity of the Acquiring Fund was 21.6 years
and of the Acquired Fund was 21.3 years and the duration was 4.3 years for
each Fund. Both dollar-weighted average maturity and duration reflect the
sensitivity of a Fund to interest rate fluctuations, whereby a Fund with a
longer maturity and duration reacts more strongly to interest rate changes
than a Fund with a shorter maturity and duration. The average dollar-
weighted maturity of a Fund is the dollar-weighted average of the stated
maturities of all debt instruments held by the Fund. Duration is the
weighted present value of principal and interest payments expressed in
years and may more accurately measure a Fund's sensitivity to incremental
changes in interest rates than average maturity. For example, a Fund with a
duration of 5.0 years should have half the interest rate sensitivity of a
Fund with a duration of 10.0 years, because the Fund with the shorter
duration will receive payments (and can reinvest at prevailing interest
rates) twice as quickly. Assuming the Reorganization had occurred on July
31, 1995, the portfolio yield, dollar-weighted average portfolio maturity
and duration of the combined Funds would have been 5.4%, 21.4 years and 4.3
years, respectively.
2. Although the investment portfolio of each Fund must satisfy similar
standards of credit quality and diversification, the securities owned by
each Fund are different, resulting in certain differences in the
composition of each Fund's portfolio. Of the Municipal Obligations owned by
the Acquiring Fund as of July 31, 1995 (excluding temporary investments),
44% are rated in the highest grade by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Corporation ("S&P"), 55% in the highest
two grades, 65% in the highest three grades, 97% in the highest four
grades, and 3% are unrated. Of the Municipal Obligations owned by the
Acquired Fund, as of July 31, 1995 (excluding temporary investments), 17%
are in the highest grade, 26% in the highest two grades, 38% in the highest
three grades, 91% in the highest four grades, and 9% are unrated. See Annex
A to the Statement of Additional Information for a general description of
Moody's and S&P's ratings of Municipal Obligations. Assuming the
Reorganization had occurred on July 31, 1995, of the Municipal Obligations
owned by the combined Funds, 39% would have been rated in the highest grade
category by S&P or Moody's, 50% in the highest two grades, 60% in the
highest three grades, 96% in the highest four grades and 4% would have been
unrated.
3. There are differences in concentration among the categories of
industries and tax-exempt issuers of the Municipal Obligations held in the
portfolios of the Funds. For the Acquiring Fund, as of July 31, 1995, the
highest concentrations of Municipal Obligations were in the escrowed,
housing, lease/rental and pollution control categories, accounting for 35%,
16%, 14% and 12% of such Fund's portfolio, respectively. For the Acquired
Fund, as of July 31, 1995, the highest concentrations were in the escrowed,
pollution control, lease/rental and resource recovery categories,
accounting for 27%, 21%, 13% and 12% of such Fund's portfolio,
respectively. Assuming the Reorganization had occurred on July 31, 1995,
the combined Funds would have had the highest concentrations in the
escrowed, housing, lease/rental and pollution control categories,
accounting for 34%, 15%, 14% and 13%, of the combined Funds portfolio,
respectively.
4. During the periods since the inception of the Funds, shares of the
Acquiring Fund have generally traded at premiums to net asset value, with
deep discounts being reflected at times, and the shares of the Acquired
Fund have generally traded at premiums to net asset value, with deep
discounts being reflected at times. As determined by the closing price at
the end of each week, share prices for the Acquiring Fund have fluctuated
between a maximum premium of 11.24% and a maximum discount of 11.27%; and
share prices for the Acquired Fund have fluctuated between a maximum
premium of 11.16% and a maximum discount of 9.49%. As of July 31, 1995, the
Acquiring Fund shares were trading at a premium to net asset value of
6.66%, and the Acquired Fund shares were trading at a premium to net asset
value of 1.77%. It is not possible to state whether the Acquiring Fund
shares will trade at a premium or discount to net asset value following the
Reorganization, or what the extent of any such premium or discount might
be.
5. Each Fund is managed under a different management fee schedule. The
Acquiring Fund pays an annual management fee of .35% of the average weekly
net assets of the Fund. The Acquiring Fund also pays a fee of
5
<PAGE>
4.125% of gross interest income. The Acquired Fund pays an annual
management fee of .65% of average daily net assets for net assets of up to
$125 million, .6375% in excess of $25 million (but less than $250 million),
.625% in excess of $250 million (but less than $500 million), .6125% in
excess of $500 million (but less than $1 billion), .60% in excess of $1
billion (but less than $2 billion), and .5875% in excess of $2 billion. For
the fiscal year ended September 30, 1994, the effective management fee rate
for the Acquiring and Acquired Funds, respectively, was 0.64% and 0.65%.
Based upon the foregoing, as well as the anticipated benefits of the
Reorganization described below, the Board of each Fund determined that the
Reorganization is likely to provide benefits to the shareholders of such Fund
that outweigh any adverse effects and the costs presented by the
Reorganization. See "Proposal No. 1--The Reorganization--Reasons for the
Reorganization."
THE ANNUAL MEETINGS
GENERAL
This Joint Proxy Statement--Prospectus is furnished in connection with the
solicitation by the Boards of the Funds of proxies to be voted at the Funds'
Annual Meetings to be held in the 31st Floor conference room of John Nuveen &
Co. Incorporated ("Nuveen"), 333 West Wacker Drive, Chicago, Illinois, on
Tuesday, November 14, 1995 at 10:00 a.m., Central Time, and at any and all
adjournments of such Annual Meetings. The cost of preparing, printing and
mailing the enclosed proxy, accompanying notice and Joint Proxy Statement--
Prospectus and all other costs in connection with the solicitation of proxies,
to the extent they are not incremental costs related to the Reorganization,
will be paid by the Funds pro rata based on their respective asset sizes.
Incremental costs related to the Reorganization will be paid by the Funds based
upon estimated savings to each Fund as a result of expected reduced operating
expenses resulting from the Reorganization. Additional solicitation may be made
by letter, telephone or telegraph by officers of the Funds, by officers or
employees of the Adviser or Nuveen, or by dealers and their representatives.
The Funds have engaged Tritech Services to assist in the solicitation of
proxies at a total estimated cost of $12,000.
The Board of each Fund has fixed the close of business on September 18, 1995
as the record date (the "Record Date") for determining holders of such Fund's
shares entitled to notice of and to vote at that Fund's Annual Meeting. Each
shareholder will be entitled to one vote for each share held. At the close of
business on the Record Date, there were outstanding (a) shares of
the Acquiring Fund, and (b) shares of the Acquired Fund. This
Joint Proxy Statement--Prospectus is first being mailed to shareholders of the
Funds on or about September , 1995. EACH FUND WILL FURNISH, WITHOUT CHARGE, A
COPY OF ITS SEPTEMBER 30, 1994 ANNUAL REPORT AND ITS MORE RECENT SEMI-ANNUAL
REPORT UPON REQUEST. SUCH WRITTEN OR ORAL REQUEST SHOULD BE DIRECTED TO A FUND
AT 333 WEST WACKER DRIVE, CHICAGO, ILLINOIS 60606 OR BY CALLING 1-800-257-8787.
VOTING; PROXIES
Shares of each Fund entitled to vote at that Fund's Annual Meeting that are
represented by properly executed proxies will, unless such proxies have been
revoked, be voted in accordance with the shareholder's instructions indicated
on such proxies. If no contrary instructions are indicated, all such shares
will be voted (1) FOR approval of, in the case of the Acquiring Fund, the
issuance of the Acquiring Fund shares pursuant to the Agreement and, in the
case of the Acquired Fund, the Agreement, (2) FOR the election of the three
nominees for director and (3) FOR ratification of the Acquiring Fund's
selection of independent auditors.
A quorum of shareholders is required to take action at each Annual Meeting. A
majority of the shares entitled to vote at each Annual Meeting, represented in
person or by proxy, will constitute a quorum of shareholders at that Annual
Meeting. Votes cast by proxy or in person at each Annual Meeting will be
tabulated by the inspectors of election appointed for that Annual Meeting. The
inspectors of election will determine whether or not a quorum is present at
that Annual Meeting. The inspectors of election will treat abstentions and
"broker non-votes" (i.e., shares held by brokers or nominees, typically in
"street name," as to which (i) instructions have not been received from the
beneficial owners or persons entitled to vote and (ii) the broker or nominee
does not have discretionary voting power on a particular matter) as present for
purposes of determining a quorum.
For purposes of determining the approval of the matters submitted to
shareholders for a vote, abstentions and broker non-votes will be treated as
shares voted against approval of the proposal relating to the Agreement,
against
6
<PAGE>
the election of directors and against ratification of a Fund's selection of
independent auditors. The details of each proposal to be voted on by the
shareholders of each Fund and the vote required for approval of each proposal
are set forth under the description of each proposal below. Shareholders of
either Fund who execute proxies may revoke them at any time before they are
voted by filing with their Fund a written notice of revocation, by delivering a
duly executed proxy bearing a later date or by attending the meeting and voting
in person.
AVAILABLE INFORMATION
Each Fund is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the Investment
Company Act of 1940, as amended (the "1940 Act"), and in accordance therewith
is required to file reports, proxy statements and other information with the
Commission. Any such reports, proxy statements and other information can be
inspected and copied at the public reference facilities of the Commission, Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Northeast Regional Office, Suite 1300, Seven World Trade
Center, New York, New York 10048 and Midwest Regional Office, Suite 1400,
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661-2511. Copies
of such materials can be obtained from the Public Reference Branch, Office of
Consumer Affairs and Information Services of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The shares of the
Acquiring Fund are listed on the NYSE, and such reports, proxy statements and
other information concerning the Acquiring Fund can also be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005. The shares of
the Acquired Fund are listed on the AMEX, and such reports, proxy statements
and other information concerning the Acquired Fund can also be inspected at the
offices of the AMEX, 86 Trinity Place, New York, New York 10006.
The Acquiring Fund has filed with the Commission a registration statement on
Form N-14 (herein, together with all amendments and exhibits, referred to as
the "Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the Acquiring Fund shares to be issued pursuant
to the Reorganization. This Joint Proxy Statement--Prospectus and the related
Statement of Additional Information does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Acquiring Fund shares to be issued pursuant to
the Reorganization, reference is hereby made to the Registration Statement.
Statements contained in the Joint Proxy Statement--Prospectus and the related
Statement of Additional Information as to the content 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 included as an
Annex hereto or filed as an exhibit to the Registration Statement.
The information in this Joint Proxy Statement--Prospectus concerning the
Acquiring Fund has been furnished by the Acquiring Fund, and the information
concerning the Acquired Fund has been furnished by the Acquired Fund. This
Joint Proxy Statement--Prospectus constitutes a prospectus of the Acquiring
Fund with respect to the Acquiring Fund Shares issued pursuant to the
Reorganization.
PROPOSAL NO. 1--THE REORGANIZATION
The terms and conditions of the Reorganization are set forth in the
Agreement. Significant provisions of the Agreement are summarized below;
however, this summary is qualified in its entirety by reference to the
Agreement, a copy of which is attached as Annex A to this Joint Proxy
Statement--Prospectus.
GENERAL
The Agreement sets forth the terms of the Reorganization, under which (a) the
Acquiring Fund would acquire substantially all of the assets of the Acquired
Fund in exchange for newly issued shares of the Acquiring Fund and the
Acquiring Fund's assumption of substantially all of the liabilities of the
Acquired Fund; and (b) the Acquired Fund would liquidate and distribute to its
shareholders pro rata the Acquiring Fund shares received. As a result of the
Reorganization, the assets of the Acquiring Fund and the Acquired Fund would be
combined and the shareholders of the Acquired Fund would become shareholders of
the Acquiring Fund. The investment objectives and policies of the Acquiring
Fund are substantially similar to those of the Acquired Fund. The portfolio
characteristics of the Acquiring Fund, after the Reorganization, would reflect
the blended characteristics of the
7
<PAGE>
constituent Funds. Compared to the Acquiring Fund, the combined portfolio would
have a higher yield, comparable maturity and lower credit quality. Compared to
the Acquired Fund, the combined portfolio would have a lower yield, comparable
maturity and higher overall quality. See "Risks and Special Considerations
Regarding the Reorganization." If the proposals relating to the Agreement are
approved, the Effective Time is expected to be the close of business on
December 19, 1995. Following the Reorganization, the Acquired Fund would
terminate its registration as an investment company under the 1940 Act by
filing a Form N-8F with the Commission.
TERMS OF THE REORGANIZATION
If the Reorganization is approved and the other conditions are satisfied or
waived, at the Effective Time the Acquiring Fund will acquire substantially all
of the assets of the Acquired Fund, including cash (other than cash used to pay
expenses of the Acquired Fund, to pay shareholders exercising dissenters'
rights, if any, and to make a final distribution of net tax-exempt income, net
ordinary income and net capital gains to the shareholders of the Acquired Fund
as of the Effective Time), cash equivalents, Municipal Obligations and other
securities, receivables and other property owned by the Acquired Fund. In
exchange, the Acquiring Fund would assume from the Acquired Fund all debts,
liabilities, obligations and duties of the Acquired Fund (other than certain
expenses incurred by the Acquired Fund in connection with the Reorganization,
the payment of amounts to shareholders exercising dissenters' rights, if any,
and the Acquired Fund's obligation to distribute any net tax-exempt income, net
ordinary income and net capital gains accrued as of the Effective Time), and
the Acquiring Fund would issue to the Acquired Fund shares of the Acquiring
Fund. The number of Acquiring Fund shares to be issued to the Acquired Fund
would be that number having an aggregate per share net asset value equal to the
aggregate value of the Acquired Fund's assets transferred to, net of the
Acquired Fund's liabilities assumed by, the Acquiring Fund as of the Effective
Time.
The value of the Acquired Fund's assets to be acquired and liabilities to be
assumed by the Acquiring Fund, and the net asset value per share to be issued
by the Acquiring Fund, will be determined by United States Trust Company of New
York ("U.S. Trust"), the custodian for each Fund, as of the Effective Time. Net
asset value per Acquiring Fund share shall be computed by dividing the value of
the Acquiring Fund's total assets, less liabilities, by the number of Acquiring
Fund shares outstanding. In determining net asset value per Acquiring Fund
share and the value of the Acquired Fund's assets, U.S. Trust utilizes the
valuations of portfolio securities furnished by a pricing service approved by
the Boards of the respective Funds. The pricing service values portfolio
securities at the mean between the quoted bid and asked price or the yield
equivalent when quotations are readily available. Securities for which
quotations are not readily available (which constitute a majority of the
securities held by the Funds) are valued at fair value as determined by the
pricing service using methods that include consideration of yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating; indications as to value from dealers; and general market conditions.
The pricing service may employ electronic data processing techniques or a
matrix system, or both, to determine valuations. The procedures of the pricing
service and its valuations are reviewed periodically by the officers of each
Fund under the general supervision of that Fund's Board. The number of
Acquiring Fund shares to be issued to the Acquired Fund pursuant to the
Reorganization will be calculated based on the determinations of U.S. Trust.
In the event the Reorganization is consummated, as soon as practicable after
the Effective Time, the Acquired Fund will liquidate and distribute pro rata to
its shareholders of record the Acquiring Fund shares it receives. Such
liquidation and distribution will be accomplished by opening accounts on the
books of the Acquiring Fund in the names of the shareholders of the Acquired
Fund and transferring to those shareholder accounts the Acquiring Fund shares
previously credited on those books to the account of the Acquired Fund. Each
shareholder account will receive the respective pro rata number of Acquiring
Fund shares (rounded down, in the case of fractional Acquiring Fund shares, to
the next largest number of whole Acquiring Fund shares) due such Acquired Fund
shareholder.
No fractional Acquiring Fund shares will be issued. In lieu thereof, the
Acquired Fund's transfer agent, U.S. Trust, will aggregate all fractional
Acquiring Fund shares and sell the resulting whole Acquiring Fund shares on the
NYSE for the account of all shareholders of fractional interests, and each such
shareholder will be entitled to his or her pro rata share of the proceeds of
such sale upon surrender of his or her Acquired Fund share certificates.
Following the Reorganization, every shareholder of the Acquired Fund would
own shares of the Acquiring Fund that, except for cash payments received in
lieu of fractional Acquiring Fund shares, will have an aggregate
8
<PAGE>
per share net asset value immediately after the Effective Time equal to the
aggregate per share net asset value of that shareholder's Acquired Fund shares
immediately prior to the Effective Time. See "Description of Shares Issued by
the Acquiring Fund" for a description of the rights of such shareholders. Since
the Acquiring Fund shares issued to the shareholders of the Acquired Fund would
be issued at net asset value in exchange for net assets of the Acquired Fund
having a value equal to the aggregate per share net asset value of those
Acquiring Fund shares so issued, the net asset value of the Acquiring Fund
shares should remain virtually unchanged by the Reorganization. Thus, the
Reorganization should result in no dilution of net asset value of any
shareholder's holdings. See "Pro-Forma Financial Statements" in the Statement
of Additional Information. However, as a result of the Reorganization,
shareholders of both Funds would hold reduced percentages of ownership in the
larger combined entity than they held in the Acquiring Fund or the Acquired
Fund, as the case may be.
Under the terms of the Agreement, the Reorganization is conditioned upon (a)
approval by the shareholders of the Acquiring Fund and the Acquired Fund, as
described under "Votes Required" below, (b) the Funds' receipt of an opinion to
the effect that the Reorganization will qualify as a tax-free reorganization
under the Code (which opinion has already been received), (c) the absence of
legal proceedings challenging the Reorganization and (d) the Funds' receipt of
certain routine certificates and legal opinions.
The Agreement may be terminated and the Reorganization abandoned, whether
before or after approval by the Funds' shareholders, at any time prior to the
Effective Time (a) by the written consent of the Boards of both Funds, (b) by
either Fund if any condition to that Fund's obligations under the Agreement has
not been satisfied or waived and it reasonably appears that such condition will
not be satisfied or (c) by either Fund if the Reorganization has not occurred
by March 31, 1996.
REASONS FOR THE REORGANIZATION
The respective Boards of the Acquiring Fund and the Acquired Fund, which
consist of the same individuals, have concluded that the Reorganization is in
the best interests of the shareholders of their respective Funds and
unanimously recommend that the shareholders of their respective Funds vote FOR
approval of the proposals relating to the Agreement.
In approving the Reorganization, the Boards identified certain benefits that
are likely to result from combining the Funds, including lower administrative
expenses, greater efficiency and flexibility in portfolio management and a more
liquid trading market for shares of the combined Fund. The Boards also
considered the possible adverse effects and estimated costs of combining the
Funds. See "Risks and Special Considerations Regarding the Reorganization."
Based on data presented by management of the Funds, the Boards believe that
administrative expenses of a larger combined Fund comprised of the assets of
both Funds will be less than the aggregate expenses of the individual Funds,
resulting in a lower expense ratio for the combined Fund and corresponding
higher earnings for its shareholders. For the ten-month period ended July 31,
1995, the annualized expense ratios for the Acquiring Fund and the Acquired
Fund were 0.80% and 0.97%, respectively. The pro-forma annualized expense ratio
for the combined Fund for that period would have been 0.76%.
The larger asset base resulting from combining the Funds should also provide
benefits in portfolio management. The Acquiring Fund after the Reorganization
should be able to purchase larger amounts of Municipal Obligations at more
favorable prices than either of the Funds individually and, with this greater
purchasing power, be in a better position to request improvements in the terms
of Municipal Obligations (e.g., added indenture provisions covering call
protection, sinking funds or audits for the benefit of large holders) prior to
purchase.
The Reorganization would result in the Acquiring Fund's having a
significantly larger number of shares outstanding, and a significantly larger
number of shareholders, than either individual Fund. Data prepared by
management of the Funds indicates that market prices of shares of smaller funds
are likely to experience greater spreads between the bid and the offer than
market prices of shares of larger funds, and that increasing the size of the
Acquiring Fund by combining it with the Acquired Fund should result in a higher
average daily trading volume, a narrower average spread between the bid and the
offer and reduced price volatility for its shares. There can be no assurance
that the Reorganization will produce these anticipated benefits. However, the
Boards believe that these results, if obtained, would benefit holders of shares
by affording them a more liquid trading market for their shares and the
opportunity for more favorable price execution in trading the shares.
9
<PAGE>
In approving the Reorganization, the respective Boards determined that the
Reorganization should result in no dilution of the interests of the respective
Funds' existing shareholders. See "Pro Forma Financial Statements" in the
Statement of Additional Information. Although the Reorganization is expected to
result in a reduction in net asset value per Acquiring Fund share (and per
Acquired Fund share equivalent) of approximately $0.01 as a result of the
estimated costs of the Reorganization, management of the Funds has advised the
Boards that it expects that such costs will be recovered within approximately
19 months after the Effective Time. See "Expenses Associated with the
Reorganization."
In approving the Reorganization, the Boards considered a report of the Funds'
management indicating that the Reorganization should not have a materially
adverse overall effect on the financial status and ongoing performance of
either Fund, and considered such measures as gross portfolio yield, net
portfolio earnings rate as a percentage of net asset value, monthly net
earnings, monthly dividends, dividend rates as a percentage of the initial
offering and market price, management fees, expense ratios and undistributed
net investment income balances. The Boards also examined the relative credit
strength, maturity characteristics, mix of type and purpose, and yield of the
Funds' portfolios of Municipal Obligations and the costs involved in the
Reorganization. The Boards noted similarities between the Funds, including
their substantially similar investment objectives and policies, common
management and each of the Fund's respective portfolios of Municipal
Obligations. Based on these factors, the Boards determined that the
Reorganization is likely to provide benefits to the shareholders of each Fund,
as discussed above, that outweigh any possible adverse effects and the costs
(including relatively minor legal, accounting and administrative costs, some of
which have already been incurred in evaluating and analyzing the
Reorganization) presented by the Reorganization.
VOTES REQUIRED
Shareholders of the Acquiring Fund are being asked to approve the issuance of
up to 3,500,000 additional shares of the Acquiring Fund pursuant to the
Agreement. Adoption of this proposal requires the affirmative vote of the
holders of at least a majority of the Acquiring Fund shares voting on the
proposal, provided that the total vote cast on the proposal represents over 50%
of all Acquiring Fund shares entitled to vote on the proposal.
Shareholders of the Acquired Fund are being asked to approve the Agreement.
Adoption of this proposal requires the affirmative vote of the holders of at
least a majority of the outstanding shares of the Acquired Fund entitled to
vote on the proposal.
DESCRIPTION OF SHARES ISSUED BY THE ACQUIRING FUND
GENERAL
The Articles of Incorporation (the "Articles") of the Acquiring Fund
authorizes the issuance of 250,000,000 shares of common stock, par value $.01
per share. As of July 31, 1995, there were issued and outstanding 11,903,229
shares of the Acquiring Fund. If the Reorganization is approved, at the
Effective Time the Acquiring Fund will issue additional shares. The number of
such additional Acquiring Fund shares will be based on the relative aggregate
per share net asset values of the Acquiring Fund on the one hand and the
Acquired Fund on the other hand, in each case as of the Effective Time. Based
on the relative per share net asset values as of July 31, 1995, the Acquiring
Fund would have issued approximately 2,718,705 additional shares if the
Reorganization had occurred as of that date.
The terms of the Acquiring Fund shares to be issued pursuant to the
Reorganization will be identical to the terms of the Acquiring Fund shares that
are then outstanding. All of the Acquiring Fund shares have equal rights with
respect to the payment of dividends and the distribution of assets upon
liquidation. The Acquiring Fund shares are, when issued, fully paid and, non-
assessable and have no preemptive, conversion or exchange rights or right to
cumulative voting.
DISTRIBUTIONS
It is each Fund's present policy, which may be changed by its Board, to make
monthly cash distributions to the holders of its shares of net investment
income at a level rate that reflects past and projected performance of the
Fund, which over time will result in the distribution of all net investment
income of the Fund and to distribute at least annually net capital gains, if
any. Each Fund's distribution level is determined by the Board of such Fund
10
<PAGE>
after giving consideration to a number of factors, including the Fund's
undistributed net investment income and historical and projected investment
income and expenses. Net investment income of each Fund consists of all
interest income accrued on portfolio assets less all expenses of such Fund.
Expenses of each Fund are accrued each day. To permit each Fund to maintain a
more stable monthly distribution, each Fund may from time to time 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 such Fund's monthly net income due to
fluctuations in investment income or expenses. As a result, the distributions
paid by each Fund for any particular monthly period may be more or less than
the amount of net investment income actually earned by such Fund during such
period. Undistributed net investment income is added to each Fund's net asset
value, and, correspondingly, distributions from undistributed net investment
income are deducted from such Fund's net asset value. See "Tax Matters
Associated with Investment in the Funds" under "Additional Information About
the Funds" below.
The Adviser expects the level of monthly distributions to the Shareholders of
the Acquiring Fund and the Acquired Fund to be unaffected by the
Reorganization. There can be no assurance, however, that a stable level of
distributions may be maintained over the life of a Fund.
DIVIDEND REINVESTMENT PLAN
Under each Fund's Dividend Reinvestment Plan (the "Plan"), each shareholder
of such Fund may elect to have all dividends or capital gains distributions, or
both, automatically reinvested by U.S. Trust, as agent for the shareholders of
the Fund (the "Plan Agent"), in additional Fund shares. A Fund shareholder may
make this election by completing a Dividend Reinvestment Plan Application Form.
Shareholders of the Acquired Fund who participate in the Acquired Fund's
Dividend Reinvestment Plan will automatically be enrolled in the Plan upon
consummation of the Reorganization and any unpaid dividends at the time of the
Reorganization will be reinvested in shares of the Acquiring Fund as if subject
to the Plan. Other shareholders of the Acquired Fund will be given the
opportunity to enroll in the Plan following the Effective Time. An Acquired
Fund shareholder who does not elect to participate in the Plan will receive all
dividends and capital gains distributions in cash paid by check mailed directly
to the record shareholder by U.S. Trust, as dividend paying agent.
Under the plan, the number of shares equivalent to the cash distribution is
determined as follows:
(a) If the Fund shares are trading at net asset value or at a premium
above net asset value at the time of valuation, the Fund will issue new
shares at the then current market price; or
(b) If the Fund shares are trading at a discount from net asset value at
the time of valuation, the Plan Agent will receive the dividend or
distribution in cash and apply it to the purchase of Fund shares in the
open market, on the NYSE or AMEX or elsewhere, for the participants'
accounts. As a result of increases in the market price prior to the time
the Plan Agent has completed its purchases, the average purchase price per
share paid by the Plan Agent may exceed the market price at the time of
valuation, resulting in the acquisition of fewer Fund shares than if the
dividend or distribution had been paid in shares issued by the Fund. The
Plan Agent will use all dividends and distributions received in cash to
purchase Fund shares in the open market within 30 days of the dividend
payment date. Interest will not be paid on any uninvested cash payments.
Participants in the Plan may withdraw from the Plan upon written or telephone
notice to the Plan Agent. When a participant withdraws from the Plan or upon
termination of the Plan, certificates for whole Fund shares credited to his or
her account under the Plan will be issued and a cash payment will be made for
any fraction of a Fund share credited to such account; or, if a participant so
desires, the Plan Agent will sell his or her Fund shares in the Plan and send
the proceeds to the participant, less brokerage commissions and a $2.50 service
fee.
The Plan Agent maintains all Fund shareholder accounts in the Plan and
furnishes written confirmation of all transactions in the accounts, including
information needed by such shareholders for tax records. The Fund shares in the
account of each Plan participant are held by the Plan Agent in non-certificated
form in the name of the participant, and each such shareholder's proxy includes
those Acquiring Fund shares received pursuant to the Plan.
In the case of Fund shareholders such as banks, brokers or nominees that hold
Fund shares for others who are the beneficial owners, the Plan Agent
administers the Plan on the basis of the number of Fund shares certified from
time to time by the record shareholders as representing the total amount
registered in the record shareholder's name and held for the account of
beneficial owners who participate in the Plan.
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There will be no brokerage charges with respect to shares issued directly by
the Fund as a result of dividends or capital gains distributions payable either
in shares or in cash. However, each participant pays a pro rata share of
brokerage commissions incurred with respect to the Plan Agent's open market
purchases in connection with the reinvestment of dividends or capital gains
distributions.
The automatic reinvestment of dividends and distributions does not relieve
participants of any income taxes that may be payable on dividends or
distributions.
Experience under the Plan may indicate that changes are desirable.
Accordingly, each Fund reserves the right to amend or terminate the Plan. There
is no direct service charge to participants in the Plan; however, each 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 U.S.
Trust, 770 Broadway, New York, New York 10003.
ODD LOT HOLDINGS
In connection with the Reorganization, a shareholder of the Acquired Fund
might receive a number of Acquiring Fund shares in the Reorganization which
consists of or includes an "odd lot" (i.e., less than 100 shares). Such odd lot
holders may participate in the Acquiring Fund's Dividend Reinvestment Plan for
the limited purpose of purchasing a sufficient number of Acquiring Fund shares
to bring their odd lot shares up to a 100-share "round lot." Each such odd lot
holder would send in the certificates representing his or her odd lot shares
and direct the Plan Agent to reinvest dividends only until a sufficient number
of Acquiring Fund shares have been acquired to form a round lot. When this is
accomplished, (a) certificates representing the round lot of Acquiring Fund
shares would be issued to the holder, (b) any excess Acquiring Fund shares or
fractional Acquiring Fund shares would be sold and a check for the sale issued
to the holder, and (c) dividend reinvestment on behalf of such shareholder
would be discontinued.
COMPARISON OF RIGHTS OF HOLDERS OF SHARES
OF THE ACQUIRING FUND AND THE ACQUIRED FUND
The terms of the Acquiring Fund shares to be issued in the Reorganization are
identical to the terms of the outstanding Acquired Fund shares, including the
super-majority voting provisions contained in each Fund's Articles, except for
the voting provisions relating to the conversion to an open-end investment
company as described below.
Each Fund's Articles include provisions that could have the effect of
limiting the ability of other entities or persons to acquire control of the
Fund. Specifically, the Board of Directors is divided into three classes, each
having a term of three years. At each annual meeting of shareholders the term
of one class will expire. This provision could delay for up to two years the
replacement of a majority of the Board of Directors. In addition, each Fund's
Articles require the affirmative vote of the holders of at least 66 2/3% of the
shares then entitled to be voted to authorize any of the following
transactions:
(a) conversion of the Fund from a closed-end to an open-end investment
company (except under certain circumstances in the case of the Acquired
Fund as discussed below),
(b) a merger or consolidation of the Fund with another corporation or a
reorganization or recapitalization,
(c) a sale, lease or transfer of all or substantially all of the Fund's
assets (other than in the regular course of the Fund's investment
activities), or
(d) a liquidation or dissolution of the Fund,
unless such transaction has been authorized by the affirmative vote of 66 2/3%
of the total number of directors fixed in accordance with the By-Laws, in which
case the affirmative vote of the holders of a majority of the Fund's
outstanding shares is required. The votes required under certain circumstances
to approve the conversion of each Fund from a closed-end to an open-end
investment company or to approve the other transactions described above is
higher than that required by the 1940 Act. Reference should be made to each
Fund's Articles on file with the Commission (which may be obtained as described
under "Available Information") for the full text of these provisions, which
could have the effect of depriving shareholders of the Fund of an opportunity
to sell their shares at a premium over prevailing market prices by discouraging
a third party from seeking to obtain control of the Fund.
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The Acquired Fund's Articles differ from those of the Acquiring Fund in that
they provide that if the Acquired Fund's shares trade at an average discount
from net asset value of more than 10%, determined on the basis of the discount
as of the end of the last trading day in each week during the 12 calendar weeks
preceding the beginning of such fiscal year, an amendment to the Acquired
Fund's Articles to convert the Acquired Fund to an open-end investment company
that is approved by a majority of the directors fixed in accordance with the
By-Laws will require for its adoption the affirmative vote of the holders of a
majority of the outstanding shares of the Acquired Fund.
COMPARISON OF THE INVESTMENT OBJECTIVES AND POLICIES
OF THE ACQUIRING FUND AND THE ACQUIRED FUND
GENERAL
The investment objectives and policies set forth below for each of the
Acquiring Fund and the Acquired Fund are fundamental policies of such Fund and
may not be changed without the approval of the holders of a "majority of the
outstanding" shares of that Fund. For purposes of the following discussion and
"Investment Restrictions" below, "majority of the outstanding" means (a) 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 (b) more than 50% of the shares,
whichever is less. The following restrictions and other limitations discussed
herein and in the Statement of Additional Information 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.
During temporary defensive periods (e.g., times when temporary imbalances of
supply and demand or other temporary dislocations in the tax-exempt bond market
adversely affect the price at which New York Municipal Obligations are
available), each Fund may invest any percentage of its net assets in taxable
temporary investments, the income on which may be subject to New York and New
York City personal income taxes or to both Federal and New York and New York
City personal income taxes. Each Fund will invest only in temporary investments
which are U.S. Government securities or securities rated within the two highest
grades by Moody's or S&P (including tax-exempt securities issued in states
other than New York), and which mature within one year from the date of
purchase. Temporary investments of the Funds may also include repurchase
agreements.
Neither Fund has established any limit on the percentage of its portfolio
that may be invested in New York Municipal Obligations subject to the
alternative minimum tax provisions of Federal tax law, and a substantial
portion of the income produced by the Funds may be taxable under the
alternative minimum tax. The Funds, therefore, would not ordinarily be suitable
investments for investors who are subject to the alternative minimum tax. The
suitability of either Fund for these investors will depend upon a comparison of
the yield likely to be provided from the Funds, 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.
The Acquiring Fund. The Acquiring Fund's primary investment objective is to
provide, through investment in a professionally managed portfolio of tax-exempt
New York Municipal Obligations, current interest income exempt from both
Federal and New York and New York City personal income taxes. A secondary
objective of the Acquiring Fund is to achieve enhancement of portfolio value
through investments in tax-exempt New York Municipal Obligations that, in the
opinion of the Acquiring Fund's Adviser, are underrated or represent municipal
market sectors that are undervalued. Underrated Municipal Obligations are those
whose ratings do not, in the Adviser's opinion, reflect their true value.
Obligations may be underrated because of the time that has elapsed since their
most recent rating, or because of positive factors that may not have been fully
taken into account by the rating agencies, or for other similar reasons.
Undervalued municipal market sectors, on the other hand, refers to Municipal
Obligations of particular types or purposes (e.g., hospital bonds, industrial
revenue bonds, or bonds issued by a particular municipal issuer) that, in the
Adviser's opinion, are worth more than the value assigned to them in the
marketplace. Obligations may be undervalued because there is a temporary excess
of supply in a particular market sector, or because of a general decline in the
market price of Municipal Obligations of a market sector for reasons that do
not apply to the particular Municipal Obligations that are considered
undervalued. The Acquiring Fund's investment in underrated or undervalued New
York Municipal Obligations will be based on the Adviser's belief that the
prices of such Obligations should ultimately reflect their true value. Under
certain market conditions, such underrated or undervalued Municipal Obligations
may realize market appreciation, while in a declining market such Municipal
Obligations may experience less market depreciation than other Municipal
Obligations. Accordingly, "enhancement of portfolio value" does not merely
refer to market appreciation of portfolio securities, and the Acquiring Fund
does not suggest that capital appreciation is itself an objective of the
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Acquiring Fund. Instead, the objective of enhancement of portfolio value is one
of seeking to outperform the market by prudent selection of Municipal
Obligations, regardless of which direction the market may move. A shareholder
of the Acquiring Fund will receive taxable income upon the sale of shares at an
appreciated value or in the event of capital gains distributions by the
Acquiring Fund.
Except during temporary defensive periods, the Acquiring Fund will, as a
fundamental policy, invest 100% of its net assets in tax-exempt New York
Municipal Obligations, of which 80% will be Municipal Obligations rated at the
time of purchase within the four highest grades (Baa or BBB or better) by
Moody's or S&P. Municipal Obligations rated Baa or BBB are considered
"investment grade" securities; Obligations rated Baa are considered medium
grade obligations which lack outstanding investment characteristics and in fact
have speculative characteristics as well, while Obligations rated BBB are
regarded as having an adequate capacity to pay principal and interest. A
general description of Moody's and S&P's ratings of Municipal Obligations is
set forth in Annex A to the Statement of Additional Information. The Acquiring
Fund emphasizes investments in New York Municipal Obligations with long-term
maturities, but the degree of such emphasis will depend upon market conditions
existing at the time of investment.
The Acquiring Fund may invest up to 20% of its net assets in unrated New York
Municipal Obligations or in New York Municipal Obligations rated lower than the
four highest grades, but no more than half of this amount (10% of the Fund's
net assets) will be invested in such lower rated New York Municipal
Obligations. To the extent it does so, there may be somewhat greater risk
because such unrated or lower rated Municipal Obligations, although generally
offering a higher current yield than higher rated securities, are generally
less liquid and involve a greater risk of non-payment of principal and interest
than higher rated securities. The Acquiring Fund will only invest in unrated
New York Municipal Obligations which, in the opinion of the Adviser, have
credit characteristics equivalent to Obligations rated Baa or BBB or better.
The Acquiring Fund will not invest in any rated New York Municipal Obligations
that are rated lower than Ba by Moody's or BB by S&P at the time of purchase.
The Acquired Fund. The Acquired Fund's investment objective is to provide,
through investment in a professionally managed portfolio of tax-exempt New York
Municipal Obligations, a high level of current interest income exempt from both
Federal and New York and New York City personal income taxes.
Except during temporary defensive periods, the Acquired Fund will, as a
fundamental policy, invest 100% of its net assets in tax-exempt New York
Municipal Obligations, of which 75% will be Municipal Obligations rated at the
time of purchase within the four highest grades (Baa or BBB or better) by
Moody's or S&P, or unrated Municipal Obligations which, in the opinion of the
Adviser, have credit characteristics equivalent to, and will be of comparable
quality to, Obligations rated within the four highest grades by Moody's or S&P,
provided that the Acquired Fund may not invest more than 10% of its net assets
in such unrated Municipal Obligations. The Acquired Fund emphasizes investments
in New York Municipal Obligations with long-term maturities, but the degree of
such emphasis will depend upon market conditions existing at the time of
investment.
The Acquired Fund may invest up to 25% of its net assets in New York
Municipal Obligations rated Ba or B by Moody's or BB or B by S&P at the time of
purchase, or in unrated New York Municipal Obligations that, in the Adviser's
opinion, have credit characteristics equivalent to Obligations so rated,
provided that no more than 10% of the Fund's net assets may be invested in New
York Municipal Obligations rated B by Moody's or B by S&P, or their unrated
equivalents. To the extent the Acquired Fund invests in these lower rated New
York Municipal Obligations, there may be somewhat greater risk because such
lower rated securities, although generally offering a higher current yield than
higher rated securities, are generally less liquid and involve a greater risk
of non-payment of principal and interest than higher rated securities.
Securities rated B by S&P have a greater vulnerability to default but presently
have the capacity to meet interest and principal payments, while securities
rated B by Moody's generally lack characteristics of the desirable investment.
The Acquired Fund will not invest in any New York Municipal Obligations that
are not rated at least B by either Moody's or S&P or that do not have credit
characteristics equivalent to Municipal Obligations so rated in the opinion of
the Adviser.
MUNICIPAL OBLIGATIONS
"Municipal Obligations" are debt obligations issued by states, cities and
local authorities, and certain possessions and territories of the United
States, to obtain funds for various public purposes, including the construction
and maintenance of such public facilities as airports, bridges, highways,
housing, hospitals, mass transportation, schools, streets and water and sewer
works. Other public purposes for which Municipal Obligations may be issued
include the refinancing of outstanding obligations and the obtaining of funds
for general operating
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expenses and for loans to other public institutions and facilities. In
addition, certain industrial development, private activity and pollution
control bonds may be included within the term Municipal Obligations if the
interest paid thereon qualifies as exempt from regular Federal income tax. The
two principal classifications of Municipal Obligations are "general obligation"
and "revenue" bonds. General obligation bonds are secured by the issuer's
pledge of its full faith, credit and taxing power for the payment of principal
and interest. Revenue bonds (e.g., industrial development bonds) are payable
only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source. Also included within the general category of Municipal
Obligations are participations in lease obligations or installment purchase
contract obligations of municipal authorities or entities.
"New York Municipal Obligations" are Municipal Obligations issued by the
State of New York and cities and local authorities in the State of New York
bearing interest that, in the opinion of bond counsel to the issuer, is exempt
from regular Federal income tax as well as New York and New York City personal
income taxes. Such interest may be subject to the Federal alternative minimum
tax. In addition, the Acquired Fund may invest up to 10% of its net assets in
Municipal Obligations issued by United States possessions or territories, which
also bear interest that is exempt from both Federal and New York and New York
City personal income taxes and, for this purpose, are considered to be New York
Municipal Obligations.
The yields on Municipal Obligations are dependent on a variety of factors,
including the condition of the general money market and the Municipal
Obligation market, the size of a particular offering, the maturity of the
obligation and the rating of the issue. The market value of Municipal
Obligations will vary with changes in prevailing interest rate levels and as a
result of changing evaluations of the ability of their issuers to meet interest
and principal payments.
Each Fund may purchase and sell Municipal Obligations on a when-issued or
delayed delivery basis. When-issued and delayed delivery transactions arise
when securities are purchased or sold with payment and delivery beyond the
regular settlement date. On such transactions the payment obligation is fixed
at the time the buyer enters into the commitment. This involves an element of
risk to a Fund when it is the buyer because at the time of delivery the market
value of the Municipal Obligations may be less than such Fund's payment
obligation. Each Fund is required under the rules of the Commission to maintain
in a segregated account liquid assets, consisting of cash, U.S. government
securities or other high grade debt obligations, equal in value to the purchase
price due on the settlement date. Income generated by assets in such a
segregated account of a Fund may be taxable to shareholders of that Fund.
SPECIAL CONSIDERATIONS RELATING TO NEW YORK MUNICIPAL OBLIGATIONS
Certain risks result from the financial condition of New York State, certain
of its public bodies and municipalities and New York City. Beginning in early
1975, New York State, New York City and other related entities faced serious
financial difficulties that jeopardized the credit standing and impaired the
borrowing abilities of these entities and contributed to high interest rates
on, and lower market prices for, debt obligations issued by them. A recurrence
of such financial difficulties or a failure of certain financial recovery
programs could result in defaults or declines in the market values of various
New York Municipal Securities in which the Funds may invest. If there were a
default or other financial crisis relating to New York State, New York City, a
State or City agency, or other municipality, the market value and marketability
of Municipal Securities in the portfolio of the Funds and the interest income
to the Funds could be adversely affected. A summary of the more significant
events and conditions affecting the financial situation in New York is included
under "Investment Objectives and Policies of the Funds--Special Considerations
Relating to New York Municipal Obligations" in the Statement of Additional
Information.
INVESTMENT RESTRICTIONS
Neither Fund, as a fundamental policy, may, without the approval of the
holders of a "majority of the outstanding" shares:
(1) Issue senior securities, as defined in the 1940 Act, except to the
extent such issuance might be involved with respect to borrowings described
under subparagraph (3) under "Investment Objectives and Policies of the
Funds--Investment Restrictions" in the Statement of Additional Information
or with respect to transactions involving futures contracts or the writing
of options within the limits described in the Statement of Additional
Information under "Certain Trading Strategies of the Funds--Financial
Futures and Options Transactions;"
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(2) 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 Obligations issued by governments or political subdivisions of
governments (except, in the case of the Acquired Fund, this limitation
shall apply to those Municipal Obligations backed only by the assets and
revenues of non-governmental users) and obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities;
(3) Invest in securities other than New York Municipal Obligations and
temporary investments as described in the Statement of Additional
Information under "Investment Objectives and Policies of the Funds--
Portfolio Investments;" or
(4) Invest more than 5% of its total assets in securities of any one
issuer, except that this limitation shall not apply to securities of the
U.S. government, its agencies and instrumentalities or to the investment of
25% of its total assets.
See "Investment Objectives and Policies of the Funds--Investment
Restrictions" in the Statement of Additional Information for a description of
additional investment restrictions.
SURRENDER AND EXCHANGE OF ACQUIRED FUND SHARE CERTIFICATES
After the Effective Time, each holder of an outstanding certificate or
certificates formerly representing shares of the Acquired Fund ("Acquired Fund
Shares") will be entitled to receive, upon surrender of his or her
certificates, a certificate or certificates representing the number of
Acquiring Fund shares distributable with respect to such holder's Acquired Fund
Shares, together with cash in lieu of any fractional Acquiring Fund share.
Promptly after the Effective Time, the Transfer Agent will mail to each holder
of certificates formerly representing Acquired Fund Shares a letter of
transmittal for use in surrendering his or her certificates for certificates
representing Acquiring Fund shares and cash in lieu of any fractional Acquiring
Fund share.
PLEASE DO NOT SEND IN ANY SHARE CERTIFICATES AT THIS TIME. UPON CONSUMMATION
OF THE REORGANIZATION, HOLDERS OF ACQUIRED FUND SHARES WILL BE FURNISHED
INSTRUCTIONS FOR EXCHANGING THEIR ACQUIRED FUND SHARE CERTIFICATES FOR
ACQUIRING FUND SHARE CERTIFICATES AND, IF APPLICABLE, CASH IN LIEU OF
FRACTIONAL ACQUIRING FUND SHARES.
From and after the Effective Time, certificates formerly representing
Acquired Fund Shares will be deemed for all purposes to evidence ownership of
the number of full Acquiring Fund shares distributable with respect to such
Acquired Fund Shares in the Reorganization, provided that until such Acquired
Fund Share certificates have been so surrendered, no dividends payable to the
holders of record of Acquiring Fund shares as of any date subsequent to the
liquidation of the Acquired Fund shall be paid to the holders of such
outstanding Acquired Fund Share certificates. Dividends payable on Acquiring
Fund shares to holders of record as of any date after the liquidation of the
Acquired Fund and prior to the exchange of certificates by any Acquired Fund
shareholder will be paid to such shareholder, without interest, at the time
such shareholder surrenders his or her Acquired Fund Share certificates for
exchange.
From and after the Effective Time, there will be no transfers on the record
transfer books of the Acquired Fund. If, after the Effective Time, certificates
representing Acquired Fund Shares are presented to the Acquired Fund, they will
be cancelled and exchanged for certificates representing the Acquiring Fund
shares and, if applicable, the cash in lieu of fractional Acquiring Fund shares
distributable with respect to such Acquired Fund Shares in the Reorganization.
EXPENSES ASSOCIATED WITH THE REORGANIZATION
In evaluating the Reorganization, management of the Funds estimated the
amount of additional expenses the Funds would incur, including additional stock
exchange listing fees, Commission registration fees, legal and accounting fees
and increased proxy and distribution costs. These estimates were based in part
on information provided by the Funds' independent auditors, as well as
historical expense information regarding expenses incurred by other funds
managed by the Funds' management in preparation for previous shareholder
meetings. The aggregate amount of estimated Reorganization expenses (estimated
to be $134,515), excluding annual stock exchange fees which will be borne by
the Acquiring Fund after the Reorganization, are to be allocated between the
Acquiring Fund (37.9%) and the Acquired Fund (62.1%) based upon estimated
savings to each Fund as a result of expected reduced operating expenses
resulting from the Reorganization.
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Reorganization expenses of the Acquiring Fund and the Acquired Fund have been
or will be expensed prior to the Effective Time. Management of the Funds
expects that reduced operating expenses resulting from the Reorganization
should allow the Acquiring Fund to recover the projected costs of the
Reorganization within approximately 19 months after the Effective Time.
DISSENTING SHAREHOLDERS' RIGHTS OF APPRAISAL
Under Minnesota law, shareholders of the Acquired Fund have dissenters'
rights of appraisal with respect to the Reorganization, but shareholders of the
Acquiring Fund do not have such rights.
GENERAL
Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act
provide for rights of shareholders to dissent and obtain payment in cash of the
"fair value" of their shares, as defined in the statute, in the event of a sale
of substantially all of the assets of a Minnesota corporation. The procedures
for asserting dissenters' rights are set forth in such sections, the full texts
of which are reprinted as Annex B to this Joint Proxy Statement-Prospectus.
Shareholders of the Acquired Fund who wish to assert their dissenters' rights
must fully comply with the statutory requirements in order to preserve the
right to obtain payment for their shares under the statute. The following
summary of the applicable provisions of Section 302A.471 and 302A.473 is not
intended to be a complete statement of such provisions and is qualified in its
entirety by reference to such Sections.
PROCEDURE
Any shareholder of the Acquired Fund who wishes to dissent and obtain payment
for his or her shares (a) must file with the Acquired Fund prior to the
shareholder vote with respect to the Agreement at the Annual Meeting, a written
notice stating the shareholder's intention to demand payment of the fair value
of his or her shares if the Reorganization is effectuated and (b) must not vote
his or her shares in favor of approval of the Agreement. Such notice must be
filed at the offices of the Acquired Fund at 333 West Wacker Drive, Chicago,
Illinois 60606. A vote against approval of the Agreement does not in itself
constitute the required written notice described in (a) above. A shareholder
must satisfy requirement (b) above either by voting against approval of the
Agreement in person or by proxy at the Annual Meeting or by abstaining from
voting his or her shares. The shareholder can so abstain by not voting in favor
of approval of the Agreement at the Annual Meeting and either (i) not signing
and returning the proxy card or (ii) marking the space indicating "Abstain" on
the proxy card. If a shareholder returns a signed proxy card, unless such proxy
card indicates that the shareholder wishes to abstain or vote against approval
of the Agreement, such shareholder's shares will be voted in favor of approval
of the Agreement, and such shareholder will not be permitted to dissent.
A shareholder of the Acquired Fund may not assert dissenters' rights as to
less than all of the shares registered in such holder's name, except in the
situation in which certain shares are beneficially owned by another person but
registered in such holder's name. If a shareholder wishes to dissent with
respect to shares beneficially owned by another person, such shareholder must
dissent with respect to all such shares and disclose the name and address of
the beneficial owner on whose behalf the holder is dissenting. A beneficial
owner who is not the shareholder of record may assert dissenters' rights with
respect to all of his or her shares if the beneficial owner submits a written
consent of the shareholder of record at the time of or prior to the assertion
of such dissenters' rights.
If the Agreement is approved by the requisite shareholder vote, the Acquired
Fund will be required to mail a notice to each Acquired Fund shareholder who
filed a written notice of intent to demand payment and refrained from voting in
favor of approval of the Agreement. The notice shall state when and where a
demand for payment shall be sent and share certificates shall be deposited in
order to obtain payment. The notice shall also include a form to be completed
by the shareholder for demanding payment and certifying the date on which the
shareholder, or the beneficial owner on whose behalf the shareholder is
dissenting, acquired the shares. In order to receive the fair value of his or
her shares, a dissenting shareholder must demand payment and deposit his or her
share certificates within 30 days after the notice is mailed by the Acquired
Fund. A shareholder who fails to demand payment or fails to deposit share
certificates, as required by such notice, shall have no right to receive
payment for his or her shares under the dissenters' rights provisions.
After the Reorganization takes effect or after receipt of a valid demand for
payment, whichever is later, the Acquired Fund shall remit to each shareholder
who has made such demand of the Acquired Fund and deposited his or her share
certificates, the amount that the Acquired Fund estimates to be the fair value
of the shares, plus
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any interest that may have accrued commencing five days after the Effective
Time up to and including the date of payment at the judgment rate of interest
then in effect under Minnesota law (currently 6% per annum). The Acquired Fund
shall also include with such remittance, along with certain financial
statements of the Acquired Fund, a brief description of the method used to
reach the estimated fair value of the shares of the Acquired Fund. As used in
Section 302A.473, the term "fair value of the shares" means the value of the
shares immediately before the Effective Time.
The Acquired Fund may withhold any remittance from a dissenting shareholder
who was not a shareholder (or who is dissenting on behalf of a person who was
not a beneficial owner) on July 27, 1995, the date of the first public
announcement of the Reorganization, if the Acquired Fund (a) provides to such
shareholder, along with the materials described in the preceding paragraph, a
statement of the reason for withholding the remittance and (b) offers to pay
the fair value of the shares, plus interest, if the dissenting shareholder
agrees to accept that amount in full satisfaction. The dissenting shareholder
may decline the offer and demand payment as described below. Failure to make
such demand entitles the dissenting shareholder only to the amount offered by
the Acquired Fund.
If a dissenting shareholder of the Acquired Fund believes that the amount
remitted (or the amount offered in the case of certain dissenting shareholders)
by the Acquired Fund is less than the fair value of his or her shares of the
Acquired Fund, plus interest, the shareholder may, within 30 days after the
mailing date of the remittance (or the offer), give written notice to the
Acquired Fund of his or her own estimate of the fair value of the shares of the
Acquired Fund, plus interest, and demand payment of the difference. If the
shareholder fails to do so, the shareholder is entitled only to the amount
remitted (or offered).
If the Acquired Fund receives a demand for supplemental payment from any
dissenting shareholder, it shall, within 60 days after receipt of such demand,
either (a) pay to the dissenter the amount demanded or agreed to by the
dissenter after settlement discussions or (b) file in a court of competent
jurisdiction in Hennepin County, Minnesota, a petition requesting that the
court determine the fair value of the shares, plus interest. All shareholders
of the Acquired Fund whose demands have not been settled with the Acquired Fund
shall be made parties to the proceeding. The court shall determine whether each
such dissenting shareholder has complied with all statutory requirements and
shall determine the fair value of the shares, taking into account any and all
factors the court finds relevant if the court determines that the fair value of
the shares exceeds the Acquired Fund's estimate of the fair value of the shares
of the Acquired Fund, then the court will enter judgment in favor of such
dissenting shareholders in an amount by which the value determined by the court
exceeds the Acquired Fund's estimated value.
The costs and expenses of the proceeding, including the reasonable expense
and compensation of any appraisers appointed by the court, shall be determined
by the court and assessed against the Acquired Fund, except that the court may
assess part or all of such costs and expenses against any dissenting
shareholder whose action in demanding supplemental payment is found by the
court to be arbitrary, vexatious or not in good faith. If the court finds that
the Acquired Fund has failed to comply substantially with the statutory
requirements, the court may assess against the Acquired Fund all fees and
expenses of any experts or attorneys as the court deems equitable. In addition,
fees and expenses may be assessed against any party the court determines has
acted arbitrarily, vexatiously or not in good faith in bringing a proceeding
for supplemental payment.
Cash received pursuant to the exercise of dissenters' rights may be subject
to Federal or state income tax. See "Tax Consequences of the Reorganization--
Dissenting Shareholders."
TAX CONSEQUENCES OF THE REORGANIZATION
The Funds have received the opinion of Vedder, Price, Kaufman & Kammholz,
counsel to the Funds, to the effect that the Reorganization will qualify as a
tax-free reorganization under Section 368(a)(1)(C) of the Code. Accordingly,
neither Fund will recognize gain or loss for Federal income tax purposes as a
result of the Reorganization. Provided that the proposed Reorganization
qualifies as a tax-free reorganization under the Code, neither Fund will
recognize any gain or loss for New York income tax purposes as a result of the
Reorganization. The following discussion summarizes the anticipated Federal
income and New York and New York City personal income tax treatment to
shareholders of the Acquired Fund.
EXCHANGE OF ACQUIRED FUND SHARES SOLELY FOR ACQUIRING FUND SHARES
A shareholder of the Acquired Fund who receives shares of the Acquiring Fund
pursuant to the Reorganization will recognize no gain or loss for Federal
income or New York and New York City personal income
18
<PAGE>
tax purposes, except with respect to the cash received for a fractional
Acquiring Fund share interest, if any, which will be taxable for Federal income
tax purposes and for New York and New York City personal income tax purposes.
See "Fractional Share Interests" below.
The aggregate basis of the Acquiring Fund shares received by a shareholder of
the Acquired Fund (including any fractional Acquiring Fund share interest to
which he or she may be entitled) will be the same as the shareholder's
aggregate basis in the Acquired Fund Shares surrendered in exchange therefor,
decreased by any cash received and increased by the amount of gain recognized
on the exchange.
The holding period of the Acquiring Fund shares received by a shareholder of
the Acquired Fund (including any fractional Acquiring Fund share interest to
which he or she may be entitled) will include the period during which the
shareholder's Acquired Fund Shares were held, provided such Acquired Fund
Shares were held as a capital asset at the Effective Time.
For Federal income tax reasons, the Acquired Fund must declare a distribution
to its shareholders of all net tax-exempt income, investment company net
taxable income and net capital gain income, if any, prior to the end of its
fiscal year, which declaration will occur at or prior to the Effective Time.
FRACTIONAL SHARE INTERESTS
No fractional Acquiring Fund shares will be issued pursuant to the
Reorganization. Cash payments received by an Acquired Fund shareholder in lieu
of a fractional Acquiring Fund share will be treated as received by such
shareholder as a distribution in redemption by the Acquiring Fund of that
fractional share interest and will be treated as a distribution in full payment
in exchange for the fractional Acquiring Fund share interest, resulting in a
capital gain or loss for Federal income tax purposes and for New York and New
York City personal income tax purposes, assuming the Acquired Fund Shares
exchanged for cash in lieu of the fractional Acquiring Fund share were held as
a capital asset at the Effective Time.
DISSENTING SHAREHOLDERS
Cash payments received by an Acquired Fund shareholder as a result of the
exercise of his or her dissenters' rights of appraisal will be treated as
received by such shareholder as a distribution in redemption by the Acquired
Fund of his or her shares and will be treated as a distribution in full payment
in exchange for his or her shares, resulting in a capital gain or loss for
Federal income tax purposes and for New York and New York City personal income
tax purposes, assuming the Acquired Fund Shares exchanged for cash as a result
of the exercise of his or her dissenters' rights were held as a capital asset
at the Effective Time.
THE FOREGOING IS INTENDED TO BE ONLY A SUMMARY OF THE PRINCIPAL FEDERAL
INCOME AND NEW YORK INCOME TAX CONSEQUENCES OF THE REORGANIZATION AND SHOULD
NOT BE CONSIDERED TO BE TAX ADVICE. THERE CAN BE NO ASSURANCE THAT THE INTERNAL
REVENUE SERVICE AND THE NEW YORK DIVISION OF TAXATION WILL CONCUR ON ALL OR ANY
OF THE ISSUES DISCUSSED ABOVE. ACQUIRED FUND SHAREHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISERS REGARDING THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES
WITH RESPECT TO THE FOREGOING MATTERS AND ANY OTHER CONSIDERATIONS WHICH MAY BE
APPLICABLE TO THEM.
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Funds as
of July 31, 1995 and the pro forma combined capitalization of the combined Fund
as if the Reorganization had occurred on that date. The table reflects a pro
forma exchange ratio of approximately 1.0805585 shares of the Acquiring Fund
issued for each share of the Acquired Fund. If the Reorganization is
consummated, the actual exchange ratio may vary from the ratio indicated below.
See Pro Forma Financial Statements included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
ACQUIRING FUND ACQUIRED FUND ACQUIRING FUND
(ACTUAL) (ACTUAL) (AS ADJUSTED)
-------------- ------------- --------------
<S> <C> <C> <C>
Net Assets.......................... $124,124,615 $28,428,782 $152,407,041
Net Asset Value per Share........... $10.43 $11.30 $10.42
Shares Outstanding.................. 11,903,229 2,516,018 14,621,934
Shares Authorized................... 250,000,000 200,000,000 250,000,000
</TABLE>
19
<PAGE>
COMPARATIVE PERFORMANCE INFORMATION
Comparative investment performance for the Funds for certain periods ended
July 31, 1995 are shown below:
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURN TOTAL RETURN
ON MARKET VALUE ON NET ASSET VALUE
-------------------------- --------------------------
LIFE LIFE
ONE THREE FIVE OF ONE THREE FIVE OF
YEAR YEARS YEARS FUND YEAR YEARS YEARS FUND
----- ------ ------ ------ ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Acquiring Fund............ 6.59% 16.25% 48.64% 91.46% 5.92% 17.62% 45.46% 95.45%
Acquired Fund............. 1.17% 5.91% 34.80% 55.66% 6.44% 11.21% 36.34% 65.52%
</TABLE>
Total Investment Return on Market Value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and changes in
price per share. Total Return on Net Asset Value is the combination of
reinvested dividend income, reinvested capital gains distributions, if any, and
changes in net asset value per share. Life of Fund is calculated from October
7, 1987 for the Acquiring Fund and April 20, 1988 from the Acquired Fund. Past
performance information is not necessarily indicative of future results.
PROPOSAL NO. 2--ELECTION OF DIRECTORS OF EACH FUND
Shareholders of each Fund are being asked to vote for the election of three
(3) directors of their Fund to serve for three years, as described below, and
until their successors have been duly elected and qualified or, in the case of
the Acquired Fund, until the earlier liquidation of the Acquired Fund.
It is the intention of the persons named in the enclosed proxy to vote the
shares represented thereby for the election of the nominees listed below unless
the proxy is marked otherwise. Each of the nominees listed below has agreed to
serve as a director of each Fund if elected; however, should any nominee become
unable or unwilling to accept nomination or election, the proxies for each Fund
will be voted for one or more substitute nominees designated by each Fund's
present Board.
Shareholders of each Fund will be entitled to one vote for each share held
for the election of directors. The affirmative vote of a majority of the shares
present and entitled to vote at the Annual Meeting of each Fund will be
required to elect the directors for that Fund.
The following table show each nominee's or continuing director's age,
address, principal occupation and other business affiliations as of July 31,
1995, the year in which each nominee or continuing director was first elected
or appointed a director of each Fund and the number of shares of each Fund and
of all funds managed by the Adviser (excluding money market funds) which each
nominee or continuing director beneficially owned as of July 31, 1995.
The Board of Directors of each Fund is divided into three classes with the
terms of each of the first, second and third classes expiring at the Annual
Meetings of the Funds in the years indicated below. The members of the Board
and the nominees for election to the Board are the same for each Fund. Lawrence
H. Brown, Anne E. Impellizzeri, Margaret K. Rosenheim and Timothy R.
Schwertfeger were last elected to the Board of Directors at the 1994 annual
meeting of shareholders. Richard J. Franke was last elected to the Board of
Directors at the 1993 annual meeting of shareholders. Peter R. Sawers was last
elected to the Board of Directors at the 1992 annual meeting of shareholders.
If the Reorganization is consummated, the directors of the Acquired Fund will
cease to serve as such upon the liquidation of the Acquired Fund.
The members of the Board of Directors mourn the recent passing of John E.
O'Toole, a director since 1989. Mr. O'Toole was a Class III director of the
Acquiring Fund and a Class II director of the Acquired Fund. There is currently
a vacancy on the Board of each Fund. The Fund's nominating committees are
considering candidates for the vacancy, and will report to the full Boards
later this year.
