<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 23, 1995
SECURITIES ACT REGISTRATION NO. 33-
INVESTMENT COMPANY ACT REGISTRATION NO. 811-5235
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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 CALIFORNIA 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
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
BEING OFFERING PRICE AGGREGATE REGISTRATION
TITLE OF SECURITIES BEING REGISTERED REGISTERED (1) PER UNIT OFFERING PRICE FEE
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 Par Value Per
Share............................... 7,000,000 $8.33 $58,285,879(2) $20,099
--------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
(1) Represents the maximum additional number of shares to be issued in exchange
for substantially all of the assets of Nuveen California 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 $11.1875,
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 5,209,911
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
California Municipal Value Fund, Inc. and Nuveen California 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 California
Municipal Value Fund, Inc. (the "Acquiring Fund") will acquire substantially
all of the assets and assume substantially all of the liabilities of Nuveen
California 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 CALIFORNIA MUNICIPAL VALUE FUND, INC.
NUVEEN CALIFORNIA 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 California Municipal Value Fund, Inc. (the "Acquiring Fund") and Nuveen
California 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 7,000,000 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 August 31, 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 CALIFORNIA
MUNICIPAL VALUE FUND, INC.
NUVEEN CALIFORNIA
MUNICIPAL INCOME FUND, INC.
JOINT PROXY STATEMENT
MEETINGS OF SHAREHOLDERS TO BE HELD NOVEMBER 14, 1995
----------
NUVEEN CALIFORNIA MUNICIPAL VALUE FUND, INC.
PROSPECTUS
----------
This Joint Proxy Statement--Prospectus is being furnished to the shareholders
of Nuveen California Municipal Value Fund, Inc. (the "Acquiring Fund") and
Nuveen California 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 7,000,000 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 California income taxes; its
secondary objective is to enhance portfolio value relative to the California
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 each Fund are listed on the New York
Stock Exchange ("NYSE"); reports, proxy statements and other information
concerning the Funds can be inspected at the offices of the NYSE. 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
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT--
PROSPECTUS. ANY REPRESEN- TATION 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..................................... 2
Management of the Funds................................................ 3
Dividends and Distributions............................................ 3
Comparative Fee Table.................................................. 3
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 California 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............................. 16
General................................................................ 16
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...................................... 19
PROPOSAL NO. 2--ELECTION OF DIRECTORS OF EACH FUND........................ 20
PROPOSAL NO. 3--SELECTION OF INDEPENDENT AUDITORS FOR THE FUNDS........... 23
MANAGEMENT OF THE FUNDS................................................... 23
Directors and Officers................................................... 23
Investment Adviser....................................................... 24
Portfolio Management..................................................... 24
ADDITIONAL INFORMATION ABOUT THE FUNDS.................................... 25
Financial Highlights..................................................... 25
General Information and History.......................................... 26
Repurchase of Fund Shares; Conversion to Open-End Fund................... 26
Custodian, Transfer Agent, and Dividend Disbursing Agent................. 27
Tax Matters Associated With Investment in the Funds...................... 27
Federal Income Tax Matters............................................. 27
California State and Local Tax Matters................................. 28
LEGAL OPINIONS............................................................ 28
EXPERTS................................................................... 28
SHAREHOLDER PROPOSALS..................................................... 28
GENERAL................................................................... 29
Agreement and Plan of Reorganization and Liquidation (ANNEX A)
Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act
Relating to the Acquired Fund Dissenting Shareholders' Rights of
Appraisal (ANNEX B)
</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 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 eleven-month period ended
1
<PAGE>
July 31, 1995, the annualized expense ratios for the Acquiring Fund and the
Acquired Fund were 0.75% and 0.84%, respectively. The annualized expense ratio
for the combined Fund based upon the eleven-month period ended July 31, 1995
would have been .73%.
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 each Fund qualifies as a qualified
investment fund under California tax law and that the proposed Reorganization
qualifies as a tax-free reorganization under the Code, neither Fund will
recognize any gain or loss for California 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
California income tax purposes, except, as to individual shareholders, 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 NCA and the Acquired Fund shares are listed and
trade on the NYSE under the symbol NCM. 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."
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 California income taxes, and its secondary
investment objective is the enhancement of portfolio value relative to the
California municipal bond market through investments in tax-exempt California
Municipal Obligations that, in the opinion of Nuveen
2
<PAGE>
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 California
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 California 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 21.2 years for the Acquiring Fund and 20.8 years
for the Acquired Fund and the durations were 5.0 years for the Acquiring Fund
and 5.2 years for the Acquired 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 August 31, 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."
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.................................... 0.64% 0.65% 0.64%
Other Expenses..................................... 0.11 0.19 0.09
Total Annual Expenses.............................. 0.75 0.84 0.73
</TABLE>
3
<PAGE>
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 $24 $42 $ 93
Acquired Fund................................... 9 27 47 104
Pro-Forma Acquiring Fund........................ 7 23 41 91
</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 eleven-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 5.04% and for the
Acquired Fund's portfolio was 5.31%. 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 21.2 years
and of the Acquired Fund was 20.8 years and the duration was 5.0 years for
the Acquiring Fund and 5.2 years for the Acquired 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 5.12%, 21.1 years and 5.1 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),
43% are rated in the highest grade by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Corporation ("S&P"), 68% in the highest
two grades, 85% in the highest three grades, 87% in the highest four
grades, and 13% are unrated. Of the Municipal Obligations owned by the
Acquired Fund, as of July 31, 1995 (excluding temporary investments), 26%
are in the highest grade, 52% in the highest two grades, 83% in the highest
three grades, 87% in the highest four grades, 2% below the four highest
grades and 11% 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, 64% in the
highest two grades, 85% in the highest three grades, 87% in the highest
four grades, 1% below the four highest grades and 12% 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,
health care, housing and tax allocation categories, accounting for 37%,
15%, 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,
health care, tax allocation and housing categories, accounting for 30%,
18%, 12% and 10% 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, health care, housing and
tax allocation categories accounting for 35%, 15%, 13% and 12%, 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
slight discounts being reflected at times, and the shares of the Acquired
Fund have generally traded at premiums to net asset value, with moderate
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 11.92% and a maximum discount of 3.36%; and
share prices for the Acquired Fund have fluctuated between a maximum
premium of 9.61% and a maximum discount of 6.43%. As of July 31, 1995, the
Acquiring Fund shares were trading at a premium to net asset value of
0.59%, and the Acquired Fund shares were trading at a discount to net asset
value of 3.76%. 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
<PAGE>
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 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 August 31, 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 AUGUST 31, 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.
THE ANNUAL REPORT FOR THE FISCAL YEAR ENDED AUGUST 31, 1995 IS EXPECTED TO BE
AVAILABLE ON OR BEFORE OCTOBER 30, 1995.
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.
6
<PAGE>
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 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 and the Acquired Fund are listed on the NYSE, and such reports,
proxy statements and other information concerning the Funds can also be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
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 slightly 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 per share net
asset value immediately after the Effective Time equal to the aggregate per
share net asset value of
8
<PAGE>
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 eleven-month period ended July
31, 1995, the annualized expense ratios for the Acquiring Fund and the Acquired
Fund were 0.75% and 0.84%, respectively. The pro-forma annualized expense ratio
for the combined Fund for that period would have been 0.73%.
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
17 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 7,000,000 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 18,950,790
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 6,026,058 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 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 California 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 California income
tax or to both Federal and California 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 California), 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 California 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
California Municipal Obligations, current interest income exempt from both
Federal and California income taxes. A secondary objective of the Acquiring
Fund is to achieve enhancement of portfolio value through investments in tax-
exempt California 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 California 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 Acquiring Fund.
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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 California
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 California 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
California Municipal Obligations or in California 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 California
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 California 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 California 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
California Municipal Obligations, a high level of current interest income
exempt from both Federal and California income taxes.
Except during temporary defensive periods, the Acquired Fund will, as a
fundamental policy, invest 100% of its net assets in tax-exempt California
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 California 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 California
Municipal Obligations rated Ba or B by Moody's or BB or B by S&P at the time of
purchase, or in unrated California 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
California 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 California 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 California
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 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,
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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.
"California Municipal Obligations" are Municipal Obligations issued by the
State of California and cities and local authorities in the State of California
bearing interest that, in the opinion of bond counsel to the issuer, is exempt
from regular Federal income tax as well as California personal income tax. Such
interest may be subject to the Federal alternative minimum tax.
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 CALIFORNIA MUNICIPAL OBLIGATIONS
Except to the extent a Fund invests in temporary investments, it will invest
substantially all of its net assets in California Municipal Obligations. The
Funds are therefore susceptible to political, economic and regulatory factors
affecting issuers of California Municipal Obligations. A summary of the more
significant events and conditions affecting the financial situation in
California is included under "Investment Objectives and Policies of the Funds--
Special Considerations Relating to California 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;"
(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 California 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.
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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 $176,091), excluding annual stock exchange fees which will be borne by
the Acquiring Fund after the Reorganization, are to be allocated between the
Acquiring Fund (32.5%) and the Acquired Fund (67.5%) based upon estimated
savings to each Fund as a result of expected reduced operating expenses
resulting from the Reorganization.
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 17 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
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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 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.
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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 each Fund qualifies (prior to and
as of the Effective Time) as a qualified investment fund under California tax
law and that the proposed Reorganization qualifies as a tax-free reorganization
under the Code, neither Fund will recognize any gain or loss for California
income tax purposes as a result of the Reorganization. The following discussion
summarizes the anticipated Federal income and California 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 California personal income tax purposes, except with respect to the
cash received for a fractional Acquiring Fund share interest, if any. 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.
18
<PAGE>
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 California
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 California 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 CALIFORNIA 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 CALIFORNIA 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 1.1566528 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.......................... $193,134,759 $61,585,961 $254,435,233
Net Asset Value per Share........... $ 10.19 $ 11.82 $ 10.18
Shares Outstanding.................. 18,958,790 5,209,911 24,984,848
Shares Authorized................... 250,000,000 200,000,000 250,000,000
</TABLE>
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 NET
ON MARKET VALUE ASSET VALUE
---------------------------- ---------------------------
ONE THREE FIVE LIFE OF ONE THREE FIVE LIFE OF
YEAR YEARS YEARS FUND YEAR YEARS YEARS FUND
---- ----- ----- ------- ---- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Acquiring Fund.......... (.52)% 9.69% 35.17% 68.81% 6.63% 16.74% 39.62% 82.53%
Acquired Fund........... 3.24% 5.32% 25.97% 52.68% 5.88% 16.41% 39.31% 71.59%
</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.
19
<PAGE>
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.
NOMINEES FOR DIRECTOR OF EACH FUND
<TABLE>
<CAPTION>
FULL SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
YEAR FIRST JULY 31, 1995
YEAR ELECTED OR --------------------
NAME, AGE AND ADDRESS PRINCIPAL TERM APPOINTED A THE ALL 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
Director of the Funds; 1998 1993 0 3,475
retired in August 1989
Lawrence H. Brown (61) as Senior Vice Presi-
201 Michigan Ave. dent of The Northern
Highwood, IL 60040 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 Econom-
ics, University of Du-
buque, Iowa (since
January 1991); Adjunct
Professor, Lake Forest
Graduate School of
Management, Lake For-
est, Illinois (since
January 1992); prior
thereto, Executive Di-
rector, 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 Di-
rector of The John
Nuveen Company (since
March 1992) and John
Nuveen & Co. Incorpo-
rated; Director of
Nuveen Advisory Corp.
(since October 1992)
and Nuveen Institu-
tional Advisory Corp.
(since October 1992).
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
FULL SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
YEAR FIRST JULY 31, 1995
YEAR ELECTED OR --------------------
NAME, AGE AND ADDRESS PRINCIPAL TERM APPOINTED A THE ALL NUVEEN
AS OF JULY 31, 1995 OCCUPATION(/1/) EXPIRES DIRECTOR FUNDS FUNDS(/2/)
--------------------- --------------- ------- -------------- ------- -----------
CONTINUING DIRECTORS OF EACH FUND
<C> <S> <C> <C> <C> <C>
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 Ex-
New York, NY 10001 ecutive Officer of
Blanton-Peale, Insti-
tutes of Religion and
Health (since December
1990); prior thereto,
Vice President of New
York City Partnership
(from 1988 to 1990) and
Vice President of Met-
ropolitan Life Insur-
ance 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 Institu-
tional 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 Serv- Acquired Fund
ice 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 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 August 31, 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 FUNDS
ACQUIRING ACQUIRED ACCRUED FOR
NAME FUND FUND DIRECTORS(2)
---- --------- -------- ------------
<S> <C> <C> <C>
Lawrence H. Brown.............................. $290 $175 $56,500
Anne E. Impellizzeri(1)........................ 101 60 48,750
Margaret K. Rosenheim.......................... 424 252 64,404(3)
Peter R. Sawers................................ 400 244 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.
21
<PAGE>
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 12 meetings for the fiscal year ended August 31, 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 August 31,
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 August 31, 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 August 31,
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 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>
POSITIONS AND OFFICES
NAME AGE WITH FUNDS PRINCIPAL OCCUPATIONS
---- --- -------------------------------- ---------------------
<C> <C> <C> <S>
Kenneth C. Dunn 39 Vice President and Vice President,
Assistant Secretary 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) & Vice President (since
Assistant Secretary (since 1987) September 1992),
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 & Vice President and
Controller (since each Controller of The John
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 (since Vice President of Nuveen
each Fund's organization) Advisory Corp. and
Nuveen Institutional
Advisory Corp. (since
April 1990); Chartered
Financial Analyst
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AGE WITH FUNDS PRINCIPAL OCCUPATIONS
---- --- ------------------------ ---------------------
<C> <C> <C> <S>
H. William Stabenow 61 Vice President & Vice President and
Treasurer (since 1988) 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 (since Vice President of John
each Fund's organization) Nuveen & Co. Incorporated
James J. Wesolowski 45 Vice President & Vice President, General
Secretary (since 1988) 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 Vice President (since
1993) & Assistant September 1992), Assistant
Secretary (since 1988) 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. 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
August 31, 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.
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 August 31,
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.
23
<PAGE>
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>
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 $1,256,174 for the
fiscal year ended August 31, 1994, for an effective management fee rate of
0.64%. The Acquired Fund paid aggregate management fees of $411,874 for the
fiscal year ended August 31, 1994, for an effective management fee rate of
0.65%.
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
John W. Gambla, an Assistant Portfolio Manager of the Adviser since 1992 and
portfolio manager of each Fund since September 1, 1993. Mr. Gambla currently
manages 8 Nuveen-sponsored investment companies.
24
<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
2/28/95 (unaudited) $10.200 $.322 $(.038) $(.336) $(.008) $10.140 $10.250 (3.62)% 2.91%
Year ended 8/31,
1994 10.740 .653 (.514) (.669) (.010) 10.200 11.000 (.50) 1.32
1993 10.480 .667 .265 (.670) (.002) 10.740 11.750 13.37 9.21
1 Mo. ended
8/31/92 10.610 .056 (.130) (.056) -- 10.480 11.000 (1.74) (.71)
Year ended 7/31,
1992 10.250 .668 .379 (.664) (.023) 10.610 11.250 12.83 10.61
1991 10.120 .667 .123 (.660) -- 10.250 10.625 9.22 8.13
1990 10.190 .664 (.037) (.666) (.031) 10.120 10.375 7.10 6.45
1989 9.670 .664 .602 (.670) (.076) 10.190 10.375 11.82 13.70
10/7/87 to
7/31/88 9.350 .482 .259 (.421) -- 9.670 10.000 4.28 8.01
---------------------------------------------------------------------------------------------------------
<CAPTION>
ACQUIRED FUND
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 Mos. ended
2/28/95 (unaudited) 11.870 .361 (.105) (.376) -- 11.750 11.750 2.25 2.27
Year ended 8/31,
1994 12.480 .724 (.571) (.759) (.004) 11.870 11.875 (1.99) 1.24
1993 12.100 .752 .387 (.745) (.014) 12.480 12.875 4.22 9.76
9 Mos. ended
8/31/92 12.000 .580 .214 (.598) (.096) 12.100 13.125 12.02 6.83
Year ended
11/30/91 11.790 .800 .196 (.786) -- 12.000 12.375 13.40 8.75
1 Mo. ended
11/30/90 11.710 .067 .133 (.066) (.054) 11.790 11.625 2.10 1.71
Year ended 10/31,
1990 11.810 .794 (.016) (.797) (.081) 11.710 11.500 3.17 6.84
1989 11.640 .805 .184 (.813) (.006) 11.810 12.000 13.05 8.82
4/20/88 to
10/31/88 11.210 .356 .356 (.282) -- 11.640 11.375 (2.78) 6.45
---------------------------------------------------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
------------------------
RATIO OF
NET
RATIO OF INVEST-
EXPENSES MENT PORT-
NET ASSETS TO INCOME FOLIO
END OF AVERAGE TO AVER- TURN-
PERIOD (IN NET AGE NET OVER
THOUSANDS) ASSETS ASSETS RATE
---------------------------------------------------------------------------------------------------------
ACQUIRING FUND
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6 Mos. Ended
2/28/95 (unaudited) $191,659 .76*% 6.51*% 5%
Year ended 8/31,
1994 192,237 .76 6.24 9
1993 200,828 .82 6.31 4
1 Mo. ended
8/31/92 194,430 .79* 6.25* --
Year ended 7/31,
1992 196,669 .83 6.46 6
1991 188,370 .88 6.62 5
1990 184,888 .91 6.62 2
1989 185,016 .94 6.75 27
10/7/87 to
7/31/88 174,645 .94* 6.29* 32
---------------------------------------------------------------------------------------------------------
<CAPTION>
ACQUIRED FUND
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6 Mos. ended
2/28/95 (unaudited) 61,200 .86* 6.30* 3
Year ended 8/31,
1994 61,711 .86 5.93 13
1993 64,427 .90 6.16 5
9 Mos. ended
8/31/92 61,927 .82* 6.42* 11
Year ended
11/30/91 60,964 .73 6.75 9
1 Mo. ended
11/30/90 59,503 .70* 6.92* --
Year ended 10/31,
1990 59,091 .76 6.77 7
1989 59,343 .72 6.89 23
4/20/88 to
10/31/88 59,298 .74* 6.13* 11
---------------------------------------------------------------------------------------------------------
</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.
25
<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 18,000,000
shares in an initial public offering and commenced operations. In April 1988,
the Acquired Fund issued an aggregate of 5,000,000 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 18,950,790
ACQUIRED FUND
common stock 200,000,000 0 5,209,911
</TABLE>
The Acquiring Fund shares are listed and trade on the NYSE under the symbol
NCA. The Acquired Fund shares are listed and trade on the NYSE under the symbol
NCM.