20
<PAGE>
NOMINEES FOR DIRECTOR OF EACH FUND
<TABLE>
<CAPTION>
FULL SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
JULY 31, 1995
YEAR FIRST --------------------
YEAR ELECTED OR ALL
NAME, AGE AND ADDRESS PRINCIPAL TERM APPOINTED A THE NUVEEN
AS OF JULY 31, 1995 OCCUPATION(/1/) EXPIRES DIRECTOR FUNDS FUNDS(/2/)
--------------------- ------------------------ ------- -------------- ------- -----------
<C> <S> <C> <C> <C> <C>
CLASS III, ACQUIRED FUND
CLASS I, ACQUIRING FUND
Lawrence H. Brown (61) Director of the Funds; 1998 1993 0 3,475
201 Michigan Ave. retired in August 1989
Highwood, IL 60040 as Senior Vice
President of The
Northern Trust Company.
Peter R. Sawers (62) Director of the Funds; 1998 1991 0 7,934
22 The Landmark Adjunct Professor of
Northfield, IL 60093 Business and Economics,
University of Dubuque,
Iowa (since January
1991); Adjunct
Professor, Lake Forest
Graduate School of
Management, Lake
Forest, Illinois (since
January 1992); prior
thereto, Executive
Director, Towers Perrin
Australia (management
consultant); Chartered
Financial Analyst;
Certified Management
Consultant.
*Timothy R. Schwertfeger (46) Director and President 1998 1994 0 90,117
333 W. Wacker Drive of the Funds (since
Chicago, IL 60606 July 1994); Executive
Vice President and
Director of The John
Nuveen Company (since
March 1992) and John
Nuveen & Co.
Incorporated; Director
of Nuveen Advisory
Corp. (since October
CONTINUING1DIRECTORS9OF9EACH2FUND) and Nuveen
Institutional Advisory
Corp. (since October
1992).
CLASS I, ACQUIRED FUND
CLASS II, ACQUIRING FUND
Anne E. Impellizzeri (62) Director of the Funds; 1996 1994 0 2,000
3 W. 29th St. President and Chief
New York, NY 10001 Executive Officer of
Blanton-Peale,
Institutes of Religion
and Health (since
December 1990); prior
thereto, Vice President
of New York City
Partnership (from 1988
to 1990) and Vice
President of
Metropolitan Life
Insurance Company (from
1980 to 1988).
Richard J. Franke (64) Chairman of the Board 1996 1987 - 0 20,695
333 W. Wacker Dr. and Director of the Acquiring Fund
Chicago, IL 60606 Funds, The John Nuveen 1988 -
Company (since March Acquired Fund
1992), John Nuveen &
Co. Incorporated,
Nuveen Advisory Corp.
and Nuveen
Institutional Advisory
Corp. (since April
1990); Certified
Financial Planner.
CLASS II, ACQUIRED FUND
CLASS III, ACQUIRING FUND
Margaret K. Rosenheim (69) Director of the Funds; 1997 1987 - 0 5,091
969 E. 60th St. Helen Ross Professor of Acquiring Fund
Chicago, IL 60639 Social Welfare Policy, 1988 -
School of Social Acquired Fund
Service Administration,
University of Chicago.
</TABLE>
-------
*"Interested person" as defined in the 1940 Act by reason of being an officer
or director of the Adviser.
(1) The nominees and continuing directors of the Funds are directors or
trustees, as the case may be, of 21 Nuveen open-end funds and 55 Nuveen
closed-end funds.
(2) The number shown reflects the aggregate number of shares beneficially
owned by the nominee or continuing director in all of the Nuveen-sponsored
funds referred to in note (1) above (excluding money market funds).
The directors affiliated with Nuveen or the Adviser serve without any
compensation from either Fund. Directors who are not affiliated with Nuveen or
the Adviser receive a $45,000 annual retainer for serving as a director or
trustee, as the case may be, of all funds sponsored by Nuveen and managed by
the Adviser and a $1,000 fee per day plus expenses for attendance at all
meetings held on a day on which a regularly scheduled Board meeting
21
<PAGE>
is held, a $1,000 fee per day plus expenses for attendance in person or a $500
fee per day plus expenses for attendance by telephone at a meeting held on a
day on which no regular Board meeting is held, and a $250 fee per day plus
expenses for attendance in person or by telephone at a meeting of the
executive committee. The annual retainer, fees and expenses are allocated
among each Fund and the other funds managed by the Adviser on the basis of
relative net assets. The Funds have each adopted a Directors' Deferred
Compensation Plan pursuant to which a director may elect to have all or a
portion of his or her director's fee deferred. Directors may defer fees for
any calendar year by the execution of a Participation Agreement prior to the
beginning of the calendar year during which the director wishes to begin
deferral.
The table below shows, for each director who is not affiliated with Nuveen
or the Adviser, the aggregate compensation paid by each Fund for its fiscal
year ended September 30, 1994 and the total compensation that Nuveen funds
accrued for each director during the calendar year 1994, including any
interest accrued for directors on deferred compensation. The rate of earnings
on deferred compensation is equivalent to the average net earnings rate,
computed on a quarterly basis, on the shares of such Nuveen fund.
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION FROM THE FUNDS
---------------------------------------------
TOTAL COMPENSATION NUVEEN
ACQUIRING ACQUIRED FUNDS
NAME FUND FUND ACCRUED FOR DIRECTORS(/2/)
---- --------- -------- --------------------------
<S> <C> <C> <C>
Lawrence H. Brown................ $228 $145 $56,500
Anne E. Impellizzeri(1).......... $ 79 $ 49 48,750
Margaret K. Rosenheim............ $332 $208 64,404(3)
Peter R. Sawers.................. $316 $204 56,000
</TABLE>
-------
(1) Anne E. Impellizzeri was appointed a director in April 1994.
(2) Includes compensation for service on the boards of 21 Nuveen open-end
funds and 55 Nuveen closed-end funds. Also includes amounts for Nuveen
funds that existed for part of the year, estimated as if the funds had
existed for the entire year.
(3) Includes $1,404 in interest accrued on deferred compensation from prior
years.
Richard J. Franke, Timothy R. Schwertfeger and Margaret K. Rosenheim serve
as members of the executive committee of each Fund's Board. The executive
committee, which meets between regular meetings of the Board, is authorized to
exercise all of the powers of the Board. The executive committee of each Fund
held 13 meetings for the fiscal year ended September 30, 1994. Most of the
executive committee meetings for each Fund were held for the sole purpose of
declaring a dividend on the Fund's shares.
Each Fund's Board has an audit committee composed of Lawrence H. Brown, Anne
E. Impellizzeri, Margaret K. Rosenheim and Peter R. Sawers, directors of each
Fund who are not "interested persons." The audit committee reviews the work
and any recommendations of each Fund's independent public auditors. Based on
such review, it is authorized to make recommendations to the Board. The audit
committee of each Fund held two meetings for the fiscal year ended September
30, 1994.
Nomination of those directors who are not "interested persons" of a Fund is
committed to a nominating committee composed of the directors who are not
"interested persons" of that Fund. It identifies and recommends individuals to
be nominated for election as non-interested directors. The nominating
committee of each Fund held one meeting for the fiscal year ended September
30, 1994. No policy or procedure has been established as to the recommendation
of director nominees by shareholders.
The Board of each Fund held six meetings for the fiscal year ended September
30, 1994. During the last fiscal year, each director attended 75% or more of
each Fund's Board meetings and the committee meetings (if a member thereof),
except that Mr. Franke was unable to attend certain executive committee
meetings held solely to declared dividends. His attendance at executive
committee meetings that he was scheduled to attend was less than 75%.
The Funds have the same executive officers. The following table sets forth
information as of July 31, 1995 with respect to each executive officer of the
Funds, other than executive officers who are directors and included in the
table relating to nominees for the Boards. The business address of each
executive officer listed below is 333 West Wacker Drive, Chicago, Illinois
60606. Officers of the Funds receive no compensation from the Funds. With
respect to each Fund, the term of office of all officers is expected to expire
at the meeting of the Board of such
22
<PAGE>
Fund following the next regular meeting of shareholders. In the case of the
Acquired Fund, such term of office will expire upon liquidation of the Acquired
Fund in the event the Reorganization is consummated.
<TABLE>
<CAPTION>
NAME AGE POSITIONS AND OFFICES WITH FUNDS PRINCIPAL OCCUPATIONS
---- --- -------------------------------- ---------------------
<S> <C> <C> <C>
Kenneth C. Dunn 39 Vice President and Assistant Secretary Vice President, Assistant Secretary and
(since July 1995) Assistant General Counsel of John Nuveen &
Co. Incorporated (since May 1995); Vice
President and Assistant Secretary of
Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp. (since May
1995); Partner, Gardner, Carton & Douglas
(from January 1990 to April 1995)
Kathleen M. Flanagan 48 Vice President (since 1994) Vice President of John Nuveen & Co.
Incorporated
J. Thomas Futrell 40 Vice President (since 1991) Vice President of Nuveen Advisory Corp.
(since February 1991); prior thereto,
Assistant Vice President of Nuveen
Advisory Corp. (from August 1988 to
February 1991); Chartered Financial
Analyst
Steven J. Krupa 38 Vice President (since 1990) Vice President of Nuveen Advisory Corp.
(since October 1990); prior thereto, Vice
President of John Nuveen & Co.
Incorporated (from January 1989 to October
1990)
Anna R. Kucinskis 49 Vice President (since 1991) Vice President of John Nuveen & Co.
Incorporated
Larry W. Martin 44 Vice President (since 1993) & Assistant Vice President (since September 1992),
Secretary (since 1987) Assistant Secretary and Assistant General
Counsel of John Nuveen & Co. Incorporated;
Vice President (since May 1993) and
Assistant Secretary of Nuveen Advisory
Corp.; Vice President (since May 1993) and
Assistant Secretary (since January 1992)
of Nuveen Institutional Advisory Corp.;
Assistant Secretary (since February 1993)
of The John Nuveen Company; Director of
Nuveen/Duff & Phelps Investment Advisors
(since January 1995)
O. Walter Renfftlen 56 Vice President & Controller Vice President and Controller of The John
(since each Fund's organization) Nuveen Company (since March 1992), John
Nuveen & Co. Incorporated, Nuveen Advisory
Corp. and Nuveen Institutional Advisory
Corp.
Thomas C. Spalding, Jr. 44 Vice President Vice President of Nuveen Advisory Corp. and
(since each Fund's organization) Nuveen Institutional Advisory Corp. (since
April 1990); Chartered Financial Analyst
H. William Stabenow 61 Vice President & Treasurer (since 1988) Vice President and Treasurer of The John
Nuveen Company (since March 1992), John
Nuveen & Co. Incorporated, Nuveen Advisory
Corp. and Nuveen Institutional Advisory
Corp. (since January 1992)
George P. Thermos 63 Vice President Vice President of John Nuveen & Co.
(since each Fund's organization) Incorporated
James J. Wesolowski 45 Vice President & Secretary (since 1988) Vice President, General Counsel and
Secretary of The John Nuveen Company
(since March 1992), John Nuveen & Co.
Incorporated, Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp.
Gifford R. Zimmerman 39 Vice President (since 1993) & Assistant Vice President (since September 1992),
Secretary (since 1988) Assistant Secretary and Assistant General
Counsel of John Nuveen & Co. Incorporated;
Vice President (since May 1993) and
Assistant Secretary of Nuveen Advisory
Corp.; Vice President (since May 1993) and
Assistant Secretary (since January 1992)
of Nuveen Institutional Advisory Corp.
</TABLE>
On July 31, 1995, directors and executive officers of the Acquiring Fund as a
group did not beneficially own any shares of either the Acquiring Fund or the
Acquired Fund. On July 31, 1995, directors and executive officers of the Funds
as a group beneficially owned 203,639 common shares of all funds managed by the
Adviser (excluding money market funds). As of July 31, 1995, no person is known
to the Funds to have owned beneficially more than 5% of the shares of either
Fund.
Section 30(f) of the 1940 Act and Section 16(a) of the Exchange Act require
the Funds' directors and officers, investment adviser, affiliated persons of
the investment adviser and persons who own more than ten percent of a
registered class of either Fund's equity securities to file forms reporting
their affiliation with that Fund and reports of ownership and changes in
ownership of that Fund's shares with the Commission and the NYSE or AMEX, as
the case may be. These persons and entities are required by Commission
regulation to furnish each Fund with copies of all Section 16(a) forms they
file. Based on a review of these forms furnished to each Fund, each Fund
believes that for the fiscal year ended September 30, 1994, all Section 16(a)
filing requirements applicable to that Fund's directors and officers,
investment adviser and affiliated persons of the investment adviser were
complied with.
23
<PAGE>
PROPOSAL NO. 3--SELECTION OF INDEPENDENT AUDITORS FOR THE FUNDS
The members of each Fund's Board who are not "interested persons" of that
Fund have unanimously selected Ernst & Young LLP, independent auditors, to
audit the books and records of that Fund for the fiscal year ending September
30, 1996. Ernst & Young LLP has served each Fund in this capacity since each
Fund was organized and has no direct or indirect financial interest in any Fund
except as independent auditors. The selection of Ernst & Young LLP as
independent auditors of each Fund is being submitted to the shareholders of
each Fund for ratification, which requires the affirmative vote of a majority
of the shares of each Fund present and entitled to vote on the matter. A
representative of Ernst & Young LLP is expected to be present at the Annual
Meetings and will be available to respond to any appropriate questions raised
at the Annual Meetings and to make a statement if he or she wishes. EACH FUND'S
BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE RATIFICATION OF THE
SELECTION OF THE INDEPENDENT AUDITORS.
MANAGEMENT OF THE FUNDS
DIRECTORS AND OFFICERS
The same individuals constitute the Boards of both Funds, and the Funds have
the same officers. The management of each Fund, including general supervision
of the duties performed by the Adviser under the Investment Management
Agreement for each Fund, is the responsibility of its Board. There are
currently six directors of each Fund, two of whom are "interested persons" (as
defined in the 1940 Act) and four of whom are disinterested persons. The
continuing directors of the Acquiring Fund and those that are elected at the
Acquiring Fund's Annual Meeting will serve as directors of the Acquiring Fund
whether or not the Reorganization is approved and will hold office until their
successors have been duly elected and qualified. The continuing directors of
the Acquired Fund and those that are elected at the Acquired Fund's Annual
Meeting will hold office until their successors have been duly elected and
qualified or, if the Reorganization is consummated, the earlier liquidation of
the Acquired Fund. However, since the directors are the same for both Funds, if
the nominees for election at the Acquiring Fund's Annual Meeting are re-
elected, the Reorganization will not result in a change of directors for
shareholders of either Fund.
INVESTMENT ADVISER
The Adviser, located at 333 West Wacker Drive, Chicago, Illinois, serves as
investment adviser and manager for each Fund. The Adviser is a wholly-owned
subsidiary of Nuveen, 333 West Wacker Drive, Chicago, Illinois 60606. Nuveen is
a subsidiary of The John Nuveen Company which in turn is approximately 75%
owned by The St. Paul Companies, Inc. ("St. Paul"). St. Paul is located at 385
Washington Street, St. Paul, Minnesota 55102, and is principally engaged in
providing property-liability insurance through subsidiaries.
Under the Management Agreement for the Acquiring Fund, the Acquiring Fund has
agreed to pay an annual management fee equal to the sum of .35% of the average
weekly net assets and 4.125% of the gross interest income of the Acquiring
Fund.
Under the Management Agreement for the Acquired Fund, the Acquired Fund has
agreed to pay an annual management fee as follows:
<TABLE>
<CAPTION>
MANAGEMENT FEE SCHEDULE
---------------------------------- ---
AVERAGE DAILY NET ASSETS RATE
------------------------ -----
<S> <C> <C>
Up to $125 million .6500%
$125 to $250 million .6375
$250 to $500 million .6250
$500 million to $1 billion .6125
$1 billion to $2 billion .6000
$2 billion and over .5875
</TABLE>
The Acquiring Fund paid aggregate management fees of $800,465 for the fiscal
year ended September 30, 1994, for an effective management fee rate of 0.64%.
The Acquired Fund paid aggregate management fees of $187,591 for the fiscal
year ended September 30, 1994, for an effective management fee rate of 0.65%.
24
<PAGE>
PORTFOLIO MANAGEMENT
The Adviser places orders for the purchase and sale of portfolio securities
for the accounts of the Funds. Consistent with Rule 10f-3 under the 1940 Act,
portfolio securities may be purchased from Nuveen or its affiliates.
Thomas C. Spalding, Jr., a Vice President of the Acquiring Fund, the Acquired
Fund and the Adviser, has general supervisory responsibility with respect to
all Nuveen-sponsored open-end and exchange-traded funds managed by the Adviser.
Mr. Spalding has been employed by Nuveen since 1976 and by the Adviser since
1978.
The day to day management of each Fund is currently the responsibility of
Stephen S. Peterson, an Assistant Portfolio Manager of the Adviser since 1991
and portfolio manager of each Fund since September 1, 1994. Prior to joining
Nuveen Advisory, Mr. Peterson was employed by John Nuveen & Co. Incorporated in
its research department. Mr. Peterson currently manages 9 Nuveen-sponsored
investment companies.
25
<PAGE>
ADDITIONAL INFORMATION ABOUT THE FUNDS
FINANCIAL HIGHLIGHTS
Selected data for a Common share outstanding throughout each period is as
follows:
<TABLE>
<CAPTION>
OPERATING PERFORMANCE
-----------------------
NET
REAL-
IZED &
UNREAL- TOTAL
NET IZED PER INVEST-
ASSET GAIN NET SHARE MENT TOTAL
VALUE NET (LOSS) DIVIDENDS ASSET MARKET RETURN RETURN
BEGIN- INVEST- FROM FROM NET DISTRIBUTIONS VALUE VALUE ON ON NET
NING OF MENT INVEST- INVESTMENT FROM CAPITAL END OF END OF MARKET ASSET
PERIOD INCOME MENTS INCOME GAINS PERIOD PERIOD VALUE** VALUE**
---------------------------------------------------------------------------------------------------------
ACQUIRING FUND
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 Mos. ended
3/31/95 (Unaudited) $10.390 $.332 $(.015) $(.336) $(.001)+ $10.370 $10.500 3.33% 3.16%
Year ended 9/30,
1994 10.990 .659 (.575) (.669) (.015) 10.390 10.500 (.77) .78
1993 10.740 .664 .393 (.670) (.137) 10.990 11.250 7.27 10.28
2 Mos. ended
9/30/92 10.870 .112 (.129) (.113) -- 10.740 11.250 (2.29) (.16)
Year ended 7/31,
1992 10.270 .676 .727 (.676) (.127) 10.870 11.625 17.77 14.28
1991 10.200 .679 .115 (.676) (.048) 10.270 10.625 8.58 8.21
1990 10.370 .677 (.127) (.676) (.044) 10.200 10.500 7.08 5.61
1989 9.950 .675 .659 (.679) (.235) 10.370 10.500 14.92 14.22
10/7/87 to
7/31/88 9.350 .514 .541 (.455) -- 9.950 10.000 4.67 11.40
---------------------------------------------------------------------------------------------------------
<CAPTION>
ACQUIRED FUND
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 Mos. ended
3/31/95 (Unaudited) 11.170 .346 .047 (.353) -- 11.210 11.125 10.88 3.63
Year ended 9/30,
1994 11.960 .701 (.748) (.743) -- 11.170 10.375 (13.43) (.40)
1993 12.200 .755 (.185) (.767) (.043) 11.960 12.750 8.69 4.88
10 Mos. ended
9/30/92 11.940 .661 .325 (.655) (.071) 12.200 12.500 12.82 8.54
Year ended
11/30/91 11.430 .795 .517 (.802) -- 11.940 11.750 8.02 11.92
1 Mo. ended
11/30/90 11.370 .068 .095 (.068) (.035) 11.430 11.625 .94 1.44
Year ended 10/31,
1990 11.710 .806 (.266) (.810) (.070) 11.370 11.625 8.75 4.77
1989 11.530 .806 .210 (.808) (.028) 11.710 11.500 6.39 9.15
4/20/88 to
10/31/88 11.210 .358 .244 (.282) -- 11.530 11.625 (.66) 5.45
---------------------------------------------------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
--------------------------------
RATIO OF
NET NET
ASSETS RATIO OF INVEST-
END OF EXPENSES MENT PORT-
PERIOD TO INCOME FOLIO
(IN AVERAGE TO AVER- TURN-
THOU- NET AGE NET OVER
SANDS) ASSETS ASSETS RATE
---------------------------------------------------------------------------------------------------------
ACQUIRING FUND
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6 Mos. ended
3/31/95 (Unaudited) $122,927 .81*% 6.53*% 4%
Year ended 9/30,
1994 122,311 .84 6.16 4
1993 127,976 .85 6.16 5
2 Mos. ended
9/30/92 123,313 .84* 6.20* --
Year ended 7/31,
1992 124,620 .90 6.46 9
1991 116,236 .96 6.77 14
1990 114,368 .98 6.70 16
1989 115,379 1.03 6.75 24
10/7/87 to
7/31/88 109,750 .99* 6.54* 47
---------------------------------------------------------------------------------------------------------
<CAPTION>
ACQUIRED FUND
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6 Mos. ended
3/31/95 (Unaudited) 28,177 .98* 6.30* --
Year ended 9/30,
1994 28,050 1.00 6.08 12
1993 29,769 1.07 6.31 17
10 Mos. ended
9/30/92 30,075 .93* 6.58* 3
Year ended
11/30/91 29,187 .92 6.84 14
1 Mo. ended
11/30/90 27,736 .80* 7.26* 1
Year ended 10/31,
1990 27,564 .86 6.99 11
1989 28,177 .90 6.95 36
4/20/88 to
10/31/88 27,689 .94* 6.21* 21
---------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized.
** Total Investment Return on Market Value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and changes
in stock price per share. Total Return on Net Asset Value is the combination
of reinvested dividend income, reinvested capital gains distributions, if
any, and changes in net asset value per share.
+The amount shown reflects a distribution in excess of capital gains of $.0010
to Acquiring Fund shareholders.
26
<PAGE>
GENERAL INFORMATION AND HISTORY
The Acquiring Fund and the Acquired Fund are closed-end, diversified
management investment companies. The Acquiring Fund and the Acquired Fund were
organized as corporations under the laws of the State of Minnesota on July 14,
1987 and February 26, 1988, respectively. Each Fund is registered under the
1940 Act. In October 1987, the Acquiring Fund issued an aggregate of 11,000,000
shares in an initial public offering and commenced operations. In April 1988,
the Acquired Fund issued an aggregate of 2,300,000 shares in an initial public
offering and commenced operations.
The following table sets forth the number of outstanding shares, and certain
other share information, of each Fund as of July 31, 1995.
<TABLE>
<CAPTION>
(3) (4)
AMOUNT HELD BY AMOUNT OUTSTANDING
(1) (2) FUND FOR ITS EXCLUSIVE OF AMOUNT
TITLE OF CLASS AMOUNT AUTHORIZED OWN ACCOUNT SHOWN UNDER (3)
-------------- ----------------- -------------- -------------------
<S> <C> <C> <C>
ACQUIRING FUND
common stock 250,000,000 0 11,903,229
ACQUIRED FUND
common stock 200,000,000 0 2,516,018
</TABLE>
The Acquiring Fund shares are listed and trade on the NYSE under the symbol
NNY. The Acquired Fund shares are listed and trade on the AMEX under the symbol
NNM.
The following table sets forth the high and low sales prices for each Fund's
shares as reported on the consolidated transaction reporting system for the
periods indicated.
<TABLE>
<CAPTION>
ACQUIRING
FUND ACQUIRED FUND
------------- -------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<C> <S> <C> <C> <C> <C> <C>
1993 First Quarter.......................... 12 1/8 11 1/8 13 1/4 12 1/2
Second Quarter......................... 11 7/8 11 1/4 13 1/8 12 1/2
Third Quarter.......................... 12 11 1/4 13 1/4 12 5/8
Fourth Quarter......................... 11 5/8 11 13 1/8 12 1/8
1994 First Quarter.......................... 12 10 1/8 13 11 1/4
Second Quarter......................... 11 3/8 10 1/8 12 1/8 10 3/8
Third Quarter.......................... 11 1/4 10 3/8 12 1/8 10 3/8
Fourth Quarter......................... 10 3/4 9 7/8 11 9 3/4
1995 First Quarter.......................... 10 5/8 10 1/8 11 5/8 10
Second Quarter......................... 11 1/4 10 1/4 11 3/4 10 3/4
</TABLE>
On July 31, 1995, the closing sale prices of the Acquiring Fund shares and
Acquired Fund shares were $11.125 and $11.50, respectively. These prices
represent a premium to net asset value of the Acquiring Fund of 6.66% and a
premium to net asset value of the Acquired Fund of 1.77%.
During the period since the inception of the Funds, shares of both Funds have
generally traded at prices close to net asset value, with varying premiums or
discounts to net asset value being reflected in the market value of the shares
from time to time. As determined by the closing price at the end of each week,
prices for the Acquiring Fund shares have fluctuated between a maximum premium
of 11.24% and a maximum discount of 11.27% and for the Acquired Fund shares
have fluctuated between a maximum premium of 11.16% and a maximum discount of
9.49%. It is not possible to state whether shares of the combined Fund will
trade at a premium or discount to net asset value following the Reorganization,
or what the extent of any such premium or discount might be.
REPURCHASE OF FUND SHARES; CONVERSION TO OPEN-END FUND
Each Fund is a closed-end management investment company and as such its
shareholders will not have the right to cause the Fund to redeem their shares.
Instead, shares will trade in the open market at a price that will be a
function of several factors, including net asset value and yield. The Board of
each Fund has currently determined that, at least annually, in the event the
shares are then trading at a material discount from net asset value, it will
consider action that might be taken to reduce or eliminate such discount, which
may include the repurchase of 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 management investment company.
There can be no assurance, however, that either Fund's Board will decide to
take any of these actions, or that share repurchases or tender offers, if
undertaken will reduce market discount.
27
<PAGE>
If a Fund converted to an open-end management investment company, the shares
would no longer be listed on the NYSE, in the case of the Acquiring Fund, or
the AMEX, in the case of the Acquired Fund. In contrast to a closed-end
management investment company, shareholders of an open-end management
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. See "Proposal No. 1--The Reorganization--
Comparison of Rights of Holders of Shares of the Acquiring Fund and the
Acquired Fund" for a discussion of the voting requirements applicable to the
conversion of a Fund to an open-end management investment company. See the
Statement of Additional Information under "Repurchase of Fund Shares;
Conversion to Open-End Fund" for a further discussion of conversion to an open-
end management investment company.
Before deciding whether to take any action in response to a discount from net
asset value, the Board of each Fund 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 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.
CUSTODIAN, TRANSFER AGENT, AND DIVIDEND DISBURSING AGENT
The Custodian of the assets of each Fund and the transfer agent and dividend
disbursing agent with respect to each Fund's shares is U.S. Trust, a trust
company organized under the laws of New York, with its principal place of
business at 114 West 47th Street, New York, New York 10036 and its corporate
transfer office at 770 Broadway, New York, New York 10003.
TAX MATTERS ASSOCIATED WITH INVESTMENT IN THE FUNDS
FEDERAL INCOME TAX MATTERS
The following is based upon the advice of Vedder, Price, Kaufman & Kammholz,
counsel to the Funds.
The tax implications for Acquired Fund shareholders who will own Acquiring
Fund shares after the Reorganization will be substantially the same as the tax
implications currently applicable to such shareholders with respect to their
ownership of Acquired Fund Shares. The Acquiring Fund and the Acquired Fund
qualify under Subchapter M of the Code as regulated investment companies and
satisfy conditions which enable dividends on shares that are attributable to
interest on Municipal Obligations to be exempt from Federal income tax in the
hands of owners of such shares, subject to the possible application of the
alternative minimum tax.
Each year each Fund distributes substantially all of its net tax-exempt
income from Municipal Obligations, any ordinary taxable income, recognized
market discount and net realized short-term capital gains, and net realized
long-term capital gains, if any. Although dividends generally will be treated
as distributed when paid, dividends declared in October, November or December,
payable to 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 each Fund (and received by the shareholders) on December 31 of
the year declared. For most shareholders, the sale or other disposition of
shares of a Fund will generally result in capital gain or loss.
Federal tax law imposes an alternative minimum tax with respect to both
corporations and individuals. Interest on certain Municipal Obligations, such
as bonds issued to make loans for housing purposes or to private entities (but
not to certain tax-exempt organizations such as universities and non-profit
hospitals) is included as an item of tax preference in determining the amount
of a taxpayer's alternative minimum taxable income. To the extent that a Fund
receives income from Municipal Obligations subject to the Federal alternative
minimum tax, a portion of the dividends paid by it, although otherwise exempt
from Federal income tax, will be taxable to its shareholders to the extent that
their tax liability is determined under the alternative minimum tax. Each Fund
will annually supply a report indicating the percentage of that Fund's income
attributable to Municipal Obligations subject to the Federal alternative
minimum tax. In addition, for certain corporations, alternative minimum taxable
income is increased by 75% of the difference between an alternative measure of
income ("adjusted current earnings") and the amount otherwise determined to be
the alternative minimum taxable income. Interest on all Municipal Obligations,
and therefore all distributions by each Fund that would otherwise be tax-
exempt, is included in calculating a corporation's adjusted current earnings.
28
<PAGE>
The foregoing is a general, abbreviated summary. A more detailed summary of
the provisions of the Code and regulations thereunder appears in the Statement
of Additional Information. Shareholders are advised to consult their own tax
advisers for more detailed information concerning Federal income tax matters.
NEW YORK STATE AND LOCAL TAX MATTERS
The following is based upon the advice of Edwards & Angell, special New York
counsel to the Funds.
Dividends paid by each Fund representing net interest received on New York
Municipal Obligations will be exempt from New York and New York City personal
income taxes. Any short-term and long term capital gain dividends will be
included in New York State and New York City taxable income as dividend income
and long-term capital gain, respectively, and are taxed at ordinary personal
income tax rates. Dividends paid by each Fund, including capital gain
distributions, will be taxable to corporate shareholders that are subject to
New York State franchise taxation or New York City general corporate taxation.
The foregoing is a general, abbreviated summary of certain of the provisions
of New York statutes and administrative interpretations presently in effect
governing the taxation of shareholders of each Fund. The New York and New York
City tax information above assumes that each Fund qualifies as a regulated
investment company for Federal income tax purposes under Subchapter M of the
Code and that dividends paid by each Fund representing net interest received on
New York Municipal Obligations qualify as "exempt-interest dividends" under
Section 852(b)(5) of the Code. A more detailed summary of certain of the
provisions of New York Statutes and administrative interpretations governing
the taxation of shareholders of each Fund appears in the Statement of
Additional Information. Shareholders are advised to consult with their own tax
advisers for more detailed information concerning New York tax matters.
LEGAL OPINIONS
Certain legal matters in connection with the shares of the Acquiring Fund to
be issued pursuant to the Reorganization will be passed upon by Vedder, Price,
Kaufman & Kammholz, Chicago, Illinois. Vedder, Price, Kaufman & Kammholz will
rely as to certain matters of Minnesota law on the opinion of Dorsey & Whitney,
P.L.L.P., Minneapolis, Minnesota. Edwards & Angell, New York, New York, is
special New York counsel to the Funds.
EXPERTS
The financial statements of the Funds as of September 30, 1994 appearing in
this Joint Proxy Statement--Prospectus, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing. Ernst & Young LLP audits
and reports on the Funds' annual financial statements, reviews certain
regulatory reports and the Funds' Federal income tax returns, and performs
other professional accounting, auditing, tax and advisory services when engaged
to do so by the Funds.
SHAREHOLDER PROPOSALS
To be considered for presentation at a Fund's Annual Meeting of Shareholders
to be held in 1996, a shareholder proposal must be received at the offices of
such Fund, 333 West Wacker Drive, Chicago, Illinois 60606, not later than June
1, 1996.
GENERAL
Management of the Funds does not intend to present and does not have reason
to believe that others will present any items of business at the Annual
Meetings, except as described in this Joint Proxy Statement--Prospectus.
However, if other matters are properly presented at the meetings for a vote,
the proxies will be voted upon such matters in accordance with the judgment of
the persons acting under the proxies.
A list of shareholders of each Fund entitled to be present and to vote at
that Fund's Annual Meeting will be available at the offices of the Funds, 333
West Wacker Drive, Chicago, Illinois, for inspection by any shareholder of that
Fund during regular business hours for ten days prior to the date of the Annual
Meetings.
29
<PAGE>
Failure of a quorum to be present at either Fund's Annual Meeting will
necessitate adjournment and will subject such Fund to additional expense. The
persons named in the enclosed proxy may also move for an adjournment of the
meeting to permit further solicitation of proxies with respect to any of the
proposals if they determine that adjournment and further solicitation is
reasonable and in the best interests of the shareholders. Under each Fund's By-
Laws, an adjournment of a meeting requires the affirmative vote of a majority
of the shares present in person or represented by proxy at such meeting.
IF YOU CANNOT BE PRESENT IN PERSON, YOU ARE REQUESTED TO FILL IN, SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
James J. Wesolowski
Secretary
30
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION ("Agreement") is made as
of the first day of August, 1995, by and between Nuveen New York Municipal
Value Fund, Inc. (the "Acquiring Fund"), a Minnesota corporation, and Nuveen
New York Municipal Income Fund, Inc., a Minnesota corporation (the "Acquired
Fund" and, together with the Acquiring Fund, the "Funds"). Each of the Funds
maintains its principal place of business at 333 West Wacker Drive, Chicago,
Illinois 60606.
This Agreement is intended to be, and is adopted as, a plan of reorganization
(the "Reorganization") pursuant to Section 368(a)(1) of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code"). The Reorganization will
consist of (a) the acquisition by the Acquiring Fund of substantially all of
the assets of the Acquired Fund in exchange solely for shares of common stock,
par value $.01 per share, of the Acquiring Fund ("Acquiring Fund Shares"), and
the assumption by the Acquiring Fund of substantially all of the liabilities of
the Acquired Fund; and (b) the pro rata distribution, after the Closing Date
hereinafter referred to, of such Acquiring Fund Shares to the shareholders of
the Acquired Fund in liquidation of the Acquired Fund as provided herein, all
upon the terms and conditions hereinafter set forth in this Agreement.
In consideration of the premises and of the covenants and agreements set
forth herein, the parties covenant and agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR SHARES OF THE
ACQUIRING FUND AND ASSUMPTION OF LIABILITIES, IF ANY; LIQUIDATION OF THE
ACQUIRED FUND.
1.1 Subject to the terms and conditions herein set forth and on the basis of
the representations and warranties contained herein, the Acquired Fund
agrees to sell, assign, transfer and deliver, as of the close of business
on the Closing Date (the "Effective Time"), substantially all of its
assets as set forth in paragraph 1.2 to the Acquiring Fund, free and
clear of all liens and encumbrances, except as otherwise provided herein,
and in exchange therefor the Acquiring Fund agrees (a) to assume
substantially all of the liabilities, if any, of the Acquired Fund, as
set forth in paragraph 1.3 and (b) to issue and deliver to the Acquired
Fund, for distribution in accordance with paragraph 1.5 to the Acquired
Fund's shareholders, the number of Acquiring Fund Shares having an
aggregate net asset value equal to the value of the assets, less the
liabilities, of the Acquired Fund so transferred, assigned and delivered,
all determined in the manner and as of the date and time provided in
paragraph 2. Such transactions shall take place at the closing provided
for in paragraph 3.1 (the "Closing").
1.2 Except as otherwise provided herein, as of the Effective Time, the
Acquiring Fund shall acquire the assets of the Acquired Fund (consisting
without limitation of all cash, cash equivalents, municipal obligations
and other portfolio securities, receivables (including interest and
dividends receivable) and any deferred or prepaid expenses shown as
assets) as set forth in the respective Statement of Net Assets referred
to in paragraph 7.3 as of the Closing Date. Notwithstanding the
foregoing, the assets to be acquired will not include cash in the amount
necessary to pay expenses of the Acquired Fund in connection with the
transactions contemplated by this Agreement, to pay the dividends and/or
other distributions contemplated by paragraph 1.4 or held to pay
shareholders exercising dissenters' rights under Minnesota law. The
Acquired Fund has no plan or intent to sell or otherwise dispose of any
of its assets, other than in the ordinary course of business.
1.3 Except as otherwise provided herein, as of the Effective Time, the
Acquiring Fund will assume from the Acquired Fund all debts, liabilities,
obligations and duties of the Acquired Fund of whatever kind or nature,
whether absolute, accrued, contingent or otherwise, arising in the
ordinary course of business, whether or not determinable as of the
Effective Time and whether or not specifically referred to in this
Agreement. Notwithstanding the foregoing, the Acquiring Fund will not
assume the Acquired Fund's obligation to pay certain expenses incurred by
the Acquiring Fund in connection with the transactions contemplated by
this Agreement, to pay shareholders exercising dissenters' rights to the
extent of the cash held for such purpose as contemplated by paragraph 1.2
hereof or assume the Acquired Fund's obligation to pay the dividends
and/or other distributions contemplated by paragraph 1.4; and further
provided that the Acquired Fund
Annex A-1
<PAGE>
agrees to utilize its best efforts to discharge all of its known debts,
liabilities, obligations and duties (other than pursuant to paragraph
1.4) prior to the Effective Time.
1.4 Prior to the Effective Time, the Acquired Fund will declare a dividend
and/or other distribution to be paid within 30 days after the Closing
Date to its shareholders of record so that, upon such payment, it will
have distributed all of its investment company taxable income (computed
without regard to any deduction for dividends paid), net tax-exempt
income and realized net capital gains, if any, through and including the
Closing Date.
1.5 On a date as soon after the Closing Date as is conveniently practicable
(the "Liquidation Date"), the Acquired Fund will liquidate and
distribute pro rata to its shareholders of record, determined as of the
Effective Time, the Acquiring Fund Shares received by the Acquired Fund
pursuant to paragraph 1.1 (together with any dividends declared with
respect thereto to holders of record as of a time after the Effective
Time and prior to the Liquidation Date ("Interim Dividends")), in
exchange for shares of the Acquired Fund held by the shareholders of
such Fund. Such liquidation and distribution will be accomplished by
opening accounts on the books of the Acquiring Fund in the names of the
shareholders of the Acquired Fund and transferring to each account such
shareholder's pro rata share of the Acquiring Fund Shares received by
the Acquired Fund (rounded down to the nearest whole Share).
1.6 After the Liquidation Date, each holder of an outstanding certificate or
certificates representing shares of the Acquired Fund will be entitled
to receive, upon surrender of his or her certificates, a certificate or
certificates representing the number of Acquiring Fund Shares, and a
check for cash in lieu of any fractional Acquiring Fund Share as
provided by paragraph 1.7, distributable with respect to the shares of
the Acquired Fund that are surrendered. No dividends or other
distributions payable to the holders of record of the Acquiring Fund
Shares as of a date on or after the Liquidation Date shall be paid to
any shareholder holding certificates representing shares of the Acquired
Fund ("Acquired Fund Share Certificates") as of the Closing Date until
the Acquiring Fund is notified by the Acquired Fund's transfer agent
that such shareholder has surrendered his or her outstanding Acquired
Fund Share Certificates or, in the event of lost, stolen or destroyed
Acquired Fund Share Certificates, posted adequate bond or submitted an
affidavit of lost certificate, or both. The Acquired Fund will, at its
expense, request its shareholders to surrender their outstanding
Acquired Fund Share Certificates, post adequate bond and/or submit an
affidavit of lost certificate, as the case may be. Upon the surrender of
Acquired Fund Share Certificates (or, if applicable, after the posting
of a bond and/or submission of an affidavit of lost certificate), there
shall be paid to the shareholder in whose name the Acquiring Fund Shares
shall be registered all dividends or other distributions that shall have
become payable with respect to such Acquiring Fund Shares between the
Liquidation Date and the time of such surrender. In no event shall the
shareholder entitled to receive such dividends and distributions be
entitled to receive interest thereon.
1.7 No certificates or scrip representing fractional Acquiring Fund Shares
shall be distributed upon the surrender for exchange of Acquired Fund
Share Certificates. In lieu of distributing any such fractional
Acquiring Fund Shares, the Acquired Fund's transfer agent shall, on
behalf of all holders of fractional Acquiring Fund Shares, on or before
the tenth business day following the Liquidation Date, aggregate all
such fractional Acquiring Fund Shares and sell the resulting whole
Acquiring Fund Shares on the New York Stock Exchange (the "NYSE") for
the accounts of such holders, and each such holder shall be entitled to
receive his or her respective pro rata share of the net proceeds of such
sale upon surrender of his or her Acquired Fund Share Certificates in
accordance with paragraph 1.6.
1.8 Any transfer taxes payable upon issuance of Acquiring Fund Shares in a
name other than the registered holder of the Acquired Fund shares
surrendered in exchange therefor on the books of the Acquired Fund as of
that time shall be paid by the person to whom such Acquiring Fund Shares
are to be issued as a condition to the registration of such transfer.
1.9 Any reporting responsibility of the Acquired Fund with the Securities
and Exchange Commission (the "SEC"), the American Stock Exchange (the
"AMEX"), or any state securities commission is and shall remain the
responsibility of the Acquired Fund up to and including the Liquidation
Date.
1.10 All books and records of the Acquired Fund, including all books and
records required to be maintained under the Investment Company Act of
1940, as amended (the "Investment Company Act"), and the rules and
regulations thereunder, shall be available to the Acquiring Fund from
and after the Closing Date and shall be turned over to the Acquiring
Fund on or prior to the Liquidation Date.
1.11 The Acquired Fund will apply to terminate its registration under the
Investment Company Act promptly following the Liquidation Date and
thereafter shall be dissolved.
Annex A-2
<PAGE>
2. VALUATION
2.1 The value of the Acquired Fund's assets and liabilities to be acquired
and assumed, respectively, by the Acquiring Fund shall be computed as of
the Effective Time, using the valuation procedures set forth in the
Funds' Joint Proxy Statement--Prospectus (the "Joint Proxy Statement--
Prospectus") to be used in connection with the Reorganization.
2.2 The net asset value of an Acquiring Fund Share shall be computed as of
the Effective Time by dividing the value of the Acquiring Fund's total
assets, less liabilities by the number of Acquiring Fund Shares
outstanding (excluding shares issuable pursuant to the Reorganization),
using the valuation procedures set forth in the Joint Proxy Statement--
Prospectus.
2.3 The number of Acquiring Fund Shares to be issued in exchange for the
Acquired Fund's net assets shall be calculated by dividing the net asset
value of the Acquired Fund (determined in accordance with paragraph 2.1)
by the net asset value of an Acquiring Fund Share (determined in
accordance with paragraph 2.2).
2.4 All computations of net asset value shall be made by or under the
direction of United States Trust Company of New York ("U.S. Trust") in
accordance with its regular practice as custodian of the Funds.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be December 19, 1995 or such later date as the
parties may agree in writing. All acts taking place at the Closing shall
be deemed to take place simultaneously as of the Effective Time unless
otherwise provided. The Closing shall be at the office of the Acquiring
Fund or at such other place as the parties may agree.
3.2 U.S. Trust, as custodian for the Acquired Fund, shall deliver to the
Acquiring Fund at the Closing a certificate of an authorized officer
stating that (a) the Acquired Fund's portfolio securities, cash and any
other assets have been transferred in proper form to the Acquiring Fund
on the Closing Date and (b) all necessary taxes, if any, have been paid,
or provision for payment has been made, in conjunction with the delivery
of portfolio securities.
3.3 In the event that on the proposed Closing Date (a) the NYSE or AMEX is
closed to trading or trading thereon is restricted or (b) trading or the
reporting of trading on the NYSE or AMEX or elsewhere is disrupted so
that accurate appraisal of the value of the net assets of the Acquired
Fund or of the net asset value per Acquiring Fund Share is
impracticable, the Closing Date shall be postponed until the first
business day after the date when such trading shall have been fully
resumed and such reporting shall have been restored.
3.4 The Acquired Fund shall deliver to the Acquiring Fund on or prior to the
Liquidation Date a list of the names and addresses of its shareholders
and the number of outstanding shares of the Acquired Fund owned by each
such shareholder (the "Shareholder Lists"), all as of the Effective
Time, certified by the Secretary or Assistant Secretary of the Acquired
Fund. The Acquiring Fund shall issue and deliver to the Acquired Fund at
the Closing a confirmation or other evidence satisfactory to the
Acquired Fund that Acquiring Fund Shares have been or will be credited
to the Acquired Fund's account on the books of the Acquiring Fund. At
the Closing each party shall deliver to the other such bills of sale,
checks, assignments, stock certificates, receipts and other documents as
such other party or its counsel may reasonably request to effect the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Acquired Fund represents and warrants as follows:
4.1.1 The Acquired Fund is a corporation duly organized, validly existing
and in good standing under the laws of the State of Minnesota and
has the power to own all of its properties and assets and, subject
to approval of the shareholders of the Acquired Fund, to carry out
the Agreement.
4.1.2 The Acquired Fund is a closed-end diversified management investment
company duly registered under the Investment Company Act, and such
registration is in full force and effect.
4.1.3 The Acquired Fund is not, and the execution, delivery and
performance of this Agreement will not result, in violation of any
provision of the Articles of Incorporation or By-Laws of the
Acquired Fund or of any material agreement, indenture, instrument,
contract, lease or other undertaking to which the Acquired Fund is
a party or by which the Acquired Fund is bound.
Annex A-3
<PAGE>
4.1.4 The Acquired Fund has no material contracts or other commitments
(except this Agreement and the obligations to pay the dividends
and/or distributions contemplated by paragraph 1.4) that will not
be terminated on or prior to the Closing Date without any liability
or penalty to the Acquired Fund or the Acquiring Fund.
4.1.5 No material litigation or administrative proceeding or
investigation of or before any court or governmental body is
presently pending or, to the knowledge of the Acquired Fund,
threatened against the Acquired Fund or any of its properties or
assets. The Acquired Fund knows of no facts that might form the
basis for the institution of such proceedings, and the Acquired
Fund is not a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body that
materially and adversely affects its business or its ability to
consummate the transactions herein contemplated.
4.1.6 The audited Statement of Net Assets, Statement of Operations,
Statement of Changes in Net Assets, Financial Highlights and
Portfolio of Investments of the Acquired Fund at September 30, 1994
and for the period then ended and the unaudited statement of Net
Assets, Statement of Operations, Statement of Changes in Net
Assets, Financial Highlights and Portfolio of Investments of the
Acquired Fund at March 31, 1995 and for the period then ended
(copies of which have been furnished to the Acquiring Fund) have
been prepared in accordance with generally accepted accounting
principles consistently applied and present fairly, in all material
respects, the financial condition of the Acquired Fund as of such
date, and there are no known material liabilities of the Acquired
Fund (contingent or otherwise) not disclosed therein.
4.1.7 Since March 31, 1995, there has not been any materially adverse
change in the Acquired Fund's financial condition, assets,
liabilities or business, other than changes occurring in the
ordinary course of business, or any incurrence by the Acquired Fund
of indebtedness maturing more than one year from the date such
indebtedness was incurred, except as otherwise disclosed to and
accepted by the Acquiring Fund. For the purposes of this paragraph
4.1.7, a decline in net asset value or net asset value per share of
the Acquired Fund as a result of changes in the value of
investments held by the Acquired Fund or a distribution or payment
of dividends shall not constitute a materially adverse change.
4.1.8 All federal, state and other tax returns and reports of the
Acquired Fund required by law to have been filed or furnished by
the date hereof have been filed or furnished, and all federal,
state and other taxes, interest and penalties shown as due on said
returns and reports have been paid insofar as due, or provision has
been made for the payment thereof, and, to the best of the Acquired
Fund's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns or
reports.
4.1.9 Since it commenced operations, the Acquired Fund has met the
requirements of Subchapter M of the Internal Revenue Code for
qualification and treatment as a regulated investment company and
intends to meet those requirements for the current taxable year.
4.1.10 The authorized capital of the Acquired Fund consists of
200,000,000 Acquired Fund shares of common stock. All issued and
outstanding shares of the Acquired Fund are duly and validly
issued and outstanding, fully paid and non-assessable. All issued
and outstanding shares of the Acquired Fund will, at the time of
the Closing, be held by the persons and in the amounts set forth
in the applicable Shareholder List submitted to the Acquiring Fund
in accordance with the provisions of paragraph 3.4. The Acquired
Fund does not have outstanding any options, warrants or other
rights to subscribe for or purchase any shares of the Acquired
Fund, nor is there outstanding any security convertible into
shares of the Acquired Fund.
4.1.11 At the Closing Date, the Acquired Fund will have good and
marketable title to the assets to be transferred to the Acquiring
Fund pursuant to paragraph 1.1 and full right, power and authority
to sell, assign, transfer and deliver such assets hereunder free
of any liens or other encumbrances, and, upon delivery and payment
for such assets, the Acquiring Fund will acquire good and
marketable title thereto.
4.1.12 The execution, delivery and performance of this Agreement has been
duly authorized by the Board of Directors of the Acquired Fund
(including the determinations required by Rule 17a-8(a) under the
Investment Company Act) and by all necessary action, other than
shareholder approval, on the part of the Acquired Fund, and,
subject to shareholder approval, this Agreement constitutes a
valid and binding obligation of the Acquired Fund.
Annex A-4
<PAGE>
4.1.13 The information furnished and to be furnished by the Acquired Fund
for use in applications for orders, registration statements, proxy
materials and other documents which may be necessary in connection
with the transactions contemplated hereby is, and shall be,
accurate and complete in all material respects and is in
compliance, and shall comply, in all material respects with
applicable federal securities and other laws and regulations.
4.1.14 On the effective date of the Registration Statement referred to in
paragraph 5.5, at the time of the Annual Meeting of the Acquired
Fund's shareholders and on the Closing Date, the Joint Proxy
Statement--Prospectus (a) will comply in all material respects
with the provisions and regulations of the Securities Act of 1933,
as amended (the "1933 Act"), the Securities Exchange Act of 1934,
as amended (the "1934 Act"), and the Investment Company Act and
the rules and regulations thereunder and (b) will not contain any
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 light of the circumstances under which they
were made, not misleading; provided, however, that the
representations and warranties in this paragraph 4.1.14 shall not
apply to statements in or omissions from the Joint Proxy
Statement--Prospectus made in reliance upon and in conformity with
information furnished by the Acquiring Fund for use therein.
4.1.15 No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Acquired Fund of the transactions contemplated by this Agreement,
except such as have been obtained under the 1933 Act, the 1934 Act
and the Investment Company Act, and such as may be required under
state securities laws.
4.1.16 There are no brokers or finder's fees payable on behalf of the
Acquired Fund in connection with the transactions provided for
herein.
4.2 The Acquiring Fund represents and warrants as follows:
4.2.1 The Acquiring Fund is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Minnesota and has the power to own all of its properties and assets
and, subject to approval of the shareholders of the Acquiring Fund,
to carry out the Agreement.
4.2.2 The Acquiring Fund is a closed-end diversified management
investment company duly registered under the Investment Company
Act, and such registration is in full force and effect.
4.2.3 The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in violation of any
provision of the Articles of Incorporation or By-Laws of the
Acquiring Fund or of any material agreement, indenture, instrument,
contract, lease or other undertaking to which the Acquiring Fund is
a party or by which the Acquiring Fund is bound.
4.2.4 No material litigation or administrative proceeding or
investigation of or before any court or governmental body is
presently pending or, to the knowledge of the Acquiring Fund,
threatened against the Acquiring Fund or any of its properties or
assets. The Acquiring Fund knows of no facts that might form the
basis for the institution of such proceedings, and the Acquiring
Fund is not a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body that
materially and adversely affects its business or its ability to
consummate the transactions herein contemplated.
4.2.5 The audited Statement of Net Assets, Statement of Operations,
Statement of Changes in Net Assets, Financial Highlights and
Portfolio of Investments of the Acquiring Fund at September 30,
1994 and for the period then ended and the unaudited Statement of
Net Assets, Statement of Operations, Statement of Changes in Net
Assets, Financial Highlights and Portfolio of Investments of the
Acquiring Fund March 31, 1995 and for the period then ended (copies
of which have been furnished to the Acquired Fund) have been
prepared in accordance with generally accepted accounting
principles and present fairly, in all material respects, the
financial condition of the Acquiring Fund as of such date, and
there are no known material liabilities of the Acquiring Fund
(contingent or otherwise) not disclosed therein.
4.2.6 Since March 31, 1995, there has not been any materially adverse
change in the Acquiring Fund's financial condition, assets,
liabilities or business, other than changes occurring in the
ordinary course of business, or any incurrence by the Acquiring
Fund of indebtedness maturing more than one year from the date such
indebtedness was incurred, except as otherwise disclosed to and
accepted by the Acquired Fund. For the purposes of this paragraph
4.2.6, a decline in net asset value or net asset value per
Acquiring Fund Share as a result of changes in the value of
investments held by the
Annex A-5
<PAGE>
Acquiring Fund or a distribution or payment of dividends shall not
constitute a materially adverse change.
4.2.7 All federal, state and other tax returns and reports of the
Acquiring Fund required by law to have been filed or furnished by
the date hereof have been filed or furnished, and all federal,
state and other taxes, interest and penalties shown as due on said
returns and reports have been paid insofar as due, or provision has
been made for the payment thereof, and, to the best of the
Acquiring Fund's knowledge, no such return is currently under audit
and no assessment has been asserted with respect to such returns or
reports.
4.2.8 Since it commenced operations, the Acquiring Fund has met the
requirements of Subchapter M of the Internal Revenue Code for
qualification and treatment as a regulated investment company and
intends to meet those requirements for the current taxable year.
4.2.9 The authorized capital of the Acquiring Fund consists of
250,000,000 Acquiring Fund Shares. All issued and outstanding
Acquiring Fund Shares are, and all Acquiring Fund Shares to be
issued in exchange for the net assets of the Acquired Funds
pursuant to this Agreement will be when so issued, duly and validly
issued and outstanding, fully paid and non-assessable. Except as
contemplated by this Agreement, the Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for
or purchase any Acquiring Fund Shares, nor is there outstanding any
security convertible into any Acquiring Fund Shares.
4.2.10 The execution, delivery and performance of this Agreement has been
duly authorized by the Board of Directors of the Acquiring Fund
(including the determinations required by Rule 17a-8(a) under the
Investment Company Act) and by all necessary action, other than
shareholder approval, on the part of the Acquiring Fund, and,
subject to shareholder approval, this Agreement constitutes a
valid and binding obligation of the Acquiring Fund.
4.2.11 The information furnished and to be furnished by the Acquiring
Fund for use in applications for orders, registration statements,
proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby is, and shall
be, accurate and complete in all material respects and is in
compliance, and shall comply, in all material respects with
applicable federal securities and other laws and regulations.
4.2.12 On the effective date of the Registration Statement, at the time
of the Annual Meeting of the Acquiring Fund shareholders and on
the Closing Date, the Registration Statement and the Joint Proxy
Statement--Prospectus (a) will comply in all material respects
with the provisions of the 1933 Act, the 1934 Act and the
Investment Company Act and the rules and regulations thereunder
and (b) will not contain any 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 light of the
circumstances under which they were made, not misleading;
provided, however, that the representations and warranties in this
paragraph 4.2.12 shall not apply to statements in or omissions
from the Joint Proxy Statement--Prospectus and the Registration
Statement made in reliance upon and in conformity with information
furnished by the Acquired Fund for use therein.
4.2.13 No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Acquiring Fund of the transactions contemplated by this Agreement,
except such as have been obtained under the 1933 Act, the 1934 Act
and the Investment Company Act, and such as may be required under
state securities laws.
4.2.14 There are no brokers' or finders' fees payable on behalf of the
Acquiring Fund in connection with the transactions provided for
herein.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 Except as may otherwise be required by paragraph 1.4, each Fund will
operate its respective business in the ordinary course between the date
hereof and the Closing Date, it being understood that the ordinary
course of business will include declaring and paying customary dividends
and other distributions.
5.2 Each Fund will call a shareholders' meeting to consider and act upon
this Agreement and the transactions contemplated herein and to take all
other action necessary to obtain approval of the transactions
contemplated hereby.
5.3 The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the
beneficial ownership of the Acquired Fund's shares.
Annex A-6
<PAGE>
5.4 Subject to the provisions of this Agreement, each Fund will take or cause
to be taken all action, and will do or cause to be done all things,
reasonably necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement.
5.5 Each Fund will prepare and file with the SEC the Joint Proxy Statement--
Prospectus, and the Acquiring Fund will prepare and file with the SEC a
registration statement on Form N-14 relating to the Acquiring Fund Shares
to be issued hereunder (together with any amendments thereof and
supplements thereto, the "Registration Statement"), in compliance with
the 1933 Act, the 1934 Act and the Investment Company Act and the rules
and regulations thereunder.
5.6 Each Fund will, from time to time, as and when requested by the other
Fund, execute and deliver or cause to be executed and delivered all such
assignments and other instruments, and will take or cause to be taken
such further action, as the other Fund may deem necessary or desirable in
order to (a) vest in and confirm to the Acquiring Fund title to and
possession of all the assets of the Acquired Fund to be sold, assigned,
transferred and delivered to the Acquiring Fund pursuant to this
Agreement, (b) vest in and confirm to the Acquired Fund title to and
possession of all the Acquiring Fund Shares to be transferred to the
Acquired Fund pursuant to this Agreement, (c) assume all of the Acquired
Fund's liabilities in accordance with this Agreement, and (d) otherwise
to carry out the intent and purpose of this Agreement.
5.7 The Acquiring Fund will use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the Investment
Company Act and such of the state Blue Sky or securities laws as it may
deem appropriate in order to continue its operations after the Closing
Date.
5.8 The expenses incurred by the Funds in connection with this Agreement and
the transactions contemplated hereby shall be allocated between the Funds
in a fair and equitable manner based upon estimated savings to each Fund
resulting from the transactions contemplated hereby, whether or not the
transactions contemplated hereby are consummated.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions provided
for herein shall, at its election, be subject to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and the following further conditions.
6.1 All representations and warranties of the Acquiring Fund contained in
this Agreement shall be true and correct in all material respects as of
the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same
force and effect as if made on and as of the Closing Date.
6.2 The Acquiring Fund shall have delivered to the Acquired Fund a
certificate executed in its name by the President or a Vice President of
the Acquiring Fund, in form and substance satisfactory to the Acquired
Fund and dated as of the Closing Date, to the effect that the
representations and warranties of the Acquiring Fund in this Agreement
are true and correct at and as of the Closing Date except as they may be
affected by the transactions contemplated by this Agreement, and as to
such other matters as the Acquired Fund shall reasonably request.
6.3 The Acquired Fund shall have received an opinion from Vedder, Price,
Kaufman & Kammholz, counsel to the Acquiring Fund, dated as of the
Closing Date, to the effect that:
6.3.1 The Acquiring Fund has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of
Minnesota with requisite power and authority to own its properties
and, to the knowledge of such counsel, to carry on its business as
presently conducted;
6.3.2 This Agreement has been duly authorized, executed and delivered by
the Acquiring Fund and, assuming due authorization, execution and
delivery of the Agreement by the Acquired Fund, constitutes a valid
and binding obligation of the Acquiring Fund enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights
and to general equitable principles;
6.3.3 The Acquiring Fund Shares to be distributed to shareholders of the
Acquired Fund under this Agreement will, when issued in exchange
for the net assets of the Acquired Fund as contemplated by this
Agreement, be validly issued and outstanding and fully paid and
non-assessable and free of preemptive rights;
Annex A-7
<PAGE>
6.3.4 Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby violate (i)
the Acquiring Fund's Articles of Incorporation or By-Laws or (ii)
any federal law of the United States, the laws of the State of
Illinois or the laws of the State of Minnesota applicable to the
Acquiring Fund; provided, however, that such counsel may state that
it expresses no opinion with respect to federal or state securities
laws, other antifraud laws and fraudulent transfer laws; and
provided, further that insofar as performance by the Acquiring Fund
of its obligations under this Agreement is concerned such counsel
may state that it expresses no opinion as to bankruptcy,
insolvency, reorganization, moratorium or similar laws of general
applicability relating to or affecting creditors' rights;
6.3.5 All regulatory consents, authorizations, approvals and filings
required to be obtained or made by the Acquiring Fund under the
federal laws of the United States, the laws of the State of
Minnesota and state Blue Sky or securities laws for the
consummation of the transactions contemplated by this Agreement
have been obtained or made;
6.3.6 The Acquiring Fund has been registered with the SEC as an
investment company and, to the knowledge of such counsel, no order
has been issued or proceeding instituted to suspend such
registration; and
6.3.7 To the knowledge of such counsel, (a) no litigation or
administrative proceeding or investigation of or before any court
or governmental body is presently pending or threatened as to the
Acquiring Fund or any of its properties or assets, and (b) the
Acquiring Fund is not a party to or subject to the provision of any
order, decree or judgment of any court or governmental body, which
materially and adversely affects its business.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the transactions provided
for herein with respect to the Acquired Fund shall, at its election, be subject
to the performance by the Acquired Fund of all the obligations to be performed
by it hereunder on or before the Closing Date and the following further
conditions:
7.1 All representations and warranties of the Acquired Fund contained in
this Agreement shall be true and correct in all material respects as of
the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same
force and effect as if made on and as of the Closing Date.
7.2 The Acquired Fund shall have delivered to the Acquiring Fund a
certificate executed in its name by the President or Vice President of
the Acquired Fund, in form and substance satisfactory to the Acquiring
Fund and dated as of the Closing Date, to the effect that the
representations and warranties of the Acquired Fund in this Agreement
are true and correct at and as of the Closing Date except as they may be
affected by the transactions contemplated by this Agreement, and as to
such other matters as the Acquiring Fund shall reasonably request.
7.3 The Acquired Fund shall have delivered to the Acquiring Fund on the
Closing Date a Statement of Net Assets, which Statement shall be
prepared in accordance with generally accepted accounting principles
consistently applied, together with a list of its portfolio securities
showing the adjusted tax bases and holding periods of such securities as
of the Closing Date, certified by the Treasurer of the Acquired Fund.
7.4 On or immediately prior to the Closing Date, the Acquired Fund shall
have declared the dividends and/or distributions contemplated by
paragraph 1.4.