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>
1993 First Quarter.............................. 12 1/8 11 1/8 13 1/8 11 1/4
Second Quarter............................. 11 7/8 11 12 7/8 12 1/8
Third Quarter.............................. 11 7/8 11 13 3/8 12 5/8
Fourth Quarter............................. 11 3/4 11 1/8 13 3/8 12 1/2
1994 First Quarter.............................. 11 3/4 11 13 5/8 11 7/8
Second Quarter............................. 11 1/8 10 3/8 12 3/4 11 1/2
Third Quarter.............................. 11 1/8 10 5/8 12 3/8 11 1/2
Fourth Quarter............................. 10 7/8 9 3/8 11 7/8 10 3/8
1995 First Quarter.............................. 10 7/8 9 3/4 11 7/8 11
Second Quarter............................. 10 7/8 10 1/8 12 11 1/4
</TABLE>
On July 31, 1995, the closing sale prices of the Acquiring Fund shares and
Acquired Fund shares were $10.25 and $11.375, respectively. These prices
represent a premium to net asset value of the Acquiring Fund of 0.59% and a
discount to net asset value of the Acquired Fund of 3.76%.
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 11.92% and a maximum discount of 3.36% and for the Acquired Fund shares have
fluctuated between a maximum premium of 9.61% and a maximum discount of 6.43%.
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.
26
<PAGE>
If a Fund converted to an open-end management investment company, the shares
would no longer be listed on the NYSE. 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
27
<PAGE>
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.
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.
CALIFORNIA STATE AND LOCAL TAX MATTERS
The following is based upon the advice of Orrick, Herrington & Sutcliffe,
special California counsel to the Funds, and assumes that each Fund will be
qualified as a regulated investment company under subchapter M of the Code and
will be qualified thereunder to pay exempt-interest dividends.
The California 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 shares of the Acquired Fund. Individual shareholders of
each Fund who are subject to California personal income taxation are not
required to include in their California gross income that portion of their
Federally tax-exempt dividends which such Fund clearly and accurately
identifies as directly attributable to interest earned on obligations the
interest on which is exempt from California personal income taxation, provided
that at least fifty percent of the value of such Fund's total assets consists
of such obligations. Other distributions representing income or gains realized
by each Fund are generally subject to California personal income tax at the
rates applicable to ordinary income. Corporate shareholders of each Fund which
are subject to the California franchise tax generally are required to include
all distributions of exempt-interest dividends, capital gains and other taxable
income, if any, as income subject to such tax.
A more detailed summary of certain of the provisions of California statutes
and administrative interpretations presently in effect governing the taxation
of shareholders of the Funds appears in the Statement of Additional
Information. 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 California 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. Orrick, Herrington & Sutcliffe, San
Francisco, California, is special California counsel to the Funds.
EXPERTS
The financial statements of the Funds as of August 31, 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.
28
<PAGE>
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.
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
29
<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 California Municipal
Value Fund, Inc. (the "Acquiring Fund"), a Minnesota corporation, and Nuveen
California 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 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.
A-1
<PAGE>
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 NYSE, 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.
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 is closed to
trading or trading thereon is restricted or (b) trading or the reporting
of trading on the NYSE 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.
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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 August 31, 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 February 28, 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 February 28, 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.
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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 August 31, 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 February 28, 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 February 28, 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 Acquiring Fund or a distribution or payment
of dividends shall not constitute a materially adverse change.
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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.
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.
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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;
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
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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;
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
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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; 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 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
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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 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.
A-10
<PAGE>
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 CALIFORNIA MUNICIPAL VALUE NUVEEN CALIFORNIA MUNICIPAL INCOME
FUND, INC. FUND, INC.
/s/ Timothy R. Schwertfeger /s/ Timothy R. Schwertfeger
By:_________________________________ By:_________________________________
President President
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.
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
B-2
<PAGE>
subdivision 6. Failure to do so entitles the dissenter only to the amount
offered. If the dissenter makes demand, subdivisions 7 and 8 apply.
(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.
B-3
<PAGE>
NUVEEN CALIFORNIA MUNICIPAL
VALUE FUND, INC.
NUVEEN CALIFORNIA 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 STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION--DATED AUGUST 23, 1995
NUVEEN CALIFORNIA
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 California 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 California 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-12
Management of the Funds.................................................... S-14
Portfolio Transactions of the Funds........................................ S-16
Repurchase of Fund Shares; Conversion to Open-End Fund..................... S-16
Tax Matters Associated with Investment in the Funds........................ S-18
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 California
Municipal Obligations, current interest income exempt from both Federal and
California income taxes. A secondary objective of the Acquiring Fund is to
achieve enhancement of portfolio value through investments in tax-exempt
California 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 California 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 California
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 California
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
California Municipal Obligations or in California 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 California
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 California 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 California 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 California 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 California
income tax or to both Federal and California 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 California), 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
S-2
<PAGE>
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.
THE ACQUIRED FUND
The Acquired Fund's investment objective is to provide, through investment in
a professionally managed portfolio of tax-exempt California Municipal
Obligations, a high level of current interest income exempt from both Federal
and California income taxes. The Acquired Fund has not established any limit on
the percentage of its portfolio that may be invested in California 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 Acquired 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 California
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 California 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 California
Municipal Obligations rated Ba or B by Moody's or BB or B by S&P at the time of
purchase, or in unrated California Municipal Obligations that, in the Adviser's
opinion, have credit characteristics equivalent to Obligations so rated,
provided that no more than 10% of the Acquired Fund's net assets may be
invested in California 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 California 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 California
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 California 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 California
income tax or to both federal and California 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 California), 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 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 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 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
S-3
<PAGE>
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 CALIFORNIA MUNICIPAL OBLIGATIONS
As described above, except to the extent a Fund invests in temporary
investments, it invests substantially all of its net assets in California
Municipal Obligations. Each Fund is therefore susceptible to political,
economic and regulatory factors affecting issuers of California Municipal
Obligations. These include the possible adverse effects of certain California
constitutional amendments, legislative measures, voter initiatives and other
matters that are described below. The following information provides only a
brief summary of the complex factors affecting the financial situation in
California (the "State") and is derived from sources that are generally
available to investors and are believed to be accurate. No independent
verification has been made of the accuracy or completeness of any
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of the following information. It is based in part on information obtained from
various State and local agencies in California or contained in Official
Statements for various California Municipal Obligations.
There can be no assurance that future statewide or regional economic
difficulties, and the resulting impact on State or local governmental finances
generally, will not adversely affect the market value of California Municipal
Obligations held in the portfolio of either Fund or the ability of particular
obligors to make timely payments of debt service on (or relating to) those
obligations.
ECONOMIC OVERVIEW
California's economy is the largest among the 50 states and one of the
largest in the world. The State's population of over 32 million represents
12.3% of the total United States population and grew by 27% in the 1980s. While
the State's substantial population growth during the 1980s stimulated local
economic growth and diversification and sustained a real estate boom between
1984 and 1990, it has increased strains on the State's limited water resources
and its infrastructure. Resultant traffic congestion, school overcrowding and
high housing costs have increased demands for government services and may
impede future economic growth. Population growth has slowed between 1991 and
1994 even while substantial immigration has continued, due to a significant
increase in outmigration by California residents. Generally the household
incomes of new residents have been substantially lower (and their education and
social service utilization higher) than those of departing households, which
may have a major long-term socioeconomic and fiscal impact. However, with the
California economy improving, the recent net outmigration within the
Continental U.S. is expected to decrease or be reversed.
From mid-1990 to late 1993, the State's economy suffered its worst recession
since the 1930s, with recovery starting later than for the nation as a whole.
The State has experienced the worst job losses of any post-war recession.
Prerecession job levels may not be realized until near the end of the decade.
The largest job losses have been in Southern California, led by declines in the
aerospace and construction industries. Weakness statewide occurred in
manufacturing, construction, services and trade. Additional military base
closures will have further adverse effects on the State's economy later in the
decade.
Since the start of 1994, the California economy has shown signs of steady
recovery and growth. The State Department of Finance reports net job growth,
particularly in construction and related manufacturing, wholesale and retail
trade, transportation, recreation and services. This growth has offset the
continuing but slowing job losses in the aerospace industry and restructuring
of the finance and utility sectors. Unemployment in the State was down
substantially in 1994 from its 10% peak in January, 1994, but still remains
higher than the national average rate. Retail sales were up strongly in 1994
from year-earlier figures. Delay or slowdown in recovery will adversely affect
State revenues.
CONSTITUTIONAL LIMITATIONS ON TAXES AND APPROPRIATIONS
Limitation on Taxes. Certain California Municipal Obligations may be
obligations of issuers which rely in whole or in part, directly or indirectly,
on ad valorem property taxes as a source of revenue. The taxing powers of
California local governments and districts are limited by Article XIIIA of the
California Constitution, enacted by the voters in 1978 and commonly known as
"Proposition 13." Briefly, Article XIIIA limits to 1% of full cash value the
rate of ad valorem property taxes on real property and generally restricts the
reassessment of property to the rate of inflation, not to exceed 2% per year,
or decline in value, or in the case of new construction or change of ownership
(subject to a number of exemptions). Taxing entities may, however, raise ad
valorem taxes above the 1% limit to pay debt service on voter-approved bonded
indebtedness.
Under Article XIIIA, the basic 1% ad valorem tax levy is applied against the
assessed value of property as of the owner's date of acquisition (or as of
March 1, 1975, if acquired earlier), subject to certain adjustments. This
system has resulted in widely varying amounts of tax on similarly situated
properties. Several lawsuits have been filed challenging the acquisition-based
assessment system of Proposition 13 and on June 18, 1992 the U.S. Supreme Court
announced a decision upholding Proposition 13.
Article XIIIA prohibits local governments from raising revenues through ad
valorem property taxes above the 1% limit; it also requires voters of any
governmental unit to give two-thirds approval to levy any "special tax." Court
decisions, however, allowed non-voter approved levy of "general taxes" which
were not dedicated to a specific use. In response to these decision, the voters
of the State in 1986 adopted an initiative statute which imposed significant
new limits on the ability of local entities to raise or levy general taxes,
except by receiving majority local
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voter approval. Significant elements of this initiative, "Proposition 62," have
been overturned in recent court cases. An initiative proposed to re-enact the
provisions of Proposition 62 as a constitutional amendment was defeated by the
voters in November 1990, but such proposal may be renewed in the future.
Appropriations Limits. California and its local governments are subject to an
annual "appropriations limit" imposed by Article XIIIB of the California
Constitution, enacted by the voters in 1979 and significantly amended by
Propositions 98 and 111 in 1988 and 1990, respectively. Article XIIIB prohibits
the State or any covered local government from spending "appropriations subject
to limitation" in excess of the appropriations limit imposed. "Appropriations
subject to limitation" are authorizations to spend "proceeds of taxes," which
consists of tax revenues and certain other funds, including proceeds from
regulatory licenses, user charges or other fees, to the extent that such
proceeds exceed the cost of providing the product or service, but "proceeds of
taxes" excludes most State subventions to local governments. No limit is
imposed on appropriations of funds which are not "proceeds of taxes," such as
reasonable user charges or fees, and certain other non-tax funds, including
bond proceeds.
Among the expenditures not included in the Article XIIIB appropriations limit
are (1) the debt service cost of bonds issued or authorized prior to January 1,
1979, or subsequently authorized by the voters, (2) appropriations arising from
certain emergencies declared by the Governor, (3) appropriations for qualified
capital outlay projects, (4) appropriations by the State of post-1989 increases
in gasoline taxes and vehicle weight fees, and (5) appropriations made in
certain cases of emergency.
The appropriations limit for each year is adjusted annually to reflect
changes in cost of living and population, and any transfers of service
responsibilities between government units. The definitions for such adjustments
were liberalized in 1990 to follow more closely growth in California's economy.
"Excess" revenues are now measured over a two-year cycle. With respect to
local governments, excess revenues must be returned by a revision of tax rates
or fee schedules within the two subsequent fiscal years. The appropriations
limit for a local government may be overridden by referendum under certain
conditions for up to four years at a time. With respect to the State, 50% of
any excess revenues is to be distributed to K-12 school districts and community
college districts (collectively, "K-14 districts") and the other 50% is to be
refunded to taxpayers. With more liberal annual adjustment factors since 1988,
and depressed revenues since 1990 because of the recession, few governments,
including the State, are currently operating near their spending limits, but
this condition may change over time. Local governments may by voter approval
exceed their spending limits for up to four years.
Because of the complex nature of Articles XIIIA and XIIIB of the California
Constitution, the ambiguities and possible inconsistencies in their terms, and
the impossibility of predicting future appropriations or changes in population
and cost of living, and the probability of continuing legal challenges, it is
not currently possible to determine fully the impact of Article XIIIA or
Article XIIIB on California Municipal Obligations or on the ability of
California or local governments to pay debt service on such California
Municipal Obligations. It is not presently possible to predict the outcome of
any pending litigation with respect to the ultimate scope, impact or
constitutionality of either Article XIIIA or Article XIIIB, or the impact of
any such determinations upon State agencies or local governments, or upon their
ability to pay debt service on their obligations. Future initiatives or
legislative changes in laws or the California Constitution may also affect the
ability of the State or local issuers to repay their obligations.
Obligations of the State of California. Under the California Constitution,
debt service on outstanding general obligation bonds is the second charge to
the General Fund after support of the public school system and public
institutions of higher education. Total outstanding general obligation bond and
lease purchase debt of the State increased from $9.4 billion at June 30, 1987
to $24.6 billion at June 30, 1995. In FY 1994-95, debt service on general
obligation bonds and lease purchase debt was approximately 5.2% of General Fund
revenues.
Recent Financial Results. The principal sources of General Fund revenues in
1993-94 were the California personal income tax (44% of total revenues), the
sales tax (38%), bank and corporation taxes (35%), and the gross premium tax on
insurance (3%). California maintains a Special Fund for Economic Uncertainties
(the "Economic Uncertainties Fund"), derived from General Fund revenues, as a
reserve to meet cash needs of the General Fund.
General. Throughout the 1980's, State spending increased rapidly as the State
population and economy also grew rapidly, including increased spending for many
assistance programs to local governments, which were
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constrained by Proposition 13 and other laws. The largest State program is
assistance to local public school districts. In 1988, an initiative
(Proposition 98) was enacted which (subject to suspension by a two-thirds vote
of the Legislature and the Governor) guarantees local school districts and
community college districts a minimum share of State General Fund revenues
(currently about 33%).
Since the start of 1990-91 Fiscal Year, the State has faced adverse economic,
fiscal, and budget conditions. The economic recession seriously affected State
tax revenues. It also caused increased expenditures for health and welfare
programs. The State is also facing a structural imbalance in its budget with
the largest programs supported by the General Fund (education, health, welfare
and corrections) growing at rates higher than the growth rates for the
principal revenue sources of the General Fund. These structural concerns will
be exacerbated in coming years by the expected need to substantially increase
capital and operating funds for corrections as a result of a "Three Strikes"
law enacted in 1994.
Recent Budgets. As a result of these factors, among others, from the late
1980's until 1992-93, the State had a period of nearly chronic budget
imbalance, with expenditures exceeding revenues in four out of six years, and
the State accumulated and sustained a budget deficit in the budget reserve, the
Special Fund for Economic Uncertainties ("SFEU") approaching $2.8 billion at
its peak at June 30, 1993. Starting in the 1990-91 Fiscal Year and for each
year thereafter, each budget required multibillion dollar actions to bring
projected revenues and expenditures into balance and to close large "budget
gaps" which were identified. The Legislature and Governor eventually agreed on
a number of different steps to produce Budget Acts in the years 1991-92 to
1994-95, including:
. significant cuts in health and welfare program expenditures;
. transfers of program responsibilities and funding from the State to local
governments, coupled with some reduction in mandates on local government;
. transfer of about $3.6 billion in annual local property tax revenues from
cities, counties, redevelopment agencies and some other districts to
local school districts, thereby reducing State funding for schools;
. reduction in growth of support for higher education programs, coupled
with increases in student fees;
. revenue increases (particularly in the 1991-92 Fiscal Year budget), most
of which were for a short duration;
. increased reliance on aid from the federal government to offset the costs
of incarcerating, educating and providing health and welfare services to
undocumented aliens (although these efforts have produced much less
federal aid than the State Administration has requested); and
. various one-time adjustments and accounting changes.
Despite these budget actions, the effects of the recession led to large,
unanticipated deficits in the SFEU, as compared to projected positive balances.
By the start of the 1993-94 Fiscal Year, the accumulated deficit was so large
(almost $2.8 billion) that it was impractical to budget to retire it in one
year, so a two-year program was implemented, using the issuance of revenue
anticipation warrants to carry a portion of the deficit over the end of the
fiscal year. When the economy failed to recover sufficiently in 1993-94, a
second two-year plan was implemented in 1994-95, to carry the final retirement
of the deficit into 1995-96.
The combination of stringent budget actions cutting State expenditures, and
the turnaround of the economy by late 1993, finally led to the restoration of
positive financial results. While General Fund revenues and expenditures were
essentially equal in FY 1992-93 (following two years of excess expenditures
over revenues), the General Fund had positive operating results in FY 1993-94
and 1994-95, which have reduced the accumulated budget deficit to around $600
million as of June 30, 1995.
A consequence of the accumulated budget deficits in the early 1990's,
together with other factors such as disbursement of funds to local school
districts "borrowed" from future fiscal years and hence not shown in the annual
budget, was to significantly reduce the State's cash resources available to pay
its ongoing obligations. When the Legislature and the Governor failed to adopt
a budget for the 1992-93 Fiscal Year by July 1, 1992, which would have allowed
the State to carry out its normal annual cash flow borrowing to replenish its
cash reserves, the State Controller was forced to issue registered warrants
("IOUs") to pay a variety of obligations representing prior years' or
continuing appropriations, and mandates from court orders. Available funds were
used to make constitutionally-mandated payments, such as debt service on bonds
and warrants. Between July 1 and September 4, 1992 the State Controller issued
a total of approximately $3.8 billion of registered warrants. After that date,
all remaining outstanding registered warrants (about $2.9 billion) were called
for redemption from proceeds of the issuance of 1992 Interim Notes after the
budget was adopted.
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The State's cash condition became so serious in late spring of 1992 that the
State Controller was required to issue revenue anticipation warrants maturing
in the following fiscal year in order to pay the State's continuing
obligations. The State was forced to rely increasingly on external debt markets
to meet its cash needs, as a succession of notes and warrants (both forms of
short-term cash flow financing) were issued in the period from June 1992 to
July 1994, often needed to pay previously-maturing notes or warrants. These
borrowings were used also in part to spread out the repayment of the
accumulated budget deficit over the end of a fiscal year.
The State issued $7.0 billion of short-term debt in July, 1994 to meet its
cash flow needs and to finance the deferral of part of the accumulated budget
deficit to the 1995-96 fiscal year. In order to assure repayment of $4 billion
of this borrowing which matures on April 25, 1996, the State enacted
legislation (the "Trigger Law") which can lead to automatic, across-the-board
cuts in General Fund expenditures in either the 1994-95 or 1995-96 fiscal years
if cash flow projections made at certain times during those years show
deterioration from the projections made in July 1994 when the borrowings were
made. On November 15, 1994, the State Controller as part of the Trigger Law
reported that the cash position of the General Fund on June 30, 1995 would be
about $580 million better than earlier projected, so no automatic budget
adjustments were required in 1994-95. The Controller's report showed that loss
of federal funds was offset by higher revenues, lower expenditures, and certain
other increases in cash resources.
Current Budget. For the first time in four years, the State entered the 1995-
96 fiscal year with strengthening revenues based on an improving economy. The
major feature of the Governor's proposed Budget, a 15% phased tax cut, was
rejected by the Legislature.
The 1995-96 Budget Act was signed by the Governor on August 3, 1995, 34 days
after the start of the fiscal year. The Budget Act projects General Fund
revenues and transfers of $44.1 billion, a 3.5 percent increase from the prior
year. Expenditures are budgeted at $43.4 billion, a 4 percent increase. The
Department of Finance projects that, after repaying the last of the carryover
budget deficit, there will be a positive balance of less than $30 million in
the budget reserve, the Special Fund for Economic Uncertainties, at June 30,
1996, providing no margin for adverse results during the year.
The Department of Finance projects cash flow borrowings in the 1995-96 Fiscal
Year will be the smallest in many years, comprising about $2 billion of notes
to be issued in April, 1996, and maturing by June 30, 1996. With full payment
of $4 billion of revenue anticipation warrants on April 25, 1996, the
Department sees no further need for borrowing over the end of the fiscal year.
The Department projects that available internal cash resources to pay State
obligations will be almost $2 billion at June 30, 1996. This "cushion" will be
re-examined by the State Controller on October 15, 1995, in the last step under
the "Trigger Law" process. If the Controller believes the available internal
cash resources on June 30, 1996 will, in fact, be zero or less, her report
would start a process which could lead to automatic budget cuts starting in
December, 1995.
The principal features of the 1995-96 Budget Act, in addition to those noted
above, are additional cuts in health and welfare expenditures (some of which
are subject to approvals or waivers by the federal government); assumed receipt
of an additional $473 million of federal aid for illegal immigrant costs; and
an increase in per-pupil funding for public schools and community colleges, the
first such significant increase in four years.
Bond Rating. State general obligation bonds ratings were reduced in July,
1994 to "A1" by Moody's and "A" by S&P. Both of these ratings were reduced from
"AAA" levels which the State held until late 1991. There can be no assurance
that such ratings will be maintained in the future. It should be noted that the
creditworthiness of obligations issued by local California issuers may be
unrelated to the creditworthiness of obligations issued by the State of
California, and that there is no obligation on the part of the State to make
payment on such local obligations in the event of default.
Legal Proceedings. The State is involved in certain legal proceedings
(described in the State's recent financial statements) that, if decided against
the State, may require the State to make significant future expenditures or may
substantially impair revenues. Trial courts have recently entered tentative
decisions or injunctions which would overturn several parts of the state's
recent budget compromises. The matters covered by these lawsuits include a
deferral of payments by the State to the Public Employees Retirement System,
reductions in welfare payments, and the use of certain cigarette tax funds for
health costs. All of these cases are subject to further proceedings and
appeals, and if the State eventually loses, the final remedies may not have to
be implemented in one year.
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OBLIGATIONS OF OTHER ISSUERS
Other Issuers of California Municipal Obligations. There are a number of
state 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 the
obligations backed by the full faith and credit of the State.
State Assistance. Property tax revenues received by local governments
declined more than 50% following passage of Proposition 13. Subsequently, the
California Legislature enacted measures to provide for the redistribution of
the State's General Fund surplus to local agencies, the reallocation of certain
State revenues to local agencies and the assumption of certain governmental
functions by the State to assist municipal issuers to raise revenues. Through
1990-91, local assistance (including public schools) accounted for
approximately 75% of General Fund spending. To reduce State General Fund
support for school districts, the 1992-93 and 1993-94 Budget Acts caused local
governments to transfer $3.9 billion of property tax revenues to school
districts, representing loss of all of the post-Proposition 13 "bailout" aid.
The largest share of these transfers came from counties, and the balance from
cities, special districts and redevelopment agencies. In order to make up this
shortfall, the Legislature proposed and voters approved in 1993 dedicating 0.5%
of the sales tax to counties and cities for public safety purposes. In
addition, the Legislature has changed laws to relieve local governments of
certain mandates, allowing them to reduce costs. However, the net result has
been to place greater fiscal stress on counties.
To the extent the State should be constrained by its Article XIIIB
appropriations limit, or its obligation to conform to Proposition 98, or other
fiscal considerations, the absolute level, or the rate of growth, of State
assistance to local governments may be further reduced. Any such reductions in
State aid could compound the serious fiscal constraints already experienced by
many local governments, particularly counties. At least one rural county
(Butte) publicly announced that it might enter bankruptcy proceedings in August
1990, although such plans were put off after the Governor approved legislation
to provide additional funds for the county. Other counties have also indicated
in recent years that their budgetary condition is extremely grave. The Richmond
Unified School District (Contra Costa County) entered bankruptcy proceedings in
May 1991 but the proceedings have been dismissed.
Los Angeles County, the largest in the State, has reported severe fiscal
problems, leading to a nominal $1.2 billion deficit (half of which is in the
County Hospital Systems Enterprise) in its $12 billion budget for the 1995-96
Fiscal Year. To balance the budget, the County has imposed severe cuts in
services, particularly for health care. The Legislature is considering actions
to help alleviate the County's fiscal problems, but none were completed before
August 15, 1995. If additional State aid and federal aid relating to Medicare
cost waivers is not received, the County has stated it will impose further cuts
in health services by October 1, 1995. Both Moody's and S&P have reduced the
County's debt ratings in August, 1995 (to "A" and "A-", respectively), and the
County remains on S&P Credit Watch with negative implications. As a result of
its bankruptcy proceedings (discussed further below), Orange County also has
implemented stringent cuts in services and has laid off workers.
Assessment Bonds. California Municipal Obligations which are assessment bonds
may be adversely affected by a general decline in real estate values or a
slowdown in real estate sales activity. In many cases, such bonds are secured
by land which is undeveloped at the time of issuance but anticipated to be
developed within a few years after issuance. In the event of such reduction or
slowdown, such development may not occur or may be delayed, thereby increasing
the risk of a default on the bonds. Because the special assessments or taxes
securing these bonds are not the personal liability of the owners of the
property assessed, the lien on the property is the only security for the bonds.
Moreover, in most cases the issuer of these bonds is not required to make
payments on the bonds in the event of delinquency in the payment of assessments
or taxes, except from amounts, if any, in a reserve fund established for the
bonds.
California Long-Term Lease Obligations. Certain California long-term lease
obligations, though typically payable from the general fund of the
municipality, are subject to "abatement" in the event the facility being leased
is unavailable for beneficial use and occupancy by the municipality during the
term of the lease. Abatement is not a default, and there may be no remedies
available to the holders of the certificates evidencing the lease obligation in
the event abatement occurs. The most common cases of abatement are failure to
complete construction of the facility before the end of the period during which
lease payments have been capitalized and uninsured casualty losses to the
facility (e.g., due to earthquake). In the event abatement occurs with respect
to a lease obligation,
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lease payments may be interrupted (if all available insurance proceeds and
reserves are exhausted) and the certificates may not be paid when due.
Several years ago the Richmond Unified School District (the "District")
entered into a lease transaction in which certain existing properties of the
District were sold and leased back in order to obtain funds to cover operating
deficits. Following a fiscal crisis in which the District's finances were taken
over by a State receiver (including a brief period under bankruptcy court
protection), the District failed to make rental payments on this lease,
resulting in a lawsuit by the Trustee for the Certificate of Participation
holders, in which the State was a named defendant (on the grounds that it
controlled the District's finances). One of the defenses raised in answer to
this lawsuit was the invalidity of the District's lease. The trial court has
upheld the validity of the lease and the case has been settled. Any ultimate
judgment in any future case against the position asserted by the Trustee in the
Richmond case may have adverse implications for lease transactions of similar
nature by other California entities.
Other Considerations. The repayment of industrial development securities
secured by real property may be affected by California laws limiting
foreclosure rights of creditors. Securities backed by health care and hospital
revenues may be affected by changes in State regulations governing cost
reimbursements to health care providers under Medi-Cal (the State's Medicaid
program), including risks related to the policy of awarding exclusive contracts
to certain hospitals.
Limitations on ad valorem property taxes may particularly affect "tax
allocation" bonds issued by California redevelopment agencies. Such bonds are
secured solely by the increase in assessed valuation of a redevelopment project
area after the start of redevelopment activity. In the event that assessed
values in the redevelopment project decline (e.g., because of a major natural
disaster such as an earthquake), the tax increment revenue may be insufficient
to make principal and interest payments on these bonds. Both Moody's and S&P
suspended ratings on California tax allocation bonds after the enactment of
Articles XIIIA and XIIIB, and only resumed such ratings on a selective basis.
Proposition 87, approved by California voters in 1988, requires that all
revenues produced by a tax rate increase go directly to the taxing entity which
increased such tax rate to repay that entity's general obligation indebtedness.
As a result, redevelopment agencies (which, typically, are the issuers of tax
allocation securities) no longer receive an increase in tax increment when
taxes on property in the project area are increased to repay voter-approved
bonded indebtedness.
The effect of these various constitutional and statutory changes upon the
ability of California municipal securities issuers to pay interest and
principal on their obligations remains unclear. Furthermore, other measures
affecting the taxing or spending authority of California or its political
subdivisions may be approved or enacted in the future. Legislation has been or
may be introduced which would modify existing taxes or other revenue-raising
measures or which either would further limit or, alternatively, would increase
the abilities of state and local governments to impose new taxes or increase
existing taxes. It is not presently possible to predict the extent to which any
such legislation will be enacted. Nor is it presently possible to determine the
impact of any such legislation on California Municipal Obligations in which the
Fund may invest, future allocations of state revenues to local governments or
the abilities of state or local governments to pay the interest on, or repay
the principal of, such California Municipal Obligations.
Substantially all of California is within an active geologic region subject
to major seismic activity. Northern California in 1989 and Southern California
in 1994 experienced major earthquakes causing billions of dollars in damages.
The federal government provided more than $13 billion in aid for both
earthquakes, and neither event is expected to have any long-term negative
economic impact. Any California Municipal Obligation in the Funds could be
affected by an interruption of revenues because of damaged facilities, or,
consequently, income tax deductions for casualty losses or property tax
assessment reductions. Compensatory financial assistance could be constrained
by the inability of (i) an issuer to have obtained earthquake insurance
coverage at reasonable rates; (ii) an insurer to perform on its contracts of
insurance in the event of widespread losses; or (iii) the Federal or State
government to appropriate sufficient funds within their respective budget
limitations.
On January 17, 1994, a major earthquake with an estimated magnitude of 6.8 on
the Richter scale struck the Los Angeles area, causing significant property
damage to public and private facilities, presently estimated at $15-20 billion.
While over $9.5 billion of federal aid, and a projected $1.9 billion of State
aid, plus insurance proceeds, will reimburse much of that loss, there will be
some ultimate loss of wealth and income in the region, in addition to costs of
the disruption caused by the event. Short-term economic projections are
generally neutral, as the infusion
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of aid will restore billions of dollars to the local economy within a few
months; already the local construction industry has picked up. Although the
earthquake will hinder recovery from the recession in Southern California,
already hard-hit, its long-term impact is not expected to be material in the
context of the overall wealth of the region. Almost five years after the event,
there are few remaining effects of the 1989 Loma Prieta earthquake in northern
California (which, however, caused less severe damage than Northridge).
On December 6, 1994, Orange County, California (the "County"), together with
its pooled investment funds (the "Pools") filed for protection under Chapter 9
of the federal Bankruptcy Code, after reports that the Pools had suffered
significant market losses in its investments caused a liquidity crisis for the
Pools and the County. More than 180 other public entities, most but not all
located in the County, were also depositors in the Pools. The County estimated
the Pools' loss at about $1.69 billion, or 23%, of its initial deposits of
around $7.5 billion. Many of the entities which kept moneys in the Pools,
including the County, faced cash flow difficulties because of the bankruptcy
filing and may be required to reduce programs or capital projects. Moody's and
Standard & Poor's have suspended, reduced to below investment grade levels, or
placed on "Credit Watch" various securities of the County and the entities
participating in the Pools.
On May 2, 1995, the Bankruptcy Court approved a settlement agreement covering
claims of the other participating entities against the County and the Pools.
Most participants have received in cash 80% (90% for school districts) of their
Pools' investment; the balance is to be paid in the future. The County
succeeded in deferring, by consent, until June 30, 1996, the repayment of $800
million of short-term obligations due in July and August, 1995; these notes
are, however, considered to be in default by Moody's and S&P. On June 27, 1995,
County voters turned down a proposal for a temporary 0.5% increase in the local
sales tax, making the County's fiscal recovery much harder. Unless a viable
financial plan can be implemented early in the 1995-96 Fiscal Year, which the
County believes will require legislation to transfer some moneys from other
local government entities to the County, the County may not be able to pay all
its creditors, including debt holders.
The State of California has no obligation with respect to any obligations or
securities of the County or any of the other participating entities. The State
may be obligated to ensure that school districts have sufficient funds to
operate, and to ensure delivery of certain State-mandated services, but no such
activities have been deemed necessary as of August, 1995. All school districts
involved with the Pools were able to meet their obligations in the 1994-95
Fiscal Year.
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;
S-11
<PAGE>
(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 California 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
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<PAGE>
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.
Subject to the foregoing, each Fund will attempt to achieve its investment
objectives by prudent selection of California 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
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<PAGE>
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
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.
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<PAGE>
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.
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 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 $1,256,174 for the
fiscal year ended August 31, 1994, for an effective management fee rate of
0.64%. The Acquired Fund paid aggregate management fees of $411,874 for the
fiscal year ended August 31, 1994, for an effective management fee rate of
0.65%. For the fiscal years ended August 31, 1993 and August 31, 1992, the
Acquiring Fund paid aggregate management fees of $1,267,060 and $106,230 (1
month) and the Acquired Fund paid aggregate management fees of $407,998 and
$261,063 (9 months).
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<PAGE>
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
Chairman of the Board and Director and Director,
(Principal Executive Officer) John Nuveen & Co. Incorporated
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
Director and Director,
333 West Wacker Drive John Nuveen & Co. Incorporated
Chicago, Illinois 60606
Timothy R. Schwertfeger................... Executive Vice President
Director and Director,
333 West Wacker Drive John Nuveen & Co. Incorporated
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.
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.
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<PAGE>
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 August 31, 1994, August 31, 1993 and August 31,
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 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 (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, (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
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<PAGE>
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.
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 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
S-18
<PAGE>
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, 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.
S-19
<PAGE>
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.
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.
S-20
<PAGE>
CALIFORNIA STATE AND LOCAL TAX MATTERS
The following is based upon the advice of Orrick, Herrington & Sutcliffe,
special California counsel to the Funds, and assumes that each Fund will be
qualified as a regulated investment company under subchapter M of the Code and
will be qualified thereunder to pay exempt-interest dividends.
The California 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. Individual shareholders of each
Fund who are subject to California personal income taxation will not be
required to include in their California gross income that portion of their
Federally tax-exempt dividends which such Fund clearly and accurately
identifies as directly attributable to interest earned on obligations the
interest on which is exempt from California personal income taxation, provided
that at least 50 percent of the value of such Fund's total assets consists of
such obligations. Distributions to individual shareholders derived from
interest on Municipal Obligations issued by governmental authorities in states
other than California and short-term capital gains will be taxed as dividends
for purposes of California personal income taxation. A Fund's long-term capital
gains for Federal income tax purposes that are distributed to the Fund's
shareholders will be taxed as long-term capital gains to individual
shareholders of the Fund for purposes of California personal income taxation.
Gain or loss, if any, resulting from a sale or redemption of shares will be
recognized in the year of the sale or redemption. Present California law taxes
both long-term and short-term capital gains at the rates applicable to ordinary
income. Interest on indebtedness incurred or continued by a shareholder in
connection with the purchase of shares of a Fund will not be deductible for
California personal income tax purposes.
Generally corporate shareholders of a Fund subject to the California
franchise tax will be required to include any gain on a sale or redemption of
shares and all distributions of exempt-interest, capital gains and other
taxable income, if any, as income subject to such tax.
Neither Fund will be subject to California franchise or corporate income tax
on interest income or net capital gain distributed to its shareholders.
Shares of each Fund will be exempt from local property taxes in California.
Shares of a Fund will not be excludable from the taxable estates of deceased
California resident shareholders for purposes of the California estate and
generation-skipping taxes. California estate and generation-skipping taxes are
creditable against the corresponding Federal taxes.
The foregoing is a general, abbreviated summary of certain of the provisions
of the California Revenue and Taxation Code presently in effect as it directly
governs the taxation of shareholders of the Fund. These provisions are subject
to change in 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
California tax matters.