7.5 The Acquiring Fund shall have received an opinion from Vedder, Price,
Kaufman & Kammholz, counsel to the Acquired Fund, dated as of the
Closing Date, to the effect that:
7.5.1 The Acquired Fund has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of
Minnesota with requisite power and authority to own its properties
and, to the knowledge of such counsel, to carry on its business as
presently conducted;
7.5.2 This Agreement has been duly authorized, executed and delivered by
the Acquired Fund and, assuming due authorization, execution and
delivery of the Agreement by the Acquiring Fund, constitutes a
valid and binding obligation of the Acquired Fund enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights
and to general equitable principles;
Annex A-8
<PAGE>
7.5.3 Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby violate (i)
the Acquired Fund's Articles of Incorporation or By-Laws or (ii)
any federal law of the United States, the laws of the State of
Illinois or the laws of the State of Minnesota applicable to the
Acquired Fund; provided, however, that such counsel may state that
it expresses no opinion with respect to federal or state securities
laws, other antifraud laws and fraudulent transfer laws; and
provided, further that insofar as performance by the Acquired Fund
of its obligations under this Agreement is concerned such counsel
may state that it expresses no opinion as to bankruptcy,
insolvency, reorganization, moratorium or similar laws of general
applicability relating to or affecting creditors' rights;
7.5.4 All regulatory consents, authorizations, approvals and filings
required to be obtained or made by the Acquired Fund under the
federal laws of the United States, the laws of the State of
Minnesota and state Blue Sky or securities laws for the
consummation of the transactions contemplated by this Agreement
have been obtained or made;
7.5.5 The Acquired Fund has been registered with the SEC as an investment
company, and, to the knowledge of such counsel, no order has been
issued or proceeding instituted to suspend such registration; and
7.5.6 To the knowledge of such counsel, (a) no litigation or
administrative proceeding or investigation of or before any court
or governmental body is presently pending or threatened as to the
Acquired Fund or any of its properties or assets, and (b) the
Acquired Fund is not a party to or subject to the provision of any
order, decree or judgment of any court or governmental body, which
materially and adversely affects its business.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE
ACQUIRED FUND
The obligations of each Fund hereunder are subject to the further conditions
that on or before the Closing Date:
8.1 This Agreement and the transactions contemplated herein shall have been
approved by the requisite votes of (a) the Board of Directors of the
Acquiring Fund and the Board of Directors of the Acquired Fund,
including as to the determinations required by Rule 17a-8(a) under the
Investment Company Act and (b) the holders of the outstanding shares of
the Acquiring Fund and the Acquired Fund in accordance with the
provisions of the Acquiring Fund's Articles of Incorporation and By-Laws
and the Acquired Fund's Articles of Incorporation and By-Laws and the
requirements of the NYSE and AMEX as the case may be; each Fund shall
have delivered certified copies of the resolutions evidencing such
approvals to the other Fund; and the Acquiring Fund shall have given the
Depository Trust Company or its successor, at least five business days
notice of such approval.
8.2 On the Closing Date no action, suit or other proceeding shall be pending
before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection
with, this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all consents, orders and permits of
federal, state and local regulatory authorities (including those of the
SEC and of state Blue Sky or securities authorities, including "no-
action" positions of such federal or state authorities) deemed necessary
by the Acquiring Fund or the Acquired Fund to permit consummation, in
all material respects, of the transactions contemplated hereby shall
have been obtained, except where failure to obtain any such consent,
order or permit would not involve a risk of a materially adverse effect
on the assets or properties of the Acquiring Fund or the Acquired Fund,
provided that either party hereto may waive any part of this condition
as to itself.
8.4 The Registration Statement shall have become effective under the 1933
Act, and no stop order suspending the effectiveness thereof shall have
been issued, and, to the best knowledge of the Funds no investigation or
proceeding under the 1933 Act for that purpose shall have been
instituted or be pending, threatened or contemplated.
8.5 The Funds shall have received an opinion of Vedder, Price, Kaufman &
Kammholz satisfactory to the Funds and based on such reasonably
requested representations and warranties as requested by counsel,
substantially to the effect that, for federal income tax purposes:
8.5.1 The acquisition by the Acquiring Fund of substantially all the
assets of the Acquired Fund in exchange solely for Acquiring Fund
Shares and the assumption by the Acquiring Fund of the
Annex A-9
<PAGE>
Acquired Fund's liabilities, if any, followed by the distribution by
the Acquired Fund of the Acquiring Fund Shares to the shareholders of
the Acquired Fund in exchange for their Acquired Fund shares in
complete liquidation of the Acquired Fund, will constitute a
"reorganization" within the meaning of Section 368(a)(1)(C) of the
Internal Revenue Code, and the Acquiring Fund and the Acquired Fund
each will be "a party to a reorganization" within the meaning of
Section 368(b) of the Internal Revenue Code;
8.5.2 The Acquired Fund's shareholders will recognize no gain or loss
upon the exchange of all of their Acquired Fund shares for
Acquiring Fund Shares in complete liquidation of the Acquired Fund,
except with respect to cash received for a fractional Acquiring
Fund Share, if any;
8.5.3 No gain or loss will be recognized by the Acquired Fund upon the
transfer of substantially all its assets to the Acquiring Fund in
exchange solely for Acquiring Fund Shares and the assumption by the
Acquiring Fund of the Acquired Fund's liabilities, if any, and with
respect to the subsequent distribution of those Acquiring Fund
Shares to the Acquired Fund shareholders in complete liquidation of
the Acquired Fund;
8.5.4 No gain or loss will be recognized by the Acquiring Fund upon the
acquisition of substantially all the Acquired Fund's assets in
exchange solely for Acquiring Fund Shares and the assumption of the
Acquired Fund's liabilities, if any;
8.5.5 The basis of the assets acquired by the Acquiring Fund will be, in
each instance, the same as the basis of those assets when held by
the Acquired Fund immediately before the transfer, and the holding
period of such assets acquired by the Acquiring Fund will include
the holding period thereof when held by the Acquired Fund;
8.5.6 The basis of the Acquiring Fund Shares to be received by the
Acquired Fund's shareholders upon liquidation of the Acquired Fund
will be, in each instance, the same as the basis of the Acquired
Fund shares surrendered in exchange therefor, decreased by any cash
received and increased by the amount of gain recognized on the
exchange; and
8.5.7 The holding period of the Acquiring Fund Shares to be received by
the Acquired Fund's shareholders will include the period during
which the Acquired Fund shares to be surrendered in exchange
therefor were held, provided such Acquired Fund shares were held as
capital assets by those shareholders on the date of the exchange.
9. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
9.1 This Agreement constitutes the entire agreement between the Funds.
9.2 The representations, warranties and covenants contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereby.
10. TERMINATION
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after approval of the shareholders of the Funds:
10.1 By mutual agreement of the Funds;
10.2 By either Fund, if a condition to the obligations of such Fund shall
not have been met and it reasonably appears that it will not or cannot
be met; or
10.3 By either Fund, if the Closing shall not have occurred on or before
March 31, 1996.
In the event of any such termination, there shall be no liability for damages
on the part of either Fund (other than the liability of the Funds to pay
expenses pursuant to paragraph 5.8) or any Director or officer of either Fund.
11. AMENDMENT
This Agreement may be amended, modified or supplemented only in writing by
the parties; provided, however, that following the shareholders' meetings
called by the Funds pursuant to paragraph 5.2, no such amendment may have the
effect of changing the provisions for determining the number of Acquiring Fund
Shares to be distributed to the Acquired Fund's shareholders under this
Agreement without their further approval and the further approval
Annex A-10
<PAGE>
of the Funds' Boards of Directors (including the determination required by Rule
17a-8(a) under the Investment Company Act), and provided further that nothing
contained in this paragraph 11 shall be construed as requiring additional
approval to amend this Agreement to change the Closing Date or the Effective
Time.
12. NOTICES
Any notice, report, demand or other communication required or permitted by
any provision of this Agreement shall be in writing and shall be given by hand
delivery, prepaid certified mail or overnight delivery service addressed to
John Nuveen & Co. Incorporated, 333 West Wacker Drive, Chicago, Illinois 60606,
Attention: James J. Wesolowski.
13. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
13.1 The paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each of
which will be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois.
13.4 This Agreement shall bind and inure to the benefit of the parties and
their respective successors and assigns, and no assignment or transfer
hereof or of any rights or obligations hereunder shall be made by
either party without the written consent of the other party. Nothing
herein expressed or implied is intended or shall be construed to confer
upon or give any person, firm or corporation other than the parties and
their respective successors and assigns any rights or remedies under or
by reason of this Agreement.
13.5 All persons dealing with the Acquiring Fund must look solely to the
property of the Acquiring Fund for the enforcement of any claims
against the Acquiring Fund as neither the Directors, officers, agents
or shareholders of the Acquiring Fund assume any personal liability for
obligations entered into on behalf of the Acquiring Fund.
13.6 All persons dealing with the Acquired Fund must look solely to the
property of the Acquired Fund for the enforcement of any claims against
the Acquired Fund as neither the Directors, officers, agents or
shareholders of the Acquired Fund assume any personal liability for
obligations entered into on behalf of the Acquired Fund.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed by the President or Vice President of each Fund.
NUVEEN NEW YORK MUNICIPAL VALUE FUND, NUVEEN NEW YORK MUNICIPAL INCOME
INC. FUND, INC.
/s/ Timothy R. Schwertfeger /s/ Timothy R. Schwertfeger
By: __________________________________ By: __________________________________
President President
Annex A-11
<PAGE>
ANNEX B
SECTIONS 302A.471 AND 302A.473 OF THE MINNESOTA BUSINESS CORPORATION ACT
RELATING TO THE ACQUIRED FUND DISSENTING SHAREHOLDERS' RIGHTS OF APPRAISAL
302A.471 RIGHTS OF DISSENTING SHAREHOLDERS.--Subdivision 1. Actions creating
rights. A shareholder of a corporation may dissent from, and obtain payment for
the fair value of the shareholder's shares in the event of, any of the
following corporate actions:
(a) An amendment of the articles that materially and adversely affects
the rights or preferences of the shares of the dissenting shareholder in
that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the redemption
of the shares, including a provision respecting a sinking fund for the
redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the shares
to acquire shares, securities other than shares, or rights to purchase
shares or securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a matter,
or to cumulate votes, except as the right may be excluded or limited
through the authorization or issuance of securities of an existing or
new class or series with similar or different voting rights; except that
an amendment to the articles of an issuing public corporation that
provides that section 302A.671 does not apply to a control share
acquisition does not give rise to the right to obtain payment under this
section;
(b) A sale, lease, transfer, or other disposition of all or substantially
all of the property and assets of the corporation, but not including a
transaction permitted without shareholder approval in section 302A.661,
subdivision 1, or a disposition in dissolution described in section
302A.725, subdivision 2, or a disposition pursuant to an order of a court,
or a disposition for cash on terms requiring that all or substantially all
of the net proceeds of disposition be distributed to the shareholders in
accordance with their respective interests within one year after the date
of disposition;
(c) A plan of merger, whether under this chapter or under chapter 322B,
to which the corporation is a party, except as provided in subdivision 3;
(d) A plan of exchange, whether under this chapter or under chapter 322B,
to which the corporation is a party as the corporation whose shares will be
acquired by the acquiring corporation, if the shares of the shareholder are
entitled to be voted on the plan; or
(e) Any other corporate action taken pursuant to a shareholder vote with
respect to which the articles, the bylaws, or a resolution approved by the
board directs that dissenting shareholders may obtain payment for their
shares.
Subdivision 2. Beneficial owners. (a) A shareholder shall not assert
dissenters' rights as to less than all of the shares registered in the name of
the shareholder, unless the shareholder dissents with respect to all the shares
that are beneficially owned by another person but registered in the name of the
shareholder and discloses the name and address of each beneficial owner on
whose behalf the shareholder dissents. In that event, the rights of the
dissenter shall be determined as if the shares as to which the shareholder has
dissented and the other shares were registered in the names of different
shareholders.
(b) A beneficial owner of shares who is not the shareholder may assert
dissenters' rights with respect to shares held on behalf of the beneficial
owner, and shall be treated as a dissenting shareholder under the terms of this
section and section 302A.473, if the beneficial owner submits to the
corporation at the time of or before the assertion of the rights a written
consent of the shareholder.
Subdivision 3. Rights not to apply. Unless the articles, the bylaws, or a
resolution approved by the board otherwise provide, the right to obtain payment
under this section does not apply to a shareholder of the surviving corporation
in a merger, if the shares of the shareholder are not entitled to be voted on
the merger.
Subdivision 4. Other rights. The shareholders of a corporation who have a
right under this section to obtain payment for their shares do not have a right
at law or in equity to have a corporate action described in subdivision 1 set
aside or rescinded, except when the corporate action is fraudulent with regard
to the complaining shareholder or the corporation.
Annex B-1
<PAGE>
302A.473 PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS.--Subdivision 1.
Definitions. (a) For purposes of this section, the terms defined in this
subdivision have the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action referred to in section 302A.471, subdivision 1 or the
successor by merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a corporation
immediately before the effective date of the corporate action referred to in
section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the effective date
of the corporate action referred to in section 302A.471, subdivision 1 up to
and including the date of payment, calculated at the rate provided in section
549.09 for interest on verdicts and judgments.
Subdivision 2. Notice of action. If a corporation calls a shareholder meeting
at which any action described in section 302A.471, subdivision 1 is to be voted
upon, the notice of the meeting shall inform each shareholder of the right to
dissent and shall include a copy of section 302A.471 and this section and a
brief description of the procedure to be followed under these sections.
Subdivision 3. Notice of dissent. If a proposed action must be approved by
the shareholders, a shareholder who wishes to exercise dissenters' rights must
file with the corporation before the vote on the proposed action a written
notice of intent to demand the fair value of the shares owned by the
shareholder and must not vote the shares in favor of the proposed action.
Subdivision 4. Notice of procedure; deposit of shares. (a) After the proposed
action has been approved by the board and, if necessary, the shareholders, the
corporation shall send to all shareholders who have complied with subdivision 3
and to all shareholders entitled to dissent if no shareholder vote was
required, a notice that contains:
(1) The address to which a demand for payment and certificates of
certificated shares must be sent in order to obtain payment and the date by
which they must be received;
(2) Any restrictions on transfer of uncertificated shares that will apply
after the demand for payment is received;
(3) A form to be used to certify the date on which the shareholder, or
the beneficial owner on whose behalf the shareholder dissents, acquired the
shares or an interest in them and to demand payment; and
(4) A copy of section 302A.471 and this section and a brief description
of the procedures to be followed under these sections.
(b) In order to received the fair value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares or comply with
any restrictions on transfer of uncertificated shares within 30 days after the
notice was given, but the dissenter retains all other rights of a shareholder
until the proposed action takes effect.
Subdivision 5. Payment; return of shares. (a) After the corporate action
takes effect, or after the corporation receives a valid demand for payment,
whichever is later, the corporation shall remit to each dissenting shareholder
who has complied with subdivisions 3 and 4 the amount the corporation estimates
to be the fair value of the shares, plus interest, accompanied by:
(1) the corporation's closing balance sheet and statement of income for a
fiscal year ending not more than 16 months before the effective date of the
corporate action, together with the latest available interim financial
statements;
(2) an estimate by the corporation of the fair value of the shares and a
brief description of the method used to reach the estimate; and
(3) a copy of section 302A.471 and this section, and a brief description
of the procedure to be followed in demanding supplemental payment.
(b) The corporation may withhold the remittance described in paragraph (a)
from a person who was not a shareholder on the date the action dissented from
was first announced to the public or who is dissenting on behalf of a person
who was not a beneficial owner on that date. If the dissenter has complied with
subdivisions 3 and 4, the corporation shall forward to the dissenter the
materials described in paragraph (a), a statement of the reason for withholding
the remittance, and an offer to pay to the dissenter the amount listed in the
materials if the dissenter agrees to accept that amount in full satisfaction.
The dissenter may decline the offer and demand payment under subdivision 6.
Failure to do so entitles the dissenter only to the amount offered. If the
dissenter makes demand, subdivisions 7 and 8 apply.
Annex B-2
<PAGE>
(c) If the corporation fails to remit payment within 60 days of the deposit
of certificates or the imposition of transfer restrictions on uncertificated
shares, it shall return all deposited certificates and cancel all transfer
restrictions. However, the corporation may again give notice under subdivision
4 and require deposit or restrict transfer at a later time.
Subdivision 6. Supplemental payment; demand. If a dissenter believes that the
amount remitted under subdivision 5 is less than the fair value of the shares
plus interest, the dissenter may give written notice to the corporation of the
dissenter's own estimate of the fair value of the shares, plus interest, within
30 days after the corporation mails the remittance under subdivision 5, and
demand payment of the difference. Otherwise, a dissenter is entitled only to
the amount remitted by the corporation.
Subdivision 7. Petition; determination. If the corporation receives a demand
under subdivision 6, it shall, within 60 days after receiving the demand,
either pay to the dissenter the amount demanded or agreed to by the dissenter
after discussion with the corporation or file in court a petition requesting
that the court determine the fair value of the shares, plus interest. The
petition shall be filed in the county in which the registered office of the
corporation is located, except that a surviving foreign corporation that
receives a demand relating to the shares of a constituent domestic corporation
shall file the petition in the county in this state in which the last
registered office of the constituent corporation was located. The petition
shall name as parties all dissenters who have demanded payment under
subdivision 6 and who have not reached agreement with the corporation. The
corporation shall, after filing the petition, serve all parties with a summons
and copy of the petition under the rules of civil procedure. Nonresidents of
this state may be served by registered or certified mail or by publication as
provided by law. Except as otherwise provided, the rules of civil procedure
apply to this proceeding. The jurisdiction of the court is plenary and
exclusive. The court may appoint appraisers, with powers and authorities the
court deems proper, to receive evidence on and recommend the amount of the fair
value of the shares. The court shall determine whether the shareholder or
shareholders in question have fully complied with the requirements of this
section, and shall determine the fair value of the shares, taking into account
any and all factors the court finds relevant, computed by any method or
combination of methods that the court, in its discretion, sees fit to use,
whether or not used by the corporation or by a dissenter. The fair value of the
shares as determined by the court is binding on all shareholders, wherever
located. A dissenter is entitled to judgment in cash for the amount by which
the fair value of the shares as determined by the court, plus interest, exceeds
the amount, if any, remitted under subdivision 5, but shall not be liable to
the corporation for the amount, if any, by which the amount, if any, remitted
to the dissenter under subdivision 5 exceeds the fair value of the shares as
determined by the court, plus interest.
Subdivision 8. Costs; fees; expenses. (a) The court shall determine the costs
and expenses of a proceeding under subdivision 7, including the reasonable
expenses and compensation of any appraisers appointed by the court, and shall
assess those costs and expenses against the corporation, except that the court
may assess part or all of those costs and expenses against a dissenter whose
action in demanding payment under subdivision 6 is found to be arbitrary,
vexatious, or not in good faith.
(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses of
any experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily, vexatiously,
or not in good faith in bringing the proceeding, and may be awarded to a party
injured by those actions.
(c) The court may award, in its discretion, fees and expenses to an attorney
for the dissenters out of the amount awarded to the dissenters, if any.
Annex B-3
<PAGE>
NUVEEN NEW YORK MUNICIPAL
VALUE FUND, INC.
NUVEEN NEW YORK MUNICIPAL
INCOME FUND, INC.
--------------------------------------------------------------------------------
JOINT PROXY STATEMENT--PROSPECTUS
--------------------------------------------------------------------------------
SEPTEMBER , 1995
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION SHALL NOT +
+CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL +
+THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, +
+SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION +
+UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION--DATED AUGUST 23, 1995
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information relates to the shares of common
stock (the "Acquiring Fund Shares") to be issued by Nuveen New York Municipal
Value Fund, Inc. (the "Acquiring Fund") pursuant to an Agreement and Plan of
Reorganization and Liquidation dated as of August 1, 1995 (the "Agreement") by
and between the Acquiring Fund and Nuveen New York Municipal Income Fund, Inc.
(the "Acquired Fund" and, together with the Acquiring Fund, the "Funds"),
providing for a reorganization (the "Reorganization") in which, among other
things, the Acquiring Fund would (a) acquire substantially all of the assets of
the Acquired Fund in exchange for newly issued Acquiring Fund Shares and (b)
assume substantially all of the liabilities of the Acquired Fund. This
Statement of Additional Information does not constitute a prospectus, but
should be read in conjunction with the Joint Proxy Statement--Prospectus
relating to the Acquiring Fund Shares dated September , 1995. This Statement
of Additional Information does not include all information that a shareholder
should consider before voting on the proposals contained in the Joint Proxy
Statement--Prospectus, and shareholders should obtain and read the Joint Proxy
Statement--Prospectus prior to voting. A copy of the Joint Proxy Statement--
Prospectus may be obtained without charge by mailing a written request to
either of the Funds, Attention: Administration, 333 West Wacker Drive, Chicago,
Illinois 60606 or by calling (800) 257-8787.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and Policies of the Funds............................ S-2
Certain Trading Strategies of the Funds.................................... S-14
Management of the Funds.................................................... S-16
Portfolio Transactions of the Funds........................................ S-18
Repurchase of Fund Shares; Conversion to Open-End Fund..................... S-19
Tax Matters Associated with Investment in the Funds........................ S-20
Index to Financial Statements.............................................. F-1
Index to Pro Forma Financial Statements.................................... P-1
Ratings of Investments (ANNEX A)........................................... A-1
</TABLE>
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS SEPTEMBER , 1995.
S-1
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
THE ACQUIRING FUND
The Acquiring Fund's primary investment objective is to provide, through
investment in a professionally managed portfolio of tax-exempt New York
Municipal Obligations, current interest income exempt from both Federal and New
York and New York City personal income taxes. A secondary objective of the
Acquiring Fund is to achieve enhancement of portfolio value through investments
in tax-exempt New York Municipal Obligations that, in the opinion of the Nuveen
Advisory Corp. (the "Adviser"), are underrated or represent municipal market
sectors that are undervalued. Underrated Municipal Obligations are those whose
ratings do not, in the Adviser's opinion, reflect their true value. Obligations
may be underrated because of the time that has elapsed since their most recent
rating, or because of positive factors that may not have been fully taken into
account by the rating agencies, or for other similar reasons. Undervalued
municipal market sectors, on the other hand, refers to Municipal Obligations of
particular types or purposes (e.g., hospital bonds, industrial revenue bonds,
or bonds issued by a particular municipal issuer) that, in the Adviser's
opinion, are worth more than the value assigned to them in the marketplace.
Obligations may be undervalued because there is a temporary excess of supply in
a particular market sector, or because of a general decline in the market price
of Municipal Obligations of a market sector for reasons that do not apply to
the particular Municipal Obligations that are considered undervalued. The
Acquiring Fund's investment in underrated or undervalued New York Municipal
Obligations will be based on the Adviser's belief that the prices of such
Obligations should ultimately reflect their true value. Under certain market
conditions, such underrated or undervalued Municipal Obligations may realize
market appreciation, while in a declining market such Municipal Obligations may
experience less market depreciation than other Municipal Obligations.
Accordingly, "enhancement of portfolio value" does not merely refer to market
appreciation of portfolio securities, and the Acquiring Fund does not suggest
that capital appreciation is itself an objective of the Fund. Instead, the
objective of enhancement of portfolio value is one of seeking to outperform the
market by prudent selection of Municipal Obligations, regardless of which
direction the market may move. A shareholder of the Acquiring Fund will receive
taxable income upon the sale of shares at an appreciated value or in the event
of capital gains distributions by the Fund.
Except during temporary defensive periods, the Acquiring Fund will, as a
fundamental policy, invest 100% of its net assets in tax-exempt New York
Municipal Obligations, of which 80% will be Municipal Obligations rated at the
time of purchase within the four highest grades (Baa or BBB or better) by
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation
("S&P"). Municipal Obligations rated Baa or BBB are considered "investment
grade" securities; Obligations rated Baa are considered medium grade
obligations which lack outstanding investment characteristics and in fact have
speculative characteristics as well, while Obligations rated BBB are regarded
as having an adequate capacity to pay principal and interest. A general
description of Moody's and S&P's ratings of Municipal Obligations is set forth
in Annex A hereto. The Acquiring Fund emphasizes investments in New York
Municipal Obligations with long-term maturities, but the degree of such
emphasis will depend upon market conditions existing at the time of investment.
The Acquiring Fund may invest up to 20% of its net assets in unrated New York
Municipal Obligations or in New York Municipal Obligations rated lower than the
four highest grades, but no more than half of this amount (10% of the Fund's
net assets) will be invested in such lower rated New York Municipal
Obligations. To the extent it does so, there may be somewhat greater risk
because such unrated or lower rated Municipal Obligations, although generally
offering a higher current yield than higher rated securities, are generally
less liquid and involve a greater risk of non-payment of principal and interest
than higher rated securities. The Acquiring Fund will only invest in unrated
New York Municipal Obligations which, in the opinion of the Adviser, have
credit characteristics equivalent to Obligations rated Baa or BBB or better.
The Acquiring Fund will not invest in any rated New York Municipal Obligations
that are rated lower than Ba by Moody's or BB by S&P at the time of purchase.
During temporary defensive periods (e.g., times when temporary imbalances of
supply and demand or other temporary dislocations in the tax-exempt bond market
adversely affect the price at which New York Municipal Obligations are
available), the Acquiring Fund may invest any percentage of its net assets in
taxable temporary investments, the income on which may be subject to New York
and New York City personal income taxes or to both Federal and New York and New
York City personal income taxes. The Acquiring Fund will invest only in
temporary investments which are U.S. Government securities or securities rated
within the two highest grades by Moody's or S&P (including tax-exempt
securities issued in states other than New York), and which mature within one
year from the date of purchase. Temporary investments of the Acquiring Fund may
also include repurchase agreements. The foregoing restrictions and other
limitations discussed herein will apply only at the time of purchase
S-2
<PAGE>
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 ACQUIRED FUND
The Acquired Fund's investment objective is to provide, through investment in
a professionally managed portfolio of tax-exempt New York Municipal
Obligations, a high level of current interest income exempt from both Federal
and New York and New York City personal income taxes. The Acquired Fund has not
established any limit on the percentage of its portfolio that may be invested
in New York Municipal Obligations subject to the alternative minimum tax
provisions of Federal tax law, and a substantial portion of the income produced
by the Acquired Fund may be taxable under the alternative minimum tax. The
Acquired Fund therefore would not ordinarily be a suitable investment for
investors who are subject to the alternative minimum tax. The suitability of
the Acquired Fund for these investors will depend upon a comparison of the
yield likely to be provided from the Fund, 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.
Except during temporary defensive periods, the Acquired Fund will, as a
fundamental policy, invest 100% of its net assets in tax-exempt New York
Municipal Obligations, of which 75% will be Municipal Obligations rated at the
time of purchase within the four highest grades (Baa or BBB or better) by
Moody's or S&P, or unrated Municipal Obligations which, in the opinion of the
Adviser, have credit characteristics equivalent to, and will be of comparable
quality to, Obligations rated within the four highest grades by Moody's or S&P,
provided that the Acquired Fund may not invest more than 10% of its net assets
in such unrated Municipal Obligations. The Acquired Fund emphasizes investments
in New York Municipal Obligations with long-term maturities, but the degree of
such emphasis will depend upon market conditions existing at the time of
investment.
The Acquired Fund may invest up to 25% of its net assets in New York
Municipal Obligations rated Ba or B by Moody's or BB or B by S&P at the time of
purchase, or in unrated New York Municipal Obligations that, in the Adviser's
opinion, have credit characteristics equivalent to Obligations so rated,
provided that no more than 10% of the Fund's net assets may be invested in New
York Municipal Obligations rated B by Moody's or B by S&P, or their unrated
equivalents. To the extent the Acquired Fund invests in these lower rated New
York Municipal Obligations, there may be somewhat greater risk because such
lower rated securities, although generally offering a higher current yield than
higher rated securities, are generally less liquid and involve a greater risk
of non-payment of principal and interest than higher rated securities.
Securities rated B by S&P have a greater vulnerability to default but presently
have the capacity to meet interest and principal payments, while securities
rated B by Moody's generally lack characteristics of the desirable investment.
The Acquired Fund will not invest in any New York Municipal Obligations that
are not rated at least B by either Moody's or S&P.
During temporary defensive periods (e.g., times when temporary imbalances of
supply and demand or other temporary dislocations in the tax-exempt bond market
adversely affect the price at which New York Municipal Obligations are
available), the Acquired Fund may invest any percentage of its net assets in
taxable temporary investments, income on which may be subject to New York and
New York City personal income taxes or to both federal and New York and New
York City personal income taxes. The Acquired Fund will invest only in
temporary investments which are U.S. Government securities or securities rated
within the two highest grades by Moody's or S&P (including tax-exempt
securities issued in states other than New York), and which mature within one
year from the date of purchase. Temporary investments of the Acquired Fund may
also include repurchase agreements. The foregoing restrictions and other
limitations discussed herein 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.
MUNICIPAL OBLIGATIONS
"Municipal Obligations" are debt obligations issued by states, cities and
local authorities, and certain possessions and territories of the United
States, to obtain funds for various public purposes, including the construction
and maintenance of such public facilities as airports, bridges, highways,
housing, hospitals, mass transportation, schools, streets and water and sewer
works. Other public purposes for which Municipal Obligations may be issued
include the refinancing of outstanding obligations and the obtaining of funds
for general operating expenses and for loans to other public institutions and
facilities. In addition, certain industrial development, private activity and
pollution control bonds may be included within the term Municipal Obligations
if the interest paid thereon qualifies as exempt from regular Federal income
tax. The two principal classifications of Municipal
S-3
<PAGE>
Obligations are "general obligation" and "revenue" bonds. General obligation
bonds are secured by the issuer's pledge of its full faith, credit and taxing
power for the payment of principal and interest. Revenue bonds (e.g.,
industrial development bonds) are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise or other specific revenue source. Also included within the
general category of Municipal Obligations are participations in lease
obligations or installment purchase contract obligations of municipal
authorities or entities.
Municipal Obligations also include participations in lease obligations or
installment purchase contract obligations (hereinafter collectively called
"Municipal Lease Obligations") of municipal authorities or entities. Although
Municipal Lease Obligations do not constitute general obligations 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, a 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. Each Fund seeks
to minimize these risks by not investing more than 5% of its total investment
assets in Municipal Lease Obligations that contain "non-appropriation" clauses,
and by only investing in those "non-appropriation" Municipal Lease Obligations
where (a) the nature of the leased equipment or property is such that its
ownership or use is essential to a governmental function of the municipality,
(b) the lease payments will commence amortization of principal at an early date
that results in an average life of seven years or less for the Municipal Lease
Obligation, (c) appropriate covenants will be obtained from the municipal
obligor prohibiting the substitution or purchase of similar equipment if lease
payments are not appropriated, (d) the lease obligor has maintained good market
acceptability in the past, (e) the investment is of a size that will be
attractive to institutional investors and (f) the underlying leased equipment
has elements of portability or use, or both, that enhance its marketability in
the event foreclosure on the underlying equipment were ever required.
Certain Municipal Obligations 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 indexes, such as a bank prime rate or a tax-exempt
money market index. The term Municipal Obligations also includes obligations,
such as tax-exempt notes, municipal commercial paper and Municipal Lease
Obligations, having relatively short-term maturities, although, as noted above,
each Fund emphasizes investments in Municipal Obligations with long-term
maturities.
The yields on Municipal Obligations are dependent on a variety of factors,
including the condition of the general money market and the Municipal
Obligation market, the size of a particular offering, the maturity of the
obligation and the rating of the issue. The ratings of Moody's and S&P
represent their opinions as to the quality of the Municipal Obligations which
they undertake to rate. It should be emphasized, however, that ratings are
general and are not absolute standards of quality. Consequently, Municipal
Obligations 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 market value of outstanding Municipal Obligations will
vary with changes in prevailing interest rate levels and as a result of
changing evaluations of the ability of their issuers to meet interest and
principal payments.
Obligations of issuers of Municipal Obligations 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, as amended. In addition,
the obligations of such issuers may become subject to 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 Obligations may be materially affected.
SPECIAL CONSIDERATIONS RELATING TO NEW YORK MUNICIPAL OBLIGATIONS
As described above, except to the extent a Fund invests in temporary
investments, it invests substantially all of its assets in New York Municipal
Obligations. Each Fund is therefore susceptible to political, economic or
regulatory factors affecting New York State and governmental bodies within New
York State. Some of the more significant events and conditions relating to the
financial situation in New York are summarized below. The following information
provides only a brief summary of the complex factors affecting the financial
situation in New
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York, is derived from sources that are generally available to investors and
believed to be accurate. It is based on information drawn from official
statements and prospectuses issued by, and other information reported by, the
State of New York (the "State"), by its various public bodies (the "Agencies"),
and by other entities located within the State, including the City of New York
(the "City"), in connection with the issuance of their respective securities.
There can be no assurance that current or future statewide or regional
economic difficulties, and the resulting impact on State or local government
finances generally, will not adversely affect the market value of New York
Municipal Obligations held in the portfolio of each Fund or the ability of
particular obligors to make timely payments of debt service on (or relating to)
those obligations.
(1) The State: The State has historically been one of the wealthiest states
in the nation. For decades, however, the State economy has grown more slowly
than that of the nation as a whole, gradually eroding the State's relative
economic affluence. Statewide, urban centers have experienced significant
changes involving migration of the more affluent to the suburbs and an influx
of generally less affluent residents. Regionally, the older Northeast cities
have suffered because of the relative success that the South and the West have
had in attracting people and business. The City has also had to face greater
competition as other major cities have developed financial and business
capabilities which make them less dependent on the specialized services
traditionally available almost exclusively in the City.
The State has for many years had a very high state and local tax burden
relative to other states. The burden of State and local taxation, in
combination with the many other causes of regional economic dislocation, has
contributed to the decisions of some businesses and individuals to relocate
outside, or not locate within, the State.
Slowdown of Regional Economy. A national recession commenced in mid-1990. The
downturn continued throughout the State's 1990-91 fiscal year and was followed
by a period of weak economic growth during the 1991 calendar year. For calendar
year 1992, the national economy continued to recover, although at a rate below
all post-war recoveries. For calendar year 1993, the economy grew faster than
in 1992, but still at a very moderate rate, as compared to other recoveries.
Moderate economic growth continued in calendar year 1994. The State has
projected the rate of economic growth to slow within New York during 1995, as
the expansion of the national economy moderates. Economic recovery started
considerably later in the State than in the nation as a whole due in part to
the significant retrenchment in the banking and financial services industries,
downsizing by several major corporations, cutbacks in defense spending, and an
oversupply of office buildings. Many uncertainties exist in forecasts of both
the national and State economies and there can be no assurance that the State
economy will perform at a level sufficient to meet the State's projections of
receipts and disbursements.
1995-96 Fiscal Year. The State Legislature enacted the State's 1994-95 fiscal
year budget on June 7, 1995, more than two months after the start of that
fiscal year. The budget provides for a balanced general fund and receipts and
disbursements of $33.1 billion and $33.0 billion, respectively. The delay in
the enactment of the budget may negatively affect certain proposed actions and
reduce projected savings.
The 1995-96 State Financial Plan provides for the closing of a projected $4.7
billion budget gap in the 1995-96 fiscal year by cost-containment savings in
social welfare programs, savings from State agency restructurings, savings from
reforms in some categories of local aid and new revenue measures.
The State's budget and the Financial Plan for the 1995-96 fiscal year may be
impacted negatively by uncertainties relating to the economy and tax
collections, although recent signs of improvement in the national economy could
lead to short-term increases in State receipts.
1994-1995 Fiscal Year. The State Legislature enacted the State's 1994-95
fiscal year budget on June 7, 1994, more than two months after the start of
that fiscal year. The State ended its 1994-95 fiscal year with a $158 million
general fund balance, based on general fund receipts and disbursements of $33.2
billion and $33.4 billion, respectively. While actual receipts during the
fiscal year were over $1 billion less than projected, reductions in
disbursements were effected so that the 1994-95 fiscal year budget remained
substantially balanced.
Future Fiscal Years. There can be no assurance that the State will not face
substantial potential budget gaps in the future resulting from a significant
disparity between tax revenues projected from a lower recurring receipts base
and the spending required to maintain State programs at current levels. To
address any potential budgetary imbalance, the State may need to take
significant actions to align recurring receipts and disbursements.
Indebtedness. As of March 31, 1995, the total amount of long-term State
general obligation debt authorized but unissued stood at $1.8 billion. As of
the same date, the State had approximately $5.2 billion in general obligation
bonds including $149 million of bond anticipation notes outstanding.
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The State projects that its borrowings for capital purposes during the
State's 1995-96 fiscal year will consist of $248 million in general obligation
bonds and bond anticipation notes and $186 million in general obligation
commercial paper. The Legislature has authorized the issuance of up to $47
million in certificates of participation in pools of leases for equipment and
real property to be utilized by State agencies. The projections of the State
regarding its borrowings for any fiscal year are subject to change if actual
receipts fall short of State projections or if other circumstances require.
In June 1990, legislation was enacted creating the "New York Local Government
Assistance Corporation" ("LGAC"), a public benefit corporation empowered to
issue long-term obligations to fund certain payments to local governments
traditionally funded through the State's annual seasonal borrowing. As of June
1995, LGAC has issued its bonds to provide net proceeds of $4.7 billion. The
LGAC is authorized to provide net proceeds of $529 million, during the State's
1995-96 fiscal year.
Financing of capital programs by other public authorities of the State is
also obtained from lease-purchase and contractual-obligation financing
arrangements, the debt service for which is paid from State appropriations. As
of March 31, 1995, there were $18.0 billion of such other financing
arrangements outstanding and additional financings of this nature by public
authorities are projected to total $2.7 billion during the 1995-96 fiscal year.
In addition, certain agencies had issued and outstanding approximately $7.0
billion of "moral obligation financings" as of March 31, 1995, which are to be
repaid from project revenues. While there has never been a default on moral
obligation debt of the State, the State would be required to make up any
shortfall in debt service.
Ratings. The $850 million in TRANs issued by the State in April 1993 were
rated SP-1-Plus by S&P and MIG-1 by Moody's which represent the highest ratings
given by such agencies and the first time the State's TRANs have received these
ratings since its May 1989 TRANs issuance. Both agencies cited the State's
improved fiscal position as a significant factor in the upgrading of the April
1993 TRANs.
Moody's rating of the State's general obligation bonds stood at A on February
28, 1994, and S&P's rating stood at A- with a positive outlook on February 28,
1994, an improvement from S&P's stable outlook from April 1993 through February
1994 and negative outlook prior to April 1993. Previously, Moody's lowered its
rating to A on June 6, 1990, its rating having been A1 since May 27, 1986. S&P
lowered its rating from A to A- on January 13, 1992. S&P's previous ratings
were A from March 1990 to January 1992, AA- from August 1987 to March 1990 and
A+ from November 1982 to August 1987.
Moody's maintained its A rating and S&P continued its A- rating in connection
with the State's issuance of $537 million of its general obligation bonds in
March 1995.
(2) The City and the Municipal Assistance Corporation ("MAC"): The City
accounts for approximately 40% of the State's population and personal income,
and the City's financial health affects the State in numerous ways.
In response to the City's fiscal crisis in 1975, the State took a number of
steps to assist the City in returning to fiscal stability. Among other actions,
the State Legislature (i) created MAC to assist with long-term financing for
the City's short-term debt and other cash requirements and (ii) created the
State Financial Control Board (the "Control Board") to review and approve the
City's budgets and City four-year financial plans (the financial plans also
apply to certain City-related public agencies (the "Covered Organizations")).
In recent years, the rate of economic growth in the City slowed substantially
as the City's economy entered a recession. While by some measures the City's
economy may have begun to recover, a number of factors, including poor
performance by the City's financial services companies, may prevent a
significant improvement in the City's economy and may in fact negatively impact
upon the City's finances by reducing tax receipts. The City Comptroller has
issued reports concluding that the recession of the City's economy may be
ending, but there is little prospect of any significant improvement in the near
term.
Fiscal Year 1996 and the 1996-1999 Financial Plan. The City adopted its
budget for the 1996 fiscal year on June 14, 1995 and submitted its 1996-1999
Financial Plan to the Control Board on July 11, 1995. The 1996 budget provides
for expenditures of $31.4 billion and includes $3.1 billion of deficit
reduction measures. These deficit reduction measures include a $400 million
reduction in mandated welfare and Medicaid expenditures from the State, a $1.2
billion reduction in expenditures by city agencies and the Board of Education
budget, $600 million in personnel related savings and other measures.
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The 1996-1999 Financial Plan (the "Plan") projects budget gaps of $888
million, $1.5 billion and $1.6 billion for the 1997, 1998 and 1999 fiscal
years, respectively. Gap closing measures in the Plan assume agreement with
City unions as to an additional $100 million of benefit savings and no wage
increases without productivity increases, $275 million of additional State and
federal aid in each year, savings by City hospitals to offset a $254 million
annual reduction in Medicaid revenues and unspecified agency expenditure
reductions in each year of between $388 million and $684 million, as well as
other savings.
In late July 1995, both the Control Board and the City Controller criticized
the City's 1996 budget for relying on as much as $1 billion in savings over
which the City has no control. Both identified projected savings in education
expenses as of particular concern. The Control Board also noted the potential
for a deficit of as much as $400 million in the operating budgets of City
hospitals. The Control Board also reported budget risks of $2.1 billion, $2.8
billion and $2.8 billion in the 1997, 1998 and 1999 fiscal years, respectively.
At the same time the OSDC also questioned the City's 1996 budget, indicating
that the budget gap for the year was approximately $392 million because the
City had not yet achieved unspecified labor and other savings and that there
were additional budget risks of $409 million in fiscal year 1996.
The City successfully negotiated concessions with a number of unions in order
to ensure that the fiscal year 1995 budget remained in balance. The Mayor has
indicated that to avoid additional lay-offs, higher than the number referred to
above, reductions will be necessary in the benefit plans of City employees to
close the budget gaps for fiscal years 1996 and thereafter. Union leadership
has publicly opposed such "givebacks". With respect to fiscal year 1995 the
City was also successful in obtaining additional funds and relief from certain
mandated expenditures from the State for various programs, including Medicaid.
However, the amount of gap closing measures requiring State action set forth in
the Plan is well in excess of proposed assistance to the City outlined in the
current State budget.
The extended delay by the State in adopting its 1995-96 fiscal year budget
could negatively impact upon the City's financial condition and ability to
close budget gaps for fiscal years 1996 and thereafter.
Given the foregoing factors, there can be no assurance that the City will
continue to maintain a balanced budget, or that it can maintain a balanced
budget without additional tax or other revenue increases or reductions in City
services, which could adversely affect the City's economic base.
Pursuant to State law, the City prepares a four-year annual financial plan,
which is reviewed and revised on a quarterly basis and which includes the
City's capital, revenue and expense projections. The City is required to submit
its financial plans to review bodies, including the Control Board. If the City
were to experience certain adverse financial circumstances, including the
occurrence or the substantial likelihood and imminence of the occurrence of an
annual operating deficit of more than $100 million or the loss of access to the
public credit markets to satisfy the City's capital and seasonal financial
requirements, the Control Board would be required by State law to exercise
certain powers, including prior approval of City financial plans, proposed
borrowings and certain contracts.
The City depends on the State for State aid both to enable the City to
balance its budget and to meet its cash requirements. If the State experiences
revenue shortfalls or spending increases beyond its projections during its
1995-96 fiscal year or subsequent years, such developments could result in
reductions in projected State aid to the City. In addition, there can be no
assurance that State budgets in the 1996-97 or future fiscal years will be
adopted by the April 1 statutory deadline and that there will not be adverse
effects on the City's cash flow and additional City expenditures as a result of
such delays.
The City projections set forth in the Plan are based on various assumptions
and contingencies which are uncertain and which may not materialize. Changes in
major assumptions could significantly affect the City's ability to balance its
budget as required by State law and to meet its annual cash flow and financing
requirements. Such assumptions and contingencies include the timing of any
regional and local economic recovery, the absence of wage increases in excess
of the increases assumed in its financial plan, employment growth, provision of
State and Federal aid and mandate relief, State legislative approval of future
State budgets, levels of education expenditures as may be required by State
law, adoption of future City budgets by the New York City Council, and approval
by the Governor or the State Legislature and the cooperation of MAC with
respect to various other actions proposed in the Plan.
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The City's ability to maintain a balanced operating budget is dependant on
whether it can implement necessary service and personnel reduction programs
successfully. As discussed above, the City must identify additional expenditure
reductions and revenue sources to achieve balanced operating budgets for fiscal
years 1996 and thereafter. Any such proposed expenditure reductions will be
difficult to implement because of their size and the substantial expenditure
reductions already imposed on City operations in the past two years.
Attaining a balanced budget is also dependent upon the City's ability to
market its securities successfully in the public credit markets. The City's
financing program for fiscal years 1996 through 1999 contemplates capital
spending of $13.6 billion, which will be financed through issuance of $9.3
billion of general obligation bonds and the balance through Water Authority
Revenue Bonds and Covered Organization obligations, and will be utilized
primarily to reconstruct and rehabilitate the City's infrastructure and
physical assets and to make capital investments. A significant portion of such
bond financing is used to reimburse the City's general fund for capital
expenditures already incurred. In addition, the City issues revenue and tax
anticipation notes to finance its seasonal working capital requirements. The
terms and success of projected public sales of City general obligation bonds
and notes will be subject to prevailing market conditions at the time of the
sale, and no assurance can be given that the credit markets will absorb the
projected amounts of public bond and note sales. In addition, future
developments concerning the City and public discussion of such developments,
the City's future financial needs and other issues may affect the market for
outstanding City general obligation bonds and notes. If the City were unable to
sell its general obligation bonds and notes, it would be prevented from meeting
is planned operating and capital expenditures.
Fiscal Year 1995. New York City adopted its fiscal year 1995 budget on June
21, 1994, which provided for spending of $31.6 billion and closed a budget gap
of $2.3 billion. However, following adoption of the fiscal year 1995 budget,
additional unexpected budget gaps totaling approximately $2.0 billion were
identified. The widening of the budget gap for fiscal year 1995 resulted from
shortfalls in tax revenues and State and federal aid. As of July 21, 1995, the
City's modified projections for fiscal year 1995 forecast a balanced budget
with revenues and expenditures of $32.2 billion.
Fiscal Years 1990 through 1994. The City achieved balanced operating results
as reported in accordance with GAAP for its fiscal years 1990 through 1994. The
City was required to close substantial budget gaps in these fiscal years to
maintain balanced operating results.
The City is a defendant in a significant number of lawsuits. Such litigation
includes, but is not limited to, actions commenced and claims asserted against
the city arising out of alleged constitutional violations, torts, breaches of
contracts, and other violations of law and condemnation proceedings. While the
ultimate outcome and fiscal impact, if any, on the proceedings and claims are
not currently predictable, adverse determinations in certain of them might have
a material adverse effect upon the City's ability to carry out its financial
plan. As of June 30, 1994, the City estimated its potential future liability to
be $2.6 billion.
On January 30, 1995, Robert L. Schulz and other defendants commenced a
federal district court action seeking among other matters to cancel the
issuance on January 31, 1995 of $659 million of City bonds. While the federal
courts have rejected requests for temporary restraining orders and expedited
appeals, the case is still pending. The City has indicated that it believes the
action to be without merit as it relates to the City and has moved to dismiss
any claims against it, but there can be no assurance as to the outcome of the
litigation and an adverse ruling or the granting of a permanent injunction
would have a negative impact on the City's financial condition and its ability
to fund its operations.
Ratings. As of the date of this prospectus, Moody's rating of the City's
general obligation bonds stood at Baa1 and S&P's rating stood at BBB+. On
February 11, 1991, Moody's had lowered its rating from A. S&P's lowered its
rating from A- on July 10, 1995 after placing the City on "negative credit
watch" in January 1995.
On March 13, 1995, Moody's confirmed its Baa1 rating in connection with a
scheduled March 1995 sale of $795 million of the City's general obligation
bonds.
In dropping the City's rating in July 1995, S&P's cited the "sluggish"
economy and the poor outlook for job growth, as well as the continued use of
"one-time measures" to close budget gaps. The lowered rating could increase the
City's borrowing costs by forcing it to offer higher interest rates on its
bonds thereby adding further pressures to the City's budget problems. In
addition, the lowered rating may prevent certain institutional investors from
purchasing the City's bonds reducing demand for future offerings, which could
also force the City to increase interest rates on its bonds.
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On October 12, 1993, Moody's increased its rating of the City's issuance of
$650 million of Tax Anticipation Notes ("TANs") to MIG-1 from MIG-2. Prior to
that date, on May 9, 1990, Moody's revised downward its rating on outstanding
City revenue anticipation notes from MIG-1 to MIG-2 and rated the $900 million
Notes then being sold MIG-2. S&P's rating of the October 1993 TANS issue
increased to SP-1 from SP-2. Prior to that date, on April 29, 1991, S&P revised
downward its rating on City revenue anticipation notes from SP-1 to SP-2.
As of June 30, 1995, the City and MAC had, respectively, $23.2 billion and
$4.1 billion of outstanding net long-term indebtedness.
(3) The State Agencies: Certain Agencies of the State have faced substantial
financial difficulties which could adversely affect the ability of such
Agencies to make payments of interest on, and principal amounts of, their
respective bonds. The difficulties have in certain instances caused the State
(under so-called "moral obligation" provisions which are non-binding statutory
provisions for State appropriations to maintain various debt service reserve
funds) to appropriate funds on behalf of the Agencies. Moreover, it is expected
that the problems faced by these Agencies will continue and will require
increasing amounts of State assistance in future years. Failure of the State to
appropriate necessary amounts or to take other action to permit those Agencies
having financial difficulties to meet their obligations could result in a
default by one or more of the Agencies. Such default, if it were to occur,
would be likely to have a significant adverse effect on investor confidence in,
and therefore the market price of, obligations of the defaulting Agencies. In
addition, any default in payment on any general obligation of any Agency whose
bonds contain a moral obligation provision could constitute a failure of
certain conditions that must be satisfied in connection with Federal guarantees
of City and MAC obligations and could thus jeopardize the City's long-term
financing plans.
As of September 30, 1994, the State reported that there were eighteen
Agencies that each had outstanding debt of $100 million or more and an
aggregate of $70.3 billion of outstanding debt, some of which was state-
supported, state-related debt.
(4) State Litigation: The State is a defendant in numerous legal proceedings
pertaining to matters incidental to the performance of routine governmental
operations. Such litigation includes, but is not limited to, claims asserted
against the State arising from alleged torts, alleged breaches of contracts,
condemnation proceedings and other alleged violations of State and Federal
laws. Included in the State's outstanding litigation are a number of cases
challenging the constitutionality or the adequacy and effectiveness of a
variety of significant social welfare programs primarily involving the State's
mental hygiene programs. Adverse judgments in these matters generally could
result in injunctive relief coupled with prospective changes in patient care
which could require substantial increased financing of the litigated programs
in the future.
The State is also engaged in a variety of claims wherein significant monetary
damages are sought. Actions commenced by several Indian nations claim that
significant amounts of land were unconstitutionally taken from the Indians in
violation of various treaties and agreements during the eighteenth and
nineteenth centuries. The claimants seek recovery of approximately six million
acres of land as well as compensatory and punitive damages.
The State has entered into a settlement agreement with Delaware,
Massachusetts and all other parties with respect to State of Delaware v. State
of New York, an action by Delaware and other states to recover unclaimed
property from New York-based brokers, which has escheated to the State pursuant
to its Abandoned Property Law. Annual payments under this settlement will be
made through the State's 2002-03 fiscal year in amounts not exceeding $48.4
million in any fiscal year subsequent to the State's 1994-95 fiscal year.
In Schulz v. State of New York, commenced May 24, 1993 ("Schulz 1993"),
petitioners have challenged the constitutionality of mass transportation
bonding programs of the New York State Thruway Authority and the Metropolitan
Transportation Authority. On May 24, 1993, the Supreme Court, Albany County,
temporarily enjoined the State from implementing those bonding programs.
Petitioners in Schulz asserted that issuance of bonds by the two Authorities
is subject to approval by statewide referendum. By decision dated October 21,
1993, the Appellate Division, Third Department, affirmed the order of the
Supreme Court, Albany County, granting the State's motion for summary judgment,
dismissing the complaint and vacating the temporary restraining order. On June
30, 1994, the Court of Appeals, the State's highest court, upheld the decisions
of the Supreme Court and Appellate Division in Schulz, Plaintiffs' motion for
reargument was denied by the Court of Appeals on September 1, 1994 and their
writ of certiorari to the U.S. Supreme Court was denied on January 23, 1995.
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Adverse developments in the foregoing proceedings or new proceedings could
adversely affect the financial condition of the State in the future.
(5) Other Municipalities: Certain localities in addition to New York City
could have financial problems leading to requests for additional State
assistance. The potential impact on the State of such actions by localities is
not included in projections of State receipts and expenditures in the State's
1995-96 fiscal years.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers") resulted
in the creation of the Financial Control Board for the City of Yonkers (the
"Yonkers Board") by the State in 1984. The Yonkers Board is charged with
oversight of the fiscal affairs of Yonkers. Future actions taken by the
Governor or the State Legislature to assist Yonkers could result in allocation
of State resources in amounts that cannot yet be determined.
Municipalities and school districts have engaged in substantial short-term
and long-term borrowings. In 1993, the total indebtedness of all localities in
the State (other than New York City) was approximately $17.7 billion. State law
requires the Comptroller to review and make recommendations concerning the
budgets of those local government units other than New York City authorized by
State law to issue debt to finance deficits during the period that such deficit
financing is outstanding. Fifteen localities had outstanding indebtedness for
state financing at the close of their fiscal year ending in 1993.
Certain proposed Federal expenditure reductions could reduce, or in some
cases eliminate, Federal funding of some local programs and accordingly might
impose substantial increased expenditure requirements on affected localities.
If the State, New York City or any of the Agencies were to suffer serious
financial difficulties jeopardizing their respective access to the public
credit markets, the marketability of notes and bonds issued by localities
within the State, including notes or bonds in the Funds, could be adversely
affected. Localities also face anticipated and potential problems resulting
from certain pending litigation, judicial decisions, and long-range economic
trends. The longer-range potential problems of declining urban population,
increasing expenditures, and other economic trends could adversely affect
localities and require increasing State assistance in the future.
(6) Other Issuers of New York Municipal Obligations: There are a number of
other agencies, instrumentalities and political subdivisions of the State that
issue Municipal Obligations, some of which may be conduit revenue obligations
payable from payments from private borrowers. These entities are subject to
various economic risks and uncertainties, and the credit quality of the
securities issued by them may vary considerably from the credit quality of
obligations backed by the full faith and credit of the State.
INVESTMENT RESTRICTIONS
Neither Fund, as a fundamental policy, may, without the approval of the
holders of a "majority of the outstanding" shares:
(1) Issue senior securities, as defined in the 1940 Act, except to the
extent such issuance might be involved with respect to borrowings described
under subparagraph (3) below or with respect to transactions involving
futures contracts or the writing of options within the limits described
under "Certain Trading Strategies of the Funds--Financial Futures and
Options Transactions" below;
(2) Make short sales of securities or purchase any securities on margin
(except for such short-term credits as are necessary for the clearance of
transactions), or write or purchase put or call options, except to the
extent that the purchase of a standby commitment may be considered the
purchase of a put, and except for transactions involving options within the
limits described under "Certain Trading Strategies of the Funds--Financial
Futures and Options Transactions" below;
(3) 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 its total assets including the amount borrowed;
while any such borrowings exceed 5% of its total assets, no additional
purchases of investment securities will be made;
(4) Underwrite any issue of securities, except to the extent that the
purchase of Municipal Obligations in accordance with its investment
objective(s), policies and limitations may be deemed to be an underwriting;
(5) 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 Obligations issued by governments or political subdivisions of
governments (except, in the case of the Acquired Fund, this limitation
shall apply to those Municipal Obligations backed only by the assets and
revenues of non-governmental users) and obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities;
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(6) Purchase or sell real estate, but this shall not prevent it from
investing in Municipal Obligations secured by real estate or interests
therein or foreclosing upon and selling such security;
(7) Purchase or sell commodities or commodities contracts, except for
transactions involving futures contracts within the limits described under
"Certain Trading Strategies of the Funds--Financial Futures and Options
Transactions" below;
(8) Make loans, other than by entering into repurchase agreements and
through the purchase of Municipal Obligations or temporary investments in
accordance with its investment objective(s), policies and limitations;
(9) Invest in securities other than New York Municipal Obligations and
temporary investments as described under "Investment Objectives and
Policies of the Funds--Portfolio Investments" above;
(10) Invest more than 5% of its total assets in securities of any one
issuer, except that this limitation shall not apply to securities of the
U.S. government, its agencies and instrumentalities or to the investment of
25% of its total assets;
(11) Pledge, mortgage or hypothecate its assets, except that, to secure
borrowings permitted by subparagraph (3) above, it may pledge securities
having a market value at the time of pledge not exceeding 20% of the value
of its total assets;
(12) Invest more than 10% of its total assets in repurchase agreements
maturing in more than seven days; and
(13) Purchase or retain the securities of any issuer other than its own
securities if, to its knowledge, those of its directors or trustees, or
those officers and directors of the Adviser, who individually own
beneficially more than 1/2 of 1% of the outstanding securities of such
issuer, together own beneficially more than 5% of such outstanding
securities.
For the purposes of the foregoing, "majority of the outstanding," when used
with respect to particular shares of a particular 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 (10)
above, an issuer shall be deemed a separate issuer when its assets and revenues
are separate from other governmental entities and its securities are backed
only by its assets and revenues. Similarly, in the case of a non-governmental
user, such as an industrial corporation or a privately owned or operated
hospital, if the security is backed only by the assets and revenues of the non-
governmental user then such non-governmental user would be deemed to be the
sole issuer. Where a security is also backed by the enforceable obligations of
a superior governmental entity, it shall be included in the computation of
securities owned that are issued by such superior governmental entity. If
however, a security is guaranteed by a governmental entity or some other
entity, 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.
In addition to the foregoing restrictions, neither Fund will, as a matter of
operating policy, (i) invest more than 5% of its total assets in unsecured
obligations of issuers which, together with their predecessors, have been in
operation for less than three years, (ii) invest for the purpose of exercising
control or management, or (iii) invest more than 10% of its total assets in
unmarketable securities (including repurchase agreements maturing in more than
seven days). In addition, the Acquired Fund will not invest more than 20% of
its total assets in securities which are not readily marketable. These policies
are not fundamental and may be changed by either Fund without shareholder
approval.
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.
CERTAIN TRADING STRATEGIES OF THE FUNDS
PORTFOLIO TRADING AND TURNOVER RATE
Portfolio trading will be undertaken to accomplish the investment objectives
of each Fund in relation to actual and anticipated movements in interest rates.
Each 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 neither Fund will
engage in trading solely to recognize a gain. In addition, a security may be
sold and another of comparable quality purchased at approximately the same time
to take advantage of what the Adviser believes to be a temporary disparity in
the normal yield relationship between the two securities.
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Subject to the foregoing, each Fund will attempt to achieve its investment
objectives by prudent selection of New York Municipal Obligations with a view
to holding them for investment. While there can be no assurance thereof, each
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 a
Fund deems it desirable to sell or purchase securities. Therefore, depending
upon market conditions, the annual portfolio turnover rate of each Fund may
exceed 100% in particular years.
FINANCIAL FUTURES AND OPTIONS TRANSACTIONS
Each Fund may attempt to hedge its investment portfolio against market risk
by engaging in transactions in financial futures contracts, options on
financial futures or options that either are based on an index of long-term
Municipal Obligations (i.e,, those with remaining maturities averaging 20-30
years) or relate to debt securities whose prices are anticipated by the Adviser
to correlate with the prices of the Municipal Obligations owned by such Fund.
Neither Fund has any present intention to engage in such hedging transactions
and in no event does it expect that any material portion of its assets would be
so committed. To accomplish such hedging, a Fund may take an investment
position in a futures contract or in an option which is expected to move in the
opposite direction from the position being hedged. Hedging may be utilized to
reduce the risk that the value of securities owned by a Fund may decline on
account of an increase in interest rates and to hedge against increases in the
cost of the securities such Fund intends to purchase as a result of a decline
in interest rates. A Fund's use of futures and options for hedging purposes can
be expected to result in taxable income or gain to its shareholders. See "Tax
Matters Associated with Investment in the Funds."
The sale of financial futures or the purchase of put options on financial
futures or on debt securities or indexes is a means of hedging against the risk
of rising interest rates, whereas the purchase of financial futures or of call
options on financial futures or on debt securities or indexes is a means of
hedging a Fund's portfolio against an increase in the price of securities such
Fund intends to purchase. Writing a call option on a futures contract or on
debt securities or indexes may serve as a hedge against a modest decline in
prices of Municipal Obligations held in a Fund's portfolio, and writing a put
option on a futures contract or on debt securities or indexes may serve as a
partial hedge against an increase in the value of Municipal Obligations a Fund
intends to acquire. The writing of such options provides a hedge to the extent
of the premium received in the writing transaction.
Although certain risks are involved in futures and options transactions (as
discussed under "Risks of Futures and Options Transactions" below), because
these transactions will be engaged in by a Fund only for hedging purposes,
these futures and options portfolio strategies should not subject such Fund to
those risks frequently associated with speculation in futures or options
transactions. Regulations of the Commodity Futures Trading Commission (the
"CFTC") applicable to each Fund require that transactions in futures and
options on futures be engaged in only for bona fide hedging purposes or if the
aggregate initial margin deposits and premiums paid by such Fund do not exceed
5% of the market value of its assets. Neither Fund will purchase futures unless
it has segregated cash, government securities or high grade liquid debt equal
to the contract price of the futures less any margin on deposit, or unless the
long futures position is covered by the purchase of a put option. Neither Fund
will sell futures unless such Fund owns the instruments underlying the futures
or owns options on such instruments or owns a portfolio whose market price may
be expected to move in tandem with the market price of the instruments or index
underlying the futures. In addition, each Fund is subject to the Federal income
tax requirement that it derive less than 30% of its gross income from the gain
on the sale or other disposition of securities held for less than three months.
With respect to its engaging in transactions involving the purchase or writing
of put and call options on debt securities or indexes, neither Fund will
purchase such options if more than 5% of its assets would be invested in the
premiums for such options, and it will only write "covered" or "secured"
options, wherein the securities or cash required to be delivered upon exercise
are held by such Fund, with such cash being maintained in a segregated account.
These requirements and limitations may limit a Fund's ability to engage in
hedging transactions.
DESCRIPTION OF FINANCIAL FUTURES AND OPTIONS. A futures contract is a
contract between a seller and a buyer for the sale and purchase of specified
property at a specified future date for a specified price. An option is a
contract that gives the holder of the option the right, but not the obligation,
to buy (in the case of a call option) specified property from, or to sell (in
the case of a put option) specified property to, the writer of the option for a
specified price during a specified period prior to the option's expiration.
Financial futures contracts and options cover specified debt securities (such
as U.S. Treasury securities) or indexes designed to correlate with price
movements in certain categories of debt securities. At least one exchange
trades futures contracts on an index designed to correlate with the long-term
municipal bond market. Financial futures contracts and options on financial
futures contracts are traded on exchanges regulated by the CFTC. Options on
certain financial instruments and financial indexes are traded on securities
markets regulated by the Commission. Although futures contracts and options on
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specified financial instruments call for settlement by delivery of the
financial instruments covered by the contracts, in most cases positions in
these contracts are closed out in cash by entering into offsetting liquidating
or closing transactions. Index futures and options are designed for cash
settlement only.