S-21
<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-11
Report of Independent Auditors of the Funds................................ F-14
Audited Statements of Net Assets of the Funds.............................. F-15
Audited Statements of Operations of the Funds.............................. F-16
Audited Statements of Changes in Net Assets of the Funds................... F-17
Notes to Audited Financial Statements of the Funds......................... F-18
Audited Portfolio of Investments of the Acquiring Fund..................... F-22
Audited Portfolio of Investments of the Acquired Fund...................... F-25
</TABLE>
F-1
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
STATEMENT OF NET ASSETS
FEBRUARY 28, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
NCA NCM
------------ -----------
<S> <C> <C>
ASSETS
Investments in municipal securities, at market value
(note 1)............................................. $185,506,716 $59,354,809
Temporary investments in short-term municipal
securities, at amortized cost
(note 1)............................................. 4,500,000 700,000
Cash.................................................. 51,757 654,212
Interest receivables.................................. 2,870,856 920,094
------------ -----------
Total assets...................................... 192,929,329 61,629,115
------------ -----------
LIABILITIES
Accrued expenses:
Management fees (note 6)............................ 97,067 30,260
Other............................................... 114,984 75,382
Share dividends payable............................... 1,058,649 323,014
------------ -----------
Total liabilities................................. 1,270,700 428,656
------------ -----------
Net assets (note 7)................................... $191,658,629 $61,200,459
============ ===========
Shares outstanding.................................... 18,904,441 5,209,911
============ ===========
Net asset value per share outstanding (net assets
divided by shares outstanding)....................... $ 10.14 $ 11.75
============ ===========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
NCA NCM
---------- ----------
<S> <C> <C>
INVESTMENT INCOME
Interest income (note 1)............................... $6,795,039 $2,135,240
---------- ----------
Expenses:
Management fees (note 6)............................. 607,446 193,922
Shareholders' servicing agent fees and expenses...... 29,602 8,715
Custodian's fees and expenses........................ 26,024 20,323
Directors' fees and expenses (note 6)................ 2,506 548
Professional fees.................................... 4,421 5,306
Shareholders' reports--printing and mailing expenses. 18,555 12,364
Stock exchange listing fees.......................... 7,140 6,295
Investor relations expense........................... 3,269 1,087
Other expenses....................................... 7,639 6,985
---------- ----------
Total expenses..................................... 706,602 255,545
---------- ----------
Net investment income............................ 6,088,437 1,879,695
---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain (loss) from investment transactions
(note 3).............................................. (25,725) 95,991
Net change in unrealized appreciation or depreciation
of investments........................................ (724,988) (634,898)
---------- ----------
Net gain (loss) from investments................. (750,713) (538,907)
---------- ----------
Net increase in net assets from operations............. $5,337,724 $1,340,788
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
NCA NCM
--------------------------- --------------------------
6 MONTHS ENDED 6 MONTHS ENDED
2/28/95 YEAR ENDED 2/28/95 YEAR ENDED
(UNAUDITED) 8/31/94 (UNAUDITED) 8/31/94
-------------- ------------ -------------- -----------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income.. $ 6,088,437 $ 12,271,907 $ 1,879,695 $ 3,756,890
Net realized gain
(loss) from investment
transactions.......... (25,725) 155,583 95,991 (22,126)
Net change in
unrealized
appreciation or
depreciation of
investments........... (724,988) (10,005,121) (634,898) (3,007,494)
------------ ------------ ----------- -----------
Net increase
(decrease) in net
assets from
operations........ 5,337,724 2,422,369 1,340,788 727,270
------------ ------------ ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS (note 1)
From undistributed net
investment income..... (6,347,218) (12,561,847) (1,958,344) (3,935,170)
From accumulated net
realized gains from
investment
transactions.......... (155,016) (193,055) -- (18,116)
------------ ------------ ----------- -----------
Decrease in net
assets from
distributions to
shareholders...... (6,502,234) (12,754,902) (1,958,344) (3,953,286)
------------ ------------ ----------- -----------
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.......... 586,323 1,741,483 106,605 510,660
------------ ------------ ----------- -----------
Net increase in net
assets derived from
capital share
transactions........ 586,323 1,741,483 106,605 510,660
------------ ------------ ----------- -----------
Net increase
(decrease) in net
assets............ (578,187) (8,591,050) (510,951) (2,715,356)
Net assets at beginning
of period............. 192,236,816 200,827,866 61,711,410 64,426,766
------------ ------------ ----------- -----------
Net assets at end of
period................ $191,658,629 $192,236,816 $61,200,459 $61,711,410
============ ============ =========== ===========
Balance of
undistributed net
investment income at
end of period......... $ 597,642 $ 856,423 $ 95,683 $ 174,332
============ ============ =========== ===========
</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 February 28, 1995, the California Funds (the "Funds") covered in this
report and their corresponding New York Stock Exchange symbols are Nuveen
California Municipal Value Fund, Inc. (NCA) and Nuveen California Municipal
Income Fund, Inc. (NCM).
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
February 28, 1995, 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 California 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 investment 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 gains
from investment transactions, 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>
NCA NCM
------------------------- -------------------------
6 MONTHS ENDED YEAR ENDED 6 MONTHS ENDED YEAR ENDED
2/28/95 8/31/94 2/28/95 8/31/94
-------------- ---------- -------------- ----------
<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.......... 54,903 154,976 9,073 40,087
====== ======= ===== ======
</TABLE>
3. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments during the six months ended
February 28, 1995, were as follows:
<TABLE>
<CAPTION>
NCA NCM
----------- ----------
<S> <C> <C>
PURCHASES
Investments in municipal securities............... $ 9,817,640 $2,047,977
Temporary municipal investments................... 17,500,000 7,300,000
SALES AND MATURITIES
Investments in municipal securities............... 18,654,114 2,952,490
Temporary municipal investments................... 13,300,000 6,600,000
=========== ==========
</TABLE>
At February 28, 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 August 31, 1994, the Fund's last fiscal year end, NCM had a $22,126 unused
capital loss carryovers available for federal income tax purposes to be applied
against future security gains, if any. If not applied, the carryover will
expire in the year 2002.
4. DISTRIBUTIONS TO SHAREHOLDERS
On March 1, 1995, the Funds declared dividend distributions from their
ordinary income that were paid April 3, 1995, to shareholders of record on
March 15, 1995, as follows:
<TABLE>
<CAPTION>
NCA NCM
------ ------
<S> <C> <C>
Dividend per share.......................................... $.0560 $.0620
====== ======
</TABLE>
5. UNREALIZED APPRECIATION (DEPRECIATION)
Gross unrealized appreciation and gross unrealized depreciation of
investments at February 28, 1995, were as follows:
<TABLE>
<CAPTION>
NCA NCM
----------- ----------
<S> <C> <C>
Gross unrealized:
Appreciation................................... $15,357,062 $3,368,710
Depreciation................................... (1,003,452) (556,704)
----------- ----------
Net unrealized appreciation...................... $14,353,610 $2,812,006
=========== ==========
</TABLE>
F-6
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
6. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Funds' investment management agreements with 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 NCA
---------------------------------------------------------------------------
<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
<CAPTION>
AVERAGE DAILY NET ASSET VALUE NCM
---------------------------------------------------------------------------
<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
<CAPTION>
GROSS INTEREST INCOME NCA
---------------------------------------------------------------------------
<S> <C>
For the first $50,000,000..................................... 4.125%
For the next $50,000,000...................................... 4.000
For the gross 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 February 28, 1995, net assets consisted of:
<TABLE>
<CAPTION>
NCA NCM
------------ ------------
<S> <C> <C>
Shares, $.01 par value per share.............. $ 189,044 $ 52,099
Paid-in surplus............................... 176,544,058 58,166,806
Balance of undistributed net investment
income....................................... 597,642 95,683
Accumulated net realized gain (loss) from
investment transactions...................... (25,725) 73,865
Net unrealized appreciation or depreciation of
investments.................................. 14,353,610 2,812,006
------------ ------------
Net assets................................ $191,658,629 $ 61,200,459
============ ============
Authorized shares............................. 250,000,000 200,000,000
============ ============
</TABLE>
F-7
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
8. INVESTMENT COMPOSITION
Each fund invests in municipal securities which include general obligation,
escrowed and revenue bonds. At February 28, 1995, the revenue sources by
municipal purpose for these investments, expressed as a percent of total
investments, were as follows:
<TABLE>
<CAPTION>
NCA NCM
--- ---
<S> <C> <C>
Revenue Bonds:
Health Care Facilities........................................ 15% 18%
Lease Rental Facilities....................................... 1 --
Housing Facilities............................................ 15 10
Water/Sewer Facilities........................................ 5 7
Transportation................................................ -- --
Pollution Control Facilities.................................. 2 7
Electrical Utilities.......................................... 1 6
Educational Facilities........................................ 2 --
Other......................................................... 20 20
General Obligation Bonds........................................ 2 3
Escrowed Bonds.................................................. 37 29
--- ---
100% 100%
=== ===
</TABLE>
Certain long-term and intermediate 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 (48% for NCA, and 37% for NCM. Such insurance or escrow, however, does
not guarantee the market value of the municipal securities or the value of any
of the Funds' 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 (80% for NCA, and 100% for
NCM).
For additional information regarding each investment security, refer to the
Portfolio of Investments of each Fund.
F-8
<PAGE>
NUVEEN CALIFORNIA MUNICIPAL VALUE FUND, INC. (NCA)
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL
AMOUNT DESCRIPTION PROVISIONS* RATINGS** MARKET VALUE
--------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 5,250,000 California Department of
Veterans Affairs, Home
Purchase, Alternative
Minimum Tax, 8.300%,
8/01/19................ 8/98 at 102 Aa $ 5,476,065
890,000 California Educational
Facilities Authority
(University of San
Diego Projects),
9.125%, 10/01/10 (Pre-
refunded to 10/01/95).. 10/95 at 102 Aaa 930,655
1,500,000 California Health
Facilities Authority
(Sutter Health System),
8.000%, 1/01/16 (Pre-
refunded to 1/01/97)... 1/97 at 102 A1 1,613,745
California Health
Facilities Authority
(The Whittier Institute
For Diabetes and
Endocrinology), Scripps
Memorial Hospitals:
1,545,000 8.000%, 12/01/00....... 12/98 at 102 N/R 1,674,286
1,500,000 8.400%, 12/01/08....... 12/98 at 102 N/R 1,651,845
1,500,000 California Health
Facilities Financing
Authority (St. Joseph
Health),
7.000%, 7/01/10 (Pre-
refunded to 7/01/01)... 7/01 at 102 AA 1,676,160
8,500,000 California Housing
Finance Agency, Home
Mortgage, 8.200%,
8/01/17................ 8/97 at 102 AA- 8,979,910
California Housing
Finance Agency, Home
Mortgage Alternative
Minimum Tax:
2,180,000 8.600%, 8/01/19........ 8/98 at 102 AA- 2,346,421
400,000 8.150%, 8/01/19........ 8/98 at 102 AA- 423,208
2,090,000 California Housing
Finance Agency,
Alternative Minimum
Tax,
8.200%, 2/01/20........ 8/98 at 102 Aaa 2,238,244
1,500,000 California Pollution
Control Financing
Authority (Pacific Gas
and Electric Company),
Alternative Minimum
Tax, 8.875%, 1/01/10... 12/97 at 102 A2 1,648,470
1,140,000 California Public
Capital Improvement
Authority, Pooled
Projects,
8.125%, 3/01/95........ No Opt. Call Baa 1,140,000
5,000,000 California Statewide
Communities Development
Corporation (Pacific
Homes), Certificates of
Participation, 6.000%,
4/01/17................ 4/03 at 102 A 4,742,200
2,250,000 ABAG Finance Authority
for Nonprofit
Corporations (United
Way of Santa Clara
County), Certificates
of Participation,
7.200%, 7/01/11........ 7/01 at 102 Aa2 2,382,548
5,000,000 Arcadia Hospital Revenue
(Methodist Hospital of
Southern California),
7.875%, 8/01/10........ 8/97 at 102 A 5,352,300
7,085,000 Brea Public Financing
Authority, 8.100%,
10/01/14............... 10/95 at 102 1/2 N/R 7,265,738
2,750,000 Campbell Union School
District, General
Obligation, 6.250%,
8/01/19................ 8/04 at 102 Aaa 2,776,648
5,000,000 Castaic Lake Water
Agency, Certificates of
Participation, 6.300%,
8/01/20................ 8/04 at 102 Aaa 5,068,750
Colma Improvement Bonds,
Local Improvement
District No. 1,
Reassessment Project:
870,000 8.125%, 9/02/03........ No Opt. Call N/R 898,014
1,140,000 8.125%, 9/02/04........ No Opt. Call N/R 1,175,956
1,240,000 8.125%, 9/02/05........ No Opt. Call N/R 1,279,556
1,500,000 Cucamonga School
District, Certificates
of Participation,
8.350%, 1/01/08........ 1/96 at 102 Baa 1,546,095
Duarte Redevelopment
Agency, Huntington
Drive Phase II, Tax
Allocation:
1,170,000 7.900%, 10/01/02....... 10/97 at 102 N/R 1,269,345
3,745,000 8.000%, 10/01/10....... 10/97 at 102 N/R 3,958,465
1,470,000 El Paso de Robles
Redevelopment Agency,
Tax Allocation,
7.250%, 7/01/21........ 7/00 at 102 BBB 1,509,881
2,000,000 Emeryville Public
Financing Authority,
Redevelopment Project,
Subordinated Lien,
8.100%, 2/01/18 (Pre-
refunded to 2/01/97)... 2/97 at 102 A- 2,160,220
980,000 Inglewood Public Finance
Authority, 7.000%,
5/01/22................ 5/02 at 102 BBB 980,519
3,000,000 Los Angeles Community
Redevelopment Agency,
Tax Allocation (Central
Business District),
6.750%, 7/01/10........ 7/96 at 102 A- 3,079,770
8,515,000 Los Angeles Convention
and Exhibition Center,
Certificates of
Participation, 9.000%,
12/01/20 (Pre-refunded
to 12/01/05)........... 12/05 at 100 Aaa 10,982,306
5,500,000 Los Angeles Department
of Water and Power,
Electric Plant,
8.000%, 2/15/26........ 2/96 at 103 AA 5,826,150
365,000 Los Angeles Single
Family Home Mortgage
(GNMA and FNMA),
Alternative Minimum
Tax, 6.875%, 6/01/25... 12/01 at 102 AAA 376,191
7,965,000 Los Angeles Wastewater
System, 8.125%,
11/01/17 (Pre-refunded
to 11/01/97)........... 11/97 at 102 AAA 8,776,713
3,465,000 Los Angeles County
Transportation
Commission, Sales Tax,
7.900%, 7/01/08 (Pre-
refunded to 7/01/97)... 7/97 at 102 Aaa 3,768,361
2,635,000 Menlo Park Community
Development Agency, FHA
Insured, Multi-Family
Housing, 8.250%,
12/01/28............... 6/97 at 103 Aa 2,815,577
</TABLE>
F-9
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL
AMOUNT DESCRIPTION PROVISIONS* RATINGS** MARKET VALUE
-------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 8,500,000 Orange County Public
Facilities Corporation,
Certificates of
Participation, 8.250%,
12/01/18 (Pre-refunded
to 12/01/97)........... 12/97 at 102 AAA $ 9,423,015
5,000,000 Orange County Sanitation
District Nos. 1, 2, and
3,
7.100%, 8/01/11 (Pre-
refunded to 8/01/96)... 8/96 at 102 Aaa 5,266,100
8,565,000 Palmdale Single Family
(GNMA), 0.000%,
3/01/17................ No Opt. Call Aaa 1,882,587
4,430,000 Sacramento Public
Facilities,
Certificates of
Participation, 8.250%,
8/01/12 (Pre-refunded
to 8/01/97)............ 8/97 at 102 1/2 AAA 4,886,246
5,000,000 Sacramento Sanitation
District Finance
Authority, 4.750%,
12/01/23............... 12/03 at 102 AA 3,942,900
10,000,000 San Bernardino County,
Single Family Mortgage
(GNMA), Alternative
Minimum Tax, 0.000%,
9/01/21................ No Opt. Call Aaa 1,612,700
San Diego Community
College District,
Certificates of
Participation:
1,000,000 8.625%, 12/01/09 (Pre-
refunded to 12/01/97).. 12/97 at 102 N/R 1,117,070
1,000,000 8.625%, 12/01/09 (Pre-
refunded to 12/01/97).. 12/97 at 102 AAA 1,115,420
4,000,000 San Francisco Public
Utility Commission,
Water System,
8.000%, 11/01/11....... 11/97 at 102 AA 4,366,640
3,000,000 San Francisco City and
County Redevelopment
Agency, GNMA (South
Beach Marina), 5.700%,
3/01/29................ 3/04 at 102 Aaa 2,729,520
5,000,000 San Jose Redevelopment
Agency, Tax Allocation,
5.000%, 8/01/20........ 2/04 at 102 Aaa 4,276,600
5,500,000 Santa Rosa (Kaiser
Permanente), 9.000%,
12/01/15............... 12/95 at 102 Aa2 5,767,740
1,955,000 Southern California Home
Financing Authority,
Single Family Mortgage
(GNMA), Alternative
Minimum Tax, 8.125%,
2/01/21................ No Opt. Call AAA 2,298,024
5,015,000 Southern California
Public Power Authority,
Transmission Project,
7.875%, 7/01/18 (Pre-
refunded to 7/01/96)... 7/96 at 103 AAA 5,368,056
3,000,000 Southern California
Public Power Authority,
5.000%, 7/01/22........ 7/03 at 100 Aaa 2,552,850
2,000,000 Turlock Irrigation
District, 7.750%,
1/01/18 (Pre-refunded
to 1/01/96)............ 1/96 at 102 A 2,098,280
2,000,000 University of California
(UCLA Central
Chiller/Cogeneration),
5.500%, 11/01/17....... 11/03 at 102 Aa 1,794,740
2,675,000 University of
California, 6.875%,
9/01/16 (Pre-refunded
to 9/01/02)............ 9/02 at 102 A- 2,990,516
2,000,000 University of
California, Housing
System, 5.500%,
11/01/18............... 11/03 at 102 Aaa 1,852,860
8,270,000 Upland Hospital (San
Antonio Community
Hospital), 7.125%,
1/01/11................ 1/96 at 102 A 8,505,777
3,590,000 Walnut Valley Unified
School District,
Certificates of
Participation,
8.200%, 1/01/13 (Pre-
refunded to 1/01/97)... 1/97 at 102 N/R 3,868,763
-------------------------------------------------------------------------------
$192,140,000 Total Investments--(cost
$171,153,106)--96.8%... 185,506,716
-------------------------------------------------------------------------------
------------
TEMPORARY INVESTMENTS IN
SHORT-TERM MUNICIPAL
SECURITIES--2.3%
$ 2,000,000 California Statewide
Communities Development
Authority (St. Joseph
Health System),
Certificates of
Participation, Variable
Rate Demand Bonds,
3.700%, 7/01/24+....... VMIG-1 $ 2,000,000
2,100,000 Santa Ana Health
Facilities Authority
(Town & Country),
Variable Rate Demand
Bonds, 3.600%,
10/01/20+.............. A-1 2,100,000
400,000 Santa Clara County
Transit District,
Refunding Equipment,
Trust Certificates,
Variable Rate Demand
Bonds, 3.850%,
6/01/15+............... VMIG-1 400,000
-------------------------------------------------------------------------------
$ 4,500,000 Total Temporary Investments--2.3%........ 4,500,000
------------
--------------------------------------------------------------------------
------------
Other Assets Less Liabilities--0.9%...... 1,651,913
--------------------------------------------------------------------------
Net Assets--100%......................... $191,658,629
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
<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 20 $ 78,181,846 42%
PORTFOLIO OF INVESTMENTS AA+, AA, AA- Aa1, Aa, Aa2, Aa3 12 45,798,059 25
(EXCLUDING TEMPORARY A+ A1 1 1,613,745 1
INVESTMENTS): A, A- A, A2, A3 8 30,577,533 16
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 4 5,176,495 3
Non-rated Non-rated 10 24,159,038 13
------------------------------------------------------------------------------------------------
Total 55 $185,506,716 100%
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
</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.