RISKS OF FUTURES AND OPTIONS TRANSACTIONS. There are certain risks associated
with the use of financial futures and options to hedge investment portfolios.
There may be an imperfect correlation between price movements of the futures
and options and price movements of the portfolio securities being hedged.
Losses may be incurred in hedging transactions, which could reduce the
portfolio gains that might have been realized if the hedging transactions had
not been entered into. The ability to close out positions in futures and
options depends upon the existence of a liquid secondary market, which may not
exist for all futures and options at all times. If a Fund engages in futures
transactions or in the writing of options on futures, it will be required to
maintain initial margin and maintenance margin and may be required to make
daily variation margin payments in accordance with applicable rules of the
exchanges and the CFTC. If a Fund purchases a financial futures contract or a
call option or writes a put option in order to hedge the anticipated purchase
of Municipal Obligations, and if such Fund fails to complete the anticipated
purchase transaction, such Fund may experience a loss or a gain on the futures
or options transaction that will not be offset by price movements in the
Municipal Obligations that were the subject of the anticipatory hedge. The cost
of put options on debt securities or indexes effectively increases the cost of
the securities subject to them, thereby reducing the yield otherwise available
from such securities. If a Fund decides to use futures contracts or options on
futures contracts for hedging purposes, such Fund will be required to establish
an account for such purposes with one or more CFTC-registered futures
commission merchants. A futures commission merchant could establish initial and
maintenance margin requirements for a Fund that are greater than those which
would otherwise be applicable to such Fund under applicable rules of the
exchanges and the CFTC.
REPURCHASE AGREEMENTS
As temporary investments, a Fund may invest in repurchase agreements. A
repurchase agreement is a contractual agreement whereby the seller of
securities (U.S. government securities or Municipal Obligations) 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
such 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 by a Fund
is taxable to shareholders of that Fund. See "Tax Matters Associated with
Investment in the Funds." A Fund will enter into repurchase agreements only
with registered securities dealers or domestic banks that, in the opinion of
the Adviser, present minimal credit risk. The risk to a 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
a 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 a Fund may be
delayed or limited. The Adviser 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, the Adviser will
demand additional collateral from the issuer to increase the value of the
collateral to at least that of the repurchase price, including interest.
MANAGEMENT OF THE FUNDS
The Management Agreements provide that the Adviser shall act as investment
adviser for each Fund, manage the Funds' respective investments, administer
their business affairs, provide office facilities and equipment and certain
clerical, bookkeeping and administrative services, and permit any of its
officers and employees to serve without compensation as directors and officers
of the Funds if elected to such positions. Under its respective Management
Agreement, each Fund has agreed to pay all other costs and expenses of its
operations, including the compensation of its directors (other than those
affiliated with the investment adviser), custodian, transfer, dividend
disbursing and service agent expenses, legal fees, expenses of independent
auditors, costs of acquiring and disposing of portfolio securities, expenses of
preparing, printing and distributing reports to shareholders and governmental
agencies, and taxes, if any.
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<PAGE>
The Adviser is a wholly-owned subsidiary of John Nuveen & Co. Incorporated
("Nuveen"), located at 333 West Wacker Drive, Chicago, Illinois 60606, the
oldest and largest investment banking firm specializing in the underwriting and
distribution of tax-exempt securities. Nuveen, which maintains the largest
research department of all investment banking firms devoted exclusively to
municipal securities, has issued over $34 billion of tax-exempt unit trusts
since 1961 and currently sponsors 76 management investment company portfolios
(including the Funds) with approximately $30 billion in tax-exempt securities
under management. Over 1,000,000 individuals have invested to date in Nuveen's
tax-exempt funds and trusts. Founded in 1898, Nuveen is a majority-owned
subsidiary of The John Nuveen Company, which, in turn, is approximately 75%
owned by The St. Paul Companies, Inc., 385 Washington Street, St. Paul,
Minnesota 55102, a management company of St. Paul, Minnesota, principally
engaged in providing property-liability insurance through subsidiaries. Nuveen
acted as co-managing underwriter for the Acquiring Fund in its initial public
offering of shares in October 1987, and for the Acquired Fund in its initial
public offering of shares in April and May 1988.
Under the Management Agreement for the Acquiring Fund, the Acquiring Fund has
agreed to pay an annual management fee in an amount equal to the sum of .35% of
the average weekly net assets and 4.125% of the gross interest income of the
Acquiring Fund.
Under the Management Agreement for the Acquired Fund, the Acquired Fund has
agreed to pay an annual management fee as follows:
<TABLE>
<CAPTION>
MANAGEMENT FEE SCHEDULE
-----------------------------------------
AVERAGE DAILY NET ASSETS RATE
------------------------ -----
<S> <C>
Up to $125 million................ .6500%
$125 to $250 million.............. .6375
$250 to $500 million.............. .6250
$500 million to $1 billion........ .6125
$1 billion to $2 billion.......... .6000
$2 billion and over............... .5875
</TABLE>
The Acquiring Fund paid aggregate management fees of $800,465 for the fiscal
year ended September 30, 1994, for an effective management fee rate of 0.64%.
The Acquired Fund paid aggregate management fees of $187,591 for the fiscal
year ended September 30, 1994, for an effective management fee rate of 0.65%.
For the fiscal years ended September 30, 1993 and September 30, 1992, the
Acquiring Fund paid aggregate management fees of $798,249 and $132,134 (2
months) and the Acquired Fund paid aggregate management fees of $192,645 and
$141,710 (10 months).
The names, addresses and principal occupations of the principal executive
officers and the directors of the Adviser are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATIONS
---------------- ---------------------
<S> <C>
Richard J. Franke........................ Chairman of the Board and Director,
Chairman of the Board and Director John Nuveen & Co. Incorporated
(Principal Executive Officer)
333 West Wacker Drive
Chicago, Illinois 60606
Donald E. Sveen.......................... President and Director,
President and Director John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606
Anthony T. Dean.......................... Executive Vice President and Director,
Director John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606
Timothy R. Schwertfeger.................. Executive Vice President and Director,
Director John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606
</TABLE>
Messrs. Franke and Schwertfeger, directors of each Fund, are "interested
persons" of the Adviser. The remaining directors and nominees to the Board of
each Fund are not "interested persons" of the Adviser. The other officers of
the Funds are officers or employees of the Adviser. See also "Proposal No. 2--
Election of Directors of Each Fund" in the Joint Proxy Statement--Prospectus.
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<PAGE>
PORTFOLIO TRANSACTIONS OF THE FUNDS
The Adviser, in effecting purchases and sales of portfolio securities for the
account of each Fund, places orders in such manner as, in the opinion of the
Adviser's management, offers the best price and market for the execution of
each transaction. Portfolio securities are normally purchased directly from an
underwriter or in the over-the-counter market from the principal dealers in
such securities, unless it appears that a better price or execution may be
obtained elsewhere. Portfolio securities are not purchased from Nuveen or its
affiliates except in compliance with the 1940 Act.
Generally, all portfolio transactions are effected on a principal (as opposed
to an agency) basis and, accordingly, the Funds have not paid and do not expect
to pay any brokerage commissions. Purchases from underwriters include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers include the spread between the bid and asked price. Given the best
price and execution obtainable, it is the practice of each Fund to select
dealers which, in addition, furnish research information (primarily credit
analyses of issuers) and statistical and other services to the Adviser. It is
not possible to place a dollar value on information, statistical and other
services received from dealers. Since it is only supplementary to the Adviser's
own research efforts, the receipt of research information is not believed to
reduce significantly the Adviser's expenses. Any research benefits obtained are
available to all of the Adviser's other clients. While the Adviser is primarily
responsible for the placement of the business of each Fund, the policies and
practices of the Adviser in this regard must be consistent with the foregoing
and are at all times subject to review by the Board of each Fund.
The Adviser reserves the right to, and does, manage other investment accounts
and investment companies for other clients which may have investment objectives
similar or identical to those of the Funds. Subject to applicable laws and
regulations, the Adviser will attempt to allocate equitably portfolio
transactions among each Fund and the portfolios of its other clients purchasing
or selling securities whenever decisions are made to purchase or sell
securities by a Fund or Funds and one or more of such other clients
simultaneously. In making such allocations, the main factors to be considered
will be the respective investment objectives of the Funds and such other
clients, the relative size of the portfolio holdings of the same or comparable
securities, the availability of cash for investment by a Fund and such other
clients, the size of investment commitments generally held by such Fund and
such other clients and opinions of the persons responsible for recommending
investments to such Fund and such other clients. While this procedure could
have a detrimental effect on the price or amount of the securities available to
a Fund from time to time, it is the opinion of the Board of each Fund that the
benefits available from the Adviser's organization will outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
Notwithstanding the similarity of the investment objectives of the Funds with
those of other funds managed by the Adviser, each of these funds will be
separately managed and the composition of their investment portfolios will
differ. Accordingly, the investment performance of each of these funds will
likely not be the same.
Under the 1940 Act, a 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 Obligations
purchased by a Fund, the amount of Municipal Obligations which may be purchased
in any one issue and the assets of such Fund which 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 a Fund,
including a majority of the members thereof who are not interested persons of
such Fund.
For the fiscal years ended September 30, 1994, September 30, 1993 and
September 30, 1992, neither Fund paid any brokerage commissions.
REPURCHASE OF FUND SHARES; CONVERSION TO OPEN-END FUND
Each Fund is a closed-end investment company and as such its shareholders
will not have the right to cause such Fund to redeem their shares. Each Fund's
shares trade in the open market at a price that is a function of several
factors, including net asset value and yield. The shares of each Fund have
traded at both premiums and discounts to net asset value. The Board of each
Fund has currently determined that, at least annually, it will consider actions
that might be taken to reduce or eliminate any material discount from net asset
value in respect of such Fund's 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 such Fund
to an open-end investment company. There can be no assurance, however, that
either Fund's Board will decide to take any of
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<PAGE>
these actions, or that share repurchases or tender offers, if undertaken, will
reduce market discount. The staff of the 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 a Fund would be borne by that Fund and would not
reduce the stated consideration to be paid to tendering shareholders.
Subject to its investment limitations, either Fund may borrow to finance the
repurchase of its shares or to make a tender offer. Interest on any borrowings
to finance share repurchase transactions or the accumulation of cash by either
Fund in anticipation of share repurchases or tenders will reduce that Fund's
net income. Any share repurchase, tender offer or borrowing that might be
approved by a Fund's Board would have to comply with the Exchange Act 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 a Fund's Board at the time it considers such issue, it is
each Board's present policy, which may be changed by such Board, not to
authorize repurchases of such Fund's shares or a tender offer for such shares
if (a) such transactions, if consummated, would (i) result in the delisting of
such shares from the NYSE or the AMEX, as the case may be, or (ii) impair such
Fund's status as a regulated investment company under the Code (which would
make such Fund a taxable entity, causing its income to be taxed at the
corporate level in addition to the taxation of shareholders who receive
dividends from such Fund) or as a regulated closed-end investment company under
the 1940 Act; (b) such Fund would not be able to liquidate portfolio securities
in an orderly manner and consistent with its investment objectives and policies
in order to repurchase shares; or (c) there is, in such Board's judgment, any
(i) material legal action or proceeding instituted or threatened challenging
such transactions or otherwise materially adversely affecting such Fund, (ii)
general suspension of or limitation on prices for trading securities on the
NYSE or the AMEX, as the case may be, (iii) 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 such Fund invests, (iv) material limitation
affecting such 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, (v) commencement of war, armed hostilities or
other international or national calamity directly or indirectly involving the
United States, or (vi) other event or condition which would have a materially
adverse effect (including any adverse tax effect) on such Fund or its
shareholders if shares of such Fund were repurchased. The Board of each Fund
may in the future modify these conditions in light of experience.
For each Fund, conversion to an open-end company would require the approval
of the holders of such Fund's outstanding shares. See "Proposal No. 1--The
Reorganization--Comparison of Rights of Holders of Shares of the Acquiring Fund
and the Acquired Fund" for a discussion of voting requirements applicable to
conversion of a Fund to an open-end company. In addition, such Fund would be
required to liquidate portfolio securities to meet required and requested
redemptions, and its shares would no longer be listed on the NYSE or the AMEX,
as the case may be. 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 either Fund may at any time propose conversion of such Fund to an
open-end company depending upon its judgment as to the advisability of such
action in light of circumstances then prevailing.
The repurchase by a Fund of its shares at prices below net asset value would
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 would result in a Fund's shares trading at
a price equal to their net asset value. Nevertheless, the fact that a Fund's
shares may be the subject of repurchase or tender offers at net asset value
from time to time, or that a Fund may be converted to an open-end company, may
reduce any spread between market price and net asset value that might otherwise
exist. Shares that have been repurchased by a Fund will be retired
automatically and shall have the status of authorized but unissued shares.
In addition, a purchase by a Fund of its shares will decrease that Fund's
total assets, which would likely have the effect of increasing such Fund's
expense ratio.
Before deciding whether to take any action in response to a discount from net
asset value, a Fund's Board would consider all relevant factors, including the
extent and duration of the discount, the liquidity of such Fund's
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<PAGE>
portfolio, the impact of any action that might be taken on such Fund or its
shareholders and market considerations. Based on these considerations, even if
a Fund's shares should trade at a discount, such Fund's Board may determine
that, in the interest of such Fund and its shareholders, no action should be
taken.
TAX MATTERS ASSOCIATED WITH INVESTMENT IN THE FUNDS
FEDERAL INCOME TAX MATTERS
The following is based upon the advice of Vedder, Price, Kaufman & Kammholz,
counsel to the Funds.
The Federal income tax implications for Acquired Fund shareholders who will
own Acquiring Fund Shares after the Reorganization will be substantially the
same as the Federal income tax implications currently applicable to such
shareholders with respect to their ownership of Acquired Fund Shares. The
Acquiring Fund and the Acquired Fund each qualify under Subchapter M of the
Code as regulated investment companies and satisfy conditions which enable
dividends on shares that are attributable to interest on Municipal Obligations
to be exempt from Federal income tax in the hands of owners of such shares,
subject to the possible application of the alternative minimum tax.
To qualify under Subchapter M for tax treatment as a regulated investment
company, each Fund must, among other things: (a) distribute to its shareholders
at least 90% of its investment company taxable income (as that term is defined
in the Code determined without regard to the deduction for dividends paid) and
90% of its net tax-exempt income; (b) derive less than 30% of its annual gross
income from the sale or other disposition of stock, securities, options,
futures, or forward contracts held for less than three months; and (c)
diversify its holdings so that, at the end of each fiscal quarter of such Fund
(i) at least 50% of the market value of such Fund's assets is represented by
cash, cash items, U.S. government securities and securities of other regulated
investment companies, and other securities, with these other securities
limited, with respect to any one issuer, to an amount not greater in value than
5% of such 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 market
value of such Fund's assets is invested in the securities of any one issuer
(other than U.S. government securities or securities of other regulated
investment companies). In meeting these requirements of Subchapter M of the
Code, each Fund may be restricted in the selling of portfolio securities held
for less than three months and in the utilization of certain of the investment
techniques described under "Investment Objectives and Policies of the Funds"
above. If in any year a Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, that Fund would incur a regular
Federal corporate income tax upon its taxable income for that year, and
distributions to its shareholders would be taxable to such holders as ordinary
income to the extent of the earnings and profits of such Fund. A regulated
investment company that fails to distribute, by the close of each calendar
year, an amount equal to the sum of 98% of its ordinary taxable income for such
year and 98% of its capital gain net income for the one year period ending
October 31 in such year, plus any shortfalls from the prior year's required
distribution, is liable for a 4% excise tax on the portion of the undistributed
amount of such income that is less than the required amount for such
distributions. To avoid the imposition of this excise tax, each Fund generally
makes the required distributions of its ordinary taxable income, if any, and
its capital gain net income, to the extent possible, by the close of each
calendar year.
Each Fund intends to qualify to pay "exempt-interest" dividends on its shares
as defined under the Code. Under the Code, at the close of each quarter of its
taxable year, if at least 50% of the value of its total assets consists of
Municipal Obligations, each Fund shall be qualified to pay exempt-interest
dividends to its shareholders. Exempt-interest dividends are dividends or any
part thereof (other than a capital gain dividend) paid by each Fund which are
attributable to interest on Municipal Obligations and are so designated by the
Fund. Exempt-interest dividends will be exempt from Federal income tax, subject
to the possible application of the Federal alternative minimum tax. Insurance
proceeds received by each Fund under any insurance policies in respect of
scheduled interest payments on defaulted Municipal Obligations, as described
herein, will be excludable from Federal gross income under Section 103(a) of
the Code. In the case of non-appropriation by a political subdivision, however,
there can be no assurance that payments made by the issuer representing
interest on such "non-appropriation" Municipal Lease Obligations will be
excludable from gross income for Federal income tax purposes. See "Investment
Objectives and Policies of the Funds--Municipal Obligations" above. Gains of a
Fund that are attributable to market discount on certain Municipal Obligations
acquired after April 30, 1993 are treated as ordinary income. Distributions to
shareholders by each Fund of net income received, if any, from taxable
temporary investments and net short-term capital gains, if any, realized by
such Fund will be taxable to its shareholders as ordinary income. Distributions
by each Fund of net capital gains, if any, are taxable as long-term capital
gains,
S-17
<PAGE>
regardless of the length of time the shareholder has owned shares of such Fund
and regardless of whether the distribution is received in additional shares or
in cash. As long as a Fund qualifies as a regulated investment company under
the Code, no part of its distributions to shareholders will qualify for the
dividends-received deduction for corporations.
The Code provides that interest on indebtedness incurred or continued to
purchase or carry a Fund's shares to which exempt-interest dividends are
allocated is not deductible. Under rules used by the IRS for determining when
borrowed funds are considered used for the purpose of purchasing or carrying
particular assets, the purchase or ownership of shares may be considered to
have been made with borrowed funds even though such funds are not directly used
for the purchase or ownership of such shares.
The interest on private activity bonds in most instances is not Federally
tax-exempt to a person who is a "substantial user" of a facility financed by
such bonds or a "related person" of such "substantial user." As a result, a
Fund may not be an appropriate investment for shareholders who are considered
either a "substantial user" or a "related person" within the meaning of the
Code. In general, a "substantial user" of a facility includes a "non-exempt
person who regularly uses a part of such facility in his trade or business."
"Related persons" are in general defined to include persons among whom there
exists a relationship, either by family or business, which would result in a
disallowance of losses in transactions among them under various provisions of
the Code (or if they are members of the same controlled group of corporations
under the Code), including a partnership and each of its partners (and their
spouses and minor children), an S corporation and each of its shareholders (and
their spouses and minor children) and various combinations of these
relationships. The foregoing is not a complete statement of all of the
provisions of the Code covering the definitions of "substantial user" and
"related person."
Nonresident alien individuals and certain foreign corporations and other
entities ("foreign investors") generally are subject to U.S. withholding tax at
the rate of 30% (or possibly a lower rate provided by an applicable tax treaty)
on distributions of taxable net investment income and net short-term capital
gains. To the extent received by foreign investors, exempt-interest dividends
and distributions of net long-term capital gains generally are exempt from U.S.
taxation. Different tax consequences may result if the owner is engaged in a
trade or business in the United States or is present in the United States for
more than 182 days during a taxable year.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to 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 each Fund (and received
by the shareholders) on December 31 of the year declared.
The sale or other disposition of shares of a Fund will normally result in
capital gain or loss to shareholders. Generally, a shareholder's gain or loss
will be a long-term gain or loss if the shares have been held for more than one
year. Present law taxes both long-term and short-term capital gains of
corporations at the rates applicable to ordinary income. For non-corporate
taxpayers, however, under current law net capital gains will be taxed at a
maximum rate of 28%, while short-term capital gains and other ordinary income
will be taxed at a maximum rate of 39.6%. However, because of the limitations
on itemized deductions and the deduction for personal exemptions applicable to
higher income taxpayers, the effective rate of tax may be higher in certain
circumstances. Losses realized by a shareholder on the sale or exchange of
shares of a Fund held for six months or less are disallowed to the extent of
any distribution of exempt-interest dividends received with respect to such
shares, and, if not disallowed, such losses are treated as long-term capital
losses to the extent of any distribution of long-term capital gain received
with respect to such shares.
Federal tax law imposes an alternative minimum tax with respect to both
corporations and individuals. Interest on certain Municipal Obligations, such
as bonds issued to make loans for housing purposes or to private entities (but
not to certain tax-exempt organizations such as universities and non-profit
hospitals) is included as an item of tax preference in determining the amount
of a taxpayer's alternative minimum taxable income. To the extent that a Fund
receives income from Municipal Obligations subject to the Federal alternative
minimum tax, a portion of the dividends paid by it, although otherwise exempt
from Federal income tax, will be taxable to its shareholders to the extent that
their tax liability is determined under the alternative minimum tax. Each Fund
will annually supply a report indicating the percentage of that Fund's income
attributable to Municipal Obligations subject to the Federal alternative
minimum tax.
In addition, for certain corporations, alternative minimum taxable income is
increased by 75% of the difference between an alternative measure of income
("adjusted current earnings") and the amount otherwise determined to be the
alternative minimum taxable income. Interest on all Municipal Obligations, and
therefore all distributions by each Fund that would otherwise be tax-exempt, is
included in calculating a corporation's adjusted current earnings.
S-18
<PAGE>
For taxable years beginning before 1996, the Code imposes a separate tax on
corporations (other than regulated investment companies such as the Funds) at a
rate of 0.12% on the excess of such corporation's "modified alternative minimum
taxable income" over $2,000,000. A portion of the tax-exempt interest,
including exempt-interest dividends from the Funds, is includable in modified
alternative minimum taxable income. This tax will be imposed even if the
corporation is not required to pay an alternative minimum tax because the
corporation's regular income tax liability exceeds its minimum tax liability.
Tax-exempt income, including exempt-interest dividends paid by each Fund, is
taken into account in calculating the amount of social security and railroad
retirement benefits that may be subject to Federal income tax.
Each Fund is required in certain circumstances to withhold 31% of taxable
dividends and certain other payments paid to non-corporate holders of that
Fund's shares who do not furnish to that 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 Code provides that every shareholder required to file a tax return must
include for information purposes on such return the amount of tax-exempt
interest received during the taxable year, including any exempt-interest
dividends received from each Fund.
The value of shares acquired pursuant to a Fund's Dividend Reinvestment Plan
will generally be excluded from gross income to the extent that the cash amount
reinvested would be excluded from gross income.
The foregoing is a general, abbreviated summary of the provisions of the Code
and regulations thereunder presently in effect as they directly govern the
Federal income taxation of each Fund and its shareholders. These provisions are
subject to change by legislative or administrative action, and any such change
may be retroactive with respect to each Fund's transactions. Moreover, the
foregoing does not address many of the factors that may be determinative of
whether an investor will be liable for the alternative minimum tax.
Shareholders are advised to consult their own tax advisers for more detailed
information concerning Federal income tax matters.
NEW YORK STATE AND LOCAL TAX MATTERS
The following is based upon the advice of Edwards & Angell, special New York
counsel to the Funds.
New York State (or New York City) Personal Income Taxation. Individual
shareholders of each Fund who are subject to New York State (or New York City)
personal income taxation will not be required to include in their New York
adjusted gross income that portion of their exempt-interest dividends (as
determined for Federal income tax purposes) which each Fund clearly identifies
as directly attributable to interest earned on Municipal Obligations which are
specifically exempted from personal income taxation in New York State (or New
York City), or interest earned on obligations of United States territories or
possessions to the extent interest earned on such obligations is exempt from
taxation by the states pursuant to Federal law. Distributions to individual
shareholders of the Fund of dividends derived from interest that does not
qualify as an exempt-interest dividend (as determined for Federal income tax
purposes), distributions of exempt-interest dividends (as determined for
Federal income tax purposes) which are derived from interest earned on
Municipal Obligations issued by governmental authorities in states other than
New York State and distributions derived from interest earned on Federal
obligations will be included in their New York adjusted gross income as
ordinary income.
Distributions to individual shareholders of each Fund of capital gain
dividends (as determined for Federal income tax purposes) will be included in
their New York adjusted gross income as long-term capital gains. Distributions
to individual shareholders of each Fund of dividends derived from any net
income received from taxable temporary investments and any net short-term
capital gains realized by the Fund will be included in their New York adjusted
gross income as ordinary income. Present New York law taxes long-term capital
gains at the rates applicable to ordinary income.
Gain or loss, if any, resulting from a sale or redemption of shares of a Fund
that is recognized by an individual shareholder of the Fund for Federal income
tax purposes will be recognized for purposes of New York State (or New York
City) personal income taxation.
Other New York State (or New York City) Taxes. Generally, corporate
shareholders of each Fund which are subject to New York State franchise
taxation (or New York City general corporation taxation) will be taxed upon
S-19
<PAGE>
their entire net income, business and investment capital, or at a flat rate
minimum tax. Entire net income will include dividends received from a Fund (as
determined for Federal income tax purposes), as well as any gain or loss
resulting from a sale or redemption of shares of a Fund. Investment capital
will include the corporate shareholder's shares of the Fund. Corporate
shareholders of each Fund, which are subject to the temporary metropolitan
transportation surcharge, will be required to pay a tax surcharge on the
franchise taxes imposed by New York State.
Shareholders of each Fund will not be subject to New York City unincorporated
business taxation solely by reason of their ownership of shares of each Fund.
If a shareholder of a Fund is subject to the New York City unincorporated
business tax, income and gains derived from that Fund, as well as any gain
resulting from the sale or redemption of shares of the Fund, will be subject to
such tax, except for exempt-interest dividends (as determined for Federal
income tax purposes) which the Fund clearly identifies as directly attributable
to interest earned on New York Municipal Obligations.
Shares of each Fund will be exempt from local property taxes in New York
State and New York City, but will be includable in the New York gross estate of
a deceased individual shareholder who is a resident of New York for purposes of
the New York Estate Tax.
The foregoing is a general, abbreviated summary of certain of the provisions
of New York statutes and administrative interpretations presently in effect
governing the taxation of shareholders of each Fund. The New York State and New
York City tax information above assumes that each Fund qualifies as a regulated
investment company for Federal income tax purposes under Subchapter M of the
Code, and that amounts so designated by each Fund to its shareholders qualify
as "exempt-interest dividends" under Section 852(b)(5) of the Code. These
provisions are subject to change by legislative or administrative action, and
any such change may be retroactive with respect to Fund transactions.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning New York tax matters.
S-20
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Unaudited Statements of Net Assets of the Funds............................ F-2
Unaudited Statements of Operations of the Funds............................ F-3
Unaudited Statements of Changes in Net Assets of the Funds................. F-4
Notes to Unaudited Financial Statements of the Funds....................... F-5
Unaudited Portfolio of Investments of the Acquiring Fund................... F-9
Unaudited Portfolio of Investments of the Acquired Fund.................... F-12
Report of Independent Auditors of the Funds................................ F-15
Audited Statements of Net Assets of the Funds.............................. F-16
Audited Statements of Operations of the Funds.............................. F-17
Audited Statements of Changes in Net Assets of the Funds................... F-18
Notes to Audited Financial Statements of the Funds......................... F-19
Audited Portfolio of Investments of the Acquiring Fund..................... F-23
Audited Portfolio of Investments of the Acquired Fund...................... F-26
</TABLE>
F-1
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
STATEMENT OF NET ASSETS
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
NNY NNM
------------ -----------
<S> <C> <C>
ASSETS
Investments in municipal securities, at market value
(note 1)............................................. $118,544,159 $26,693,499
Temporary investments in short-term municipal
securities, at amortized cost
(note 1)............................................. 400,000 --
Cash.................................................. 43,647 73,488
Receivables:
Interest............................................ 2,410,171 600,559
Investments sold.................................... 5,133,086 1,020,000
Other assets.......................................... 20,019 --
------------ -----------
Total assets...................................... 126,551,082 28,387,546
------------ -----------
LIABILITIES
Payable for investments purchased..................... 2,779,916 --
Accrued expenses:
Management fees (note 6)............................ 66,960 15,495
Other............................................... 113,389 48,333
Share dividends payable............................... 663,757 147,065
------------ -----------
Total liabilities................................. 3,624,022 210,893
------------ -----------
Net assets (note 7)................................... $122,927,060 $28,176,653
============ ===========
Shares outstanding.................................... 11,852,801 2,513,939
============ ===========
Net asset value per share outstanding (net assets
divided by shares outstanding)....................... $ 10.37 $ 11.21
============ ===========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
NNY NNM
---------- ----------
<S> <C> <C>
INVESTMENT INCOME
Interest income (note 1)................................ $4,415,187 $1,002,898
---------- ----------
Expenses:
Management fees (note 6).............................. 392,875 89,524
Shareholders' servicing agent fees and expenses....... 25,861 4,479
Custodian's fees and expenses......................... 22,906 17,952
Directors' fees and expenses (note 6)................. 633 548
Professional fees..................................... 7,851 11,003
Shareholders' reports--printing and mailing expenses.. 15,090 5,504
Stock exchange listing fees........................... 12,329 3,241
Investor relations expense............................ 3,867 1,786
Other expenses........................................ 3,577 1,530
---------- ----------
Total expenses...................................... 484,989 135,567
---------- ----------
Net investment income............................. 3,930,198 867,331
---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain from investment transactions (note 3). 116,211 20,000
Net change in unrealized appreciation or depreciation of
investments............................................ (264,927) 101,715
---------- ----------
Net gain (loss) from investments.................. (148,716) 121,715
---------- ----------
Net increase in net assets from operations.............. $3,781,482 $ 989,046
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
NNY NNM
--------------------------- --------------------------
6 MONTHS ENDED 6 MONTHS ENDED
3/31/95 YEAR ENDED 3/31/95 YEAR ENDED
(UNAUDITED) 9/30/94 (UNAUDITED) 9/30/94
-------------- ------------ -------------- -----------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income.. $ 3,930,198 $ 7,722,232 $ 867,331 $ 1,754,584
Net realized gain
(loss) from investment
transactions.......... 116,211 (262,676) 20,000 (123,390)
Net change in
unrealized
appreciation or
depreciation of
investments........... (264,927) (6,594,626) 101,715 (1,777,178)
------------ ------------ ----------- -----------
Net increase
(decrease) in net
assets from
operations........ 3,781,482 864,930 989,046 (145,984)
------------ ------------ ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS (note 1)
From undistributed net
investment income..... (3,971,532) (7,836,491) (885,561) (1,856,829)
From accumulated net
realized gains from
investment
transactions.......... -- (176,312) -- --
In excess of
accumulated net
realized gains from
investment
transactions.......... (11,813) -- -- --
------------ ------------ ----------- -----------
Decrease in net assets
from distributions to
shareholders.......... (3,983,345) (8,012,803) (885,561) (1,856,829)
------------ ------------ ----------- -----------
CAPITAL SHARE
TRANSACTIONS (note 2)
Net proceeds from
shares issued to
shareholders due to
reinvestment of
distributions from net
investment income and
from net realized
gains from investment
transactions.......... 818,275 1,482,971 23,096 284,173
------------ ------------ ----------- -----------
Net increase in net
assets derived from
capital share
transactions........ 818,275 1,482,971 23,096 284,173
------------ ------------ ----------- -----------
Net increase
(decrease) in net
assets............ 616,412 (5,664,902) 126,581 (1,718,640)
Net assets at beginning
of period............. 122,310,648 127,975,550 28,050,072 29,768,712
------------ ------------ ----------- -----------
Net assets at end of
period................ $122,927,060 $122,310,648 $28,176,653 $28,050,072
============ ============ =========== ===========
Balance of
undistributed net
investment income at
end of period......... $ 459,124 $ 500,458 $ 23,966 $ 42,196
============ ============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
At March 31, 1995, the New York Funds (the "Funds") covered in this report
and their corresponding stock exchange symbols are Nuveen New York Municipal
Value Fund, Inc. (NNY) and Nuveen New York Municipal Income Fund, Inc. (NNM).
NNY is traded on the New York Stock Exchange while NNM is traded on the
American Stock Exchange.
The Funds are registered under the Investment Company Act of 1940 as closed-
end, diversified management investment companies.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
Portfolio securities for which market quotations are readily available are
valued at the mean between the quoted bid and asked prices or the yield
equivalent. Portfolio securities for which market quotations are not readily
available are valued at fair value by consistent application of methods
determined in good faith by the Board of Directors. Temporary investments in
securities that have variable rate and demand features qualifying them as
short-term securities are traded and valued at amortized cost.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains
and losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may be settled a month or more after the transaction date. The securities so
purchased are subject to market fluctuation during this period. The Funds have
instructed the custodian to segregate assets in a separate account with a
current value at least equal to the amount of their purchase commitments. At
March 31, 1995, NNY had outstanding purchase commitments of $2,779,916 there
were no such purchase commitments in NNM.
Interest Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt
securities when required for federal income tax purposes.
Income Taxes
The Funds intend to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies by distributing all of their net
investment income, in addition to any significant amounts of net realized gains
from investments, to shareholders. The Funds currently consider significant net
realized gains as amounts in excess of $.01 per Common share. Furthermore, each
Fund intends to satisfy conditions which will enable interest from municipal
securities, which is exempt from regular federal and New York State income
taxes, to retain such tax-exempt status when distributed to shareholders of the
Funds.
Dividends and Distributions to Shareholders
Net investment income is declared as a dividend monthly and payment is made
or reinvestment is credited to shareholder accounts after month-end. Net
realized gains from securities transactions are distributed to shareholders not
less frequently than annually only to the extent they exceed available capital
loss carryovers.
Distributions to shareholders of net investment income and net realized
capital gains are recorded on the ex-dividend date. The amount and timing of
such distributions are determined in accordance with federal income tax
regulations, which may differ from generally accepted accounting principles.
Accordingly, temporary over-distributions as a result of these differences may
result and will be classified as either distributions in excess of net
investment income or distributions in excess of accumulated net realized
capital gains, if applicable.
F-5
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
2. FUND SHARES
Transactions in shares were as follows:
<TABLE>
<CAPTION>
NNY NNM
------------------------- -------------------------
6 MONTHS ENDED YEAR ENDED 6 MONTHS ENDED YEAR ENDED
3/31/95 9/30/94 3/31/95 9/30/94
-------------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Shares issued to
shareholders due to
reinvestment of
distributions from net
investment income and
from net realized gains
from investment
transactions........... 78,374 131,414 2,053 23,425
------ ------- ----- ------
Net increase............ 78,374 131,414 2,053 23,425
====== ======= ===== ======
</TABLE>
3. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments during the six months ended
March 31, 1995, were as follows:
<TABLE>
<CAPTION>
NNY NNM
---------- ---------
<S> <C> <C>
PURCHASES
Investments in municipal securities................. $4,725,740 $ --
Temporary municipal investments..................... 1,400,000 200,000
SALES AND MATURITIES
Investments in municipal securities................. 5,143,086 1,020,000
Temporary municipal investments..................... 2,600,000 300,000
========== =========
</TABLE>
At March 31, 1995, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes
for each Fund.
At September 30, 1994, the Funds' last fiscal year end, the following Funds
had unused capital loss carryovers available for federal income tax purposes to
be applied against future security gains, if any. If not applied, the
carryovers will expire as follows:
<TABLE>
<CAPTION>
NNY NNM
-------- --------
<S> <C> <C>
Expiration Year:
2001.................................................. $ -- $ 59,477
2002.................................................. 262,676 123,390
2003.................................................. -- --
-------- --------
Total................................................... $262,676 $182,867
======== ========
</TABLE>
4. DISTRIBUTIONS TO SHAREHOLDERS
On April 3, 1995, the Funds declared share dividend distributions from their
ordinary income which were paid May 1, 1995, to shareholders of record on April
15, 1995, as follows:
<TABLE>
<CAPTION>
NNY NNM
------ ------
<S> <C> <C>
Dividend per share.......................................... $.0560 $.0585
====== ======
</TABLE>
5. UNREALIZED APPRECIATION (DEPRECIATION)
Gross unrealized appreciation and gross unrealized depreciation of
investments at March 31, 1995, were as follows:
<TABLE>
<CAPTION>
NNY NNM
----------- -----------
<S> <C> <C>
Gross unrealized:
Appreciation.................................. $11,605,316 $ 1,728,552
Depreciation.................................. (224,577) (1,347,833)
----------- -----------
Net unrealized appreciation (depreciation)...... $11,380,739 $ 380,719
=========== ===========
</TABLE>
F-6
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
6. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Funds' investment management agreements with the Nuveen Advisory
Corp. (the "Adviser"), a wholly owned subsidiary of The John Nuveen Company,
each Fund pays to the Adviser an annual management fee, payable monthly, at the
rates set forth below, which are based upon the average daily net asset value
of each Fund:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE NNY
----------------------------- ---------
<S> <C>
For the first $500,000,000..................................... .35% of 1%
For the next $500,000,000...................................... .325 of 1
For net assets over $1,000,000,000............................. .3 of 1
</TABLE>
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE NNM
----------------------------- ----------
<S> <C>
For the first $125,000,000.................................... .65 of 1%
For the next $125,000,000..................................... .6375 of 1
For the next $250,000,000..................................... .625 of 1
For the next $500,000,000..................................... .6125 of 1
For the next $1,000,000,000................................... .6 of 1
For net assets over $2,000,000,000............................ .5875 of 1
</TABLE>
In addition, NNY pays to the Adviser an annual management fee, payable
monthly, based on gross interest income. The management fee in effect
throughout the period was as follows:
<TABLE>
<CAPTION>
GROSS INTEREST INCOME NNY
--------------------- -----
<S> <C>
For the first $50,000,000.......................................... 4.125%
For the next $50,000,000........................................... 4.000
For income over $100,000,000....................................... 3.875
</TABLE>
The fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Funds pay no
compensation directly to those Directors who are affiliated with the Adviser or
to their officers, all of whom receive remuneration for their services to the
Funds from the Adviser.
7. COMPOSITION OF NET ASSETS
At March 31, 1995, net assets consisted of:
<TABLE>
<CAPTION>
NNY NNM
------------ -----------
<S> <C> <C>
Shares, $.01 par value per share.............. $ 118,528 $ 25,139
Paid-in surplus............................... 111,127,065 27,910,017
Balance of undistributed net investment
income....................................... 459,124 23,966
Accumulated net realized gain (loss) from
investment transactions...................... (146,583) (163,188)
Distributions in excess of accumulated net
realized gains from investment transactions.. (11,813) --
Net unrealized appreciation or depreciation of
investments.................................. 11,380,739 380,719
------------ -----------
Net assets.................................. $122,927,060 $28,176,653
============ ===========
Authorized shares............................. 250,000,000 200,000,000
============ ===========
</TABLE>
F-7
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
(UNAUDITED)
8. INVESTMENT COMPOSITION
Each Fund invests in municipal securities which include general obligation,
escrowed and revenue bonds. At March 31, 1995, the revenue sources by municipal
purpose for these investments, expressed as a percent of total investments,
were as follows:
<TABLE>
<CAPTION>
NNY NNM
--- ---
<S> <C> <C>
Revenue Bonds:
Pollution Control Facilities.................................. 12% 22%
Housing Facilities............................................ 14 11
Educational Facilities........................................ 4 4
Lease Rental Facilities....................................... 15 10
Transportation................................................ 3 4
Health Care Facilities........................................ 2 --
Electric Utilities............................................ 1 --
Other......................................................... 6 16
General Obligation Bonds........................................ 6 4
Escrowed Bonds.................................................. 37 29
--- ---
100% 100%
=== ===
</TABLE>
Certain long-term and intermediate-term investments owned by the Funds are
covered by insurance issued by several private insurers or are backed by an
escrow or trust containing U.S. Government or U.S. Government agency
securities, either of which ensure the timely payment of principal and interest
in the event of default (41% for NNY and 29% for NNM). Such insurance or
escrow, however, does not guarantee the market value of the municipal
securities or the value of any of the Fund's shares.
Certain temporary investments in short-term municipal securities have credit
enhancements (letters of credit, guarantees or insurance) issued by third party
domestic or foreign banks or other institutions (33% for NNY).
For additional information regarding each investment security, refer to the
Portfolio of Investments of each Fund.
F-8
<PAGE>
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC. (NNY)
PORTFOLIO OF INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
-------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$1,000,000 New York Local Goverment
Assistance Corporation,
7.500%, 4/01/20 (Pre-
refunded to 4/01/01)....... 4/01 at 102 Aaa $1,143,090
New York State Certificates
of Participation
(Commissioner of Office of
Mental Health):
1,000,000 8.250%, 9/01/07............. 9/97 at 102 Baa1 1,106,270
3,000,000 8.300%, 9/01/12............. 9/97 at 102 Baa1 3,192,990
1,000,000 New York State Energy
Research and Development
Authority, Gas Facilities
(The Brooklyn Union Gas
Company), Alternative
Minimum Tax, 5.600%,
6/01/25.................... 7/03 at 102 Aaa 915,930
3,000,000 New York State Energy
Research and Development
Authority, Pollution
Control (Central Hudson Gas
and Electric Corporation),
Alternative Minimum Tax,
8.375%, 12/01/28........... 12/98 at 102 A3 3,267,900
3,500,000 New York State Energy
Research and Development
Authority, Pollution
Control (Rochester Gas and
Electric Corporation),
Alternative Minimum Tax,
8.375%, 12/01/28........... 12/98 at 102 Baa1 3,841,005
1,000,000 New York State Energy
Research and Development
Authority, Pollution
Control (New York Electric
and Gas Corporation),
Alternative Minimum Tax,
5.950%, 12/01/27........... 12/03 at 102 Baa1 885,400
1,000,000 New York State Energy
Research and Development
Authority, Electric
Facilities (Consolidated
Edison Company),
Alternative Minimum Tax,
6.000%, 3/15/28............ 3/03 at 102 Aaa 948,570
1,425,000 New York State Environmental
Facilities Corporation,
Water Facilities (The New
Rochelle Water Company
Project), Alternative
Minimum Tax,
6.400%, 12/01/24........... 6/02 at 102 A3 1,398,851
4,000,000 New York State Housing
Finance Agency, Health
Facilities (New York City),
8.000%, 11/01/08........... 11/00 at 102 BBB+ 4,432,000
2,500,000 New York State Medical Care
Facilities Finance Agency,
Hospital and Nursing Home
Insured Mortgage (St.
Vincent's Hospital),
8.000%, 2/15/27 (Pre-
refunded to 8/15/97)....... 8/97 at 102 Aaa 2,723,575
4,980,000 New York State Medical Care
Facilities Finance Agency,
Hospital and Nursing Home
Insured Mortgage (Albany
Medical Center), 8.000%,
2/15/28.................... 8/98 at 102 AAA 5,500,908
5,000,000 New York State Medical Care
Facilities Finance Agency,
Hospital and Nursing Home,
FHA-Insured (Catholic
Medical Center), 8.300%,
2/15/22 (Pre-refunded to
2/15/98)................... 2/98 at 102 AAA 5,558,250
5,250,000 New York State Medical Care
Facilities Finance Agency
(Columbia-Presbyterian),
8.000%, 2/15/25 (Pre-
refunded to 8/15/97) ...... 8/97 at 102 Aaa 5,736,885
1,800,000 New York State Medical Care
Facilities Finance Agency
(Hospital and Nursing
Home), 6.550%, 8/15/12 (DD)
........................... 8/02 at 102 AA 1,835,136
New York State Medical Care
Facilities Finance Agency,
Mental Health Services:
1,650,000 8.875%, 8/15/07 (Pre-
refunded to 8/15/97)....... 8/97 at 102 AAA 1,833,117
1,850,000 8.875%, 8/15/07............ 8/97 at 102 Baa1 2,012,504
1,000,000 6.375%, 8/15/17............ 12/02 at 102 Aaa 1,019,900
New York State Mortgage
Agency:
20,000 9.750%, 10/01/10........... 4/95 at 102 1/2 Aa 20,607
455,000 8.625%, 4/01/11............ 10/95 at 102 Aa 471,967
1,375,000 8.375%, 10/01/17........... 1/98 at 102 Aa 1,461,254
New York State Mortgage
Agency, Homeowner Mortgage,
Alternative Minimum Tax:
1,550,000 8.125%, 4/01/20............ 10/97 at 102 Aa 1,641,776
495,000 8.250%, 4/01/22............ 4/99 at 102 Aa 520,210
1,500,000 7.950%, 4/01/22............ 6/00 at 102 Aa 1,580,010
8,205,000 0.000%, 10/01/23........... 10/01 at 13/32 Aa 983,451
New York State Urban
Development Corporation
(Correctional Facilities):
1,500,000 8.000%, 1/01/16 (Pre-
refunded to 1/01/96)....... 1/96 at 102 Baa1 1,570,230
1,500,000 7.000%, 1/01/16 (Pre-
refunded to 1/01/96)....... 1/96 at 102 Aaa 1,554,285
2,000,000 New York State Urban
Development Corporation
(Center for Industrial
Innovation), 7.000%,
1/01/13.................... 1/96 at 102 Baa1 2,044,160
5,000,000 New York State Urban
Development Corporation
(Onondaga County Convention
Center), 7.875% 1/01/20.... 1/01 at 102 Baa1 5,439,150
1,000,000 New York State Urban
Development Corporation,
State Facilities,
7.500%, 4/01/20............ 4/01 at 102 Baa1 1,072,970
1,000,000 New York State Power
Authority, General Purpose,
8.000%, 1/01/17............ 1/98 at 102 AA- 1,089,200
</TABLE>
F-9
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL
AMOUNT DESCRIPTION PROVISIONS* RATINGS** MARKET VALUE
--------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,000,000 Brookhaven Industrial
Development Agency,
Civic Facility (St.
Joseph's College),
8.100%, 4/01/08........ 4/98 at 102 A $ 1,098,500
1,500,000 Cattaraugus County
(Olean Office
Facility), Certificates
of Participation,
8.500%, 8/01/09 (Pre-
refunded to 8/01/98)... 8/98 at 102 BBB- 1,693,050
4,000,000 Dormitory Authority of
the State of New York,
Judicial Facilities
Lease, 7.375%, 7/01/16. No Opt. Call Aaa 4,774,400
Dormitory Authority of
the State of New York
(City University):
5,000,000 8.125%, 7/01/17 (Pre-
refunded to 7/01/97)... 7/97 at 102 Aaa 5,453,350
1,000,000 5.750%, 7/01/18........ No Opt. Call Baa1 928,630
Dormitory Authority of
the State of New York,
Educational Facilities
(State University):
1,000,000 7.400%, 5/15/01........ 5/00 at 102 Baa1 1,086,710
1,250,000 5.250%, 5/15/19........ No Opt. Call Baa1 1,077,175
1,000,000 Dormitory Authority of
the State of New York,
Court Facilities Lease,
5.700%, 5/15/22........ 5/03 at 101 1/2 Baa1 906,780
5,000,000 Hempstead Industrial
Development Agency,
Resource Recovery
(American Ref-Fuel
Company), 7.375%,
12/01/05............... 12/96 at 102 A- 5,172,000
1,000,000 Metropolitan
Transportation
Authority, Transit
Facilities, 5.500%,
7/01/22 (DD)........... 7/02 at 100 Aaa 920,660
New York City General
Obligation:
25,000 6.300%, 8/01/03........ 8/02 at 101 1/2 Aaa 26,595
1,135,000 6.600%, 2/01/04........ No Opt. Call A- 1,154,261
2,500,000 8.125%, 11/01/06 (Pre-
refunded to 11/01/97).. 11/97 at 101 1/2 Aaa 2,754,550
2,500,000 8.500%, 11/01/11 (Pre-
refunded to 11/01/97).. 11/97 at 101 1/2 Aaa 2,774,575
2,500,000 7.000%, 2/01/15........ 2/96 at 102 A- 2,518,950
1,455,000 New York City Housing
Development Corporation
(South Bronx
Cooperatives),
Alternative Minimum
Tax, 8.100%, 9/01/23... 9/00 at 102 Aa 1,548,062
1,000,000 New York City Housing
Development
Corporation, Multi-
Family Mortgage (FHA-
Insured), 6.550%,
10/01/15............... 4/03 at 102 AAA 1,015,370
New York City Municipal
Water Finance
Authority, Water and
Sewer System:
3,750,000 9.000%, 6/15/17 (Pre-
refunded to 6/15/97)... 6/97 at 102 Aaa 4,157,175
1,000,000 7.750%, 6/15/20 (Pre-
refunded to 6/15/01)... 6/01 at 101 1/2 Aaa 1,150,890
1,600,000 New York City Industrial
Development Agency,
Civic Facility (YMCA of
Greater New York),
8.000%, 8/01/16........ 8/01 at 102 N/R 1,691,216
1,000,000 New York City Industrial
Development Agency
(American Airlines,
Inc.), Alternative
Minimum Tax, 8.000%,
7/01/20................ 1/99 at 102 Baa3 1,047,460
1,955,000 Newark-Wayne Community
Hospital, 7.600%,
9/01/15................ 9/03 at 102 N/R 1,974,374
1,000,000 Port Authority of New
York and New Jersey,
Special Project,
LaGuardia Airport
Passenger Terminal
(Delta Air Lines),
6.950%, 6/01/08........ 6/02 at 102 Ba1 1,006,590
2,000,000 St. Lawrence County,
Solid Waste Disposal
Authority, 8.875%,
1/01/08................ 1/98 at 102 Baa 2,215,640
2,000,000 Triborough Bridge and
Tunnel Authority,
General Purpose,
8.125%, 1/01/12........ 1/98 at 102 Aa 2,199,380
1,275,000 Triborough Bridge and
Tunnel Authority,
Mortgage Recording Tax,
8.000%, 1/01/18 (Pre-
refunded to 1/01/98)... 1/98 at 101 1/2 Aaa 1,396,265
--------------------------------------------------------------------------------
$118,000,000 Total Investments-(cost
$107,163,420)--96.4%... 118,544,159
--------------------------------------------------------------------------------
------------
TEMPORARY INVESTMENTS IN
SHORT-TERM MUNICIPAL
SECURITIES--0.3%
$ 400,000 New York City General
Obligation, Variable
Rate Demand Bonds,
4.500%, 8/01/21+....... VMIG-1 400,000
--------------------------------------------------------------------------------
------------
Other Assets Less
Liabilities--3.3%...... 3,982,901
---------------------------------------------------------------------------
Net Assets--100%........ $122,927,060
</TABLE>
----------------------------------------------------------------------
----------------------------------------------------------------------
F-10
<PAGE>
<TABLE>
<CAPTION>
STANDARD & NUMBER MARKET
POOR'S MOODY'S OF ISSUES MARKET VALUE PERCENT
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 20 $ 51,358,340 43%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 11 13,351,053 11
PORTFOLIO OF A, A- A, A2, A3 6 14,610,462 13
INVESTMENTS BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 17 34,552,124 29
(EXCLUDING BB+, BB, BB- Ba1, Ba, Ba2, Ba3 1 1,006,590 1
TEMPORARY Non-rated Non-rated 2 3,665,590 3
INVESTMENTS):
-----------------------------------------------------------------------------------
TOTAL 57 $118,544,159 100%
-----------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
*Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
**Ratings: Using the higher of Standard & Poor's or Moody's rating.
N/R--Investment is not rated.
(DD) Security purchased on a delayed delivery basis (note 1).
+The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security.
The rate disclosed is that currently in effect. This rate changes periodically
based on market conditions or a specified market index.
See accompanying notes to financial statements.
F-11
<PAGE>
NUVEEN NEW YORK MUNICIPAL INCOME FUND, INC. (NNM)
PORTFOLIO OF INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
-------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,000,000 New York State Energy
Research and
Development Authority,
Electric Facilities
(Consolidated Edison
Company), Alternative
Minimum Tax, 7.500%,
1/01/26................ 1/00 at 101 Aa3 $ 1,054,650
1,000,000 New York State Energy
Research and
Development Authority,
Pollution Control
(Central Hudson Gas and
Electric Corporation),
Alternative Minimum
Tax, 8.375%, 12/01/28.. 12/98 at 102 A3 1,089,300
1,000,000 New York State Energy
Research and
Development Authority,
Pollution Control
(Rochester Gas and
Electric Corporation),
Alternative Minimum
Tax, 8.375%, 12/01/28.. 12/98 at 102 Baa1 1,097,430
1,000,000 New York State Housing
Finance Agency (State
University
Construction), 8.100%,
11/01/10 (Pre-refunded
to 11/01/98)........... 11/98 at 102 Aaa 1,124,970
1,000,000 New York State Housing
Finance Agency (H. E.
L. P.-Suffolk Housing),
Alternative Minimum
Tax, 8.100%, 11/01/05.. 11/99 at 100 Baa 1,078,880
1,000,000 New York State Housing
Finance Agency, Health
Facilities (New York
City), 8.000%,
11/01/08............... 11/00 at 102 BBB+ 1,108,000
1,000,000 New York State Housing
Finance Agency, Service
Contract, 6.375%,
9/15/14................ 9/04 at 102 Baa1 997,200
1,000,000 New York State Medical
Care Facilities Finance
Agency (Huntington
Hospital), 8.125%,
11/01/14 (Pre-refunded
to 11/01/97)........... 11/97 at 102 BBB 1,100,080
1,000,000 New York State Medical
Care Facilities Finance
Agency (Columbia-
Presbyterian), 8.000%,
2/15/25 (Pre-refunded
to 8/15/97)............ 8/97 at 102 Aaa 1,092,740
865,000 New York State Mortgage
Agency, Homeowner
Mortgage, Alternative
Minimum Tax, 8.125%,
4/01/20................ 10/97 at 102 Aa 916,217
1,250,000 New York State Urban
Development
Corporation,
Correctional Capital
Facilities, 5.500%,
1/01/15................ 1/03 at 102 Baa1 1,126,025
2,955,000 Babylon Industrial
Development Agency,
Resource Recovery,
8.500%, 1/01/19........ 7/98 at 103 Baa1 3,221,748
250,000 Battery Park City
Authority, Junior
Revenue, 5.800%,
11/01/22............... 11/03 at 102 A 224,443
1,000,000 Cattaraugus County
(Olean Office
Facility), Certificates
of Participation,
8.500%, 8/01/09 (Pre-
refunded to 8/01/98)... 8/98 at 102 BBB- 1,128,700
1,000,000 Dormitory Authority of
the State of New York
(City University),
8.200%, 7/01/12........ 7/98 at 102 Baa1 1,107,030
250,000 Dormitory Authority of
the State of New York,
Judicial Facilities
Lease (Suffolk County),
9.500%, 4/15/14........ 4/95 at 116 15/32 Baa1 292,283
1,250,000 Dormitory Authority of
the State of New York
(State University),
5.250%, 5/15/19........ No Opt. Call Baa1 1,077,175
1,000,000 Geneva Industrial
Development Agency,
Civic Facility (Finger
Lakes Cerebral Palsy),
8.500%, 11/01/16....... 11/01 at 102 N/R 1,032,380
1,000,000 Metropolitan
Transportation
Authority, Transit
Facilities Service
Contract, 8.500%,
7/01/17 (Pre-refunded
to 7/01/97)............ 7/97 at 102 AAA 1,098,580
New York City General
Obligation:
945,000 8.500%, 8/01/12 (Pre-
refunded to 8/01/96)... 8/96 at 102 A- 1,009,506
55,000 8.500%, 8/01/12........ 8/96 at 102 A- 58,081
495,000 New York City Housing
Development Corporation
(South Williamsburg
Cooperative),
Alternative Minimum
Tax, 7.900%, 2/01/23... 2/00 at 102 Aa 520,438
500,000 New York City Housing
Development
Corporation, Multi-
Family Mortgage (FHA-
Insured), 6.550%,
10/01/15............... 4/03 at 102 AAA 507,685
1,000,000 New York City Municipal
Water Finance
Authority, Water and
Sewer System, 7.875%,
6/15/16 (Pre-refunded
to 6/15/96)............ 6/96 at 102 Aaa 1,060,340
1,850,000 New York City Industrial
Development Agency,
Civic Facility
(International Center
for Integrative
Studies, Inc.-The Door
Project), 9.000%,
3/01/09++.............. 3/97 at 103 N/R 555,000
1,000,000 New York City Industrial
Development Agency,
Civic Facility (YMCA of
Greater New York),
8.000%, 8/01/16........ 8/01 at 102 N/R 1,057,009
1,000,000 New York City Industrial
Development Agency
(Terminal One Group),
Alternative Minimum
Tax, 6.125%, 1/01/24... 1/04 at 102 A 957,609
-------------------------------------------------------------------------------
$26,665,000 Total Investments--(cost $26,312,780)--94.7%......... 26,693,499
-------------------------------------------------------------------------------
-----------
Other Assets Less Liabilities--5.3%.................. 1,483,154
--------------------------------------------------------------------------
Net Assets--100%..................................... $28,176,653
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
F-12
<PAGE>
NUVEEN NEW YORK MUNICIPAL INCOME FUND, INC. (NNM)
PORTFOLIO OF INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER MARKET
STANDARD & POOR'S MOODY'S OF ISSUES MARKET VALUE PERCENT
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF RATINGS** AAA Aaa 5 $ 4,884,315 18%
PORTFOLIO OF
INVESTMENTS: AA+, AA, AA- Aa1, Aa, Aa2, Aa3 3 2,491,305 9
A, A- A, A2, A3 5 3,338,939 13
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 11 13,334,551 50
Non-rated Non-rated 3 2,644,389 10
--------------------------------------------------------------------------------------------
TOTAL 27 $26,693,499 100%
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
</TABLE>
*Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
**Ratings: Using the higher of Standard & Poor's or Moody's rating.
N/R--Investment is not rated.
++The Fund received $72,000 of the $83,000 interest coupon payment due March 1,
1994. Interest income has not been accrued since that date. Legal proceedings
have been initiated to enforce the rights of the Fund and all other
bondholders, which include the right to obtain the property that secures the
obligation of the issuer.
See accompanying notes to financial statements.
F-13
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
FINANCIAL HIGHLIGHTS
Selected data for a Common share outstanding throughout each period is as
follows:
<TABLE>
<CAPTION>
OPERATING PERFORMANCE
-----------------------
NET
REAL-
IZED &
UNREAL- TOTAL
NET IZED PER INVEST-
ASSET GAIN NET SHARE MENT TOTAL
VALUE NET (LOSS) DIVIDENDS ASSET MARKET RETURN RETURN
BEGIN- INVEST- FROM FROM NET DISTRIBUTIONS VALUE VALUE ON ON NET
NING OF MENT INVEST- INVESTMENT FROM CAPITAL END OF END OF MARKET ASSET
PERIOD INCOME MENTS INCOME GAINS PERIOD PERIOD VALUE** VALUE**
---------------------------------------------------------------------------------------------------------
NNY
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 Mos. ended
3/31/95 (unaudited) $10.390 $.332 $(.015) $(.336) $(.001)+ $10.370 $10.500 3.33% 3.16%
Year ended 9/30,
1994 10.990 .659 (.575) (.669) (.015) 10.390 10.500 (.77) .78
1993 10.740 .664 .393 (.670) (.137) 10.990 11.250 7.27 10.28
2 Mos. ended
9/30/92 10.870 .112 (.129) (.113) -- 10.740 11.250 (2.29) (.16)
Year ended 7/31,
1992 10.270 .676 .727 (.676) (.127) 10.870 11.625 17.77 14.28
1991 10.200 .679 .115 (.676) (.048) 10.270 10.625 8.58 8.21
1990 10.370 .677 (.127) (.676) (.044) 10.200 10.500 7.08 5.61
1989 9.950 .675 .659 (.679) (.235) 10.370 10.500 14.92 14.22
10/7/87 to
7/31/88 9.350 .514 .541 (.455) -- 9.950 10.000 4.67 11.40
---------------------------------------------------------------------------------------------------------
<CAPTION>
NNM
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 Mos. ended
3/31/95 (unaudited) 11.170 .346 .047 (.353) -- 11.210 11.125 10.88 3.63
Year ended 9/30,
1994 11.960 .701 (.748) (.743) -- 11.170 10.375 (13.43) (.40)
1993 12.200 .755 (.185) (.767) (.043) 11.960 12.750 8.69 4.88
10 Mos. ended
9/30/92 11.940 .661 .325 (.655) (.071) 12.200 12.500 12.82 8.54
Year ended
11/30/91 11.430 .795 .517 (.802) -- 11.940 11.750 8.02 11.92
1 Mo. ended
11/30/90 11.370 .068 .095 (.068) (.035) 11.430 11.625 .94 1.44
Year ended 10/31,
1990 11.710 .806 (.266) (.810) (.070) 11.370 11.625 8.75 4.77
1989 11.530 .806 .210 (.808) (.028) 11.710 11.500 6.39 9.15
4/20/88 to
10/31/88 11.210 .358 .244 (.282) -- 11.530 11.625 (.66) 5.45
---------------------------------------------------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
--------------------------------
RATIO OF
NET NET
ASSETS RATIO OF INVEST-
END OF EXPENSES MENT PORT-
PERIOD TO INCOME FOLIO
(IN AVERAGE TO AVER- TURN-
THOU- NET AGE NET OVER
SANDS) ASSETS ASSETS RATE
---------------------------------------------------------------------------------------------------------
NNY
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6 Mos. ended
3/31/95 (unaudited) $122,927 .81*% 6.53*% 4%
Year ended 9/30,
1994 122,311 .84 6.16 4
1993 127,976 .85 6.16 5
2 Mos. ended
9/30/92 123,313 .84* 6.20* --
Year ended 7/31,
1992 124,620 .90 6.46 9
1991 116,236 .96 6.77 14
1990 114,368 .98 6.70 16
1989 115,379 1.03 6.75 24
10/7/87 to
7/31/88 109,750 .99* 6.54* 47
---------------------------------------------------------------------------------------------------------
<CAPTION>
NNM
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6 Mos. ended
3/31/95 (unaudited) 28,177 .98* 6.30* --
Year ended 9/30,
1994 28,050 1.00 6.08 12
1993 29,769 1.07 6.31 17
10 Mos. ended
9/30/92 30,075 .93* 6.58* 3
Year ended
11/30/91 29,187 .92 6.84 14
1 Mo. ended
11/30/90 27,736 .80* 7.26* 1
Year ended 10/31,
1990 27,564 .86 6.99 11
1989 28,177 .90 6.95 36
4/20/88 to
10/31/88 27,689 .94* 6.21* 21
---------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized.
** Total Investment Return on Market Value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and changes
in stock price per share. Total Return on Net Asset Value is the combination
of reinvested dividend income, reinvested capital gains distributions, if
any, and changes in net asset value per share.
+The amount shown reflects a distribution in excess of capital gains of $.0010
to NNY shareholders.