F-10
<PAGE>
NUVEEN CALIFORNIA MUNICIPAL INCOME FUND, INC. (NCM)
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
-------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 2,750,000 California Department of
Veterans Affairs, Home
Purchase, Alternative
Minimum Tax, 8.300%,
8/01/19.................. 8/98 at 102 Aa $ 2,868,415
1,885,000 California General
Obligation, 7.000%,
8/01/08.................. No Opt. Call A1 2,086,412
2,115,000 California Health
Facilities Authority (The
Whittier Institute For
Diabetes and
Endocrinology), Scripps
Memorial Hospitals,
8.400%, 12/01/08......... 12/98 at 102 N/R 2,329,101
1,000,000 California Health
Facilities Financing
Authority (Health
Dimensions, Inc.),
7.375%, 5/01/07.......... 5/00 at 102 Baa1 1,033,220
1,225,000 California Housing Finance
Agency, Alternative
Minimum Tax, 8.350%,
8/01/19.................. 8/98 at 102 AA- 1,305,397
1,575,000 California Pollution
Control (Pacific Gas and
Electric Company),
7.500%, 5/01/16.......... 6/96 at 102 A2 1,632,251
685,000 California Rural Mortgage
Finance Authority, Single
Family Mortgage,
Alternative Minimum Tax,
7.950%, 12/01/24......... No Opt. Call Aaa 824,288
1,000,000 Arcadia (Methodist
Hospital of Southern
California), 6.500%,
11/15/12................. 11/02 at 102 A 1,005,590
2,000,000 Barstow Wastewater
Reclamation, Certificates
of Participation, 5.250%,
10/01/18................. 10/04 at 102 Aaa 1,795,600
2,000,000 Cerritos Public Finance
Authority (Los Cerritos
Redevelopment Project),
6.000%, 11/01/13......... 11/03 at 102 A 1,915,420
2,065,000 Contra Costa County, Home
Mortgage (GNMA),
Alternative Minimum Tax,
8.250%, 6/01/21.......... No Opt. Call Aaa 2,632,524
1,600,000 Emeryville Public
Financing Authority,
Redevelopment Project,
Subordinated Lien,
8.100%, 2/01/18 (Pre-
refunded to 2/01/97)..... 2/97 at 102 A- 1,728,176
975,000 Inglewood Public Finance
Authority (In-Town,
Manchester Redevelopment
Projects), 7.000%,
5/01/22.................. 5/02 at 102 A- 979,436
2,490,000 Lassen Municipal Utility
District, Certificates of
Participation,
Alternative Minimum Tax,
8.250%, 5/01/98.......... 5/96 at 102 1/2 N/R 2,618,534
2,000,000 Long Beach Redevelopment
Agency, Downtown
Redevelopment Project,
Tax Allocation, 8.300%,
11/01/10 (Pre-refunded to
5/01/98)................. 5/98 at 102 N/R 2,232,400
2,000,000 Los Angeles Community
Redevelopment Agency, Tax
Allocation (Central
Business District),
6.750%, 7/01/10.......... 7/96 at 102 A- 2,053,180
Los Angeles Department of
Water and Power, Electric
Plant:...................
2,280,000 8.000%, 2/15/26.......... 2/96 at 103 AA 2,415,204
1,100,000 7.125%, 5/15/30 (Pre-
refunded to 5/15/00)..... 5/00 at 102 AA 1,205,974
2,500,000 Los Angeles County
Transportation
Commission, Sales Tax,
8.000%, 7/01/16 (Pre-
refunded to 7/01/97)..... 7/97 at 102 Aaa 2,726,100
2,425,000 Pasadena Health Facilities
(Pacific Clinics),
8.200%, 6/01/18.......... 6/95 at 102 A 2,493,603
2,320,000 Pittsburg Redevelopment
Agency, Los Medanos
Community Development
Project, 7.750%, 8/01/08
(Pre-refunded to
8/01/96)................. 8/96 at 102 AAA 2,463,701
2,500,000 Redding Joint Powers
Financing Authority,
Water System, 5.500%,
6/15/23.................. 6/03 at 102 Aaa 2,289,350
1,265,000 San Benito Hospital
District, 6.750%,
12/01/21................. 12/01 at 102 A 1,261,711
10,415,000 San Bernardino County,
Single Family Mortgage
(GNMA), Alternative
Minimum Tax, 0.000%,
9/01/21.................. No Opt. Call Aaa 1,679,627
2,500,000 San Diego Industrial
Development (San Diego
Gas and Electric
Company), 7.625%,
7/01/21.................. 7/96 at 102 Aa3 2,585,050
2,000,000 San Diego Redevelopment
Agency (Horton Plaza
Project), Tax Allocation,
8.125%, 7/01/08.......... 7/98 at 102 Baa1 2,096,140
2,000,000 San Francisco Public
Utility Commission, Water
System, 8.000%, 11/01/11. 11/97 at 102 AA 2,183,320
2,500,000 Santa Rosa (Kaiser
Permanente), 9.000%,
12/01/15................. 12/95 at 102 Aa2 2,621,700
680,000 Southern California Home
Financing Authority,
Single Family Mortgage
(GNMA), Alternative
Minimum Tax, 8.125%,
2/01/21.................. No Opt. Call AAA 799,313
1,000,000 Southern California Public
Power Authority, 4.750%,
7/01/16.................. 7/04 at 102 Aaa 838,940
2,375,000 University of California,
6.875%, 9/01/16 (Pre-
refunded to 9/01/02)..... 9/02 at 102 A- 2,655,132
-------------------------------------------------------------------------------
$65,225,000 Total Investments--(cost
$56,542,803)--97.0%...... 59,354,809
-----------
--------------------------------------------------------------------------
-----------
TEMPORARY INVESTMENTS IN
SHORT-TERM MUNICIPAL
SECURITIES--1.1%
$ 300,000 California Health
Facilities Financing
Authority (Sutter
Health), Series 1990B,
Variable Rate Demand
Bonds, 3.600%, 3/01/20+.. VMIG-1 300,000
200,000 California Pollution
Control Finance
Authority, Pollution
Control (Exxon Project),
Variable Rate Demand
Bonds, 3.800%, 12/01/12+. A-1+ 200,000
200,000 Santa Clara County Transit
District, Refunding
Equipment Trust
Certificates, Variable
Rate Demand Bonds,
3.850%, 6/01/15+......... VMIG-1 200,000
-------------------------------------------------------------------------------
$ 700,000 Total Temporary
Investments--1.1%........ 700,000
-----------
--------------------------------------------------------------------------
-----------
Other Assets Less
Liabilities--1.9%........ 1,145,650
--------------------------------------------------------------------------
Net Assets--100%.......... $61,200,459
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
F-11
<PAGE>
<TABLE>
<CAPTION>
NUMBER MARKET
STANDARD & POOR'S MOODY'S OF ISSUES MARKET VALUE PERCENT
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 9 $16,049,443 27%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 7 15,185,060 26
PORTFOLIO OF A+ A1 1 2,086,412 4
INVESTMENTS A, A- A, A2, A3 9 15,724,499 26
(EXCLUDING BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 2 3,129,360 5
TEMPORARY Non-rated Non-rated 3 7,180,035 12
INVESTMENTS):
-------------------------------------------------------------------------------------
Total 31 $59,354,809 100%
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
</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.
F-12
<PAGE>
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**
---------------------------------------------------------------------------------------------------------
NCA
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 Mos. Ended
2/28/95 (Unaudited) $10.200 $.322 $(.038) $(.336) $(.008) $10.140 $10.250 (3.62)% 2.91%
Year ended 8/31,
1994 10.740 .653 (.514) (.669) (.010) 10.200 11.000 (.50) 1.32
1993 10.480 .667 .265 (.670) (.002) 10.740 11.750 13.37 9.21
1 Mo. ended
8/31/92 10.610 .056 (.130) (.056) -- 10.480 11.000 (1.74) (.71)
Year ended 7/31,
1992 10.250 .668 .379 (.664) (.023) 10.610 11.250 12.83 10.61
1991 10.120 .667 .123 (.660) -- 10.250 10.625 9.22 8.13
1990 10.190 .664 (.037) (.666) (.031) 10.120 10.375 7.10 6.45
1989 9.670 .664 .602 (.670) (.076) 10.190 10.375 11.82 13.70
10/7/87 to
7/31/88 9.350 .482 .259 (.421) -- 9.670 10.000 4.28 8.01
---------------------------------------------------------------------------------------------------------
<CAPTION>
NCM
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 Mos. ended
2/28/95 (Unaudited) 11.870 .361 (.105) (.376) -- 11.750 11.750 2.25 2.27
Year ended 8/31,
1994 12.480 .724 (.571) (.759) (.004) 11.870 11.875 (1.99) 1.24
1993 12.100 .752 .387 (.745) (.014) 12.480 12.875 4.22 9.76
9 Mos. ended
8/31/92 12.000 .580 .214 (.598) (.096) 12.100 13.125 12.02 6.83
Year ended
11/30/91 11.790 .800 .196 (.786) -- 12.000 12.375 13.40 8.75
1 Mo. ended
11/30/90 11.710 .067 .133 (.066) (.054) 11.790 11.625 2.10 1.71
Year ended 10/31,
1990 11.810 .794 (.016) (.797) (.081) 11.710 11.500 3.17 6.84
1989 11.640 .805 .184 (.813) (.006) 11.810 12.000 13.05 8.82
4/20/88 to
10/31/88 11.210 .356 .356 (.282) -- 11.640 11.375 (2.78) 6.45
---------------------------------------------------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
------------------------
RATIO OF
NET
RATIO OF INVEST-
EXPENSES MENT PORT-
NET ASSETS TO INCOME FOLIO
END OF AVERAGE TO AVER- TURN-
PERIOD (IN NET AGE NET OVER
THOUSANDS) ASSETS ASSETS RATE
---------------------------------------------------------------------------------------------------------
NCA
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6 Mos. Ended
2/28/95 (Unaudited) $191,659 .76*% 6.51*% 5%
Year ended 8/31,
1994 192,237 .76 6.24 9
1993 200,828 .82 6.31 4
1 Mo. ended
8/31/92 194,430 .79* 6.25* --
Year ended 7/31,
1992 196,669 .83 6.46 6
1991 188,370 .88 6.62 5
1990 184,888 .91 6.62 2
1989 185,016 .94 6.75 27
10/7/87 to
7/31/88 174,645 .94* 6.29* 32
---------------------------------------------------------------------------------------------------------
<CAPTION>
NCM
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6 Mos. ended
2/28/95 (Unaudited) 61,200 .86* 6.30* 3
Year ended 8/31,
1994 61,711 .86 5.93 13
1993 64,427 .90 6.16 5
9 Mos. ended
8/31/92 61,927 .82* 6.42* 11
Year ended
11/30/91 60,964 .73 6.75 9
1 Mo. ended
11/30/90 59,503 .70* 6.92* --
Year ended 10/31,
1990 59,091 .76 6.77 7
1989 59,343 .72 6.89 23
4/20/88 to
10/31/88 59,298 .74* 6.13* 11
---------------------------------------------------------------------------------------------------------
</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-13
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Nuveen California Municipal Value Fund, Inc.
Nuveen California Municipal Income Fund, Inc.
We have audited the accompanying statements of net assets, including the
portfolios of investments, of Nuveen California Municipal Value Fund, Inc. and
Nuveen California Municipal Income Fund, Inc. as of August 31, 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
August 31, 1994, by correspondence with the custodian and brokers. 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 position of
Nuveen California Municipal Value Fund, Inc. and Nuveen California Municipal
Income Fund, Inc. at August 31, 1994, and the results of their operations,
changes in their net assets and financial highlights for the periods indicated
therein in conformity with generally accepted accounting principles.
Ernst & Young LLP
Chicago, Illinois
October 7, 1994
F-14
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
STATEMENT OF NET ASSETS
AUGUST 31, 1994
<TABLE>
<CAPTION>
NCA NCM
------------ -----------
<S> <C> <C>
ASSETS
Investments in municipal securities, at market value
(note 1)............................................. $195,027,520 $60,765,969
Temporary investments in short-term municipal
securities, at market value which equals cost (note
1)................................................... 300,000 --
Cash.................................................. 98,345 407,446
Interest receivable................................... 3,106,996 974,384
Other assets.......................................... 8,112 6,669
------------ -----------
Total assets...................................... 198,540,973 62,154,468
------------ -----------
LIABILITIES
Payable for investments purchased..................... 5,005,875 --
Accrued expenses:
Management fees (note 6)............................ 103,953 34,033
Other............................................... 138,755 76,171
Share dividends payable............................... 1,055,574 332,854
------------ -----------
Total liabilities................................. 6,304,157 443,058
------------ -----------
Net assets (note 7)................................... $192,236,816 $61,711,410
============ ===========
Shares outstanding.................................... 18,849,538 5,200,838
============ ===========
Net asset value per share outstanding (net assets
divided by shares outstanding)....................... $ 10.20 $ 11.87
============ ===========
</TABLE>
See accompanying notes to financial statements
F-15
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1994
<TABLE>
<CAPTION>
NCA NCM
----------- ----------
<S> <C> <C>
INVESTMENT INCOME
Interest income (note 1).............................. $13,761,174 $4,302,147
----------- ----------
Expenses:
Management fees (note 6)............................ 1,256,174 411,874
Shareholders' servicing agent fees and expenses..... 58,635 17,488
Custodian's fees and expenses....................... 53,698 42,324
Board members' fees and expenses (note 6)........... 3,872 1,744
Professional fees................................... 13,485 14,139
Shareholders' reports--printing and mailing
expenses........................................... 59,663 34,135
Stock exchange listing fees......................... 24,592 15,807
Investor relations expense.......................... 14,447 5,767
Other expenses...................................... 4,701 1,979
----------- ----------
Total expenses.................................... 1,489,267 545,257
----------- ----------
Net investment income........................... 12,271,907 3,756,890
----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain (loss) from investment transactions
(note 3)............................................. 155,583 (22,126)
Net change in unrealized appreciation or depreciation
of investments....................................... (10,005,121) (3,007,494)
----------- ----------
Net gain (loss) from investments................ (9,849,538) (3,029,620)
----------- ----------
Net increase (decrease) in net assets from operations. $ 2,422,369 $ 727,270
=========== ==========
</TABLE>
See accompanying notes to financial statements.
F-16
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
STATEMENT OF CHANGES
<TABLE>
<CAPTION>
NCA NCM
-------------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
8/31/94 8/31/93 8/31/94 8/31/93
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income.... $ 12,271,907 $ 12,425,978 $ 3,756,890 $ 3,872,220
Net realized gain (loss)
from investment
transactions............ 155,583 240,249 (22,126) 105,004
Net change in unrealized
appreciation or
depreciation of
investments............. (10,005,121) 4,557,258 (3,007,494) 1,884,418
------------ ------------ ----------- -----------
Net increase (decrease)
in net assets from
operations............ 2,422,369 17,223,485 727,270 5,861,642
------------ ------------ ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS (note 1)
From net investment
income.................. (12,561,847) (12,479,522) (3,935,170) (3,831,033)
From net realized gains
from investment
transactions (193,055) (33,472) (18,116) (73,411)
------------ ------------ ----------- -----------
Decrease in net assets
from distributions to
shareholders.......... (12,754,902) (12,512,994) (3,953,286) (3,904,444)
------------ ------------ ----------- -----------
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............ 1,741,483 1,687,449 510,660 542,380
------------ ------------ ----------- -----------
Net increase in net
assets derived from
capital share
transactions............ 1,741,483 1,687,449 510,660 542,380
------------ ------------ ----------- -----------
Net increase (decrease)
in net assets......... (8,591,050) 6,397,940 (2,715,356) 2,499,578
Net assets at beginning
of year................. 200,827,866 194,429,926 64,426,766 61,927,188
------------ ------------ ----------- -----------
Net assets at end of
year.................... $192,236,816 $200,827,866 $61,711,410 $64,426,766
============ ============ =========== ===========
Balance of undistributed
net investment income at
end of year............. $ 856,423 $ 1,146,363 $ 174,332 $ 352,612
============ ============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-17
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
NOTES TO FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
At August 31, 1994, the California Funds (the "Funds") covered in this report
and their corresponding New York Stock Exchange symbols are Nuveen California
Municipal Value Fund, Inc. (NCA) and Nuveen California Municipal Income Fund,
Inc. (NCM).
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 their purchase commitments. At
August 31, 1994, NCA had outstanding purchase commitments that amounted to
$5,005,875. There were no such purchase commitments in NCM.
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 California state income
taxes, to retain such tax-exempt status when distributed to shareholders of the
respective Funds. All income dividends paid during the year ended August 31,
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.
F-18
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
2. FUND SHARES
Transactions in Common shares were as follows:
<TABLE>
<CAPTION>
NCA NCM
--------------------- ---------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
8/31/94 8/31/93 8/31/94 8/31/93
---------- ---------- ---------- ----------
<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..... 154,976 150,437 40,087 43,019
======= ======= ====== ======
</TABLE>
3. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments during the year ended August 31,
1994, were as follows:
<TABLE>
<CAPTION>
NCA NCM
----------- -----------
<S> <C> <C>
PURCHASES
Investments in municipal securities.............. $24,087,955 $ 8,898,670
Temporary municipal investments.................. 16,800,000 16,200,000
SALES AND MATURITIES
Investments in municipal securities.............. 17,039,660 8,253,615
Temporary municipal investments.................. 18,600,000 16,900,000
=========== ===========
</TABLE>
At August 31, 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 August 31, 1994, NCM had a $22,126 unused capital loss carryovers
available for federal income tax purposes to be applied against future security
gains, if any. If not applied, the carryover will expire in the year 2002.
4. DISTRIBUTIONS TO SHAREHOLDERS
On September 1, 1994, the Funds declared dividend distributions from their
ordinary income that were paid October 3, 1994, to shareholders of record on
September 15, 1994, as follows:
<TABLE>
<CAPTION>
NCA NCM
------ ------
<S> <C> <C>
Dividend per share.......................................... $.0560 $.0640
====== ======
</TABLE>
F-19
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. UNREALIZED APPRECIATION (DEPRECIATION)
Gross unrealized appreciation and gross unrealized depreciation of
investments at August 31, 1994, were as follows:
<TABLE>
<CAPTION>
NCA NCM
----------- ----------
<S> <C> <C>
Gross unrealized:
Appreciation................................... $16,535,583 $4,033,766
Depreciation................................... (1,456,985) (586,863)
----------- ----------
Net unrealized appreciation.................. $15,078,598 $3,446,903
=========== ==========
</TABLE>
6. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Funds' investment management agreements with 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 NCA
----------------------------- ----------
<S> <C>
For the first $500,000,000.................................... .35 of 1%
For the next $500,000,000..................................... .325 of 1%
For assets over $1,000,000,000................................ .3 of 1%
<CAPTION>
AVERAGE DAILY NET ASSET VALUE NCM
----------------------------- ----------
<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 assets over $2,000,000,000................................ .5875 of 1
</TABLE>
In addition, NCA pays to the Adviser a management fee based on gross interest
income. The management fee in effect throughout the year was as follows:
<TABLE>
<CAPTION>
GROSS INTEREST INCOME NCA
--------------------- -----
<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 August 31, 1994, net assets consisted of:
<TABLE>
<CAPTION>
NCA NCM
------------ -----------
<S> <C> <C>
Shares, $.01 par value per share............... $ 188,495 $ 52,008
Paid-in surplus................................ 175,957,717 58,060,293
Undistributed net investment income............ 856,423 174,332
Undistributed net realized gain (loss) from
investment transactions....................... 155,583 (22,126)
Net unrealized appreciation of investments..... 15,078,598 3,446,903
------------ -----------
Net assets................................. $192,236,816 $61,711,410
============ ===========
Authorized shares.............................. 250,000,000 200,000,000
============ ===========
</TABLE>
F-20
<PAGE>
NUVEEN EXCHANGE-TRADED FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. INVESTMENT COMPOSITION
Each Fund invests in municipal securities which include general obligation,
escrowed and revenue bonds. At August 31, 1994, the revenue sources by
municipal purpose for these investments, expressed as a percent of total
investments, were as follows:
<TABLE>
<CAPTION>
NCA NCM
--- ---
<S> <C> <C>
Revenue Bonds:
Health Care Facilities........................................ 12% 18%
Lease Rental Facilities....................................... 3 3
Housing Facilities............................................ 14 10
Water/Sewer Facilities........................................ 4 7
Pollution Control Facilities.................................. 3 7
Electric Utilities............................................ -- 6
Educational Facilities........................................ 2 --
Other......................................................... 17 16
General Obligation Bonds........................................ 2 --
Escrowed Bonds.................................................. 43 33
--- ---
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 (51% for NCA and 41% for NCM). 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-21
<PAGE>
NUVEEN CALIFORNIA MUNICIPAL VALUE FUND, INC. (NCA)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
-------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 5,250,000 California Department of
Veterans Affairs, Home
Purchase, Alternative
Minimum Tax, 8.300%,
8/01/19.................. 8/98 at 102 AA $5,343,503
890,000 California Educational
Facilities Authority
(University of San Diego
Projects), 9.125%,
10/01/10 (Pre-refunded to
10/01/95)................ 10/95 at 102 Aaa 952,513
1,500,000 California Health
Facilities Authority
(Sutter Health System),
8.000%, 1/01/16 (Pre-
refunded to 1/01/97)..... 1/97 at 102 A1 1,642,305
California Health
Facilities Authority (The
Whittier Institute For
Diabetes and
Endocrinology), Scripps
Memorial Hospitals:
1,740,000 8.000%, 12/01/00......... 12/98 at 102 N/R 1,876,573
1,500,000 8.400%, 12/01/08......... 12/98 at 102 N/R 1,663,470
1,500,000 California Health
Facilities Financing
Authority (St. Joseph
Health),
7.000%, 7/01/10 (Pre-
refunded to 7/01/01)..... 7/01 at 102 AA- 1,695,645
8,500,000 California Housing Finance
Agency, Home Mortgage,
8.200%, 8/01/17.......... 8/97 at 102 Aa 8,856,575
California Housing Finance
Agency, Home Mortgage,
Alternative Minimum Tax:
2,230,000 8.600%, 8/01/19.......... 8/98 at 102 Aa 2,324,775
400,000 8.150%, 8/01/19.......... 8/98 at 102 Aa 412,392
2,440,000 8.200%, 2/01/20.......... 8/98 at 102 Aaa 2,497,998
1,500,000 California Pollution
Control Financing
Authority (Pacific Gas
and Electric Company),
Alternative Minimum Tax,
8.875%, 1/01/10.......... 12/97 at 102 A1 1,667,070
1,000,000 California Pollution
Control Finance Authority
(Pacific Gas and Electric
Company), 5.850%,
12/01/23................. 12/03 at 102 A1 916,490
1,140,000 California Public Capital
Improvement Authority,
Pooled Projects,
8.125%, 3/01/95.......... No Opt. Call Baa 1,167,086
5,000,000 California Statewide
Communities Development
Corporation (Pacific
Homes), Certificates of
Participation, 6.000%,
4/01/17.................. 4/03 at 102 A+ 4,635,450
2,250,000 ABAG Finance Authority for
Nonprofit Corporations,
Certificates of
Participation (United Way
of Santa Clara County),
7.200%, 7/01/11.......... 7/01 at 102 Aa2 2,372,850
1,900,000 CSAC Excess Insurance
Authority, Certificates
of Participation,
8.250%, 9/01/07 (Pre-
refunded to 9/01/94)..... 9/94 at 103 N/R 1,959,850
5,000,000 Arcadia Hospital Revenue
(Methodist Hospital of
Southern California),
7.875%, 8/01/10.......... 8/97 at 102 A 5,425,650
7,085,000 Brea Public Financing
Authority, 8.100%,
10/01/14................. 10/95 at 102 1/2 N/R 7,404,250
2,750,000 Campbell Union School
District, General
Obligation, 6.250%,
8/01/19.................. 8/04 at 102 Aaa 2,763,557
5,000,000 Castaic Lake Water Agency,
Certificates of
Participation,
6.300%, 8/01/20 (WI)..... 8/04 at 102 Aaa 5,045,500
Colma Improvement Bonds,
Local Improvement
District No. 1,
Reassessment Project:
870,000 8.125%, 9/02/03.......... 9/94 at 103 N/R 899,510
1,140,000 8.125%, 9/02/04.......... 9/94 at 103 N/R 1,173,459
1,240,000 8.125%, 9/02/05.......... 9/94 at 103 N/R 1,280,511
1,500,000 Cucamonga School District,
Certificates of
Participation, 8.350%,
1/01/08.................. 1/96 at 102 Baa 1,588,380
Duarte Redevelopment
Agency, Huntington Drive
Phase II, Tax Allocation:
1,170,000 7.900%, 10/01/02......... 10/97 at 102 N/R 1,261,810
3,745,000 8.000%, 10/01/10......... 10/97 at 102 N/R 4,020,707
1,470,000 El Paso de Robles
Redevelopment Agency, Tax
Allocation, 7.250%,
7/01/21.................. 7/00 at 102 BBB 1,501,987
2,000,000 Emeryville Public
Financing Authority,
Redevelopment Project,
Subordinated Lien,
8.100%, 2/01/18 (Pre-
refunded to 2/01/97)..... 2/97 at 102 A- 2,199,420
980,000 Inglewood Public Finance
Authority, 7.000%,
5/01/22.................. 5/02 at 102 BBB 1,003,265
3,000,000 Los Angeles Community
Redevelopment Agency, Tax
Allocation (Central
Business District),
6.750%, 7/01/10.......... 7/96 at 102 A- 3,056,040
8,515,000 Los Angeles Convention and
Exhibition Center,
Certificates of
Participation, 9.000%,
12/01/20 (Pre-refunded to
12/01/05)................ 12/05 at 100 Aaa 11,047,957
5,500,000 Los Angeles Department of
Water and Power, Electric
Plant, 8.000%, 2/15/26... 2/96 at 103 AA 5,948,030
500,000 Los Angeles Single Family
Home Mortgage (GNMA and
FNMA), Alternative
Minimum Tax, 6.875%,
6/01/25.................. 12/01 at 102 AAA 508,705
7,965,000 Los Angeles Wastewater
System,
8.125%, 11/01/17 (Pre-
refunded to 11/01/97).... 11/97 at 102 AAA 8,956,005
3,465,000 Los Angeles County
Transportation
Commission, Sales Tax,
7.900%, 7/01/08 (Pre-
refunded to 7/01/97)..... 7/97 at 102 Aaa 3,831,944
2,635,000 Menlo Park Community
Development Agency, FHA-
Insured Multi-Family
Housing, 8.250%,
12/01/28................. 6/97 at 103 Aa 2,827,908
</TABLE>
F-22
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL
AMOUNT DESCRIPTION PROVISIONS* RATINGS** MARKET VALUE
---------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 2,000,000 Mountain View Shoreline
Regional Park
Commission, Tax
Allocation,
8.375%, 7/01/16 (Pre-
refunded to 7/01/95)... 7/95 at 102 AAA $ 2,107,320
8,500,000 Orange County Public
Facilities Corporation,
Certificates of
Participation, 8.250%,
12/01/18 (Pre-refunded
to 12/01/97)........... 12/97 at 102 AAA 9,607,890
5,000,000 Orange County Sanitation
District Nos. 1, 2, and
3,
7.100%, 8/01/11 (Pre-
refunded to 8/01/96)... 8/96 at 102 Aaa 5,351,650
8,565,000 Palmdale Single Family
(GNMA), 0.000%,
3/01/17................ No Opt. Call Aaa 1,965,496
4,430,000 Sacramento Public
Facilities,
Certificates of
Participation,
8.250%, 8/01/12 (Pre-
refunded to 8/01/97)... 8/97 at 102 1/2 AAA 4,980,782
4,850,000 Sacramento Municipal
Utility District,
8.625%, 7/01/10 (Pre-
refunded to 7/01/95)... 7/95 at 102 AAA 5,122,134
10,000,000 San Bernardino County,
Single Family Mortgage
(GNMA), Alternative
Minimum Tax, 0.000%,
9/01/21................ No Opt. Call Aaa 1,696,300
San Diego Community
College District,
Certificates of
Participation:
1,000,000 8.625%, 12/01/09 (Pre-
refunded to 12/01/97).. 12/97 at 102 N/R 1,140,620
1,000,000 8.625%, 12/01/09 (Pre-
refunded to 12/01/97).. 12/97 at 102 AAA 1,140,580
4,000,000 San Francisco City and
County Sewer System,
5.375%, 10/01/22....... 10/02 at 102 Aaa 3,534,400
4,000,000 San Francisco Public
Utility Commission,
Water System, 8.000%,
11/01/11............... 11/97 at 102 AA 4,455,360
3,000,000 San Francisco City and
County Redevelopment
Agency, GNMA (South
Beach Marina), 5.700%,
3/01/29................ 3/04 at 102 Aaa 2,656,500
5,500,000 Santa Rosa (Kaiser
Permanente), 9.000%,
12/01/15............... 12/95 at 102 Aa2 5,866,740
1,955,000 Southern California Home
Financing Authority,
Single Family Mortgage
(GNMA), Alternative
Minimum Tax, 8.125%,
2/01/21................ No Opt. Call AAA 2,188,955
4,250,000 Southern California
Public Power Authority,
Palo Verde Project,
8.125%, 7/01/15 (Pre-
refunded to 7/01/96)... 7/96 at 103 Aaa 4,655,153
5,015,000 Southern California
Public Power Authority,
Transmission Project,
7.875%, 7/01/18 (Pre-
refunded to 7/01/96)... 7/96 at 103 AAA 5,478,236
2,000,000 Turlock Irrigation
District, 7.750%,
1/01/18 (Pre-refunded
to 1/01/96)............ 1/96 at 102 A 2,134,400
2,000,000 University of California
(UCLA Central
Chiller/Cogeneration),
5.500%, 11/01/17....... 11/03 at 102 Aa 1,797,220
2,675,000 University of
California, 6.875%,
9/01/16 (Pre-refunded
to 9/01/02)............ 9/02 at 102 A 3,017,587
2,000,000 University of
California, Housing
System, 5.500%,
11/01/18............... 11/03 at 102 Aaa 1,823,300
8,270,000 Upland Hospital (San
Antonio Community
Hospital), 7.125%,
1/01/11................ 1/96 at 102 A 8,631,234
3,590,000 Walnut Valley Unified
School District,
Certificates of
Participation,
8.200%, 1/01/13 (Pre-
refunded to 1/01/97)... 1/97 at 102 N/R 3,946,523
---------------------------------------------------------------------------------
$197,870,000 Total Investments--(cost
$179,948,922)--101.4%.. 195,027,520
---------------------------------------------------------------------------------
----------------------------------------------------------------------------
------------
TEMPORARY INVESTMENTS IN
SHORT-TERM MUNICIPAL
SECURITIES--0.2%
$ 300,000 Irvine Assessment
============= District No. 89-10,
Variable Rate Demand
Bonds,
2.800%, 9/02/15+....... VMIG-1 300,000
---------------------------------------------------------------------------
Other Assets Less
Liabilities--(1.6)%.... (3,090,704)
---------------------------------------------------------------------------
Net Assets--100%........ $192,236,816
---------------------------------------------------------------------------
---------------------------------------------------------------------------
</TABLE>
F-23
<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 22 $ 87,912,875 45%
PORTFOLIO OF INVESTMENTS AA+, AA, AA- Aa1, Aa, Aa2, Aa3 11 41,900,998 21
(EXCLUDING TEMPORARY A+ A1 4 8,861,315 4
INVESTMENTS): A, A- A, A2, A3 6 24,464,331 13
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 4 5,260,718 3
Non-rated Non-rated 11 26,627,283 14
------------------------------------------------------------------------------------------------
Total 58 $195,027,520 100%
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
</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.
(WI) Security purchased on a when-issued 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-24
<PAGE>
NUVEEN CALIFORNIA MUNICIPAL INCOME FUND, INC. (NCM)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
-------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 2,750,000 California Department of
Veterans Affairs, Home
Purchase, Alternative
Minimum Tax, 8.300%,
8/01/19................. 8/98 at 102 AA $ 2,798,978
2,115,000 California Health
Facilities Authority
(The Whittier Institute
For Diabetes and
Endocrinology), Scripps
Memorial Hospitals,
8.400%, 12/01/08........ 12/98 at 102 N/R 2,345,493
1,000,000 California Health
Facilities Financing
Authority (Health
Dimensions, Inc.),
7.375%, 5/01/07......... 5/00 at 102 Baa1 1,028,890
1,230,000 California Housing
Finance Agency,
Alternative Minimum Tax,
8.350%, 8/01/19......... 8/98 at 102 Aa 1,267,872
1,575,000 California Pollution
Control (Pacific Gas and
Electric Company),
7.500%, 5/01/16......... 6/96 at 102 A1 1,656,947
1,000,000 California Rural Mortgage
Finance Authority,
Single Family Mortgage,
Alternative Minimum Tax,
7.950%, 12/01/24........ No Opt. Call Aaa 1,149,430
2,500,000 California State
Department of Water
Resources (Central
Valley Project), Power
Facilities, 8.000%,
12/01/16 (Pre-refunded
to 12/01/95)............ 12/95 at 101 1/2 Aaa 2,648,575
1,000,000 Arcadia (Methodist
Hospital of Southern
California), 6.500%,
11/15/12................ 11/02 at 102 A 1,002,110
2,000,000 Barstow Wastewater
Reclamation,
Certificates of
Participation, 5.250%,
10/01/18 10/04 at 102 Aaa 1,736,940
2,000,000 Cerritos Public Finance
Authority (Los Cerritos
Redevelopment Project),
6.000%, 11/01/13........ 11/03 at 102 A- 1,915,120
2,065,000 Contra Costa County, Home
Mortgage (GNMA),
Alternative Minimum Tax,
8.250%, 6/01/21......... No Opt. Call Aaa 2,734,122
1,600,000 Emeryville Public
Financing Authority,
Redevelopment Project,
8.100%, 2/01/18 (Pre-
refunded to 2/01/97).... 2/97 at 102 A- 1,759,536
975,000 Inglewood Public Finance
Authority (In-Town,
Manchester Redevelopment
Projects), 7.000%,
5/01/22................. 5/02 at 102 A- 994,685
2,490,000 Lassen Municipal Utility
District, Certificates
of Participation,
Alternative Minimum Tax,
8.250%, 5/01/98......... 5/96 at 102 1/2 N/R 2,628,021
2,000,000 Long Beach Redevelopment
Agency (Downtown
Redevelopment Project),
Tax Allocation, 8.300%,
11/01/10 (Pre-refunded
to 5/01/98)............. 5/98 at 102 N/R 2,272,720
2,000,000 Los Angeles Community
Redevelopment Agency
(Central Business
District), Tax
Allocation, 6.750%,
7/01/10................. 7/96 at 102 A- 2,037,360
Los Angeles Department of
Water and Power,
Electric Plant:
2,280,000 8.000%, 2/15/26......... 2/96 at 103 AA 2,465,729
1,100,000 7.125%, 5/15/30 (Pre-
refunded to 5/15/00).... 5/00 at 102 AA 1,221,990
2,500,000 Los Angeles County
Transportation
Commission, Sales Tax,
8.000%, 7/01/16 (Pre-
refunded to 7/01/97).... 7/97 at 102 Aaa 2,775,575
2,425,000 Pasadena Health
Facilities (Pacific
Clinics), 8.200%,
6/01/18................. 6/95 at 102 A+ 2,531,288
2,320,000 Pittsburg Redevelopment
Agency, Los Medanos
Community Development
Project, 7.750%, 8/01/08
(Pre-refunded to
8/01/96)................ 8/96 at 102 AAA 2,507,386
2,500,000 Redding Joint Powers
Financing Authority,
Water System,
5.500%, 6/15/23......... 6/03 at 102 Aaa 2,263,050
1,265,000 San Benito Hospital
District, 6.750%,
12/01/21................ 12/01 at 102 A+ 1,280,560
10,415,000 San Bernardino County
Single Family Mortgage
(GNMA),
Alternative Minimum Tax,
0.000%, 9/01/21......... No Opt. Call Aaa 1,766,696
2,500,000 San Diego Industrial
Development (San Diego
Gas and Electric
Company), 7.625%,
7/01/21................. 7/96 at 102 Aa3 2,647,675
2,000,000 San Diego Redevelopment
Agency (Horton Plaza
Project), Tax
Allocation, 8.125%,
7/01/08................. 7/97 at 102 Baa1 2,174,860
2,000,000 San Francisco Public
Utility Commission,
Water System, 8.000%,
11/01/11................ 11/97 at 102 AA 2,227,680
2,500,000 Santa Rosa (Kaiser
Permanente), 9.000%,
12/01/15................ 12/95 at 102 Aa2 2,666,700
680,000 Southern California Home
Financing Authority,
Single Family Mortgage
(GNMA), Alternative
Minimum Tax, 8.125%,
2/01/21................. No Opt. Call AAA 761,376
1,000,000 Southern California
Public Power Authority,
4.750%, 7/01/16......... 7/04 at 102 Aaa 819,440
2,375,000 University of California,
6.875%, 9/01/16 (Pre-
refunded to 9/01/02).... 9/02 at 102 A 2,679,165
-------------------------------------------------------------------------------
$66,160,000 Total Investments--(cost
$57,319,066)--98.5%..... 60,765,969
-------------------------------------------------------------------------------
-----------
Other Assets Less
Liabilities--1.5%....... 945,441
--------------------------------------------------------------------------
Net Assets--100%......... $61,711,410
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
F-25
<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 10 $19,162,590 32%
PORTFOLIO OF
INVESTMENTS: AA+, AA, AA- Aa1, Aa, Aa2, Aa3 7 15,296,624 25
A+ A1 3 5,468,795 9
A, A- A, A2, A3 6 10,387,976 17
BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 2 3,203,750 5
Non-rated Non-rated 3 7,246,234 12
--------------------------------------------------------------------------------------------
Total 31 $60,765,969 100%
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
</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.