F-14
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Nuveen New York Municipal Value Fund, Inc.
Nuveen New York Municipal Income Fund, Inc.
We have audited the accompanying statements of net assets, including the
portfolios of investments, of Nuveen New York Municipal Value Fund, Inc. and
Nuveen New York Municipal Income Fund, Inc. as of September 30, 1994, and the
related statements of operations, changes in net assets and the financial
highlights for the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
September 30, 1994, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of
Nuveen New York Municipal Value Fund, Inc. and Nuveen New York Municipal Income
Fund, Inc. at September 30, 1994, and the results of their operations, changes
in their net assets and their financial highlights for the periods indicated
therein in conformity with generally accepted accounting principles.
Ernst & Young LLP
Chicago, Illinois
November 4, 1994
F-15
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
STATEMENT OF NET ASSETS
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
NNY NNM
------------ -----------
<S> <C> <C>
ASSETS
Investments in municipal securities, at market value
(note 1)............................................. $119,069,901 $27,589,625
Temporary investments in short-term municipal
securities, at market value which equals cost (note
1)................................................... 1,600,000 100,000
Cash.................................................. 22,503 --
Receivables:
Interest............................................ 2,349,934 619,263
Investments sold.................................... 134,157 --
Other assets.......................................... 7,134 --
------------ -----------
Total assets...................................... 123,183,629 28,308,888
------------ -----------
LIABILITIES
Cash overdraft........................................ -- 29,353
Accrued expenses:
Management fees (note 6)............................ 65,591 15,069
Other............................................... 148,022 63,681
Share dividends payable............................. 659,368 150,713
------------ -----------
Total liabilities................................. 872,981 258,816
------------ -----------
Net assets (note 7)................................... $122,310,648 $28,050,072
============ ===========
Shares outstanding.................................... 11,774,427 2,511,886
============ ===========
Net asset value per share outstanding (net assets
divided by shares outstanding)....................... $ 10.39 $ 11.17
============ ===========
</TABLE>
See accompanying notes to financial statements.
F-16
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
NNY NNM
----------- -----------
<S> <C> <C>
INVESTMENT INCOME
Interest income (note 1)............................. $ 8,773,382 $ 2,043,645
----------- -----------
Expenses:
Management fees (note 6)........................... 800,465 187,591
Shareholders' servicing agent fees and expenses.... 61,310 12,330
Custodian's fees and expenses...................... 47,288 36,665
Board members' fees and expenses (note 6).......... 2,704 1,255
Professional fees.................................. 19,271 18,930
Shareholders' reports--printing and mailing
expenses.......................................... 74,697 21,807
Stock exchange listing fees........................ 21,144 6,380
Investor relations expense......................... 19,672 1,835
Other expenses..................................... 4,599 2,268
----------- -----------
Total expenses................................... 1,051,150 289,061
----------- -----------
Net investment income.......................... 7,722,232 1,754,584
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain (loss) from investment transactions
(note 3)............................................ (262,676) (123,390)
Net change in unrealized appreciation or depreciation
of investments...................................... (6,594,626) (1,777,178)
----------- -----------
Net gain (loss) from investments............... (6,857,302) (1,900,568)
----------- -----------
Net increase (decrease) in net assets from
operations.......................................... $ 864,930 $ (145,984)
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-17
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
NNY NNM
-------------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
9/30/94 9/30/93 9/30/94 9/30/93
------------ ------------ ----------- ----------- ---
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income... $ 7,722,232 $ 7,696,881 $ 1,754,584 $ 1,872,458
Net realized gain (loss)
from investment
transactions........... (262,676) 177,673 (123,390) (59,477)
Net change in unrealized
appreciation or
depreciation of
investments............ (6,594,626) 4,273,343 (1,777,178) (420,878)
------------ ------------ ----------- -----------
Net increase
(decrease) in net
assets from
operations........... 864,930 12,147,897 (145,984) 1,392,103
------------ ------------ ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS (note 1)
From net investment
income................. (7,836,491) (7,750,927) (1,856,829) (1,899,078)
From net realized gains
from investment
transactions........... (176,312) (1,572,018) -- (106,704)
------------ ------------ ----------- -----------
Decrease in net assets
from distributions to
shareholders......... (8,012,803) (9,322,945) (1,856,829) (2,005,782)
------------ ------------ ----------- -----------
CAPITAL SHARE
TRANSACTIONS (note 2)
Net proceeds from shares
issued to shareholders
due to reinvestment of
distributions from net
investment income and
from net realized gains
from investment
transactions........... 1,482,971 1,837,190 284,173 307,075
------------ ------------ ----------- -----------
Net increase in net
assets derived from
capital share
transactions........... 1,482,971 1,837,190 284,173 307,075
------------ ------------ ----------- -----------
Net increase
(decrease) in net
assets............... (5,664,902) 4,662,142 (1,718,640) (306,604)
Net assets at beginning
of year................ 127,975,550 123,313,408 29,768,712 30,075,316
------------ ------------ ----------- -----------
Net assets at end of
year................... $122,310,648 $127,975,550 $28,050,072 $29,768,712
============ ============ =========== ===========
Balance of undistributed
net investment income
at end of year......... $ 500,458 $ 614,717 $ 42,196 $ 144,441
============ ============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-18
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
At September 30, 1994, the New York Funds (the "Funds") covered in this
report and their corresponding stock exchange symbols are Nuveen New York
Municipal Value Fund, Inc. (NNY) and Nuveen New York Municipal Income Fund,
Inc. (NNM). NNY is traded on the New York Stock Exchange, while NNM is traded
on the American Stock Exchange.
The Funds are registered under the Investment Company Act of 1940 as closed-
end, diversified management investment companies.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
Portfolio securities for which market quotations are readily available are
valued at the mean between the quoted bid and asked prices or the yield
equivalent. Portfolio securities for which market quotations are not readily
available are valued at fair value by consistent application of methods
determined in good faith by the Board members. Temporary investments in
securities that have variable rate and demand features qualifying them as
short-term securities are traded and valued at principal amount.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains
and losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may be settled a month or more after the transaction date. The securities so
purchased are subject to market fluctuation during this period. The Funds have
instructed the custodian to segregate assets in a separate account with a
current value at least equal to the amount of the purchase commitments. At
September 30, 1994, there were no such purchase commitments in either of the
Funds.
Interest Income
Interest income is determined on the basis of interest accrued and discount
earned, adjusted for amortization of premiums or discounts on long-term debt
securities when required for federal income tax purposes.
Income Taxes
The Funds intend to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies by distributing all of their net
investment income, in addition to any significant amounts of net realized gains
from investments, to shareholders. The Funds currently consider significant net
realized gains as amounts in excess of $.01 per share. Furthermore, each Fund
intends to satisfy conditions which will enable interest from municipal
securities, which is exempt from regular federal and New York State income
taxes, to retain such tax-exempt status when distributed to shareholders of the
Funds. All income dividends paid during the period ended September 30, 1994,
have been designated Exempt Interest Dividends.
Dividends and Distributions to Shareholders
Net investment income is declared as a dividend monthly and payment is made
or reinvestment is credited to shareholder accounts after month-end. Net
realized gains from securities transactions are distributed to shareholders not
less frequently than annually only to the extent they exceed available capital
loss carryovers.
Distributions to shareholders of net investment income and net realize
capital gains are recorded on the ex-dividend date. The amount and timing of
such distributions are determined in accordance with federal income tax
regulations, which may differ from generally accepted accounting principles.
Accordingly, temporary over-distributions as a result of these differences may
result and will be classified as either distributions in excess of net
investment income or distributions in excess of accumulated net realized
capital gains, if applicable.
F-19
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS
2. FUND SHARES
Transactions in shares were as follows:
<TABLE>
<CAPTION>
NNY NNM
--------------------- ---------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
9/30/94 9/30/93 9/30/94 9/30/93
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Shares issued to shareholders
due to reinvestment of
distributions from net
investment income and from
net realized gains from
investment transactions..... 131,414 159,771 23,425 24,174
======= ======= ====== ======
</TABLE>
3. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments during the year ended September
30, 1994, were as follows:
<TABLE>
<CAPTION>
NNY NNM
---------- ----------
<S> <C> <C>
PURCHASES
Investments in municipal securities................ $7,155,423 $3,892,363
Temporary municipal investments.................... 7,300,000 3,200,000
SALES AND MATURITIES
Investments in municipal securities................ 5,258,036 3,384,513
Temporary municipal investments.................... 6,100,000 3,300,000
========== ==========
</TABLE>
At September 30, 1994, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes
for each Fund.
At September 30, 1994, the Funds had unused capital loss carryovers available
for federal income tax purposes to be applied against future security gains, if
any. If not applied, the carryovers will expire as follows:
<TABLE>
<CAPTION>
NNY NNM
-------- --------
<S> <C> <C>
Expiration year:
2001.................................................... $ -- $ 59,477
2002.................................................... 262,676 123,390
-------- --------
Total............................................... $262,676 $182,867
======== ========
</TABLE>
4. DISTRIBUTIONS TO SHAREHOLDERS
On October 3, 1994, the Funds declared dividend distributions from their
ordinary income that were paid November 1, 1994, to shareholders of record on
October 15, 1994, as follows:
<TABLE>
<CAPTION>
NNY NNM
------ ------
<S> <C> <C>
Dividend per share.......................................... $.0560 $.0600
====== ======
</TABLE>
5. UNREALIZED APPRECIATION (DEPRECIATION)
Gross unrealized appreciation and gross unrealized depreciation of
investments at September 30, 1994, were as follows:
<TABLE>
<CAPTION>
NNY NNM
----------- -----------
<S> <C> <C>
Gross unrealized:
Appreciation.................................. $12,035,390 $ 1,737,856
Depreciation.................................. (389,724) (1,458,852)
----------- -----------
Net unrealized appreciation..................... $11,645,666 $ 279,004
=========== ===========
</TABLE>
F-20
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Funds' investment management agreements with the Nuveen Advisory
Corp. (the "Adviser"), a wholly owned subsidiary of The John Nuveen Company,
each Fund pays to the Adviser an annual management fee, payable monthly, at the
rates set forth below, which are based upon the average daily net asset value
of each Fund:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE NNY
----------------------------- ----------
<S> <C>
For the first $500,000,000..................................... .35 of 1%
For the next $500,000,000...................................... .325 of 1%
For net assets over $1,000,000,000............................. .3 of 1%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE NNM
----------------------------- -----------
<S> <C>
For the first $125,000,000.................................... .65 of 1%
For the next $125,000,000..................................... .6375 of 1%
For the next $250,000,000..................................... .625 of 1%
For the next $500,000,000..................................... .6125 of 1%
For the next $1,000,000,000................................... .6 of 1%
For net assets over $2,000,000,000............................ .5875 of 1%
</TABLE>
In addition, NNY pays to the Adviser a management fee based on gross interest
income. The management fee in effect throughout the period was as follows:
<TABLE>
<CAPTION>
GROSS INTEREST INCOME NNY
--------------------- -----
<S> <C>
For the first $50,000,000.......................................... 4.125%
For the next $50,000,000........................................... 4.000
For income over $100,000,000....................................... 3.875
</TABLE>
The fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Funds pay no
compensation directly to those Board members who are affiliated with the
Adviser or to their officers, all of whom receive remuneration for their
services to the Funds from the Adviser.
7. COMPOSITION OF NET ASSETS
At September 30, 1994, net assets consisted of:
<TABLE>
<CAPTION>
NNY NNM
------------ -----------
<S> <C> <C>
Shares, $.01 par value per share.............. $ 117,744 $ 25,119
Paid-in surplus............................... 110,309,456 27,886,620
Undistributed net investment income........... 500,458 42,196
Undistributed net realized gain (loss) from
investment transactions...................... (262,676) (182,867)
Net unrealized appreciation of investments.... 11,645,666 279,004
------------ -----------
Net assets.................................. $122,310,648 $28,050,072
============ ===========
Authorized shares............................. 250,000,000 200,000,000
============ ===========
</TABLE>
F-21
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. INVESTMENT COMPOSITION
Each Fund invests in municipal securities which include general obligation,
escrowed and revenue bonds. At September 30, 1994, the revenue sources by
municipal purpose for these investments, expressed as a percent of total
investments, were as follows:
<TABLE>
<CAPTION>
NNY NYM
--- ---
<S> <C> <C>
Revenue Bonds:
Housing Facilities............................................ 12% 11%
Pollution Control Facilities.................................. 11 21
Educational Facilities........................................ 3 8
Transportation................................................ 7 7
Lease Rental Facilities....................................... 15 10
Health Care Facilities........................................ 2 --
Electric Utilities............................................ 1 --
Other......................................................... 6 11
General Obligation Bonds........................................ 5 4
Escrowed Bonds.................................................. 38 28
--- ---
100% 100%
=== ===
</TABLE>
Certain long-term and intermediate-term investments owned by the Funds are
covered by insurance issued by several private insurers or are backed by an
escrow or trust containing U.S. Government or U.S. Government agency
securities, either of which ensure the timely payment of principal and interest
in the event of default (39% for NNY and 28% for NNM). Such insurance or
escrow, however, does not guarantee the market value of the municipal
securities or the value of any of the Funds' shares.
All of the temporary investments in short-term municipal securities have
credit enhancements (letters of credit, guarantees or insurance) issued by
third party domestic or foreign banks or other institutions.
For additional information regarding each investment security, refer to the
Portfolio of Investments of each Fund.
F-22
<PAGE>
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC. (NNY)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL
AMOUNT DESCRIPTION PROVISIONS* RATINGS** MARKET VALUE
---------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,000,000 New York State Dormitory
Authority (Court
Facilities),
5.700%, 5/15/22........ 5/03 at 101 1/2 Baa1 $ 862,540
1,000,000 New York Local
Government Assistance
Corporation,
7.500%, 4/01/20 (Pre-
refunded to 4/01/01)... 4/01 at 102 Aaa 1,140,450
New York State
(Commissioner of Office
of Mental Health),
Certificates of
Participation:
1,000,000 8.250%, 9/01/07........ 9/97 at 102 Baa1 1,105,090
3,000,000 8.300%, 9/01/12........ 9/97 at 102 Baa1 3,299,490
3,000,000 New York State Energy
Research and
Development Authority,
Pollution Control
(Central Hudson Gas and
Electric Corporation),
Alternative Minimum
Tax, 8.375%, 12/01/28.. 12/98 at 102 A3 3,310,560
3,500,000 New York State Energy
Research and
Development Authority,
Pollution Control
(Rochester Gas and
Electric Corporation),
Alternative Minimum
Tax, 8.375%, 12/01/28.. 12/98 at 102 Baa1 3,818,920
1,000,000 New York State Energy
Research and
Development Authority,
Pollution Control (New
York Electric and Gas
Corporation),
Alternative Minimum
Tax, 5.950%, 12/01/27.. 12/03 at 102 Baa1 868,620
1,000,000 New York State Energy
Research and
Development Authority,
Electric Facilities
(Consolidated Edison
Company), Alternative
Minimum Tax,
6.000%, 3/15/28........ 3/03 at 102 Aaa 928,250
1,425,000 New York State
Environmental
Facilities Corporation,
Water Facilities (The
New Rochelle Water
Company Project),
Alternative Minimum
Tax, 6.400%, 12/01/24.. 6/02 at 102 A3 1,373,315
4,000,000 New York State Housing
Finance Agency, Health
Facilities (New York
City), 8.000%,
11/01/08............... 11/00 at 102 BBB+ 4,485,600
2,500,000 New York State Medical
Care Facilities Finance
Agency, Hospital and
Nursing Home Insured
Mortgage (St. Vincent's
Hospital),
8.000%, 2/15/27 (Pre-
refunded to 8/15/97)... 8/97 at 102 Aaa 2,752,300
4,980,000 New York State Medical
Care Facilities Finance
Agency, Hospital and
Nursing Home Insured
Mortgage (Albany
Medical Center),
8.000%, 2/15/28........ 8/98 at 102 AAA 5,451,008
5,000,000 New York State Medical
Care Facilities Finance
Agency, Hospital and
Nursing Home, FHA-
Insured Mortgage
(Catholic Medical
Center),
8.300%, 2/15/22 (Pre-
refunded to 2/15/98)... 2/98 at 102 AAA 5,614,050
5,250,000 New York State Medical
Care Facilities Finance
Agency (Columbia-
Presbyterian), 8.000%,
2/15/25 (Pre-refunded
to 8/15/97)............ 8/97 at 102 Aaa 5,796,263
New York State Medical
Care Facilities Finance
Agency, Mental Health
Services Facilities:
1,650,000 8.875%, 8/15/07 (Pre-
refunded to 8/15/97)... 8/97 at 102 AAA 1,866,249
1,850,000 8.875%, 8/15/07........ 8/97 at 102 Baa1 2,040,197
1,000,000 6.375%, 8/15/17........ 12/02 at 102 Aaa 995,730
New York State Mortgage
Agency:
20,000 9.750%, 10/01/10....... 4/95 at 102 1/2 Aa 20,837
455,000 8.625%, 4/01/11........ 10/95 at 102 Aa 469,728
1,375,000 8.375%, 10/01/17....... 1/98 at 102 Aa 1,418,739
New York State Mortgage
Agency, Homeowner
Mortgage, Alternative
Minimum Tax:
1,550,000 8.125%, 4/01/20......... 10/97 at 102 Aa 1,659,709
495,000 8.250%, 4/01/22......... 4/99 at 102 Aa 519,344
1,500,000 7.950%, 4/01/22......... 6/00 at 102 Aa 1,562,580
8,490,000 0.000%, 10/01/23........ 10/01 at 19 13/32 Aa 973,718
New York State Urban
Development
Corporation,
(Correctional
Facilities):
1,500,000 8.000%, 1/01/06 (Pre-
refunded to 1/01/96)... 1/96 at 102 Baa1 1,593,840
1,500,000 7.000%, 1/01/16 (Pre-
refunded to 1/01/96)... 1/96 at 102 Aaa 1,570,965
2,000,000 New York State Urban
Development Corporation
(Center for Industrial
Innovation), 7.000%,
1/01/13................ 1/96 at 102 Baa1 2,057,460
5,000,000 New York State Urban
Development Corporation
(Onondaga County
Convention Center),
7.875%, 1/01/20........ 1/01 at 102 Baa1 5,433,750
1,000,000 New York State Urban
Development
Corporation, State
Facilities,
7.500%, 4/01/20........ 4/01 at 102 Baa1 1,065,200
1,000,000 New York State Power
Authority, General
Purpose, 8.000%,
1/01/17................ 1/98 at 102 AA- 1,099,910
</TABLE>
F-23
<PAGE>
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC. (NNY)--CONTINUED
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL
AMOUNT DESCRIPTION PROVISIONS* RATINGS** MARKET VALUE
--------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,000,000 Brookhaven Industrial
Development Agency,
Civic Facility (St.
Joseph's College),
8.100%, 4/01/08........ 4/98 at 102 A $ 1,084,990
1,500,000 Cattaraugus County
(Olean Office
Facility), Certificates
of Participation,
8.500%, 8/01/09 (Pre-
refunded to 8/01/98)... 8/98 at 102 BBB- 1,656,135
4,000,000 Dormitory Authority of
the State of New York,
Judicial Facilities
Lease, 7.375%, 7/01/16. No Opt. Call Aaa 4,630,560
Dormitory Authority of
the State of New York
(City University):
5,000,000 8.125%, 7/01/17 (Pre-
refunded to 7/01/97)... 7/97 at 102 Aaa 5,535,050
1,000,000 5.750%, 7/01/18......... No Opt. Call Baa1 888,800
Dormitory Authority of
the State of New York,
Educational Facilities
(State University):
1,000,000 7.400%, 5/15/01......... 5/00 at 102 Baa1 1,086,510
1,250,000 5.250%, 5/15/19......... No Opt. Call Baa1 1,024,988
5,000,000 Hempstead Industrial
Development Agency,
Resource Recovery
(American Ref-Fuel
Company), 7.375%,
12/01/05............... 12/96 at 102 A- 5,206,700
New York City General
Obligation:
25,000 6.300%, 8/01/03......... 8/02 at 101 1/2 Aaa 26,135
2,500,000 8.125%, 11/01/06 (Pre-
refunded to 11/01/97).. 11/97 at 101 1/2 Aaa 2,774,125
2,500,000 8.500%, 11/01/11 (Pre-
refunded to 11/01/97).. 11/97 at 101 1/2 Aaa 2,808,025
2,500,000 7.000%, 2/01/15......... 2/96 at 102 A- 2,526,175
1,465,000 New York City Housing
Development Corporation
(South Bronx
Cooperatives),
Alternative Minimum
Tax, 8.100%, 9/01/23... 9/00 at 102 Aa 1,553,354
1,000,000 New York City Housing
Development
Corporation, FHA-
Insured Multi-Family
Mortgage, 6.550%,
10/01/15............... 4/03 at 102 AAA 1,000,740
New York City Municipal
Water Finance Authority
Water and Sewer System:
3,750,000 9.000%, 6/15/17 (Pre- 6/97 at 102
refunded to 6/15/97)... Aaa 4,230,488
1,000,000 7.750%, 6/15/20 (Pre- 6/01 at 101 1/2
refunded to 6/15/01)... Aaa 1,153,990
1,600,000 New York City Industrial
Development Agency,
Civic Facility (YMCA of
Greater New York),
8.000%, 8/01/16........ 8/01 at 102 N/R 1,685,984
1,000,000 New York City Industrial
Development Agency,
Special Facility
(American Airlines,
Inc.), Alternative
Minimum Tax, 8.000%,
7/01/20................ 1/99 at 102 Baa3 1,038,010
1,955,000 Newark-Wayne Community 9/03 at 102
Hospital, 7.600%,
9/01/15................ N/R 1,959,203
1,000,000 Port Authority of New
York and New Jersey,
Special Project,
LaGuardia Airport
Passenger Terminal
(Delta Air Lines),
6.950%, 6/01/08........ 6/02 at 102 Ba1 982,590
5,000,000 Port Authority of New
York and New Jersey,
Consolidated Bonds,
Alternative Minimum
Tax, 8.250%, 4/01/23... 4/95 at 102 AA- 5,187,650
2,000,000 St. Lawrence Country, 1/98 at 102
Solid Waste Disposal
Authority, 8.875%,
1/01/08................ Baa 2,259,280
2,000,000 Triborough Bridge and 1/98 at 102
Tunnel Authority,
General Purpose,
8.125%, 1/01/12........ Aa 2,204,060
1,275,000 Triborough Bridge and
Tunnel Authority,
Mortgage Recording Tax,
8.000%, 1/01/18 (Pre-
refunded to 1/01/98)... 1/98 at 101 1/2 Aaa 1,411,947
--------------------------------------------------------------------------------
$118,360,000 Total Investments--(cost
$107,424,235)--97.4%... 119,069,901
--------------------------------------------------------------------------------
------------
TEMPORARY INVESTMENTS IN
SHORT-TERM MUNICIPAL
SECURITIES--1.3%
$ 300,000 New York City General
Obligation, Variable
Rate Demand Bonds,
3.800%, 8/01/11+....... VMIG-1 300,000
900,000 New York City General
Obligation, Variable
Rate Demand Bonds,
3.800%, 8/01/15+....... VMIG-1 900,000
400,000 Port Authority of New
York and New Jersey,
Special Obligation
Versatile Structure,
Alternative Minimum
Tax, Variable Rate
Demand Bonds, 3.650%,
8/01/28+............... VMIG-1 400,000
---------------------------------------------------------------------------
$ 1,600,000 Total Temporary
Investments--1.3%...... 1,600,000
------------
---------------------------------------------------------------------------
------------
Other Assets Less
Liabilities--1.3%...... 1,640,747
---------------------------------------------------------------------------
Net Assets--100%........ $122,310,648
---------------------------------------------------------------------------
---------------------------------------------------------------------------
</TABLE>
F-24
<PAGE>
<TABLE>
<CAPTION>
NUMBER
STANDARD & POOR'S MOODY'S OF ISSUES MARKET VALUE MARKET PERCENT
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF RATINGS** AAA Aaa 18 $ 49,686,325 42%
PORTFOLIO OF INVESTMENTS AA+, AA, AA- Aa1, Aa, Aa2, Aa3 11 16,669,629 14
(EXCLUDING TEMPORARY A, A- A, A2, A3 5 13,501,740 11
INVESTMENTS): BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 17 34,584,430 29
BB+, BB, BB- Ba1, Ba, Ba2, Ba3 1 982,590 1
Non-rated Non-rated 2 3,645,187 3
-------------------------------------------------------------------------------------------------------
TOTAL 54 $119,069,901 100%
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
</TABLE>
*Optional Call Provisions (not covered by the report of independent auditors):
Dates (month and year) and prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at later dates.
**Ratings (not covered by the report of independent auditors): Using the higher
of Standard & Poor's or Moody's rating.
N/R--Investment is not rated.
+The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed
is that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
F-25
<PAGE>
PORTFOLIO OF INVESTMENTS
NUVEEN NEW YORK MUNICIPAL INCOME FUND, INC. (NNM)
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
---------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,000,000 New York State Energy
Research and Development
Authority, Electric
Facilities (Consolidated
Edison Company),
Alternative Minimum Tax,
7.500%, 1/01/26......... 1/00 at 101 Aa3 $ 1,063,250
1,000,000 New York State Energy
Research and Development
Authority, Pollution
Control (Central Hudson
Gas and Electric
Corporation),
Alternative Minimum Tax,
8.375%, 12/01/28........ 12/98 at 102 A3 1,103,520
1,000,000 New York State Energy
Research and Development
Authority, Pollution
Control (Rochester Gas
and Electric
Corporation),
Alternative Minimum Tax,
8.375%, 12/01/28........ 12/98 at 102 Baa1 1,091,120
1,000,000 New York State Housing
Finance Agency (State
University
Construction), 8.100%,
11/01/10 (Pre-refunded
to 11/01/98)............ 11/98 at 102 Aaa 1,135,930
1,000,000 New York State Housing
Finance Agency (H. E. L.
P.-Suffolk Housing),
Alternative Minimum Tax,
8.100%, 11/01/05........ 11/99 at 100 Baa 1,079,730
1,000,000 New York State Housing
Finance Agency, Health
Facilities (New York
City), 8.000%, 11/01/08. 11/00 at 102 BBB+ 1,121,400
1,000,000 New York State Housing
Finance Agency, Service
Contract,
6.375%, 9/15/14......... 9/04 at 102 Baa1 975,190
1,000,000 New York State Medical
Care Facilities Finance
Agency (Huntington
Hospital), 8.125%,
11/01/14 (Pre-refunded
to 11/01/97)............ 11/97 at 102 BBB 1,078,810
1,000,000 New York State Medical
Care Facilities Finance
Agency (Columbia-
Presbyterian), 8.000%,
2/15/25 (Pre-refunded to
8/15/97)................ 8/97 at 102 Aaa 1,104,050
865,000 New York State Mortgage
Agency, Homeowner
Mortgage, Alternative
Minimum Tax, 8.125%,
4/01/20................. 10/97 at 102 Aa 926,225
1,250,000 New York State Urban
Development Corporation,
Correctional Capital
Facilities, 5.500%,
1/01/15................. 1/03 at 102 Baa1 1,078,713
2,955,000 Babylon Industrial
Development Agency,
Resource Recovery,
8.500%, 1/01/19......... 7/98 at 103 Baa1 3,208,953
250,000 Battery Park City
Authority, Junior
Revenue, 5.800%,
11/01/22................ 11/03 at 102 A 221,103
1,000,000 Cattaraugus County (Olean
Office Facility),
Certificates of
Participation, 8.500%,
8/01/09 (Pre-refunded to
8/01/98)................ 8/98 at 102 BBB- 1,104,090
1,000,000 Dormitory Authority of
the State of New York
(City University),
8.200%, 7/01/12......... 7/98 at 102 Baa1 1,120,000
250,000 Dormitory Authority of
the State of New York,
Judicial Facilities
Lease (Suffolk County), 10/94 at
9.500%, 4/15/14......... 116 11/16 Baa1 292,858
1,250,000 Dormitory Authority of
the State of New York
(State University),
5.250%, 5/15/19......... No Opt. Call Baa1 1,024,988
1,000,000 Geneva Industrial
Development Agency,
Civic Facility (Finger
Lakes Cerebral Palsy),
8.500%, 11/01/16........ 11/01 at 102 N/R 994,240
1,000,000 Metropolitan
Transportation
Authority, Transit
Facilities Service
Contract, 8.500%,
7/01/17 (Pre-refunded to
7/01/97)................ 7/97 at 102 AAA 1,116,600
New York City General
Obligation:
945,000 8.500%, 8/01/12 (Pre-
refunded to 8/01/96).... 8/96 at 102 A- 1,027,345
55,000 8.500%, 8/01/12.......... 8/96 at 102 A- 59,853
495,000 New York City Housing
Development Corporation
(South Williamsburg
Cooperative),
Alternative Minimum Tax,
7.900%, 2/01/23......... 2/00 at 102 Aa 508,177
500,000 New York City Housing
Dvelopment Corporation,
FHA Insured, Multi-
Family Mortgage, 6.550%,
10/01/15................ 4/03 at 102 AAA 500,370
1,000,000 New York City Municipal
Water Finance Authority,
Water and Sewer System,
7.875%, 6/15/16 (Pre-
refunded to 6/15/96).... 6/96 at 102 Aaa 1,075,480
1,850,000 New York City Industrial
Development Agency,
Civic Facility
(International Center
for Integrative Studies,
Inc.-The Door Project),
9.000%, 3/01/09++....... 3/97 at 103 N/R 555,000
1,000,000 New York City Industrial
Development Agency,
Civic Facility (YMCA of
Greater New York),
8.000%, 8/01/16......... 8/01 at 102 N/R 1,053,740
1,000,000 New York City Industrial
Development Agency
(Terminal One Group),
Alternative Minimum Tax,
6.125%, 1/01/24......... 1/04 at 102 A 931,360
1,000,000 Port Authority of New
York and New Jersey,
Alternative Minimum Tax,
8.250%, 4/01/23......... 4/95 at 102 AA- 1,037,530
---------------------------------------------------------------------------
$27,665,000 Total Investments--(cost
$27,310,621)--98.3%..... 27,589,625
-----------
----------------------------------------------------------------------
-----------
TEMPORARY INVESTMENTS IN
SHORT-TERM MUNICIPAL
SECURITIES--0.4%
New York City General
Obligation, Variable
Rate Demand Bonds,
$ 100,000 3.800%, 8/01/11+........ VMIG-1 100,000
-----------
----------------------------------------------------------------------
-----------
Other Assets Less
Liabilities--1.3%....... 360,447
----------------------------------------------------------------------
Net Assets--100%......... $28,050,072
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
F-26
<PAGE>
<TABLE>
<CAPTION>
NUMBER MARKET
STANDARD & POOR'S MOODY'S OF ISSUES MARKET VALUE PERCENT
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF RATINGS** AAA Aaa 5 $ 4,932,430 18%
PORTFOLIO OF INVESTMENTS AA+, AA, AA- Aa1, Aa, Aa2, Aa3 4 3,535,182 13
(EXCLUDING A, A- A, A2, A3 5 3,343,181 12
TEMPORARY BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 11 13,175,852 48
INVESTMENTS): Non-rated Non-rated 3 2,602,980 9
------------------------------------------------------------------------------------------------
TOTAL 28 $27,589,625 100%
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
</TABLE>
*Optional Call Provisions (not covered by the report of independent auditors):
Dates (month and year) and prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at later dates.
**Ratings (not covered by the report of independent auditors): Using the higher
of Standard & Poor's or Moody's rating.
N/R--Investment is not rated.
+The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed
is that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
++The Fund received $72,000 of the $83,000 interest coupon payment due March 1,
1994. Interest income has not been accrued since that date. Legal proceedings
have been initiated to enforce the rights of the Fund and all other
bondholders, which include the right to obtain the property that secures the
obligation of the issuer.
See accompanying notes to financial statements.
F-27
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
OPERATING PERFORMANCE
--------------------------------
NET
REALIZED PER
AND NET SHARE TOTAL TOTAL
NET ASSET UNREALIZED DIVIDENDS ASSET MARKET INVESTMENT RETURN
VALUE NET GAIN (LOSS) FROM NET DISTRIBUTIONS VALUE VALUE RETURN ON ON NET
BEGINNING INVESTMENT FROM INVESTMENT FROM CAPITAL END OF END OF MARKET ASSET
OF PERIOD INCOME INVESTMENTS INCOME GAINS PERIOD PERIOD VALUE** VALUE**
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NNY
--------------------------------------------------------------------------------------------------------------------
Year ended 9/30/94 $10.990 $.659 $(.575) $(.669) $(.015) $10.390 $10.500 (.77)% .78%
Year ended 9/30/93 10.740 .664 .393 (.670) (.137) 10.990 11.250 7.27 10.28
2 Mos. ended 9/30/92 10.870 .112 (.129) (.113) -- 10.740 11.250 (2.29) (.16)
Year ended 7/31,
1992 10.270 .676 .727 (.676) (.127) 10.870 11.625 17.77 14.28
1991 10.200 .679 .115 (.676) (.048) 10.270 10.625 8.58 8.21
1990 10.370 .677 (.127) (.676) (.044) 10.200 10.500 7.08 5.61
1989 9.950 .675 .659 (.679) (.235) 10.370 10.500 14.92 14.22
10/7/87 to 7/31/88 9.350 .514 .541 (.455) -- 9.950 10.000 4.67 11.40
--------------------------------------------------------------------------------------------------------------------
NNM
--------------------------------------------------------------------------------------------------------------------
Year ended 9/30/94 11.960 .701 (.748) (.743) -- 11.170 10.375 (13.43) (.40)
Year ended 9/30/93 12.200 .755 (.185) (.767) (.043) 11.960 12.750 8.69 4.88
10 Mos. ended 9/30/92 11.940 .661 .325 (.655) (.071) 12.200 12.500 12.82 8.54
Year ended 11/30/91 11.430 .795 .517 (.802) -- 11.940 11.750 8.02 11.92
1 Mo. ended 11/30/90 11.370 .068 .095 (.068) (.035) 11.430 11.625 .94 1.44
Year ended 10/31,
1990 11.710 .806 (.266) (.810) (.070) 11.370 11.625 8.75 4.77
1989 11.530 .806 .210 (.808) (.028) 11.710 11.500 6.39 9.15
4/20/88 to 10/31/88 11.210 .358 .244 (.282) -- 11.530 11.625 (.66) 5.45
--------------------------------------------------------------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
------------------------------------------
RATIO OF
NET
NET ASSETS RATIO OF INVESTMENT
END OF EXPENSES INCOME TO PORTFOLIO
PERIOD (IN TO AVERAGE AVERAGE TURNOVER
THOUSANDS) NET ASSETS NET ASSETS RATE
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NNY
--------------------------------------------------------------------------------------------------------------------
Year ended 9/30/94 $122,311 .84% 6.16% 4%
Year ended 9/30/93 127,976 .85 6.16 5
2 Mos. ended 9/30/92 123,313 .84* 6.20* 0
Year ended 7/31,
1992 124,620 .90 6.46 9
1991 116,236 .96 6.77 14
1990 114,368 .98 6.70 16
1989 115,379 1.03 6.75 24
10/7/87 to 7/31/88 109,750 .99* 6.54* 47
--------------------------------------------------------------------------------------------------------------------
NNM
--------------------------------------------------------------------------------------------------------------------
Year ended 9/30/94 28,050 1.00 6.08 12
Year ended 9/30/93 29,769 1.07 6.31 17
10 Mos. ended 9/30/92 30,075 .93* 6.58* 3
Year ended 11/30/91 29,187 .92 6.84 14
1 Mo. ended 11/30/90 27,736 .80* 7.26* 1
Year ended 10/31,
1990 27,564 .86 6.99 11
1989 28,177 .90 6.95 36
4/20/88 to 10/31/88 27,689 .94* 6.21* 21
--------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized.
**Total Investment Return on Market Value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and changes
in stock price per share. Total Return on Net Asset Value is the combination
of reinvested dividend income, reinvested capital gains distributions, if any,
and changes in net asset value per share.
F-28
<PAGE>
INDEX TO PRO FORMA FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Pro Forma Portfolio of Investments.......................................... P-2
Pro Forma Financial Information............................................. P-6
Pro Forma Capitalization.................................................. P-6
Pro Forma Condensed Balance Sheet......................................... P-7
Pro Forma Condensed Income Statement...................................... P-7
</TABLE>
P-1
<PAGE>
PRO FORMA PORTFOLIO OF INVESTMENTS AS OF JULY 31, 1995 (UNAUDITED)
ACQUIRING FUND (AS ADJUSTED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
-------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,000,000 New York Local Government
Assistance Corporation,
7.500%, 4/01/20 (Pre-
refunded to 4/01/01)...... 4/01 at 102 Aaa $ 1,162,940
New York State,
Certificates of
Participation
(Commissioner of Office of
Mental Health):
1,000,000 8.250%, 9/01/07........... 9/97 at 102 Baa1 1,086,720
3,000,000 8.300%, 9/01/12........... 9/97 at 102 Baa1 3,251,220
1,000,000 New York State Energy
Research and Development
Authority, Gas Facilities
(The Brooklyn Union Gas
Company), Alternative
Minimum Tax, 5.600%,
6/01/25................... 7/03 at 102 Aaa 917,520
4,000,000 New York State Energy
Research and Development
Authority, Pollution
Control (Central Hudson
Gas and Electric
Corporation), Alternative
Minimum Tax, 8.375%,
12/01/28.................. 12/98 at 102 A3 4,436,760
4,500,000 New York State Energy
Research and Development
Authority, Pollution
Control (Rochester Gas and
Electric Corporation),
Alternative Minimum Tax,
8.375%, 12/01/28.......... 12/98 at 102 Baa1 4,991,355
1,000,000 New York State Energy
Research and Development
Authority, Pollution
Control (New York Electric
and Gas Corporation),
Alternative Minimum Tax,
5.950%, 12/01/27.......... 12/03 at 102 Baa1 918,440
New York State Energy
Research and Development
Authority (Consolidated
Edison Company),
Alternative Minimum Tax:..
1,000,000 7.500%, 1/01/26........... 1/00 at 101 Aa3 1,071,890
1,000,000 6.000%, 3/15/28........... 3/03 at 102 Aaa 966,630
1,425,000 New York State
Environmental Facilities
Corporation, Water
Facilities (The New
Rochelle Water Company
Project), Alternative
Minimum Tax, 6.400%,
12/01/24.................. 6/02 at 102 A3 1,415,495
1,000,000 New York State Housing
Finance Agency, State
University Construction,
8.100%, 11/01/10 (Pre-
refunded to 11/01/98)..... 11/98 at 102 Aaa 1,139,630
1,000,000 New York State Housing
Finance Agency, H.E.L.P.-
Suffolk Housing,
Alternative Minimum Tax,
8.100%, 11/01/05.......... 11/99 at 100 Baa 1,083,850
5,000,000 New York State Housing
Finance Agency, Health
Facilities (New York
City), 8.000%, 11/01/08... 11/00 at 102 BBB+ 5,562,700
1,000,000 New York State Housing
Finance Agency, Service
Contract,
6.375%, 9/15/14........... 9/04 at 102 Baa1 1,002,670
2,500,000 New York State Medical Care
Facilities Finance Agency,
Hospital and Nursing Home
Insured Mortgage (St.
Vincent's Hospital),
8.000%, 2/15/27 (Pre-
refunded to 8/15/97)...... 8/97 at 102 Aaa 2,671,675
4,980,000 New York State Medical Care
Facilities Finance Agency,
Hospital and Nursing Home,
Insured Mortgage (Albany
Medical Center),
8.000%, 2/15/28........... 8/98 at 102 AAA 5,499,763
5,000,000 New York State Medical Care
Facilities Finance Agency,
Hospital and Nursing Home,
FHA-Insured Mortgage
(Catholic Medical Center),
8.300%, 2/15/22 (Pre-
refunded to 2/15/98)...... 2/98 at 102 AAA 5,600,550
6,250,000 New York State Medical Care
Facilities Finance Agency
(Columbia-Presbyterian),
8.000%, 2/15/25 (Pre-
refunded to 8/15/97)...... 8/97 at 102 Aaa 6,886,313
1,000,000 New York State Medical Care
Facilities Finance Agency
(Huntington Hospital),
8.125%, 11/01/14 (Pre-
refunded to 11/01/97)..... 11/97 at 102 BBB 1,109,320
1,800,000 New York State Medical Care
Facilities Finance Agency
(Hospital and Nursing
Home), 6.550%, 8/15/12.... 8/02 at 102 Aa 1,849,284
New York State Medical Care
Facilities Finance Agency
(Mental Health Services):
1,650,000 8.875%, 8/15/07 (Pre-
refunded to 8/15/97)...... 8/97 at 102 AAA 1,841,219
1,850,000 8.875%, 8/15/07........... 8/97 at 102 Baa1 2,022,975
1,000,000 6.375%, 8/15/17........... 12/02 at 102 Aaa 1,021,390
</TABLE>
P-2
<PAGE>
ACQUIRING FUND (AS ADJUSTED) (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
--------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 3,305,000 New York State Medical
Care Facilities
Financing Agency
(Hospital and Nursing
Home, FHA Insured),
6.250%, 2/15/15........ 8/05 at 102 AAA $ 3,327,110
New York State Mortgage
Agency:
20,000 9.750%, 10/01/10....... 4/95 at 102 1/2 Aa 20,620
455,000 8.625%, 4/01/11........ 10/95 at 102 Aa 468,896
1,375,000 8.375%, 10/01/17....... 1/98 at 102 Aa 1,480,133
New York State Mortgage
Agency, Homeowner
Mortgage, Alternative
Minimum Tax:
2,415,000 8.125%, 4/01/20........ 10/97 at 102 Aa 2,566,324
305,000 8.250%, 4/01/22........ 4/99 at 102 Aa 324,889
1,500,000 7.950%, 4/01/22........ 6/00 at 102 Aa 1,598,145
8,205,000 0.000%, 10/01/23....... 10/01 at 19 2/5 Aa 977,216
1,000,000 New York State Power
Authority, General
Purpose,
8.000%, 1/01/17........ 1/98 at 102 Aa 1,106,690
New York State Urban
Development
Corporation,
Correctional Capital
Facilities:
1,500,000 8.000%, 1/01/06 (Pre-
refunded to 1/01/96)... 1/96 at 102 Baa1 1,557,585
1,250,000 5.500%, 1/01/15........ 1/03 at 102 Baa1 1,127,150
5,000,000 New York State Urban
Development Corporation
(Onondaga County
Convention Center),
7.875%, 1/01/20........ 1/01 at 102 Baa1 5,495,450
New York State Urban
Development
Corporation, State
Facilities:
1,000,000 7.500%, 4/01/11........ 4/01 at 102 Baa1 1,077,340
1,000,000 7.500%, 4/01/20........ 4/01 at 102 Baa1 1,086,850
2,955,000 Babylon Industrial
Development Agency,
Resource Recovery,
8.500%, 1/01/19........ 7/98 at 103 Baa1 3,260,429
250,000 Battery Park City
Authority, Junior
Revenue,
5.800%, 11/01/22....... 11/03 at 102 A 230,443
1,000,000 Brookhaven Industrial
Development Agency,
Civic Facility,
St. Joseph's College,
8.100%, 4/01/08........ 4/98 at 102 A 1,096,290
2,500,000 Cattaraugus County,
Certificates of
Participation (Olean
Office Facility),
8.500%, 8/01/09 (Pre-
refunded to 8/01/98)... 8/98 at 102 BBB- 2,844,950
4,000,000 Dormitory Authority of
the State of New York,
Judicial Facilities
Lease, 7.375%, 7/01/16. No Opt. Call Aaa 4,650,160
250,000 Dormitory Authority of
the State of New York,
Judicial Facilities
Lease (Suffolk County),
9.500%, 4/15/14........ 10/95 at 116 1/2 Baa1 293,588
Dormitory Authority of
the State of New York
(City University):
1,000,000 8.200%, 7/01/12........ 7/98 at 102 Baa1 1,126,390
5,000,000 8.125%, 7/01/17 (Pre-
refunded to 7/01/97)... 7/97 at 102 Aaa 5,483,000
1,000,000 5.750%, 7/01/18........ No Opt. Call Baa1 941,770
Dormitory Authority of
the State of New York,
Educational Facilities
(State University):
1,000,000 7.400%, 5/15/01........ 5/00 at 102 Baa1 1,097,660
2,500,000 5.250%, 5/15/19........ No Opt. Call Baa1 2,195,050
1,000,000 Dormitory Authority of
the State of New York,
Court Facilities,
5.700%, 5/15/22........ 5/03 at 101 1/2 Baa1 913,120
1,000,000 Geneva Industrial
Development Agency,
Civic Facility, (Finger
Lakes Cerebral Palsy),
8.500%, 11/01/16....... 11/01 at 102 N/R 1,035,660
5,000,000 Hempstead Industrial
Development Agency,
Resource Recovery
(American Ref-Fuel
Company),
7.375%, 12/01/05....... 12/96 at 102 A- 5,173,850
Metropolitan
Transportation
Authority, Transit
Facilities:
1,000,000 8.500%, 7/01/17 (Pre-
refunded to 7/01/97)... 7/97 at 102 AAA 1,103,460
1,000,000 5.500%, 7/01/22........ 7/02 at 100 Aaa 938,640
</TABLE>
P-3
<PAGE>
ACQUIRING FUND (AS ADJUSTED) (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
--------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
New York City General
Obligation:
$ 3,500,000 9.500%, 8/01/02........ 8/01 at 101 1/2 Baa1 $ 4,222,505
25,000 6.300%, 8/01/03........ 8/02 at 101 1/2 Aaa 27,328
1,135,000 6.600%, 2/01/04........ No Opt. Call A- 1,193,226
2,500,000 8.125%, 11/01/06 (Pre-
refunded 11/01/97)..... 11/97 at 101 1/2 Aaa 2,761,850
2,500,000 8.500%, 11/01/11 (Pre-
refunded to 11/01/97).. 11/97 at 101 1/2 Aaa 2,781,850
945,000 8.500%, 8/01/12 (Pre-
refunded to 8/01/96)... 8/96 at 102 A- 1,006,671
55,000 8.500%, 8/01/12........ 8/96 at 102 Baa1 58,046
2,500,000 7.000%, 2/01/15........ 2/96 at 102 Baa1 2,560,425
1,455,000 New York City Housing
Development Corporation
(South Bronx
Cooperatives),
Alternative Minimum
Tax,
8.100%, 9/01/23........ 9/00 at 102 Aa 1,554,434
495,000 New York City Housing
Development
Corporation, (South
Williamsburg
Cooperative),
Alternative Minimum
Tax, 7.900%, 2/01/23... 2/00 at 102 Aa 522,427
1,500,000 New York City Housing
Development
Corporation, Multi-
Family Mortgage, (FHA
Insured), 6.550%,
10/01/15............... 4/03 at 102 AAA 1,551,900
New York City Municipal
Water Finance
Authority, Water and
Sewer:
1,000,000 7.875%, 6/15/16 (Pre-
refunded to 6/15/96)... 6/96 at 102 Aaa 1,054,900
3,750,000 9.000%, 6/15/17 (Pre-
refunded to 6/15/97)... 11/97 at 102 Aaa 4,164,450
1,000,000 7.750%, 6/15/20 (Pre-
refunded to 6/15/01)... 6/01 at 101 1/2 Aaa 1,176,420
1,850,000 New York City Industrial
Development Agency,
Civic Facility
(International Center
for Integrative Studies
Inc., The Door
Project), 9.000%,
3/01/09................ 3/97 at 103 N/R 555,000
2,600,000 New York City Industrial
Development Agency,
Civic Facility (YMCA of
Greater New York),
8.000%, 8/01/16........ 8/01 at 102 N/R 2,773,185
1,000,000 New York City Industrial
Development Agency
(American Airlines,
Inc.), Alternative
Minimum Tax,
8.000%, 7/01/20........ 1/99 at 102 Baa3 1,067,940
1,000,000 New York City Industrial
Development Agency
(Terminal One Group),
Alternative Minimum
Tax, 6.125%, 1/01/24... 1/04 at 102 A 957,840
1,930,000 Newark-Wayne Community
Hospital, 7.600%,
9/01/15................ 9/03 at 102 N/R 1,969,255
2,000,000 St. Lawrence County
Solid Waste Disposal
Authority, Solid Waste
Disposal, 8.875%,
1/01/08................ 1/98 at 102 Baa 2,236,980
2,000,000 Triborough Bridge and
Tunnel Authority,
General Purpose,
8.125%, 1/01/12........ 1/98 at 102 Aa 2,212,220
1,275,000 Triborough Bridge and
Tunnel Authority,
Mortgage Recording Tax,
8.000%, 1/01/18 (Pre-
refunded to 1/01/98)... 1/98 101 1/2 Aaa 1,407,115
--------------------------------------------------------------------------------
$147,755,000 Total Investments--(cost $137,810,817)--
98.3%.................................... 149,925,134
============ ------------------------------------------------------------------
TEMPORARY INVESTMENT IN SHORT-TERM
MUNICIPAL SECURITIES--0.4%
$ 100,000 New York City General Obligation,
Variable Rate Demand Bonds,
3.350%, 8/01/21+......................... VMIG-1 100,000
500,000 New York City Industrial Development
Agency (Japan Airlines Company),
Variable Rate Demand Bonds, Alternative
Minimum Tax, 3.450%, 11/01/15+........... A-1+ 500,000
------------ ------------------------------------------------------------------
$ 600,000 Total Temporary Investments--0.4% 600,000
============ ------------------------------------------------------------------
Other Assets Less Liabilities--1.3%....... 1,881,907
------------------------------------------------------------------
Net Assets--100%.......................... $152,407,041
==================================================================
</TABLE>
P-4
<PAGE>
<TABLE>
<CAPTION>
NUMBER MARKET
STANDARD & POOR'S MOODY'S OF ISSUES MARKET VALUE PERCENT
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF
RATINGS** AAA Aaa 23 $ 58,135,813 39%
PORTFOLIO OF
INVESTMENTS AA+, AA, AA- Aa1, Aa, Aa2, Aa3 13 15,753,168 11
(EXCLUDING
TEMPORARY A, A- A, A2, A3 8 15,510,575 10
INVESTMENT): BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 27 54,192,478 36
Non-rated Non-rated 4 6,333,100 4
------------------------------------------------------------------------------------
TOTAL 75 $149,925,134 100%
------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
**Ratings: Using the higher of Standard & Poor's or Moody's rating.
N/R--Investment is not rated.
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed
is that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
P-5
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following tables set forth the unaudited capitalization, net asset value
per share and income of the Funds as of July 31, 1995 and for the ten-month
period then ended and as adjusted to give effect to the Reorganization, as
well as the unaudited portfolio of investments as of July 31, 1995 as adjusted
to give effect to the Reorganization.
PRO FORMA CAPITALIZATION AS OF JULY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
ACQUIRING FUND
ACQUIRING FUND ACQUIRED FUND (AS
(ACTUAL) (ACTUAL) ADJUSTED)(/1/)
-------------- ------------- -----------------
<S> <C> <C> <C>
Shareholders' Equity:
Common shares, $.01 par value
per share; 250,000,000 shares
authorized: 11,903,229 shares
outstanding for Acquiring
Fund (Actual); 2,516,018
shares outstanding for
Acquired Fund (Actual);
14,621,934 shares outstanding
for Acquiring Fund (As
Adjusted)..................... $ 119,032 $ 25,160 $ 146,219(/2/)
Paid-in surplus................ 111,715,140 27,933,844 139,512,442(/3/)
Undistributed net investment
income........................ 380,079 11,841 380,079(/4/)
Net realized gain (loss) from
investment transactions....... 466,851 (162,867) 303,984(/5/)
Net unrealized appreciation of
investments................... 11,443,513 620,804 12,064,317
------------ ----------- -----------------
Net Assets................... $124,124,615 $28,428,782 $ 152,407,041
============ =========== =================
</TABLE>
-------
(1) The adjusted balances are presented as if the Reorganization were
effective as of July 31, 1995 for information purposes only. The actual
Effective Time of the Reorganization is expected to be ,
at which time the results would be reflective of the actual composition of
shareholders' equity at that date.
(2) Assumes the issuance of 2,718,705 Acquiring Fund common shares in exchange
for the net assets of the Acquired Fund, which number is based on the net
asset value of the Acquiring Fund common shares, and the net asset value
of the Acquired Fund, as of July 31, 1995, after adjustment for the
distributions referred to in (4) and (5) below. The issuance of such
number of Acquiring Fund common shares would result in the distribution of
1.0805585 Acquiring Fund common shares for each Acquired Fund common share
upon liquidation of the Acquired Fund.
(3) Includes the impact of (a) estimated Reorganization costs of $134,515 and
(b) $(2,027) due to the effect of the exchange ratio on the value of new
shares issued in excess of the value of shares liquidated. None of the
estimated Reorganization costs described in (a) above, of which $56,890 of
this amount is an expense of the Acquiring Fund and $77,625 is an expense
of the Acquired Fund, are recurring expenses.
(4) Assumes the Acquired Fund distributes all of its undistributed net
investment income to its shareholders.
(5) Assumes the Acquired Fund carries forward its net realized losses from
investment transactions to the Acquiring Fund, as permitted under
applicable tax regulations.
P-6
<PAGE>
PRO FORMA CONDENSED BALANCE SHEET AS OF JULY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
ACQUIRING FUND ACQUIRED FUND PRO FORMA ACQUIRING FUND
(ACTUAL) (ACTUAL) ADJUSTMENTS (AS ADJUSTED)
-------------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
Investments in municipal
securities, at market
value.................. $121,807,995 $28,117,139 $ -- $149,925,134
Temporary investments in
short-term municipal
securities, at market
value.................. 100,000 500,000 -- 600,000
Cash.................... 379,207 188,708 (146,356)(/2/) 421,559
Other assets less
liabilities............ 1,837,413 (377,065) -- 1,460,348
------------ ----------- --------- ------------
Net assets.............. $124,124,615 $28,428,782 $(146,356) $152,407,041
============ =========== ========= ============
Common shares
outstanding............ 11,903,229 2,516,018 202,687 (/3/) 14,621,934
============ =========== ========= ============
Net asset value per
common share:
As of July 31, 1995.... $10.43 $11.30
============ ===========
After distribution of
ordinary income....... $10.43 $11.29
============ ===========
After Reorganization
related expenses...... $10.42 $11.26 $10.42
============ =========== ============
</TABLE>
-------
(1) See note (1) to Pro Forma Capitalization table on preceding page as to the
Effective Time of the Reorganization. Assumes sales of investments in
municipal securities and temporary investments to provide additional cash
needed to make distributions of ordinary income and to pay estimated
Reorganization related expenses.
(2) Net effect on cash after payment of estimated Reorganization costs.
(3) None of the Reorganization costs, estimated to be $134,515 ($56,890 of
which is an expense of the Acquiring Fund and $77,625 of which is an
expense of the Acquired Fund), are recurring expenses.
(4) See note (1) to Pro Forma Capitalization table. Based on the issuance of
2,718,705 additional Acquiring Fund common shares and the cancellation of
2,516,018 Acquired Fund common shares.
PRO FORMA CONDENSED INCOME STATEMENT FOR THE TEN MONTHS ENDED JULY 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
ACQUIRING FUND ACQUIRED FUND PRO FORMA ACQUIRING FUND
(ACTUAL) (ACTUAL) ADJUSTMENTS (AS ADJUSTED)
-------------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
Investment Income:
Interest income........ $7,328,838 $1,663,085 $ -- $8,991,923
---------- ---------- ------- ----------
Expenses:
Management fees........ 658,101 151,199 (1,192) 808,108
All other expenses..... 157,393 73,329 (50,514) 180,208
---------- ---------- ------- ----------
Total expenses....... 815,494 224,528 (51,706) 988,316
---------- ---------- ------- ----------
Net investment
income............ 6,513,344 1,438,557 51,706 8,003,607
---------- ---------- ------- ----------
Realized and Unrealized
Gain (Loss) on
Investments:.
Net realized gain from
investment
transactions.......... 741,340 20,000 -- 761,340
Net change in
unrealized
appreciation or
depreciation of
investments........... (152,154) 341,800 -- 189,646
---------- ---------- ------- ----------
Net gain on
investments....... 589,186 361,800 -- 950,986
---------- ---------- ------- ----------
Net Increase in Net
Assets from Operations. $7,102,530 $1,800,357 $51,706 $8,954,593
========== ========== ======= ==========
</TABLE>
-------
(1) Reflects the management fee of .35% of net assets for the first
$500,000,000 and 4.125% of gross interest income for the first $50,000,000
for the acquiring fund and .65% of net assets for the first $125 million
for the acquired fund.
(2) Represents estimated reduction in operating expenses, including audit,
legal, custodian, stock exchange and report printing. The Acquiring Fund
(As Adjusted) would have a much larger asset base than either Fund
currently has. Certain operating expenses would have been reduced had they
been applied to the larger asset base for one Fund, rather than to two
smaller separate Funds.
P-7
<PAGE>
ANNEX 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 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.
A-1
<PAGE>
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 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 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.
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.
--------
*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.
A-2
<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, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher
designation.
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 paper 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.
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-3
<PAGE>
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.
CA Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
CON(...) Bonds for which the security depends upon the completion of some act
or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b)
earnings of projects unseasoned in operation experience, (c) rentals
which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes
probable credit stature upon completion of construction or elimination
of basis of condition.
NOTE: Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols
Aa1, A1, Baa1, Ba1 and B1.
SHORT-TERM LOANS
MIG 1/VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broad based 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.
A-4
<PAGE>
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.
--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.
A-5
<PAGE>
PART C--OTHER INFORMATION
ITEM 15: INDEMNIFICATION
Article EIGHTH of the Registrant's Articles of Incorporation provides as
follows:
EIGHTH: To the maximum extent permitted by the Minnesota Business
Corporation Act, as from time to time amended, the Corporation shall
indemnify its currently acting and its former directors, officers,
employees and agents, and those persons who, at the request of the
Corporation, serve or have served another corporation, partnership, joint
venture, trust or other enterprise in one or more such capacities. The
indemnification provided for herein shall not be deemed exclusive of any
other rights to which those seeking indemnification may otherwise be
entitled.
Expenses (including attorneys' fees) incurred in defending a civil or
criminal action, suit or proceeding (including costs connected with the
preparation of a settlement) may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding, if authorized by
the Board of Directors in the specific case, upon receipt of an undertaking
by or on behalf of the director, officer, employee or agent to repay that
amount of the advance which exceeds the amount which it is ultimately
determined that he is entitled to receive from the Corporation by reason of
indemnification as authorized herein; provided, however, that prior to
making any such advance at least one of the following conditions shall have
been met: (1) the indemnitee shall provide a security for his undertaking,
(2) the Corporation shall be insured against losses arising by reason of
any lawful advances, or (3) a majority of a quorum of the disinterested,
non-party directors of the Corporation, or an independent legal counsel in
a written opinion, shall determine, based on a review of readily available
facts, that there is reason to believe that the indemnitee ultimately will
be found entitled to indemnification.
Nothing in these Articles of Incorporation or in the By-Laws shall be
deemed to protect or provide indemnification to any director or officer of
the Corporation against any liability to the Corporation or to its security
holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office ("disabling conduct"), and the
Corporation shall not indemnify any of its officers or directors against
any liability to the Corporation or to its security holders unless a
determination shall have been made in the manner provided hereafter that
such liability has not arisen from such officer's or director's disabling
conduct. A determination that an officer or director is entitled to
indemnification shall have been properly made if it is based upon (1) a
final decision on the merits by a court or other body before whom the
proceeding was brought that the indemnitee was not liable by reason of
disabling conduct or, (2) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the indemnitee was
not liable by reason of disabling conduct, by (a) the vote of a majority of
a quorum of directors who are neither "interested persons" of the
Corporation as defined in the Investment Company Act of 1940 nor parties to
the proceeding, or (b) an independent legal counsel in a written opinion.
The directors and officers of the Registrant are covered by an Investment
Trust Errors and Omission policy in the aggregate amount of $20,000,000 (with a
maximum deductible of $350,000) 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).
ITEM 16: EXHIBITS
The exhibits to this Registration Statement are set forth on the Index to
Exhibits attached hereto.
ITEM 17: UNDERTAKINGS
1. The undersigned Registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is a part of
this registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act, the
reoffering prospectus will contain the information called for by the applicable
registration form for reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
Part C-1
<PAGE>
2. The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering of them.
3. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such directors, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Part C-2
<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 BEHALF OF THE UNDERSIGNED THEREUNTO DULY AUTHORIZED, IN THIS
CITY OF CHICAGO, AND STATE OF ILLINOIS, ON THE 22ND DAY OF AUGUST, 1995.
Nuveen New York Municipal Value Fund,
Inc.
/s/ Larry W. Martin
----------------------------------------
Larry W. Martin, Vice President
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.
SIGNATURE TITLE DATE
/s/ O. Walter Renfftlen Vice President and August 22, 1995
----------------------- Controller
O. Walter Renfftlen (Principal Financial
and Accounting
Officer)
Richard J. Franke Chairman of the
Board and Trustee
(Principal
Executive Officer)
By /s/ Larry W. Martin
-------------------
Larry W. Martin,
Attorney-in-Fact
Timothy R. Schwertfeger President and Trustee
Lawrence H. Brown Director August 22, 1995
Anne E. Impellizzeri Director
Margaret K. Rosenheim Director
Peter R. Sawers Director
POWERS OF ATTORNEY AUTHORIZING RICHARD J. FRANKE, TIMOTHY R. SCHWERTFEGER,
JAMES J. WESOLOWSKI, LARRY W. MARTIN, GIFFORD R. ZIMMERMAN AND MORRISON C.
WARREN, AND EACH OF THEM, TO EXECUTE THIS REGISTRATION STATEMENT, AND
AMENDMENTS THERETO, FOR EACH OF THE OFFICERS AND DIRECTORS OF REGISTRANT ON
WHOSE BEHALF THIS REGISTRATION STATEMENT IS FILED, HAVE BEEN EXECUTED AND FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION.
Part C-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
------- -------------------------------------------------------- ------------
<C> <S> <C>
1.1 Articles of Incorporation of Registrant, as amended.....
2. By-Laws of Registrant, as amended.......................
3. Not Applicable..........................................
4.1 Form of Agreement and Plan of Reorganization
(incorporated by reference to Annex A to the Joint Proxy
Statement--Prospectus)..................................
5. Terms and Conditions of the Dividend Reinvestment Plan..
6.1 Investment Management Agreement, dated May 1, 1989 by
and between Registrant and Nuveen Advisory Corp. as
amended and renewed as of May 9, 1995...................
7. Not Applicable..........................................
8. Directors' Deferred Compensation Plan...................
9.1 Mutual Fund Custody Agreement, dated January 1, 1991, by
and between Registrant and United States Trust Company
of New York as amended and renewed as of February 25,
1991....................................................
9.2 Fund Accounting Agreement, dated January 1, 1991, by and
between Registrant and United States Trust Company of
New York................................................
9.3 Form of Shareholder Transfer Agency Agreement, dated
January 1, 1991, by and between Registrant and United
States Trust Company of New York........................
10. Not Applicable..........................................
11.1 Opinion and consent of Vedder, Price, Kaufman &
Kammholz................................................
11.2 Opinion and consent of Dorsey & Whitney, P.L.L.P........
12. Tax opinion and consent of Vedder, Price, Kaufman &
Kammholz................................................
13. Not Applicable..........................................
14.1 Consent of Ernst & Young LLP............................
14.2 Consent of Edwards & Angell.............................
15. Not Applicable..........................................
16.1 Power of Attorney of Richard J. Franke..................
16.2 Power of Attorney of Timothy R. Schwertfeger............
16.3 Power of Attorney of Lawrence H. Brown..................
16.4 Power of Attorney of Anne E. Impellizzeri...............
16.5 Power of Attorney of Margaret K. Rosenheim..............
16.6 Power of Attorney of Peter R. Sawers....................
17.1 Form of Proxy for the Acquiring Fund shareholders.......
17.2 Form of Proxy for the Acquired Fund shareholders........
</TABLE>
<PAGE>
EXHIBIT 1.1
ARTICLES OF INCORPORATION
OF
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
* * * * * *
THIS IS TO CERTIFY:
That the undersigned does hereby establish a corporation under and by
virtue of the Minnesota Business Corporation Act, Chapter 302A, Minnesota
Statutes and does hereby adopt the following Articles of Incorporation.
FIRST: The name and address of the incorporator signing these Articles of
Incorporation are as follows:
Name Address
---- --------
John E. McTavish 333 West Wacker Drive
Chicago, Illinois 60606
SECOND: The name of the Corporation is:
Nuveen New York Municipal Value Fund, Inc. (the "Corporation").
THIRD: The purposes for which the Corporation is formed and the
business to be carried on and promoted by it are as follows:
To hold, invest, and reinvest its funds, and in connection therewith
to hold part or all of its funds in cash, and to purchase or otherwise
sell, assign, negotiate, transfer, exchange or otherwise dispose of or turn
to account or realize upon securities and other negotiable or non-
negotiable instruments, obligations and evidences of indebtedness created
or issued by any persons, firms, associations, corporations, syndicates,
combinations, organizations, governments or subdivisions thereof, and
generally deal in any such securities and other
<PAGE>
negotiable or non-negotiable instruments, obligations and evidences of
indebtedness; and to exercise, as owner or holder of any securities or
other instruments, all rights, powers, and privileges in respect thereof;
and to do any and all acts and things for the preservation, protection,
improvement, and enhancement in value of any and all such securities or
other instruments and, in general, to conduct the business of an closed-end
investment company as that term is defined in the Act of Congress entitled
the Investment Company Act of 1940, as amended;
To issue and sell shares of its own capital stock from time to time on
such terms and conditions, for such purposes and for such amount or kind of
consideration (including, without limitation thereto, securities) now or
hereafter permitted by the laws of the State of Minnesota and by these
Articles of Incorporation as its Board of Directors may determine; and
To engage in any lawful act or activity for which corporations may be
organized under the Minnesota Business Corporation Act.
The enumeration herewith of the objects and purposes of the
Corporation shall be construed as powers as well as objects and purposes
and shall not be deemed to exclude by inference any powers, objects or
purposes which the Corporation is empowered to exercise, whether expressly
by force of the laws of the State of Minnesota now or hereafter in effect,
or impliedly by the reasonable construction of such laws.
FOURTH: The address of the registered office of the Corporation in the
State of Minnesota is 405 Second Avenue South, Minneapolis, Minnesota 55401.
The name of its resident agent at such address is CT Corporation System, Inc.
FIFTH: The total number of shares of stock which the Corporation is
authorized to issue is Two Hundred and Fifty Million (250,000,000) shares of
common stock, par value $.01 per share and of the aggregate par value of Two
Hundred and Fifty Thousand Dollars ($250,000) (the "Common Stock"), all of which
shall be of the same class and have equal voting rights. The Common Stock shall
be subject to the following restrictions, conditions, and provisions:
2
<PAGE>
(a) In the event of the liquidation or dissolution of the Corporation,
the holders of the Common Stock shall be entitled to receive pro rata the
net distributable assets of the Corporation.
(b) The holders of shares of the Common Stock shall not, as such
holders, have any right to acquire, purchase or subscribe for any shares of
Common Stock or securities of the Corporation which it may hereafter issue
or sell (whether out of the number of shares authorized by these Articles
of Incorporation, or out of any shares acquired by it after the issuance
thereof, or otherwise), other than such right, if any, as the Board of
Directors of the Corporation in its discretion may determine.
(c) Dividends, when, as and if declared by the Board of Directors,
shall be shared equally by the holders of Common Stock on a share for share
basis. Unless a holder of Common Stock directs otherwise, any such
dividends so declared and distributed shall be automatically reinvested in
full and fractional shares of the Corporation; provided, however, that the
Board of Directors may direct that any such dividends be paid to said
holder, or, alternatively, may direct that any such dividends be paid
rather than so reinvested unless such holder elects to have them
reinvested.
(d) If any shares of Common Stock shall have been purchased or
otherwise reacquired by the Corporation in accordance with law, all shares
so purchased or otherwise reacquired shall be retired automatically, and
such retired shares shall have the status of authorized but unissued shares
of Common Stock and the number of authorized shares of Common Stock of the
Corporation shall not be reduced by the number of any shares retired.
3
<PAGE>
(e) The value of the net assets of the Corporation as of any relevant
time shall be determined by such person or persons (which term shall
include any firm, corporation, trust, or association) as the Board of
Directors of the Corporation, from time to time, may authorize, such
determination to be made in accordance with generally accepted accounting
principles by deducting from the gross value of the assets belonging to the
Corporation at such time the amount of all liabilities, including expenses
incurred or accrued and unpaid, such reservations as may be established to
cover (i) taxes in respect of net realized gains and potential taxes to be
paid in respect of the excess, if any, of the unrealized gains over
unrealized losses and (ii) any other liabilities, and such other deductions
as may be determined by or under the authority of the Board of Directors.
The net asset value per share of the Corporation's Common Stock shall be
determined at the time or times hereinbelow set forth by dividing the value
of the net assets of the Corporation by the total number of outstanding
shares (excluding treasury shares). The Board of Directors is empowered,
in its absolute discretion, to establish other methods for determining such
net asset value whenever such other methods are deemed by it to be
necessary in order to enable the Corporation to comply with, or are deemed
by it to be desirable provided they are not inconsistent with, any
provision of the Investment Company Act of 1940 as amended, or any rule or
regulation thereunder. The net asset value per share of the Corporation's
Common Stock shall be determined as of the close of trading on the last day
of each week on which the New York Stock Exchange (the "Exchange") is open
for trading.
4
<PAGE>
In determining the gross value of the assets of the Corporation,
portfolio securities and other assets will be valued at fair value using
methods determined in good faith by the Board of Directors.
The Corporation may suspend the determination of net asset value (i)
during any period when the Exchange is closed (other than customary weekend
and holiday closings), (ii) when trading in the markets the Corporation
normally utilizes is restricted, or an emergency exists as determined by
the Securities and Exchange Commission (the "Commission") so that disposal
of the Corporation's investments or determination of its net asset value is
not reasonably practical, or (iii) for such other periods as the Commission
may by order permit for protection of the holders of shares of the Common
Stock.
(f) Shares of Common Stock shall be issued from time to time either
for cash or for such other considerations (which may be in any one or more
instances a certain specified consideration or certain specified
considerations) as the Board of Directors, from time to time, may deem
advisable, in the manner and to the extent now or hereafter permitted by
the laws of the State of Minnesota; provided, however, that the
consideration (or the value thereof as determined by the Board of
Directors) per share to be received by the Corporation upon the issuance or
sale of any share (including treasury shares) shall not be less than the
par value thereof and not less than the net asset value per share of the
Corporation's Common Stock determined as provided in Paragraph (e) of this
article FIFTH as of a time not earlier than the close of business on the
last day of the next preceding week on which the Exchange was open for
trading and
5
<PAGE>
not later than the close of business on the last day of the week on which
the shares are sold or, if the Exchange is not open for trading on that
day, not later than the close of trading on the next day on which the
Exchange is open for business, as the Board of Directors shall determine.
(g) The Corporation may issue shares of its Common Stock in fractional
denominations to the same extent as its whole shares, and shares in
fractional denominations shall be shares of Common Stock having
proportionately to the respective fractions represented thereby all the
rights of whole shares, including, without limitation, the right to vote,
the right to receive dividends and distributions and the right to
participate upon liquidation of the Corporation, but excluding the right to
receive a certificate representing fractional shares.
SIXTH: (a) The initial number of directors of the Corporation shall be
eight. The By-Laws of the Corporation may fix the number of directors at a
number greater or less than eight and may authorize the Board of Directors, by
the vote of the majority of the entire Board of Directors, to increase or
decrease the number of directors fixed by these Articles of Incorporation or by
the By-Laws within limits specified in the By-Laws.
(b) The names of the persons who will serve as the initial directors
of the Corporation are as follows: Richard J. Franke, Royce A. Hoyle, Jr.,
Margaret K. Rosenheim, Robert G. Sether, Charles R. Standen, Donald E.
Sveen, Frank P. Wendt and William R. Wilkerson.
(c) Beginning with the first annual meeting of shareholders (the
"First Annual Meeting"), the Board of Directors shall be divided into three
classes: Class I, Class II
6
<PAGE>
and Class III. The terms of office of the classes of directors elected at
the First Annual Meeting shall expire at the times of the annual meeting of
shareholders as follows: Class I -- 1989, Class II -- 1990, Class III --
1991 or thereafter in each case when their respective successors are
elected and qualified. At each subsequent annual election, the directors
chosen to succeed those whose terms are expiring shall be identified as
being of the same class as the directors whom they succeed and shall be
elected for a term expiring at the time of the third succeeding annual
meeting of shareholders, or thereafter in each case when their respective
successors are elected and qualified. If the number of directors is
changed, any increase or decrease shall be apportioned among the classes by
resolution of the Board of Directors so as to maintain the number of
directors in each class as nearly as equal as possible, but in no case
shall a decrease in the number of directors shorten the term of any
incumbent director.
(d) Any vacancy occurring in the Board of Directors may be filled by a
majority of the directors in office. A new directorship resulting from an
increase in the number of directors shall be construed to be a vacancy.
Any director elected to fill a vacancy shall be in the same class and have
the same remaining term as that of the predecessor.
(e) A director may be removed from office only for "Cause" (as
hereinafter defined) and only by action of the shareholders taken by the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the
outstanding Common Stock. "Cause" shall require wilful misconduct,
dishonesty, fraud or a felony conviction.
7
<PAGE>
(f) In addition to the voting requirements imposed by law or by any
other provision of these Articles of Incorporation, the provisions set
forth in this Article SIXTH may not be amended, altered or repealed in any
respect, nor may any provision inconsistent with this Article SIXTH be
adopted, unless such action is approved by the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the
outstanding Common Stock.
SEVENTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and shareholders.
(a) All corporate powers of the Corporation shall be exercised by the
Board of Directors except as otherwise provided by law; provided, subject
to the provisions of paragraph (c) of this Article SEVENTH, the Board of
Directors may delegate the management of the assets of the Corporation and
such other functions as it may deem reasonable and proper to an Investment
Adviser, as such term is hereinbelow defined, pursuant to a written
contract. The Board of Directors may, by resolution or resolutions passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation,
which, to the extent provided in said resolution or resolutions or in the
By-laws of the Corporation, shall have and may exercise the powers of the
Board of Directors in the management of the business and affairs of the
Corporation, and may have power to authorize the seal of the Corporation to
be affixed to all papers which may require it.
8
<PAGE>
(b) A contract or other transaction between the Corporation and any of
its directors or between the Corporation and an organization in which any
of its directors is a director, officer, or legal representative or has a
material financial interest is not void or voidable because the director or
directors or other organizations are parties or because the director or
directors are present at the meeting of shareholders or the board or a
committee at which the contract or transaction is authorized, approved or
ratified, if: (i) the contract or transaction was, and the person
asserting the validity of the contract or transaction sustains the burden
of establishing that the contract or transaction was, fair and reasonable
as to the corporation at the time it was authorized, approved, or ratified;
(ii) the material facts as to the contract or transaction and as to the
director's or directors' interest are fully disclosed or known to the
shareholders and the contract or transaction is approved in good faith by
the holders of a majority of the outstanding shares, but shares owned by
the interested director or directors shall not be counted in determining
the presence of a quorum and shall not be voted; or (iii) the material
facts as to the contract or transaction and as to the director's or
directors' interest are fully disclosed or known to the board or a
committee, and the board or committee authorizes, approves, or ratifies the
contract or transaction in good faith by a majority of the board or
committee, but the interested director or directors shall not be counted in
determining the presence of a quorum and shall not vote.
(c) The Corporation may enter into a written contract with one or more
persons (which term shall include any firm, corporation, trust or
association), hereinafter referred to as the "Investment Adviser", to act
as investment adviser to the Corporation
9
<PAGE>
and as such to perform such functions as the Board of Directors may deem
reasonable and proper, including, without limitation, investment advisory,
management, research, valuation of assets, clerical and administrative
functions. Any such contract shall be subject to the approval of those
persons required by the Investment Company Act of 1940 to approve such
contract, and shall be terminable at any time upon not more than 60 days'
notice by resolution of the Board of Directors or by vote of a majority of
the outstanding shares of Common Stock.
Subject to the provisions of paragraph (b) of this Article SEVENTH,
any such contract may be made with any firm or corporation in which any
director or directors of the Corporation may be interested. The
compensation of the Investment Adviser may be based upon a percentage of
the value of the net assets of the Corporation, a percentage of the income
or gross realized or unrealized gain of the Corporation, or a combination
thereof, or otherwise, as may be provided in such contract.
Upon the termination of any contract with Nuveen Advisory Corp., or
any corporation affiliated with John Nuveen & Co. Incorporated, acting as
Investment Adviser, the Board of Directors is hereby authorized to promptly
change the name of the Corporation to a name which does not include
"Nuveen" or any approximation or abbreviation thereof.
(d) The Board of Directors shall have authority to appoint and enter
into a written contract or contracts with an underwriter or distributor or
distributors as agent or agents for the sale of shares of the Corporation
and to pay such underwriter, distributor or distributors and agent or
agents such amounts as the Board of Directors
10
<PAGE>
may in its discretion deem reasonable and proper. Subject to the
provisions of paragraph (b) of this Article SEVENTH, any such contract may
be made with any firm or corporation, including, without limitation, the
Investment Adviser, or any firm or corporation in which any director or
directors of the Corporation or the Investment Adviser may be interested.
(e) The Board of Directors is hereby empowered to authorize the
issuance from time to time of any class or series of class of shares of
Common Stock, whether now or hereafter authorized, for such consideration
as the Board of Directors may deem advisable, subject to such limitations
and restrictions as may be set forth in these Articles of Incorporation or
in the By-Laws of the Corporation, or in the laws of the State of
Minnesota.
(f) The Board of Directors shall have the power to make, alter, amend
or repeal the By-Laws of the Corporation, and to adopt any new By-Laws,
except to the extent that the By-Laws may otherwise provide; provided,
however, that any such By-laws may be altered, amended or repealed, or new
By-Laws may be adopted, by the shareholders of the Corporation.
(g) The Board of Directors shall have power from time to time to set
apart out of any funds of the Corporation available for dividends a reserve
or reserves for any proper purpose, and to abolish any such reserve.
(h) Any determination made by or pursuant to the direction of the
Board of Directors in good faith and consistent with the provisions of
these Articles of Incorporation as to any of the following matters shall be
final and conclusive and shall
11
<PAGE>
be binding upon the Corporation and every holder at any time of shares of
Common Stock, namely: the amount of the assets, obligations, liabilities
and expenses of the Corporation; the amount of the net income of the
Corporation from dividends and interest for any period and the amount of
assets at any time legally available for the payment of dividends or
distributions; the amount, purpose, time of creation, increase or decrease,
alteration or cancellation of any reserves or charges and the propriety
thereof (whether or not any obligation or liability for which such reserves
or charges were created shall have been paid or discharged; the market
value, or any quoted price to be applied in determining the market value,
of any security owned or held by the Corporation; the fair value of any
security for which quoted prices are not readily available, or of any other
asset owned or held by the Corporation; the number of shares of the
Corporation issued or issuable; the net asset value per share; any matter
relating to the acquisition, holding and depositing of securities and other
assets by the Corporation; any question as to whether any transaction
constitutes a purchase of securities on margin, a short sale of securities,
or an underwriting of the sale of, or participation in any underwriting or
selling group in connection with the public distribution of, any
securities, and any matter relating to the issue, sale, repurchase, and/or
other acquisition or disposition of shares of Common Stock of the
Corporation. No provision of these Articles of Incorporation shall be
effective to (i) require a waiver of compliance with any provision of the
Securities Act of 1933, as amended, or the Investment Company Act of 1940,
as amended, or of any valid rule, regulation or order of the Commission
thereunder, or (ii) protect or purport to protect any director or officer
of the Corporation against any
12
<PAGE>
liability to the Corporation or to its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office.
EIGHTH: To the maximum extent permitted by the Minnesota Business
Corporation Act, as from time to time amended, the Corporation shall indemnify
its currently acting and its former directors, officers, employees and agents,
and those persons who, at the request of the Corporation serve or have served
another corporation, partnership, joint venture, trust or other enterprise in
one or more such capacities. The indemnification provided for herein shall not
be deemed exclusive of any other rights to which those seeking indemnification
may otherwise be entitled.
Expenses (including attorneys' fees) incurred in defending a civil or
criminal action, suit or proceeding (including costs connected with the
preparation of a settlement) may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding, if authorized by the Board
of Directors in the specific case, upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay that amount of the
advance which exceeds the amount which it is ultimately determined that he is
entitled to receive from the Corporation by reason of indemnification as
authorized herein; provided, however, that prior to making any such advance at
least one of the following conditions shall have been met: (1) the indemnitee
shall provide a security for his undertaking, (2) the Corporation shall be
insured against losses arising by reason of any lawful advances, or (3) a
majority of a quorum of the disinterested, non-party directors of the
Corporation, or an independent legal counsel in a written
13
<PAGE>
opinion, shall determine, based on a review of readily available facts, that
there is reason to believe that the indemnitee ultimately will be found entitled
to indemnification.
Nothing in these Articles of Incorporation or in the By-Laws shall be
deemed to protect or provide indemnification to any director or officer of the
Corporation against any liability to the Corporation or to its security holders
to which he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office ("disabling conduct"), and the Corporation shall not
indemnify any of its officers or directors against any liability to the
Corporation or to its security holders unless a determination shall have been
made in the manner provided hereafter that such liability has not arisen from
such officer's or director's disabling conduct. A determination that an officer
or director is entitled to indemnification shall have been properly made if it
is based upon (1) a final decision on the merits by a court or other body before
whom the proceeding was brought that the indemnitee was not liable by reason of
disabling conduct or, (2) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the indemnitee was not
liable by reason of disabling conduct, by (a) the vote of a majority of a quorum
of directors who are neither "interested persons" of the Corporation as defined
in the Investment Company Act of 1940 nor parties to the proceeding, or (b) an
independent legal counsel in a written opinion.
NINTH: The existence of the Corporation shall be perpetual.
TENTH: Any action required or permitted to be taken by the board of
directors may be taken by written action signed by that number of directors that
would be required to take the same action at a meeting of the board at which all
directors were present.
14
<PAGE>
ELEVENTH: (a) Notwithstanding any other provision of these Articles of
Incorporation, an affirmative vote of the holders of at least sixty-six and two-
thirds percent (66 2/3%) of the outstanding Common Stock shall be required to
approve, adopt or authorize (i) a conversion of the Corporation from a closed-
end investment company to an open-end investment company, (ii) a merger or
consolidation of the Corporation with any other corporation or a reorganization
or recapitalization, (iii) a sale, lease or transfer of all or substantially all
of the assets of the Corporation (other than in the regular course of the
Corporation's investment activities), or (iv) a liquidation or dissolution of
the Corporation, unless such action has previously been approved, adopted or
authorized by the affirmative vote of two-thirds of the total number of
directors fixed in accordance with the By-Laws.
(b) In addition to the voting requirements imposed by law or by any
other provision of these Articles of Incorporation, the provisions set
forth in this Article ELEVENTH may not be amended, altered or repealed in
any respect, nor may any provision inconsistent with this Article ELEVENTH
be adopted, unless such action is approved by the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the
outstanding Common Stock.
TWELFTH: No person who was or is a director of the Corporation shall be
personally liable to the Corporation or its shareholders for monetary damages
for any breach of fiduciary duty as a director except for liability (a) for any
breach of the director's duty of loyalty to the Corporation or its shareholders,
(b) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, (c) under Section 302A.559 or 80A.23
of the Minnesota Business Corporation Act, (d) for any transaction for which the
director derived
15
<PAGE>
an improper personal benefit or (e) for any act or omission occurring prior to
the date of this Article TWELFTH becomes effective.
THIRTEENTH: (a) The Corporation reserves the right to amend, alter,
change or repeal any provision contained in these Articles of Incorporation, in
the manner now or hereafter prescribed by statute, and any contract rights
conferred upon the shareholders are granted subject to this reservation.
(b) Notwithstanding the foregoing, the provisions set forth in
Articles SIXTH and ELEVENTH may not be amended, altered or repealed in any
respect, nor may any provision inconsistent with any of such Articles be
adopted unless such amendment, alteration, repeal or inconsistent provision
is approved as specified in each such respective Article.
IN WITNESS WHEREOF, I have signed these Articles of Incorporation on this
13th day of July, 1987.
/s/ John E. McTavish
--------------------
Incorporator
/s/
----------------
Witness
16
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Jane Bensley, a notary public, in and for the County of Cook in the
state of Illinois, do hereby certify that John E. McTavish personally known to
me to be the same person whose name is subscribed to the foregoing Articles of
Incorporation, appeared before me this day in person and acknowledged that he
signed and delivered the foregoing Articles of Incorporation as his free and
voluntary act, for the uses and purposes therein set forth.
Given under my hand and official seal this 13th day of July, 1987.
/s/ Jane Bensley
----------------
Notary Public
(Seal)
17
<PAGE>
EXHIBIT 2
AMENDMENT TO BY-LAWS
OF
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
The By-Laws of Nuveen New York Municipal Value Fund, Inc., a Minnesota
corporation, have been amended, by unanimous vote of the Board of Directors at a
meeting duly called, convened and held on February 2, 1994, to read as follows:
WHEREAS, the Board of Directors (Trustees) desires to amend the By-laws of the
Fund by adding Section 5.6(b) and revising what becomes Section 5.6(c) in order
to clarify certain provisions regarding the Board's ability to declare a record
date for the payment of dividends or other distributions or allocations.
NOW, THEREFORE, BE IT RESOLVED, that Section 5.6 of the By-Laws of the fund is
amended and restated in its entirety to read as follows:
Section 5.6 Record Date: Certification of Beneficial Owner. (a) The
directors may fix a date not more than sixty (60) days before the date of a
meeting of shareholders as the date for the determination of the holders of
shares entitled to notice of and entitled to vote at the meeting.
(b) The directors (trustees) may fix a date for determining shareholders
entitled to receive payment of any dividend or distribution or an allotment
of any rights or entitled to exercise any rights in respect of any change,
conversion or exchange of stock (shares).
(c) In the absence of any such fixed record date, (i) the date for the
determination of holders of shares entitled to notice of and entitled to
vote at a meeting of shareholders shall be the later of the close of
business on the day on which notice of the meeting is mailed or the
thirtieth day before the meeting, and (ii) the date for determining
shareholders entitled to receive payment of any dividend or distribution or
an allotment of any rights or entitled to exercise any rights in respect of
any change, conversion or exchange of stock (shares) shall be the close of
business on the day on which the resolution of the Board of Directors
(Trustees) is adopted.
(d) A resolution approved by the affirmative vote of a majority of the
directors (trustees) present may establish a procedure whereby a
shareholder may certify in writing to the Corporation (Trust) that all or a
portion of the shares registered in the name of the shareholder are held
for the account of one or more
<PAGE>
beneficial owners. Upon receipt by the Corporation (Trust) of the writing,
the persons specified as beneficial owners, rather than the actual
shareholders, are deemed the shareholders for the purposes specified in the
writing.
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AMENDMENT TO BY-LAWS
OF
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
The By-Laws of Nuveen New York Municipal Value Fund, Inc., a Minnesota
corporation, have been amended, by unanimous vote of the Board of Directors at a
meeting duly called, convened and held on October 19, 1993, to read as follows:
RESOLVED, that Section 3.1 of the By-Laws is hereby amended by
striking the sentences that read: "The Board of Directors shall
consist of six persons", "The Board of Directors shall never be less
than one", and by inserting in their place the following sentence:
"The number of Directors shall be no greater than twelve and no less
than three, and the Board of Directors, by a vote of a majority of the
entire Board, may increase or decrease the number of Directors fixed
by these By-Laws within the limits specified herein."
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AMENDED
BY-LAWS
OF
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
OFFICES
Section 1.1 Registered Office. The registered office of the Corporation
in the State of Minnesota shall be at CT Corporation System, Inc., 405 Second
Avenue South, Minneapolis, Minnesota 55401, or at such other address as may be
fixed by the Board of Directors.
Section 1.2 Other Offices. The Corporation may have such other offices
and places of business within or without the State of Minnesota as the Board of
Directors shall determine.
SHAREHOLDERS
Section 2.1 Place of Meetings. Meetings of the shareholders may be held
at such place or places within or without the State of Minnesota as shall be
fixed by the Board of Directors and stated in the notice of the meeting.
Section 2.2 Regular Meeting. Regular meetings of the shareholders for the
election of directors and the transaction of such other business as may properly
come before the meeting shall be held on an annual or other less frequent
periodic basis at such date and time as the Board of Directors by resolution
shall designate, except as otherwise required by the Minnesota Business
Corporation Act.
Section 2.3 Special Meeting. Special meetings of the shareholders for any
purpose or purposes may be called by the Chairman of the Board, the President or
two or more directors, and must be called at the written request, stating the
purpose or purposes of the meeting, of shareholders entitled to cast at least 10
percent of all the votes entitled to be cast at the meeting.
Section 2.4 Notice of Meetings. Notice stating the time and place of the
meeting, and in the case of a special meeting the purpose or purposes thereof
and by whom called, shall be delivered to each shareholder entitled to vote, and
each other shareholder entitled to notice of the meeting, not less than ten nor
more than sixty days prior to the meeting, except where the meeting is an
adjourned meeting and the date, time and place of the meeting were announced at
the time of the adjournment.
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Section 2.5 Quorum and Action. (a) The holders of a majority of the
voting power of the shares entitled to vote at a meeting are a quorum for the
transaction of business. If a quorum is present when a duly called or held
meeting is convened, the shareholders present may continue to transact business
until adjournment, even though the withdrawal of a number of shareholders
originally present leaves less than the proportion or number otherwise required
for a quorum.
(b) The shareholders shall take action by the affirmative vote of the
holders of a majority of the voting power of the shares present and entitled to
vote at a meeting of shareholders at which a quorum is present, except as may be
otherwise required by the 1940 Act or under the Minnesota Business Corporation
Act.
(c) On each matter submitted to vote of the shareholders, each holder of a
share shall be entitled to one vote for each such share standing in his name on
the books of the Corporation, except as may be otherwise required by the 1940
Act or under the Minnesota Business Corporation Act.
Section 2.6 Voting. At each meeting of the shareholders, every holder of
stock then entitled to vote may vote in person or by proxy and, except as may be
otherwise provided by the Articles of Incorporation, shall have one vote for
each share of stock registered in his name.
Section 2.7 Proxy Representation. A shareholder may cast or authorize the
casting of a vote by filing a written appointment of a proxy with an officer of
the Corporation at or before the meeting at which the appointment is to be
effective. The appointment of a proxy is valid for eleven months, unless a
longer period is expressly provided in the appointment. No appointment is
irrevocable unless the appointment is coupled with an interest in the shares or
in the Corporation.
Section 2.8 Adjourned Meetings. Any meeting of shareholders may, by
announcement thereat, be adjourned to a designated time and place by the vote of
the holders of a majority of the shares present and entitled to vote thereat
even though less than a quorum is so present. An adjourned meeting may
reconvene as designated, and when a quorum is present any business may be
transacted which might have been transacted at the meeting as originally called.
Section 2.9 Action by Written Consent in Lieu of Meeting of Stockholders.
See Section 6.4 of these By-Laws.
DIRECTORS
Section 3.1 Qualifications and Number; Vacancies. Each director shall be
a natural person. A director need not be a shareholder, a citizen of the United
States, or a resident of the State of Minnesota. The Board of Directors shall
consist of six persons. The number of directors shall never be less than one.
The number of directors may be increased or, subject
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to the provisions of the Minnesota Business Corporation Act, decreased at any
time by amendment to these By-laws or by the directors or by the shareholders.
The first Board of Directors shall be elected by the incorporator or
incorporators and shall hold office until the first regular meeting of the
shareholders, and until their successors are elected and qualified. Thereafter,
the term of office of each director shall be as set forth in the Articles of
Incorporation of the Corporation.
Section 3.2 Powers. The business and affairs of the Corporation shall be
managed under the direction of the Board of Directors. All powers of the
Corporation may be exercised by or under the authority of the Board of
Directors, except those conferred on or reserved to the shareholders by statute,
the Articles of Incorporation or these By-Laws.
Section 3.3 Investment Policies. It shall be the duty of the Board of
Directors to ensure that the purchase, sale, retention and disposal of portfolio
securities and the other investment practices of the Corporation are at all
times consistent with the investment objective, policies and restrictions with
respect to securities investments and otherwise of the Corporation filed from
time to time with the Securities and Exchange Commission and as required by the
1940 Act, unless such duty is delegated to an investment adviser pursuant to a
written contract, as provided in the Articles of Incorporation. The Board,
however, may delegate the duty of management of the assets of the Corporation,
and may delegate such other of its powers and duties as are permitted by the
Articles of Incorporation, to the Executive Committee or any other committee, or
to an individual or corporate investment adviser to act as investment adviser
pursuant to a written contract to be approved or ratified initially by the vote
of a majority of the outstanding voting securities of the Corporation and to be
renewable annually by the affirmative vote of a majority of the entire Board of
Directors, including a majority of the directors of the Corporation who are not
parties to such contract or affiliated persons (other than as directors) of the
Corporation or the investment adviser.
Section 3.4 Meetings. Regular meetings of the Board of Directors may be
held without notice at such time as the Board thereof shall fix. Special
meetings of the Board may be called by the Chairman of the Board or the
President, and shall be called at the written request or two or more directors.
Three days' notice of special meetings shall be given to each director by mail,
personally or by telegraph or cable. Notice of special meetings need not state
the purpose or purposes thereof, except as provided by these By-Laws or by
statute. Meetings of the Board may be held at any place within or outside the
State of Minnesota. A conference among directors by any means of communication
through which the directors may simultaneously hear each other during the
conference constitutes a board meeting, if the notice requirements have been met
and if the number of directors participating in the conference would be
sufficient to constitute a quorum at a meeting. Participation in a meeting by
that means constitutes presence in person at the meeting.
Section 3.5 Quorum and Action. A majority of the directors currently
holding office shall constitute a quorum for the transaction of business. If a
quorum is present when a duly called or held meeting is convened, the directors
present may continue to transact business until
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adjournment, even though the withdrawal of a number of directors originally
present leaves less than the proportion or number otherwise required for a
quorum. At any duly held meeting at which a quorum is present, the affirmative
vote of the majority of the directors present shall be the act of the Board of
Directors on any question, except where the act of a greater number is required
by these By-Laws, by the Articles of Incorporation or by statute.
Section 3.6 Action by Written Consent in Lieu of Meetings of Directors.
See Section 6.4 of these By-Laws.
Section 3.7 Removal. Unless the Articles of Incorporation provide
otherwise, any one or more of the directors may be removed, (1) either with or
without cause, at any time, by vote of the shareholders holding a majority of
all the votes entitled to be cast for the election of directors, at a special
meeting of shareholders, the notice of which announces such removal, or (2) for
cause, by the affirmative vote of a majority of the entire Board of Directors at
any regular or special meeting of the Board.
Section 3.8 Committees. The Board of Directors, by resolution adopted by
the affirmative vote of a majority of the Board, may designate from its members
an Executive Committee, an Investment Committee (whose function shall be to
advise the Board as to the investment policies of the Corporation) and any other
committee, each such committee to consist of two or more persons who need not be
directors and to have such powers and authority (to the extent permitted by law)
as may be provided in such resolution.
OFFICERS
Section 4.1 Number and Qualifications. The officers of the Corporation
shall include a Chairman of the Board, a chief executive officer who shall be
designated President, one or more Vice Presidents (one of whom may be designated
an Executive Vice President), a chief financial officer who shall be designated
Treasurer, and a Secretary. Any two or more offices may be held by the same
person. Unless otherwise determined by the Board, each officer shall be
appointed by the Board of Directors for a term which shall continue until the
meeting of the Board of Directors following the next regular meeting of
shareholders and until his successor shall have been duly elected and qualified,
or until his death, or until he shall have resigned or have been removed, as
hereinafter provided in these By-Laws. The Board may from time to time elect,
or delegate to the Chairman of the Board or the President, or both, the power to
appoint, such officers (including one or more Assistant Vice Presidents, one or
more Assistant Treasurers and one or more Assistant Secretaries) and such agents
as may be necessary or desirable for the business of the Corporation. Such
other officers shall hold office for such terms as may be prescribed by the
Board or by the appointing authority.
Section 4.2 Resignations. Any officer of the Corporation may resign at
any time by giving written notice of his resignation to the Board of Directors,
the Chairman of the Board, the President or the Secretary. Any such resignation
shall take effect at the time specified
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therein or, if the time when it shall become effective shall not be specified
therein, immediately upon its receipt, and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
Section 4.3 Removal. An officer may be removed at any time, with or
without cause, by a resolution approved by the affirmative vote of a majority of
the directors present at a duly convened meeting of the Board of Directors.
Section 4.4 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause, may be filled for the
unexpired portion of the term by the Board of Directors, or in the manner
determined by the Board, or pursuant to the provisions of the Minnesota Business
Corporation Act.
Section 4.5 The Chairman of the Board. The Chairman of the Board shall be
an ex officio member of all committees of the Board. He shall perform all
duties incident to the office of Chairman of the Board and such other duties as
may from time to time be assigned to him by the Board or by these By-Laws. In
the case of the absence of the President, his inability to act or any other
reason, the Chairman of the Board shall perform the duties of the President and
when so acting shall have all the power of, and be subject to all the
restrictions upon, the President.
Section 4.6 The President. The President shall be elected from among the
directors. He shall be the chief executive officer of the Corporation and
shall:
(a) have general active management of the business of the Corporation;
(b) when present, preside at all meetings of the Board and of the
shareholders;
(c) see that all orders and resolutions of the Board are carried into
effect;
(d) sign and deliver in the name of the Corporation any deeds, mortgages,
bonds, contracts or other instruments pertaining to the business of the
Corporation, except in cases in which the authority to sign and deliver is
required by law to be exercised by another person or is expressly delegated by
the Articles or By-Laws or by the Board to some other officer or agent of the
Corporation; and
(e) maintain records of and, whenever necessary, certify all proceedings of
the Board and the shareholders.
The President shall be authorized to do or cause to be done all things
necessary or appropriate, including preparation, execution and filing of any
documents, to effectuate the registration from time to time of shares of the
Common Stock of the Corporation with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended. He
8
<PAGE>
shall perform all duties incident to the office of President and such other
duties as from time to time may be assigned to him by the Board or by these By-
Laws. In the case of the absence of the Chairman of the Board, or his inability
to act, the President shall perform the duties of the Chairman of the Board and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the Chairman of the Board.
Section 4.7 Executive Vice-President. In the case of the absence or
inability to act of the President and the Chairman of the Board, the Executive
Vice-President shall perform the duties of the President and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
President. The Executive Vice-President shall perform all duties incident to
the office of Executive Vice-President and such other duties as from time to
time may be assigned to him by the Board, the President or these By-Laws.
Section 4.8 Vice-Presidents. Each Vice-President shall perform all such
duties as from time to time may be assigned to him by the Board or the
President.
Section 4.9 Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible for, all the funds and
securities of the Corporation, except those which the Corporation has placed in
the custody of a bank or trust company pursuant to a written agreement
designating such bank or trust company as custodian of the property of the
Corporation, as required by Section 6.7 of these By-Laws;
(b) keep accurate financial records for the Corporation;
(c) deposit all money, drafts, and checks in the name of and to the credit
of the Corporation in the banks and depositories designated by the Board;
(d) endorse for deposit all notes, checks, and drafts received by the
Corporation as ordered by the Board, making proper vouchers therefor;
(e) disburse corporate funds and issue checks and drafts in the name of the
Corporation, as ordered by the Board;
(f) render to the President and the Board, whenever requested, an account
of all transactions by the Treasurer and of the financial condition of the
Corporation; and
(g) in general, perform all the duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him by the Board
or the President.
Section 4.10 The Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for the purpose,
the minutes of all meetings of the Board, the committees of the Board and the
shareholders;
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(b) see that all notices are duly given in accordance with the provisions
of these By-Laws and as required by statute;
(c) be custodian of the records and the seal of the Corporation and affix
and attest the seal to all stock certificates of the Corporation (unless the
seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to be
executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by statute to be kept and filed are properly kept
and filed; and
(e) in general, perform all the duties incident to the office of Secretary
and such other duties as from time to time may be assigned to him by the Board
or the President.
Section 4.11 Salaries. The salaries of all officers shall be fixed by the
Board of Directors, and the Board has the authority by majority vote to
reimburse expenses and to establish reasonable compensation of all directors for
services to the Corporation as directors, officers, or otherwise.
CAPITAL STOCK
Section 5.1 Stock Certificates. Each owner of shares of Common Stock of
the Corporation shall be entitled upon request to have a certificate, in such
form required by the laws of the State of Minnesota as shall be approved by the
Board of Directors, representing the number of shares of stock of the
Corporation owned by him. No certificates shall be issued for fractional
shares. The certificates representing shares of stock shall be signed in the
name of the Corporation by the Chairman of the Board, the President, the
Executive Vice President or a Vice President and by the Secretary, an Assistant
Secretary, the Treasurer or an Assistant Treasurer (which signatures may be
either manual or facsimile, engraved or printed) and sealed with the seal of the
Corporation (which seal may be a facsimile, engraved or printed). In case any
officer who shall have signed such certificate shall have ceased to be such
officer before such certificates shall be issued, they may nevertheless be
issued by the Corporation with the same effect as if such officer were still in
office at the date of their issue.
Section 5.2 Books and Records; Inspection. The Corporation shall keep at
its principal executive office, or at another place or places within the United
States determined by the Board, a share register not more than one year old,
containing the names and addresses of the shareholders and the number and
classes of shares held by each shareholder. The Corporation shall also keep, at
its principal executive office, or at another place or places within the United
States determined by the Board, a record of the dates on which certificates
representing shares were issued.
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The Corporation shall keep at its principal executive office, or, if its
principal executive office is outside of the State of Minnesota, shall make
available at its registered office within ten days after receipt by an officer
of the Corporation of a written demand for them made by a person described in
subdivision 4 of Section 302A.461 of the Minnesota Business Corporation Act,
originals or copies of:
(a) records of all proceedings of shareholders for the last three years;
(b) records of all proceedings of the Board for the last three years;
(c) the Corporation's Articles of Incorporation and all amendments
currently in effect;
(d) the Corporation's By-Laws and all amendments currently in effect;
(e) financial statements required by Section 302A.463 of the Minnesota
Business Corporation Act, and the financial statement for the most recent
interim period prepared in the course of the operation of the Corporation for
distribution to the shareholders or to a governmental agency as a matter of
public record;
(f) reports made to shareholders generally within the last three years;
(g) a statement of the names and usual business addresses of its directors
and principal officers;
(h) voting trust agreements described in Section 302A.453 of the Minnesota
Business Corporation Act; and
(i) shareholder control agreements described in Section 302A.455 of the
Minnesota Business Corporation Act.
Section 5.3 Share Transfers. Upon compliance with any provisions
restricting the transferability of shares that may be set forth in the Articles
of Incorporation, these By-Laws, or any resolution or written agreement in
respect thereof, transfers of shares of the Corporation shall be made only on
the books of the Corporation by the registered holder thereof, or by his
attorney thereunto authorized by power of attorney duly executed and filed with
an officer of the Corporation, or with a transfer agent or a registrar and on
surrender of the certificate or certificates for such shares properly endorsed
and the payment of all taxes thereon. Except as may be otherwise provided by
law or these By-Laws, the person in whose name shares stand on the books of the
Corporation shall be deemed the owner thereof for all purposes as regards the
Corporation; provided that whenever any transfer of shares shall be made for
collateral security, and not absolutely, such fact, if known to an officer of
the Corporation, shall be so expressed in the entry of transfer.
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Section 5.4 Regulations. The Board of Directors may make such additional
rules and regulations, not inconsistent with these By-Laws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of stock of the Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer agents or one or more transfer clerks
and one or more registrars and may require all certificates for shares of stock
to bear the signature or signatures of any of them.
Section 5.5 Lost, Destroyed or Mutilated Certificates. The holder of any
certificate representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it which the owner thereof shall
allege to have been lost or destroyed or which shall have been mutilated, and
the Board may, in its discretion, require such owner or his legal
representatives to give to the Corporation, a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties as the Board in its
absolute discretion shall determine, to indemnify the Corporation against any
claim that may be made against it on account of the alleged loss or destruction
of any such certificate, or the issuance of a new certificate. Anything herein
to the contrary notwithstanding, the Board, in its absolute discretion, may
refuse to issue any such new certificate, except pursuant to legal proceedings
under the laws of the State of Minnesota.
Section 5.6 Record Date; Certification of Beneficial Owner. (a) The
directors may fix a date not more than sixty days before the date of a meeting
of shareholders as the date for the determination of the holders of shares
entitled to notice of and entitled to vote at the meeting.
(b) In the absence of such fixed record date, (i) the date for
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders shall be the later of the close of business on the day on which
notice of the meeting is mailed or the thirtieth day before the meeting, and
(ii) the date for determining shareholders entitled to receive payment of a
dividend or an allotment of any rights shall be the close of business on the day
on which the resolution of the Board of Directors is adopted, but the payment or
allotment shall not be made more than sixty days after the date on which the
resolution is adopted.
(c) A resolution approved by the affirmative vote of a majority of the
directors present may establish a procedure whereby a shareholder may certify in
writing to the Corporation that all or a portion of the shares registered in the
name of the shareholder are held for the account of one or more beneficial
owners. Upon receipt by the Corporation of the writing, the persons specified
as beneficial owners, rather than the actual shareholders, are deemed the
shareholders for the purposes specified in the writing.
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MISCELLANEOUS
Section 6.1 Seal. The Board of Directors shall provide a suitable
corporate seal stating the corporate name, and state and year of incorporation,
which shall be in the charge of the Secretary and shall be used as authorized by
these By-Laws.
Section 6.2 Fiscal Year. The fiscal year of the Corporation shall
begin on October 1 of each year and end on September 30 of the succeeding year.
Section 6.3 Notice and Waiver of Notice. (a) Any notice of a meeting
required to be given under these By-Laws to shareholders and/or directors may be
waived by any such person (1) orally or in writing signed by such person before,
at or after the meeting or (ii) by attendance at the meeting in person or, in
the case of a shareholder, by proxy.
(b) All notices required by these By-Laws shall be printed or written,
and shall be delivered either personally, by telegraph or cable or by mail and,
if mailed, shall be deemed to be delivered when deposited in the United States
mail, postage prepaid, addressed to the shareholder or director at his address
as it appears on the records of the Corporation.
Section 6.4 Action by Written Consent in Lieu of Meetings. (a) An
action required or permitted to be taken at a meeting of the shareholders may be
taken without a meeting by written action signed by all of the shareholders
entitled to vote on that action. The written action is effective when it has
been signed by all of those shareholders, unless a different effective time is
provided in the written action.
(b) An action which requires shareholder approval and which is
required or permitted to be taken at a Board meeting may be taken by written
action signed by all of the directors. An action which does not require
shareholder approval and which is required or permitted to be taken at a Board
meeting may be taken by written action signed by the number of directors that
would be required to take the same action at a meeting of the Board at which all
directors were present. The written action is effective when signed by the
required number of directors, unless a different effective time is provided in
the written action. When written action is permitted to be taken by less than
all directors, all directors shall be notified immediately of its text and
effective date.
Section 6.5 Reports to Shareholders. The books of account of the
Corporation shall be examined by an independent firm of public accountants at
the close of each annual period of the Corporation and at such other times, if
any, as may be directed by the Board of Directors. A report to the shareholders
based upon such examination shall be mailed to each shareholder of the
Corporation of record on such date with respect to each report as may be
determined by the Board, at his address as the same appears on the books of the
Corporation. Each such report shall show the assets and liabilities of the
Corporation as of the annual or other period covered by the report and the
securities in which the funds of the Corporation were then invested; such report
shall also show the Corporation's income and expenses for the period from the
end of the
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Corporation's preceding fiscal year to the close of the annual or other period
covered by the report and any other information required by the 1940 Act, and
shall set forth such other matters as the Board or such independent firm of
public accountants shall determine.
Section 6.6 Approval of Firm of Independent Public Accountants. At
every regular meeting of the stockholders of the Corporation there may be
submitted for ratification or rejection, the name of the firm of independent
public accountants which has been selected for the current fiscal year in which
such meeting is held by a majority of those members of the Board of Directors
who are not investment advisers of, or affiliated persons of an investment
adviser of, or officers or employees of, the Corporation, as such terms are
defined in the 1940 Act.
Section 6.7 Custodian. All securities and cash of the Corporation
shall be held by a custodian meeting the requirements for a custodian contained
in the 1940 Act and the rules and regulations thereunder and in any applicable
state securities or blue sky laws. The Corporation shall enter into a written
contract with the custodian regarding the powers, duties and compensation of the
custodian with respect to the cash and securities of the Corporation held by the
custodian. Said contract and all amendments thereto shall be approved by the
Board of Directors of the Corporation. The Corporation shall upon the
resignation or inability to serve of the custodian obtain a successor custodian
and require that the cash and securities owned by the Corporation be delivered
directly to the successor custodian.
Section 6.8 Prohibited Transactions. No officer or director of the
Corporation or of its investment adviser shall deal for or on behalf of the
Corporation with himself, as principal or agent, or with any corporation or
partnership in which he has a financial interest. This prohibition shall not
prevent: (a) officers or directors of the Corporation from having a financial
interest in the Corporation, its principal underwriter or its investment
adviser; (b) the purchase of securities for the portfolio of the Corporation or
the sale of securities owned by the Corporation through a securities dealer, one
or more of whose partners, officers or directors is an officer or director of
the Corporation, provided such transactions are handled in the capacity of
broker only and provided commissions charged do not exceed customary brokerage
charges for such service; (c) the purchase or sale of securities for the
portfolio of the Corporation pursuant to a rule under the 1940 Act or pursuant
to an exemptive order of the Securities and Exchange Commission; or (d) the
employment of legal counsel, registrar, transfer agent, dividend disbursing
agent, or custodian having a partner, officer or director who is an officer or
director of the Corporation, provided only customary fees are charged for
services rendered to or for the benefit of the Corporation.
Section 6.9 Bonds. The Board of Directors may require any officer,
agent or employee of the Corporation to give a bond to the Corporation,
conditioned upon the faithful discharge of his duties, with one or more sureties
and in such amount as may be satisfactory to the Board of Directors. The Board
of Directors shall, in any event, require the Corporation to provide and
maintain a bond issued by a reputable fidelity insurance company, authorized to
do business in the place where the bond is issued, against larceny and
embezzlement, covering each
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officer and employee of the Corporation, who may singly, or jointly with others,
have access to securities or funds of the Corporation, either directly or
through authority to draw upon such funds or to direct generally the disposition
of such securities, such bond or bonds to be in such reasonable form and amount
as a majority of the Board of Directors who are not "interested persons" of the
Corporation as defined in the 1940 Act shall approve not less than once every
twelve months, with due consideration to all relevant factors including, but not
limited to, the value of the aggregate assets of the Corporation to which any
such officer or employee may have access, the type and terms of the arrangements
made for the custody and safekeeping of such assets, and the nature of the
securities in the Corporation's portfolio, and as meet all requirements which
the Securities and Exchange Commission may prescribe by order, rule or
regulation.
AMENDMENTS
Section 7. These By-Laws may be amended or repealed, or new By-Laws
may be adopted, by the Board of Directors at any meeting thereof, provided that
notice of such meeting shall have been given as provided in these ByLaws, which
notice shall state that amendment or repeal of the By-Laws or adoption of new
By-Laws, is one of the purposes of such meeting, or by action of the Board of
Directors by written consent in lieu of a meeting. Any such By-Laws adopted by
the Board may be amended or repealed, or new By-Laws may be adopted, by the vote
of the shareholders of the Corporation, at any regular or special meeting
thereof, provided that the notice of such meeting shall have been given as
provided in these By-Laws, which notice shall state that amendment or repeal of
these By-Laws, or the adoption of new By-Laws, is one of the purposes of such
meeting, or by action of the shareholders by written consent in lieu of a
meeting.
15
<PAGE>
EXHIBIT 5
Nuveen New York Municipal Value Fund, Inc.
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. set forth on Exhibit A attached hereto (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 United States Trust Company of New York ("U.S. Trust"), the
Plan Agent, in accordance with the following terms:
1. U.S. Trust 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 U.S. Trust 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
U.S. Trust and the Fund may agree. In the case of shareholders who hold shares
for others who are the beneficial owners, U.S. Trust 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 U.S. Trust 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.
<PAGE>
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
U.S. Trust 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. U.S. Trust 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.
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 U.S. Trust shall determine. Participants' funds held
uninvested by U.S. Trust will not bear interest, and it is understood that, in
any event, U.S. Trust 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. U.S. Trust shall have no
responsibility as to the value of the Fund's shares acquired for Participants'
accounts. U.S. Trust 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 U.S. Trust as Agent.
6. U.S. Trust may hold each Participant's shares acquired pursuant to
this Plan, together with the shares of other Participants, in non-certificated
form in U.S. Trust's name or that of its nominee. U.S. Trust 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. U.S. Trust 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. U.S. Trust 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, U.S. Trust will adjust
for any such undivided fractional interest at the market value of the Fund's
shares at the time of termination.
2
<PAGE>
8. Any stock dividends or split shares distributed by the Fund on
full and fractional shares held by U.S. Trust 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. U.S. Trust'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.
10. Each Participant may terminate his account under the Plan by
notifying U.S. Trust 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 U.S. Trust and the Fund may agree. Such
termination will be effective immediately if notice is received by U.S. Trust
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 U.S. Trust upon at
least 90 days prior notice. Upon any termination, U.S. Trust 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 U.S. Trust sell part or all of his shares, U.S. Trust 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 U.S.
Trust 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, U.S. Trust
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 U.S. Trust 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. U.S. Trust 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.
3
<PAGE>
13. These terms and conditions shall be governed by the laws of the State
of New York.
4
<PAGE>
Exhibit A
Nuveen Municipal Income Fund, Inc.
Nuveen California Municipal Income Fund, Inc.
Nuveen New York Municipal Income Fund, Inc.
Nuveen Premium Income Municipal Fund, Inc.
Nuveen Performance Plus Municipal Fund, Inc.
Nuveen Municipal Advantage Fund, Inc.
Nuveen Municipal Market Opportunity Fund, Inc.
Nuveen Investment Quality Municipal Fund, Inc.
Nuveen Insured Quality Municipal Fund, Inc.
Nuveen Select Quality Municipal Fund, Inc.
Nuveen Quality Income Municipal Fund, Inc.
Nuveen Insured Opportunity Municipal Fund, Inc.
Nuveen Premier Municipal Income Fund, Inc.
Nuveen Premier Insured Municipal Income Fund, Inc.
Nuveen Premium Income Municipal Fund 2, Inc.
Nuveen Premium Income Municipal Fund 4, Inc.
Nuveen Insured Premium Income Municipal Fund, Inc.
Nuveen Insured Premium Income Municipal Fund 2
Nuveen Select Maturities Fund
Nuveen California Municipal Value Fund, Inc.
Nuveen California Performance Plus Municipal Fund, Inc.
Nuveen California Municipal Market Opportunity Fund, Inc.
Nuveen California Investment Quality Municipal Fund, Inc.
Nuveen California Select Quality Municipal Fund, Inc.
Nuveen California Quality Income Municipal Fund, Inc.
Nuveen Insured California Premium Income Municipal Fund, Inc.
Nuveen Insured California Premium Income Municipal Fund 2, Inc.
Nuveen California Premium Income Municipal Fund
Nuveen Florida Investment Quality Municipal Fund
Nuveen Florida Quality Income Municipal Fund
Nuveen Insured Florida Premium Income Municipal Fund
Nuveen New Jersey Investment Quality Municipal Fund, Inc.
Nuveen New Jersey Premium Income Municipal Fund, Inc.
Nuveen New York Municipal Value Fund, Inc.
Nuveen New York Performance Plus Municipal Fund, Inc.
Nuveen New York Investment Quality Municipal Fund, Inc.
Nuveen New York Select Quality Municipal Fund, Inc.
Nuveen New York Quality Income Municipal Fund, Inc.
Nuveen Insured New York Premium Income Municipal Fund, Inc.
Nuveen Pennsylvania Investment Quality Municipal Fund
Nuveen Pennsylvania Premium Income Municipal Fund 2
Nuveen Arizona Premium Income Municipal Fund, Inc.
Nuveen Connecticut Premium Income Municipal Fund
Nuveen Georgia Premium Income Municipal Fund
Nuveen Maryland Premium Income Municipal Fund
Nuveen Massachusetts Premium Income Municipal Fund
Nuveen Michigan Quality Income Municipal Fund, Inc.
Nuveen Michigan Premium Income Municipal Fund, Inc.
Nuveen Missouri Premium Income Municipal Fund
Nuveen North Carolina Premium Income Municipal Fund
Nuveen Ohio Quality Income Municipal Fund, Inc.
Nuveen Texas Quality Income Municipal Fund
Nuveen Virginia Premium Income Municipal Fund
Nuveen Washington Premium Income Municipal Fund
5
<PAGE>
EXHIBIT 6.1
INVESTMENT MANAGEMENT AGREEMENT
-------------------------------
AGREEMENT made this 1st day of May, 1989, by and between NUVEEN NEW YORK
MUNICIPAL VALUE FUND, INC., a Minnesota corporation (the "Fund"), and NUVEEN
ADVISORY CORP., a Delaware corporation (the "Adviser").
W I T N E S S E T H
-------------------
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Fund hereby employs the Adviser to act as the investment adviser
for, and to manage the investment and reinvestment of the assets of the Fund in
accordance with the Fund's investment objective and policies and limitations,
and to administer the Fund's affairs to the extent requested by and subject to
the supervision of the Board of Directors of the Fund for the period and upon
the terms herein set forth. The investment of the Fund's assets shall be
subject to the Fund's policies, restrictions and instructions with respect to
securities investments as set forth in the Fund's then current registration
statement under the Investment Company Act of 1940, and all applicable laws and
the regulations of the Securities and Exchange Commission relating to the
management of registered closed-end, diversified management investment
companies.
The Adviser accepts such employment and agrees during such period to render
such services, to furnish office facilities and equipment and clerical,
bookkeeping and administrative
<PAGE>
services (other than such services, if any, provided by the Fund's transfer
agent) for the Fund, to permit any of its officers or employees to serve without
compensation as directors or officers of the Fund if elected to such positions,
and to assume the obligations herein set forth for the compensation herein
provided. The Adviser shall, for all purposes herein provided, be deemed to be
an independent contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for nor represent the Fund in any
way, nor otherwise be deemed an agent of the Fund.
2. For the services and facilities described in Section 1, the Fund will
pay to the Adviser, at the end of each calendar month, an investment management
fee in an amount equal to the sum of .40 of 1% of the average weekly net assets
of the Fund and 4.75% of gross interest income (i.e., income other than gains
from the sale of securities or gains realized from futures contracts), computed
in each case on an annualized basis. For the month and year in which this
Agreement becomes effective, or terminates, there shall be an appropriate
proration on the basis of the number of days that the Agreement shall have been
in effect during the month and year, respectively. The services of the Adviser
to the Fund under this Agreement are not to be deemed exclusive, and the Adviser
shall be free to render similar services or other services to others so long as
its services hereunder are not impaired thereby.
3. The Adviser shall arrange for officers or employees of the Adviser to
serve, without compensation from the Fund, as directors, officers or agents of
the Fund, if duly elected or appointed to such positions, and subject to their
individual consent and to any limitations imposed by law.
2
<PAGE>
4. Subject to applicable statutes and regulations, it is understood that
officers, directors, or agents of the Fund are, or may be, interested in the
Adviser as officers, directors, agents, shareholders or otherwise, and that the
officers, directors, shareholders and agents of the Adviser may be interested in
the Fund otherwise than as directors, officers or agents.
5. The Adviser shall not be liable for any loss sustained by reason of
the purchase, sale or retention of any security, whether or not such purchase,
sale or retention shall have been based upon the investigation and research made
by any other individual, firm or corporation, if such recommendation shall have
been selected with due care and in good faith, except loss resulting from
willful misfeasance, bad faith, or gross negligence on the part of the Adviser
in the performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
6. The Adviser currently manages other investment accounts and funds,
including those with investment objectives similar to the Fund, and reserves the
right to manage other such accounts and funds in the future. Securities
considered as investments for the Fund may also be appropriate for other
investment accounts and funds that may be managed by the Adviser. Subject to
applicable laws and regulations, the Adviser will attempt to allocate equitably
portfolio transactions among the portfolios of its other investment accounts and
funds purchasing securities whenever decisions are made to purchase or sell
securities by the Fund and one or more of such other accounts or funds
simultaneously. In making such allocations, the main factors to be considered
by the Adviser will be the respective investment objectives of the Fund and such
other accounts and funds, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment by the Fund and
such other accounts and funds,
3
<PAGE>
the size of investment commitments generally held by the Fund and such accounts
and funds, and the opinions of the persons responsible for recommending
investments to the Fund and such other accounts and funds.
7. This Agreement shall continue in effect until May 1, 1990, unless and
until terminated by either party as hereinafter provided, and shall continue in
force from year to year thereafter, but only as long as such continuance is
specifically approved, at least annually, in the manner required by the
Investment Company Act of 1940.
This Agreement shall automatically terminate in the event of its
assignment, and may be terminated at any time without the payment of any penalty
by the Fund or by the Adviser upon sixty (60) days' written notice to the other
party. The Fund may effect termination by action of the Board of Directors or
by vote of a majority of the outstanding shares of the Common Stock of the Fund,
accompanied by appropriate notice.
This Agreement may be terminated, at any time, without the payment of any
penalty, by the Board of Directors of the Fund, or by vote of a majority of the
outstanding shares of Common Stock of the Fund, in the event that it shall have
been established by a court of competent jurisdiction that the Adviser, or any
officer or director of the Adviser, has taken any action which results in a
breach of the covenants of the Adviser set forth herein.
Termination of this Agreement shall not affect the right of the Adviser to
receive payments on any unpaid balance of the compensation, described in Section
2, earned prior to such termination.
8. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule, or otherwise, the remainder shall not be thereby
affected.
4
<PAGE>
9. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for receipt of such notice.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to
be executed on the day and year above written.
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
By: /s/
------------------------------------------
President
Attest: /s/ Larry W. Martin
---------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By: /s/ Paul R. Daniels
----------------------------------------------
Vice President
Attest: /s/ G.R. Zimmerman
----------------------
Assistant Secretary
5
<PAGE>
Renewal of Investment Management Agreement
------------------------------------------
This Agreement made this 24th day of April, 1990 by and between Nuveen New York
Municipal Value Fund, Inc., a Minnesota corporation (the "Fund"), and Nuveen
Advisory Corp., a Delaware corporation (the "Adviser");
WHEREAS, the parties hereto are the contracting parties under that certain
Investment Management Agreement (the "Agreement") pursuant to which the Adviser
furnishes investment management and other services to the Fund; and
WHEREAS, the Agreement terminates May 1, 1990 unless continued in the manner
required by the Investment Company Act of 1940; and
WHEREAS, the Board of Directors and the shareholders of the Fund, at meetings
called for the purpose of reviewing the Agreement, have approved the Agreement
and its continuance until May 1, 1991 in the manner required by the Investment
Company Act of 1940.
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreement the parties hereto do hereby continue the Agreement in effect until
May 1, 1991 and ratify and confirm the Agreement in all respects.
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
By: /s/
------------------------------------------
Vice President
ATTEST:
/s/ Larry Martin
---------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By:/s/ Thomas C. Spalding
-------------------------------------------
ATTEST:
/s/ G.R. Zimmerman
-----------------------------
Assistant Secretary
6
<PAGE>
Renewal of Investment Management Agreement
------------------------------------------
This Agreement made this 26th day of April, 1991 by and between Nuveen New York
Municipal Value Fund, Inc , a Minnesota corporation (the "Fund"), and Nuveen
Advisory Corp , a Delaware corporation (the "Adviser");
WHEREAS, the parties hereto are the contracting parties under that certain
Investment Management Agreement (the "Agreement") pursuant to which the Adviser
furnishes investment management and other services to the Fund; and
WHEREAS, the Agreement terminates May 1, 1991 unless continued in the manner
required by the Investment Company Act of 1940; and
WHEREAS, the Board of Directors and the shareholders of the Fund, at meetings
called for the purpose of reviewing the Agreement, have approved the Agreement
and its continuance until May 1, 1992 in the manner required by the Investment
Company Act of 1940.
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreement the parties hereto do hereby continue the Agreement in effect until
May 1, 1992 and ratify and confirm the Agreement in all respects.
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
By:/s/
------------------------------------------
Vice President
ATTEST:
/s/
--------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By:/s/ Thomas C. Spalding
-------------------------------------------
ATTEST:
/s/ G.R. Zimmerman
---------------------------
Assistant Secretary
7
<PAGE>
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
AMENDMENT AND RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
--------------------------------------------------------
Agreement made this 1st day of May, 1991, by and between NUVEEN NEW YORK
MUNICIPAL VALUE FUND, INC., a Minnesota corporation (the "Fund"), and NUVEEN
ADVISORY CORP., a Delaware corporation (the "Adviser").