See accompanying notes to financial statements.
F-26
<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
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>
NCA
-------------------------------------------------------------------------------------------------------------------
Year ended 8/31/94 $10.740 $.653 $(.514) $(.669) $(.010) $10.200 $11.000 (.50)% 1.32%
Year ended 8/31/93 10.480 .667 .265 (.670) (.002) 10.740 11.750 13.37 9.21
1 Mo. ended 8/31/92 10.610 .056 (.130) (.056) -- 10.480 11.000 (1.74) (.71)
Year ended 7/31,
1992 10.250 .668 .379 (.664) (.023) 10.610 11.250 12.83 10.61
1991 10.120 .667 .123 (.660) -- 10.250 10.625 9.22 8.13
1990 10.190 .664 (.037) (.666) (.031) 10.120 10.375 7.10 6.45
1989 9.670 .664 .602 (.670) (.076) 10.190 10.375 11.82 13.70
10/7/87 to 7/31/88 9.350 .482 .259 (.421) -- 9.670 10.000 4.28 8.01
-------------------------------------------------------------------------------------------------------------------
NCM
-------------------------------------------------------------------------------------------------------------------
Year ended 8/31/94 12.480 .724 (.571) (.759) (.004) 11.870 11.875 (1.99) 1.24
Year ended 8/31/93 12.100 .752 .387 (.745) (.014) 12.480 12.875 4.22 9.76
9 Mos. ended 8/31/92 12.000 .580 .214 (.598) (.096) 12.100 13.125 12.02 6.83
Year ended 11/30/91 11.790 .800 .196 (.786) -- 12.000 12.375 13.40 8.75
1 Mo. ended 11/30/90 11.710 .067 .133 (.066) (.054) 11.790 11.625 2.10 1.71
Year ended 10/31/90 11.810 .794 (.016) (.797) (.081) 11.710 11.500 3.17 6.84
Year ended 10/31/89 11.640 .805 .184 (.813) (.006) 11.810 12.000 13.05 8.82
4/20/88 to 10/31/88 11.210 .356 .356 (.282) -- 11.640 11.375 (2.78) 6.45
-------------------------------------------------------------------------------------------------------------------
<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>
NCA
-------------------------------------------------------------------------------------------------------------------
Year ended 8/31/94 $192,237 .76% 6.24% 9%
Year ended 8/31/93 200,828 .82 6.31 4
1 Mo. ended 8/31/92 194,430 .79* 6.25* 0
Year ended 7/31,
1992 196,669 .83 6.46 6
1991 188,370 .88 6.62 5
1990 184,888 .91 6.62 2
1989 185,016 .94 6.75 27
10/7/87 to 7/31/88 174,645 .94* 6.29* 32
-------------------------------------------------------------------------------------------------------------------
NCM
-------------------------------------------------------------------------------------------------------------------
Year ended 8/31/94 61,711 .86 5.93 13
Year ended 8/31/93 64,427 .90 6.16 5
9 Mos. ended 8/31/92 61,927 .82* 6.42* 11
Year ended 11/30/91 60,964 .73 6.75 9
1 Mo. ended 11/30/90 59,503 .70* 6.92* 0
Year ended 10/31/90 59,091 .76 6.77 7
Year ended 10/31/89 59,343 .72 6.89 23
4/20/88 to 10/31/88 59,298 .74* 6.13* 11
-------------------------------------------------------------------------------------------------------------------
</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-27
<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>
$ 8,000,000 California Department of
Veterans Affairs, Home
Purchase, Alternative
Minimum Tax, 8.300%,
8/01/19................ 8/98 at 102 Aa $ 8,336,720
890,000 California Educational
Facilities Authority
(University of San
Diego Projects),
9.125%, 10/01/10 (Pre-
refunded to 10/01/95).. 10/95 at 102 Aaa 915,944
1,885,000 California General
Obligation, 7.000%,
8/01/08................ No Opt. Call A1 2,137,628
California Health
Facilities Authority
(The Whittier Institute
For Diabetes and
Endocrinology), Scripps
Memorial Hospitals:
1,545,000 8.000%, 12/01/00....... 12/98 at 102 N/R 1,709,728
3,615,000 8.400%, 12/01/08....... 12/98 at 102 N/R 4,059,681
1,500,000 California Health
Facilities Financing
Authority (Sutter
Health System), 8.000%,
1/01/16 (Pre-refunded
to 1/01/97)............ 1/97 at 102 A1 1,610,115
1,500,000 California Health
Facilities Financing
Authority (St. Joseph
Health), 7.000%,
7/01/10 (Pre-refunded
to 7/01/01)............ 7/01 at 102 AA 1,709,145
1,000,000 California Health
Facilities Financing
Authority (Health
Dimensions, Inc.),
7.375%, 5/01/07........ 5/00 at 102 Ba 1,024,590
8,500,000 California Housing
Finance Agency, Home
Mortgage,
8.200%, 8/01/17........ 8/97 at 102 Aa 9,041,620
California Housing
Finance Agency, Home
Mortgage, Alternative
Minimum Tax:
2,025,000 8.600%, 8/01/19........ 8/98 at 102 Aa 2,172,076
1,150,000 8.350%, 8/01/19........ 8/98 at 102 Aa 1,230,029
380,000 8.150%, 8/01/19........ 8/98 at 102 Aa 406,437
2,090,000 8.200%, 2/01/20........ 8/98 at 102 Aaa 2,256,719
1,500,000 California Pollution
Control Financing
Authority (Pacific Gas
and Electric Company),
Alternative Minimum
Tax,
8.875%, 1/01/10........ 12/97 at 102 A2 1,673,895
1,575,000 California Pollution
Control (Pacific Gas
and Electric Company),
7.500%, 5/01/16........ 6/96 at 102 A2 1,636,819
685,000 California Rural
Mortgage Finance
Authority, Single
Family Mortgage,
Alternative Minimum
Tax, 7.950%, 12/01/24.. No Opt. Call Aaa 825,706
5,000,000 California Statewide
Communities Development
Corporation (Pacific
Homes), Certificates of
Participation,
6.000%, 4/01/17........ 4/03 at 102 A 4,780,850
2,175,000 ABAG Finance Authority
for Nonprofit
Corporations (United
Way of Santa Clara
County), Certificates
of Participation,
7.200%, 7/1/11......... 7/01 at 102 Aa2 2,287,100
Arcadia (Methodist
Hospital of Southern
California):
5,000,000 7.875%, 8/01/10........ 8/97 at 102 A 5,374,850
1,000,000 6.500%, 11/15/12....... 11/02 at 102 A 1,015,880
2,000,000 Barstow Wastewater
Reclamation,
Certificates of
Participation, 5.250%,
10/01/18............... 10/04 at 102 Aaa 1,794,960
Brea Public Financing
Authority:
7,085,000 8.100%, 10/01/14....... 10/95 at 102 1/2 N/R 7,312,074
2,750,000 Campbell Union School
District, General
Obligation,
6.250%, 8/1/19......... 8/04 at 102 Aaa 2,791,498
5,000,000 Castaic Lake Water
Agency, Certificates of
Participation, 6.300%,
8/1/20................. 8/04 at 102 Aaa 5,083,250
2,000,000 Cerritos Public Finance
Authority (Los Cerritos
Redevelopment Project),
6.000%, 11/01/13....... 11/03 at 102 A-- 1,914,340
Colma Improvement Bonds,
Local Improvement
District No. 1,
Reassessment Project:
870,000 8.125%, 9/02/03........ 9/95 at 103 N/R 899,310
1,140,000 8.125%, 9/02/04........ 9/95 at 103 N/R 1,177,916
1,240,000 8.125%, 9/02/05........ 9/95 at 103 N/R 1,282,768
</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>
$ 2,065,000 Contra Costa County Home
Mortgage, GNMA,
Alternative Minimum Tax,
8.250%, 6/01/21......... No Opt. Call Aaa $ 2,734,432
1,500,000 Cucamonga School
District, Certificates
of Participation,
8.350%, 1/01/08......... 1/96 at 102 Baa 1,551,720
Duarte Redevelopment
Agency, Huntington
Drive, Tax Allocation:
1,170,000 7.900%, 10/01/02........ 10/97 at 102 N/R 1,269,848
3,745,000 8.000%, 10/01/10........ 10/97 at 102 N/R 3,950,675
1,470,000 El Paso de Robles
Redevelopment Agency,
Tax Allocation, 7.250%,
7/01/21................. 7/00 at 102 BBB 1,524,493
3,600,000 Emeryville Public
Financing Authority,
Redevelopment Project,
Subordinated Lien,
8.100%, 2/01/18 (Pre-
refunded to 2/01/97).... 2/97 at 102 A-- 3,880,656
970,000 Inglewood Public Finance
Authority, 7.000%,
5/01/22................. 5/02 at 102 Baa 986,325
960,000 Inglewood Public Finance
Authority (In-Town,
Manchester Redevelopment
Projects), 7.000%,
5/01/22................. 5/02 at 102 A-- 984,432
1,950,000 Lassen Municipal Utility
District, Certificates
of Participation
Alternative Minimum Tax,
8.250%, 5/01/98......... 5/96 at 102 1/2 N/R 2,051,751
2,000,000 Long Beach Redevelopment
Agency, Downtown
Redevelopment Project
Tax Allocation, 8.300%,
11/01/10 (Pre-refunded
to 5/01/98)............. 5/98 at 102 N/R 2,246,900
5,000,000 Los Angeles Community
Redevelopment Agency Tax
Allocation (Central
Business District),
6.750%, 7/01/10......... 7/96 at 102 A-- 5,124,150
8,515,000 Los Angeles Convention
and Exhibition Center,
Certificates of
Participation, 9.000%,
12/01/20 (Pre-refunded
to 12/01/05)............ 12/05 at 100 Aaa 11,417,338
Los Angeles Department of
Water and Power Electric
Plant:
7,780,000 8.000%, 2/15/26......... 2/96 at 103 Aa 8,177,248
1,100,000 7.125%, 5/15/30 (Pre-
refunded to 5/15/00).... 5/00 at 102 Aa 1,228,183
100,000 Los Angeles Single Family
Home Mortgage (GNMA and
FNMA), Alternative
Minimum Tax, 6.875%,
6/01/25................. 12/01 at 102 AAA 103,084
7,965,000 Los Angeles Wastewater
System, 8.125%, 11/01/17
(Pre-refunded to
11/01/97)............... 11/97 at 102 AAA 8,839,398
Los Angeles County
Transportation
Commission, Sales Tax:
3,465,000 7.900%, 7/01/08 (Pre-
refunded to 7/01/97).... 7/97 at 102 Aaa 3,784,092
2,500,000 8.000%, 7/01/16 (Pre-
refunded to 7/01/97).... 7/97 at 102 Aaa 2,735,775
2,635,000 City of Menlo Park
Community Development
Agency, Multi-Family
Housing, 8.250%,
12/01/28................ 6/97 at 103 Aa 2,849,463
4,000,000 Modesto Irrigation
District, 5.750%,
9/01/22................. 9/05 at 102 Aaa 3,795,040
8,500,000 Orange County Public
Facilities Corporation,
Certificates of
Participation, 8.250%,
12/01/18 (Pre-refunded
to 12/01/97)............ 12/97 at 102 AAA 9,483,790
5,000,000 Orange County Sanitation
District Nos. 1, 2, and
3,
7.100%, 8/01/11 (Pre-
refunded to 8/01/96).... 8/96 at 102 Aaa 5,262,300
8,565,000 Palmdale Single Family
(GNMA), 0.000%, 3/01/17. No Opt. Call Aaa 1,958,816
2,425,000 Pasadena Health
Facilities (Pacific
Clinics), 8.200%,
6/01/18................. 6/95 at 102 A 2,480,290
2,225,000 Pittsburg Redevelopment
Agency, Los Medanos
Community Development
Project, 7.750%, 8/01/08
(Pre-refunded to
8/01/96)................ 8/96 at 102 AAA 2,356,698
2,500,000 Redding Joint Powers
Financing Authority,
Water System, 5.500%,
6/15/23................. 6/03 at 102 Aaa 2,299,950
4,430,000 Sacramento Public
Facilities, Certificates
of Participation,
8.250%, 8/01/12 (Pre-
refunded to 8/01/97).... 8/97 at 102 1/2 AAA 4,905,295
7,750,000 Sacramento Sanitation
District Finance
Authority,
4.750%, 12/01/23........ 12/03 at 102 Aa 6,214,570
1,265,000 San Benito Hospital
District, 6.750%,
12/01/21................ 12/01 at 102 A 1,286,568
20,415,000 San Bernardino County
Single Family Mortgage
(GNMA), Alternative
Minimum Tax, 0.000%,
9/01/21................. No Opt. Call Aaa 3,601,206
</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>
San Diego Community
College District,
Certificates of
Participation:
$ 1,000,000 8.625%, 12/01/09 (Pre-
refunded to 12/01/97)... 12/97 at 102 N/R $ 1,120,200
1,000,000 8.625%, 12/01/09 (Pre-
refunded to 12/01/97)... 12/97 at 102 AAA 1,124,030
2,500,000 San Diego Industrial
Development Authority
(San Diego Gas and
Electric Company),
7.625%, 7/01/21......... 7/96 at 102 Aa3 2,594,925
2,000,000 San Diego Redevelopment
Agency (Horton Plaza
Project), Tax
Allocation, 8.125%,
7/01/08................. 7/98 at 102 Baa1 2,123,020
6,000,000 San Francisco Public
Utility Commission,
Water System,
8.000%, 11/01/11........ 11/97 at 102 Aa 6,620,700
3,000,000 San Francisco City and
County Redevelopment
Agency (GNMA--South
Beach Marina), 5.700%,
3/01/29................. 3/04 at 102 Aaa 2,789,010
5,000,000 San Jose Redevelopment
Agency, Tax Allocation,
5.000%, 8/01/20......... 2/04 at 102 Aaa 4,316,250
8,000,000 Santa Rosa (Kaiser
Permanente), 9.000%,
12/01/15................ 12/95 at 102 Aa2 8,267,440
2,635,000 Southern California Home
Financing Authority,
Single Family Mortgage
(GNMA), Alternative
Minimum Tax,
8.125%, 2/01/21......... No Opt. Call AAA 2,985,217
5,015,000 Southern California
Public Power Authority,
Transmission Project,
7.875%, 7/01/18 (Pre-
refunded to 7/01/96).... 7/96 at 103 AAA 5,348,647
Southern California
Public Power Authority:
1,000,000 4.750%, 7/01/16......... 7/04 at 102 Aaa 843,690
3,000,000 5.000%, 7/01/22......... 7/03 at 100 Aaa 2,576,760
2,000,000 Turlock Irrigation
District, 7.750%,
1/01/18 (Pre-refunded to
1/01/96)................ 1/96 at 102 A 2,073,880
2,000,000 University of California
(UCLA Central
Chiller/Cogeneration),
5.500%, 11/01/17........ 11/03 at 102 Aa 1,796,480
5,050,000 University of California,
6.875%, 9/01/16 (Pre-
refunded to 9/01/02).... 9/02 at 102 A-- 5,834,012
2,000,000 University of California
Housing System, 5.500%,
11/01/18................ 11/03 at 102 Aaa 1,856,400
8,270,000 City of Upland Hospital
(San Antonio Community
Hospital), 7.125%,
1/01/11................. 1/96 at 102 A 8,505,115
3,590,000 Walnut Valley Unified
School District,
Certificates of
Participation, 8.200%,
1/01/13 (Pre-refunded to
1/01/97)................ 1/97 at 102 N/R 3,860,756
-------------------------------------------------------------------------------
$261,725,000 Total Investments--(cost
$231,392,951)--98.2%................... 250,182,666
============ ----------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES--1.8%
$ 100,000 California Health Facilities Financing
Authority (St. Joseph Health System),
Series A, Variable Rate Demand Bonds,
3.750%, 7/01/13+....................... VMIG-1 100,000
820,000 California Health Facilities Financing
Authority (St. Joseph Health System),
Series B, Variable Rate Demand Bonds,
3.750%, 7/01/13+....................... VMIG-1 820,000
1,500,000 California Health Facilities Financing
Authority (St. Francis Memorial
Hospital), Series 1993B, Variable Rate
Demand Bonds, 3.800%, 11/01/19+........ P-1 1,500,000
370,000 California Statewide Communities
Development Authority (St. Joseph
Health System), Certificates of
Participation, Variable Rate Demand
Bonds,
3.750%, 7/01/24+....................... VMIG-1 370,000
300,000 California Statewide Community
Development Authority, Certificates of
Participation, Series 1993, Variable
Rate Demand Bonds, 3.950%, 12/01/18+... A-1+ 300,000
300,000 California Statewide Communities
Development Authority (St. Joseph
Health System), Certificates of
Participation, Variable Rate Demand
Bonds,
3.750%, 7/01/24+....................... VMIG-1 300,000
1,000,000 Santa Ana Health Facilities Authority
(Town & Country), Variable Rate Demand
Bonds, 3.950%, 10/01/20+............... A-1 1,000,000
-------------------------------------------------------------------------------
$ 4,390,000 Total Temporary Investments--1.7%....... 4,390,000
============ ----------------------------------------------------------------
Other Assets Less Liabilities--(0.1)%... (137,433)
----------------------------------------------------------------
Net Assets--100%........................ $254,435,233
================================================================
</TABLE>
P-4
<PAGE>
ACQUIRING FUND (AS ADJUSTED) (CONTINUED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
STANDARD & POOR'S MOODY'S OF ISSUES MARKET VALUE PERCENT
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF
RATINGS** AAA Aaa 28 $ 98,785,295 39%
PORTFOLIO OF AA+, AA, AA- Aa1, Aa, Aa2, Aa3 15 62,932,136 25
INVESTMENTS A^ A1 2 3,747,743 2
(EXCLUDING A,A- A, A2, A3 14 46,565,737 19
TEMPORARY BBB+,BBB, BBB- Baa1, Baa, Baa2, Baa3 4 6,185,558 2
INVESTMENTS): BB+, BB, BB- Ba1, Ba, Ba2, Ba3 1 1,024,590 1
Non-rated Non-rated 12 30,941,607 12
-------------------------------------------------------------------------------------
TOTAL 76 $250,182,666 100%
-------------------------------------------------------------------------------------
</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 eleven-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 ACQUIRED FUND ACQUIRING FUND
(ACTUAL) (ACTUAL) (AS ADJUSTED)(/1/)
-------------- ------------- ------------------
<S> <C> <C> <C>
Shareholders' Equity:
Common shares, $.01 par
value per share;
250,000,000 shares
authorized: 18,958,790
shares outstanding for
Acquiring Fund (Actual);
5,209,911 shares
outstanding for Acquired
Fund (Actual); 24,984,848
shares outstanding for
Acquiring Fund (As
Adjusted)................. $ 189,588 $ 52,099 $ 249,849(/2/)
Paid-in surplus............ 177,114,034 58,166,806 235,096,587(/3/)
Undistributed net
investment income......... 323,691 34,905 323,691(/4/)
Net realized gain (loss)
from investment
transactions.............. (24,609) 74,491 (24,609)(/5/)
Net unrealized
appreciation of
investments............... 15,532,055 3,257,660 18,789,715
------------ ----------- ------------
Net Assets............... $193,134,759 $61,585,961 $254,435,233
============ =========== ============
</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 6,026,058 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
1.1566528 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 $176,091 and
(b) $(8,162) 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 $71,466 of
this amount is an expense of the Acquiring Fund and $104,625 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 distributes all of its net realized gains from
investment transactions.