WITNESSETH THAT:
---------------
WHEREAS, the Board of Directors of the Fund and the Adviser have agreed to
amend that certain Investment Management Agreement between the Fund and the
Adviser dated May 1, 1989 and as renewed on April 24, 1990 (the "Agreement") by
reducing the investment management fee paid to the Adviser by the Fund; and
WHEREAS, the Agreement terminates May 1, 1991 unless continued in the
manner required by the Investment Company Act of 1940; and
WHEREAS, the Board of Directors and the shareholders of the Fund, at
meetings called for the purpose, have approved the amendment to the Agreement
and the continuation of the Agreement until May 1, 1992 in the manner required
by the Investment Company Act of 1940.
NOW THEREFORE, in consideration of the mutual covenants contained herein
and in the Agreement as hereby amended, the Fund and the Adviser hereby agree to
amend the Agreement as follows:
1. Section 2 of the Agreement shall be deleted in its entirety and the
following shall be inserted in lieu thereof:
For the services and facilities described in Section 1, the Fund will
pay to the Adviser, at the end of each calendar month, an investment
management fee in an amount equal to the sum of .40 of 1% of the average
weekly net assets of the Fund and 4.25% of gross interest income (i.e.,
income other than gains from the sales of securities or gains realized from
futures contracts), computed in each case on an annualized basis. For the
month and year in which this Agreement becomes effective, or terminates,
there shall be an appropriate proration on the basis of the number of days
that the Agreement shall have been in effect during the month and year,
respectively. The services of the Adviser to the Fund under this Agreement
are not to be deemed exclusive, and the Adviser shall be free to render
similar services or other services to others so long as its services
hereunder are not impaired thereby.
2. The first paragraph of Section 7 shall be deleted in its entirety
and the following inserted in lieu thereof:
8
<PAGE>
This Agreement shall continue in effect until May 1, 1992, unless and
until terminated by either party as hereinafter provided, and shall
continue in force from year to year thereafter, but only as long as such
continuance is specifically approved, at least annually, in the manner
required by the Investment Company Act of 1940.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed in its name and on its behalf by a duly authorized officer as of the
day and year first above written.
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
By:/s/
-----------------------------------------
Vice President
Attest:/s/
---------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By:/s/
-----------------------------------------
Vice President
Attest:/s/ G.R. Zimmerman
----------------------------
Assistant Secretary
9
<PAGE>
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
AMENDMENT AND RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
--------------------------------------------------------
Agreement made this 27th day of April, 1992, by and between NUVEEN NEW YORK
MUNICIPAL VALUE FUND, INC., a Minnesota corporation (the "Fund"), and NUVEEN
ADVISORY CORP., a Delaware corporation (the "Adviser"), to be effective May 1,
1992.
WITNESSETH THAT:
---------------
WHEREAS, the Board of Directors of the Fund and the Adviser have agreed to
amend that certain Investment Management Agreement between the Fund and the
Adviser dated May 1, 1989, as subsequently amended and renewed (the
"Agreement"), by reducing the investment management fee paid to the Adviser by
the Fund; and
WHEREAS, the Agreement terminates May 1, 1992 unless continued in the
manner required by the Investment Company Act of 1940; and
WHEREAS, the Board of Directors and the shareholders of the Fund, at
meetings called for the purpose, have approved the amendment to the Agreement
and the continuation of the Agreement until May 1, 1993 in the manner required
by the Investment Company Act of 1940.
NOW THEREFORE, in consideration of the mutual covenants contained herein
and in the Agreement as hereby amended, the Fund and the Adviser hereby agree to
amend the Agreement as follows:
1. Section 2 of the Agreement shall be deleted in its entirety and the
following shall be inserted in lieu thereof:
For the services and facilities described in Section 1, the Fund will
pay to the Adviser, at the end of each calendar month, an investment
management fee in an amount equal to the sum of .35 of 1% of the average
weekly net assets of the Fund and 4.125% of gross interest income (i.e.,
income other than gains from the sales of securities or gains realized from
futures contracts), computed in each case on an annualized basis. For the
month and year in which this Agreement becomes effective, or terminates,
there shall be an appropriate proration on the basis of the number of days
that the Agreement shall have been in effect during the month and year,
respectively. The services of the Adviser to the Fund under this Agreement
are not to be deemed exclusive, and the Adviser shall be free to render
similar services or other services to others so long as its services
hereunder are not impaired thereby.
2. The first paragraph of Section 7 shall be deleted in its entirety and
the following inserted in lieu thereof:
10
<PAGE>
This Agreement shall continue in effect until May 1, 1993, unless and
until terminated by either party as hereinafter provided, and shall
continue in force from year to year thereafter, but only as long as such
continuance is specifically approved, at least annually, in the manner
required by the Investment Company Act of 1940.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed in its name and on its behalf by a duly authorized officer as of the
day and year first above written.
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
By: /s/
---------------------------------------
Vice President
Attest:/s/ G.R. Zimmerman
---------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By:/s/ Thomas C. Spalding
-----------------------------------------
Vice President
Attest:/s/ Larry Martin
----------------------------
Assistant Secretary
11
<PAGE>
Renewal of Investment Management Agreement
------------------------------------------
This Agreement made this 23rd day of February, 1993 by and between Nuveen New
York Municipal Value Fund, Inc , a Minnesota Corporation (the "Fund"), and
Nuveen Advisory Corp., a Delaware corporation (the "Adviser");
WHEREAS, the parties hereto are the contracting parties under that certain
Investment Management Agreement (the "Agreement") pursuant to which the Adviser
furnishes investment management and other services to the Fund; and
WHEREAS, the Agreement terminates August 1, 1993 unless continued in the manner
required by the Investment Company Act of 1940; and
WHEREAS, the Board of Directors and the shareholders of the Fund, at meetings
called for the purpose of reviewing the Agreement, have approved the Agreement
and its continuance until August 1, 1993 in the manner required by the
Investment Company Act of 1940.
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreement the parties hereto do hereby continue the Agreement in effect until
August 1, 1993 and ratify and confirm the Agreement in all respects.
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
By:/s/
-----------------------------------------
Vice President
ATTEST:
/s/ G.R. Zimmerman
----------------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By:/s/ Thomas C. Spalding
-----------------------------------------
ATTEST:
/s/
-----------------------------------
Assistant Secretary
12
<PAGE>
Renewal of Investment Management Agreement
------------------------------------------
This Agreement made this 28th day of July, 1993 by and between Nuveen New York
Municipal Value Fund, Inc., a Minnesota corporation (the "Fund"), and Nuveen
Advisory Corp., a Delaware corporation (the "Adviser");
WHEREAS, the parties hereto are the contracting parties under that certain
Investment Management Agreement (the "Agreement") pursuant to which the
Adviser furnishes investment management and other services to the Fund; and
WHEREAS, the Agreement terminates August 1, 1993 unless continued in the
manner required by the Investment Company Act of 1940; and
WHEREAS, the Board of Directors and the shareholders of the Fund, at
meetings called for the purpose of reviewing the Agreement, have approved
the Agreement and its continuance until August 1, 1994 in the manner
required by the Investment Company Act of 1940.
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreement the parties hereto do hereby continue the Agreement in effect
until August 1, 1994 and ratify and confirm the Agreement in all respects.
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
By:/s/
-----------------------------------------
Vice President
ATTEST:
/s/ G.R. Zimmerman
---------------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By:/s/ Thomas C. Spalding
-----------------------------------------
ATTEST:
/s/ Larry Martin
----------------------------------
Assistant Secretary
13
<PAGE>
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
------------------------------------------
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
------------------------------------------
This Agreement made this 27th day of July, 1994 by and between Nuveen New York
Municipal Value Fund, Inc., a Minnesota corporation (the "Fund"), and Nuveen
Advisory Corp., a Delaware corporation (the "Adviser");
WHEREAS, the parties hereto are the contracting parties under that certain
Investment Management Agreement (the "Agreement") pursuant to which the Adviser
furnishes investment management and other services to the Fund; and
WHEREAS, the Agreement terminates August 1, 1994 unless continued in the manner
required by the Investment Company Act of 1940; and
WHEREAS, the Board of Directors, at a meeting called for the purpose of
reviewing the Agreement, have approved the Agreement and its continuance until
August 1, 1995 in the manner required by the Investment Company Act of 1940.
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreement the parties hereto do hereby continue the Agreement in effect until
August 1, 1995 and ratify and confirm the Agreement in all respects.
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
By:/s/ G.R. Zimmerman
----------------------------------------
Vice President
ATTEST:
/s/
--------------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By:/s/
-----------------------------------------
ATTEST: Vice President
/s/ Larry Martin
---------------------------------
Assistant Secretary
14
<PAGE>
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
------------------------------------------
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
------------------------------------------
This Agreement made this 9th day of May, 1995 by and between Nuveen New York
Municipal Value Fund, Inc., a Minnesota corporation (the "Fund"), and Nuveen
Advisory Corp., a Delaware corporation (the "Adviser");
WHEREAS, the parties hereto are the contracting parties under that certain
Investment Management Agreement (the "Agreement") pursuant to which the Adviser
furnishes investment management and other services to the Fund; and
WHEREAS, the Agreement terminates August 1, 1995 unless continued in the manner
required by the Investment Company Act of 1940; and
WHEREAS, the Board of Directors, at a meeting called for the purpose of
reviewing the Agreement, have approved the Agreement and its continuance until
August 1, 1996 in the manner required by the Investment Company Act of 1940.
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreement the parties hereto do hereby continue the Agreement in effect until
August 1, 1996 and ratify and confirm the Agreement in all respects.
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
By:/s/ G.R. Zimmerman
----------------------------------------
Vice President
ATTEST:
/s/
---------------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By:/s/
-----------------------------------------
Vice President
ATTEST:
/s/ Larry Martin
----------------------------------
Assistant Secretary
15
<PAGE>
EXHIBIT 8
DIRECTORS' DEFERRED COMPENSATION PLAN
NUVEEN OPEN-END AND CLOSED-END FUNDS
1. PURPOSE
-------
The purpose of this Plan is to provide non-interested directors of Nuveen's
existing open-end and closed-end Funds and all future such Funds (the
"Funds") the opportunity to defer all or a portion of amounts payable to
them as compensation for services rendered as members of the Board of
Directors of each of the Funds ("directors' fees").
2. ELIGIBILITY
-----------
Any non-interested director for one or more of the Funds shall be eligible
to participate under this Plan. "Director" shall mean any person duly
elected as a member of the Board of Directors or Board of Trustees of any
of the Funds at the annual meeting of shareholders thereof. "Non-
interested director" shall mean any director who is not an "interested
person" of John Nuveen & Co. Incorporated or any affiliate thereof within
the meaning of Section 2(a)(19) of the Investment Company Act of 1940.
3. DEFERRAL OF DIRECTORS' FEES
---------------------------
Each non-interested director may elect to have all of his director's fee
for one or more of the Funds for any calendar year deferred under this
Plan. Such election shall be made by such director by the execution of a
written election to participate prior to the beginning of the calendar year
during which the director wishes to begin deferral, except that for any
person who is nominated as a non-interested director of any of the Funds
and was not a director on the December 31st immediately prior to his
election may, at any time prior to commencement of his term, elect to defer
all or any portion of the director's fee to which he may thereafter be
entitled with respect to the calendar year in which he is so elected. All
elections to defer directors' fees shall be made by the execution of a
Participation Agreement in the form attached to this Plan and made a part
hereof. A participating director's election to defer a particular year's
fee shall not be subject to amendment or withdrawal unless the amendment or
withdrawal is executed prior to the beginning of the calendar year in which
the fee is accrued. An election, once made, shall be irrevocable for the
next calendar year and shall continue in effect for subsequent years during
the deferral period until changed prospectively by the participating
director. Each non-interested director may elect to defer until the end of
a specified calendar year or until he or she is no longer a director of the
Funds. A director will be deemed to have elected to defer until the first
to occur of such events if he or she checks both such options in the
deferral period section of the Participation Agreement.
4. STATUS OF DEFERRED ACCOUNTS
---------------------------
Each of the Funds shall establish on its books a deferred liability
directors account for each participating director to accurately reflect its
liability to each such director. Title to, and beneficial ownership of,
any assets which each such Fund may earmark to pay the amount deferred
hereunder, shall at all times remain in such Fund and neither the
participating director nor any beneficiary of such director shall have any
property interest whatsoever in any specific assets of such Fund. Amounts
credited to such accounts shall not be construed to be held in trust or
escrow or in any form of asset segregation, it being understood that the
participating director's only interest hereunder is a contractual right to
receive the payments credited to his or her deferred liability directors
account. No director or any other person acquiring the right to receive
payments from any of the Funds under this Plan shall have greater rights
than the right of an unsecured general creditor of such Fund. Within a
reasonable time after each calendar year, each participating director shall
receive a statement from each Fund in which he has elected to defer
director's
<PAGE>
fees detailing the amount of director's fees credited to such director's
account during the prior calendar year, the amount of earnings credited
thereto and the total amount credited to such director's account as of the
preceding December 31.
5. EARNINGS
--------
With respect to each Fund in which the director has elected to defer
director's fees and which has an accrued balance, on the last day of each
calendar quarter earnings at the average net earnings rate for that
calendar quarter on the shares of each such Fund shall be credited to the
deferred liability directors account for such Fund. The Administrators are
empowered to change the rate of earnings to be credited to deferred
liability directors accounts to a rate equivalent to the prevailing 90-day
U.S. Treasury bill rate at the beginning of each calendar quarter.
6. PAYMENT OF DEFERRED AMOUNTS
---------------------------
All payments of deferred amounts under this Plan, together with earnings
accrued thereon, shall be made in cash out of the general assets of the
applicable Fund. Payment shall be made as specified by the director in his
Participation Agreement.
7. PAYMENT IN DISCRETION OF ADMINISTRATORS
---------------------------------------
Amounts deferred hereunder, together with interest accrued thereon, may
become payable in the discretion of the Administrators:
A. to the participating director in the event of such director's total
disability. Such disability shall be deemed to have occurred if the
Administrators find on the basis of medical evidence satisfactory to
them that the participating director is prevented from engaging in any
suitable gainful employment or occupation and that such disability
will be permanent and continuous during the remainder of his or her
life;
B. to the participating director or any beneficiary entitled to receive
payment hereunder to alleviate demonstrated financial hardship. For
this purpose, hardship refers to circumstances beyond the control of
and severely affecting the director's or beneficiary's financial
affairs or clearly endangering his or her family with present or
impending want or privation. Any such payment shall be limited to an
amount necessary to relieve the immediate needs created by such
hardship.
8. ADMINISTRATORS
--------------
The Administrators of this Plan shall consist of the individuals holding
the office of Chairman of the Board, President and Executive Vice President
of the Funds and such other person or persons as the Board of Directors of
the Funds may, from time to time, designate except that no participating
director may serve as an Administrator. A majority of the Administrators
shall constitute a quorum for the transaction of business.
9. ACCELERATION OF PAYMENTS
------------------------
A. In the event of the liquidation, dissolution or winding up of a Fund
or the distribution of all or substantially all of a Fund's assets and
property to its shareholders (for this purpose a sale, conveyance or
transfer of a Fund's assets to a trust, partnership, association or
another corporation in exchange for cash, shares or other securities
with the transfer being made subject to, or with the assumption by the
transferee of, the liabilities of such Fund shall not be deemed a
termination of such Fund or such a distribution), the entire unpaid
balance of the deferred liability directors accounts of the Fund shall
be paid in a lump sum as of the effective date thereof.
2
<PAGE>
B. The Administrators of the Plan are empowered to accelerate the payment
of deferred amounts to all participating directors and beneficiaries
in the event that there is a change in law which would have the effect
of working a financial hardship on participating directors if such
acceleration did not occur.
10. AMENDMENT OR TERMINATION
------------------------
The Board of Directors of each Fund may in its sole discretion amend or
terminate this Plan at any time. No amendment or termination shall
adversely affect any then existing deferred amounts or rights under this
Plan.
11. MISCELLANEOUS
-------------
The rights and benefits of participating directors under this Plan and any
other person or persons to whom payments may be made pursuant to the Plan
shall not be subject to alienation, assignment, pledge, transfer or other
disposition, except as otherwise provided by law. Participation in this
Plan by any director shall not confer any right to be nominated for
election or re-election to the Board of Directors of any of the Funds.
3
<PAGE>
EXHIBIT 9.1
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
AMENDMENT TO
MUTUAL FUND CUSTODY AGREEMENT
-----------------------------
AGREEMENT made this 25th day of February, 1991 by and between UNITED STATES
TRUST COMPANY OF NEW YORK ("Custodian") and NUVEEN NEW YORK MUNICIPAL VALUE
FUND, INC. (the "Fund").
WITNESSETH THAT:
---------------
WHEREAS, the Custodian and the Fund are parties to a Mutual Fund Custody
Agreement dated January 1, 1991 (the "Agreement") that governs the terms and
conditions under which the Custodian maintains custody of the securities and
other assets of the Fund; and
WHEREAS, the Fund and the Custodian wish to clarify the circumstances under
which the Custodian may advance cash to the Fund and provide to the Custodian a
security interest in Fund securities in connection with any such advances;
NOW THEREFORE, in consideration of the mutual agreements contained herein
and in the Agreement as hereby amended, the Custodian and the Fund hereby agree
to amend the Agreement by adding thereto a new Section 6A, said new Section to
read as follows:
"6A. Advances by Custodian. The Fund may from time to time purchase
securities for settlement payable in "next day" funds and provide for
payment for such transactions by selling securities for settlement in
"same day" funds settling on the day after settlement of the Fund's
purchase transaction. Under these circumstances the Fund may require
the Custodian to advance funds in amounts not exceeding 20% of the
value of the Fund's assets at the time of the advance for payment of
the securities purchase transaction, and the Custodian shall recover
an amount equal to its advance, without
<PAGE>
interest, from the proceeds of the securities sale. In addition to
the foregoing, the Custodian may from time to time agree to advance
cash to the Fund, without interest, for the Fund's other proper
corporate purposes. If the Custodian advances cash for any purpose,
the Fund shall and hereby does grant to the Custodian a security
interest in Fund securities equal in value to the amount of the cash
advance but in no event shall the value of securities in which a
security interest has been granted exceed 20% of the value of the
Fund's total assets at the time of the pledge; should the Fund fail to
repay the Custodian promptly, the Custodian shall be entitled to
utilize available cash and to reasonably dispose of any securities in
which it has a security interest to the extent necessary to obtain
reimbursement."
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed in its name and on its behalf by a duly authorized officer as of the
day and year first above written.
ATTEST: NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
/s/ /s/
--------------------------------- ---------------------------------------
Assistant Secretary Vice President
ATTEST: UNITED STATES TRUST COMPANY OF NEW YORK
/s/ Jacqueline Binder /s/
--------------------------------- ---------------------------------------
Assistant Secretary Vice President
2
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Appointment...........................................................
2. Delivery of Documents.................................................
3. Definitions...........................................................
4. Delivery and Registration of the Property.............................
5. Voting Rights.........................................................
6. Receipt and Disbursement of Money.....................................
7. Receipt and Delivery of Securities....................................
8. Use of Securities Depository or Book-Entry System.....................
9. Segregated Account....................................................
10. Instructions Consistent With The Articles, etc.........................
11. Transaction Not Requiring Instructions.................................
12. Transactions Requiring Instructions....................................
13. Purchase of Securities.................................................
14. Sale of Securities.....................................................
15. Authorized Shares......................................................
16. Records................................................................
17. Cooperation with Accountants...........................................
18. Reports to Fund by Independent Public Accountants......................
18. Confidentiality........................................................
19. Equipment Failures.....................................................
20. Right to Receive Advice................................................
21. Compliance with Governmental Rules and Regulations.....................
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
22. Compensation........................................................
23. Indemnification.....................................................
24. Responsibility of U.S. Trust........................................
25. Collection of Income................................................
27. Ownership Certificates for Tax Purposes.............................
26. Effective Period; Termination and Amendment.........................
27. Successor Custodian.................................................
28. Notices.............................................................
29. Further Actions.....................................................
30. Amendments..........................................................
31. Miscellaneous.......................................................
</TABLE>
4
<PAGE>
MUTUAL FUND CUSTODY AGREEMENT
-----------------------------
THIS AGREEMENT is made this 1st day of January, 1991 by and between NUVEEN
NEW YORK MUNICIPAL VALUE FUND, INC. (the "Fund"), and UNITED STATES TRUST
COMPANY OF NEW YORK, a New York State chartered bank and trust company ("U.S.
Trust").
W I T N E S S E T H
-------------------
WHEREAS, the Fund is registered as a closed-end diversified, management
investment company under the Investment Company Act of 1940, as amended ("the
1940 Act"); and
WHEREAS, the Fund desires to retain U.S. Trust to serve as the Fund's
custodian and U.S. Trust is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints U.S. Trust to act as custodian
of its portfolio securities, cash and other property on the terms set forth in
this Agreement. U.S. Trust accepts such appointment and agrees to furnish the
services herein set forth in return for the compensation as provided in Section
23 of this Agreement.
2. Delivery of Documents. The Fund has furnished U.S. Trust with copies
properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Directors authorizing the
appointment of U.S. Trust as Custodian of the portfolio securities, cash and
other property of the Fund and approving this Agreement;
5
<PAGE>
(b) Incumbency and signature certificates identifying and containing
the signatures of the Fund's officers and/or the persons authorized to sign
Proper Instructions, as hereinafter defined, on behalf of the Fund;
(c) The Fund's Articles of Incorporation filed with the State of
Minnesota and all amendments thereto (such Articles of Incorporation as
currently in effect and from time to time be amended, are herein called the
"Articles");
(d) The Fund's By-Laws and all amendments thereto (such By-Laws, as
currently in effect and as they shall from time to time be amended, are herein
called the "By-Laws"),
(e) Resolutions of the Fund's Board of Directors appointing the
investment advisor of the Fund and resolutions of the Fund's Board of Directors
and the Fund's Shareholders approving the proposed Investment Advisory Agreement
between the Fund and the advisor (the "Advisory Agreement");
(f) The Advisory Agreement
(g) The Fund's Notification of Registration filed pursuant to Section
8(a) of the 1940 Act, as filed with the SEC; and
(h) The Fund's Registration Statement on Form N-2 under the 1940 Act
and the Securities Act of 1933, as amended ("the 1933 Act") as filed with the
SEC; and
(i) The Fund's most recent prospectus including all amendments and
supplements thereto (the "Prospectus").
Upon request the Fund will furnish U.S. Trust with copies of all
amendments of or supplements to the foregoing, if any. The Fund will also
furnish U.S. Trust upon request with a copy of the opinion of counsel for the
Fund with respect to the validity of the Shares and
6
<PAGE>
the status of such Shares under the 1933 Act filed with the SEC, and any other
applicable federal law or regulation.
3. Definitions.
(a) "Authorized Person". As used in this Agreement, the term
"Authorized Person" means the Fund's President, Treasurer and any other person,
whether or not any such person is an officer or employee of the Fund, duly
authorized by the Board of Directors of the Fund to give Proper Instructions on
behalf of the Fund as set forth in resolutions of the Fund's Board of Directors.
(b) "Book-Entry System". As used in this Agreement, the term "Book-
Entry System" means a book-entry system authorized by the U.S. Department of
Treasury, its successor or successors and its nominee or nominees.
(c) Proper Instructions. Proper Instructions as used herein means a
writing signed or initialled by two or more persons as the Board of Directors
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if U.S. Trust reasonably believes them to
have been given by a person authorized to give such instructions with respect to
the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Directors of the
Fund accompanied by a detailed description of procedures approved by the Board
of Directors, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Board of
Directors and U.S. Trust are satisfied that such procedures afford adequate
safeguards for the Fund's assets. For purposes of this Section, Proper
Instructions shall include instructions received by U.S. Trust pursuant
7
<PAGE>
to any three-party agreement which requires a segregated asset account in
accordance with Section 9.
(d) "Property". The term "Property", as used in this Agreement,
means:
(i) any and all securities and other property of the Fund which
the Fund may from time to time deposit, or cause to be deposited, with U.S.
Trust or which U.S. Trust may from time to time hold for the Fund;
(ii) all income in respect of any such securities or other
property;
(iii) all proceeds of the sales of any of such securities or
other property; and
(iv) all proceeds of the sale of securities issued by the Fund,
which are received by U.S. Trust from time to time from or on behalf of the
Fund.
(e) "Securities Depository". As used in this Agreement, the term
"Securities Depository" shall mean The Depository Trust Company, a clearing
agency registered with the SEC or its successor or successor and its nominee or
nominees; and shall also mean any other registered clearing agency, its
successor or successors specifically identified in a certified copy of a
resolution of the Company's Board of Directors approving deposits by U.S. Trust
therein.
4. Delivery and Registration of the Property. The Fund will deliver or
cause to be delivered to U.S. Trust all securities and all moneys owned by it,
including payments of interest, principal and capital distributions and cash
received for the issuance of its Shares, at any time during the period of this
Agreement, except for securities and monies to be delivered to any subcustodian
appointed pursuant to Section 7 hereof. U.S. Trust will not be responsible for
such securities and such monies until actually received by it. All securities
delivered to U.S. Trust or to any such subcustodian (other than in bearer form)
shall be registered in the name of the Fund or in the name of a nominee of the
Fund or in the name of U.S. Trust or any nominee of
8
<PAGE>
U.S. Trust (with or without indication of fiduciary status) or in the name of
any subcustodian or any nominee of such subcustodian appointed pursuant to
Paragraph 7 hereof or shall be properly endorsed and in form for transfer
satisfactory to U.S. Trust.
5. Voting Rights. With respect to all securities, however registered, it
is understood that the voting and other rights and powers shall be exercised by
the Fund. U.S. Trust's only duty shall be to mail for delivery on the next
business day to the Fund any documents received, including proxy statements and
offering circulars, with any proxies for securities registered in a nominee name
executed by such nominee. Where warrants, options, tenders or other securities
have fixed expiration dates, the Fund understands that in order for U.S. Trust
to act, U.S. Trust must receive the Fund's instructions at its offices in New
York, addressed as U.S. Trust may from time to time request, by no later than
noon (NY City time) at least one business day prior to the last scheduled date
to act with respect thereto (or such earlier date or time as U.S. Trust may
reasonably notify the Fund). Absent U.S. Trust's timely receipt of such
instructions, such instruments will expire without liability to U.S. Trust.
6. Receipt and Disbursement of Money.
(a) U.S. Trust shall open and maintain a custody account for the Fund,
subject only to draft or order by U.S. Trust acting pursuant to the terms of
this Agreement, and shall hold in such account, subject to the provisions
hereof, all cash received by it from or for the Fund other than cash maintained
by the Fund in a bank account established and used in accordance with Rule 17f-3
under the 1940 Act. Funds held by U.S. Trust for the Fund may be deposited by
it to its credit at U.S. Trust in the Banking Department of U.S. Trust or in
such other banks or trust companies as it may in its discretion deem necessary
or desirable; provided, however, that every such bank or trust company shall be
qualified to act as a custodian under the 1940 Act, and that each such bank or
trust company shall be approved by vote of a majority
9
<PAGE>
of the Board of Directors of the Fund. Such funds shall be deposited by U.S.
Trust in its capacity as Custodian and shall be withdrawable by U.S. Trust only
in that capacity.
(b) Upon receipt of Proper Instructions (which may be continuing
instructions as deemed appropriate by the parties) U.S. Trust shall make
payments of cash to, or for the account of, the fund from such cash only (i) for
the purchase of securities, options, futures contracts or options on futures
contracts for the Fund as provided in Section 13 hereof; (ii) in the case of a
purchase of securities effected through a Book-Entry System or Securities
Depository, in accordance with the conditions set forth in Section 8 hereof;
(iii) in the case of repurchase agreements entered into between the Fund and
U.S. Trust, or another bank, or a broker-dealer which is a member of The
National Association of Securities Dealers, Inc. ("NASD"), either certified by
its Secretary or an Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or persons to whom such
payment is to be made.
(c) U.S. Trust is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received as custodian for the
Fund.
7. Receipt and Delivery of Securities.
(a) Except as provided by Section 8 hereof, U.S. Trust shall hold and
physically segregate all securities and non-cash Property received by it for the
Fund. All such securities and non-cash Property are to be held or disposed of
by U.S. Trust for the Fund pursuant to the terms of this Agreement. In the
absence of Proper Instructions accompanied by a certified resolution authorizing
the specific transaction by the Fund's Board, U.S. Trust shall have no power or
authority to withdraw, deliver, assign, hypothecate, pledge or otherwise dispose
of any such securities and investments, except in accordance with the express
terms
10
<PAGE>
provided for in this Agreement. In no case may any director, officer, employee
or agent of the Fund withdraw any securities. In connection with its duties
under this Section 7, U.S. Trust may, at its own expense, enter into
subcustodian agreements with other banks or trust companies for the receipt of
certain securities and cash to be held by U.S. Trust for the account of the Fund
pursuant to this Agreement; provided that each such bank or trust company has an
aggregate capital, surplus and undivided profits, as shown by its last published
report, of not less than twenty million dollars ($20,000,000) and that such bank
or trust company agrees with U.S. Trust to comply with all relevant provisions
of the 1940 Act and applicable rules and regulations thereunder. U.S. Trust
will be liable for acts or omissions of any subcustodian. U.S. Trust shall
employ subcustodians upon receipt of Proper Instructions, but only in accordance
with an applicable vote by the Board of Directors of the Fund.
(b) Promptly after the close of business on each day U.S. Trust shall
furnish the Fund with confirmations and a summary of all transfers to or from
the account of the Fund during said day. Where securities are transferred to
the account of the Fund established at a Securities Depository or Book Entry
System pursuant to Section 8 hereof, U.S. Trust shall also by book-entry or
otherwise identify as belonging to such Fund the quantity of securities in a
fungible bulk of securities registered in the name of U.S. Trust (or its
nominee) or shown in U.S. Trust's account on the books of a Securities
Depository or Book-Entry System. At least monthly and from time to time, U.S.
Trust shall furnish the Fund with a detailed statement of the Property held for
the Fund under this Agreement.
8. Use of Securities Depository or Book-Entry System. The Fund shall
deliver to U.S. Trust a certified resolution of the Board of Directors of the
Fund approving, authorizing and instructing U.S. Trust on a continuous and
ongoing basis until instructed to the contrary by Proper Instructions actually
received by U.S. Trust (i) to deposit in a Securities Depository or
11
<PAGE>
Book-Entry System all securities of the Fund eligible for deposit therein and
(ii) to utilize a Securities Depository or Book-Entry System to the extent
possible in connection with the performance of its duties hereunder, including
without limitation settlements of purchases and sales of securities by the Fund,
and deliveries and returns of securities collateral in connection with
borrowings. Without limiting the generality of such use, it is agreed that the
following provisions shall apply thereto:
(a) Securities and any cash of the Fund deposited in a Securities
Depository or Book-Entry System will be at all times (1) be represented in an
account of U.S. Trust in the Securities Depository or Book Entry System (the
"Account") and (2) be segregated from any assets and cash controlled by U.S.
Trust in other than a fiduciary or custodian capacity but may be commingled with
other assets held in such capacities. U.S. Trust will effect payment for
securities and receive and deliver securities in accordance with accepted
industry practices as set forth in (b) below, unless the Fund has given U.S.
Trust Proper Instructions to the contrary. The records of U.S. Trust with
respect to securities of the Fund maintained in a Securities Depository or Book
Entry System shall identify by book-entry those securities belonging to the
Fund.
(b) U.S. Trust shall pay for securities purchased for the account of
the Fund upon (i) receipt of advice from the Securities Depository or Book Entry
System that such securities have been transferred to the Account, and (ii) the
making of an entry on the records of U.S. Trust to reflect such payment and
transfer for the account of the Fund. Upon receipt of Proper Instructions, U.S.
Trust shall transfer securities sold for the account of the Fund upon (i)
receipt of advice from the Securities Depository or Book Entry System that
payment for such securities has been transferred to the Account, and (ii) the
making of an entry on the records of
12
<PAGE>
U.S. Trust to reflect such transfer and payment for the account of the Fund.
Copies of all advices from the Securities Depository or Book Entry System of
transfers of securities for the account of the Fund shall identify the Fund, be
maintained for the Fund by U.S. Trust and be provided to the Fund at its
request. Upon request, U.S. Trust shall furnish the Fund confirmation of each
transfer to or from the account of the Fund in the form of a written advice or
notice and shall furnish to the Fund copies of daily transaction sheets
reflecting each day's transactions in a Securities Depository or Book Entry
System for the account of the Fund.
(c) U.S. Trust shall provide the Fund with any report obtained by U.S.
Trust on the Securities Depository or Book Entry System's accounting system,
internal accounting control and procedures for safeguarding securities deposited
in the Securities Depository or Book Entry System;
(d) All Books and records maintained by U.S. Trust which relate to the
Fund participation in a Securities Depository or Book-Entry System will at all
times during U.S. Trust's regular business hours be open to the inspection of
the Fund's duly authorized employees or agents, and the Fund will be furnished
with all information in respect of the services rendered to it as it may
require.
(e) Anything to the contrary in this Agreement notwithstanding, U.S.
Trust shall be liable to the Fund for any loss or damage to the Fund resulting
from any negligence, misfeasance or misconduct of U.S. Trust or any of its
agents or of any of its or their employees in connection with its or their use
of the Securities Depository or Book Entry Systems or from failure of U.S. Trust
or any such agent to enforce effectively such rights as it may have against such
Securities Depository or Book Entry System; at the election of the Fund, it
shall be entitled to be subrogated to the rights of U.S. Trust with respect to
any claim against the Securities Depository or Book Entry System or any other
person which U.S. Trust may have as a
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consequence of any such loss or damage if and to the extent that the Fund has
not been made whole for any such loss or damage.
9. Segregated Account. U.S. Trust shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts for and on
behalf of the Fund, into which account or accounts may be transferred cash
and/or securities, including securities maintained in an account by U.S. Trust
pursuant to Section 8 hereof, (i) in accordance with the provisions of any
agreement among the Fund, U.S. Trust and a broker-dealer registered under the
Securities and Exchange Act of 1934 and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions buy the Fund, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased or sold by the Fund,
(iii) for the purposes of compliance by the Fund with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release or releases
of the Securities and Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies and (iv) for other proper
corporate purposes, but only, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of the Board
of Directors or of the Executive Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant Secretary, setting forth the purpose
or purposes of such segregated account and declaring such purposes to be proper
corporate purposes.
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10. Instructions Consistent With The Articles, etc.
(a) Unless otherwise provided in this Agreement, U.S. Trust shall act
only upon Proper Instructions. U.S. Trust may assume that any Proper
Instruction received hereunder are not in any way inconsistent with any
provision of the Articles or By-Laws or any vote or resolution of the Fund's
Board of Directors, or any committee thereof. U.S. Trust shall be entitled to
rely upon any Proper Instructions actually received by U.S. Trust pursuant to
this Agreement. The Fund agrees that U.S. Trust shall incur no liability in
acting in good faith upon Proper Instructions given to U.S. Trust, except to the
extent such liability was incurred as a result of U.S. Trust's negligence or
willful misconduct. In accord with instructions from the Fund, as required by
accepted industry practice or as U.S. Trust may elect in effecting the execution
of Fund instructions, advances of cash or other Property made by U.S. Trust,
arising from the purchase, sale, redemption, transfer or other disposition of
Property of the Fund, or in connection with the disbursement of funds to any
party, or in payment of fees, expenses, claims or liabilities owed to U.S. Trust
by the Fund, or to any other party which has secured judgement in a court of law
against the Fund which creates an overdraft in the accounts or overdelivery of
Property, shall be deemed a loan by U.S. Trust to the Fund, payable on demand,
bearing interest at such rate customarily charged by U.S. Trust for similar
loans.
(b) The Fund agrees that test arrangements, authentication methods or
other security devices to be used with respect to instructions which the Fund
may give by telephone, telex, TWX facsimile transmission, bank wire or other
teleprocess, or through an electronic instruction system, shall be processed in
accordance with terms and conditions for the use of such arrangements, methods
or devices as U.S. Trust may put into effect and modify from time to time. The
Fund shall safeguard any test keys, identification codes or other security
devices which U.S. Trust makes available to the Fund and agrees that the Fund
shall be responsible for
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any loss, liability or damage incurred by U.S. Trust or by the Fund as a result
of U.S. Trust's acting in accordance with instructions from any unauthorized
person using the proper security device except to the extent such loss,
liability or damage was incurred as a result of U.S. Trust' negligence or
willful misconduct. U.S. Trust may electronically record, but shall not be
obligated to so record, any instructions given by telephone and any other
telephone discussions with respect to the Fund. In the event that the Fund uses
U.S. Trust's Asset Management system or any successor electronic communications
or information system, the Fund agrees that U.S. Trust is not responsible for
the consequences of the failure of that system to perform for any reason, beyond
the reasonable control of U.S. Trust, or the failure of any communications
carrier, utility, or communications network. In the event that system is
inoperable, the Fund agrees that it will accept the communication of transaction
instructions by telephone, facsimile transmission on equipment compatible to
U.S. Trust's facsimile receiving equipment or by letter, at no additional charge
to the Fund.
(c) U.S. Trust shall transmit promptly to the Fund all written
information (including, without limitation, pendency of calls and maturities of
securities and expirations of rights in connection therewith and notices of
exercise of call and put options written by the Fund and the maturity of futures
contracts purchased or sold by the Fund) received by U.S. Trust from issuers of
the securities being held for the Fund. With respect to tender or exchange
offers, U.S. Trust shall transmit promptly by facsimile to the Fund all written
information received by U.S. Trust from issuers of the securities whose tender
or exchange is sought and from the party (or his agents) making the tender or
exchange offer. If the Fund desires to take action with respect to any tender
offer, exchange offer or any other similar transaction, the Fund shall notify
U.S. Trust at least three business days prior to the date on which U.S. Trust is
to take such action or upon the date such notification is first received by the
Fund, if later. If any
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Property registered in the name of a nominee of U.S. Trust is called for partial
redemption by the issuer of such property, U.S. Trust is authorized to allot the
called portion to the respective beneficial holders of the Property in such
manner deemed to be fair and equitable by U.S. Trust in its sole discretion.
11. Transaction Not Requiring Instructions. U.S. Trust is authorized to
take the following action without Proper Instructions:
(a) Collection of Income and Other Payments. U.S. Trust shall:
(i) collect and receive on a timely basis for the account of the
Fund, all income and other payments and distributions, including (without
limitation) stock dividends, rights, warrants and similar items, included
or to be included in the Property of the Fund, and promptly advise the Fund
of such receipt and shall credit such income, as collected, to the Fund.
From time to time, U.S. Trust may elect, but shall not be obligated, to
credit the account with interest, dividends or principal payments on
payable or contractual settlement date, in anticipation of receiving same
from a payor, central depository, broker or other agent employed by the
Fund or U.S. Trust. Any such crediting and posting shall be at the Fund's
sole risk, and U.S. Trust shall be authorized to reverse any such advance
posting in the event it does not receive good funds from any such payor,
central depository, broker or agent of the Customer. U.S. Trust agrees to
promptly notify the Fund of the reversal of any such advance posting.
(ii) endorse and deposit for collection in the name of the Fund,
checks, drafts, or other orders for the payment of money on the same day as
received;
(iii) receive and hold for the account of the Fund all
securities received by the Fund as a result of a stock dividend, share
split-up or reorganization, merger, recapitalization, readjustment or other
rearrangement or distribution of rights or similar
17
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securities issued with respect to any portfolio securities of the Fund held
by U.S. Trust hereunder;
(iv) present for payment and collect the amount payable upon all
securities which may mature or be called, redeemed or retired, or otherwise
become payable on the date such securities become payable;
(v) take any action which may be necessary and proper in
connection with the collection and receipt of such income and other
payments and the endorsement for collection of checks, drafts and other
negotiable instruments;
(vi) to effect an exchange of the securities where the par value
is changed, and to surrender securities at maturity or upon an earlier call
for redemption, or when securities otherwise become payable, against
payment therefor in accordance with accepted industry practice. If any
Property registered in the name of a nominee of U.S. Trust is called for
partial redemption by the issuer of such property, U.S. Trust is authorized
to allot the called portion to the respective beneficial holders of the
Property in such manner deemed to be fair and equitable by U.S. Trust in
its sole discretion.
(a) Miscellaneous Transactions. U.S. Trust is authorized to deliver
or cause to be delivered Property against payment or other consideration or
written receipt therefor for examination by a dealer selling for the account of
the Fund in accordance with street delivery custom.
12. Transactions Requiring Instructions. In addition to the actions
requiring Proper Instructions set forth herein, upon receipt of Proper
Instructions and not otherwise, U.S. Trust, directly or through the use of a
Securities Depository or Book-Entry System, shall:
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(a) Execute and deliver to such persons as may be designated in such
Proper Instructions, proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as owner of any securities may be
exercised;
(b) Deliver any securities held for the Fund against receipt of other
securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization of any
issuer of securities or corporation, or the exercise of any conversion
privilege;
(c) Deliver any securities held for the Fund to any protective
committee, reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization or sale of
assets of any issuer of securities or corporation, against receipt of such
certificates of deposit, interim receipts or other instruments or documents, and
cash, if any, as may be issued to it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of the Fund and
take such other steps as shall be stated in said instructions to be for the
purpose of effectuating any duly authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Fund;
(e) Release securities belonging to the Fund to any bank or trust
company for the purpose of pledge or hypothecation to secure any loan incurred
by the Fund; provided, however, that securities shall be released only upon
payment to U.S. Trust of the monies borrowed, or upon receipt of adequate
collateral as agreed upon by the Fund and U.S. Trust which may be in the form of
cash or obligations issued by the U.S. government, its agencies or
instrumentalities, except that in cases where additional collateral is required
to secure a borrowing already made, subject to proper prior authorization,
further securities may be released
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<PAGE>
for that purpose; and pay such loan upon redelivery to it of the securities
pledged or hypothecated therefore and upon surrender of the note or notes
evidencing the loan; and
(f) Deliver securities in accordance with the provisions of any
agreement among the Fund, U.S. Trust and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Funds;
(g) Deliver securities in accordance with the provisions of any
agreement among the Fund, U.S. Trust and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any Contract Market, or
any similar organization or organizations, regarding account deposits in
connection with transactions by the Fund; and
(h) Deliver securities against payment or other consideration or
written receipt therefor for transfer of securities into the name of the Fund or
U.S. Trust or a nominee of either, or for exchange or securities for a different
number of bonds, certificates, or other evidence, representing the same
aggregate face amount or number of units bearing the same interest rate,
maturity date and call provisions, if any; provided that, in any such case, the
new securities are to be delivered to U.S. Trust;
(i) Exchange securities in temporary form for securities in definitive
form;
(j) Surrender, in connection with their exercise, warrants, rights or
similar securities, provided that in each case, the new securities and cash, if
any, are to be delivered to U.S. Trust;
20
<PAGE>
(k) Deliver securities upon receipt of payment in connection with any
repurchase agreement related to such securities entered into by the Fund;
(l) Deliver securities pursuant to any other proper corporate purpose,
but only upon receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Board of Directors or of the Executive Committee signed
by an officer of the Funds and certified by the Secretary or an Assistant
Secretary, specifying the securities to be delivered, setting forth the purpose
for which such delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom delivery of such
securities shall be made.
13. Purchase of Securities. Promptly after each purchase of securities,
options, futures contracts or options on futures contracts by the investment
advisor, the Fund shall deliver to U.S. Trust (as Custodian) Proper Instructions
specifying with respect to each such purchase: (a) the name of the issuer and
the title of the securities, (b) the number of shares of the principal amount
purchased and accrued interest, if any, (c) the dates of purchase and
settlement, (d) the purchase price per unit, (e) the total amount payable upon
such purchase, (f) the name of the person from whom or the broker through whom
the purchase was made and (g) the Fund name. U.S. Trust shall upon receipt of
securities purchased by or for the Fund registered in the name of the Fund or in
the name of a nominee of U.S. Trust or of the Fund or in proper form for
transfer or upon receipt of evidence of title to options, futures contracts or
options on futures contracts purchased by the Fund, pay out of the moneys held
for the account of the Fund the total amount payable to the person from whom or
the broker through whom the purchase was made, provided that the same conforms
to the total amount payable as set forth in such Proper Instructions. Except as
specifically stated otherwise in this Agreement, in any and every case where
payment for purchase of securities for the account of the Fund is made by U.S.
Trust in
21
<PAGE>
advance of receipt of the securities purchased in the absence of specific
written instructions from the Fund to so pay in advance, U.S. Trust shall be
absolutely liable to the Fund for such securities to the same extent as if the
securities had been received by U.S. Trust.
14. Sale of Securities. Promptly after each sale of securities by the
Fund at the instruction of the investment advisor, the Fund shall deliver to
U.S. Trust (as Custodian) Proper Instructions, specifying with respect to each
such sale; (a) the name of the issuer and the title of the security, (b) the
number of shares or principal amount sold, and accrued interest, if any, (c) the
date of sale, (d) the sale price per unit, (e) the total amount payable to the
Fund upon such sale, (f) the name of the broker through whom or the person to
whom the sale was made and (g) the Fund name. U.S. Trust shall deliver the
securities upon receipt of the total amount payable to the Fund upon such sale,
provided that the same conforms to the total amount payable as set forth in such
Proper Instructions. Subject to the foregoing, U.S. Trust may accept payment in
such form as shall be satisfactory to it, and may deliver securities and arrange
for payment in accordance with the customs prevailing among dealers in
securities.
15. Authorized Shares. The Fund has a fixed number of authorized shares
of each class of its securities.
16. Records. The books and records pertaining to the Fund which are in
the possession of U.S. Trust shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the 1940 Act, as
amended, and other applicable securities laws and rules and regulations. The
Fund, or the Fund's authorized representative, shall have access to such books
and records at all times during U.S. Trust's normal business hours, and such
books and records shall be surrendered to the Fund promptly upon request. Upon
reasonable request of the Fund, copies of any such books and records shall be
provided by U.S. Trust to the Fund or the Fund's authorized representative at
the Fund's expense.
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17. Cooperation with Accountants. U.S. Trust shall cooperate with the
Fund's independent certified public accountants and shall take all reasonable
action in the performance of its obligations under this Agreement to assure that
the necessary information is made available to such accountants for the
expression of their unqualified opinion, including but not limited to the
opinion included in the Fund's Form N-2, Form N-SAR and other reports to the
Securities and Exchange Commission and with respect to any other requirement of
such Commission.
18. Reports to Fund by Independent Public Accountants. U.S. Trust shall
provide the Fund, at such times as the Fund may reasonably require, with reports
by independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited and/or maintained
in a Securities Depository or Book Entry System, relating to the services
provided by U.S. Trust under this Contract; such reports, shall be of sufficient
scope and in sufficient detail, as may reasonably be required by the Fund to
provide reasonable assurance that any material inadequacies would be disclosed
by such examination, and, if there are no such inadequacies, the reports shall
so state.
18. Confidentiality. U.S. Trust agrees on behalf of itself and its
employees to treat confidentially and as the proprietary information of the Fund
all records and other information relative to the Fund and its prior, present or
potential Shareholders and relative to the advisors and its prior, present or
potential customers, and not to use such records and information for any purpose
other than performance of its responsibilities and duties hereunder, except
after prior notification to and approval in writing by the Fund, which approval
shall not be unreasonably withheld and may not be withheld where U.S. Trust may
be exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Fund. Nothing contained herein, however,
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<PAGE>
shall prohibit U.S. Trust from advertising or soliciting the public generally
with respect to other products or services, regardless of whether such
advertisement or solicitation may include prior, present or potential
Shareholders of the Fund.
19. Equipment Failures. In the event of equipment failures beyond U.S.
Trust's control, U.S. Trust shall, at no additional expense to the Fund, take
reasonable steps to minimize service interruptions but shall not have liability
with respect thereto. U.S. Trust shall enter into and shall maintain in effect
with appropriate parties one or more agreements making reasonable provisions for
back up emergency use of electronic data processing equipment to the extent
appropriate equipment is available.
20. Right to Receive Advice.
(a) Advice of Fund. If U.S. Trust shall be in doubt as to any action
to be taken or omitted by it, it may request, and shall receive, from the Fund
clarification or advice.
(b) Advice of Counsel. If U.S. Trust shall be in doubt as to any
question of law involved in any action to be taken or omitted by U.S. Trust, it
may request advice at its own cost from counsel of its own choosing (who may be
counsel for the Fund or U.S. Trust, at the option of U.S. Trust).
(c) Conflicting Advice. In case of conflict between directions or
advice received by U.S. Trust pursuant to subparagraph (a) of this paragraph and
advice received by U.S. Trust pursuant to subparagraph (b) of this paragraph,
U.S. Trust shall be entitled to rely on and follow the advice received pursuant
to the latter provision alone.
(d) Protection of U.S. Trust. U.S. Trust shall be protected in any
action or inaction which it takes or omits to take in reliance on any directions
or advice received pursuant to subparagraphs (a) or (b) of this section which
U.S. Trust, after receipt of any such directions or advice, in good faith
believes to be consistent with such directions or advice. However,
24
<PAGE>
nothing in this paragraph shall be construed as imposing upon U.S. Trust any
obligation (i) to seek such directions or advice, or (ii) to act in accordance
with such directions or advice when received, unless, under the terms of another
provision of this Agreement, the same is a condition to U.S. Trust's properly
taking or omitting to take such action. Nothing in this subsection shall excuse
U.S. Trust when an action or omission on the part of U.S. Trust constitutes
willful misfeasance, bad faith, negligence or reckless disregard by U.S. Trust
of its duties under this Agreement.
21. Compliance with Governmental Rules and Regulations. The Fund assumes
full responsibility for insuring that the contents of each Prospectus of the
Fund complies with all applicable requirements of the 1933 Act, the 1940 Act,
and any laws, rules and regulations of governmental authorities having
jurisdiction.
22. Compensation. As compensation for the services rendered by U.S. Trust
during the term of this Agreement, the Fund will pay to U.S. Trust, in addition
to reimbursement of its out-of-pocket expenses, monthly fees as outlined in
Exhibit A.
23. Indemnification. The Fund, as sole owner of the Property, agrees to
indemnify and hold harmless U.S. Trust and its nominees from all taxes, charges,
expenses, assessments, claims, and liabilities (including, without limitation,
liabilities arising under the 1933 Act, the Securities Exchange Act of 1934, the
1940 Act, and any state and foreign securities and blue sky laws, all as or to
be amended from time to time) and expenses, including (without limitation)
attorney's fees and disbursements (hereafter "liabilities and expenses"),
arising directly or indirectly from any action or thing which U.S. Trust takes
or does or omits to take or do (i) at the request or on the direction of or in
reliance on the advice of the Fund, or (ii) upon Proper Instructions, provided,
that neither U.S. Trust nor any of its nominees or subcustodians shall be
indemnified against any liability to the Fund or to its Shareholders (or any
expenses incident to
25
<PAGE>
such liability) arising out of (x) U.S. Trust's or such nominee's or
subcustodian's own willful misfeasance, bad faith, negligence or reckless
disregard of its duties under this Agreement or any agreement between U.S. Trust
and any nominee or subcustodian or (y) U.S. Trust's own negligent failure to
perform its duties under this Agreement. U.S. Trust similarly agrees to
indemnify and hold harmless the fund from all liabilities and expenses arising
directly or indirectly from U.S. Trust's or such nominee's or subcustodian's
wilful misfeasance, bad faith, negligence or reckless disregard in performing
its duties under this agreement. In the event of any advance of cash for any
purpose made by U.S. Trust resulting from orders or Proper Instructions of the
Fund, or in the event that U.S. Trust or its nominee or subcustodian shall incur
or be assessed any taxes, charges, expenses, assessments, claims or liabilities
in connection with the performance of this Agreement, except such as may arise
from its or its nominee's or subcustodian's own negligent action, negligent
failure to act, willful misconduct, or reckless disregard, the Fund shall
promptly reimburse U.S. Trust for such advance of cash or such taxes, charges,
expenses, assessments claims or liabilities.
24. Responsibility of U.S. Trust. In the performance of its duties
hereunder, U.S. Trust shall be obligated to exercise care and diligence and to
act in good faith to insure the accuracy and completeness of all services
performed under this Agreement. U.S. Trust shall be responsible for its own
negligent failure or that of any subcustodian it shall appoint to perform its
duties under this Agreement but to the extent that duties, obligations and
responsibilities are not expressly set forth in this Agreement, U.S. Trust shall
not be liable for any act or omission which does not constitute willful
misfeasance, bad faith, or negligence on the part of U.S. Trust or such
subcustodian or reckless disregard of such duties, obligations and
responsibilities. Without limiting the generality of the foregoing or of any
other provision of this Agreement, U.S. Trust in connection with its duties
under this Agreement shall, so long as
26
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and to the extent it is in the exercise of reasonable care, not be under any
duty or obligation to inquire into and shall not be liable for or in respect of
(a) the validity or invalidity or authority or lack thereof of any advice,
direction, notice or other instrument which conforms to the applicable
requirements of this Agreement, if any, and which U.S. Trust believes to be
genuine, (b) the validity of the issue of any securities purchased or sold by
the Fund, the legality of the purchase or sale thereof or the propriety of the
amount paid or received therefor, (c) the legality of the issue or sale of any
Shares, or the sufficiency of the amount to be received therefor, (d) the
legality of the redemption of any Shares, or the propriety of the amount to be
paid therefor, (e) the legality of the declaration or payment of any dividend or
distribution on Shares, of (f) delays or errors or loss of data occurring by
reason of circumstances beyond U.S. Trust's control, including acts of civil or
military authority, national emergencies, labor difficulties, fire, mechanical
breakdown (except as provided in Section 20), flood or catastrophe, acts of God,
insurrection, war, riots, or failure of the mail; transportation, communication
or power supply.
25. Collection of Income. U.S. Trust shall collect on a timely basis all
income and other payments with respect to registered securities held hereunder
to which the Fund shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date of payment by the
issuer, such securities are held by U.S. Trust or its agent thereof and shall
credit such income, as collected, to the Fund's custodian account. Without
limiting the generality of the foregoing, U.S. Trust shall detach and present
for payment all coupons and other income items requiring presentation as and
when they become due and shall collect interest when due on securities held
hereunder. Income due the Fund on securities loaned pursuant to the provisions
of Section 9 shall be the responsibility of the Fund. U.S. Trust will have no
duty or responsibility in connection therewith, other than to provide the Fund
with such information or
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<PAGE>
data as may be necessary to assist the Fund in arranging for the timely delivery
to the Custodian of the income to which the Fund is properly entitled.
27. Ownership Certificates for Tax Purposes. U.S. Trust shall execute
ownership and other certificates and affidavits for all federal and state tax
purposes in connection with receipt of income or other payments with respect to
securities of the Fund held by it and in connection with transfers of
securities.
26. Effective Period; Termination and Amendment. This Agreement shall
become effective as of its execution, shall continue in full force and effect
until terminated as hereinafter provided, may be amended at any time by mutual
agreement of the parties hereto and may be terminated by either party by an
instrument in writing delivered or mailed, postage prepaid to the other party,
such termination to take effect not sooner than thirty (30) days after the date
of such delivery or mailing; provided, however that U.S. Trust shall not act
under Section 8 hereof in the absence of receipt of an initial certificate of
the Secretary or an Assistant Secretary that the Board of Directors of the Fund
has approved the initial use of a particular Securities Depository or Book Entry
System and the receipt of an annual certificate of the Secretary or an Assistant
Secretary that the Board of Directors has reviewed the use by the Fund of such
Securities Depository and/or Book Entry System, as required in each case by Rule
17f-4 under the Investment Company Act of 1940, as amended; provided further,
however, that the Fund shall not amend or terminate this Agreement in
contravention of any applicable federal or state regulations, or any provision
of the Articles of Incorporation, and further provided, that the Fund may at any
time by action of its Board of Directors (i) substitute another bank or trust
company for U.S. Trust by giving notice as described above to U.S. Trust, or
(ii) immediately terminate this Agreement in the event of the appointment of a
conservator or receiver for U.S.
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Trust by the Comptroller of the Currency or upon the happening of a like event
at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Agreement, the Fund shall pay to U.S. Trust such
compensation as may be due as of the date of such termination and shall likewise
reimburse U.S. Trust for its costs, expenses and disbursements.
27. Successor Custodian. If a successor custodian shall be appointed by
the Board of Directors of the Fund, U.S. Trust shall, upon termination, deliver
to such successor custodian at the office of the custodian, duly endorsed and in
the form for transfer, all securities then held by it hereunder and shall
transfer to an account of the successor custodian all of the Fund's securities
held in a Securities Depository or Book Entry System.
If no such successor custodian shall be appointed, U.S. Trust shall, in
like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
U.S. Trust on or before the date when such termination shall be come effective,
then U.S. Trust shall have the right to deliver to a bank or trust company,
which is a "bank" as defined in the 1940 Act, doing business in New York, New
York, of its own selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than $25,000,000,
all securities, funds and other properties held by U.S. Trust and all
instruments held by U.S. Trust relative thereto and all other property held by
it under this Agreement and to transfer to an account of such successor
custodian all of the Fund's securities held in any Securities Depository or Book
Entry
29
<PAGE>
System. Thereafter, such bank or trust company shall be the successor of the
Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of U.S. Trust after the date of termination hereof owing to failure
of the Fund to procure the certified copy of the vote referred to or of the
Board of Directors to appoint a successor custodian, U.S. Trust shall be
entitled to fair compensation for its services during such period as U.S. Trust
retains possession of such securities, funds and other properties and the
provisions of this Contract relating to the duties and obligations of U.S. Trust
shall remain in full force and effect.
28. Notices. All notices and other communications (collectively referred
to as "Notice" or "Notices" in this section hereunder shall be in writing and
shall be first sent by telegram, cable, telex, or facsimile sending device and
thereafter by overnight mail for delivery on the next business day. Notices
shall be addressed (a) if to U.S. Trust, at U.S. Trust's address, 114 West 47th
Street, New York, New York, 10036-1532, facsimile number (212) 852-1488; (b) if
to the Fund, at the address of the Fund Attention: Portfolio Manager, facsimile
number (312) 917-8211; or (c) if to neither of the foregoing, at such other
address as shall have been notified to the sender of any such Notice or other
communication. Notices sent by overnight mail shall be deemed to have been
given the next business day. Notices sent by messenger shall be deemed to have
been given on the day delivered, and notices sent by confirming telegram, cable,
telex or facsimile sending device shall be deemed to have been given
immediately. All postage, cable, telegram, telex and facsimile sending device
charges arising from the sending of a Notice hereunder shall be paid by the
sender.
29. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
30
<PAGE>
30. Amendments. This Agreement or any part hereof may be changed or
waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
31. Miscellaneous. This Agreement embodies the entire Agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. This Agreement shall be deemed to be a contract made in New York and
governed by New York law. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be binding
upon and shall insure to the benefit of the parties hereto and their respective
successors.
31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year second above
written.
UNITED STATES TRUST COMPANY
OF NEW YORK
Attest: /s/ JACQUELINE BINDER By:/s/ PETER C. ARRIGHETTI
--------------------- -----------------------
JACQUELINE BINDER PETER C. ARRIGHETTI
ASSISTANT VICE PRESIDENT VICE PRESIDENT
NUVEEN NEW YORK MUNICIPAL
VALUE FUND, INC.
Attest:/s/ GIFFORD R. ZIMMERMAN By:/s/ O. WALTER RENEFFTLEN
------------------------ ------------------------
GIFFORD R. ZIMMERMAN O. WALTER RENFFTLEN
ASSISTANT GENERAL COUNSEL VICE PRESIDENT &
CONTROLLER
32
<PAGE>
EXHIBIT A
CUSTODY SERVICE FEE
Administration and Maintenance Fee
----------------------------------
.03% (3-Basis Points) on first $50 million
.02% (2-Basis Points) on next $50 million
.01% (1-Basis Point) on remainder
Transaction Fees
----------------
$15.00 Per Book Entry Transaction
$25.00 Per Physical Transaction
$35.00 Per Future Contract or Option Wire
$8.00 Per Wire Transfer
Earnings on Balances
--------------------
An earnings credit, adjusted on a monthly basis, will be applied against the
Custody Service Fee and Fund Accounting Fee equal to 75% of the latest available
three month average of the 91 day treasury bill coupon equivalent rate times the
average collected balance in the custodian account (or accounts) for the month
billed. If the credit exceeds the fees for the month, this excess is carried
forward to subsequent months. However, this carry forward is only available as a
credit against fees incurred through December 31 of each calendar year and
expires effective January 1 of the following year.
NOTES:
1. Schedule should be applied separately to each fund; All fees are
billed monthly.
2. Add $5.00 per book entry transaction and physical transaction if U.S.
Trust inputs trades.
3. Minimum charge of $1,000 per month.
NUVEEN NEW YORK MUNICIPAL UNITED STATES TRUST
FUND, INC. COMPANY OF NEW YORK
By:/s/ O. Walter Renfftlen By:/s/ Peter C. Arrighetti
----------------------- -----------------------
Title: V.P. and Controller Title: Vice President
Date: 12-12-90 Date: 12-11-90
33
<PAGE>
EXHIBIT 9.2
FUND ACCOUNTING AGREEMENT
-------------------------
THIS AGREEMENT, made this 1st day of January, 1991, by and between,
Nuveen New York Municipal Value Fund, Inc., a Minnesota Corporation (the
"Fund"), and UNITED STATES TRUST COMPANY OF NEW YORK, a New York State chartered
bank and trust company ("U.S. Trust").
W I T N E S S E T H:
-------------------
WHEREAS, the Fund is a registered closed-end diversified management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Fund desires to hire U.S. Trust to provide the Fund with
certain accounting services, and U.S. Trust is willing to provide such services
upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. APPOINTMENT. The Fund hereby appoints U.S. Trust to provide the
accounting services hereinafter set forth to the Fund, and U.S. Trust accepts
such appointment and agrees to provide such services, under the terms and
conditions set forth herein.
2. CALCULATION OF NET ASSET VALUE. U.S. Trust will calculate the
Fund's daily net asset value and the daily per-share net asset value in
accordance with the Fund's effective Registration Statement on Form N-2 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), including its current prospectus. If so directed, U.S. Trust
shall also calculate daily the net income of the Fund and shall advise the Fund
daily
<PAGE>
of the total amounts of such net income and, if instructed in writing by an
officer of the Fund to do so, of the division of such net income among its
various components.