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.................. $191,082,596 $59,100,070 $ -- $250,182,666
Temporary investments in
short-term municipal
securities, at market
value.................. 3,100,000 1,595,000 (305,000) 4,390,000
Cash.................... (56,793) 44,651 19,513(/2/) 7,371
Other assets less
liabilities............ (991,044) 846,240 -- (144,804)
------------ ----------- --------- ------------
Net assets.............. $193,134,759 $61,585,961 $(285,487) $254,435,233
============ =========== ========= ============
Common shares
outstanding............ 18,958,790 5,209,911 816,147(/3/) 24,984,848
============ =========== ========= ============
Net asset value per
common shares:
As of July 31, 1995.... $ 10.19 $ 11.82
============ ===========
After distribution of
ordinary income....... $ 10.19 $ 11.80
============ ===========
After Reorganization
related expenses...... $ 10.18 $ 11,78 $ 10.18
============ =========== ============
</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 sales of temporary investments and payment of
estimated Reorganization costs.
(3) None of the Reorganization costs, estimated to be $176,091 ($71,466 of
which is an expense of the Acquiring Fund and $104,625 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
6,026,058 additional Acquiring Fund common shares and the cancellation of
5,209,911 Acquired Fund common shares.
PRO FORMA CONDENSED INCOME STATEMENT FOR THE ELEVEN 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........ $12,372,550 $3,883,749 $ -- $16,256,299
----------- ---------- -------- -----------
Expenses:
Management fees........ 1,120,663 361,663 (6,727) 1,475,599
All other expenses..... 190,349 103,726 (53,815) 240,260
----------- ---------- -------- -----------
Total expenses....... 1,311,012 465,389 (60,542) 1,715,859
----------- ---------- -------- -----------
Net investment
income............ 11,061,538 3,418,360 60,542 14,540,440
----------- ---------- -------- -----------
Realized and Unrealized
Gain (Loss) on
Investments:
Net realized gain
(loss) from
investment
transactions.......... (24,609) 96,617 (96,617) (24,609)
Net change in
unrealized
appreciation or
depreciation of
investments........... 453,457 (189,244) -- 264,213
----------- ---------- -------- -----------
Net gain on
investments....... 428,848 (92,627) (96,617) 239,604
----------- ---------- -------- -----------
Net Increase in Net
Assets from Operations. $11,490,386 $3,325,733 $(36,075) $14,780,044
=========== ========== ======== ===========
</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 "B' 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.
--------
* Continuance of the rating is contingent upon S&P's receipt of an executed
copy of the escrow agreement or closing documentation confirming investments
and cash flow.
NR Indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
MUNICIPAL NOTES
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in 3 years or less will likely receive a note
rating. Notes maturing beyond 3 years will most likely receive a long-term debt
rating. The following criteria will be used in making that assessment:
--Amortization schedule (the larger the final maturity relative to other
maturities, the more likely it will be treated as a note).
--Source of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).
NOTE RATING SYMBOLS ARE AS FOLLOWS:
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
A-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 California 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 Director
(Principal
Executive Officer)
By /s/ Larry W. Martin
--------------------
Larry W. Martin,
Attorney-in-Fact
Timothy R. Schwertfeger President and Trustee
Lawrence H. Brown Trustee August 22, 1995
Anne E. Impellizzeri Trustee
John E. O'Toole Trustee
Margaret K. Rosenheim Trustee
Peter R. Sawers Trustee
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 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 Orrick, Herrington & Sutcliffe.............
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 CALIFORNIA 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 California 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
<PAGE>
deal in any such securities and other 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 a 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.
2
<PAGE>
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:
(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.
3
<PAGE>
(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 by 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.
(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
4
<PAGE>
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.
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.
5
<PAGE>
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 not later than the close of business
6
<PAGE>
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
7
<PAGE>
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 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, and 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
8
<PAGE>
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.
(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
9
<PAGE>
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.
(b) A contract or other transaction between the Corporation and any of
its directors or between the Corporation and any 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
10
<PAGE>
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 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
11
<PAGE>
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 may in its discretion deem
reasonable and proper. Subject to the provisions of paragraph (b) of this
Article SEVENTH, any such contract may
12
<PAGE>
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
13
<PAGE>
final and conclusive and shall 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
14
<PAGE>
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 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
15
<PAGE>
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 a 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
16
<PAGE>
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.
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
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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 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
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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
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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)
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EXHIBIT 2
AMENDMENT TO BY-LAWS
OF
NUVEEN CALIFORNIA MUNICIPAL VALUE FUND, INC.
The By-Laws of Nuveen California 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.
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(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 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 CALIFORNIA MUNICIPAL VALUE FUND, INC.
The By-Laws of Nuveen California 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 CALIFORNIA 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. A 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
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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:
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(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;
(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
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States determined by the Board, a record of the dates on which certificates
representing shares were issued.
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
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security, and not absolutely, such fact, if known to an officer of the
Corporation, shall be so expressed in the entry of transfer.
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 September 1 of each year and end on August 31 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
13
<PAGE>
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
14
<PAGE>
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 By-Laws, 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 California 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.
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
<PAGE>
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.
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.
2
<PAGE>
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.
13. These terms and conditions shall be governed by the laws of the
State of New York.
3
<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
4
<PAGE>
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 CALIFORNIA
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 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
<PAGE>
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.
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
2
<PAGE>
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, 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.
3
<PAGE>
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 CALIFORNIA 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
California 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 CALIFORNIA 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
California 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 CALIFORNIA 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 CALIFORNIA MUNICIPAL VALUE FUND, INC.
AMENDMENT AND RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
--------------------------------------------------------
Agreement made this 1st day of May, 1991, by and between NUVEEN CALIFORNIA
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 l, 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 CALIFORNIA 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 CALIFORNIA MUNICIPAL VALUE FUND, INC.
AMENDMENT AND RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
--------------------------------------------------------
Agreement made this 27th day of April, 1992, by and between NUVEEN
CALIFORNIA MUNICIPAL VALUE FUND, INC., a Minnesota corporation (the "Fund"), and
NUVEEN ADVISORY CORP., a Delaware corporation (the "Adviser"), to be effective
May l, 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 CALIFORNIA 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
California 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 CALIFORNIA 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/
-----------------------
Assistant Secretary
12
<PAGE>
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
------------------------------------------
This Agreement made this 28th day of July, 1993 by and between Nuveen California
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 CALIFORNIA 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
13
<PAGE>
NUVEEN CALIFORNIA MUNICIPAL VALUE FUND, INC.
--------------------------------------------
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
------------------------------------------
This Agreement made this 27th day of July, 1994 by and between Nuveen California
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 CALIFORNIA MUNICIPAL VALUE FUND, INC.
By: /s/ G.R. Zimmerman
--------------------------
Vice President
Attest: /s/
-----------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By: /s/
--------------------------
Vice President
Attest: /s/
-----------------------
Assistant Secretary
14
<PAGE>
NUVEEN CALIFORNIA MUNICIPAL VALUE FUND, INC.
--------------------------------------------
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
------------------------------------------
This Agreement made this 9th day of May, 1995 by and between Nuveen California
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 CALIFORNIA 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 fees detailing the amount of director's fees credited to such
director's account during the prior calendar
<PAGE>
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.
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
2
<PAGE>
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 CALIFORNIA 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 CALIFORNIA 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 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
<PAGE>
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 CALIFORNIA 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
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..............................
(a) Collection of Income and Other Payments........................
(b) Miscellaneous Transactions.....................................
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.............................................
(a) Advice of Fund.................................................
3
<PAGE>
(b) Advice of Counsel..............................................
(c) Conflicting Advice.............................................
(d) Protection of U.S. Trust.......................................
21. Compliance with Governmental Rules and Regulations..................
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.......................................................
4
<PAGE>
MUTUAL FUND CUSTODY AGREEMENT
-----------------------------
THIS AGREEMENT is made this 1st day of January, 1991 by and between NUVEEN
CALIFORNIA 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 the
6
<PAGE>
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 to
7
<PAGE>
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 (a) against
delivery of the securities either in certificate form or through an entry
crediting U.S. Trust's account at the Federal Reserve Bank with such securities
or (b) against delivery of the receipt evidencing purchase by the Fund of
securities owned by U.S. Trust along with written evidence of the agreement by
U.S. Trust to repurchase such securities from the Fund; (iv) for transfer to a
time deposit account of the Fund in any bank whether domestic or foreign; such
transfer may be effected prior to receipt of a confirmation from a broker and/or
the applicable bank pursuant to Proper Instructions from the Fund; (v) for the
payment of dividends or other distributions on shares declared pursuant to the
governing documents of the Fund, or for the payment of interest, taxes,
administration, distribution or advisory fees or expenses which are to be borne
by the Fund under the terms of this Agreement, any Advisory Agreement, or any
administration agreement; (vi) for payments in connection with the conversion,
exchange or surrender of securities owned or subscribed to by the Fund and held
by or to be delivered to U.S. Trust; (vii) to a subcustodian pursuant to Section
7 hereof; (viii) for such common expenses incurred by the Fund in the ordinary
course of its business, including
10
<PAGE>
but not limited to printing and mailing expenses, legal fees, accountants fees,
exchange fees. Or (ix) for any other proper 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 of the Fund signed by an
officer of the Fund and 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 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
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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 lest 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 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:
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(a) Securities and any cash of the Fund deposited in a Securities
Depository or Book-Entry System will 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 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.
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(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 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
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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 by 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 buy 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.
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
15
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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 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
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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 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:
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(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 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;
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<PAGE>
(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.
(b) 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:
(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,
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<PAGE>
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 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
20
<PAGE>
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;
(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
21
<PAGE>
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 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,
22
<PAGE>
(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.
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.
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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, 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
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<PAGE>
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, 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
25
<PAGE>
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 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
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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 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
27
<PAGE>
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 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
28
<PAGE>
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. 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.
29
<PAGE>
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 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.
30
<PAGE>
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. 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
31
<PAGE>
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.
32
<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 CALIFORNIA 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 & CONTROLLER
33
<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% (l-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 CALIFORNIA MUNICIPAL UNITED STATES TRUST
VALUE FUND, INC. COMPANY OF NEW YORK
By /s/ O. Walter Renfftlen By /s/ Peter C. Arrighetti
----------------------------------- ---------------------------------
Title Vice President and Comptroller Title Vice President
-------------------------------- ------------------------------
Date 12-12-90 Date 12-11-90
--------------------------------- -------------------------------
34
<PAGE>
EXHIBIT 9.2
FUND ACCOUNTING AGREEMENT
-------------------------
THIS AGREEMENT, made this 1st day of January, 1991, by and between,
Nuveen California 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
<PAGE>
prospectus. If so directed, U.S. Trust shall also calculate daily the net
income of the Fund and shall advise the Fund daily 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
2
<PAGE>
information is made available to such accountants for the expression of their
unqualified opinion where required for any document for the Fund.
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.
3
<PAGE>
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
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,
4
<PAGE>
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
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
5
<PAGE>
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, 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 l, 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.
6
<PAGE>
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.
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.
7
<PAGE>
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.
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 California 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
SHAREHOLDER TRANSFER AGENCY AGREEMENT
-------------------------------------
This Agreement is made this 1st day of January, 1991 by and between United
States Trust Company of New York ("U.S. Trust"), a New York corporation, and
Nuveen California 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;
- Reconciling and reporting taxes withheld to the Internal Revenue
Service, including complying with additional 1099 reporting
requirements;
3
<PAGE>
- 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.
(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
4
<PAGE>
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:
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
5
<PAGE>
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.
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;
6
<PAGE>
(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;
(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.
7
<PAGE>
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.
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;
8
<PAGE>
(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 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.
9
<PAGE>
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, 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.
10
<PAGE>
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 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
11
<PAGE>
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 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.
12
<PAGE>
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 CALIFORNIA MUNICIPAL
OF NEW YORK VALUE FUND, INC.
By /s/ Andrew Massa By /s/ George P. Thermos
--------------------------- ---------------------------------
Name Andrew Massa Name George P. Thermos
------------------------ -----------------------------
Title Senior Vice President Title Vice President
---------------------- ----------------------------
13
<PAGE>
Exhibit A
---------
Amended
January 1, 1991
NUVEEN CALIFORNIA MUNICIPAL VALUE FUND, INC.
Terms and Conditions of the Dividend Reinvestment Plan
------------------------------------------------------
This Dividend Reinvestment Plan of Nuveen California 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 California Municipal
Value Fund, Inc.
333 West Wacker Drive
Chicago, Illinois 60606
RE: NUVEEN CALIFORNIA MUNICIPAL VALUE FUND, INC.
REGISTRATION STATEMENT ON FORM N-14
--------------------------------------------
Ladies and Gentlemen:
We are acting as counsel for Nuveen California 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 7,000,000
shares of common stock, $.01 par value per share, of the Fund (the "Shares"),
pursuant to the proposed reorganization of the Fund and Nuveen California
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>
Nuveen California Municipal
Value Fund, Inc.
August 22, 1995
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 California 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 7,000,000 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 nd 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.
Based on the foregoing, it is our opinion that:
<PAGE>
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 California Municipal Nuveen California 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
California Municipal Income Fund, Inc., a Minnesota corporation ("Acquired
Fund"), into Nuveen California 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
<PAGE>
Nuveen California Municipal Value Fund, Inc.
Nuveen California Municipal Income Fund, Inc.
Page 2
"Effective Time"). We have undertaken no independent investigation of the
accuracy of the facts and representations set forth or referred to herein.
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));
<PAGE>
Nuveen California Municipal Value Fund, Inc.
Nuveen California Municipal Income Fund, Inc.
Page 3
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, 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
<PAGE>
Nuveen California Municipal Value Fund, Inc.
Nuveen California Municipal Income Fund, Inc.
Page 4
is exempt from federal income taxation, cash and other securities held in the
Acquired Fund's portfolio.
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
<PAGE>
Nuveen California Municipal Value Fund, Inc.
Nuveen California Municipal Income Fund, Inc.
Page 5
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 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
<PAGE>
Nuveen California Municipal Value Fund, Inc.
Nuveen California Municipal Income Fund, Inc.
Page 6
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 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 October 7, 1994 for Nuveen California Municipal
Value Fund, Inc. and Nuveen California Municipal Income Fund, Inc. in the
Registration Statement (Form N-14) and related Prospectus of Nuveen California
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
CONSENT OF ORRICK, HERRINGTON & SUTCLIFFE
We consent to the reference to our firm under the captions "Tax Matters
Associated with Investment in the Funds -- California State and Local Tax
Matters" and "Legal Opinions" in the Registration Statement (Form N-14) and
related Joint Proxy Statement -- Prospectus of Nuveen California Municipal Value
Fund, Inc. and Nuveen California Municipal Income Fund, Inc. and under the
caption "Tax Matters Associated with Investment in the Funds -- California State
and Local Tax Matters" in the Statement of Additional Information of Nuveen
California Municipal Value Fund, Inc. filed with the Securities and Exchange
Commission under the Securities Act of 1933.
ORRICK, HERRINGTON & SUTCLIFFE
By:/s/ Kenneth G. Whyburn
----------------------------------------
Kenneth G. Whyburn
San Francisco, California
August 18, 1995
<PAGE>
EXHIBIT 16.1
NUVEEN CALIFORNIA 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 CALIFORNIA 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 CALIFORNIA 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 CALIFORNIA 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 CALIFORNIA 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 CALIFORNIA 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
California Municipal Value Fund, Inc. (the "Fund") will acquire substantially
all of the assets and assume substantially all of the liabilities of Nuveen
California 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 CALIFORNIA 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 California 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 California 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 CAV895
<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 CALIFORNIA 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 CAV895 CAV895
<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 assume substantially all of
the liabilities to Nuveen California 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 CALIFORNIA 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 California 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 California 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 CAI895
<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 CALIFORNIA
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 CAI895 CAI895