3. BOOKS AND RECORDS. U.S. Trust will (a) maintain such books and
records as are necessary to enable it to perform its duties under this
Agreement; (b) prepare and maintain complete, accurate and current all records
with respect to the Fund required to be maintained by the Fund under the
Internal Revenue Code of 1986, as amended (the "Code"), and under the 1940 Act
and the applicable rules and regulations thereunder; (c) at the Fund's expense,
retain and preserve said records in the manner and for the periods prescribed in
the Code and such rules and regulations; and (d) assist to the extent requested
by the Fund in the preparation of reports to the Fund's shareholders, the Fund's
Registration Statement and reports and filings required pursuant to the Code or
the 1940 Act and the rules and regulations thereunder.
U.S. Trust hereby acknowledges and agrees that all records prepared
and maintained by U.S. Trust pursuant to this paragraph 3 which are required to
be maintained by the Fund under the Code and the 1940 Act ("Required Records")
are the property of the Fund. If this agreement is terminated, all Required
Records shall be delivered, at the Fund's expense, to the Fund or any such
person designated by the Fund, and U.S. Trust shall be relieved of
responsibility for the preparation and maintenance of any Required Records
delivered to the Fund or any such person.
4. COOPERATION WITH ACCOUNTANTS. U.S. Trust shall cooperate with the
Fund's independent public accountants and shall take all reasonable action in
the performance of its obligation under this Agreement to assure that the
necessary information is made available to such accountants for the expression
of their unqualified opinion where required for any document for the Fund.
2
<PAGE>
5. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS U.S. Trust
shall provide the Fund, at such times as the Fund may reasonably require, with
reports by independent public accountants relating to the services provided by
U.S. Trust under this Contract; such reports, shall be of sufficient scope and
in sufficient detail, as may reasonably be required by the Fund to provide
reasonable assurance that any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, the reports shall so state.
6. FEES AND CHARGES. In consideration of services rendered pursuant
to this Agreement, the Fund shall pay to U.S. Trust a fee in accordance with the
schedule attached hereto (Exhibit A) and shall promptly reimburse U.S. Trust for
any out-of-pocket expenses and advances payable by the Fund in accordance with
Paragraph 6.
7. EXPENSES. The expenses connected with the performance of this
Agreement shall be allocated between the Fund and U.S. Trust as follows:
(a) U.S. Trust shall furnish, at its expense and without cost to the
Fund, (i) the services of its personnel to the extent required to carry out its
obligations under this Agreement, and (ii) use of data processing equipment.
(b) All costs and expenses not expressly assumed by U.S. Trust under
Paragraph 6 (a) of this Agreement shall be paid by the Fund, including but not
limited to costs and expenses for pricing service fees; necessary outside record
storage; media for storage or records (e.g., microfilm, microfiche); and any and
all assessments, taxes or levies assessed on U.S. Trust for services provided
under this Agreement.
8. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. Except as
otherwise provided in this Agreement and except for the accuracy of information
furnished to it by U.S. Trust, the Fund assumes full responsibility of the
3
<PAGE>
preparation, contents and distribution of each prospectus of the Fund, and for
compliance with all applicable requirements of the 1940 Act, the Securities Act
and any laws, rules and regulations of governmental authorities having
jurisdiction over the Fund.
9. CONFIDENTIALITY. U.S. Trust agrees to treat all records and other
information relative to the Fund as proprietary information of the Fund and, on
behalf of itself and its employees, to keep confidential all such information,
except after prior notification to and approval in writing by the Fund, which
approval shall not be unreasonably withheld and may not be withheld where U.S.
Trust may be exposed to civil or criminal contempt proceedings for failure to
comply, when requested to divulge such information by duly constituted
authorities or when so requested by the Fund.
10. REFERENCES TO U.S. TRUST. The Fund shall not circulate any
printed matter which contains any reference to U.S. Trust without the prior
written approval of U.S. Trust, except solely such printed matter as merely
identifies U.S. Trust as Accounting and Pricing Services Agent. The Fund will
submit printed matter requiring approval to U.S. Trust in draft form, allowing
sufficient time for review by U.S. Trust and its counsel prior to any deadline
for printing.
11. FORCE MAJEURE; EQUIPMENT FAILURES.
(a) If U.S. Trust shall be delayed in its performance of services or
prevented entirely or in part from performing services because of causes or
events beyond its control, including and without limitation, acts of God,
interruption of power or other utility, transportation or communication
services, acts of civil or military authority, sabotages, national emergencies,
explosion, flood, accident, earthquake or other catastrophe, fire, strike or
other labor problems, legal action, present or future law, governmental order,
rule or regulation, or shortage of suitable parts, materials, labor or
transportation, then such delay or nonperformance
4
<PAGE>
shall be excused and a reasonable time for performance in connection with this
Agreement shall be extended to include the period of such delay or
nonperformance.
(b) In the event of equipment failures beyond U.S. Trust's control,
U.S. Trust shall take all steps necessary to minimize service interruptions but
shall have no liability with respect thereto. U.S. Trust shall endeavor to
enter into one or more agreements making provision for emergency use of
electronic data processing equipment to the extent appropriate equipment is
available.
12. INDEMNIFICATION OF U.S. TRUST.
(a) U.S. Trust, its directors, officers, employees, shareholders, and
agents shall not be liable for any error of judgement or mistake of law or for
any loss suffered by the Fund in connection with the performance of this
Agreement, except a loss resulting from a breach of fiduciary duty or a loss
resulting from willful misfeasance, bad faith or negligence on the part of U.S.
Trust in the performance of its obligations and duties under this Agreement.
(b) Notwithstanding any other provision of this Agreement, the Fund
shall indemnify and hold harmless U.S. Trust, its directors, officers,
employees, shareholders, and agents from and against any and all claims,
demands, expenses and liabilities (whether with or without basis in fact or law)
of any and every nature which U.S. Trust may sustain or incur or which be
asserted against U.S. Trust by any person by reason of, or as a result of any
action taken or omitted to be taken by U.S. Trust in connection with its
appointment, in good faith, in reliance upon any law, act, regulation or
official interpretation of same even though the same may have been altered,
changed, amended or repealed subsequent to the date of U.S. Trust's actions in
reliance there on. However, indemnification under this subparagraph shall not
apply to actions or omissions of U.S. Trust or its directors, officers,
employees, shareholders, agents,
5
<PAGE>
or subcontractors in cases of its or their own negligence, willful misconduct,
bad faith, or reckless disregard of its or their own duties hereunder.
13. TERM; TERMINATION.
(a) The provisions of this Agreement shall be effective as of January
1, 1991, shall continue in force from year to year thereafter, but only so long
as such continuance is approved by U.S. Trust and the Fund.
(b) Either party may terminate this Agreement on any date by giving
the other party at least ninety (90) days prior written notice of such
termination specifying the date fixed therefore.
(c) In the event that in connection with termination of this Agreement
a successor to any of U.S. Trust's duties or responsibilities under this
Agreement is designated by the Fund by written notice to U.S. Trust, U.S. Trust
shall, promptly upon such termination and at the expense of the Fund, transfer
all Required Records and shall cooperate in the transfer of such duties and
responsibilities, including provision for assistance from the U.S. Trust's
cognizant personnel in the establishment of books, records, and other data by
such successor.
14. ASSIGNMENT. Except as hereinafter provided, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party. This Agreement shall
inure to the benefit of and be binding upon the parties and their respective
permitted successors and assignees. U.S. Trust may, without further consent on
the part of the Fund, subcontract for the performance hereof with third parties
who are subsidiaries or other affiliates of U.S. Trust; provided, however, that
U.S. Trust shall be as fully responsible to the Fund for the acts and omissions
of any subcontractor as it is for its own acts and omissions and shall be
responsible for its choice of subcontractors.
6
<PAGE>
15. SERVICES FOR OTHERS. Nothing in this Agreement shall prevent
U.S. Trust or any affiliated person (as defined in the Act) of U.S. Trust from
providing services for any other person, firm or corporation (including other
investment companies).
16. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.
17. SEVERABILITY. In the event any provision of this Agreement is
determined to be void or unenforceable, such determination shall not affect the
remainder of this Agreement, which shall continue to be in force.
18. GOVERNING LAWS. This Agreement shall be deemed to be a contract
made under, and shall be construed in accordance with, the laws (other than the
laws governing conflict-of-law matters) of The State of New York.
19. NOTICES. Any notice or demand given in connection with any
agreement, document or instrument executed pursuant hereto shall be deemed to
have been sufficiently given or served for all purposes if sent by certified or
registered mail, postage and charges prepaid, to the following addresses: if to
the Fund, at 333 West Wacker Drive, Chicago, IL 60606, Attention: O.W.
Renfftlen, Vice President, or at any other address or addresses designated by
the Fund to U.S. Trust in writing; and if to U.S. Trust, to it at 114 West 47th
Street, New York, NY 10036, or at any other address or addresses designated by
U.S. Trust to the Fund in writing.
20. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year second above written.
U.S. Trust Co. of New York
Attest:/s/ Jacqueline Binder By:/s/ Peter C. Arrighetti
--------------------- -----------------------
Jacqueline Binder Peter C. Arrighetti
Assistant Vice President Vice President
Nuveen New York Municipal Value
Fund, Inc.
Attest:/s/ Gifford R. Zimmerman By:/s/ O. Walter Renfftlen
------------------------ -----------------------
Gifford R. Zimmerman O. Walter Renfftlen
Assistant General Counsel Vice President
8
<PAGE>
EXHIBIT A
FUND ACCOUNTING FEE
$18,000 PER ANNUM
9
<PAGE>
EXHIBIT 9.3
FORM OF SHAREHOLDER TRANSFER AGENCY AGREEMENT
This Agreement is made this January 1, 1991 by and between United States
Trust Company of New York ("U.S. Trust"), a New York corporation, and Nuveen New
York Municipal Value Fund, Inc. (the "Fund"), a closed-end investment company
incorporated under the laws of the state of Minnesota.
I. SERVICES
--------
Commencing on January 1, 1991 and in accordance with procedures established
from time to time by the Fund and U.S. Trust, U.S. Trust shall perform the (i)
account maintenance services, (ii) mailing and reporting services, (iii)
dividend and distribution payment services, (iv) dividend reinvestment plan
services, and (v) recordkeeping services (collectively, the "Standard Services")
in connection with the Fund's Common Stock, par value $.01 per share (the
"Shares"), as more fully described herein.
A. Account Maintenance Services. U.S. Trust shall perform transfer
agent, registrar and other account maintenance services in connection with the
Shares. Such services are composed of (i) registering Share transfers on the
Fund's records of the holders of Shares (the "Shareholders") upon receipt of
instructions from the transferor and documentation in proper form to effect a
transfer of Shares; (ii) cancelling the certificates/*/ representing such
Shares, if any, and if so requested, countersigning, registering, issuing and
mailing by insured first class mail new certificates for the same or a smaller
whole number of Shares; (iii) issuing replacement certificates in lieu of
certificates which have been lost, stolen or destroyed upon receipt of a
-----------------------
/*/All references to certificates will include book entry services.
<PAGE>
properly executed affidavit with respect to such loss, theft or destruction and
a lost certificate bond in form satisfactory to U.S. Trust; (iv) combining
certificates into large denominations; (v) maintaining stop-transfer orders,
including placing and removing the same; (vi) processing new Shareholder
accounts; (vii) posting address changes, and (viii) researching and responding
to Shareholder inquiries. Shares will be transferred and new certificates
issued in transfer upon surrender of the old certificates in form deemed by U.S.
Trust to be properly endorsed for transfer accompanied by delivery of such
documents as U.S. Trust may deem necessary to evidence the authority of the
person making the transfer and payment of any applicable stock transfer taxes.
U.S. Trust reserves the right to refuse to transfer shares until it is satisfied
that the endorsement or signature on the certificate or any other document is
valid and genuine, and for that purpose it will require a signature guarantee by
a commercial bank or trust company having its principal office or correspondent
in the City of New York, by a member firm of a major stock exchange or by a
guarantor previously approved by U.S. Trust.
B. Mailing List and Reporting Services. Mailing list and reporting
services provided to the Fund are composed of (i) annual preparation of a list
of Shareholders owning Fund Shares, (ii) semi-annual distribution of a report to
Shareholders, (iii) mailing proxies, (iv) receiving and tabulating proxies and
mailing shareholder reports to current shareholders, (v) certifying share vote
totals, (vi) assisting with Annual Meeting of Shareholders.
C. Dividend and Distribution Payment Services.
(1) Upon the declaration of any dividend or distribution payable either in
Shares or cash, the Fund shall notify U.S. Trust in writing setting forth the
date of payment (the "Payment Date") of such dividend or distribution, the
record date as of which Shareholders entitled to payment thereof shall be
determined (the "Record Date"), and the amount payable per Share to Shareholders
of record as of the Record Date. In the case of dividends at regular intervals,
such
2
<PAGE>
notification may be a standing notification setting forth the method of
calculating such dividends and the Fund or its agent shall advise U.S. Trust of
the amount of such dividend at the appropriate intervals. U.S. Trust shall
notify the Fund and the entity then acting as the custodian (which entity may be
U.S. Trust) for the portfolio securities and cash of the Fund (the "Custodian")
of the amount of cash required to pay the dividend or distribution so that the
Fund may instruct the Custodian to make sufficient funds available on or before
the Payment Date. Upon receipt of such funds from the Custodian, U.S. Trust
shall prepare and mail to Shareholders who are not participants in the DRP (as
hereinafter defined in accordance with the terms of Section D), at their
addresses as they appear on the records maintained by U.S. Trust or pursuant to
any written order of a Shareholder on file with U.S. Trust, checks representing
any dividends or distributions to which they are entitled, and an accompanying
distribution statement.
(2) In addition to the foregoing, dividend and distribution payment
services are composed of (i) inserting an enclosure supplied by the Fund with
each dividend or distribution check (all checks to be drawn on United States
Trust Company of New York with good funds in-house on mailing date); (ii)
replacing lost dividend checks; (iii) providing photocopies of cancelled checks
when requested by Shareholders; (iv) reconciling paid and outstanding checks;
(v) coding as "undeliverable" certain accounts to suppress mailing of dividend
checks to same; (vi) processing and recordkeeping of accumulated uncashed
dividends; (vii) furnishing requested dividend and distribution information to
Shareholders; and (viii) performing the following duties required by the
Interest and Dividend Tax Compliance Act of 1983:
- Withholding taxes from Shareholders who are not in compliance with its
provisions;
3
<PAGE>
- Reconciling and reporting taxes withheld to the Internal Revenue
Service, including complying with additional 1099 reporting
requirements;
- Responding to Shareholder inquiries regarding regulations promulgated
pursuant to the Act;
- Notifying Shareholders who have had taxes withheld of the procedures
to be followed to curtail future withholding; and
- Adjusting Shareholder account records to reflect subsequent
compliance.
D. Dividend Reinvestment Plan Service. (1) U.S. Trust will act as agent
for Shareholders under the Dividend Reinvestment Plan (the "DRP"), a copy of
which is attached hereto as Exhibit A.
E. Record Keeping Services.
(1) U.S. Trust shall keep records relating to the Standard Services to be
performed hereunder, in such form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as amended,
and the rules promulgated thereunder, U.S. Trust agrees that all such records
prepared or maintained by U.S. Trust relating to the services to be performed by
U.S. Trust hereunder are the property of the Fund and will be preserved for the
periods prescribed under Rule 31a-2 of said rules and made available in
accordance with such section and rules. U.S. Trust shall forthwith upon the
Fund's demand surrender promptly to the Fund and cease to retain in its files
those records and documents created and maintained by U.S. Trust pursuant to
this Agreement.
(2) U.S. Trust and the Fund agree that all books, records, information and
data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law.
4
<PAGE>
(3) In case of any requests or demands for the inspection of the
Shareholder records of the Fund, U.S. Trust will endeavor to notify the Fund and
to secure instructions from an authorized officer of the Fund as to such
inspection. U.S. Trust reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.
II. SHARE CERTIFICATES
------------------
The Fund shall supply U.S. Trust with sufficient blank Share certificates.
Such blank Share certificates shall be properly signed, manually or by facsimile
signature, by the duly authorized officers of the Fund, and shall bear the seal
or a facsimile thereof of the Fund. Notwithstanding the death, resignation or
removal of any officer of the Fund authorized to sign such share certificates,
U.S. Trust may continue to countersign certificates which bear the manual or
facsimile signature of such officer until otherwise directed by the Fund. U.S.
Trust shall establish and maintain facilities and procedures reasonably
acceptable to the Fund for safekeeping of share certificates and facsimile
signature imprinting devices, if any, and for the preparation or use and for
keeping account of such certificates and devices. U.S. Trust hereby agrees to
establish and maintain facilities and procedures reasonably acceptable to the
Fund for safekeeping of stock certificates, check forms and facsimile signature
imprinting devices, if any; and for the preparation or use, and for keeping
account of, such certificates, forms and devices.
III. FEES AND EXPENSES
-----------------
For the services to be performed by U.S. Trust pursuant to this Agreement,
the Fund shall pay to U.S. Trust all fees and expenses described herein:
5
<PAGE>
A. Shareholder Service Fee. The Fund shall pay U.S. Trust an annual
service fee (the "Shareholder Service Fee") for each Shareholder account, as
described more fully in Exhibit B hereto. For purposes of this Section A, a
"Shareholder account" is an account holding at least a fraction of a Share. The
Shareholder Service Fee is prorated and payable monthly based on the total
number of accounts on the system on the last day of each month.
B. Out-of-Pocket Expenses. The Fund agrees to reimburse U.S. Trust for
any and all out of pocket expenses as described and listed in Exhibit "B".
C. Additional Services. The Fund may request additional processing,
special reports, changes in its DRP, or other additional services. The Fund
shall submit such requests for additional services in writing together with such
specifications as may be reasonably required by U.S. Trust, and U.S. Trust shall
respond to such requests in the form of a price quotation. The Fund's written
acceptance of the quotation must be received prior to implementation of such
request.
D. Terms of Payment. All fees, out-of-pocket expenses, or additional
charges of U.S. Trust shall be billed on a monthly basis and shall be due and
payable within 15 days after receipt of the invoice. U.S. Trust will render,
after the close of each month in which services have been furnished, a statement
reflecting all of the charges for such month.
E. Taxes. In addition to any other charges specified hereunder, the Fund
shall pay any sales tax, use tax, transfer tax, excise tax, tariff, duty, or any
other tax or payment in lieu thereof imposed by any governmental authority or
agency as a direct result of the provision by U.S. Trust of goods or services
hereunder, except for taxes based on U.S. Trust's net income.
6
<PAGE>
IV. REPRESENTATIONS AND WARRANTIES
------------------------------
A. U.S. Trust. U.S. Trust represents and warrants to the Fund that:
(1) It is a corporation duly organized and existing and in good
standing under the laws of the State of New York as a trust company pursuant to
Article III of the New York Banking Law;
(2) It is empowered under applicable laws and by its organization
certificate and by-laws to enter into and perform this Agreement;
(3) All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement; and
(4) Its entering into this Agreement shall not cause a material breach
or be in material conflict with any other agreement or obligation of U.S. Trust.
(5) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
B. The Fund. The Fund represents and warrants to U.S. Trust that:
(1) It is a corporation duly organized and existing and in good
standing under the laws of the State of Minnesota;
(2) It is empowered under applicable laws and by its certificate or
articles of incorporation and by-laws (the "Organizational Documents") to enter
into and perform this Agreement;
(3) All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement;
(4) It is a closed-end investment company registered under the
Investment Company Act of 1940, as amended;
7
<PAGE>
(5) Its entering into this Agreement shall not cause a material breach
or be in material conflict with any other agreement or obligation of the Fund;
and
(6) A registration statement on Form N-2 (including a prospectus), as
amended, is currently effective and will remain effective, and all necessary
filings under the securities laws of the states have been made.
V. DOCUMENTS FURNISHED BY THE FUND
-------------------------------
A. Initially Furnished Documents. The Fund has furnished to U.S. Trust
the following documents:
(1) A copy of the Organizational Documents of the Fund, attached
hereto as Exhibit C;
(2) A specimen certificate representing outstanding Shares in the form
approved by the Board of the Fund, attached hereto as Exhibit D; and
(3) Copies of the Fund's registration statement on Form N-2 as amended
and declared effective by the Securities and Exchange Commission, attached
hereto as Exhibit E.
B. Prospectively Furnished Documents. The Fund shall furnish the
following documents upon request by U.S. Trust:
(1) Copies of all amendments to the Organizational Documents of the
Fund;
(2) Copies of all post-effective amendments to the Fund's
registration statement on Form N-2; and
(3) Such other certificates, documents and opinions as U.S. Trust
shall deem to be appropriate or necessary for the proper performance of its
duties hereunder.
8
<PAGE>
VI. INDEMNIFICATION
---------------
A. Fund Indemnification Obligation. U.S. Trust shall not be
responsible for, and the Fund shall indemnify and hold U.S. Trust harmless from
any and all losses, damages, costs, charges, reasonable attorneys' fees,
payments, expenses and liability arising out of or attributable to:
(1) All actions of U.S. Trust or its agents or subcontractors required
to be taken pursuant to this Agreement unless such actions are taken in bad
faith or with negligence or willful misconduct;
(2) The Fund's refusal or failure to comply with the terms of this
Agreement, or the Fund's lack of good faith, negligence or willful misconduct,
or the breach of any representation or warranty of the Fund hereunder;
(3) The reliance on or use by U.S. Trust or its agents or
subcontractors of information, records or documents which are received by U.S.
Trust or its agents or subcontractors and furnished to it by or on behalf of the
Fund, and which have been prepared or maintained by the Fund or any other person
or firm (other than U.S. Trust or its agents or subcontractors) on behalf of the
Fund;
(4) The reliance on, or the carrying out by U.S. Trust or its agents
or subcontractors of, any instructions or requests of the Fund or recognition by
U.S. Trust of any Share certificates which are reasonably believed to bear the
proper manual or facsimile signatures of the officers of the Fund, and the
proper countersignature of any former transfer agent or registrar, or of a co-
transfer agent or co-registrar;
(5) The offer or sale of Shares by the Fund in violation of any
requirement under the federal securities laws or regulations or the securities
laws or regulations of any state, or in
9
<PAGE>
violation of any stop order or other determination or ruling by any federal
agency or any state agency with respect to the offer or sale of such Shares in
such state.
B. U.S. Trust Indemnification Obligation. U.S. Trust shall indemnify
and hold the Fund harmless from and against any and all losses, damages, costs,
charges, reasonable attorney's fees, payments, expenses and liability arising
out of or attributable to U.S. Trust's refusal or failure to comply with the
terms of this Agreement, or U.S. Trust's lack of good faith, negligence or
willful misconduct, or the breach of any representation or warranty of U.S.
Trust hereunder.
C. Claims. Upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion and shall keep the other party
advised with respect to all developments concerning such claim, but the failure
to give such notice shall not affect rights to indemnification hereunder except
to the extent that the indemnifying party demonstrates actual damage caused by
such failure. The party who may be required to indemnify shall have the option
to participate with the party seeking indemnification in the defense of such
claim but not to control such defense. The party seeking indemnification shall
in no case confess any claim or make any compromise in any case in which the
other party may be required to indemnify it, except with the indemnifying
party's prior written consent.
D. Force Majeure. In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
interruption of electrical power or other utilities, equipment or transmission
failure or damage reasonably beyond its control, or other causes reasonably
beyond its control, such party shall not be liable to the other for any damages
resulting from such failure to perform or otherwise from such causes. U.S.
Trust shall use all reasonable efforts to minimize the likelihood of all damage,
loss of data,
10
<PAGE>
delays and errors resulting from uncontrollable events, and should such damage,
loss of data, delays or errors occur, U.S. Trust shall use its reasonable
efforts to mitigate the effects of such occurrence.
VII. TERM AND TERMINATION
--------------------
A. Notice. This Agreement shall remain in effect until terminated by
either party, without penalty, upon 90 days' prior written notice.
B. Breach. This Agreement may be terminated by either party if the
other party is in material breach of this Agreement. In order to so terminate
this Agreement, written notice shall be given to an officer of the other party
of the non-breaching party's intention to terminate due to a failure to comply
with, or breach of, a material term or condition of this Agreement. Said
written notice shall specifically state the material term or condition claimed
to be breached and shall provide at least 15 days in which to correct such
alleged breach. If such breach is not corrected in the time period allowed,
then the party giving notice may terminate this Agreement immediately, upon
written notice.
C. Expenses. Should this Agreement be terminated, all out-of-pocket
expenses reasonably incurred by U.S. Trust in connection with the movement of
records and materials to its successor or to the Fund shall be borne by the
Fund.
VIII. USE OF U.S. TRUST NAME
----------------------
The Fund shall not use U.S. Trust's name in any prospectus,
Shareholder report, advertisement or other material relating to the Fund, other
than for the purpose of merely identifying and describing the functions of U.S.
Trust hereunder, in a manner not approved by U.S. Trust in writing prior to such
use; provided, however, that U.S. Trust shall consent to all
11
<PAGE>
uses of its name required by the Securities and Exchange Commission, any state
securities commission, or any federal or state regulatory authority; and
provided, further, that in no case will such approval be unreasonably withheld.
IX. ASSIGNMENT
----------
Except as hereunder provided, neither this Agreement nor any rights or
obligations hereunder may be assigned by either party without the written
consent of the other party. This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted successors and assigns.
U.S. Trust may, with the Fund's consent, subcontract for the performance hereof
with third parties, or subsidiaries or other affiliates of U.S. Trust; provided,
however, that U.S. Trust shall be as fully responsible to the Fund for the acts
and omissions of any subcontractor as it is for its own acts and omissions and
shall be responsible for its choice of subcontractor.
X. CONFIDENTIALITY
---------------
The information contained in this Agreement is confidential and
proprietary in nature. By receiving this Agreement, the Fund agrees that none
of its directors, officers, employees, or agents, without the prior written
consent of U.S. Trust, will divulge, furnish or make accessible to any third
party, except as required by law or any regulatory authority or as permitted by
the next sentence, any part of this Agreement or information in connection
therewith which has been or may be made available to it. The Fund agrees that
it will limit access to the Agreement and such information to only those
officers or employees with responsibilities for analyzing the Agreement, to its
counsel, to such independent consultants hired expressly for the purpose of
assisting in such analysis, and to governmental agencies. In addition, the Fund
agrees that any
12
<PAGE>
persons to whom such information is properly disclosed shall be informed of the
confidential nature of the Agreement and the information relating thereto, and
shall be directed to treat the same appropriately. The terms set forth in this
Article X shall continue without termination.
XI. MISCELLANEOUS
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York. The captions in this Agreement are included
for convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute the entire Agreement between the parties hereto and supersede any
prior oral or written Agreement with respect to the subject matter hereof. This
Agreement may not be amended or modified in any manner except by a written
instrument executed by both parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers thereunto duly authorized as of the date first
above written.
UNITED STATES TRUST COMPANY NUVEEN NEW YORK MUNICIPAL
OF NEW YORK VALUE FUND, INC.
By By
----------------------- ---------------------------
Name Name
----------------------- ---------------------------
Title Title
----------------------- ---------------------------
13
<PAGE>
Exhibit A
---------
Amended
[Date]
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
Terms and Conditions of the Dividend Reinvestment Plan
------------------------------------------------------
This Dividend Reinvestment Plan of Nuveen New York Municipal Value Fund, Inc.
(the "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 United States Trust Company of New York ("U.S. Trust"), the
Plan Agent, in accordance with the following terms:
1. U.S. Trust 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 U.S. Trust 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
U.S. Trust and the Fund may agree.
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 U.S. Trust 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 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 U.S.
Trust shall apply the amount of such distribution (less each Participant's pro
rata share of brokerage commissions incurred) to the purchase on the open market
of shares of the Fund for the Participant's account. Such purchases will be
made on or shortly after the payment date for such distribution, and in no event
more than 30 days after such date except where temporary curtailment or
suspension of purchases is necessary to comply with applicable provisions of
federal securities law.
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.
14
<PAGE>
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 U.S. Trust shall determine. Participants' funds held uninvested by
U.S. Trust will not bear interest, and it is understood that, in any event, U.S.
Trust shall have no liability in connection with any inability to purchase
shares within 30 days after the initial date of such purchase as herein
provided, or with the timing of any purchases affected. U.S. Trust shall have
no responsibility as to the value of the Fund's shares acquired for
Participants' accounts. U.S. Trust 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) of all Fund shares purchased by
U.S. Trust as Agent.
6. U.S. Trust may hold each Participant's shares acquired pursuant to this
Plan, together with the shares of other Participants, in non-certificated form
in U.S. Trust's name or that of its nominee. U.S. Trust 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. U.S. Trust 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. U.S. Trust 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, U.S. Trust 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 spilt shares distributed by the Fund on full and
fractional shares held by U.S. Trust 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. U.S. Trust'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.
10. Each Participant may terminate his account under the Plan by notifying U.S.
Trust 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 U.S. Trust and the Fund may agree. Such termination will be
effective immediately if notice is received by U.S. Trust 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 U.S. Trust upon at least 90 days prior notice. Upon
any termination, U.S. Trust 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
15
<PAGE>
advance of such termination to have U.S. Trust sell part or all of his shares,
U.S. Trust 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 U.S. Trust 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, U.S. Trust
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 U.S. Trust 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. U.S. Trust 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.
20201
16
<PAGE>
EXHIBIT B
---------
Shareholder Service Fee
-----------------------
$6.50 Per Shareholder Account
$ .50 Per Month Per Account in the Dividend Reinvestment Program
$ .15 Per Certificate Issued
Earnings on Balances
--------------------
An earnings credit, adjusted to a monthly basis, will be applied against
the Shareholder Service Fee equal to 75% of the latest available three
month average of the 91 day treasury bill coupon equivalent rate times the
average collected balance in the Demand Deposit account (or accounts) for
the month billed. If the credit exceeds the fees for the month, this
excess is carried forward to subsequent months. However, this carry
forward is only available as a credit against fees incurred through
December 31 of each calendar year and expires effective January 1 of the
following year.
Note: Fee does not include out-of-pocket expenses:
Blank Certificates Proxy
Check Stock Forms/Stationery
Postage Envelopes
17
<PAGE>
EXHIBIT 11.1
August 22, 1995
Nuveen New York Municipal
Value Fund, Inc.
333 West Wacker Drive
Chicago, Illinois 60606
RE: NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
REGISTRATION STATEMENT ON FORM N-14
-----------------------------------------------
Ladies and Gentlemen:
We are acting as counsel for Nuveen New York Municipal Value Fund, Inc., a
Minnesota corporation (the "Fund"), in connection with the Fund's filing of a
registration statement on Form N-14 (the "Registration Statement") with the
Securities and Exchange Commission covering the registration of up to 3,500,000
shares of common stock, $.01 par value per share, of the Fund (the "Shares"),
pursuant to the proposed reorganization of the Fund and Nuveen New York
Municipal Income Fund, Inc., a Minnesota corporation (the "Acquired Fund"), as
described in the Registration Statement and pursuant to that certain Agreement
and Plan of Reorganization and Liquidation entered into between the Fund and the
Acquired Fund dated as of August 1, 1995 (the "Agreement").
In that capacity, we have examined such corporate records, certificates and
other documents, and have made such other factual and legal investigations as we
have deemed necessary and appropriate for the purposes of this opinion. In such
examination, we have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals, the conformity to originals of
all documents submitted to us as certified copies or photocopies and the
authenticity of the originals of such latter documents. Insofar as this opinion
pertains to matters governed by the laws of the State of Minnesota, we are
relying, with your consent, upon the opinion of Dorsey & Whitney dated August
21, 1995, which opinion is satisfactory in substance and form to us.
<PAGE>
Based upon the foregoing, it is our opinion that:
(1) The Fund is validly existing as a corporation in good standing under
the laws of the State of Minnesota.
(2) The Shares, when issued and delivered by the Fund pursuant to, and
upon satisfaction of the conditions and covenants contained in the
Agreement (including without limitation the approval of the issuance
of the Shares and/or the proposed reorganization by the shareholders
of the Fund and/or the Acquired Fund as described in the Registration
Statement), will be legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 11.1 to the
Registration Statement and to the references to us under the caption "Legal
Opinions" in the Joint Proxy Statement - Prospectus contained in the
Registration Statement.
Respectfully submitted,
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
By /s/ David A. Sturms
-------------------
David A. Sturms
JSH/lmj
<PAGE>
EXHIBIT 11.2
August 21, 1995
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601
Re: Nuveen New York Municipal Value Fund, Inc.
Shares to be Issued Pursuant to Agreement and Plan
of Reorganization and Liquidation
Ladies and Gentlemen:
We have acted as special Minnesota counsel to Nuveen New York Municipal
Value Fund, Inc., a Minnesota corporation (the "Fund"), in connection with the
Fund's authorization and proposed issuance of up to 3,500,000 of its common
shares, par value $.01 per share (the "Shares"). The Shares are to be issued
pursuant to an Agreement and Plan of Reorganization and Liquidation dated as of
August 1, 1995 (the "Agreement"), by and between the Fund and Nuveen New York
Municipal Income Fund, Inc., a Minnesota corporation, the form of which
Agreement is included as Annex A to the Joint Proxy Statement--Prospectus
included in the Fund's Registration Statement on Form N-14 filed with the
Securities and Exchange Commission (the "Registration Statement").
In rendering the opinions hereinafter expressed, we have reviewed the
corporate proceedings taken by the Fund in connection with the authorization and
issuance of the Shares, and we have reviewed such questions of law and examined
copies of such corporate records of the Fund, certificates of public officials
and of responsible officers of the Fund, and other documents as we have deemed
necessary as a basis for such opinions. As to the various matters of fact
material to such opinions, we have, when such facts were not independently
established, relied to the extent we deem proper on certificates of public
officials and of responsible officers of the Fund. In connection with such
review and examination, we have assumed that all copies of documents provided to
us conform to the originals; that all signatures are genuine; and that the
Agreement has been duly and validly authorized, executed and delivered on behalf
of each of the parties thereto.
<PAGE>
Based on the foregoing, it is our opinion that:
1. The Fund is validly existing as a corporation in good standing under
the laws of the State of Minnesota.
2. The Shares, when issued and delivered by the Fund pursuant to, and
upon satisfaction of the conditions contained in, the Agreement, will be legally
issued and fully paid and non-assessable; and the issuance of the Shares is not
subject to preemptive rights.
In rendering the forgoing opinions, we express no opinion as to the laws of
any jurisdiction other than the State of Minnesota. In addition, in rendering
the foregoing opinions, we have assumed, with your concurrence, that the
conditions to closing set forth in the Agreement will have been satisfied. You
and the Fund are hereby authorized to rely on the foregoing opinions in
rendering your opinion to the Fund to be filed as Exhibit 11.1 to the
Registration Statement. Except as aforesaid, the foregoing opinions are not to
be relied upon by any other person without our prior written authorization.
We hereby consent to the filing of this opinion as Exhibit 11.2 to the
Registration Statement and to the reference to this firm under the caption
"Legal Opinions" in the Fund's final Joint Proxy Statement--Prospectus relating
to the Shares included in the Registration Statement.
Very truly yours,
By: /s/ Dorsey & Whitney P.L.L.P.
-----------------------------
JDA
<PAGE>
EXHIBIT 12
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, Illinois 60601-1003
312/609-7500
<TABLE>
<S> <C> <C>
VEDDER, PRICE, KAUFMAN, KAMMHOLZ & DAY VEDDER, PRICE, KAUFMAN & KAMMHOLZ VEDDER, PRICE, KAUFMAN, KAMMHOLZ & DAY
805 Third Avenue 4615 East State Street, Suite 201 2121 K Street, N.W.
New York, New York 10022-2203 Rockford, Illinois 61108-2100 Washington, D.C. 20037
212/407-7700 815/226-7700 202/496-1200
</TABLE>
August 22, 1995
Nuveen New York Municipal Nuveen New York Municipal
Value Fund, Inc. Income Fund, Inc.
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
Gentlemen:
You have requested our opinion regarding certain federal income tax
consequences of the proposed reorganization ("Reorganization") of Nuveen New
York Municipal Income Fund, Inc., a Minnesota corporation ("Acquired Fund"),
into Nuveen New York Municipal Value Fund, Inc., a Minnesota corporation
("Acquiring Fund"). The Reorganization contemplates the acquisition by the
Acquiring Fund of substantially all the assets of the Acquired Fund in exchange
for voting shares of the Acquiring Fund and the assumption of the Acquired
Fund's liabilities. Thereafter, the shares of the Acquiring Fund will be
distributed to the shareholders of the Acquired Fund and the Acquired Fund will
be completely liquidated and terminated. The foregoing will be accomplished
pursuant to an Agreement and Plan of Reorganization and Liquidation, dated as of
August 1, 1995 (the "Plan"), entered into by the Acquired Fund and the Acquiring
Fund.
In rendering this opinion, we have reviewed and relied upon statements made
to us by certain of your officers. We have also examined certificates of such
officers and such other agreements, documents, and corporate records that have
been made available to us and such other matters as we have deemed relevant for
purposes of this opinion. In such examination, we have assumed the genuineness
of all signatures, the authenticity of all documents submitted to us as
originals, the conformity to originals of all documents submitted to us as
copies and the authenticity of the originals of such latter documents.
Our opinion is based, in part, on the assumption that the proposed
Reorganization described herein will occur in accordance with the agreements and
the facts and representations set forth or referred to in this opinion letter,
and that such facts and representations are accurate as of the date hereof and
will be accurate on the effective date of such Reorganization (the "Effective
Time"). We have undertaken no independent investigation of the accuracy of the
facts and representations set forth or referred to herein.
<PAGE>
Nuveen New York Municipal Value Fund, Inc.
Nuveen New York Municipal Income Fund, Inc.
August 22, 1995
Page 2
For the purposes indicated above, and based upon the facts, assumptions and
conditions as set forth below, and the representations made to us by duly
authorized officers of the Acquired Fund and the Acquiring Fund in a letter
dated August 22, 1995, it is our opinion that:
i. The acquisition by the Acquiring Fund of substantially all the
assets of the Acquired Fund in exchange solely for Acquiring Fund shares
and the assumption by the Acquiring Fund of the Acquired Fund's
liabilities, if any, followed by the distribution by the Acquired Fund of
the Acquiring Fund shares to the shareholders of the Acquired Fund in
exchange for their Acquired Fund shares in complete liquidation of the
Acquired Fund, will constitute a "reorganization" within the meaning of
Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the Acquiring Fund and the Acquired Fund each will be "a party
to a reorganization" within the meaning of Section 368(b) of the Code;
ii. The Acquired Fund's shareholders will recognize no gain or loss
upon the exchange of all of their Acquired Fund shares for Acquiring Fund
shares in complete liquidation of the Acquired Fund, except with respect to
cash received for a fractional Acquiring Fund share, if any (Code Section
354(a)(1));
iii. No gain or loss will be recognized by the Acquired Fund upon the
transfer of substantially all its assets to the Acquiring Fund in exchange
solely for Acquiring Fund shares and the assumption by the Acquiring Fund
of the Acquired Fund's liabilities, if any, and with respect to the
subsequent distribution of those Acquiring Fund shares to the Acquired Fund
shareholders in complete liquidation of the Acquired Fund (Code Section
361);
iv. No gain or loss will be recognized by the Acquiring Fund upon the
acquisition of substantially all the Acquired Fund's assets in exchange
solely for Acquiring Fund shares and the assumption of the Acquired Fund's
liabilities, if any (Code Section 1032(a));
v. The basis of the assets acquired by the Acquiring Fund will be, in
each instance, the same as the basis of those assets when held by the
Acquired Fund immediately before the transfer, and the holding period of
such assets acquired by the Acquiring Fund will include the holding period
thereof when held by the Acquired Fund (Code Sections 362(b) and 1223(2));
vi. The basis of the Acquiring Fund shares to be received by the
Acquired Fund's shareholders upon liquidation of the Acquired Fund will be,
in each instance, the same as the basis of the Acquired Fund shares
surrendered in exchange therefor,
<PAGE>
Nuveen New York Municipal Value Fund, Inc.
Nuveen New York Municipal Income Fund, Inc.
August 22, 1995
Page 3
decreased by any cash received and increased by the amount of gain
recognized on the exchange (Code Section 358(a)(1)); and
vii. The holding period of the Acquiring Fund shares to be received
by the Acquired Fund's shareholders will include the period during which
the Acquired Fund shares to be surrendered in exchange therefor were held,
provided such Acquired Fund shares were held as capital assets by those
shareholders on the date of the exchange (Code Section 1223(1)).
FACTS
-----
Our opinion is based upon the above referenced representations and the
following facts and assumptions, any alteration of which could adversely affect
our conclusions.
The Acquired Fund has been registered and operated since it commenced
operations as a diversified, closed-end, management investment company under the
Investment Company Act of 1940, 15 U.S.C. (S)80a, et seq. (the "1940 Act"). Its
shares are traded on the New York Stock Exchange. The Acquired Fund has
qualified and will qualify as a regulated investment company under Section 851
of the Code for each of its taxable years, and has distributed and will
distribute all or substantially all its income so that it and its shareholders
have been and will be taxed in accordance with Section 852 of the Code.
The Acquiring Fund has also been registered and operated since it commenced
operations as a diversified, closed-end, management investment company under the
1940 Act. It has qualified as a regulated investment company under Section 851
of the Code for each of its taxable years, will so qualify for its current
taxable year, and has distributed and will distribute all or substantially all
its income so that it and its shareholders have been and will be taxed in
accordance with Section 852 of the Code. The Acquiring Fund's shares are traded
on the New York Stock Exchange.
Upon satisfaction of certain terms and conditions set forth in the Plan on
or before the closing date, the following will occur: (a) the Acquiring Fund
will acquire substantially all the assets of the Acquired Fund in exchange for
the Acquiring Fund's assumption of substantially all the liabilities of the
Acquired Fund and the issuance of Acquiring Fund shares to such Acquired Fund;
(b) the Acquiring Fund shares will be distributed to the shareholders of the
Acquired Fund; and (c) the Acquired Fund will be dissolved and liquidated. The
assets of the Acquired Fund to be acquired by the Acquiring Fund consist
primarily of bonds whose interest is exempt from federal income taxation, cash
and other securities held in the Acquired Fund's portfolio.
<PAGE>
Nuveen New York Municipal Value Fund, Inc.
Nuveen New York Municipal Income Fund, Inc.
August 22, 1995
Page 4
The value of the Acquired Fund's assets to be acquired and the liabilities
to be assumed by the Acquiring Fund and the net asset value per Acquiring Fund
share to be issued by the Acquiring Fund will be determined by United States
Trust Company of New York ("U.S. Trust"), the custodian for each of the funds,
as of the Effective Time. Net asset value per Acquiring Fund share shall be
computed by dividing the value of the Acquiring Fund's total assets less
liabilities by the number of Acquiring Fund shares outstanding. In determining
net asset value per Acquiring Fund share and the value of the Acquired Fund's
assets, U.S. Trust will utilize the valuations of portfolio securities furnished
by a pricing service approved by the Boards of the respective funds.
As soon as practicable after the Effective Time, the Acquired Fund will be
liquidated and will distribute the newly issued Acquiring Fund shares it
receives pro rata to its shareholders of record in exchange for such
shareholders' interests in such Acquired Fund. Such liquidation and
distribution will be accomplished by opening accounts on the books of the
Acquiring Fund in the names of the shareholders of the Acquired Fund and
transferring to those shareholder accounts the Acquiring Fund shares. Each
shareholder account would represent the respective pro rata number of newly
issued Acquiring Fund shares (rounded down, in the case of fractional Acquiring
Fund shares, to the next largest number of whole Acquiring Fund shares) due such
Acquired Fund shareholder. No fractional Acquiring Fund shares will be issued.
In lieu thereof, pursuant to the Plan, the Acquired Fund's transfer agent will
aggregate all fractional Acquiring Fund shares and sell the resulting whole
Acquiring Fund shares on the New York Stock Exchange for the account of all
shareholders of fractional interests, and each such shareholder will be entitled
to his or her pro rata share of the proceeds of such sale upon surrender of his
or her Acquired Fund share certificates.
As a result of the Reorganization, every shareholder of the Acquired Fund
will own Acquiring Fund shares that, except for cash payments received in lieu
of fractional Acquiring Fund shares, would have an aggregate per share net asset
value immediately after the Effective Time equal to the aggregate per share net
asset value of that shareholder's Acquired Fund shares immediately prior to the
Effective Time. Since the Acquiring Fund shares issued to the shareholders of
the Acquired Fund would be issued at net asset value in exchange for the net
assets of such Acquired Fund having a value equal to the aggregate per share net
asset value of those Acquiring Fund shares so issued, the net asset value of the
Acquiring Fund shares should remain virtually unchanged by the Reorganization.
In approving the Reorganization, the Boards of Directors of the Acquiring
Fund and the Acquired Fund each identified certain benefits that are likely to
result from combining the funds, including lower administrative expenses,
greater efficiency and flexibility in portfolio management and a more liquid
trading market for the shares of the combined fund. Each Board also considered
the possible risks and costs of combining the funds and determined that the
<PAGE>
Nuveen New York Municipal Value Fund, Inc.
Nuveen New York Municipal Income Fund, Inc.
August 22, 1995
Page 5
Reorganization is likely to provide benefits to the shareholders of each fund
that outweigh the costs incurred.
CONCLUSION
----------
Based on the foregoing, it is our opinion that the acquisition by the
Acquiring Fund, pursuant to the Plan, of substantially all the assets and
liabilities of the Acquired Fund in exchange for voting shares of the Acquiring
Fund will qualify as a reorganization under Code Section 368(a)(1)(C).
Our opinions set forth above with respect to (1) the nonrecognition of gain
or loss to the Acquired Fund and the Acquiring Fund, (2) the basis and holding
period of the assets received by the Acquiring Fund, (3) the nonrecognition of
gain or loss to the Acquired Fund's shareholders upon the receipt of the
Acquiring Fund shares, and (4) the basis and holding period of the Acquiring
Fund shares received by the Acquired Fund's shareholders, follow as a matter of
law from the opinion that the acquisition under the Plan will qualify as a
reorganization under Code Section 368(a)(1)(C).
The opinions expressed in this letter are based on the Code, the Income Tax
Regulations promulgated by the Treasury Department thereunder and judicial
authority reported as of the date hereof. We have also considered the position
of the Internal Revenue Service (the "Service") reflected in published and
private rulings. Although we are not aware of any pending changes to these
authorities that would alter our opinions, there can be no assurances that
future legislative or administrative changes, court decisions or Service
interpretations will not significantly modify the statements or opinions
expressed herein.
Our opinions are limited to those federal income tax issues specifically
considered herein and are addressed to and are only for the benefit of the
Acquired Fund and Acquiring Fund. We do not express any opinion as to any other
federal income tax issues, or any state or local law issues, arising from the
transactions contemplated by the Plan. Although the discussion herein is based
upon our best interpretation of existing sources of law and expresses what we
believe a court would properly conclude if presented with these issues, no
assurance can be given that such interpretations would be followed if they were
to become the subject of judicial or administrative proceedings.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the use of our name under the captions "Proposal
No. 1 - The Reorganization - Tax Consequences of the Reorganization", "Legal
Opinions" and "Additional Information About the Funds - Tax Matters Associated
with Investment in the Funds" in the Joint Proxy Statement -Prospectus contained
in such Registration Statement. In giving such consent, we do not thereby
<PAGE>
Nuveen New York Municipal Value Fund, Inc.
Nuveen New York Municipal Income Fund, Inc.
August 22, 1995
Page 6
concede that we are within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/S/ VEDDER, PRICE, KAUFMAN & KAMMHOLZ
-----------------------------------------------
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
<PAGE>
EXHIBIT 14.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated November 4, 1994 for Nuveen New York Municipal Value
Fund, Inc., and Nuveen New York Municipal Income Fund, Inc. in the Registration
Statement (Form N-14) and related Prospectus of Nuveen New York Municipal Value
Fund, Inc. filed with the Securities and Exchange Commission in this
Registration Statement under the Securities Act of 1933.
/s/ Ernst & Young LLP
---------------------
ERNST & YOUNG LLP
Chicago, Illinois
August 21, 1995
<PAGE>
EXHIBIT 14.2
August 21, 1995
Nuveen New York Municipal
Value Fund, Inc.
333 West Wacker Drive
Chicago, Illinois 60606
Re: Agreement and Plan of Reorganization and Liquidation dated as of
August 1, 1995 (the "Agreement") by and between Nuveen New York
Municipal Value Fund, Inc. (the "Acquiring Fund") and Nuveen New
York Municipal Income Fund, Inc. (the "Acquired Fund")
Gentlemen:
We have acted as local New York counsel for the Acquiring Fund and the
Acquired Fund, concerning a Registration Statement of the Acquiring Fund on Form
N-14 with respect to the transactions contemplated by the Agreement. We hereby
consent to the filing of this letter as an exhibit to such Registration
Statement and to the reference to our firm under the captions "Tax Matters
Associated with Investment in the Funds-New York State and Local Tax Matters"
and "Legal Opinions" in the Joint Proxy Statement and Prospectus which is a part
of such Registration Statement. In giving such consent, we do not thereby admit
that we are within the category of persons whose consent is required by Section
7 of the Securities Act of 1933, as amended, and the rules and regulations
thereunder.
Very truly yours,
/s/ Edwards & Angell
----------------------
EDWARDS & ANGELL
<PAGE>
EXHIBIT 16.1
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
-------------------------
POWER OF ATTORNEY
-------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of the above
referenced organization, hereby constitutes and appoints RICHARD J. FRANKE,
TIMOTHY R. SCHWERTFEGER, JAMES J. WESOLOWSKI, LARRY W. MARTIN, GIFFORD R.
Z1MMERMAN and MORRISON C. WARREN, and each of them (with full power to each of
them to act alone) his true and lawful attorney-in-fact and agent, for him on
his behalf and in his name, place and stead, in any and all capacities, to sign,
execute and affix his seal thereto and file one or more Registration Statements
on Form N-14, under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the reorganization, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as he might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of the above-referenced
organization has hereunto set his hand this 10th day of August, 1995.
/s/ Richard J. Franke
---------------------
Richard J. Franke
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 10th day of August, 1995, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
(SEAL) /s/
-------------------------------------------
My Commission Expires
<PAGE>
EXHIBIT 16.2
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
-------------------------
POWER OF ATTORNEY
-------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of the above
referenced organization, hereby constitutes and appoints RICHARD J. FRANKE,
TIMOTHY R. SCHWERTFEGER, JAMES J. WESOLOWSKI, LARRY W. MARTIN, GIFFORD R.
Z1MMERMAN and MORRISON C. WARREN, and each of them (with full power to each of
them to act alone) his true and lawful attorney-in-fact and agent, for him on
his behalf and in his name, place and stead, in any and all capacities, to sign,
execute and affix his seal thereto and file one or more Registration Statements
on Form N-14, under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the reorganization, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as he might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of the above-referenced
organization has hereunto set his hand this 10th day of August, 1995.
/s/ Timothy R. Schwertfeger
---------------------------
Timothy R. Schwertfeger
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 10th day of August, 1995, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
(SEAL) /s/
--------------------------------------------
My Commission Expires
<PAGE>
EXHIBIT 16.3
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
-------------------------
POWER OF ATTORNEY
-------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of the above
referenced organization, hereby constitutes and appoints RICHARD J. FRANKE,
TIMOTHY R. SCHWERTFEGER, JAMES J. WESOLOWSKI, LARRY W. MARTIN, GIFFORD R.
Z1MMERMAN and MORRISON C. WARREN, and each of them (with full power to each of
them to act alone) his true and lawful attorney-in-fact and agent, for him on
his behalf and in his name, place and stead, in any and all capacities, to sign,
execute and affix his seal thereto and file one or more Registration Statements
on Form N-14, under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the reorganization, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as he might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of the above-referenced
organization has hereunto set his hand this 10th day of August, 1995.
/s/ Lawrence H. Brown
---------------------
Lawrence H. Brown
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 10th day of August, 1995, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
(SEAL) /s/
-----------------------------------------
My Commission Expires
<PAGE>
EXHIBIT 16.4
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
-------------------------
POWER OF ATTORNEY
-------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of the above
referenced organization, hereby constitutes and appoints RICHARD J. FRANKE,
TIMOTHY R. SCHWERTFEGER, JAMES J. WESOLOWSKI, LARRY W. MARTIN, GIFFORD R.
Z1MMERMAN and MORRISON C. WARREN, and each of them (with full power to each of
them to act alone) his true and lawful attorney-in-fact and agent, for him on
his behalf and in his name, place and stead, in any and all capacities, to sign,
execute and affix his seal thereto and file one or more Registration Statements
on Form N-14, under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the reorganization, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as he might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of the above-referenced
organization has hereunto set his hand this 10th day of August, 1995.
/s/ Anne E. Impellizzeri
------------------------
Anne E. Impellizzeri
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 10th day of August, 1995, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
(SEAL) /s/
-------------------------------------------
My Commission Expires
<PAGE>
EXHIBIT 16.5
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
-------------------------
POWER OF ATTORNEY
-------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of the above
referenced organization, hereby constitutes and appoints RICHARD J. FRANKE,
TIMOTHY R. SCHWERTFEGER, JAMES J. WESOLOWSKI, LARRY W. MARTIN, GIFFORD R.
Z1MMERMAN and MORRISON C. WARREN, and each of them (with full power to each of
them to act alone) his true and lawful attorney-in-fact and agent, for him on
his behalf and in his name, place and stead, in any and all capacities, to sign,
execute and affix his seal thereto and file one or more Registration Statements
on Form N-14, under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the reorganization, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as he might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of the above-referenced
organization has hereunto set his hand this 10th day of August, 1995.
/s/ Margaret K. Rosenheim
-------------------------
Margaret K. Rosenheim
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 10th day of August, 1995, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
(SEAL) /s/
------------------------------------------
My Commission Expires
<PAGE>
EXHIBIT 16.6
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
-------------------------
POWER OF ATTORNEY
-------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of the above
referenced organization, hereby constitutes and appoints RICHARD J. FRANKE,
TIMOTHY R. SCHWERTFEGER, JAMES J. WESOLOWSKI, LARRY W. MARTIN, GIFFORD R.
Z1MMERMAN and MORRISON C. WARREN, and each of them (with full power to each of
them to act alone) his true and lawful attorney-in-fact and agent, for him on
his behalf and in his name, place and stead, in any and all capacities, to sign,
execute and affix his seal thereto and file one or more Registration Statements
on Form N-14, under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the reorganization, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as he might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of the above-referenced
organization has hereunto set his hand this 10th day of August, 1995.
/s/ Peter R. Sawers
-------------------
Peter R. Sawers
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 10th day of August, 1995, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
(SEAL) /s/
-------------------------------------------
My Commission Expires
<PAGE>
EXHIBIT 17.1
At the upcoming Annual Meeting, all shareholders will be asked to consider and
approve a very important proposal. Subject to shareholder approval, Nuveen New
York Municipal Value Fund, Inc. (the "Fund") will acquire substantially all of
the assets and assume substantially all of the liabilities of Nuveen New York
Municipal Income Fund, Inc. in exchange for newly issued shares of the Fund.
The reorganization should lead to efficiencies of scale, providing such benefits
as:
[ ] Lower administrative expenses
[ ] Greater efficiency and flexibility in portfolio management
[ ] A more liquid trading market for common shares of the combined fund
WHETHER OR NOT YOU PLAN TO JOIN US, PLEASE COMPLETE, DATE AND SIGN YOUR PROXY
CARD AND RETURN IT IN THE ENCLOSED ENVELOPE SO THAT YOUR VOTE WILL BE COUNTED.
----------Please fold at perforation before detaching---------
| |
--------------------------------------------------------------------------------
PROXY BALLOT
NUVEEN NEW YORK MUNICIPAL VALUE FUND, INC.
COMMON SHARES
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 14, 1995
The undersigned hereby appoints Richard J. Franke, Donald E. Sveen and James J.
Wesolowski, and each of them, with full power of substitution, Proxies for the
undersigned to represent and vote the common shares of the undersigned at the
Annual Meeting of Shareholders of Nuveen New York Municipal Value Fund, Inc.
(the "Fund") to be held on November 14, 1995, or any adjournment or adjournments
thereof. The following items are to be considered:
1. Approval of the issuance of additional common shares of the Fund in
connection with an Agreement and Plan of Reorganization and Liquidation
between the Fund and Nuveen New York Municipal Income Fund, Inc.
2. Election of Directors:
NOMINEES: Lawrence H. Brown, Richard J. Franke, Anne E. Impellizzeri,
Margaret K. Rosenheim, Peter R Sawers, Timothy R. Schwertfeger.
3. Ratification of the selection of Ernst & Young LLP as independent auditors.
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
--------------------------------------------------------------------------------
You are encouraged to specify your choices by marking the appropriate boxes ON
THE REVERSE SIDE. If you do not mark any boxes, your Proxy will be voted in
accordance with the Board of Directors' recommendations. Please sign date and
return this Proxy card promptly using the enclosed envelope.
--------------------------------------------------------------------------------
SEE REVERSE SIDE NYV895
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES AND PROPOSALS:
Please mark your votes as in this example [X]
--------------------------------------------------------------------------------
1. APPROVAL OF THE ISSUANCE OF ADDITIONAL FOR AGAINST ABSTAIN
COMMON SHARES OF THE FUND IN CONNECTION [_] [_] [_]
WITH AN AGREEMENT AND PLAN OF
REORGANIZATION AND LIQUIDATION BETWEEN
THE FUND AND NUVEEN NEW YORK MUNICIPAL
INCOME FUND, INC.
2. ELECTION OF [_] FOR [_] WITHHOLD [_] WITHHOLD
DIRECTORS: all authority authority to vote
(SEE REVERSE nominees to vote for for nominees
FOR NOMINEES) all nominees indicated below:
_____________________
INSTRUCTIONS:
To grant authority to vote FOR ALL nominees,
mark the box on the left above OR do not
mark any box above.
To WITHHOLD authority to vote FOR ALL
nominees, mark the box in the middle above.
To WITHHOLD authority to vote FOR ANY ONE
OR MORE of the nominees, mark the box on the
right above AND write each nominee's name in
the space provided.
3. Ratification of the selection of Ernst
& Young LLP as independent auditors. [_] [_] [_]
4. In their discretion, the Proxies are
authorized to vote upon such other
business as may properly come before
the Annual Meeting.
--------------------------------------------------------------------------------
The shares to which this Proxy relates will be voted as specified. If no
specification is made, such shares will be voted for the election of Directors
and for the proposals set forth on this Proxy.
------------------------------
_______ Please be sure to sign and
| date this Proxy
|
-----------------------------------------------
-Shareholder
sign here __________________ Date _________
-Co-owner
sign here __________________ Date _________
NOTE: Please sign exactly as your name appears
on this Proxy. If signing for estates, trusts
or corporations, title or capacity should be
stated. If shares are held jointly, each
holder should sign. ------------------------------
[_] BK NYV895 NYV895
<PAGE>
EXHIBIT 17.2
At the upcoming Annual Meeting, all shareholders will be asked to consider and
approve a very important proposal. Subject to shareholder approval, your Fund
will transfer substantially all of its assets and substantially all of its
liabilities to Nuveen New York Municipal Value Fund, Inc. (the "Acquiring Fund")
in exchange for newly issued shares of the Acquiring Fund, which will be
distributed to shareholders of your Fund.
The reorganization should lead to efficiencies of scale, providing such benefits
as:
[_] Lower administrative expenses
[_] Greater efficiency and flexibility in portfolio management
[_] A more liquid trading market for common shares of the combined fund
WHETHER OR NOT YOU PLAN TO JOIN US, PLEASE COMPLETE, DATE AND SIGN YOUR PROXY
CARD AND RETURN IT IN THE ENCLOSED ENVELOPE SO THAT YOUR VOTE WILL BE COUNTED.
----------Please fold at perforation before detaching---------
| |
-------------------------------------------------------------------------------
PROXY BALLOT
NUVEEN NEW YORK MUNICIPAL INCOME FUND, INC.
COMMON SHARES
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 14, 1995
The undersigned hereby appoints Richard J. Franke, Donald E. Sveen and James J.
Wesolowski, and each of them, with full power of substitution, Proxies for the
undersigned to represent and vote the common shares of the undersigned at the
Annual Meeting of Shareholders of Nuveen New York Municipal Income Fund, Inc.
(the "Fund") to be held on November 14, 1995, or any adjournment or adjournments
thereof. The following items are to be considered:
1. Approval of an Agreement and Plan of Reorganization and Liquidation between
the Fund and Nuveen New York Municipal Value Fund, Inc.
2. Election of Directors:
NOMINEES: Lawrence H. Brown, Richard J. Franke, Anne E. Impellizzeri,
Margaret K. Rosenheim, Peter R. Sawers, Timothy R. Schwertfeger.
3. Ratification of the selection of Ernst & Young LLP as independent auditors.
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
--------------------------------------------------------------------------------
You are encouraged to specify your choices by marking the appropriate boxes ON
THE REVERSE SIDE. If you do not mark any boxes, your Proxy will be voted in
accordance with the Board of Directors' recommendations. Please sign date and
return this Proxy card promptly using the enclosed envelope.
--------------------------------------------------------------------------------
SEE REVERSE SIDE NYI895
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES AND PROPOSALS:
Please mark your votes as in this example [X]
--------------------------------------------------------------------------------
1. APPROVAL OF AN AGREEMENT AND PLAN OF FOR AGAINST ABSTAIN
REORGANIZATION AND LIQUIDATION [_] [_] [_]
BETWEEN THE FUND AND NUVEEN NEW YORK
MUNICIPAL VALUE FUND, INC.
2. ELECTION OF [_] FOR [_] WITHHOLD [_] WITHHOLD
DIRECTORS: all authority authority to vote
(SEE REVERSE nominees to vote for for nominees
FOR NOMINEES) all nominees indicated below:
_____________________
INSTRUCTIONS:
To grant authority to vote FOR ALL nominees,
mark the box on the left above OR do not
mark any box above.
To WITHHOLD authority to vote FOR ALL
nominees, mark the box in the middle above.
To WITHHOLD authority to vote FOR ANY ONE
OR MORE of the nominees, mark the box on the
right above AND write each nominee's name in
the space provided.
3. Ratification of the selection of Ernst
& Young LLP as independent auditors. [_] [_] [_]
4. In their discretion, the Proxies are
authorized to vote upon such other
business as may properly come before
the Annual Meeting.
--------------------------------------------------------------------------------
The shares to which this Proxy relates will be voted as specified. If no
specification is made, such shares will be voted for the election of Directors
and for the proposals set forth on this Proxy.
------------------------------
_______ Please be sure to sign and
| date this Proxy
|
-----------------------------------------------
-Shareholder
sign here __________________ Date _________
-Co-owner
sign here __________________ Date _________
NOTE: Please sign exactly as your name appears
on this Proxy. If signing for estates, trusts
or corporations, title or capacity should be
stated. If shares are held jointly, each
holder should sign. ------------------------------
[_] BK NYI895 NYI895
